Severfield Annual Report 2015

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FY2015 Annual Report · Severfield

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Annual report and accounts for the year ended 31 March 2015
Stock code: SFR www.severfield.com

Building a
solid platform
for growth

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Severfield plc

Stock code: SFR

Welcome to our 2015 annual report

Severfield plc is the largest specialist structural steelwork group
in the UK, with a growing presence in India and a reputation for
performance and value. Our vision is to be recognised as world-
class leaders in structural steel, known for our ability to deliver
any project, to the highest possible standards.

Five reasons to invest

Market leading UK position —
well positioned to benefit from
the recovery in the wider UK
construction market.

Strong balance sheet provides
operational and financial flexibility.

Unrivalled experience and
capability in design, fabrication and
construction of steel structures.

Operational improvement
programme — generating steady
margin improvement.

Established foothold in the
developing Indian market —
building value through the joint
venture business.

Investor website

We maintain a corporate website at
www.severfield.com containing a wide range
of information of interest to institutional and
private investors including:

• Latest news and press releases

• Annual reports and investor presentations

Getting around the report

This icon signposts the reader to
other sections in this report

Find out more information on our
website www.severfield.com

Front cover image:

Project: South Bank Tower

Sector: Commercial offices

Location: London

Tonnage: 1,700

Client: CIT

Main contractor: Mace

Completion: Summer 2015

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Annual report and accounts for the year ended 31 March 2015

Strategic report / Overview

What’s inside

Strategic report

Our governance

89Our financials

Strategic report
Overview
Highlights and milestones

Chairman’s introduction

Severfield snapshot

Our business and strategy
Group at a glance

Our business model

Marketplace

Market sectors

Our strategy

JSW Severfield Structures

Our performance
Operating review

Financial review

Corporate social responsibility

Key performance indicators

Principal risks and uncertainties

Our governance
Board of directors

Executive committee

Chairman’s letter

Corporate governance report

Audit committee report

Directors’ report

Directors’ remuneration report

— Letter from the committee chairman

— Policy

— Implementation

Directors’ responsibilities statement

Our financials
Independent auditor’s report

Consolidated income statement

Consolidated statement of comprehensive income 96

Consolidated balance sheet

Consolidated statement of changes in equity

Consolidated cash flow statement

Notes to the consolidated financial statements

Five year summary

Financial calendar

Company balance sheet

Notes to the Company financial statements

Shareholder information
Addresses and advisers

100

129

132

133

138

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Highlights and milestones

Underlying* profit before tax

£8.3m

2014: £4.0m

Underlying* operating profit
(before JVs and associates)

£9.0m

2014: £7.6m

Operating profit
(before JVs and associates)

£0.5m

2014: (Loss of £0.1m)

Underlying* operating margin
(before JVs and associates)

Revenue

4.5%

2014: 3.3%

Profit after tax

£0.1m

2014: (Loss of £2.6m)

£201.5m

2014: £231.3m

Underlying* basic earnings
per share

2.31p

2014: 0.88p

Improvement in UK underlying* operating margin to 4.5% (2014: 3.3%), in line
with expectations

* Underlying results are stated before non-
underlying items of £8.5m (2014: £8.1m):

•

— contract remedial costs – £6.0m (2014:

£nil)

— amortisation of acquired intangible

assets – £2.6m (2014: £2.7m)
— valuation of derivative financial

instruments – £0.1m favourable (2014:
£nil)

— restructuring and redundancy costs –

£nil (2014: £2.6m)

— retirement of acquired intangible asset

– £nil (2014: £2.4m)

— impairment of investment in associates

– £nil (2014: £0.4m)

— the associated tax impact of the above

Improved tendering disciplines and operational processes, reflected in
increased margin

• Over 110 projects undertaken during the year in key market sectors:

— Core construction: office developments, stadia, warehouses and distribution

centres; and

— Core infrastructure: transport

• Share of losses from Indian joint venture of £0.2m (2014: £3.0m) reflecting

higher production levels and operational improvements

• Non-underlying charge of £6.0m for the cost of Leadenhall remedial works

programme

• Strong cash performance, with year-end net funds of £6.4m (2014: £0.3m)
• UK order book of £194m at 1 June 2015 (1 November 2014: £185m), reflecting

improving market position

India order book of £38m at 1 June 2015 (1 November 2014: £38m)

•
• Successful completion of new £25m revolving credit facility until July 2019
• Reintroduction of proposed final dividend of 0.5p per share

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Annual report and accounts for the year ended 31 March 2015

Strategic report / Overview

03 Strategic report

Chairman’s introduction
Severfield snapshot

Overview

04
06

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Severfield plc

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Chairman’s introduction

John Dodds
Chairman

“ The Group is set for

another year of good
progress.”

2014/15 saw the Group make good progress against
our strategic priorities. We more than doubled
underlying pre-tax profits, continued to strengthen
our executive team and have established the
foundations to achieve further growth in 2015/16.

year-end together with management’s
best estimate of the remaining cost to the
Group before taking account of possible
future recoveries.

Read the operating review on
page 28

Cash generated from operations was
£11.4m (operating cash conversion was
107 per cent), which has resulted in year-
end net funds of £6.4m.

In October, the Group refinanced its
borrowing facilities with National
Australia Bank and HSBC, with HSBC
replacing previous lender Royal Bank
of Scotland. The new facilities, which
expire in July 2019, are for £25m with an
accordion facility of up to £20m available
at the Group’s request. This new facility
provides a solid foundation for the Group
as it continues to develop its wider
strategy.

Read the financial review on
page 32

Dividends
As a result of the improved underlying
results and its commitment to a
progressive dividend policy, the board has
recommended a final dividend of 0.5p per
share. This dividend will be payable on
11 September 2015 to shareholders on
the register on 14 August 2015.

I am pleased to report a strong set of
results for 2014/15. The Group reported
an underlying operating profit for the
year of £9.0m which represents a further
increase in the UK operating margin from
3.3 per cent in the previous year to 4.5
per cent, positioning us well to achieve
our previously stated target of 5 to 6 per
cent by 2015/16. The margin uplift reflects
improved contract tendering disciplines,
together with the continued benefits of
our ongoing operational improvement
programme which was initiated in 2013
following the rights issue. Furthermore,
the UK order book of £194m has
strengthened during the year, providing
us with the platform required to return to
revenue growth in 2015/16.

Underlying profit before tax was £8.3m, an
increase of £4.3m from the previous year.
This reflects both the increase in operating
profit and the improved performance of the
Indian joint venture, with the Group’s share
of losses significantly reducing to £0.2m
from £3.0m. The joint venture result reflects
the benefits of the changes made to the
senior management team and the business
development and operational improvement
programmes, all of which were initiated in
response to the disappointing performance
in the previous year.

The 2014/15 result includes a non-
underlying charge of £6.0m relating to a
programme of bolt replacement works at
the Leadenhall building, a contract that
was completed in 2013. This programme
is being undertaken in conjunction
with British Land, Laing O’Rourke and
Arup and is likely to continue until the
end of the calendar year. This charge
represents certain costs incurred at

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Annual report and accounts for the year ended 31 March 2015

Strategic report / Overview

Underlying profit before tax

£8.3m

2014: £4.0m

Order book

£194m

November 2014:
£185m

Accident frequency rate
(AFR)

0.21

2014: 0.57 (UK only)

The health and safety of our people
remains a priority of the board. All of the
Group’s employees should benefit from
an incident-free environment. The Group’s
AFR for the year, which includes our Indian
joint venture, was 0.21. This AFR score
of 0.21 includes an AFR of 0.33 for our
UK operations which was a significant
improvement from the prior year of
0.57, reflecting certain new initiatives
launched in the current year following the
appointment of a new Group SHE director
in April 2014. A number of new initiatives
are also planned for 2015/16.

Read more about corporate social
responsibility on page 36

Outlook
The improved results for 2014/15
demonstrate the strength of the Group’s
business model and the progress that we
have made in implementing key elements
of our strategy.

Looking forward, our improved order
book and a growing pipeline of contract
opportunities leaves us well positioned
to return to revenue growth in 2015/16
which, together with the continuing
improvements in operational performance
both in the UK and India, mean that we
believe the Group is set for another year
of good progress.

John Dodds
Non-executive chairman
17 June 2015

Strategy
The Group’s strategy is to continue
building a solid platform for growth.
We have made good progress against
our strategic priorities during the year,
particularly in the areas of operational
excellence and India. Another significant
step during the year was the recruitment
of the legacy Mabey Bridge infrastructure
team, providing us with additional
resources and expertise to support
stronger future growth within the bridge
and infrastructure markets.

Read more about
Group strategy on page 20

Board
During the year, Kevin Whiteman, Tony
Osbaldiston and Alun Griffiths all joined
the board as non-executive directors.
Their considerable operational expertise
and the knowledge and experience gained
in global organisations have proved real
assets to our board discussions as we
continue our strategic and operational
progression.

We have continued to strengthen our
executive team with the appointment of
Gary Wintersgill as managing director of
Severfield (UK) Limited and Martin Kelly
as Group strategic business development
director.

Read our corporate governance
report on page 58

Employees and safety
Over 1,200 employees have contributed
to the strong performance of the Group
during the current year. On behalf of the
board, I would like to thank them for
their hard work and continued support.
During the year, we launched a save as
you earn share scheme to enable all of our
employees to participate in the long-term
success of the Group.

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Severfield plc

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Severfield
snapshot

What we want to be
Our vision
Our vision is to be recognised as world-class leaders in structural steel, known for
our ability to deliver any project, to the highest possible standards.

What we set out to achieve
Our mission
As ambitious, innovative leaders in a demanding and ever developing industry, we
will use our collective strengths and resources to build the capacity required to
deliver the structures of the future.

What defines us
Our values

Safety
There’s a reason it is known as ‘safety first’.
We make no apologies for the fact that
profit and loss, deadlines and headlines,
all come second to making sure everyone
goes home safely. Every day.

Customer focus
Our clients are paramount in all that
we do. We are here to understand their
requirements and meet their aspirations.
Together we will deliver projects of which
we can all be proud.

Integrity
We operate in a complex and challenging
industry, one that often requires
innovative thinking and a flexible
approach to deliver successful outcomes.
The one thing we’ll never compromise
on though is our integrity, which ensures
we’re able to maintain the exceptionally
high standards we set for ourselves.

Commitment
We stand by our word, when the Group
says we’ll deliver, whatever challenges lie
ahead, you can depend on us to deliver,
and to the highest possible standard.

How we will achieve our vision

Our strategy

Find out more about
our strategy on page 20

There are five elements to our strategy:

The core of our strategy revolves around continuing
to build a solid platform for continued growth.

Growth

Operational
excellence

Clients

People

India

How we impact on society

Resources and relationships

Find out more about
our corporate social responsibility
on page 36

There are four main areas where our business model impacts on society and
where we have responsibilities that extend beyond financial performance:

• Safety, health and environment
• Sustainability
• People
• Communities

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Strategic report / Overview

What we do
Business model

Find out more about our
business model on page 12

DESIGN

FABRICATE

CONSTRUCT

Our business model delivers value to our shareholders,
customers and employees and is the key enabler of our
strategy. Our proven strengths are our unrivalled capacity
and performance, the technical expertise of our people,
engineering excellence and customer service.

The Group’s businesses perform every part of the
fabrication and construction process from initial
scheme design to the eventual handover to our clients
of a quality product on-site.

Where we do it
Our businesses

Find out more about our
Group at a glance on page 10

The combined resources of our Group of companies
provide us with the largest capacity and capability of any
steel company in the UK, which allows us to offer great
choice, value and flexibility through our national network
of factories in North Yorkshire, Lancashire and Northern
Ireland.

Our joint venture in India, which presents great opportunities
for overseas steel fabrication, is of significant importance in
achieving the Group’s strategic growth ambitions.

Who we serve
Market sectors

Find out more about our
market sectors

on page 18

Our state-of-the-art facilities provide steel structures
which serve people every day, whether for work, leisure
or travel, or to provide essential services, including
power and energy, health and education. We have
extensive experience in multiple market sectors, which
supports the business through changes in spending
patterns and fluctuations in macroeconomic conditions.

How we measure success
KPIs

How we manage our risks
Risks

Find out more about
our KPIs on page 42

We use a combination of financial
and non-financial key performance
indicators (KPIs) to measure our
progress in delivering our strategic
priorities:
• Underlying operating profit/

•

•
•

•

margin £9.0m/4.5%
Underlying basic earnings
per share 2.31p
Operating cash conversion 107%
Return on capital employed
(ROCE) 6.1%
UK order book £194m
Accident frequency rate
(AFR) 0.21
Revenue growth
(new KPI for 2015/16)

Find out more about
managing risk on page 44

Strong and effective risk management is
at the heart of how the directors run the
business and supports the achievement
of the Group’s strategic objectives.

Our performance is dependent on
macroeconomic conditions as well
as changes in government policies
and in the commercial environment.
Accordingly, we have identified six
principal risks and uncertainties which
have the potential to impact the Group’s
business model and strategy:

• Commercial and market environment
• People
•
•
• Health and safety
•

Interruption to fabrication facilities
Indian joint venture

Information technology

How we govern ourselves
Governance

Find out more about
our governance on page 58

We are committed to maintaining
the highest standards of corporate
governance and ensuring that values
and behaviours are consistent across
our businesses. We encourage
open and honest discussion and
constructive challenge across the
Group to ensure that best practice is
maintained. This culture is integral to
our business model and strategy and
for the benefit of our shareholders.

Our KPIs for profitability, AFR and
cash flow generation are linked to our
performance share plan and annual
incentive arrangements to ensure that
the remuneration of our directors is
aligned with our strategic priorities.

Safety underpins everything we do

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Delivering quality service

A new third tier is being added to the existing south
stand at the Etihad stadium including plant room,
corporate functions, roof and suspension system.
Once completed the existing roof will be dismantled
from the inside of the stadium ready for the start of the
2015/16 football season.

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Strategic report / Our business and strategy

09 Group at a glance

Strategic report
Our business and strategy

Our business model
Marketplace
Market sectors
Our strategy
JSW Severfield Structures

10
12
16
18
20
24

Project: South Stand redevelopment,
Manchester City F.C.

Sector: Stadia and leisure

Location: Etihad Stadium, Manchester

Tonnage: 3,600

Client: Manchester City Football Club

Main contractor: Laing O’Rourke

Completion: August 2015

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Group at a glance

The combined resources of our Group of companies have the design skills,
engineering skills and experience to handle complex projects over a diverse
range of market sectors. We can facilitate the production of a wide range of
steelwork packages, from projects requiring added value engineering content
to basic structural work.

Severfield (UK) Limited
Severfield (UK) Limited combines high-volume structural steel
production with specialist design and engineering expertise to deliver
a complete service to clients from project concept to completion. It has
a combined capacity of around 100,000 tonnes of fabricated steelwork
per year, the most extensive product range and capability in the
industry and its own highly skilled site construction teams.

Its Dalton site in North Yorkshire boasts ten state-of-the-art production
lines where modern manufacturing and painting processes are undertaken
in a controlled environment. The streamlined, high-volume and efficient
nature of this facility is geared for strong repeat business in the structures
market. Its Lostock site in Lancashire can also take on more difficult or
complex work with the capability of operating in ‘challenging’ environments
such as live railways, airports, public places and city centres.

Severfield (Design & Build) Limited
Severfield (Design & Build) Limited, located in Sherburn, near
Scarborough, is the principal design and build steelwork contractor for
distribution warehouses and low-rise structures in the UK.

The company designs, fabricates and constructs structural steelwork
and portal frames principally for the warehouse, distribution and
industrial sectors. The company also has a specialist steel stair and
metalwork division and expertise in the commercial, residential, health
and education sectors.

With an annual capacity of 25,000 tonnes, the company has a
business, skill base and client profile which are complementary to the
rest of the Group.

Severfield (NI) Limited
Severfield’s base in Northern Ireland, Severfield (NI) Limited has a
strong reputation for delivering quality constructional steel products
in the UK and Irish structural steel market. It has contributed to such
notable projects as Leadenhall Tower, Dundrum Shopping Centre in
Dublin and Belfast’s Odyssey Arena and Titanic Signature Building.

The company has an annual capacity in excess of 25,000 tonnes with
full-service capabilities and is equipped with the latest
state-of-the-art manufacturing processes.

The site’s highly skilled workforce includes a directly employed site
construction team.

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Strategic report / Our business and strategy

Severfield (UK)

Dalton, North Yorkshire and
Lostock, Lancashire

Severfield
(Design & Build)

Sherburn, North Yorkshire

JSW Severfield
Structures

(Indian-based
joint venture business)

Mumbai, India

Severfield (NI)

Enniskillen, Co. Fermanagh

JSW Severfield Structures Limited
Located adjacent to JSW Steel’s plant at Vijayanagar, in the District
of Bellary, Karnataka, India, the site has an annual capacity of 60,000
tonnes and consists of two fabrication lines and a plate line.

Plant investment has been significant, with many of the Group’s
innovative features being incorporated into the joint venture.

The company is involved in the design, fabrication and construction of
structural steelwork to principally service the Indian markets.

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Our business model

What we do
Severfield plc is the UK’s market-leading structural steel
group, serving the construction and infrastructure markets,
operating across four sites providing unrivalled capacity
and capability. We also have an operation in India, which
forms part of our international growth plans. The Group’s
businesses manage every aspect of the fabrication and
construction process, from initial scheme design, through
detailing, specification and manufacture to the eventual
handover to our clients of a quality product on-site.

The Group’s proven strengths are its unrivalled capacity
and performance, iconic, high quality products, engineering
excellence and customer service.

Our customers
Clients serviced by the Group cover a broad range of
disciplines from contractors and developers, to engineers
and architects. Contractors include Brookfield, BAM, Laing
O’Rourke, Sir Robert McAlpine, MACE, Morgan Sindall,
Skanska, Carillion, Vinci, Winvic, McLaren, VolkerFitzpatrick
and Balfour Beatty, and developers include Stanhope,
Hammerson, British Land, Land Securities, Westfield and
Grosvenor. We have also developed structures for clients
such as ASDA, Sainsbury’s, Aldi, Jaguar Land Rover, ProLogis
and Gazeley and project owners such as Network Rail, the
Highways Agency, BAA and Sellafield.

Resources
The Group has the largest capacity and capability of any
steel fabrication company in the UK and can offer great
choice, value and flexibility thanks to our national network
of factories and the technical expertise of our people.

The Group is equipped with the latest state-of-the-art
manufacturing and painting processes and has a highly
skilled workforce of over 1,200 staff including an in-house
construction team.

We have the design, experience and engineering skills to
serve a diverse range of market sectors, from airports,
railway stations and bridges to data centres and
commercial offices.

Partners
A key ingredient for the long-term success of any business
is the ability to forge strong and lasting relationships with
supply chain partners, which provides clients with high value
and consistent reliability. The Group spends a high percentage
of its operating costs on goods and subcontractor services.
Careful management of the supply chain is essential to
drive efficiency and suppliers are monitored to ensure that
maximum benefits are delivered to clients and the Group.

As the UK’s largest steelwork contractor, we engage with
clients and the supply chain wherever we operate and long-
term relationships are forged with partners who meet our
commitment to quality and sustainability. This helps to improve
the interfaces between disciplines as we strive to optimise
construction value and performance both now and in the future.

FABRICATE

DESIGN

VALUE
GENERATION
VALUE
GENERATION

CONSTRUCT

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Annual report and accounts for the year ended 31 March 2015

Strategic report / Our business and strategy

Value generation
All of the Group’s revenue and profits are generated from the
design, fabrication and construction of structural steelwork
and its related activities. Our state-of-the-art manufacturing
facilities have been established to generate profit and surplus
cash flow.

Close management of our contracts and cost base is critical
to our success particularly in winning new contracts,
reinvesting in our business and seeking further opportunities
for growth. The Group’s operational improvement programme,
the objective of which is to improve risk assessment and
operational and contract management processes, is central
to the generation of value.

Good cash generation and balance sheet management
provide a solid foundation for the Group.

Our competitive advantage
The Group’s competitive advantages derive from its scale,
client focus, flexibility, experience, cost base, productivity,
supply chain strengths and integrated approach from design
to construction. We have unrivalled capabilities and our
facilities are the best in the UK and possibly in Europe.

We approach every project, from the highly technical
to basic structural work, with the same level of safety,
professionalism, commitment, care and customer service.

The dedication, expertise and experience of our workforce
ensure that we offer more skills and variety than any other UK
steel contractor. We are committed to matters of health and
safety, sustainability, ethics and client and staff engagement.

Where we fit in the value chain

Design
The Group’s design department consists of highly skilled
and motivated professional structural and civil engineers
with specialist knowledge of structural steelwork design.

The design process offers our clients innovative concepts
and solutions. We are able to offer ‘value engineering’
through the close guidance of our consulting engineers at
the concept of the project and with the assistance of the
latest state-of-the-art computer software for 2-D and 3-D
building information modelling (BIM), analysis and design.

Our advice on material choices, fabrication, fire protection,
surface treatment and construction techniques can often
lead to significant project savings and efficiencies.

Our engineers are also involved in temporary works to suit
site construction and buildability issues. Working closely
with the Group’s in-house construction team, we ensure the
most efficient and safest solutions for our clients’ needs.
This expertise is essential for high-rise towers and other
complex structures undertaken by the Group.

Fabricate
The Group’s fabrication facilities include expansive
stockyard areas and in-line cutting, fabrication, welding
and painting and some of the largest finished goods and
subassembly areas in the industry.

Operational investment has been significant and
continuous over the years, with many innovative features
being developed and incorporated. Modern, state-of-the-
art processing equipment has been employed with full
consideration for design, supporting layout, logistics,

integration and construction. Our equipment is fed with
numerical control data which optimises output and
minimises waste and errors.

The FABSEC® production line at Dalton is a fully self-
contained production facility. The process provides the
structural steelwork sector with a full range of highly
efficient plated sections, optimal section profiles and shop-
applied intumescent coatings.

Haulage for our steel products is managed by WS
Transportation, which boasts a range of state-of-the-art
equipment such as new trailers, trailer safe systems, cycle
aware cameras and audible warning features for city centre
deliveries.

Construct
The Group has its own highly trained construction
workforce which provides services for all of its construction
requirements. Working closely with the project
management team, they are leaders in steel construction
and utilise the latest equipment on-site. The Group is an
industry leader in construction methodology.

The Group also has a large and highly experienced contract
management team. Each contract manager is the single
point of contact with each client and is supported by all
resources within the Group. Our contract managers engage
with our clients and the supply chain to ensure optimum
communication and performance in all aspects of the
project, including site construction and administration.

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DESIGN

FABRICATE

VALUE

GENERATION

VALUE

GENERATION

CONSTRUCT

Severfield plc

Stock code: SFR

www.severfield.com

Our business model

Health and safety
The well-being and safety of our
employees, clients, suppliers and
subcontractors are paramount and directly
impact on the commercial viability of our
business.

The directors, through the implementation
of our safety, health and environmental
philosophy, encourage each employee
and subcontractor to strive constantly
to adopt the best safety, health and
environmental practices. Our dedicated
SHE director has overall responsibility for
health and safety operations, with the aim
of minimising the risk of incidents and
generally promoting a proactive health
and safety culture.

A principal aim of the board is to ensure,
through example and encouragement,
that we behave ethically and responsibly,
particularly in the fields of health, safety
and environmental management.

Training standards are high within the
Group to ensure performance excellence
and health and safety standards
and we work closely with equipment
manufacturers to ensure that efficiency
and safety are always at the forefront of
operations.

The Group’s health and safety team
monitors all sites on a regular basis to
make sure these essential standards
are maintained. We have developed our
own unique safety handrail solution
(Seversafe®) and a tool-tethering system.

The values below support our health and
safety policy and establish the areas
that are essential to achieving our main
goal, namely to ensure each and every
employee can enjoy a safe working
environment, with no exceptions.

Leadership — people at all levels have
responsibility for their own health and
safety and should set an example for
others. Our management is accountable
for health and safety and will demonstrate
leadership through personal example.

Hazard, risks and control measures
— we will identify the hazards and
risks associated with our business
activities and introduce appropriate
control measures to challenge them in
the changing environment and aim for
continuous improvement.

Health and well-being — we will promote
and improve the health and well-being of
all Group employees.

Competence and behaviour — we will
ensure our employees are trained so
they are skilled and qualified for their
occupation and therefore can contribute
to an improved health and safety
performance.

DESIGN

FABRICATE

CONSTRUCT

DESIGN
DESIGN
DESIGN
DESIGN

FABRICATE
FABRICATE
FABRICATE
FABRICATE

VALUE
VALUE
VALUE
GENERATION
GENERATION
GENERATION

CONSTRUCT
CONSTRUCT
CONSTRUCT
CONSTRUCT

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Strategic report / Our business and strategy

Innovation
FABSEC is the unrivalled market leader
in the design, fabrication and supply of
long span cellular and bespoke plated
beams. It is a joint venture of four major
UK companies at the forefront of the UK
construction industry, including the Group.
FABSEC® beams and FBEAM® software
are used on a variety of prestigious
construction projects across the UK.

Innovation also plays an important role
in building long-term relationships
and creating additional value for our
customers. The Group’s continued
expertise in creating innovative solutions
at a project level enables our clients to
realise their architectural visions.

Read about our strategy on
page 20

Read about our marketplace on
page 16

Read about our Group at a glance
on page 10

Quality and accreditations
Quality assurance is a fundamental
feature across all of our operations. From
initial enquiry through to design, materials
ordering, fabrication and construction, we
employ processes designed to ensure full
customer satisfaction.

Quality systems assumed through the
British Standards Institution (BSI),
together with welding control through The
Welding Institute (TWI), operate to ensure
customer requirements are recognised
and delivered. Registration under the
Qualified Steelwork Contractors Scheme
provides extra confidence to customers.

The CE mark is a claim that a particular
construction product can be used
within the European Union and is
based on the principle that the product
is ‘fit for purpose’. All of the Group’s
manufacturing facilities are CE
marking compliant and have been
independently assessed to meet the
requirements of Execution Class 4.
Accordingly, our clients can be assured
that their steelwork is in compliance with
the latest Europe-wide legislation and is
manufactured to a level of quality that is
second to none.

The Group has a strong policy of
continuous improvement and seeks to
enhance corporate management through
proactive development. New facilities
and procedures are integrated into the
relevant quality assurance system as
they are adopted.

The Group is committed to providing our
clients with the best possible service
and protecting our workforce wherever
we operate. By gaining the necessary
certification through recognised bodies,
we provide the reassurance that we are
properly trained and qualified to carry
out our contractual and partnership
obligations.

Incident analysis and prevention — we
will ensure work-related accidents and
near-misses are reported, investigated
and analysed to prevent reoccurrence.
The investigations will focus on root cause
and recommendations shared across the
business.

Safety in design — our designers
and construction management teams
will focus on the design aspect of the
structure with the objective to erect the
structure safely and more efficiently.

Monitoring, audit and review — we will
conduct regular internal audits on our
management systems in order to achieve
our objectives and targets to drive the
health and safety culture of our business
forward.

Sustainability
We are committed to minimising the
environmental impact of our business
through sustainable practices and
continuous improvement of our
environmental performance.

The following values support our
environmental policy and establish the
areas that are essential to achieving
the policy.

Management systems — to implement
effective management systems and to
encourage all our employees to act in an
environmentally responsible manner.

Continuous improvement — to improve
the environmental performance of
our business through research and
development of new technologies,
preventing and reducing our emissions
and minimising waste.

Sustainable development — to
contribute to sustainable resources by
using energy and raw materials more
efficiently, thus optimising our natural
resources.

Monitoring and reporting — to monitor
and audit our environmental performance,
report progress on policy objectives and
strive for continuous improvement in our
targets to achieve a more environmentally
friendly business.

23925-04 24-06-2015 Proof 5

Severfield plc

Stock code: SFR

www.severfield.com

Marketplace

The Group’s strategic focus is to increase its UK market share from
construction activities, to enter new market sectors and to build market share
from its existing European opportunities.

2014 share of
addressable market

c.15%

delivering 75,000
tonnes

2014 share of total
UK market

c.8%

Find out more about
strategy on page 20

Find out more about
KPIs on page 42

Find out more about
risk management on page 44

Marketplace
The total value of structural steel output
in the UK, estimated by the British
Constructional Steel Association (BCSA),
was approximately £1.7bn in 2014. This
represents UK structural steel production
for calendar year 2014 of 889,000
tonnes. The value of this market, which is
considered addressable by the Group, is
approximately £1.1bn, which represents
production levels of 500,000 tonnes.

The Group’s potential production capability
is approximately 150,000 tonnes, which
represents 15 per cent of the current
estimated capacity of the UK market of
1,000,000 tonnes. Its current share of the
UK market is approximately 75,000 tonnes,
resulting in an addressable market share
for 2014 of c.15 per cent and a total UK
market share for 2014 of c.8 per cent.

The reduction in the Group’s market share
during the year reflects improved tendering
disciplines and the willingness and ability
to decline work where the pricing is not
considered economic or where there is
insufficient allowance for risk.

The market sectors targeted by the Group
and its estimated market share are shown
below.

Market sectors

Sector

Industrial and distribution
Infrastructure (including bridges)
Health and education
Commercial offices
Power and energy
Stadia and leisure
Retail
Other
Exports
TOTAL

Source: BCSA.

Outlook
Market conditions have improved
during the year but continued to remain
challenging as margins remain under
pressure from rising input prices. In
addition, some market tension remains
as main contractors continue to work
through certain legacy contracts. Whilst
the market remains tight in some
respects, there are now clearer signs of
improvement which, if it continues, will
further assist our margin recovery and
drive revenue growth in due course.

Future growth driven by the recovery
in the core UK market is expected to
come from private sector growth in the
industrial, commercial and leisure sectors
as well as major infrastructure projects.
In particular, we believe the long-term
drivers for infrastructure remain sound,
necessitating ongoing investment.

Forecasts for the next four years prepared
by the BCSA show an expected increase in
UK structural steel demand, particularly
in the Group’s key markets of industrial,
commercial and leisure.

Market tonnage in 2014

(000s)

311
136
125
87
51
37
21
31
90
889

(%)

35%
15%
14%
10%
6%
4%
2%
4%
10%
100%

Group market
share (estimated)

10–20%
5–10%
< 5%
20–30%
5–10%
30–40%
10–20%
10–20%
< 5%

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Strategic report / Our business and strategy

UK order book
The Group has a well-diversified order book of £194m (June 2015) which represents
approximately nine months of forward production capacity. The order book has
increased during the year, reflecting the improving market position, and the contract mix
within the order book includes the benefits of improved tendering disciplines and our
more selective approach to winning work.

Despite the improvement in the market during the year, prices have remained
competitive and we continue to focus on ensuring that there is a fair balance of risk
and reward within the contracts. Our improving operational processes are helping us
to manage these market pressures more effectively and to deliver improving margins
in line with our strategy. The current order book, which is expected to convert into an
improved outturn in 2016, is set out below.

June 2015
£194m

November 2014
£185m

Future trend

32%

26%

19%

41%

24%

14%

3%
100%

2%
100%

Market sectors
The Group’s key market sectors are
discussed in detail on pages 18 and 19.

Sector

Commercial offices

Transport (including bridges)

Industrial and distribution

Stadia and leisure

Power and energy

Data centres and other

Retail

Health and education

Pipeline/prospects
The Group continues to monitor the
future pipeline of work which is likely
to convert to orders in the near term.
This provides forward visibility of future
orders and helps to facilitate production
planning. The Group’s pipeline of contract
opportunities is encouraging and
includes prestigious developments in the
commercial offices, stadia and leisure,
data centres, industrial (warehousing) and
transport sectors.

Current estimated
UK capacity

1,000,000

tonnes

Total UK production of
constructional steelwork

889,000

tonnes

Group potential capacity

150,000

tonnes

23925-04 24-06-2015 Proof 5

Severfield plc

Stock code: SFR

www.severfield.com

Market sectors

With our extensive experience in multiple sectors, the Group’s state-of-the-art
facilities provide our clients with unrivalled services and value in the execution
of their projects. Our structures serve people every day, whether for work, play
or travel, or to provide essential infrastructure, including power and energy.

Core construction sectors

1. Commercial offices
Through our work in the commercial office sector, we have made
a significant impact on the cityscapes of London and other major
commercial hubs around the world. We ensure our structural steel
methods, products and processes keep up with the needs and challenges
of this rapidly evolving sector. Our success is underpinned by specialist
products such as FABSEC® and Firebeam®, together with other
initiatives. Recent successes include Aldgate Tower, Nova, Victoria, New
Street Square, W5, Regents Place, South Bank Tower and Fetter Lane.

2. Industrial and distribution
The Group is a trusted partner to the industrial, warehousing and
distribution industries, thanks to our strong reputation for engineering
excellence and versatility. Unrivalled capacity, the ability to meet diverse
and rigorous requirements and other strengths such as design capability,
supply chain co-ordination and delivery speeds set us apart from our
competitors. Our clients cover a wide range of sectors from automotive
to retail, with major contracts including projects for Sports Direct, Ocado,
ASDA, Sainsbury’s, Aldi and Jaguar Land Rover.

3. Stadia and leisure
Stadia and leisure complexes are important sectors for the steelwork industry.
The Group has an unrivalled record in the design, engineering and building
of many of the UK’s best known sports hubs, including the world-renowned
Olympic Stadium, Arsenal Football Club’s Emirates Stadium and Wimbledon
Centre Court. We have also provided timely and cost-effective solutions for key
leisure destinations, ranging from exhibition and conference centres to state-
of-the-art concert arenas.

Other recent projects include the redevelopment of Anfield stadium
(Liverpool Football Club) and the south stand redevelopment at
Manchester City Football Club.

4. Retail
Retail developments are becoming increasingly complex and ambitious
as towns and cities position themselves as attractive shopping
destinations in today’s competitive economy. Major redevelopment in
cities and out-of-town shopping facilities are challenging projects in their
own right, requiring different skills and services. Project management
and supply chain linkage are vital to successful project execution. Group
successes include Bradford’s Westfield Shopping Centre, Hereford
Old Livestock Market, John Lewis, Birmingham and projects for ASDA,
Sainsbury’s, Costco and Aldi.

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Annual report and accounts for the year ended 31 March 2015

Strategic report / Our business and strategy

Key:

Core construction sectors

Core infrastructure sectors

5. Data centres and other
Data centres are an ever growing part of the business world. In recent
years, they have become increasingly important to businesses of all sizes
as they look for cost-effective alternatives to high in-house IT and other
costs. With a large proportion of data centres being specified in steel, the
Group is well placed to meet the needs of this rapidly expanding sector,
and our cost, speed and flexibility have resulted in several key contract
awards. Recent successes include London Data Centre, Slough, Microsoft
Amsterdam and Telehouse.

1. Transport
Transportation is a key market sector for the Group. Our expertise includes
international airports, road and rail facilities, and bridges. Many of the
structures we create become famed landmarks in their own right. Services
range from design, planning and high-volume steel supply, to fabrication
and construction. As a key element of the UK’s infrastructure, bridge building
requires skill, precision and quality on a large scale. Our growing bridge
business has a strong reputation and extensive experience in the successful
delivery of all types of bridgework, including major transport routes.

Our successes include multiple contracts with Heathrow Airport, London
Bridge Station Canopies, Manchester Victoria Station, Pulpit Rock Viaduct
and the M8 rail bridges.

2. Power and energy
Power stations, sustainable energy facilities and waste processing plants
form an important part of our business. Our professionalism, extensive
sector experience and ability to meet specific engineering requirements
enable us to continue serving these vital sectors in the UK and other parts
of the world. Group successes include Essex and Milton Keynes waste
treatment plants, Cardiff and Peterborough Waste to Energy plants and
Carrington Power Station.

3. Health and education
We have a long history of providing world-class steel solutions for
hospitals, which are increasingly being specified with structural steel
frames. Key factors giving us an advantage in this sector include span
length, enhanced flexibility, adaptability and speed of construction. We
have also worked with many education clients and contractors over the
years, each project bringing its own specific requirements and challenges.
Group successes include Francis Crick Institute, Syringe Factory, Nigeria
and the University of Strathclyde.

23925-04 24-06-2015 Proof 5

Severfield plc

Stock code: SFR

www.severfield.com

Our strategy

Our vision is to be recognised as world-class leaders in structural steel, known
for our ability to deliver any project to the highest possible standards. We will
deliver this vision through the Group’s strategy, the core of which revolves
around continuing to build a solid platform for growth, and is supported by a
focus on five key elements.

In 2015, the progress that we have made in delivering our strategy, together with how this strategy has been further developed,
is set out below:

Strategic element

Growth

In the short to medium term, our aim is to capitalise on
growth opportunities both in the UK and in overseas
markets.

Priorities

Achievements in 2015

Objectives for 2016

Increase UK market share – growing market share in areas
where the business already operates.

Enter new UK market sectors – looking for new market
areas where the business has not operated in the past,
taking advantage of our existing capacity and capabilities.

Building from existing European opportunities – driving
more opportunities from European contractors with whom
we have strong relationships in the UK.

We have focused on larger projects within our target

Grow Group revenues (and the order book) in FY16,

markets, playing to our strengths of capability and

taking advantage of the improving market position.

capacity (including Anfield Stadium, Principal Place,

Angel Court, Ordsall Chord and Telehouse).

We have undertaken significant research work to

gain greater knowledge of current markets and target

markets outside of our traditional areas.

Increase market share in areas where the Group

already has specialist expertise.

Infrastructure and bridge markets – coupled with

developing the legacy Mabey Bridge operations, we

have a targeted approach with key UK infrastructure

This has led us to expand our bridge capability

project owners to exploit identified growth

through the recruitment of the legacy Mabey Bridge

opportunities.

infrastructure team, providing us with additional

resources and expertise to capitalise on the growth

potential within the bridge and infrastructure markets.

Continue to review growth opportunities in the UK,

Europe (which was deferred in FY15 by the European

downturn) and the rest of the world.

Operational excellence

Drive operational improvements and efficiencies – the
objective of our comprehensive operational improvement
programme is to improve the Group’s risk assessment,
operational and contract management processes.

The improvement in operating margin during the

Our aim remains to restore underlying operating

year highlights the benefits of our short-term focus

margins to 5 to 6 per cent by the end of 2016

on margin recovery rather than top line growth. The

reflecting the continued improvement in contract

increased margin reflects the ongoing improvements

execution coupled with better commercial and project

Our emphasis is on delivering high quality products and
reducing costs by driving excellence through our core
business processes.

Invest in market-leading technology – we will make
this investment in the short and medium term in order to
support the Group’s ongoing requirements and for growth.

23925-04 24-06-2015 Proof 5

in risk management and operational processes,

together with a more selective approach when

tendering for work.

The operational improvements were also evidenced in the

Group’s positive operating cash flow for FY15 which has

enabled the directors to recommend a final dividend.

management procedures and the underlying margins

on individual contracts secured in the order book.

This, in accordance with the Group’s business model,

will continue to generate surplus cash flows and

support dividends.

Capital expenditure of £6.6m represents a significant

increase in the Group’s investment programme. This

We will continue to upgrade and replace existing

equipment where appropriate, with new state-of-the-

enabled the upgrade of some of the Group’s core fabrication

art technology to help drive production efficiencies,

equipment and also an increase in the Group’s fleet of

and to expand the capital equipment base where

mobile plant and equipment used on its construction sites.

there is a strong return on investment case.

This has generated operational efficiencies during the year,

which are reflected in the improved operating margin, and

will continue to benefit the Group in following years.

We have disposed of our non-core investment property to

release cash for investment in new technologies.

Annual report and accounts for the year ended 31 March 2015

Strategic report / Our business and strategy

Read about our KPIs on
page 42

Read about our marketplace on
page 16

Read about our business model on
page 12

Read our operating review on
page 28

Growth

Clients

Our strategy:
Building a solid
platform for growth

Operational
excellence

People

India

Priorities

Achievements in 2015

Objectives for 2016

We have focused on larger projects within our target
markets, playing to our strengths of capability and
capacity (including Anfield Stadium, Principal Place,
Angel Court, Ordsall Chord and Telehouse).

We have undertaken significant research work to
gain greater knowledge of current markets and target
markets outside of our traditional areas.

This has led us to expand our bridge capability
through the recruitment of the legacy Mabey Bridge
infrastructure team, providing us with additional
resources and expertise to capitalise on the growth
potential within the bridge and infrastructure markets.

The improvement in operating margin during the
year highlights the benefits of our short-term focus
on margin recovery rather than top line growth. The
increased margin reflects the ongoing improvements
in risk management and operational processes,
together with a more selective approach when
tendering for work.

The operational improvements were also evidenced in the
Group’s positive operating cash flow for FY15 which has
enabled the directors to recommend a final dividend.

Capital expenditure of £6.6m represents a significant
increase in the Group’s investment programme. This
enabled the upgrade of some of the Group’s core fabrication
equipment and also an increase in the Group’s fleet of
mobile plant and equipment used on its construction sites.
This has generated operational efficiencies during the year,
which are reflected in the improved operating margin, and
will continue to benefit the Group in following years.

We have disposed of our non-core investment property to
release cash for investment in new technologies.

Grow Group revenues (and the order book) in FY16,
taking advantage of the improving market position.

Increase market share in areas where the Group
already has specialist expertise.

Infrastructure and bridge markets – coupled with
developing the legacy Mabey Bridge operations, we
have a targeted approach with key UK infrastructure
project owners to exploit identified growth
opportunities.

Continue to review growth opportunities in the UK,
Europe (which was deferred in FY15 by the European
downturn) and the rest of the world.

Our aim remains to restore underlying operating
margins to 5 to 6 per cent by the end of 2016
reflecting the continued improvement in contract
execution coupled with better commercial and project
management procedures and the underlying margins
on individual contracts secured in the order book.
This, in accordance with the Group’s business model,
will continue to generate surplus cash flows and
support dividends.

We will continue to upgrade and replace existing
equipment where appropriate, with new state-of-the-
art technology to help drive production efficiencies,
and to expand the capital equipment base where
there is a strong return on investment case.

23925-04 24-06-2015 Proof 5

Strategic element

Growth

In the short to medium term, our aim is to capitalise on

growth opportunities both in the UK and in overseas

markets.

Increase UK market share – growing market share in areas

where the business already operates.

Enter new UK market sectors – looking for new market

areas where the business has not operated in the past,

taking advantage of our existing capacity and capabilities.

Building from existing European opportunities – driving

more opportunities from European contractors with whom

we have strong relationships in the UK.

Operational excellence

Drive operational improvements and efficiencies – the

objective of our comprehensive operational improvement

programme is to improve the Group’s risk assessment,

operational and contract management processes.

Our emphasis is on delivering high quality products and

reducing costs by driving excellence through our core

business processes.

Invest in market-leading technology – we will make

this investment in the short and medium term in order to

support the Group’s ongoing requirements and for growth.

Severfield plc

Stock code: SFR

www.severfield.com

Our strategy

Strategic element

Clients

By understanding, anticipating and responding to
client needs we aim to build secure, sustainable and
mutually valuable relationships and create lasting client
satisfaction.

People

Our people are at the heart of our business and are vital
to the success of our vision and the achievement of our
strategic goals.

Priorities

Achievements in 2015

Objectives for 2016

Quality of service – our industry experience allows us to
better understand our customers’ own strategic objectives
and enables us to design, fabricate and construct structural
steelwork solutions to support these objectives.

Following the rebranding exercise during the year, the

Client retention is vital to our organic growth plans

Group is now operating under the single Severfield

and we will continue to ensure that the customer is at

brand. We believe that this provides improved clarity

the centre of everything we do.

We have continued to develop our relationships with

value-added solutions throughout the project life cycle.

We will seek to engage at an early stage with our

clients and ultimate project owners to enhance our

understanding of their requirements and to provide

Develop our people – our aim is to attract and recruit the
right person at every level and to keep them engaged so that
we can deliver our goals and customer commitments whilst
maintaining a safe working environment.

During the year, the following key appointments were

We will continue to prioritise investment in our people

for our customers, supporting an increased level of

business and market development activity in both

existing and adjacent markets.

key clients during the year, the benefit of which is

evidenced in the improved order book position.

made:

• Gary Wintersgill, managing director (Severfield UK);

• Martin Kelly, Group strategic business

development director;

• Lee Mills, Group SHE director;

• Three new non-executive directors;

• Group communications manager;

• 20 apprentices/trainees

We conducted our first Group-wide employee

engagement survey. This has enabled us to

identify areas in need of improvement and create

We launched a save as you earn share scheme to

provide our employees with an improved choice in the

way that they participate.

We have strengthened our dedicated health and

safety team during the year which has assisted in

reducing the Group’s AFR.

to ensure a healthy pipeline of talent to achieve our

strategic goals.

We will conduct a Group-wide review of emerging

talent to ensure consistency and visibility of talent,

succession planning and career opportunity.

We plan to extend our performance share plan to our

wider operating company director population. This

will support buy-in to the long-term success of the

business and assist in management retention.

We are committed to a target of zero injuries and we

will continue to apply the highest standards in health

and safety across all operations in order to further

improve the Group AFR. Further initiatives around

Find out more about

people on page 40

a benchmark against which we can measure progress.

behavioural safety are also being planned.

India

Sustainability of India – our aim is to ensure that the
business develops a sustainable position whilst the market
continues its conversion to steel.

We have significantly reduced joint venture losses

We will continue to embed the operational

during the year. This reflects improved levels of

improvements implemented in 2015, consolidate the

production output in the factory together with the

management team and build relationships with key

We continue to believe that the Indian market presents
great opportunities for steel fabrication.

23925-04 24-06-2015 Proof 5

benefits of the overhead reduction programme and

clients.

the operational improvement plan being implemented

by the new management team.

We aim to strike the right balance between

commercial and industrial projects to ensure that

We have reviewed our strategy for India in light of the

production remains at satisfactory levels whilst we

improved performance in 2015, resulting in a new

continue to improve the operating margin.

strategic priority, ‘building value in India’. Our aim is

to ensure that the business continues to grow and to

generate value for our shareholders.

To further strengthen the India operations, we

also consider geographically proximate export

opportunities to support the existing order book and

pipeline.

Find out more about

India on page 24

Annual report and accounts for the year ended 31 March 2015

Strategic report / Our business and strategy

Strategic element

Clients

satisfaction.

People

By understanding, anticipating and responding to

client needs we aim to build secure, sustainable and

mutually valuable relationships and create lasting client

Our people are at the heart of our business and are vital

to the success of our vision and the achievement of our

strategic goals.

Priorities

Achievements in 2015

Objectives for 2016

Quality of service – our industry experience allows us to

better understand our customers’ own strategic objectives

and enables us to design, fabricate and construct structural

steelwork solutions to support these objectives.

Following the rebranding exercise during the year, the
Group is now operating under the single Severfield
brand. We believe that this provides improved clarity
for our customers, supporting an increased level of
business and market development activity in both
existing and adjacent markets.

We have continued to develop our relationships with
key clients during the year, the benefit of which is
evidenced in the improved order book position.

Client retention is vital to our organic growth plans
and we will continue to ensure that the customer is at
the centre of everything we do.

We will seek to engage at an early stage with our
clients and ultimate project owners to enhance our
understanding of their requirements and to provide
value-added solutions throughout the project life cycle.

Develop our people – our aim is to attract and recruit the

right person at every level and to keep them engaged so that

we can deliver our goals and customer commitments whilst

maintaining a safe working environment.

During the year, the following key appointments were
made:

• Gary Wintersgill, managing director (Severfield UK);

• Martin Kelly, Group strategic business

development director;

• Lee Mills, Group SHE director;

• Three new non-executive directors;

• Group communications manager;

• 20 apprentices/trainees

We conducted our first Group-wide employee
engagement survey. This has enabled us to
identify areas in need of improvement and create
a benchmark against which we can measure progress.

We launched a save as you earn share scheme to
provide our employees with an improved choice in the
way that they participate.

We have strengthened our dedicated health and
safety team during the year which has assisted in
reducing the Group’s AFR.

We have significantly reduced joint venture losses
during the year. This reflects improved levels of
production output in the factory together with the
benefits of the overhead reduction programme and
the operational improvement plan being implemented
by the new management team.

We have reviewed our strategy for India in light of the
improved performance in 2015, resulting in a new
strategic priority, ‘building value in India’. Our aim is
to ensure that the business continues to grow and to
generate value for our shareholders.

We will continue to prioritise investment in our people
to ensure a healthy pipeline of talent to achieve our
strategic goals.

We will conduct a Group-wide review of emerging
talent to ensure consistency and visibility of talent,
succession planning and career opportunity.

We plan to extend our performance share plan to our
wider operating company director population. This
will support buy-in to the long-term success of the
business and assist in management retention.

We are committed to a target of zero injuries and we
will continue to apply the highest standards in health
and safety across all operations in order to further
improve the Group AFR. Further initiatives around
behavioural safety are also being planned.

Find out more about
people on page 40

We will continue to embed the operational
improvements implemented in 2015, consolidate the
management team and build relationships with key
clients.

We aim to strike the right balance between
commercial and industrial projects to ensure that
production remains at satisfactory levels whilst we
continue to improve the operating margin.

To further strengthen the India operations, we
also consider geographically proximate export
opportunities to support the existing order book and
pipeline.

Find out more about
India on page 24

23925-04 24-06-2015 Proof 5

India

Sustainability of India – our aim is to ensure that the

business develops a sustainable position whilst the market

continues its conversion to steel.

We continue to believe that the Indian market presents

great opportunities for steel fabrication.

Severfield plc

Stock code: SFR

www.severfield.com

JSW Severfield Structures

The Group’s joint venture and operations in India
remain important in achieving our strategy of
generating value for our shareholders.

Picture top: JSW Barmill and Sinter Plant, Bellary.

Picture bottom: Health and safety briefing at the
Bellary facility.

Current and future projects
The order book stands at £38m (1 June
2015).

The demonstration of value through
design, quality, speed, consistency and
overall professional capability has led to
the successful award of many prestigious
projects from local and inward investors
including:

• A prestigious office for Intel, Bangalore

• A mixed use development for Proplarity,

Noida

• A complex office extension project for

K. Raheja

• A data centre programme for Reliance

Industries Ltd to support its 4G
expansion programme

• A commercial building for Altair in
Colombo, with Shapoorji Pallonji

• A manufacturing development for

Godrej in Gujarat

•

Industrial projects for JSW Steel Ltd,
Doosan etc

The future
Although India is still primarily a concrete
construction market, we are seeing
continued progress in its conversion
from concrete to steel and prospects are
expected to improve over the next 6–12
months given the Government’s plans for
infrastructure growth and more access for
foreign direct investment. 2015/16 is likely
to see the mix of work in the business
between commercial and lower margin
industrial projects improve against a

Overview
Performance from the Indian joint venture
was much improved during the year
resulting in a Group share of losses of
£0.2m compared to £3.0m the previous year.
The improved result reflects the benefits of
the many changes made in response to the
very disappointing performance in 2013/14,
including the appointment of Derek Randall
as managing director. In addition to Derek’s
appointment, the senior management team
was also strengthened with changes made
to many key positions.

The overhead reduction programme has
been successful with almost a 40 per cent
reduction in costs at a time when output
was increased by 85 per cent from 26,000
tonnes to just over 48,000 tonnes. This,
together with a host of other efficiency
and market development initiatives,
means that the business is in a much
better position than it was 12 months ago.

The Indian business itself delivered an
operating margin of 9.0 per cent which
has improved confidence that it is a
sustainable business which can support
itself and deliver significant value to the
Group in the medium and long term.

The quality of product and a differentiated
and fully integrated in-house service of
design, fabrication and site construction is
now being valued by clients. Together with
a best-in-class health and safety record
which is being recognised and rewarded
by clients, the company’s reputation is
growing positively within the construction
industry in India. Significantly, more
architects, consultants, end clients and
main contractors are appreciating the value
of structural steel solutions delivered within
a holistic technical and service model.

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Annual capacity

60,000

tonnes

Site area

acres

Order book

£million

• An INDISEC® line to produce sections
from plate and to make cellular beams
for steel design optimisation and
improved floor to ceiling space.

• A smaller welded beam line.

• Off-line facilities to manufacture

hand-railing, stairs and other ancillary
products.

• A second joint venture, JSW Structural
Metal Decking Limited (between JSW
Severfield Structures and SMD Asia),
which has a metal decking floor line,
also in Bellary.

State-of-the-art facility
• The facility has been designed to

optimise product range, quality and
productivity, as befitting the demands
of the construction industry in India.

•

Incorporating state-of-the-art
technology and processing equipment,
the facility is managed and operated
by highly qualified, experienced and
dedicated people.

• Bespoke plated products and INDISEC®
are manufactured on-site at Bellary,
Karnataka offering clients a range of
benefits.

The facility currently utilises around
35,000 square metres of covered area,
and 52,000 square metres of logistics
and storage area. The site is on 65 acres,
allowing for future expansion.

relatively weak backdrop. We expect the
stable level of performance achieved in the
current year to continue in 2015/16.

Current operations
The facility is based in Bellary, Karnataka.

The Group and our joint venture partner JSW
Steel remain positive that the business will
continue to improve its performance and
that it will grow through continued market
penetration and overall market growth. We
believe that the joint venture is increasingly
well placed to deliver solid long-term growth
for the Group.

Depending on mix, the capacity is
approximately 60,000 tonnes per annum.
The facility consists of:

• A bit shop, two fabrication lines and
a bay to provide bespoke off-line
heavy fabrication, tubular products,
specialised multi-coat painting
and further bogey line fabrication if
required.

Locations within India

MUMBAI — Head office

BELLARY — Production plant

BANGALORE — Sales representation and
drawing/design office

DELHI — Sales representation

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Delivering quality service

The project is part of Network Rail’s £6bn upgrade
programme. Fifteen platforms are being demolished
progressively and rebuilt whilst keeping a significant
number of lines open around the works. Due to the tight
programme and site constraints, we have developed
and manufactured a cassette canopy system off-site
that includes steel framed cassette structure, roof and
cladding.

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Strategic report / Our performance

27 Strategic report

Our performance

Operating review
Financial review
Corporate social responsibility
Key performance indicators
Principal risks and uncertainties

28
32
36
42
44

Project: London Bridge Station
Canopies

Sector: Transport

Location: London

Tonnage: 4,030

Client: Network Rail

Main contractor: Costain

Completion: 2017

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Operating review

Ian Lawson
Chief executive officer

“ This year has seen

good progress on all
key fronts. ”

Read our strategy on
page 20

Read our KPIs on
page 42

Read our financial review on
page 32

We have made good progress in implementing
and developing the new strategy introduced last
year, particularly in respect of operating and margin
improvements in the UK and creating a sustainable
business in India.

Group overview
This year has seen good progress on all key
fronts. The UK operational improvement
programme has contributed to an increase
in the underlying operating margin from 3.3
per cent to 4.5 per cent, the performance
of the Indian joint venture has improved
greatly with the Group’s share of losses
reducing to £0.2m (2014: £3.0m) and
cash flow has been good with net funds
at year-end increasing to £6.4m (2014:
£0.3m), even after an increase in capital
investment to £6.6m.

Our health and safety performance
has also improved, with the accident
frequency rate (AFR) for our UK operations
reducing from 0.57 to 0.33 (the Group AFR
which includes our Indian joint venture
was 0.21).

Our comprehensive review of the Group’s
brand and market position undertaken
in early 2014 has also helped deliver
operational improvement. The rebrand
has delivered increased brand penetration
in our core market sectors, and has had
a demonstrable impact on our ability
to secure key projects and expand our
capability. This has all helped to deliver
solid progress with the implementation of
the new Group strategy.

During the year, a small number of bolts
failed on the Leadenhall building, the
construction of which was completed
in 2013. A programme of remedial
works involving the replacement of
all bolts at risk of failure is being
undertaken in conjunction with British
Land, Laing O’Rourke and Arup and is
likely to continue until the end of the
2015 calendar year. Whilst these works

progress, discussions continue to agree
where the liability for the costs of the
programme should rest. The Group
incurred costs of £1.0m relating to the
remedial works programme during the
financial year and estimates that its total
costs will be in the region of £6.0m. A non-
underlying charge has been recognised for
these costs as at 31 March 2015.

Based on the overall progress made by
the Group over the past year, I am pleased
that the board has agreed to recommend
the reintroduction of a final dividend of
0.5p per share.

UK review
As previously stated, our objective moving
from 2014 into 2015 has been to prioritise
continued improvement in operating
margins, rather than revenue growth. UK
revenue of £201.5m was lower than the
prior year level of £231.3m, consistent
with this strategy. The revenue reduction
reflected a more disciplined approach to
pricing and bidding for work, along with
a temporary softening of demand in the
middle of the year. Despite this reduction
in revenue, underlying operating profit
(before the share of results of JVs and
associates) increased to £9.0m (2014:
£7.6m) reflecting an increase in margin
from 3.3 per cent to 4.5 per cent.

The UK business has had a more
stable year structurally following the
reorganisations in the prior year. We
appointed Gary Wintersgill as the new
managing director for the main business,
Severfield (UK), in November, which
allowed Ian Cochrane to step back into his
chief operating officer role on a full-time
basis. Further changes were made to

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strengthen management at all levels within
the UK and these changes, coupled with
the more stable organisation structure,
allowed focus to be maintained on the
operational improvement programme. This
was initiated following the rights issue
in 2013 to improve risk assessment and
operational and contract management
processes across the business. There has
been real evidence of progress in all three
of these areas during the year and this
generates benefits on every new cycle of
contracts which the Group undertakes.
There continues to be scope for further
improvement, particularly in some
operational processes. This will help drive
margins up to and beyond the previously
stated target of 5 to 6 per cent and towards
a medium-term target of 8 to 10 per cent.
Another important step during the year

was the recruitment of a significant
number of staff from the infrastructure
division of Mabey Bridge, following the
announcement of its closure. The Group
has existing expertise in the UK bridge
building market and this move expands
our capability significantly both for
bridges and other infrastructure projects,
and will support stronger growth in these
areas in the coming years.

Order book and market
conditions
The UK order book at 1 June 2015 of
£194m has strengthened over the year
and this provides the platform required
to return to revenue growth in 2015/16.
The current order book contains over
70 live contracts which are particularly

focused in the Group’s key market sectors
of commercial offices, retail, stadia
and leisure, industrial and distribution
and transport. New contracts won
during the year, which remain in the
order book, include London commercial
office developments at Principal Place
and Angel Court, the Anfield stadium
redevelopment for Liverpool Football Club
and the Ordsall Chord link bridge between
Manchester’s Victoria and Piccadilly
stations.

The market conditions have shown some
improvement over the last few months
with the pipeline of opportunities growing
particularly in the infrastructure and
commercial office building sectors. We
are also seeing some clients increasingly
recognise the importance and value of

Case study: New Fetter Lane, London

Sector: Commercial offices
Tonnage: 1,500
Client: Great Portland Estates
Main contractor: Mace

Project overview:
12–14 New Fetter Lane is a 15-storey
innovative office building development in
the City of London. The building features a
tall single-storey ground floor level which
includes the main building entrance, retail
accommodation and service bay, with 12 floors
of office accommodation above. The top of
the building, above the final floor of offices, is
articulated with a double-stacked plant room
which contains two levels of plant, taking the
total building height to 60 metres above
Fetter Lane.

The Group is providing the connection design,
fabrication and construction of just over 1,500
tonnes of structural steel for the project.

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Business investment
This year saw a step up in our level of
capital investment to £6.6m, following
several years at a more restrained level
of £2–3m. This investment was focused
on replacing and upgrading some of the
Group’s older fabrication equipment along
with increasing its owned fleet of mobile
elevated work platforms for construction
site work. Other capital investment in
the UK included a new canteen and
office facility at our Dalton plant in
North Yorkshire.

This investment in equipment will enable
us to deliver even greater efficiency
across the business and we see further
opportunity to increase efficiency with our
ongoing investment programme which we
have set at £4-5m per year. The Group’s
scale and resources will enable us to
invest more readily than our competitors
in new and emerging fabrication
technology and continue building on our
existing competitive advantage.

A further £1.7m of capital was invested
in the Indian joint venture in the first
half of the year, which was required to
finance previous losses generated by
the business. With the business now
operating at close to a break-even level,
the requirement for future support should
be reduced although the balance of debt
to equity in the capital structure of the
business will be kept under constant
review as repayments start on the existing
term loan in 2015/16.

Operating review

efficient and consistent supply levels
and production capabilities and this is
leading to a more structured and rounded
approach to procurement rather than it
being solely price led. However, pricing
in some areas is still competitive but our
more disciplined approach means that we
are bringing a clearer sense of value, risk
and reward to our pricing decisions.

major contribution to the success of
the business, with 48,000 tonnes of
fabricated steel being produced compared
with 26,000 tonnes last year. There is
now improved confidence amongst the
JV partners that JSSL is a sustainable
business which can support itself and
deliver significant value to the Group in
the medium to long term.

The wider market in India is displaying two
distinct characteristics at the moment.
On the one hand, the initial exuberance
following the election of the new Modi
government last year has diminished and
in many ways the construction market
is relatively soft at the moment. This is
expected to improve over the next 6–12
months as the government’s structural
reforms start to take effect. On the other
hand, we are seeing continued progress
in the conversion of the construction
market from concrete to steel. The result
is that we are seeing a growing number of
enquiries for commercial projects which
would previously have been delivered in
concrete, when compared to industrial
projects (which have traditionally been
done in steel but at low margins). The year
ahead is likely to see the mix of work in
the business between commercial and
industrial improve. This should mean
another year of stable performance
against the soft current market backdrop,
whilst the longer-term outlook will
continue to improve from the shift in mix
towards more commercial work.

Projects
We have continued to deliver projects to
our clients’ expectations. During the year
we worked on over 110 projects covering
many of the Group’s key market sectors.
These included:

• Westfield Shopping Centre, Bradford

• Nova, Victoria

• Carrington Power Station

• Manchester City Football Club (the
expansion of the Etihad Stadium)

• London Bridge Station Canopies

• New London Embassy

• Telehouse Data Centre

• Manchester Victoria Station

• South Bank Tower, London

• Fetter Lane, London

• Sports Direct, Shirebrook

• Microsoft, Amsterdam

• Western Approach Viaduct (WAV

Bridge)

India
The Indian joint venture has delivered a
much improved performance during the
year, with the Group’s share of losses
reducing to £0.2m from £3.0m in the prior
year. The business delivered an operating
margin of 9.0 per cent (2014: -18.0 per
cent). However, it is the financing costs
of the business’s current debt structure
which turned an operating profit into a
net loss of which the Group reports its 50
per cent share. This improved operating
performance reflects the benefits of
all the changes made in response to
the prior year’s very disappointing
performance, including a significant
reduction in overheads and an operational
improvement programme. These changes
also helped secure a higher volume
of work for the factory, which made a

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“ I would like to thank

all of our people for
their hard work and
commitment over the
past 12 months and
look forward to their
ongoing support
as we continue to
build a successful
business.”

Safety
The Group’s AFR for the year, which
includes our Indian joint venture, was
0.21. The current year result of 0.21
includes an AFR of 0.33 for our UK
operations which was a significant
improvement on the prior year of 0.57. This
reflects a continuation of the improving
trend seen towards the end of the prior
period along with some new initiatives
launched in the current year following
the appointment of a new Group SHE
director in April 2014. These initiatives
included a focus on near miss reporting,
both in the factory and on-site, improved
health and safety communications,
investment in technology and training and
site SHE visits by directors to drive visible
leadership and reaffirm our commitment
to a zero accident culture. The safety
of all our employees is of paramount
importance and continues to receive
priority attention from both the executive
committee and the board.

Strategy, branding and
communication
The change in the Group’s name to
Severfield plc and the associated
simplification of the naming structure of
the Group’s main operating companies
has been well received in the marketplace.
It is also supporting a more proactive
communication programme to both raise
the profile of the Group’s capabilities
and our role in building many of the
iconic structures around the UK. This is
being mirrored with improved internal
communications and, for the first time
ever, an employee engagement survey
was undertaken in the year. Improving
employee engagement is vital to ensuring
that the Group is an attractive place to
work for both existing and potential new
employees as we seek to develop and
grow. During the year we launched a SAYE
share scheme. This achieved a 28 per cent
take-up rate which was pleasing when
compared with more normal levels for
these types of schemes of around 20
per cent.

We have made good progress in starting
to implement and develop further the new
strategy introduced last year, as set out
on pages 20 to 23 and elsewhere in this
review, particularly in respect of operating
and margin improvements in the UK and
creating a sustainable business in India.
We appointed a Group strategic business
development director to ensure that we
could continue developing the wider
business strategy without distracting
operational management from the
continued improvement of the core UK
business.

Summary and outlook
The Group has made real progress
in the UK and India in the year both
operationally and financially. The quality
of the current order book and sustained
increase in the pipeline in the UK gives us
the confidence to believe we can deliver
improved revenues. We have the skills and
capacity to deliver the expected demand
as spend in the UK infrastructure markets
and the power and energy sectors grows,
alongside delivering improved margins.

As the JV in India stabilises with improved
market conditions, as government and
international funding becomes more
readily available for infrastructure and
commercial projects, along with the
continued move from concrete to steel,
we believe we are well placed to take
advantage of this growing market. The
JV has the potential to generate real
shareholder value from a sustainable
business over the next few years.

Finally, I would like to thank all of
our people for their hard work and
commitment over the past 12 months
and look forward to their ongoing support
as we continue to build a successful
business.

Ian Lawson
Chief executive officer
17 June 2015

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Financial review

Alan Dunsmore
Group finance director

“ The board

recommends the
reintroduction of a
final dividend of
0.5p per share.”

Revenue for the year of £201.5m compared with
£231.3m in the prior year. The reduction directly
reflects the focus for the year being on operating
margin recovery rather than revenue growth.

Non-underlying items
Non-underlying items for the year of
£8.5m (2014: £8.1m) consist of the
following:

• Contract remedial costs – £6.0m

(2014: £nil)

• Amortisation of acquired intangible

assets – £2.6m (2014: £2.7m)

• Valuation of derivative financial

instruments – £0.1m favourable
(2014: £nil)

The contract remedial costs relate
to a programme of bolt replacement
works at the Leadenhall building, a
contract that was completed in 2013.
They are treated as non-underlying
costs in accordance with the Group’s
stated policy. This programme is being
undertaken in conjunction with British
Land, Laing O’Rourke and Arup and is
likely to continue until the end of the
calendar year. The liability of the Group
and the other parties for the programme
costs has not yet been determined and,
therefore, the charge represents certain
costs incurred at year-end, together
with management’s best estimate of
the remaining cost to the Group. This is
based on the current requirements of the
programme and before taking account
of possible future recoveries, as these
cannot be recognised under IFRS.

Trading performance
Revenue for the year of £201.5m
compared with £231.3m in the prior
year. The reduction directly reflects the
focus for the year being on operating
margin recovery rather than revenue
growth. Improved tendering disciplines
contributed to the move away from
winning work at uneconomic rates or
with insufficient allowance for risk. The
benefits of this approach, alongside
improved operational processes, are
evident in the underlying operating profit
(before results of JVs and associates)
of £9.0m, an increase of £1.4m over
the prior year level of £7.6m, reflecting
an increased operating margin of 4.5
per cent (2014: 3.3 per cent). Margins
are progressing on track to achieve our
previously stated 5 to 6 per cent target
for the 2015/16 financial year. The share
of results of JVs and associates was
a loss of £0.2m (2014: £3.0m) and net
finance costs were £0.4m (2014: £0.6m).
Underlying profit before tax, which is
management’s primary measure of Group
profit, was £8.3m (2014: £4.0m). The
statutory profit after tax, reflecting both
underlying and non-underlying items was
£0.1m (2014: £2.6m loss).

Share of losses of JVs
and associates
The Group’s share of losses from its Indian
joint venture was £0.2m (2014: £3.0m).
This significant reduction reflects the
measures put in place to strengthen
management and reduce overheads,
alongside higher volume throughput in
the factory.

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Revenue
Underlying operating profit (before results of JVs and associates)
Underlying operating margin
Underlying profit before tax
Underlying basic earnings per share
Net funds
Operating profit /(loss) (before results of JVs and associates)
Profit/(loss) after tax

2015
£201.5m
£9.0m
4.5%
£8.3m
2.31p
£6.4m
£0.5m
£0.1m

2014
£231.3m
£7.6m
3.3%
£4.0m
0.88p
£0.3m
(£0.1m)
(£2.6m)

Finance costs
Net finance costs in the year were £0.4m
(2014: £0.6m). The reduction reflects the
Group’s move into a net funds position
for most of the year, coupled with
reduced bank facility costs following
the refinancing which was completed in
October 2014.

Taxation
The underlying tax charge of £1.4m
represents an effective tax rate of 17.0
per cent on the applicable profit (which
excludes results from JVs and associates).
This compares with an effective tax rate
of 20.2 per cent in the prior year. The
reduction over prior year mainly reflects
the UK statutory corporation tax rate
which reduced from 23 per cent to 21
per cent on 1 April 2014.

The total tax credit for the year of £0.3m
(2014: £1.4m) reflects the underlying tax
charge, offset by deferred tax benefits
arising from the amortisation of intangible
assets in the year, together with the
current tax credit on the contract remedial
costs associated with the Leadenhall
building.

Earnings per share
Underlying basic earnings per share was
2.31p (2014: 0.88p). This calculation is
based on the underlying profit after tax
of £6.9m and 297,503,587 shares, being
the weighted average number of shares in
issue during the year.

Basic earnings per share, based on the
statutory profit after tax, is 0.05p (2014:
-0.89p). There was no difference between
basic and diluted earnings per share in
the year (2014: no difference).

Dividend
The board recommends the reintroduction
of a final dividend of 0.5p per share
payable on 11 September 2015 to
shareholders on the register at the close
of business on 14 August 2015. This
dividend is not reflected on the balance
sheet at 31 March 2015 as it remains
subject to shareholder approval.

During the year, the board considered
what the dividend policy of the Group
should be. The Group intends to follow
a progressive dividend policy. Funding
flexibility will be maintained to ensure
there are sufficient cash resources
to fund the Group’s requirements.
Additional dividends will be paid when
the Group’s cash generation exceeds the
requirements of the business, and where
its underlying financial position remains
strong.

Revenue £000

£318,256

£266,692

£267,778

£231,312

£201,535

2010

2011

2013

2014

2015

Underlying* operating
profit/(loss) £000

£16,204

£14,193

£8,974

£7,621

2010

2011

2013

2014

2015

(£19,218)

* The basis for stating results on an underlying

basis is set out on page 101.

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Financial review

Balance sheet
Shareholders’ funds at 31 March 2015
were £140.6m (2014: £143.4m). The
reduction is primarily due to the non-
underlying Leadenhall remedial costs
coupled with an increase in the IAS 19
deficit on the Group’s defined benefit
pension scheme.

Goodwill on the balance sheet is valued at
£54.7m (2014: £54.7m) and is subject to
an annual impairment review under IFRS.
No impairment existed either at
31 March 2015 or at 31 March 2014.

Other intangible assets on the balance
sheet are valued at £7.1m (2014: £9.8m).
This represents the net book value of
the intangible assets identified on the
acquisition of Fisher Engineering in
2007, along with certain software assets.
Amortisation of £2.7m was charged in
the year.

The Group has property, plant and
equipment of £76.6m (2014: £74.1m).
Capital expenditure in the year was
£6.6m (2014: £2.2m). This included new
equipment for our fabrication lines in
Dalton and Northern Ireland, additional
equipment for use on our construction
sites, and a new canteen and employee
welfare facility at our Dalton factory.
Depreciation in the year was £3.6m.

The Group’s ongoing replenishment levels
of capital expenditure are expected to be
£4–5m per annum.

During the year the Group sold its
investment property in Leeds for £3.9m.
This was acquired several years ago, had
no relevance to the Group’s core steel
fabrication activities and the sale price was
within £0.1m of the property’s book value.

The Group invested a further £1.7m of
equity in its Indian joint venture in the
first half of the year, primarily to fund the
historical losses of the business. With
the joint venture now operating at close
to break-even levels, the need for further
equity injections to finance trading losses
should be much reduced.

The Group has a defined benefit pension
scheme which, although closed to new
members, had an IAS 19 deficit of £16.5m
(2014: £12.5m). The increase in the deficit
is mainly as a result of the reduction in
the assumption for corporate bond yields
which is used to set the discount rate,
partly offset by strong performance of
the scheme’s assets. Notwithstanding
this, the 2014 triennial valuation of
the scheme was completed during the
year and resulted in the Group’s deficit
contributions being maintained at £1m
per annum.

The Group is now adopting return on
capital employed (ROCE) as an additional
key performance indicator (KPI) to help
ensure that its strategy and associated
investment decisions recognise the
underlying cost of capital of the business.
The Group’s ROCE will be calculated
as underlying operating profit divided
by the average of opening and closing
capital employed. Capital employed is
shareholders’ equity excluding retirement
benefit obligations (net of tax), acquired
intangible assets and net funds. For the
2014/15 financial year, ROCE on this basis
was 6.1 per cent and the Group’s target is
for ROCE to exceed 10 per cent over the
whole economic cycle.

Cash flow
The Group finished the year with net
funds of £6.4m (2014: £0.3m). Operating
cash flows for the year before working
capital movements were £6.6m. Net
working capital, excluding the impact of
Leadenhall remedial costs, increased by
£1.2m during the year and represented
8.4 per cent of revenue at the year-end.
This is a little higher than the 5 to 7 per
cent range within which working capital
has stabilised over the past 18 months
but the difference can be attributed to the
slower than expected final settlement of
two older contracts.

Net investment during the year was
£3.0m, with £5.7m in capital expenditure
and £1.7m of additional equity investment
in India. Offsetting this was the proceeds
of £3.9m from the sale of the Group’s
investment property in June 2014.

The Group entered into a new banking
facility in October 2014 with Yorkshire
Bank (part of National Australia Bank)
and HSBC. The new facilities are for £25m,
with an accordion facility of a further
£20m available at the Group’s request,
and are available until July 2019. There are
two key financial covenants, with net debt:
EBITDA of <2.5x, and interest cover of >4x.
Other terms and conditions represent a
return to normality in comparison with
the terms required by the banks at the
time of the rights issue in 2013. This new
facility provides a solid foundation for
the Group, with supportive partners, as it
continues to improve its core profitability
and implement its wider strategy.

Treasury
Group treasury activities are managed
and controlled centrally. Risks to assets
and potential liabilities to customers,
employees and the public continue to be
insured. The Group maintains its low risk
financial management policy by insuring
all significant trade debtors.

The treasury function seeks to reduce
the Group’s exposure to any interest rate,
foreign exchange and other financial
risks, to ensure that adequate, secure
and cost-effective funding arrangements
are maintained to finance current and
planned future activities and to invest
cash assets safely and profitably.

The Group continues to have some
exposure to exchange rate fluctuations,
currently between sterling and the euro.
In order to maintain the projected level
of profit budgeted on contracts, foreign
exchange contracts are taken out to
convert into sterling at the expected date
of receipt.

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Strategic report / Our performance

Read our operating review on
page 28

Read our Group financials
on page 89

Read our Company financials on
page 131

Going concern
In determining whether the Group’s
annual consolidated financial statements
can be prepared on the going concern
basis, the directors considered all factors
likely to affect its future development,
performance and its financial position,
including cash flows, liquidity position
and borrowing facilities and the risks
and uncertainties relating to its business
activities. The following factors were
considered as relevant:

• The UK order book, which is

strengthening, and the pipeline of
potential future orders.

• The Group’s operational improvement
plan which has delivered stronger
financial performance and is expected
to continue doing so in the 2015/16
financial year and beyond.

• The Group’s net funds position and its
new committed bank finance facilities,
including both the level of those
facilities and the covenants attached
to them.

Based on the above, and having made
appropriate enquiries and reviewed
medium-term cash forecasts, the
directors consider it reasonable to
assume that the Group has adequate
resources to continue for the foreseeable
future and therefore that it is appropriate
to continue to adopt the going concern
basis in preparing the financial
statements.

Alan Dunsmore
Group finance director
17 June 2015

Case study: Manchester Victoria Station

Sector: Transport
Tonnage: 1,950
Client: Network Rail
Main contractor: Morgan Sindall

Project overview:
The project involves the creation of a modern
station environment at Manchester Victoria.
In addition to the new-build aspects of the
project, parts of the existing Victorian building
are being restored and refurbished.

A key component is the replacement of the
station roof, which allows for future expansion
of the station. The Group is supplying and
constructing around 1,900 tonnes of structural
steel for the iconic new roof, with the project’s
scope also involving the construction of a
mezzanine floor to link the station to the
Phones4U Arena as well as lifts and a feature
staircase.

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Severfield plc

Stock code: SFR

www.severfield.com

Corporate social responsibility

“ Safety underpins

everything we do.”

Our commitment to corporate responsibility is
a key element of the strategy of the Group
and is central to how we run the business.

Overview of commitment to
corporate social responsibility
We take our responsibilities very seriously
and are committed to good practice in
all our CSR activities. We work beyond
compliance to consider how we can have a
positive impact on communities, minimise
risk in our operations and ensure the best
health and safety performance standards.
This commitment can be seen in our core
values and mission statement which has
been communicated through roadshows
and toolbox talks to all our employees.

Our board takes regular account of the
significance of social, environmental,
ethical and health and safety matters
to the Group. A comprehensive risk
management and internal control process
is in place.

With our focus on people, we are
passionate about providing excellent
training and skills development
opportunities that benefit individual
members of staff and preserve our high
working standards. We also support
employment in local areas by taking on
apprentices across the Group each year,
hiring our people locally wherever possible
and providing opportunities for graduates
across a number of functions including
business support, quantity surveying,
design engineering, site management and
project management.

S.L.A.M.

Stop for a moment.
L ook at your work area.
A nticipate what could go wrong.
Manage your work safely.

Do the safe thing.

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Annual report and accounts for the year ended 31 March 2015

Strategic report / Our performance

Safety, health and
environment
In the current year, we introduced a
number of initiatives aimed at improving
the Group’s accident frequency rate
(AFR). These included a focus on ‘near
miss’ reporting, both in the factory and
on site and which we incentivised using
monetary awards and donations to local
charities. They also included improved
health and safety communications,
investment in technology and training and
site SHE visits by directors to drive visible
leadership and reaffirm our commitment
to a zero accident culture.

The current year AFR of 0.21 includes an
AFR of 0.33 for our UK operations which
also compares favourably (c40 per cent
lower) with the previous year’s UK AFR
of 0.57. In 2014/15 we had 12 RIDDORs
compared to 22 in 2013/14, which is
reflected in our improved AFR results.

We are very pleased with this
improvement but are not complacent
and we will continue our efforts to
improve health and safety awareness
across the entire Group in the coming
year. We will continue to concentrate
on improving our AFR performance in
2015/16 and we believe that our focus in
the following five key areas will deliver the
performance we desire.

Work environment
This year we have continued our focus
on improving the lighting levels in the
factories to make them a better place to
work; this work will be ongoing in 2015/16.
This has had a positive impact on
efficiency, greenhouse gas emissions and
on the working environment in general.

We have improved the conditions of the
yards in all of our factories and have
undertaken a comprehensive review
of welfare facilities for Severfield (UK).
We have established a new training and
canteen facility at Dalton which will
substantially improve the environment
for training and create a more convivial
atmosphere for mealtimes and breaks for
all of our employees.

We issued a new personal protective
equipment (PPE) brochure and policy in
2014/15 which focused on providing a
better quality and standard of PPE for our
employees and we aim to roll this out to
our supply chain in 2015/16.

One of our safety critical areas is tool
tethering and in 2014/15 we enhanced
our tool tethering policy and undertook
extensive trials of products available in
the market to ensure that the Group was
industry leading in this respect. Following
this review, we entered into a new
agreement with a UK-based company for
all new tool tethers supplied to the Group.

During the year, we have developed and
implemented our Seversafe® edge
protection product, our lorry edge protection
system and we now have our own bespoke
fan protection systems. These systems
comply with the Work at Height Regulations
in terms of meeting the requirements for
collective protection measures and our edge
protection solution is endorsed by the Edge
Protection Federation.

Commitment
The Group continues to maintain an
appropriate SHE budget. We committed
last year to improving SHE communication
across the Group and to this end we
have delivered SHE news bulletins this
year and we have issued SHE posters in
response to incidents and near misses.

We hold regular Group, factory and site
safety leadership team (SLT) meetings
and the Group meeting is attended by
the CEO and COO. We use this meeting
structure to derive, test and challenge
our policies and to ensure we react in an
appropriate manner to incidents and
near misses.

For 2015/16 we are implementing
a director tour matrix to include our
plc directors and our chairman to
demonstrate to our workforce and our
clients our commitment to our safety,
health and environmental performance.

We have undertaken 1,241 (2014: 1,159)
man-days of training in the year. This
includes more than 40 different courses;
examples are: site manager safety training
scheme, overhead crane supervision and use,
first aid, portable magnet use, life jacket use,
confined space and reversing vehicles.

23925-04 24-06-2015 Proof 5

Picture top: Secondary school children attending
UKCG’s Open Doors event at our Lostock facility.

Picture middle: Members of our SHE team outside
Watson House.

Picture bottom: Engaging closely with schools and
colleges at Scarborough Engineering Week.

Severfield plc

Stock code: SFR

www.severfield.com

Corporate social responsibility

We have amended our site audit and
inspection system. We now undertake
all on a web-based format which allows
much better analysis of where our key
issues lie. This allows us to focus our
resources in the correct areas and engage
with our workforce, supply chain and
clients in a targeted manner.

Behaviour
We define behaviour as everything we
say and do. This means that any culture
change model needs to include an
element of understanding of what drives
these behaviours and how we generate
positive, safe behaviours in the workplace.

We have trained all the SHE team as
organisational coaches to ensure that
when we interact with our stakeholders,
we are obtaining the best outcome
for them and for the Group in terms of
our safety, health and environmental
performance.

During the next year we will continue
with our behavioural safety programme,
starting with training the SHE team in
cognitive behaviours and conducting a
SHE culture survey.

Sustainability
Steel is arguably the most sustainable
of the major structural materials. It has
numerous sustainability benefits, such as
low waste, flexibility, off-site manufacture,
speed, resource efficiency, adaptability,
demountability, long lasting appeal,
safety, reusability and recyclability. These
inherent characteristics result in many
social, environmental and economic
benefits to satisfy sustainability’s ‘triple
bottom line’.

Leadership
We use a variety of styles of leadership,
from transformational with vision,
dynamism and energy to create the
culture we want to work within, through
to transactional leadership to embed
our culture using tools such as coaching,
recognition and corrective action.

We demonstrate leadership by
undertaking director tours, chairing
committees, involving our senior
management in incident investigations,
being involved in and attending formal and
informal training, and communications
around safety, health, environment and
sustainability with our workforce, clients
and supply chain.

Engagement
We engage with our stakeholders on a
daily basis. Key engagement behaviours
are communication, involvement, visibility
and support. We are continually striving
to communicate better this year, (as
discussed above), we have continued to
actively involve the directors in safety,
health, environment and sustainability
committees and we use the audit process
as a communication tool.

To improve engagement with our
employees, clients and supply chain,
we regularly attend client meetings and
our Group SHE director liaises directly
with the SHE teams within our client
organisations and with the UK Contractors
Group. With respect to our employees
and supply chain, they are represented at
our SLTs and committees and our visible
leadership means that we frequently have
workplace-based conversations with our
employees and supply chain alike.

We audit our supply chain which provides
assurance that our supply chain meets
legal requirements and our own standards
plus, where applicable, any standards
stipulated by our clients.

Steel is a fast, safe construction material.
Reduced time on-site means lower costs,
quicker returns and less disruption to
the local community. The Group’s steel is
manufactured off-site in a safe factory
environment and arrives on site only
when needed. Steel has a high strength
to weight ratio and is resource efficient.
The fact we can erect with fewer deliveries
means reduced emissions.

Steel’s long, clear spans mean that
interiors can be changed with ease.
Steel frames can readily be adapted and
reconfigured to give old buildings a new
lease of life. The longevity of a building is
fundamental to its overall sustainability.

Steel structures are inherently reusable
in full or part. An increasing number
of buildings are being designed with
this in mind, but reuse is an option for
steel structures without any special
provision. Any steel which is not reused is
captured and recycled for further use in
construction or elsewhere.

Steel can be recycled indefinitely without
loss of property or performance. This is
referred to as multicycling. It means steel
always has a value, which guarantees
that virtually none is ever disposed of to
landfill. The multicycling of steel is a self-
sustaining system that predates modern
appreciation of environmental issues and
would continue in the unlikely event that
they should ever lessen in importance.

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Strategic report / Our performance

Greenhouse gas emissions reporting
In accordance with the Companies Act
2006 (strategic report and directors’
reports) Regulations 2013, we report our
emissions as described below.

• Scope 1 GHG emissions are from:

natural gas, gas oil, propane, kerosene,
welding gases, diesel and petrol.

• Scope 2 GHG emissions are from:

electricity purchased and consumed.

Reporting boundaries
To the best of our knowledge, we have
included all material emission sources
which fall within the boundaries of our
consolidated financial statements.

All direct (scope 1) and indirect (scope
2) emissions are reported in absolute
tonnes equivalent CO2 (CO2e). Greenhouse
gases (‘GHG’) included are carbon dioxide,
methane and nitrous oxide emissions
from the combustion of fuels disclosed
below, and carbon dioxide emissions from
the consumption of purchased electricity.

Methodology
The Group’s GHG emissions have been
calculated using an operational control
approach in accordance with WRI/WBCSD
GHG reporting protocols (revised edition)
and emission factors from UK Government
GHG conversion factors for company
reporting 2013.

For the year ended 31 March 2015, the
Group’s global GHG emissions were as
follows:

Emissions from:
Scope 1 – combustion of fuel and operation of facilities
Scope 2 – electricity, heat, steam and cooling purchased
for own use
Total CO2e emissions
Intensity measurement:
Absolute tonnes equivalent CO2e per £m of revenue

Tonnes of CO2e

2015
5,529

6,345
11,874
2015
59

2014
6,340

6,179
12,519
2014
54

Scope 1 and 2 emissions in 2014/15 were 5 per cent lower than in 2013/14, mainly as
a result of a significant reduction in gas oil usage. Our intensity ratio per £m of revenue
has increased by 9 per cent this year, however our intensity ratio per factory staff
hour has decreased by 6 per cent. The reason for this differential is because over the
past year we have undertaken work which involves less tonnage but more fabrication
resource.

Picture: Bridlington School visit to our Sherburn
facility in June 2014.

Sustainability committee
During the year we established a
sustainability committee. The committee
approved the introduction of energy
management systems in our Dalton facility
and changing our lighting in all factories
to low energy lighting which resulted in a
significant reduction in energy usage and
costs.

Our 2015/16 targets and objectives for the
sustainability committee include:

• Carbon reduction policy and strategy

• Reduction in carbon intensity by

2020/21

• Waste reduction and diversion of waste

from landfill

• Comply with Energy Savings
Opportunity Scheme (ESOS)

• Quarterly GHG reporting using shared
database and validation of emissions

•

Improve CDP (climate change)
scoring including climate change risk
assessment

• Measurement of construction site fuels

• Review of ISO 14001 EMS —

operational control, training and audits

• Customer and supply chain

engagement

• Staff engagement and internal

performance reporting

• Sustainable procurement

Environmental performance
The Group maintains its environmental
management system which is certified
to ISO 14001. Information on our
environmental impact is collated monthly
and is reported to the board. This includes
impacts such as waste, factory energy, VOC
emissions and fuels. We met our monthly
average VOC concentration limit targets for
every factory in 2014/15. With respect to
waste 89 per cent is recovered or recycled.

All our works and project sites operate
in accordance with our sustainability
policies. We track our sustainability
performance on a project by project basis
and, where required, report information to
our clients.

23925-04 24-06-2015 Proof 5

Severfield plc

Stock code: SFR

www.severfield.com

Talent and succession
In order to protect the long term success
of our business we want to ensure that
we understand our talent pipeline and
support their development so that our
people can be the best that they can be.
We would like to be an employer of choice
for current and future talent within the
structural steel industry and the wider
business community.

In 2015/16 we will conduct a Group-
wide review of emerging talent to
ensure consistency and visibility of
talent, succession planning and career
opportunity. Our agility in deploying talent
and experience to maximise opportunities
through sharing knowledge across the
Group is a key differentiator and one
which we will continue to develop.

We are passionate about helping young
people take their first step onto the
construction career ladder, from school
leavers experiencing the world of work
for the first time, to graduates qualified
in disciplines relevant to the construction
sector. We believe that the recruitment and
training of apprentices is fundamental to
business development; another means of
ensuring that we have all the desired skill
bases available in the future.

Corporate social responsibility

To better understand the factors informing
our people’s views, we held a series of
Staff Engagement Action Team workshops
(SEATs) across the Group.

We will focus on these areas within
each business unit and re-survey our
employees against this benchmark in
2015/16.

In 2014/15, we reviewed our occupational
health provision and moved to a new
provider. During 2015/16 we will monitor
the performance of our occupational
health provider and highlight priority
areas for promoting the benefits of health
to our employees.

Leadership and management
capability
During 2014/15, we invested in building
our leadership teams and individual
leadership capability, ensuring that our
leaders understand our strategy, the
associated business challenges and
their roles in leading and engaging their
teams. We will continue to focus on our
leadership development programme with
our executive directors, directors and
associates.

We believe that strong leadership
capability is vital at all levels within
any organisation, and are committed
to building the skills and capabilities
of our workforce and future leaders. In
2014/15 training expenditure of c£0.3m
was focused on health and safety and
core technical disciplines. In 2015/16, we
have budgeted for expenditure to increase
to £0.5m with additional investment to
enable a modular people management
programme for team leaders and the
implementation of an emerging leaders
programme.

We will also derive additional value from
our strategic partnerships with a number
of universities, colleges and schools
including Salford and Nottingham Trent
Universities. We will explore opportunities
for action learning, joint projects and
secondments and at the same time
publicise the benefits of a career within
our industry sector.

People
We are proud of our 1,200 strong
workforce and recognise that the long-
term success of our business depends on
our ability to attract, retain and develop
the best talent in the industry.

Change
In 2013/14, our people were called
upon to embrace change and in
particular Severfield (UK) completed
its reorganisation, resulting in a strong,
talented and aligned team. We continued
to invest in our people in 2014/15, through
the training and development of our
existing employees and targeted external
recruitment as necessary.

During 2014/15, we made the following
key appointments:

• Gary Wintersgill, managing director

(Severfield UK)

• Martin Kelly, Group strategic business

development director

• Lee Mills, Group SHE director

• Group communications manager

• Three new non-executive directors

• 20 apprentices/trainees

We will continue to prioritise investment
in our people to ensure a healthy pipeline
of talent to achieve our strategic goals.

Employee engagement and
well-being
We recognise that creating a happier
and healthier workforce will enable us to
deliver our ambition and we want to further
embed this into our culture to ensure a
sustainable future for our business.

We recognise that employee wellness
(physical and psychological health of the
individual) and employee engagement (the
commitment, satisfaction, advocacy and
pride of the employee) are at the heart of
our business.

During the year, we conducted our first
Group-wide employee engagement
survey. This provided our employees with
a platform to share their views on the
issues that impact most on their working
lives. This has enabled us to identify
areas in need of improvement and create
a benchmark against which we can
measure progress.

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Strategic report / Our performance

We have 62 apprentices within the
Group, having taken on at least ten
apprentices each year since our dedicated
apprenticeship programme launched in
2010. Among the opportunities available,
we have provided placements for
fabricators, maintenance engineers, steel
erectors and business support assistants.
We are also committed to providing
opportunities for undergraduates via
work placements and internships and
graduates across a number of functions
including business support, quantity
surveying, design engineering, site
management and project management.

Diversity
We believe that equal opportunity means
hiring and retaining the best people,
developing them to their full potential and
using their talents and resources to the
full. Diversity of people, skills and abilities
is a strength which will help us to achieve
our best. This is not only about treating
our people with dignity and respect; it also
makes sound business sense.

At 31 March 2015, the Group workforce
consisted of 1,257 employees of whom
83 (7 per cent) were female. The Group’s
executive committee (see page 54) and
board of directors (see page 52) did not
have any female representation. We do not
currently monitor ethnicity.

In 2015/16, we will implement equal
opportunities monitoring across the Group
at all stages of the employee life cycle in
accordance with local legislation. We will
also continue to work with schools and
colleges to increase the diversity of our
future workforce by encouraging under-
represented groups to study STEM subjects.

Communications
Maintaining a strong dialogue with
our people can be challenging in such
a geographically diverse Group, with
a mix of factory, office and site-based
employees. Our internal communications
draw on a wide variety of media,
including our workspace document
sharing system, company newsletters,
consultative groups, factory committees,
suggestion schemes and employee
roadshows. In 2014, the Group appointed
a communications manager to develop
more effective internal and external
communication strategies.

In 2014/15, significant improvements
were made to internal communications,
particularly on the shop floor where new
noticeboards were installed and regular
project updates took place. During
2015/16, particular focus will be given
to interdepartmental communication to
address developmental areas highlighted
by the employee engagement survey.

High performance culture
We set ourselves stretching goals and
we want our people to understand the
key part that they play in our strategy
and our success. We want them to
feel accountable for their delivery and
rewarded for their success. In light of this,
in 2014/15 we redefined our performance
management tools and processes.

Reward
We recognise that our approach to reward is
critical to our ability to both attract and retain
the best people and drive a performance
culture. Each of our businesses offers a
competitive reward package appropriate to
the labour market in which they operate and
review salaries annually in line with market
rates. Our focus is on cash and variable pay
rather than fixed benefits and each division’s
reward package includes an annual Group
profit performance-related bonus which
encourages the achievement of our strategic
objectives.

Over 65 per cent of our employees are
shareholders in the Company via our
share incentive plan and in March 2015
we launched a save as you earn (SAYE)
share scheme to provide our employees
with an improved choice in the way that
they participate.

Our people are also eligible to participate
in a Group defined contribution
pension scheme into which we make a
contribution. Employees also have the
option to make their own contributions
through salary sacrifice. We have also
been able to facilitate a number of flexible
benefits that enable our people to access
programmes and savings that would not
be available to them on an individual
basis without additional cost to the Group.
These include cycle to work and childcare
voucher schemes.

Communities
Wherever we operate, we strive to leave
a positive legacy. During the year, our
employees have continued to support
both the communities in which we operate
and our core charitable programmes.

During 2014/15 the Group companies
have undergone a variety of activities
including visiting local schools to discuss
careers, providing advice for interview
techniques and contributing time and
funds to support different charitable
organisations.

To inspire secondary school children
to consider careers in construction we
participated in the UKCG’s Open Doors
event and over 100 children and young
people attended the events at our Dalton
and Lostock facilities in March 2015.
Following this, close relationships with
local education establishments have been
further strengthened.

As in previous years, we also engaged
closely with local schools and colleges for
Scarborough Engineering Week.

The Group companies consistently work to
spread thought leadership to employees,
customers, suppliers and potential
employees via various initiatives including
seminars, industry specific exhibitions,
site visits and events. In 2014/15 a
presentation and factory tour for students
from Imperial College, London was held
at our Dalton site. We also sponsored
the Young Designers Competition at the
International Association for Bridge and
Structural Engineering (IABSE) Future of
Design Conference to encourage emerging
new talent within the sector.

In 2014/15 Group employees have
donated both time and effort to raise
funds for many different charitable
organisations, including the British Heart
Foundation, the Yorkshire Air Ambulance,
St Catherine’s Hospice (Scarborough),
Bolton Hospice and the Northern Ireland
Chest, Heart and Stroke Baby Hearts
Appeal.

We are extremely proud of the continued
good work undertaken by our employees
to support and engage with their
local communities and charitable
organisations.

23925-04 24-06-2015 Proof 5

Severfield plc

Stock code: SFR

www.severfield.com

Key performance indicators

Our goal to deliver long-term shareholder value drives our strategic priorities.
We measure our performance through a balanced set of key performance
indicators that are both financial and non-financial.

KPI
Underlying operating profit
and margin

Our performance

£9.0m (at 4.5%)
Operating profit has increased by 18%,
reflecting an increase in the margin
from 3.3% to 4.5%.

Underlying basic earnings per
share (EPS)

2.31p
EPS growth was 163%.

Operating cash conversion

107%*
Cash conversion exceeds the Group’s
targets (*after adjusting for the sale of
the Group’s investment property).

Return on capital employed
(ROCE)

6.1%
ROCE has improved from 3.3%.

Why this is important
This is the principal measure used to assess the
success of the Group’s UK strategy.

We are focused on driving growth in operating profit in
order to drive higher and sustainable returns for our
investors.

EPS is one of the key metrics in measuring shareholder
value and a performance condition of the Group’s
performance share plan (PSP).

The measure reflects all aspects of the income
statement including the performance of India and the
management of the Group’s tax rate.

Cash is critical for providing the financial resources to
develop the Group’s business and to provide adequate
working capital to operate smoothly.

This measures how successful we are in converting
profit to cash through management of working capital
and capital expenditure.

ROCE measures the return generated on the capital we
have invested in the business and reflects our ability to
add shareholder value over the long term.

We have an asset-intensive business model and ROCE
reflects how productively we deploy those capital
resources.

Order book

£194m
The order book has increased by 5%
since November 2014.

The order book is a key part of our focus on building
long-term recurring revenue. It is an important measure
of our success in winning new work.

Our order book shows the total value of future revenue secured

We aim to build a growing order book in line with our strategy.

by contractual agreements.

Whilst the revenue within the order book is reported
externally, the margin inherent within the order book
is monitored internally to provide visibility of future
earnings.

Accident frequency rate (AFR)

0.21
The UK AFR has reduced from 0.57
to 0.33.

This is an industry-standard measure of the safe
operation of our business and is one of a number of
health and safety measures the Group uses to monitor
its activities.

Revenue growth

New for FY16
This KPI will be assessed for the first
time during the year ending 31 March
2016.

This is a key measure for the business to track our
overall success in specific contract activity, our progress
in increasing our market share and our ability to
maintain appropriate pricing levels.

£
Our KPIs for profitability and AFR are linked to our performance share plan and annual incentive

arrangements to ensure that the remuneration of our directors is aligned with our strategic priorities.

23925-04 24-06-2015 Proof 5

How we calculate

What we target

Underlying operating profit is defined as operating profit

Our aim is to restore underlying operating margins to 5 to 6

before other items and before the results of JVs and associates

per cent in FY16 and to generate steady margin improvement in

(principally the Indian joint venture).

FY17 and beyond.

Underlying operating margin is calculated as underlying

In the medium term, as efficiencies and pricing offset inflation

operating profit expressed as a percentage of revenue.

over time, we expect operating profit to grow at a faster rate than

EPS is calculated as underlying profit after tax divided by the

Our aim is to maximise sustainable EPS growth.

weighted average number of shares in issue during the period.

revenue.

Operating cash conversion is defined as cash flow generated

We target a conversion rate of 85 per cent as a base level of

from continuing operations after capital expenditure (before

achievement, subject to future capital investment made to

interest and tax) expressed as a percentage of underlying

position the Group for further growth.

operating profit.

ROCE is calculated as underlying operating profit plus share of

We aim to deliver ROCE which is in excess of 10 per cent over the

post-tax results from JVs and associates divided by the average

whole economic cycle.

of opening and closing capital employed.

Capital employed is defined as shareholders’ equity after

adding back retirement benefit obligations (net of tax), acquired

intangible assets and net funds.

AFR is equivalent to one reportable lost-time incident resulting

We are committed to a target of zero injuries in the

in more than three working days’ absence per 100,000 hours

medium term.

worked, which equates to approximately one working lifetime.

This represents the year-on-year percentage change in revenue

To grow revenue year-on-year in line with our strategic objectives.

from Group operations as reported in the accounts. The effects of

acquisitions and disposals will be removed from this measure.

Annual report and accounts for the year ended 31 March 2015

Strategic report / Our performance

They reflect our strategic priorities of growing and investing in the business
and driving ongoing efficiencies that will lead to sustainable shareholder
returns, supported by safe and responsible working practices.

KPI

Our performance

Why this is important

Underlying operating profit

and margin

£9.0m (at 4.5%)

Operating profit has increased by 18%,

This is the principal measure used to assess the

success of the Group’s UK strategy.

reflecting an increase in the margin

We are focused on driving growth in operating profit in

from 3.3% to 4.5%.

order to drive higher and sustainable returns for our

investors.

Underlying basic earnings per

share (EPS)

2.31p

EPS growth was 163%.

How we calculate
Underlying operating profit is defined as operating profit
before other items and before the results of JVs and associates
(principally the Indian joint venture).

What we target
Our aim is to restore underlying operating margins to 5 to 6
per cent in FY16 and to generate steady margin improvement in
FY17 and beyond.

Underlying operating margin is calculated as underlying
operating profit expressed as a percentage of revenue.

EPS is calculated as underlying profit after tax divided by the
weighted average number of shares in issue during the period.

In the medium term, as efficiencies and pricing offset inflation
over time, we expect operating profit to grow at a faster rate than
revenue.
Our aim is to maximise sustainable EPS growth.

Operating cash conversion

107%*

Cash conversion exceeds the Group’s

targets (*after adjusting for the sale of

the Group’s investment property).

This measures how successful we are in converting

Operating cash conversion is defined as cash flow generated
from continuing operations after capital expenditure (before
interest and tax) expressed as a percentage of underlying
operating profit.

We target a conversion rate of 85 per cent as a base level of
achievement, subject to future capital investment made to
position the Group for further growth.

Return on capital employed

(ROCE)

6.1%

ROCE has improved from 3.3%.

Order book

£194m

The order book has increased by 5%

since November 2014.

The order book is a key part of our focus on building

long-term recurring revenue. It is an important measure

of our success in winning new work.

ROCE is calculated as underlying operating profit plus share of
post-tax results from JVs and associates divided by the average
of opening and closing capital employed.

Capital employed is defined as shareholders’ equity after
adding back retirement benefit obligations (net of tax), acquired
intangible assets and net funds.

Our order book shows the total value of future revenue secured
by contractual agreements.

We aim to deliver ROCE which is in excess of 10 per cent over the
whole economic cycle.

We aim to build a growing order book in line with our strategy.

Accident frequency rate (AFR)

The UK AFR has reduced from 0.57

AFR is equivalent to one reportable lost-time incident resulting
in more than three working days’ absence per 100,000 hours
worked, which equates to approximately one working lifetime.

We are committed to a target of zero injuries in the
medium term.

Revenue growth

New for FY16

This KPI will be assessed for the first

time during the year ending 31 March

This is a key measure for the business to track our

overall success in specific contract activity, our progress

in increasing our market share and our ability to

maintain appropriate pricing levels.

This represents the year-on-year percentage change in revenue
from Group operations as reported in the accounts. The effects of
acquisitions and disposals will be removed from this measure.

To grow revenue year-on-year in line with our strategic objectives.

0.21

to 0.33.

2016.

Our KPIs for profitability and AFR are linked to our performance share plan and annual incentive

arrangements to ensure that the remuneration of our directors is aligned with our strategic priorities.

EPS is one of the key metrics in measuring shareholder

value and a performance condition of the Group’s

performance share plan (PSP).

The measure reflects all aspects of the income

statement including the performance of India and the

management of the Group’s tax rate.

Cash is critical for providing the financial resources to

develop the Group’s business and to provide adequate

working capital to operate smoothly.

profit to cash through management of working capital

and capital expenditure.

ROCE measures the return generated on the capital we

have invested in the business and reflects our ability to

add shareholder value over the long term.

We have an asset-intensive business model and ROCE

reflects how productively we deploy those capital

resources.

Whilst the revenue within the order book is reported

externally, the margin inherent within the order book

is monitored internally to provide visibility of future

earnings.

This is an industry-standard measure of the safe

operation of our business and is one of a number of

health and safety measures the Group uses to monitor

its activities.

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Principal risks and uncertainties

Strong and effective risk management is at the heart of how the directors run
the business and supports the achievement of the Group’s strategic objectives.
The board believes that ongoing consideration of and regular updates to the
risk management framework enable the effective balancing of risk and reward.

The Group’s ongoing operations and growth
plans are subject to a number of different
risks and uncertainties. Although we cannot
eliminate such risks and uncertainties
completely, we have established risk and
internal control systems and procedures
to mitigate their impact and the likelihood
of them occurring. Further details of the
Group’s risk management processes are
set out on pages 62 and 63 of the corporate
governance report.

We strive to ensure that risk management
is embedded into day-to-day business
processes and operations such that it is
effective at all levels of the organisation;
this ensures that potential risks
are identified at an early stage and
mitigations are put in place to manage
such risks. Through the risk management
process and communication, there is
a robust, periodic risk review involving
Group management and all businesses.

The board formally reviews risks and
mitigations for the Group and each of the
businesses on a biannual basis. The review
focuses on identifying potential risks that
could significantly impact the business
and considers in detail the various impacts
of the risks and the mitigations in place.

The board
The board has overall responsibility for the
Group’s risk management and internal controls,
sets the strategic objectives, defines the risk
appetite and monitors the risk exposure.

The nomination committee
This committee ensures that the board has the
appropriate balance of skills and knowledge
required to assess and address risk and that
appropriate succession plans are in place.

The audit committee
This committee oversees the effectiveness of
the Group’s internal control function and risk
management systems.

The executive risk committee and
executive committee
The executive committees are responsible
for the identification, reporting and ongoing
management of risks and for the stewardship
of the risk management approach.

The businesses
Local management are responsible for the
identification, reporting and ongoing management
of risks in their respective businesses.

Other assurance
Independent assurance is provided by the
independent auditor, internal auditor, and various
external advisers. External consultants and
advisers support management and the board
through ad hoc consulting activities, as required.

RISK MANAGEMENT
POLICY

Further details of
the Group’s risk
management policies
and processes are set
out on page 62 of the
corporate governance
report

K
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SEVERFIELD

LIMITED

SEVERFIELD

JSW
SEVERFIELD
STRUCTURES
LIMITED

S
E
S
S
E
N
S
U
B
E
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T

E
E
T
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I
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O
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AUDIT
COMMITTEE

THE
BOARD

THE
NOMINATION
COMMITTEE

OTHER ASSURANCE

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Annual report and accounts for the year ended 31 March 2015

Strategic report / Our performance

The board has identified the following principal risks and uncertainties which have the potential to impact the Group’s profitability
and ability to achieve its strategic objectives.

Risk/explanation

Risk change

Description/impact

Mitigation

Commercial and market
environment
The UK construction market shows
continued signs of improvement,
however some market tension remains
as main contractors continue to work
through legacy contracts. There is also
still some sensitivity in predicting the
longer-term outlook. This continues to
place pressure on certain elements of
the supply chain, from end customers
through to material suppliers and
subcontractors.

Through our different businesses we
seek to win profitable work through
successful tender processes. This
success depends on our ability to identify,
price and execute appropriate contracts
to maintain a profitable order book.

Link to KPIs:
• Order book

• Underlying basic EPS

• Underlying operating profit / margin

• Operating cash conversion

• ROCE

Challenging trading
conditions and lack of
growth
Changes in government and client
spending or other external factors
could lead to programme/contract
delays or cancellations, or changes
in market growth.

Continued strengthening of senior
management to improve processes
and discipline around contract
risk assessment, engagement and
execution.

Recruitment of a Group strategic
business development director to
focus on markets and opportunities
that fit the Group’s risk appetite.

Lower than anticipated demand
could result in increased
competition, tighter margins
and the transfer of commercial,
technical and financial risk down
the supply chain, through more
demanding contract terms and
longer payment cycles.

A significant fall in construction
activity could impact revenues,
profits and the ability to recover
overheads. Cash generation
could also be impacted resulting
in breaches of banking facilities
or failure to deliver on strategic
objectives.

Close engagement with both
customers and suppliers and
monitoring of payment cycles.

Ongoing assessment of financial
solvency and strength of
counterparties throughout the life
of contracts.

Continuing use of credit insurance
to minimise impact of customer
failure.

Strong balance sheet, including
refinanced banking facilities,
supports the business through
fluctuations in the economic
conditions for the sector.

Inadequate contract
pricing, cost
management and
variation management
Failure to accurately estimate and
evaluate the contract risks, costs
to complete, contract duration and
the impact of price increases could
result in a contract being mispriced.

As contracts progress, there are
likely to be changes to the work
packages being undertaken which
could result in the Group not being
appropriately reimbursed for the
cost of these variations as a result
of poor commercial controls,
disagreements or disputes.

Failure to achieve targeted
profitability of contracts resulting
in a reduction in Group margins and
missed growth targets. The Group
may need to resort to legal action to
resolve disputes, which can be costly
and may damage client relationships.

Business planning identifies the
markets and clients that the Group
will target.

Estimating processes are in place
with approvals by appropriate levels
of management.

Tender settlement processes are in
place to give senior management
regular visibility of major tenders.

Work performed under standard
terms (to mitigate onerous contract
terms) where possible.

Established system of monthly
reviews to measure and report
contract progress and estimated
out-turns, including contract
variations.

Use of delegated authorities
to ensure appropriate contract
tendering and acceptance.

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Principal risks and uncertainties

Risk/explanation

Risk change

Description/impact

Mitigation

People
The Group has established a market-
leading position over many years due in
large part to the experience and skills of
its key people. The Group prides itself on
its industry-leading practices and works
in some high profile and technically
challenging environments.

Link to KPIs:
• Order book

• Underlying basic EPS

• Underlying operating profit / margin

• ROCE

New

Inadequate supply chain
management
We are heavily reliant on our supply
chain partners for successful
operational delivery of contracts
to meet client expectations. We
will be commercially, as well as
reputationally, responsible for
performance shortcomings by
suppliers and subcontractors
whether in terms of quality, safety,
technical or ethical standards.

Insolvency or poor performance of a
key supplier or subcontractor could
expose the Group to liability for
defective workmanship, materials
or design. This may affect contract
profitability, cash flow, reputation
and the Group’s ability to win repeat
business.
Recruitment and
retention of talented
people
In the current improving economic
environment, it can become
increasingly difficult to recruit
capable people and retain key
employees, especially those
targeted by competitors.

Loss of key people could adversely
impact the Group’s existing market
position and reputation. Insufficient
growth and development of its
people and skillsets could restrict its
growth ambitions both in the UK and
overseas.

Strong relationships maintained
with key suppliers including a
programme of regular meetings and
reviews.

Contingency plans developed to
address supplier and subcontractor
failure.

Contracts only entered into with
suppliers and subcontractors after
review at the appropriate level of
delegated authority.

Monthly review process to facilitate
early warning of issues and
subsequent mitigation strategies.

Initiatives have been implemented
to select supply chain partners that
match our commitment to quality.

Remuneration policy is regularly
reviewed to ensure that it is
competitive and strikes the
appropriate balance between
short and long term rewards and
incentives.

Skills gaps are continually identified
and actions put in place to bridge
these by training, development or
external recruitment.

In 2015/16 we will conduct a Group-
wide review of emerging talent to
ensure consistency and visibility
of talent, succession planning and
career opportunity.

Performance management tools
and processes were redefined in the
current year.

Leadership and management
training plans are now in place.

Further investment made
in graduate, trainee and
apprenticeship schemes to
safeguard an inflow of new talent.

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Risk/explanation

Risk change

Description/impact

Mitigation

Interruption to fabrication
facilities
The Group’s state-of-the-art production
facilities are at the core of its business
and the Group relies on their smooth
continued operation, both in terms of
the facilities themselves and the highly
skilled employees who operate them.

Link to KPIs:
• Order book

• Underlying basic EPS

• Underlying operating profit / margin

• Operating cash flow

• ROCE

Inadequate business
continuity planning
Every business faces the potential
risk of its operations being
impacted by disruption due to loss
of supply, industrial disputes, failure
with technology, unplanned outages
and physical damage as a result of
fire or other such event.

Interruption could impact the
Group’s performance on existing
contracts, its ability to bid for future
contracts and its reputation, thereby
impacting its financial performance.

New

Industrial action
The Group (and the industry in
general) has a significant number
of employees who are members
of trade unions. Industrial action
taken by employees could impact on
the ability of the Group to maintain
effective levels of production.

Interruption could impact the
Group’s performance on existing
contracts, its ability to bid for future
contracts and its reputation, thereby
impacting its financial performance.

The Group has four main production
facilities so interruption at one
facility could to some extent be
absorbed by increasing capacity at
a sister facility.

Detailed maintenance programmes
are in place at each of the Group’s
facilities.

A wide network of subcontract
fabricators is used on a recurring
basis, both for short-term peak
capacity requirements and for
more specialised fabrication. This
network could also be used to
mitigate disruption to the Group’s
own fabrication facilities.

Appropriate levels of business
interruption insurance cover are
maintained and reviewed regularly
with the assistance of independent
advisers and brokers.
Employee and union engagement
takes place on a regular basis.

The Group has four main production
facilities so interruption at one
facility could to some extent be
absorbed by increasing capacity at
a sister facility.

Processes are in place to mitigate
disruptions as a result of industrial
action.

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Severfield plc

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Principal risks and uncertainties

Risk/explanation

Risk change

Description/impact

Mitigation

Indian joint venture
The Group has invested in a joint venture
in India, where the growth prospects are
believed to be substantial.

Link to KPIs:
• Underlying basic EPS

• ROCE

Health and safety
The construction industry sets very
high standards of health and safety
which the Group aims to exceed to
maintain the health and well-being of its
employees.

Link to KPIs:
• Order book

• Underlying basic EPS

• Underlying operating profit / margin

• Operating cash flow

• ROCE

• Accident frequency rate (AFR)

Performance of the joint
venture
The growth, management and
performance of the business
is a key element of the Group’s
overall performance. Effective
management of the joint venture is
therefore important to the Group’s
continuing success.

Crucial to the long-term success of
the joint venture is the development
of the market for steel (rather than
concrete) construction.

Failure to identify, understand and
evaluate the risks of operating in
India could lead to financial loss,
reputational damage and a drain
on cash resources to fund the
operations.
Serious health and
safety incident
Construction activities can result
in injury or death to employees,
leading to the potential for
legal proceedings, regulatory
intervention, project delays and,
where at fault, potential loss of
reputation.

Loss of profitability and ultimately
exclusion from future business.

Robust joint venture agreement.

Two members of the Group’s board
of directors are members of the
joint venture board.

Strong governance in place at the
joint venture.

Regular formal and informal
meetings held with both joint
venture management and joint
venture partners.

Contract risk assessment,
engagement and execution process
now embedded.

Overhead reduction and operational
improvement plans being
implemented by new management
team.

Established safety systems, site
visits, monitoring and reporting, and
detailed health and safety policies
and procedures, are in place across
the Group.

Thorough and regular employee
training programmes, including
new behavioural safety training
initiatives, under the leadership of
the new Group SHE director.

Director-led safety leadership
teams established to bring
innovative solutions and to engage
with all stakeholders to deliver
continuous improvement in
standards across the business and
wider industry.

Priority board review of ongoing
performance.

Regular reporting of and
investigation and root cause
analysis of accidents and near
misses.

Achievement of challenging health
and safety performance targets
is a key element of management
remuneration.

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Strategic report / Our performance

Risk/explanation

Risk change

Description/impact

Mitigation

Information technology (IT)
The Group’s complex and interdependent
IT systems support the effective and
efficient running of the business.
Ensuring our systems are reliable
strengthens the day-to-day operations
of the Group.

Link to KPIs:
• Underlying basic EPS

• Underlying operating profit / margin

• Operating cash flow

• ROCE

IT failure or disruption
With insufficient IT disaster
recovery planning, cyber-attack or
property damage could lead to IT
disruption with resultant loss of
data, loss of system functionality
and business interruption.

The Group’s core IT systems must
be managed effectively, to avoid
interruptions, keep pace with new
technologies and respond to threats
to data and security.

Prolonged or major failure of IT
systems could pose significant risk
to the ability of the Group to operate
and trade, thereby impacting its
financial performance. If the Group
fails to invest in its IT systems, it will
ultimately be unable to meet the
future needs of the business and
fulfil its strategy.

IT is the responsibility of a central
function which manages the
systems across the Group.

Significant investments in IT
systems are subject to board
approval.

Group IT committee now in place
ensuring focused strategic
development and resolution of
issues impacting the Group’s
technology environment.

Data protection and information
security policies are in place
across the Group including anti-
virus software, off-site and on-site
backups, storage area networks,
software maintenance agreements
and virtualisation of the IT
environment.

Cyber-crimes and associated IT
risks are assessed on a continual
basis.

ISO 27001 certification project
is ongoing to further improve the
Group’s technology environment.

The 2014 annual report disclosed ‘failure to mitigate onerous contract terms’ within the existing risk category ‘commercial and market
environment’ (see table above). This item is now considered lower risk (and is classified as such in the Group risk register) as a result
of improvements made to the Group’s legal and commercial review processes and the implementation of a more standard approach
to client engagement.

Read about our KPIs on page 42

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Delivering quality service

The project involves the construction of a new
state-of-the-art waste to energy facility in Fengate
to manage the city’s residual waste. Work undertaken
by the Group includes the design, fabrication and
construction of galvanised lattice columns, roof trusses
and metal decking.

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Our governance

52
54
56
58
66
69

72
74
79
87

Our governance

Board of directors
Executive committee
Chairman’s letter
Corporate governance report
Audit committee report
Directors’ report
Directors’ remuneration report
— Letter from the committee chairman
— Policy
— Implementation
Directors’ responsibilities statement

Project: Peterborough Waste to Energy

Sector: Power and energy

Location: Fengate, Peterborough

Tonnage: 780

Client: Viridor

Main contractor: Interserve

Completion: July 2015

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Severfield plc

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www.severfield.com

Board of directors

John Dodds
Non-executive chairman

Ian Lawson
Chief executive officer

Ian Cochrane
Chief operating officer

John joined the Group as a non-executive director
in October 2010, becoming chairman in September
2011.

He retired in March 2010 from Kier Group plc, the
construction and property services group, after
serving for seven years as group chief executive.
He worked for Kier, both in the UK and overseas,
for nearly 40 years and held a main board position
through the employee buy-out process in 1992 and
the subsequent flotation of the group on the London
Stock Exchange in 1996.

Ian joined the Group on 1 November 2013 as chief
executive officer and was previously a main board
director of Kier Group plc, where he enjoyed a 13-
year career.

He was appointed to the board of Kier Group plc as
executive director in 2005 with responsibility initially
for its services division and later he also assumed
responsibility for the property division. Before
joining Kier in 2000, Ian had a successful career
at Bickerton Group plc where he was managing
director.

John is non-executive chairman of Lagan
Construction Holdings Limited and Sweett Group
plc and a non-executive director of Newbury
Racecourse plc.

Ian, who is a fellow of both The Royal Institution
of Chartered Surveyors (FRICS) and the Chartered
Institute of Building (FCIOB), has a wide range
of skills and experience from working within the
construction industry for more than 35 years.

Ian joined the Group in 2007, following the
acquisition of Fisher Engineering. Ian worked at
Fisher Engineering for 26 years, starting in the
drawing office and progressing to managing director
in October 2007.

In March 2013, Ian was appointed as Group
operations director and subsequently, in June 2013,
as chief operating officer.

Ian has a comprehensive understanding of all
aspects of the business and has been involved
in many major projects in the UK and Ireland,
representing a range of market sectors.

Alan Dunsmore
Group finance director

Alan joined the Group in March 2010 from Smiths
Group plc. He joined Smiths Group medical division
in 1995, holding various positions throughout the
business and from 2004 was director of finance for
Smiths Detection.

Prior to joining Smiths, he was with Coopers
and Lybrand in Glasgow, where he qualified as a
chartered accountant in 1992.

Derek Randall
Executive director and managing director at
JSW Severfield Structures Limited

Derek was appointed as executive director for
business development in May 2008. In December
2013 he was appointed as managing director of
JSW Severfield Structures Limited (JSSL), our joint
venture in India.

Before joining the Group, most of Derek’s career
was with Corus Group (now Tata Steel) where his
last position was as commercial director of the long
products division.

Derek has held a number of international board
positions with Corus and served on the executive
council of the Steel Construction Institute.

Kevin Whiteman
Senior independent director

Kevin was appointed as a non-executive director on
19 July 2014 and is the senior independent director.

A chartered engineer, Kevin was chief executive of
Kelda Group and Yorkshire Water for a period of
eight years. Kevin was non-executive chairman of
both companies from 2010 to March 2015.

In 2013 he became chairman of the privately owned
NG Bailey. Kevin was previously chief executive officer
for the National Rivers Authority, regional director
of the Environment Agency, and has held a number
of senior positions within British Coal. He was also
chairman for Wales and West Gas Networks (UK)
Limited, and has been a trustee for WaterAid UK.

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Our governance

Tony Osbaldiston
Non-executive director

Alun Griffiths
Non-executive director

Chris Holt
Non-executive director

Tony was appointed as a non-executive director
on 19 July 2014 and is chairman of the audit
committee.

Alun was appointed to the board as a non-executive
director on 1 May 2014 and is chairman of the
remuneration committee.

A chartered accountant having qualified with PwC,
Tony was previously finance director of Max Factor
UK, Volvo Cars UK, Raymarine plc and FirstGroup plc.
He was also deputy group chief executive officer and
chief executive officer of FirstGroup America.

Tony has been a non-executive director and
chairman of the audit committee of BSS Group plc,
and chairman of the remuneration committee of
Synstar International plc. He is currently chairman
of Encon, the insulation and building products
distributor, and also non-executive director and
chairman of the audit and risk committee of the
Serious Fraud Office.

Alun was previously Group HR director and board
member at WS Atkins plc, where he enjoyed a
28-year career, having held a number of business
management and corporate positions. He is a
fellow of the Chartered Institute of Personnel and
Development.

Alun is also a non-executive director of the Port of
London Authority, the McLean Partnership Limited,
Ramboll Group and ISG plc.

Chris joined the Group as a non-executive director in
November 2011.

He retired in September 2010 from MJ Gleeson
Group plc after serving two years as chief executive
officer, prior to which he held the position of group
finance director.

Chris’s experience also includes 17 years with Foster
Wheeler Limited as finance director and deputy
chairman of the UK subsidiary company and 12
years with Bechtel Corporation.

Chris is a graduate of Leeds University, a qualified
accountant and has an MBA from Golden Gate
University, San Francisco.

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Executive committee

333

666

222

555

101010

777

888

444

999

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Annual report and accounts for the year ended 31 March 2015

Our governance

The following people also regularly
attend executive committee meetings:

999 Sian Evans
Group HR director

Sian joined the Group in January 2013.

Her career in human resources started at William
Morrison Supermarkets in 1990 and covered a
wide range of industry sectors including Ciba
Speciality Chemicals, Redcats UK and Callcredit
Information Group where she held the position of
group HR director.

She is a fellow of the Chartered Institute of
Personnel and Development.

101010 Lee Mills
Group SHE director

Lee joined the Group in April 2014 from Stewart
Milne where he was SHE and quality director,
which also involved providing consultancy
services to the National House Building Council.

Lee has 17 years of experience in the construction
sector having previously held responsible
positions within several major construction
companies, including Alfred McAlpine.

666 Brian Keys
Managing director, Severfield (NI)

Brian joined Severfield (NI), formerly Fisher
Engineering, as production manager in 1986.
In 2007, prior to the acquisition of Fisher
Engineering by the Group, Brian became
production director, a role which he performed
until his appointment as managing director in
March 2013.

Brian has been involved in the successful delivery
of many major projects throughout Ireland and
the UK during his 27-year career with the Group
and Severfield (NI).

777 Mark Sanderson
Group legal director and
Company secretary

Mark joined the Group in September 2013.

His previous role was as group legal director
for the utility specialist Enterprise plc, until its
acquisition by Ferrovial in April 2013. He also
worked in private practice as a projects partner,
most recently at Walker Morris and prior to that
Pinsent Masons.

Mark has over 20 years of experience in the
construction and engineering sector.

888 Martin Kelly
Group strategic business
development director

Martin, who is a chartered accountant, joined
the Group in October 2014 from KPMG where
he was a director. He enjoyed a 16-year career
with KPMG, more recently working as a sector
specialist in the firm’s advisory department.

Martin also spent two years working with Arup
and ten years as a quantity surveyor which,
together with his work at KPMG, provides
him with a comprehensive perspective of the
construction industry.

Ian Lawson
Chief executive officer

For details see board of directors on page 52.

222 Ian Cochrane
Chief operating officer

For details see board of directors on page 52.

333 Alan Dunsmore
Group finance director

For details see board of directors on page 52.

Derek Randall
Executive director and managing director
at JSW Severfield Structures

For details see board of directors on page 52.

444 Gary Wintersgill
Managing director, Severfield (UK)

Gary joined the Group in November 2014, from
Kier Group plc, where he was managing director
of Kier northern operations.

As a fellow of the Institution of Civil Engineers
(ICE), Gary has over 20 years of broad experience
within the construction industry. He acts as a
supervising civil engineer for the ICE and is also
deputy chairman of the Construction Council for
Manchester, whose focus is on recruitment of
apprentices into the industry.

555 Jim Martindale
Managing director, Severfield
(Design & Build)

Jim joined Severfield (Design & Build), formerly
Atlas Ward Structures, in 1994 as a design
engineer. He previously held the positions of
engineering manager, design director and deputy
managing director, a role that he performed until
his current appointment in January 2014.

Jim has been involved in the successful delivery
of many major projects throughout the UK during
his 20-year career with Atlas Ward (which was
acquired by the Group in 2005). He is also an
associate member of the Institution of Structural
Engineers.

23925-04 24-06-2015 Proof 5

Severfield plc

Stock code: SFR

www.severfield.com

Chairman’s letter

John Dodds
Chairman

“ We continue to focus

on ensuring that the
views presented in
the annual report
are fair, balanced
and understandable
and provide the
information necessary
for shareholders to
assess the Group’s
performance,
business model and
strategy.”

We are committed to maintaining high standards
of corporate governance to enhance performance
and for the protection of our shareholders.

Dear shareholder
I am pleased to introduce the Group’s
corporate governance report on behalf of
our board of directors (‘the board’). We are
committed to maintaining high standards
of corporate governance to enhance
performance and for the protection
of our shareholders. At Severfield,
good governance involves establishing
appropriate policies, procedures and
guidelines to ensure that the Group’s
businesses are managed effectively
resulting in the delivery of long-term
shareholder value.

Our corporate governance report is set
out on pages 58 to 65 and explains how
we manage the Group and comply with
the provisions of the 2012 UK Corporate
Governance Code (‘the Code’). Whilst
currently subject to the provisions of the
Code applicable to smaller companies, we
seek, where appropriate, to follow those
applicable to FTSE 350 companies.

Leadership and effectiveness
It is of great importance to me, as
chairman, to ensure that the board has
the right composition. This means having
the right balance of skills and experience
to contribute, and where appropriate
challenge, decision making and ensuring
that all directors have a good knowledge
of the Group and the context in which
it operates. There have been a number
of changes to the board since the 2014
year-end.

During the year, Kevin Whiteman, Tony
Osbaldiston and Alun Griffiths all joined
the board as non-executive directors.
Kevin has assumed the responsibilities
of senior independent non-executive
director, Tony was appointed as the
chairman of the audit committee and
Alun has become the chairman of the
remuneration committee. In combination,
they bring to the board a wealth of
relevant experience.

In addition to these appointments,
we have continued to strengthen our
management team to drive forward the
continued implementation of our strategy.
In particular, the senior management
team has been strengthened with the
appointment of Lee Mills as Group SHE
director in April 2014, Martin Kelly as
Group strategic business development
director in October 2014 and Gary
Wintersgill as managing director of our
largest business, Severfield (UK) Limited,
in November 2014. The appointment of
Gary has allowed Ian Cochrane to fully
concentrate on his responsibilities as
chief operating officer, having previously
also acted as managing director of
Severfield (UK) Limited.

Board evaluation
In line with corporate governance best
practice, during the year an internal board
evaluation was undertaken. Following this
review, I am satisfied that the board and
each of its committees are performing
effectively and that each of the directors
is making an effective contribution and
retains a strong commitment to their role.
A further evaluation of the board will be
undertaken during the year ending
31 March 2016.

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Our governance

Read the remuneration report
on page 72

Read the audit committee report
on page 66

Relationships with
shareholders
We continue to remain committed
to sharing information with our
shareholders. The Group actively solicits
feedback from investors and feedback
from shareholder meetings is reported
to the board, including the non-executive
directors. The AGM is recognised as an
opportunity for private shareholders to
engage with the board. Further details
regarding this engagement with our
shareholders are set out in the board
effectiveness section on page 61.

Finally, in line with the requirements
of the Code, we continue to focus on
ensuring that the views presented in
the annual report are fair, balanced
and understandable and provide the
information necessary for shareholders to
assess the Group’s performance, business
model and strategy. Further details can
be found in the audit committee report on
page 66.

John Dodds
Non-executive chairman
17 June 2015

Audit tender
During the year, the board authorised the
audit committee to review the provision
of audit services to the Group. Following
a rigorous tender process, the audit
committee recommended to the board
that KPMG LLP be appointed as auditor
for the financial year commencing on
1 April 2015 and a resolution confirming
this appointment will be proposed at the
forthcoming AGM. Deloitte LLP will resign
as auditor following completion of the
audit for the year ended 31 March 2015.

Remuneration
The remuneration policy, subject to a
binding vote for the first time in 2014, was
approved by shareholders at the AGM in
September. We remain committed to the
principles and alignment of the policy to
shareholder value, and are not proposing
any significant changes for the current
year. Further details of our remuneration
policy are set out in the remuneration
report on pages 72 to 86.

Group policies
During the year, we rolled out a
comprehensive competition law policy
and anti-bribery policy to all Group
employees who deal with customers
and suppliers. In tandem with the
updated whistleblowing policy which
was also rolled out during the year, this
underscores the importance of ethics
and values to the board, and ensures that
these ethics and values continue to be
firmly embedded across the Group.

23925-04 24-06-2015 Proof 5

Severfield plc

Stock code: SFR

www.severfield.com

Corporate governance report

The corporate governance report
is intended to give shareholders an
understanding of the Company’s
corporate governance arrangements and
how they have operated during the year
ended 31 March 2015.

The Company has, throughout the
year ended 31 March 2015, complied
without exception with the provisions
of the September 2012 UK Corporate
Governance Code (‘the Code’), which is
the version of the Code which applies
to its 2015 financial year. The Code is
issued by the Financial Reporting
Council and is available for review on the
Financial Reporting Council’s website
(www.frc.org.uk).

LEADERSHIP
Structure of the board
The Company is controlled through the
board of directors, which consists of
the chairman, four other non-executive
directors and four executive directors.
The membership of the board is stated on
pages 52 and 53.

Alun Griffiths was appointed as a non-
executive director on 1 May 2014. Kevin
Whiteman and Tony Osbaldiston were
appointed as non-executive directors
from 19 July 2014. Keith Elliott and
Toby Hayward retired as non-executive
directors on 18 July 2014.

Ian Lawson has board level responsibility
for corporate and social responsibility and
employment matters; Ian Cochrane has
board level responsibility for health and
safety matters.

Role of the chairman, chief
executive officer and senior
independent director
The board has agreed a clear division of
responsibility between the chairman and
chief executive officer and their roles and
responsibilities are clearly established
and set out in writing.

The chairman, John Dodds, is mainly
responsible for managing the business of
the board, evaluating its performance and
setting the agenda for board meetings to
ensure that adequate time is allocated
to the discussion of all agenda items,
facilitating the effective contribution
of all directors. The chairman acts as
an ambassador for the Company and
provides effective communication
between the board and its shareholders.

As the senior executive of the Company,
Ian Lawson is responsible to the chairman
and the board for directing and prioritising
the profitable operation and development
of the Group. The chief executive officer
is responsible for the day-to-day
management of the operational activities
of the Group, assessing and implementing
strategy and implementing the board’s
decisions.

The chief executive officer chairs an
executive committee consisting of the
members indicated on pages 54 and 55.
This committee assists the main board
by focusing on strategic and operational
performance matters relating to the
business and meets formally on a monthly
basis. He also, together with the Group
finance director and chief operating
officer, holds quarterly meetings with each
of the three business unit boards to review
all operational issues and meets with
an executive risk committee comprising
himself, the Group finance director, chief
operating officer and the Group legal
director on a weekly basis to discuss any
key issues affecting the business.

In addition, he chairs a safety leadership
team (‘SLT’) and a Group human resources
(‘GHR’) meeting once a month, both of
which consist of certain other members
of the executive management team and
business unit managing directors.

Keith Elliott acted as senior independent
non-executive director until his retirement
on 18 July 2014 and was succeeded by
Kevin Whiteman from 19 July 2014. The
role of the senior independent director
is to provide a sounding board for the
chairman and to serve as an alternative
source of advice to the chairman for the
other non-executive directors.

The senior independent director is
available to shareholders if they request
a meeting or have concerns which
contact through the normal channels
has failed to resolve, or where such
contact is inappropriate. He also leads
the performance review of the chairman,
taking into account the views of the
executive directors.

Independence
All of the non-executive directors
are considered by the board to be
independent in character and judgement
and no cross-directorships exist between
any of the directors.

No director had any material interest
in any contract of significance with the
Group during the period under review. The
directors have put in place procedures
to ensure the board collectively, and the
directors individually, comply with the
disclosure requirements on conflicts of
interest set out in the Companies Act
2006. The interests of the directors in
the share capital of the Company and
its subsidiary undertakings and their
interests under the performance share
plan and other share schemes are set out
in the remuneration report on page 72.

Directors to stand for election
The Company’s articles of association
require the directors to offer themselves
for re-election at least once every three
years. Notwithstanding this, and in
accordance with the recommendations
of the Code, the Company’s policy is that
all of the directors retire at each AGM
and may offer themselves for re-election
by shareholders. Accordingly, all of the
existing directors whose biographies
are set out on pages 52 and 53 will be
standing for re-election at the 2015 AGM.

The board is satisfied that the
performance of all of the remaining
non-executive directors continues to be
effective and that they continue to show
commitment to their respective roles.
Non-executive directors are not appointed
for a fixed term. The terms and conditions
of appointment of non-executive directors
will be available for inspection at the AGM.

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Our governance

Board meetings
The directors’ attendance record at the scheduled board meetings and board committee
meetings for the year ended 31 March 2015 is shown in the table below.

Total number of meetings
Executive directors
Ian Lawson
Ian Cochrane
Alan Dunsmore
Derek Randall
Non-executive directors
John Dodds1
Chris Holt
Alun Griffiths4
(from 1 May 2014)
Tony Osbaldiston4
(from 19 July 2014)
Kevin Whiteman2
(from 19 July 2014)
Keith Elliott3
(until 18 July 2014)
Toby Hayward
(until 18 July 2014)

Board

11/11
11/11
11/11
11/11

10/11
11/11

10/10

8/8

7/8

1/3

3/3

Audit
committee

Remuneration
committee

Nomination
committee

—
—
—
—

4/4
4/4

4/4

3/3

0/1

1/1

—
—
—
—

4/5
5/5

4/4

3/3

2/2

—
—
—
—

3/3
3/3

3/3

—

1. John Dodds was unable to attend one board meeting due to illness. The meeting was chaired by Kevin

Whiteman in his absence.

2. Kevin Whiteman was unable to attend one board meeting due to a conflicting commitment which was

disclosed to the Company on his appointment in July 2014.

3. Keith Elliott was unable to attend two board meetings and one audit committee meeting due to

conflicting commitments that had previously been agreed with the chairman.

4. Alun Griffiths and Tony Osbaldiston attended all required meetings during their tenure as non-

executive directors.

Board meetings are held at various locations in London, the Group’s head office in
Dalton, North Yorkshire and at the offices of the Group’s other operating subsidiaries
to provide non-executive directors the opportunity to increase their knowledge and
understanding of the Group’s operations. In addition to scheduled meetings, ad hoc
meetings were also arranged to deal with other Group matters as appropriate.

BOARD EFFECTIVENESS
Operation of the board
The board is responsible for providing
effective leadership to the Group to
create and deliver long-term shareholder
value. This includes setting the strategic
direction of the Group, reviewing all
significant aspects of the Group’s
activities, overseeing the executive
management and reviewing the overall
system of internal control and risk
management. The board has a formal
schedule of matters reserved for it. It is
responsible for overall Group strategy,
acquisition and divestment policy,
approval of major capital expenditure
projects and consideration of significant
financing matters. It monitors the
exposure to key business risks including
environmental and health and safety
issues. It reviews the Group’s strategic
direction, codes of conduct, annual
budgets, progress towards achievement
of those budgets, significant capital
expenditure programmes and the annual
and half year results.

The board also considers employee issues
and key appointments. It also ensures
that all directors receive appropriate
training on appointment and then
subsequently as appropriate. Other
specific responsibilities are delegated to
the board’s committees described below.

The chairman, together with the
Company secretary, ensures that the
directors receive clear information on
all relevant matters in a timely manner.
Board papers are circulated sufficiently
in advance of meetings for them to be
thoroughly digested to ensure clarity
of informed debate. The board papers
contain the chief executive officer’s
written report, the Group finance
director’s and chief operating officer’s
written reports, high level papers on
each business area, key metrics and
specific papers relating to agenda items.
The board papers are accompanied by a
management information pack containing
detailed financial and other supporting
information. The board receives
occasional ad hoc papers on matters of
particular relevance or importance. The
board also receives presentations from
various business units.

23925-04 24-06-2015 Proof 5

Severfield plc

Stock code: SFR

www.severfield.com

Corporate governance report

Board calendar for the current year
During the financial year the board discussed and implemented the following key actions:

2014

April 2014
• Approved change of name to
Severfield plc (final approval
granted at May EGM)

July 2014
• Presentation by Group SHE

director

• Reviewed proposal for process of
refinancing the Group’s revolving
credit facility

• Approved revised board committee

terms of reference

• Strategy presentation by chief

executive officer

September 2014
• External presentation on market
conditions and views by Jefferies,
the Group’s brokers

• Approved refinancing of the

Group’s revolving credit facility
with HSBC and Yorkshire Bank
• Approved updated anti-bribery
policy and competition law
compliance policy

• Reviewed annual statements of
compliance from directors

October/November 2014
• Reviewed and approved half

year results, including unaudited
results announcement
• Reviewed results of staff
engagement survey

February 2015
• Approved appointment of KPMG as
external auditor for the 2016 year-
end subject to shareholder approval
at 2015 AGM

• Agreed scope and content of

board and chairman performance
evaluation

Early June 2014
• Reviewed and approved annual
results, including unaudited
preliminary announcement

• Approved sale of Leeds 27 Limited

investment property

Late June 2014
• Board meeting held at Lostock
facilities including site tour and
management presentations
• Reviewed and approved annual

report and accounts

• Reviewed full year results investor

feedback from roadshows

August 2014
• Approved revised conflicts of

interest policy and whistleblowing
policy

• Approved revised year-end reporting
timetable incorporating an audited
year-end results announcement and
completion of the annual report by
mid-June

• Adopted electronic board books
software to streamline board
reporting

• Board feedback on strategy review

2015

January 2015
• Adopted sharesave (SAYE) scheme

for all employees

• Reviewed interim results investor

feedback from roadshows

March 2015
• Reviewed and approved the
Group’s 2016 annual budget
• Presentation by Group HR director
• Approved dividend policy wording
• Approved 2015 sharesave (SAYE)

awards

• Reviewed results of board and

chairman performance evaluation

23925-04 24-06-2015 Proof 5

Board evaluation
The board considers that the balance
of relevant experience amongst the
various board members enables the
board to exercise effective leadership
and control of the Group. It also ensures
that the decision making process cannot
be dominated by any individual or small
group of individuals.

The Code attaches importance to boards
having processes for individual and
collective performance evaluation. The
performance of individual directors is
evaluated annually in conjunction with the
remuneration review. The chairman meets
with the non-executive directors at least
annually to review their performance.

During the year, the board appointed Kevin
Whiteman, the new senior independent
director, to undertake a formal evaluation
of board effectiveness. This process was
undertaken using a questionnaire which
was completed by all members of the
board and focused on the performance of
the chairman and overall cohesiveness
of the board. The key points arising from
the evaluation were documented and
discussed with the chairman.

A further evaluation of the board will be
undertaken during the year ending
31 March 2016.

Professional development
Appropriate training and briefing is
provided to all directors on appointment
to the board, taking into account their
individual qualifications and experience.
This is supplemented with visits to the
Group’s operations and meetings with
senior business unit management to
develop the directors’ understanding of
the business. During the year, the new
non-executive directors, Kevin Whiteman,
Tony Osbaldiston and Alun Griffiths,
undertook the following briefings:

• had individual meetings with the

executive directors and the Company
secretary;

• met with the business unit boards and

senior management teams;

• visited the Group’s fabrication facilities;

and

• met with the audit partner from

Deloitte LLP.

Annual report and accounts for the year ended 31 March 2015

Our governance

Training and updating in relation to the
business of the Group and the legal and
regulatory responsibilities of directors
was provided throughout the year by
a variety of means to board members
including presentations by executives,
visits to business operations and
circulation of briefing materials. Individual
directors are also expected to take
responsibility for identifying their training
needs and to ensure they are adequately
informed about the Group and their
responsibilities as a director.

Non-executive directors are continually
updated on the Group’s business, its
markets, social responsibility matters,
changes to the legal and governance
environment and other changes impacting
the Group. During the year, the directors
received updates on various best practice,
regulatory and legislative developments,
including imminent changes to the
UK Corporate Governance Code which
introduces two new board statements
for the year ending 31 March 2016
(robust assessment of principal risks
and longer-term viability statement)
and a requirement for monitoring of risk
management and internal controls.

All directors have access to the advice
and services of the Group legal director
and Company secretary who ensures
that board processes are followed and
good corporate governance standards
are maintained. Any director who
considers it necessary or appropriate
may take independent professional
advice in furtherance of their duties at the
Company’s expense. No directors sought
such advice in the year.

The board is confident that all its
members have the knowledge, ability
and experience to perform the functions
required of a director of a listed company.

Relations with shareholders
The Company encourages two-way
communication with both its institutional
and private investors and attempts to
respond quickly to all queries received
verbally or in writing.

The executive directors undertake a
programme of regular communication
with institutional shareholders and with
analysts covering the Group’s activities,
its performance and strategy. Ian Lawson
and Alan Dunsmore attended several
meetings with institutional shareholders,
private investors and analysts during the
year, at the time of the announcements of
the Group’s annual and half year results,
during visits to the Group’s head office in
North Yorkshire and on an ad hoc basis
as required. In addition, capital markets
events took place on 25 April 2014 and
24 March 2015, both attended by between
20 and 30 analysts and investors.
Feedback from those meetings was
reported to the board, including the non-
executive directors.

The board has sought to use the AGM
to communicate with private investors
and encourages their participation. The
notice of the AGM, detailing all proposed
resolutions, is posted to shareholders
at least 20 workings days before the
meeting.

BOARD COMMITTEES
The board has established three standing
committees, all of which operate within
defined terms of reference, which are
available from the Company secretary
by request and will be available for
inspection at the AGM.

The committees established are the audit
committee, the remuneration committee
and the nominations committee. Trading
companies are managed by separate
boards of directors. Any matters of a
material nature concerning the trading
companies are reported to the board on a
monthly basis.

Audit committee
The audit committee comprises the
non-executive directors and is chaired
by Tony Osbaldiston (who took up that
position on 19 July 2014). Toby Hayward
served as chairman of the committee
from 1 April 2014 to 18 July 2014. The
committee members have been selected
to provide the wide range of financial and
commercial expertise necessary to fulfil
the committee’s duties; Tony Osbaldiston
and Chris Holt are chartered accountants.

On invitation, the chief executive officer,
Group finance director, other executive
directors, executive committee members,
senior management and the internal
and external auditors attend meetings to
assist the committee in fulfilling its duties.

Meetings are held at least three times per
annum and additional meetings may be
requested by the auditor. The committee
met on four occasions during the year.

The audit committee report is set out on
pages 66 to 68.

23925-04 24-06-2015 Proof 5

Severfield plc

Stock code: SFR

www.severfield.com

Corporate governance report

Remuneration committee
The remuneration committee comprises
the non-executive directors and is chaired
by Alun Griffiths (who took up that
position on 19 July 2014). Keith Elliott
served as chairman of the committee from
1 April 2014 to 18 July 2014.

This committee, which meets at least
three times per year, is responsible for
making recommendations to the board
concerning the compensation of senior
executives. It also determines, within the
agreed terms of reference, the specific
remuneration packages for each of the
executive directors and the chairman,
as well as the level and structure of
remuneration for senior management.
New Bridge Street (NBS) (an AON Hewitt
Company) is appointed as the Group’s
remuneration consultant. NBS is a
member of the Remuneration Consultants
Group and complies with its code of
conduct. NBS has no other connection
with the Company.

The committee met on five occasions
during the year.

Shareholders are required to approve
all new long-term incentive plans and
significant changes to existing plans.
Further details of these plans, as well
as the activities undertaken by the
committee during the year, can be found in
the directors’ remuneration report as set
out on pages 72 to 86.

Nominations committee
The nominations committee comprises
the non-executive directors and is chaired
by John Dodds.

The principal task of the committee is to
deal with key appointments to the board,
and related employment matters. The
committee is responsible for proposing
candidates for appointment to the
board, having regard to the balance and
structure of the board, and meets as and
when required.

The committee met on three occasions
during the year.

Diversity
We recognise the importance of diversity
in board effectiveness and remain
committed to ensuring that appointments
are ultimately made on merit and against
agreed selection criteria.

We support the Davies report’s aspiration
to promote greater female representation
on listed company boards. The Group,
however, does not believe in the concept
of gender quotas, our preferred approach
being much more directed at merit,
experience and skill.

In the sectors in which the Group operates
female representation at a senior level is
rare and as at 31 March 2015, the board
had no female directors. As and when
board appointments arise, and where
practicable, we will look to follow the
procedures recommended by the Davies
report and by the Code to maintain a
balanced board.

The Group’s policy on diversity applies
across all levels of the organisation, not
just the board, further details of which
can be found in the corporate social
responsibility report on page 41. The
board recognises that gender diversity
below board level remains an issue,
particularly in management and technical
roles within the construction industry.

Succession planning
The nominations committee ensures the
continued effectiveness of the board
through appropriate succession planning.
This worked effectively last year when
three new non-executive directors were
recruited to the board. As a result the
board now consists of nine directors, only
four of whom have been directors of the
Company for more than two years. More
work will be done in the next 12 months
to formalise the process of ongoing
succession planning.

ACCOUNTABILITY
Risk management
The board has overall responsibility
for the Group’s risk management and
systems of internal control. The board is
responsible for determining the nature
and extent of the significant risks it is
willing to take in achieving its strategic
objectives. An ongoing process has been
established for identifying, evaluating
and managing the significant risks faced
by the Group. A Group assurance map is
used to co-ordinate the various assurance
providers within the Group.

Management has continued to develop
and improve the approach to risk
management during the course of the
year in response to changes in the
business and operating environment and
to further embed risk management into
the Group’s governance structure and
operating processes. Senior management
from all key disciplines and businesses
within the Group continues to be involved
in the process of risk assessment and
monitoring in order to identify and
assess Group objectives, key issues and
controls. Further reviews are performed to
identify and monitor those risks relevant
to the Group as a whole. This process
encompasses all aspects of risk, including
operational, compliance, financial and
strategic.

Identified risk events, their causes and
possible consequences are recorded
in risk registers. Their likelihood and
potential business impact and the control
systems that are in place to manage them
are analysed and, if required, additional
actions are developed and put in place to
mitigate or eliminate unwanted exposures.
Individuals are allocated responsibility
for evaluating and managing these risks
within an agreed timetable.

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Our governance

Internal control
The overall responsibility for the Group’s
systems of internal control and for
reviewing their effectiveness rests with
the board. There are inherent limitations
in any system of internal control and,
accordingly, even the most effective
system can provide only reasonable, and
not absolute, assurance against material
misstatement or loss. The system is
designed to manage rather than eliminate
the risk of failure to achieve the Group’s
objectives.

The system of internal control, which
includes financial, operational and
compliance controls, is based on a
process of identifying, evaluating and
managing risks. This process has been in
place for the full financial year and up to
the date of the approval of these financial
statements. The process is subject to
continuous improvement and has been
enhanced as the Group has implemented
greater formality and standardisation,
which allows for better oversight by the
board.

The audit committee undertakes an
annual review of the appropriateness of
the risk management processes to ensure
that they are sufficiently robust to meet
the needs of the Group.

Details of the Group’s principal risks,
together with the controls and procedures
in place to mitigate the risks, can be found
on pages 44 to 49.

Annual report
The board is responsible for the
preparation of the annual report and the
financial statements to ensure that the
annual report taken as a whole is fair,
balanced and understandable.

The annual report is drafted by executive
management with reviews undertaken
by third-party advisers as required.
Additional steps have been built into
the reporting timetable to ensure that
directors are given sufficient time
to review, consider and comment
on the annual report. Our external
auditor reviews the narrative sections
of the annual report to identify any
material inconsistencies between
their knowledge acquired during the
audit and the directors’ ‘fair, balanced
and understandable’ statement and
whether the annual report appropriately
discloses those matters that they have
communicated to the audit committee. A
substantially final draft is reviewed by the
audit committee prior to approval by the
board.

The Group establishes its risk appetite
through use of delegated authorities
so that matters considered higher
risk require the approval of senior
management or the board. These include,
but are not limited to, tender pricing,
bid submissions, approval of contract
variations and final account settlements,
capital requirements, procurement, and
certain legal and strategic matters.

Ongoing risk management and assurance
is provided through various monitoring
reviews and reporting mechanisms,
including the executive risk committee
(chaired by Ian Lawson) which convenes
on a weekly basis and has the primary
responsibility to identify, monitor
and control significant risks to an
acceptable level throughout the Group.
The committee receives information on
relevant risk matters from a variety of
sources on a regular basis.

Subsidiary company meetings consider
and report on risk on a monthly basis
as part of the monthly business review
process. This process is followed to ensure
that, as far as possible, the controls and
safeguards are being operated in line with
established procedures and standards.

On a quarterly basis, the significant risks
identified by the Group’s businesses
are discussed in detail with each
management team. The outcome of these
discussions is collated and reported
to the executive committee. The risk
registers of each business are updated
and, together with a consolidated Group
risk register compiled by the executive
committee, are reported to the audit
committee twice yearly, to ensure that
adequate information in relation to risk
management matters is available to the
board and to allow board members the
opportunity to challenge and review the
risks identified.

23925-04 24-06-2015 Proof 5

Severfield plc

Stock code: SFR

www.severfield.com

Corporate governance report

The board believes that senior
management within the Group’s operating
businesses should also contribute in a
substantial way and this has been built
into the process. To assist the board in
discharging its overall responsibilities,
each of the managing directors of the
Group’s business units is required to
provide a letter of assurance in respect
of the businesses for which they are
responsible. Assurance is sought about
the effectiveness of internal controls over:

• the maintenance of accounting

records;

• the reliability of management and

financial information;

• the safeguarding of assets;

• the ongoing process for identifying,
evaluating and managing business
risks;

• effectiveness and efficiency of

operations;

• compliance with the Group finance

manual and Group authorisation policy;
and

•

legal and ethical standards practised
in the business.

This letter of assurance is approved by
all of the senior management team of the
relevant business unit, demonstrating
a proper recognition of business control
responsibilities.

In accordance with the revised Guidance
for Directors on the Code, the board has
reviewed the effectiveness of the Group’s
framework of internal controls during
the year, the key features of which are as
follows:

Financial reporting system
The Group operates a comprehensive
budgeting and forecasting system.
Budgets and forecasts include income
statements (including detailed contract-
by-contract information), cash flow
statements and balance sheets. Risks are
identified and appraised throughout the
annual process of preparing budgets. The
annual budget and quarterly forecasts are
approved by the board.

A formal quarterly review of each
business’s year-end forecast, business
performance, risk and internal control
matters is carried out by the directors
of each business unit with the chief
executive officer, Group finance director
and chief operating officer in attendance.

Detailed management accounts are
prepared for each business and the
Group on a monthly basis which, as a
matter of routine, compare actual results
with budget and the latest forecast.
Material variances from budget and
forecast are thoroughly investigated. A
detailed monthly Group management
information pack is prepared which covers
the performance of each business and
contains detailed consolidated results
and other financial information for the
Group as a whole. This information pack is
subsequently presented to the executive
committee and the board.

Standard financial control procedures
operate throughout the Group to ensure
the integrity of the Group’s financial
statements.

Project management procedures
Project risk is managed throughout the
life of a contract from the tender stage to
completion.

Individual tenders for projects are subject
to detailed review with approvals required
at relevant levels and at various stages
from commencement of the tender
process through to contract award.
Tenders above a certain value and those
involving an unusually high degree of
technical or commercial risk must be
approved at a senior level within the
Group.

Robust procedures exist to manage
the ongoing risks associated with
contracts. Regular monthly contract
reviews to assess contract performance,
covering both financial and operational
issues, form an integral part of contract
forecasting procedures.

Authorisation procedures
The Group operates an established
management structure, with clearly
defined levels of responsibility and a clear
system of delegated authorities. These
procedures are relevant across Group
operations and provide for successive
assurances to be given at increasingly
higher levels of management and, finally,
to the board.

All significant investment decisions,
including capital expenditure, are referred
to the board, the executive directors or
senior management, depending on the
value and/or nature of the proposed
investment. Capital expenditure requests
are supported by detailed investment
appraisals.

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Our governance

Cash and working capital
management
Cash flow forecasts are regularly prepared
to ensure that the Group has adequate
funds and resources for the foreseeable
future and is in compliance with banking
covenants. Each business reports its cash
position daily. Actual cash performance is
compared to forecast on a weekly basis.

Group policies
The Group operates a comprehensive
‘whistleblowing’ policy which was updated
during the year. Accordingly, staff may, in
confidence, raise concerns about possible
improprieties in matters of financial
reporting or other matters. The audit
committee reviews adherence with this
policy on an ongoing basis.

Health and safety
Safety, health and environmental issues
and risks are continually monitored at all
sites and are reviewed on a monthly basis
by senior management and the board.

The Group has a well-developed health
and safety management system for the
internal and external control of health
and safety risks which is managed by
the Group SHE director. This includes the
use of risk management systems for the
identification, mitigation and reporting
of health and safety management
information.

During the year, a comprehensive
competition law policy and anti-bribery
policy were also rolled out to all Group
employees who deal with customers and
suppliers to ensure that ethics and values
continue to be firmly embedded across
the Group.

Information included in the
directors’ report
Certain information that fulfils the
requirements of the corporate governance
statement can be found in the directors’
report in the sections headed ‘significant
shareholdings’, ‘share capital’, ‘amendment
of articles of association’, ‘appointment
and replacement of directors’ and ‘powers
of the directors’ and is incorporated into
this corporate governance section by
reference.

23925-04 24-06-2015 Proof 5

Severfield plc

Stock code: SFR

www.severfield.com

Audit committee report

Tony Osbaldiston
Chairman of the audit committee

“ This is my first year

as chairman of the
committee.”

During the year, the committee has continued to
devote significant time to the scrutiny of the Group’s
system of risk management and internal controls,
together with undertaking a tender of the external
audit arrangements, resulting in the appointment of
KPMG as the Group’s auditor, subject to shareholder
approval at our AGM.

Role
The primary function of the committee
is to assist the board in fulfilling its
oversight responsibilities. This includes
reviewing the financial reports and other
financial information before publication.
The committee assists the board in
achieving its obligations under the Code
in areas of risk management and internal
control, focusing particularly on areas
of compliance with legal requirements,
accounting standards and the Listing
Rules (Listing Authority Rules for
companies listed on the London Stock
Exchange), and ensuring that an effective
system of internal financial and non-
financial controls is maintained.

The committee also reviews the accounting
and financial reporting processes, along
with reviewing the roles of and effectiveness
of the external auditor. The ultimate
responsibility for reviewing and approving
the annual report remains with the board.

The responsibility of the committee
principally falls into the following areas:

• To monitor the integrity of the financial

statements and formal announcements
and to review significant financial
reporting judgements.

• To review the Group’s internal financial

controls.

• To make recommendations to the

board in relation to the appointment
and removal of the external auditor
and to approve its remuneration and its
terms of engagement.

• To review the nature of non-audit

services supplied and non-audit fees
relative to the audit fee.

• To provide independent oversight over
the external audit process through
agreeing the suitability of the scope
and approach of the external auditor’s
work, assessing its objectivity in
undertaking its work and monitoring
its independence taking into account
relevant UK professional regulatory
requirements and the auditor’s period
in office and compensation.

• To oversee the effectiveness of the

internal audit process.

• To oversee the effectiveness of the
external audit process particularly
with regard to the quality and cost-
effectiveness of the auditor’s work.

• To report to the board how it has
discharged its responsibilities.

Activities of the committee
• Reviewed the interim results for the

period ended 30 September 2014 and
the year-end results for the period
ended 31 March 2015.

• Reviewed the significant management
judgements reflected in the Group’s
results including significant contract
judgements and accounting for the
Leadenhall bolts issue.

• Reviewed and agreed significant
accounting risks and principal
business risks for the year ended
31 March 2015.

• Reviewed and agreed the external
auditor’s audit planning report in
advance of the audit for the year ended
31 March 2015.

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Our governance

• Discussed the report received from
the external auditor regarding the
audit of the results for the year ended
31 March 2015. This report included
the key accounting considerations
and judgements reflected in the
Group’s year-end results, comments
on findings on internal control and
a statement on independence and
objectivity.

• Proposed the appointment of KPMG
as external auditor for the financial
year commencing on 1 April 2015
(subject to shareholder approval at the
AGM) following a rigorous audit tender
process.

• Reviewed KPMG’s internal audit plan
and internal audit reports covering
various aspects of the Group’s
operations, controls and processes.

• Reviewed the Group’s risk register.

• Reviewed and approved external audit
fees for the year ended 31 March 2015.

The committee was provided with, and
commented on, a draft copy of the annual
report. At the request of the board, the
committee also considered whether
the annual report was fair, balanced
and understandable and whether it
provided the necessary information
for shareholders to assess the Group’s
performance, business model and
strategy. The committee is satisfied
that, taken as a whole, the annual report
and accounts is fair, balanced and
understandable.

In carrying out the above processes,
key considerations included ensuring
that there was consistency between the
financial statements and the narrative
provided in the front half of the annual
report, that there is a clear and well-
articulated link between all areas of
disclosure and that the strategic report
focused on the balance between the
reporting of weaknesses, difficulties and
challenges, as well as successes, in an
open and honest manner.

Risk management and
internal control
The board as a whole, including the
audit committee members, considers
the nature and extent of the Group’s
risk management framework and the
risk profile that is acceptable in order to
achieve the Group’s strategic objectives.
As a result, it is considered that the board
has fulfilled its obligations under the
Code.

The Group’s system of internal controls,
along with their design and operating
effectiveness, is subject to review by the
audit committee. The evidence on which
this review will be based will come from
three main sources:

• Deloitte, the external auditor;

• KPMG, the internal auditor; and

• the managing directors responsible for
each of the Group’s business units.

To assist the board in discharging its
overall responsibilities, each of the
managing directors is required to provide
a letter of assurance in respect of the
businesses for which they are responsible.
Responses in the individual letters of
assurance have been summarised and
reported to the audit committee.

No significant deficiencies were noted in
the review. In performing this review, the
committee considered the processes that
have been designed and implemented
during the year ended 31 March 2015
and the continued formalisation of the
system of internal controls. Improvements
continue to be made to further enhance
the Group’s internal control and risk
management processes and to deal with
areas of improvement which are brought
to the attention of management and the
board.

Further details of the Group’s internal
control process are set out in the
corporate governance report on pages 63
to 65.

Internal audit
The committee is responsible for
overseeing the work of the internal
auditor, KPMG, who continued during the
year to provide a structured programme
of independent, outsourced reviews
based on an approved internal audit
plan. The scope of their work focused on
key financial controls and non-financial
reviews covering areas of perceived
higher business risk. The committee
assessed the quality of internal audit
reports prepared by KPMG, along with
management’s actions relating to findings
and the closure of recommended actions.

Following the decision to appoint KPMG
as the Group’s external auditor, they
will be unable to continue in their role
as internal auditor. Until their formal
appointment as external auditor at the
AGM on 2 September 2015, KPMG will
deliver a further three non-financial
reviews but will conduct no further
reviews of key financial controls. KPMG
internal audit will continue to validate
management action until they resign.

Financial reporting and
significant financial issues
The committee assesses whether suitable
accounting policies have been adopted
and whether management has made
appropriate estimates and judgements.
The committee reviews accounting
papers prepared by management which
provide details on the main financial
reporting judgements. For example, during
the year the committee reviewed the
significant contract judgements made by
management and the judgemental areas
of other (non-underlying) items and the
carrying values of goodwill and the Indian
joint venture.

23925-04 24-06-2015 Proof 5

Severfield plc

Stock code: SFR

www.severfield.com

Audit committee report

The three significant issues considered
during the year are detailed below:

Contract valuation, revenue and profit
recognition: The committee reviewed the
report of the Group finance director that
set out the main contract judgements
associated with the Group’s significant
contracts. The significant areas of
judgement include the timing of revenue
and profit recognition, the estimation of
the recoverability of contract variations
and claims and the estimation of future
costs to complete. The external auditor
performed detailed audit procedures
on revenue and profit recognition and
reported the findings to the committee.

Review of carrying value of goodwill
and the investment in the Indian joint
venture: The committee considered
the carrying value of goodwill and the
investment in the Indian joint venture
and the assumptions underlying the
impairment review. The judgements in
relation to impairment largely relate to the
assumptions underlying the identification
of the Group’s cash-generating units
(CGUs) (for goodwill only) together with
the calculation of the value in use of
the assets being tested for impairment,
primarily the achievability of long-term
business plans and macroeconomic
assumptions underlying the valuation
process.

Other (non-underlying) items: The
committee reviewed the treatment
of other items, including the costs
associated with the Leadenhall bolts
issue, and their separate disclosure in the
consolidated financial statements. The
committee has reviewed papers prepared
by management showing how these
costs have been identified and calculated
and has discussed with the external
auditor their review of the assumptions
underpinning the estimates used. It has
tested the quantum of the charge, the
amounts accrued at year-end and the
presentation in the consolidated income
statement and is satisfied that these
costs have been treated appropriately.

The committee was satisfied that each
of the matters set out above had been
fully and adequately addressed by
management, appropriately tested and
reviewed by the external auditor and that
the disclosures made in the annual report
were appropriate.

In addition, the committee has considered
a number of other judgements which
have been made by management, none
of which had a material impact on
the Group’s results. These include the
recoverability of deferred tax assets
and the valuation of pension scheme
liabilities.

Audit tendering
During the year, the audit committee was
authorised by the board to review the
provision of audit services to the Group.
Following a rigorous tender process, which
included the establishment of a sub-
committee (selection panel) comprising
certain of the non-executive directors,
the Group finance director and the Group
financial controller, an invitation to tender
was issued to the incumbent auditor,
Deloitte LLP (Deloitte), and three other
accounting firms. The invitation to tender
included certain pre-determined criteria
to ensure that the Group continued to
be subject to a robust and independent
external audit.

Following a series of meetings with senior
management of the Group and detailed
presentations by three of the firms, the
committee recommended to the board
that KPMG LLP (KPMG) replace Deloitte
as the Group’s auditor. The board accepted
the proposal of the committee and, as a
result, on 24 February 2015, KPMG was
appointed as auditor for the financial year
commencing on 1 April 2015 subject to
shareholder approval at the AGM. Deloitte
will resign as auditor following completion
of the audit for the year ended 31 March
2015.

In accordance with best practice and
guidance from the Financial Reporting
Council, the audit committee will continue
to review the qualification, expertise,
resources and independence of the external
auditor and the effectiveness of the audit
process during the next financial year.

Non-audit services
The Group’s policy on the engagement of
the external auditor for non-audit related
services is designed to ensure that the
provision of such services does not impair
the external auditor’s independence or
objectivity. Under no circumstances will
any assignment be given to the external
auditor, when the result would be that:

• as part of the statutory audit, it is

required to report directly on its own
non-audit work;

•

it makes management decisions on
behalf of the Group; or

•

it acts as advocate for the Group.

There is no inconsistency between the
Financial Reporting Council’s ethical
standards and the Group’s policy.

Other categories, such as audit-related
services or work which, because of the
auditor’s existing knowledge of the Group’s
business, could be more effectively
carried out by it, may, if not on the list of
prohibited services, be carried out by the
external auditor subject to the advance
approval of the Group finance director
or, if the fees for such services exceed an
absolute limit or a specified proportion
of the audit fee, the advance approval of
the audit committee. Non-audit services
provided by the auditor during the year
ended 31 March 2015, which mainly
represented corporation tax compliance
advice only, did not require the approval of
the committee.

Details of the auditor’s fees, including
non-audit fees, are shown in note 4 to the
consolidated financial statements. The
committee has reviewed the nature of the
work and level of fees for these services
and concluded that they have not affected
Deloitte LLP’s objectivity or independence.

Tony Osbaldiston
Chairman of the audit committee
17 June 2015

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Our governance

Directors’ report

Introduction
The directors present their report together
with the audited consolidated financial
statements for the year ended 31 March
2015.

The Companies Act 2006 requires the
directors to present a fair review of the
business during the year to 31 March
2015 and of the position of the Group
at the end of the financial year along
with a description of the principal risks
and uncertainties. The Disclosure and
Transparency Rules require certain
information to be included in a corporate
governance statement.

The strategic report on pages 3 to 49 and
the corporate governance report on pages
58 to 65, including the audit committee
report, form part of this directors’ report.
Disclosures elsewhere in the annual
report are cross-referenced where
appropriate. Taken together, they fulfil the
combined requirements of company law,
the Disclosure and Transparency Rules
and Listing Rules.

There were no significant events since
the balance sheet date. An indication of
likely future developments in the business
of the Group and details of research and
development activities are included in the
strategic report.

Information about the use of financial
instruments by the Company and its
subsidiaries is given in note 21 to the
financial statements.

Dividends
The directors did not declare an interim
dividend for the six months ended
30 September 2014 (2014: no dividend
was declared). The directors have
recommended a final dividend of 0.5p per
ordinary share to be paid on 11 September
2015 to shareholders on the register at
the close of business on 14 August 2015.

Directors
The present membership of the board is
set out on pages 52 and 53.

Details of directors’ interests, including
interests in the Company’s shares, are
disclosed in the directors’ remuneration
report on page 83.

The other significant commitments of
the chairman consist of acting as non-
executive chairman of Sweett Group
plc (since 29 August 2014 having been
non-executive director since 21 July
2014) and non-executive director of
Lagan Construction Holdings Limited and
Newbury Racecourse plc.

Significant shareholdings
As at 1 June 2015, the Group had been
notified of the following voting rights to the
Company’s shares in accordance with the
Disclosure Rules and Transparency Rules of
the UK Listing Authority:

Name

1 M&G

Investments
2 JO Hambro

Capital
Management
3 Threadneedle
Investments
4 Standard Life
Investments
5 Legal & General

Investment
Management

6 River &

Mercantile Asset
Management

7 BlackRock Merrill
Lynch Investment
Managers
8 Henderson

Ordinary 2.5p
share

46,543,871

15.64

45,453,034

15.28

24,889,519

8.37

21,620,394

7.27

18,290,158

6.15

16,068,853

5.40

10,428,372

3.51

Global Investors 10,114,864

3.40

Share capital
The Company has a single class of share
capital which is divided into ordinary shares
of 2.5p each.

Rights attaching to shares
The rights attaching to the ordinary shares
are defined in the Company’s articles of
association. The articles of association
may be changed with the agreement of
shareholders. A shareholder whose name
appears on the Company’s register of
members can choose whether his shares
are evidenced by share certificates (i.e.
in certificated form) or held in electronic
(i.e. uncertificated) form in CREST (the
electronic settlement system in the UK).

Subject to any restrictions below,
shareholders may attend any general
meeting of the Company and, on a
show of hands, every shareholder (or
his representative) who is present at
a general meeting has one vote on
each resolution and, on a poll, every
shareholder (or his representative) who is
present has one vote on each resolution
for every ordinary share of which they are
the registered shareholder. A resolution
put to the vote of a general meeting is
decided on a show of hands unless before,
or on the declaration of the result of a vote
on a show of hands, a poll is demanded
by the chairman of the meeting, or by at
least five shareholders present in person
or by proxy and having the right to vote, or
by any shareholders present in person or
by proxy having at least 10 per cent of the
total voting rights of all shareholders, or
by any shareholders present in person or
by proxy holding ordinary shares in which
an aggregate sum has been paid up of at
least one-tenth of the total sum paid up
on all ordinary shares.

Shareholders can declare final dividends
by passing an ordinary resolution but the
amount of the dividends cannot exceed
the amount recommended by the board.
The board can pay interim dividends on
any class of shares of the amounts and on
the dates and for the periods they decide
the distributable profits of the Company
justify such payment.

Any dividend which has not been claimed
for 12 years after it became due for
payment will be forfeited and will then
belong to the Company, unless the
directors decide otherwise.

If the Company is wound up, the liquidator
can, with the sanction of a special
resolution passed by the shareholders,
divide among the shareholders all or any
part of the assets of the Company and
he can value any assets and determine
how the division shall be carried out
as between the members or different
classes of members. The liquidator can
also transfer the whole or any part of the
assets to trustees upon any trusts for the
benefit of the members. No shareholders
can be compelled to accept any asset
which would give them a liability.

23925-04 24-06-2015 Proof 5

Severfield plc

Stock code: SFR

www.severfield.com

Directors’ report

Voting at general meetings
Any form of proxy sent by the Company
to shareholders in relation to any general
meeting must be delivered (subject to the
provisions of the articles of association) to
the Company, whether in written form or
in electronic form, not less than 48 hours
before the time appointed for holding the
meeting or adjourned meeting at which
the person named in the appointment
proposes to vote.

No shareholder is, unless the board
decides otherwise, entitled to attend or
vote either personally or by proxy at a
general meeting or to exercise any other
right conferred by being a shareholder if
he or any person with an interest in shares
has been sent a notice under section
793 of the Companies Act 2006 (which
confers upon public companies the power
to require information with respect to
interests in their voting shares) and he or
any interested person failed to supply the
Company with the information requested
within 14 days after delivery of that notice.

The board may also decide (where the
shares represent at least 0.25 per cent in
nominal value of the issued shares of the
same class) that no dividend is payable in
respect of those default shares and that
no transfer of any default shares shall be
registered.

These restrictions end seven days after
receipt by the Company of a notice of an
approved transfer of the shares or all
the information required by the relevant
section 793 notice, whichever is the
earlier.

Change of control
There are no agreements between the
Group and its directors or employees
providing for compensation for loss of
office or employment that occurs because
of a takeover bid.

The Group’s banking arrangements which
were refinanced during the year and
expire in July 2019 can be terminated
upon a change of control of the Group.

Appointment and
replacement of directors
In accordance with the Company’s
articles, directors shall be no fewer than
two and no more than 12 in number.
Subject to applicable law, a director may
be appointed by an ordinary resolution of
shareholders in general meeting following
nomination by the board or a member
(or members) entitled to vote at such
a meeting, or following retirement by
rotation if the director chooses to seek re-
election at a general meeting. In addition,
the directors may appoint a director to
fill a vacancy or as an additional director,
provided that the individual retires at the
next AGM. A director may be removed by
the Company as provided for by applicable
law, in certain circumstances set out in
the Company’s articles of association (for
example bankruptcy, or resignation), or by
a special resolution of the Company. We
have decided this year to adopt voluntarily
the practice that all directors stand for
re-election on an annual basis, in line with
the recommendations of the Code.

Powers of the directors
The business of the Company is managed
by the board, who may exercise all the
powers of the Company subject to the
provisions of the Company’s articles of
association, the Companies Act 2006 (‘the
Act’) and any ordinary resolution of the
Company.

Transfer of shares
The board may refuse to register a
transfer of a share which is not fully paid,
provided that the refusal does not prevent
dealings in shares in the Company from
taking place on an open and proper basis.
The board may also refuse to register a
transfer of a certificated share unless: (i)
the instrument of transfer is lodged, duly
stamped (if stampable), at the registered
office of the Company or any other place
decided by the board, accompanied by a
certificate for the share to which it relates
and such other evidence as the board
may reasonably require to show the right
of the transferor to make the transfer; (ii)
is in respect of only one class of shares;
and (iii) is in favour of not more than four
transferees.

Transfer of uncertificated shares must be
carried out using CREST and the board
can refuse to register a transfer of an
uncertificated share in accordance with
the regulations governing the operation
of CREST. There are no other limitations
on the holding of ordinary shares in the
Company.

Variation of rights
If at any time the capital of the Company
is divided into different classes of shares,
the special rights attaching to any class
may be varied or revoked either:

• with the written consent of the holders
of at least 75 per cent in nominal value
of the issued shares of the class; or

• with the sanction of a special

resolution passed at a separate
general meeting of the holders of the
shares of the class.

The Company can issue new shares and
attach any rights to them. If there is no
restriction by special rights attaching to
existing shares, rights attaching to new
shares can take priority over the rights of
existing shares.

General meetings
A resolution is to be proposed at the
forthcoming AGM that a general meeting
of the Company, other than an AGM, can
be called on not less than 14 clear days’
notice.

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Our governance

External auditor
Deloitte LLP acted as the auditor for the
Company for the year ended 31 March
2015. On 24 February 2015, KPMG LLP
was appointed as auditor for the Company
for the financial year commencing on
1 April 2015 and a resolution confirming
this appointment will be proposed at the
forthcoming AGM.

Annual general meeting
The notice concerning the AGM to be held
at Aldwark Manor Hotel, York at noon on
Wednesday 2 September 2015, together
with explanatory notes on the resolutions
to be proposed and full details of the
deadlines for exercising voting rights,
is contained in a circular to be sent to
shareholders with this report.

The directors’ report from pages 69 to 71
inclusive was approved by the board and
signed on its behalf by:

Mark Sanderson
Company secretary
17 June 2015

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.

In addition, and in common with many
other companies, the Company had
during the year and continues to have in
place directors’ and officers’ insurance in
favour of its directors and other officers
in respect of certain losses or liabilities to
which they may be exposed due to their
office.

Amendment of articles
of association
Any amendments to the articles may be
made in accordance with the provisions of
the Act by way of special resolution.

Political contributions
No contributions were made to any
political parties during the current or
preceding year.

Greenhouse gas emissions
All disclosures on the Group’s greenhouse
gas emissions, as required to be disclosed
under the Companies Act 2006 (Strategic
Report and Directors’ Report Regulations
2013), are contained in the corporate
social responsibility report on page 39.

Employment of
disabled persons
The Company gives full and fair
consideration to applications for
employment made by disabled persons,
having regard to their particular aptitudes
and abilities. In the event of an employee
becoming disabled, every effort is
made to ensure that their employment
within the Company continues and that
appropriate training is arranged where
necessary. It is the policy of the Company
that the training, career development and
promotion of disabled persons should,
as far as possible, be identical to that of
other employees.

Employee involvement
The Group places considerable value on
the involvement of its employees and has
continued its practice of keeping them
informed on matters affecting them as
employees, for example, eligibility to join
Company share schemes, and on the
various factors affecting the performance
of the Group. Communication is
made using the Group’s internal
communications newsletter and through
regular meetings with, and presentations
by, senior management.

Details of employee share-based payment
schemes are set out in note 22.

Going concern
After making enquiries, the directors
have formed a judgement at the time
of approving the financial statements
that there is a reasonable expectation
that the Group has adequate resources
to continue in operational existence for
the foreseeable future. For this reason
the directors continue to adopt the going
concern basis in preparing the financial
statements.

The key factors considered by the
directors in making the statement are set
out in the financial review on pages 32
to 35.

Disclosure of information to
the external auditor
The directors who held office at the date of
approval of this directors’ report confirm
that, so far as they are each aware, there
is no relevant audit information of which
the Company’s auditor is unaware and
each director has taken all the steps that
he or she ought to have taken as a director
in order to make himself or herself aware
of any relevant audit information and to
establish that the Company’s auditor is
aware of that information.

This confirmation is given and should
be interpreted in accordance with the
provisions of section 418 of the Act.

23925-04 24-06-2015 Proof 5

Severfield plc

Stock code: SFR

www.severfield.com

Directors’ remuneration report

Alun Griffiths
Chairman of the remuneration
committee

“ A year of steady

progress for the
Group.”

Dear shareholder
Performance and
remuneration in 2014/15
The Group has continued to make
steady progress towards its medium-
term objectives of margin improvement,
stabilising India and strengthening its
order book.

Whilst market conditions remain
challenging in some areas, our positioning
as the market leader in structural
steel and our underlying management,
technical and delivery capabilities give the
board confidence in the future prospects
of the Group.

Remuneration policy is aligned with the
priorities of shareholders in incentivising
management to meet demanding short-
term targets and to deliver sustainable
growth over the longer term, whilst
ensuring that high safety standards are
achieved. Fifty per cent of any bonus is
paid in shares, deferred for three years,
and specific provisions are included
for clawback in the event of material
misstatement, error or gross misconduct.

Remuneration policy
Shareholders approved the remuneration
policy of the Group in 2014 with a vote in
favour of 99.8 per cent. The policy report,
which remains unchanged, is included for
information purposes albeit with minor
updates to reflect the adoption of the
sharesave scheme approved at last
year’s AGM.

Annual remuneration report
The annual remuneration report describes
the implementation of this policy, in
particular in relation to reward for
performance in 2014/15.

I am pleased to report that both the base
financial and safety targets set by the
board were met, resulting in a bonus
payout of 65 per cent of the maximum
(82 per cent in respect of India). In
determining the achievement of bonus
targets for 2014/15, the committee
considered what impact, if any, the non-
underlying remedial costs in relation
to the Leadenhall building should have
on payout. After careful consideration
and after taking external advice, the
committee determined that the bonus
should be paid against the achievement
of underlying profit before tax targets
in accordance with the Group’s stated
policy. When forming this judgement,
the committee considered that these
non-underlying costs relate to a historic
project and where the recognition of the
original profit and loss associated with
this project did not result in any annual
bonus payable at the time. If the Group is
able to recover any of these costs in the
future, any such inflows will not be treated
as underlying PBT.

The targets for the 2012 PSP award,
(earnings per share of between 6.51p
and 11.71p) were not achieved and these
awards have lapsed.

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Annual report and accounts for the year ended 31 March 2015

Our governance

Conclusion
The committee is committed to improving
further the levels of disclosure and
transparency by explaining in more detail
how it has reached decisions regarding
the achievement of performance targets.
Linking pay to performance is critical and
as such, the committee has endeavoured
to set future bonus and share plan targets
at a level which incentivises and rewards
management but only for performance
at a level which also ensures appropriate
returns for shareholders. The committee
will continue to engage with shareholders
to ensure that the policy of the Group
remains appropriate.

Alun Griffiths
Chairman of the remuneration
committee
17 June 2015

Targets for 2015/16
The financial and safety performance
targets for the 2015/16 bonus reflect
the strong forward momentum of the
Group over the past year. The committee
considered the balance of financial and
non-financial measures, as well as the
appropriateness of each measure, and
considers that these remain appropriate
for the year ahead.

The share plan targets are intended to
incentivise management to maintain this
momentum and will require the Group to
deliver EPS in the range of 4.30p to 6.45p
in 2017/18. This equates to a PBT range
of £16.0m to £24.0m. This represents an
increase in the lower vesting threshold
of £4.0m p.a. (33 per cent) and holds the
threshold at which maximum vesting
takes place at £24.0m, thus narrowing
the vesting range to one the board
feels is more realistic, whilst remaining
appropriately stretching.

Salaries for the directors will be reviewed
in October of this year with increases set
in the context of pay reviews for the Group
generally. No increases are planned for
the chairman or non-executive directors.

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Severfield plc

Stock code: SFR

www.severfield.com

Directors’ remuneration report

This report complies with the provisions of the Companies Act 2006, the Large and Medium-sized Companies and Groups Regulations
2008 as amended in 2013, the UK Corporate Governance Code 2014 and the UKLA Listing Rules and the Disclosure and Transparency
Rules. The remuneration committee has also taken into consideration guidelines published by institutional investor advisory bodies
such as the Investment Association and the NAPF.

The report is in two sections:

• a summary of the directors’ remuneration policy (pages 74 to 79). This section contains details of the remuneration policy approved

at the 2014 AGM and is for information only; and

• the directors’ annual remuneration report (pages 79 to 86). This section sets out the details of how our remuneration policy was

implemented for the year ended 31 March 2015 and how we intend to apply it for the year ending 31 March 2016, and it is subject
to an advisory vote at this year’s AGM.

Summary of directors’ remuneration policy
The remuneration policy was approved at last year’s AGM. Provided for information only are the details of the policy that were
referenced in the committee’s activities over the past reporting year which includes the remuneration policy table, the recruitment
remuneration arrangements, executive director service contracts and terms and conditions for non-executive directors. Minor
updates have been made to the table to reflect the adoption of the sharesave scheme approved at last year’s AGM.

The full policy report, as approved by shareholders, can be found on page 66 in the 2014 annual report.

Find out more information on our website
http://www.severfield.com

It is intended this policy will remain in place until the 2017 AGM.

Remuneration policy

Executive directors
Base salaries

Purpose and link to strategy
To provide the core reward for the role.

Sufficient to recruit and retain directors of the calibre necessary to execute the Group’s strategy.

Operation
Base salaries are normally reviewed annually by the committee.

Our review takes into account levels of increase across the broader workforce, changes in responsibility, and a periodic remuneration
review for comparable companies.

Maximum opportunity
There is no prescribed maximum.

Current salaries are disclosed in the annual report on
remuneration.

Increases (as a percentage of salary) are generally limited to the
range set for the wider workforce.

However, further increases may be awarded where there have
been significant changes in the scope and/or responsibilities of
the role or a material change in the size and scale of the Group.

Performance conditions
The committee considers individual salaries each year having
due regard to the factors noted in operation of the policy.

No recovery provisions apply to salary.

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Our governance

Benefits

Purpose and link to strategy
Cost-effective benefits, sufficient to recruit and retain directors of the calibre necessary to execute the Group’s strategy.

Operation
The Group currently provides the following employee benefits:

• Life assurance at four times salary

• Medical insurance for self with option to purchase for family

• Company car and fuel allowance

Relocation expenses would be paid as appropriate for new recruits or a change in role.

In circumstances where an executive is deployed on an international assignment, their arrangements will be managed in a way that
is consistent with good practice for international organisations. Additional allowances may also be paid e.g. to cover any increase in
cost of living, tax equalisation and/or additional accommodation costs.

The committee may wish to offer executive directors other employee benefits on broadly similar terms as those offered to other
employees from time to time, provided within the maximum opportunity limit.

Maximum opportunity
The value of insured benefits can vary from year to year based on
the costs from third party providers.

Performance conditions
No performance conditions or recovery provisions apply to
benefits.

The total value of benefits (excluding relocation and international
assignment allowances) will not exceed more than 15 per cent of
salary in any year.

Pension

Purpose and link to strategy
Cost-effective long-term retirement benefits, sufficient to recruit and retain directors of the calibre necessary to execute the Group’s
strategy.

Operation
Group contribution to defined contribution scheme (own or the Group’s), a cash supplement or a combination of both up to the
maximum value.

Director has no obligation to match Group contributions.

Maximum opportunity
Twenty per cent of base salary contribution/cash supplement
for chief executive officer and 18 per cent of salary for others up
to a maximum of £50,000 (with the exception that for executive
directors commencing service before 1 November 2013 where
the Group pays a fixed contribution/cash supplement of
£50,000 p.a.).

For international assignments the Group may be required
to make additional payments to comply with local statutory
requirements.

Performance conditions
No recovery provisions apply to pension benefits.

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Severfield plc

Stock code: SFR

www.severfield.com

Directors’ remuneration report

Annual bonus

Purpose and link to strategy
To focus attention on achieving short-term corporate objectives, incentivise outperformance of targets and provide a deferred
element to reinforce the impact of long-term performance.

Operation
Any annual bonus award is made 50 per cent in cash and 50 per cent in shares deferred for three years under the rules of the Group’s
deferred share bonus plan (‘DSBP’) which incorporates a clawback mechanism for instances of financial misstatement, error or
gross misconduct.

Dividends may accrue on deferred bonus shares.

Maximum opportunity
Maximum 100 per cent of base salary per annum.

Performance conditions
The committee will review the appropriateness of performance
measures on an annual basis and consider whether there is
a need to rebalance or amend the performance measures
and weightings to reflect the business objectives at the time.
However, the majority of the annual bonus will be subject to
financial targets.

Currently the business uses a combination of underlying profit
before tax (‘PBT’) targets and accident frequency rate (‘AFR’)
targets.

A minority of bonus will be payable for threshold levels of
performance.

The actual measures and weightings are set out in the annual
report on remuneration on page 85.

Performance share plan (‘PSP’) (approved by shareholders in 2007)

Purpose and link to strategy
Incentivise and reward for long-term, sustainable performance linked to corporate strategy and provide alignment with shareholders’
interests.

Operation
Annual grant of performance shares which will, in normal circumstances, vest subject to continued service and the achievement of
performance conditions over a three-year period.

There is a clawback mechanism for instances of financial misstatement, error or gross misconduct.

Dividends may accrue on vested awards.

Maximum opportunity
Maximum annual award level is 150 per cent of salary.

The current award policy is, in normal circumstances, for awards
of 100 per cent of salary for the chief executive officer and 75 per
cent of salary for other executive directors.

Performance conditions
The committee will determine each year the appropriate award
levels and performance conditions based on the corporate
strategy at the time. However, a financial measure such as
underlying earnings per share (‘EPS’) will be used for at least half
of any award.

Currently the awards are subject to an EPS growth target, the
details of which are set out in the annual remuneration report.

No more than 25 per cent of an award will vest for performance
at the lower threshold of EPS targets.

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Our governance

All-employee share plan

Purpose and link to strategy
To foster wider employee share ownership.

Operation
The Group currently operates a share incentive plan and introduced a sharesave scheme in February 2015.

Participation in any all-employee share plans operated by the Group is in line with HMRC guidelines. Executive directors are entitled
to participate on the same basis as for other eligible employees.

Maximum opportunity
The Group has discretion under the all-employee share plans to
issue awards up to the HMRC approved limits as set from time
to time.

Performance conditions
No recovery provisions apply to all-employee share awards.

Executive directors’ service
agreements
All executive directors’ service agreements
run on a rolling basis. Notice periods of
12 months are required to be given by
all parties. Payment to be made in lieu
of notice on termination is equal to 12
months’ salary or to any proportion of
unexpired notice period.

Full details of the contracts of each
director including the date, unexpired
term and any payment obligations on
early termination are available from the
Company secretary at the annual general
meeting.

The discretions retained by the
committee in operating the annual
bonus and the PSP
The committee will operate the annual
bonus (including the deferred share
element) and the PSP according to their
respective rules and in accordance with
the Listing Rules where relevant.

The committee retains discretion,
consistent with market practice, in a
number of regards to the operation and
administration of these plans.

In relation to both the Group’s PSP and
annual bonus plan, the committee retains
the ability to adjust the targets and/or set
different measures if events occur (e.g.
material acquisition and/or divestment
of a Group business) which cause it to
determine that the conditions are no
longer appropriate and the amendment
is required so that the conditions achieve
their original purpose and are not
materially less difficult to satisfy.

Any use of the above discretions would,
where relevant, be explained in the annual
report on remuneration and may, as
appropriate, be the subject of consultation
with the Group’s major shareholders.

Notes to the policy table
Choice of performance conditions
and metrics
Our role as the remuneration committee
includes the establishment of
performance goals through long-term
incentive plans which are challenging but
achievable through superior performance,
thereby incentivising and rewarding
success.

The long-term incentive plan currently
incorporates an EPS performance
measure, which is a key financial metric
that is aligned with shareholder interests.
The committee has considered and
taken advice on alternative performance
measures, such as total shareholder
return (‘TSR’), to substitute for (all or
part of) the use of the EPS range used in
the past. Lack of a suitable peer group
of similar listed companies made this
approach impracticable and to date we
have found no better benchmark.

No performance targets are set for
any share incentive plan or sharesave
plan awards since these form part of
all-employee arrangements that are
purposefully designed to encourage
employees across the Group to purchase
shares in the Company.

Details of all the outstanding share
awards granted to existing executive
directors are set out in the annual
remuneration report.

23925-04 24-06-2015 Proof 5

Severfield plc

Stock code: SFR

www.severfield.com

in exceptional circumstances in order to
facilitate the buy-out of existing awards
the committee may go above this limit
(see below).

Different performance measures may be
set initially for the annual bonus, taking
into account the responsibilities of the
individual, and the point in the financial
year that they joined.

The above policy applies to both an
internal promotion to the board or an
external hire.

In the case of an external hire, if it is
necessary to buy out incentive pay or
benefit arrangements (which would
be forfeited on leaving the previous
employer), this would be provided for
taking into account the form (cash or
shares) and timing and expected value
(i.e. likelihood of meeting any existing
performance criteria) of the remuneration
being forfeited. Replacement share
awards, if used, will be granted using
the Group’s existing share plans to the
extent possible (including the use of the
exceptional limit under the PSP), although
awards may also be granted outside
of these schemes if necessary and as
permitted under the Listing Rules.

In the case of an internal hire, any
outstanding variable pay awarded in
relation to the previous role will be
allowed to pay out according to its terms
of grant (adjusted as relevant to take into
account the board appointment).

On the appointment of a new chairman or
non-executive director, the fees will be set
taking into account the experience and
calibre of the individual and the expected
time commitments of the role. Where
specific cash or share arrangements are
delivered to non-executive directors, these
will not include share options or other
performance-related elements.

Directors’ remuneration report

Provision on payment for
loss of office
If an executive director’s employment is
to be terminated, the committee’s policy
in respect of the contract of employment,
in the absence of a breach of the service
agreement by the director, is to agree a
termination payment based on the value
of base salary that would have accrued
to the director during the contractual
notice period. The committee will consider
mitigation to reduce the termination
payment to a leaving director when
appropriate to do so, having regard to the
circumstances.

The payment of any annual bonus will
be at the committee’s discretion and will
be based on the circumstances of the
termination. Any bonus payment will be
calculated based after assessing the
relevant performance conditions and will
only be in relation to the service period
worked.

The rules of the PSP and DSBP set out
what happens to share awards if a
participant ceases to be an employee
or director of the Company before the
end of the vesting period. Generally, any
outstanding share awards will lapse
on such cessation, except in certain
circumstances.

If the executive director ceases to be an
employee or director of the Company as
a result of death, disability, retirement,
the sale of the business or company that
employs the individual or any other reason
at the discretion of the committee, then
they will be treated as a ‘good leaver’
under the plan rules. Under the DSBP, the
shares for a good leaver will normally vest
in full on the normal vesting date (or on
cessation of employment in the case of
death).

Under the PSP, a good leaver’s unvested
awards will vest (either on the normal
vesting date or the relevant date
of cessation, as determined by the
committee) subject to achievement of any
relevant performance condition, with a pro
rata reduction to reflect the proportion of
the vesting period served (although the
committee has the discretion to disapply
time prorating if it considers it appropriate
to do so).

In determining whether an executive
director should be treated as a good
leaver and the extent to which their
award may vest, the committee will take
into account the circumstances of an
individual’s departure.

Our recruitment
remuneration policy
Base salary levels will be set in
accordance with our remuneration
policy, taking into account the experience
and calibre of the individual and the
relevant market rates at the time. Where
it is appropriate to offer a lower salary
initially, progressive increases (possibly
above those of the wider workforce as
a percentage of salary) to achieve the
desired salary positioning may be given
over the following few years subject to
individual performance and continued
development in the role.

Benefits will be provided in line with
those offered to other employees, with
relocation expenses/arrangements
provided for if necessary.

Should it be appropriate to recruit a
director from overseas, flexibility is
retained to provide benefits that take
account of those typically provided in
their country of residence (e.g. it may be
appropriate to provide benefits that are
tailored to the unique circumstances of
such an appointment).

Pension contributions or a cash
supplement up to the maximum level
indicated in the policy table will be
provided, although the committee
retains the discretion to structure any
arrangements as necessary to comply
with the relevant legislation and market
practice if an overseas director is
appointed.

The aggregate ongoing (i.e. after the year
of appointment) incentive opportunity
offered to new recruits will be no higher
than that offered under the annual
bonus plan and the PSP policy to the
existing executive directors. In the
year of appointment the annual bonus
opportunity will be no higher than that
offered to existing executive directors,
prorated for the period of service (i.e. 100
per cent of salary on an annualised basis).
The committee may award up to 150
per cent of salary under the PSP although

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Our governance

How are the non-executive directors paid?
The chairman and non-executive directors receive an annual fee (paid in monthly instalments by payroll). The fee for the chairman is
set by the remuneration committee and the fees for the non-executive directors are approved by the board, on the recommendation of
the chairman and chief executive officer.

Element

Fees

Purpose and link to strategy

Operation (including maximum levels)

To attract and retain a
high-calibre chairman and
non-executive directors by
offering market competitive
fee levels.

Current fee levels are disclosed in the annual report on remuneration.

The chairman and the other non-executive directors receive a basic board fee, with
supplementary fees payable for additional board responsibilities.

Non-executive directors will be reimbursed for any normal business-related expenses
and any taxable benefit implications that may result.

The non-executive directors do not participate in any of the Group’s incentive
arrangements or pension scheme.

The fee levels are reviewed on a periodic basis, and may be increased, taking into
account factors such as the time commitment of the role and market levels in
companies of comparable size and complexity. Fee increases may be greater than those
of the wider workforce in a particular year, reflecting the periodic nature of increases
and that they take into account changes in responsibility and/or time commitments.

No benefits or other remuneration are provided to non-executive directors.

The Group considers all members of the
committee to be independent. Executive
directors may attend remuneration
committee meetings at the invitation of
the committee chairman, but do not take
part in any discussion about their own
remuneration.

The terms of reference for the
remuneration committee are available on
the Company‘s website.

Advisers to the committee
The committee retained New Bridge
Street (an Aon plc company) as an
independent adviser to the remuneration
committee throughout the year. New
Bridge Street is a member of the
Remuneration Consultants Group and is
a signatory to its code of conduct. Neither
New Bridge Street nor any other part of
Aon plc provided other services to the
Group during the year. The fees paid to
New Bridge Street for work carried out
during the year 31 March 2015 totalled
£46,000 (2014: £40,000).

What are the terms of
appointment of the non-
executive directors?
The chairman and non-executive directors’
terms of appointment are recorded in
letters of appointment. The required notice
from the Company is one month in all cases.
The non-executive directors are not entitled
to any compensation on loss of office.

Shareholding guideline
Executive directors are required to retain
shares acquired under equity incentive
schemes until such time they have built
up a holding equivalent in market value (at
the date of vesting) to the executive’s base
salary. Thereafter, the executive directors
will be under a continuing obligation to
maintain at least such a holding. The
requirement underscores the committee’s
policy to align executive director
remuneration and shareholder interests.

ANNUAL REMUNERATION
REPORT
In this section, we report on the
implementation of our policies in the year
ended 31 March 2015 as well as how the
policy will be implemented for 2015/16. The
regulations require the auditor to report to
the Group’s shareholders on the auditable
part of the directors’ remuneration report
and to state whether, in its opinion, that
part of the report has been properly
prepared in accordance with the

Companies Act 2006. The relevant sections
subject to audit have been highlighted in
the annual report on remuneration.

IMPLEMENTATION OF
POLICY FOR 2014/15
Remuneration committee
Membership, meetings and
attendance
The Group has an established remuneration
committee which is constituted in
accordance with the recommendations of
the UK Corporate Governance Code.

The members of the remuneration
committee who served during the year are
shown below together with their attendance
at remuneration committee meetings:

Number of meetings attended:

Alun Griffiths (chairman
from 19 July 2014)
John Dodds
Chris Holt
Kevin Whiteman (from
19 July 2014)
Tony Osbaldiston (from
19 July 2014)
Keith Elliott (chairman until
18 July 2014)
Toby Hayward (until 18 July
2014)

4/4
4/5*
5/5

3/3

2/2

* John Dodds was unable to attend one meeting

due to illness.

23925-04 24-06-2015 Proof 5

Severfield plc

Stock code: SFR

www.severfield.com

Directors’ remuneration report

Directors’ earnings for the 2014/15 financial year (audited)
Remuneration received by the directors

Year ended 31 March 2015

£000

Salary

Bonus

Fees

Benefits

Pension

LTIPs

Total

Executives
Ian Lawson
Ian Cochrane
Alan Dunsmore
Derek Randall
Non-executives
John Dodds
Tony Osbaldiston (from 19/7/14)
Kevin Whiteman (from 19/7/14)
Alun Griffiths (from 1/5/14)
Chris Holt
Toby Hayward (to 19/7/14)
Keith Elliott (to 19/7/14)

356
280
230
230

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—
—
—
—
1,096

231
182
149
189

—
—
—
—
—
—
—
751

—
—
—
—

100
32
32
41
40
18
18
281

23
16
22
—

—
—
—
—
—
—
—
61

71
50
50
50

—
—
—
—
—
—
—
221

—
—
—
—

—
—
—
—
—
—
—
—

681
528
451
469

100
32
32
41
40
18
18
2,410

Taxable benefits primarily include the provision of company cars, fuel for company cars, car allowances and private medical
insurance. LTIPs reflect those PSP awards vesting based on performance to 31 March 2015.

£000

Salary

Bonus

Fees

Benefits

Pension

LTIPs

Total

Year ended 31 March 2014

Executives
Ian Lawson (from 1/11/13)
Ian Cochrane (from 5/6/13)
Alan Dunsmore
Derek Randall
John Dodds (to 1/11/13)1
Peter Emerson (to 5/6/13)
Non-executives
John Dodds (from 1/11/13)1
Toby Hayward
Keith Elliott
Chris Holt2

146
227
226
226
204
81

—
—
—
—
1,110

50
169
—
—
85
—

—
—
—
—
304

—
—
—
—
—
—

42
60
60
45
207

8
1
25
8
—
4

—
—
—
—
46

29
41
50
50
—
—

—
—
—
—
170

—
—
—
—
—
—

—
—
—
—
—

233
438
301
284
289
85

42
60
60
45
1,837

1. John Dodds operated as executive chairman until 1 November 2013 when he reverted to his previous role of non-executive chairman. The salary he received as

an executive director and the fees he received as a non-executive director have been disclosed separately.

2. Chris Holt served as chairman of the nomination committee for part of the year for which he was paid an additional fee of £5,000.

Past directors/loss of office payments (audited)
There have been no payments made to past directors or any payment for loss of office.

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Our governance

How pay linked to performance in 2014/15
Bonus
The executive directors received the bonuses set out in the table below, of which 50 per cent has been paid in shares deferred for
three years.

Under the rules of the Group’s deferred share bonus plan the participants will have beneficial ownership of the shares, the share
certificates are retained by the Company secretary for a period of three years and, unless otherwise determined by the remuneration
committee, are subject to forfeiture provisions in the event of termination of employment prior to the expiry of this period.

Ian Lawson
Ian Cochrane
Alan Dunsmore
Derek Randall

£231,000
£182,000
£149,000
£189,000

As reported last year, the bonus plan applicable to the executive directors for 2014/15 had two separate performance conditions:

• Eighty per cent was payable on achieving budgeted Group PBT (with exception of Derek Randall who, whilst he remains in India,
has the profit performance-based component of his bonus split 50/50 between Group PBT and PBT for India). The financial
element begins to pay out at 95 per cent of budgeted Group PBT, rising to 50 per cent of this element being payable for achieving
budget and full pay out for achieving 120 per cent of budget.

• Twenty per cent was payable based on achieving a target Group AFR (with the exception of Derek Randall who, whilst he remains in

India, has the AFR-based component of his bonus based on AFR (India)).

Our policy is to disclose annual PBT and AFR targets retrospectively following the end of the performance period, unless, in the view of
the remuneration committee, this would compromise the commercial position of the Group.

The targets for 2014/15 and the payout against these targets are set out below:

Measure

Group PBT*
Group AFR

% of maximum
bonus
opportunity

Performance required

Threshold

On-target

Maximum

80%
20%

£7.7m
0.35

£8.1m
0.35

£9.7m
0.35

Actual

£8.3m
0.21

% of
bonus paid

56%
100%

Payout
as %
of salary

45%
20%

* For Group PBT, ‘threshold’ represents 95% of budget, ‘on-target’ represents 100% of budget and ‘maximum’ represents 120% of budget.

The total bonus payout of 65 per cent of salary above applies to all executive directors with the exception of Derek Randall who, based
on the year-end results for India achieved 78 per cent of bonus paid for PBT and 100 per cent of bonus paid for AFR (resulting in a
total bonus payout of 82 per cent of salary).

In determining the achievement of bonus targets for 2014/15, the committee considered what impact, if any, the non-underlying
remedial costs in relation to the Leadenhall building should have on payout. After careful consideration and after taking external
advice, the committee determined that bonus should be paid against the achievement of underlying profit before tax targets in
accordance with the Group’s stated policy. When forming this judgement, the committee considered that these non-underlying costs
relate to a historic project and where the recognition of the original profit and loss associated with this project did not result in any
annual bonus payable at the time. If the Group is able to recover any of these costs in the future, any such inflows will not be treated
as underlying PBT.

PSP
No PSP awards vested in 2014/15. The 2012 PSP award was subject to an EPS performance condition measured over the three
financial years ended 31 March 2015. The minimum EPS figure required for vesting of 25 per cent of the award was 6.51p (as adjusted
after the rights issue in March 2013) which equates to a PBT of c.£24m. This target was not achieved and the awards have lapsed.

23925-04 24-06-2015 Proof 5

Severfield plc

Stock code: SFR

www.severfield.com

Directors’ remuneration report

PSP awards granted to directors in 2014/15 (audited)
Share awards were made in the year under the PSP scheme for the three-year period expiring on 31 March 2017. Details of the
awards made to the executive directors are summarised below.

Ian Lawson
Ian Cochrane
Alan Dunsmore
Derek Randall

Type

Nil-cost option
Nil-cost option
Nil-cost option
Nil-cost option

Number of
shares

632,054
372,460
306,298
306,298

% of salary

Face value (£)1

Performance
condition2

Performance
period

% vesting at
threshold

100%
75%
75%
75%

350,000
206,250
169,613
169,613

EPS

3 financial
years ending
31 March
2017

25%

1. Face value calculated based on the pre-grant date share price of 55.38p on 4 June 2014.

2. Performance conditions are based on EPS targets of 3.23p (minimum performance – 25% vests) to 6.45p (maximum performance – 100% vests) with linear

interpolation in between. This represents a PBT range of £12m–£24m.

The PSP and the annual bonus plan contain recovery and withholding (i.e. clawback) provisions which can be applied within a year
of a PSP award vesting (i.e. within four years of grant) or within a year of a bonus being paid. Clawback can be applied where it
becomes apparent that a PSP award or bonus was larger than ought to have been the case due to the Company having materially
misstated its financial results or made an error in assessing any performance condition or bonus. Clawback can also be applied in the
case of subsequently discovered misconduct of a relevant individual. The amount of the relevant clawback would be the net of tax
amount (or the full amount to the extent that the individual can recover any tax paid) that had effectively been overpaid in the case of
misstatement or error or would be at the committee’s discretion in the case of misconduct. Clawback can be imposed by a reduction
in the amount of any unvested PSP award, a reduction in the amount of any future bonus or by a requirement to pay back the amount
in question (with a right to deduct from salary).

Outstanding share awards at the year-end (audited)
Details of share awards under the PSP to the executive directors which were outstanding at the year-end are shown in the following table:

Director

Ian Lawson

Total
Ian Cochrane

Total
Alan Dunsmore

Total
Derek Randall

Total

Year of
award

2013
2014

2011
2012
2013
2014

Vesting date
(June)

Performance
condition

Awards held at
1 April 20141

Awards granted
in year

Awards lapsed
in year

Awards vested
in year

Awards held at
31 March 2015

2016
2017

2014
2015
2016
2017

EPS
EPS

EPS
EPS
EPS
EPS

549,020
—
549,020
120,002
153,181
429,688
—
702,871
213,250
272,209
353,359
—
838,818
213,250
272,209
353,359
—
838,818

—
632,054
632,054
—
—
—
372,460
372,460
—
—
—
306,298
306,298
—
—
—
306,298
306,298

—
—
—
(120,002)
—
—
—
(120,002)
(213,250)
—
—
—
(213,250)
(213,250)
—
—
—
(213,250)

549,020
—
632,054
—
— 1,181,074
—
—
153,181
—
429,688
—
372,460
—
955,329
—
—
—
272,209
—
353,359
—
306,298
—
931,866
—
—
—
272,209
—
353,359
—
306,298
—
931,866
—

1. 2012 awards were adjusted in August 2013 to take into account the dilutive impact of the rights issue.

Performance conditions are based on a range of EPS targets as follows:

2012 award
2013 award1
2014 award2

1. Represents a PBT range of £8m–£18m.
2. Represents a PBT range of £12m–£24m.

23925-04 24-06-2015 Proof 5

Threshold
(25% vests)

Maximum
(100% vests)

6.51p
2.15p
3.23p

11.71p
4.87p
6.45p

Annual report and accounts for the year ended 31 March 2015

Our governance

Directors’ current shareholdings (audited):
The following table provides details on the directors’ beneficial interests in the Company’s share capital as at 31 March 2015:

Executives
Ian Lawson
Ian Cochrane
Alan Dunsmore
Derek Randall
Non-executives
John Dodds
Tony Osbaldiston (from 19/7/14)
Kevin Whiteman (from 19/7/14)
Alun Griffiths (from 1/5/14)
Chris Holt

Owned shares1

Share incentive
plan (SIP)2

Sharesave
scheme

DSBP3

PSP4

Total5

82,431
2,708,979
50,000
50,000

319,833
—
—
—
53,097

2,229
9,591
9,591
4,667

—
—
—
—
—

33,003
33,003
33,003
—

23,538
79,593
—
—

1,181,074
955,329
931,866
931,866

1,322,275
3,786,495
1,024,460
986,533

—
—
—
—
—

319,833
—
—
—
53,097

Includes shares owned by connected persons.

1.
2. SIP shares are unvested and held in trust.
3. The principal terms of the deferred share bonus plan are described on page 76.
4. PSP shares are in the form of conditional awards which will only vest on the achievement of certain performance conditions.
5. As at 31 March 2015, only Ian Cochrane satisfies the Company’s shareholding guideline (see page 79). The other executive directors will be required to retain a

proportion of any net of tax shares which may vest from equity-based plans until the guideline is achieved.

Position against dilution limits
Severfield plc complies with the Investment Association’s principles of executive remuneration. These principles require that
commitments under all of the Group’s share ownership schemes (including the share incentive plan (SIP), sharesave scheme and the
PSP) must not exceed 10 per cent of the issued share capital in any rolling ten-year period. The Group’s position against its dilution
limit as at 31 March 2015 was well under the maximum 10 per cent limit at 3.6 per cent.

Performance graph
The following graph shows the Group’s performance, measured by total shareholder return, compared with the performance of the
FTSE SmallCap Index. It is based on the change in the value of a £100 investment made on 31 March 2009 over the six-year period
ended 31 March 2015.

This index was selected as it represents a broad equity market index and an appropriate comparator group of companies over the
period.

Total shareholder return
Source: Datastream (Thomson Reuters)

£
350

300

250

200

150

100

n
r
u
t
e
r

r
e
d
l
o
h
e
r
a
h
s
l

a
t
o
T

Mar 2009

Mar 2010

Mar 2011

Mar 2012

Mar 2013

Mar 2014

Mar 2015

FTSE SmallCap Index

Severfield plc

23925-04 24-06-2015 Proof 5

Severfield plc

Stock code: SFR

www.severfield.com

Directors’ remuneration report

Chief executive officer remuneration change
The table below shows the total remuneration figure for the chief executive officer role over the same six-year period. Total
remuneration includes bonus and the value of PSP awards which vested based on performance in those years (at the share price at
which they vested).

2009
Haughey

2010
Haughey

2011
Haughey

2013
Haughey1

2013
Dodds2,3

2014
Dodds2

2014
Lawson4

2015
Lawson

Total remuneration
(£000)
Annual bonus (%)
LTIP vesting (%)

1,265
94.8%
100.0%

640
50.1%
100.0%

701
60.5%
—

450
—
—

62
N/A
N/A

289
N/A
N/A

233
34.0%
—

681
34.0%
—

1. Tom Haughey received compensation of £423,000 for loss of office in accordance with his contract.
2. John Dodds was appointed executive chairman in an interim capacity following Tom Haughey’s resignation as chief executive officer on 23 January 2013 and
prior to the appointment of Ian Lawson as chief executive officer on 1 November 2013. During this time he was awarded a discretionary bonus (no maximum
was set) but was not entitled to any PSP award. These figures do not include his fees as non-executive chairman.

3. Financial year 2013 represented the 15 month period to 31 March 2013.
4. Appointed on 1 November 2014.

How the change in chief executive officer pay for the year compares to that of the Group’s
employees
The table below shows the percentage change in salary, benefits and annual bonus earned between the years ended 31 March 2015
and 31 March 2014 for the chief executive officer compared to the percentage change of each of those components of pay for a group
of employees. The committee has selected salaried employees in mainland UK as this geography provides the most appropriate
comparator.

Chief executive officer
Salary
Benefits
Bonus
Average employees
Salary
Benefits
Bonus

2015
£000

356
23
231

2014
£000

350
8
135

13,735
1,060
1,005

13,301
1,206
665

% change

1.7%
187.5%
71.1%

3.3%
-12.1%
51.1%

Relative importance of spend on pay
The following table shows the actual spend on pay for all employees relative to revenue and underlying operating profit before the
results of JVs and associates:

Staff costs
Revenue
Underlying operating profit
Dividends

2015
£000

53,975
201,535
8,974
—

2014
£000

50,551
231,312
7,621
—

% change

6.8%
-12.9%
17.8%
0.0%

Shareholder voting
The results below show the response to the 2014 AGM shareholder voting for the directors’ 2014 remuneration report (excluding the
remuneration policy):

For
Against
Total votes cast (for and against)
Withheld votes
Total votes (including withheld votes)

Total number
of votes1

% of
votes cast

234,477,651
4,010,504
238,488,155
1,259,500
239,747,655

98.3%
1.7%
100%
N/A
N/A

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Our governance

The results below show the response to the 2014 AGM shareholder voting for the directors’ 2014 remuneration policy:

For
Against
Total votes cast (for and against)
Withheld votes
Total votes (including withheld votes)

Total number
of votes1

% of
votes cast

237,577,309
459,386
238,036,695
1,710,960
239,747,655

99.8%
0.2%
100%
N/A
N/A

1. A vote abstention is not a vote in law and is not counted in the calculation of the proportion of votes cast ‘for’ and ‘against’ a resolution.

Implementation of policy for 2015/16
The executive directors’ current salaries
The salaries of the executive directors will be reviewed in October 2015. Increases will be set in the context of overall salary increases
for the wider workforce. The previous salary increase was on 1 July 2014.

The executive directors’ salaries at the start of the 2015/16 financial year are as follows:

Ian Lawson
Ian Cochrane
Alan Dunsmore
Derek Randall

357,900
281,200
231,250
231,250

Benefits and pension
All executive directors will be entitled to a car allowance of £15,000 (chief executive officer: £18,000), a fuel allowance, life insurance
cover and medical insurance. A pension contribution of £50,000 will be offered to each executive director, with the exception of Ian
Lawson who will be offered 20 per cent of basic salary.

Rewards for performance in 2015/16
Bonus
The annual bonus for 2015/16 will operate on the same basis as for 2014/15 and will be consistent with the policy detailed in
the remuneration policy section of this report in terms of the maximum bonus opportunity, deferral and clawback provisions. The
measures have been selected to reflect a range of financial and operational goals that support the key strategic objectives of the
Group.

The performance measures and weightings will be as follows:

Profit performance-based component — 80 per cent
The sliding scale range for bonus targets in 2015/16 is as follows:

Maximum bonus based on actual PBT versus budget

PBT % of budget

95 or below
100
120 or better

% of award

—
50
100

The committee believes that the budget PBT figures are commercially sensitive metrics and therefore are not disclosed at this time.
Actual target figures will be disclosed on a retrospective basis when these sensitivities have been removed.

Other performance-based component — 20 per cent
AFR (accident frequency rate) will again be used throughout the Group†.

AFR is an industry recognised and measurable target. The pre-set targets have not been disclosed due to commercial sensitivities.
Actual target figures will be disclosed on a retrospective basis when these sensitivities have been removed.

† Whilst Derek Randall remains in India the AFR component of his bonus will be based on AFR (India).

23925-04 24-06-2015 Proof 5

Severfield plc

Stock code: SFR

www.severfield.com

Directors’ remuneration report

PSP
It is the committee’s intention to grant PSP awards of 100 per cent of salary for the chief executive officer and 75 per cent of salary for
other executive directors.

This year we will set a performance condition for a three-year period commencing on 1 April 2015 and ending on 31 March 2018.
These targets reflect the continuing expected recovery of profitability, recognising that market conditions remain challenging in many
areas. At the lower threshold, below which no awards will vest, we have set a target EPS equivalent to PBT of £16.0m. If this level is
achieved 25 per cent of the shares granted will vest. At the higher end the target EPS is set at EPS equivalent to PBT of £24.0m. If
this is achieved, 100 per cent of the shares granted will vest. Vesting at EPS levels between the lower and upper thresholds will be
calculated by linear interpolation.

This represents an increase of £4m (33 per cent) in the lower threshold whilst maintaining the threshold at which maximum vesting
takes place at £24m. This reflects, in the view of the committee, a more realistic performance range whilst maintaining the targets at
an appropriately stretching level. They will require management to deliver strong, sustainable performance over the period.

How will the non-executive directors be paid in the 2015/16 financial year?
The fees for the chairman and non-executive directors will be as follows:

Chairman
Basic fee for other non-executive directors
Additional fee for SID role
Additional fee for chairman of audit, nominations and remuneration committees

Approval
This report was approved by the board of directors and signed on behalf of the board.

Alun Griffiths
Chairman of the remuneration committee
17 June 2015

2015

95,000
40,000
5,000
5,000

2014

95,000
40,000
5,000
5,000

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Our governance

Directors’ responsibilities statement

The directors are responsible for
preparing the annual report and the
financial statements in accordance with
applicable law and regulations.

Company law requires the directors to
prepare financial statements for each
financial year. Under that law the directors
are required to prepare the consolidated
financial statements in accordance
with International Financial Reporting
Standards (IFRSs) as adopted by the
European Union and Article 4 of the IAS
Regulation and have elected to prepare
the parent company financial statements
in accordance with United Kingdom
Generally Accepted Accounting Practice
(United Kingdom Accounting Standards
and applicable law). Under company
law the directors must not approve the
accounts unless they are satisfied that
they give a true and fair view of the state
of affairs of the Group and the Company
and of the profit or loss of the Group for
that period.

In preparing the parent company financial
statements, the directors are required to:

• select suitable accounting policies and

then apply them consistently;

• make judgements and accounting
estimates that are reasonable and
prudent;

• state whether applicable UK

Accounting Standards have been
followed, subject to any material
departures disclosed and explained in
the financial statements; and

• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Company will continue in business.

In preparing the consolidated financial
statements, International Accounting
Standard 1 requires that directors:

• properly select and apply accounting

policies;

• present information, including

accounting policies, in a manner that
provides relevant, reliable, comparable
and understandable information;

• provide additional disclosures

when compliance with the specific
requirements in IFRSs are insufficient
to enable users to understand the
impact of particular transactions,
other events and conditions on the
entity’s financial position and financial
performance; and

• make an assessment of the Group’s

ability to continue as a going concern.

The directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Group’s
and the Company’s transactions and
disclose with reasonable accuracy at any
time the financial position of the Group
and Company to enable them to ensure
that the financial statements comply
with the Companies Act 2006. They are
also responsible for safeguarding the
assets of the Group and the Company and
hence for taking reasonable steps for the
prevention and detection of fraud and
other irregularities.

The directors are responsible for the
maintenance and integrity of the
corporate and financial information
included on the Group’s website.
Legislation in the United Kingdom
governing the preparation and
dissemination of financial statements
may differ from legislation in other
jurisdictions.

The directors consider that the annual
report and financial statements,
taken as a whole, are fair, balanced
and understandable and provide the
information necessary for shareholders
to assess the Company’s and the Group’s
performance, business model and
strategy.

Each of the directors listed on pages 52
and 53 confirms that, to the best of their
knowledge:

• the consolidated and parent company
financial statements, prepared in
accordance with the relevant financial
reporting framework, give a true and
fair view of the assets, liabilities,
financial position and profit or loss of
the Company and the undertakings
included in the consolidation taken as
a whole; and

• the strategic report on pages 3 to 49
and the directors’ report on pages
69 to 71 include a fair review of the
development and performance of
the business and the position of
the Company and the undertakings
included in the consolidation taken as
a whole, together with a description of
the principal risks and uncertainties
that they face.

By order of the board

Ian Lawson
Chief executive officer
17 June 2015

Alan Dunsmore
Group finance director
17 June 2015

23925-04 24-06-2015 Proof 5

Severfield plc

Stock code: SFR

www.severfield.com

Delivering quality service

This mixed use (office, residential, retail) development
of around 900,000 square feet consists of five buildings,
for which the Group is providing the connection design,
fabrication and construction of just over 7,000 tonnes
of structural steel. Other services provided include
metal decking, ‘Seversafe’ edge protection, stairs and
open mesh flooring.

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Our financials

Our financials — Group

Independent auditor’s report
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated cash flow statement
Notes to the consolidated financial statements
Five year summary
Financial calendar

90
95
96
97
98
99
100
129
129

Project: Nova, Victoria

Sector: Commercial offices

Location: Victoria, London

Tonnage: 7,100

Client: Land Securities

Main contractor: MACE

Completion: September 2015

23925-04 24-06-2015 Proof 5

Severfield plc

Stock code: SFR

www.severfield.com
www.severfield.com

Independent auditor’s report
to the members of Severfield plc

Opinion on financial statements of Severfield plc

In our opinion:

• the financial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at

31 March 2015 and of the Group’s profit for the year then ended;

• the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards

(IFRSs) as adopted by the European Union;

• the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted

Accounting Practice; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the

Group financial statements, Article 4 of the IAS Regulation.

The Group financial statements comprise the consolidated income statement, the consolidated statement of comprehensive income,
the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and the
related notes 1 to 31. The financial reporting framework that has been applied in the preparation of the Group financial statements is
applicable law and IFRSs as adopted by the European Union. The parent company financial statements comprise the parent company
balance sheet and the related notes 1 to15. The financial reporting framework that has been applied in the preparation of the parent
company financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted
Accounting Practice).

Going concern

As required by the Listing Rules we have reviewed the directors’ statement contained within the strategic report on page 35 that the
Group is a going concern. We confirm that:

• we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements

is appropriate; and

• we have not identified any material uncertainties that may cast significant doubt on the Group’s ability to continue as a going

concern.

However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s ability to
continue as a going concern.

Our assessment of material misstatement

The assessed risks of material misstatement described below are those that had the greatest effect on our audit strategy, the
allocation of resources in the audit and directing the efforts of the engagement team:

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Our financials

Risk

How the scope of our audit responded to the risk

Contract valuation, revenue and
profit recognition in relation to
the final outcome of material
construction contracts (as
described on page 106 in the
annual report)

The following judgements can have
a material impact on the financial
statements:

We have focused our audit procedures on material contracts based on the following principal
criteria:

a) the balance sheet carrying value;

b) the contribution to profit in the year;

c) the stage of completion;

d) the value at risk identified by management; and

e) our assessment of the degree of judgement involved in the contract accounting.

• the stage of completion of

contracts;

We have:
• reviewed the design and implementation of management’s internal controls over contract

• the recoverability of unagreed

accounting; and

variations and claims;

• performed the following substantive audit procedures:

• the estimates of future costs to

• agreed revenue recognised on contracts to evidence of third party certifications and cash

complete; and

receipts;

• the outcome of other uncertain

future events.

• challenged management on any revenues recognised which exceed the certified revenue,
particularly in relation to unagreed variations and claims. This included the inspection of
variation instructions, enquiries of quantity surveyors and contract managers and liaison
with internal and external legal advisors;

• challenged management on its estimates of future costs to complete. This included review
of the detailed forecast cost to complete schedules, including agreeing estimates of future
costs and critical assumptions to supporting evidence, such as agreed third party quotes for
site work and materials price lists;

• performed a retrospective review of previous judgements on contracts to assess the

historical forecasting accuracy; and

• performed a review of subsequent events on contracts that may have a material impact on

the financial statements up to the date of signing this auditor’s report.

23925-04 24-06-2015 Proof 5

Severfield plc

Stock code: SFR

www.severfield.com
www.severfield.com

Independent auditor’s report
to the members of Severfield plc

Risk

How the scope of our audit responded to the risk

Impairment of goodwill and other
non-current assets
The consolidated balance sheet
includes:

• goodwill and intangible assets

We have:
• assessed and challenged management’s assumptions (as described in notes 11 and 15 to the
financial statements) included in its impairment model for goodwill and intangible assets,
and the joint venture. These include the trading and cash flow projections, the growth and
perpetuity rates and the discount factors applied;

of £61.8m; and

• compared these to external medium-term growth rate projections for the UK and India, the

historical trading and cash flow performance of the business units, and the discount rates of
relevant comparator companies; and

• taken into account the Group’s historical budgeting accuracy, including comparing the

operating profit margin assumed in the order book with historic performance.

We have:

• made enquiries of the directors, management and their legal advisors in relation to the
Group’s contractual obligations, including contingent liabilities and reimbursements;

• reviewed management’s analysis of costs to complete, including challenging the main

assumptions and considering reasonably possible sensitivities;

• agreed a sample of actual costs incurred in the period to 31 March 2015 to supporting

documentation;

• compared actual costs incurred with the work plan and the estimated costs to complete,
and considered the impact of any deviations, up until the date of this audit report; and

• considered compliance with:

— IAS 1 ‘Presentation of Financial Statements’ for classification of the costs as non-

underlying; and

— IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’ for management’s

best estimate of the costs to the Group and the disclosure of contingent liabilities and
reimbursements.

• the investment in the Indian

joint venture of £4.8m

Management has made its
annual assessment of the
impairment risk in relation to
these carrying values, which
includes a number of important
judgements on uncertain future
events (as described on page 106
in the annual report). The most
subjective judgements relate to
the forecast financial performance
of the cash-generating units
(‘CGU’), including the growth
rates, operating margins and the
discount rates for future cash
flows.

Leadenhall costs
The Group is undertaking a
remedial works programme to
replace a number of bolts at the
Leadenhall building.

The following key judgements
have been made by the directors
(as described on page 106 in the
annual report) in preparing the
financial statements at 31 March
2015:

• quantification and accrual

of their best estimate of the
costs to the Group of the bolt
replacement programme,
including the disclosure of
contingent liabilities and
reimbursements; and

• the classification of these

costs as non-underlying in the
income statement.

The description of risks above should be read in conjunction with the significant issues considered by the audit committee as
described on page 68 in the annual report.

Our audit procedures relating to these matters were designed in the context of our audit of the financial statements as a whole, and
not to express an opinion on individual accounts or disclosures. Our opinion on the financial statements is not modified with respect
to any of the risks described above, and we do not express an opinion on these individual matters.

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Our financials

Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of
our audit work and in evaluating the results of our work.

In recent years the Group has reported both profits and losses, and has made adjustments to highlight non-underlying items included
in its statutory results. In the absence of a stable profit base, we have used Group revenue to determine materiality of £1m by applying
0.5 per cent (2014: £1m and 0.5 per cent) to turnover for the year. We also sense-checked this materiality threshold by reference to
the scale of underlying profits and losses in recent years and the directors’ expectations of future profits.

We agreed with the audit committee that we would report to the committee all audit differences in excess of £20,000 (2014: £20,000),
as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the audit
committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.

An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide controls, and
assessing the risks of material misstatement at the Group level. The Group and parent company audits are performed at the Group’s
head office at Dalton, North Yorkshire. All of the subsidiaries are based in three locations within the UK, together with the joint
venture based in India, and an associate based in South Yorkshire.

Full scope audits are completed on all the businesses located in the UK, except for the associate which is scoped out of our Group
audit procedures on the grounds of materiality. These locations account for 100 per cent of Group revenue, 97 per cent of Group net
assets and 100 per cent of Group profit before tax.

The audits of the UK subsidiaries were executed to a component materiality which is less than Group materiality. The joint venture is
audited by Deloitte Mumbai to a component materiality.

The Group audit team continued to follow a programme of planned visits that has been designed so that the senior statutory auditor
attends the principal financial reporting locations in the UK and the Indian joint venture each year, including attendance at the audit
close meetings.

Opinion on other matters prescribed by the Companies Act 2006
In our opinion:

• the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act

2006; and

• the information given in the strategic report and the directors’ report for the financial year for which the financial statements are

prepared is consistent with the financial statements.

Matters on which we are required to report by exception

Adequacy of explanations
received and accounting records

Directors’ remuneration

Under the Companies Act 2006 we are required to report to you if, in our opinion:

• we have not received all the information and explanations we require for our audit; or

• adequate accounting records have not been kept by the parent company, or returns
adequate for our audit have not been received from branches not visited by us; or

• the parent company financial statements are not in agreement with the accounting records

and returns.

We have nothing to report in respect of these matters.

Under the Companies Act 2006 we are also required to report if in our opinion certain
disclosures of directors’ remuneration have not been made or the part of the directors’
remuneration report to be audited is not in agreement with the accounting records and returns.
We have nothing to report arising from these matters.

Corporate governance statement Under the Listing Rules we are also required to review the part of the corporate governance

statement relating to the Company’s compliance with ten provisions of the UK Corporate
Governance Code. We have nothing to report arising from our review.

23925-04 24-06-2015 Proof 5

Severfield plc

Stock code: SFR

www.severfield.com
www.severfield.com

Independent auditor’s report
to the members of Severfield plc

Matters on which we are required to report by exception

Our duty to read other
information in the annual report

Under International Standards on Auditing (UK and Ireland), we are required to report to you if,
in our opinion, information in the annual report is:
• materially inconsistent with the information in the audited financial statements; or

• apparently materially incorrect based on, or materially inconsistent with, our knowledge of

the Group acquired in the course of performing our audit; or

• otherwise misleading.

In particular, we are required to consider whether we have identified any inconsistencies
between our knowledge acquired during the audit and the directors’ statement that they
consider the annual report is fair, balanced and understandable and whether the annual report
appropriately discloses those matters that we communicated to the audit committee which
we consider should have been disclosed. We confirm that we have not identified any such
inconsistencies or misleading statements.

As explained more fully in the directors’ responsibilities statement, the directors are
responsible for the preparation of the financial statements and for being satisfied that they
give a true and fair view. Our responsibility is to audit and express an opinion on the financial
statements in accordance with applicable law and International Standards on Auditing
(UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s
Ethical Standards for Auditors. We also comply with International Standard on Quality Control
1 (UK and Ireland). Our audit methodology and tools aim to ensure that our quality control
procedures are effective, understood and applied. Our quality controls and systems include our
dedicated professional standards review team and independent partner reviews.

This report is made solely to the Company’s members, as a body, in accordance with Chapter
3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might
state to the Company’s members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company and the Company’s members as a
body, for our audit work, for this report, or for the opinions we have formed.

An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are
free from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the Group’s and the parent
company’s circumstances and have been consistently applied and adequately disclosed;
the reasonableness of significant accounting estimates made by the directors; and the
overall presentation of the financial statements. In addition, we read all the financial and
non-financial information in the annual report to identify material inconsistencies with the
audited financial statements and to identify any information that is apparently materially
incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course
of performing the audit. If we become aware of any apparent material misstatements or
inconsistencies we consider the implications for our report.

Respective responsibilities of
directors and auditor

Scope of the audit of the financial
statements

Paul Feechan
(Senior statutory auditor)
for and on behalf of Deloitte LLP
Chartered accountants and
statutory auditor
Newcastle, United Kingdom
17 June 2015

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Our financials

Consolidated income statement
Year ended 31 March 2015

Continuing operations

Revenue

Operating costs
Operating profit/(loss) before share
of results of JVs and associates
Share of results of JVs and
associates

Operating profit/(loss)

Net finance expense

Profit/(loss) before tax

Taxation
Profit/(loss) for the year
attributable to the equity holders
of the parent

Earnings per share:

Basic

Diluted

Note

Before
other
items
2015
£000

Other
items
2015
£000

Total
2015
£000

Before
other
items
2014
£000

Other
items
2014
£000

Total
2014
£000

201,535

—

201,535

231,312

—

231,312

(192,561)

(8,502)

(201,063)

(223,691)

(7,729)

(231,420)

8,974

(8,502)

472

7,621

(7,729)

(108)

(213)

8,761

(450)

8,311

(1,449)

—

(8,502)

—

(8,502)

1,784

(213)

259

(450)

(191)

335

(3,038)

4,583

(558)

4,025

(1,427)

(353)

(8,082)

—

(8,082)

2,844

(3,391)

(3,499)

(558)

(4,057)

1,417

6,862

(6,718)

144

2,598

(5,238)

(2,640)

2.31p

(2.26p)

0.05p

0.88p

(1.77p)

(0.89p)

Further details of other items are disclosed in note 5 to the consolidated financial statements.

23925-04 24-06-2015 Proof 5

Severfield plc

Stock code: SFR

www.severfield.com
www.severfield.com

Consolidated statement of comprehensive income
Year ended 31 March 2015

Actuarial loss on defined benefit pension scheme*

Tax relating to components of other comprehensive income*

Other comprehensive income for the year

Profit/(loss) for the year from continuing operations
Total comprehensive income for the year attributable to
equity holders of the parent

* These items will not be subsequently reclassified to the consolidated income statement.

Note

Year ended
31 March
2015
£000

Year ended
31 March
2014
£000

(4,471)

1,033

(3,438)

144

(1,261)

(101)

(1,362)

(2,640)

(3,294)

(4,002)

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Our financials

Consolidated balance sheet
At 31 March 2015

Assets

Non-current assets

Goodwill

Other intangible assets

Property, plant and equipment

Investment property

Interests in JVs and associates

Deferred tax asset

Current assets

Inventories

Trade and other receivables

Derivative financial instruments

Cash and cash equivalents

Total assets

Liabilities

Current liabilities

Trade and other payables

Financial liabilities — borrowings

Financial liabilities — finance leases

Current tax liabilities

Non-current liabilities

Retirement benefit obligations

Financial liabilities — finance leases

Deferred tax liabilities

Total liabilities

Net assets

Equity

Share capital

Share premium

Other reserves

Retained earnings

Total equity

At
31 March
2015
£000

At
31 March
2014
£000

Note

54,712

7,088

76,606

—

4,802

1,870

54,712

9,845

74,128

3,870

3,315

1,780

145,078

147,650

4,767

64,530

118

6,884

76,299

221,377

5,842

60,801

—

5,525

72,168

219,818

(58,406)

(51,322)

—

(205)

(1,123)

(59,734)

(5,000)

(181)

(1,422)

(57,925)

(16,477)

(12,533)

(589)

(3,993)
(21,059)

(80,793)

(25)

(5,937)
(18,495)

(76,420)

140,584

143,398

7,437

85,702

1,250

46,195

140,584

7,437

85,702

770

49,489

143,398

The consolidated financial statements were approved by the board of directors on 17 June 2015 and signed on its behalf by:

Ian Lawson
Chief executive officer

Alan Dunsmore
Group finance director

23925-04 24-06-2015 Proof 5

Severfield plc

Stock code: SFR

www.severfield.com
www.severfield.com

Consolidated statement of changes in equity
Year ended 31 March 2015

At 1 April 2014
Profit for the year (attributable
to equity holders of the parent)

Equity settled share-based payments
Actuarial loss on defined benefit pension
scheme
Tax relating to components of other
comprehensive income

At 31 March 2015

At 1 April 2013
Loss for the year (attributable
to equity holders of the parent)

Proceeds from shares issued

Equity settled share-based payments
Actuarial loss on defined benefit pension
scheme
Tax relating to components of other
comprehensive income

At 31 March 2014

Share
capital
£000

7,437

—

7,437

Share
capital
£000

2,231

—

5,206

—

Note

Share
premium
£000

85,702

—

Other
reserves
£000

770

—

480

—

85,702

1,250

Share
premium
£000

46,152

—

39,550

—

Other
reserves
£000

527

—

243

—

770

Retained
earnings
£000

49,489

144

—

Total
equity
£000

143,398

144

480

(4,471)

1,033

46,195

Retained
earnings
£000

53,491

(2,640)

—

1,033

140,584

Total
equity
£000

102,401

(2,640)

44,756

243

(1,261)

(101)

49,489

143,398

7,437

85,702

The increase in share capital and share premium in the prior year reflect the 7:3 rights issue of 208,252,511 new ordinary shares at
23p per share which was approved by shareholders on 18 March 2013. The rights issue completed on 5 April 2013, with the Group
receiving net proceeds of £44,756,000 consisting of gross proceeds of £47,898,000 offset by transaction costs of £3,142,000.

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Our financials

Consolidated cash flow statement
Year ended 31 March 2015

Net cash flow from operating activities

Cash flows from investing activities

Proceeds on disposal of property, plant and equipment

Purchases of property, plant and equipment

Investment in JVs and associates

Net cash used in investing activities

Cash flows from financing activities

Interest paid

Repayment of obligations under finance leases

New borrowings

Repayment of borrowings

Proceeds from shares issued

Net cash (used in)/generated from financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Year ended
31 March
2015
£000

10,446

Year ended
31 March
2014
£000

2,522

Note

4,434

(5,727)

(1,700)

(2,993)

(782)

(312)

—

746

(2,218)

(3,538)

(5,010)

(759)

(194)

5,000

(5,000)

(41,461)

—

(6,094)

44,756

7,342

1,359

5,525

6,884

4,854

671

5,525

23925-04 24-06-2015 Proof 5

100

Severfield plc

Stock code: SFR

www.severfield.com
www.severfield.com

Notes to the consolidated financial statements
Year ended 31 March 2015

1. Significant accounting policies
General information
Severfield plc (‘the Company’) is a Company incorporated in the United Kingdom under the Companies Act 2006. The address of the
registered office is provided on page 138. The registered number of the Company is 1721262. The nature of the Group’s operations and
its principal activities are set out on pages 10 to 19. These financial statements are presented in sterling which is the currency of the
primary economic environment in which the Group operates.

Basis of accounting
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS).
The consolidated financial statements have also been prepared in accordance with IFRS adopted for use in the European Union and
therefore comply with Article 4 of the EU IAS Regulation.

The consolidated financial statements have been prepared on the historical cost basis, except for the revaluation of financial
instruments. The principal accounting policies adopted are set out below. During the year the Group classified the expenses in the
income statement by their nature in order to improve their presentation; in prior years these were classified by their function.

During the year certain new standards and a number of amendments to IFRS became effective. These are as follows:

•

IFRS 10 ‘Consolidated financial statements’

IFRS 11 ‘Joint arrangements’

IFRS 12 ‘Disclosure of interests in other entities’

IAS 27 (revised) ‘Consolidated and separate financial statements’

IAS 32 (amended) ‘Financial instruments: presentation’

IAS 36 (amended) ‘Recoverable amount disclosures for non-financial assets’

IAS 39 (amended) ‘Financial instruments: recognition and measurement’

The Group has considered the above new standards and amendments and has concluded that they are either not relevant to the
Group or that they do not have a significant impact on the Group’s financial statements.

The Group’s interest in its jointly controlled entity, JSW Severfield Structures, was previously accounted for using the equity method
of accounting. Following the adoption of IFRS 11, the jointly controlled entity has been assessed to be a joint venture and hence the
equity method remains appropriate.

A number of other new and amended IFRS were issued during the year which do not become effective until after 31 March 2015.
These include:

•

IAS 1 (amended) ‘Presentation of financial statements’

IAS 16 (amended) ‘Property, plant and equipment’

IAS 19 (amended) ‘Employee benefits’

IAS 27 (amended) ‘Separate financial statements’

IAS 28 (amended) ’Investments in associates and joint ventures’

IAS 38 (amended) ‘Intangible assets’

IFRS 9 ‘Financial instruments’

IFRS 10 (amended) ‘Consolidated financial statements’

IFRS 11 (amended) ‘Joint arrangements: accounting for acquisitions of interests in joint operations’

IFRS 12 (amended) ‘Disclosure of interest in other entities’

IFRS 14 ‘Regulatory deferral accounts’

IFRS 15 ‘Revenue from contracts with customers’

None of these new and amended standards have been adopted early by the Group and none of the new and amended standards are
likely to have a significant impact on the Group’s future results. The directors have made initial assessments of the impact of IFRS 15
and do not expect any material quantitative impact to the Group. The Group will perform a detailed review of its significant contracts
to ensure that the impact and effect of the new standard is fully understood and implemented in advance of the effective date.

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Our financials

101

1. Significant accounting policies continued
Going concern
After making enquiries, the directors have formed a judgement at the time of approving the consolidated financial statements that
there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable
future. For this reason the directors continue to adopt the going concern basis in preparing the consolidated financial statements.

The key factors considered by the directors in making the statement are set out within the financial review on pages 32 to 35.

Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the
Company made up to the reporting date each year. Control is achieved where the Company has the power over the investee, is exposed
or has rights to variable return from its involvement with the investee and has the ability to use its power to affect its returns.

Where relevant, the results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement
from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line
with those used by the Group.

All intra-Group transactions, balances, income and expenses are eliminated on consolidation.

Other items
Other items have been separately identified to provide a better indication of the Group’s underlying business performance. They are
not considered to be ‘business as usual’ items and have a varying impact on different businesses and reporting periods. They have
been separately identified as a result of their magnitude, incidence or unpredictable nature.

These non-underlying items are presented as a separate column within their related consolidated income statement category. Their
separate identification results in the calculation of an underlying profit measure in the same way as it is presented and reviewed by
management.

Items that may give rise to classification as non-underlying include, but are not limited to, restructuring items, the amortisation of
acquired intangible assets, rectification and remediation costs on completed contracts, movements in the valuation of derivative
financial instruments and certain non-recurring legal and consultancy costs. Restructuring items include income and expenses
arising from Group restructuring activities including redundancy costs, onerous contract and lease provisions and asset gains and
impairments.

Further details of other items are disclosed in note 5 to the consolidated financial statements.

Business combinations
The acquisition of subsidiaries is accounted for using the acquisition method. The cost of the acquisition is measured at the
aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued
by the Group in exchange for control of the acquiree. Acquisition-related costs are expensed as incurred. The acquiree’s identifiable
assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at
the acquisition date.

Investments in joint ventures and associates
An associated company is an entity over which the Group is in a position to exercise significant influence, but not control, through
participation in the financial and operating policy decisions of the investee. Significant influence is the power to participate in the
financial and operating policy decisions of the investee but is not control over those policies.

A joint venture is an entity over which the Group is in a position to exercise joint control. The Group has adopted the equity method of
accounting (as discussed below) for joint ventures and associated companies (together ‘JVs and associates’), in accordance with IAS 11.

The results and assets and liabilities of JVs and associates are incorporated in these financial statements using the equity method of
accounting unless it meets the exceptions described in IAS 28. Investments in JVs and associates are carried in the balance sheet at
cost as adjusted by post-acquisition changes in the Group’s share of their net assets, less any impairment in the value of individual
investments. Losses in excess of the Group’s interest in those JVs and associates are not recognised unless, and only to the extent
that, the Group has incurred legal or constructive obligations on their behalf.

Any excess of the cost of acquisition over the Group’s share of the fair values of the identifiable net assets of the JVs and associates
at the date of acquisition is recognised as goodwill. Any deficiency of the cost of acquisition below the Group’s share of the fair values
of the identifiable net assets of the JVs and associates at the date of acquisition (i.e. discount on acquisition) is credited in the
consolidated income statement in the period of acquisition.

The consolidated income statement includes the Group’s share of the JVs and associates profit less losses while the Group’s share of
the net assets of the JVs and associates is shown in the consolidated balance sheet.

23925-04 24-06-2015 Proof 5

102

Severfield plc

Stock code: SFR

www.severfield.com
www.severfield.com

Notes to the consolidated financial statements

1. Significant accounting policies continued
Goodwill
The Group recognises goodwill at cost less accumulated impairment losses. Goodwill which is recognised as an asset is reviewed for
impairment at least annually. Any impairment is recognised immediately as a loss and is not subsequently reversed.

For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the
synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more
frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less
than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to
the unit and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. An impairment
loss recognised for goodwill is not reversed in a subsequent period.

On disposal of a subsidiary, associate or jointly controlled entity, the attributable amount of goodwill is included in the determination
of the profit or loss on disposal.

Negative goodwill arising on acquisition is recognised immediately in the consolidated income statement.

Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable for goods and services provided, net of sales taxes,
rebates and discounts, after eliminating revenue within the Group.

Revenue from construction contracts is recognised in accordance with the Group’s accounting policy on construction contracts
(see below).

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established.

Construction contracts
Revenue represents the gross value of work performed (including retentions) during the reporting period and is normally determined
by qualified management assessment, taking into account customer certifications to date.

The general principles for profit recognition are as follows:

• Revenues on contracts are recognised on a percentage of completion basis when the contract’s outcome can be estimated reliably.

• Provision is made for total losses incurred or foreseen in bringing the contract to completion as soon as they become apparent.

• Variations are included in forecast contract revenues when it is considered probable that the customer will approve the variation

and the amount of revenue arising from the variation, and the amount of revenue can be reliably measured.

•

Incentive payments are included in forecast contract revenues when the contract is sufficiently advanced that it is probable that
the specified performance standards will be met or exceeded and the amount of the incentive payment can be reliably measured.

• Claims receivable are recognised as income when negotiations have reached an advanced stage such that it is probable that the
customer will accept the claim, and the amount that it is probable will be accepted by the customer can be measured reliably.

• Rectification work which is reasonably foreseeable is provided for as a cost of the contract and taken into account when assessing

its overall profitability. Claims for rectification arising after the end of a contract and which have not been provided for are
recognised as losses as they arise.

When determining whether a contract’s outcome can be estimated reliably, management considers a number of indicators including
the stage of completion of the contract to provide assurance over the reliability of costs to complete, cumulative cash received and
agreed certifications, the inherent risk in certain industry sectors and whether certain contract milestones have been satisfied.

All costs relating to contracts are recognised as expenses in the period in which they are incurred, except where they relate to future
activity on a contract, in which case they are recognised as an asset provided it is probable that they will be recovered. Where the
outcome of a contract cannot be reliably estimated, contract revenue is recognised only to the extent that contract costs incurred are
expected to be recovered.

Percentage of completion is determined by reference to the contract costs incurred to date (the proportion that estimated total
contract costs are accounted for by contract costs incurred for work performed to date). Only those contract costs that reflect work
performed are included in costs incurred to date.

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Our financials

103

1. Significant accounting policies continued
Total expected contract costs are initially determined by the estimating function during the contract tender process. At launch,
responsibility for the contract is handed over to the commercial function (consisting of qualified quantity surveyors) which, on an
ongoing basis, reassesses the expected contract costs as the contract progresses, taking into account the risks identified in contract
risk registers.

The assessment of the final outcome of each contract is determined by regular review of the revenues and costs to complete that
contract. Regular monthly contract reviews form an integral part of the contract forecasting procedures.

Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership
to the lessee. All other leases are classified as operating leases.

Amounts payable under operating leases are charged to the income statement on a straight-line basis over the lease term.

Property, plant and equipment acquired under finance leases are capitalised in the balance sheet at fair value and depreciated
in accordance with the Group’s accounting policy. The capital element of the leasing commitment is included as obligations under
finance leases. The rentals payable are apportioned between interest, which is charged to the income statement, and capital, which
reduces the outstanding obligation.

Retirement benefit obligations
The Group operates two defined contribution pension schemes and costs of these schemes are charged to the income statement in
the period in which they are incurred.

The Group has a defined benefit pension scheme which is now closed. The liability recognised in the balance sheet comprises the
present value of the defined benefit pension obligation, determined by discounting the estimated future cash flows using the market
yield on a high quality corporate bond, less the fair value of the scheme assets.

The cost of providing benefits recognised within operating costs in the income statement and the defined benefit obligations are
determined at the reporting date by independent actuaries, using the projected unit credit method.

Actuarial gains and losses are recognised in the period in which they occur in the statement of comprehensive income.

Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income
statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes
items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or
substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in
the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted
for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible
temporary differences can be utilised.

Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the
initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax
profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised.
These are determined based on future changes in tax rates that have been enacted rather than simply future changes that have been
proposed but not enacted. Deferred tax is charged or credited in the income statement, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax
assets and liabilities on a net basis.

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104

Severfield plc

Stock code: SFR

www.severfield.com
www.severfield.com

Notes to the consolidated financial statements

1. Significant accounting policies continued
Dividends
Dividends are recorded in the consolidated financial statements in the period in which they are declared, appropriately authorised
and no longer at the discretion of the Company.

Property, plant and equipment
Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, and plant and
machinery are currently stated at cost in the balance sheet. Depreciation on buildings is included within operating costs.

Depreciation is provided on other property, plant and equipment to write off the cost of each asset over its estimated useful life at the
following rates:

Freehold buildings/investment properties
Plant and machinery
Fixtures, fittings and office equipment
Computer equipment
Motor vehicles
Site safety equipment

1 per cent straight-line
10 per cent straight-line
10 per cent written down value
20 per cent straight-line
25 per cent written down value
20 per cent straight-line

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where
shorter, over the term of the relevant lease.

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the
carrying amount of the asset and is included within operating costs.

Investment property
Investment property, which is property held to earn rentals and/or for capital appreciation, is stated at cost less provision for
impairment. Depreciation is charged annually based on the Group’s stated depreciation policy together with an annual impairment
review. Where properties have been impaired below cost and are being held at directors’ valuation, the directors have taken
appropriate external guidance on the likely current value of properties.

Intangibles
The Group recognises intangible assets at cost less accumulated amortisation and impairment losses. Intangible assets acquired
through acquisitions arise as a result of applying IFRS 3 which requires the separate recognition of intangible assets from goodwill.

Other acquired intangible assets include software costs.

Intangible assets are amortised on a straight-line basis over their useful economic lives as follows:

Customer relationships
Brands
Know-how
Software costs

Amortisation
period

10 years
25 years
10 years
7 years

Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there
is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the
asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows
that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset
belongs. An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that
the asset may be impaired.

The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of
the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately,
unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

23925-04 24-06-2015 Proof 5

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Our financials

105

1. Significant accounting policies continued
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal
of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case
the reversal of the impairment loss is treated as a revaluation increase.

Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct
labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Net
realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing,
selling and distribution.

Financial instruments
Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the
contractual provisions of the instrument.

Trade receivables
Trade receivables are classified as loans and receivables, and therefore measured at amortised cost using the effective interest
method.

Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and demand deposits, and other short-term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Bank borrowings
Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Finance charges,
including premiums payable on settlement or redemption and direct issue costs, are accounted for in the income statement using the
effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period
in which they arise. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating
interest over the relevant period.

Trade payables
Trade payables are initially measured at fair value, and are subsequently measured at amortised cost.

Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Share-based payment transactions
The Group issues equity settled share-based payments. These share-based payments are measured at fair value at the date of grant
based on the Group’s estimate of shares that will eventually vest. The fair value determined is then expensed in the consolidated
income statement on a straight-line basis over the vesting period, with a corresponding increase in equity. Further details regarding
the determination of the fair value of equity settled share-based transactions are set out in note 22.

Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will
be required to settle that obligation. Provisions are measured at the directors’ best estimate of the expenditure required to settle the
obligation at the balance sheet date, and, as appropriate, are discounted to present value where the effect is material.

Derivative financial instruments
The Group enters into certain foreign exchange forward contracts to manage its exposure to currency movements. Further details of
derivative financial instruments are disclosed in note 21.

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to
their fair value at each balance sheet date. The resulting gain or loss is recognised in profit or loss.

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106

Severfield plc

Stock code: SFR

www.severfield.com
www.severfield.com

Notes to the consolidated financial statements

2. Critical accounting judgements and estimates
The preparation of financial statements under IFRS requires management to make judgements, assumptions and estimates that
affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may
differ from these estimates. Assumptions and estimates are reviewed on an ongoing basis and any revisions to them are recognised
in the period in which they are revised.

The following items are those that management consider to be critical due to the level of judgement and estimation required:

Revenue and profit recognition
Recognition of revenue and profit is based on judgements made in respect of the ultimate profitability of a contract. Such judgements
are arrived at through the use of estimates in relation to the costs and value of work performed to date and to be performed in
bringing contracts to completion. These estimates are made by reference to recovery of pre-contract costs, surveys of progress
against the construction programme, changes in work scope, the contractual terms under which the work is being performed,
including the recoverability of any unagreed income from variations and the likely outcome of discussions on claims, costs incurred
and external certification of the work performed.

The Group has appropriate internal control procedures over the determination of each of the above variables to ensure that profit
take as at the balance sheet date and the extent of future costs to contract completion are reasonably and consistently determined
and subject to appropriate review and authorisation.

Impairment of goodwill and other non-current assets
Goodwill is tested at least annually for impairment, along with the intangible assets and other assets of the Group’s cash-generating
units. The Group’s investment in its Indian joint venture has also been reviewed for impairment.

Determining whether goodwill or other non-current assets are impaired requires an estimation of the value in use of the business
being tested for impairment and of the cash-generating units to which these assets have been allocated. The value in use calculation
requires the entity to estimate the future cash flows expected to arise from the cash-generating unit, taking into account the
achievability of long-term business plans and macroeconomic assumptions underlying the valuation process, and a suitable discount
rate in order to calculate present value. The discount rates used are based on the Group’s weighted average cost of capital adjusted to
reflect the specific economic environment of the relevant cash-generating unit.

The carrying amount of goodwill at the balance sheet date was £54,712,000 and of intangible assets arising from acquisitions was
£6,573,000. The carrying value of the Group’s investment in the Indian joint venture was £4,802,000 at the balance sheet date.

Disclosure of other (non-underlying) items
The Group has presented certain items of a one-off and material nature as non-underlying items in the income statement and notes
to the consolidated financial statements. These items have been disclosed because the directors view their presentation as relevant
to the understanding of the Group’s underlying financial performance. Judgement is required to determine which items are disclosed
as one-off. Inclusion within this category is restrictive and is applied consistently.

One-off items before tax recognised in the year ended 31 March 2015 were £8,502,000 (2014: £8,082,000).

Recognition of deferred tax assets
The carrying values of deferred tax assets on the balance sheet are dependent on the estimates of future taxable profits arising from
the Group’s operations. The realisation of deferred tax assets is dependent on the generation of sufficient future taxable profits. The
Group recognises deferred tax assets where it is more likely than not that the benefit will be realised.

The carrying amount of deferred tax assets at the balance sheet date was £1,870,000 (2014: £1,780,000).

Retirement benefit obligations
The Group’s defined benefit pension scheme has been valued in accordance with IAS 19 ‘Employee benefits’. The benefit obligation
is calculated using a number of assumptions including increases in pension benefits, mortality rates and inflation and the future
investment returns from the scheme’s assets. The present value of the benefit obligations is calculated by discounting the benefit
obligation using market rates on relevant AA corporate bonds at the balance sheet date.

The scheme’s assets are valued at market rates at the balance sheet date. Effects of changes in the actuarial assumptions underlying
the benefit obligation, discount rates and the difference between expected and actual returns on the scheme’s assets are classified
as actuarial gains and losses.

The defined benefit obligation recognised at the balance sheet date was £16,477,000 (2014: £12,533,000).

Of the items discussed above, revenue and profit recognition (including the assessment of the remedial costs for the Leadenhall
building) and retirement benefit obligations represent the key sources of estimation uncertainty.

23925-04 24-06-2015 Proof 5

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Our financials

107

3. Revenue and segmental analysis
Revenue
An analysis of the Group’s revenue is as follows:

Revenue from construction contracts

Total revenue

Other operating income (note 4)

Interest received (note 7)

Total income

2015
£000

201,535

2014
£000

231,312

403

541

201,945

231,860

Segmental results
Following adoption of IFRS 8, the Group has identified its operating segments as those upon which the executive committee (the chief
operating decision maker) regularly assesses performance.

The Group has deemed it appropriate to aggregate its operating segments into one reported segment (construction contracts). The
constituent operating segments have been aggregated as they have businesses with similar products and services, production
processes, types of customer, methods of distribution, regulatory environments and economic characteristics.

Revenues by product group
All revenue is derived from construction contracts and related assets.

Geographical information
The Group’s revenue from external customers is detailed below:

Revenue by destination:

United Kingdom

Republic of Ireland and mainland Europe

Other countries

2015
£000

2014
£000

194,974

218,916

5,459

1,102

9,867

2,529

201,535

231,312

All revenue originated from the United Kingdom and all non-current assets of the Group are located in the United Kingdom.

Information about major customers
Included in Group revenue is £43,075,000 relating to sales to one major customer, which individually contributed to more than 10
per cent of Group revenue in the year ended 31 March 2015. In the prior year, no single customer individually contributed to more than
10 per cent of Group revenue.

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108

Severfield plc

Stock code: SFR

www.severfield.com
www.severfield.com

Notes to the consolidated financial statements

4. Operating costs

Raw materials and consumables (including subcontractor costs)
Staff costs
Other operating charges
Amortisation of other intangible assets (note 12)
Operating lease expense:
— plant and machinery
— other
Depreciation (note 13):
— owned property, plant and equipment
— property, plant and equipment held under finance leases
— investment property
Other operating income
Operating costs before other items
Other items

Other operating charges include:
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts
Fees payable to the Company’s auditor for other services:
— the audit of the Company’s subsidiaries pursuant to legislation
— audit-related assurance services
— taxation compliance services
— other taxation advisory services

2015
£000

109,717
53,975
22,499
137

1,354
1,650

3,442
180
10
(403)
192,561
8,502
201,063

148
35
39
52

2014
£000

139,456
48,087
29,330
137

1,744
1,857

3,496
85
40
(541)
223,691
7,729
231,420

148
30
45
67

Fees payable to Deloitte LLP and their associates for non-audit services to the Company are not required to be disclosed because the
consolidated financial statements are required to disclose such fees on a consolidated basis.

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Our financials

109

5. Other items

Contract remedial costs

Amortisation of acquired intangible assets (note 12)

Restructuring and redundancy costs

Retirement of acquired intangible asset (note 12)

Impairment of investment in associates (note 15)

Movements in the valuation of derivative financial instruments (note 21)

Other items before tax

Tax on other items

Other items after tax

2015
£000

6,000

2,620

—

(118)

8,502

(1,784)

6,718

2014
£000

—

2,748

2,611

2,370

353

—

8,082

(2,844)

5,238

The contract remedial costs relate to a programme of bolt replacement works at the Leadenhall building, a contract that was
completed in 2013. They are treated as non-underlying costs in accordance with the Group’s stated policy. This programme is being
undertaken in conjunction with British Land, Laing O’Rourke and Arup and is likely to continue until the end of the calendar year.
The liability of the Group and the other parties for the programme costs has not yet been determined and, therefore, the charge
represents certain costs incurred at year-end, together with management’s best estimate of the remaining cost to the Group. This is
based on the current requirements of the programme and before taking account of potential future recoveries, as these cannot be
recognised under IFRS.

Restructuring and redundancy costs in the prior year arose on the reorganisation of the Group’s largest business, Severfield (UK)
(formerly Severfield–Watson Structures), in May 2013. This resulted in the reduction in factory capacity by approximately 10 per cent
and a reduction in headcount of 84 people.

The prior year retirement of the acquired intangible asset for the Fisher Engineering brand arose following the rebranding exercise
undertaken by the Group in 2014.

During the prior year, Kennedy Watts Partnership, a company in which the Group had a holding of 25.1 per cent, went into
administration. Accordingly, an impairment charge of £353,000 was recognised which represented the Group’s historical investment
in the associate.

6. Staff costs
Details of directors’ remuneration for the year are provided in the audited part of the directors’ remuneration report on page 80.

The average number of persons employed by the Group (including executive directors) during the year was:

Production and site

Sales and administration

The aggregate payroll costs of these persons were as follows:

Wages and salaries

Social security costs

Other pension costs

Employee remuneration costs under share-based payment schemes are set out in note 22.

2015
Number

1,119

1,212

2015
£000

46,824

5,227

1,924

53,975

2014
Number

1,105

1,203

2014
£000

43,929

4,938

1,684

50,551

23925-04 24-06-2015 Proof 5

110

Severfield plc

Stock code: SFR

www.severfield.com
www.severfield.com

Notes to the consolidated financial statements

7. Net finance expense

Finance income — interest receivable

Finance expense — interest and other costs in relation to bank borrowings

8. Taxation
a) The taxation credit comprises:

Current tax

UK corporation tax

Adjustments to prior years’ tax provisions

Deferred tax (note 20)

Current year credit

Impact of reduction in future years’ tax rates

Adjustments to prior years’ provisions

b) Tax reconciliation
The credit for the year can be reconciled to the loss per the income statement as follows:

Loss before tax

Tax on loss on ordinary activities at standard UK corporation tax rate

Expenses not deductible for tax purposes

Tax effect of share of results of JVs and associates

Unprovided deferred tax movement

Adjustments to prior years’ provisions

Rate differences

Corporation tax was calculated at 21 per cent (2014: 23 per cent) of the estimated taxable result for the year.

2015
£000

(7)

457

450

2015
£000

(512)

(154)

(666)

573

—

428

1,001

335

2015
£000

(191)

(136)

128

274

—

335

2014
£000

(7)

565

558

2014
£000

(1,025)

(1,018)

1,319

1,066

2,435

1,417

2014
£000

(4,057)

933

(374)

(657)

392

1,066

1,417

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Annual report and accounts for the year ended 31 March 2015

Our financials

111

9. Dividends
No dividends were either paid or declared for the year ended 31 March 2014. No interim dividend was either paid or declared for the
six months ended 30 September 2014.

The directors are recommending a final dividend in respect of the financial year ended 31 March 2015 of 0.5p per share which
will amount to an estimated dividend payment of £1,488,000. If approved by the shareholders at the annual general meeting on 2
September 2015, this dividend will be paid on 11 September 2015 to shareholders who are on the register of members at 14 August
2015. This dividend is not reflected in the balance sheet as at 31 March 2015 as it is subject to shareholder approval.

10. Earnings per share
Earnings per share is calculated as follows:

Earnings for the purposes of basic earnings per share being net profit/(loss)
attributable to equity holders of the parent company
Earnings for the purposes of underlying basic earnings per share being underlying
net profit attributable to equity holders of the parent company

2015
£000

144

2014
£000

(2,640)

6,862

2,598

Number

Number of shares

Weighted average number of ordinary shares for the purposes of basic earnings per share

297,503,587 295,791,922

Weighted average number of ordinary shares for the purposes of diluted earnings per share

297,503,587 295,791,922

Basic earnings per share

Underlying basic earnings per share

Diluted earnings per share

Underlying diluted earnings per share

Reconciliation of earnings

Net profit/(loss) attributable to equity holders of the parent company

Other items

Underlying net profit attributable to equity holders of the parent company

Further details of other items are provided in note 5.

0.05p

2.31p

0.05p

2.31p

2015
£000

144

6,718

6,862

(0.89p)

0.88p

(0.89p)

0.88p

2014
£000

(2,640)

5,238

2,598

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112

Severfield plc

Stock code: SFR

www.severfield.com
www.severfield.com

Notes to the consolidated financial statements

11. Goodwill
The carrying value of goodwill is allocated to cash-generating units (‘CGUs’) as follows:

On the Fisher Engineering acquisition in 2007

On the Atlas Ward acquisition in 2005

On the Watson Steel Structures acquisition in 2001

£000

47,980

6,571

161

54,712

The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.

The Group considers that the cash flows of the legacy Fisher Engineering and Severfield (UK) operations are so closely related that
they should be treated as a group of CGUs for the purposes of goodwill impairment testing.

The recoverable amounts of goodwill are determined from value in use calculations. The key assumptions for the value in use
calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the
year. The directors estimate discount rates using pre-tax rates that reflect current market assessments of the time value of money
and the risks specific to the CGUs. Changes in selling prices and direct costs are based on past practices and expectations on future
changes in the market.

The Group prepares forecast cash flows based on the following year’s budget, approved by the directors, together with cash flows
based on budgets for the following two years which are derived from the directors’ views on revenue prospects until March 2018. After
this period, cash flows have been extrapolated using a growth rate of 1.5 per cent (2014: 1.5 per cent) which does not exceed the long-
term growth rate for the relevant markets. The cash flow forecasts have been discounted using a pre-tax discount rate of 10 per cent
(2014: 10 per cent).

Following the impairment reviews performed by the Group, no impairment charge was recorded in the year ended 31 March 2015.

Management considers that no reasonably possible change in the key assumptions would cause the goodwill attached to the above
CGUs to fall below their carrying value at 31 March 2015.

12. Other intangible assets

Cost
At 1 April 2013
Additions
At 1 April 2014
Additions
At 31 March 2015

Amortisation
At 1 April 2013
Charge for the year
Retirements
At 1 April 2014
Charge for the year
At 31 March 2015

Carrying amount
At 31 March 2015
At 31 March 2014

Intangible assets
acquired on
acquisition
£000

Other
intangible
assets
£000

39,000
—
39,000
—
39,000

24,689
2,748
2,370
29,807
2,620
32,427

6,573
9,193

883
—
883
—
883

94
137
—
231
137
368

515
652

Total
£000

39,883
—
39,883
—
39,883

24,783
2,885
2,370
30,038
2,757
32,795

7,088
9,845

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Our financials

113

12. Other intangible assets continued
The intangible assets acquired on acquisition arise as a result of applying IFRS 3 which requires the separate recognition of acquired
intangibles from goodwill. The Group’s acquired intangible assets are as follows:

Cost
At 1 April 2014 and 31 March 2015

Customer
relationships
£000

Brands
£000

Order book
£000

Know-how
£000

Total
£000

25,800

3,200

9,600

400

39,000

Amortisation
At 1 April 2013
Charge for the year
Retirements
At 1 April 2014
Charge for the year
At 31 March 2015

Net book value
At 31 March 2015
At 31 March 2014

14,167
2,580
—
16,747
2,580
19,327

6,473
9,053

702
128
2,370
3,200
—
3,200

—
—

9,600
—
—
9,600
—
9,600

—
—

220
40
—
260
40
300

100
140

24,689
2,748
2,370
29,807
2,620
32,427

6,573
9,193

During the prior year, the intangible asset of £2,370,000 relating to the Fisher Engineering brand was retired as a result of the
rebranding of the Group and the renaming of its main operating businesses.

Amortisation and retirement of acquired intangibles is included in the consolidated income statement as part of operating costs and
is classified as other items (see note 5).

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114

Severfield plc

Stock code: SFR

www.severfield.com
www.severfield.com

Notes to the consolidated financial statements

13. Property, plant and equipment (including investment property)

Cost
At 1 April 2013
Additions
Disposals
At 1 April 2014
Additions
Disposals
At 31 March 2015

Accumulated depreciation
At 1 April 2013
Charge for the year
Disposals
At 1 April 2014
Charge for the year
Disposals
At 31 March 2015

Carrying amount
At 31 March 2015
At 31 March 2014

Plant and
machinery
£000

Fixtures,
fittings
and office
equipment
£000

Freehold
and long
leasehold
land and
buildings
£000

66,189
164
(169)
66,184
62
(215)
66,031

2,941
503
—
3,444
527
—
3,971

Investment
property
£000

6,197
—
—
6,197
—
(6,197)
—

2,287
40
—
2,327
10
(2,337)
—

30,347
1,895
(776)
31,466
5,211
(887)
35,790

19,086
2,680
(459)
21,307
2,762
(716)
23,353

—
3,870

62,060
62,740

12,437
10,159

Motor
vehicles
£000

1,952
84
(556)
1,480
62
(587)
955

1,096
244
(392)
948
148
(446)
650

Total
£000

106,545
2,218
(1,501)
107,262
6,627
(7,886)
106,003

26,494
3,621
(851)
29,264
3,632
(3,499)
29,397

305
532

76,606
77,998

1,860
75
—
1,935
1,292
—
3,227

1,084
154
—
1,238
185
—
1,423

1,804
697

The net book value of the Group’s plant and machinery includes £1,174,000 (2014: £589,000) of assets held under finance leases.

On 23 June 2014, the Group sold its sole investment property in Leeds for a gross consideration of £3,830,000. This resulted in a small
loss on disposal after taking into account transaction costs.

14. Subsidiaries
The Company has investments in the following significant subsidiary undertakings. All of the companies listed are registered in
England and Wales.

Severfield (UK) Limited
Severfield (Design & Build) Limited
Severfield (NI) Limited

— steel fabrication and construction
— steel fabrication
— steel fabrication and construction

The Company owns the whole of the issued share capital of the subsidiaries noted above.

15. Interests in JVs and associates
The Group has an interest in an associated company and a joint venture as follows:

Associated companies:

Fabsec Limited — development of fire beam

Joint venture:
JSW Severfield Structures Limited — structural steelwork serving the Indian market

Holding %

25.0

50.0

Class of capital

Ordinary

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Our financials

115

15. Interests in JVs and associates continued
On 17 November 2008 a formal agreement was signed in India with JSW Building Systems Limited (a subsidiary of JSW Steel Limited
of India) to form a 50/50 joint venture, JSW Severfield Structures Limited, to create a structural steelwork business in Bellary and
Mumbai, India, serving primarily the Indian market.

JSW Severfield Structures Limited is registered in India, and during the year the Group invested a further £1,700,000 (2014:
£3,538,000) in the joint venture. As a result of the loss of £213,000 recorded during the year, the Group’s investment in the Indian joint
venture of £4,802,000 has been reviewed for impairment. The recoverable amount of the investment is determined from value in use
calculations which are based on the following year’s budget, together with financial projections for 2017 to 2019. The calculations
assume a long-term growth rate of 1.5 per cent from 2020 onwards and a pre-tax discount rate of 10 per cent. Following this review,
no impairment charge was recorded in the year ended 31 March 2015 (2014: £nil). Management considers that no reasonably
possible change in the key assumptions would result in an impairment, whilst recognising that the achievement of the forecasts is
dependent on the move to a sustainable profit position.

Share of net
assets/
(liabilities)
£000

Loans to
associate
undertaking
£000

Goodwill
£000

At 1 April 2013

Net assets acquired

Losses retained

Impairment of investment in associates

At 1 April 2014

Net assets acquired

Losses retained

At 31 March 2015

251

—

(251)

—

The Group’s share of the retained loss for the year of JVs and associates is made up as follows:

Share of results

Summarised financial information in respect of the Group’s JVs and associates is as follows:

Current assets

Non-current assets

Current liabilities

Non-current liabilities

Net assets

Group’s share of net assets

Revenue

Profit/(loss) after tax

Group’s share of loss after tax

2,846

3,538

(3,038)

(31)

3,315

1,700

(213)

4,802

Fabsec
Limited
£000

—

(71)

—

JSW
Severfield
Structures
Limited
£000

(213)

2015
£000

28,868

26,081

(32,111)

(15,993)

6,845

3,688

42,365

181

(213)

There were no contingent liabilities or capital commitments (2014: none) associated with the Group’s JVs and associates.

Total
£000

3,168

3,538

(3,038)

(353)

3,315

1,700

(213)

4,802

Total
£000

(213)

2014
£000

22,002

23,984

(26,672)

(16,848)

2,466

1,575

27,911

(5,871)

(3,038)

23925-04 24-06-2015 Proof 5

116

Severfield plc

Stock code: SFR

www.severfield.com
www.severfield.com

Notes to the consolidated financial statements

16. Inventories

Raw materials and consumables

Work-in-progress

17. Construction contracts

Contracts-in-progress at balance sheet date:

Amounts due from construction contract customers included in trade and other receivables
Amounts due to construction contract customers included in trade and other payables

Contract costs incurred plus recognised profits less recognised losses to date
Less: progress billings received

18. Trade and other receivables

Amounts due from construction contract customers (note 17):

— Current amounts receivable in respect of progress billings

— Retentions due within one year

— Retentions due after one year

Total

Other receivables

Prepayments and accrued income

Amounts due from JVs and associates

2015
£000

4,075

692

4,767

2014
£000

3,832

2,010

5,842

2015
£000

2014
£000

60,440
(5,074)
55,366

55,154
(386)
54,768

356,840
(301,474)
55,366

412,310
(357,542)
54,768

2015
£000

2014
£000

55,130

3,599

1,711

60,440

626

3,219

245

50,361

2,822

1,971

55,154

2,531

2,841

275

64,530

60,801

In the prior year, other receivables included the fair value of a financial guarantee of £2,200,000, which represented the estimated
equity payments during the year ended 31 March 2015 to the Indian joint venture (JSW Severfield Structures Limited). A
corresponding liability of £2,200,000 was included within other creditors (see note 19).

The average credit period taken on revenue, calculated on a count-back basis to make appropriate allowance for monthly revenue
phasing, is 82 days (2014: 70 days). No interest is charged on receivables.

The directors consider that the carrying amount of trade and other receivables approximates to their fair value.

Before accepting any new customer, the Group uses an external credit rating agency to assess the potential customer’s credit quality
and defines credit limits by customer. It is Group policy that adequate credit insurance is taken out on all customers to manage the
exposure that may arise as the contractual work proceeds. Accordingly, no bad debt provisions are held or expenses incurred. The
Group’s executive risk committee reviews situations where adequate credit insurance on the Group’s customers cannot be purchased
in the present economic climate as required.

Due to the nature of the business involving applications for payment, contractually overdue amounts within trade and other
receivables are limited to retentions. The Group has rigorous procedures in place for monitoring and obtaining settlement of
retentions in a prompt manner.

Overdue retentions at 31 March 2015 were £0.2m (2014: £0.1m).

23925-04 24-06-2015 Proof 5

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Our financials

117

19. Trade and other payables

Trade creditors

Other taxation and social security

Other creditors and accruals

Payments in advance (note 17)

2015
£000

32,255

3,562

17,515

5,074

58,406

2014
£000

34,554

3,136

13,246

386

51,322

Other creditors and accruals includes contract remedial costs associated with the programme of bolt replacement works at the
Leadenhall building (see note 5).

During the prior year, the Group provided an undertaking, not exceeding £3,500,000, to secure a loan facility of the Indian joint venture
(JSW Severfield Structures Limited) until 31 March 2016. Other creditors in the prior year included the fair value of this financial
guarantee of £2,200,000 which represented the estimated equity payments to the joint venture during the year ended 31 March
2015 (see note 18). Equity payments during the year ended 31 March 2015 were £1,700,000 (see note 15). Based on the latest cash
flow projections, no further equity payments are scheduled before the expiry of the financial guarantee. Accordingly, its fair value is
considered to be £nil.

The directors consider that the carrying amount of trade payables approximates to their fair value.

The average credit period taken for trade purchases, calculated on a count-back basis to make appropriate allowance for monthly
revenue phasing, is 58 days (2014: 59 days).

20. Deferred tax liabilities
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current
and prior reporting period.

Deferred tax liabilities

Deferred tax assets

Deferred tax is disclosed in the balance sheet as follows:

Deferred tax liabilities

Deferred tax asset — trading losses

2015
£000

(7,615)

5,492

(2,123)

2015
£000

(3,993)

1,870

(2,123)

2014
£000

(8,443)

4,286

(4,157)

2014
£000

(5,937)

1,780

(4,157)

23925-04 24-06-2015 Proof 5

118

Severfield plc

Stock code: SFR

www.severfield.com
www.severfield.com

Notes to the consolidated financial statements

20. Deferred tax liabilities continued

At 1 April 2013

Credit/(charge) to income statement

Credit to equity

Effect of change in tax rate

Reclassification

At 1 April 2014

Credit/(charge) to income statement

Credit to equity
At 31 March 2015

Excess capital
allowances
£000

(7,937)

515

–

1,035

–

(6,387)

–
(6,301)

Acquired
intangible
assets
£000

(3,292)

1,178

–

276

–

(1,838)

524

–
(1,314)

Retirement
benefit
obligations
£000

2,716

(108)

252

(354)

–

2,506

(106)

894
3,294

Trading
losses
£000

1,840

152

–

(212)

–

1,780

–
1,870

Other timing
differences
£000

120

(368)

–

(32)

(218)

407

139
328

Total
£000

(6,553)

1,369

252

713

(4,157)

1,001

1,033
(2,123)

The deferred tax assets reducing the deferred tax liability relate to 20 per cent (2014: 20 per cent) of the Group’s deficit on its defined
benefit retirement scheme, trading losses carried forward and other timing differences. The tax losses on which a deferred tax asset
has been recognised do not expire. Deferred tax assets are recognised for tax loss carry-forwards to the extent that the utilisation of
the related tax benefit through future taxable profits is probable. In determining the amounts of deferred tax assets to be recognised,
management uses historical profitability information and, if relevant, forecasted operating results, based on approved budgets and
forecasts, including a review of the eligible carry-forward periods, tax planning opportunities and other relevant considerations.

Unrecognised deferred tax assets in respect of trading losses amounted to £1,302,000 (2014: £1,430,000). These have not been
recognised as a result of the unpredictability of future profit streams against which these losses may be utilised.

21. Financial instruments
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while optimising the
return to stakeholders. The capital structure of the Group consists of debt, which includes borrowings, cash and cash equivalents and
equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings.

The board reviews the capital structure of the Group on a semi-annual basis. As part of this review, it considers the cost of capital and
the risks associated with each class of capital. The Group monitors capital using the following indicators:

i) Gearing ratio

Borrowings
Cash and cash equivalents
Unamortised debt arrangement fees
Finance leases
Net funds
Equity
Net debt to equity ratio

2015
£000

—
6,884
273
(794)
6,363
140,584
N/A

2014
£000

(5,000)
5,525
—
(206)
319
143,398
N/A

Equity includes all capital and reserves of the Group attributable to equity holders of the parent. There are no externally imposed
capital requirements.

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Our financials

119

21. Financial instruments continued
ii) Return on capital employed
Underlying operating profit plus share of post-tax results from JVs and associates divided by the average of opening and closing
capital employed. Capital employed is defined as shareholders’ equity after adding back retirement benefit obligations (net of tax),
acquired intangible assets and net funds.

Underlying operating profit
Share of results of JVs and associates

Capital employed:
Shareholders’ equity
Cash and cash equivalents
Borrowings
Net funds
Retirement benefit obligations (net of deferred tax) (note 30)
Acquired intangible assets (note 12)

Average capital employed
Return on capital employed

Categories of financial instruments

Financial assets
Cash and cash equivalents

Amounts due from construction contract customers (note 17)

Derivative financial instruments

Unamortised debt arrangement fees

Financial liabilities

Trade creditors (note 19)

Other creditors and accruals (note 19)

Borrowings

Finance leases

2015
£000

8,974
(213)
8,761

140,584
(6,884)
794
(6,090)
13,183
(6,573)
141,104
142,509
6.1%

2014
£000

7,621
(3,038)
4,583

143,398
(5,525)
5,206
(319)
10,027
(9,193)
143,913
140,944
3.3%

Carrying value

2015
£000

6,884

60,440

118

273

(32,255)

(17,515)

—

(794)

2014
£000

5,525

55,154

—

(34,554)

(13,246)

(5,000)

(206)

The Group’s financial instruments consist of borrowings, cash, unamortised debt arrangement fees items that arise directly from its
operations and derivative financial instruments. Cash and cash equivalents, trade and other receivables and trade and other payables
generally have short terms to maturity. For this reason their carrying values approximate to fair value. The Group’s borrowings relate
principally to amounts drawn down against its revolving credit facility, the carrying amounts of which approximate to their fair values by
virtue of being floating rate instruments.

The Group is required to analyse financial instruments that are measured subsequent to initial recognition at fair value, grouped into
levels 1 to 3 based on the degree to which the fair value is observable:

• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or

liabilities;

• Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable

for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are

not based on observable market data (unobservable inputs).

Derivative financial instruments are the only instruments valued at fair value through profit or loss, and are valued as such on initial
recognition. These relate to foreign currency forward contracts measured using quoted forward exchange rates and yield curves
matching the maturities of the contracts. These derivative financial instruments are categorised as level 2 financial instruments.
Except for derivative financial instruments, the carrying amounts of financial assets and financial liabilities are recorded at
amortised cost in the consolidated financial statements.

23925-04 24-06-2015 Proof 5

120

Severfield plc

Stock code: SFR

www.severfield.com
www.severfield.com

Notes to the consolidated financial statements

21. Financial instruments continued
General risk management principles
The board has overall responsibility for the establishment and oversight of the Group’s risk management framework. A formal risk
assessment and management framework for assessing, monitoring and managing the strategic, operational and financial risks of
the Group is in place to ensure appropriate risk management of its operations. Internal control and risk management systems are
embedded in the operations of the divisions.

Financial risks and management
The Group has exposure to a variety of financial risks through the conduct of its operations. Risk management is governed by the
Group’s operational policies, which are subject to periodic review by the board of directors.

Credit risk
The Group’s primary exposure to credit risk arises from the potential for non-payment or default from construction contract debtors.
The degree to which the Group is exposed to this credit risk depends on the individual characteristics of the contract counterparty
and the nature of the project. The Group’s credit risk is also influenced by the general macroeconomic conditions. The Group does
not have significant concentration of risk in respect of amounts due from construction contract customers at the reporting date with
them being spread across a wide range of customers. Due to the nature of the Group’s operations, it is normal practice for customers
to hold retentions in respect of contracts completed. Retentions held by customers at 31 March 2015 were £5,310,000 (2014:
£4,793,000).

The Group manages its exposure to credit risk through the application of its credit risk management policies which specify the
minimum requirements in respect of the creditworthiness of potential customers, assessed through reports from credit agencies,
and the timing and extent of progress payments in respect of contracts. In addition, before accepting any new customer adequate
credit insurance is taken out as reported in note 18. Where credit insurance is difficult to acquire, the executive risk committee
determines the appropriate exposure for the Group to take with a customer.

The Group manages the collection of retentions through its post-completion project monitoring procedures and ongoing contact with
customers so as to ensure that potential issues that could lead to the non-payment of retentions are addressed as soon as they are
identified.

Amounts outstanding from construction contract customers are due with reference to the payment terms for each particular contract
but the majority would be receivable within four months from the end of the reporting period. Amounts due for settlement after 12
months are disclosed in note 18.

Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as and when they fall due. The ultimate
responsibility for liquidity risk rests with the board.

The Group generates cash through its operations and aims to manage liquidity by ensuring that it will always have sufficient financing
facilities to meet its liabilities when due, under both normal and stress conditions, without incurring unacceptable losses or risking
damage to the Group’s reputation. Forecast and actual cash flow is continuously monitored.

On 31 October 2014, the Group entered into a new £25,000,000 revolving credit facility (‘RCF’) with HSBC Bank plc and Yorkshire Bank
(a member of the National Australia Bank group) which matures in July 2019 and cancelled the existing RCF facility with Royal Bank
of Scotland plc and Yorkshire Bank which was due to expire in November 2016.

The new facility includes an accordion facility of £20,000,000, which allows the Group to increase the aggregate available borrowings
to £45,000,000, at the Group’s request. This new facility is subject to certain covenants including the cover of interest costs and the
ratio of net debt to EBITDA.

As at 31 March 2015, £25,000,000 of this facility was not drawn but available. Up to £10,000,000 of this facility is available by way of
an overdraft.

23925-04 24-06-2015 Proof 5

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Our financials

121

21. Financial instruments continued
In accordance with IFRS 7, the following tables detail the Group’s remaining contractual maturity for its financial liabilities.

Liabilities – 2015

Trade and other payables

Financial liabilities — finance leases

Liabilities – 2014

Trade and other payables

Financial liabilities — borrowings

Financial liabilities — finance leases

Maturity analysis

Carrying
value
£000

49,770

794

50,564

47,800

5,000

206

53,006

Less than
3 months
£000

43,408

43,478

43,250

—

43,299

3 months
to 1 year
£000

5,799

135

5,934

3,166

—

132

3,298

1–2
years
£000

272

180

452

1,035

—

1,060

2–5
years
£000

291

409

700

349

5,000

—

5,349

Total
£000

49,770

794

50,564

47,800

5,000

206

53,006

Market risk
The Group’s activities expose it primarily to the financial risks of changes in credit risks described above, in foreign currency exchange
rates and interest rates. The Group has entered into certain derivative financial instruments to manage its exposure to foreign
currency risk.

Market risk exposures are monitored and are supplemented by sensitivity analysis. There has been no change to the Group’s exposure
to market risks or the manner in which it manages and measures the risk.

Foreign currency risk management
The Group undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange rate fluctuations arise.
Exchange rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts.

The Group seeks to minimise the effects of currency risks by using derivative financial instruments when appropriate to hedge these risk
exposures against contracted sales. The use of financial derivatives is governed by the Group’s policies approved by the board of directors.
The Group does not enter into or trade financial instruments, including derivative financial instruments for speculative purposes.

The carrying value of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date are
as follows:

Euro

US dollar

Liabilities

Assets

2015
£000

(149)

—

(149)

2014
£000

(132)

—

(132)

2015
£000

942

605

1,547

2014
£000

4,148

4,153

Foreign currency sensitivity analysis
The Group is only significantly exposed to the euro and US dollar.

The following table details the Group’s sensitivity to a 10 per cent increase and decrease in sterling against the relevant foreign
currencies. Ten per cent is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and
represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes
only outstanding foreign currency denominated monetary items and derivative financial instruments, and adjusts their translation
at the year-end for a 10 per cent change in foreign currency rates. A positive number below indicates an increase in profit and other
equity where sterling strengthens 10 per cent against the relevant currency. For a 10 per cent weakening of sterling against the relevant
currency, there would be an equal and opposite impact on the profit and other equity, and the balances below would be negative.

Profit or loss and equity

US dollar currency
impact

Euro currency
impact

2015
£000

(61)

2014
£000

—

2015
£000

501

2014
£000

324

At present the Group’s translation exposure to the Indian rupee via its Indian joint venture is not significant. As the business grows,
this exposure is expected to become more significant.

23925-04 24-06-2015 Proof 5

122

Severfield plc

Stock code: SFR

www.severfield.com
www.severfield.com

Notes to the consolidated financial statements

21. Financial instruments continued
Forward foreign exchange contracts
It is the policy of the Group to enter into forward foreign exchange contracts to cover future euro and US dollar currency receipts on
relevant contracts.

At 31 March 2015, the Group had forward exchange contracts held for the sale of 7.7m euros (2014: 8.8m euros) and nil US dollars
(2014: nil US dollars) at an average exchange rate of 1.326 euros/£ (2014: 1.206 euros/£) and nil US dollars/£ (2014: nil US dollars/£)
to the pound and maturing within 12 months of the year-end.

Interest rate risk management
The Group is exposed to interest rate risk as described under the borrowings paragraph earlier in this note. The Group does not
currently hedge any of its interest rate exposure.

Interest rate sensitivity analysis
The sensitivity analysis below has been determined based on the exposure to interest rates at the balance sheet date. For floating
rate liabilities, the analysis is prepared assuming the gross amount of liability outstanding at balance sheet date was outstanding
for the whole period. A 0.5 per cent increase or decrease is used when reporting interest rate risk internally to key management
personnel and represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 0.5 per cent higher and all other variables were held constant, the Group’s profit for the year ended
31 March 2015 and the Group’s equity at that date would decrease by £nil (2014: £25,000). This is attributable to the Group’s exposure
to interest rates on its variable rate borrowings. If the £25,000,000 facility is fully utilised the exposure increases to £125,000.

22. Share-based payments
The Group operates a share-based incentive scheme open to all employees of the Group although the current intention is that only
the Company’s executive directors (being both board directors and certain members of the executive committee) and selected senior
employees will participate in the scheme. Further details are given in the directors’ remuneration report on pages 72 to 86.

Performance share plan
The vesting of awards is subject to performance conditions set by the remuneration committee. The Group recognised a total charge
of £480,000 for the year (2014: £162,000) with a corresponding entry to reserves. The weighted average fair value of share options
granted during the year was £0.52 per share. Three outstanding awards had been granted to 31 March 2015:

• During the period ended 31 March 2013 the remuneration committee granted 1,113,508 ordinary shares of 2.5p each at £nil value
to the executive directors. The vesting of these awards was dependent on the Group’s underlying earnings per share performance
over the three-year period from 1 January 2012 to 31 December 2014. As a result of the Group’s change of year-end to 31 March,
these awards were deferred until 31 March 2015. The following vesting schedule applies:

Underlying EPS performance‡ for year ended 31 December 2014†

Equal to less than 6.51p
Equal to 11.71p or better
Between 6.51p and 11.71p

The assumptions used to measure the fair value of the shares granted are as follows:

Share price on date of grant
Exercise price
Expected volatility (using historic performance)
Risk-free rate
Dividend
Actual life

% of award vesting

0%
100%
between 25% and 100%

£2.00*
nil
50%
1.7%
5.0p
three years

* Granted on 7 March 2012.
† Now deferred to 31 March 2015.
‡ The original EPS targets have been adjusted by a factor of 1.92105. This adjustment is based on the relationship between the last day cum rights issue share

price (73p) and the theoretical ex rights price (38p).

The Black–Scholes pricing model produced, using the above assumptions, an annual charge of £nil (2014: charge of £nil).

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Our financials

123

22. Share-based payments continued
• During the year ended 31 March 2014 the remuneration committee granted 2,183,779 ordinary shares of 2.5p each at £nil value to
the executive directors. The vesting of these awards will be dependent on the Group’s underlying earnings per share performance
over the three-year period from 1 April 2013 to 31 March 2016. The following vesting schedule applies:

Underlying EPS performance for year ending 31 March 2016

Equal to less than 2.15p
Equal to 4.87p or better
Between 2.15p and 4.87p

The assumptions used to measure the fair value of the shares granted are as follows:

Share price on date of grant
Exercise price
Expected volatility (using historic performance)
Risk-free rate
Dividend
Actual life

* Granted on 5 June 2013.

% of award vesting

0%
100%
between 25% and 100%

£0.48*
nil
98%
2.7%
1.0p
three years

The Black–Scholes pricing model produced, using the above assumptions, an annual charge of £229,000 (2014: £162,000).

• During the year ended 31 March 2015 the remuneration committee granted 2,198,382 ordinary shares of 2.5p each at £nil value to
the executive directors. The vesting of these awards will be dependent on the Group’s underlying earnings per share performance
over the three-year period from 1 April 2014 to 31 March 2017. The following vesting schedule applies:

Underlying EPS performance for year ending 31 March 2017

Equal to less than 3.23p
Equal to 6.45p or better
Between 3.23p and 6.45p

The assumptions used to measure the fair value of the shares granted are as follows:

Share price on date of grant
Exercise price
Expected volatility (using historic performance)
Risk-free rate
Dividend
Actual life

* Granted on 4 June 2014.

The Black–Scholes pricing model produced, using the above assumptions, an annual charge of £251,000.

23. Share capital

Issued and fully paid:
297,503,587 ordinary shares of 2.5p each (2014: 297,503,587 ordinary shares of 2.5p each)

There are no share options outstanding as at 31 March 2015 (2014: nil).

% of award vesting

0%
100%
between 25% and 100%

£0.55*
nil
76%
2.7%
1.0p
three years

2015
£000

2014
£000

7,437

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124

Severfield plc

Stock code: SFR

www.severfield.com
www.severfield.com

Notes to the consolidated financial statements

24. Other reserves

At 1 April 2013
Share-based payments charge
At 1 April 2014
Share-based payments charge
At 31 March 2015

Share-based
payment
reserve
£000

388
243
631
480
1,111

Other
reserves
£000

139
—
139
—
139

Total
£000

527
243
770
480
1,250

The movement in the share-based payment reserve represents the share-based payment charge of £480,000 (2014: £243,000)
(see note 22). The prior year charge includes £162,000 for the performance share plan and £81,000 for the share incentive plan which
terminated in 2014.

25. Net cash flow from operating activities

Operating profit/(loss) from continuing operations
Adjustments:
Depreciation of property, plant and equipment (note 13)
Depreciation of investment property (note 13)
Gain on disposal of property, plant and equipment
Amortisation of intangible assets (note 12)
Retirement of acquired intangible asset (note 12)
Movements in pension scheme (note 30)
Share of results of JVs and associates (note 15)
Share-based payments
Movement in valuation of derivatives
Operating cash flows before movements in working capital
Decrease in inventories

(Increase)/decrease in receivables
Increase/(decrease) in payables
Cash generated from operations
Tax (paid)/received
Net cash flow from operating activities

26. Analysis of net funds

Cash and cash equivalents

Unamortised debt arrangement fees

Financial liabilities — borrowings

Financial liabilities — finance leases

27. Capital commitments

Contracted for but not provided in the financial statements

23925-04 24-06-2015 Proof 5

2015
£000

259

3,622
10
(46)
2,757
—
(528)
213
480
(118)
6,649
1,075
(4,206)
7,893
11,411
(965)
10,446

2015
£000

6,884

273

—

(794)

6,363

2015
£000

—

2014
£000

(3,499)

3,581
40
(96)
2,885
2,370
(539)
3,391
243
—
8,376
2,372
10,798
(19,433)
2,113
409
2,522

2014
£000

5,525

—

(5,000)

(206)

319

2014
£000

750

Annual report and accounts for the year ended 31 March 2015

Our financials

125

28. Contingent liabilities
Liabilities have been recorded for the directors’ best estimate of uncertain contract positions, known legal claims, investigations and
legal actions in progress. The Group takes legal advice as to the likelihood of success of claims and actions and no liability is recorded
where the directors consider, based on that advice, that the action is unlikely to succeed, or that the Group cannot make a sufficiently
reliable estimate of the potential obligation. The Group also has contingent liabilities in respect of other issues that may have
occurred, but where no claim has been made and it is not possible to reliably estimate the potential obligation.

The Company and its subsidiaries have provided unlimited multilateral guarantees to secure any bank overdrafts and loans of
all other Group companies. At 31 March 2015 these amounted to £15,000,000 (2014: £25,000,000). The Group has also given
performance bonds in the normal course of trade.

29. Operating lease arrangements
The Group as lessee
The Group leases a number of its premises under operating leases which expire between 2015 and 2032.

The total future minimum lease rentals are as follows:

Minimum lease rentals due:

— Within one year

— After one year and within five years

— After five years

2015
£000

2014
£000

1,140

3,656

11,553

16,349

1,076

3,779

12,231

17,086

The Group also leases certain items of plant and machinery and vehicles whose total future minimum lease rentals are as follows:

Minimum lease rentals due:

— Within one year

— After one year and within five years

— After five years

2015
£000

1,272

2,128

3,439

2014
£000

1,172

1,450

105

2,727

The Group as lessor
Property rental income earned on owned properties during the year was £211,000 (2014: £422,000). The properties held have
committed tenants for the next one to five years. All operating lease contracts contain market review clauses in the event that the
lessees exercise the options to renew. The lessees do not have an option to purchase the property at the expiry of the lease period.

As at the balance sheet date the Group had contracted with tenants for the following future minimum lease payments:

— Within one year
— After one year and within five years
— After five years

2015
£000

172
313
212
697

2014
£000

397
919
—
1,316

23925-04 24-06-2015 Proof 5

126

Severfield plc

Stock code: SFR

www.severfield.com
www.severfield.com

Notes to the consolidated financial statements

30. Retirement benefit obligations
Defined contribution schemes
The Group operates two defined contribution retirement benefit schemes. The assets of the schemes are held separately from those
of the Group in funds under the control of trustees.

The total cost charged to income of £1,644,000 (2014: £1,357,000) represents contributions payable to these schemes by the Group
at rates specified in the rules of the plans. As at 31 March 2015, contributions of £266,000 (2014: £183,000) due in respect of the
current reporting period had not been paid over to the schemes.

Defined benefit schemes
The Group has a defined benefit scheme which is now closed to new members and no defined benefit membership rights will accrue
under the scheme.

The scheme exposes the Group to actuarial and other risks, the most significant of which are considered to be:

Investment risk The present values of the scheme liabilities are calculated using a discount rate determined by reference to

Interest risk

Longevity risk

Salary risk

corporate bond yields; if the return on scheme assets is below this rate, it will create a plan deficit. The Group
holds a significant proportion of growth assets (bonds, gilts and equities) to leverage the return generated by the
scheme.
A decrease in the corporate bond interest rate will increase the scheme liabilities, although this will be partially
offset by an increase in the return on the scheme’s assets.
The present values of the scheme liabilities are calculated by reference to the best estimate of the mortality of
scheme participants which reflect continuing improvements in life expectancy. An increase in the life expectancy
of the scheme participants will increase the scheme’s liabilities.
The present values of the defined benefit scheme liabilities are calculated by reference to the future salaries of
scheme participants. As such, an increase in the salary of the scheme participants will increase the scheme’s
liabilities.

The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out at 5 April
2014 by Mr Christopher Hunter, Fellow of the Institute of Actuaries. The present value of the defined benefit obligation, the related
current service cost and past service cost were measured using the projected unit credit method.

Key assumptions used:
Discount rate
Inflation (RPI)
Future pension increases

2015
%

3.2
2.9
2.8

2014
%

4.4
3.2
3.1

When considering mortality assumptions a male life expectancy to 85 at age 65 has been used for the year ended 31 March 2015
(2014: 85).

Impact on scheme liabilities of changes to key assumptions:

Assumption

Discount rate
Rate of mortality

Change in assumption

Increase/decrease by 0.25%
Increase by one year

Impact on scheme liabilities

Decrease/increase by 4.5%
Increase by 3.4%

Amounts recognised in income in respect of these defined benefit schemes are as follows:

Interest cost
Interest income

2015
£000

1,407
(898)
509

2014
£000

1,290
(815)
475

The charge for the year has been included in operating costs. Actuarial gains and losses have been reported in the statement of
comprehensive income. The cumulative actuarial gains and losses recognised amount to a loss of £13,980,000 (2014: £9,509,000).

The actual return on scheme assets was a gain of £2,414,000 (2014: £300,000).

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Our financials

127

30. Retirement benefit obligations continued
The amount included in the balance sheet arising from the Group’s obligations in respect of the defined benefit retirement scheme is
as follows:

Present value of defined benefit obligations
Fair value of scheme assets

The major categories of scheme assets as a percentage of the total scheme assets are as follows:

Equities
Bonds and gilts
Cash
Property
Other

2015
£000

(38,958)
22,481
(16,477)

2014
£000

(32,395)
19,862
(12,533)

2015
%

21.3
61.3
6.2
9.2
2.0
100.0

2014
%

21.5
62.3
5.5
8.8
1.9
100.0

Bonds and gilts include a mixture of corporate and government bonds and fixed and index-linked gilts. Approximately 9 per cent of bonds
have a sub-investment grade credit rating (BB+ or lower) and approximately 68 per cent of gilts are index-linked with 32 per cent being
fixed.

Movements in the present value of defined benefit obligations were as follows:

At start of year

Interest cost

Actuarial losses

Benefits paid

At end of year

2015
£000

(32,395)

(1,407)

(5,988)

832

2014
£000

(31,061)

(1,290)

(746)

702

(38,958)

(32,395)

Actuarial losses arising from changes in demographic assumptions, changes in financial assumptions and gains or losses arising
from experience were losses of £nil (2014: £768,000), losses of £5,624,000 (2014: gains of £127,000) and losses of £364,000 (2014:
losses of £105,000) respectively.

Movements in the fair value of scheme assets were as follows:

At start of year

Interest income

Actuarial gains/(losses)

Employer contributions

Benefits paid

At end of year

2015
£000

2014
£000

19,862

19,250

898

1,517

1,037

(833)

22,481

815

(515)

1,014

(702)

19,862

The Group expects to contribute £88,000 per month to its defined benefit pension scheme in the year to 31 March 2016.

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128

Severfield plc

Stock code: SFR

www.severfield.com
www.severfield.com

Notes to the consolidated financial statements

30. Retirement benefit obligations continued
History of experience of gains and losses:

Experience gains/(losses) on scheme assets (£000)

Percentage of scheme assets

Experience (gains)/losses on scheme liabilities (£000)

Percentage of the present value of scheme liabilities

Total amount recognised in the consolidated
statement of comprehensive income (£000)

Percentage of the present value of scheme liabilities

* Represents the 15-month period ended 31 March 2013.

2015

1,516

6.7%

(364)

(0.9%)

2014

(515)

(2.6%)

(105)

(0.3%)

2013*

961

5.0%

424

1.4%

2011

243

1.4%

(512)

(1.9%)

2010

(34)

(0.2%)

1,013

4.1%

(4,471)

(11.5%)

(1,261)

(3.9%)

(2,824)

(9.1%)

(1,369)

(5.1%)

(440)

(1.8%)

The weighted average period over which benefits are expected to be paid, or the duration of the liabilities, is currently 18 years.

31. Related party transactions
The remuneration of the directors is provided in the audited part of the directors’ remuneration report on page 80.

In addition to the board of directors, members of the executive committee are also considered as key management personnel of the
Group. Information about the remuneration of the additional directors who belong to the executive committee is as follows:

Short-term employee benefits

Contributions into pension schemes

2015
£000

1,204

1,297

2014
£000

852

112

964

Short-term employee benefits include salary, bonus, social security contributions, the provision of company cars, fuel for company
cars and private medical insurance.

The charge in relation to share-based payments is provided in note 22 and relates to executive directors and members of the
executive committee.

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not
disclosed in this note. Transactions between the Group and its associated undertakings are disclosed below.

During the year the Group purchased services in the ordinary course of business from Fabsec Limited at a cost of £162,000
(2014: £105,000). The amount outstanding at 31 March 2015 was £92,000 (2014: £16,000).

During the year the Group incurred additional operating costs in relation to the day-to-day running of the joint venture in India of
£596,000 (2014: £595,000). Those costs were recharged to the joint venture company during the year and the amount outstanding at
31 March 2015 was £245,000 (2014: £275,000).

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Our financials

129

Five year summary

Results

Revenue

Underlying* operating profit/(loss)
Underlying* profit/(loss) before tax

Non-underlying items before tax
Profit/(loss) attributable to equity holders
of Severfield plc

Assets employed

Non-current assets

Net current assets/(liabilities)

Non-current liabilities

Net assets

Key statistics

Earnings per share:

Basic — underlying*

Basic
Diluted — underlying*

Diluted

Dividends per share

Dividend cover (times) — underlying* basis

Share price — high

— low

2015
£000

2014
£000

2013†
£000

2011
£000

2010
£000

201,535

231,312

318,256

267,778

266,692

8,974
8,311

(8,502)

7,621
4,025

(8,082)

(19,218)
(21,532)

(7,326)

14,193
10,117

(3,335)

16,204
15,283

(4,176)

144

(2,640)

(23,127)

5,822

7,633

145,078

16,565

(21,059)

140,584

147,650

14,243

(18,495)

143,398

154,871

156,940

165,013

(32,060)

(20,410)

(3,059)

(21,583)

(11,739)

(22,331)

102,401

132,298

130,943

2.31p

0.05p
2.31p

0.05p

—

72.00p

53.50p

0.88p

(0.89p)
0.88p

(0.89p)

—

65.50p

38.00p

(10.78p)

(13.49p)
(10.78p)

(13.49p)

1.50p

(13.8)

114.26p

35.40p

4.19p

3.39p
4.19p

3.39p

5.00p

1.6

6.51p

4.46p
6.51p

4.46p

7.50p

1.3

173.60p

78.08p

163.06p

92.27p

Key statistics for 2013, 2011 and 2010 have been restated to reflect the 7:3 rights issue in April 2013.

* The basis of stating results on an underlying basis is set out on page 101.
† Represents the 15-month period ended 31 March 2013.

Financial calendar

Preliminary announcement of full year results

Publication of annual report

Annual general meeting

Announcement of interim results (provisional)

17 June 2015

July 2015

2 September 2015

24 November 2015

23925-04 24-06-2015 Proof 5

130

Severfield plc

Stock code: SFR

www.severfield.com

Delivering quality service

The project involves the construction of two new
production studios within the Warner Brothers complex
at Leavesden, together with an extension to the existing
Harry Potter tour. Each new studio is essentially a portal
frame which includes wide spanning roof trusses with
gantry walkways located within the trusses, as well as
runway beams fixed to the underside of the trusses. The
Harry Potter extension is of similar construction.

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Our financials

131

Our financials — Company

Company balance sheet
Notes to the Company financial statements

132
133

Project: Warner Brothers, Leavesden

Sector: Stadia and leisure

Location: Leavesden, Hertfordshire

Tonnage: 1,500

Client: Warner Brothers

Main contractor: Bowmer and Kirkland

Completion: March 2015

23925-04 24-06-2015 Proof 5

132

Severfield plc

Stock code: SFR

www.severfield.com
www.severfield.com

Company balance sheet
At 31 March 2015

Fixed assets

Tangible assets

Intangible assets

Investments

Debtors — amounts falling due within one year

Creditors — amounts falling due within one year

Net current liabilities

Total assets less current liabilities

Capital and reserves

Share capital

Share premium

Other reserves

Profit and loss account

Equity and total shareholders’ funds

Note

2015
£000

2014
£000

60,022

515

100,659

161,196

48,094

(95,674)

(47,580)

113,616

7,437

85,702

1,100

19,377

113,616

60,760

652

98,959

160,371

63,021

(115,879)

(52,858)

107,513

7,437

85,702

620

13,754

107,513

The financial statements were approved by the board of directors on 17 June 2015 and signed on its behalf by:

Ian Lawson
Chief executive officer

Alan Dunsmore
Group finance director

Severfield plc
Registered in England No: 1721262

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Our financials

133

Notes to the Company financial statements
At 31 March 2015

1. Significant accounting policies
Basis of accounting
The separate financial statements of the Company are presented as required by the Companies Act 2006. They have been prepared
under the historical cost convention and in accordance with applicable UK accounting standards (‘UK GAAP’).

Going concern
After making enquiries, the directors have formed a judgement at the time of approving the financial statements that there is a
reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For
this reason the directors continue to adopt the going concern basis in preparing the financial statements of the Company. The key
factors considered by the directors in making the statement are set out within the financial review on pages 32 to 35.

Cash flow
The Company is exempt from the requirements of FRS1 (Revised) ‘Cash flow statements’.

Tangible fixed assets
Freehold and long leasehold land is held at cost and not depreciated.

Depreciation is provided on other fixed assets to write off the cost of each asset over its estimated useful life at the following rates:

Freehold buildings
Motor vehicles

1 per cent straight-line
25 per cent written down value

Intangible fixed assets
Intangible fixed assets relate to capitalised software costs.

Intangible assets are amortised on a straight-line basis over their useful economic lives as follows:

Software costs

7 years

Investments
Fixed asset investments are shown at cost less provision for impairment.

Taxation
Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered) using the tax rates
and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is provided in full on timing differences which result in an obligation at the balance sheet date to pay more tax, or a
right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Timing
differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in
which they are included in financial statements.

Deferred tax is not provided on timing differences arising from the revaluation of fixed assets where there is no commitment to sell
the asset, or on unremitted earnings of subsidiaries and associates where there is no commitment to remit these earnings. Deferred
tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax assets and
liabilities are not discounted.

Share-based payments
Share-based payments are accounted for as described in the Group accounting policies on page 105.

Related party transactions
The Company has taken advantage of the exemption under FRS 8 ‘Related party disclosures’ not to disclose transactions with other
wholly-owned Group companies.

2. Operating profit
The auditor’s remuneration for audit services to the Company was £17,000 (2014: £17,000).

3. Profit of the Company
The Company has taken advantage of Section 408 of the Companies Act 2006 and consequently its profit and loss account is not
presented as part of these accounts. The profit of the Company for the financial year amounted to £5,623,000 (2014: £10,742,000).
Dividends paid and proposed are disclosed in note 9 to the consolidated financial statements.

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134

Severfield plc

Stock code: SFR

www.severfield.com
www.severfield.com

Notes to the Company financial statements

4. Tangible fixed assets

Cost

At 1 April 2014

Disposals

At 31 March 2015

Depreciation

At 1 April 2014

Charge for the year

Disposals

At 31 March 2015

Net book value

At 31 March 2015

At 31 March 2014

Freehold
and long
leasehold
land and
buildings
£000

64,256

(216)

64,040

3,513

505

—

4,018

60,022

60,743

Motor
vehicles
£000

(46)

(32)

—

Total
£000

64,321

(262)

64,059

3,561

508

(32)

4,037

60,022

60,760

The Company’s freehold and long leasehold land and buildings includes those which are occupied and used by some of the Company’s
subsidiary undertakings.

5. Investments

Investment in subsidiaries

Investment in joint ventures

2015
£000

86,950

13,709

100,659

2014
£000

86,950

12,009

98,959

Investment in subsidiaries
The Company has investments in the following significant subsidiary undertakings. All of the companies listed are registered in
England and Wales.

Severfield (UK) Limited
Severfield (Design & Build) Limited
Severfield (NI) Limited

— steel fabrication and construction
— steel fabrication
— steel fabrication and construction

The Company owns the whole of the issued share capital of the subsidiaries noted above.

Cost
At 1 April 2014 and 31 March 2015
Provision for impairment
At 1 April 2014 and 31 March 2015
Net book value
At 31 March 2015
At 31 March 2014

£000

107,150

20,200

86,950
86,950

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

Our financials

135

5. Investments continued
Investment in joint ventures
On 17 November 2008 a formal agreement was signed in India with JSW Building Systems Limited (a subsidiary of JSW Steel Limited
of India) to form a 50/50 joint venture, JSW Severfield Structures Limited, to create a structural steelwork business in Bellary and
Mumbai, India, serving primarily the Indian market.

JSW Severfield Structures Limited is registered in India and, during the year, the Company invested indirectly £1,700,000 (2014:
£3,538,000) in the joint venture. The investment is carried in Severfield Mauritius Limited, a wholly-owned subsidiary of the Company.

Cost
At 1 April 2014
Additions
At 31 March 2015

£000

12,009
1,700
13,709

As a result of the loss of £213,000 recorded during the year, the Company’s investment in the Indian joint venture of £13,709,000
has been reviewed for impairment. The recoverable amount of the investment is determined from value in use calculations which
are based on the following year’s budget, together with financial projections for 2017 to 2019. The calculations assume a long-term
growth rate of 1.5 per cent from 2020 onwards and a pre-tax discount rate of 10 per cent. Following this review, no impairment charge
was recorded in the year ended 31 March 2015 (2014: £nil). Management considers that no reasonably possible change in the key
assumptions would result in an impairment, whilst recognising that the achievement of the forecasts is dependent on the move to a
sustainable profit position.

6. Debtors — amounts falling due within one year

Other debtors

Amounts owed by subsidiary undertakings

Corporation tax recoverable

7. Creditors — amounts falling due within one year

Bank borrowings

Other creditors and accruals

Amounts owed to subsidiary undertakings

Deferred tax liability (note 8)

2015
£000

1,202

45,321

1,571

48,094

2015
£000

3,864

4,266

2014
£000

493

61,699

829

63,021

2014
£000

8,873

2,797

87,351

103,931

193

278

95,674

115,879

Borrowings represent an element of the Group’s revolving credit facility from HSBC Bank plc and National Australia Bank jointly as
disclosed in note 21 to the consolidated financial statements. The facility is available until July 2019.

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136

Severfield plc

Stock code: SFR

www.severfield.com
www.severfield.com

Notes to the Company financial statements
At 31 March 2015

8. Deferred tax

Excess capital allowances

Short-term timing differences

Deferred tax — movement for the year

At 1 April 2014

Current year credit

At 31 March 2015

9. Share capital

Issued and fully paid:

Amount provided

Amount unprovided

2015
£000

394

(201)

193

2014
£000

385

(107)

278

2015
£000

—

2015
£000

2014
£000

—

£000

278

(85)

193

2014
£000

297,503,587 ordinary shares of 2.5p each (2014: 297,503,587 ordinary shares of 2.5p each)

7,437

There are no share options outstanding as at 31 March 2015 (2014: nil).

10. Share premium

At start of year
Proceeds from shares issued
At end of year

11. Other reserves

At start of year
Share-based payment charge
At end of year

2015
£000

85,702
—
85,702

2015
£000

620
480
1,100

2014
£000

46,152
39,550
85,702

2014
£000

377
243
620

The movement in the share-based payment reserve represents the share-based payment charge of £480,000 (2014: £243,000).

23925-04 24-06-2015 Proof 5

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Our financials

137

12. Profit and loss account

At start of year
Net profit for the year
At end of year

13. Movement in shareholders’ funds

At start of year
Proceeds from shares issued
Net profit for the year
Movement in share-based payment reserve
At end of year

14. Capital commitments

Contracted for but not provided in the financial statements

2015
£000

13,754
5,623
19,377

2015
£000

107,513
—
5,623
480
113,616

2014
£000

3,012
10,742
13,754

2014
£000

51,772
44,756
10,742
243
107,513

2015
£000

—

2014
£000

—

15. Contingent liabilities
The Company has provided an unlimited multilateral guarantee to secure any bank overdrafts and loans of all other Group companies.
At 31 March 2015 these amounted to £nil (2014: £nil).

During the prior year, the Company provided an undertaking, not exceeding £3,500,000, to secure a loan facility of the Indian joint
venture (JSW Severfield Structures Limited) until 31 March 2016.

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138

Severfield plc

Stock code: SFR

www.severfield.com
www.severfield.com

Addresses and advisers

Registered office and headquarters
Severfield plc
Severs House
Dalton Airfield Industrial Estate
Dalton, Thirsk
North Yorkshire
YO7 3JN

Severfield (Design & Build)
Limited
Ward House
Sherburn
Malton
North Yorkshire
YO17 8PZ

Severfield (NI) Limited
Fisher House
Ballinamallard
Enniskillen
Co Fermanagh
BT94 2FY

Stockbrokers
Jefferies International Limited
Vintners Place
68 Upper Thames Street
London, EC4V 3BJ

Registrars
Computershare Investor Services
PLC
PO Box 82

The Pavilions, Bridgwater Road

Bristol, BS99 7NP

Bankers
HSBC Bank plc
Maingate

Kingsway North

Team Valley Trading Estate
Gateshead, NE11 0BE

National Australia Bank Limited
(Yorkshire Bank)
94 Albion Street
Leeds, LS1 6AG

Operational businesses
Severfield (UK) Limited
Severs House
Dalton Airfield Industrial Estate
Dalton, Thirsk
North Yorkshire
YO7 3JN

JSW Severfield Structures
Limited
Office No. 302, Naman Centre
3rd Floor, Plot No. C-31
Bandra Kurla Complex
Bharat Nagar, Bandra East
Mumbai 400 051
India

Advisers
Auditor
Deloitte LLP
Chartered Accountants

and Statutory Auditor

1 City Square
Leeds, LS1 2AL

Solicitors
Ashurst LLP
Broadwalk House

5 Appold Street

London, EC2A 2HA

Public Relations
Bell Pottinger
6th Floor, Holborn Gate

330 High Holborn

London, WC1V 7QD

23925-04 24-06-2015 Proof 5

Annual report and accounts for the year ended 31 March 2015

This Annual Report has been printed on recycled coated Board and Paper by an FSC® (Forest Stewardship Council)
certified printer using vegetable based inks.

23925-04 24-06-2015 Proof 5

Severfield plc
Severs House
Dalton Airfield Industrial Estate
Dalton, Thirsk
North Yorkshire
YO7 3JN

Tel: (01845) 577896
Fax: (01845) 577411

www.severfield.com

23925-04 24-06-2015 Proof 5