Severfield plc Annual report and accounts
for the year ended 31 March 2021
DEVELOPING BETTER WAYS
TO BUILD FOR A WORLD OF
CHANGING DEMANDS
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WELCOME TO OUR
ANNUAL REPORT 2021
Severfield is the largest specialist structural
steelwork group in the UK, with a growing
presence in India and Europe and a reputation
for performance and value.
“ Our 2021 performance is testament to
a resilience which has been developed
and embedded over a number of years
of strategic and operational progress.”
“ The Group’s strategy to build a
balanced business, with geographic,
sector and client diversity, has
facilitated revenue growth of around
30 per cent over the last three years.”
KEVIN WHITEMAN
NON-EXECUTIVE CHAIRMAN
ALAN DUNSMORE
CHIEF EXECUTIVE OFFICER
Read more about our chairman’s view
on pages 10 to 11
Read more about our strategy
on pages 32 to 41
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
THE STRENGTH
WITHIN ICONIC
STRUCTURES
OUR PROJECTS
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FULHAM FC
RIVERSIDE STAND
The two-tiered stand
redevelopment aims to
not only provide first class
facilities for match-going
football fans, but will
benefit the local community
by becoming a leisure
destination in its own right,
housing shops, restaurants,
bars and even a health club
with rooftop pool, all while
blending in seamlessly with
the West London surroundings
with a new riverside walk.
Location
Fulham, London
Client
Fulham Football Club
Main contractor
Buckingham Group
Contracting Ltd
Engineer
WSP Group Plc
Architect
Populous Ltd
Tonnage
2,700
The project
The redevelopment project will add
an additional 3,900 seats, taking
the capacity of Craven Cottage to a
total of 29,600 as well as enhancing
local amenities. The Group’s scope
included the connection design,
fabrication and erection of c.2,700
tonnes of structural steelwork,
delivered from both our Dalton
and Lostock production facilities,
together with all secondary
steelwork and temporary fittings,
the installation of free issue
concrete terrace units, vomitories
and walls.
As ever, safety was a top priority,
with use of our ‘Seversafe’ edge
protection throughout the
construction. The project has
proven an extreme engineering
and logistical challenge, but one
that Severfield’s experience and
knowledge has helped meet.
Construction of the Riverside stand
took place whilst Craven Cottage
was still in operation during the
2019/2020 football season. This,
together with the site’s small
footprint and riverside location,
made usual methods of delivering
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FULHAM FC
RIVERSIDE STAND
and erecting the roof trusses
impossible. To solve this problem,
the steelwork was pre-fabricated,
assembled and fire-protected at
Tilbury Docks, with the trusses
delivered by barge along the
River Thames and lifted into
place with a 400-tonne capacity
crane on a jack-up barge. This
project had to be meticulously
planned from with the utmost
care and precision from the
design stage onwards, with the
trusses having to be designed to
not only be lifted in such unusual
ways while retaining strength,
but to fit under London’s iconic
bridges, sometimes with only
one metre of clearance at low
tide. This was a clear success,
with the fabrication and erection
proceeding without issues.
The Riverside stand incorporates
a cantilever roof structure, for
which steel is the traditional
choice of material, but steelwork
was also chosen for the main
structure and tiers because of
the unique logistical constraints
of the site. Flanked by the pitch to
the north and the River Thames
to the south, the project was
constructed in a partly top-down
sequence with steel columns
springing directly from basement
pile caps, allowing the steel
frame construction to commence
with the basement level works
following afterwards.
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3
BARKING RIVERSIDE
EXTENSION
This redevelopment sees a
significant expansion of the
existing rail infrastructure
north of the River Thames,
which includes a large viaduct
spanning over the existing
railway lines.
Location
Barking, London
Client
Transport for London
Main contractor
Morgan Sindall Volker
Fitzpatrick JV
Engineer
Arcadis NV
Architect
WestonWilliamson+Partners
Tonnage
3,100
Completion date
May 2021
The project
This rail extension is part of a
significant investment in East
London, which will support over
10,000 new homes along with
leisure, healthcare and shopping
facilities as part of a large multi-
use development. The significant
upgrade to the transport
infrastructure includes a new
railway station and a two-mile line
extension to the existing Gospel
Oak to Barking London Overground
line including a signature viaduct
spanning over the existing lines.
Structural steelwork supplied and
erected by Severfield is playing a
pivotal role in the overall Barking
Riverside extension, which will
add 4.5 kilometres to the London
Overground railway network.
Severfield was responsible for the
supply and erection of plate girders
for nine bridges, some of which
were over operational railway lines.
This posed logistical challenges
and required the project team to
work closely with local authorities
and Transport for London to arrange
rail possession periods to allow
certain erection stages to proceed,
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BARKING RIVERSIDE
EXTENSION
sometimes requiring the use of
the largest mobile cranes in the
UK, with capacities of up to 1,200
tonnes.
was delivered and erected
over a single weekend thereby
minimising disruption to rail
services.
The project has been a success,
with high quality fabrication of
the plate girders and the smooth
execution of the on-site activities,
despite the challenges faced by
the project team.
Due to the restricted erection
programme, close collaboration
with other contractors was a key
requirement of the project. One
particularly large and complex
delivery to site which required
such precise coordination,
consisted of four large sections,
each being 40 metres long and
3 metres wide with a combined
weight of around 500 tonnes,
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BANKSIDE YARDS
BUILDING 3
This multi-use development
is a 19-storey steel structure
built over historic railway
arches in the heart of London.
Location
Bankside Yards, London
Client
Native Land
Main contractor
Multiplex Europe Limited
Engineer
AKT II
Architect
PLP Architecture
Tonnage
3,500
Completion date
Spring 2021
The project
The mixed-use development
near the River Thames in Central
London will feature commercial,
office and residential spaces
throughout its 19 floors. The
overall Bankside Yards project will
open up a previously inaccessible
area, connecting routes between
Bankside and the South Bank
for the first time in more than a
century.
Severfield have provided the
connection design, supply and
erection of the structural steelwork
for the building, the supply and
installation of metal decking on
site as well as intumescent paint
including on-site decorative
finishes.
This project is unusual in that it
is constructed over the historic
railway arches which support the
Thameslink railway line adjacent to
Blackfriars station. These existing
arches provided logistical and
technical design challenges for
the project. In order to perform
the rigging and lifting of the
steelwork all associated works
required stringent design checks in
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BANKSIDE YARDS
BUILDING 3
team understood the importance
of using our ‘Seversafe’ edge
protection, safety fans and debris
netting to help ensure the safety
of both site contractors and
members of the public.
accordance with Network Rail’s
requirements. In addition, there
were difficulties stemming from
the site’s very small footprint due
to its proximity to Blackfriars
Road. The project had to be
carefully planned right from the
design stage, as all columns
had to be designed to not only
retain their strength but also
enable delivery to site within
the confines of the site location.
In some instances, mobile
cranes were required on site to
lift particularly heavy columns
directly to specific areas of the
building. Additionally, metal deck
support plates and perimeter
edges were fixed to columns and
beams prior to lifting the steel
into position which reduced the
requirements for working at
height.
Safety is always a top priority
for the Group, but especially
so on this project given the
proximity of the public roads and
railways surrounding it. From
our experience and knowledge of
working on such sites, the project
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7
KING’S
CROSS P2
This project sees a significant
mixed-use scheme developed
in an area of London with key
national and international rail
links.
Location
King’s Cross, London
Client
King’s Cross Central Limited
Partnership
Main contractor
Kier Group
Engineer
ATK-II
Architect
Allford Hall Monaghan Morris
Tonnage
3,600
Completion date
September 2020
The project
King’s Cross P2 is a key piece of
the King’s Cross redevelopment.
Acting as a backdrop to Lewis
Cubitt Square, P2 is a 12-storey,
steel-framed, mixed-use building,
including office accommodation,
a 600-seat theatre and c.18,000
square feet of retail space, further
expanding the Coal Drops Yard
complex, which the Group delivered
in 2017.
The Group was responsible for
fabricating, supplying and erecting
c. 3,600-tonnes of internally
exposed structural steelwork and
supplying and installing c.20,000
square metres of hollowcore
flooring. The steelwork including
the connections and support
plates needed to meet not only
our rigorous quality and safety
standards, but also an architectural
standard of finish, as the soffit of
the steelwork is exposed. The use
of intumescent paint forms a key
part of the process to ensure these
decorative and safety standards
are met.
Our commitment to providing a
high-quality finished product was
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KING’S
CROSS P2
evident from the outset, when the
project team created a full bay
mock-up to test the connection
design, fabrication, paint finish
and erection quality to ensure
delivery of an exceptional end
product.
Since the 67-acre King’s Cross
development is a busy public
space, the project team were
faced with several challenges,
mainly time and access
constraints, from the outset.
Some of the first fabricated steel
to be delivered by the Group to
site included the largest sections
for this project. Using a large
mobile crane, four fabricated
girders, measuring 20-metres
long by 3 metres deep and over
1 metre wide, were erected at
level one to form the roof of the
theatre. These were installed
successfully over just one
weekend, minimising traffic
disruption to the surrounding
streets. The beams spanned half
of the project’s overall footprint
and created the desired column-
free internal space.
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9
LARGE WAREHOUSE
FACILITY – SWINDON
Development of a large new
distribution centre and
modern office accommodation
for a leading internet retailer.
Location
Swindon, Wiltshire
Main contractor
Buckingham Group
Contracting Ltd
Engineer
EirEng Consulting Engineers
Architect
Ashton Smith Associates
Tonnage
12,400
Completion date
May 2021
The project
As a result of the COVID-19
pandemic, demand for new
distribution and warehouse
facilities from internet-based
retailers has never been higher. For
this project in Swindon, Severfield
is responsible for the structural
steel-frame of the warehouse, three
internal mezzanine floors, and
all associated hubs, pods, offices
and gatehouses, totalling c.12,000
tonnes of hot and cold rolled steel.
This includes the supply and
installation of c.160,000 square
metres of galvanised metal floor
decking, galvanised steelwork,
open-mesh flooring and handrailing
to 28 roof plant platforms, as
well as the design, manufacture
and installation of seven internal
steel staircases. To supply this
project, our cold rolled specialist
joint venture, Construction Metal
Forming Limited, supplied the cold
rolled steelwork and metal floor
decking.
The Group is familiar with large,
complex warehouses having
completed several in recent years.
This project however brought new
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LARGE WAREHOUSE
FACILITY – SWINDON
challenges, with the overall
large volume of steelwork and
relatively short site programme of
25 weeks, placing a high demand
for advance factory production
to supply the site erection team
and maintain the schedule.
On top of this, from a design
perspective, the design loadings
and deflection requirements
for the mezzanine floors were
challenging. Specific client
sign off of these elements were
scheduled earlier than would
normally be the case for such
a project, to ensure the entire
strict project programme was not
disrupted.
Nevertheless, the project has
successfully dealt with the
challenges faced, with quick
resolution and integration of
issues raised helping to deliver
the project smoothly and with
good relations with both client
and subcontractors.
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11
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DEMONSTRATING
RESILIENCE
Our underlying* profit before tax of £24.3m demonstrates the
resilience of the Group against COVID-19 backdrop
Underlying* profit before tax
£24.3m
£28.6m
£23.5m
£24.7m
£24.3m
£19.8m
2017
2018
2019
2020
2021
* Underlying results are stated before non-underlying items of £3.2m
(2020: £2.8m) consisting of the amortisation of acquired intangible
assets of £2.8m (2020: £1.4m) and net acquisition-related expenses of
£0.4m (2020: £1.4m).
Read more about our operating
performance on pages 46 to 53
Strong UK and Europe order book
£301m
£295m
£271m
£301m
£229m
£237m
2017
2018
2019
2020
2021
CONTENTS
Overview
A snapshot of what we do
Our strong foundations
Our year in review
Showcasing our resilience to COVID-19
Chairman’s view
Investment case
Our projects
The scale of our operations
Strategic report
How we create value
The markets we serve: UK and Europe
The markets we serve: India
Our market sectors
Engaging with our stakeholders
Our strategy
Key performance indicators
Our operating performance
Our financial performance
Building a sustainable business
How we manage risk
Section 172 statement
Our governance
Our board of directors
Our executive committee
Our chairman’s view on governance
Corporate governance report
Audit committee report
Nominations committee report
Directors’ report
Directors’ remuneration report
– Letter from the committee chairman
– Policy
– Implementation
Directors’ responsibilities statement
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
Our financials — Company
Company balance sheet
Company statement of changes in equity
Notes to the Company financial statements
Shareholder information
Addresses and advisers
02
04
06
08
10
12
14
16
20
24
26
28
30
32
42
46
54
60
76
87
90
92
94
96
108
112
114
118
121
129
141
144
154
155
156
157
158
159
194
194
195
196
197
203
O V E R V I E W
A SNAPSHOT OF
WHAT WE DO
AND HOW WE DO IT
01 02 03 04
OUR
STRUCTURAL
FRAMEWORK
Why we exist, what we want
to be, what our purpose is and
our strategy and values that
our people believe in to help us
achieve this.
Read about our strong
foundations on pages 04
and 05
WHERE
WE DO IT
Severfield (UK)
Dalton and Lostock
Severfield (Design & Build)
Sherburn and Dalton
Severfield (NI)
Ballinamallard
Severfield (Products &
Processing) Sherburn
Severfield Europe
Zevenbergen, Netherlands
Harry Peers
Bolton
DAM Structures
Bridlington
JSW Severfield Structures
Mumbai, India
Construction Metal Forming
Monmouthshire
Read about the scale of our
operations on pages 14 to 17
HOW WE
MANAGE
THREATS
Our risks
Risk management is at the
heart of how the business is
run and supports the Group’s
strategic objectives. We have
identified eight principal risks
and uncertainties which have the
potential to impact the Group’s
business model and strategy.
See how we manage risk
on pages 76 to 86
HOW WE
IMPACT
ON SOCIETY
Resources and
relationships
There are four main areas where
our business model impacts
on society and where we have
responsibilities that extend
beyond financial performance,
including on Environmental,
Social and Governance (‘ESG’)
matters.
Our planet, our people, our
prosperity and our principles of
governance.
See building a sustainable
business on pages 60 to 75
02
Severfield plc Annual report and accounts
for the year ended 31 March 2021
O V E R V I E W
05 06 07 08
WHAT WE DO
Our business model
We 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.
See how we create value
on pages 20 to 23
WHO WE SERVE
Markets
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.
Read more about the
markets we serve on pages
24 to 29
HOW WE
MEASURE
SUCCESS
Our KPIs
We use a combination of
financial and non-financial key
performance indicators (‘KPIs’)
to measure our progress in
delivering our strategic priorities.
Read more about our key
performance indicators on
pages 42 to 45
HOW WE
GOVERN
OURSELVES
Our governance
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 are linked to our
remuneration policy to ensure
that there is a strong alignment
to our strategic priorities.
www.severfield.com
Stock Code: SFR
03
OUR STRONG
FOUNDATIONS
HOW OUR
STRONG
FOUNDATIONS
SUPPORT OUR
SUSTAINABLE
GROWTH
ASPIRATIONS
During a year which has been
dominated by the COVID-19
pandemic, our strong 2021 results
demonstrate the resilience of the
Group as we continued to deliver
on our strategic objectives and
continued to grow the Group.
We were able to support our
employees, our customers, and our
other stakeholders through these
challenging times, maintaining our
focus on their health, safety and
wellbeing together with protecting
the financial strength of the Group.
The strength of our UK and Europe
order book and breadth of our
experience across a wide and diverse
range of market sectors leaves us
well positioned to continue to build
on this success.
04
01 OUR
PURPOSE
is to develop
better ways
to build
02
OUR
STRATEGY
is how we
achieve our
purpose
We are founded
on our strong
core values and
committed to
achieving our
purpose.
OUR
VALUES
are what
define us
03
Severfield plc Annual report and accountsfor the year ended 31 March 2021OVERVIEW 01
03
OUR PURPOSE
Our purpose is to develop better
ways to build, for a world of
changing demands.
As the world of work and industry evolves,
the buildings we use and the things we
demand from them change consistently.
Our response is to stay habitually
innovative. We are instinctively driven
towards better ways of building. Our
engineers are known for their remarkable
ingenuity, consistently pushing boundaries
to create better buildings.
02
OUR STRATEGY
Our strategy revolves around five main
elements. This is aided by our business
improvement programme, ‘Smarter, Safer,
more Sustainable’.
Growth
Clients
India
Operational
excellence
People
Read more about our strategy
on pages 32 to 41
OUR VALUES
Safety
There’s a reason it’s 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.
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 is our integrity,
which ensures we’re able to maintain the
exceptionally high standards we set for
ourselves.
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.
Commitment
We may move with the times, but our long
and rich history means that we have a
few old-fashioned beliefs. One of those
beliefs is that you stand by your word.
When Severfield say we’ll deliver, whatever
challenges lie ahead, you can depend on
us to deliver, and to the highest possible
standards.
www.severfield.com
Stock Code: SFR
05
OVERVIEW OUR YEAR
IN REVIEW
RESILIENT PERFORMANCE DESPITE COVID-19, GOOD
CASH GENERATION AND A STRONG BALANCE SHEET
Financial Highlights
Revenue
£363.3m
Underlying* profit
before tax
£24.3m
Underlying*
operating margin
7.0%
£363.3m
£327.4m
£28.6m
£24.7m
£24.3m
8.5%
8.2%
7.0%
£274.9m
2019
2020
2021
2019
2020
2021
2019
2020
2021
Profit before
tax
£21.1m
Underlying* basic
earnings per share
6.4p
£24.7m
£25.8m
£21.1m
7.7p
6.7p
6.4p
Net funds**
£4.4m
£25.1m
£16.4m
£4.4m
2019
2020
2021
2019
2020
2021
2019
2020
2021
* Underlying results are stated before non-underlying items of £3.2m (2020: £2.8m) consisting of
the amortisation of acquired intangible assets of £2.8m (2020: £1.4m) and net acquisition-related
expenses of £0.4m (2020: £1.4m).
Read more about our financial
performance on pages 54 to 57
** The Group excludes IFRS 16 lease liabilities from its measure of net funds/debt as they are excluded
from the definition of net debt as set out in the Group’s borrowing facilities.
06
Severfield plc Annual report and accountsfor the year ended 31 March 2021OVERVIEW Operational highlights
• Revenue up 11% to £363.3m (2020: £327.4m)
• No claims made under COVID-related government schemes,
• Underlying* profit before tax of £24.3m (2020: £28.6m),
demonstrates resilience of the Group against COVID-19
backdrop
• Underlying* basic earnings per share of 6.4p (2020: 7.7p)
• Total dividend of 2.9p per share (2020: 2.9p per share),
includes proposed final dividend of 1.8p per share
(2020: 1.8p per share)
• Acquisition of DAM Structures, an innovative steel fabrication
company, giving the Group immediate access to attractive,
complementary market sectors with strong growth potential,
including the propping, railway and steel piling markets
• Good cash generation resulting in year-end cash balances
of £25.0m. Net funds (pre-IFRS 16 basis**) were £4.4m
(2020: £16.4m), including acquisition loans of £20.7m
(2020: £13.1m)
all tax deferrals now fully up to date
• Over 100 projects undertaken during the year in the UK,
Ireland and continental Europe in diverse market sectors,
including industrial and distribution, data centres, nuclear
and commercial offices
• UK and Europe order book of £301m at 1 June 2021
(1 November 2020: £287m), including £18m for DAM
Structures, of which £241m is for delivery over the next
12 months
• Share of loss from Indian joint venture (‘JSSL’) of £0.7m
(2020: profit of £2.2m), reflecting the COVID-19 impacted loss
in H1 and break-even profit position in H2
•
India order book of £140m at 1 June 2021 (1 November
2020: £98m), a record high for the company, reflects strong
underlying demand of structural steel in India
Order book 2021
The order book contains a healthy mix of projects across a diverse range of sectors, including industrial and distribution, data centres,
nuclear, commercial offices and stadia and leisure.
UK and Europe order book
2019
2020
2021
£295
MILLION
£271
MILLION
£301
MILLION
2017
2018
£229
MILLION
£237
MILLION
www.severfield.com
Stock Code: SFR
07
OVERVIEW SHOWCASING OUR
RESILIENCE TO COVID-19
AND HOW SEVERFIELD HAS SUPPORTED ALL OF OUR STAKEHOLDERS THROUGH THE PANDEMIC
Safety first
The Group’s approach to the COVID-19 pandemic has been guided by our core values
and throughout this period, our primary focus has been on the health, safety and
wellbeing of all colleagues, clients and the wider public. During the early stages of the
pandemic, all our factories and sites reacted quickly and decisively by successfully
implementing new operating procedures, in accordance with national government,
devolved administration and industry guidance, including changes to working practices,
enhanced levels of cleaning, additional hygiene facilities and social distancing. The
Group also facilitated home working by all office staff, where appropriate, and this was
supported by the acceleration of software upgrades and the adoption and widespread
use of Microsoft Teams.
2020
Maintain our financial strength
Work closely with our suppliers
Our strong financial position and significant market
sector, geographical and client diversification has
enabled us to successfully navigate the headwinds
of COVID-19. We have been trading at normal (pre-
pandemic) levels since June 2020.
During the pandemic, the Group’s strong cash position
has been carefully managed. We took advantage of
certain permissions to defer VAT, PAYE and other tax
payments, and at the year end, all these deferred
amounts had been repaid and were fully up to date. In
addition, borrowings of £15m, originally drawn down in
late March 2020 under the Group’s revolving credit facility
(‘RCF’) as a precautionary measure in response to the
COVID-19 outbreak, were repaid in June 2020.
Our relationships with our supply chain partners are of
strategic importance and key to the Group’s success,
and payment practices remained a major area of
focus throughout the year and even more so against
the backdrop of COVID-19. We worked closely with our
suppliers to ensure the disruption caused by COVID-19
was minimised. Our three main businesses are all
signatories of the Prompt Payment Code (’PPC’). As a
result of the continued hard work of our purchase ledger
teams, for the PPC reporting period of 1 October 2020
to 31 March 2021 these businesses all reported that at
least 95 per cent of invoices were paid within 60 days.
08
Severfield plc Annual report and accountsfor the year ended 31 March 2021OVERVIEW 2021
Support our people
Support the government’s recovery plan
We were conscious of the difficulties faced by some of
our people through extended periods of working from
home and the effect this could have on their mental
health and in response to this we increased the level
of Group-wide communications and also encouraged
the use of Microsoft Teams to facilitate regular video
calling. During the year, we launched our new intranet,
SeverfieldConnect. This has allowed us to keep
colleagues up to date on the strategy, performance and
progress of the organisation, general company news and
health and wellbeing issues. Specifically, in response to
COVID-19, SeverfieldConnect was also used to provide
additional regular updates to colleagues and to provide
practical advice and support during the pandemic,
through a dedicated intranet page, Coronavirus Hub.
Despite the COVID-19 headwinds, we continued to
invest in our people, through the continuous provision
of training programmes, including externally facilitated
courses and events, together with a wide range of training
courses that are provided internally by our dedicated in-
house HR and SHE teams. Furthermore, we continued to
train our team of 60 mental health first aiders and rolled
out our enhanced Employees Assistance Programme,
which includes the launch of a new app (My Healthy
Advantage), to provide support and advice to colleagues
on physical and mental wellbeing issues.
Whilst we furloughed some of our workforce in Q1, all of
whom have long since returned to work, we did not claim
for support under any employee-related government
support packages, including the Coronavirus Job
Retention Scheme.
As a key component of economic growth, the
construction industry will be central to a sustainable
recovery from the effects of COVID-19. New, low carbon
infrastructure (including HS2, wind power, new nuclear,
rail electrification, energy efficient buildings) will play
a leading role in stimulating growth, including the UK
government’s National Infrastructure Strategy (‘NIS’),
which sets out plans to transform infrastructure to drive
economic recovery, levelling up and meeting the UK’s net
zero emissions target by 2050. This, together with our
encouraging pipeline of opportunities, leaves us well-
placed to win work in a diverse range of market sectors
and geographies in which we operate and across a wide
client base, providing us with extra resilience and the
ability to increase our market share and to drive future
profitable growth.
09
www.severfield.comStock Code: SFR OVERVIEW CHAIRMAN’S
VIEW
KEVIN WHITEMAN | NON-EXECUTIVE CHAIRMAN
DEMONSTRATING THE GROUP’S RESILIENCE
IN A YEAR OF CHALLENGES
Our chairman’s view
Despite the disruption and challenges of
COVID-19, the Group delivered a strong
performance in the 2021 financial year,
which is testament to a resilience which
has been developed and embedded
over a number of years of strategic
and operational progress. In 2021, we
have continued to grow the business,
strengthen our balance sheet and make
further progress with our ‘Smarter, Safer,
more Sustainable’ business improvement
programmes. We have also continued
to invest in improving the business,
including through our capital investment
programme and by entering new markets
through the acquisition of DAM Structures.
Group revenue for the year was £363.3m,
an increase of 11 per cent on 2020, and we
are very pleased with an underlying* profit
before tax of £24.3m, which has been
achieved despite some very challenging
market conditions in 2021. The strength
of our business model, even in the face of
a pandemic, is evidenced by our positive
operating cash flow (operating cash
conversion was 93 per cent) and the
continuation of our progressive dividend
policy, recognising the importance of
dividends to our shareholders. Our year-
end net funds were £4.4m which includes
cash balances of £25.0m, providing
us with significant amounts of cash
headroom in our banking facilities.
Throughout the year, we had to adapt
quickly and decisively to the ever-changing
COVID-19 backdrop. I would sincerely
like to thank all our colleagues for their
commitment and dedication, recognising
how they have stepped up in these
challenging times.
Navigating through COVID-19
The Group has coped well with the
challenges presented by the COVID-19
pandemic. The Group’s factories and
sites are fully operational, and we have
been trading at normal (pre-pandemic)
levels, in line with government and
industry guidelines, since June 2020.
Although the first COVID-19 wave and
associated lockdown impacted the Group’s
profitability in Q1, subsequent regional
and further national lockdown restrictions
imposed in the second half of the year
did not result in any further significant
disruption to our operations.
In managing our response to the
pandemic, the primary focus has been
on the health, safety and wellbeing of all
employees, clients and the wider public,
together with protecting the financial
strength of the Group. During the year, all
our factories and sites implemented new
operating procedures, including changes
to working practices, enhanced levels of
cleaning, additional hygiene facilities and
social distancing.
Our strong financial position has also
meant that, whilst we furloughed some
of our workforce in Q1, we did not claim
for support under any employee-related
government support packages, including
the Coronavirus Job Retention Scheme.
During the year, although the Group took
advantage of certain permissions to defer
VAT, PAYE and other tax payments, all these
deferred amounts have now been repaid.
Board changes
John Dodds retired from the board
as non-executive chairman at the
conclusion of the AGM in September
2020, having served for ten years,
including nine years as chairman. John
was instrumental in securing the future
of the Group through the rights issue in
2013 and in its subsequent recovery and
strengthening. On behalf of the board,
I would like to express our enormous
gratitude to John for his leadership and
guidance as he leaves behind a very
strong legacy. Following the completion
of a comprehensive selection and
appointment process, I succeeded
John as non-executive chairman and as
* The basis for stating results on an underlying basis is set out on page 06.
Read more about our
operating performance
on pages 46 to 53
Read more about our
board of directors on
pages 90 to 91
Read more about our
financial performance
on pages 54 to 57
Read more about our
strategy on pages 32 to 41
Read more about building
a sustainable business
on pages 60 to 75
10
Severfield plc Annual report and accountsfor the year ended 31 March 2021OVERVIEW chairman of the nominations committee
and am delighted to be leading the board
as the Group moves into the next phase of
its development.
In 2021, as part of our board succession
planning process, we commenced a
selection process for an additional
non-executive director. I am pleased to
announce that Rosie Toogood has agreed
to join the board with effect from 16 June.
Rosie brings a wealth of manufacturing
and engineering experience within the
modular homes, aerospace and nuclear
sectors to the board. She is currently CEO
of L&G’s modular homes business, having
previously had a successful 25-year
career at Rolls-Royce, progressing from a
finance executive into procurement and
technology positions followed by a general
management role where she was Executive
Vice President for the Compressors
division. We welcome her to the board.
Markets and strategy
The COVID-19 pandemic has not changed
our business model and our strategy
also remains unchanged. Despite some
investment decisions being delayed by
clients and developers, more obviously in
the earlier part of the year, our clients have
continued to regularly place orders and
we have secured a significant value of new
work over the past 12 months. This has
resulted in a UK and Europe order book at
1 June 2021 of £301m, leaving us well-
positioned with a strong future workload
for the 2022 financial year and beyond.
Although pricing remains tight, we are very
encouraged by the current level of tendering
and pipeline activity across the Group.
As a key component of economic growth,
the construction industry will be central
to a sustainable recovery from the
effects of COVID-19. With the release of
the UK government’s five-year plan in
November, infrastructure investment will
play a significant role in this recovery,
given its multiplier effect on jobs and
spending. Many of these projects contain
a significant steelwork content, which
the Group is well-positioned to benefit
from given our historical track record in
the transport sector and in-house bridge
capability, together with the in-depth
expertise of the recently acquired DAM
Structures (see below).
Our strategic progress over recent years
has enabled us to successfully navigate
the headwinds of Brexit and the COVID-19
pandemic, which have contributed to
periods of market softness in certain
of our main sectors in the UK, notably
commercial offices. In 2021, we have
seen further growth in our revenue and
continued investment in our business
and in the expansion of our client base
and market reach. The acquisition of DAM
Structures, which is integrating well into
the existing Group, gives us access to
attractive, complementary market sectors,
including in infrastructure, with strong
growth potential.
Our ‘Smarter, Safer, more Sustainable’
programmes have continued to drive
improvements to operational efficiencies
and business processes. As part of
our digital transformation initiative,
we have overseen further technology
improvements in both our manufacturing
and contracting operations. We have also
invested in our engineering capability and
have continued to invest in our factories,
particularly at our main production
centre in Dalton, where we are continuing
to upgrade and expand our fabrication
capability to improve the output and
efficiency of these operations.
Dividends
The board considers the dividend to be a
very important component of shareholder
returns. Accordingly, based on its current
assessment of the performance of the
business, the outlook for the year and
our strong financial position, the board is
recommending a final dividend of 1.8p per
share (2020: 1.8p), which, together with the
interim dividend of 1.1p per share (2020:
1.1p), will result in a total dividend of 2.9p
per share, unchanged from the previous
year.
India
The Indian joint venture (‘JSSL’) has
continued its recovery from the disruptive
effects of COVID-19 and after a difficult
first half, the company maintained a
largely break-even profit position in H2.
JSSL’s order book as at 1 June 2021
was a record £140m (1 November 2020:
£98m) and this includes several recent
commercial awards and some further
industrial work for JSW.
Although the return to normal trading
conditions in India has been considerably
disrupted by the ongoing second wave
of COVID-19, JSSL’s pipeline of potential
orders continues to include several
commercial projects for key developers
and clients with whom it has established
strong relationships. JSSL is also
developing formal strategic alliances with
certain key clients, mainly for commercial,
data centre and healthcare projects. We
remain very positive about the long-term
development of the Indian market and the
value creation potential of JSSL.
Sustainability
In 2021, we launched our new
sustainability strategy. We know that
construction has a key role to play in
reducing carbon emissions and waste
and meeting international commitments
on climate change. In the 2021 financial
year, the Group continued to make good
progress in reducing energy and fuel
consumption and emissions, resulting in
a reduction in our carbon intensity from
our scope 1 and 2 emissions of 21 per cent
since 2020 and 64 per cent since 2015
(using a market-based approach). We
also maintained our ‘B’ rating in the CDP
index and were awarded an ‘A’ in the CDP
Supplier Engagement Rating, improving
on the prior year score of ‘A minus’. We
will continue to work collaboratively with
customers, industry and our supply chain
to ensure that we meet our targets and
ambitions.
Summary and outlook
Although 2021 was a very challenging
period for all of us at Severfield, it was also
one which demonstrated the tremendous
resilience that the Group has developed
over recent years in creating a business
able to maintain its disciplines, capability
and financial strength, whilst continuing to
invest for the future.
The construction industry has an obvious
role to play in the recovery of the UK
economy, leaving us well-placed to win
work in the diverse range of market
sectors and geographies in which we
operate and across our wide client base,
and I look forward to 2022 with optimism.
Kevin Whiteman
Non-executive chairman
16 June 2021
* The basis for stating results on an underlying
basis is set out on page 06.
www.severfield.com
Stock Code: SFR
11
OVERVIEW O V E R V I E W
INVESTMENT
CASE
We are driving sustainable growth to create long-term value for all stakeholders
01
02
CUSTOMER FOCUS
We are committed to providing outstanding customer service.
An essential part of project delivery is understanding our clients’
requirements and aspirations. This builds secure, sustainable
and mutually valuable relationships and creates lasting client
satisfaction.
MARKET LEADER
Severfield is the UK’s market-leading structural steel company,
respected for delivering world-class engineering and design
excellence. We have unrivalled experience and capability in the
design, fabrication and construction of steel structures. The
breadth of technical expertise in our workforce ensures that we
can serve our diverse range of market sectors, positioning us well
for future growth.
03
04
INTEGRATED APPROACH FROM
DESIGN TO CONSTRUCTION
By engaging with our clients in the design stage, our
understanding of their requirements is enhanced and adds
value throughout the project life cycle. Our in-house design and
construction teams work closely together to create the most
efficient and safest solutions that match our clients’ needs.
BENEFITS OF SCALE
Severfield is the largest structural steel business in the UK and
one of the largest in Europe, with an expanding presence in India,
providing unrivalled capacity and capability, allowing us to share
our expertise across a wide range of market sectors to deliver
cost-effective and innovative steel structure solutions.
07
08
PRODUCTIVITY AND GROWTH
Our disciplined use of capital for investment in market-leading
technology, plant and equipment leads to higher quality products
with a shorter turnaround, increasing the productivity of our
operations. Alongside our targeted strategies for growth and
operational excellence, our business model illustrates the
Group’s clear plan to develop and increase our market share and
maximise shareholder returns.
12
Severfield plc Annual report and accounts
for the year ended 31 March 2021
SUPPLY CHAIN STRENGTHS
Careful management of the supply chain is an essential part
of improving efficiency. We choose supply chain partners who
match our expectations in terms of quality, sustainability and
commitment to client service.
O V E R V I E W
05
06
STRONG, PEOPLE-ORIENTATED
CORPORATE CULTURE
A healthy corporate culture is vital to the creation and protection
of long-term value and the success of our business model is
driven by our culture, which is founded on our core values. Our
culture is characterised by a respect for our talented people, a
desire to deliver the best possible outcomes for our colleagues,
clients and partners, the encouragement of openness and
transparency, a collaborative approach towards working with our
customers and our supply chain, and a regard for the sustainable
value we can bring to local communities and the environment.
FOCUS ON SUSTAINABILITY
As a market leader in structural steel, we recognise that operating
in a sustainable manner is crucial to both the current and future
success of the Group. The Group is committed to behaving
responsibly and conducting business with openness, honesty, and
integrity - motivating and enabling our people and our supply chain
to deliver high quality, innovative buildings in a sustainable and
efficient way. Carbon reduction is an important strategic objective
for the Group and we have launched our new sustainability strategy
in 2021. We continue to make excellent progress in reducing the
Group’s carbon emissions, which have fallen by more than 50 per
cent since 2015.
09
10
INNOVATION
Innovative thinking is integral to our approach, giving us flexibility
in how we deliver projects for our clients. This means that our
business can easily adapt to the trends across all the sectors
that we serve. Our business model is based on a virtuous cycle of
growth, investment and innovation.
OPERATIONAL EXCELLENCE
Our board of directors and employees have a wealth of experience
in the construction industry. We have a track record of successful
operational performance on many of the UK’s most iconic
structures. Our ‘Smarter, Safer, more Sustainable’ team are
focused on delivering internal efficiency improvements to support
the Group’s operational efficiency and effectiveness.
www.severfield.com
Stock Code: SFR
13
O V E R V I E W
OUR
PROJECTS
MARKET-LEADING, CONTINUOUS INNOVATION
UNITED
KINGDOM
Our site near Thirsk in North
Yorkshire fabricates products for
Severfield (UK) and Severfield
(Design & Build). Our Severfield plc
head office team are also based here.
1
3
Edinburgh
2
Our main offices and fabrication
facilities for Severfield (NI) are based
in Ballinamallard, near Enniskillen.
This site in Lostock near Bolton in
Lancashire comprises offices and
factory facilities and is part of our
Severfield (UK) operations.
12
Belfast
Located in Sherburn, near
Scarborough, are our sales and
commercial teams for Severfield
(Design & Build) and the production
facilities for Severfield (Products &
Processing).
The fabrication
facility for our
recent acquistion,
DAM Structures,
is located near
Bridlington
Our offices and fabrication facilities
for Harry Peers are based in Bolton.
13
Dublin
14
Based in South Wales, our specialist
cold rolled steel joint venture,
Construction Metal Forming
Limited, provides a state-of-the-
art manufacturing facility for the
manufacture of metal decking
and purlins.
4
5
6
7
8
London
11
9
10
1 V&A Museum, Dundee
Health and education
2 Dunbar, Scotland
Power and energy
3 Emirates Arena &
Velodrome, Glasgow
Stadia and leisure
4 Westfield Shopping Centre,
Bradford
Retail
5 Anfield Stadium, Liverpool
Stadia and leisure
6 Ordsall Chord, Manchester
Transport
7 Manchester Engineering
Campus Development,
Manchester
Health and education
8 Peterborough Waste to
Energy plant
Power and energy
9 BBC, Cardiff
Commercial offices
10 Princesshay, Exeter
Retail
11 Gulfstream Farnborough,
Hampshire
Transport
12 Titanic, Belfast
Commercial offices
13 Large data centre, Dublin
Data centres and other
14 Covanta, Dublin
Power and energy
15 Coal Drops Yard
Retail
16 Google Headquarters,
King’s Cross
Commercial offices
17 22 Bishopsgate
Commercial offices
18 Tottenham Hotspur
Stadia and leisure
19 Lords Cricket Ground,
Compton and Edrich Stands
Stadia and leisure
20 The Shard
Commercial offices
21 Wimbledon No.1 Court Roof
Stadia and leisure
22 ESS Target, Lund, Sweden
Data centres and other
23 Large data centre, Finland
Data centres and other
24 Large data centre, Belgium
Data centres and other
25 Large warehouse, Germany
Industrial and distribution
26 Phoenix H10, Hyderabad
Commercial offices
27 Phoenix Centaurus,
Hyderabad
Commercial offices
14
Severfield plc Annual report and accounts
for the year ended 31 March 2021
O V E R V I E W
EUROPE
23
22
INDIA
24
25
Mumbai
JSW Severfield Structures Limited,
a 50:50 joint venture with JSW
Steel (India’s largest steel producer)
which is situated in the district of
Bellary, Karnataka, India, is involved
in the design, fabrication and
construction of structural steelwork
to principally service the growing
Indian market.
26
27
Bellary
GREATER
LONDON
16
18
15
19
17
20
21
15
www.severfield.comStock Code: SFR O V E R V I E W
THE SCALE OF
OUR OPERATIONS
Operating across the Group’s six main UK locations, we provide unrivalled capacity, capability and technical
expertise to the industry. Our joint venture operations in India and Wales are fundamental in helping the
Group achieve our strategic growth objectives.
Our subsidiaries
Severfield
(UK) Limited
Dalton, North
Yorkshire
c.550
employees
The Group’s main manufacturing
centre boasts ten state-of-the-art
production lines where modern
manufacturing and painting processes
are undertaken in a controlled
environment for both our Severfield
(UK) and Severfield (Design & Build)
operations. The streamlined, high-
volume and efficient nature of this
facility is geared for strong repeat
business in the structures market.
Severfield
(UK) Limited
Lostock,
Greater
Manchester
c.250
employees
Severfield
(Design &
Build) Limited
c.100
employees
The company, 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. In
2018, steel fabrication at Sherburn was
consolidated into our Dalton factory.
Severfield (NI)
Limited
c.350
employees
Severfield
Europe B.V.
c.10
employees
Our European business, based in the
Netherlands, extends the Group’s
capabilities into continental Europe.
The company’s highly skilled team are
winning work and developing a pipeline
of future orders across a wide range
of high-quality projects in Northern
Europe and Scandinavia. Supported
by our UK fabrication capability, this
enables the company to tailor our
established UK offering to the wider
European market.
Severfield
(Products &
Processing)
Limited
c.75
employees
16
This is one of the UK’s largest
structural steelwork sites, with a
history dating back to 1933. The facility
is internationally respected for its
advanced design and engineering
skills, having had a hand in many iconic
and unique constructions. It 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’s base in Northern Ireland
has a strong reputation for delivering
quality constructional steel products
in the UK and Irish structural steel
market. The facility provides full-service
capabilities and is equipped with the
latest manufacturing processes. The
company’s highly skilled workforce
includes a directly employed site
construction team. This offers
significant benefits to clients with
experienced, dedicated and capable
personnel administering every part
of the fabrication and construction
process from initial scheme design,
through detailing, specification and
manufacture to the eventual handover
of a quality product on site.
Severfield (Products & Processing)
was launched at Sherburn in 2018.
The company provides a one-stop
shop for steel products and processing
service using our extensive range of
equipment and allows us to address
smaller scale projects. The company
offers a market-leading suite of
products, including an expanding
range of modular products to cater to
diverse needs, including ‘Severstor’
units (robust, steel-framed modules
that house critical systems equipment
such as electrical switchgear) and
‘Rotoflo’ technology (a well-established
high-efficient and controlled discharge
system representing a major advance in
materials handling technology).
Severfield plc Annual report and accountsfor the year ended 31 March 2021 O V E R V I E W
Harry Peers &
Co Limited
c.65
employees
DAM
Structures
Limited
c.70
employees
Acquired by the Group in 2020, Harry Peers is based in Bolton near the Group’s Lostock facility. The company is
a leading structural steelwork business and is experienced in the specialist, highly regulated nuclear, process
industries and power generation sectors. The Bolton facility includes the Peers award-winning design team,
utilising state-of-the-art design software and Tekla detailing facilities to offer customers value engineering and
options for modular construction.
DAM Structures was acquired by the Group in February 2021. The company is an innovative steel fabrication
business, with access to the propping, railway and steel piling markets, which have strong growth potential.
Based near Bridlington, their manufacturing capabilities range from plunge columns, plated beams, box
sections, tower crane grillages, propping works, façade retention towers and portal-framed structures through
to mezzanine floors and heavy-duty stairs and bridges.
Our joint ventures
JSW Severfield
Structures
Limited
The company, a 50:50 joint venture with JSW Steel (India’s largest steel producer) which is situated in the
district of Bellary, Karnataka, India, is involved in the design, fabrication and construction of structural
steelwork to principally service the Indian market.
Its state-of-the-art facility consists of six standard (saw and drill) fabrication lines, two plate (INDISEC®) lines,
smaller welded beam lines, bit shops and five bays which provide bespoke off-line heavy fabrication, tubular
products, specialised multi-coat painting and further bogey line fabrication. Off-line facilities are available to
manufacture hand railing, stairs and other ancillary products.
The facility has been designed to optimise product range, quality and productivity, and incorporates cutting-
edge technology and processing equipment. The recent expansion of the Bellary facility has increased capacity
from c.60,000 tonnes to c.90,000 tonnes.
Construction
Metal Forming
Limited
The Group has a 50 per cent share of Construction Metal Forming Limited (‘CMF’), a specialist designer,
manufacturer, innovator and installer of profiled MetFloor® metal decking. The modern manufacturing facility
in South Wales houses three dedicated roll forming production lines, for the manufacture of MetFloor® metal
decking. Recent investment by CMF has further expanded the company’s product range to include cold formed
products, the design and manufacture of steel purlins and certain modular products.
Key:
n Design n Fabricate n Construct
17
www.severfield.comStock Code: SFR
STRATEGIC
REPORT
18
Severfield plc Annual report and accountsfor the year ended 31 March 2021 CONTENTS
How we create value
The markets we serve: UK
and Europe
The markets we serve: India
Our market sectors
Engaging with our stakeholders
Our strategy
Key performance indicators
Our operating performance
Our financial performance
Building a sustainable business
How we manage risk
Section 172 statement
20
24
26
28
30
32
42
46
54
60
76
87
www.severfield.com
Stock Code: SFR
19
S T R AT E G I C R E P O R T
HOW WE
CREATE VALUE
Severfield plc is the UK’s market-leading structural steel group, serving the construction and infrastructure markets. 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.
Commitment to health and safety
The wellbeing 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.
Sustainable investment
We are continually investing in our
business in order to preserve our ability to
generate value in the short, medium and
long term.
OUR VALUE
PROPOSITION
Our customers
Clients serviced by the Group cover
a broad range of disciplines from
contractors and developers, to
engineers and architects. We are
focused on and are committed to
delivering excellent customer service at
every stage of the project to our broad
range of clients and draw upon our
industry experience to allow us to tailor
our offering and service to customers’
needs.
Why they work with us
Severfield has a strong history of
delivering iconic and unique structures.
Our competitive advantage derives from
our client focus, operational excellence,
benefits of scale, integrated approach
from design to construction, innovation
and our strong focus on driving growth
and productivity.
We aim to leverage our skills and
experience in these areas to allow us
to better understand our customers’
own needs and work with them to
provide world-class steel solutions.
We approach every project, from the
highly technical to basic structural
work, with the same level of safety,
professionalism, commitment, care and
customer service.
We 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.
Read more about our investment
case on pages 12 to 13
OUR
INPUTS
Resources
The Group can offer great choice, value
and flexibility thanks to our 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 around 1,400 staff,
including an in-house construction team.
We have the design and engineering skills
to serve a diverse range of market sectors.
The dedication, expertise and experience
of our workforce ensure that we offer more
skills and variety than any other UK steel
contractor.
Partners
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 through
contracting processes. Our framework
of robust risk management and control
ensures that challenges are mitigated,
allowing us to deliver all projects to the
highest possible standard. 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, sustainability and
excellent client service.
20
Severfield plc Annual report and accounts
for the year ended 31 March 2021
S T R AT E G I C R E P O R T
We 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.
OUR
SERVICES
01
02
03
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
2D and 3D 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 sub-assembly 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.
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.
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.
www.severfield.com
Stock Code: SFR
21
S T R AT E G I C R E P O R T
OUR VALUE
GENERATION
Our activities generate the following types of long-term value:
For our employees
We are committed to matters of
health and safety, sustainability,
ethics and staff engagement. We
ensure our employees are trained
so they are skilled and qualified for
their occupation and therefore can
contribute to performance.
We offer our engaged and talented
employees stable and secure
employment in a growing business
and with opportunities to develop and
progress.
For our society
We are committed to minimising our
impact on the national environment
and local communities, as well as
maintaining sustainable practices in
all our disciplines.
We have a new sustainability
strategy in development for 2021,
as we aim to further reduce our
environmental impact and carbon
emissions, working collaboratively
with customers, industry and the
supply chain.
A commitment to our own Group
charity, the Severfield Foundation,
which partners with a nominated
national charity, as well as supporting
several local charities, to help us give
back to society.
For our shareholders
All of the Group’s consolidated
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. Steel purchases are only made
for secured contracts in order to
maximise working capital positions.
Good cash generation and balance
sheet management provide a solid
foundation for the Group.
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 has a progressive dividend
policy. We invest in capital projects
and market-leading technology to
drive sustainable growth.
For our customers
We approach every project, from the
highly technical to basic structural
work, with the same level of safety,
professionalism, commitment, care
and customer service.
Alongside our industry-leading
customer service is our continued
focus on product range development,
to ensure our products meets
the ever-changing needs of our
customers.
Underlying basic
earnings per share
6.4p
£363.3m
Revenue from
orders in 2021
£75.6m
paid in employee
benefits in 2021
Reduction in
greenhouse gas
emissions to
27.5
tonnes of CO2e/£m
revenue
www.severfield.com
Stock Code: SFR
22
S T R AT E G I C R E P O R T
THE MARKETS
WE SERVE
THE UK AND EUROPE
WELL-PLACED TO WIN WORK IN THE DIVERSE RANGE OF MARKET
SECTORS AND GEOGRAPHIES IN WHICH WE OPERATE
Our purpose is to develop better
ways to build, for a world of
changing demands and as the
UK’s largest specialist structural
steelwork group, our balanced
business model with market
sector, geographical and client
diversity provides the platform to
further grow our market share in
our chosen sectors.
Favourable market trends
Steel continues to be overwhelmingly
the structural framing material of choice.
Despite the total UK consumption of
constructional steel decreasing by 20 per
cent to 683,000 tonnes during the 2020
calendar year, mainly because of the
COVID-19 pandemic, steel out-performed
other framing materials and grew its
already commanding market share in the
shed-market to 92.4 per cent** across
a broad range of sectors. According to
the BCSA, steel output is expected to
increase to c.800,000* tonnes in 2021 and
c.850,000* tonnes in 2022.
As the world’s population grows, there
is an increased need to invest in new
and greater infrastructure to support
the population and economic growth. In
addition, the completion of the Trade and
Co-operation Agreement between the UK
and EU creates greater certainty in the UK
and European market.
The long-term trends in the UK and
European construction market remain
positive with strong underlying market
drivers, providing the Group with
significant opportunities for growth.
Performance in 2021
The Group’s potential production capability
is approximately 165,000 tonnes. In 2021,
Group revenue of £363.3m represented
an 11 per cent increase, reinforcing our
market-leading position and the continued
delivery of our strategic objectives. This
strong performance has been achieved
despite the challenges faced due to the
pandemic and reflects an increase in
order flow (£20.0m), together with the full-
year effect of the Harry Peers acquisition
(£12.0m), which was acquired in October
2019, and one month’s trading from the
recently acquired DAM Structures (£3.9m).
In 2021, we further increased our market
share in certain sectors, including
industrial and distribution and nuclear,
and maintained our strong share of the
data centre and stadia and leisure sectors.
The Group’s recent acquisition of DAM
Structures provides the Group immediate
access to attractive, complementary
market sectors with strong growth
potential, including in propping, railway
and steel piling markets (as noted above)
and is another step in the implementation
of the Group’s strategy, enhancing our
position as the UK’s broadest structural
steel services group.
Outlook
We remain very encouraged by the current
level of tendering and pipeline activity
across the Group, both in the UK and in
Europe. We continue to see a good number
of opportunities, albeit some at tighter
prices given the current market conditions,
in our key market sectors, including in
the industrial and distribution, transport
infrastructure, stadia and leisure, nuclear
and data centre sectors. Looking slightly
further ahead, although we are now much
less reliant on this sector, we are now
starting to see more bidding activity in
the commercial office market, including
in London, a trend which we expect to
increase over the next few years, given
that some of the challenges recently
experienced by this sector are now
starting to abate. As a diverse, innovative
Group, with expertise in managing complex
projects and offering a wide range of
structural steel solutions across a wide
range of sectors, we are well placed to
capitalise on these positive opportunities
and provide a sustainable solution as the
UK government progress their agenda to
‘build back better’.
As a key component of economic growth,
the construction industry will be central
to a sustainable recovery from the
effects of COVID-19. New, low carbon
infrastructure (including HS2, wind power,
new nuclear, rail electrification, energy
efficient buildings) will play a leading
role in stimulating growth, including the
UK government’s National Infrastructure
Strategy (‘NIS’), which sets out plans to
transform infrastructure to drive economic
recovery, levelling up and meeting the UK’s
net zero emissions target by 2050.
This plan will provide increased funding
of £640 billion for UK infrastructure
projects, including future work for HS2
and investment programmes for Highways
England. In addition to HS2, the rail
industry is transitioning from one Network
Rail control programme (‘CP5’) to the next
(‘CP6’). This latest programme has a total
budget of £53 billion (2019–2024), 39
per cent higher than CP5, and includes a
significant amount of rail electrification
work. Similarly, unprecedented levels of
expenditure is anticipated on the second
Road Investment Strategy (‘RIS2’), which
has been increased by a further £2 billion
to deliver additional projects, including the
Lower Thames Crossing.
24
Severfield plc Annual report and accounts
for the year ended 31 March 2021
S T R AT E G I C R E P O R T
We continue to make good progress with
several of these significant infrastructure
opportunities, particularly with HS2,
road bridges and rail electrification
programmes, and remain well positioned
to win work in the transport sector given
the Group’s historical track record and
our in-house bridge capability, together
with the in-depth expertise of the recently
acquired DAM Structures.
Order book
Despite the challenges associated with
COVID-19, we have secured a significant
value of new work over the past 12
months. This has resulted in a UK and
Europe order book at 1 June 2021 of
£301m (1 November 2020: £287m), of
which £241m is for delivery over the next
12 months, and only c. 25 per cent of the
Group’s order book represents commercial
offices, compared to the more normal
previous range of 30 to 35 per cent and a
peak of 60 per cent around four years ago,
showcasing the benefits of our strategic
diversification. This leaves the Group well-
positioned with a strong future workload
for the 2022 financial year and beyond.
Market output for structural
steelwork in the UK
683,000 tonnes*
(2020: 856,000 tonnes)
Group production
95,000 tonnes
(2020: 95,000 tonnes)
Group potential capacity
165,000 tonnes
(2020: 150,000 tonnes)
UK and Europe order book
£301m
at 1 June 2021
(£287m at 1 November 2020)
* As measured by the British Constructional Steelwork Association (‘BCSA’).
** Based on the latest survey from independent market research consultants Construction Markets.
www.severfield.com
Stock Code: SFR
25
THE MARKETS
WE SERVE
INDIA
AN INCREASED ORDER BOOK, STRONG PIPELINE OF POTENTIAL ORDERS AND
EXISTING CLIENT RELATIONSHIPS LEAVE JSSL WELL POSITIONED ONCE THE
CURRENT DISRUPTIVE EFFECTS OF COVID-19 SUBSIDE
Through its performance and know-how,
JSSL has established excellent strategic
relationships with major construction
players, positioning it well for the future.
JSSL has also established a network of
strategic suppliers and subcontractors
which it continually audits for health,
safety, quality and assurance purposes,
to support the further supply of certain
fabricated steel products, all of which
contribute to overall revenues.
Current and future operations
JSSL’s operations are based on a 65-acre
site in Bellary, Karnataka. The plant has
been designed to optimise JSSL’s 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 plant is managed and operated by
a growing workforce containing highly
qualified, experienced people. Bespoke
plated products and INDISEC® are
manufactured on-site, offering clients a
range of benefits.
Positive long-term growth
predictions
The Group’s joint venture in India, JSW
Severfield Structures Limited (‘JSSL’) is an
important part of its overall strategy. The
Group holds a 50 per cent shareholding
in JSSL alongside its partner JSW Steel
Limited (‘JSW’), India’s largest steel
producer. JSSL also has an interest of
67 per cent in a metal decking business,
JSWSMD Limited.
2021 performance
The Indian joint venture (‘JSSL’) has
shown its resilience against COVID-19
in the 2021 financial year. The company
has continued its recovery from the
disruptive effects of the pandemic and
after a difficult first half, maintained a
largely break-even profit position in H2.
The impact of COVID-19 is evident in
JSSL’s loss for the year which reflects
a reduction in revenue to £48.0m,
compared to £109.3m in the previous
year, and an operating margin of 3.3
per cent, compared with 8.5 per cent in
the previous year. Financing expenses
of £3.4m (2020: £2.9m) turn JSSL’s
operating profit of £1.6m (2020: £9.3m)
into a loss before tax for the year of £1.8m
(2020: profit before tax of £6.4m), of which
the Group’s after-tax share was £0.7m
(2020: share of profit of £2.2m).
Total output for 2021 was much reduced at
35,000 tonnes compared to 96,000 tonnes
in the previous year, reflecting the impact
of COVID-19 on operations at Bellary.
Despite the disruption, JSSL’s health and
safety record remained excellent with only
one lost time incident (‘LTI’) recorded in
the year. The safety performance of the
business has been recognised in previous
years, resulting in many certificates and
awards from clients and health and safety
organisations in India.
Market developments
The return to more normal trading
conditions in India is being considerably
disrupted by the ongoing second wave of
COVID-19. Despite the ongoing COVID-19
challenges, JSSL’s clients have continued
to place orders, resulting in an order
book which has increased to a record
high of £140m (1 November 2020: £98m).
This reflects several recent commercial
awards (a large data centre in Chennai
and commercial offices in Bangalore,
Hyderabad and Navi Mumbai) and some
large industrial projects for JSW. In terms
of mix, 68 per cent of the order book
represents higher margin commercial work,
with the remaining 32 per cent representing
industrial projects, mainly for JSW.
JSSL’s pipeline of potential orders
continues to include several commercial
projects for key developers and clients
with whom it has established strong
relationships. JSSL is also developing
formal strategic alliances with certain key
clients, mainly for commercial, data centre
and healthcare projects. This, together with
the step up in the order book, leaves the
business very well positioned in the market
once the current COVID-19 wave subsides.
JSSL
Despite the recent challenges of COVID-19,
JSSL is well positioned for future market
expansion. Since its inception over ten
years ago it has built up a reputation
as the number one design and build
structural steel company in India,
providing a full design, fabrication and site
construction service. This fully integrated
and expert offering gives clients,
developers, architects, consultants and
contractors confidence that complicated
and changing project requirements can be
delivered on time and within budget.
26
Severfield plc Annual report and accountsfor the year ended 31 March 2021STRATEGIC REPORT Depending on mix, the capacity of the
Bellary facility is c.90,000 tonnes per
annum. The key characteristics of the
plant are as follows:
• The original configuration was two
fabrication lines. Four narrower
fabrication lines have been added
in new factory space, following
completion of the expansion in 2020.
These service JSSL’s target commercial
and industrial sectors of multi-
mix commercial, healthcare, data
centres, retail and the industrial and
manufacturing sectors.
• A further INDISEC® plated beam line
was added in 2020 to the existing two
plated beam lines, together with a bit
shop and additional painting facilities.
Outlook
Whilst the short-term situation
continues to be challenging due to
COVID-19, the medium and longer-term
growth predictions for India remain very
positive. With JSSL’s holistic design and
build capability, its operational capability
and capacity and its established network
of suppliers and contractors, it is well
set to take further advantage of both
economic and sector growth and further
growth through the continued conversion
of the market from concrete to steel.
Overall, we remain positive about the
long-term development of the Indian
market and of the value creation potential
of JSSL, especially considering the
significant structural changes made in
India over recent years, the government’s
ongoing focus on the ‘ease of doing
business’, and the significant production
capability of the business following the
Bellary expansion in 2020.
A record India
order book of
£140m
at 1 June 2021
(£98m at
1 November 2020)
Group after-tax
share of loss
£0.7m
(2020: share of profit
of £2.2m)
27
www.severfield.comStock Code: SFR STRATEGIC REPORT OUR MARKET
SECTORS
We have the design skills, engineering skills and experience to handle complex projects over a diverse range of
market sectors, whether for work, industry, leisure, transport or to provide essential infrastructure.
Our sectors
The market sectors targeted by the Group, and their estimated size in tonnes during the 2020 calendar year are shown below (as defined
by the BCSA):
Percentage
Tonnes
All industrial (including distribution)
Commercial offices
Power and energy
Transport (including bridges)
Health and education
Other
Leisure
Retail
48%
12%
11%
9%
9%
6%
4%
1%
330,000
83,000
79,000
61,000
60,000
39,000
25,000
6,000
100%
683,000
Constructional steel output in the 2020 calendar year reduced from 858,000 tonnes in 2019 largely due to the disruptive impact of
COVID-19. The market is forecast (per the BCSA) to recover to c.800,000 tonnes in 2021 and c.850,000 tonnes in 2022.
Core infrastructure sectors
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.
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. The acquisition of Harry Peers
also provides greater access to this market sector.
We have a long history of providing world-class
steel solutions for hospitals and other medical
facilities, 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.
Successes
Multiple contracts with Heathrow Airport,
Manchester Airport, London Bridge, Manchester
Victoria and Birmingham New Street
stations, Ordsall Chord (link bridge between
Manchester’s Victoria and Piccadilly stations),
Ely Southern Bypass, M8 footbridge and Barking
Riverside bridge.
Successes
Essex and Milton Keynes waste treatment plants,
Peterborough, Cardiff and Covanta (Dublin)
Waste to Energy plants, Port of Liverpool Biomass
Terminal, Ferrybridge Power Station.
Successes
Francis Crick Institute, Nigeria Syringe Factory,
University of Strathclyde, Victoria & Albert
Museum (Dundee), Kings College Hospital,
Graphene Innovation Centre, Manchester
University Engineering Campus.
Transport
5-10%
Group market share
(for infrastructure
including bridges)
↑
Power and energy
<5%
Group market share
↑
Health and education
<5%
Group market share
→
28
Severfield plc Annual report and accountsfor the year ended 31 March 2021STRATEGIC REPORT Core construction sectors
Commercial offices
20-30%
Group market share
→
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 UK and Europe. We ensure our
structural steel methods, products and processes
keep up with the needs and challenges of this
rapidly evolving sector.
Industrial and
distribution
10-20%
Group market share
↑
Stadia and leisure
30-40%
Group market share
→
Retail
<5%
Group market share
→
Data centres
and other
20-30%
Group market share
↑
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.
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 sporting
hubs. 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.
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.
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.
Successes
22 Bishopsgate, Google UK Headquarters, Sky
Studios, Kings Cross P2, The Shard, Leadenhall
Tower, 5 Broadgate, Nova Victoria, New Street
Square, South Bank Tower, Principal Place, One
Angel Court, Southbank Place, St Giles Circus
Development, Hanover Square Masterplan, One
Braham, Bankside Yards and numerous smaller
developments both in London and the UK regions.
Successes
Major contracts for BMW, Unilever, Sports Direct,
Ocado, ASDA, Sainsbury’s, Prologis, Gazeley,
Jaguar Land Rover, Rolls-Royce, DHL and B&M
and large industrial facilities in the Republic of
Ireland, Swindon and Littlebrook.
Successes
Wimbledon Centre Court (roof) and No.1 Court
roof, Paris Philharmonic Hall, First Direct (Leeds)
Arena, Olympic Stadium, Arsenal FC (Emirates
Stadium), Liverpool FC (redevelopment of Anfield
Stadium), Manchester City FC (south stand
redevelopment), Tottenham Hotspur F.C. (new
stadium), Lord’s Cricket ground (Compton and
Edrich stands), Fulham FC.
Successes
Bradford’s Westfield Shopping Centre,
Stratford’s Westfield Shopping Centre, Cherry
Park Development, Hereford Old Livestock
Market, Birmingham John Lewis, Bracknell’s The
Lexicon, Coal Drops Yard and projects for ASDA,
Sainsbury’s, Tesco, Morrisons and Costco.
Successes
Data centres for Microsoft (Amsterdam),
Telehouse (London), large data centres in the
Republic of Ireland, Belgium and Finland.
Other projects include a research facility for
the European Spallation Source (Sweden),
multiple contracts with Sellafield and the Atomic
Weapons Establishment (‘AWE’), and processing
projects with Centrica and water distillation
specialist, SNF.
Key: Global market future trends ↑ Upward trend ↓ Downward trend → No change
29
www.severfield.comStock Code: SFR STRATEGIC REPORT ENGAGING WITH OUR
STAKEHOLDERS
We maintain regular dialogue with our key stakeholders so that we can take account of their
views and act with regard to their interests.
Detailed below are the ways in which
the Group as a whole engages with our
stakeholders and more information
can be found in the governance report
which describes how the board engages
with its direct stakeholders: the Group’s
shareholders, employees, clients,
suppliers and funders.
Our culture
We believe that a healthy corporate
culture is vital to the creation and
protection of long-term value and the
success of our business model is driven by
our culture, which is founded on our core
values: safety, customer focus, integrity
and commitment.
Our culture is characterised by a respect
for our talented people, a desire to
deliver the best possible outcomes for
our colleagues, clients and partners,
the encouragement of openness and
transparency, a collaborative approach
towards working with our customers and
our supply chain, and a regard for the
value we can bring to local communities
and the environment. All new employees
receive a formal induction and are made
aware of our core values and culture.
We believe that through our recruitment,
performance management and reward
processes, we support and encourage
behaviours consistent with the Group’s
purpose, values, strategy and culture.
These principles are driven by the
board and embedded in the culture and
operations of all Group companies.
Information on our performance against
our safety, health, environmental and
people objectives can be found in our 2021
‘building a sustainable business’ report.
During the last 12 months, with the
continuation of the COVID-19 pandemic,
we have continued to see the value to the
business of our culture, and our people
have really come to the fore to enable
us to continue to carry on trading as
normally as possible. We have continued
to hold regular video conference calls with
the executive team and the board and
to frequently communicate with those
working from home. During this period,
we issued several communications with
30
advice on working from home, including
how to cope with certain mental health
issues arising from the crisis itself, as well
as information on the practicalities of
working from home.
Our key stakeholders
Our shareholders
Our executive directors communicate
regularly with institutional investors and
analysts and all shareholders are invited
to the Group’s annual general meeting. Our
non-executive directors are also available
to meet with shareholders. The Group’s
website provides an important resource
for communications to all stakeholders,
with a specific section dedicated to
investors. The Group provides regular
updates on financial performance and
significant events using a regulatory
information service and responds to
queries received from shareholders.
Our people
We keep our employees informed of
our financial performance through
newsletters, emails, an intranet and
briefing sessions, and let them know of
any external factors and significant events
that might have an impact on them. During
the COVID-19 outbreak in particular, we
have communicated regularly with our
staff via a dedicated online information
hub relating to the crisis through our
intranet platform. We offer share plans
to employees (including the opportunity
to save for three years under our SAYE
scheme) to encourage them to engage
with business performance and progress.
Each Group company updates its
employees on business goals, market
conditions and company performance.
Business-specific employee roadshows
are held throughout the year and
employees are invited to give their views
and provide feedback on a range of topics.
This year we are launching a
comprehensive engagement programme
via a series of voice forums and have
appointed Louise Hardy as our workforce
engagement director to ensure that the
views of our staff are represented in the
board room.
Our suppliers and subcontractors
We develop long-term relationships with
our supply chain and work with them to
achieve the best results for our clients.
Most of our suppliers are signed up to
Group-wide agreements. We have a
structured timetable of senior contact
with suppliers of strategic importance
and hold regular meetings with suppliers,
covering a broad range of topics, including
identifying and managing any incidents of
modern slavery. We have a comprehensive
Group-wide supplier accreditation process
which involves reviewing and scoring
supplier performance on criteria such as
quality and safety and providing them with
constructive feedback. Subcontractors
who achieve preferred status benefit from
long-term relationships and repeat work.
Our policy is to treat our suppliers and
contractors fairly and with respect, which
includes paying our supply chain promptly.
Our three main businesses are all
signatories of the Prompt Payment Code
(‘PPC’) and for the PPC reporting period
of 1 October 2020 to 31 March 2021, all
of the Group’s businesses that are PPC
signatories reported at least 95 per cent
of our suppliers and subcontractors were
paid within 60 days.
Our clients and partners
Our proven ability to work collaboratively
and innovatively with clients is
fundamental to our success and is critical
to securing new work. This involves
early contract engagement with clients,
anticipating the issues they face, providing
problem-solving solutions and delivering
the best results to balance time, cost and
quality objectives, whilst ensuring that risk
and reward are appropriately shared.
Our aim is to secure work where possible
through partnerships, framework
arrangements or repeat business. We
nurture long-term relationships with
our clients and partners, which can be
achieved by taking the time to understand
their priorities and then delivering on their
project goals.
On completion, clients are asked for
feedback on their experience in face-
to-face interviews using detailed
questionnaires. The results are shared and
Severfield plc Annual report and accountsfor the year ended 31 March 2021STRATEGIC REPORT analysed, in order to drive further improvements. We are
recognised for our collaborative approach and positive
engagement and are regularly involved in early contract
engagement with clients to ensure greater clarity around
scope, programme and cost which, in combination,
reduces delivery risk for all parties.
Local communities
Engagement with the wide range of communities in
which the Group operates is recognised as an important
part of the delivery of our projects and is referenced
where appropriate in reports to the board throughout the
year. Our directors have taken up opportunities to learn
more about engagement with community stakeholders
on specific projects through our programme of site visits.
Through social and charitable committees within each
business and through the Severfield Foundation we get
involved with and raise money for local events, such as
school or college talks or careers fairs, or supporting
local charities. More details of the work of the Severfield
Foundation can be found on page 70.
CHERRY PARK
Forming part of the continuing redevelopment of the
famous Westfield retail centre, this project includes an
extension to the existing retail space as well as providing
support structures for new facilities.
This project is part of the exciting redevelopment of the
Westfield Stratford City retail and leisure area in Stratford,
London, with Severfield’s involvement focusing on three
main components. The largest was a three-storey structural
steel extension to the existing shopping centre, including
large transfer steelwork to support further concrete
structures above. The Group also provided two large steel
transfer frames designed to take the load of a new concrete
structure down through the existing structure, as well as
structural support to existing buildings.
The Group was responsible for structural connection
design, fabrication and erection of c.1,800 tonnes of
structural steel, with ‘Seversafe’ railings used throughout to
provide safe temporary handrails for the ongoing works.
Working around the existing shopping centre was
challenging, with the erection programme constrained by
both the lack of physical space on site and the allowable
plant loadings. For the largest plate girders, the weight
exceeded the capacity of the on-site telehandlers and
required the use of a strand jack to lift them from the slab
above. The Westfield retail space remained fully operational
throughout the build programme, and welcomed thousands
of visitors on a daily basis, however, the project team had to
carefully plan their erection programme when installing the
new sections which had to connect to existing columns.
To ensure this area of the shopping centre could remain
operational, temporary works were installed, and these had
to be made water-tight and fire protected. This ensured
the connection work could be undertaken safely and
successfully.
Location
Stratford, London
Client
Westfield Europe Limited
Engineer
Walsh Group
Architect
PRP Architects LLP
Tonnage
1,800
Completion date
January 2021
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STRATEGY
OUR PURPOSE IS TO DEVELOP BETTER WAYS TO BUILD, FOR A WORLD OF CHANGING DEMANDS. WE WILL ACHIEVE THIS
THROUGH THE GROUP’S STRATEGY WHICH IS FOCUSED ON ITS CORE STRENGTHS OF ENGINEERING AND CONSTRUCTION
IN THE UK, REPUBLIC OF IRELAND AND CONTINENTAL EUROPE.
Our well-established strategy is unchanged, focused on growth, both organic and through selective acquisitions, operational
improvements and creating further value in JSSL. This is supported by an emphasis on five key elements and assisted by our
business improvement programme, ‘Smarter, Safer, more Sustainable’.
Our business improvement programme represents the
consolidation of all the Group’s ongoing improvement projects,
established to help us deliver the Group’s overall strategy. These
include improvements in business processes, use of technology,
manufacturing efficiencies, quality control, cost reduction
programmes and new product development, all set within the
framework of strong risk management and control. The progress
we have made on these initiatives have served the Group well
during the pandemic.
,
t e r
r
S a f e r, more Sustainable
S m a
Growth
Clients
People
India
Operational
excellence
S
marter, Safer, mor e S u s t
b l e
a
n
a i
Smarter
Safer
Improve how we deliver our projects with
speed, efficiency and accuracy.
Continue our relentless focus on safety
and always think ‘safety first’.
What we’ll do
Invest in activities to drive operational
excellence, improved efficiency, and
quality.
What we’ll do
Introduce new technology and
equipment that enables safer ways of
working.
More Sustainable
Focus on working sustainably and
reducing our environmental impact and
carbon emissions.
What we’ll do
Invest in technology that reduces our
energy consumption and emissions.
What this will mean for us
Further development of our expertise,
quality and an improved offering to clients.
What this will mean for us
Safeguard employees, clients and
shareholders.
What this will mean for us
Care for our environment whilst building
our external reputation.
32
Severfield plc Annual report and accountsfor the year ended 31 March 2021STRATEGIC REPORT Strategic pillar
Growth
Link to KPIs
Link to principal risk
Our aim is to capitalise on growth opportunities, both in the UK and in
Europe, and to maximise our market share.
1
5
2
6
3
7
4
1
5
2
6
3
4
7 8
Read more on page 34
Clients
By understanding, anticipating and responding to client needs we aim
to build secure, sustainable and mutually valuable relationships and
create lasting client satisfaction.
Read more on page 36
1
5
2
6
3
7
4
1
5
2
6
3
4
7 8
India
Our aim is to build value in JSSL and we remain very positive about the
long-term development of the Indian market.
1
5
2
6
3
7
4
1
5
2
6
3
4
7 8
Read more on page 37
Operational excellence
Our emphasis is on delivering high-quality projects and reducing costs
by driving excellence through our core business processes.
1
5
2
6
3
7
4
1
5
2
6
3
4
7 8
Read more on page 38
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.
Read more on page 40
1
5
2
6
3
7
4
1
5
2
6
3
4
7 8
Key performance indicator reference number
Key to principal risks
1
2
3
4
5
6
7
Underlying operating profit and margin
(before JVs and associates)
Underlying basic earnings per share (‘EPS’)
Revenue growth
Operating cash conversion
Return on capital employed (‘ROCE’)
Order book
Injury frequency rate (‘IFR’)
1
2
Health and safety
Supply chain
3 Commercial and market environment
4
COVID-19
5
6
7
8
Cyber security
Failure to mitigate onerous contract terms
Indian joint venture
People
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STRATEGY
In 2021, we continued to make good operational and strategic progress, helping to generate
sustainable long-term value for our stakeholders.
Growth
Our aim is to capitalise on growth opportunities, both in the UK and Europe,
and to maximise our market share.
Strategic priorities
Achievements in 2021
Objectives for 2022
Continue to grow Group revenue, maintain our
strong balance sheet and the quality of the
order book to deliver sustainable growth.
Increase our market share in existing UK and
European market sectors where the Group
already has specialist expertise (at good
margins and with acceptable levels of risk) to
deliver sustainable shareholder value.
Target new, low carbon infrastructure (including
HS2, wind power, new nuclear, rail electrification,
energy efficient buildings), supporting the UK’s
economic recovery from the effects of COVID-19.
Identify further opportunities for growth, both
organically and through selective acquisitions,
to further enhance the services we can offer.
Make continuous incremental improvements,
driven by our ‘SSS’ initiatives, to remain
competitive in our chosen markets.
Continue to develop the product offering at
CMF, taking advantage of the expansion of the
business which is currently underway.
Increase UK market
share:
Growing profitable
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.
Growth in Europe:
Continue the
momentum of recent
contract successes in
Europe, building strong,
lasting relationships
with European clients,
to drive growth through
our European business
and our core business
in the UK.
Increased Group revenue by 11 per cent, despite
the headwinds of COVID-19. This represents
a 30 per cent increase in revenue over the
last three years, reflecting the benefit of our
significant market sector, geographical and client
diversification over recent years.
Achieved an underlying profit before tax of
£24.3m (2020: £28.6m), despite the COVID-19
related disruption to the Group’s operations in
Q1, demonstrating the resilience of the Group’s
operations.
The UK and Europe order book at 1 June 2021
stands at £301m. This reflects a balanced order
book, containing a healthy mix of projects across
our chosen sectors and leaves the Group well-
positioned with a strong future workload.
Entered attractive, complementary new UK
markets through the recent acquisition of DAM
Structures.
Continued the integration of Harry Peers,
acquired by the Group in the 2020 financial year,
and maintained our market share in the growing
nuclear sector. These recent acquisitions have
increased our targeted market sectors from eight
to ten.
Continued to invest in organic growth, further
developing our ‘Severstor’ and ‘Rotoflo’
product ranges launched in the prior year. This
investment resulted in these new products
generating revenue of c.£2m, a growing number
of orders across an expansive customer base,
and an attractive pipeline of potential orders.
34
Severfield plc Annual report and accountsfor the year ended 31 March 2021STRATEGIC REPORT 150 HOLBORN
The project
The new 185,000 square foot mixed-use
development will include office space over
eight floors for an international consulting
group, retail units on the ground floor and
13 residential apartments. Severfield
were awarded the supply, fabrication and
erection of all structural steelwork to this
development including the structural steel
frame, metal decking, shear studding and
off-site fire proofing.
Key aspects of the project are the bespoke
feature roof which slopes down the rear
elevation of the building, along with an
architectural scenic lift and an atrium with
an 85-tonne feature staircase in the core
of the development. The feature elements
provided a significant engineering and
logistical challenge, given both the bespoke
nature of the steelwork as well as the city
centre site location. Careful planning and
close working with the main contractor and
other service providers was required as the
site is situated in a no-laydown area. As
such, all steelwork had to be delivered on a
just-in-time basis, with abnormal loads for
the lift shaft, in particular, requiring extra
care and attention.
The Group also supplied c.2,800 metres
of ‘Seversafe’ edge protection. This safety
feature was considered to be crucial to this
project given the city centre location with a
busy public footpath running alongside the
construction site.
Location
Holborn, London
Main Contractor
McLaren Construction
Engineer
Clarke Nicholls Marcel
Architect
Perkins & Will
Tonnage
1,400
Completion date
October 2021
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STRATEGY
Clients
By understanding, anticipating and responding to client needs we aim to build secure,
sustainable and mutually valuable relationships and create lasting client satisfaction.
Strategic priorities
Achievements in 2021
Objectives for 2022
Continue to deliver a quality, safe and efficient
service to our clients.
Focus on opportunities to improve client
satisfaction and retention and develop
strategically important relationships with
existing and new clients in our target markets in
support of our growth plans.
Continue our focus on engineering efficiency,
including looking at new and innovative ways of
working, our approach to drawing and design,
and the optimisation of engineering software.
Strive to secure work, where possible, through
partnerships, framework arrangements or
repeat business.
Build relationships with new clients as we
continue to extend our new modular product
ranges and further enhance our ‘Severstor’ and
‘Rotoflo’ product offerings.
Aim to satisfy the requirements of a wider
customer base through the increased cold rolled
steel products offered by our joint venture, CMF.
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.
Innovative
engineered
solutions:
The world of work and
industry are constantly
evolving, in response
our teams strive to be
habitually innovative.
Our engineers are
known for their
remarkable ingenuity,
consistently pushing
boundaries to create
better buildings.
Delivered on over 100 projects during the year
in the UK, Ireland and continental Europe in
diverse market sectors, including industrial
and distribution, data centres, nuclear and
commercial offices.
Further strengthened our relationships with
key clients and worked closely with them to
ensure the disruption caused by COVID-19 was
minimised.
Continued to add value to our clients and their
projects. Our skilled teams engage early with all
clients, anticipating the issues they face, providing
problem-solving solutions and delivering the
best results to balance time, cost and quality
objectives, whilst ensuring that risk and reward
are appropriately shared.
During the year, we completed the acquisition of
DAM Structures, whose core business involves on-
site work with main contractors and demolition
contractors. This has allowed us to establish
relationships with customers, both new and
existing, at an earlier stage of the project life cycle
than the Group, in the past, would typically have
become involved.
Listened and responded to feedback received
from our clients on their experience of working
with Severfield, during face-to-face interviews,
and used this to shape further improvements
across the business.
In 2021, we continued to invest in our capability
to provide our clients with innovative, engineered
solutions and have established a central
engineering team, under the leadership of our new
Group engineering director.
Continued to build new client relationships
across the UK and Europe, resulting in further
opportunities, including in smaller projects in
the UK.
36
Severfield plc Annual report and accountsfor the year ended 31 March 2021STRATEGIC REPORT India
Our aim is to build value in JSSL and we remain very positive about the long-term development of the
Indian market.
Strategic priorities
Achievements in 2021
Objectives for 2022
Value creation in
India:
Our aim is to develop
and build value in the
business whilst the
market continues
its conversion from
concrete to steel and
its recovery from the
effects of the pandemic
JSSL reported a record order book of £140m at 1
June 2021 (1 November 2020: £98m), reflecting
the strong underlying demand for structural steel
in India.
This contains an encouraging mix of 68 per cent
higher margin commercial work and the remaining
32 per cent representing industrial projects,
mainly for our joint venture partner, JSW.
The business has continued its recovery from
the effects of COVID-19 in 2021. Whilst this
particularly impacted the H1 results, the
business achieved a largely break-even profit
position in H2.
Established strong relationships with several
key developers and clients for large commercial
projects and developed formal strategic alliances
with certain key clients, mainly for commercial,
data centre and healthcare projects, ensuring
the business is well-placed in the market once
the current COVID-19 wave subsides.
Continue to respond quickly and decisively to
the challenges of COVID-19 and to support our
people, suppliers and clients during this time.
Capitalise on the strong underlying demand in
India for structural steel by continuing to grow
the order book and leveraging the increased
Bellary factory capacity.
Strive to maintain the order book mix of higher
margin commercial work, to benefit operating
margins.
Continue to invest in the management team,
technical and operational staff to further drive
efficiency improvements.
37
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STRATEGY
Operational excellence
Our emphasis is on delivering high-quality projects and reducing costs by driving
excellence through our core business processes.
Strategic priorities
Achievements in 2021
Despite the challenges faced by the Group due to the pandemic, all our
factories and sites have been operating at normal (pre-pandemic) levels, in
line with government and industry guidelines, since June 2020.
The 2021 UK margin performance continues to reflect improvements to
our operational execution, driven by our ‘SSS’ initiatives. These initiatives
include:
• Continued focus on manufacturing efficiency and internal process
improvements, including the application of Lean manufacturing
techniques, optimisation of factory processes and production flows,
quality control and cost reduction programmes.
•
Implemented a new coatings management system, at our main
production centre in Dalton, covering improvements to the specification,
management and application of paint systems, which are becoming
ever more complex and bespoke.
• Launched new software systems, including dashboards, workflow
management and project-specific commercial and operational tools
to better inform decision-making and improve efficiencies both in our
factories and on our construction sites.
• Devoted skilled resource to reviewing and responding to developing
technologies (including virtual reality) and are making good progress
with the automation of repetitive tasks.
•
In 2021, we established a central engineering team, under the
leadership of our new Group engineering director. This team focuses on
providing our clients with innovative, engineered solutions that meet all
our clients’ requirements.
• Upgraded IT systems and implemented the widespread use of Microsoft
Teams across the Group to ensure we could continue to provide a high
level of service to our clients.
From an ESG perspective, we improved upon previous climate-related
targets by reporting a 21 per cent reduction in our scope 1 and 2 GHG
emissions since 2020 and a reduction of 64 per cent since 2015, our
baseline year (using a market-based approach).
The Group was included in the Financial Times inaugural listing of Europe’s
climate leaders (May 2021) which highlights the 300 companies that have
achieved the greatest reduction in their GHG emissions between 2014 and 2019.
Maintained our ‘B’ rating in the CDP index and were awarded an ‘A’ in the CDP
Supplier Engagement Rating, improving on our ‘A minus’ from the previous year.
Signed up to the SteelZero initiative in April 2021, further strengthening our
commitment to reducing carbon emissions.
Invested £6.6m in capital expenditure as our capital investment programme
continues to drive operational efficiencies and organic growth across the Group.
Drive operational
improvements and
efficiencies:
The objective of
our comprehensive
‘SSS’ improvement
programme is to further
develop the Group’s
risk assessment,
operational and
contract management
processes.
Invest in market-
leading technology:
We will make this
investment in the short
and medium term to
support the Group’s
ongoing requirements
and for growth.
38
Objectives for 2022
Continue with our ‘SSS’
initiatives to maintain
the Group’s focus on
business improvement
and efficiencies, further
optimising processes
within our factories and
production lines.
Further investment in
capital expenditure
across the Group to
make our businesses
more competitive and
operationally efficient.
We will continue to invest
in excess of depreciation.
Continue our focus on
engineering efficiency,
including looking at new
and innovative ways of
working, our approach
to drawing and design,
and the optimisation of
engineering software.
Further build upon the
progress made this
year rolling out our
sustainability policy
and developing a more
sustainable business
to ensure we achieve
our target to become
an operationally carbon
neutral organisation in
the 2021 calendar year.
Continue the progress
made to date to ensure
100 per cent of our
directly controlled
facilities switch to green
electricity.
Severfield plc Annual report and accountsfor the year ended 31 March 2021STRATEGIC REPORT SEVERSTOR AND ROTOFLO
During the year, the Group has continued to develop organically the new ‘Severstor’ and ‘Rotoflo’ product ranges, produced
by Severfield (Products & Processing), allowing Severfield to go further in meeting customers’ needs than ever before.
Severstor
Our Severstor units are robust, steel-framed modules
that house critical systems equipment such as electrical
switchgear and are designed to suit the requirements of
our customers. They are supplied to a wide range of Original
Equipment Manufacturer (‘OEM’), Engineering, Procurement
and Construction contracts (‘EPC’) as well as end users in the
nuclear, infrastructure and rail sectors. They are built to ensure
the safety and protection of the systems they house. Severstor
provides customers with bespoke design, off-site build, system
integration and site installation of these modules.
Although bespoke, Severstor units are suited to factory
manufacturing, which allows for established and repeat
processes to continually improve on efficiency. This also
means we are consistent, with our high manufacturing
standards delivering high quality, every time.
Rotoflo
The Rotoflo silo discharge unit provides highly efficient,
reliable and controlled flow of powders and granular
materials from bulk storage silos (including very cohesive
materials), without incurring the complications, cost, or side
effects associated with vibration or aeration. Rotoflo has
been used globally since its inception in 2001 proving its
performance and reliability time and again.
Since its inception at Portasilo more than a decade ago, the
Rotoflo discharge unit has been continuously developed and
improved in order to deliver major advances in materials
handling technology. Following the acquisition of the
intellectual property and patent from Portasilo in 2020,
Severfield (Products & Processing) has now taken on the role
of producing and delivering Rotoflo units to the world.
With the unit’s track record in numerous applications already
proving its reliability, and already specified by blue-chip
international customers, our aim is to make Rotoflo the first
choice globally for silo discharge in the powder and granular
products handling industry.
39
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STRATEGY
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.
Strategic priorities
Achievements in 2021
Objectives for 2022
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.
Louise Hardy will lead a
comprehensive workforce
engagement programme, via a
series of voice forums, to gather
a deeper understanding of
colleagues’ perspectives on which
to build a sustainable Group-wide
approach for ongoing dialogue.
Continue to share best practice
across the Group in operational
processes, technical knowledge,
governance and compliance.
Promote diversity and equality
through employment practices,
that are free from discrimination
and in accordance with human
rights principles.
Continue to invest in the
development, mental health
and wellbeing of our people,
including leadership and talent
development initiatives.
Launch a further employee Save
As You Earn scheme.
Maintain our focus on driving
down our IFR rate to ensure we are
continuing to drive the appropriate
safety behaviours.
Maintained our ‘safety first’ core value across the Group.
This assumed an even greater emphasis in 2021, against the
COVID-19 backdrop.
Continued our focus on mental health, in light of the pandemic.
To support our people, we increased the level of Group-wide
communications and encouraged the use of Microsoft Teams
to facilitate regular video calls.
Updated our succession plan, identifying future leaders from
within the business.
Launched our new intranet, SeverfieldConnect, allowing
us to keep colleagues up to date on the Group’s strategy,
performance and progress of the organisation, general
company news and health and wellbeing issues.
SeverfieldConnect was also used to provide additional regular
updates to colleagues and to provide practical advice and
support during the pandemic, through a dedicated intranet
page, Coronavirus Hub.
Continued to invest in our people, through the continuous
provision of training programmes, both internal and external
courses.
Further invested in training our team of 60 mental health first
aiders and rolled out our enhanced Employees Assistance
Programme, which includes the launch of a new app (My
Healthy Advantage), to provide support and advice to
colleagues on physical and mental wellbeing issues.
Appointed Louise Hardy as the Group’s workforce engagement
director to ensure that the views of our people are represented
in the board room.
In June 2021 we welcomed the appointment of Rosie Toogood
to the board, our second female board member.
Increased employment across the Group to around 1,500
employees, which includes c.70 employees who joined us with
the DAM Structures acquisition.
Continued to promote our graduate and apprenticeship
schemes, which are particularly focused on welders
and technical staff, in particular our metal fabricator
apprenticeship programme, which we developed in
conjunction with the Institute of Apprenticeships.
In 2021, we saw a positive and significant reduction in injury
rates, resulting in an injury frequency rate (‘IFR’) of 1.48,
compared to 1.81 in 2020.
40
Severfield plc Annual report and accountsfor the year ended 31 March 2021STRATEGIC REPORT SEVERFIELD FOUNDATION: A RACE TO REMEMBER
After losing her nan to Alzheimer’s
disease, Sara Halliday Severfield’s
Sustainability Manager, decided to
raise as much money as possible for the
Alzheimer’s Society to raise awareness
of the disease. Spurred on by competitive
friends, Sara set herself her first
challenge of the Budapest marathon, but
soon faced her first setback along her
journey – having spent a gruelling five-
and-a-half hours running, Sara was told
she was too slow and had exceeded the
official cut-off time of the race. Despite
this disappointment, Sara was even more
determined to complete a marathon in
aide of the Alzheimer’s Society and soon
signed up for the London Marathon.
Once she’d begun training however, Sara
faced twin obstacles: a knee injury and
the postponement of the event due to
the COVID-19 pandemic. Once it was
announced that the London Marathon
would be a purely virtual event, Sara
approached the challenge with renewed
enthusiasm. She ran her own route,
using an official app to track her distance
and time.
“As I approached my own little finish line,
I was met by family, friends, and locals.
They’d put a group together to cheer me on
over the final mile. I also rang my friends
that I’d run the Budapest Marathon with.
It’s safe to say it was a little emotional.”
In fact, thanks to a glitch with the official
app, Sara discovered that she’d truly gone
the extra mile for her cause, completing
27.6 miles instead of the required
26.2 miles.
Sara continues to be committed to
raising funds to support the Alzheimer’s
Society and has already started training
for her next challenge, conquering the
2021 London and Budapest marathons
on consecutive weekends, showing her
characteristic dedication and desire to
not let setbacks get the better of her in
pursuit of her goal of greater dementia
awareness.
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INDICATORS
1
Underlying* operating profit and margin
(before JVs and associates)
2
Underlying* basic earnings per share
(‘EPS’)
Strategic pillar
Strategic pillar
£27.0m
8.2%
£25.5m
7.0%
£23.3m
8.5%
7.7p
6.7p
6.4p
2019
2020
2021
2019
2020
2021
Why this is important
Why this is important
This is the principal measure used to assess the success of the
Group’s strategy.
We are focused on driving growth in operating profit in order to
drive higher and sustainable returns for our investors.
How we calculate
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.
Underlying operating profit is defined as operating profit before
non-underlying items and the results of JVs and associates.
How we calculate
EPS is calculated as underlying profit after tax divided by the
weighted average number of shares in issue during the period.
Our performance
EPS has decreased by 17 per cent, reflecting the decreased
underlying profit before tax in the year due to COVID-19.
Stakeholder linkage
Shareholders
Employees
Underlying operating margin is calculated as underlying operating
profit expressed as a percentage of revenue.
Our performance
Despite COVID-19, which particularly impacted profitability in
Q1 of FY21, we demonstrated our resilience with an underlying*
operating profit (before JVs and associates) of £25.5m.
Stakeholder linkage
Shareholders
Employees
Strategic pillar key
Growth
Clients
India
Operational
excellence
People
*The basis for stating results on an underlying basis is set out on
page 06.
42
Severfield plc Annual report and accountsfor the year ended 31 March 2021STRATEGIC REPORT 3
Revenue growth
(on a like-for-like basis)
4
Operating cash conversion
Strategic pillar
Strategic pillar
£332.9m
£313.0m
£274.9m
93%
81%
50%
2019
2020
2021
2019
2020
2021
Why this is important
Why this is important
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.
Cash is critical for providing the financial resources to develop
the Group’s business and to provide adequate working capital to
operate smoothly.
How we calculate
This represents the year-on-year percentage change in revenue
from Group operations as reported in the accounts.
Like-for-like revenue excludes the revenue generated from the
recent acquisitions of DAM Structures of £3.9m (2020: £nil) and
Harry Peers of £26.5m (2020: £14.4m).
Our performance
Like-for-like revenue has increased by 6 per cent, reflecting an
increase in order flow despite the COVID-19 headwinds. The
Group’s factories and sites in the UK and Europe are all fully
operational, and we have been trading at normal (pre-pandemic)
levels, in line with government and industry guidelines, since
June 2020.
Stakeholder linkage
Shareholders
Employees
Clients
Suppliers
Communities
This measures how successful we are in converting profit to cash
through management of working capital and capital expenditure.
How we calculate
Operating cash conversion is defined as cash generated from
operations after net capital expenditure (before interest and tax)
expressed as a percentage of underlying operating profit (before
JVs and associates).
Our performance
Operating cash conversion was 93 per cent, exceeding our target
conversion rate of 85 per cent.
Stakeholder linkage
Shareholders
Employees
Suppliers
43
www.severfield.comStock Code: SFR STRATEGIC REPORT KEY PERFORMANCE
INDICATORS
5
Return on capital employed
(‘ROCE’)
6
Order book
17.2%
15.7%
13.6%
Strategic pillar
£301m
Strategic pillar
£295m
£271m
2019
2020
2021
2019
2020
2021
Why this is important
Why this is important
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.
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.
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.
How we calculate
Our UK and Europe order book shows the total value of future
revenue secured by contractual agreements.
Our performance
The UK and Europe order book stands at £301m at 1 June 2021,
representing an 11 per cent increase since 1 June 2020. This solid
order book position leaves the Group well-positioned to deliver on
its strategic objectives.
Stakeholder linkage
Shareholders
Employees
Suppliers
Communities
We have an asset-intensive business model and ROCE reflects
how productively we deploy those capital resources.
How we calculate
ROCE is calculated as underlying operating profit divided by the
average of opening and closing capital employed.
Capital employed is defined as shareholders’ equity excluding
retirement benefit obligations (net of tax), acquired intangible
assets and net funds.
Our performance
Despite the Group’s ROCE decreasing slightly in the year, reflecting
the reduction in underlying operating profit, the Group continues
to exceed our target of 10 per cent.
Stakeholder linkage
Shareholders
Employees
Strategic pillar key
Growth
Clients
India
Operational
excellence
People
44
Severfield plc Annual report and accountsfor the year ended 31 March 2021STRATEGIC REPORT 7
Injury frequency rate (‘IFR’)
IFR
2.11
Strategic pillar
1.81
1.48
2019
2020
2021
Why this is important
IFR 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.
In recent years we have shifted our focus to the Group’s injury
frequency rate. IFR focuses on a variety of incidents, ranging from
minor to potentially more serious. The Group’s IFR has reduced
over the course of the year, with targeted reductions in almost all
areas of the business.
How we calculate
IFR is the number of reportable injuries per 100,000 hours worked.
Our performance
Our Group IFR of 1.48 continues to reflect the significant reduction
in injury rates, despite the challenges faced in the year of
implementing new safe operating procedures across all our sites
and facilities.
Stakeholder linkage
Employees
45
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PERFORMANCE
THE GROUP IS WELL POSITIONED TO MEET
THE DEMAND FOR ONGOING INVESTMENT
IN THE UK’S INFRASTRUCTURE
Group overview
Whilst the year has been dominated by
the COVID-19 pandemic, the 2021 results
demonstrate the resilience of the Group
and serve to highlight its many strengths
including the benefit of the strategic and
operational progress made in recent
years, the additional resilience provided
by our market sector, geographical and
client diversity, the skill and adaptability
of our workforce and our strong financial
position.
The Group has coped well with the
challenges presented by COVID-19. This is
reflected in an increased UK and Europe
order book of £301m, increased revenues
and good cash generation in 2021,
which has enabled us to continue to pay
dividends and support ongoing investment
in the business, both organically and by
acquisition.
In 2021, we increased our revenue by 11
per cent to £363.3m (2020: £327.4m) and
are pleased with our profit performance
and an underlying profit before tax of
£24.3m (2020: £28.6m), which was
achieved despite the COVID-19-related
disruption that particularly impacted
profitability through the under recovery
of overheads in Q1. The Group’s factories
and sites in the UK and Europe are all fully
operational, and we have been trading at
normal (pre-pandemic) levels, in line with
government and industry guidelines, since
June 2020.
The 2021 results include the acquisition
of DAM Structures, an innovative
steel fabrication company, giving the
Group immediate access to attractive,
complementary market sectors with
strong growth potential including the
propping, railway and steel piling markets.
DAM is integrating well into the Group’s
existing operations and has contributed
revenue of £3.9m and a nominal profit for
the one month of trading since its date of
acquisition.
We have maintained a strong financial
position throughout the year, allowing us
to make the right decisions and take the
right actions for the long-term benefit of
the Group. Year-end net funds (on a pre-
IFRS 16 basis) were £4.4m (2020: £16.4m),
which includes the outstanding term loans
of £20.7m (2020: £13.1m) for the DAM
Structures and Harry Peers acquisitions.
The Indian joint venture (‘JSSL’) has
continued its recovery from the disruptive
effects of COVID-19. After a difficult
first half, the company maintained a
largely break-even profit position in H2 of
2021. The return to more normal trading
conditions in India is being considerably
disrupted by the ongoing second wave of
COVID-19, which is currently impacting
output in H1 of 2022. Notwithstanding
this, JSSL’s order book at 1 June 2021 has
increased to a record level of £140m
(1 November 2020: £98m), which, together
with a strong pipeline of potential orders,
is reflective of the strong underlying
demand for structural steel in India.
Strategy
The Group’s strategy is focused on its core
strengths of engineering and construction
in the UK, Republic of Ireland and
continental Europe. This well-established
strategy is unchanged, focused on growth,
both organic and through selective
acquisitions, operational improvements
and creating further value in JSSL.
In recent years, the evolution of this
strategy has been particularly evident in
our significant market sector, geographical
“ The Group has coped
well with the challenges
presented by the
COVID-19 pandemic and
has achieved a resilient
set of results for 2021.”
ALAN DUNSMORE
CHIEF EXECUTIVE OFFICER
46
Severfield plc Annual report and accountsfor the year ended 31 March 2021STRATEGIC REPORT and client diversification, which has
enabled us to successfully navigate
periods of market softness in certain
of our main sectors in the UK, notably
commercial offices. This has resulted in a
more balanced business and a resilience
that has seen us successfully negotiate
the headwinds of Brexit and the COVID-19
pandemic, facilitated revenue growth of
c.30 per cent over the last three years
and reinforced the Group’s strong balance
sheet and ability to generate cash, which
have allowed us to continue to invest in
our operations and in acquisitions through
Harry Peers and DAM Structures.
As a result, our capabilities are
applicable to many market sectors,
which are expected to see increasing
opportunities in the medium to long term.
The Group is well positioned to meet the
demand for ongoing investment in the
UK’s infrastructure, while our diverse
construction activities remain focused
on key areas such as industrial and
distribution, data centres, stadia and
leisure, nuclear and commercial offices.
In India, despite the current challenges of
COVID-19, we remain positive about the
long-term trajectory of the market and
of the value creation potential of JSSL,
especially considering the structural
changes in the economy over recent
years, the government’s ongoing focus
on simplifying regulations and the ‘ease
of doing business’, and the significant
expansion of the business already
evidenced to date, which has resulted
in a business capable of producing over
100,000 tonnes of steelwork from one site
in Bellary.
This platform provides Severfield with the
capacity to deliver enhanced shareholder
returns in the future and to fulfil our
strategic growth aspirations.
Board change
In 2021, as part of our board succession
planning process, we commenced a
selection process for an additional non-
executive director. This has resulted in
Rosie Toogood being appointed to the
board with effect from 16 June 2021.
Rosie brings a wealth of manufacturing
and engineering experience within the
modular homes, aerospace and nuclear
sectors to the board. She is currently CEO
of L&G’s modular homes business, having
previously had a successful 25-year
career at Rolls-Royce, progressing from
a finance executive into procurement
and technology positions, followed by
a general management role, where she
was executive vice president for the
compressors division.
Specific actions in response
to COVID-19
In managing our response to the
pandemic, the primary focus has been
on the health, safety and wellbeing of all
colleagues, clients and the wider public,
together with protecting the financial
strength of the Group. During the year,
all our factories and sites implemented
new operating procedures, in accordance
with national government, devolved
administration and industry guidance,
including changes to working practices,
enhanced levels of cleaning, additional
hygiene facilities and social distancing.
The Group’s strong cash position has been
carefully managed during the pandemic
whilst ensuring that we continue to
support our supply chain partners. Since
31 March 2020, the Group has continued
to operate in a net funds position,
maintaining significant amounts of cash
headroom in banking facilities, which
mature in October 2023.
Our strong financial position has also
meant that, whilst we furloughed some of
our workforce in Q1, all of whom have long
since returned to work, we did not claim
for support under any employee-related
government support packages including
the Coronavirus Job Retention Scheme.
During the year, the Group took advantage
of certain permissions to defer VAT, PAYE
and other tax payments. At the year-
end, all these deferred amounts had
been repaid and were fully up to date. In
addition, borrowings of £15m, originally
drawn down in late March 2020 under the
Group’s revolving credit facility (‘RCF’) as
a precautionary measure in response to
the COVID-19 outbreak, were repaid in
June 2020.
UK and Europe
Revenue was up 11 per cent over the
prior year, mainly reflecting an increase
in order flow, and the full year revenue
effect of Harry Peers, which was acquired
in October 2019. During the year, we
continued to work on a large industrial
facility, which includes a bespoke paint
package, and a large data centre, both
in the Republic of Ireland, a large data
centre in Finland, several large distribution
facilities in the UK and one in Germany,
the new stadium works at Fulham F.C.
and the redevelopment of Lord’s Cricket
Ground (Compton and Edrich stands).
We have also continued our work on the
new Google Headquarters at King’s Cross,
together with several mid-sized office
developments, both in London and the UK
regions (including another project at
King’s Cross, Bankside Yards, the
Assembly Buildings in Bristol, and Sky
Studios in Elstree).
As expected, the disruption experienced
by the Group due to COVID-19, both on its
sites and within its factories, impacted
2021 profitability, particularly in Q1.
Notwithstanding this, overall activity levels
increased from the beginning of the first
lockdown in March and returned to normal
(pre-pandemic) levels from Q2 onwards.
The subsequent regional and further
national lockdown restrictions imposed in
the second half of the year did not result
in any further significant disruption or
have a material impact on the Group’s
profitability.
The underlying operating margin (before
JVs and associates) was 7.0 per cent
(2020: 8.2 per cent), resulting in an
underlying operating profit (before JVs
and associates) of £25.5m (2020: £27.0m),
which includes a one-off profit (the
associated revenue is included in Group
revenue) on the bespoke paint package
on the large industrial facility in the
Republic of Ireland (referred to above).
Unsurprisingly, the disruptive effects
of COVID-19 have resulted in the 2021
operating margin of 7.0 per cent falling
below that achieved in the previous year;
however, the margin in H2 recovered well
and, looking forward, we expect the 2022
operating margin to be approaching to our
normal range of 8 to 10 per cent, which
was established pre-pandemic.
47
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Smarter, Safer, more Sustainable
The UK margin performance continues to
reflect improvements to our operational
execution. This includes the benefits from
our programme of projects categorised
under the banner of ‘Smarter, Safer, more
Sustainable’ (‘SSS’). These initiatives
continue to focus on manufacturing
efficiency and improving many aspects
of our internal operations, including
the application of Lean manufacturing
techniques, optimisation of factory
processes and production flows, quality
control and cost reduction programmes,
all of which have served the Group well
during the pandemic.
During the year, we have continued the
roll out of new software systems including
dashboards, workflow management
and project-specific commercial and
operational tools to better inform
decision-making and improve efficiencies
both in our factories and on our
construction sites. This includes the use
of these systems on mobile devices to
capture information at the point of use and
to provide live information to operatives.
As part of our digital transformation
initiative, we are devoting skilled resource
to reviewing and responding to developing
technologies (including virtual reality)
and are making good progress with the
automation of repetitive tasks. COVID-19
has also allowed us to adapt to new ways
of working including the adoption and
widespread use of Microsoft Teams.
Engineering solutions are vital to our
success, and our ability to deliver for
our clients is dependent on us driving
excellence throughout our engineering
teams. In 2021, we have invested in this
capability and have established a central
engineering team, under the leadership of
our new Group engineering director. This
team is focusing on engineering efficiency,
including looking at new and innovative
ways of working, our approach to drawing
and design, and the optimisation of
engineering software, building on the
previous work of our engineering forum.
We continue to invest in and streamline
our factories, particularly at our main
production centre in Dalton, where we
are continuing to upgrade and expand
our fabrication capability to improve the
output and efficiency of these operations.
During the year, we implemented a
new coatings management system
at Dalton covering improvements to
the specification, management and
application of paint systems, which
are becoming ever more complex and
bespoke. These improvements form part
of the Group’s ongoing capital investment
programme, taking our capital investment
in the Group to close to £50m over the last
seven years.
Continued stability in our management
teams remains a key strength of the
business. During the year, we updated
our succession plan that identifies and
develops future senior leaders from
within the business. We believe that being
able to promote from within is critical
so that we can retain specialist skills
and experience, especially given the
capabilities and expertise that we provide
to our clients. We continue to promote our
graduate and apprenticeship schemes,
which are particularly focused on welders
and technical staff, including our metal
fabricator apprenticeship programme,
which we developed in conjunction with
the Institute of Apprenticeships.
Our new intranet, SeverfieldConnect,
which was launched in 2021, has allowed
us to keep colleagues up to date on the
strategy, performance and progress of the
organisation, general company news and
health and wellbeing issues. In response
to COVID-19, SeverfieldConnect was
also used to provide additional regular
updates to colleagues and to provide
practical advice and support during the
pandemic, through a dedicated intranet
page, Coronavirus Hub. We also regularly
use social network sites and emails
to deliver key messages to colleagues
and to encourage the use of our new
communications platforms for colleague
engagement.
Order book, pipeline and market
conditions
The future success of the Group is
determined, amongst other things, by the
quality of the secured workload and our
discipline to maintain contract selectivity
irrespective of economic conditions.
Despite the challenges associated with
COVID-19, we have secured a significant
value of new work over the past 12
months. This has resulted in a UK and
Europe order book at 1 June 2021 of
£301m (1 November 2020: £287m), of
which £241m is for delivery over the next
12 months. This leaves the Group well
positioned with a strong future workload
for the 2022 financial year and beyond.
Our balanced order book contains a
healthy mix of projects across a diverse
range of sectors including industrial and
distribution, stadia and leisure, nuclear,
transport infrastructure and commercial
offices. Significant awards include
several large distribution facilities in the
UK, reflecting a sector that continues to
remain buoyant, the Co-op Live Arena
in Manchester, new nuclear orders
secured by Harry Peers, and mid-sized
office developments, both in London and
outside, including one in Glasgow. We
have also secured several HS2 bridge
packages, following the HS2 Notice to
Proceed issued by the UK Government
in April. Largely unhindered by Brexit,
our European business has also secured
several smaller orders, along with proving
its continued benefit to our UK operations
when tendering for and executing projects
in Europe. In terms of geographical spread,
of the order book of £301m, 84 per cent
represents projects in the UK, with the
remaining 16 per cent representing
projects for delivery in Europe and the
Republic of Ireland (1 November 2020: 68
per cent in the UK; 32 per cent in Europe
and the Republic of Ireland). The more
UK-centric nature of the current order
book is driven by the acquisition of DAM
Structures’ UK order book, together with a
lower proportion of work in the Republic of
Ireland, as several projects, including the
large industrial facility, draw to completion.
Furthermore, whilst the order book is
48
Severfield plc Annual report and accountsfor the year ended 31 March 2021STRATEGIC REPORT S T R AT E G I C R E P O R T
currently around £300m, only
c. 25 per cent of this represents
commercial offices, compared to the
more normal previous range of 30 to
35 per cent and a peak of c. 60 per cent
around four years ago, showcasing the
benefits of our strategic diversification.
We remain very encouraged by the current
level of tendering and pipeline activity
across the Group. We continue to see a
good number of opportunities, albeit some
at tighter prices given the current market
conditions, in our key market sectors,
including in the industrial and distribution,
transport infrastructure, stadia and
leisure, nuclear and data centre sectors.
Opportunities exist in these sectors both
in the UK and in Europe, where we have
demonstrated our ability to win more work,
supported by our European business.
Looking slightly further ahead, although
we are now much less reliant on this
sector, we are now starting to see more
bidding activity in the commercial office
market, including in London, a trend that
we expect to increase over the next few
years, given that some of the challenges
recently experienced by this sector are
now starting to abate. We remain well
placed to win work in the diverse range of
market sectors and geographies in which
we operate and across a wide client base,
especially with the return of more normal
trading conditions, following the disruption
of COVID-19 in the early part of the year.
This diversity provides us with extra
resilience and the ability to increase our
market share in the future.
As a key component of economic growth,
the construction industry will be central
to a sustainable recovery from the
effects of COVID-19. New, low-carbon
infrastructure (including HS2, wind power,
new nuclear, rail electrification, energy
efficient buildings) will play a leading role
in stimulating growth. In November, the
UK Government released details of its
five-year plan, the National Infrastructure
Strategy, (‘NIS’), which sets out its plans to
transform infrastructure to drive economic
recovery, levelling up and meeting the
UK’s net-zero emissions target by 2050.
This plan will provide increased funding
of £640 billion for UK infrastructure
projects including future work for HS2 and
investment programmes for Highways
England. At Network Rail, in addition to
49
www.severfield.comStock Code: SFR OUR OPERATING
PERFORMANCE
HS2, the total CP6 budget of £53 billion
(2019–2024), which includes a significant
amount of rail electrification work, is
substantially higher than the previous
CP5 budget of £38 billion (2014-2019)
and, at Highways England, the second
Road Investment Strategy, (‘RIS2’), has
been increased by a further £2 billion.
We continue to make good progress with
several of these significant infrastructure
opportunities, particularly with HS2,
road bridges and rail electrification
programmes and remain well positioned to
win work in the transport sector given the
Group’s historical track record and our in-
house bridge capability, together with the
in-depth expertise of the recently acquired
DAM Structures (see below).
The Brexit transition period between
the EU and UK came to an end on 31
December 2020 and the Trade and Co-
operation Agreement, which governs
significant aspects of the trading
relationship between the UK and EU,
is now in force. Whilst, to date, these
new trading arrangements have not
had a significant impact on the Group’s
operations, we continue to monitor
developments in this area, particularly
in relation to the flow of goods and
people across borders. Specific risks and
mitigations continue to be monitored at a
project level and controlled by individual
business units.
Supply chain
We are mindful of industry-wide supply
chain pressures which are, in some
instances, impacting material costs and
availability, over and above that seen in
the second half of 2021. This includes
certain steel products, in part reflecting
the price of iron ore which has nearly
doubled over the past nine months.
Notwithstanding this, steel remains largely
a pass-through cost for the Group, albeit
the recent steel price increases are likely
to impact working capital in the short
term. In response to the current market
conditions and the associated supply
chain pressures, we remain in regular
contact with our customers and our major
supply chain partners and, for steel, we
benefit from relationships with a number
of partners in the UK and continental
Europe, considerably reducing the risk
of interruptions to the Group’s steel
supply. We have also experienced some
challenges with the restricted supply of
cold rolled steel over the past 12 months,
which we continue to manage by forward
purchasing as appropriate.
Severfield (Products & Processing)
Severfield (Products & Processing) (‘SPP’),
which is based at our Sherburn facility,
allows us to address smaller-scale
projects and provides a one-stop shop for
smaller fabricators to source high-quality
processed steel and ancillary products,
albeit at lower margins. Encouragingly,
despite trading through a pandemic, SPP
has continued to secure and successfully
deliver orders to its expanding customer
base. The business has also provided high-
quality subcontract fabrication packages
(including general fabrication, secondary
beams, trusses, bracing and stairs) to
assist other Group companies in the
delivery of larger projects, thus ensuring a
greater proportion of project work remains
in-house. During 2021, we have continued
to grow and invest in the business,
both in the factory and in our people,
including strengthening the engineering
and commercial functions, to maintain
our focus on business development and
developing the modular product range of
the business. This includes the ‘Severstor’
and ‘Rotoflo’ product ranges, which we
are continuing to develop organically,
resulting in 2021 revenue of c.£2m and
a growing number of orders for delivery
to an expanding customer base. During
the year, SPP has also been awarded ‘Fit
for Nuclear’ and certain Network Rail
accreditations, which, together with the
encouraging progress to date and our
previous record in modular construction,
we believe will help us to achieve our
future growth aspirations for the business.
Harry Peers
Harry Peers continues to secure high-
quality orders and we have good visibility
of a strong order pipeline including in
the growing nuclear and power (waste-
to-energy) sectors. As part of the ‘SSS’
programme, we are also focusing on
certain operational initiatives including
investment in technology-driven
enhancements to make the business
more competitive and efficient and to
support the development of our client
service offering.
As expected, in addition to the initial
consideration of £18.9m that was paid
in 2019, a further performance-based
consideration of £6.0m was paid in
December 2020, as the business achieved
certain financial and operational targets
for the period ended 31 August 2020.
DAM Structures
On 26 February 2021, the Group completed
the acquisition of DAM Structures, an
innovative steel fabrication company,
giving the Group immediate access to
attractive, complementary market sectors
with strong growth potential including the
propping, railway and steel piling markets.
The initial consideration was £12.0m
and a further deferred consideration of
£7.0m is payable in cash in April 2022. An
additional performance-based contingent
consideration of up to £8.0m is also in
place, payable if certain work-winning
targets in the railway and steel piling
sectors are achieved over a five-year
period, ending in April 2026.
DAM Structures is integrating well into the
Group’s operations. In addition to its core
steel fabrication markets, we are seeing
significant opportunities for growth in
the UK from Network Rail electrification
programmes including piling, overhead
line equipment and general rail works,
and elements of the HS2 project that
we were not previously addressing, such
as temporary and permanent tunnel
work. This will complement the Group’s
existing expertise in bridges and stations.
We also see opportunities for growth in
DAM’s propping business, which provides
bespoke fabricated propping systems to
demolition and groundwork contractors.
DAM’s core business involves on-site work
with main contractors, and ground and
demolition contractors, often prior to the
50
Severfield plc Annual report and accountsfor the year ended 31 March 2021STRATEGIC REPORT The Group worked on over 100 projects with our clients during the year, including:
Major projects –
over £20m
Google King’s Cross, London
Large industrial facility, Republic of Ireland
Large data centres, Republic of Ireland and Finland
Large distribution centres, Littlebrook and Swindon
Commercial
offices – London
and regional
King’s Cross P2, London
Bankside Yards, London
150 Holborn, London
One Sherwood Street, London
Argyle Street, Glasgow
Industrial and
distribution
Transport
infrastructure
Data centres and
other projects
Distribution centres, East Midlands, Germany, Republic of Ireland
Jaguar Land Rover, Logistics Operations Centre (‘LOC’) and car park
M8 Footbridge, Glasgow
Barking Riverside Bridge, London
Luton Airport DART Parkway Station
HS2 bridges, West Midlands
Data centres, Republic of Ireland
Sky Studios, Elstree
Stadia and leisure
Lord’s Cricket Ground redevelopment (Compton and Edrich stands)
Fulham FC, London
stage of project construction at which
the Group, in the past, would typically
have become involved. The acquisition
is allowing us to establish relationships
and contracts at an earlier stage in site
development with both existing and new
customers and is another step in the
implementation of the Group’s strategy,
enhancing our position as the UK’s
broadest structural steel services group.
Clients
Our proven ability to work collaboratively
and innovatively with clients is
fundamental to our success and is critical
to securing new work. This involves
early contract engagement with clients,
anticipating the issues they face and
providing problem-solving solutions to
ensure greater clarity around scope,
construction programmes and cost, which,
in combination, reduces delivery risk for all
parties.
Our unique capability to deliver complex
design solutions, our capacity and speed
of fabrication, the expert capabilities
of the Group and its colleagues, and
our management and integration of the
construction process is important to our
clients and a key differentiator for the
Group. During the pandemic, when certain
construction programmes were delayed
and disrupted, these capabilities allowed
us to help clients deliver changes to these
programmes more quickly and efficiently.
We have again achieved national
recognition for our projects including an
award at the 2020 Structural Steel Design
Awards (for the Brunel Building) and we
have been shortlisted for awards (for the
new Tottenham Hotspur F.C. stadium and
the Brunel Building) at the prestigious
2020 Royal Institute of British Architects
(‘RIBA’) Awards, which have been
postponed until 2021 due to COVID-19.
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India
The Indian joint venture (‘JSSL’) has
continued its recovery from the disruptive
effects of COVID-19. After a difficult first
half, the company maintained a largely
break-even profit position in H2 of 2021.
The impact of COVID-19 is evident in the
Group’s after-tax share of loss of £0.7m
(2020: share of profit of £2.2m). The loss
reflects a reduction in JSSL’s revenue
to £48.0m, compared to £109.3m in the
previous year, and an operating margin of
3.3 per cent, compared with 8.5 per cent
in the previous year. Financing expenses
of £3.4m (2020: £2.9m) turn JSSL’s much
reduced operating profit into a loss before
tax for the year of £1.8m (2020: profit
before tax of £6.4m).
The return to normal trading conditions
in India is being considerably disrupted
by the ongoing second wave of COVID-19,
which is currently impacting output in H1
of 2022. Despite the ongoing COVID-19
challenges, JSSL’s clients have continued
to place orders, resulting in an order book
that has increased to a record level of
£140m (1 November 2020: £98m). This
reflects the strong underlying demand
for structural steel in India and includes
several recent commercial awards (a large
data centre in Chennai and commercial
offices in Bangalore, Hyderabad and
Navi Mumbai) and some large industrial
projects for JSW. In terms of mix, 68
per cent of the order book represents
higher margin commercial work, with
the remaining 32 per cent representing
industrial projects, mainly for JSW.
JSSL’s pipeline of potential orders
continues to include several commercial
projects for key developers and clients
with whom it has established strong
relationships. JSSL is also developing
formal strategic alliances with certain key
clients, mainly for commercial, data centre
and healthcare projects. This, together
with the step up in the order book, leaves
the business very well positioned in the
market once the current COVID-19 wave
subsides. Overall, we remain positive
about the long-term development of the
Indian market and of the value creation
potential of JSSL, especially considering
the significant structural changes made in
India over recent years, the government’s
ongoing focus on the ‘ease of doing
business’, and the significant production
capability of the business following the
Bellary expansion in 2020.
Safety, health and the
environment
Throughout COVID-19, we have maintained
our ‘safety first’ core value across the
Group and this assumed an even greater
emphasis in 2021 as we developed
new operating procedures to support
safe working to government guidelines.
Significant changes were made in
adapting our operations to maintain
social distancing, facilitate home working
by office staff where appropriate and to
provide a safe working environment in
both our factories and on our sites.
We have also continued our focus on
mental health, which we recognise has
been impacted nationally by COVID-19,
including issuing regular communications
through our new Coronavirus Hub on how
to cope with certain issues arising from
the pandemic itself, assisted by our team
of 60 mental health first aiders. In 2021,
we rolled out our enhanced Employees
Assistance Programme, which includes
the launch of a new app (My Healthy
Advantage), to provide support and advice
to colleagues on physical and mental
wellbeing issues.
In 2021, a new platform for reporting SHE
incidents and completing inspections was
implemented, which has been designed
to clearly identify trends to enable
targeted improvements through enhanced
reporting, root cause and data analysis.
We have maintained our ISO 45001 and
14001 certifications, along with additional
client and sector specific certifications.
During the year, we continued to focus on
the Group’s injury frequency rate (‘IFR’) and
high-potential near misses, HiPos. Despite
the challenges of adapting operations to
maintain social distancing, we have seen
a positive and significant reduction in
injury rates, resulting in an IFR (including
JSSL) of 1.48, compared to 1.81 in 2020,
improving upon our Group targets in the
process. The Group’s accident frequency
rate (‘AFR’) (including JSSL) for the year,
which is based solely on the level of
RIDDORS (reportable accidents) was
0.18, which continues to outperform the
industry average. This represents a slight
increase from the prior year AFR of 0.15
but this was not wholly unexpected given
the significant improvement in the AFR
over recent years.
ESG
Following the launch of our new
sustainability policy in 2020, we
established an executive working
group to focus on the evolution of our
sustainability strategy and to develop
a more sustainable business, taking
into account certain Environmental,
Social and Governance (‘ESG’) reporting
frameworks, current and future legislation,
and climate science. Aligning ourselves to
the UN Sustainable Development Goals
and building on the requirements of the
Task Force on Climate-Related Financial
Disclosures, (‘TCFD’), the Group has
developed targets and KPIs to monitor
progress against our ESG objectives.
A key element of our sustainability
strategy is our target to become an
operationally carbon-neutral organisation
in the 2021 calendar year. Carbon
neutral in this context means that we
will use carbon offsetting to eliminate
the combined scope 1, scope 2 and
operational scope 3 greenhouse gas
(‘GHG’) emissions generated from our
manufacturing facilities and construction
sites. Projects set to benefit from our
carbon offsetting include solar power
projects in India, the manufacture of
efficient cookstoves in Ghana, and the
regeneration of degraded lands in Chile.
The Group has improved upon previous
climate-related targets and, in 2021,
we saw a reduction of eight per cent
in our scope 1 and 2 GHG emissions
to 27.5 CO2e/£m revenue compared to
29.8 in 2020 and a reduction of 53 per
cent compared to 58.9 in 2015. Using a
market-based approach, which includes
the positive impact of switching to green
energy (see below), our 2021 scope 1
and 2 GHG emissions reduced further
to 21.0 CO2e/£m revenue, 21 per cent
and 64 per cent lower than 2020 and
2015 respectively. This progress has
been recognised by our inclusion in
52
Severfield plc Annual report and accountsfor the year ended 31 March 2021STRATEGIC REPORT Summary and outlook
The Group has coped well with the
challenges presented by the COVID-19
pandemic and has delivered a resilient set
of results for 2021, reflecting the benefit
of the strategic and operational progress
made over recent years. This resilience is
reflected in a UK and Europe order book
of £301m, a record Indian order book
of £140m, increased Group revenues
and a strong cash position, which has
enabled us to continue to pay dividends,
support our supply chain and continue
with our investment plans, including
the acquisition of DAM Structures. Our
strategy remains unchanged, focused on
growth, both organic and through selective
acquisitions, operational improvements
and creating further value in our Indian
joint venture, JSSL.
Whilst we continue to be mindful of
the COVID-19 backdrop, particularly in
India, there is now considerable positive
momentum across the Group, and we
remain optimistic about the future. We
continue to regularly win high-quality
work resulting in a strong order book,
which supports trading throughout the
2022 financial year and beyond. We have
an encouraging pipeline of opportunities
in the UK, Europe and India, expertise
in managing complex projects and good
long-standing client relationships. This,
together with the construction industry’s
obvious role in the recovery of the UK
economy, leaves us well placed to win work
in the diverse range of market sectors
and geographies in which we operate
and across a wide client base, providing
us with extra resilience and the ability to
increase our market share and to drive
future profitable growth.
Throughout the year, the business has
had to adapt quickly and decisively to a
continually changing market backdrop.
I would like to thank all our colleagues
for their commitment and dedication
throughout these challenging times.
Alan Dunsmore
Chief executive officer
16 June 2021
the Financial Times inaugural listing of
Europe’s climate leaders (May 2021), which
highlights the 300 companies that have
achieved the greatest reduction in their
GHG emissions between 2014 and 2019.
We have also established new targets
to reduce scope 1 and 2 GHG emissions
by 25 per cent by 2025 against a 2018
baseline. These targets based on the 2015
International Treaty on Climate Change,
also known as the Paris Agreement,
which seeks to limit global warming to
below 1.5 degrees Celsius, compared to
pre-industrial levels.
Following our earlier switch to green
electricity at our two largest facilities, we
have now committed to switch to 100 per
cent green electricity across all the Group’s
directly controlled facilities and we have
achieved the level of 73 per cent during
the year. In 2021, we maintained our ‘B’
rating in the CDP index and were awarded
an ‘A’ in the CDP Supplier Engagement
Rating improving on our ‘A minus’ from the
previous year.
SteelZero – building a sustainable
future
The Group has strengthened its
commitment to reducing carbon emissions
by signing up to SteelZero, a global
initiative to speed up the transition to a
net-zero steel industry. SteelZero is led by
the international non-profit organisations,
the Climate Group and ResponsibleSteel.
Targeting net-zero steel from the demand
side of the supply chain makes this
the first initiative of its kind, with the
potential for it to have significant impact
on investment, policy, manufacturing, and
production in the construction sector.
The initiative is being signed up to by an
increasing number of steel buyers, both
in the UK and internationally. By signing
up, we are making a public commitment
to transition to procuring, specifying, or
stocking 100 per cent net-zero steel by
2050, with certain interim targets to be
achieved by 2030.
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www.severfield.comStock Code: SFR STRATEGIC REPORT OUR FINANCIAL
PERFORMANCE
OUR STRONG BALANCE SHEET AND DIVERSE
UK AND EUROPE ORDER BOOK UNDERPIN OUR
AMBITIONS TO DELIVER SUSTAINABLE GROWTH
Revenue
Underlying* operating profit (before JVs and associates)
Underlying* operating margin (before JVs and
associates)
Underlying* profit before tax
Underlying* basic earnings per share
Operating profit (before JVs and associates)
Profit before tax
Basic earnings per share
Return on capital employed (‘ROCE’)
2021
£363.3m
£25.5m
7.0%
£24.3m
6.4p
£22.7m
£21.1m
5.6p
13.6%
2020
£327.4m
£27.0m
8.2%
£28.6m
7.7p
£24.7m
£25.8m
6.7p
17.2%
* The basis for stating results on an underlying basis is set out on the highlights page. The board believes
that non-underlying items should be separately identified on the face of the income statement to assist
in understanding the underlying performance of the Group. Accordingly, certain Alternative Performance
Measures (‘APMs’) have been used throughout this report to supplement, rather than replace, the
measures provided under IFRS.
Trading performance
Revenue for the year of £363.3m
represents an increase of £35.9m
(11 per cent) compared with the previous
year, reflecting an increase in order flow
(£20.0m), together with the full year effect
of the Harry Peers acquisition (£12.0m),
which was acquired in October 2019, and
one month’s trading from the recently
acquired DAM Structures (£3.9m).
Underlying operating profit (before JVs
and associates) of £25.5m (2020: £27.0m),
which includes a one-off profit (the
associated revenue is included in Group
revenue) on a bespoke paint package on
the large industrial facility in the Republic
of Ireland that the Group is currently
working on, was £1.5m lower than in the
previous year, reflecting the disruptive
effects of COVID-19. This has also resulted
in the 2021 operating margin of 7.0 per
cent falling below that achieved in the
previous year; however, the margin in
H2 recovered well and, looking forward,
we expect the 2022 operating margin
to be approaching our normal range of
8 to 10 per cent, which was established
pre-pandemic. The statutory operating
profit (before JVs and associates), which
includes the Group’s non-underlying items,
was £22.7m (2020: £24.7m).
The share of results of JVs and associates
was a loss of £0.3m (2020: profit £2.4m),
mainly reflecting a difficult year for our
Indian joint venture (‘JSSL’). Net finance
costs were £0.8m (2020: £0.7m).
Underlying profit before tax, which is
management’s primary measure of Group
profitability, was £24.3m (2020: £28.6m).
The statutory profit before tax, reflecting
both underlying and non-underlying items,
was £21.1m (2020: £25.8m).
Acquisition of DAM Structures
On 26 February 2021, the Group completed
the acquisition of 100 per cent of the
share capital of DAM Structures Limited
for an initial net cash consideration of
£12.0m on a cash-free, debt-free basis
assuming a normalised level of working
capital on completion. The total initial
“ The Group’s strong
cash position has been
carefully managed
during the pandemic,
ensuring we can continue
to support our supply
chain partners whilst
not claiming any support
under COVID-related
government schemes.”
ADAM SEMPLE
GROUP FINANCE DIRECTOR
54
Severfield plc Annual report and accountsfor the year ended 31 March 2021STRATEGIC REPORT consideration was £17.0m, including cash
and cash equivalents of £5.0m, which was
funded by a combination of Group cash
reserves of £5.0m and a new term loan of
£12.0m. A further deferred consideration
of £7.0m is payable in 2022, together
with a performance-based contingent
consideration of up to £8.0m, which would
be payable over a five-year period. Based
on provisional fair values, the acquired
assets included intangible assets of
£4.8m, which were attributed to customer
relationships and order books and residual
goodwill of £15.1m.
The business contributed revenue of
£3.9m and a nominal operating profit in
the year.
Share of results of JVs
and associates
The share of results from JSSL was a loss
of £0.7m (2020: profit of £2.2m), reflecting
the impact of COVID-19 on JSSL’s trading
and profitability. Our specialist cold
rolled steel business, Construction Metal
Forming (‘CMF’), contributed a share of
profit of £0.4m (2020: £0.2m). The business
is currently in the process of expanding its
production operations in Wales and has
continued to develop its product range,
including modular steel products, to drive
organic revenue growth. We continue to be
the only hot rolled steel fabricator in the
UK to have a cold rolled manufacturing
capability.
Non-underlying items
Non-underlying items are classified as
such as they do not form part of the profit
monitored in the ongoing management of
the Group. Non-underlying items for the
year of £3.2m (2020: £2.8m) consisted of
the amortisation of acquired intangible
assets of £2.8m (2020: £1.4m) and other
acquisition-related expenses of £0.4m
(2020: £1.4m).
The amortisation of acquired intangible
assets represents the amortisation of
customer relationships, order books and
brand name, which were identified on the
acquisition of Harry Peers. These assets
are being amortised over a period of 18
months to five years. No amortisation has
been recorded for the intangible assets,
which were provisionally identified on the
acquisition of DAM Structures on grounds
of materiality and as these fair values are
currently provisional. Acquisition-related
expenses include certain non-recurring
legal and consultancy costs associated
with the DAM Structures acquisition
and movements in the valuation of the
contingent consideration for the Harry
Peers acquisition, which was paid in
December 2020.
Taxation
The Group’s underlying taxable profits
of £24.7m (2020: £26.3m) resulted
in an underlying tax charge of £4.6m
(2020: £5.0m), which represents an
effective tax rate of 18.5 per cent
(2020: 19.0 per cent). The total tax charge
of £3.8m (2020: £5.4m) also includes
adjustments relating to prior years, which
are categorised as non-underlying and
included in non-underlying items.
Earnings per share
Underlying basic earnings per share
decreased by 17 per cent to 6.4p (2020:
7.7p) based on the underlying profit after
tax of £19.8m (2020: £23.7m) and the
weighted average number of shares in
issue of 307.3m (2020: 305.4m). Basic
earnings per share, which is based on
the statutory profit after tax, was 5.6p
(2020: 6.7p), reflecting the decreased
underlying profit after tax offset by a
decrease in non-underlying items. Diluted
earnings per share, which includes the
effect of the Group’s performance share
plan, was 5.6p (2020: 6.6p).
Dividend and capital structure
The Group has a progressive dividend
policy. Funding flexibility is maintained to
ensure there are sufficient cash resources
to fund the Group’s requirements. In
this context, the board has established
the following clear priorities for the use
of cash:
• To support the Group’s ongoing
operational requirements, and
to fund profitable organic growth
opportunities where these meet the
Group’s investment criteria;
• To support steady growth in the
core dividend as the Group’s profits
increase;
• To finance strategic opportunities that
meet the Group’s investment criteria;
and
• To return excess cash to shareholders
in the most appropriate way, whilst
maintaining a good underlying net
funds position.
The board considers the dividend to be a
very important component of shareholder
returns. Accordingly, based on the outlook
for the year ahead and our strong financial
position, and despite the significant
impact of COVID-19 on the 2021 results,
the board is recommending a final
dividend of 1.8p per share (2020: 1.8p),
payable on 3 September to shareholders
on the register at the close of business on
13 August. This, together with the interim
dividend of 1.1p per share (2020: 1.1p),
will result in a total dividend of 2.9p per
share (2020: 2.9p), unchanged from the
previous year.
Goodwill and intangible assets
Goodwill was £85.8m at 31 March 2021
(2020: £70.7m), the increase reflecting the
provisional goodwill arising on the DAM
Structures acquisition. In accordance
with IFRS, an annual impairment review
has been performed. No impairment was
required either during the year ended
31 March 2021 or the year ended 31 March
2020. Other intangible assets are recorded
at £9.6m (2020: £7.4m). This largely
represents the net book value of the
intangible assets (customer relationships,
order books and brand name) identified
on the acquisitions of Harry Peers and
DAM Structures, with the value of the
DAM Structures intangibles remaining
provisional at 31 March 2021.
55
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PERFORMANCE
Property, plant and equipment
The Group has property, plant and
equipment of £91.7m (2020: £88.9m).
Capital expenditure of £6.6m (2020:
£6.5m) represents the continuation of the
Group’s capital investment programme.
This predominantly consisted of ongoing
expansion to our Dalton production
facility, including new equipment for our
fabrication lines, and improvements to
our site and office facilities. Depreciation
in the period was £6.0m (2020: £5.5m),
of which £1.6m (2020: £1.6m) relates to
right-of-use assets under IFRS 16.
Joint ventures
The carrying value of our investment in
joint ventures and associates was £28.8m
(2020: £26.7m), which consists of the
investment in India of £17.6m (2020:
£18.3m) and in CMF of £11.2m (2020:
£8.5m).
Pensions
The Group’s defined benefit pension
liability at 31 March 2021 was £22.4m,
an increase of £3.7m from the 2020
position of £18.7m. The deficit has
increased largely because of a reduction
in the discount rate, which reflects the
significant fall in bond yields over the
past year, together with higher long-term
inflation assumptions. This has been
partially offset by higher returns on the
scheme’s assets and by ongoing deficit
contributions. The triennial funding
valuation of the scheme is in progress,
with a valuation date of 31 March 2020. All
other pension arrangements in the Group
are of a defined contribution nature.
Return on capital employed
The Group adopts ROCE as a KPI to help
ensure that its strategy and associated
investment decisions recognise
the underlying cost of capital of the
business. The Group’s ROCE is defined as
underlying operating profit divided by the
average of opening and closing capital
employed. Capital employed is defined as
shareholders’ equity excluding retirement
benefit obligations (net of tax), acquired
intangible assets and net funds. For 2021,
ROCE was 13.6 per cent (2020: 17.2 per
cent), which exceeds the Group’s target of
10 per cent through the economic cycle.
Cash flow
Operating cash flow (before working capital
movements)
Cash generated from operations
Operating cash conversion
Cash balances
Net funds**
2021
2020
£30.2m
£30.0m
93%
£25.0m
£4.4m
£30.2m
£28.0m
81%
£29.5m
£16.4m
** The Group excludes IFRS 16 lease liabilities from its measure of net funds/debt as they are excluded from
the definition of net debt as set out in the Group’s borrowing facilities.
The Group’s business model has been
established to generate surplus cash
flows and we have always placed a high
priority on cash generation and the active
management of working capital. The Group
ended the financial year with net funds
of £4.4m (2020: £16.4m). Net funds at 31
March 2021 consisted of cash of £25.0m
offset by the outstanding term loans of
£20.7m for the Harry Peers and DAM
Structures acquisitions.
Operating cash flow for the year before
working capital movements was £30.2m
(2020: £30.2m). Net working capital was
broadly stable over the course of the year,
increasing by £0.2m. Excluding advance
payments, year-end net working capital
represented approximately two per cent
of revenue (2020: three per cent). This is
slightly below our well-established target
range of four to six per cent, reflecting
our continued focus on working capital
management.
Our cash generation KPI shows the
conversion of 93 per cent (2020: 81 per
cent) of underlying operating profit (before
JVs and associates) into operating cash
(cash generated from operations less net
capital expenditure), ahead of our target of
85 per cent.
Prompt Payment Code
We believe in treating our suppliers and
subcontractors fairly and with respect. Our
three main businesses are all signatories
of the Prompt Payment Code (‘PPC’).
Our relationships with our supply chain
partners are of strategic importance and
key to the Group’s success, and payment
practices remained a major area of focus
throughout the year and even more so
against the backdrop of COVID-19. For the
PPC reporting period of 1 October 2020 to
31 March 2021, all the Group’s businesses
that are signatories of the PPC, reported
that at least 95 per cent of invoices were
paid within 60 days.
Whilst we remain very focused on
continuing to improve our payment
performance, the Group operates in
a sector where supply chains and
contractual terms are complex, and
prompt payment can often be significantly
impacted by resolution of disputes
and alignment to agreed contractual
processes. On 1 March 2021, the UK’s new
VAT Domestic Reverse Charge regulations
for construction services came into force,
further increasing existing cash flow
pressures on many businesses in our
sector, and which also may impact the
ability of certain supply chain partners to
accurately invoice the Group.
Bank facilities committed
until 2023
The Group has a £25m revolving credit
facility (‘RCF’) with HSBC Bank and
Yorkshire Bank, which matures in October
2023. The RCF, of which £10m is available
as an overdraft facility, continues to
include an additional accordion facility of
£20m, which allows the Group to increase
the aggregate available borrowings to
£45m. As part of the Harry Peers and DAM
Structures acquisitions, new amortising
term loans of £14m and £12m, respectively,
were established as amendments to
the existing RCF. These loans, for which
£20.7m remained outstanding at 31 March
2021, also mature in October 2023. The
RCF remains subject to three financial
covenants, interest cover (>4x) and net
debt to EBITDA (<2.5x) and cash flow cover
(<1x). The Group operated well within these
covenant limits throughout the year ended
31 March 2021.
56
Severfield plc Annual report and accountsfor the year ended 31 March 2021STRATEGIC REPORT 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 current market conditions and
the impact of these (including the
potential future impact of COVID-19
and similar other significant downside
risks linked to our principal risks) on
the Group’s profit and cash flows;
• The UK and Europe order book and the
pipeline of potential future orders;
• The Group’s ‘SSS’ business
improvement programme, which has
delivered tangible benefits in 2021
and is expected to continue doing
so in the 2022 financial year and
beyond; and
• The Group’s net funds position and
its bank finance facilities, which
are committed until October 2023,
including both the level of those
facilities and the three financial
covenants attached to them.
The Group has continued to trade safely
and profitably with positive operating cash
flows for the year ended 31 March 2021
whilst operating under various COVID-19
restrictions. Whilst there continues to
be some uncertainty associated with
COVID-19, the directors expect the Group
to remain similarly resilient over the
forecast period whilst it continues to
operate under any further restrictions until
the end of the pandemic.
The directors have reviewed the Group’s
forecasts and projections for the 2022
financial year and up to at least 12 months
from the date of approval of the financial
statements, including sensitivity analysis
to assess the Group’s resilience to potential
adverse outcomes arising out of COVID-19
(or similar significant disruptions) including
a highly pessimistic ‘worst case’ scenario.
This ‘worst case’ is based on the combined
impact of securing no further orders for
the next 12 months and further significant
COVID-19 (or similar other) disruption for
the entirety of the going concern period.
Given the strong previous performance of
the Group, despite three separate COVID-19
lockdowns, this scenario is only being
modelled to stress test our strong financial
position and demonstrate the existence
of considerable headroom in the Group’s
covenants and borrowing facilities.
The directors also considered sensitivities
in respect of other potential downside
scenarios in concluding that the Group
can continue in operation for a period
of at least 12 months from the date of
approving the financial statements. Having
also made appropriate enquiries, the
directors are confident that the Group
will have sufficient funds to continue to
meets its liabilities as they fall due for
at least 12 months from the approval
of the financial statements, and for this
reason, have continued to adopt the going
concern basis in preparing the financial
statements.
Adam Semple
Group finance director
16 June 2021
57
www.severfield.comStock Code: SFR STRATEGIC REPORT Viability statement
In accordance with the UK Corporate
Governance Code (the ‘Code’), the directors
have assessed the prospects and the
financial viability of the Group.
This viability assessment has been made
using a three-year period ending on 31
March 2024 which is in line with that used
for the Group’s annual strategic planning
process. This gives good visibility of
future work as the majority of the Group’s
workload falls within three years and
enables more accurate forecasting as
the Group’s most significant construction
contracts follow an execution period
of which is normally less than three
years. In the previous year, the directors
considered whether the assessment
period of three years should be revisited
in light of COVID-19. However, our strong
financial position, and the lesser extent
to which our operations have been
adversely impacted compared to other
businesses and sectors, it was concluded
that the three-year timeframe remained
appropriate. In making their assessment,
the directors took account of the Group’s
strategy, strong financial position, forward
order book of £301m, encouraging pipeline
of opportunities, recent and planned
investments and main committed bank
facilities (which mature in October 2023).
For our assessment of going concern,
which covers a twelve-month period, we
have modelled a ‘base case’ scenario,
which captures the Group’s most up-to-
date ‘realistic’ forecast position, and a
highly pessimistic ‘worst case’ scenario,
being the combined impact of securing no
further orders for the next twelve months
and further significant COVID-19 (or
similar other) disruption for the entirety of
the going concern period. Given the strong
performance of the Group in FY21 despite
three separate COVID-19 lockdowns,
this implausible scenario is only being
modelled to ‘stress test’ our strong
financial position and demonstrate the
considerable headroom that the Group has
in its covenants and borrowing facilities.
The directors have also assessed the
potential financial and operational impact
of other downside scenarios resulting
from the crystallisation of one or more of
the principal risks described in the annual
report that are relevant to the industry
sector in which the Group operates. The
assessed risks, for which the impacts were
applied, include supply chain risks (and
the reliance on key suppliers), changes in
the commercial and market environment,
the impact of COVID-19 on trading, the
failure to mitigate onerous contract
terms, business disruption caused by a
cyber-attack, and the impact of a serious
health and safety incident. The impact of
these were modelled through a reduction
in margin of 25 per cent, a reduction in
revenue of 25 per cent, a deterioration in
working capital (the extension of customer
payment terms by one month), a period of
business interruption (two months with
no factory production or site activity) and
a significant one-off event resulting in
a cost to the Group of £20m. The range
of scenarios tested was considered in
detail by the directors, taking account
of the probability of occurrence and
the effectiveness of likely mitigation
actions including the reduction of any
non-essential capital expenditure and
operating expenditure, bonuses and
dividend payments.
There are no individual risks which are
considered to materially impact the
Group’s viability, and our assessment
included modelling the financial impact of
a ‘worst case’ scenario (incorporating the
‘worst case’ scenario performed for going
concern purposes), where the impact of
certain risks and uncertainties highlighted
above were applied in combination. Based
on this assessment, and considering
that the Group remained profitable
and sustainable throughout periods of
significant COVID-19 related uncertainty
in 2020, the directors have a reasonable
expectation that the Group will be able
to continue in operation and meet its
liabilities as they fall due over the three-
year period of their assessment.
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BUILDING A SUSTAINABLE
BUSINESS
As the world’s population grows, more pressure than ever before is put on our cities, environment, and
infrastructure. Our purpose is to develop better ways to build, for a world of changing demands. To achieve this,
we are committed to motivating and enabling our people and our supply chain to deliver high quality, innovative
buildings in a sustainable and efficient way.
Our sustainability journey
As a market leader in structural steel, we
recognise that operating in a sustainable
manner is crucial to both the current and
future success of the Group. The Group
is committed to behaving responsibly
and conducting business with openness,
honesty, and integrity.
This year, the COVID-19 global pandemic
has put many things in perspective and
has emphasised the impact that the
construction industry has on the UK
economy. Contributing up to 7 per cent
of the UK GDP and being one of the few
sectors supporting large numbers of
highly-skilled, well-paid jobs, across a
vast supply chain, the importance of the
construction industry was recognised
by the government’s decision to class
construction employees as ‘key workers’
during the pandemic. Whilst the pandemic
is far from over, climate change is a
recognised global crisis and one of the
biggest challenges facing the construction
industry. The Group is committed to
addressing climate risk and reducing
the lifetime emissions of the assets it
builds. We recognise that sustainability
is not only about meeting legislative
requirements, but also about being a
responsible employer, attracting the right
talent, minimising the environmental
impact of our operations on our local
communities and about safely maintaining
the profitable growth of our business to
deliver long-term, sustainable benefits to
all our stakeholders.
As a key component of economic growth,
the construction industry will be central
to a sustainable recovery from the
effects of COVID-19. New, low carbon
infrastructure (including HS2, wind power,
new nuclear, rail electrification, energy
efficient buildings) will play a leading
role in stimulating growth, including the
UK government’s National Infrastructure
Strategy (NIS), which sets out plans to
transform infrastructure to drive economic
recovery, levelling up and meeting the UK’s
net zero emissions target by 2050.
Smarter, Safer, more Sustainable
Our sustainable business strategy is
driven by our values and our strategic
objectives to ensure that we operate
responsibly and ethically. We focus on all
areas of sustainability – Environmental,
Social and Prosperity – and we report on
four key sustainability focus areas (‘our 4
Ps’); Our Planet, Our People, Our Prosperity
and Our Principles of Governance, which
are supported by our ongoing ‘Smarter,
Safer, more Sustainable’ business
improvement programme. This enables us
to operate as a responsible, sustainable
business for the benefit of all our
stakeholders. We believe that investing in
improvement projects and in training and
technology to empower our people to work
in a ‘Smarter, Safer, more Sustainable’ way
will be fundamental to achieving our long-
term strategic objectives.
In the 2021 financial year, the Group
launched its new sustainability strategy.
Aligning ourselves to the UN Sustainable
Development Goals (‘UN SDGs’) and
building on the requirements of the
Task Force on Climate-related Financial
Disclosure (‘TCFD’), the Group has
developed targets and KPIs to monitor
progress against our sustainability
objectives. These targets and KPIs have
been identified as the most material to the
business by stakeholder groups including
our clients, suppliers, colleagues and
shareholders.
In line with the Global Reporting Initiative
(‘GRI’) Standards, our sustainability
reporting is structured around our
most material sustainability issues.
This assessment process draws on our
existing risk assessment process and
stakeholder engagement activity as well
as specific research and analysis. In 2021,
this included engagement with both
internal and external stakeholders. The
assessment identified the following eight
areas of importance:
60
Severfield plc Annual report and accountsfor the year ended 31 March 2021STRATEGIC REPORT S T R AT E G I C R E P O R T
Materiality matrix
4
d
l
e
i
f
r
e
v
e
S
o
t
e
c
n
a
c
i
f
i
n
g
S
i
6
7
1. Health and safety
1
2. Climate change and carbon emissions
2
3
3. Supply change management
4. Sustainable construction
5. Diversity and inclusion
6. Training and development
7. Employee engagement
8. Waste management
5
8
Significance to stakeholder
The Group supports the Task Force on Climate-related Financial Disclosures (‘TCFD’), which comes into force in the 2022 financial year,
and is committed to ensuring the Group’s climate-related reporting in the 2022 annual report is fully compliant with its requirements.
We will continue to evolve our approach to sustainability and our climate-related disclosure and reporting, including the setting of
sustainability targets, in the 2022 financial year.
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BUILDING A SUSTAINABLE
BUSINESS
Sustainability performance highlights in 2021
Our key achievements in the year across our four key focus areas are:
Our planet
see page 64
Our people
see page 68
Our prosperity
see page 71
Our principles of
governance
see page 73
Sustainability strategy
Launched our new
sustainability strategy with
the target to be carbon neutral
in the 2021 calendar year
Dedicated workforce
engagement director
Economic value generated
and distributed
Business ethics and human
rights
Appointed non-executive
director, Louise Hardy, as
our workforce engagement
director
£363.3m / £343.2m
0
(2020: £327.4m / £306.1m)
11% / 12% increase from
2020
Total number of reported
cases of non-compliance with
the Group’s suite of ethics
policies and cases of violation
of our human rights policy
Supporting SteelZero
Became one of the first
signatories to SteelZero, a
global initiative to accelerate
the transition to a net zero
steel industry
Colleagues’ safety, health
and wellbeing
Corporation taxes paid in
cash
Executive responsibility
of sustainability matters
Maintained the safety, health
and wellbeing of our people
and their families during the
COVID-19 pandemic
£4.6m
2020: £6.0m
23% decrease from 2020 as
profits have reduced
Established an executive
working group to focus on the
evolution of our sustainability
strategy
Improved our GHG
emissions
27.5 CO2e/£m
Incident frequency rate
(‘IFR’)
1.48
Net investment
25%
(2020: 29%)
(2020: 29.8 CO2e/£m)
(2020: 1.81)
(2015: 58.9 CO2e/£m)
18% improvement in our IFR
Reduction in our scope 1 and
2 GHG emissions by 8% from
2020 and 53% from 2015 (our
first full year of reporting)
using a location-based
approach
Accident frequency rate (‘AFR’)
0.18
(2020: 0.15)
AFR remains above industry
average
Capital expenditure minus
depreciation divided by
dividend payments
We continue to invest well
above depreciation whilst
recognising the importance of
dividends to our shareholders.
Coverage of certified
environmental
management systems
Group-wide alignment to:
ISO14001 (environmental) –
100% (2020: 100%)
ISO45001 (occupational
health and safety) – 100%
(2020: 100%)
Succession planning
Prompt payment reporting
SHE reporting system
Updated our succession plan
which identifies and develops
future senior leaders from
within the business
95%
Percentage of invoices paid
within agreed payment terms
in latest PPC reporting period
for our signatory companies
Launched a new platform for
reporting SHE incidents and
inspections
CDP global evaluation
rating
B
(2020: B)
CDP supplier
engagement rating
A
(2020: A minus)
CDP index ratings maintained
and improved
Green electricity
Board diversity
Supply chain management
Board tenure
73% green electricity used
in our wholly owned factories
(with a target to increase
this to 100%)
22%
(2020: 12%)
Percentage of women
on the board
97%
Percentage of suppliers
subject to annual supply
chain contractor due
diligence reviews
6.1 years
(2020: 6.3 years)
Average tenure of our
board of directors
62
Severfield plc Annual report and accountsfor the year ended 31 March 2021STRATEGIC REPORT Alignment to the United Nations Sustainable Development Goals
The Group has aligned our sustainability strategy to the United Nations Sustainable Development Goals (‘UN SDGs’) since these provide
businesses and stakeholders with a comprehensive, internationally-recognised framework against which to align their operations,
strategic objectives and reporting. Of the 17 UN SDGs, we consider the following seven goals to be those where we can have the greatest
impact and set out how these are linked to our sustainability objectives and the key performance indicators used to measure them.
Directly relevant
Indirect contribution
UN SDG Link to our sustainability objectives
KPIs
Planet
Limit the environmental impact of our operations on
the planet so it can support the needs of the present
and future generations
People
Target zero harm through health and safety
excellence, attract and retain talent and promote
a diverse, inclusive environment for our people
to thrive
• Energy usage and intensity
• Gender pay equality
• Diversity and inclusion %
Job creation
•
Incident frequency rate
•
• Accident frequency rate
• Training provided
Prosperity
Achieving our strategic objectives is essential for
the long-term profitable growth of the Group and its
ability to deliver future benefits to all stakeholders
Prosperity
Achieving our strategic objectives is essential for
the long-term profitable growth of the Group and its
ability to deliver future benefits to all stakeholders
• Economic value generated and distributed
• Net investment ((capex – depreciation) / dividends)
• Supply chain due diligence
• Prompt payment reporting
• Economic value generated and distributed
• Supply chain due diligence
• Prompt payment reporting
Planet
• Waste management %
Limit the environmental impact of our operations on
the planet so it can support the needs of the present
and future generations
Planet
Limit the environmental impact of our operations on
the planet so it can support the needs of the present
and future generations
Planet
Limit the environmental impact of our operations on
the planet so it can support the needs of the present
and future generations
Principles of governance
Uphold the highest standards of ethics and act with
integrity in accordance with our values
• GHG intensity
• CDP ratings
• Waste management %
• Coverage of certified environmental management systems
• GHG intensity
• CDP ratings
• Waste management %
• Coverage of certified environmental management systems
• Board diversity
• Board tenure
• Ethics training rate
• Number of incidents of non-compliance with the Group’s
suite of ethics policies
The following sections provide a summary of the material sustainability issues across the four focus areas, outlined above. We explain why
these issues are material to the Group, how they are managed and reported against and our performance against them during the year.
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BUILDING A SUSTAINABLE
BUSINESS
OUR PLANET
Why is it important?
Steel is the world’s most widely used
material and global steelmakers
are making progress in developing
technologies to decarbonise the
industry. All construction materials have
some environmental impact and when
assessing sustainability, it is important to
measure all of steel’s impacts, including
the atmosphere, the environment,
means of disposal, and durability. Steel
manufacturing continues to improve its
energy use and levels of greenhouse gas
emissions and steel products exhibit a
decisive life cycle advantage versus many
other construction materials (including
concrete) since they can continually
be recycled. Our structures can last for
many years, making them cost-effective
as well as sustainable and since steel is
often fabricated off-site, it can reduce
on-site labour, cycle time and construction
waste. From a sustainability perspective,
we believe that steel offers a durable,
cost-effective and sustainable choice
for construction, and our ‘Smarter, Safer,
more Sustainable’ (‘SSS’) initiatives
continue to focus on our environmental
impact through our Lean manufacturing
techniques and cost and waste
reduction programmes.
Notwithstanding this, carbon reduction
in an important strategic objective for the
Group and our sustainability policy sets
out the Group’s commitment to protect and
enhance the environment, and to limit the
environmental impact of our operations on
the planet, so it can support the needs of
the present and future generations.
Management approach
The Group is fully committed to
minimising its impact on climate
change and mitigating the business
risks that climate change presents and
have developed plans to manage them,
underpinned by the Group’s ISO 14001
certified environmental management
system. We are also certified to BES 6001
Responsible Sourcing. A key element of
our sustainability strategy is our target to
become an operationally carbon neutral
organisation in the 2021 calendar year.
Carbon neutral in this context means
that we will use carbon offsetting to
eliminate the combined scope 1, scope
2 and operational scope 3 greenhouse
gas (‘GHG’) emissions generated from our
manufacturing facilities and construction
sites. Projects set to benefit from our
carbon offsetting include solar power
projects in India (chosen because of our
existing manufacturing footprint in India),
64
Severfield plc Annual report and accountsfor the year ended 31 March 2021STRATEGIC REPORT the manufacture of efficient cookstoves in
Ghana (chosen because of the air quality
issues in Ghana), and the regeneration of
degraded lands in Chile (chosen because
of the level of innovation associated with
this project). In the future, as we reduce
our own emissions, we will rely less on
offsetting.
We have also created new targets to
reduce scope 1 and 2 GHG emissions by 25
per cent by 2025 against a 2018 baseline.
These targets are based on the 2015
International Treaty on Climate Change,
also known as the Paris Agreement, which
seeks to limit global warming to below
1.5 degrees Celsius, compared to pre-
industrial levels. To achieve this, we will
strive to:
•
reduce energy usage in all areas of
our construction sites, offices and
factories by employing Lean ways of
working,
• procure renewable electricity for all
our facilities and researching and
implement low / no carbon diesel
alternatives,
•
investigate the feasibility of bringing
renewable energy generation to our
facilities,
• minimise the use of energy, materials
and supplies, and use renewable
or recyclable materials where
practicable,
•
continue to consider energy efficiency
and environmental criteria in design,
procurement, investment and
contracting decisions,
• monitor and seek to reduce the
levels of waste produced during our
fabrication and site processes, and
• encourage our suppliers to develop
their own sustainable business
policies.
2021 achievements
The Group has improved upon previous
climate-related targets and in 2021, using
a location-based approach, we saw a
reduction of eight per cent in our scope
1 and 2 GHG emissions to 27.5 CO2e/£m
revenue compared to 29.8 in 2020 and
a reduction of 53 per cent compared to
58.9 in 2015, when we established our
baseline. Using a market-based approach,
which includes the positive impact of
switching to green energy, our scope 1
and 2 GHG emissions reduced further to
21.0 CO2e/£m revenue, 21 per cent and
64 per cent lower than 2020 and 2015,
respectively.
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BUSINESS
As required by Streamlined Energy and Carbon Reporting (‘SECR’), we report on our CO2
emissions in accordance with the internationally recognised Greenhouse Gas (‘GHG’)
Protocol and our metrics include Scope 1 and Scope 2 emissions. For the year ended 31
March 2021, the Group’s global GHG emissions, using a location-based approach, and
energy usage, were as follows:
GHG 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 (location-based)
Intensity measurement (location-based):
Absolute tonnes equivalent CO2e per £m of revenue
Tonnes of CO2e
2021
6,297
3,598
9,895
2021
27.5
2020
5,635
3,696
9,331
2020
29.8
For the year ended 31 March 2021, the Group’s global GHG emissions, using a market-
based approach, and energy usage were as follows:
GHG 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 (market-based)
Intensity measurement (market-based):
Absolute tonnes equivalent CO2e per £m of revenue
Tonnes of CO2e
2021
6,297
1,248
7,545
2021
21.0
2020
5,635
2,706
8,341
2020
26.6
Our Scope 1 and Scope 2 GHG data is being independently verified by the Carbon Trust,
in accordance with the international standard ISO 14064-3.
Using a market-based approach, Group Scope 1 and Scope 2 emissions have reduced
by 21 per cent in the year, as a direct result of increasing our green electricity portfolio.
Whilst Scope 2 emissions have decreased by 54 per cent, Scope 1 emissions have seen
an increase of 12 per cent. This increase reflects the increase in Group revenue in FY21,
including the full-year effect of the acquisition of Harry Peers.
During the year, we have further developed our management and reporting of our
operational Scope 3 emissions, as reported below. As the Group’s sustainability strategy
and management process develops, we will capture more information on our indirect
Scope 3 emissions and strive to reduce these.
GHG emissions from:
Waste
Business travel
Colleague commuting
Transport and distribution
Total CO2e emissions
Tonnes of
CO2e
2021
332
246
404
10,155
11,137
Our Scope 3 GHG data is being independently verified by the Carbon Trust, in accordance
with the international standard ISO 14064-3.
OUR PLANET
66
Severfield plc Annual report and accountsfor the year ended 31 March 2021STRATEGIC REPORT 2021
25,452
15,431
40,883
2020
22,372
14,460
36,832
to improve segregation and to look at
alternative means of disposal for items
that can be reused or recycled. Within the
year, we have also put in place a timber
returns scheme to ensure that our 100 per
cent FSC certified timber bearers, used in
loading and transportation of steel, are in
a closed loop system and therefore used to
their potential ahead of being recycled or
donated to community projects.
We continue to be accredited with the
Gold Membership Standard of the Steel
Construction Sustainability Charter and
maintain our Gold Membership with
the Supply Chain Sustainability School,
partnering with key clients by completing
learning pathways and attending targeted
sustainability training.
SteelZero – building a sustainable
future
The Group has strengthened its
commitment to reducing carbon emissions
by signing up to SteelZero, a global
initiative to speed up the transition to a
net zero steel industry. SteelZero is led by
the international non-profit organisations,
the Climate Group and ResponsibleSteel.
Targeting net zero steel from the demand-
side of the supply chain makes this
the first initiative of its kind, with the
potential for it to have significant impact
on investment, policy, manufacturing, and
production in the construction sector.
The initiative is being signed up to by an
increasing number of steel buyers, both
in the UK and internationally. By signing
up, we are making a public commitment
to transition to procuring, specifying, or
stocking 100 per cent net zero steel by
2050, with certain interim targets to be
achieved by 2030.
Next sustainability priorities for action:
•
In 2022, we will set new long-term
net zero carbon targets for the Group,
to further reduce carbon in our
operations in line with climate science,
• Working to further understand and
then refine our approach to address
the GHG impact in our supply chain
and other Scope 3 emissions,
•
In 2022, we will build on our Group
waste management process and will
set diversion from landfill and other
waste reduction targets,
• Continuing to report on our progress in
line with the TCFD framework.
Energy usage from:
Scope 1
Scope 2
Total MWH
The Group has made good progress during
the year in managing its energy, fuel
consumption and emissions. This progress
has been recognised by our inclusion in
the Financial Times inaugural listing of
Europe’s climate leaders (May 2021), which
highlights the 300 companies that have
achieved the greater reduction in their
GHG emissions between 2014 and 2019.
Following our switch to green electricity
at our two largest facilities during 2020,
we have now committed to switch to 100
per cent green electricity across all the
Group’s wholly owned facilities and, during
the year, we have achieved the level of 73
per cent. In 2021, we maintained our ‘B’
rating in the CDP index. This annual rating
is based on CDP’s evaluation of the Group’s
strategy, goals and actual emission
reductions as well as transparency and
verification of our reported data and
assesses the completeness of the Group’s
measurement and management of our
carbon footprint, our risk management
process and our sustainability strategy.
We are also focusing on our Scope 3
emissions within our direct and indirect
operations. Our fabrication processes
produce relatively little waste, with
the main source of waste being scrap
steel offcuts, which is an unavoidable
by-product even when taking into
consideration the work we do with
our supply chain to roll as closely to
specification as possible. The Group
disposes of this waste through an
independent recycling company. In 2021,
we sent 9,134 tonnes of scrap steel
for recycling.
Whilst waste in our operations in
minimal we are still focused on further
understanding our associated waste
streams, with the aim of setting a
reduction and diversion from landfill
target within 2022. Our current target
area is commercial waste as our second
largest contributor in this category. Work is
already underway with our waste provider
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OUR PEOPLE
Why is it important?
Our people are our biggest asset and
to protect this we are committed to
effectively managing all aspects of health
and safety and creating a safe, inclusive,
and diverse working environment where
everyone can thrive.
Management approach
Health and safety
This year more than ever, we have
maintained our ‘safety first’ core value.
We reacted quickly to the ever-changing
situation resulting from the pandemic and
implemented new operating procedures
to support safe working in all our factories
and sites, in accordance with national
government, devolved administrations
and industry guidelines. In 2021, the
Group further invested in its health and
safety processes, including adapting our
operations to maintain social distancing,
facilitating home working by office staff
where appropriate, providing all colleagues
with face masks, introducing sanitisation
stations throughout our offices, factories
and sites and temperature checks before
entering our facilities. We were conscious
of the difficulties faced by some of our
people through extended periods of
working from home and the effect this
could have on their mental health. Further
details of the actions the Group took and
the support that was put in place for all
our people can be found below and in
‘showcasing our resilience to COVID-19’
on page 08.
The Group’s health and safety policy
establishes our commitment to effectively
managing all aspects of health and safety.
The board’s principal aim is to continue
to ensure that, through example and
encouragement and relevant training,
we behave ethically and responsibly,
particularly in the fields of health,
safety and environmental management.
Operating within the construction industry
means many of our activities could be
potentially dangerous to our colleagues
and wider stakeholders and we recognise
our duty of care to safeguard not only
their physical health but also their mental
health and wellbeing. Our executive
committee continues to review safety
performance monthly, primarily focusing
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Severfield plc Annual report and accountsfor the year ended 31 March 2021STRATEGIC REPORT on the Group’s injury frequency rate (‘IFR’).
Investigations are also completed on
all RIDDORs (a reportable accident that
results in a colleague’s absence from work
for more than seven consecutive days) and
high potential near miss incidents (‘HiPo’),
with input from the Group SHE director,
chief operating officer and the managing
director of each business unit. Findings
from investigations and ‘lessons learned’
are shared Group-wide using measures
such as ‘stand downs’ or ‘tool-box talks’
to promote a collaborative approach to
preventing accidents and incidents.
Engagement, inclusion and diversity
Louise Hardy is the Group’s designated
non-executive director responsible
for workforce engagement. Louise is
passionate about colleague engagement
and is dedicated to ensuring that the
views of our people are heard at board
level. We communicate with colleagues
across a range of media to ensure that
they understand the operations, strategy
and performance of both the Group
and their respective Group company. As
outlined above and in the ‘principles of
governance’ section, the Group also has
well-communicated colleague assistance
helplines and whistleblowing procedures.
In 2022, Louise will lead a comprehensive
workforce engagement programme.
The aim of this programme is to gather
a deeper understanding of colleagues’
perspectives on which to build a
sustainable Group-wide approach for
ongoing dialogue.
‘Integrity’ is one of the Group’s core
values. We are committed to promoting
diversity and equality through employment
practices, that are free from discrimination
and in accordance with human rights
principles. We encourage diversity
and promote inclusivity as we believe
that diversity of gender, age, thought,
experiences and expertise enhance our
ability to operate ethically, innovatively and
sustainably.
We offer National Vocational Qualifications
to a vast majority of our workforce, the
administration and co-ordination of
which is dealt with by an in-house team of
vocational experts. This team allows us to
efficiently deal with amendments within
the industry awarding bodies, including the
Engineering Construction Industry Training
Board (‘ECITB’) and the UK Metal Decking
Association (‘UKMDA’), through the year
without relying on external sources.
The Group continues to operate annual
Save As You Earn (‘SAYE’) schemes to allow
our colleagues to share in the continued
success of the Group. All our colleagues
are eligible to participate in the Group’s
defined benefit pension scheme and have
the option to make their own contributions
though salary sacrifice. We also continue
to offer collective benefits such as cycle to
work, childcare vouchers and a discount
scheme.
2021 achievements
Health and safety
In 2021, a new platform for reporting SHE
incidents and completing inspections
was implemented, enabling us to target
and achieve improvements by identifying
trends leading to enhanced reporting,
root cause and data analysis. We have
maintained our Group-wide ISO 45001 and
14001 certifications, along with additional
client and sector-specific certifications.
Despite the challenges of adapting our
operations during the year to maintain
social distancing, we have seen a positive
and significant reduction in injury rates,
resulting in an IFR (including JSSL) of
1.48, compared to 1.81 in 2020, improving
upon our Group targets in the process.
The Group’s accident frequency rate
(‘AFR’) (including JSSL) for the year, which
is based solely on the level of RIDDORS
(reportable accidents) was 0.18, which
continues to outperform the industry
average. This represents a slight increase
from the prior year AFR of 0.15 but this
was not wholly unexpected given the
significant improvement in the AFR over
recent years.
In the early stages of the pandemic, we
risk assessed all our construction sites
and modified our operations to ensure
no work was undertaken if we could not
fully comply with the guidance issued by
the UK and local governments and the
Construction Leadership Council. Although
COVID-19 restrictions were in place for
the majority of 2021, Group directors
undertook 49 director site safety visits in
the year, engaging with colleagues on key
issues such as safety performance and
wellbeing.
Our new intranet, SeverfieldConnect,
which was launched in 2021, has allowed
us to keep colleagues up to date on the
strategy, performance and progress of the
organisation, general company news and
health and wellbeing issues. In response
to COVID-19, SeverfieldConnect was also
used to provide additional regular updates
to colleagues and to provide practical
advice and support during the pandemic,
especially those working remotely, through
a dedicated intranet page, Coronavirus
Hub. This process was assisted by our
team of 60 mental health first aiders. In
2021, we also rolled out our enhanced
Employees Assistance Programme, which
includes the launch of a new app (My
Healthy Advantage), to provide support
and advice to colleagues on physical and
mental wellbeing issues.
We also regularly use social network sites
and emails to deliver key messages to
colleagues and to encourage the use of
our new communications platforms for
colleague engagement.
Engagement, inclusion and diversity
In June 2021, we appointed Rosie Toogood
as a new non-executive director. This
appointment was made after considering
the board’s existing skills set and seeking
to improve, where appropriate, its diversity.
As at 31 March 2021, the board had one
female director (13 per cent), and Rosie’s
recent appointment increases the Group’s
percentage of women on the board to 22
per cent. Female representation on our
executive committee is two (17 per cent)
and of those reporting directly to members
of the executive committee, female
representation is much higher at 63 per
cent with nearly all senior finance and HR
roles being held by women.
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During the year, we updated our succession plan which identifies and develops future
senior leaders from within the business. We believe that being able to promote from
within is critical so that we can retain specialist skills and experience, especially given
the capabilities and expertise that we provide to our clients.
In 2021, despite the COVID-19 headwinds, we continued to invest in our people, through
the continuous provision of training programmes. These include externally facilitated
courses and events, together with a wide range of training courses that are provided
internally by our dedicated in-house HR and SHE teams.
We also continued to promote our graduate and apprenticeship schemes, which are
particularly focused on welders and technical staff, in particular our metal fabricator
apprenticeship programme, which we developed in conjunction with the Institute of
Apprenticeships.
The Severfield Foundation
The Severfield Foundation (‘the Foundation’), our registered charitable incorporated
organisation, has continued to be a great success during the year, from raising funds
and awareness for several local and national charities to encouraging engagement
among our employees. The Foundation’s national partner charity is the Alzheimer’s
Society. Since our two-year partner-relationship with the Alzheimer’s Society started,
the Foundation, through the Group’s dedicated and generous employees, has raised over
£72,000.
Along with supporting our national charity partner, the Foundation also worked with
several nominated local charities for each of our company subsidiaries, including Bolton
Hospice, Aisling Centre, St Catherine’s, Yorkshire Air Ambulance and York Mind.
Number of staff by region
England
Wales
Northern Ireland
Republic of Ireland
Scotland
Europe
Job creation / employee turnover
Jobs created – Group
Employee turnover – Group
2021
1,121
7
320
9
8
6
1,471
2021
(number)
175
180
2020
1,031
9
347
8
7
6
1,408
2021
(%)
12%
12%
OUR PEOPLE
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Severfield plc Annual report and accountsfor the year ended 31 March 2021STRATEGIC REPORT OUR PROSPERITY
Why is it important?
Striving for continuous improvement
across our four sustainability focus
areas, is essential to support the long-
term success and sustainability of the
Group. Continually delivering value, in
an ethical and transparent manner,
helps to build strong relationships with
customers, suppliers and shareholders,
increasing our prospects of accessing new
business opportunities.
Management approach
As outlined in the ‘principles of
governance’ section above, our
interactions with stakeholders are
governed by several key corporate policies
and procedures, including modern slavery,
human rights, anti-bribery, competition
law and whistleblowing. Our policies
require us to conduct our business in an
open and honest way, and, as a result, we
aim to have a positive impact on our local
communities in which we operate.
A lot of the value the Group creates
is redistributed throughout the local
communities, through payments to local
suppliers, to our local workforce (wages
and benefits), to the Group’s providers
of our financing facilities and other
capital providers (interest payments,
loan repayments and dividends) and
as donations to local charities and
community groups supported by
our colleagues.
We acknowledge that improving our
sustainability performance is only
possible if we collaborate with businesses
that share our commitment. Our
supply chain predominantly consists
of subcontractors working on our sites,
and materials suppliers. We have a
comprehensive Group-wide supplier
accreditation process, managed through
our central procurement team, which
continually assesses our supply chain
on areas including quality, safety,
responsible manufacturing and ethical
resourcing to ensure compliance with the
Group’s policies.
We believe in treating our suppliers and
subcontractors fairly and with respect.
Our three main business units are all
signatories of the Prompt Payment Code
(‘PPC’). Our relationships with our supply
chain partners are of strategic importance
and key to the Group’s success, and
payment practices remained a major area
of focus throughout the year and even
more so against the backdrop of COVID-19.
Through our ongoing capital investment
programme, 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. We also have a
progressive dividend policy where funding
flexibility is maintained to ensure there
are sufficient cash resources to fund
the Group’s requirements, including our
capital investment programme.
The UK margin performance continues to
reflect improvements to our operational
execution, including the benefits from
our programme of projects categorised
under the banner of ‘SSS’. These initiatives
continue to focus on manufacturing
efficiency and improving many aspects
of our internal operations, including
the application of Lean manufacturing
techniques, optimisation of factory
processes and production flows, quality
control and cost reduction programmes,
all of which have served the Group well
during the pandemic.
2021 achievements
In 2021, the Group generated economic
value of £363.3m (2020: £327.4m), an
increase of 11 per cent from the prior year
and distributed £343.2m (2020: £306.1m),
resulting economic value retained of
£20.1m (2020: £21.3m).
For the Prompt Payment Code reporting
period of 1 October 2020 to 31 March
2021, all the Group’s businesses that are
signatories of the PPC, reported that at
least 95 per cent of invoices were paid
within 60 days.
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OUR PROSPERITY
Key metrics:
Economic value
£m
Economic value
generated
Economic value
distributed
Economic value
retained
Taxes paid
£m
Taxes paid
2021
2020
363.3
327.4
(343.2)
(306.1)
20.1
21.3
2021
4.6
2020
6.0
During the year, 97 per cent of the Group’s
suppliers were subject to our annual
supply chain contractor due diligence
reviews to ensure our supply chain
maintains the highest operational and
ethical standards.
We continue to invest in excess of
depreciation through the Group’s
ongoing capital investment programme,
and capital expenditure in 2021 was
£6.6m (2020: £6.5m), taking our capital
investment in the Group to close to
£50m over the last seven years. In 2021,
recognising the importance of dividends
to our shareholders and to our investment
case, we paid ordinary dividends of £8.9m
(2020: £8.9m), resulting in net investment
of 25 per cent (2020: 29 per cent). Net
investment in this context means capital
expenditure minus depreciation divided by
dividend payments.
The benefits of ‘SSS’ operational
improvements were seen in our profit
performance and an underlying profit
before tax of £24.3m (2020: £28.6m),
which was achieved despite the COVID-19
related disruption experienced by the
Group which particularly impacted
profitability in Q1.
72
Severfield plc Annual report and accountsfor the year ended 31 March 2021STRATEGIC REPORT OUR PRINCIPLES
OF GOVERNANCE
Why is it important?
Integrity is one of our core company values
and this means that we conduct our
business lawfully and ethically. We strive
to uphold the highest standards of ethics
and act with integrity in accordance with
our values.
Good governance is key to ensuring the
Group’s long-term sustainability. The board
has overall responsibility for the Group’s
sustainability strategy and determining
its risk appetite. The level of risk it is
considered appropriate to accept in
achieving the Group’s strategic objectives
is reviewed and validated by the board.
The appropriateness of the mitigating
actions is determined in accordance with
the board-approved risk appetite for
the relevant area. This process includes
the identification and management of
climate-related and other sustainability-
related risks.
Following the launch of our new
sustainability policy in 2020, we
established a sustainability executive
working group to focus on the evolution
of our sustainability strategy and to
set the Group’s sustainability targets
and metrics in accordance with the UN
SDGs. We have also created a separate
sustainability climate-related risk register
to ensure that material risks are identified
and managed effectively. The following
risks were identified, all of which have
been considering when establishing our
sustainability strategy (none of these
risks are sufficiently elevated at present
to warrant disclosure as one of the Group
‘principal risks’ on pages 76 to 86.
• Failure to reduce emissions,
• Compliance with legislation (climate
and other ESG metrics),
• Compliance with external
requirements / expectations (climate
and other ESG metrics),
• Sustainability of steel,
• Climate risk per se (extreme weather,
global warming etc.).
In 2022 and beyond, the Group’s
sustainability committee will continue
to engage with a wide range of senior
managers and colleagues across
the Group to oversee the day-to-day
implementation of our sustainability
strategy and report on the progress of the
Group to the executive committee, who
ultimately report to the board.
This gives us a well-defined management
structure to help us achieve our
sustainability objectives.
Board of directors
Responsible for the Group
sustainability strategy
Executive committee
Sustainability executive
working group
Sustainability committee
Oversee strategy implementation and
review progress against our strategic
objectives
Supported by senior
management
including Group sustainability
manager and Group procurement
manager
Wider employee groups
Implement the Group’s strategy and
report on performance within their
sites
Management approach
Business ethics and compliance with the
Group’s policies and procedures, which
establish the rules of conduct within
Severfield, are all extremely important.
We ensure compliance by ensuring all our
colleagues are fully trained on the content
of our key corporate policies, including
modern slavery, human rights, anti-bribery,
competition law and whistleblowing (see
below for further details).
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OUR PRINCIPLES
OF GOVERNANCE
These policies require all colleagues
not only to operate in compliance with
applicable laws and regulations, but also
in accordance with internal controls and
reporting requirements. They are regularly
reviewed and updated and frequent
training via our e-learning platform,
Cognito, is provided to all relevant
colleagues. The Group’s suite of policies is
available on our website.
As set out in our Group assurance map
and compliance framework, the board also
relies on our financial controls, compliance
with the Group’s authorisation policy
and general management oversight and
review of financial and other reporting. All
our businesses operate local processes
to ensure policies are effectively
implemented.
2021 achievements
We have a comprehensive Group-wide
supplier accreditation process which
involves reviewing and scoring supplier
performance on criteria such as quality
and safety and providing them with
constructive feedback. During the year,
we were awarded ‘A’ rating in the CDP’s
annual supplier engagement rating,
improving on our ‘A minus’ rating in the
previous year. This is designed to evaluate
and drive action on corporate supply chain
engagement on climate issues. The scope
of the review includes governance, targets,
value chain emissions and supplier
engagement strategies.
In 2021, the Group had no incidents of
bribery or corruption confirmed during the
year (either relating to 2021 or previous
years) and there were no incidents of
discrimination reported during the year
(either through HR or whistleblowing
disclosures). In addition, the Group
received no fines or sanctions imposed
for legal or regulatory breaches (including
HSE and environmental) or relating to
non-compliance with laws and regulations
during the year.
During the year, the majority of our
colleagues, including all office and senior
factory and site personnel, completed
regular ethics training (using Cognito)
based on the Group’s following policies:
• whistleblowing policy,
• anti-bribery policy,
•
competition law compliance policy,
• health and safety policy,
• equal opportunities and diversity
policy,
•
•
•
•
share dealing code,
information security policy,
social media policy,
social and sustainability policy,
• modern slavery statement.
Modern slavery
The board annually reviews and approves
the Group’s modern slavery statement.
The 2021 statement is available on our
website and explains the actions taken to
ensure that we do not undertake activities
or engage suppliers or subcontractors who
undertake activities that may be in breach
of the Modern Slavery Act 2015. This
year we undertook a more detailed risk
assessment of our supply chain, trained
all relevant staff in awareness of modern
slavery and encouraged key suppliers to
undertake training through the Supply
Chain Sustainability School.
Human rights
We remain committed to protecting
and respecting the human rights of our
colleagues and those who work throughout
our supply chain. As a company operating
within the UK, the key human rights issue
we face is equality, which we address with
training and promoting inclusivity.
74
Severfield plc Annual report and accountsfor the year ended 31 March 2021STRATEGIC REPORT Anti-bribery and corruption
Bribery and corruption are criminal
offences in the countries in which the
Group operates. We have a responsibility
to our stakeholders to conduct our
business in an honest and ethical manner.
Our Group policy prohibits all forms of
bribery, both in giving and receiving,
wherever it operates. This includes our
colleagues and any agent, contractor,
consultant or business partner acting on
our behalf or under our control.
Whistleblowing
We encourage effective and honest
communication, and we respond
immediately to any malpractice brought
to our attention. Our whistleblowing policy
enables anyone to raise genuine concerns
about malpractice in the knowledge that
their concerns will be taken seriously and
that they will be protected from possible
reprisals by colleagues and management.
We also publish details for Protect, an
independent charity, allowing colleagues
to raise concerns or seek advice from
someone outside of the Group. Any
whistleblowing report is immediately
reported to the Group’s legal director,
Group HR director or Group SHE director,
as appropriate, and is investigated
quickly with appropriate feedback
provided to the whistle blower.
Tax transparency
The Group is committed to compliance
with all applicable tax laws and
regulations across all the countries in
which we operate. We focus on ensuring
that, across the wide remit of taxes, the
Group has comprehensive governance
and risk management processes in place
to allow us to meet our obligations.
We maintain a good, open and honest
working relationship with HMRC, seeking
to clarify any areas of potential uncertainty
in relation to new or existing tax legislation
at an early stage, and we have regular
meetings with them to update on the
Group’s performance and structure. We do
not engage in any aggressive tax planning
of tax avoidance schemes.
We have rigorous procedures in place for
preventing the facilitation of tax evasion
and ensure that all relevant colleagues are
trained in the key aspects of the relevant
legislation.
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MANAGE RISK
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 key focus areas in 2021
COVID-19
The impact of the COVID-19 pandemic
was a major area of focus during, in
particular, the first half of the year and,
as reported last year, we coped well with
the challenges presented by COVID-19,
keeping our factories operational and
our construction sites open, for almost
all of the year by implementing strict
precautions, including enhanced levels of
cleaning, additional hygiene facilities and
social distancing.
Brexit
The risks associated with Brexit remained a
key focus during the year due to the lack of
clarity on the long-term trading relationship
that would be established with the EU and
we implemented a detailed contingency
plan in preparation for Brexit to allow us
to continue our operations with the least
impact by ensuring that the flow of goods
(both imports and exports) continued
unimpeded. The new trading arrangements
with the EU, which came into effect from
1 January 2021, have not had a significant
impact on the Group’s operations.
ESG matters
We have established a sustainability
working group which is in the process
of creating a separate sustainability
risk register and setting out the Group’s
roadmap to compliance with the Listing
Rules for Climate-related Financial
Disclosures (‘TCFD’), which will require us
to disclose in next year’s annual report
how the Group has identified, assessed
and managed ESG risks.
Read more about building a
sustainable business on pages 60
to 75
Our future priorities for 2022
Some of our main priorities (and emerging
risks) this year will be:
• Continued focus on the recovery of the
market from COVID-19;
• Continued identification and
mitigation of sustainability risks;
76
• Continued focus on staff engagement
and culture in order to maintain good
industrial relations; and
• Continued focus on cyber security risk.
Changes to principal risks
The following changes have been made to
the Group’s principal risks in 2021:
• Commercial and market environment
risk was downgraded from high to
medium risk, reflecting both the
relative certainty provided by the
agreement of a UK-EU trade deal
and the resilience provided by our
market sector, geographical and
client diversity, which has enabled the
Group to navigate well through the
challenging market conditions during
the COVID-19 pandemic.
• COVID-19 risk was downgraded from
high to medium risk, reflecting the
Group’s ability over the past 12 months
to deal with the challenges presented
by COVID-19, and the reducing
impact of the pandemic itself due
to the ongoing roll-out of the global
vaccination programme and the easing
of lockdowns.
• Supply chain risk was upgraded from
medium to high risk, reflecting the
impact of demand issues caused, in
part, by COVID-19, on the capacity
levels of and product availability
from certain of our supply chain
partners. This has been exacerbated
by significant increases in the price of
iron ore for some suppliers which led to
similar increases in the price of some
steel products over the same period.
• Mispricing a contract (at tender) risk
was downgraded from medium to low
risk, reflecting the improved ability
of the Group’s businesses to price
complex projects.
• We have renamed IT resilience risk
as Cyber security risk since we now
regard the risk of a deliberate cyber-
attack which breaches our defences as
our principal IT risk.
Other principal risks remain largely
unchanged from last year. Changes
have also been made to the detailed
descriptions of mitigation to reflect
ongoing activity in the year.
Risk appetite
The level of risk it is considered appropriate
to accept in achieving the Group’s strategic
objectives is reviewed and validated
by the board. The appropriateness of
the mitigating actions is determined in
accordance with the board-approved risk
appetite for the relevant area.
The organisation’s approach is to minimise
exposure to reputational, financial and
operational risk, while accepting and
recognising a risk and reward trade-off in
the pursuit of its strategic and commercial
objectives. Operating in the construction
industry, the reputation of the Group is
imperative to its continued success and
cannot be risked. Consequently, it has a zero
tolerance for risks relating to health and
safety. However, management recognises
that certain strategic, commercial and
investment risks will be required to seize
opportunities and deliver growth in line with
the Group’s strategic objectives.
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.
Risk management process
The board has overall responsibility for the
Group’s risk management and systems of
internal control and 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. This includes emerging risks
such as climate-related risks and cyber
security risks.
The audit committee, on behalf of the
board, formally reviews principal and
emerging risks and mitigations for the
Group and each of the businesses on a
biannual basis. The key elements of this
risk management process are:
• Senior management from all key
disciplines and businesses within
the Group continue to be involved in
Severfield plc Annual report and accountsfor the year ended 31 March 2021STRATEGIC REPORT •
the process of risk assessment and
monitoring in order to identify and
assess Group objectives, key issues,
emerging issues and controls.
Further reviews are performed to
identify and monitor those risks relevant
to the Group as a whole. This process
feeds into our assessment of long-term
viability and encompasses all aspects of
risk, including operational, compliance,
financial, strategic, and ESG issues.
Identified risk and emerging 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.
• Ongoing risk management and
assurance is provided through various
monitoring reviews and reporting
mechanisms, including the executive
risk committee (chaired by the chief
executive officer) 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 boards consider
and report on risk on a monthly basis
as part of the monthly business review
process. In doing so they identify
emerging risks. 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. In
addition, the Group legal director
and Group IT director meet on a
quarterly basis to review IT risks facing
the Group and the ESG risk review
committee (comprising the Group
legal director, the Group SHE director,
Group financial controller and the
Group sustainability manager) meet on
a quarterly basis to review ESG risks
facing the Group. The outcome of these
discussions is collated and reported to
the executive committee.
• The risk registers of each business,
together with the Group IT risk
register, and the Group ESG risk
register 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 and to consider in
detail the various impacts of the risks
and the mitigations in place.
• A Group assurance map is used to co-
ordinate the various assurance providers
within the Group and a compliance
framework provides the board with
a ready reference tool for monitoring
compliance across the Group.
Group board
Risk appetite
First line of defence
Second line of defence
Management activity
Divisional boards
Internal controls:
• Project management procedures
• Health and safety
• Financial control
• Cash and working capital
management
Group oversight
Group policies
• Group authorisation policy
• Group finance manual
• Contract sign-off process
• Purchase guidelines
• Quality manual
• SHE policies
− Information security
management policy
Committees
• Executive committee, risk
committee, safety leadership team,
Group human resource committee
and sustainability committee
• Audit committee
• Nominations committee
− Information security
management committee
Third line of defence
Independent review
Divisional boards
Internal controls:
• External audit
•
Internal audit
• Other third-party assurance
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MANAGE RISK
Three lines of defence
The Group manages risk by operating a ‘three lines of defence’ assurance model (management activity, Group oversight and
independent review), which is mapped against the Company’s principal risks. This process is summarised in the Group assurance map.
Senior management/risk committee
The board/audit committee
A. First line of defence:
Management activity
B. Second line of defence:
Group oversight
C. Third line of defence:
Independent review
A. First line of defence:
Management activity
The first line of defence involves senior
management implementing and
maintaining effective internal controls
and risk management procedures. These
internal controls cover all areas of the
Group’s operations. 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
Group’s policies and procedures are
continuously under review and improved
to ensure they are adequate for our
current circumstances.
The key features of the Group’s framework
of internal controls are as follows:
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.
Health and safety
SHE 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.
Financial control
The Group maintains a strong system of
accounting and financial management
controls. Standard financial control
procedures operate throughout the Group
to ensure the integrity of the Group’s
financial statements.
The Group operates a comprehensive
budgeting and forecasting system. 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.
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.
B. Second line of defence:
Group oversight
The first line of defence is supported by
certain Group policies, functions and
committees which, in combination, form
the second line of defence.
Group policies
Internal controls across financial,
operational and compliance systems
are provided principally through the
requirement to adhere to the Group
finance manual, divisional procedures
and a number of Group-wide policies
(such as the Group authorisation policy,
the contract sign-off process, the
purchase guidelines, the anti-bribery
policy, the Competition Law compliance
policy, the quality manual, the health
and safety policy and the environmental
policy). During the year, we were
audited successfully on our ISO 27001
accreditation for our information security
management system and a separate
committee reviews any information
security issues impacting the Group. This
continues to give further assurance as
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Severfield plc Annual report and accountsfor the year ended 31 March 2021STRATEGIC REPORT S T R AT E G I C R E P O R T
to the Group’s resilience to cyber risk,
which is a subject that is also discussed
regularly at main board level.
These policies are supported by
statements of compliance from all
directors and letters of assurance
(‘LoA’) from the Group’s four managing
directors. LoAs are required twice
yearly, one at 30 September and one
at 31 March, supported by an internal
control questionnaire (‘ICQ’) which is
completed by each business unit and
which provides a detailed basis for
management to satisfy themselves that
they are complying with all key control
requirements. The responses in these
ICQs are subject to ongoing independent
review by PwC, the Group’s internal
auditor.
The following main committees provide
oversight of management activities:
The executive committee,
risk committee and safety
leadership team
These committees are responsible
for the identification, reporting and
ongoing management of risks and for
the stewardship of the Group’s risk
management approach.
The audit committee
The board has delegated responsibility
to this committee for overseeing the
effectiveness of the Group’s internal
control function and risk management
systems.
The nominations 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.
C. Third line of defence:
Independent review
The third line of defence represents
independent assurance which is provided
mainly by the internal auditor, external
auditor and various external consultants
and advisers. External consultants and
advisers support management and
the board through ad hoc consulting
activities, as required, including the
Group’s insurance brokers Lockton LLP.
Internal auditor
The audit committee annually reviews
and approves the PwC internal audit
programme for the year. The committee
reviews progress against the plan at each
of its meetings, considering the adequacy
of audit resource, the results of audit
findings and any changes in business
circumstances which may require
additional audits.
The results of internal audits are
reported to the executive team and
senior management and, where required,
corrective actions are agreed. The results
of all audits are summarised for the audit
committee along with progress against
agreed actions.
Annual review of effectiveness
The risk management and internal
control systems have been in place for
the year under review and up to the date
of approval of the annual report and
are regularly reviewed by the board. The
board monitors executive management’s
action plans to implement improvements
in internal controls that have been
identified following the processes
described above.
The board confirms that it has not
identified any significant failings or
weaknesses in the Group’s systems of
risk management or internal control as
a result of information provided to the
board and resulting discussions.
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Principal risks
The board has carried out a robust assessment of the principal risks and uncertainties which have the potential to impact the Group’s
profitability and ability to achieve its strategic objectives. These are set out in the table below. This list is not intended to be exhaustive.
Additional risks and uncertainties not presently known to management or deemed to be less significant at the date of this report may
also have the potential to have an adverse effect on the Group.
Principal risk
Strategic pillars
Link to KPIs
Movement
Scoring
1 Health and safety
2 Supply chain
3 Commercial
and market environment
4 COVID-19
5 Cyber security
6 Failure to mitigate onerous
contract terms
7 Indian joint venture
8 People
Strategic pillar key
Growth
Clients
India
Operational
excellence
People
1 2 3 4 5 6 7
1 2 3 4 5 6 7
1 2 3 4 5 6 7
1 2 3 4 5 6 7
1 2 3 4 5 6 7
1 2 3 4 5 6 7
1 2 3 4 5 6 7
1 2 3 4 5 6 7
KPI key
1 Underlying operating profit and
margin (before JVs and associates)
2 Underlying basic earnings per
share (‘EPS’)
3 Revenue growth
4 Operating cash conversion
5 Return on capital employed
(‘ROCE’)
6 Order book
7 Accident frequency rate (‘AFR’) /
Injury frequency rate (‘IFR’)
Movement
Upward trend
Downward trend
No change
New
Scoring
High
Medium
Scoring
The scoring of each risk as high or medium is determined based on the scoring of the risk within the Group’s risk register. This scoring
takes into account the potential impact and likelihood associated with the crystallisation of each risk (the assessment of impact takes
into account both potential and reputational issues). Only high and medium risks are considered sufficiently significant for disclosure
in the annual report.
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81
HOW WE
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1 Health and safety
Movement:
Scoring: High
2 Supply chain
Movement:
Scoring: High
Description
The Group works on significant, complex and
potentially hazardous projects, which require
continuous monitoring and management of health
and safety risks. Ineffective governance over and
management of these risks could result in serious
injury, death and damage to property or equipment.
• 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.
• Close monitoring of subcontractor safety
performance.
Impact
A serious health and safety incident could lead
to the potential for legal proceedings, regulatory
intervention, project delays, potential loss of
reputation and ultimately exclusion from future
business. Continued changes in legislation can result
in increased risks to both individuals and the Group.
Mitigation
• Established safety systems, site visits, safety
audits, monitoring and reporting, and detailed
health and safety policies and procedures are
in place across the Group, all of which focus on
prevention and risk reduction and elimination.
• Thorough and regular employee training
programmes.
• Priority board review of ongoing performance
and in-depth review of both high potential and
reportable incidents.
• Regular reporting of, and investigation and root
cause analysis of, accidents, incidents and high
potential near misses.
• Behavioural safety cultural change programme.
• Occupational health programme, including
mental health.
• Achievement of challenging health and safety
performance targets is a key element of
management and staff remuneration.
• Detailed due diligence on new acquisitions
and effective integration of SHE processes and
systems.
Description
The Group is reliant on certain key supply chain
partners for the successful operational delivery of
contracts to meet client expectations. The failure of
a key supplier, a breakdown in relationships with a
key supplier or the failure of a key supplier to meet
its contractual obligations could potentially result
in some short to medium-term price increases and
other short-term delay and disruption to the Group’s
projects and operations. There is also a risk that
credit checks undertaken in the past may no longer
be valid.
Impact
Interruption of supply or poor performance by a
supply chain partner could impact the Group’s
execution of existing contracts (including the costs
of finding replacement supply), its ability to bid for
future contracts and its reputation, thereby adversely
impacting financial performance.
Mitigation
•
Initiatives are in place to select supply chain
partners that match our expectations in terms
of quality, sustainability and commitment to
client service – new sources of supply are quality
controlled.
• Ongoing reassessment of the strategic value of
supply relationships and the potential to utilise
alternative arrangements, including for steel
supply.
• Contingency plans developed to address supplier
and subcontractor issues (including the failure of
a supplier or subcontractor).
• Monthly review process to facilitate early warning
of issues and subsequent mitigation strategies.
• Strong relationships maintained with key
suppliers, including a programme of regular
meetings and reviews.
•
Implementation of best practice improvement
initiatives, including automated supplier
accreditation processes.
• Key supplier audits are performed within projects
to ensure they can deliver consistently against
requirements.
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Severfield plc Annual report and accountsfor the year ended 31 March 2021STRATEGIC REPORT 3 Commercial and market environment
Movement:
Scoring: Medium
Description
Changes in government and client spending or
other external factors could lead to programme
and contract delays or cancellations, or changes in
market growth. External factors include national
or market trends, political or regulatory change
(including the UK’s trading relationship with the EU)
and the impact of pandemics (including the ongoing
COVID-19 pandemic).
The pace of recovery from the impact of the COVID-19
pandemic is unpredictable and could have a negative
impact on future trading. A sluggish recovery from
COVID-19 could adversely impact investor confidence.
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.
Impact
A significant fall in construction activity and higher
costs could adversely impact revenues, profits, ability
to recover overheads and cash generation.
Mitigation
• Regular reviews of market trends performed (as
part of the Group’s annual strategic planning
and market review process) to ensure actual and
anticipated impacts from macroeconomic risks
are minimised and managed effectively.
• Regular monitoring and reporting of financial
performance, orders secured, prospects and the
conversion rate of the pipeline of opportunities
and marshalling of market opportunities is
undertaken on a co-ordinated Group-wide basis.
• Selection of opportunities that will provide
sustainable margins and repeat business.
• Strategic planning is undertaken to identify and
focus on the addressable market (including new
overseas and domestic opportunities).
• Monitoring our pipeline of opportunities in
continental Europe and in the Republic of Ireland,
supported by our European business venture.
• The Group closely monitors the flows of goods
and people across borders for ongoing work with
the EU and specific risks and related mitigations
are kept under review by the executive committee.
We have taken steps to ensure we can continue
to deliver on current and future contractual
commitments.
• Maintenance and establishment of supply chain
in mainland Europe.
• Close management of capital investment and
focus on maximising asset utilisation to ensure
alignment of our capacity and volume demand
from clients.
• 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 cash position supports the business
through fluctuations in the economic conditions
of the sector.
• Acquisition of Harry Peers and DAM Structures
has broadened our reach and cross-selling
opportunities, resulting in improved market
resilience.
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4 COVID-19
Movement:
Scoring: Medium
5 Cyber security
Movement:
Scoring: Medium
Description
Future outbreaks of COVID -19 or temporary
emergency public measures such as travel bans,
quarantines and public lockdowns could have a
significant and prolonged impact on global economic
conditions, disrupt our clients and suppliers, supply
chain, increase employee absenteeism and adversely
impact our operations.
Impact
The effect of the disease itself is on the health
and safety of our people, the financial impact of
implementing social distancing measures across
our business and the economic slowdown that
has resulted from the measures taken in the UK
and abroad to combat the virus. A significant fall in
demand and higher costs could adversely impact
revenues, profits, ability to recover overheads and
cash generation.
Mitigation
• The safety and wellbeing of our clients and
employees continues to be our overriding priority.
Our executive committee are monitoring events
closely with regular board oversight evaluating
the impact and designing appropriate response
strategies.
• The availability of cash resources and committed
facilities together with strong cash flow to
support our strong financial position, including
the Group’s longer-term viability.
Description
Cyber-attack 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 keep pace with new technologies and
respond to threats to data and security.
Impact
Prolonged or major failure of IT systems could result
in business interruption, financial losses, loss of
confidential data, negative reputational impact and
breaches of regulations.
Mitigation
•
IT is the responsibility of a central function which
manages the majority of the systems across the
Group. Other IT systems are managed locally by
experienced IT personnel.
• Significant investments in IT systems which
are subject to board approval, including anti-
virus software, off-site and on-site backups,
storage area networks, software maintenance
agreements and virtualisation of the IT
environment.
• Specific software has been acquired to combat
the risk of ransomware attacks.
• Group IT committee ensures focused strategic
development and resolution of issues impacting
the Group’s technology environment.
• Robust business continuity plans are in place
and disaster recovery and penetration testing are
undertaken on a systematic basis.
• Data protection and information security policies
are in place across the Group.
• Cyber-crimes and associated IT risks are
assessed on a continual basis and additional
technological safeguards introduced. Cyber
threats and how they manifest themselves
are communicated regularly to all employees
(including practical guidance on how to respond
to perceived risks).
•
•
ISO 27001 accreditation achieved for the Group’s
information security environment and regular
employee engagement undertaken to reinforce
key messages.
Insurance covers certain losses and is reviewed
annually to establish further opportunities for
affordable risk transfer to reduce the financial
impact of this risk.
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Severfield plc Annual report and accountsfor the year ended 31 March 2021STRATEGIC REPORT 6 Failure to mitigate onerous contract terms
Movement:
Scoring: Medium
Description
The Group’s revenue is derived from construction
contracts and related assets. Given the highly
competitive environment in which we operate,
contract terms need to reflect the risks arising from
the nature or the work to be performed. Failure to
appropriately assess those contractual terms or the
acceptance of a contract with unfavourable terms
could, unless properly mitigated, result in poor
contract delivery, poor understanding of contract
risks and legal disputes.
Impact
Loss of profitability on contracts as costs incurred
may not be recovered, and potential reputational
damage for the Group.
Mitigation
• The Group has identified minimum standard
terms which mitigate contract risk.
• Robust tendering process with detailed legal and
commercial review and approval of proposed
contractual terms at a senior level (including
the risk committee) are required before contract
acceptance so that onerous terms are challenged,
removed or mitigated as appropriate.
• Regular contract audits are performed to ensure
contract acceptance and approval procedures
have been adhered to.
• We continue to work with the British
Constructional Steelwork Association to raise
awareness of onerous terms across the industry.
• Through regular project reviews we capture early
those occasions where onerous terms could have
an adverse impact and are able to implement
appropriate mitigating action at the earliest
stage.
7 Indian joint venture
Movement:
Scoring: Medium
Description
The growth, effective management and performance
of our Indian joint venture (‘JSSL’) is a key element of
the Group’s overall strategy. The Indian market has
continued to expand rapidly in recent years and the
factory in Bellary has been expanded to meet current
and anticipated future market growth.
The COVID-19 pandemic continues to impact JSSL
and recovery is likely to take several months.
Impact
Failure to effectively manage our operations in India
could lead to financial loss, reputational damage and
a drain on cash resources to fund the operations.
Mitigation
•
In line with the response of the Group to
COVID-19, local management in India continue to
closely monitor cash flows and debt repayments,
together with adopting specific actions to
minimise the disruption on the joint venture
operations during the Indian economy’s recovery
period.
• Restructuring undertaken in 2021 to reduce
overheads without compromising future growth
plans.
• Robust joint venture agreement and strong
governance structure is in place.
• Regular schedule of annual visits to India by
UK executive and senior management to review
operations and ensure appropriate oversight
(suspended during the COVID-19 outbreak and
conducted by video conference).
• Two members of the Group’s board of directors
are members of the joint venture board.
• Regular formal and informal meetings held with
both joint venture management and joint venture
partners.
• Contract risk assessment, engagement and
execution process now embedded in the joint
venture.
• Operational improvement programmes remain
ongoing.
• Ongoing review of controls environment and risk
management processes undertaken by Group
senior management.
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8 People
Movement:
Scoring: Medium
Description
The ability to identify, attract, develop and retain
talent is crucial to satisfy the current and future
needs of the business. Skills shortages in the
construction industry are likely to remain an issue for
the foreseeable future and it can become increasingly
difficult to recruit capable people and retain key
employees, especially those targeted by competitors.
Impact
Loss of key people could adversely impact the Group’s
existing market position and reputation. Insufficient
growth and development of its people and skill sets
could adversely affect its ability to deliver its strategic
objectives.
A high level of staff turnover or low employee
engagement could result in a decrease of confidence
in the business within the market, customer
relationships being lost and an inability to focus on
business improvements.
Mitigation
• Training and development schemes to build skills
and experience, such as our successful graduate,
trainee and apprenticeship programmes.
• Detailed succession planning exercise
commenced in 2021 to identify and develop
future senior leaders within the business.
• Attractive working environments, remuneration
packages, technology tools and wellbeing
initiatives to help improve employees’ working
lives.
• Annual appraisal process providing two-way
feedback on performance.
•
•
Internal communications continually improved.
Interviews with leavers and joiners to understand
the reasons for their decision.
• A new HR structure implemented in 2021 and
updated HR systems rolled out covering payroll
and a new employee portal.
• Three-year goals have been defined around HR
operational efficiency, evolving our approach
to performance, development and careers
and creating an environment where Severfield
employees feel listened to and are fairly
recognised and rewarded for their contribution to
the Group.
• A review of the company approach to flexible
working practices has been undertaken in the
light of our experiences of remote working during
the COVID-19 pandemic.
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SECTION
172 STATEMENT
Section 172 of the Companies Act 2006 requires each director to act in the way they consider, in good faith, would
most likely promote the success of the Group for the benefit of its shareholders. In doing this, the director must
have regard, amongst other matters, to:
•
•
•
•
•
•
the likely consequences of any
decision in the long term;
the interests of the Group’s employees;
the need to foster the Group’s
business relationships with suppliers,
customers and others;
the impact of the Group’s operations
on the community and the
environment;
the Group’s reputation for high
standards of business conduct; and
the need to act fairly as between
members of the Group.
The board has complied with these
requirements. Details of the board’s
decisions in 2021 to promote long-
term success, and how it engaged with
stakeholders and considered their
interests when making those decisions,
can be found throughout this strategic
report and in the governance report.
A key board decision is ensuring that
we continue to have the right strategy
in place for sustainable growth. Details
of our strategy, how it is resourced and
the value generated for stakeholders are
set out in the strategic report. The board
monitors the Group’s culture to ensure
that high standards of business conduct
are maintained.
Open, constructive dialogue with our
employees and other key stakeholders is
critical to inform the board’s decisions.
Whilst the board has overall responsibility
for managing relationships with all our
stakeholders, some stakeholder groups are
most practicably engaged with directly by
Group companies. The board supervises
this engagement with their stakeholders,
principally through quarterly management
meetings between the boards of each
Group company and the executive directors.
The board has identified its and
the Group’s key stakeholders as
our shareholders, employees and
funders. With facilitation through
Group departmental activity our Group
companies manage relationships with
their employees, clients, supply chain
partners and local communities. Details
of how we have engaged as a Group with
our stakeholders can be found on page
30 of the strategic report. The board’s
direct engagement with stakeholders is
described on page 104 in the governance
report, the board’s key decisions and the
stakeholder groups considered during the
decision-making process are set out on
page 104, and the board’s monitoring of
the Group’s culture is described on pages
106 to 107.
The board monitors the Group’s
performance in relation to safety and the
reduction of greenhouse gas emissions
and waste on a monthly basis.
Approval of strategic report
The strategic report is approved by the
board and signed on its behalf by:
Mark Sanderson
Company secretary
16 June 2021
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GOVERNANCE
88
Severfield plc Annual report and accountsfor the year ended 31 March 2021 CONTENTS
Our board of directors
Our executive committee
Our chairman’s view on governance
Corporate governance report
Audit committee report
Nominations committee report
Directors’ report
Directors’ remuneration report
– Letter from the committee
chairman
– Policy
– Implementation
Directors’ responsibilities
statement
90
92
94
96
108
112
114
118
121
129
141
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Stock Code: SFR
89
89
www.severfield.comStock Code: SFR OUR BOARD
OF DIRECTORS
Executives and
non-executives
The quality of our workforce, senior
leadership team and board leaves us
well placed to deliver on our strategic
expectations and for long-term growth.
Board composition
1
4
4
Executive directors
Non-executive directors
Senior independent director
Committee membership
N Nominations
A Audit
R Remuneration
Committee chairman
90
Kevin Whiteman
Chairman
Independent: Yes
N R
Alan Dunsmore
Chief executive officer
Independent: No
Appointed: 2014 to the board and 2020 as
Chairman.
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 and in January 2018
a non-executive director of Cadent Gas Limited
and chair of their remuneration committee.
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.
Appointed: 2010
Alan was appointed chief executive officer in
February 2018. Prior to this he held the position
of Group finance director from March 2010 to
March 2017 and acting chief executive officer
from April 2017 to January 2018. He joined
the Group from Smiths Group plc. He joined
Smiths Group’s 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.
Louise Hardy
A N R
Ian Cochrane
Non-executive director
Independent: Yes
Chief operating officer
Independent: No
Appointed: 2013
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. He previously held
the position of Group operations director. 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.
Appointed: September 2019
As an executive director, Louise was the
European project excellence director at AECOM,
and between 2006 and 2013 was a director at
Laing O’Rourke, the largest privately owned
construction company in the UK. At Laing
O’Rourke she worked within the CLM consortium,
the private sector delivery partner for the London
2012 Olympics. Prior to this, Louise worked
at Bechtel as a project director and worked
for London Underground on the Jubilee Line
extension project.
Louise is a non-executive director at Polypipe
Group plc and Crest Nicholson Holdings plc. She
is also a non-executive director at Ebbsfleet
Development Corporation.
Louise was appointed as our workforce
engagement director in 2021.
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR GOVERNANCE Adam Semple
Group finance director
Independent: No
Appointed: 2018
Adam joined the Group in 2013 from Firth
Rixson Group, prior to which he was with PwC
in both Leeds and London, where he qualified
as a chartered accountant in 2002. He was
appointed as Group finance director in February
2018, having held the role on an acting basis
since April 2017. He was previously the Group’s
financial controller.
Tony Osbaldiston
NA
R
Alun Griffiths
A N R
Non-executive director
(chairman of the audit committee)
Senior independent director (chairman
of the remuneration committee)
Independent: Yes
Independent: Yes
Appointed: 2014
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
non-executive director and chairman of the
audit committee of BSS Group plc, chairman
of the remuneration committee of Synstor
International plc and non-executive director and
chairman of the audit and risk committee of the
Serious Fraud Office. He is currently chairman
of Encon, the insulation and building products
distributor.
Appointed: 2014
Alun was a main board member at WS Atkins
plc from 2007 to 2014 having held a number
of business leadership and corporate roles,
most recently as Group HR director. He has
significant experience in HR and organisational
development, business development and
project delivery. He is vice chairman and chairs
the licensing committee and the remuneration
committee at the Port of London Authority, chairs
the transaction committee at the Ramboll Group
and chairs the remuneration committee at
Anchor Hanover.
His HR experience, together with his wider
business experience and understanding of the
views of investors, is well suited to his role at
Severfield.
Derek Randall
Executive director and managing
director at JSW Severfield Structures
Independent: No
Appointed: 2011
Derek previously held the position of executive
director for business development until his
appointment in December 2013 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.
Rosie Toogood
Non-executive director
Independent: Yes
A N R
Appointed: June 2021
Rosie is currently the chief executive officer of
Legal & General Homes Modular Limited and a
director of Legal & General Homes (Services Co)
Limited and brings a wealth of manufacturing and
engineering experience within the modular homes,
aerospace and nuclear sectors to the board.
She previously had a successful 25-year career
at Rolls-Royce, progressing from a finance
executive into procurement and technology
positions followed by a general management role
where she was executive vice president for the
compressors division.
She originally qualified as a chartered
accountant with Ernst & Young and was a
non-executive director at Derwent Housing
Association from 1999 to 2008.
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COMMITTEE
Alan Dunsmore
Chief executive officer
For details, see board of directors
on page 90
Ian Cochrane
Chief operating officer
For details, see board of directors on
page 90
Derek Randall
Executive director and managing
director at JSW Severfield Structures
For details, see board of directors on
page 91
Adam Semple
Group finance director
For details, see board of directors on
page 91
Rob Evans
Managing director, Severfield (UK)
Rob became managing director of Severfield
(UK) in 2020. Within this role, Rob is responsible
for all aspects of the contracting businesses for
both Severfield (UK) and Severfield Europe.
Rob joined the Group over 23 years ago and
during that time has performed various
commercial and quantity surveying roles within
the Group, including at Severfield (Design &
Build) and Severfield (NI).
Rob has been involved with many iconic
projects, including Tottenham Hotspur FC
stadium, Liverpool FC stadium, 22 Bishopsgate
and several projects at Wimbledon.
Mike Mannion
Operations director (manufacturing),
Severfield (UK)
Mike joined Severfield in 2019 as operations
director (manufacturing) for Severfield (UK).
Mike oversees the production across both our
Dalton and Lostock factories.
Previously managing director of Weir Valves &
Controls, Mike has over 25 years of business
management experience and an extensive
knowledge of manufacturing and supply chains,
obtained within sector-relevant, international
settings.
Jim Martindale
Managing director,
Severfield (Design & Build) and
Severfield (Products & Processing) and
Harry Peers
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 career with Atlas Ward (which was
acquired by the Group in 2005). He is also
an associate member of the Institution of
Structural Engineers.
Adrian McCoy
Managing director,
Severfield (NI)
Adrian became managing director of Severfield
(NI) in 2020. He joined Severfield (NI), formerly
Fisher Engineering, in 2000 as a project
manager. His background was engineering
design and project management and he attained
chartered Membership of the Institution of Civil
Engineers in 1994. During this role, Adrian was
involved with the delivery of all aspects of our
projects, with particular focus on construction
and commercials.
He was elevated to the role of projects director
in 2008, where he had overall responsibility for
the successful delivery of numerous projects,
before his promotion to managing director in
2020.
During his 20-year career with Severfield he has
delivered projects throughout the UK, Ireland
and Europe.
92
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR GOVERNANCE 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 and is also
a non-executive director and trustee at Fitzroy
Support, a learning disabilities charity.
Phillipa Recchia
Group SHE director
Phillipa joined Severfield in July 2016 from
housing and regeneration specialist Keepmoat
and she has previously worked as corporate
head of health and safety at global industries
services company KAEFER Group.
Phillipa has over 20 years’ experience within the
construction industry and a strong background
in behavioural safety.
Kevin Campbell
Managing director,
Construction Metal Forming Limited
Kevin joined the Severfield Group in 2011 as
head of operations at the Group’s joint venture,
JSW Severfield Structures in India, where
he held several senior positions and had an
instrumental role in the development of the
business over a period of three and a half years.
Since returning to the UK, Kevin has held the
position of business improvement associate
director of Severfield plc, business unit director
of Severfield (Products & Processing) Limited
and was appointed to his current role from 1
April 2020.
Kevin has over 20 years’ experience in the
structural steelwork industry, with his career
centred on senior manufacturing roles. He is
a chartered engineer with the Institution of
Engineering and Technology and holds an MBA
gained at the University of Bradford.
Samantha Brook
Group HR director
Sam joined Severfield in March 2020, having
been group people director at Drax Group and
group head of HR at Croda International (both
listed companies). She is a Chartered Fellow
of the Chartered Institute of Personnel and
Development (‘CIPD’), is passionate about
helping people realise their full potential and
is ideally suited to lead our people strategy,
talent development and workforce engagement
initiatives.
www.severfield.com
Stock Code: SFR
93
OUR GOVERNANCE OUR CHAIRMAN’S
VIEW ON GOVERNANCE
THIS YEAR WE HAVE ADAPTED OUR GOVERNANCE
TO MEET THE CHALLENGES OF REMOTE WORKING
AND THE UNCERTAINTY CREATED BY THE COVID-19
PANDEMIC, ENSURING THAT STRONG AND ROBUST
CORPORATE GOVERNANCE CONTINUES TO BE AT
THE HEART OF EVERYTHING WE DO
Dear shareholder
I am pleased to introduce, for the first
time, the Group’s corporate governance
report on behalf of our board of directors
(‘the board’). As indicated in last year’s
annual report I took over as chairman
from John Dodds after the AGM in 2020
and I continue to ensure that effective
stewardship and good governance of our
Group remains a high priority for the board.
The Group is committed to business
integrity, high ethical values and
professionalism in all of its activities and
this report will outline how the board has
ensured that we have effective corporate
governance in place to help support
the creation of long-term value for our
shareholders and stakeholders.
During the period from the AGM, following
the retirement of John as chairman,
until June 2021 we did not comply with
provision 9 of the Code requiring at least
half of the board, excluding the chairman,
to be independent but have now rectified
that situation with the appointment of
Rosie Toogood to the board. We took the
view on John’s retirement that we would
not appoint a new non-executive director
immediately but, mindful of the annual
strategic review coming up in December
2020, would take the opportunity to review
the existing mix of skills and experience
represented on the board and look to
complement those in a way that was
consistent with our overall strategy. We
were also able to take into account our
succession plan as a number of board
directors will be retiring from the board
over the next two to three years.
Our corporate governance report is set
out on pages 96 to 107 and explains
how we manage the Group and comply
with the provisions of the UK Corporate
Governance Code (‘the Code’) and
outlines how the board ensures that high
standards of corporate governance are
maintained. In this report we have set out
the steps that we are proposing to take to
be ready for the required climate-related
disclosure next year and we have sought
to address some of the issues raised by
the FRC in their report on governance
reporting issued in November 2020, as
well as issues raised by our institutional
shareholders.
Leadership and board composition
As well as the appointments highlighted
above, we have this year refreshed our
succession planning and appointed Louise
Hardy as our workforce engagement
director. This is part of our focus on
workforce engagement which was delayed
last year due to COVID-19. This work will
also encompass purpose and culture.
Board evaluation
During the year, an internal board
evaluation was undertaken by Alun
Griffiths, the senior independent director.
This included an evaluation of my own
performance as well as that of the other
directors and the board’s committees.
Overall, the evaluation was positive
and further details can be found in the
corporate governance report on page 107.
“ The effective stewardship
and good governance of
our Group remains a high
priority for the board. I
am delighted that this
year we appointed Alun
Griffiths as our senior
independent director
and have recently
appointed Rosie Toogood
to the board to ensure we
remain Code compliant.”
KEVIN WHITEMAN
NON-EXECUTIVE CHAIRMAN
94
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR GOVERNANCE UK Corporate Governance Code
This year, the Company has complied
fully with the requirements of the 2018
Code throughout the accounting period
and to the date of this report, with one
exception, namely non-compliance
with provision 9 requiring at least half
of the board excluding the chairman
to be independent, during the period 3
September 2020 to 15 June 2021.
employer and as a provider of services and
to achieving and maintaining a workforce
that broadly reflects the communities
in which we operate. During the year, we
continued to monitor the gender pay gap
and our gender balance across all tiers of
management. We are confident that our
gender pay gap does not stem from paying
men and women differently for the same
or equivalent work. We are mindful though,
that the sector in which we operate is male
dominated and we have set up initiatives
to monitor diversity in our recruitment and
to seek to attract a more diverse workforce
over time.
Relations with shareholders
The board and I recognise the
responsibility we have to a range of
stakeholders, including customers,
employees, subcontractors and suppliers
and the environment and communities in
which we operate.
We have an open and effective dialogue
with shareholders, with regular meetings
being held with institutional shareholders.
The AGM will be held on 1 September 2021
and I encourage all shareholders to vote
via proxy for the resolutions.
Kevin Whiteman
Non-executive chairman
16 June 2021
Audit, risk and internal control
The board has confirmed that this
annual report is fair, balanced and
understandable. The audit committee,
supported by management, has adopted
a process to enable the board to take
this view. You can find an explanation of
the process we have used to make this
determination in the audit committee
report on page 110.
The board delegates certain of its
responsibilities to the board committees
to enable it to carry out its functions
effectively. A diagram of the board
governance structure is set out on page 96.
Remuneration
Our executive director remuneration
arrangements are intended to support
the achievement of the Group’s objectives
and strategy. With the support of the
remuneration committee’s oversight,
we continue to believe that the current
remuneration packages help to
appropriately incentivise management to
sustain long-term value for shareholders.
Our remuneration policy was updated and
approved at our AGM in September 2020.
Our remuneration policy, a summary of
how we intend to operate that policy in
2022, and a review of the remuneration
committee’s activities, together with bonus
and PSP performance in 2021, can be
found in the remuneration report on pages
121 to 128.
Talent and diversity
The board is mindful of diversity and
we believe that a diverse company (in
all regards, not just gender) provides
a balanced and effective organisation.
The board is represented by a range
of industry experience and personal
strengths and, from 16 June 2021, the
board consisted of two female and
seven male directors. Further details
of their skills and experience can be
found on pages 90 and 91. The board is
committed to ensuring it and our wide
employee base remains diverse and the
Group has an equal opportunities and
diversity policy to support this. As an equal
opportunities employer, we are committed
to encouraging diversity and eliminating
discrimination in both our role as an
www.severfield.com
Stock Code: SFR
95
95
OUR GOVERNANCE CORPORATE
GOVERNANCE REPORT
Board leadership and company purpose
The Group is controlled through the board of directors of Severfield plc. We believe that, consistent with Principle A of the Code,
the board is effective and entrepreneurial. We have described in the strategic report how opportunities and risks to the future
success of the business have been considered and addressed, together with the sustainability of the Group’s business model.
In this section we describe how our governance contributes to the delivery of our strategy and how the board monitors and
drives culture and purpose.
Structure of the board
The membership of the board is stated on pages 90 and 91. The board consists of the chairman, four other non-executive
directors and four executive directors.
Alan Dunsmore has board-level responsibility for ESG matters and employment matters; Ian Cochrane has board-level
responsibility for health and safety matters.
Severfield plc board
Executive directors
Principal committees
Executive committees
Audit
committee
Remuneration
committee
Nominations
committee
Executive
committee
Risk
committee
Safety
leadership
team (‘SLT’)
Group human
resources
(‘GHR’)
committee
Sustainability
committee
96
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR GOVERNANCE Independence
All 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.
At no time during the year ended 31 March
2021 did any director hold a material
interest, directly or indirectly, in any
contract of significance with the Company
or any subsidiary undertaking other than
the executive directors in relation to their
service agreements. 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
135. Save as disclosed in the directors’
remuneration report, none of the directors,
or any person connected with them, has
any interest in the share or loan capital of
the Company or any of its subsidiaries.
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 Group’s policy is that
all 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 90 and 91 will be
standing for re-election at the 2021 AGM.
The board is satisfied that the
performance of all of the 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
are available for inspection on request.
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.
Severfield 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.
www.severfield.com
Stock Code: SFR
97
OUR GOVERNANCE CORPORATE
GOVERNANCE REPORT
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
as follows.
Member(s)/Committee
Responsibilities
Non-executive chairman
Kevin Whiteman
The chairman, Kevin Whiteman, 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.
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, 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 and senior managers, including members of the executive committee.
Chief executive officer
Alan Dunsmore
As the senior executive of the Company, Alan Dunsmore 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 90 to 93. 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 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.
Alun Griffiths is the senior independent non-executive director whose role 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 and the
board, taking into account the views of the executive directors.
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 published on the website.
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.
Details of the work of the audit, nominations and remuneration committees are set out on pages 108
to 140.
Senior independent
director
Alun Griffiths
98
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR GOVERNANCE Board meetings
The directors’ attendance record at the scheduled board meetings and board committee meetings for the year ended 31 March 2021 is
shown in the table below.
Board
Audit
committee
Remuneration
committee
Nominations
committee
Total number of meetings
Executive directors
Alan Dunsmore
Ian Cochrane
Derek Randall
Adam Semple
Non-executive directors
Kevin Whiteman1
Tony Osbaldiston
Alun Griffiths
Louise Hardy
John Dodds2
11
11
11
11
11
11
11
11
11
5
3
6
3
1
3
3
3
6
6
6
6
4
2
3
3
3
1
1 Kevin Whiteman did not attend the nominations committee meeting to consider his appointment as chairman, which was chaired by Alun Griffiths. Kevin Whiteman
has not been a member of the audit committee since his appointment as chairman on 4 September 2020 but attended the audit committee meeting in June 2020,
prior to his appointment as chairman.
2 John Dodds attended all board and remuneration and nominations committee meetings held prior to his retirement on 4 September 2020. As chairman, he was not
a member of the audit committee.
Board and committee meetings were all held remotely by video conference during the year because of the COVID-19 pandemic. During
April and May 2020, when the pandemic was in its early stages and its impact on the Group was uncertain, weekly board update video
calls were also held. In the ordinary course, board meetings are primarily held at the Group’s head office in Dalton, North Yorkshire, but
also at various locations in London, and at the offices of the Group’s other operating subsidiaries and, from time to time, at clients’ sites
to provide non-executive directors the opportunity to increase their knowledge and understanding of the Group’s operations.
Board strategy review
In addition to regular scheduled board and board committee meetings, the board undertakes an annual strategy away day each year.
The agenda for the strategy away day is agreed in advance, including specific strategic issues which have been raised at previous
board meetings or requested by the board. The strategy review is supplemented by an annual market update following a similar format
although shorter in length.
99
www.severfield.comStock Code: SFR OUR GOVERNANCE CORPORATE
GOVERNANCE REPORT
Board meetings for the current year
During the financial year, the board discussed and implemented the following key actions:
April 2020
July 2020
• Reviewed the statement of compliance in accordance
• Reviewed first quarterly forecast for the year ended 31
with the Modern Slavery Act
March 2021
• Reviewed papers detailing the Group’s European and
• Reviewed feedback on year-end results
HS2 pipelines
• Reviewed and approved the Group’s pre-close trading
statement issued on 21 April 2020
• Reviewed and approved the publication of the Company’s
articles of association in accordance with Listing Rule
9.2.6ER(1)
June 2020
2 meetings
• Received feedback from the chairman of the nomination
committee on the board evaluation undertaken by the
senior independent director
• Presentation on the Group’s strategy for mitigating cyber
risk by the Group IT director, including consideration of
the risk of remote working due to the COVID-19 pandemic
• Considered the Group’s position on reclaiming furlough
monies via the government’s Coronavirus Job Retention
Scheme and deferring a decision on whether to do so until
end July
• Reviewed and approved RNS announcing the
appointment of Kevin Whiteman as chairman to replace
John Dodds on his retirement at the forthcoming AGM
• Reviewed and approved annual report and accounts and
results announcement
• Agreed to defer a decision on final dividend until the end
of July when the impact of the COVID-19 pandemic would
be clearer
• Assessed going concern and longer-term viability of the
Group with particular emphasis on the impact of the
COVID-19 pandemic and reviewed the effectiveness of
internal controls
• Reviewed a paper on significant aspects of the
accounting treatment of the acquisition of Harry Peers
• Reviewed a detailed paper on the Group’s cash position
with particular emphasis on the impact of the COVID-19
pandemic
• Approved the launch of a new savings plan under the
rules of the Severfield Sharesave Scheme and the
relevant share options that would be granted as a result
• Decided not to proceed to make any claim under the
government’s Coronavirus Job Retention Scheme
• Approved the payment of a final dividend
• Reviewed and approved a paper recommending that, due
to the impact of the COVID-19 pandemic, the 2020 AGM
be a closed meeting without shareholders but offering
shareholders the opportunity to ask questions in advance
of the meeting
• Reviewed and approved AGM notice
• Reviewed and approved the Company’s RNS dated 30
July 2020 announcing the dividend, the AGM and the
Group’s decision not to claim furlough monies from the
government
September 2020
2 meetings
• Reviewed and approved the Group’s AGM trading
statement issued on 3 September 2020
• Reviewed and approved an update to the Company’s
conflicts of interest policy, received annual statements of
compliance from directors and approved related parties
list and conflicts of interest disclosed
• Reviewed a paper summarising investor representatives’
comments ahead of the AGM
• Reviewed a detailed paper on the cash position of JSSL
with particular emphasis on the impact of the COVID-19
pandemic
• Received a detailed presentation from the Company’s
brokers, Jefferies, on valuation and strategy
considerations
• Reviewed and approved the Company’s RNS dated 6
October 2020 announcing the payment of directors’
bonuses for the financial year ending 31 March 2020
• Considered and approved additional equity investment
in Construction Metal Forming Limited to fund expansion
work which had been delayed due to the impact of the
COVID-19 pandemic
• Approved the appointment of Alun Griffiths as Senior
Independent Director with effect from 1 October 2020
100
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR GOVERNANCE November 2020
2 meetings
March 2021
2 meetings
• Management briefing from Severfield (Design & Build)’s
estimating director on business development
• Management briefing from Severfield (UK)’s production
director on production planning and management
• Technical briefing from the Group’s principal design
• Reviewed and approved the Company’s RNS dated
26 February 2021 announcing the acquisition of DAM
Structures
• Agreed appointment of Louise Hardy as workforce
engagement director
• Reviewed third quarterly forecast for the year ended
31 March 2021
• Agreed scope and content of board and chairman
evaluation
• Management briefing from the Group engineering director
• Noted the register of directors’ interests in shares
• Reviewed and approved the budget for the year ending
31 March 2022
engineer
• Presentation on sustainability from the Group SHE
director
• Management briefing from Severfield (UK)’s associate
sales and estimating director on sales and estimating
• Reviewed and approved half year results
• Approved interim dividend
• Reviewed second quarterly forecast for the year ended
31 March 2021
December 2020
• Off-site strategy day
January 2021
• Management briefing from Severfield (NI)’s operations
director on project management
• Presentation on health and safety from the Group SHE
director
• Reviewed investor feedback on interim results
• Reviewed and approved the acquisition of DAM
Structures
• Reviewed and approved a paper on the Atlas Ward
defined benefit pension scheme triennial valuation
101
www.severfield.comStock Code: SFR OUR GOVERNANCE CORPORATE
GOVERNANCE REPORT
Key matters considered by the board
Board and committee activities are organised throughout the year to address the matters reserved for the board.
An overview of the board’s principal decisions during the year, including how the board has taken into account the factors set out in
section 172 of the Companies Act 2006 (‘the Act’), is set out below. From the board’s engagement with its stakeholders, see page 30 and
31, there were no specific issues raised during the year that influenced these decisions.
Key stakeholder
groups considered
The safety of our colleagues was
our primary consideration during
this period, together with their
and the Group’s financial security.
We also took into account the
financial needs of our clients,
supply chain, our shareholders
and other stakeholders.
In deciding not to reclaim furlough
monies we also considered the
wider purpose of the government’s
scheme and concluded that
making a claim was not consistent
with the aims of the scheme,
which was to benefit those who
had been worst affected by the
COVID-19 pandemic.
The long-term impact of the
acquisition is, we believe,
beneficial to all of our
stakeholders, contributing
expected annual revenue of
c.£20m and PBT of c.£2m, as a
minimum, from its core operations.
We expect the business to grow
from this position in the future.
In approving the strategy and
business plans and purpose, the
views of all our stakeholders were
considered. Our success depends
on good relations with members
of our workforce, customers and
supply chain. Before publishing
the Group’s purpose, the views of
our workforce will be considered
via the voice forums.
Principal
decision
Dealing with
the COVID-19
pandemic
Action taken
Outcome
Decision to carry on factory and
site operations where, after
analysis, we could continue
to do so safely, implementing
additional precautions and
testing and monitoring the
health of the workforce.
Regularly reviewed the challenges
presented by the COVID-19 pandemic
in the UK, Europe and in India and
government announcements on social
distancing and safety. These included
detailed considerations as to how we
could continue to operate safely in
factories and on sites, and travel and
accommodation issues for our workers.
Implemented a series of precautionary
cash management measures to ensure
the Group could continue to trade as
normally as possible and to protect its
financial strength.
Deciding not to reclaim furlough monies
via the government’s Coronavirus Job
Retention Scheme.
Proposed
acquisition of
DAM Structures
Reviewed proposal to acquire entire
share capital of DAM Structures.
Approved the acquisition
which includes an earn-out
arrangement with the principal
shareholder and managing
director.
Approved the four-year
strategic plan and the
proposed definition of the
Group’s purpose.
Strategy review
Comprehensively reviewed progress
against strategy.
Monitored market trends, including
the macroeconomic environment,
supported by comparative data and
customer insight.
Considered the impact of the strategic
plan on the retention and development
of employees.
Reviewed the Group’s long-term
financial outlook and assessed and
prioritised growth opportunities.
Reviewed the Group’s four-year
strategic plan and divisional strategic
plans and priorities to ensure they
remained fit for purpose.
Reviewed and approved the proposed
definition of the Group’s purpose.
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Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR GOVERNANCE Action taken
Outcome
Reviewed Group budgets for FY22 and,
following the COVID-19 outbreak, high-
level profit and cash forecasts for the
next 12 months.
Reviewed general market conditions
and key trends that support the Group’s
strategy.
Approved the viability
statement and going concern
assumption.
Principal
decision
Setting the
annual Group
budget and
subsequent
forecast
modelling
following the
COVID-19
outbreak for
going concern
purposes
Determining the
Group’s approach
to risk
Reviewed and made changes to the
Group’s principal risks and emerging
risks that could impact the Group’s
strategic objectives.
Considered the impact of risks arising
from uncertainties in the market and
the wider economy, including COVID-19.
Recommending a
final dividend
Initially deferred any decision on a final
dividend until more data was available
as to the impact of the COVID-19
pandemic on the Group’s financial
position.
Maintained as ‘high’ risk our
assessment of the risk of a
serious health and safety
incident but reduced to
‘medium’ risk our assessment
of the risk of the impact of
adverse market conditions
(including COVID-19 and Brexit).
Recognising the importance of
the dividend to our investment
case and our shareholders, we
recommended the payment of
a final 2020 dividend of 1.8p
per share (maintaining the
2019 dividend level) once the
board was comfortable that
the impact of the COVID-19
pandemic was manageable
and that it would not reclaim
furlough monies under the
government’s Coronavirus Job
Retention Scheme.
Key stakeholder
groups considered
In reviewing the budget and
subsequent forecasts, the board
considered the impact on all
stakeholders.
Prior to approving and
recommending dividend payments,
the board considers the future
cash requirements of the business,
shareholder expectations and the
need to provide our shareholders
with sustainable returns over
the longer term. This has been
particularly important given
COVID-19.
The board considered the impact
on all stakeholders, in particular
those identified in the principal
risks section on pages 76 to 86.
The board considered the impact
on its shareholders of not
declaring a dividend and balanced
this with the needs of other
stakeholders.
Pension
valuation
Reviewed the latest triennial valuation
of the Atlas Ward defined benefit
pension scheme and the trustees’
recommended deficit repair payment.
Approved an increase of
£1 million in the Group’s annual
deficit contributions.
The board considered, primarily,
the interest of the scheme’s
pensioners and deferred
pensioners.
The Group’s
approach to
sustainability
and ESG matters
The board reviewed management’s
proposed approach to ESG matters.
The board approved
management’s proposed
approach to the setting of
targets and goals on ESG
matters.
The board, mindful of its duty
to promote the success of the
Company and consider the
broader interest of external
stakeholders, took a proactive
approach to considering how
to minimise the impact of its
operations on the environment.
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Engagement with stakeholders
The board considers the needs and priorities of each of the Group’s stakeholders during its discussions and as part of its decision-
making process. This, together with considering the long-term consequences of decisions and maintaining our reputation, is integral to
the way the board operates.
Our stakeholder map identifies our key stakeholder relationships and the impact that the business has on each of those groups and
our engagement with those groups. The table below summarises the board’s understanding of the key interests of our stakeholders:
Clients
Workforce
Supply chain
Communities
Shareholders
Funders
A safe environment
to work in,
investment
in personal
development and
career progression,
and a fair, open
and honest culture.
Fair treatment
and respect,
with prompt
payment for work
undertaken in
a safe working
environment, with
opportunities for
repeat business.
Excellent
customer service,
with delivery of
projects on time
and to budget.
Early contract
engagement,
providing
problem-solving
solutions and
balancing time,
cost and quality
objectives.
Operating ethically,
causing minimal
impact from our
activities.
Creating social
value through
employment
opportunities,
helping people
back to work and
investing in the
local community
by using local
suppliers and
services.
Robust operational
and financial risk
management,
strong returns
on investment
decisions, effective
communication
of strategy and
a progressive
dividend policy.
Strong cash
management,
robust working
capital
management and
risk management
and good
communication
through regular
financial updates.
With regard to our clients, supply chain
and communities, these groups are
recognised by the board as integral to
our business model and, as such, are
considered regularly by the board. In
practice, however, our clients, supply
chain and communities vary with each
Group company and therefore the
Group companies manage day-to-day
engagement with these important
stakeholder groups. Our Group
SHE director and our Group head
of procurement assist in managing
relationships with those subcontractors
and suppliers who are common to more
than one Group company. Further details
of our engagement with communities can
be found on page 31.
The board engages directly with the
Group’s shareholders, suppliers, workforce
and funders, and has undertaken the
following activities in 2021:
Shareholders
Providing sustainable returns to our
shareholders is a key factor in the board’s
decision-making. The chairman and the
non-executive directors are available
to meet with shareholders to listen to
their views.
The board recognises the importance of
communicating with its shareholders to
ensure that its strategy and performance
is understood. The Group 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, and issues
regular trading updates to the market.
Alan Dunsmore and Adam Semple
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.
Feedback from those meetings was
reported to the board, including the non-
executive directors, and was factored into
the board’s strategy review and its decision
to defer and then declare a final dividend.
The board generally uses 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 working days before the meeting.
Suppliers
During the year, we implemented a
detailed contingency plan in preparation
for Brexit and worked closely with our key
suppliers in agreeing our respective roles
in undertaking the additional customs
administration necessary to allow us to
continue our operations with the least
impact by ensuring that the flow of goods
(both imports and exports) continued
unimpeded. The board reviewed and
approved the continuation of our prompt
payment policy and throughout the year
we continued to pay our suppliers on time.
Funders
The Group’s finance director meets with
the Group’s banks and performance bond
issuers to discuss the full-year and half-
year results, to update them on the Group’s
performance and discuss any issues that
they wish to raise. These meetings are
important in ensuring that the Group has
sufficient facilities available. The Group
finance director advised the board that no
issues or concerns had arisen during the
course of these meetings that the board
needed to consider in its discussions and
decision-making.
104
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR GOVERNANCE Following the COVID-19 outbreak, the
Group finance director held regular
discussions with the Group’s banks to
discuss management’s response to the
crisis. Despite the challenges presented by
the COVID-19 pandemic, the Group has a
strong balance sheet and sufficient cash
and committed funding in place during
the current unprecedented period of
uncertainty.
Board’s monitoring of culture
The Group’s purpose and culture are
closely aligned with our core values
which are focused on driving the right
behaviours for the Group to succeed. Our
culture provides an environment in which
our workforce can operate safely, act
instinctively with integrity, develop strong
and long-term relationships with clients
and suppliers, and are treated fairly and
with respect. This way we can innovate,
evolve and successfully deliver our
strategic objectives. We do not experience
the typical indications of poor culture such
as high staff turnover and absenteeism or
a poor attitude to training and the board
was encouraged by the constructive
approach taken by the workforce and by
management to dealing with the impact
of the COVID-19 pandemic by changing
ways of working, travelling patterns and
participating in other measures such as
temperature testing and COVID-19 testing.
Our executive directors promote our
core values throughout the Group. The
board as a whole is responsible for
ensuring that our culture is maintained.
It does this by meeting with employees
and senior managers, undertaking
regular site visits and reading regular
reports and presentations from Group
companies on how they are operating
their businesses and taking into account
internal audit reports on matters which
are heavily influenced by culture and
behaviour. The non-executive directors
also draw on their own experiences in
other organisations in order to challenge
and verify that the Group’s values and
behaviours remain effective. Our new
chairman, Kevin Whiteman, instigated a
series of one-to-one meetings with key
managers soon after his appointment in
order to understand culture better and has
implemented a series of board briefings
on a wide range of topics from managers
of the business at different tiers of the
organisation.
We reviewed and sought to re-define our
purpose this year and are now consulting
with our workforce via a series of voice
forums in order to refine and develop our
proposals based on their feedback. In
addition, we launched our new intranet
‘Severfield Connect’ in 2021 to enable us to
communicate better and develop a more
integrated working culture and we plan to
develop metrics which track engagement
and to develop pulse surveys.
LISTENING TO OUR
EMPLOYEES’ VOICES
We recognise the importance of listening to employees to
understand their concerns and to act on them. Although less
frequently than normal, due to COVID-19, during the year,
members of the board visited various sites across the Group
and met with groups of employees, discussing with them their
experiences and views. The board has agreed to undertake a
comprehensive workforce engagement programme to gather
a deeper understanding of colleagues’ perspectives on which
to build a sustainable Group-wide approach for ongoing
dialogue. Unfortunately, the COVID-19 pandemic resulted
in this work being delayed last year, but in 2022 we plan to
launch our ‘voice forums’, to ensure meaningful and regular
dialogue between board members and colleagues.
In 2021 we launched our new intranet, ‘Severfield Connect’. This
has enabled us to communicate with colleagues who are away
from work, to share updates and information with them and to
engage in dialogue through the comments feature. Colleagues
across the Group have raised issues and questions about
COVID-19 with management and these have been discussed
openly with our executive directors and have informed
our approach in many areas (for example, our approach to
going above and beyond our contractual requirements on
payment for periods of self-isolation). Throughout the year,
our executive directors have kept our employees informed
of our financial performance through newsletters, email
notifications and briefing sessions, and made colleagues
aware of any external factors and significant events that
might have an impact on our business.
See pages 68 to 70 for further detail on how we engage with
our employees.
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The table below sets out how the board monitors our culture to ensure that behaviours remain aligned with our core values.
What we monitor and measure
Board action in 2021
Core value – customer focus
The executive directors keep the board
updated on key projects and customer
relationships. The board reviews material
issues arising on contracts which may impact
a Group company or the Group as a whole.
Core value – safety first
The executive reports include information
on health and safety performance, including
accident frequency rate, incident frequency
rate, near misses and high potential incidents
and absence days due to sickness/injury.
The board regularly reviews information on
the safety strategy, update on personal injury
claims, training records and performance,
interaction with the HSE, occupational health
initiatives and key developments in the market
which could impact on safety performance.
Core value – integrity
The executive directors keep the board
updated on the Group’s ethical dealings with
clients, suppliers and the workforce.
We report on e-learning on ethical matters;
supplier payment terms, gender pay and
any issues of concern raised by employees
whether by way of formal whistleblowing or
otherwise.
We have policies in place, including the
Group’s authorisation policy, competition law
policy, anti-bribery policy, and expenses policy,
and these are regularly reviewed.
Core value – commitment
The executive directors keep the board
updated on how the Group is meeting its
contractual and commercial commitments
to our customers, our suppliers and our
workforce.
Reviewed Group company board summaries which included information on key
clients and suppliers and the performance of contracts.
Reviewed market information and tender feedback information, together with
business development plans which focus on key client relationships and new clients
with whom we wish to have future business.
Approved Group company strategic plans which include information on key clients
and client feedback.
Regular monitoring of health and safety performance is a priority for the board and
is the first agenda item for all board meetings.
Board members attended site and factory safety visits during the year, encouraging
employees to suggest improvements and share best practice.
Reviewed ongoing behavioural safety programme.
For more information, please read our building a
sustainable business report on page 68
Reviewed output from Cognito (our e-learning tool).
Reviewed payment practices reporting submissions and prompt payment code
disclosures.
Reviewed and approved our modern slavery statement (see page 74).
Reviewed statements of compliance from all directors and letters of assurance
(‘LoA’) from the Group’s four managing directors.
Asking colleagues, customers and suppliers on factory and site visits for feedback
on our performance.
For more information, please read our building a
sustainable business report on page 73
Challenging the executive directors on any relationship issues arising with any of our
customers, suppliers or workforce.
Asking colleagues, customers and suppliers on factory and site visits for feedback
on our performance.
106
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR GOVERNANCE Board evaluation process
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 asked Alun
Griffiths, the 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 the company secretary 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.
Areas reviewed this year included the
effectiveness of the transition from one
chairman to another and the lessons
learned from undertaking board meetings
remotely.
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 each director’s understanding of
the business.
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 and regulatory and legislative
developments. Particular attention was
paid this year to the changes to reporting
on ESG matters which will come into effect
for next year’s annual report.
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.
Audit, risk and internal control
Financial and business reporting
The financial statements contain
an explanation of the directors’
responsibilities in preparing the annual
report and the financial statements (page
141) and a statement by the auditor
concerning their responsibilities (pages
144 to 153). The directors also report that
the business is a going concern (page 116)
and detail how the Group generates and
preserves value over the longer term (the
business model) and the Group’s strategy
for delivering its objectives in the strategic
report (pages 32 to 41). The directors have
also made a statement about the long-
term viability of the Group, as required
under the Code (page 59).
Modern slavery
The board annually reviews and approves
the Group’s modern slavery statement.
The 2021 statement is available on
our website at severfield.com and
explains the actions taken to ensure
that we do not undertake activities or
engage suppliers or subcontractors who
undertake activities that may be in breach
of the Modern Slavery Act 2015. This
year we undertook a more detailed risk
assessment of our supply chain, trained
all relevant staff in awareness of modern
slavery and encouraged key suppliers to
undertake training via the Supply Chain
Sustainability School.
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.
Remuneration
The directors’ remuneration report is
on pages 118 to 140. It sets out the
activities of the committee, the levels and
components of remuneration and refers
to the development of the remuneration
policy.
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COMMITTEE REPORT
THE AUDIT COMMITTEE REVIEWS AND REPORTS
TO THE BOARD ON THE GROUP’S FINANCIAL
REPORTING, INTERNAL CONTROL AND RISK
MANAGEMENT SYSTEMS AND THE INDEPENDENCE
AND EFFECTIVENESS OF THE AUDITORS
Membership
All committee members during the year
were independent non-executive directors
in accordance with the Code.
The members have been selected to
provide the wide range of financial and
commercial expertise necessary to fulfil
the committee’s duties. Tony Osbaldiston is
a chartered accountant.
By invitation, there were a number of other
regular attendees, including internal and
external auditors. The chairman (John
Dodds or Kevin Whiteman as appropriate),
Alan Dunsmore, Adam Semple and Mark
Sanderson also attended each meeting by
invitation.
Meetings are held at least three times per
annum and additional meetings may be
requested by the external auditor.
There were three meetings in the year
attended by all members.
Role and key responsibilities
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.
Number of meetings
3
Members
Tony Osbaldiston (chairman)
Alun Griffiths
Louise Hardy
Kevin Whiteman
(until his appointment as chairman on 3 September 2020)
Key achievements during 2020/2021
•
Oversaw the continued development of the Group’s systems of risk management
and internal control.
• Reviewed and recommended to the main board the report and accounts for the
2021 interim accounts and the year ended 31 March 2021.
• Detailed consideration of the financial impact of the COVID-19 pandemic.
• Reviewed management’s contingency plans for Brexit.
“ During the year, the
committee’s focus has
continued to be on
monitoring the integrity
of financial reporting,
financial judgements and
the effectiveness of risk
management and internal
controls processes,
especially in light of the
uncertainties posed by
the COVID-19 pandemic.”
TONY OSBALDISTON
CHAIRMAN OF THE
AUDIT COMMITTEE
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Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR GOVERNANCE 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
and non-financial controls and risk
management.
• 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
The committee addressed the following
key agenda items in relation to the 2021
financial year:
• Reviewed the interim results for the
period ended 30 September 2020 and
the year-end results for the year ended
31 March 2021.
• Reviewed the significant management
judgements reflected in the Group’s
results, including significant contract
judgements.
• Discussed the report received from
the external auditor regarding the
audit of the results for the year ended
31 March 2021. 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.
• Reviewed and agreed significant
accounting risks and principal
business risks for the year ended 31
March 2021.
• Reviewed the Group’s risk register.
• Considered and reviewed JSSL’s
internal audit reports.
• Considered and reviewed
management’s papers on the
accounting impact of the acquisition of
Harry Peers.
• Considered and reviewed
management’s contingency plans in
preparation for Brexit.
• Reviewed the carrying value of the
Group’s investment in JSSL in the
light of the impact of the COVID-19
pandemic.
• Reviewed and agreed the external
auditor’s audit planning report in
advance of the audit for the year ended
31 March 2021.
• Reviewed the measures taken by
management to monitor and review
the effectiveness of the Group’s
internal control and risk management
processes, to enable the board to make
its annual review of effectiveness.
• Reviewed the long-term viability and
going concern statements (in light
of the COVID-19 pandemic) and the
process undertaken by executive
management to enable the board to
make these statements.
• Considered the effectiveness of
the external auditor, KPMG LLP
(‘KPMG’), their independence and
reappointment for the year ending
31 March 2022.
• Reviewed PwC LLP’s (‘PwC’) internal
audit reports covering various aspects
of the Group’s operations, controls and
processes and approved the internal
audit plan.
Fair, balanced and understandable
The committee was provided with, and
commented on, a draft copy of the annual
report for the year ended 31 March 2021.
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. To enable the board to make
this declaration, the committee received
a paper from management detailing the
approach taken in preparing the annual
report. 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 (and that the use of alternative
performance measures was appropriate
and clearly articulated); that there is
a clear and well-communicated 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. In addition, the external
auditor reviewed the consistency between
the narrative reporting in the annual report
and the financial statements.
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
and internal control framework and the
risk profile that is acceptable in order to
achieve the Group’s strategic objectives.
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COMMITTEE REPORT
Details of the Group risk management and
internal control processes and its principal
and emerging risks are set out in the risk
management section of the strategic
report on pages 76 to 86 . As a result, it is
considered that the board has fulfilled its
obligations under the Code to carry out
a robust assessment of the Company’s
emerging and principal risks.
Whistleblowing
The Group operates a comprehensive
whistleblowing policy. Accordingly, staff
may, in confidence, raise concerns about
possible improprieties in matters of
financial reporting or other matters. The
committee reviews adherence with this
policy on an ongoing basis.
Viability statement
The committee has undertaken a detailed
assessment of the viability statement
and recommended to the board that
the directors could have a reasonable
expectation that the Company will be
able to continue in operation and meet
its liabilities as they fall due over the
three-year period of their assessment. The
viability statement can be found on page
59 of the strategic report.
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.
‘Contract valuation, revenue and profit
recognition’, like last year, is classified as a
significant accounting risk. Following the
acquisition of DAM Structures in February
2021, the other significant accounting risk
considered this year was the ‘valuation
of intangible assets and contingent
consideration for DAM Structures’.
Contract valuation, revenue and
profit recognition
The committee reviewed and challenged
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, the estimation of future costs
to complete and the estimation of claims
received by the Group.
Valuation of intangible assets and
contingent consideration for DAM
Structures
The committee reviewed the report of
the Group finance director that set out
the provisional acquisition accounting
positions for DAM Structures for the 2021
financial year and the provisional valuation
of the material acquired intangible
assets (customer relationships and order
books), together with their associated
amortisation periods.
The external auditor performed detailed
audit procedures on the accounting risks
above and reported their findings to the
committee. The committee was satisfied
that these matters 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 considered a
number of other judgements which have
been made by management, none of which
had a material impact on the Group’s 2021
results. These include going concern, profit
recognition of the Indian joint venture
investment, the valuation of pension
scheme liabilities and the disclosure of
certain contingent liabilities.
Internal audit
The Group’s internal audit function
is currently outsourced to PwC. The
committee is responsible for reviewing the
role and effectiveness of the internal audit
function by monitoring the results of its
work and the responses of management to
its recommendations. The scope of PwC’s
work focused on key financial controls
and non-financial reviews covering areas
of perceived higher business risk. Results
and management actions arising from
reviews undertaken by PwC in the current
year were also discussed in detail at each
of the committee’s meetings.
External auditor independence
and effectiveness
KPMG has acted as the Group’s external
auditor for a period of six years. The
committee considers the reappointment of
the external auditor, including the rotation
of the senior statutory auditor, annually.
This also includes an assessment of the
external auditor’s independence and an
assessment of the performance in the
previous year, taking into account detailed
feedback from directors and senior
management across the Group.
The committee also assesses the
effectiveness, independence and
objectivity of the external auditor by,
amongst other things:
•
considering all key external auditor
plans and reports;
• having regular engagement with the
external auditor during committee
meetings and ad hoc meetings (when
required), including meetings without
any member of management being
present;
•
•
the chairman of the committee having
discussions with David Morritt, the
senior statutory auditor, ahead of each
committee meeting; and
considering the external audit scope,
the materiality threshold and the level
of audit and non-audit fees.
Following this assessment of the external
audit process, the committee agreed
that the audit process, independence
and quality of the external audit were
satisfactory. The committee will continue
to assess the performance of the external
auditor to ensure that they are satisfied
with the quality of services provided.
Reappointment of external auditor
The statutory audit services order (‘the
Order’) requires rotation of audit firms
every ten years unless there is a tender, in
which case the audit firm can remain as
auditor for up to 20 years.
As previously reported, KPMG were
selected as the Group’s auditor for the
year ended 31 March 2016, following a
competitive tender process, and were
appointed at the AGM on 2 September
2015. The external auditor is required to
110
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR GOVERNANCE audit services), are shown in note 4 to the
consolidated financial statements. The
total non-audit fees for 2021 represent
10 per cent of the total KPMG audit fee.
Those non-audit services undertaken
by the auditor were purchased from the
auditor because of its existing knowledge
of the Group’s business which meant it
could undertake them more effectively.
Tony Osbaldiston
Chairman of the audit committee
16 June 2021
rotate the senior statutory auditor every
five years. The senior statutory auditor
responsible for the Group audit for 2021
is David Morritt, whose appointment in
this role commenced with the audit for the
financial year ended 31 March 2019.
The committee has recommended to
the board that a resolution proposing
the appointment of KPMG as external
auditor be put to the shareholders at the
forthcoming AGM.
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.
This policy is compliant with the Code and
with the FRC’s revised Guidance on Audit
Committees. It includes restrictions on the
scope of permissible non-audit work and a
cap on fees for permissible non-audit work
(which may not exceed 70 per cent of the
average audit fees paid in the last three
consecutive years). The policy requires a
competitive tender for all work with a fee
over £30,000.
For work that is permitted under the policy,
authority is delegated to the Group finance
director to approve up to a limit of £50,000
for each assignment and there is a
cumulative annual total of less than 50 per
cent of that year’s audit fee. Prior approval
is required by the committee for any
non-audit assignments over £50,000 or
where the 50 per cent audit fee threshold
is exceeded. No non-audit services
provided by KPMG during the year ended
31 March 2021 required the approval of
the committee.
Details of the auditor’s fees, including
non-audit fees (which comply with the
Group’s policy on the provision of non-
111
www.severfield.comStock Code: SFR OUR GOVERNANCE NOMINATIONS
COMMITTEE REPORT
THE COMMITTEE ENSURES THE CONTINUED
EFFECTIVENESS OF THE BOARD THROUGH
APPROPRIATE SUCCESSION PLANNING
AND SUPPORTS THE DEVELOPMENT OF A
DIVERSE PIPELINE
Role
The primary function of the committee
is to deal with key appointments to the
board, and related employment matters.
The responsibility and the objectives of
the committee principally fall into the
following areas:
• To review the structure, size and
composition of the board.
• To make recommendations to the
board for any changes considered
necessary.
• To approve the description of the
role and capabilities required for a
particular appointment.
• To ensure, having due regard for the
benefits of diversity on the board,
including gender, and on the skills
matrix of the board, that suitable
candidates are identified and are
recommended for appointment to
the board.
The committee’s terms of reference were
updated in April 2021 and are available
on the Group’s website (www.severfield.
com) and on request from the Company
secretary.
Board effectiveness
Following John Dodds’s retirement in
September 2020, I succeeded him as
chairman of the nominations committee.
Prior to John’s retirement, the committee,
chaired by Alun Griffiths for these
purposes, undertook a comprehensive
process to identify John’s replacement as
non-executive chairman of the Group. This
resulted in my appointment to the role and
I am delighted to be chosen to lead the
board during the next phase of the Group’s
development.
The committee undertook a process for
identifying my replacement as senior
independent director and selected
Alun Griffiths to fulfil this role from 1
October 2020. An internal candidate was
chosen only after careful consideration
of other alternatives (including external
candidates identified last year) and after
the committee had undertaken a series of
interviews with Alun and other members
of the board, to satisfy themselves that he
was the right choice.
In June 2021, Rosie Toogood was
appointed as a new non-executive director
following a recruitment process involving
Korn Ferry. The committee outlined its
recruitment criteria to Korn Ferry, taking
into account the board’s existing skills set
and seeking to improve where appropriate
its diversity, and a suitable shortlist was
identified. After meeting the existing
directors, Rosie was then recommended
and duly appointed by the board.
The board will now consist of nine
directors, with an average tenure of six
years. We consider each of our non-
executive directors on the board to be
independent. Korn Ferry has supported
the board in previous selection processes
for new board members but has no other
connection with the Company.
Diversity
We truly value diversity and a culture of
inclusion at all levels within the Group. Our
formally adopted equal opportunities and
diversity policy sets out the key actions
that will be taken to ensure we have a
more diverse workforce throughout the
Group. We consider diversity to include
diversity of background, race, disability,
“ Increasing the diversity
of the board and effective
succession planning
remain key areas of focus
for the nominations
committee.”
KEVIN WHITEMAN
CHAIRMAN OF THE
NOMINATIONS COMMITTEE*
* Alun Griffiths was chairman of one meeting
which was held to consider and recommend to
the board the appointment of Kevin Whiteman
as a new Chairman and which Kevin Whiteman
did not attend due to a conflict of interest.
112
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR GOVERNANCE O U R G O V E R N A N C E
Number of meetings
3
Members
Kevin Whiteman (chairman
since 3 September 2020)*
Tony Osbaldiston
Alun Griffiths
Louise Hardy
John Dodds
(until 3 September 2020)
2021 key achievements
• Recommending the appointment
of Kevin Whiteman as the new
chairman.
• Recommending the appointment
of Alun Griffiths as the new senior
independent director.
• Undertaking and considering the
results of the board evaluation.
• Establishing the process for the
appointment of a new non-executive
director, taking into account
succession planning and diversity.
2022 areas of focus
• Recommending the appointment
of Rosie Toogood as a new
non-executive director.
• Reviewing and re-establishing
the Group’s succession plan and
diversity policy.
• Reconsidering the effectiveness of
an external board evaluation.
* Alun Griffiths was chairman of one meeting which
was held to consider and recommend to the
board the appointment of Kevin Whiteman as a
new chairman and which Kevin Whiteman did not
attend due to a conflict of interest.
gender, sexual orientation, beliefs and age
and encompasses culture, personality and
work-style.
We support the principle of seeking
to increase the number of women on
FTSE boards, and to improve women’s
representation in leadership positions.
The Group, however, does not believe in the
concept of gender quotas, our preferred
approach being directed at the selection of
the right talent, experience and skill.
As at 31 March 2021, the board had one
female director (13 per cent). After 16 June
2021, it will have two female directors
(22 per cent). Female representation on
our executive committee is two (17 per
cent) and of those reporting directly to
members of the executive committee,
female representation is much higher at
63 per cent with nearly all senior finance
and HR roles being held by women.
Succession planning
The committee ensures the continued
effectiveness of the board through
appropriate succession planning and
ensures that the Company has in place a
succession planning programme designed
to identify and develop future senior
leaders and to achieve diversity. Each year
the committee meets to review succession
plans for the board and for senior
management and takes into account the
issues arising out of the evaluation of the
board’s effectiveness and its commitment
to diversity.
Evaluation
The committee asked Alun Griffiths, the
senior independent director, to perform
an internal evaluation using the process
described on page 107. The results of
the evaluation were positive. The key
points arising from the evaluation were
documented and discussed with the
chairman and the board and taken into
account in the process for recruitment of a
new non-executive director.
Kevin Whiteman
Chairman of the nominations committee
16 June 2021
Gender diversity on the
board*
22%
78%
Female
Male
Gender diversity in senior
management**
19%
81%
Female
Male
* After appointment of Rosie Toogood.
** Senior management comprises the board
and the executive committee.
113
www.severfield.comStock Code: SFR
DIRECTORS’
REPORT
THE DIRECTORS PRESENT THEIR REPORT
TOGETHER WITH THE AUDITED CONSOLIDATED
FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 MARCH 2021
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 continue 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.
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.
Significant shareholdings
As at 1 June 2021, 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 Investment Management
2. JO Hambro Capital Management
3. Chelverton Asset Management
4. Unicorn Asset Management
5. Threadneedle Asset Management
6. Legal & General Investment Management
7. Invesco (including Perpetual & Trimark)
Ordinary
2.5p share
33,533,934
29,773,575
24,013,305
21,500,000
20,759,121
16,513,289
15,999,666
%
10.88
9.66
7.79
6.98
6.73
5.36
5.19
MARK SANDERSON
COMPANY SECRETARY
Overview
As permitted by legislation, some of
the matters normally included in this
report have instead been included in the
strategic report on pages 20 to 87, as the
board considers them to be of strategic
importance. Specifically, these relate
to the Company’s business model and
strategy, future business developments,
research and development activities and
risk (including financial risk) management.
The corporate governance report on pages
96 to 107 is incorporated in this report by
reference.
There have been no significant events
since the balance sheet date.
Directors
The present membership of the board is
set out on pages 90 to 91.
The other significant commitments of the
chairman consist of acting as chairman of
NG Bailey and non-executive director and
remuneration committee chair of Cadent
Gas Limited.
The service agreements of the executive
directors and the letters of appointment of
the non-executive directors are available
for inspection at the Company’s registered
office. Brief details are also included in the
directors’ remuneration report on page 128.
114
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR GOVERNANCE Powers for the Company to buy back
its shares and to issue its shares
At the Company’s annual general meeting
(‘AGM’) held on 3 September 2020,
shareholders authorised the Company
to make market purchases of ordinary
shares representing up to 10 per cent of
its issued share capital at that time and to
allot shares within certain limits approved
by shareholders. These authorities will
expire at the 2021 AGM (see below) and a
renewal will be sought. The Company did
not purchase any of its ordinary shares
during the year.
The Directors were granted authority
at the previous annual general meeting
on 3 September 2020, to allot shares in
the Company: (i) up to one-third of the
Company’s issued share capital; and (ii)
up to two-thirds of the Company’s issued
share capital in connection with a rights
issue. These authorities apply until the
end of the 2021 AGM (or, if earlier, until the
close of business on 30 September 2021).
During the period, the directors did not
use their power to issue shares under the
authorities but did issue shares to satisfy
options and awards under the Company’s
share incentive schemes.
The directors were also granted authority
at the previous annual general meeting
on 3 September 2020, under two separate
resolutions, to disapply pre-emption
rights. These resolutions, which followed
the Pre-emption Group’s Statement of
Principles (March 2015) on disapplying
pre-emption rights applicable at that
time, sought the authority to disapply
pre-emption rights over 10 per cent of the
Company’s issued ordinary share capital.
These authorities apply until the end
of the 2021 AGM (or, if earlier, until the
close of business on 30 September 2021).
During the period, the directors did not use
these powers.
Dividends
The directors declared an interim
dividend for the six months ended 30
September 2020 of 1.1p per ordinary share
(2020:1.1p).
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 expire
in October 2023 and can be terminated
upon a change of control of the Group.
Share capital
The Company has a single class of share
capital which is divided into ordinary
shares of 2.5p each. No other securities
have been issued by the Company. At
31 March 2021, there were 308,221,462
ordinary shares in issue and fully paid.
Further details relating to share capital,
including movements during the year,
are set out in note 24 to the financial
statements. During the period, shares
in the Company were issued to satisfy
awards under the Company’s share
incentive schemes. Further details
regarding employee share-based
payment schemes are set out in note
23. No shareholder holds shares in the
Company which carry special rights with
regard to control of the Company. There
are no shares relating to an employee
share scheme which have rights with
regard to control of the Company that are
not exercisable directly and solely by the
employees.
Voting rights and restrictions on
transfer of shares
All of the issued and outstanding ordinary
shares of the Company have equal voting
rights, with one vote per share. There are
no special control rights attaching to
them save that the control rights of any
ordinary shares held in the EBT can be
directed by the Company to satisfy the
vesting of outstanding awards under its
various employee share plans. In relation
to the EBT and any unallocated Company
shares held in it, the power to vote or not
vote is at the absolute discretion of the
trustee. The Company is not aware of any
agreements or control rights between
existing shareholders that may result in
restrictions on the transfer of securities or
on voting rights. The rights, including full
details relating to voting of shareholders
and any restrictions on transfer relating
to the Company’s ordinary shares, are set
out in the articles and in the explanatory
notes that accompany the Notice of the
2021 AGM.
These documents are available
on the Group’s website at
www.severfield.com.
115
www.severfield.comStock Code: SFR OUR GOVERNANCE DIRECTORS’
REPORT
External auditor
KPMG LLP acted as the auditor for
the Company for the year ended 31
March 2021. KPMG LLP has expressed
its willingness to continue in office
as external auditor and a resolution
to appoint it will be proposed at the
forthcoming AGM.
Annual general meeting
The notice concerning the AGM on
Wednesday 1 September 2021, 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 114 to 116
inclusive was approved by the board and
signed on its behalf by:
Mark Sanderson
Company secretary
16 June 2021
The Company’s share plans contain
provisions that take effect in such an event
but do not entitle participants to a greater
interest in the shares of the Company than
created by the initial grant or award under
the relevant plan.
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.
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 at least 12
months from the approval of the financial
statements. 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 page 57.
Anti-corruption and bribery
matters
The Group updated its anti-bribery policy
during the year and prohibits all forms
of bribery, both in giving and receiving,
wherever it operates. This includes its
own employees and any agent or business
partner acting on its behalf. No concerns
have arisen in relation to such matters
during the year and the Group does not
regard corruption or bribery as a principal
risk. Part of our policy is to undertake due
diligence on the risks associated with
operating in any high-risk locations.
Additional disclosures
Additional information that is relevant
to this report, and which is incorporated
by reference into this report, including
information required in accordance with
the UK Companies Act 2006 and Listing
Rule 9.8.4R, can be located as follows:
• Employees, employee involvement and
engagement – pages 68 to 70
• Respect for human rights – page 74
• Social matters – page 74
• Equal opportunities (including for the
disabled) – page 74
• Environmental matters – pages
64 to 67
• Greenhouse gas emissions – page 66
• Long-term incentive plans – page 130
of the directors’ remuneration report
• Statement of directors’ interests
– page 134 of the directors’
remuneration report
• Financial instruments – note 22 to the
Group financial statements
• Credit, market, foreign currency and
liquidity risks – note 22 to the Group
financial statements
• Related party disclosures – note 31 to
the Group financial statements
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 they
ought to have taken as a director in order
to make themselves 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.
116
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR GOVERNANCE DIRECTORS’
REMUNERATION REPORT
THE COMMITTEE SEEKS TO APPLY THE REMUNERATION
POLICY FAIRLY AND EFFECTIVELY TO ALIGN THE
INTERESTS OF MANAGEMENT WITH THOSE OF OTHER
STAKEHOLDERS AND TO REWARD MANAGEMENT FOR
DELIVERY OF STRETCHING BUSINESS TARGETS
Overview
The committee has sought to
apply discretion appropriately in
what has been an unprecedented
year to recognise fairly the
achievements of the management
team in delivering solid results in
a very challenging environment.
More broadly, we believe that the
remuneration policy continues to
provide strong alignment with the
interests of our shareholders and
other stakeholders in incentivising
management to meet demanding
short-term targets and to deliver
sustainable long-term value
creation, whilst ensuring that high
safety standards are achieved.
Dear shareholder
As chairman of the remuneration
committee, I am pleased to present our
directors’ remuneration report (the ‘report’)
for the year ended 31 March 2021.
The report is split into the following two
sections:
• Part 1, the remuneration policy report,
which sets out the remuneration policy
for the executive and non-executive
directors which was approved at our
2020 AGM, with 94.71 per cent of votes
cast in favour; and
• Part 2, the annual report on
remuneration, which discloses how the
remuneration policy was implemented
for the year ended 31 March 2021 and
how it will be implemented for the year
ending 31 March 2022. The annual
report on remuneration will be subject
to an advisory shareholder vote at the
forthcoming AGM on 1 September 2021.
2021 has been a very challenging
financial year for the Company and all its
stakeholders. The COVID-19 pandemic
plus continued Brexit uncertainty made
it impossible to set meaningful annual
bonus targets for the first half-year and
required a reappraisal of the Company’s
growth trajectory for the short to medium
term as the economy recovered from the
worst recession for 75 years.
As set out below, the committee
approached this challenge by splitting
the financial element of the annual
bonus into two: treating the first half-
year on an exceptional basis, setting
a range of financial and non-financial
objectives related to the handling of the
crisis and recovery of the business with
an expectation that it would be possible
at the half-year to set meaningful profit
targets for the year as a whole.
Targets for the 2020 Performance Share
Plan were set at a level which recognised
the medium-term impact on the Company’s
growth trajectory, but which were
appropriately stretching in incentivising
the management team to return towards
previous projections for growth.
Finally, we took note of the strengthened
guidance from the Investment Association
and others regarding pension alignment
and will be bringing forward the date by
which time executive pensions will be
aligned with those available to the wider
workforce to 31 December 2022.
Overall, the committee considers that
the policy operated as intended during
Number of meetings
6
Members and
committee attendance
Alun Griffiths (chairman)
Kevin Whiteman
Tony Osbaldiston
Louise Hardy
John Dodds
6/6
6/6
6/6
6/6
4/4
2021 key considerations
Setting and reviewing directors’
remuneration and benefits, including the
basic salary increases across the Group.
Assessed performance against the
bonus targets and the PSP targets for
the year ended 31 March 2021.
Reviewed and adapted remuneration
arrangements in the light of the
economic impact of the COVID-19
pandemic on the Group and on
shareholder value in particular:
• deferred consideration of the
2020 bonus and pay review for the
majority of the executive directors
until October 2020 after the half
year to allow time for the economic
impact to be assessed; and
• deferred grant of 2021 PSP awards
and determination of performance
targets until December 2020.
Appointed new remuneration advisers
(Deloitte).
Accelerated the pension alignment
timetable.
118
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR GOVERNANCE the year and continues to support our
business strategy and provides an
appropriate link between performance and
reward. In determining the policy, we have
taken careful note of the guidance issued
by shareholders and by the investment
community as a whole. Where appropriate,
remuneration policy for directors is in line
with remuneration of the Group as a whole.
Impact of the COVID-19 pandemic on
remuneration
As noted in last year’s directors’
remuneration report, the committee
deferred certain decisions in relation to
executive remuneration so as to allow
time for the economic impact of the
COVID-19 pandemic on the Group to be
assessed. An update on such decisions is
provided below.
• Annual bonus outcome for 2020: The
executive directors earned bonuses of
between 61 per cent and 70 per cent
of maximum opportunity in respect
of the 2020 financial year. In October
2020, following the half year for the
2021 financial year, the committee
determined that the payment of bonus
for the 2020 financial year should
be made as the company was in a
strong financial position, had paid a
final dividend for the 2020 financial
year and did not seek any government
aid via furlough payments under the
Coronavirus Job Retention Scheme
(‘CJRS’).
• Base salaries: Adam Semple’s salary
was increased to £250,000 in July
2020 for reasons explained in last
year’s Director’s Report, but the review
of the salaries of all other directors
was deferred until October 2020.
Increases of 2 per cent of salary were
awarded in line with those of the wider
workforce and backdated to 1 July
2020.
• Grant of PSP awards: In line with the
guidance published by the Investment
Association, the committee deferred
the grant of PSP awards until
December 2020 to ensure that the
earnings per share (‘EPS’) performance
targets would be consistent with the
board strategy review completed
in December 2020 and in line with
updated market expectations. Awards
were granted equal to 100 per cent of
salary for the chief executive officer
and the chief operating officer and 75
per cent of salary for other executive
directors. All awards were granted
below the maximum opportunity of
150 per cent of salary permitted by
the remuneration policy. The targets
set are intended to incentivise
management to maintain forward
momentum and will require the Group
to deliver EPS which equates to a PBT
range of £25.5m to £32.5m for the
2023 financial year. The committee
considers that this represents a
vesting range which is realistic, whilst
remaining appropriately stretching,
particularly in the context of current
expectations of the external market
over the next performance cycle.
Update on pension alignment
As part of last year’s remuneration policy
update, we confirmed that pension
allowance for existing executive directors
would be reduced to 15 per cent of
salary over the next three years, with full
alignment to the level available to the
entire UK workforce being achieved by the
end of the next policy period. This year,
following the Investment Association’s
updated guidance, we have decided to
accelerate this timetable by committing to
full alignment by 31 December 2022.
Performance and reward 2021
The Group has performed well despite
challenging market conditions,
significantly influenced by the
COVID-19 pandemic and continued
Brexit uncertainty, and has continued
to make progress in meeting its
strategic objectives. This was achieved
through sustained focus on operational
improvements, supported by continued
investment in people, processes and
technology. In addition, the acquisition of
DAM Structures has given us additional
market share in a strategically significant
market.
Annual bonus outcome
As in previous years, executive directors
were granted an annual bonus opportunity
equal to 100 per cent of salary in line
with the remuneration policy. 80 per cent
of the award was based on financial
performance and 20 per cent based on
safety performance.
Profit-based targets – 80 per cent
In the first half of the year, when the
uncertainty associated with the COVID-19
pandemic was at its greatest, profit
forecasts for the full financial year were
unable to be made with any reliability. As
such, the committee split the financial
element of the bonus into two:
• 50 per cent based on the committee’s
assessment of the Group’s response to,
and recovery from, COVID-19 during the
first half of the financial year with focus
on profitability, liquidity, staff welfare
and the smooth running of operations,
in particular continuing to meet client
needs at a very demanding time. The
committee determined that 75 per
cent of this element should be paid,
taking into account that operations
continued to run safely and effectively
through the pandemic, the Group
worked closely with clients in making
changes to working practices to allow
sites to remain open, the Group’s
financial position remained strong,
no claims for government support
were made (including via employee-
related support schemes) and
half-year financial performance was
positive. In making this determination,
the committee considered that
the interests of employees and
shareholders were adequately
represented during this period, with
employees afforded a COVID-19 safe
working environment, receiving a
bonus (for the 2020 financial year) and
an average 2 per cent salary increase
and with shareholders continuing to be
paid ordinary dividends.
• 50 per cent based on the achievement
of Group PBT targets for the whole
financial year. This element would pay
out at 50 per cent for achievement of
Group PBT for the 2021 financial year
of £21m, 75 per cent at £23m and 100
per cent at £25m. Group PBT of £24.3m
was achieved and 75 per cent of this
element paid out. Derek Randall, as
managing director of the Indian joint
venture (‘JSSL’), has this profit-based
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target of £4.5m (18 per cent) and in the
maximum target of £7.5m (23 per cent)
compared to the targets set for 2023
and represents a vesting range which
the committee feels is realistic, whilst
remaining appropriately stretching,
particularly in the context of current
expectations of the external market over
the next performance cycle.
Conclusion
The committee continues to seek to
strengthen shareholder alignment and
ensure that pay remains firmly linked to
performance whilst ensuring that the
bonus and performance share plans
provide a strong incentive for management
to deliver superior performance over
the short and longer term. At the same
time, we are mindful that remuneration
decisions should be considered in the
context of the impact of the COVID-19
pandemic on the Group’s operations
and the experience of shareholders and
employees. We strongly believe that the
decisions made during the year were
appropriate in this regard.
I hope you find this report to be clear and
simple, providing the rationale for our
decisions that is helpful in understanding
our remuneration policy and practices.
I look forward to answering any questions
shareholders might have, and your
continued support.
Alun Griffiths
Chairman of the remuneration committee
16 June 20211
component of his bonus split 50:50
between Group PBT and PBT for JSSL,
also resulting in a 75 per cent payout.
Safety-based targets – 20 per cent
For all directors (apart from Derek
Randall), 20 per cent of the bonus is
payable on achieving a Group incident
frequency rate (‘IFR’) score of 1.92. For
Derek Randall, 20 per cent of the bonus
is payable on achieving a JSSL accident
frequency rate (‘AFR’) score of 0.1. The
safety targets for all directors were
achieved, resulting in this element of the
bonus being paid out in full.
Based on the above, an annual bonus
payout of 80 per cent of the maximum
opportunity has been earned for all
directors. The committee considers
this to be a fair and equitable outcome
considering wider Group performance
and the experience of shareholders,
employees and clients. It was notable
that few employees were placed on
furlough (and no government support was
claimed), there was no COVID-19 related
restructuring, employees received a bonus
for 2020 and an average 2 per cent salary
increase, a final dividend and an interim
dividend were paid and by the end of
the year the share price had recovered
to c.80p from a low of c.50p in August
2020. In addition, the Company acquired
DAM Structures, broadening its strategic
outreach, achieved a strong year-end
financial position and has emerged from
the COVID-19 crisis well positioned to
respond to the recovery of the market
generally.
In line with the remuneration policy,
50 per cent of the bonus will be paid in
shares deferred for three years.
PSP vesting
The 2018 PSP awards capable of vesting
in June 2021 will lapse in full as the
threshold EPS target (which equated to
PBT of £29.5m) for the financial year 2021
was not met.
Implementation of policy for 2022
Base salaries and fees
Salaries for the directors will be reviewed
and be effective from 1 July 2021 with
increases, as a percentage of salary, being
limited to those of the wider workforce.
After no change in the fees paid to non-
executive directors since 2014, the level
of fees was benchmarked this year and
determined to have fallen substantially
below market compared to the Group’s
peer group. As a result, the board agreed
to increase the base fee by 12.5 per cent
(from £40,000 to £45,000), the additional
fee for extra roles by 50 per cent (from
£5,000 to £7,500) and the chairman’s
fee by 12.5 per cent (from £125,000
to £140.000). This then placed their
remuneration at a level between the lower
quartile and the median compared to
their peer group of other FTSE SmallCap
companies.
Annual bonus
The maximum annual bonus opportunity
is 100 per cent of salary. 80 per cent of the
award is based on PBT performance and
20 per cent based on safety performance.
The PBT performance targets reflect the
levels of growth forecast in the board’s
strategy review in December 2020 in
the light of the impact of the COVID-19
pandemic on the forward momentum of
the Group. 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.
PSP
Awards of 100 per cent of salary will
be made for the chief executive officer
and the chief operating officer and 75
per cent for other executive directors.
The performance targets are intended
to incentivise management to maintain
momentum and will require the Group
to deliver EPS in 2024 which equates to
a PBT range of £30.0m to £40.0m. This
represents an increase in the threshold
1 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 2018 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.
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Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR GOVERNANCE Part 1 – Remuneration Policy
The remuneration policy was approved at
the AGM in 2020. 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,
the executive director service contracts
and terms and conditions for non-
executive directors.
The full policy report, as approved by
shareholders, can be found from page
121 onwards of the 2020 annual report.
It is intended this policy will remain in
place until the 2023 AGM. The Company’s
remuneration policy supports the
business strategy by ensuring that the
overall remuneration package is set at
a competitive level whilst ensuring that
additional reward is only paid for high
performance over a sustained period.
The key principles of the policy are:
• Clarity: maintain transparency of
our competitive total remuneration
structure that is driven by our business
strategy and model, focuses on
sustained long-term value creation
whilst ensuring that high safety
standards are achieved and is aligned
with the interests of shareholders;
• Predictability: to ensure that targets
set each year result in stretching
ambitions and that the scale of the
reward is proportionate;
• Support the Group’s business strategy:
a reward package that balances short
and long-term performance, rewarding
Group and personal performance;
• Simplicity: ensure the remuneration
structure avoids unnecessary
complexity;
• Risk is appropriately managed. The
remuneration of executive directors
provides an appropriate balance
between fixed and performance-
related pay elements: restraint on fixed
pay, with a substantial proportion of
total remuneration based on variable
pay linked to performance;
• Alignment: the remuneration
principles encourage behaviour that
the committee expects; and
• Proportionality: the link between
individual awards, the delivery
of strategy and the long-term
performance of the Group is clear.
Remuneration policy table for executive directors
The following table sets out each element of the remuneration policy for the executive directors, explaining how each element operates
and links to the business strategy.
Base salaries
Purpose and link to strategy
To provide the core reward for the role recognising knowledge, skills and experience, in
addition to the size and scope of 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, with changes typically
effective from 1 July.
Base salaries are pensionable.
Our review takes into account levels of increase across the broader workforce, changes in
responsibility, and a periodic remuneration review of comparable companies.
Maximum opportunity
There is no prescribed maximum base salary or salary increase.
Current salaries are disclosed in the annual report on remuneration.
Salary increases are awarded at the discretion of the committee. Salary increases (in
percentage of salary terms) will ordinarily be considered in relation to those applied to the
broader employee population.
The committee retains discretion to award a lower or a higher increase to recognise, for
example, significant changes in the scope and/or responsibilities of the role, a material
change in the size and scale of the Group and/or to take account of relevant market
movements.
Where an executive director’s salary is set below market levels at appointment, a series of
increases may be given (in addition to the factors listed above) in order to achieve the desired
salary positioning, subject to satisfactory individual performance.
Performance conditions
None, although 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.
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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 may be offered if considered appropriate and reasonable by
the committee.
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.
Any reasonable business-related expenses can be reimbursed (including the tax thereon
if determined to be a taxable benefit). 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, including participation in any
all-employee share plans operated by the Group, in line with the prevailing HMRC guidelines
(where relevant).
Maximum opportunity
The value of insured benefits can vary from year to year based on the costs from third party
providers. The committee reviews the cost of the benefits provision on a regular basis to
ensure that it remains appropriate.
The total value of benefits (excluding relocation and international assignment allowances)
will not exceed more than 15 per cent of salary in any year.
The maximum level of participation for all-employee share plans, if relevant, is subject to the
limits imposed by HMRC from time to time (or a lower cap set by the Group).
Performance conditions
No performance conditions or
recovery provisions apply to benefits.
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Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR GOVERNANCE 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
For new executive director appointments after the 2020 AGM, the Group pension
contribution/allowance will be aligned to that available to the majority of the UK monthly
paid workforce, from time to time. The current pension contribution being 7 per cent of base
salary.
For incumbent directors, the pension contribution levels will be aligned with the level
available to the entire UK workforce by 31 December 2022 as follows:
CEO
Others
Current
20%
18%
1 April 2021
19%
17%
1 April 2022
1 Jan 2023
17% UK workforce
level
16%
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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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
Annual awards based on targets set by the committee at the beginning of each financial year.
The extent to which the performance measures have been achieved is determined by the
committee after the end of the performance period. The level of bonus for each measure is
determined by reference to the actual performance relative to that measure’s performance
targets, on a pro rata basis.
All bonus payments are at the ultimate discretion of the committee and the committee
retains an overriding ability to ensure that overall bonus payments reflect its view of
corporate performance during the year when determining the final bonus amount to be
awarded.
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’). The plan
incorporates a malus and clawback mechanism for instances of financial misstatement,
error, substantial failures in risk control, serious misconduct or any other exceptional
circumstances determined by the remuneration committee, for a period of three years from
the bonus payment date. The malus and clawback provisions extend to the cash element of
the annual bonus.
Dividends may accrue on deferred bonus shares, to the extent they have vested. Any dividend
equivalents would normally be delivered in shares.
Maximum opportunity
Maximum 100 per cent of base salary per annum.
124
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, targets and weightings
to reflect the business objectives at
the time. The committee retains the
discretion to set alternate measures,
as appropriate. 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.
Performance is measured over one
financial year.
No more than 50 per cent of the
maximum bonus opportunity will be
payable for on-target performance.
The actual measures and weightings
are set out in the annual report on
remuneration on page 131.
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR GOVERNANCE Performance Share Plan (‘PSP’) (approved by shareholders in 2017)
Purpose and link to strategy
Incentivise and reward for long-term sustainable performance linked to corporate strategy
and provide alignment with shareholders’ interests.
Operation
Discretionary awards of performance shares are normally granted annually. The committee
reviews the quantum of awards annually and monitors the continuing suitability of the
performance measures.
The awards will, in normal circumstances, vest subject to continued service and the
achievement of performance conditions over a prescribed period, normally measured over
three financial years.
A two-year post-vesting holding period requirement, which continues to apply post-
employment, applies for shares that vest, net of sales to settle tax or other withholding due
on the vesting or exercise of awards.
Malus and clawback provisions apply to allow recoupment for a period of three years
following the vesting of an award, in the event that the value of a vested award is
subsequently found to have been overstated as a result of financial misstatement,
error, substantial failures in risk control, serious misconduct or any other exceptional
circumstances determined by the remuneration committee.
Dividends may accrue on vested awards. Any dividend equivalents accrued will normally be
delivered in shares.
All awards are subject to the discretions contained in the relevant plan rules.
Maximum opportunity
Maximum annual award level is 150 per cent of salary.
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, increasing
to 100 per cent vesting at maximum
on a straight-line basis.
The committee retains discretion
to override formulaic outcomes
in deciding the level of vesting to
reflect wider Group performance.
Any exercise of discretion will be fully
disclosed to shareholders.
A two-year post-vesting holding
period applies.
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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 a sharesave scheme. 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
Performance conditions
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.
No recovery provisions apply to all-
employee share awards.
Shareholding requirements
Purpose and link to strategy
To strengthen the alignment between the interests of the executive directors and those of
shareholders.
Operation
In accordance with best practice, shareholding requirements apply during and post-
employment.
In-employment shareholding requirement
Executive directors will normally be required to retain a shareholding of at least 200 per cent
of their PSP award opportunity. Executive directors are required to retain shares acquired
under equity incentive schemes, net of tax, until such time as they have built up the required
holding.
Deferred bonus shares, vested but unexercised PSP awards, shares subject to a holding
period and open market purchase shares, including shares held by a spouse or children
under 18, count towards this limit, on a net of tax basis.
Post-employment shareholding requirement
Executive directors will normally be required to retain a shareholding, at the level of the in-
employment shareholding or the actual shareholding on cessation, if lower, until the second
anniversary of the date they ceased to be an executive director.
The post-cessation shareholding requirement will apply to shares acquired (net of tax)
under awards granted under this policy. Shares acquired under all-employee share plans or
purchased from the executives’ own funds would not be included.
Maximum opportunity
Performance conditions
Executive directors are required to build up and maintain an in-employment shareholding of
at least 200 per cent of their PSP award opportunity.
No performance conditions or
recovery provisions apply.
Executive directors will normally be required to retain a post-employment shareholding at
the level of the in-employment shareholding requirement, or the actual shareholding on
cessation, if lower, for a period of two years post-employment.
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Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR GOVERNANCE Policy of payment for departure from office
Provision
Policy
Salary, pension
and benefits
If no breach of service agreement – termination payment based on the value of base salary that would
have accrued during the contractual notice period* taking into account mitigation, when appropriate, as
circumstances dictate.
Annual bonus
PSP
Discretionary payment based on the circumstances of the termination and after assessing performance
conditions and only for the service period worked. DSBP will be forfeited for dismissal for misconduct, fraud and
performance issues and where executive director leaves for alternative employment at a competitor.
Outstanding awards will lapse unless good leaver (death, disability, retirement, the sale of the business or
company that employs the individual or for any reason at the discretion of the committee (which may take into
account the circumstances of an individual’s departure)). A good leaver’s unvested awards will vest on the normal
vesting date subject to the achievement of any relevant performance condition (other than in the case of death
when vesting will be immediate), with a pro rata reduction to reflect the proportion of the vesting period served.
* The committee will have the authority to settle any legal claims made against the Company, for example for unfair dismissal, that may arise on termination.
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.
The remuneration committee has retained flexibility on the measures which will be used for future award cycles to ensure that the
measures are fully aligned with the strategy prevailing at the time the awards are granted. Notwithstanding this, the remuneration
committee would seek to consult with major shareholders in advance of any material change to the choice or weighting of the PSP
performance measures.
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.
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 remuneration committee, consistent with market practice, retains
discretion over a number of areas relating to the operation and administration of the plans. These include, for example, selecting
the participants, the timing and quantum of awards and setting performance criteria each year, determining ‘good leaver’ status,
determining the extent of vesting based on the assessment of performance, form of payment, discretion to retrospectively amend
performance targets in exceptional circumstances (providing the new targets are no less challenging than originally envisaged) and in
respect of share awards, to adjust the number of shares subject to an award in the event of a variation in the share capital of
the Company.
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.
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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.
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 recommendations of
the chairman and the chief executive officer.
Element
Fees
Purpose and link
to strategy
To attract and
retain a high-
calibre chairman
and non-executive
directors by
offering market
competitive fee
levels.
Operation (including maximum 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 normally 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.
• Additional fees may be payable to reflect exceptional time commitments.
• No benefits or other remuneration are provided to non-executive directors.
What are the terms of appointment of the non-executive directors?
The chairman’s 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. Appointments
are subject to annual re-election by shareholders at the AGM.
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Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR GOVERNANCE Part 2 – Annual remuneration report
In this section, we report on the implementation of our policies in the year ended 31 March 2021 as well as how the policy will be
implemented for 2022. 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 2021
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:
Alun Griffiths (chairman)
John Dodds (until 3 September 2020)
Louise Hardy
Kevin Whiteman
Tony Osbaldiston
Number of
meetings attended
6/6
4/4
6/6
6/6
6/6
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
Company secretary acts as the secretary to the remuneration committee.
The terms of reference for the remuneration committee are available on the Company’s website.
Shareholder engagement
The committee engages directly with major shareholders where it considers there to be material changes to the remuneration policy or
executive remuneration framework.
Consideration of conditions and pay levels for the workforce
In determining the remuneration of executive directors and remuneration policy for the Group, the committee took account of general
market conditions and pay levels for the workforce as a whole. In so doing, the committee reviewed wage growth generally and the
proportion of earnings paid as bonus to groups of staff at each level – executive directors, senior staff and all other employees (who
receive a profit share bonus and are eligible to participate in an SAYE scheme). The Group recognises a number of trade unions who are
consulted regarding wage settlements on a site-by-site basis and seeks employee participation on a range of matters, including safety,
but does not formally engage with employees on executive pay.
Advisers to the committee
Wholly independent and objective advice on executive remuneration is received from the committee’s external advisers.
Deloitte were appointed in December 2020 following a tender organised by the committee. Deloitte is one of the founding members of
the Remuneration Consultants Group and is a signatory to its Code of Conduct. No fees were charged by Deloitte for advice provided to
the committee for the year ended 31 March 2021.
Deloitte replaced Alvarez & Marsal, who themselves replaced Aon plc in September 2020. Fees charged by Alveraz & Marsal and Aon
plc for advice provided to the committee for the year ended 31 March 2021 amounted to £54,000 (excluding VAT).
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Directors’ earnings for the 2021 financial year (audited)
Remuneration received by the directors
£000
Salary
Fees
Benefits
Pension
Total
fixed pay
Bonus
LTIPs
Total
variable
pay
Year ended 31 March 2021
Executives
Alan Dunsmore
Ian Cochrane
Derek Randall1
Adam Semple
Non-executives
Kevin Whiteman2
Alun Griffiths3
Tony Osbaldiston
Louise Hardy
John Dodds (resigned
3 September 2020)
364
324
267
246
–
–
–
–
–
–
–
–
–
91
48
45
40
54
19
16
79
16
–
–
–
–
–
73
50
50
44
–
–
–
–
–
456
390
396
306
91
48
45
40
54
291
259
213
197
–
–
–
–
–
1,201
278
130
217
1,826
960
–
–
–
–
–
–
–
–
–
–
291
259
213
197
–
–
–
–
–
960
2,786
Taxable benefits include the provision of company cars, fuel for company cars, car, accommodation and living allowances and private
medical insurance. LTIPs reflect those PSP awards expected to lapse based on performance to 31 March 2021.
1 £22,317 of the cost of living allowance paid to Derek Randall related to FY20 but was wholly paid in FY21.
2 Kevin Whiteman was appointed as chairman on 3 September 2020.
3 Alun Griffiths was appointed as senior independent director on 1 October 2020.
Directors’ earnings for the 2020 financial year (audited)
Remuneration received by the directors
Year ended 31 March 2020
£000
Salary
Fees
Benefits
Pension
Total
fixed pay
Bonus
LTIPs*
Total
variable
pay
Executives
Alan Dunsmore
Ian Cochrane
Derek Randall
Adam Semple
Non-executives
John Dodds
Tony Osbaldiston
Kevin Whiteman
Alun Griffiths
Louise Hardy (appointed
3 September 2019)
356
318
261
231
–
–
–
–
–
1,166
–
–
–
–
125
45
45
45
26
286
19
16
–
16
–
–
–
–
–
71
50
50
42
–
–
–
–
–
446
384
311
289
125
45
45
45
26
219
195
185
143
–
–
–
–
–
215
190
156
22
–
–
–
–
–
434
385
341
165
–
–
–
–
–
51
213
1,716
742
583
1,325
3,041
Taxable benefits include the provision of company cars, fuel for company cars, car and accommodation allowances and private medical
insurance.
* LTIPs reflect those PSP awards vested based on performance to 31 March 2020 and are calculated as actual value of benefit at the actual vesting date (including
extra dividend equivalent shares) based on the vesting share price of 72.50p. The awards were granted on 15 June 2017 at a share price of 82.50p and therefore no
proportion of the value is attributable to share price growth.
130
Total
747
649
609
503
91
48
45
40
54
Total
880
769
652
454
125
45
45
45
26
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR GOVERNANCE Base salary increases received by the directors
The directors received a 2 per cent salary increase effective from 1 July 2020, which was broadly in line with that received by the
UK workforce, with the exception of Adam Semple who received an increase of 6.4 per cent for the reasons explained in last year’s
directors’ remuneration report.
Past directors/loss of office payments (audited)
There have been no payments made to past directors/loss of office during the year.
How pay linked to performance in 2021 (audited)
Bonus
As in previous years, executive directors were granted an annual bonus opportunity equal to 100 per cent of salary in line with the
remuneration policy. 80 per cent of the award was based on financial performance and 20 per cent based on safety performance.
The targets and the performance against these targets are set out below:
For all directors (excluding Derek Randall)
Measure
Response to COVID-19 (H1)
Group PBT (H2)*
Group IFR**
% of maximum
bonus
opportunity
40%
40%
£21m
20% above 2.14
Threshold
On-target
Maximum
Discretionary
£23m
below 2.03
£25m
below 1.92
Actual % of bonus
75%
75%
100%
£24.3m
1.48
* For Group PBT, ‘threshold’ represents 50%, ‘on-target’ represents 75% and ‘maximum’ represents 100% of maximum bonus opportunity.
** For Group IFR, ‘threshold’ represents nil per cent payout, ‘on-target’ represents 50 per cent payout and ‘maximum’ represents 100 per cent payout.
Derek Randall (JSSL managing director)
Measure
Response to COVID-19 (H1)
Group PBT (H2)*
JSSL (India) LBT (H2)
JSSL (India) AFR**
Threshold
% of maximum
bonus
opportunity
40%
£21m
20%
20%
(22.0 Cr)
20% above 0.121
On-target
Maximum
Discretionary
£23m
(17.0 Cr)
below 0.12
£25m
(7.0 Cr)
below 0.10
Actual % of bonus
75%
75%
75%
100%
£24.3m
(14.8 Cr)
0.03
* For Group PBT, ‘threshold’ represents 50%, ‘on-target’ represents 75% and ‘maximum’ represents 100% of maximum bonus opportunity.
** For JSSL AFR, ‘threshold’ represents nil per cent payout, ‘on-target’ represents 50 per cent payout and ‘maximum’ represents 100 per cent payout.
Payout as
% of salary
30%
30%
20%
80%
Payout as
% of salary
30%
15%
15%
20%
80%
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REMUNERATION REPORT
Profit-based targets – 80 per cent
In the first half of the year, when the uncertainty associated with the COVID-19 pandemic was at its greatest, profit forecasts for the full
financial year were unable to be made with any reliability. As such, the committee split the financial element of the bonus into two:
• 50 per cent based on the committee’s assessment of the Group’s response to, and recovery from, COVID-19 during the first half of
the financial year with focus on profitability, liquidity, staff welfare and the smooth running of operations, in particular continuing
to meet client needs at a very demanding time. The committee determined that 75 per cent of this element should be paid, taking
into account that operations continued to run safely and effectively through the pandemic, the Group worked closely with clients
in making changes to working practices to allow sites to remain open, the Group’s financial position remained strong, no claims
for government support were made (including via employee-related support schemes) and half-year financial performance
was positive. In making this determination, the committee considered that the interests of employees and shareholders were
adequately represented during this period, with employees afforded a COVID-19 safe working environment, receiving a bonus (for
the 2020 financial year) and a normal pay increase and with shareholders continuing to be paid ordinary dividends.
• 50 per cent based on the achievement of Group PBT targets for the whole financial year. This element would pay out at 50 per cent
for achievement of Group PBT for the 2021 financial year of £21m, 75 per cent at £23m and 100 per cent at £25m. Group PBT of
£24.3m was achieved and 75 per cent of this element paid out. Derek Randall, as managing director of the Indian joint venture
(‘JSSL’), has this profit-based component of his bonus split 50:50 between Group PBT and PBT for JSSL, also resulting in a
75 per cent pay out.
Safety-based targets – 20 per cent
For all directors (apart from Derek Randall), 20 per cent of the bonus is payable on achieving a Group IFR score of 1.92. For Derek
Randall, 20 per cent of the bonus is payable on achieving a JSSL AFR score of 0.1. The safety targets for all directors were achieved,
resulting in this element of the bonus being paid out in full.
The executive directors will receive the bonuses set out in the table below, of which 50 per cent will be paid in shares deferred for three
years.
Under the rules of the Group’s deferred share bonus plan, the participants will receive nil cost options exercisable after three years over
a seven-year period which are forfeitable only in certain scenarios in accordance with the remuneration policy as disclosed on page 124.
Alan Dunsmore
Ian Cochrane
Derek Randall
Adam Semple
£291,021
£259,340
£213,278
£197,000
The committee considers this to be a fair and equitable outcome considering wider Group performance and the experience of
shareholders and employees, for reasons explained in the chairman’s statement on page 94.
PSP awards vesting in 2021
The 2018 PSP awards were capable of vesting in June 2021, subject to the achievement of an EPS performance condition measured
over the three financial years ended 31 March 2021. The threshold EPS target required for vesting of 25 per cent of the award was
7.88p which equated to a PBT of £29.5m. The EPS target required for vesting at 100 per cent of the award was 9.75p which equated to a
PBT of £36.5m. The actual PBT achieved was £24.3m, which equated to EPS of 6.4p and therefore the awards will lapse in full.
132
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR GOVERNANCE Deferred bonus awards granted in 2021 (audited)
On 5 October 2020 the committee made the following awards under the Group’s Deferred Share Bonus Plan to the following executive
directors in relation to the 2020 bonus outcome. The awards will vest on 5 October 2023, subject to continued employment.
Name
Alan Dunsmore
Ian Cochrane
Derek Randall
Adam Semple
Type
Number of
shares
Face value of
shares¹
Nil–cost option
Nil–cost option
Nil–cost option
Nil–cost option
194,314
173,161
164,474
127,410
£109,399
£97,490
£92,599
£71,732
Vesting date
5 October 2023
5 October 2023
5 October 2023
5 October 2023
1 Face value calculated using the average mid-market closing share price for 2 October 2020 and 5 October 2020 (56.30p).
PSP awards granted in 2021 (audited)
In line with the guidance published by the Investment Association, the committee deferred the grant of PSP awards until December
2020 to ensure that the EPS performance targets would be consistent with the board strategy review completed in December 2020 and
in line with updated market expectations. Awards were granted equal to 100 per cent of salary for the chief executive officer and the
chief operating officer and 75 per cent of salary for other executive directors. The targets set are intended to incentivise management
to maintain forward momentum, and will require the Group to deliver EPS which equates to a PBT range of £25.5m to £32.5m for the
financial year 2023. The committee considers that this represents a vesting range which is realistic, whilst remaining appropriately
stretching, particularly in the context of current expectations of the external market over the next performance cycle.
A summary is set out below:
PSP awards granted to directors in 2021 (audited)
Share awards were made in the year under the PSP scheme for the three-year period expiring on 31 March 2023. Details of the awards
made to the executive directors are summarised below.
Name
Alan Dunsmore
Ian Cochrane
Derek Randall
Adam Semple
Number of
Type
shares % of salary
Face value
(£)1
Performance
condition2
Performance
period
% vesting at
threshold
Nil–cost option
Nil–cost option
Nil–cost option
Nil–cost option
529,809
472,133
291,210
271,739
100%
100%
75%
75%
365,568
325,772
200,935
187,500
EPS
3 financial
years ending
31 March
2023
25%
1 Face value calculated based on the pre-grant date share price of 69.00p on 17 December 2020.
2 Performance conditions are based on EPS targets of 6.57p (minimum performance – 25% vests) to 8.36p (maximum performance – 100% vests) with linear
interpolation in between. This represents a PBT range of £25.5m-£32.5m.
The committee retains discretion to adjust the formulaic vesting outcome if it is not considered to be appropriate, taking into account
wider Group performance during the performance period. This includes consideration of any ‘windfall gains’ at the point of vesting.
In assessing whether there is any ‘windfall gain’, the committee will take into account a number of factors, including share price
performance over the vesting period, financial performance of the business, and any significant events (e.g. COVID-19) which have
impacted the Company’s share price or market as a whole.
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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
Alan Dunsmore
Total
Ian Cochrane
Total
Derek Randall
Total
Adam Semple
Total
Year of
award
2017
2018
2019
2020
2017
2018
2019
2020
2017
2018
2019
2020
2017
2018
2019
2020
Vesting
date*
Performance
condition
2020
2021
2022
2023
2020
2021
2022
2023
2020
2021
2022
2023
2020
2021
2022
2023
EPS
EPS
EPS
EPS
EPS
EPS
EPS
EPS
EPS
EPS
EPS
EPS
EPS
EPS
EPS
EPS
Awards
held at
1 April
2020
304,549
414,692
490,196
–
1,209,437
269,888
360,556
436,835
–
1,067,279
221,948
222,372
269,433
–
713,753
31,655
195,498
231,092
–
458,245
3,448,714
Awards
granted in
year
Awards
lapsed in
year
–
–
–
529,809
529,809
–
–
–
472,133
472,133
–
–
–
291,210
291,210
–
–
–
271,739
271,739
1,564,891
(8,598)
–
–
–
(8,598)
(7,620)
–
–
–
(7,620)
(6,266)
–
–
–
(6,266)
(895)
–
–
–
(895)
(23,379)
Performance conditions are based on a range of EPS targets as follows:
2018 award1
2019 award2
2020 award3
Awards
vested in
year
(295,951)
–
–
–
(295,951)
(262,268)
–
–
–
(262,268)
(215,682)
–
–
–
(215,682)
(30,760)
–
–
–
(30,760)
(804,661)
Awards
held at
31 March
2021
–
414,692
490,196
529,809
1,434,697
–
360,556
436,835
472,133
1,269,524
–
222,372
269,433
291,210
783,015
–
195,498
231,092
271,739
698,329
4,185,565
Threshold
(25% vests)
7.88p
8.41p
6.57p
Maximum
(100% vests)
9.75p
10.39p
8.36p
1 Represents a PBT range of £29.5m - £36.5m. These awards will lapse in full as threshold EPS performance was not achieved.
2 Represents a PBT range of £31.0m - £38.3m.
3 Represents a PBT range of £25.5m - £32.5m.
* Vesting date is June in the relevant years other than 2023 when it is December.
Statement of directors’ shareholding (audited)
As at 31 March 2021, all executive directors and their connected persons had a shareholding as follows:
Alan Dunsmore
Ian Cochrane
Adam Semple
Derek Randall
Shareholding
requirement
200%
200%
150%
150%
Actual share ownership as a percentage of shareholding
requirement as at 31 March 20211
284%
509%
53%
341%
1 Value of actual share ownership was calculated with reference to the closing mid-market share price at 31 March 2021 of 78.4p. Actual share ownership includes
DSBP shares granted but still within the three-year deferral period and / or unexercised.
134
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR 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 2021.
Executives
Alan Dunsmore
Ian Cochrane
Derek Randall
Adam Semple
Non-executives
Kevin Whiteman
Alun Griffiths
Tony Osbaldiston
Louise Hardy
Owned
shares¹
Share
incentive plan
(SIP)²
Sharesave
scheme
DSBP3
PSP4
Total5
1,130,449
1,941,790
965,988
76,755
–
50,000
–
–
22,733
22,733
4,667
–
26,470
27,237
–
–
362,651
327,095
374,979
172,392
1,434,697
1,269,524
783,015
698,329
2,977,000
3,588,379
2,128,649
947,476
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
50,000
–
–
1 Includes shares owned by connected persons and excludes DSBP shares granted but still within the three-year deferral period.
2 SIP shares are unvested and held in trust.
3 The principal terms of the deferred share bonus plan are described on page 124.
4 PSP shares are in the form of conditional awards which will only vest on the achievement of certain performance conditions. The total includes 2018 awards which
had not actually lapsed as at 31 March 2021.
5 There have been no changes in the directors’ interests in the shares issued or options granted by the Company between the end of the period and the date of this
annual report, except shares held pursuant to the SIP. There have been no changes in the directors’ beneficial interests in trusts holding ordinary shares of the
Company. Some of the executive directors continued their membership in the SIP after the end of the period and were therefore awarded further shares pursuant
to the SIP rules. Between the end of the period and 25 May 2021, being the last practicable date prior to the publication of this annual report, the executive
directors acquired further shares under the SIP as set out in the table below.
Executives
Ian Cochrane
Alan Dunsmore
Position against dilution limits
New SIP
shares since
31 March
2021
316
316
Total SIP
shares at
25 May
2021
23,049
23,049
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. Within this 10 per cent limit, the Group can
only issue 5 per cent of its issued share capital to satisfy awards under executive discretionary schemes. The Group’s position against
its dilution limit as at 31 March 2021 was under the maximum 10 per cent limit at 6.5 per cent.
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Performance graph
The following graph shows the Group’s performance, measured by total shareholder return, compared with the performance of the
FTSE Small Cap Index. It is based on the change in the value of a £100 investment made on 1 April 2011 over the ten-year period ended
31 March 2021.
This index was selected as it represents a broad equity market index and is considered to be the most appropriate comparator group of
companies over a ten-year period commencing April 2011.
£
300
250
200
150
100
50
0
n
r
u
t
e
r
r
e
d
l
o
h
e
r
a
h
s
l
a
t
o
T
Mar 2011
Mar 2012
Mar 2013
Mar 2014
Mar 2015
Mar 2016
Mar 2017
Mar 2018
Mar 2019
Mar 2020
Mar 2021
Severfield plc
FTSE Small Cap Index
Chief executive officer remuneration change
The table below shows the total remuneration figure for the chief executive officer role over the same ten-year period. Total
remuneration includes bonuses and the value of PSP awards which vested based on performance in those years (at the share price at
which they vested).
2011
Haughey
2013
Haughey1
2013
Dodds2, 3
2014
Dodds2
2014
Lawson4
2015
Lawson
2016
Lawson
2017
Lawson
2018
Lawson5
2018
Dunsmore6
2019
Dunsmore
2020
Dunsmore
2021
Dunsmore
Total
remuneration
(£000)
Annual
bonus (%)
LTIP vesting
(%)
701
450
62
289
233
681
946 1,228
738
819
890
880
747
60.5%
–
–
–
N/A
N/A 34.0% 65.0% 63.0% 95.0%
–
62.6% 20.0% 61.0% 80.0%
N/A
N/A
–
– 64.0% 74.0% 95.4%
95.4% 100.0% 85.0%
–
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 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 2013.
5 Ian Lawson received compensation of £408,000 for loss of office in accordance with his contract.
6 Alan Dunsmore operated as interim chief executive officer from 1 April 2017 to 31 January 2018, during Ian Lawson’s absence due to physical ill health. Alan’s
appointment to this role was made permanent from 1 February 2018. The figures in the table above represent Ian Lawson’s remuneration for this period and Alan
Dunsmore’s remuneration for the period in which he was both interim and permanent chief executive officer.
136
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR GOVERNANCE
How the change in directors’ 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 for the directors compared to the
percentage change of each of those components of pay of the employees of the Group (calculated by reference to the mean on
employee pay on a full-time equivalent basis).
Alan Dunsmore
Ian Cochrane
Derek Randall
Adam Semple
Kevin Whiteman¹
Alun Griffiths
Tony Osbaldiston
Louise Hardy²
John Dodds³
All UK employees
Base salary/
fees
Benefits
Annual
bonus
2%
2%
2%
7%
103%
6%
0%
0%
0%
2%
0%
0%
0%
0%
–
–
–
–
–
0%
33%
33%
15%
38%
–
–
–
–
–
6%
1 Kevin Whiteman was appointed as chairman on 3 September 2020.
2 Louise Hardy was appointed to the board on 3 September 2019. To enable comparison and to provide meaningful reflection of the annual percentage change, her
fees for the year ended 31 March 2020 have been annualised.
3 John Dodds resigned on 3 September 2020.
Chief executive officer pay ratio disclosure
25th percentile pay ratio
(CEO: UK employees)
Median pay ratio
(CEO: UK employees)
75th percentile pay ratio
(CEO: UK employees)
Year
2021
20201
Method of calculation adopted
Option A2
Option A2
25:1
30:1
18:1
22:1
14:1
17:1
1 The chief executive officer’s total remuneration figure for the year ended 31 March 2020 has been restated to reflect the actual number of PSP awards that vested
using the vesting share price (see page 130). The ratios for the year ended 31 March 2020 have therefore been updated accordingly.
2 Option A methodology was selected on the basis that it is a robust approach and is preferred by shareholders and proxy voting agencies. The calculations for the
representative employees were performed at the final day of the relevant financial year.
A substantial proportion of the chief executive officer’s total remuneration is performance related and delivered in shares. The ratios
will therefore depend significantly on the chief executive officer’s annual bonus and PSP outcomes, and may fluctuate year-to-year.
The median ratio of 18:1 is 18 per cent lower than the median ratio of 22:1 in 2020. This reduction in the chief executive officer pay ratio
is due to the chief executive officer’s PSP awards not vesting for the year ended 31 March 2021.
The committee has confirmed that the ratio is consistent with the Company’s wider policies on employee pay, reward and progression.
Total pay and benefits used to calculate the ratios
Pay details for the chief executive officer and individual whose remuneration is at the median, 25th percentile and 75th percentile
amongst full-time equivalent UK-based employees are as follows:
Year
2021
Salary
Total pay and benefits
2020
Salary
Total pay and benefits
Chief executive officer
25th percentile
£000
364
747
356
880
£000
29
29
26
29
Median
£000
75th percentile
£000
37
41
38
40
49
53
48
51
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The UK employee percentile total pay and benefits has been calculated based on the amount paid or receivable for the relevant
financial year for the full-time equivalent annualised remuneration (comprising salary, benefits, pension, annual bonus and LTIPs) for
all UK-based employees of the Group as at 31 March 2021. The calculations are on the same basis as required for the chief executive
officer’s remuneration for single figure purposes. The committee selected this methodology as it was felt to produce the most
statistically accurate result.
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
There were no share buybacks during the year.
Shareholder voting
2021
£000
75,630
363,254
25,470
8,895
2020
£000
70,714
327,364
26,978
8,851
% change
7.0%
11.0%
(5.6%)
0.5%
The results below show the response to the 2020 AGM shareholder voting for the directors’ 2020 remuneration report (excluding
remuneration policy):
For
Against
Total votes cast (for and against)
Withheld votes
Total votes (including withheld votes)
Total number
of votes
% of votes
cast
253,671,011
242,584
253,913,595
38,347
253,951,942
99.9%
0.1%
100%
N/A
N/A
The results below show the response to the 2020 AGM shareholder voting for the directors’ 2020 remuneration policy:
For
Against
Total votes cast (for and against)
Withheld votes
Total votes (including withheld votes)
Implementation of policy for 2021
Total number
of votes
% of votes
cast
239,038,916
13,347,225
252,386,141
1,565,800
253,951,941
94.71%
5.29%
100%
N/A
N/A
The executive directors’ salaries
The salaries of the executive directors will be reviewed in July 2021 and any increases will be set in the context of overall salary
increases for the wider workforce.
The executive directors’ salaries at the start of the 2022 financial year are as follows:
Alan Dunsmore
Ian Cochrane
Adam Semple
Derek Randall
* The basis for stating results on an underlying basis is set out on page 06.
£
365,568
325,772
250,000
267,913
138
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR GOVERNANCE 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.
For the year ending 31 March 2022, pension opportunity for the chief executive and other executive directors has been reduced to
19 per cent and 17 per cent of salary, respectively. As disclosed on page 123, executive pension contribution levels will be aligned
with the level available to the entire UK workforce by 31 December 2022.
Rewards for performance in 2022
Bonus
The maximum opportunity is set at 100 per cent of salary for executive directors in line with the remuneration policy. The performance
measures are as follows:
Profit performance-based component — 80 per cent
Maximum bonus based on actual PBT versus budget.
The committee believes that the threshold and maximum targets (as a percentage of budget) are appropriately positioned, taking into
account levels of growth forecast in the board’s strategy review in December 2020 and external analyst consensus.
PBT % of budget
95 or below
100
110 or better
Sliding scale applies between points.
% of award
–
50
100
Safety performance-based component — 20 per cent
Group IFR (incident frequency rate)†. IFR and AFR are industry-recognised and measurable targets.
† Whilst Derek Randall remains in India the safety component of his bonus will be based on AFR (India).
The committee believes that the PBT, IFR and AFR targets 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.
PSP
It is the committee’s intention to grant PSP awards of 100 per cent of salary to the chief executive officer and the chief operating officer
and 75 per cent of salary to the Group finance director and the JSSL managing director. The awards will be subject to the following
three-year EPS performance targets:
EPS performance for three-year period ending 31 March 2024
Equal to or less than 7.61p (equivalent to PBT of £30.0m)
Between 7.61p and 9.92p (equivalent to PBT between £30.0m and £40.0m)
Equal to 9.92p or better (equivalent to PBT of £40.0m)
Slide scale applies between points.
Vesting (% maximum)
0%
Between 25% and 100%
100%
When setting this target range, the committee considered a number of reference points, including internal financial forecasts, external
analyst consensus, the base EPS and a broad view of the wider construction industry. The committee considers the targets to be
appropriately stretching taking into account the continuing expected recovery of profitability and recognising that market conditions
remain challenging in many areas.
The committee retains discretion to adjust the formulaic vesting outcome if it is not considered to be appropriate taking into account
wider Group performance during the performance period. This includes consideration of any ‘windfall gains’ at the point of vesting.
139
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How will the non-executive directors be paid in the 2022 financial year?
In March 2021, the board undertook a benchmarking exercise of non-executive fees during the process of recruiting a new non-
executive director. This exercise demonstrated that the current level of fees have fallen below market compared to the Group’s peers of
other FTSE small caps and, accordingly, the fees have been increased for the first time since 2014 (other than the chairman’s fee, which
was reviewed in 2018). The revised 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 and remuneration committees
Additional fee for workforce engagement director role
Approval
This report was approved by the board of directors and signed on behalf of the board.
Alun Griffiths
Chairman of the remuneration committee
16 June 2021
2022
140,000
45,000
7,500
7,500
7,500
2021
125,000
40,000
5,000
5,000
n/a
140
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR GOVERNANCE STATEMENT OF DIRECTORS’
RESPONSIBILITIES
IN RESPECT OF THE ANNUAL REPORT AND FINANCIAL STATEMENTS
The directors are responsible for preparing the annual report and the Group and parent Company financial statements in accordance
with applicable law and regulations.
Company law requires the directors to prepare Group and parent Company financial statements for each financial year. Under that
law they are required to prepare the Group financial statements in accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs as adopted by the EU) and applicable law and have elected to prepare the parent Company
financial statements in accordance with UK accounting standards, including FRS 101 ‘Reduced Disclosure Framework’.
Under company law, the directors must not approve the financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and parent Company and of their profit or loss for that period. In preparing each of the Group
and parent Company financial statements, the directors are required to:
•
select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable, relevant, reliable and prudent;
•
•
for the Group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU;
for the parent Company financial statements, state whether applicable UK accounting standards have been followed, subject to
any material departures disclosed and explained in the parent company financial statements;
• assess the Group and parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern; and
• use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease
operations, or have no realistic alternative but to do so.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to
ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to
fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the
Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the directors are also responsible for preparing a strategic report, directors’ report, directors’
remuneration report and corporate governance statement that complies with that law and those regulations.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s
website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other
jurisdictions.
Responsibility statement of the directors in respect of the annual financial report
We confirm that to the best of our knowledge:
•
•
the financial statements, prepared in accordance with the applicable set of accounting standards, 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 includes a fair review of the development and performance of the business and the position of the issuer and
the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties
that they face.
We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group’s position and performance, business model and strategy.
By order of the board
Alan Dunsmore
Chief executive officer
16 June 2021
Adam Semple
Group finance director
16 June 2021
141
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FINANCIALS
142
Severfield plc Annual report and accountsfor the year ended 31 March 2021YEAR ENDED 31 MARCH 2021NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS CONTENTS
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
Our financials — Company
Company balance sheet
Company statement of changes
in equity
Notes to the Company financial
statements
144
154
155
156
157
158
159
194
194
195
196
197
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Stock Code: SFR
143
143
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AUDITOR’S REPORT
TO THE MEMBERS OF SEVERFIELD PLC
Overview
Materiality:
Group financial
statements as a
whole
£1.2m (2020: £1.3m)
4.9% (2020: 4.9%) of profit before tax
Coverage
98% (2020: 96%) of Group profit before tax
vs 2020
Key audit matters
Recurring risk
Event driven
Carrying value of construction
contract assets, and revenue
and profit recognition in
relation to construction
contracts
New: Valuation of intangibles
and contingent consideration,
and related disclosures
for acquisitions of DAM
Structures
Recurring risks
Going Concern
Recurring risks
Carrying value of parent
Company’s investments
in subsidiaries and joint
ventures
1. Our opinion is unmodified
We have audited the financial statements of Severfield plc (‘the
Company’) for the year ended 31 March 2021 which comprise
the Consolidated income statement, Consolidated statement
of comprehensive income, Consolidated balance sheet,
Consolidated statement of changes in equity, Consolidated cash
flow statement, Company balance sheet, Company statement of
changes in equity and the related notes, including the accounting
policies in note 1.
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 2021 and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared
in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006;
the parent Company financial statements have been properly
prepared in accordance with UK accounting standards,
including FRS 101 Reduced Disclosure Framework; 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 to the extent applicable.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (‘ISAs (UK)’) and applicable law. Our
responsibilities are described below. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis
for our opinion. Our audit opinion is consistent with our report to
the audit committee.
We were first appointed as auditor by the shareholders on 2
September 2015. The period of total uninterrupted engagement is
for the six financial years ended 31 March 2021. We have fulfilled
our ethical responsibilities under, and we remain independent of
the Group in accordance with, UK ethical requirements including
the FRC Ethical Standard as applied to listed public interest
entities. No non-audit services prohibited by that standard were
provided.
144
Severfield plc Annual report and accountsfor the year ended 31 March 2021 2. Key audit matters: including our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial
statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us,
including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the
efforts of the engagement team. We summarise below the key audit matters, in decreasing order of audit significance, in arriving at our
audit opinion above, together with our key audit procedures to address those matters and, as required for public interest entities, our
results from those procedures. These matters were addressed, and our results are based on procedures undertaken, in the context of,
and solely for the purpose of, our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently
are incidental to that opinion, and we do not provide a separate opinion on these matters.
Carrying value
of construction
contract assets,
and revenue and
profit recognition
in relation to
construction
contracts
Revenue:
£363.3m (2020:
£327.4m)
Construction
contract assets:
£16.3m (2020:
£29.1m)
Refer to page 108
(audit committee
report), pages
162 and 167
(accounting
policies,
judgements
and estimates)
and note 17
(construction
contracts).
The risk
Our response
Subjective estimate
Our procedures included:
The Group’s activities are undertaken via
long-term construction contracts.
The carrying value of the construction
contract assets, as well as the revenue
and profit recognised, are based on an
input measure (being costs incurred to
date as a proportion of estimated total
contract costs) and estimates of total
contract consideration (being agreed
contract consideration plus elements of
variable consideration such as instances
where the value of variations is currently
unagreed).
Estimated total contract costs, and
as a result revenues, can be affected
by a variety of uncertainties, including
associated claims against customers,
that depend on the outcome of future
events resulting in revisions throughout
the contract period.
The effect of these matters is that, as
part of our risk assessment for audit
planning purposes, we determined
that the carrying value of contract
assets, revenue and profit recognised
on construction contracts has a high
degree of estimation uncertainty, with a
potential range of reasonable outcomes
greater than our materiality for the
financial statements as a whole, and
possibly many times that amount.
− Our sector experience: Identifying high risk contracts with
risk indicators including: low margin or loss-making contracts
with significant costs to complete estimates, uncertainty over
variable consideration, significant disputes with customers,
and large carrying value of contract assets. Engaging our
own major projects advisory specialists to assist with this
identification.
− Tests of detail: For the high risk contracts identified, agreeing
uncertain variable consideration to post-year-end cash, post-
year-end certification, or customer agreed variation schedules.
Involving our own specialists to assess the position taken and
assist in challenging management on the appropriateness
of including such items in the value of contract revenue and
contract assets where such evidence was not available;
− Our sector experience: Assessing forecasted costs to complete
in the sample of high risk contracts identified by understanding
contract performance and costs incurred post year-end, along
with discussion and challenge of management’s costs to
complete estimates against original budgets and current run
rates, including consideration of COVID-19 related impacts;
− Tests of detail: Assessing the accuracy of costs incurred to
date through sample testing, including an assessment of
whether the cost sampled was allocated to the appropriate
contract;
− Tests of detail: Verifying the existence of contract claims
against the Group to external correspondence and challenging
management’s assessment of these, involving our own
specialists to challenge the position taken;
− Historical comparisons: Assessing the forecasting accuracy
of contract revenue and costs by evaluating initial forecasted
margins for a sample of contracts across the portfolio against
actual margins achieved;
− Assessing transparency: Assessing the adequacy of the
Group’s disclosures on revenue recognition and the degree of
estimation involved in arriving at the construction contract
assets and associated revenue and profit recognition.
Our results:
− We found the carrying value of construction contract assets,
and the level of revenue and profit recognition in relation to
construction contracts, to be acceptable (2020: acceptable).
145
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AUDITOR’S REPORT
TO THE MEMBERS OF SEVERFIELD PLC
We continue to perform procedures over the impact of uncertainties due to the UK exiting the European Union on our audit. However,
following the implementation of The Trade and Cooperation Agreement during the period, the degree of uncertainty has reduced
significantly, particularly in the short- to medium-term. As a result, we have not assessed this as one of the most significant risks in
our current year audit and, therefore, it is not separately identified in our report this year. The valuation of intangibles and contingent
consideration and relates disclosures for acquisition of Harry Peers is no longer a key audit matter in the current year as this was
valued in the prior year and the unwind and amortisation of balances does not involve the same complexity and risk as in the
acquisition year.
The risk
Our response
Subjective Valuation
Our procedures included:
− Our sector experience: Evaluating assumptions used, in
particular those relating to forecast revenue and EBITDA
performance, and customer attrition rates, engaging our own
valuation specialists to evaluate assumptions such as the
discount rate used;
− Methodology choice: Using our own valuation specialists to
assess the methodology used in valuing the intangible assets
recognised, such as the order book and customer relationship
intangible assets, as well as the contingent consideration;
− Tests of detail: Corroborating management’s calculations to
supporting documentation such as Sale Purchase Agreement,
and supporting documentation relating to the balance sheet
on acquisition;
− Sensitivity analysis: We performed our own analysis to
assess the sensitivity of the valuation of intangible assets and
contingent consideration to changes in the key assumptions,
noted above;
− Assessing transparency: Assessing the adequacy of the
Group’s disclosures in respect of the identification and
valuation of acquisition-related intangible assets and
contingent consideration.
Our results:
− We found the provisional valuation of intangibles and
contingent consideration, and related disclosures for
acquisition of DAM Structures to be acceptable.
On 26 February 2021 the Group
acquired DAM Structures Limited
(‘DAM Structures’) for a total gross
consideration of £28.6m, of which
£17.9m was net cash consideration, and
£10.6m was the fair value of deferred
and contingent consideration, which
has a maximum potential payment of
£15.0m depending on performance. In
accounting for the acquisition, the Group
needs to ensure all identifiable assets
are recognised at their acquisition-date
fair values.
The valuation of intangible assets and
contingent consideration requires
a significant degree of judgement
with estimates including the trading
performance of DAM Structures, the
timing of future cash flows and the
discount rate applied. The valuation
being provisional, due to the proximity
of the acquisition to year end, results in
a risk around the accuracy and quality
of disclosed amounts in the financial
statements.
The effect of these matters is that,
as part of our risk assessment, we
determined that valuation of intangible
assets identified and contingent
consideration and goodwill in relation
to the DAM Structures acquisition has
a high degree of estimation uncertainty,
with a potential range of reasonable
outcomes greater than our materiality
for the financial statements as a whole.
Provisional
valuation of
intangibles
and contingent
consideration,
and related
disclosures for
acquisition of
DAM Structures
Goodwill: £15.1m
Intangible
Assets: £4.8m
Contingent
Consideration:
£10.6m
Refer to page
46 (operating
performance),
page 54 (financial
performance),
page 108 (audit
committee
report), page
167 (accounting
policies,
judgements and
estimates and
note 21 (business
combinations).
146
Severfield plc Annual report and accountsfor the year ended 31 March 2021 The risk
Our response
Going concern
Disclosure quality
Our procedures included:
− Funding assessment: Inspected confirmation of the
Group’s committed level of financing and related covenant
requirements.
− Historical comparisons: We considered the Group’s historical
budgeting accuracy, by assessing actual performance against
budget.
− Sensitivity analysis: We considered sensitivities over the level
of available financial resources and headroom on covenant
requirements indicated by the Group’s financial forecasts
taking account of reasonably possible (but not unrealistic)
adverse effects that could arise from these risks individually
and collectively.
− Sensitivity analysis: We assessed management’s base-case
forecast to ensure consideration had been given to the impact
of COVID-19, and that this impact was included in projections
of the Group’s financial resources.
− Benchmarking assumptions: We benchmarked the
assumptions behind the cash flow forecasts to third party
evidence, such as sector-specific, as well as UK-wide,
economic forecasts, to assess downside assumptions.
− Evaluating directors’ intent: We evaluated the achievability of
the actions the directors consider they would take to improve
the position should the risks materialise;
− Assessing transparency: We assessed the completeness
and accuracy of the matters covered in the going concern
disclosure by comparing disclosures to risks identified, and
sensitivities applied.
Our results:
− We found the going concern disclosure without any material
uncertainty to be acceptable (2020: acceptable).
Refer to page
46 (operating
performance),
page 54 (financial
performance),
page 59 (viability
statement), page
80 (principal
risks), page 108
(audit committee
report) and page
159 (significant
accounting
policies).
The financial statements explain how
the Board has formed a judgement
that it is appropriate to adopt the going
concern basis of preparation for the
Group and Parent Company.
That judgement is based on an
evaluation of the inherent risks to
the Group’s business model and how
those risks might affect the Group’s
financial resources or ability to continue
operations over a period of at least a
year from the date of approval of the
financial statements.
The risks most likely to adversely affect
the Group’s available financial resources
over this period were:
− Economic downturn resulting in
significant market deterioration
reducing forward orders and
profitability.
There are also less predictable but
realistic second order impacts, such as:
− A further incidence of construction
site closures resulting from
COVID-19, causing delays in project
completion, and associated revenue
and cash flow.
− The risk of COVID-19 or commodity
price rises to the supply chain, which
could have a significant impact on
operations.
The risk for our audit was whether or
not those risks were such that they
amounted to a material uncertainty
that may have cast significant doubt
about the ability to continue as a going
concern. Had they been such, then that
fact would have been required to have
been disclosed.
147
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AUDITOR’S REPORT
TO THE MEMBERS OF SEVERFIELD PLC
Carrying value
of parent
Company’s
investments in
subsidiaries and
joint ventures
£152.7m (2020:
£128.8m)
Refer to page
161 (accounting
policy) and page
199 (financial
disclosures).
The risk
Our response
Low risk, high value:
Our procedures included:
The carrying amount of the parent
Company’s investments in subsidiaries
and joint ventures represents 51%
(2020: 47%) of the Company’s total
assets. Their recoverability is not at a
high risk of significant misstatement
or subject to significant judgement.
However, due to their materiality in the
context of the parent Company financial
statements, this is considered to be the
area that had the greatest effect on our
overall parent Company audit.
− Tests of detail: Comparing the carrying amount of 100% of the
investments balance with the relevant subsidiaries’ and joint
ventures’ draft balance sheets to identify whether their net
assets, being an approximation of their minimum recoverable
amount, were in excess of their carrying amount and assessing
whether those subsidiaries and joint ventures have historically
been profit-making.
− Assessing subsidiary and joint venture audits: Assessing
the work performed by the subsidiary and joint venture audit
teams on all of those subsidiaries and joint ventures and
considering the results of that work, on those subsidiaries’ and
joint ventures’ profits and net assets.
− Our sector experience: For the investments where the carrying
amount exceeded the net asset value, comparing the carrying
amount of the investment with the expected value of the
business based on a suitable multiple of the subsidiaries’ and
joint ventures’ profit.
Our results:
− We found the Group’s assessment of the recoverability of the
investment in subsidiaries and joint ventures to be acceptable
(2020: acceptable).
148
Severfield plc Annual report and accountsfor the year ended 31 March 2021 3. Our application of materiality and an overview of
the scope of our audit
Materiality for the Group financial statements as a whole was set
at £1,200,000 (2020: £1,335,000), determined with reference to
a benchmark of Group profit before tax (normalised to exclude
amortisation and costs as a result of acquisitions as disclosed in
note 5) of which it represents 4.9% (2020: 4.9%).
Materiality for the parent company financial statements as a
whole was set at £1,000,000 (2020: £900,000), determined with
reference to a benchmark of Company total assets, of which it
represents 0.3% (2020: 0.3%).
In line with our audit methodology, our procedures on
individual account balances and disclosures were performed
to a lower threshold, performance materiality, so as to reduce
to an acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a
material amount across the financial statements as a whole.
Performance materiality was set at 75% (2020: 75%) of
materiality for the financial statements as a whole, which equates
to £900,000 (2020: £1,000,000) for the Group and £750,000 (2020:
£675,000) for the parent Company. We applied this percentage in
our determination of performance materiality because we did not
identify any factors indicating an elevated level of risk.
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £60,000 (2020:
£66,750), in addition to other identified misstatements that
warranted reporting on qualitative grounds.
Of the Group’s 12 (2020: 11) reporting components, we subjected
six (2020: six) to full scope audits for Group purposes.
The components within the scope of our work accounted for the
percentages illustrated opposite.
The remaining 5% (2020: 6%) of total Group revenue, 2% (2020: 4%)
of Group profit before tax and 6% (2020: 2%) of total Group assets
is represented by five (2020: three) reporting components, none of
which individually represented more than 5% (2020: 3%) of any of
total Group revenue, Group profit before tax or total Group assets.
For these residual components, we performed analysis at an
aggregated Group level to re-examine our assessment that there
were no significant risks of material misstatement within these.
The Group team instructed component auditors as to the significant
areas to be covered, including the relevant risks detailed above and
the information to be reported back. The Group team approved the
component materialities, which ranged from £300,000 to £900,000
(2020: £400,000 to £950,000), having regard to the mix of size
and risk profile of the Group across the components. The work on
one of the six components (2020: one of the six components) was
performed by component auditors and the rest, including the audit
of the parent company, was performed by the Group team.
The Group team held video and telephone conference meetings
with one (2020: one) component location in India (2020: India).
At these meetings, the findings reported to the Group team were
discussed in more detail, and any further work required by the
Group team was then performed by the component auditor. The
Group team also reviewed the audit file of the component auditor.
The Group team performed procedures on the items excluded
from normalised Group profit before tax.
Normalised profit before tax
£24,331,000 (2020: £27,200,000)
Group Materiality
£1,200,000 (2020: £1,335,000)
£1,200,000
Whole financial
statements materiality
(2020: £1,335,000)
£990,000
Whole financial
statements performance
materiality
(2020: £1,000,000)
Normalised PBT
Group materiality
£60,000
Misstatements reported to the
audit committee (2020: £66,750)
Group revenue
Group profit before tax
2
4
98%
(2020: 96%)
96
98
5
6
95%
(2020: 94%)
94
95
Group total assets
6
2
94%
(2020: 98%)
98
94
Full scope for Group audit purposes 2021
Full scope for Group audit purposes 2020
Residual components
149
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AUDITOR’S REPORT
TO THE MEMBERS OF SEVERFIELD PLC
4. Going concern
The directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the Group
or the Company or to cease their operations, and as they have
concluded that the Group’s and the Company’s financial position
means that this is realistic. They have also concluded that there
are no material uncertainties that could have cast significant
doubt over their ability to continue as a going concern for at least
a year from the date of approval of the financial statements
(‘the going concern period’).
An explanation of how we evaluated management’s assessment
of going concern is set out in the related key audit matter in
section 2 of this report.
Our conclusions based on this work:
• we consider that the directors’ use of the going concern basis
of accounting in the preparation of the financial statements
is appropriate;
• we have not identified, and concur with the directors’
assessment that there is not, a material uncertainty related
to events or conditions that, individually or collectively, may
cast significant doubt on the Group’s or Company’s ability to
continue as a going concern for the going concern period;
• we have nothing material to add or draw attention to in
relation to the directors’ statement in note 1 to the financial
statements on the use of the going concern basis of
accounting with no material uncertainties that may cast
significant doubt over the Group and Company’s use of that
basis for the going concern period, and we found the going
concern disclosure in note 1 to be acceptable; and
•
the related statement under the Listing Rules set out on page
59 is materially consistent with the financial statements and
our audit knowledge.
However, as we cannot predict all future events or conditions
and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time
they were made, the above conclusions are not a guarantee that
the Group or the Company will continue in operation.
5. Fraud and breaches of laws and regulations –
ability to detect
Identifying and responding to risks of material
misstatement due to fraud
To identify risks of material misstatement due to fraud (‘fraud
risks’) we assessed events or conditions that could indicate an
incentive or pressure to commit fraud or provide an opportunity
to commit fraud.
Our risk assessment procedures included:
− Enquiring of directors, the audit committee, internal audit
and inspection of policy documentation as to the Group’s
high-level policies and procedures to prevent and detect
fraud, including the internal audit function, and the Group’s
channel for ‘whistleblowing’, as well as whether they have
knowledge of any actual, suspected or alleged fraud.
− Reading Board and Audit Committee minutes.
− Considering remuneration incentive schemes and
performance targets for management, including the EPS
target for management remuneration.
We communicated identified fraud risks throughout the audit
team and remained alert to any indications of fraud throughout
the audit. This included communication from the Group to
component audit teams of relevant fraud risks identified at the
Group level and request to component audit teams to report to
the Group audit team any instances of fraud that could give rise
to a material misstatement at a Group level.
As required by auditing standards, and taking into account
possible pressures to meet profit targets, both in the current year
and in future years, we perform procedures to address the risk
of management override of controls and the risk of fraudulent
revenue recognition, in particular the risk that contract revenue
is recognised in an overly optimistic or cautious manner given
the subjective nature and risk of bias in the related accounting
estimates, and the risk that Group and component management
may be in a position to make inappropriate accounting entries.
We did not identify any additional fraud risks.
Further detail in respect of contract revenue is set out in the key
audit matter disclosures in section 2 of this report.
We performed procedures including:
− Identifying journal entries to test for all full scope components
based on risk criteria and comparing the identified entries to
supporting documentation. These included those posted to
unusual account combinations.
− Procedures over contract revenue performed for all full scope
components are detailed in section 2 of this report.
150
Severfield plc Annual report and accountsfor the year ended 31 March 2021 Identifying and responding to risks of material
misstatement due to non-compliance with laws and
regulations
We identified areas of laws and regulations that could reasonably
be expected to have a material effect on the financial statements
from our general commercial and sector experience, through
discussion with the directors and other management (as required
by auditing standards), and from inspection of the Group’s
regulatory and legal correspondence and discussed with the
directors and other management the policies and procedures
regarding compliance with laws and regulations. As the Group
is regulated, our assessment of risks involved gaining an
understanding of the control environment including the entity’s
procedures for complying with regulatory requirements.
We communicated identified laws and regulations throughout our
team and remained alert to any indications of non-compliance
throughout the audit. This included communication from the
Group to full-scope component audit teams of relevant laws
and regulations identified at the Group level, and a request for
full scope component auditors to report to the Group team any
instances of non-compliance with laws and regulations that
could give rise to a material misstatement at Group.
The potential effect of these laws and regulations on the financial
statements varies considerably.
Firstly, the Group is subject to laws and regulations that directly
affect the financial statements including financial reporting
legislation (including related companies legislation), distributable
profits legislation, taxation legislation, and pensions legislation
and we assessed the extent of compliance with these laws and
regulations as part of our procedures on the related financial
statement items.
Secondly, the Group is subject to many other laws and regulations
where the consequences of non-compliance could have a
material effect on amounts or disclosures in the financial
statements, for instance through the imposition of fines or
litigation. We identified the following areas as those most
likely to have such an effect: health and safety, anti-bribery and
corruption, employment law and tax, recognising the nature of
the Group’s activities. Auditing standards limit the required audit
procedures to identify non-compliance with these laws and
regulations to enquiry of the directors and other management
and inspection of regulatory and legal correspondence, if any.
Therefore, if a breach of operational regulations is not disclosed
to us or evident from relevant correspondence, an audit will not
detect that breach.
Context of the ability of the audit to detect fraud or
breaches of law or regulation
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some material
misstatements in the financial statements, even though we
have properly planned and performed our audit in accordance
with auditing standards. For example, the further removed non-
compliance with laws and regulations is from the events and
transactions reflected in the financial statements, the less likely
the inherently limited procedures required by auditing standards
would identify it.
In addition, as with any audit, there remained a higher risk of
non-detection of fraud, as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of
internal controls. Our audit procedures are designed to detect
material misstatement. We are not responsible for preventing
non-compliance or fraud and cannot be expected to detect non-
compliance with all laws and regulations.
6. We have nothing to report on the other information
in the Annual Report
The directors are responsible for the other information presented
in the Annual Report together with the financial statements. Our
opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion
or, except as explicitly stated below, any form of assurance
conclusion thereon.
Our responsibility is to read the other information and, in doing so,
consider whether, based on our financial statements audit work,
the information therein is materially misstated or inconsistent
with the financial statements or our audit knowledge. Based
solely on that work we have not identified material misstatements
in the other information.
Strategic report and directors’ report
Based solely on our work on the other information:
− we have not identified material misstatements in the strategic
report and the directors’ report;
− in our opinion the information given in those reports for the
financial year is consistent with the financial statements; and
− in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’ remuneration report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
151
www.severfield.comStock Code: SFR INDEPENDENT
AUDITOR’S REPORT
TO THE MEMBERS OF SEVERFIELD PLC
Based on those procedures, we have concluded that each of the
following is materially consistent with the financial statements
and our audit knowledge:
− the directors’ statement that they consider that the annual
report and financial statements taken as a whole is fair,
balanced and understandable, and provides the information
necessary for shareholders to assess the Group’s position
and performance, business model and strategy;
− the section of the annual report describing the work of the
Audit Committee, including the significant issues that the
audit committee considered in relation to the financial
statements, and how these issues were addressed; and
− the section of the annual report that describes the review
of the effectiveness of the Group’s risk management and
internal control systems.
We are required to review the part of the Corporate Governance
Statement relating to the Group’s compliance with the provisions
of the UK Corporate Governance Code specified by the
Listing Rules for our review, and to report to you if a corporate
governance statement has not been prepared by the company.
We have nothing to report in this respect.
Based solely on our work on the other information described
above:
− with respect to the Corporate Governance Statement
disclosures about internal control and risk management
systems in relation to financial reporting processes and
about share capital structures:
− we have not identified material misstatements therein;
and
− the information therein is consistent with the financial
statements; and
− in our opinion, the Corporate Governance Statement has been
prepared in accordance with relevant rules of the Disclosure
Guidance and Transparency Rules of the Financial Conduct
Authority.
Disclosures of emerging and principal risks and longer-
term viability
We are required to perform procedures to identify whether
there is a material inconsistency between the directors’
disclosures in respect of emerging and principal risks and the
viability statement, and the financial statements and our audit
knowledge.
Based on those procedures, we have nothing material to add or
draw attention to in relation to:
− the directors’ confirmation within the viability statement
(page 59) that they have carried out a robust assessment of
the emerging and principal risks facing the Group, including
those that would threaten its business model, future
performance, solvency and liquidity;
− the Principal risks disclosures describing these risks and how
emerging risks are identified, and explaining how they are
being managed and mitigated; and
− the directors’ explanation in the viability statement of how
they have assessed the prospects of the Group, over what
period they have done so and why they considered that period
to be appropriate, and their statement as to whether they
have a reasonable expectation that the Group will be able to
continue in operation and meet its liabilities as they fall due
over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications
or assumptions.
We are also required to review the viability statement, set
out on page 59, under the Listing Rules. Based on the above
procedures, we have concluded that the above disclosures are
materially consistent with the financial statements and our audit
knowledge.
Our work is limited to assessing these matters in the context of
only the knowledge acquired during our financial statements
audit. As we cannot predict all future events or conditions and as
subsequent events may result in outcomes that are inconsistent
with judgements that were reasonable at the time they were
made, the absence of anything to report on these statements is
not a guarantee as to the Group’s and Company’s longer-term
viability.
Corporate governance disclosures
We are required to perform procedures to identify whether there
is a material inconsistency between the directors’ corporate
governance disclosures and the financial statements and our
audit knowledge.
152
Severfield plc Annual report and accountsfor the year ended 31 March 2021 7. We have nothing to report on the other matters on
9. The purpose of our audit work and to whom we
which we are required to report by exception
owe our responsibilities
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.
David Morritt (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
One Sovereign Square
Sovereign Street
Leeds
LS1 4DA
16 June 2021
Under the Companies Act 2006, we are required to report to you if,
in our opinion:
− adequate accounting records have not been kept by the
parent Company, or returns adequate for our audit have not
been received from branches not visited by us; or
− the parent Company financial statements and the part of
the Directors’ remuneration report to be audited are not in
agreement with the accounting records and returns; or
− certain disclosures of directors’ remuneration specified by
law are not made; or
− we have not received all the information and explanations we
require for our audit.
We have nothing to report in these respects.
8. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 141,
the directors are responsible for: the preparation of the financial
statements, including being satisfied that they give a true and
fair view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; assessing
the Group and parent Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going
concern; and using the going concern basis of accounting unless
they either intend to liquidate the Group or the parent Company or
to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our
opinion in an auditor’s report. Reasonable assurance is a
high level of assurance, but does not guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or
in aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the FRC’s
website at www.frc.org.uk/auditorsresponsibilities.
153
www.severfield.comStock Code: SFR CONSOLIDATED
INCOME STATEMENT
YEAR ENDED 31 MARCH 2021
Underlying
2021
£000
Note
Non-
underlying
2021
£000
Total
2021
£000
Underlying
2020
£000
Non-
underlying
2020
£000
Total
2020
£000
Continuing operations
Revenue
Operating costs
Operating profit before share of
results of JVs and associates
Share of results of JVs and
associates
Operating profit
Net finance expense
Profit before tax
Taxation
Profit for the year attributable to
the equity holders of the parent
Earnings per share:
Basic
Diluted
3
4
15
7
8
10
10
363,254
(337,784)
–
363,254
327,364
–
327,364
(2,795)
(340,579)
(300,386)
(2,294)
(302,680)
25,470
(2,795)
22,675
26,978
(2,294)
24,684
(344)
25,126
(795)
24,331
(4,574)
–
(2,795)
(429)
(3,224)
771
(344)
22,331
(1,224)
21,107
(3,803)
2,355
29,333
(712)
28,621
(4,959)
–
(2,294)
(514)
(2,808)
(439)
2,355
27,039
(1,226)
25,813
(5,398)
19,757
(2,453)
17,304
23,662
(3,247)
20,415
6.43p
6.43p
(0.80)p
(0.80)p
5.63p
5.63p
7.74p
7.70p
(1.06)p
(1.06)p
6.68p
6.64p
Further details of non-underlying items are disclosed in note 5 to the consolidated financial statements.
154
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR FINANCIALS O U R F I N A N C I A L S
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
YEAR ENDED 31 MARCH 2021
Actuarial (loss)/gain on defined benefit pension scheme*
Gains/(losses) taken to equity on cash flow hedges
Reclassification adjustments on cash flow hedges
Exchange difference on foreign operations
Tax relating to components of other comprehensive income*
Other comprehensive income for the year
Profit 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
30
25
25
25
20
2021
£000
(4,906)
1,699
251
34
734
(2,188)
17,304
2020
£000
255
(1,403)
(410)
(34)
(184)
(1,776)
20,415
15,116
18,639
155
www.severfield.comStock Code: SFR CONSOLIDATED
BALANCE SHEET
AT 31 MARCH 2021
Assets
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Right-of-use asset
Interests in JVs and associates
Contract assets, trade and other receivables
Current assets
Inventories
Contract assets, trade and other receivables
Derivative financial instruments
Current tax assets
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Trade and other payables
Financial liabilities — borrowings
Financial liabilities — leases
Derivative financial instruments
Non-current liabilities
Trade and other payables
Retirement benefit obligations
Financial liabilities — borrowings
Financial liabilities — leases
Deferred tax liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium
Other reserves
Retained earnings
Total equity
Note
2021
£000
2020
£000
11
12
13
14
15
18
16
18
22
22
19
22
22
22
19
30
22
22
20
24
25
85,782
9,630
91,698
9,808
28,790
4,368
70,714
7,375
88,864
10,140
26,690
–
230,076
203,783
10,231
67,847
1,049
3,584
24,983
107,694
337,770
6,856
74,612
–
1,640
44,338
127,446
331,229
(77,803)
(5,900)
(1,744)
–
(84,366)
(19,375)
(1,502)
(1,135)
(85,447)
(106,378)
(10,639)
(22,379)
(14,850)
(9,365)
(4,161)
–
(18,688)
(8,750)
(9,729)
(4,009)
(61,394)
(41,176)
(146,841)
(147,554)
190,929
183,675
7,706
87,658
3,464
92,101
7,648
87,292
1,402
87,333
190,929
183,675
The consolidated financial statements were approved by the board of directors on 16 June 2021 and signed on its behalf by:
Alan Dunsmore
Chief executive officer
Adam Semple
Group finance director
156
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR FINANCIALS
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
AT 31 MARCH 2021
At 1 April 2020
Total comprehensive income for the year
Ordinary shares issued*
Equity settled share-based payments
23
Note
Dividends paid
At 31 March 2021
Share
capital
£000
7,648
–
58
–
–
7,706
Share
premium
£000
87,292
–
366
–
–
87,658
Other
reserves
£000
1,402
1,984
–
78
–
3,464
Retained
earnings
£000
87,333
13,132
–
531
Total
equity
£000
183,675
15,116
424
609
(8,895)
92,101
(8,895)
190,929
* The issue of shares represents shares allotted to satisfy the 2017 Performance Share Plan award which vested in June 2020 and the 2017 Sharesave scheme.
Note
At 1 April 2019
Changes in accounting policy
Restated total equity at 1 April 2019
Total comprehensive income for the year
Ordinary shares issued*
Equity settled share-based payments
23
Dividends paid
At 31 March 2020
Share
capital
£000
7,600
–
7,600
–
48
–
–
Share
premium
£000
87,254
–
87,254
–
38
–
–
7,648
87,292
Other
reserves
£000
Retained
earnings
£000
Total
equity
£000
3,819
–
3,819
(1,847)
–
(570)
–
1,402
76,334
175,007
(895)
75,439
20,486
–
259
(8,851)
87,333
(895)
174,112
18,639
86
(311)
(8,851)
183,675
* The issue of shares represents shares allotted to satisfy the 2016 Performance Share Plan award which vested in June 2019 and the 2017 and 2018 Sharesave
schemes.
157
www.severfield.comStock Code: SFR OUR FINANCIALS CONSOLIDATED
CASH FLOW STATEMENT
Net cash flow from operating activities
Cash flows from investing activities
Proceeds on disposal of other property, plant and equipment
Purchases of land and buildings
Purchases of intangible assets
Purchases of other property, plant and equipment
Investment in JVs and associates
Investment in subsidiary entities, net of cash acquired
Net cash used in investing activities
Cash flows from financing activities
Interest paid
Dividends paid
Proceeds from shares issued
Proceeds from borrowings
Repayment of borrowings
Repayment of lease liabilities
Net cash (used in)/generated from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Note
26
2021
£000
2020
£000
25,349
21,980
104
(247)
(276)
(6,097)
(2,444)
(17,489)
(26,449)
(699)
(8,895)
424
12,000
(19,375)
(1,710)
(18,255)
(19,355)
44,338
24,983
267
(1,519)
–
(4,945)
–
(13,390)
(19,587)
(598)
(8,851)
86
29,000
(875)
(1,796)
16,966
19,359
24,979
44,338
15
21
27
158
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR FINANCIALSYEAR ENDED 31 MARCH 2021 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
YEAR ENDED 31 MARCH 2021
1. Significant accounting policies
General information
Severfield plc (‘the Company’) is a company incorporated in the United Kingdom under the Companies Act 2006. The Company’s shares
are publicly traded on the London Stock Exchange. The address of the registered office is provided on page 203. The registered number
of the Company is 1721262. The nature of the Group’s operations and its principal activities are set out on pages 20 to 29. 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 been prepared in accordance with International Accounting Standards in conformity
with the requirements of the Companies Act 2006 (‘the Act’) and in accordance with International Financial Reporting Standards as
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
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.
EU Endorsed International Financial Reporting Standards effective in the year
The following new and amended standards, adopted in the current financial year, had no significant impact on the financial statements.
•
•
•
IFRS 3 ‘Business Combinations’ – amendments to clarify the minimum requirements for a business and to assist entities to
determine whether a transaction should be accounted for as an asset acquisition or a business combination.
IAS 1 ‘Presentation of Financial statements’ and IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ –
amendment to the definition of ‘material’ in the context of applying IFRS.
IFRS 9 ‘Financial Instruments’, IFRS 7 ‘Financial Instruments: Disclosures’ and IAS 39 ‘Financial Instruments: Recognition and
Measurement’ – amendment requiring additional disclosures around uncertainty arising from the interest rate benchmark reform.
• Amendments to references to conceptual framework in IFRS standards.
EU International Financial Reporting Standards not yet effective
The following new or revised standards and interpretations issued by the International Accounting Standards Board have not been
applied in preparing these financial statements as their effective dates fall in periods beginning on or after 1 April 2021.
•
•
IFRS 17 ‘Insurance Contracts’
IFRS 10 and IAS 28 (amendments) ‘Sale or contribution of assets between an investor and its associate or joint venture’
• Amendments to IAS 1 ‘Classification of liabilities as current or non-current’
• Amendments to IFRS 3 ‘Reference to the conceptual framework’
•
IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 ‘Interest rate benchmark reform – phase 2’
• Amendments to IAS 16 ‘Property, plant and equipment – proceeds before intended use’
• Amendments to IAS 37 ‘Onerous contracts – cost of fulfilling as contract’
• Amendments to IFRS 16 ‘Covid-19 related rent concessions’
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 current market conditions and the impact of these (including the potential future impact of COVID-19 and similar other
significant downside risks linked to our principal risks) on the Group’s profits and cash flows,
• The UK and Europe order book and the pipeline of potential future orders,
• The Group’s ‘SSS’ business improvement programme, which has delivered tangible benefits in 2021 and is expected to continue
doing so in the 2022 financial year and for the period under forecast, and
• The Group’s net funds position and its bank finance facilities, which are committed until October 2023, including both the level of
those facilities and the three financial covenants attached to them (interest cover (>4x), net debt to EBITDA (<2.5x) and cash flow
cover (<1x)).
The Group has continued to trade safely and profitably with positive operating cash flows for the year ended 31 March 2021 whilst
operating under various COVID-19 restrictions. Whilst there continues to be some uncertainty associated with COVID-19, the directors
expect the Group to remain similarly resilient over the forecast period whilst it continues to operate under any further potential
restrictions until the end of the pandemic.
159
www.severfield.comStock Code: SFR OUR FINANCIALS The directors have reviewed the Group’s forecasts and projections for the 2022 financial year and up to at least 12 months from
the date of approval of the financial statements, including sensitivity analysis to assess the Group’s resilience to potential adverse
outcomes arising out of COVID-19 (or other similar significant disruptions) including a highly pessimistic ‘worst case’ scenario. This
‘worst case’ is based on the combined impact of securing no further orders for the next 12 months and further significant COVID-19
disruption for the entirety of the going concern period. Given the strong previous performance of the Group, despite three separate
COVID-19 lockdowns, this scenario is only being modelled to stress test our strong financial position and demonstrate the existence
of considerable headroom in the Group’s covenants and borrowing facilities.
The directors also considered sensitivities in respect of other potential downside scenarios in concluding that the Group can
continue in operation for a period of at least 12 months from the date of approving the financial statements. Having also made
appropriate enquiries, the directors are confident that the Group will have sufficient funds to continue to meet its liabilities as they
fall due for at least 12 months from the date of approval of the financial statements, and for this reason, have continued to adopt
the going concern basis in preparing the financial statements.
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 returns 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.
Non-underlying items
Non-underlying 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.
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, the amortisation of acquired intangible
assets, movements in the valuation of derivative financial instruments and certain non-recurring legal and consultancy costs.
Further details of non-underlying 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.
160
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR FINANCIALSYEAR ENDED 31 MARCH 2021NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS 1. Significant accounting policies continued
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
IFRS 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.
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.
Any contingent consideration is recognised at the date of acquisition. For acquisitions, subsequent changes to the fair value of the
contingent consideration are adjusted against the cost of acquisition where they qualify as measurement period adjustments. The
measurement period is the period from the date of acquisition to the date that the Group obtains complete information about facts
and circumstances that existed as at the date of acquisition and is subject to a maximum of one year. If the change does not qualify
as a measurement period adjustment, it is reflected in the consolidated income statement.
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.
161
www.severfield.comStock Code: SFR OUR FINANCIALS 1. Significant accounting policies continued
Construction contracts
Revenue arises mainly from contracts for the design, fabrication and construction of structural steelwork. To determine whether to
recognise revenue, the Group applies this five-step process:
•
•
Identify the contract(s) with the customer;
Identify the performance obligations in the contract(s);
• Determine the transaction price of the contract(s);
• Allocate the transaction price to each of the separate performance obligations; and
• Recognise the revenue as each performance obligation is satisfied.
The Group enters into contracts for the design, fabrication and construction of structural steel projects in exchange for the agreed
consideration and recognises the related revenue over time. Due to the high degree of interdependence between the various
elements of these projects, they are accounted for as a single performance obligation. The transaction price is measured based on
the consideration specified in a contract with a customer and, where applicable, the best estimate of any consideration related to
modifications to the contract, which have yet to be agreed. Revenue recognised includes retentions and is net of rebates, discounts
and value added tax. To depict the progress by which the Group transfers control of the construction to the customer, and to
establish when and to what extent revenue can be recognised, the Group measures its progress towards complete satisfaction of
the performance obligation by use of the input method (costs to complete). Where a modification to an existing contract occurs,
the Group assesses the nature of the modification and whether it represents a separate performance obligation required to be
satisfied or whether it is a modification to the existing performance obligation. This method is considered to most faithfully depict
the transfer of goods and services to the customer over the life of the performance obligation.
The timing of payment from customers is generally aligned to revenue recognition, subject to agreed invoice terms. However, in some
cases construction contracts have payment terms based on contractual milestones, which are not necessarily aligned to when
revenue is recognised, particularly for those contracts where revenue is recognised over time using the input method to determine
the percentage of completion. This generally leads to recognition of revenue in advance of customer billings, for which a contract
asset is recognised. Where cash is received from the customer in advance of recognising revenue under a contract, a contract
liability is recorded (advance payments from customers). The practical expedient available under IFRS 15 has been taken, thus
the Group does not adjust the promised amount of consideration for the effects of financing if the timing difference between the
satisfaction of the performance obligations under the contract and the receipt of payment due under the contract are expected to
be one year or less.
The general principles for revenue recognition are as follows:
• Revenues on contracts are recognised over time, using the input method, 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 highly 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 highly 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 highly 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. 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.
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The input method is used to determine the percentage of completion 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.
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.
Contract assets
Contract assets primarily relate to the Group’s rights to consideration for work completed but not billed at the reporting date on
construction contracts. Contract assets are transferred to receivables when the rights become unconditional. This usually occurs
when the Group issues an invoice to the customer.
Contract liabilities
Contract liabilities primarily relate to the advance payments from customers for construction contracts, for which revenue is
recognised over time.
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 to new members. 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 is
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.
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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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
Property, plant and equipment is stated at cost less accumulated depreciation and any impairment losses.
Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, and plant and
machinery are 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
Long leasehold buildings
Plant and machinery
Fixtures, fittings and office equipment
Computer equipment
Motor vehicles
Site safety equipment
1 per cent straight-line
Shorter of 1 per cent straight-line or lease term
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
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.
Right-of-use assets and lease liabilities
The Group adopted IFRS 16 ‘Leases’ on 1 April 2019 using the modified retrospective approach. The standard has resulted in
many operating leases being recognised as right-of-use assets and lease liabilities on the consolidated balance sheet, since the
classification as either operating leases or finance leases has been eliminated.
Under IFRS 16 ‘Leases’, at the inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract
is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for
consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether
it has both the right to obtain substantially all of the economic benefits from use of the identified asset and the right to direct the
use of the identified asset throughout the period of use.
Leases in which the Group is a lessee
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is
measured as equal to the lease liability and adjusted for the amount of any prepaid or accrued lease payments relating to that lease
before the commencement date, any lease incentives received, initial direct costs associated with the lease and an initial estimate
of restoration costs. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement
date to the end of the lease term.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental
borrowing rate.
Lease payments included in the measurement of the lease liability comprise the following:
•
•
fixed payments, including in-substance fixed payments;
variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
• amounts expected to be payable under a residual value guarantee;
•
the exercise price under a purchase option that the Group is reasonably certain to exercise; and
• penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.
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Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term
leases, in accordance with the exemption available under IFRS 16. The Group recognises the lease payments associated with these
leases as an expense on a straight-line basis over the lease term.
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
Order book
Amortisation
period
4–5 years
5 years
18 months
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.
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.
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, with an appropriate allowance for estimated irrecoverable amounts recognised in the income statement in line with the
requirements of IFRS 9.
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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 23.
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 and hedge accounting
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 22.
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, except where hedge accounting
is used, provided the conditions specified by IFRS 9 are met. Hedge accounting is applied in respect of hedge relationships where
it is both permissible under IFRS 9 and practical to do so. When hedge accounting is used, the relevant hedging relationships are
classified as cash flow hedges.
Where the hedging relationship is classified as a cash flow hedge, to the extent that the hedge is effective, changes in the fair value
of the hedging instrument will be recognised directly in other comprehensive income rather than in the income statement. When
the hedged item is recognised in the financial statements, the accumulated gains and losses recognised in other comprehensive
income will be recycled to the income statement (operating costs).
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for
hedge accounting. At that point in time, any cumulative gain or loss on the hedging instrument recognised in other comprehensive
income is kept in other comprehensive income until the forecasted transaction occurs. If a hedged transaction is no longer expected
to occur, the net cumulative gain or loss recognised in other comprehensive income is transferred to net profit or loss for the period.
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Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR FINANCIALSYEAR ENDED 31 MARCH 2021NOTES TO THE CONSOLIDATEDFINANCIAL 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 considers 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 design and work scope, the contractual terms and site conditions under
which the work is being performed, delays, costs incurred, claims received by the Group, external certification of the work performed
and the recoverability of any unagreed income from claims and variations.
Management continually reviews the estimated final outturn on contracts and makes adjustments where necessary. Based on the
above, management believes it is reasonably possible, on the basis of existing knowledge, that outcomes within the next financial
year that are different from these assumptions could require a material adjustment.
The Group has appropriate internal control procedures over the determination of each of the above variables to ensure that profit
recognised 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.
There are eight contracts that management considers, require significant accounting estimates and the Group had included revenue
and profit in the year relating to these contracts of £155,000,000 and £11,700,000, respectively. Management have performed
sensitivity analysis on these contracts and assessed that if the Group’s average contract margin increased or decreased by one per
cent, the impact of this across these projects would result in an increase or corresponding decrease in profit in the year of £1,550,000.
At the balance sheet date, amounts due from construction contract customers, included in contract assets, trade and other
receivables was £16,288,000 (2020: £29,048,000).
Identification and provisional valuation of intangible assets arising on the acquisition of DAM Structures
Provisional measurement of deferred and contingent consideration, material intangible assets and property, plant and equipment
in an acquisition includes the use of external advisers to make a fair valuation of these items and assists in determining the assets
remaining useful lives. Values were provisionally allocated to identifiable assets and liabilities on the date control was acquired,
based on information available. They may be adjusted during the 12-month period following the acquisition date on the basis of new
information obtained relating to the facts and circumstances prevailing at the time of the acquisition. The significant judgement
in the provisional valuation of DAM Structures is the forecast future performance of the business post-acquisition, including the
forecast pipeline of potential orders and the assumed win rates of the business in its chosen market sectors. Management believes
that the provisional assigned values, as well as the underlying assumptions, are reasonable and are recognised in accordance with
IFRS 3 ‘Business Combinations’, though different assumptions and assigned lives could have a significant impact on the reported
amounts. Further details of the assumptions used, including the discount rate applied, are disclosed in note 21.
Contingent liabilities
On an ongoing basis the Group is a party to various legal disputes, the outcomes of which cannot be assessed with a high degree of
certainty. A liability is recognised only where, based on the Group’s legal views and advice, it is considered probable that an outflow
of resources will be required to settle a present obligation that can be measured reliably. Disclosure of contingent liabilities is made
in note 28 unless the possibility of a loss arising is considered remote. These potential liabilities are subject to uncertain future
events, may extend over several years and their timing may differ from current assumptions. Management applies its judgement in
determining whether or not a liability on the balance sheet should be recognised or a contingent liability should be disclosed.
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 forecast discount and mortality rates (as disclosed in note 30). 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.
Significant judgement is required in setting the criteria for the valuation of the liability. 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 £22,379,000 (2020: £18,688,000).
Of the items discussed above, revenue and profit recognition represents the key source of estimation uncertainty.
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Revenue
An analysis of the Group’s revenue is as follows:
Revenue from construction contracts
Other operating income (note 4)
Interest received (note 7)
Total income
2021
£000
363,254
2,658
33
365,945
2020
£000
327,364
1,244
53
328,661
Segmental results
Following the adoption of IFRS 8, the Group has identified its operating segments with reference to the information regularly
reviewed by the executive committee (the chief operating decision maker (‘CODM’)) to assess performance and allocate resources.
On this basis the CODM has identified one operating segment (construction contracts) which in turn is the only reportable segment
of the Group.
The constituent operating businesses have been aggregated as they have similar products and services, production processes,
types of customer, methods of distribution, regulatory environments and economic characteristics. Given that only one operating
and reporting segment exists, the remaining disclosure requirements of IFRS 8 are provided below.
Revenues by product group
All revenue is derived from construction contracts and related assets.
Geographical information
Following the implementation of IFRS 15, the Group presents a disaggregation of its revenue according to the primary geographical
markets in which the Group operates. This disaggregation of revenue is presented for the Group’s one operating segment as noted
above.
Revenue by destination:
United Kingdom
Republic of Ireland and mainland Europe
2021
£000
2020
£000
214,057
149,197
363,254
215,898
111,466
327,364
Contract balances
The following table provides information about the receivables, contract assets and contract liabilities from contracts with
customers:
Receivables which are included in ‘contract assets, trade and other receivables’ (note 18)
Contract assets (note 18)
Contract liabilities (note 17)
2021
£000
56,541
16,288
–
2020
£000
62,254
29,048
(1,179)
Contract assets primarily relate to the Group’s right to consideration for work completed but not billed at the reporting date on
construction contracts. Contract assets are transferred to receivables when the rights become unconditional. This usually occurs
when the Group issues an invoice to the customer.
The contract liabilities primarily relate to the advance payments from customers for construction contracts, for which revenue is
recognised over time. Included in contract liabilities at the beginning of the financial year was £1,179,000, of which £1,179,000 has
been recognised as revenue for the year ended 31 March 2021.
There was no revenue recognised in the current financial year from performance obligations satisfied or partially satisfied in
previous years.
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The table below represents the aggregate amount of the transaction price allocated to be the performance obligations that are
unsatisfied (or partially satisfied) as at 31 March 2021 and have an original expected contract duration of more than one year:
Construction contracts
2022
£000
2023
£000
100,934
59,853
The total transaction price allocated to the remaining performance obligations represents the contracted revenue to be earned by
the Group for goods and services which the Group has promised to deliver to its customers, where the original contract duration
is more than one year. This includes performance obligations which are partially satisfied at the year end or those which are
unsatisfied but which the Group has committed to providing. In deriving this transaction price, any element of variable revenue is
estimated at a value that is highly probable not to reverse in the future. The practical expedient available under IFRS 15 has been
taken and therefore no information is provided for the transaction price allocated to the remaining performance obligations where
the original expected contract duration is one year or less.
Information about major customers
Included in Group revenue is £108,871,000 (2020: £47,655,000) relating to one major customer (spread over several contracts), who
individually contributed more than 10 per cent of Group revenue in the year ended 31 March 2021.
4. Operating costs
Raw materials and consumables (including subcontractor costs)
Staff costs (note 6)
Other operating charges
Amortisation of other intangible assets (note 12)
Lease expense (short-term or low-value assets):
— plant and machinery
— other
Depreciation:
— owned property, plant and equipment (note 13)
— right-of-use assets (note 14)
Other operating income
Operating costs before non-underlying items
Non-underlying items (note 5)
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
— other assurance services
Other operating income mainly represents research and development tax credits.
2021
£000
215,634
75,630
42,836
4
128
207
4,434
1,569
(2,658)
337,784
2,795
340,579
25
315
25
40
2020
£000
189,650
70,714
35,465
–
160
128
3,928
1,585
(1,244)
300,386
2,294
302,680
23
217
25
40
Fees payable to KPMG 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.
In addition to the non-audit fees above, the Group incurred non-audit fees of £39,000 (2020: £59,000) in respect of other assurance
services provided to its Indian joint venture.
Details of the Group’s policy on the use of the auditor for non-audit services, the reason why the auditor was used and how the
auditor’s independence and objectivity were safeguarded are set out in the audit committee report on pages 108 to 111.
No services were performed pursuant to contingent fee arrangements.
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Operating costs
Finance expense
Non-underlying items before tax
Tax on non-underlying items
Non-underlying items after tax
Non-underlying items before tax consist of:
Amortisation of acquired intangible assets – Harry Peers
Acquisition-related expenses – Harry Peers/DAM Structures
Contingent consideration movements – Harry Peers
Unwinding of discount on contingent consideration – Harry Peers
Non-underlying items after tax
2021
£000
2,795
429
3,224
(771)
2,453
2021
£000
2,842
689
(736)
429
3,224
2020
£000
2,294
514
2,808
439
3,247
2020
£000
1,421
873
–
514
2,808
Amortisation of acquired intangible assets represents the amortisation of customer relationships, order books and brand name,
which were identified on the acquisition of Harry Peers. Acquisition-related expenses represent non-recurring legal and consultancy
costs associated with the DAM Structures acquisition of £689,000 (2020: £nil) and the Harry Peers acquisition of £nil (2020:
£873,000).
The basis for stating results on an underlying basis is set out on page 06. The board believes that non-underlying items should be
separately identified on the face of the income statement to assist in understanding the underlying performance of the Group. Their
separate identification results in the calculation of an underlying profit measure, which is the same as that presented and reviewed
by management. Accordingly, certain alternative performance measures (‘APMs’) have been used throughout this annual report to
supplement rather than replace the measures provided under IFRS.
6. Staff costs
Details of directors’ remuneration for the year are provided in the audited part of the directors’ remuneration report on page 130.
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 23.
7. Net finance expense
Finance income
Finance expense
170
2021
Number
1,208
193
1,401
2021
£000
65,517
6,910
3,203
75,630
2020
Number
1,149
171
1,320
2020
£000
61,239
6,346
3,129
70,714
2021
£000
(33)
1,257
1,224
2020
£000
(53)
1,279
1,226
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR FINANCIALSYEAR ENDED 31 MARCH 2021NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS 8. Taxation
a) The taxation charge comprises:
Current tax
UK corporation tax
Adjustments to prior years’ provisions
Deferred tax (note 20)
Current year credit/(charge)
Impact of change in future years’ tax rates
Adjustments to prior years’ provisions
b) Tax reconciliation
The charge for the year can be reconciled to the profit per the income statement as follows:
Profit before tax
Tax on profit at standard UK corporation tax rate
Expenses not deductible for tax purposes
Tax effect of share of results of JVs and associates
Adjustments to prior years’ provisions
Rate differences
2021
£000
(3,940)
(69)
(4,009)
25
–
181
206
(3,803)
2021
£000
21,107
(4,010)
103
(8)
112
–
(3,803)
2020
£000
(3,945)
(578)
(4,523)
(706)
(242)
73
(875)
(5,398)
2020
£000
25,813
(4,904)
(194)
447
(505)
(242)
(5,398)
Corporation tax was calculated at 19 per cent (2020: 19 per cent) of the estimated taxable result for the year.
On 4 March 2021, the UK government announced an intention to increase the rate of corporation tax to 25 per cent with effect
from 1 April 2023. It is currently expected that this will become substantially enacted during the 2022 financial year and hence the
Group’s deferred tax balance will be reassessed at that time.
9. Dividends
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 March 2020 of 1.8p per share (2019: 1.8p)
Interim dividend for the year ended 31 March 2021 of 1.1p per share (2020: 1.1p)
2021
£000
5,523
3,372
8,895
2020
£000
5,493
3,358
8,851
The directors are recommending a final dividend of 1.8p per share (2020: 1.8p). This, together with the interim dividend of 1.1p per
share (2020: 1.1p), will result in a total dividend of 2.9p per share (2020: 2.9p), unchanged from the previous year.
171
www.severfield.comStock Code: SFR OUR FINANCIALS 10. Earnings per share
Earnings per share is calculated as follows:
Earnings for the purposes of basic earnings per share being net profit
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
Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings per share
Effect of dilutive potential ordinary shares
Weighted average number of ordinary shares for the purposes of diluted earnings per share
Basic earnings per share
Underlying basic earnings per share
Diluted earnings per share
Underlying diluted earnings per share
Reconciliation of earnings
Net profit attributable to equity holders of the parent Company
Non-underlying items
Underlying net profit attributable to equity holders of the parent Company
Further details of non-underlying items are provided in note 5.
11. Goodwill
The goodwill balance was created on the following acquisitions:
On the DAM Structures acquisition in 2021 (provisional)
On the Harry Peers acquisition in 2019
On the Fisher Engineering acquisition in 2007
On the Atlas Ward acquisition in 2005
On the Watson Steel Structures acquisition in 2001
2021
£000
2020
£000
17,304
20,415
19,757
23,662
Number
Number
307,337,645 305,428,749
1,701,466
307,337,757 307,130,215
112
5.63p
6.43p
5.63p
6.43p
2021
£000
17,304
2,453
19,757
6.68p
7.74p
6.64p
7.70p
2020
£000
20,415
3,247
23,662
£000
15,068
16,002
47,980
6,571
161
85,782
All of the acquisitions above are included in one reported segment (construction contracts) and the cash flows of the businesses
are closely related. Testing for impairment is performed at the cash-generating unit (‘CGU’) level, which is the level at which
management monitors goodwill for internal purposes.
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill may be impaired.
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 has prepared cash flows for the following year, which the directors believe capture the Group’s most up-to-date ‘realistic’
forecast position following the outbreak of COVID-19, together with cash flows based on projections for the following two years
which are derived from the Group’s strategic plan. After this period, cash flows have been extrapolated using a growth rate of 1.5 per
cent (2020: 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 (2020: 10 per cent).
Following the impairment reviews performed by the Group, no impairment charge was recorded in the year ended 31 March 2021.
172
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR FINANCIALSYEAR ENDED 31 MARCH 2021NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS 11. Goodwill continued
Management has analysed a number of sensitivity scenarios when performing the impairment reviews, including a two per cent
reduction in operating margin and a two per cent increase in discount rate. None of those scenarios resulted in an impairment to
goodwill. Management considers that no reasonably possible change in the key assumptions would cause the goodwill to fall below
its carrying value at 31 March 2021.
12. Other intangible assets
Intangible
assets
acquired on
acquisition
£000
Other
intangible
assets
£000
Cost
At 1 April 2019
Additions
At 1 April 2020
Additions
At 31 March 2021
Amortisation
At 1 April 2019
Charge for the year
At 1 April 2020
Charge for the year
At 31 March 2021
Carrying amount
At 31 March 2021
At 31 March 2020
–
8,796
8,796
4,750
13,546
–
1,421
1,421
2,842
4,263
9,283
7,375
Total
£000
1,033
8,796
9,829
5,101
14,930
1,033
1,421
2,454
2,846
5,300
1,033
–
1,033
351
1,384
1,033
–
1,033
4
1,037
347
–
9,630
7,375
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 2019
Additions
At 1 April 2020
Additions (provisional)
At 31 March 2021
Amortisation
At 1 April 2019
Charge for the year
At 1 April 2020
Charge for the year
At 31 March 2021
Net book value
At 31 March 2021
At 31 March 2020
Customer
relationships
£000
Brands
£000
–
6,070
6,070
3,000
9,070
–
709
709
1,419
2,128
6,942
5,361
–
813
813
–
813
–
74
74
148
222
591
739
Order
book
£000
–
1,913
1,913
1,750
3,663
–
638
638
1,275
1,913
Total
£000
–
8,796
8,796
4,750
13,546
–
1,421
1,421
2,842
4,263
1,750
1,275
9,283
7,375
Amortisation of acquired intangible assets is included in the consolidated income statement as part of operating costs and is
classified as a non-underlying item (see note 5).
173
www.severfield.comStock Code: SFR OUR FINANCIALS 13. Property, plant and equipment
Cost
At 1 April 2019
Additions
Acquisition of subsidiary
Disposals
At 1 April 2020
Additions
Acquisition of subsidiary
Disposals
At 31 March 2021
Accumulated depreciation
At 1 April 2019
Charge for the year
Disposals
At 1 April 2020
Charge for the year
Disposals
At 31 March 2021
Carrying amount
At 31 March 2021
At 31 March 2020
Freehold
and long
leasehold
land and
buildings
£000
66,756
1,519
2,172
–
70,447
247
–
(30)
70,664
6,041
617
–
6,658
676
–
7,334
Plant
and
machinery
£000
Fixtures,
fittings
and office
equipment
£000
Motor
vehicles
£000
41,895
3,266
284
(639)
44,806
5,075
1,103
(360)
50,624
25,838
2,445
(457)
27,826
2,622
(303)
30,145
9,082
1,447
79
–
10,608
823
37
(53)
11,415
2,028
768
–
2,796
1,034
(21)
3,809
227
229
10
(66)
400
130
–
(140)
390
67
98
(48)
117
102
(112)
107
Total
£000
117,960
6,461
2,545
(705)
126,261
6,275
1,140
(583)
133,093
33,974
3,928
(505)
37,397
4,434
(436)
41,395
63,330
63,789
20,479
16,980
7,606
7,812
283
283
91,698
88,864
174
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR FINANCIALSYEAR ENDED 31 MARCH 2021NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS 14. Right-of-use assets
The Group leases many assets, including land and buildings, plant and equipment and motor vehicles, and these are presented as
non-current assets. Information about leases for which the Group is a lessee is presented below:
Cost
At 1 April 2019
Transitional adjustment
Additions
At 1 April 2020
Additions
Disposals
At 31 March 2021
Accumulated depreciation
At 1 April 2019
Charge for the year
At 1 April 2020
Charge for the year
Disposals
At 31 March 2021
Balance at 31 March 2021
Balance at 31 March 2020
Land and
buildings
£000
Plant and
equipment
£000
Motor
Vehicles
£000
–
9,420
–
9,420
792
–
10,212
–
830
830
831
–
1,661
8,551
8,590
–
252
48
300
48
(47)
301
–
137
137
85
–
222
79
163
–
1,523
482
2,005
458
(159)
2,304
–
618
618
653
(145)
1,126
1,178
1,387
Total
£000
–
11,195
530
11,725
1,298
(206)
12,817
–
1,585
1,585
1,569
(145)
3,009
9,808
10,140
175
www.severfield.comStock Code: SFR OUR FINANCIALS 15. Interests in JVs and associates
The Group has an interest in an associated company and two joint ventures as follows:
Associated companies:
Fabsec Limited — development of fire beam
Joint ventures:
JSW Severfield Structures Limited — structural steelwork serving the Indian market
Construction Metal Forming Limited — Manufacturer of cold rolled metal products
Holding
%
Class of
capital
25.0
Ordinary
50.0
50.0
Ordinary
Ordinary
In 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.
Construction Metal Forming Limited is registered in Chepstow in the United Kingdom. During the current year, the Group invested
£2,444,000 (2020: £nil) in the joint venture to support the expansion of the production facilities in Wales (which was matched by our
joint venture partner, Studwelders Composite Floor Decks Ltd).
The Group did not make any further investments in either JSW Severfield Structures Limited or Fabsec Limited during the year
(2020: £nil).
Please refer to note 3 of the Company accounts for the registered addresses.
Total
£000
24,335
2,355
26,690
(344)
2,444
28,790
Total
£000
(344)
2,355
At 1 April 2019
Profit retained
At 1 April 2020
Unrecovered loss (net)
Investments made during the year
At 31 March 2021
Share of net
assets/
(liabilities)
£000
19,009
2,355
21,364
(344)
2,444
23,464
Goodwill
£000
5,326
–
5,326
–
–
5,326
The Group’s share of the uncovered loss (net)/retained profit for the year of JVs and associates is made up as follows:
JSW
Severfield
Structures
Limited
£000
(697)
2,190
Fabsec
Limited
£000
–
–
CMF
Limited
£000
353
165
Share of results
2021
2020
176
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR FINANCIALSYEAR ENDED 31 MARCH 2021NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS 15. Interests in JVs and associates continued
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 (liabilities)/assets
Goodwill
Investment
Impact of foreign exchange on share of net assets
Accounting policy alignment
Carrying amount of interest in JVs and associates
Revenue
Depreciation and amortisation
Net finance expense
Taxation
Profit after tax
Group’s share of profit after tax
JSW
Severfield
Structures
Limited
£000
59,352
30,590
(56,921)
(2,698)
30,323
15,162
–
–
2,068
374
17,604
48,866
(1,747)
(3,401)
465
(1,395)
(697)
Fabsec
Limited
£000
1,139
2
(73)
(2,239)
(1,171)
(293)
–
–
–
293
–
192
(15)
–
–
–
–
CMF
Limited
£000
9,877
10,053
(5,973)
(7,167)
6,790
3,395
5,326
2,444
–
21
11,186
24,055
(77)
(84)
(151)
707
353
2021
£000
70,368
40,645
(62,967)
(12,104)
35,942
18,264
5,326
2,444
2,068
688
28,790
73,113
(1,839)
(3,485)
314
(688)
(344)
There were no contingent liabilities or capital commitments (2020: none) associated with the Group’s JVs and associates.
16. Inventories
Raw materials and consumables
Work-in-progress
17. Construction contracts
2021
£000
5,980
4,251
10,231
2021
£000
2020
£000
85,222
38,856
(79,032)
(5,961)
39,085
19,810
5,326
–
942
612
26,690
129,792
(2,015)
(2,908)
(1,546)
4,710
2,355
2020
£000
4,993
1,863
6,856
2020
£000
Contracts-in-progress at balance sheet date:
Amounts due from construction contract customers included in contract assets, 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
56,541
–
56,541
62,254
(1,179)
61,075
496,720
(440,179)
56,541
340,125
(279,050)
61,075
177
www.severfield.comStock Code: SFR OUR FINANCIALS 18. Contract assets, trade and other receivables
Current assets
Amounts due from construction contract customers (note 17):
Trade receivables and other
Contract assets
Total
Other receivables
Prepayments and accrued income
Amounts due from JVs and associates
Non-current assets
Trade receivables and other
2021
£000
35,885
16,288
52,173
6,212
7,331
2,131
67,847
2021
£000
4,368
4,368
2020
£000
33,206
29,048
62,254
5,360
5,344
1,654
74,612
2020
£000
–
–
The average credit period taken on revenue, calculated on a count-back basis to make appropriate allowance for monthly revenue
phasing, is 31 days (2020: 46 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. 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.
The Group has rigorous procedures in place for monitoring and obtaining settlement of retentions in a prompt manner. Overdue
retentions at 31 March 2021 were £nil (2020: £150,000).
19. Trade and other payables
Current liabilities
Trade creditors
Other taxation and social security
Other creditors and accruals
Payments in advance (note 17)
Amounts owed to JVs and associates
2021
£000
44,092
2,839
29,628
–
1,244
77,803
2020
£000
46,886
5,495
29,507
1,179
1,299
84,366
Current other creditors and accruals in the current and prior years include the outstanding purchase consideration for CMF Limited
of £500,000 (2020: £1,000,000), which is payable in the next year, subject to certain conditions beyond the Group’s control.
Non-current liabilities
Other creditors and accruals
2021
£000
10,639
10,639
2020
£000
–
–
Non-current other creditors and accruals in the current year reflects the outstanding purchase consideration for DAM Structures,
which is payable over a five-year period, subject to certain conditions beyond the Group’s control.
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 45 days (2020: 54 days).
During the year, VAT payments of £3,277,000 were deferred but were fully repaid by March 2021.
178
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR FINANCIALSYEAR ENDED 31 MARCH 2021NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS 20. Deferred tax assets and 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 a deferred tax liability in the current and prior years.
At 1 April 2019
Changes in accounting policy
(Charge)/credit to income statement
On acquisition of subsidiary
Charge to other comprehensive income
At 1 April 2020
(Charge)/credit to income statement
On acquisition of subsidiary
Charge to other comprehensive income
At 31 March 2021
Excess
capital
allowances
£000
(5,458)
–
(996)
(311)
–
(6,765)
(177)
(189)
–
(7,131)
Acquired
intangible
assets
£000
–
–
270
(1,671)
–
(1,401)
540
(903)
–
(1,764)
Retirement
benefit
obligations
£000
3,394
–
205
–
(48)
3,551
(231)
–
932
4,252
Trading
losses
£000
153
–
60
–
–
213
7
–
–
220
2021
£000
(8,895)
4,734
(4,161)
Other
temporary
timing
differences
£000
722
215
(408)
–
(136)
393
67
–
(198)
262
2020
£000
(8,166)
4,157
(4,009)
Total
£000
(1,189)
215
(869)
(1,982)
(184)
(4,009)
206
(1,092)
734
(4,161)
179
www.severfield.comStock Code: SFR OUR FINANCIALS 21. Business combinations
Summary of acquisition
On 26 February 2021, the Company acquired 100 per cent of the share capital of DAM Structures Limited (‘DAM Structures’), an
innovative steel fabrication company. The board believes that DAM Structures is an attractive acquisition opportunity. It is profitable,
cash generative, operates in complementary market sectors with strong growth potential (including propping, railway and steel
piling) and offers the opportunity to broaden and deepen existing and new customer relationships in the construction and railway
sectors. DAM Structures is highly regarded by its clients and presents a number of opportunities for further profitable growth.
The provisional net consideration of £23.0m comprises:
Gross initial cash consideration
Provisional completion payment
Contingent consideration
Deferred consideration
Gross consideration
Net cash acquired
Net consideration
£000
16, 994
918
3,709
6,930
28,551
(5,505)
23,046
Acquisition consideration
DAM Structures was acquired for an initial gross consideration of £16,994,000, including cash and cash equivalents of £5,505,000,
which has been funded by a combination of Group cash reserves and a new term loan.
In addition, a maximum deferred consideration of £7,000,000 is payable in cash in April 2022. An additional performance-based
contingent consideration is also in place which could further increase the purchase price by up to £8,000,000, if certain work-
winning targets in the railway and steel piling sectors are achieved over a five-year period, ending in April 2026.
The contingent consideration has been recorded at its provisional fair value of £3,709,000, which represents management’s current
assessment of the amount likely to be paid of £6,000,000 (out of the maximum £8,000,000), discounted at DAM Structures’ cost of
capital of 18.5 per cent.
The provisional fair value of the assets and liabilities recognised as a result of the acquisition are as follows:
Non-current assets
Property, plant and equipment
Current assets
Inventories
Contract assets, trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Current tax liabilities
Non-current liabilities
Deferred tax liabilities
Total liabilities
Net assets
Net cash acquired
Net identifiable assets acquired
Identified intangible assets
Goodwill
Net assets acquired
£000
1,990
2,235
10,141
5,521
17,897
19,887
(9,989)
(86)
(10,075)
(1,079)
(11,154)
8,733
(5,505)
3,228
4,750
15,068
23,046
Provisional goodwill of £15,068,000 represents both existing and new end user customers (including core fabrication and rail),
180
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR FINANCIALSYEAR ENDED 31 MARCH 2021NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS which were not recognised separately in accordance with IFRS 3 (Revised) ‘Business Combinations’, the ability and skill of DAM’s
employees and management, know-how, and the quality of the services provided (none of which qualify for recognition as a separate
intangible asset under IFRS 3). The goodwill arising from the acquisition is not expected to be deductible for income tax purposes.
Analysis of amounts disclosed in the cash flow statement in connection with the Group’s acquisitions:
Gross initial cash consideration
Net cash acquired
Net initial cash consideration – DAM Structures
Contingent consideration – Harry Peers
Total cash outflow - investing activities
£000
16,994
(5,505)
11,489
6,000
17,489
Acquisition-related costs of £689,000 were fully expensed in the period to 31 March 2021 as non-underlying operating costs (see
note 5).
The acquired business contributed revenues of £3,944,000 and profit after tax of £212,000 to the Group for the period from
26 February 2021 to 31 March 2021.
22. Financial instruments
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern whilst 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 Group monitors capital using the following indicators:
i) Gearing ratio
Borrowings
Cash and cash equivalents
Unamortised debt arrangement fees
Net funds
Equity
Net debt to equity ratio
2021
£000
(20,750)
24,983
128
4,361
190,929
N/A
2020
£000
(28,125)
44,338
177
16,390
183,675
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.
The Group excludes IFRS 16 lease liabilities from its measure of net funds/debt as they are excluded from the definition of net
funds/debt as set out in the Group’s borrowing facilities.
181
www.severfield.comStock Code: SFR OUR FINANCIALS 22. Financial instruments continued
ii) Return on capital employed
Underlying operating profit 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
Underlying operating profit (before JVs and associates)
Share of results of JVs and associates
Capital employed:
Shareholders’ equity
Cash and cash equivalents
Borrowings
Net funds (for ROCE purposes)
Acquired intangible assets
Retirement benefit obligations (net of deferred tax) (note 30)
Average capital employed
Return on capital employed
Categories of financial instruments
Financial assets
Cash and cash equivalents
Trade receivables and other (note 18)
Derivative financial instruments
Financial liabilities
Trade creditors (note 19)
Other creditors and accruals (note 19)
Lease liabilities (note 22)
Derivative financial instruments
2021
£000
25,470
(344)
25,126
190,929
(24,983)
20,750
(4,233)
(9,283)
18,127
195,540
185,382
13.6%
2020
£000
26,978
2,355
29,333
183,675
(44,338)
28,125
(16,213)
(7,375)
15,137
175,224
170,939
17.2%
Carrying value
2021
£000
24,983
40,253
1,049
(44,092)
(40,267)
(11,109)
–
2020
£000
44,338
33,206
–
(46,886)
(29,507)
(11,231)
(1,135)
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.
182
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR FINANCIALSYEAR ENDED 31 MARCH 2021NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS 22. 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 2021 were £11,502,000
(2020: £7,717,000).
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.
Consideration of potential future events is taken into account when deciding when, and how much, to impair the Group’s contract
assets and trade receivables. The Group does not expect to report credit losses which would materially impact the income
statement. In recent reporting periods credit losses in the income statement have been immaterial. In addition, the Group takes out
credit insurance for the majority of the Group’s debt profile.
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.
The Group has a £25,000,000 revolving credit facility (‘RCF’) with HSBC Bank and Yorkshire Bank, which matures in October 2023. As
part of the Harry Peers and DAM Structures acquisitions, new amortising term loans of £14,000,000 and £12,000,000, respectively,
were established as amendments to the existing RCF. These loans, for which £20,750,000 remained outstanding at 31 March 2021,
also mature in October 2023. The RCF remains subject to three financial covenants, interest cover (>4x) and net debt to EBITDA.
The facility continues to include 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. The facility is subject to certain covenants, including the cover of interest costs,
the ratio of net debt to EBITDA and the ratio of cash flow to debt service.
As at 31 March 2021, £25,000,000 (2020: £10,000,000) of this facility was not drawn but available. Up to £10,000,000 of this facility
is available by way of an overdraft.
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www.severfield.comStock Code: SFR OUR FINANCIALS 22. Financial instruments continued
In accordance with IFRS 7, the following tables detail the Group’s remaining contractual maturity for its trade creditors and other
creditors and accruals and provide a reconciliation of liabilities arising from financing activities.
Liabilities – 2021
Trade and other payables
Financial liabilities —
leases
Borrowings
Liabilities – 2020
Trade and other payables
Financial liabilities —
leases
Borrowings
Carrying
value
£000
Less than
3 months
£000
3 months
to 1 year
£000
1–2
years
£000
2–5
years
£000
5+
years
£000
Total
£000
Maturity analysis
84,358
65,688
7,852
6,468
4,350
–
84,358
11,109
20,750
116,217
675
1,475
67,838
1,068
4,425
13,345
1,288
5,900
13,656
2,423
8,950
15,723
5,655
–
5,655
11,109
20,750
116,217
76,393
66,416
9,781
196
–
–
76,393
11,231
28,125
115,749
375
15,000
81,791
1,127
4,375
15,283
1,317
3,500
5,013
2,341
5,250
7,591
6,071
–
6,071
11,231
28,125
115,749
As at 1 April 2020
Changes from financing activities
Proceeds from borrowings
Repayment of borrowings
Repayment of finance leases
Increase in lease liabilities
As at 31 March 2021
Financial liabilities
Leases
£000
11,231
Borrowings
£000
28,125
–
–
(1,710)
1,588
11,109
12,000
(19,375)
–
–
20,750
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
184
Liabilities
Assets
2021
£000
(8,329)
(32)
(8,361)
2020
£000
(4,879)
(9)
(4,888)
2021
£000
28,589
5
28,594
2020
£000
24,123
15
24,138
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR FINANCIALSYEAR ENDED 31 MARCH 2021NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS 22. Financial instruments continued
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
2021
£000
3
2020
£000
(1)
2021
£000
(252)
2020
£000
641
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.
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.
The Group uses forward foreign currency contracts to hedge currency risk associated with expected future sales or purchases
for which the Group has firm commitments. The terms of the forward foreign currency contracts are negotiated to match the
terms of the commitments. During the year, the Group has applied cash flow hedge accounting to these forward foreign currency
transactions. As at 31 March 2021, derivatives designated as cash flow hedges were an asset of £1,049,000 (2020: liability of
£1,135,000) and recognised total gains of £1,950,000 (2020: losses of £1,813,000) in equity and gains of £234,000 (2020: losses of
£84,000) in profit and loss in the year.
At 31 March 2021, the Group had forward exchange contracts of 20.0m euros (2020: 29.4m euros) at an average exchange rate of
€1.127/£ (2020: €1.146/£) which mature within 12 months of the year-end.
Interest rate risk management
The Group is exposed to interest rate risk as described under the market risk 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 2021 and the Group’s equity at that date would decrease by £104,000 (2020: £66,000). If the £25,000,000 facility is fully
utilised the exposure increases by £125,000. This is attributable to the Group’s exposure to interest rates on its variable rate
borrowings.
185
www.severfield.comStock Code: SFR OUR FINANCIALS 23. 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. These awards will, under normal circumstances, vest subject to continued service and the
achievement of performance conditions over a three-year period. Further details are given in the directors’ remuneration report on
pages 129 to 140. The Group recognised a total charge of £1,167,000 (2020: £834,000) relating to its performance share plan and
sharesave scheme.
Performance share plan
The vesting of awards is subject to performance conditions set by the remuneration committee. The Group recognised a total charge
of £593,000 for the year (2020: £516,000) with a corresponding entry to reserves. The weighted average fair value of share options
granted during the year was £0.60 per share. Three outstanding awards had been granted to 31 March 2021:
During the year ended 31 March 2019 the remuneration committee granted 2,224,808 ordinary shares of 2.5p each at £nil value.
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 2018 to 31 March 2021. The following vesting schedule applies:
Underlying EPS performance for year ending 31 March 2021
Equal to less than 7.88p
Equal to 9.75p or better
Between 7.88p and 9.75p
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 20 June 2018.
% of award vesting
0%
100%
between 25% and 100%
£0.84*
nil
37%
0.8%
3.0p
three years
The Black–Scholes pricing model produced, using the above assumptions, an annual charge of £nil (2020: £nil).
During the period ended 31 March 2020, the remuneration committee granted 2,861,509 ordinary shares of 2.5p each at £nil value.
The vesting of these awards was dependent on the Group’s underlying earnings per share performance over the three-year period
from 1 April 2019 to 31 March 2022. The following vesting schedule applies:
Underlying EPS performance for year ending 31 March 2022
Equal to less than 8.41p
Equal to 10.39p or better
Between 8.41p and 10.39p
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 20 June 2019.
% of award vesting
0%
100%
between 25% and 100%
£0.71*
nil
54%
0.5%
3.0p
three years
The Black–Scholes pricing model produced, using the above assumptions, an annual charge of £nil (2020: £nil).
186
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR FINANCIALSYEAR ENDED 31 MARCH 2021NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS 23. Share-based payments continued
During the year ended 31 March 2021 the remuneration committee granted 2,983,529 ordinary shares of 2.5p each at £nil value.
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 2020 to 31 March 2023. The following vesting schedule applies:
Underlying EPS performance for year ended 31 March 2023
Equal to less than 6.57p
Equal to 8.36p or better
Between 6.57p and 8.36p
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 17 December 2020.
% of award vesting
0%
100%
between 25% and 100%
£0.69*
nil
96%
0.2%
3.0p
three years
The Black–Scholes pricing model produced, using the above assumptions, an annual charge of £593,000 (2020: £nil).
Reconciliation of share awards outstanding under the performance share plan are as follows:
Outstanding at the beginning of the year
Granted during the year
Lapsed during the year
Vested during the year
Outstanding at the end of the year
2021
Number
6,292,368
2,983,529
(149,481)
(1,696,739)
7,429,677
2020
Number
7,084,240
2,861,509
(41,605)
(3,611,776)
6,292,368
Save As You Earn share option plan (‘Sharesave’)
The plan, which was established in 2015 and expires in 2025, is open to all employees on the UK payroll. Participants may elect to
save up to £500 per month over the life of the plan under three-yearly savings schemes, each with a separate savings contract.
Under the 2017 Sharesave scheme, options were granted by the Company to participating employees to buy shares at a discount
of 20 per cent from the then market price. At the end of the 2017 Sharesave scheme in 2020, these options become exercisable
for a period of six months. A charge of £nil (2020: £135,000) was recognised in the current period in relation to the 2017
Sharesave scheme.
Under the 2018 Sharesave scheme, options were granted by the Company to participating employees to buy shares at a discount
of 20 per cent from the then market price. At the end of the 2018 Sharesave scheme in 2021, these options will become exercisable
for a period of six months. A charge of £185,000 (2020: £183,000) was recognised in the current period in relation to the 2018
Sharesave scheme.
Under the 2020 Sharesave scheme, options were granted by the Company to participating employees to buy shares at a
discount of 20 per cent from the then market price. At the end of the 2020 Sharesave scheme in 2023, these options will become
exercisable for a period of six months. A charge of £389,000 (2020: £nil) was recognised in the current period in relation to the 2020
Sharesave scheme.
187
www.severfield.comStock Code: SFR OUR FINANCIALS 23. Share-based payments continued
Reconciliation of share awards outstanding under the Sharesave plan are as follows:
Save As You Earn option plan (‘Sharesave’)
Outstanding at the beginning of the year
Granted during the year
Lapsed during the year
Vested during the year
Outstanding at the end of the year
24. Share capital
Issued and fully paid:
308,221,462 ordinary shares of 2.5p each (2020: 305,928,087 ordinary shares of 2.5p each)
2021
Number
3,551,400
4,259,136
(1,471,382)
(596,634)
5,742,520
2020
Number
4,224,200
–
(642,605)
(30,195)
3,551,400
2021
£000
2020
£000
7,706
7,648
The ordinary shares carry no right to fixed income. There are no share options outstanding as at 31 March 2021 (2020: nil).
25. Other reserves
At 1 April 2019
Share-based payments
Losses taken to equity on cash flow hedges
Reclassification adjustments on cash flow hedges
Exchange difference on foreign operations
At 1 April 2020
Share-based payments
Gains taken to equity on cash flow hedges
Reclassification adjustments on cash flow hedges
Exchange difference on foreign operations
At 31 March 2021
Share-based
payment
reserve
£000
2,889
(570)
–
–
–
2,319
78
–
–
–
2,397
Capital
redemption
reserve
£000
139
–
–
–
–
139
–
–
–
–
139
Hedge
accounting
reserve
£000
775
–
(1,403)
(410)
–
(1,038)
–
1,699
251
–
912
Currency
translation
reserve
£000
16
–
–
–
(34)
(18)
–
–
–
34
16
Total
£000
3,819
(570)
(1,403)
(410)
(34)
1,402
78
1,699
251
34
3,464
The movement in the share-based payment reserve represents the share-based payment charge of £1,167,000 (2020:
£834,000) offset by amounts recycled to retained earnings of £531,000 (2020: £307,000) for share awards vested in the year
and £557,000 (2020: £1,097,000) for tax paid on these awards. There was no reserves movement in the current or prior year for
sharesave schemes.
188
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR FINANCIALSYEAR ENDED 31 MARCH 2021NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS 26. Net cash flow from operating activities
Operating profit from continuing operations
Adjustments:
Depreciation of property, plant and equipment (note 13)
Loss/(gain) on disposal of other property, plant and equipment
Movement in contingent consideration (note 5)
Amortisation of intangible assets (note 12)
Movements in pension scheme (note 30)
Share of results of JVs and associates (note 15)
Share-based payments
Right-of-use asset depreciation (note 14)
Operating cash flows before movements in working capital
(Increase)/decrease in inventories
Decrease/(increase) in receivables
(Decrease)/increase in payables
Cash generated from operations
Tax paid
Net cash flow from operating activities
Cash generated from operations
Proceeds on disposal of other property, plant and equipment
Purchases of land and buildings
Purchases of other property, plant and equipment
Underlying operating profit (before JVs and associates)
Operating cash conversion
27. Analysis of net funds
Borrowings
Cash and cash equivalents
Unamortised debt arrangement fees
Net funds (pre-IFRS 16)
IFRS 16 lease liabilities
Net (debt)/funds (post-IFRS 16)
2021
£000
22,331
4,434
40
(736)
2,846
(1,215)
344
610
1,569
30,223
(1,140)
12,551
(11,645)
29,989
(4,640)
25,349
2021
£000
29,989
104
(247)
(6,097)
23,749
25,470
93%
2021
£000
(20,750)
24,983
128
4,361
(11,109)
(6,748)
2020
£000
27,039
3,928
(68)
–
1,421
(1,029)
(2,355)
(311)
1,585
30,210
2,059
(12,174)
7,898
27,993
(6,013)
21,980
2020
£000
27,993
267
(1,519)
(4,945)
21,796
26,978
81%
2020
£000
(28,125)
44,338
177
16,390
(11,231)
(5,159)
The Group excludes IFRS 16 lease liabilities from its measure of net funds/debt as they are excluded from the definition of net debt
as set out in the Group’s borrowing facilities.
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 the 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 legal or contractual claim has been made and it is not possible to reliably estimate the potential
obligation (see note 2).
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 2021 this amounted to £nil (2020: £nil). The Group has also given performance bonds in the
normal course of trade.
189
www.severfield.comStock Code: SFR OUR FINANCIALS
29. Lease arrangements
The Group as lessee
The Group leases certain items of plant and machinery and vehicles which are either leased over a short-term or are for low value
assets, whose total future minimum lease rentals are as follows:
Minimum lease rentals due:
— Within one year
— After one year and within five years
2021
£000
21
7
28
2020
£000
22
28
50
The Group as lessor
The Group’s property rental operating leases expired at the end of 2018 financial year, as a result; no property rental income was
earned on owned properties in the current year (2020: £nil).
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 £3,203,000 (2020: £2,866,000) represents contributions payable to these schemes by the Group
at rates specified in the rules of the plans. As at 31 March 2021, contributions of £447,000 (2020: £476,000) 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 Group, through trustees, operate the defined benefit scheme. The trustees are responsible for establishing
the investment strategy and ensuring that there are sufficient assets to meet the cost of the current and future benefits.
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
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.
Interest risk
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.
Longevity risk
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.
Salary risk
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 was carried out at 5 April
2020 by Mr Alex Pearse, 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
190
2021
%
1.9
3.4
3.2
2020
%
2.3
2.8
2.7
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR FINANCIALSYEAR ENDED 31 MARCH 2021NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS 30. Retirement benefit obligations continued
When considering mortality assumptions, a life expectancy to 86 at age 65 has been used for the year ended 31 March 2021
(2020: 85). For the year ended 31 March 2021, the Group has updated the mortality assumption following analysis undertaken
by the Scheme Actuary for the triennial funding valuation of the Scheme as at 5 April 2020 from 100 per cent of the SAPS Series
3 Base Tables with a +2 year age rating to 120 per cent of the SAPS Series 3 Base Tables. This update is based on analysis of the
membership by pension amounts carried out for the 5 April 2020 Scheme funding valuation and allowing for occupational factors.
In addition, the allowance for future improvements has been updated from the CMI 2018 model to the CMI 2019 model. The Group
has updated its long-term rate of mortality improvements assumption from 1.50 per cent for males and 1.25 per cent for females
to 1.25% p.a. for both males and females as improvements in life expectancies have continued to slow in recent years, even before
allowing for the impact of the COVID-19 pandemic.
Impact on scheme liabilities of changes to key assumptions:
Assumption
Discount rate
Rate of mortality
Price inflation
Change in assumption
Increase/decrease by 0.25%
Reducing by 10%
Increase/decrease by 0.25%
Impact on scheme liabilities
Decrease/increase by 4.3%
Increase by 3.1%
Increase/decrease by 3.3%
The above sensitivity analysis is based on isolated changes in each assumption while holding all other assumptions constant; however,
in practice this is unlikely to occur. In the current year, the methodology for calculating the sensitivity of the obligation to changes in the
mortality assumption has changed to be consistent with the updated mortality assumptions adopted as a result of analysis performed
for the 5 April 2020 triennial valuation. In the previous year, the sensitivity to changes in mortality was calculated based on a one-year
increase in longevity, whereas this year it has been calculated based on the rate of mortality reducing by 10 per cent. Both methods
show how the defined benefit obligation would have been affected by changes in mortality that were reasonably possible at that date.
Amounts recognised in income in respect of these defined benefit schemes are as follows:
Interest cost
Interest income
2021
£000
989
(578)
411
2020
£000
1,076
(615)
461
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 £24,837,000 (2020: £19,931,000).
The actual return on scheme assets was a gain of £2,800,000 (2020: loss of £478,000).
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
LDI funds
Other
2021
£000
(50,316)
27,937
(22,379)
2020
£000
(43,843)
25,155
(18,688)
2021
%
24.9
22.8
8.7
7.7
26.0
9.9
100.0
2020
%
12.9
32.4
5.8
8.7
28.9
11.3
100.0
Bonds and gilts include a mixture of corporate and government bonds and fixed and index-linked gilts. Approximately 16 per cent of
bonds have a sub-investment grade credit rating (BB+ or lower) and approximately 79 per cent of gilts are index-linked, with 21 per
cent being fixed.
191
www.severfield.comStock Code: SFR OUR FINANCIALS YEAR ENDED 31 MARCH 2021
30. Retirement benefit obligations continued
Movements in the present value of defined benefit obligations were as follows:
At start of year
Interest cost
Actuarial (losses)/gains
Benefits paid
At end of year
2021
£000
(43,843)
(989)
(7,128)
1,644
(50,316)
2020
£000
(45,561)
(1,076)
1,348
1,446
(43,843)
Actuarial losses arising from changes in demographic assumptions, changes in financial assumptions and gains or losses arising
from experience were losses of £1,230,000 (2020: losses of £312,000), losses of £6,317,000 (2020: gains of £2,667,000) and gains of
£419,000 (2020: losses of £1,007,000) 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
2021
£000
25,155
578
2,222
1,626
(1,644)
27,937
The Group expects to contribute £210,000 (2020: £128,000) per month to its defined benefit pension scheme in the year to
31 March 2022.
History of experience of gains and losses:
Experience gains/(losses) on scheme assets (£000)
Percentage of scheme assets
Experience losses/(gains) 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
2021
2,222
8.0%
419
0.8%
2020
(1,093)
(4.3%)
(1,007)
(2.2%)
2019
651
2.5%
16
0.0%
2018
(488)
(2.0%)
200
0.5%
(4,906)
(9.8%)
255
0.6%
(3,702)
(8.1%)
3,606
8.6%
(7,412)
(16.2%)
2020
£000
25,589
615
(1,093)
1,490
(1,446)
25,155
2017
420
1.7%
347
0.8%
The weighted average period over which benefits are expected to be paid, or the duration of the liabilities, is currently 17 years.
192
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR FINANCIALSNOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS 31. Related party transactions
The remuneration of the directors is provided in the audited part of the directors’ remuneration report on page 130.
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
2021
£000
1,704
119
1,823
2020
£000
2,089
186
2,275
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 23 and relates to executive directors, members of the executive
committee and selected other members of the senior management team.
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 (‘Fabsec’) at a cost of £48,000
(2020: £48,000). The amount due to Fabsec at 31 March 2021 was £117,000 (2020: £117,000).
During the year, the Group has contracted with and purchased services from Construction Metal Forming Limited (‘CMF’) amounting
to sales of £41,000 (2020: £nil) and purchases of £11,830,000 (2020: £11,003,000). The amounts due from and to CMF at 31 March
2021 was £1,362,000 (2020: £1,275,000) and £740,000 (2020: £1,170,000) respectively.
During the year, the Group contracted with and purchased services from MET Structures Limited, amounting to sales of £2,311,000
(2020: £1,894,000) and purchases of £777,000 (2020: £484,000). MET Structures shares common directors with the Group. The
amount due from and to MET Structures at 31 March 2021 was £51,000 (2020: £363,000) and £nil (2020: £281,000) respectively.
During the year, the Group incurred additional operating costs in relation to the day-to-day running of its Indian joint venture (‘JSSL’)
of £391,000 (2020: £416,000). Those costs were recharged to JSSL during the year and the amount due from JSSL at 31 March 2021
was £770,000 (2020: £379,000). During the year, the Group contracted with and purchased services from JSSL amounting to £73,000
(2020: £198,000). The amount due to JSSL at 31 March 2021 was £387,000 (2020: £12,000).
193
www.severfield.comStock Code: SFR OUR FINANCIALS FIVE YEAR
SUMMARY
Results
Revenue
Underlying* operating profit (before JVs and associates)
Underlying* profit before tax
Non-underlying items before tax
Profit attributable to equity holders of Severfield plc
Assets employed
Non-current assets
Net current assets
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
* The basis of stating results on an underlying basis is set out on page 06.
2021
£000
2020
£000
2019
£000
2018
£000
2017
£000
363,254
327,364
274,917
274,203
262,224
25,470
24,331
(3,224)
17,304
230,076
22,247
(61,394)
190,929
6.43p
5.63p
6.43p
5.63p
2.90p
2.2
79.90p
51.20p
26,978
28,621
(2,808)
20,415
203,783
21,068
(41,176)
183,675
7.74p
6.68p
7.70p
6.64p
2.90p
2.7
96.00p
57.20p
23,256
24,711
–
20,162
163,033
33,135
(21,161)
175,007
6.65p
6.65p
6.58p
6.58p
2.80p
2.5
88.20p
64.60p
22,866
23,512
(1,333)
18,146
154,510
33,147
(18,660)
168,997
6.38p
6.05p
6.29p
5.97p
2.60p
2.6
88.00p
59.50p
19,614
19,845
(1,790)
15,329
148,292
28,391
(22,526)
154,157
5.53p
5.13p
5.49p
5.09p
2.30p
2.4
83.50p
43.75p
FINANCIAL
CALENDAR
Preliminary announcement of full-year results
Publication of annual report
Annual general meeting
Announcement of interim results (provisional)
16 June 2021
30 July 2021
1 September 2021
23 November 2021
194
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR FINANCIALSYEAR ENDED 31 MARCH 2021
COMPANY
BALANCE SHEET
YEAR ENDED 31 MARCH 2021
Fixed assets
Tangible assets
Intangible assets
Right-of-use asset
Investments
Current assets
Debtors — amounts falling due within one year
Cash at bank and in hand
Current liabilities
Trade and other payables
Financial liabilities – borrowings
Financial liabilities – leases
Non-current liabilities
Trade and other payables
Financial liabilities – borrowings
Total assets less liabilities
Capital and reserves
Share capital
Share premium
Other reserves
Profit and loss account
Equity and total shareholders’ funds
Note
2021
£000
2020
£000
2
3
4
56,635
57,162
71
23
–
63
152,710
209,439
128,808
186,033
90,381
668
91,049
73,358
15,608
88,966
5
(132,602)
(115,454)
(5,900)
(19,375)
(20)
(55)
(138,522)
(134,884)
5
(10,639)
(14,850)
(25,489)
–
(8,750)
(8,750)
136,477
131,365
7,706
87,658
2,496
38,617
7,648
87,292
2,418
34,007
136,477
131,365
The Company reported a profit for the financial year ended 31 March 2021 of £12,974,000 (2020: £12,400,000).
The financial statements were approved by the board of directors on 16 June 2021 and signed on its behalf by:
Alan Dunsmore
Chief executive officer
Adam Semple
Group finance director
Severfield plc
Registered in England No.1721262
195
www.severfield.comStock Code: SFR OUR FINANCIALS COMPANY STATEMENT
OF CHANGES IN EQUITY
At 1 April 2020
Total comprehensive income for the year
Ordinary shares issued*
Equity settled share-based payments
Dividends paid
At 31 March 2021
Share
capital
£000
7,648
Share
premium
£000
87,292
Other
reserves
£000
2,418
–
58
–
–
–
366
–
–
–
–
78
–
7,706
87,658
2,496
Retained
earnings
£000
34,007
12,974
–
531
(8,895)
38,617
Total
equity
£000
131,365
12,974
424
609
(8,895)
136,477
* The issue of shares represents the shares allotted to satisfy the 2017 Performance Share Plan award which vested in June 2020 and the 2017 Sharesave schemes.
At 1 April 2019
Changes in accounting policy
Restated total equity at 1 April 2019
Total comprehensive income for the year
Ordinary shares issued*
Equity settled share-based payments
Dividends paid
At 31 March 2020
Share
capital
£000
7,600
–
7,600
–
48
–
–
Share
premium
£000
87,254
–
87,254
–
38
–
–
7,648
87,292
Other
reserves
£000
Retained
earnings
£000
Total
equity
£000
2,989
–
2,989
–
–
(571)
–
2,418
30,195
128,038
4
30,199
12,400
–
259
(8,851)
34,007
4
128,042
12,400
86
(312)
(8,851)
131,365
* The issue of shares represents the shares allotted to satisfy the 2016 Performance Share Plan award which vested in June 2019 and the 2017 and 2018 Sharesave
schemes.
196
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR FINANCIALSYEAR ENDED 31 MARCH 2021 NOTES TO THE COMPANY
FINANCIAL STATEMENTS
1. Significant accounting policies
Basis of accounting
The financial statements of the Company have been prepared in accordance with Financial Reporting Standard 101 ‘Reduced
Disclosure Framework’ (‘FRS 101’).
In preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements of
international accounting standards in conformity with the requirements of the Companies Act 2006, but makes amendments
where necessary in order to comply with the Companies Act 2006 and has set out below where advantage of the FRS 101 disclosure
exemptions has been taken.
The financial statements have been prepared on the going concern basis, under the historical cost convention and in accordance
with the Companies Act 2006.
As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation
to share-based payments, financial instruments, capital management, presentation of a cash flow statement and related notes,
related party transactions and comparative period reconciliations. In addition, disclosures in relation to share capital (note 24),
share premium and dividends (note 9) have not been repeated here as there are no differences to those provided in the consolidated
financial statements.
Except as noted below, the Company’s accounting policies are consistent with those described in the consolidated financial
statements of Severfield plc.
Profit of the parent company
The Company has taken advantage of section 408 of the Act and consequently the statement of comprehensive income (including
the profit and loss account) of the parent company is not presented as part of these accounts.
Audit fees
The Company has taken the exemption granted under SI 2008/489 not to disclose non-audit fees paid to its auditor.
Employees
Directors’ remuneration and details of their share-based payments are disclosed in the audited part of the directors’ remuneration
report on page 130 and in notes 6 and 23 to the consolidated financial statements.
Investments
Investments in subsidiaries, joint ventures and associates are stated at cost less, where appropriate, provisions for impairment.
Amounts owed by subsidiary undertakings
The Company holds intercompany loans with subsidiary undertakings which are repayable on demand. None of these loans are past
due nor impaired. The carrying value of these loans approximates their fair value.
Intercompany guarantees
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other Group companies, the
Company considers these to be insurance arrangements and accounts for them as such. In this respect the Company treats the
guarantee contract as a contingent liability until such time it becomes probable that the Company will be required to make a
payment under the guarantee.
197
www.severfield.comStock Code: SFR OUR FINANCIALS NOTES TO THE COMPANY
FINANCIAL STATEMENTS
2. Tangible fixed assets
Cost
At 1 April 2020 and 31 March 2021
Accumulated depreciation
At 1 April 2020
Charge for the year
At 31 March 2021
Carrying amount
At 31 March 2021
At 31 March 2020
Freehold
and long
leasehold
land and
buildings
£000
Fixtures,
fittings
and office
equipment
£000
Motor
vehicles
£000
Total
£000
63,288
467
33
63,788
6,400
484
6,884
56,404
56,888
198
41
239
228
269
28
2
30
3
5
6,626
527
7,153
56,635
57,162
The Company’s freehold and long leasehold land and buildings include those which are occupied and used by some of the
Company’s subsidiary undertakings. The rental income from these assets in the current year was £600,000 (2020: £600,000), which
is set at a rate only to cover certain of the costs of maintaining the properties.
198
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR FINANCIALSYEAR ENDED 31 MARCH 2021 3. Investments
In accordance with Section 409 of the Companies Act 2006, a full list of subsidiaries, joint ventures and associated undertakings,
including their country of incorporation, as at 31 March 2021 is disclosed below. All of these had a reporting period ended 31 March
2021, except where indicated.
Name of undertaking
100% owned by Severfield plc
Severfield (UK) Limited
Severfield (NI) Limited(i)
Atlas Ward Holdings Limited
Severfield (Products & Processing) Limited
Severfield Europe B.V.(ii)
Harry Peers & Co Limited
Severfield Reeve Projects Limited
Severfield Reeve International Limited
Severfield Mauritius Limited(iii)
DAM Structures Limited
100% owned by Harry Peers & Co Limited
Harry Peers Steelwork Limited
100% owned by Atlas Ward Holdings Limited
Severfield (Design & Build) Limited
100% owned by Severfield Reeve Projects Limited
Leeds 27 Limited
50% owned by Severfield plc
Construction Metal Forming Limited (formerly Composite Metal Flooring Limited)*(iv)
50% owned by Severfield Mauritius Limited
JSW Severfield Structures Limited(v)
25% owned by Severfield plc
Fabsec Limited*(vi)
Incorporated in
Class of capital
England and Wales
Northern Ireland
England and Wales
England and Wales
Netherlands
England and Wales
England and Wales
England and Wales
Mauritius
England and Wales
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
England and Wales
Ordinary
England and Wales
Ordinary
England and Wales
Ordinary
England and Wales
Ordinary
India
Ordinary
England and Wales
Ordinary
* Companies with a reporting period ended 31 December 2020.
‡ Unless otherwise stated, the registered office address for each of the above is Severs House, Dalton Airfield Industrial Estate, Dalton, Thirsk, North Yorkshire,
YO7 3JN.
Registered office classification key:
(i) Fisher House, Main Street, Ballinamallard, Enniskillen, Co Fermanagh, BT94 2FY
(ii) Gildelaan 11 2e Verdiepin, 4761 BA Zevenbergen
(iii) Felix House, 24 Dr. Joseph Rivière Street, Port Louis, Mauritius
(iv) Millennium House, Severn Link Distribution Centre, Newhouse Farm Industrial Estate, Mathern, Chepstow, NP16 6UN
(v) 401 Grande Palladium, 4th Floor, 175 CST Road, Kalina, Santacrus East, Mumbai, India, 400098
(vi) Unit 561 Avenue E East, Thorp Arch Estate, Wetherby, LS23 7DB
Investment in subsidiaries
Investment in joint ventures
2021
£000
119,783
32,927
152,710
2020
£000
98,325
30,483
128,808
199
www.severfield.comStock Code: SFR OUR FINANCIALS NOTES TO THE COMPANY
FINANCIAL STATEMENTS
3. Investments continued
Investment in subsidiaries
Cost
At 1 April 2020
Additions
Liquidated entities
At 31 March 2021
Provision for impairment
At 1 April 2020 and 31 March 2021
Net book value
At 31 March 2021
At 31 March 2020
£000
118,525
23,046
(1,588)
139,983
(20,200)
119,783
98,325
Investment in joint ventures
In 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. During a prior year, the Company invested a further £4,229,000 in the joint
venture to fund the expansion of the production facility in Bellary. During a prior year, the Company invested £5,506,000 in JSSL to
support the full repayment of the joint venture’s term debt of c.£11,000,000 in June 2017. The investment is carried in Severfield
Mauritius Limited, a wholly owned subsidiary of the Company.
The Company invested £2,444,000 in CMF Limited during the year (2020: £nil) to fund the expansion of the existing production
facilities.
£000
30,483
2,444
32,927
Cost
At 1 April 2020
Additions
At 31 March 2021
200
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR FINANCIALSYEAR ENDED 31 MARCH 2021 4. Debtors — amounts falling due within one year
Other debtors
Amounts owed by subsidiary undertakings
Amounts owed by JVs and associates
Corporation tax recoverable
5. Creditors
Current liabilities
Other creditors and accruals
Amounts owed to subsidiary undertakings
Amounts owed to JVs and associates
Deferred tax liability (note 6)
Non-current liabilities
Trade and other payables
2021
£000
1,979
79,514
48
8,840
90,381
2021
£000
6,948
120,128
473
5,053
132,602
2021
£000
10,639
10,639
2020
£000
1,362
62,987
–
9,009
73,358
2020
£000
11,490
98,853
–
5,111
115,454
2020
£000
–
–
6. Deferred tax
The following are the major deferred tax liabilities and assets recognised by the Company and movements thereon during the
current and prior reporting period.
Deferred tax liabilities
Deferred tax assets
Deferred tax — movement for the year
At 1 April 2019
Current year credit
Charge to equity
At 31 March 2020
Current year credit
Charge to equity
At 31 March 2021
2021
£000
(5,236)
183
(5,053)
Excess
capital
allowances
£000
(4,716)
(569)
–
(5,285)
49
–
(5,236)
Other
temporary
differences
£000
572
(261)
(137)
174
9
–
183
7. 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 2021 these amounted to £nil (2020: £nil).
2020
£000
(5,285)
174
(5,111)
Total
£000
(4,144)
(830)
(137)
(5,111)
58
–
(5,053)
201
www.severfield.comStock Code: SFR OUR FINANCIALS SHAREHOLDER NOTES
202
Severfield plc Annual report and accountsfor the year ended 31 March 2021OUR FINANCIALS ADDRESSES
AND ADVISERS
Registered office and headquarters
Severfield plc
Severs House
Dalton Airfield Industrial Estate
Dalton, Thirsk
North Yorkshire
YO7 3JN
Operational businesses
Severfield (UK) Limited
Severs House
Dalton Airfield Industrial Estate
Dalton, Thirsk
North Yorkshire
YO7 3JN
Severfield (Products & Processing)
Limited
Severs House
Dalton Airfield Industrial Estate
Dalton, Thirsk
North Yorkshire
YO7 3JN
DAM Structures Limited
Severs House
Dalton Airfield Industrial Estate
Dalton, Thirsk
North Yorkshire
YO7 3JN
Advisers
Auditor
KPMG LLP
Chartered Accountants
1 Sovereign Square
Leeds, LS1 4DA
Solicitors
Ashurst LLP
Broadwalk House
5 Appold Street
London, EC2A 2HA
Public Relations
Camarco
107 Cheapside
London
EC2V 6DN
Severfield (Design & Build) Limited
Ward House
Sherburn
Malton
North Yorkshire
YO17 8PZ
Severfield (NI) Limited
Fisher House
Ballinamallard
Enniskillen
Co Fermanagh
BT94 2FY
Severfield Europe B.V.
Gildelaan 11 2e Verdiepin
4761 BA Zevenbergen
The Netherlands
Harry Peers & Co Limited
Elton Street
Bolton
Lancashire
BL2 2BS
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
Construction Metal Forming Limited
Unit 3
Mamhilad Technology Park
Old Abergavenny Road
Mamhilad
Monmouthshire, NP4 0JJ
Stockbrokers
Jefferies International Limited
Vintners Place
68 Upper Thames Street
London, EC4V 3BJ
Bankers
HSBC Bank plc
Maingate
Kingsway North
Team Valley Trading Estate
Gateshead, NE11 0BE
Registrars
Computershare Investor Services PLC
PO Box 82
The Pavilions, Bridgwater Road
Bristol, BS99 7NP
Yorkshire Bank
(part of Virgin Money UK plc)
94 Albion Street
Leeds, LS1 6AG
203
www.severfield.comStock Code: SFR OUR FINANCIALS
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Severfield plc
Severs House, Dalton Airfield Industrial Estate
Dalton, Thirsk, North Yorkshire, YO7 3JN
Tel: (01845) 577896
Fax: (01845) 577411
www.severfield.com