OUR
BALANCED
AND RESILIENT
BUSINESS
Severfield plc Annual report and accounts
for the year ended 26 March 2022
SUSTAINABLE
GROWTH
IN NUMBERS
Revenue
£274
MILLION
£275
MILLION
£363
MILLION
£327
MILLION
£404
MILLION
2018
2019
2020
2021
2022
Read more about our operating performance on pages 42 to 49
UK and Europe order book
£486
MILLION
£295
MILLION
£271
MILLION
£301
MILLION
£237
MILLION
2018
2019
2020
2021
2022
Read more about our order book on pages 12 and 13
Cover image: Chiswick footbridge
A true example of sustainable engineering in the form of a 120 metre long, 220 tonnes, three-span
arched footbridge connecting Chiswick Park Business Campus with Chiswick Park station.
WELCOME TO
OUR ANNUAL
REPORT 2022
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 innovation.
KEVIN WHITEMAN
NON-EXECUTIVE CHAIRMAN
ALAN DUNSMORE
CHIEF EXECUTIVE OFFICER
“ 2022 has been another successful
year for Severfield. Our achievement
is attributable to the hard work of
our employees, the resilience of our
business model and the consistent
execution of our well-established
strategy allowing us to continue to make
strong progress in our chosen markets.”
“ The strategic and operational
progress made over recent years
ensures Severfield can continue
to deliver increased revenues and
profits, drive operating efficiencies
and maintain a strong balance sheet,
allowing us to make the right long-
term decisions for the business.”
You can find out more about the Group on our website www.severfield.com, which
includes an investor information section containing a wide range of information of
interest to institutional and private investors, including:
• Latest news and press releases
• Financial reports and investor presentations
• Company share price
Find us online @
www.severfield.com
OVERVIEW Our projects
THE STRENGTH
WITHIN ICONIC
STRUCTURES
1
www.severfield.comStock Code: SFR 30 GROSVENOR
SQUARE
Stadia & leisure
This refurbishment of the Grade
II listed former US Embassy
building, located in the heart
of Mayfair London, will create
a luxury hotel with 137 guest
rooms, five restaurants, five
shops, a spa and a ballroom.
Location:
Mayfair, London
Client:
Rosewood Hotels (Qatari Diar)
Main contractor:
Multiplex Construction Europe
Engineer:
AKT II
Architect:
Reardon Smith Architects
Tonnage:
900 tonnes
Completion date:
May 2022
2
The project
This project will transform the
former US Embassy building in
Mayfair into a luxury hotel facility,
complete with spa and ballroom.
Situated within the Mayfair
Conservation Area within the City
of Westminster, the 1960s concrete
structure features a Grade II listed
façade which was retained.
Severfield provided the fabrication,
delivery and erection of structural
steelwork and decking for the
complex ballroom trusses inclusive
of a mezzanine floor between the
bottom booms, the north and south
atrium and the roof.
The ballroom trusses were
composed of 12 primary trusses
running east to west and three
primary trusses running north to
south, with a larger quantity of
smaller internal trusses to tie the
structure back to the north and
south cores.
The height of the trusses created
logistical issues for our production
teams when moving them around
our fabrication facilities at our
Dalton and Lostock sites.
Severfield plc Annual report and accountsfor the year ended 31 March 2022 The project
This required a change to the
original design, with some
components being bolted together
rather than welded. The scale
of the trusses also required the
arrangement of bespoke transport
and lifting arrangements on site.
The interface between the columns
and the trusses was rather intricate
and required the construction
team to significantly change the
planned erection sequence. Despite
these challenges, the project was
completed on time in May 2022.
Our on-site construction specialists
were also faced with the challenge
of working with a retained Grade II
listed façade and working around
temporary works and cruciform
columns provided by other
contractors.
3
www.severfield.comStock Code: SFR LARGE WAREHOUSE
FACILITY – WAKEFIELD
Industrial &
distribution
Development of a large new
fulfilment centre and modern
office space for a leading
internet retailer.
Location:
Wakefield
Main contractor:
ISG Retail Limited
Engineer:
BWB Consulting
Architect:
SMR Architects
Tonnage:
10,700 tonnes
Completion date:
February 2022
4
The project
Following the COVID-19 pandemic,
the trend towards online shopping
has continued, resulting in the
demand for new distribution and
warehouse facilities for internet-
based retailers remaining high.
For this project in Wakefield,
Severfield was responsible for
the design, manufacture, delivery
and installation of the structural
steelwork for the warehouse,
three internal mezzanine floors,
and all related plant platforms,
internal buildings and gatehouses,
totalling c.10,700 tonnes of hot
and cold rolled steel. This includes
the supply and installation of
c.136,000 square metres of
metal floor decking, open-mesh
flooring and handrailing to 28 roof
platforms. Our cold rolled specialist
joint venture, Construction Metal
Forming Limited, supplied the cold
rolled steelwork and metal floor
decking.
Severfield plc Annual report and accountsfor the year ended 31 March 2022 The project
As always on a project of this scale,
continual communication with the
client and other contractors was
required in order to resolve any
issues that arose in a timely and
efficient manner.
Despite the Group’s familiarity
with large, complex warehouses,
each brings its own challenges,
with this project facing issues from
difficult ground conditions and
live power lines spanning the site.
This required site erection to be
paused for several weeks in order
to allow a reassessment of the site
programme to ensure our work
could continue safely.
5
www.severfield.comStock Code: SFR M8 FOOTBRIDGE,
GLASGOW
Transport
This footbridge spans the M8 in
Glasgow, connecting Sighthill
with the city centre for both
pedestrians and cyclists.
Location:
Glasgow City Council
Main contractor:
BAM Nuttall
Engineer:
Jacobs
Tonnage:
530 tonnes
Completion date:
April 2022
6
The project
Severfield’s bridge team have
worked alongside BAM Nuttall and
Glasgow City Council to supply and
install the steelwork for this new
58-metre-long pedestrian and
cyclist footbridge. The new bridge
will connect Sighthill to the nearby
city centre as part of a £250 million
regeneration of the area, which
will offer affordable housing within
walking distance of Strathclyde
University, Queen Street Station
and Glasgow’s most popular
shopping locations.
Severfield provided 17 complex
steel assemblies, which were
transported to a temporary offsite
location and welded together
whilst on temporary trestles. Due
to the stringent requirements of
this project, all individual bridge
sections that formed the full
length of the bridge were trial
fitted and assembled to each
other during the manufacturing
process by our experienced team
of bridge specialists at our Lostock
production facility.
Severfield plc Annual report and accountsfor the year ended 31 March 2022 The project
being moved into its final location
between abutments and connected
with a number of curved infill plates
to complete the eye-catching
structure. The erection was a
complex operation which required
a section of the motorway to be
shut overnight to ensure safe and
smooth construction.
The Group also manufactured and
transported the curved abutments
as one complete assembly, which
were then then lifted into position
by crane, ready to receive the
bridge.
Once all the fabrication was
completed, the bridge structure
was then jacked up onto a
Self-Propelled Modular Transporter
(‘SPMT’) in preparation for the
final erection process. The skilled
team carefully oversaw the bridge
7
www.severfield.comStock Code: SFR SKY STUDIOS ELSTREE,
BOREHAMWOOD, LONDON
Stadia & leisure
Sky’s new state-of-the-art film
and television studio.
Location:
Borehamwood, London
Client:
Legal & General
Main contractor:
BAM Construction
Engineer:
Fairhurst
Architect:
UMC Architects
Tonnage:
6,500 tonnes
Completion date:
October 2022
8
The project
With construction due to finish
in the second half of 2022,
Sky Studios Elstree is set to
revolutionise the way English film
and television is produced. The
facility will be the centre in the UK
for new film and television projects
from Sky and NBCUniversal,
building on the local area’s strong
heritage in the screen arts.
The Group’s scope on this project
included the supply, fabrication
and erection of c.6,500 tonnes of
structural steelwork, which was
fabricated at our Ballinamallard
facility. Severfield also facilitated
full connection design, fabrication,
and installation of metal decking,
67 steel staircases, 4,500 metres
of high-level walkways, 11 precast
concrete lift cores, 15 precast
staircases, as well as cold rolled
systems and open grid floors
– all of which will help towards
the ambition to build the most
sustainable film and TV studios in
the world.
Severfield plc Annual report and accountsfor the year ended 31 March 2022 The project
The facility will provide over
560,000 square feet of production
space, housing 13 sound stages.
Structural steelwork was chosen as
the framing solution for this large
project because of its ability to
create flexible column-free spaces
with spans of up to 54-metres long.
On completion, the studio will
span c.60,000 square feet, an area
greater than 17 football pitches,
across eight steel-framed buildings
and stand 20-metres tall at its
highest point.
9
www.severfield.comStock Code: SFR THE WHITELEY BUILDING,
LONDON
Commercial
offices
This redevelopment sees
London’s first luxury
department store repurposed
into a multi-use building, while
retaining the original Grade II
listed façade.
Location:
Bayswater, London
Client:
Expanded Ltd
Main contractor:
Laing O’Rourke
Engineer:
AKT II
Architect:
Foster + Partners
Tonnage:
6,500 tonnes
Completion date:
September 2022
10
The project
A major project for the Group’s most
recent acquisition, DAM Structures,
the redevelopment of the c.90,000
square metres Whiteley building
will see it include a cinema, shops,
restaurants, 139 apartments
and a hotel. The local landmark
has a century-old Grade II listed
colonnaded exterior and central
glass dome, both of which have
been retained.
Severfield has provided design,
fabrication, construction and
piling services for the project, with
steelwork ranging from plunge
columns and tower crane grillages
to props and gantries. Working on
such a historical building was itself
a challenge from start to finish.
with the internal structure being
demolished to enable the new
development while the façade was
retained, making all aspects from
design to delivery and construction
more difficult than usual.
Severfield plc Annual report and accountsfor the year ended 31 March 2022 The project
The central location also caused
challenges, with The Whiteley
building being situated in and
around many narrow streets of
London. The plunge columns
produced at our Bridlington
production facility were up to
21-metres long and weighed up to
30 tonnes each. Delivering these to
site was a major logistical test, with
special transport arrangements,
early morning road closures and
extremely tight deadlines.
Once on-site, the construction of
the plunge columns around the
existing the features also required
significant skill and management.
These challenges required all
teams to work closely together, with
design, production, logistics and
construction all being in harmony
with each other and with other
contractors to successfully deliver
a project of this scale.
11
www.severfield.comStock Code: SFR OVERVIEW
A snapshot of what we do
Our structural framework
Our year in review
Chairman’s view
Investment case
Our diversified portfolio
Our projects
The scale of our operations
STRATEGIC REPORT
How we deliver sustainable value
The markets we serve: UK and Europe
The markets we serve: India
Our market sectors
Our strategy
Engaging with our stakeholders
Key performance indicators
Our operating performance
Our financial performance
Viability statement
Building a responsible and sustainable
business
How we manage risk
Section 172 statement
OUR GOVERNANCE
Governance at a glance
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
2
4
6
8
10
12
14
16
20
24
26
28
30
38
40
42
50
54
56
86
99
102
104
106
108
110
122
126
128
132
134
142
153
156
164
165
166
167
168
169
206
206
207
208
209
214
01
OVERVIEWwww.severfield.comStock Code: SFR A SNAPSHOT
OF WHAT WE DO
AND HOW WE DO IT
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.
See our structural
framework on pages 4 to 5
WHERE
WE DO IT
Commercial and Industrial
Dalton
Lostock
Sherburn
Enniskillen
Zevernbergen, Netherlands
Nuclear and Infrastructure
Bridlington
Bolton
Chepstow
Products and Processing
Sherburn
Monmouthshire
JSW Severfield Structures
Mumbai, India
Read about the scale of our
operations on pages 16 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 nine principal risks
and uncertainties which have the
potential to impact the Group’s
business model and strategy.
Read about how we manage
risk on pages 86 to 98
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.
Read about building a
responsible and sustainable
business on pages 56 to 85
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 our market
sectors on pages 28 to 29
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.
Read more about how we
create value on pages
20 to 22
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.
See our KPIs on
pages 40 to 41
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.
Read about our governance
on pages 102 to 153
02
Severfield plc Annual report and accountsfor the year ended 26 March 2022OVERVIEW www.severfield.com
Stock Code: SFR
03
OUR STRUCTURAL
FRAMEWORK
OUR STRONG
FOUNDATIONS
How our strong
foundations continue to
deliver sustainable growth
Over the last year, we have
once again demonstrated the
Group’s resilience, confirming
our position as the UK’s
largest specialist structural
steelwork group.
During the pandemic, we
have been able to support our
employees, our customers,
and our other stakeholders
through this challenging time,
maintaining our focus on their
health, safety and wellbeing
together with protecting the
financial strength of the Group.
The strength and quality of
our record UK and Europe
order book and breadth of
our experience across a
wide and diverse range of
market sectors leave us well
positioned to continue to build
on this success.
Read more about our
strategy on pages 30 to 36
04
Severfield plc Annual report and accountsfor the year ended 26 March 2022OVERVIEW OUR
STRATEGY
is how we
achieve our
purpose
OUR
PURPOSE
is to develop
better ways
to build
We are founded
on our strong
core values and
committed to
achieving our
purpose.
OUR
VALUES
are what
define us
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 constantly. 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.
OUR STRATEGY
revolves around five main elements to enable us to
deliver sustainable long-term value creation. This is
aided by our business improvement programme.
Growth
Clients
India
Operational
excellence
People
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.
05
OVERVIEWwww.severfield.comStock Code: SFR OUR YEAR
IN REVIEW
FINANCIAL HIGHLIGHTS
Revenue
£403.6m
£363.3m
£327.4m
Underlying* profit before tax
£27.1m
£403.6m
£28.6m
£27.1m
£24.3m
Profit before tax
£21.0m
£25.8m
£21.1m
£21.0m
Lorem ipsum
2020
2021
2022
2020
2021
2022
2020
2021
2022
Underlying* operating margin
Operating margin
Underlying* basic earnings per share
6.7%
8.2%
5.3%
7.5%
7.0%
6.7%
6.2%
5.3%
7.2p
7.7p
7.2p
6.4p
2020
2021
2022
2020
2021
2022
2020
2021
2022
Basic earnings per share
5.1p
6.7p
5.6p
5.1p
Greenhouse gas intensity**
19.9 CO2/£m
26.6
21.9
19.9
2020
2021
2022
2020
2021
2022
* Underlying results are stated before non-
underlying items of £6.1m (2021: £3.2m),
including the amortisation of acquired
intangible assets of £5.2m (2021: £2.8m), and
net acquisition-related expenses of £0.7m
(2021: £0.4m). See note 32 for APM definitions.
** Scope 1 and scope 2 emissions, using a
market-based approach.
06
Severfield plc Annual report and accountsfor the year ended 26 March 2022OVERVIEW OPERATIONAL HIGHLIGHTS
Record order book, good earnings visibility through 2023, inflationary
pressures being well managed.
• India order book of £158m at 1 June
2022 (1 November 2021: £140m),
reflects strong underlying demand for
structural steel in India
• Successful completion of new £50m
revolving credit facility maturing in
December 2026
• New simplified divisional structure
implemented for UK and Europe
operations from 1 April 2022 – creating
three new divisions aligned with our
chosen market sectors
ESG
• Certified by the Carbon Trust as carbon
neutral, CDP ‘A-’ rating for leadership on
climate change
• Top UK construction business in the
2022 Financial Times listing of Europe’s
climate leaders
• Net zero carbon target established
for 2040
• Revenue up 11% to £403.6m (2021:
£363.3m)
• Underlying1 profit before tax up 11% to
£27.1m (2021: £24.3m), demonstrates
resilience of the Group in challenging
market conditions
• Underlying1 basic earnings per share up
12% at 7.2p (2021: 6.4p)
• Total dividend increased by 7% to
3.1p per share (2021: 2.9p per share),
includes proposed final dividend of
1.9p per share (2021: 1.8p per share)
• Year-end net debt (on a pre-IFRS-16
basis1) of £18.4m (2021: net funds of
£4.4m), reflects higher steel purchases to
meet production needs in 2023 and the
impact of steel price rises
• Record UK and Europe order book of
£486m at 1 June 2022 (1 November
2021: £393m), includes new industrial
and distribution, film studio, commercial
office and bridge orders and the new
stadium for Everton F.C.
• Share of profit from Indian joint venture
(‘JSSL’) of £0.8m (2021: loss of £0.7m),
reflecting revenue growth and margin
improvement following the disruptive
impact of COVID-19 in 2021
1 See note 32 for APM definitions
07
OVERVIEWwww.severfield.comStock Code: SFR CHAIRMAN’S
VIEW
2022 HAS BEEN ANOTHER
YEAR OF STRONG
PROGRESS FOR THE GROUP
AGAINST ITS STRATEGIC AND
FINANCIAL OBJECTIVES
KEVIN WHITEMAN
NON-EXECUTIVE CHAIRMAN
and Europe operations designed to align
our existing businesses more closely with
our customers and the ten market sectors
that we serve. This has led to the creation
of three market-focused divisions namely,
the Commercial and Industrial division,
the Nuclear and Infrastructure division
and the Products and Processing division.
This new structure will also allow us to
adopt a more co-ordinated approach to
manufacturing across the Group, as we
continue to invest in and optimise our
factories.
The market dynamics of these three new
divisions are different, in terms of the
solutions that customers seek, project
characteristics, the competitive landscape
and their economic cycles. By creating
a Group structure with three divisions
focused on our chosen markets, we will
not only optimise the operations of each
division to the market dynamics they
face but provide ourselves with a better
platform to fulfil our strategic growth
aspirations.
Board composition
At the start of the year, Rosie Toogood
joined our board as a non-executive
director. Rosie’s wealth of manufacturing
and engineering experience within the
modular homes, aerospace and nuclear
sectors has proved a real asset to our
board discussions as we continue our
operational and strategic evolution.
As designated non-executive director
responsible for workforce engagement,
Louise Hardy has been at the heart of
our new ‘My Voice’ forums, which were
launched in 2022, providing a formal
way for colleagues and management to
connect, gain feedback and exchange
information and views on any business-
related topic. These meetings have
provided valuable, ongoing insights
and feedback for the board during a
challenging year for everyone, and we look
forward to continuing this work with our
colleagues in the year ahead.
Markets and strategy
Our business model and strategy remain
unchanged. Despite some challenging
market conditions, 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 2022 of £486m, leaving us well-
positioned with a strong future workload
for the 2023 financial year and beyond.
Although we remain mindful of the ongoing
effects of Russia’s invasion of Ukraine, with
the most significant effects of COVID-19
now behind us, we remain encouraged by
the current level of tendering and pipeline
activity across the Group, both in the UK
and in continental Europe.
As a key component of economic growth,
the construction industry will be central to
a sustainable economic recovery. With the
release of the UK government’s five-year
plan in November 2020, infrastructure
investment will play a significant role in
Our chairman’s view
2022 was another successful year for
Severfield, attributable to the hard work of
our employees, the consistent execution
of our well-established strategy, the
resilience and flexibility of the Group’s
business model and our ongoing business
improvement programmes.
Despite unprecedented inflationary and
supply chain pressures which have been
evident throughout most of the year, we
have increased our revenue by 11 per
cent to £403.6m and our underlying profit
before tax by 11 per cent to £27.1m1. The
increase in profit reflects our ability to
offset inflationary cost increases through
a combination of operating efficiencies,
higher selling prices, contractual
protection and by forward purchasing,
leveraging our scale and supply chain
strengths.
The strength of our business model
is evidenced by our healthy balance
sheet and the continuation of our
progressive dividend policy, with the
board recommending a final dividend of
1.9p per share (which represents a total
dividend of 3.1p per share), recognising
the importance of dividends to our
shareholders.
New divisional structure
The Group has grown significantly over
recent years, both organically and through
acquisition. In response to this, and with
effect from 1 April 2022, we have created
a simpler divisional structure for our UK
1 See note 32 for APM definitions.
08
Severfield plc Annual report and accountsfor the year ended 26 March 2022OVERVIEW Supplier Engagement Rating. We have
also achieved our target to be accredited
as carbon neutral for our manufacturing
and construction operations by the Carbon
Trust, which is an important milestone
in our journey towards net zero. We are
delighted that our ESG progress has also
been recognised by the Group’s inclusion,
for the second year running, in the
Financial Times listing of Europe’s climate
leaders which showcases corporate
progress in fighting climate change.
Summary and outlook
Despite considerable external challenges,
2022 was another year of strong progress
by Severfield against its strategic and
financial objectives and goals. As we
look to the future, I am excited by the
opportunities that lie ahead for the Group.
There is a strong pipeline of significant,
profitable projects in all our geographies,
in addition to those already in our high-
quality order books.
Whilst we remain mindful of the macro-
economic backdrop, particularly regarding
the current inflationary pressures, we
continue to expect to deliver further
progress in 2023 and I look forward to the
year ahead with optimism.
Kevin Whiteman
Non-executive chairman
15 June 2022
Read more about our
operating performance on
pages 42 to 49
Read more about our
board of directors on
pages 104 to 105
Read more about our
financial performance on
50 to 53
Read more about our
strategy on pages 30 to 37
Read more about building a
responsible and sustainable
business on pages 56 to 85
09
this recovery, given its multiplier effect on
jobs and spending. This plan announced
funding of £650 billion for developments
in roads, railways (including HS2), nuclear
power and other UK infrastructure
projects. 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 infrastructure sector and
in-house bridge and nuclear capabilities,
together with the in-depth rail expertise
acquired with DAM Structures.
India
The Indian joint venture (‘JSSL’) has
returned to profitability in 2022, following
a difficult start to the year when output
was disrupted by the second wave of
COVID-19. Despite ongoing inflationary
pressures, JSSL has continued to win new
work, resulting in a strong order book of
£158m at 1 June 2022. This order book,
together with JSSL’s improving pipeline
of potential orders, reflects a continuing
strong underlying demand for structural
steel in India, leaving the business very
well-positioned to take advantage of
an improving economy. We remain very
positive about the long-term development
of the Indian market and the value
creation potential of JSSL.
Health and safety
The health, safety and wellbeing of our
employees is of utmost importance,
and the rigour that is deployed in this
area is reflected in our continued overall
improving performance. Despite wider
industry trends moving in the opposite
direction as working practices return
to normal post-pandemic, our injury
frequency rate (‘IFR’) and accident
frequency rate (‘AFR’) both reduced by over
10 per cent compared with 2021. Both
IFR and AFR continue to outperform the
industry averages. We are very proud of
this industry-leading performance and
improving track record.
Sustainability
Although the macroeconomic environment
is somewhat uncertain, there is one
enduring long term certainty and that is
the need to take action against climate
change. Over the last year, we have
continued to make good progress in this
area, better understanding the carbon
emissions relating to our activities and
positioning the business for success in a
net zero future.
In the 2022 financial year, the Group
continued to make good progress in
reducing energy and fuel consumption
and emissions and we remain well on
course to achieve our target of reducing
our scope 1 and 2 greenhouse gas
(‘GHG’) emissions by 25 per cent by 2025
against a 2018 baseline. During the
year, we have improved our rating in the
Carbon Disclosure Project (‘CDP’) index
to ‘A-’ from our prior year score of ‘B’, and
have maintained our ‘A’ rating in the CDP
OVERVIEWwww.severfield.comStock Code: SFR O V E R V I E W
OUR COMPELLING
INVESTMENT CASE
We are continuing to drive sustainable growth to
create long-term value for all stakeholders.
01 02 03 04 05
A balanced and
resilient business
– provided by ten
market sectors and
geographical and
client diversity.
Aligned to sectors
with strong growth
potential, including
infrastructure.
A record order book
and strong pipeline
– good earnings
visibility into 2024.
Emerging market
credentials
– significant
opportunity to grow
profits in India.
Strong cash
generation and
progressive
dividend policy –
Severfield typically
converts c.90 per
cent of profits into
cash.
06 07 08 09 10
A well invested
business – over
£60m capital
expenditure over
last seven years.
High return on
Continued good
Quality of earnings
Strong
capital employed –
momentum with
with through cycle
our operational
target of 10 per
improvement
cent, achieving an
initiatives –
demonstrated
by successful
navigation of
Environmental,
Social and
Governance (’ESG’)
Brexit, COVID-19
credentials –
average of over
15 per cent over
the last five years.
with much more
pandemic and
initiatives to speed
to come.
current inflationary
up transition to net
pressures.
zero steel industry
and included in
Financial Times’
listing of Europe’s
climate change
leaders for two
years running.
Key stakeholders
Clients
Shareholders
Suppliers and
subcontractors
10
Severfield plc Annual report and accounts
for the year ended 26 March 2022
01 02 03 04 05
A balanced and
resilient business
– provided by ten
Aligned to sectors
A record order book
Emerging market
Strong cash
with strong growth
and strong pipeline
credentials
potential, including
– good earnings
– significant
generation and
progressive
market sectors and
infrastructure.
visibility into 2024.
opportunity to grow
dividend policy –
geographical and
client diversity.
profits in India.
Severfield typically
converts c.90 per
cent of profits into
cash.
06 07 08 09 10
A well invested
business – over
£60m capital
expenditure over
last seven years.
High return on
capital employed –
with through cycle
target of 10 per
cent, achieving an
average of over
15 per cent over
the last five years.
Continued good
momentum with
our operational
improvement
initiatives –
with much more
to come.
Quality of earnings
demonstrated
by successful
navigation of
Brexit, COVID-19
pandemic and
current inflationary
pressures.
Strong
Environmental,
Social and
Governance (’ESG’)
credentials –
initiatives to speed
up transition to net
zero steel industry
and included in
Financial Times’
listing of Europe’s
climate change
leaders for two
years running.
www.severfield.com
Stock Code: SFR
11
OUR DIVERSIFIED
PORTFOLIO
As the UK’s market-leading structural steel company, we
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. In other words, we have a balanced portfolio with market
sector, geographical and client diversification.
Market sectors
Commercial and Industrial
Nuclear and Infrastructure
Commercial offices
Industrial and distribution
Data centres
Nuclear
Power and energy
Retail
Health and education
Stadia and leisure
Process industries
Transport infrastructure
Order book balance
The Group’s growth strategy has delivered a record UK and Europe order book with a broad diversity of sectors, geographies
and clients, providing us with good earnings visibility through 2023 and beyond.
Commercial
offices
Transport
Industrial &
distribution
Stadia &
leisure
Data centres
& other
Nuclear
Nov-17
June 18
June 19
12
12
Severfield plc Annual report and accounts
for the year ended 26 March 2022
Severfield plc Annual report and accountsfor the year ended 26 March 2022OVERVIEW Diversified UK and Europe order book
Division/Sector
Commercial and industrial:
Industrial and distribution
Stadia and leisure
Commercial offices
Data centres and other
Health and education
Retail
TOTAL
Nuclear and infrastructure:
Transport infrastructure
Nuclear
Power and energy
Process industries
TOTAL
Severfield (Products and Processing):
UK
Europe and Ireland
Key to trends
Up
No change
Down
June 2022
£486m
Nov 2021
£393m
Future trend
for Severfield
31%
24%
18%
1%
–
–
74%
17%
8%
–
–
25%
1%
96%
4%
18%
28%
16%
2%
–
–
64%
20%
12%
3%
–
35%
1%
95%
5%
5
0
0
4
0
0
3
0
0
2
0
0
1
0
0
£
m
i
l
l
i
o
n
June 20
June 21
June 22
www.severfield.com
www.severfield.com
Stock Code: SFR
Stock Code: SFR
13
13
OUR PROJECTS
Projects
1 V&A Museum, Dundee
Health and education
2 Argyle Street, Glasgow
Commercial offices
Large warehouse, Wakefield
Industrial and distribution
3
4 Co-op Live, Manchester
Stadia and leisure
5 Manchester Engineering Campus
Development, Manchester
Health and education
6 Peterborough Waste to
Energy plant
Power and energy
7 BBC, Cardiff
Commercial offices
8 SAS13 Water Orton
Development, Birmingham
Transport
9 Gulfstream Farnborough,
Hampshire
Transport
10 Titanic, Belfast
Stadia and leisure
11 Large data centre, Dublin
Data centres and other
12 Covanta, Dublin
Power and energy
13 Wilton Park, Dublin
Commercial offices
14 Fulham FC
Stadia and leisure
15 Google Headquarters,
King’s Cross
Commercial offices
16 30 Grosvenor Square,
London
Commercial offices
17 Ocado, Luton
Stadia and leisure
18 Sky Studios,
Hertfordshire
Stadia and leisure
19 The Shard
Commercial offices
20 ESS Target, Lund, Sweden
Data centres and other
21 Large data centre, Finland
Data centres and other
22 Large data centre, Belgium
Data centres and other
23 Large warehouse, Germany
Industrial and distribution
24 Lonza, Switzerland
Industrial and distribution
25 Phoenix H10, Hyderabad
Commercial offices
26 Phoenix Centaurus, Hyderabad
Commercial offices
27 JSW Blast Furnace, Bellary
Industrial and distribution
28 Colt Data Centre, Mumbai
Data centres and other
14
2
12
10
C
11
13
12
1
4
E
5
A
3
B
D
8
6
F
7
9
Severfield plc Annual report and accountsfor the year ended 26 March 2022OVERVIEW INDIA
28
25
26
27
G
EUROPE
20
GREATER
LONDON
23
22
24
15
16
14
18
17
19
21
Our offices and sites
Commercial & Industrial
Our sites at the following locations fabricate products for
our Commercial & Industrial division serving the following
main market sectors: industrial and distribution, commercial
offices, stadia and leisure, data centres, retail and health and
education. Our Severfield plc head office team is also based
in Dalton.
Dalton
Lostock
Sherburn
Enniskillen
Zevenbergen, Netherlands
Nuclear & Infrastructure
Our offices and fabrication facilities in Bridlington, Bolton
and Chepstow serve the nuclear, power and energy, transport
(road and rail) and process industries sectors.
Bridlington
Bolton
Chepstow
Products & Processing
Sherburn
Located in Sherburn, near Scarborough, is the production
facility for Severfield (Products & Processing), producing
a market-leading suite of modular products including
‘Severstor’ units and ‘Rotoflo’ technology.
Monmouthshire
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, purlins and certain modular products.
JSW Severfield Structures
Mumbai, India
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.
A Dalton
B Sherburn
C Enniskillen
D Bridlington
E Bolton
F Monmouthshire, South Wales
G Bellary, India
15
www.severfield.comStock Code: SFR THE SCALE OF
OUR OPERATIONS
Following the Group’s reorganisation in April 2022, to a simpler market-focused divisional
structure for our UK and Europe operations, our three new divisions align our existing
businesses more closely with the ten market sectors that we serve and our customer base.
Across our divisions 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.
Commercial
& Industrial
Our Commercial & Industrial division
designs, fabricates and constructs
structural steelwork for a variety of
different sections including commercial
offices, stadia & leisure, industrial &
distribution, data centres, retail and
health and education.
The division has manufacturing sites
in three locations: Dalton, Lostock
and Enniskillen. Each has full-service
capabilities and modern manufacturing
processes enabling us to provide a high
quality product to a variety of different
sectors.
Each of our sites has its own strong
reputation in the market and between
them cover a wider geographical area,
including Europe.
Dalton
c.560 employees
Sherburn
c.100 employees
Lostock
c.150 employees
Enniskillen, Northern Ireland
c.320 employees
Nuclear
& Infrastructure
Across three locations, our Nuclear &
Infrastructure division has extensive
experience in the specialist, highly
regulated nuclear, transport (road and
rail), process industries and power and
energy sectors. Providing award winning
design teams, utilising state-of-the-
art design software and Tekla detailing
facilities to offer customers value
engineering.
This gives a mix of proven success along
with modern, innovative design and
fabrication ideas to be able to provide a
quality, specialised service to a growing
market.
Bridlington
c.70 employees
Bolton
c.80 employees
Zevenbergen, Netherlands
c.10 employees
Chepstow
c.100 employees
16
Products & Processing
Severfield (Products & Processing)
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).
From its facility in Sherburn, it also
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.
Construction Metal Forming, the Group’s
50:50 joint venture in Monmouthshire,
South Wales, is 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.
Sherburn
c.100 employees
Monmouthshire
c.60 employees
Severfield plc Annual report and accountsfor the year ended 26 March 2022OVERVIEW JSW Severfield
Structures Limited
(India)
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.100,000 tonnes.
17
www.severfield.comStock Code: SFR STRATEGIC
REPORT
CONTENTS
How we deliver sustainable value
The markets we serve:
UK and Europe
The markets we serve: India
Our market sectors
Our strategy
Engaging with our stakeholders
Key performance indicators
Our operating performance
Our financial performance
Viability statement
Building a responsible and
sustainable business
How we manage risk
Section 172 statement
20
24
26
28
30
38
40
42
50
54
56
86
99
S T R AT E G I C R E P O R T
HOW WE DELIVER
SUSTAINABLE VALUE
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.
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. 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.
The Group is equipped with the latest
state-of-the-art manufacturing and
painting processes and has a highly skilled
workforce of around 1,600 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.
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.
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.
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. This
enables us to continually invest 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 outstanding
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. 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.
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.
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.
20
Severfield plc Annual report and accountsfor the year ended 26 March 2022 OUR
SERVICES
01 – DESIGN
02 – FABRICATE
03 – CONSTRUCT
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.
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.
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.
21
www.severfield.comStock Code: SFR S T R AT E G I C R E P O R T
Underlying1 basic
earnings per share
7.2p
(2021: 6.4p)
Total dividend per share
3.1p
(2021: 2.9p)
£403.6m
Revenue from orders
in 2022
(2021: £363.3m)
£86.0m
paid in employee
benefits in 2022
(2021: £75.6m)
18%
reduction in carbon
emissions since 2018
baseline
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.
Our sustainability framework is
embedded into our purpose and
corporate strategy to help us achieve our
vision. Carbon reduction is an important
strategic objective for the Group and we
are committed 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.
A commitment to our own Group
charity, the Severfield Foundation,
which supports both national and local
charities, to help us give back to society.
www.severfield.com
Stock Code: SFR
22
OUR VALUE
GENERATION
Our activities generate the following
types of long-term value:
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. 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.
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 meet the ever-changing
needs of our customers.
1 See note 32 for APM definitions.
A58 DISTRIBUTION LOGISTICS CENTRE, ROOSENDAAL
The project
This project in mainland Europe
highlights the Group’s presence and
expertise on the continent through
Netherlands-based Severfield
Europe BV.
The overall specification provided a
particular challenge for the design
team, with a lean section design
requiring special attention to be paid
to the connection design.
Fabrication was then divided
between the Group’s UK production
facilities and certain approved
European subcontractors. As with
all large international projects
delivered by the Group, this required
a high level of planning and close
organisation of an international
supply chain and workforce.
Despite the inevitable logistical
challenges that arise on such
an undertaking, the project was
delivered and installed in accordance
with the original timeframe.
The A58 distribution logistics centre
is located strategically between
the large ports of Rotterdam and
Antwerp on the intersection of two
major Dutch motorways. The overall
project will create a logistics hub that
provides easy access to mainland
Europe.
The Group has delivered two
buildings in this development,
including installation of hollow core
slabs for a mezzanine floor, all in
accordance with BREEAM’s ‘very
good’ sustainability guidelines.
Severfield were responsible for
the connection design, fabrication,
delivery and installation of c. 1,700
tonnes of main and secondary steel,
including installation of hollow core
slabs provided by the client for a
mezzanine floor.
Industrial
distribution
Location:
Roosendaal, Netherlands
Client:
Logistics Capital Partners
Main contractor:
BVR Bouw BV
Engineer:
Jecon Engineering
Architect:
Palazzo BV
Tonnage:
1,700 tonnes
Completion date:
September 2021
23
www.severfield.com
Stock Code: SFR
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.
Market output for structural
steelwork in the UK
£803,000 tonnes*
(2021: 683,000 tonnes)
Group production
95,000 tonnes
(2021: 90,000 tonnes)
Group potential capacity
165,000 tonnes
(2021: 165,000 tonnes)
UK and Europe order book
£486m at 1 June 2022
(£393m at 1 November 2021)
*As measured by the British Constructional
Steelwork Association (‘BCSA’).
24
www.severfield.com
Stock Code: SFR
Favourable market trends
Outlook
Order book
Steel continues to be overwhelmingly the structural
framing material of choice. The total UK consumption of
constructional steel in the 2021 calendar year was 803,000
tonnes, an increase of 17 per cent on 2020, but it has yet to
recover fully to the pre-pandemic level of 2019. In the 2020
calendar year, UK consumption fell to 683,000 tonnes as a
direct result of the COVID-19 pandemic. Overall, the total UK
consumption of structural steelwork is expected to grow to
913,000 tonnes by 2024, with industrial sheds making the
most significant contribution to that growth.
In 2021 the consumption of structural steelwork in industrial buildings increased by
16.4 per cent to 384,000 tonnes, with further growth of 14.5 per cent forecast in 2022
and 2.3 per cent in 2023 before levelling out in 2024. The consumption figure for offices
rose by 10 per cent to 91,000 tonnes in 2021, again with further growth of 12.6 per cent
forecast in 2022 before levelling out in 2023 and 2024.
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. 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.
Sustainable steel for the future
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. Steel 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.
Performance in 2022
The Group’s potential production capability is approximately 165,000 tonnes. In
2022, Group revenue of £403.6m 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 some challenging market conditions in
2022 and mainly reflects an increase in steel prices and the full year revenue effect of
DAM Structures which was acquired in February 2021.
In 2022, we further increased our market share in certain sectors, including transport
infrastructure, stadia and leisure, and nuclear and maintained our strong market
positions in the industrial and distribution and commercial office sectors. The
continued successful implementation of our strategy means that the Group has
significant market sector, geographical and client diversification. As a result, our
capabilities are aligned with many market sectors with strong growth potential. The
Group is well positioned to meet the demand for ongoing investment in the UK’s
infrastructure, whilst our diverse construction activities remain focused on key areas
such as industrial and distribution, data centres, stadia and leisure, nuclear and
commercial offices.
Favourable market trends
Outlook
Order book
increase over the expenditure of £15
billion during ‘RIS1’ (2015-2020). We
have already secured some significant
road bridge awards and orders for HS2
from a variety of consortia, together with
some ancillary steelwork packages at
Hinkley Point, and we continue to make
good progress with several other similar
opportunities, including rail electrification
work. We 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 DAM Structures.
Looking further ahead, in April 2022,
prompted by Russia’s invasion of Ukraine,
the UK government published its Energy
Security Strategy, pledging a new
generation of nuclear power (under the
banner of ‘Great British Nuclear’) as well
as offshore wind generation, together
with several other new energy supply
initiatives, to reduce reliance on foreign
energy supply. The combination of the
in-house nuclear expertise acquired with
Severfield (Nuclear & Infrastructure)
(formerly Harry Peers), and the Group’s
unmatched scale and capability to deliver
major infrastructure projects, leaves us
well positioned to win work from such
projects, many of which are likely to have a
significant steelwork content.
The UK and Europe order book at 1 June
includes a significant amount of new work
which we have secured over the past 12
months and now stands at a record level
of £486m, of which £397m is planned
for delivery over the next 12 months. The
growth in the order book has been driven
by several significant project awards,
including the new stadium for Everton F.C.,
the battery plant for British Volt in Blyth
and some notable film studio projects.
This leaves the Group well positioned with
a strong future workload for the 2023
financial year and beyond.
In terms of geographical spread, 96 per
cent of the order book represents projects
in the UK, with the remaining 4 per cent
representing projects for delivery in
Europe and the Republic of Ireland. This
more UK-centric nature is driven by a
lower proportion of work in the Republic
of Ireland, as several large projects draw
to completion. This, together with fewer
ongoing projects in continental Europe,
reflects a pipeline which was adversely
impacted by COVID-19 12 months ago, but
which has since recovered strongly over
recent months. Furthermore, only
16 per cent of this represents commercial
offices, compared to a peak of c.60
per cent around five years ago. Overall,
the order book remains well balanced,
showcasing the benefits of our strategic
diversification over recent years.
We remain encouraged by the current
level of tendering and pipeline activity
across the Group, both in the UK and
in continental Europe, in which we
retain a good market position and
which remains an important part of
our strategic growth plans. We are
well-positioned to take advantage of
some significant opportunities in the
industrial and distribution (battery plants
and distribution centres), transport
infrastructure, nuclear and data centre
sectors, and, despite predictions of
the demise of the office following the
pandemic, in the commercial office
market, including in London. 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 economic recovery. New,
low carbon infrastructure (including
HS2, wind power, new nuclear, rail
electrification, energy efficient buildings)
will play a leading role in stimulating
sustainable growth. In November 2020,
the UK Government released details of its
five-year plan, the National Infrastructure
Strategy (‘NIS’), to invest in digital,
transport and energy to drive economic
recovery, levelling up and meeting the UK’s
net zero emissions target by 2050.
This plan announced funding of £650
billion, an increase of around £100 billion
from the previous plan, for developments
in roads, railways, power networks and
other UK infrastructure projects. At
Network Rail, in addition to HS2, the CP6
(control period) budget of around £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). At Highways England, the second
Road Investment Strategy (‘RIS2’) budget
of £24 billion (2020-2025) is a significant
25
www.severfield.comStock Code: SFR STRATEGIC REPORT THE MARKETS
WE SERVE
INDIA
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 an expanding metal decking
business, JSWSMD Limited.
2022 performance
In 2022, the Indian joint venture (‘JSSL’)
has recovered strongly and has returned
to profitability, following the loss recorded
in the previous year which was severely
impacted by COVID-19. The profitable
performance in 2022 was achieved despite
a difficult start to the year when output
was disrupted by the second wave of
COVID-19. This resulted in COVID cases
rising to over 300,000 from the height
of the first wave at 92,000, supply chain
issues and many varying restrictions put
in place across the country. This recovery
is evident in the Group’s after-tax share
of profit of £0.8m (2021: share of loss
of £0.7m). The improved performance
reflects a more than doubling of revenue
to £100.3m, compared with £48.0m in
the previous year, and an increase in
the operating margin to 5.2 per cent,
compared with 3.3 per cent in the previous
year. Financing expenses of £3.3m
(2021: £3.4m) are broadly unchanged
from the previous year and turn JSSL’s
operating profit of £5.2m (2021: £1.6m)
into a profit before tax of £1.9m (2021: loss
before tax of £1.8m).
Total output for 2022 was a much
improved 58,000 compared to 35,000
tonnes in the previous year, reflecting the
impact of COVID-19 on 2021 operations
at Bellary. Despite the disruption earlier in
the year, JSSL’s health and safety record
remained excellent with no lost time
incidents (‘LTI’) recorded in the year. JSSL’s
factory operations have not recorded an
LTI since 2014 and only one LTI has been
recorded by its construction activities over
the same eight-year period. 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
JSSL is emerging from the pandemic in
a strong position to take advantage of an
accelerating switch from concrete to steel.
The use of fabricated steel in construction
in India is c.10% of the market, compared
with >70% in the UK and 50% to 60% in
the USA and Japan. In addition, over the
coming years, factory-made structural
steel is expected to take market share
from site-fabricated steel.
The construction sector in India is forecast
to grow due to increased demand from
real estate, infrastructure projects, retail,
commercial and the hospitality sectors.
Market forecasts are for structural steel
in construction to increase threefold from
2020 to 2030. This outlook is helped by
large infrastructure projects, similar to
the UK. In 2019, the Indian government
launched the National Infrastructure
Pipeline (‘NIP’) with a view to invest
US$1.5 trillion in infrastructure by 2025.
This underpins the wider outlook of the
construction industry in India. The Indian
population is also growing, and as the
economy is expected to grow this should
help create structural tailwinds.
A record order
book, encouraging
pipeline of
potential orders
and strong and
growing client
relationships
leave JSSL well
positioned to take
advantage of a
growing economy.
A strong India order book of
£158m
at 1 June 2022
(£140m at 1 November 2021)
Group after-tax share of
profit of
£0.8m
(2021: share of loss of £0.7m)
26
Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT There have also been a variety of reforms
to accelerate the rate of construction. The
Real Estate (Regulation and Development)
Act, which came into force in 2017, aimed
to increase transparency, accounting and
efficiency. There have been a variety of
other changes in legislation and policy,
including RERA, GST, the National Disaster
Management Act and Ease of Doing
Business initiative. By 2030, the Indian
real estate industry is expected to touch
US$1 trillion, becoming the third largest
globally.
According to a report by Savills (May
2021), there is currently c.7.5m square
feet of data centres in India with the
market expected to grow in the coming
years. Estimated capacity currently under
construction is more than 8m square feet,
expected to finish between the end of 2021
and end of 2025. There is a further 10m
square feet proposed for development and
this should create additional opportunities
for JSSL to win work.
Despite recent challenges, JSSL’s clients
have continued to place orders, resulting
in an order book which has increased to
£158m (1 November 2021: £140m).
In terms of mix, 37 per cent of the
order book represents higher margin
commercial work, with the remaining
63 per cent representing industrial
projects (1 November 2021: commercial
work of 62 per cent, industrial work of
38 per cent). The current higher level of
industrial work is consistent with the
ongoing fluctuations in the timing and mix
of industrial and commercial work in a
growing order book.
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
strategic alliances with certain key
clients, mainly for commercial, data
centre, healthcare and infrastructure
projects. This, together with the step up
in the order book, leaves the business
very well positioned to take advantage
of an improving economy and we expect
the business to recover to pre-pandemic
levels of output in 2023 of around
100,000 tonnes.
JSSL
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.
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 and has
an annual capacity of 100,000 tonnes
serving a wide range of sectors across
the growing Indian market. 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. The state-of-the-art
fabrication facility is built on the same
principles as Dalton, taking the learnings
from that site. Derek Randall, who is the
MD at JSSL, is highly regarded.
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. There are also
three fabrication bays, and an outside
area being developed for manufacturing
and trial assembly. These all 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.
• At JSWSMD, a new decking line is being
added, doubling the capacity of 60mm
decking, alongside executing other
decking lines.
In response to the strong long-term growth
projections for India and the expected
continued conversion of the market from
concrete to steel, and in tandem with our
joint venture partner, we are in the process
of selecting a plot of land to facilitate
expansion of the business in the future.
We expect that this land purchase will be
completed in the second half of the 2023
financial year. Whilst Bellary continues to
ramp up towards its maximum capacity
in 2023, this land purchase will allow
the business to expand its geographical
footprint in India whilst providing it
with the platform to build quickly
and incrementally add the necessary
volume to support the expected future
market growth.
Outlook
Following the pandemic, JSSL should
benefit from a bright market outlook
as the switch from concrete to steel
in construction in India accelerates,
generating strong demand. 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.
Overall, we remain positive about the
long-term development of the Indian
market and of our ability to build further
value in JSSL.
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 2021 calendar year are shown below
(as defined by the BCSA):
Percentage
Tonnes
All industrial (including distribution)
Power and energy
Commercial offices
Transport (including bridges)
Health and education
Other
Leisure
Retail
48%
13%
12%
11%
8%
4%
3%
1%
385,000
103,000
99,800
86,000
64,200
36,200
23,500
5,300
100%
803,000
Nuclear and Infrastructure
Power and energy
<5%
Group market share
↑
Transport
10-20%
Group market share
(including bridges)
→
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.
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.
Commercial and Industrial
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
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.
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.
Successes
22 Bishopsgate, Google UK Headquarters, 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,
One Sherwood Street and numerous smaller
developments both in London and the UK regions.
Commercial offices
20-30%
Group market share
↑
28
Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT Commercial and Industrial (continued)
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.
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.
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.
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), Sky Studios
and 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.
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
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.
Industrial and
distribution
10-20%
Group market share
↑
Stadia and leisure
20-30%
Group market share
↓
Retail
<5%
Group market share
↑
Data centres
and other
20-30%
Group market share
↑
Health and education
<5%
Group market share
↑
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
Francis Crick Institute, Nigeria Syringe Factory,
University of Strathclyde, Victoria & Albert Museum
(Dundee), Kings College Hospital, Graphene
Innovation Centre, Manchester University
Engineering Campus.
Key: Global market future trends ↑ Upward trend ↓ Downward trend → No change
29
www.severfield.comStock Code: SFR STRATEGIC REPORT OUR
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 building further value in JSSL. This is supported by an emphasis on five key elements and assisted by our
business improvement programme.
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 COVID-19 pandemic
and the current inflationary market conditions.
,
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 this will mean for us
Further development of our expertise,
quality and an improved offering to clients.
What we’ll do
Introduce new technology and equipment
that enables safer ways of working.
What this will mean for us
Safeguard employees, clients and
shareholders.
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
Care for our environment whilst building
our external reputation.
30
Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT Strategic pillar
Link to KPIs
Link to principal risk
Growth
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
A B C D E
F G H I
Read more on page 32
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 33
A B C
India
D E F
Our aim is to build value in JSSL and we remain very positive about the
G H I
long-term development of the Indian market.
Read more on page 34
1
5
2
6
3
7
4
A B C D E
F G H I
1
5
2
6
3
7
4
A B C D E
F G H I
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.
1
5
2
6
3
7
4
A B C D E
F G H I
Read more on page 35
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
A B C D E
F G H I
Read more on page 36
Key performance indicator reference number
Key to principal risks
1
2
3
4
5
6
7
Underlying1 operating profit and margin (before JVs
and associates)
Underlying1 basic earnings per share (‘EPS’)
Revenue growth
Operating cash conversion1
Return on capital employed (‘ROCE’)1
Order book
Injury frequency rate (‘IFR’)
A Health and safety
B Supply chain
C People
D Commercial and market environment
E Mispricing a contract (at tender)
F Cyber security
G Failure to mitigate onerous contract terms
H Indian joint venture
I
Sustainable and responsible business
1 See note 32 for APM definitions.
31
www.severfield.comStock Code: SFR STRATEGIC REPORT OUR
STRATEGY
GROWTH
Our aim is to capitalise on growth opportunities, both in the
UK and Europe, and to maximise our market share.
Strategic priorities
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.
32
Objectives for 2023
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.
Leverage the new divisional structure to
identify further opportunities for growth,
both organically and through selective
acquisitions, to further enhance the
services we can offer.
Continue to develop the product offering
and client base at CMF, taking advantage
of the expanded capacity.
Achievements in 2022
Increased Group revenue by 11 per cent,
despite the current challenging market
conditions. This represents an increase in
revenue of more than 50 per cent over the
last five years, reflecting the benefit of our
significant market sector, geographical
and client diversification.
Achieved an increased underlying profit
before tax of £27.1m (2021: £24.3m),
despite inflationary headwinds,
demonstrating the resilience of the
Group’s operations.
The UK and Europe order book at 1 June
2022 stands at a record level of £486m.
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.
Continued to invest in organic growth,
further developing our ‘Severstor’ and
‘Rotoflo’ modular product ranges. This has
resulted in a growing order book across
an expanding customer base, and an
attractive pipeline of potential orders.
Expansion of CMF is underway to service
a growing cold formed steel market. The
expanded capacity will allow CMF to
continue to develop its product ranges,
serve an external client base, and ensure
that its market share is maintained and
increased in line with expected market
growth.
Implemented a new simplified divisional
structure for UK and Europe operations –
creating three new divisions aligned with
our chosen ten market sectors. This will
provide the Group with a better platform to
fulfil its strategic growth aspirations.
Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT 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
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.
Objectives for 2023
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 a wider client
base as we continue to extend our new
modular product ranges, further enhance
our ‘Severstor’ and ‘Rotoflo’ product
offerings and through the increased cold
rolled steel products offered by our joint
venture, CMF.
Achievements in 2022
Delivered over 100 projects during the year
in the UK, Ireland and continental Europe
in diverse market sectors, including
industrial and distribution, stadia and
leisure, transport infrastructure, data
centres, nuclear and commercial offices.
Further strengthened our relationships
with key clients to ensure that when
certain construction programmes were
delayed and disrupted due to supply
chain challenges or when inflationary
pressures stretched existing budgets, our
operational delivery capabilities allowed
us to help them deliver changes to these
programmes more quickly and efficiently.
Our preferred and predominant two-stage
and negotiated procurement routes has
helped significantly by allowing early
collaboration with the client and supply
chain and providing increased price and
programme certainty.
We have continued to develop and deepen
our relationships with the clients of DAM
Structures, which by their nature has
allowed us to establish relationships at an
earlier stage of the project life cycle than
the Group, in the past, would typically have
become involved.
During the year, we continued to
collaborate with several clients, attending
workshops in areas such as sustainable
procurement, low embodied carbon
steel, and material passporting. Early
engagement with clients remains vital
in reducing the embodied carbon in the
structures we build, an important part of
our journey towards net zero.
Continued to build new client relationships
across the UK and Europe, resulting in
further opportunities, including in smaller
projects in the UK.
33
www.severfield.comStock Code: SFR STRATEGIC REPORT OUR
STRATEGY
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
Value building in India:
Our aim is to build further value in the
business whilst the market continues
its conversion from concrete to steel
and its recovery from the effects of
the pandemic.
Achievements in 2022
JSSL reported a strong order book of
£158m at 1 June 2022 (1 November 2021:
£140m), reflecting the strong underlying
demand for structural steel in India.
The business has returned to profitability
in 2022, following a difficult start to the
year when output was disrupted by the
second wave of COVID-19. This reflects
revenue growth and margin improvement.
Continued to develop strong existing
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.
In response to the strong long-term growth
projections for India and the expected
conversion of the market from concrete
to steel, in tandem with our joint venture
partner, we are in the process of selecting
a plot of land to facilitate expansion of the
business in the future.
Objectives for 2023
Capitalise on the strong underlying
demand in India for structural steel
by continuing to grow the order book
and optimise the mix of higher margin
commercial work, to benefit operating
margins.
Leverage the increased Bellary factory
capacity as JSSL continues its expected
recovery towards pre-pandemic levels of
output in 2023.
Continue to invest in the management
team, technical and operational staff to
further drive efficiency improvements.
Complete the purchase of land to allow
the business to expand its geographical
footprint in India whilst providing it
with the platform to build quickly and
incrementally add the necessary volume
to support the expected future market
growth.
34
Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT 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
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.
Achievements in 2022
Maintained our ‘safety first’ core value
across the Group. This assumed an even
greater emphasis in 2022, as working
practices return to normal post-pandemic.
Continued to develop our new platform for
reporting SHE incidents and completing
inspections to identify trends and root
causes in safety performance to enable
targeted improvements. In 2022, our
injury frequency rate (‘IFR’) and accident
frequency rate (‘AFR’) both reduced by over
10 per cent. Both IFR and AFR continue to
outperform the industry averages.
In June 2021 we welcomed the
appointment of Rosie Toogood to the
board, our second female board member.
Launched our Group-wide ‘MyVoice’
forums. Louise Hardy, our designated
non-executive director responsible for
workforce engagement, Alan Dunsmore,
our CEO, and Samantha Brook, our Group
HR Director, have regularly met with
forum representatives to gather a deeper
understanding of colleagues’ perspectives
on which to build a sustainable Group-
wide approach for ongoing dialogue.
Continued our focus on mental health,
with working practices again changing
post-pandemic. To support our people,
we have maintained an increased level
of Group-wide communications and
encouraged the use of Microsoft Teams to
facilitate regular video calls, with our office
colleagues now returning to the office on
three days per week.
Continued to invest in our people,
through the continuous provision of
training programmes, both internal
and external courses. Refreshed our
online performance review process
(MyPerformance) which we continue to roll
out at different grades across the Group.
Launched our ‘development on a different
scale’ graduate recruitment programme
to address future skill shortages and
became members of the ‘5% Club’, publicly
announcing our commitment to have 5
per cent of our workforce ‘earning and
learning’ over the next five years.
During the year, through our
apprenticeship programme, we had 15
apprentices join the business, taking the
Group total to 21 apprentices.
Objectives for 2023
Louise Hardy will continue to lead our
‘MyVoice’ forums in 2023, and we look
forward to continuing this work with our
colleagues in the year ahead.
Continue to deliver our behavioural safety
training programme and our wide range
of internally and externally facilitated
training courses.
Promote the health and wellbeing of
our people and their families through
our enhanced Employees Assistance
Programme (‘EAP’) and app (My Healthy
Advantage) and external resources to
ensure our colleagues receive support in
these challenging economic times.
Promote diversity and equality through
employment practices that are free from
discrimination and in accordance with
human rights principles.
Further develop processes and dashboards
to capture and report on a wide range of
employee-related data than can inform our
HR strategy, help drive our inclusivity and
diversity and foster our culture.
Continue to support employee-led local
community initiatives and developing
strong community partnerships.
Maintain our focus on reducing our IFR
rate to ensure we are continuing to drive
the appropriate safety behaviours.
35
www.severfield.comStock Code: SFR STRATEGIC REPORT OUR
STRATEGY
OPERATIONAL EXCELLENCE
Our emphasis is on delivering high-quality projects and reducing
costs by driving excellence through our core business processes.
Strategic priorities
Drive operational
improvements and
efficiencies:
The objective of our comprehensive
operational 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.
36
Achievements in 2022
During the year, we have continued our
drive to reduce costs and upgrade our
fabrication capacity and efficiency. This
has helped us offset many of the supply
chain and cost pressures currently being
experienced by the Group. Initiatives in
2022 include:
• Continued roll-out of our 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.
• Implementation of ‘right first time’
initiatives to improve quality, including
the targeted reduction of factory and
site NCRs (rework items) and drawing
office errors.
• Ongoing streamlining of production
flows and improvement of real-time
factory information, particularly at
Dalton, including the use of mobile
devices to capture information at the
point of use. This will drive quality,
reduce bottlenecks and improve the
reliability and speed of our operations.
• As part of our capital investment
programme, we have continued to
expand and automate our fabrication
capability at Dalton to improve the
throughput and efficiency of these
operations. We have invested £7.4m
in capital expenditure in 2022 to drive
operational efficiencies and organic
growth across the Group.
• Continued good progress on our digital
journey, including the automation of
repetitive tasks in areas of our design
and drawing office, and the optimisation
of engineering software.
ESG
• Good progress made in 2022 in further
reducing energy and fuel consumption
and emissions and we remain well on
course to achieve our target of reducing
our scope 1 and 2 greenhouse gas
(‘GHG’) emissions by 25 per cent by 2025
against a 2018 baseline.
• Awarded a Carbon Disclosure
Project (‘CDP’) index score of ‘A-, an
improvement from our prior year score
of ‘B’, and maintained our ‘A’ rating in the
CDP Supplier Engagement Rating.
• Achieved our target to be accredited as
carbon neutral for our manufacturing
and construction operations by the
Carbon Trust.
Objectives for 2023
Continue with our operational improvement
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 our software systems.
Maintain our current momentum with
our target of reducing our scope 1 and
2 greenhouse gas (‘GHG’) emissions
by 25 per cent by 2025 - including the
switch to ‘green’ electricity at all our
production facilities (which is now
largely complete), through mandating
hydrogenated vegetable oil (‘HVO’) fuels
and the transition to electric and hydrogen
construction plant where possible.
Development of further ESG targets and
enhancement of ESG dashboards.
Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT STRATEGY IN ACTION
CAPITAL INVESTMENT:
CNC MACHINE,
DALTON
As part of our drive for continuous improvement and through investment in modern
technology to drive efficiency, the Group has invested in excess of £5 million over
recent years to install and commission a new automated Computer Numerical
Control (‘CNC’) processing line at its main production facility at Dalton.
The new line has green credentials using
direct drive, low-energy, low-maintenance
servo motors supported with carbon
tipped tooling. This enables processing
to be achieved in seconds rather than
minutes, covering a range of processes
including saw cuts, drilling, milling,
blasting and profiling with plasma and
oxy fuel. The line is designed to process a
complete range of steel sections through
a combination of heavy-duty processing
machines, optimising flow and increasing
throughput with minimal manual
intervention.
The Group’s investment brings the best-
in-class CNC equipment and software,
coupled with automated handling and
tracking to enable our production lines
to meet high volume steel production
requirements to service the wide range of
Severfield clients.
“This investment is another step towards
our goal of higher-level production
capability that supports our efforts to
maximise throughput at our Dalton site
and at the same time delivering improved
efficiencies. Coupling state-of-the-art
machining capability with autonomous
handling and processing equipment has
challenged the team to both plan and
think differently in how we process steel
in volume. Going forward, this in turn
will help Severfield stay at the forefront
of delivering high quality products with
best-in-class service and support to our
customers.”
Mike Mannion
Group manufacturing director
37
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. Our approach to engagement extends across
all of our stakeholders, from those who influence what we do and benefit from the value we
create, to those who just influence what we do.
Shareholders
Customers
Why we engage
We have c. 6 million shareholders, including
institutional and personal investors,
providing the Group with funds for
investment in long-term growth. The board
is committed to building and maintaining
good positive relationships with all
shareholders and ensuring regular, open
dialogue with them throughout the year.
How we engage
• 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.
Their key material issues
• Share price growth and a continuing
progressive dividend policy.
• Robust financial and risk management.
• Strong corporate governance.
• Regular communication of the Group’s
performance and strategy, including
climate-related strategic objectives.
Why we engage
Our proven ability to work collaboratively
and innovatively with clients is fundamental
to our success and is critical to securing
new work and achieving our strategic goals.
How we engage
• We focus on 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 analysed, in order to drive further
improvements.
• Customer feedback and key customer
strategic initiatives are regularly reported
to the board. The board also takes the
lead in suggesting specific customer
collaborations.
Their key material issues
• Outstanding customer service,
benefitting from our employees’ technical
knowledge and expertise.
• Working closely from the start to develop
innovative and cost-efficient methods.
• Collaborative approach to lower carbon
emissions and improving sustainability
across all projects.
• The Group’s continued good performance
and delivering a strong balance sheet.
Detailed here 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 2022 ‘building a
responsible and 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 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.
38
Employees
Why we engage
Suppliers
Why we engage
Local communities
Why we engage
Our people are our biggest asset and to
Our relationships with our supply chain
Engagement with the wide range of
protect this we are committed to effectively
partners are of strategic importance and
communities in which the Group operates
managing all aspects of health and safety
key to the Group’s success.
and creating a safe, inclusive, and diverse
working environment where everyone can
thrive.
How we engage
• 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 launched MyVoice, a
comprehensive engagement programme
led by Louise Hardy, our workforce
engagement director, to ensure that the
views of our staff are represented in the
board room.
Their key material issues
• To work in a safe and respectful
environment, with consideration given
to employees’ physical and mental
health concerns.
health and safety targets, and
reducing IFRs.
• Investment in personal and professional
development.
• A fair reward and benefit structure.
We develop long-term relationships with
our supply chain and work with them to
ensure we successfully deliver our projects
efficiently and to a high standard.
How we engage
• 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 2021 to 26 March
2022, all of the Group’s businesses
that are PPC signatories reported that
between 90 and 95 per cent of our
suppliers and subcontractors were paid
within 60 days.
• The board receives feedback on the
performance of key suppliers and on our
prompt payment practices and specific
supplier initiatives.
Their key material issues
• Repeat opportunities to work with the
• To be treated fairly and with respect.
• Prompt payment.
• Sound health and safety performance.
• Commitment to continually improving
Group.
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.
How we engage
• 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 81.
• The board receives regular ESG and
climate-related reports and updates
from the SHE director. Further detail
of the governance of climate-related
matters can be found in our Task Force
on Climate-related Financial Disclosures
(‘TCFD’) report on pages 59 to 69.
Their key material issues
• Improvements to and investment in
the local environment and quality of
life of those that live and work in the
surrounding areas of the projects we
work on or our factories.
• Sustainable buildings and infrastructure
which considers whole life impact.
• Continuing commitment from the board
to reduce carbon emissions to achieve
the Group’s sustainability target of net
zero by 2040.
Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT Shareholders
Customers
Employees
Suppliers
Local communities
Why we engage
Why we engage
We have c. 6 million shareholders, including
Our proven ability to work collaboratively
institutional and personal investors,
providing the Group with funds for
and innovatively with clients is fundamental
to our success and is critical to securing
investment in long-term growth. The board
new work and achieving our strategic goals.
is committed to building and maintaining
good positive relationships with all
shareholders and ensuring regular, open
dialogue with them throughout the year.
How we engage
• Our executive directors communicate
How we engage
• We focus on 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
regularly with institutional investors and
ensuring that risk and reward are
analysts and all shareholders are invited
appropriately shared.
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 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 analysed, in order to drive further
Their key material issues
improvements.
• Share price growth and a continuing
• Customer feedback and key customer
progressive dividend policy.
• Robust financial and risk management.
• Strong corporate governance.
• Regular communication of the Group’s
performance and strategy, including
climate-related strategic objectives.
strategic initiatives are regularly reported
to the board. The board also takes the
lead in suggesting specific customer
collaborations.
Their key material issues
• Outstanding customer service,
benefitting from our employees’ technical
knowledge and expertise.
• Working closely from the start to develop
innovative and cost-efficient methods.
• Collaborative approach to lower carbon
emissions and improving sustainability
across all projects.
• The Group’s continued good performance
and delivering a strong balance sheet.
Why we engage
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.
How we engage
• 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 launched MyVoice, a
comprehensive engagement programme
led by Louise Hardy, our workforce
engagement director, to ensure that the
views of our staff are represented in the
board room.
Their key material issues
• To work in a safe and respectful
environment, with consideration given
to employees’ physical and mental
health concerns.
Why we engage
Our relationships with our supply chain
partners are of strategic importance and
key to the Group’s success.
We develop long-term relationships with
our supply chain and work with them to
ensure we successfully deliver our projects
efficiently and to a high standard.
How we engage
• 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 2021 to 26 March
2022, all of the Group’s businesses
that are PPC signatories reported that
between 90 and 95 per cent of our
suppliers and subcontractors were paid
within 60 days.
• The board receives feedback on the
performance of key suppliers and on our
prompt payment practices and specific
supplier initiatives.
Their key material issues
• Repeat opportunities to work with the
• Commitment to continually improving
Group.
health and safety targets, and
reducing IFRs.
• Investment in personal and professional
development.
• A fair reward and benefit structure.
• To be treated fairly and with respect.
• Prompt payment.
• Sound health and safety performance.
Why we engage
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.
How we engage
• 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 81.
• The board receives regular ESG and
climate-related reports and updates
from the SHE director. Further detail
of the governance of climate-related
matters can be found in our Task Force
on Climate-related Financial Disclosures
(‘TCFD’) report on pages 59 to 69.
Their key material issues
• Improvements to and investment in
the local environment and quality of
life of those that live and work in the
surrounding areas of the projects we
work on or our factories.
• Sustainable buildings and infrastructure
which considers whole life impact.
• Continuing commitment from the board
to reduce carbon emissions to achieve
the Group’s sustainability target of net
zero by 2040.
39
www.severfield.comStock Code: SFR STRATEGIC REPORT KEY PERFORMANCE
INDICATORS
01
8.2%
7.0%
6.7%
£27.0m
£25.5m
£26.9m
2020
2021
2022
Stakeholder linkage
Strategic pillar
03
£327.4m
£363.3m
£375.1m
2020
2021
2022
Stakeholder linkage
02
7.7p
7.2p
6.4p
2020
2021
2022
Stakeholder linkage
Strategic pillar
04
93%
81%
(25)%
2020
2021
2022
Stakeholder linkage
Underlying* operating profit
and margin (before JVs and
associates)
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
Underlying operating profit is defined as
operating profit before non-underlying
items and the results of JVs and
associates.
Underlying operating margin is calculated
as underlying operating profit expressed
as a percentage of revenue.
Our performance
Underlying operating profit before JVs and
associates has increased by 5 per cent
against a comparator, which included a
one-off profit of £1.5m on a bespoke paint
package on the large industrial project in
the Republic of Ireland. This performance
demonstrates the resilience of the Group
in challenging market conditions.
Revenue growth
(on a like-for-like basis)
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.
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.
Our performance
Like-for-like revenue has increased by
9 per cent, reflecting an increase in
activity and an increase in steel prices.
Strategic pillar
Strategic pillar
40
Underlying* basic earnings
per share (‘EPS’)
Why this is important
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.
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 increased 13 per cent, reflecting
the increased underlying profit before tax
in the year.
Operating cash conversion*
Why this is important
Cash is critical for providing the financial
resources to develop the Group’s business
and to provide adequate working capital
to operate smoothly.
This measures how successful we are
in converting profit to cash through
management of working capital and
capital expenditure.
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
-25 per cent, below our target conversion
rate of 85 per cent, however, we expect
to exceed our target once again in 2023.
Our net working capital has increased
by £34.5m during the year, reflecting the
expected unwinding of the low working
capital position at the start of the year,
together with the impact of steel price
rises and higher steel purchasing to meet
our 2023 production requirements.
Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT
05
17.2%
13.6%
13.5%
2020
2021
2022
Stakeholder linkage
Strategic pillar
07
1.81
1.48
1.32
2020
2021
2022
Stakeholder linkage
Strategic pillar
Return on capital employed
(‘ROCE’)*
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.
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, the Group continues to
exceed our benchmark of 10 per cent and
has achieved an average ROCE of 15 per
cent over the last five years.
Injury frequency rate (‘IFR’)
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. The 2022 result
excludes DAM Structures, which will be
included in the reported IFR statistics
in 2023 now that we have established a
baseline performance in the year following
its acquisition.
Our performance
Despite wider industry trends moving
in the opposite direction as working
practices return to normal post-pandemic,
we have seen a further reduction in injury
rates, resulting in an IFR (including JSSL)
of 1.32, compared to 1.48 in 2021.
06
£486m
£301m
£271m
2020
2021
2022
Stakeholder linkage
Strategic pillar
Order book
Why this is important
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 record UK and Europe order book
shows the total value of future revenue
secured by contractual agreements.
Our performance
Our record UK and Europe order book
stands at £486m at 1 June 2022,
representing a 61 per cent increase
since 1 June 2021. This solid order book
position leaves the Group well positioned
to deliver on its strategic objectives.
* See note 32 for APM definitions.
Key to stakeholder linkage
Clients
Employees
Shareholders
Communities
Suppliers
Key to strategic pillar
Growth
Clients
Operational
Excellence
India
People
41
www.severfield.comStock Code: SFR STRATEGIC REPORT
OUR OPERATIONAL
PERFORMANCE
WE ARE DELIGHTED TO BE
REPORTING A RESILIENT AND
STRONG PERFORMANCE DESPITE
THE ONGOING MARKET CHALLENGES.
ALAN DUNSMORE
CHIEF EXECUTIVE OFFICER
OPERATING REVIEW
Group overview
The Group has had another successful
year in 2022, delivering profit growth both
in the UK and India against a backdrop of
some challenging market conditions, and
securing a significant value of new work,
which is reflected in our order books of
£486m in the UK and Europe and £158m in
India. Together, these provide us with good
visibility of earnings and leave us well-
positioned with a strong future workload
for the 2023 financial year and beyond.
Despite inflationary and supply chain
pressures which have been a feature
of most of the year, with an already
challenging trading environment now
being exacerbated by the Russian invasion
of Ukraine, the 2022 results demonstrate
the resilience of the Group and serve to
highlight its many strengths. These include
the additional resilience provided by our
market sector, geographical and client
diversity, the talent and commitment
of our workforce, our supply chain
management expertise, and our strong
financial position.
In 2022, we have increased our revenue by
11 per cent to £403.6m (2021: £363.3m)
and our underlying1 profit before tax by
11 per cent to £27.1m (2021: £24.3m),
following the operational disruption
experienced in 2021 from the COVID-19
pandemic. The increase in profit also
reflects our ability to offset inflationary
cost increases through a combination
of operating efficiencies, higher selling
prices and contractual protection as steel
remains largely a pass-through cost for
the Group.
We have maintained a good financial
position throughout the year, enabling
us to continue to grow the dividend
and support ongoing investment in the
business. Year-end net debt (on a pre-
IFRS 16 basis¹) was £18.4m (2021: net
funds of £4.4m), which includes the
outstanding term loans for acquisitions
of £14.9m (2021: £20.8m). The increase in
borrowings mainly reflects a normalisation
of working capital, the impact of steel
and other input price rises, together with
higher steel purchases to meet production
requirements when executing our record
order book in 2023.
The Indian joint venture (‘JSSL’) has
performed profitably in 2022, following
a difficult start to the year when output
was disrupted by the second wave of
COVID-19. JSSL continues its recovery
towards pre-pandemic levels of output
in 2023 and the company’s strong order
book, together with an improving pipeline
of potential orders, reflects a continuing
strong underlying demand for structural
steel in India. All this leaves the business
very well-positioned to take advantage of
an improving economy.
Strategy
The Group’s strategy is driven by its core
strengths of engineering and construction.
This well-established strategy is
unchanged, focused on growth, both
organic and through selective acquisitions,
operational improvements and building
further value in JSSL.
In recent years, the evolution of this
strategy has been particularly evident in
our significant market sector, geographical
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 (the Group
now serves ten market sectors) and a
resilience which has seen us successfully
negotiate the headwinds of Brexit, the
COVID-19 pandemic and the inflationary
pressures in the current year. The
successful implementation of our strategy
has also facilitated revenue growth 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 such
as Harry Peers and DAM Structures. As a
result, our capabilities are aligned with
many market sectors with strong growth
potential. The Group is well positioned to
meet the demand for ongoing investment
in the UK’s infrastructure, while our
diverse construction activities remain
1 See note 32 for APM definitions.
42
Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT each division to the market dynamics they
face but provide us with a better platform
to fulfil our strategic growth aspirations,
both organically and by acquisition.
This new structure will also allow us
to adopt a more holistic approach to
manufacturing across the Group, under
the leadership of our Group Manufacturing
Director, as we continue to invest in and
optimise our factories, particularly at our
main production centres in Dalton, Lostock
and Enniskillen.
With effect from 1 April 2022, the current
structure of six mainly location-based
business units was streamlined into three
market-focused divisions as follows:
The Commercial and Industrial division
will bring together the Group’s strong
capabilities which serve the following
market sectors – industrial and
distribution, commercial offices, stadia
and leisure, data centres, retail and health
and education.
The Nuclear and Infrastructure division
will encompass the Group’s market-
leading positions in the nuclear, power
and energy, transport (road and rail) and
process industries sectors.
The Products and Processing division
will include the growing modular
product ranges of Severfield (Products
& Processing) based in Sherburn and of
Construction Metal Forming (‘CMF’), our
cold rolled steel joint venture business
based in Wales. We continue to be the only
hot rolled steel fabricator in the UK to have
a cold rolled manufacturing capability.
43
focused on key areas such as industrial
and distribution, data centres, stadia and
leisure, nuclear and commercial offices.
In India, we remain positive about the
long-term trajectory of the market and of
the value creation potential of JSSL.
This is 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.
In response to the strong long-term growth
projections for India, and in tandem with
our joint venture partner, we are in the
process of selecting a plot of land to
facilitate expansion of the business in the
future. We expect that this land purchase
will be completed in the 2023 financial
year. This will allow the business to expand
its geographical footprint whilst providing
it with the platform to build quickly and
incrementally add the necessary volume
to support the expected future market
growth.
New divisional structure
The Group has grown significantly over
recent years, both organically and through
acquisition. In response to this, since the
size and shape of the Group has changed
and evolved significantly over the last
five years, we have created a simpler
divisional structure for our UK and Europe
operations.
This has resulted in three new market-
focused divisions (see below) in a structure
designed to align our existing businesses
more closely with the ten market sectors
that we serve and our growing customer
base. Further information on how this
new structure will be presented, will be
provided at a Capital Markets Day (‘CMD’)
later in the calendar year (a separate RNS
notice will be issued for the CMD in due
course). There are no non-underlying costs
associated with this re-organisation which
has been implemented for operational
purposes.
The market dynamics of our three new
divisions are different, in terms of the
solutions that customers seek, project
characteristics, the competitive landscape
and their economic cycles. This in turn
offers very different opportunities for the
Group in terms of the growth rates and
margin opportunities available to us. By
creating a Group structure with three
divisions focused on our chosen markets,
we will not only optimise the operations of
www.severfield.comStock Code: SFR STRATEGIC REPORT OUR OPERATING
PERFORMANCE
UK and Europe review
Revenue was up 11 per cent over the
prior year mainly reflecting an increase
in steel prices and the full year revenue
effect of DAM Structures which was
acquired in February 2021. During the
year, we continued to work on several large
distribution facilities in the UK, our first
HS2 bridge package, Water Orton Viaducts
in the Midlands, and a large industrial
facility in the Republic of Ireland, which
is now substantially complete. Other
significant revenue contributing projects
include the Google Headquarters at King’s
Cross, the Co-op Live Arena in Manchester
and Sky Studios in Elstree, together with a
number of mid-sized office developments,
both in London and the UK regions
(including Argyle Street in Glasgow,
and 30 Grosvenor Square and 30 South
Colonnade, both in London).
The underlying1 operating margin (before
JVs and associates) was 6.7 per cent
(2021: 7.0 per cent), resulting in an
underlying1 operating profit (before JVs
and associates) of £26.9m (2021: £25.5m).
This represents profit growth of six per
cent against a comparator which included
a one-off profit of £1.5m on a bespoke
paint package on the large industrial
project in the Republic of Ireland (if this
one-off profit is disregarded, the Group’s
results show profit growth of over
12 per cent).
Whilst underlying operating profits
have increased year-on-year, the slight
reduction in the margin percentage mainly
reflects the dilutive impact of steel prices
which have recently more than doubled
and are largely passed on to the client
at zero margin. This has resulted in an
increase in revenue of c.£20m in 2022
but no associated increase in the Group’s
absolute profitability. This dilutive effect
on margins would reverse if steel costs
reduced to pre-pandemic levels in the
future.
Across the Group, inflationary pressures
and supply issues for both us and our
clients have presented challenges in
2022, with an already difficult trading
environment now being exacerbated by
the war in Ukraine. We have experienced
some increases in lead times and
supply restrictions, upward pressures
on costs due to tighter labour markets
and significant price increases for
certain products and services. This has
included steel products, reflecting the
volatility in iron ore prices, increased
energy costs and, latterly, some supply
restrictions as a number of steel products
previously originating in Russia and
Ukraine. Whilst not immune to these
pressures, we have not experienced any
significant disruptions to operations and
the impact has generally been managed
through contractual protection, operating
efficiencies, higher selling prices and
by forward purchasing as appropriate,
leveraging the Group’s scale and supply
chain and sub-contract management
strengths. For steel supply, we benefit
from relationships with several partners
in the UK and continental Europe, reducing
the risk of interruptions to the Group’s
steel supply.
Inflationary pressures remain present
and are expected to continue into 2023,
however we expect to be able to minimise
the impact of these through the focused
sourcing of materials through the supply
chain and our ongoing operational
efficiencies.
Smarter, Safer, more Sustainable
The Group’s operational improvement
programme has engendered a self-
help culture within the organisation.
This programme has served us well in
maintaining efficient operations during the
pandemic and in helping us to offset many
of the supply chain and cost pressures
currently being experienced by the Group.
During the year, we have continued our
drive to reduce costs and increase and
upgrade our fabrication capacity and
efficiency. This includes the continued
roll out of our new coatings management
system at Dalton covering the reduction
of paint waste and improvements to
the specification, management and
application of factory paint systems,
together with ‘right first time’ initiatives
to improve overall quality including the
targeted reduction of factory and site
NCRs (rework items) and drawing office
errors. Having rolled out a new Group-wide
production management system (StruMIS)
in 2019, we are currently in the process
of further streamlining production
flows and improving real-time factory
information at our main centre in Dalton.
This includes the use of mobile devices
to capture information at the point of use
and to provide live information to both
operatives and management. This will
help drive quality, reduce bottlenecks, and
improve the reliability and speed of our
operations. As part of our ongoing capital
investment programme, we have also
continued to expand and automate our
fabrication capability at Dalton to improve
the throughput and efficiency of these
operations.
The Group also continues to make good
progress on its digital journey. This is
focused on driving operational excellence
through process standardisation
and data alignment supported by the
implementation of new systems. This
includes our innovative approach to
drawing and design, where we continue to
make good progress with the automation
of repetitive tasks, and the optimisation of
engineering software under the leadership
of our Group engineering director.
1 See note 32 for APM definitions.
44
Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT 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.
The UK and Europe order book at 1 June
includes a significant amount of new
work which we have secured over the past
twelve months and now stands at a record
level of £486m (1 November 2021: £393m),
of which £397m is planned for delivery
over the next 12 months. This leaves the
Group very well-positioned with a strong
future workload for the 2023 financial
year and beyond. The growth in the order
book has been driven by several significant
project awards. These include the new
stadium for Everton F.C., a film studio, two
large commercial office developments
in London, and various large and several
smaller industrial distribution facilities in
the UK, reflecting a sector which continues
to remain buoyant. We have also secured
several new HS2 bridge packages and
other bridge awards reflecting investment
in infrastructure by Highways England and
Network Rail. The order book remains well-
balanced, showcasing the benefits of our
strategic diversification over recent years,
and contains a healthy mix of projects
across the Group’s key market sectors.
In terms of geographical spread of
the order book of £486m, 96 per cent
represents projects in the UK, with the
remaining 4 per cent representing projects
for delivery in Europe and the Republic
of Ireland (1 November 2021: 95 per cent
in the UK, 5 per cent in Europe and the
Republic of Ireland). The more UK-centric
nature of the current order book is driven
by a lower proportion of work in the
Republic of Ireland, as several projects,
including the large industrial facility, draw
to completion. This, together with fewer
ongoing projects in continental Europe,
reflects a pipeline which was adversely
impacted by COVID-19 twelve months
ago, but which has recovered strongly
over recent months. Furthermore, whilst
the order book is currently at record
levels, only 16 per cent of this represents
commercial offices, compared to a peak
of c.60 per cent around five years ago.
This highlights the success of our strategic
diversification.
We remain encouraged by the current
level of tendering and pipeline activity
across the Group, both in the UK and
in continental Europe, in which we
retain a good market position and
which remains an important part of
our strategic growth plans. We are
well-positioned to take advantage of
some significant opportunities in the
industrial and distribution (battery plants
and distribution centres), transport
infrastructure, nuclear and data centre
sectors, and, despite predictions of
the demise of the office following the
pandemic, in the commercial office
market, including in London. Although we
remain mindful of the ongoing effects of
Russia’s invasion of Ukraine, with the most
significant effects of COVID-19 now behind
us, we remain well-placed to win work
across a wide client base and in a diverse
range of market sectors and geographies.
This provides us with greater resilience
and the ability to drive future profitable
growth.
‘A golden age of infrastructure’
As a key component of economic growth,
the construction industry will be central
to a sustainable economic recovery. New,
low carbon infrastructure (including
HS2, wind power, new nuclear, rail
electrification, energy efficient buildings)
will play a leading role in stimulating
sustainable growth. In November 2020,
the UK Government released details of its
five-year plan, the National Infrastructure
Strategy (‘NIS’) to invest in digital,
transport and energy to drive economic
recovery, levelling up and meeting the UK’s
net zero emissions target by 2050. This
plan announced funding of £650 billion, an
increase of around £100 billion from the
previous plan, for developments in roads,
railways, power networks and other UK
infrastructure projects. At Network Rail, in
addition to HS2, the CP6 (control period)
budget of around £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). At Highways England, the
second Road Investment Strategy (‘RIS2’)
budget of £24 billion (2020-2025) is a
significant increase over the expenditure
of £15 billion during ‘RIS1’ (2015-2020).
We have already secured some significant
road bridge awards and orders for HS2
from a variety of consortia, together with
some ancillary steelwork packages at
Hinkley Point, and we continue to make
good progress with several other similar
opportunities, including rail electrification
work.
45
www.severfield.comStock Code: SFR STRATEGIC REPORT OUR OPERATING
PERFORMANCE
We 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 DAM Structures.
Looking further ahead, in April 2022,
prompted by Russia’s invasion of Ukraine,
the UK government published its Energy
Security Strategy, pledging a new
generation of nuclear power (under the
banner of ‘Great British Nuclear’) as well
as offshore wind generation, together
with several other new energy supply
initiatives, to reduce reliance on foreign
energy supply. The combination of the
in-house nuclear expertise acquired
with Harry Peers, together the Group’s
unmatched scale and capability to deliver
major infrastructure projects, leaves us
well positioned to win work from such
projects, many of which are likely to have a
significant steelwork content.
Clients – increasingly broad spread
and diverse
Our proven ability to work collaboratively
and innovatively with clients is
fundamental to our success and is critical
to securing new work. Our preferred and
predominant two-stage and negotiated
procurement routes help significantly by
allowing early collaboration with the client
and supply chain and providing increased
price and programme certainty.
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 year, when
certain construction programmes were
delayed and disrupted due to supply
chain challenges or when inflationary
pressures stretched existing budgets, our
operational delivery capabilities allowed
us to help clients deliver changes to these
programmes quickly and efficiently, to
provide clients with problem-solving
solutions and to ensure that programme
milestones were achieved.
We have again achieved national
recognition though several awards
including at the 2021 Structural Steel
Design Awards (for 60 London Wall), the
46
Royal Society for the Prevention of Accidents (‘RoSPA’) (Harry Peers won the President’s
award) and at the 2021 Morgan Sindall Supply Chain Awards. We have also been
shortlisted for training excellence at the Construction News Specialists Awards.
The Group worked on over 100 projects with our clients during the year including:
Commercial
offices
Industrial and
distribution
Nuclear
Transport
infrastructure
Data centres and
other projects
Stadia and leisure
Google King’s Cross, London
Argyle Street, Glasgow
30 Grosvenor Square, London
30 South Colonnade, London
Wilton Park, Dublin
Large industrial facility, Republic of Ireland
Large distribution centres, Wakefield, Stockton, Luton, Belvedere
Atomic Weapons Establishment (various)
M8 Footbridge, Glasgow
Water Orton Viaducts, Midlands
A46 Binley bridge, Midlands
Data centre, Republic of Ireland
Sky Studios, Elstree
Fulham FC, London
Everton FC, Liverpool
Co-op Live Arena, Manchester
Pinewood Studios, London
Modular construction
Our modular (off-site) construction offering continues to include the growing product
ranges of Severfield (Products & Processing) (‘SPP’) based in Sherburn and of CMF, our
cold rolled steel joint venture business based in Wales. These businesses will make up
the Group’s new Products and Processing division.
SPP
SPP was originally established to allow us to address smaller scale projects and
provide a one-stop shop for smaller fabricators to source high-quality processed
steel and ancillary products, at lower margins. We have continued to grow and invest
in the business, including strengthening the factory management, engineering and
commercial functions, to maintain our focus on growing our ‘Severstor’ modular product
range and ‘Rotoflo’ products, both of which attract higher margins. For Severstor, we are
already making significant progress in growing our client base and have secured repeat
orders from several blue-chip clients as well as continuing to develop our pipeline of
opportunities. During the year, to help develop the overseas footprint of the business,
the Rotoflo team appointed a new sales manager in India where we see some potentially
interesting opportunities, particularly for the paint industry. SPP has already been
awarded ‘Fit for Nuclear’ and certain Network Rail accreditations which, together with
an expanding client base and our previous record in modular construction, we believe
Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT will help us to achieve our future growth
aspirations for the business.
As well as servicing its growing external
client base, SPP has also continued
to provide high-quality sub-contract
fabrication packages for other Group
companies to assist in the delivery of our
record UK and Europe order book, thus
ensuring a greater proportion of project
work remains in-house and subject to
Severfield quality standards.
CMF
CMF has continued to develop its product
range which now includes load bearing
frame and deck profiles, purlins and side
rail systems to service a cold formed steel
market which has grown significantly
in recent years through the increased
use of steel in off-site and modular
construction. In response to these market
developments, the business is currently
being expanded through the development
of a new, separate manufacturing
facility in South Wales. This new facility
is required as the existing CMF facility
in Pontypool is operating at close to full
capacity and cannot be developed any
further due to space constraints. The
expanded capacity will allow CMF to serve
an external client base and ensure that its
market share is maintained and increased
in line with market growth.
The expansion project commenced earlier
in the 2022 financial year and the facility is
expected to be operational in the next six
months. The overall cost of construction
for CMF is c.£10m, including land of £3m,
which is being financed by a combination
of equity of c.£5m, provided in equal
amounts by the joint venture partners in
2021, and bank debt of c.£5m.
India review
JSSL returned to profitability in 2022
despite a difficult start to the year when
output was disrupted by the second wave
of COVID-19. This follows the loss recorded
in the previous year which was severely
impacted by COVID-19. This recovery is
evident in the Group’s after-tax share
of profit of £0.8m (2021: share of loss
of £0.7m). The improved performance
reflects a doubling of revenue to £100.3m,
compared with £48.0m in the previous
year, and an increase in the operating
margin to 5.2 per cent, compared with
3.3 per cent in the previous year. Financing
expenses of £3.3m (2021: £3.4m) are
broadly unchanged from the previous year
and turn JSSL’s operating profit of £5.2m
(2021: £1.6m) into a profit before tax of
£1.9m (2021: loss before tax of £1.8m).
Notwithstanding some current inflationary
pressures, JSSL has continued to win new
work, resulting in a strong order book of
£158m at 1 June 2022 (1 November 2021:
£140m). In terms of mix, 37 per cent of
the order book represents higher margin
commercial work, with the remaining
63 per cent representing industrial
projects (1 November 2021: commercial
work of 62 per cent, industrial work of
38 per cent). The current higher level of
industrial work is consistent with the
ongoing fluctuations in the timing and mix
of industrial and commercial work in a
growing order book.
47
www.severfield.comStock Code: SFR STRATEGIC REPORT OUR OPERATING
PERFORMANCE
JSSL’s pipeline of potential orders
continues to include several commercial
projects for key developers and clients
with whom it has established strong
relationships, including in the commercial
office, data centre and healthcare sectors.
This, together with JSSL’s healthy order
book, reflects a strong and growing
underlying demand for structural steel
in India, leaving the business very
well-positioned to take advantage of an
improving economy. Accordingly, we expect
the business to recover to pre-pandemic
levels of output in 2023.
In response to this demand, which is
supported by strong long-term growth
projections for India and the continued
conversion of the market from concrete to
steel, and in tandem with our joint venture
partner, we are the process of selecting
a plot of land to facilitate expansion of
the business in the future. We expect that
this land purchase will be completed in
the 2023 financial year. Whilst Bellary
continues to ramp up towards its
maximum capacity of c.100,000 tonnes
in 2023, this land purchase will allow
the business to expand its geographical
footprint in India whilst providing it
with the platform to build quickly and
incrementally add the necessary volume
to support the expected future market
growth.
ESG
Health and safety
Our updated SHE strategy is based around
three key areas: people, communication
and engagement, and systems and
processes. The strategy will serve to
further enhance and progress our SHE
culture and values as we strive to be
industry-leading in our approach. The
Group’s safety focus remains on its six Life
Saving Rules namely, Fundamentals (do
not carry out a task unless you are trained
to do it), Working at Height, Control of
Lifting Operations, Machine Safety, Vehicle
Movement and Material Stability.
In the previous year, we rolled out a new
platform for reporting SHE incidents and
completing inspections to identify trends
and root causes in safety performance to
enable targeted improvements. Following
the improvements in safety performance
in 2021, we have made further
improvements in 2022, and maintained
our primary focus on the Group’s injury
frequency rate (‘IFR’) and high potential
near misses (‘HiPos’). Despite wider
industry trends moving in the opposite
direction as working practices return
to normal post-pandemic, we have
seen a further reduction in injury rates,
resulting in an IFR (including JSSL) of 1.32,
compared to 1.48 in 2021. The 2022 result
excludes DAM Structures, which will be
included in the reported IFR statistics
in 2023 now that we have established a
baseline performance in the year following
its acquisition. Furthermore, the Group’s
accident frequency rate (‘AFR’) (including
JSSL) for the year, which is based solely
on the level of RIDDORS (reportable
accidents), of 0.16 (2021: 0.18) continues
to outperform the industry average.
Sustainability
The board gives full and close
consideration to environmental, social and
governance (‘ESG’) factors when assessing
the impact of the decisions it makes and
supports. As a result of strategic decisions
made in recent years, the Group now has a
prominent market position in the high-
growth markets of the future and is well-
positioned to help accelerate the journey
to net zero in its core sectors.
As part of our ambitious sustainability
strategy, the Group has committed to
reduce our scope 1 and 2 greenhouse gas
(‘GHG’) emissions by 25 per cent by 2025
against a 2018 baseline, aligned with the
Paris Agreement to limit global warming to
below 1.5 degrees Celsius.
We remain well on course to achieve
this target through the successful
implementation of sustainability initiatives
including the switch to ‘green’ electricity
at all our production facilities (which is
now largely complete), through mandating
hydrogenated vegetable oil (‘HVO’) fuels
and the transition to electric and hydrogen
construction plant where possible.
Progress of all targets is measured and
monitored and reported monthly through
ESG dashboards.
In 2022, for the second year running, the
Group was included in the Financial Times
(‘FT’) listing of Europe’s climate leaders
which showcases corporate progress in
fighting climate change. For 2022, this list
includes the c.400 European companies
that have achieved the greatest reduction
in their greenhouse gas emissions
intensity between 2015 and 2020, over
which the Group’s emissions fell by 34
per cent. In the FT listing, for businesses
with a rating from the Carbon Disclosure
Project (‘CDP’), only those with a score
of at least ‘B-’ were considered. In 2022,
we were awarded an ‘A-’ rating in the CDP
index, improving on our ‘B’ rating from the
previous year.
Our sustainability strategy also outlines
our commitment to reach net zero for
our scope 1 and 2 carbon emissions
by 2040. Ahead of COP26 in 2021, the
Group signed up to the United Nations
‘Race to Zero’ campaign, which requires
the establishment of a net zero target in
line with a 1.5-degree world, to hold off
some of the worst climate impacts. We
are on schedule to submit this target for
validation by the Science-Based Target
Initiative (‘SBTI’) by the end of the 2022
financial year.
48
Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT Whilst we remain mindful of the macro-
economic backdrop, particularly regarding
inflationary pressures which are expected
to continue in 2023, we continue to
expect to deliver further progress and our
expectations for the year ahead remain
unchanged.
Alan Dunsmore
Chief executive officer
15 June 2022
During the year, we achieved our target
to be accredited as carbon neutral for
our manufacturing and construction
operations by the Carbon Trust, in
accordance with PAS 2060, the only
recognised international standard for
carbon neutrality. This is an important
milestone in our journey towards net
zero. Carbon neutral in this context
means that we use carbon offsetting to
eliminate our combined scope 1, scope 2
and operational scope 3 greenhouse gas
emissions.
During the year we continued to
collaborate with several clients, attending
workshops in areas such as sustainable
procurement, low embodied carbon
steel, and material passporting. Early
engagement with clients remains vital
in reducing the embodied carbon in the
structures we build, in tandem with our
existing SteelZero commitments which
demonstrate how important the transition
to low embodied carbon steel production
is to the construction sector.
Social
We recognise the importance of input
from our people in helping us deliver on
our strategic ambitions and, in 2022,
we launched our Group-wide ‘MyVoice’
forums. These provide a formal, structured
way for colleagues and management to
connect, gain feedback and exchange
information and views on any business-
related topic. Louise Hardy, our designated
non-executive director responsible for
workforce engagement, Alan Dunsmore,
our CEO and Samantha Brook, our Group
HR Director, regularly meet with forum
representatives.
These meetings have provided valuable,
ongoing insights and feedback for
the board during a challenging year
for everyone, and we look forward to
continuing this work with our colleagues in
the year ahead.
Summary and outlook
The Group has had a successful year
in the face of some challenging market
conditions, highlighting the benefit of the
strategic and operational progress made
over recent years. We have increased
revenues and profits, including a return to
profitability for JSSL, we have continued to
drive efficiencies through our operational
improvement programme, and our balance
sheet remains healthy, allowing us to
make the right long-term decisions for the
business. Our new, simplified divisional
structure in the UK and Europe will
optimise the operations of each division
to the market dynamics they face, and
provide us with a better platform to fulfil
our strategic growth aspirations.
We continue to make strong positive
progress in our key market sectors,
with the size and quality of our secured
workload increasing during the year. This
success is reflected in our order books of
£486m in the UK and Europe and £158m
in India. Our capabilities are aligned with
many market sectors with strong growth
potential, and we have an encouraging
pipeline of significant, profitable
opportunities in the UK, Europe and India,
leaving us well positioned to increase our
market share and to drive future profitable
growth.
49
www.severfield.comStock Code: SFR STRATEGIC REPORT OUR FINANCIAL
PERFORMANCE
OUR RECORD ORDER BOOK
AND STRONG BALANCE
SHEET UNDERPIN OUR
AMBITIONS TO DELIVER
SUSTAINABLE GROWTH.
ADAM SEMPLE
GROUP FINANCE DIRECTOR
FINANCIAL REVIEW
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)
Operating profit
Operating margin
Profit before tax
Basic earnings per share
Return on capital employed (‘ROCE’)
2022
403.6
26.9
6.7%
27.1
7.2p
21.5
22.8
5.7%
21.0
5.1p
13.5%
2021
363.3
25.5
7.0%
24.3
6.4p
22.7
22.3
6.1%
21.1
5.6p
13.6%
* The basis for stating results on an underlying basis is set out on the highlights page 6. A reconciliation of
the Group’s underlying results to its statutory results is provided in the Alternative Performance Measures
(‘APM’) section, see note 32.
Trading performance
Revenue for the year of £403.6m
represents an increase of £40.3m
(11 per cent) compared with the previous
year, reflecting an increase in steel prices
(£19.2m) and the full year revenue effect
of DAM Structures which was acquired in
February 2021 (c.£20.0m).
Underlying* operating profit (before JVs
and associates) of £26.9m (2021: £25.5m),
was £1.4m higher than in the previous
year which included a one-off profit of
£1.5m on a bespoke paint package on the
large industrial facility in the Republic
of Ireland. This represents year-on-year
profit growth of 6 per cent but if the
one-off prior year profit is disregarded,
the results show profit growth of 12 per
cent. Whilst underlying* operating profits
have increased, the slight reduction in the
margin to 6.7 per cent (2021: 7.0 per cent)
reflects the dilutive impact of steel price
increases which are largely a pass
through to the client at zero margin.
This has resulted in an increase in revenue
of c.£20m in 2022 but no associated
increase in the Group’s absolute
profitability. The statutory operating profit,
which includes the results of JVs and
associates and the Group’s non-underlying
items, was £22.8m (2021: £22.3m)
Underlying* profit before tax, which is
management’s primary measure of Group
profitability, was £27.1m (2021: £24.3m).
The statutory profit before tax, which
includes the Group’s non-underlying items,
was £21.0m (2021: £21.1m).
Share of results of JVs and associates
The share of results from JSSL was a
profit of £0.8m (2021: loss of £0.7m),
reflecting revenue growth and margin
improvement following the disruptive
impact of COVID-19 on JSSL’s prior year
trading and profitability. Our specialist cold
rolled steel business, CMF, contributed
a share of profit of £0.5m (2021: £0.4m),
the prior period for CMF also having been
impacted by COVID-19. The CMF 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.
50
Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT 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 cash
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 current uncertain
macro-economic backdrop, the board is
recommending a final dividend of 1.9p per
share (2021: 1.8p), payable on 14 October
to shareholders on the register at the close
of business on 9 September. This together
with the interim dividend of 1.2p per share
(2021: 1.1p), will result in a total dividend
of 3.1p per share (2021: 2.9p).
Goodwill and intangible assets
Goodwill was £82.2m at 26 March 2022
(2021: £85.8m), the movement reflecting
the finalisation of goodwill and intangible
assets 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 26 March
2022 or the year ended 27 March 2021.
Other intangible assets were £10.3m
(2021: £9.6m). 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.
51
Non-underlying items
Non-underlying items have been
separately identified as a result of their
magnitude, incidence or unpredictable
nature. Their separate identification
results in the calculation of an underlying
profit measure in the same way as it is
presented and reviewed by management.
Non-underlying items for the year
of £6.1m (2021: £3.2m) includes the
amortisation of acquired intangible
assets of £5.2m (2021: £2.8m), and other
acquisition-related expenses of £0.7m
(2021: £0.4m).
The amortisation of acquired intangible
assets represents the amortisation of
customer relationships, order books
and brand name, which were identified
on the acquisitions of Harry Peers and
DAM Structures. These assets are being
amortised over a period of 12 months to
five years. Acquisition-related expenses
include movements in the valuation of
the contingent consideration for the DAM
Structure acquisition which is payable
over a five-year period.
Taxation
The Group’s underlying1 taxable profits
of £25.8m (2021: £24.7m) resulted
in an underlying tax charge of £4.8m
(2021: £4.6m), which represents an
effective tax rate of 18.6 per cent
(2021: 18.5 per cent). The total tax charge
of £5.4m (2021: £3.8m) also includes
adjustments relating to prior years and the
deferred tax impact of the future increase
in UK corporation tax from 19 per cent to
25 per cent which, in line with the Group’s
policy, are categorised as non-underlying
and included in non-underlying items.
Earnings per share
Underlying basic earnings per share
increased by 12 per cent to 7.2p (2021:
6.4p) based on the underlying profit after
tax of £22.3m (2021: £19.8m) and the
weighted average number of shares in
issue of 308.8m (2021: 307.3m). Basic
earnings per share, which is based on
the statutory profit after tax, was 5.1p
(2021: 5.6p), reflecting the increased
underlying profit after tax offset by an
increase in non-underlying costs. Diluted
earnings per share, which includes the
effect of the Group’s performance share
plan, was 5.1p (2021: 5.6p).
1 See note 32 for APM definitions.
www.severfield.comStock Code: SFR STRATEGIC REPORT OUR FINANCIAL
PERFORMANCE
Property, plant and equipment
The Group has property, plant and
equipment of £91.4m (2021: £91.7m).
Capital expenditure of £7.4m (2021:
£6.6m) represents the continuation of the
Group’s capital investment programme.
This predominantly consisted of site
improvements at Ballinamallard, the
purchase of additional land at Dalton to
future-proof the site, new and upgraded
equipment for our fabrication lines and
the acquisition of cranes to support our
site operations. Depreciation in the year
was £6.9m (2021: £6.0m), of which £1.7m
(2021: £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
£30.1m (2021: £28.8m), which consists
of the investment in India of £18.4m
(2021: £17.6m) and in CMF of £11.7m
(2021: £11.2m).
Cash flow
Operating cash flow (before working capital
movements)
Cash (used in)/generated from operations
Operating cash conversion
Cash balances
Net (debt)/funds* (pre-IFRS 16 basis)
Net (debt)/funds
Pensions
The Group’s defined benefit pension liability
at 26 March 2022 was £14.4m, a decrease
of £8.0m from the 2021 position of £22.4m.
The deficit has reduced due to a higher
discount rate, reflecting the significant
increase in bond yields, and employer
deficit contributions over the year. This has
been offset to a lesser extent by higher
expectations of long-term future inflation.
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.
For 2022, ROCE was 13.5 per cent (2021:
13.6 per cent), which exceeds the Group’s
minimum threshold of 10 per cent through
the economic cycle (see note 32).
2022
32.6
(1.9)
(25%)
(4.0)
(18.4)
(30.1)
2021
30.2
30.0
93%
25.0
4.4
(6.7)
* 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. See note 32 for APM definitions.
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 year with net debt (on a
pre-IFRS 16 basis) of £18.4m (2021: net
funds £4.4m). Net debt at 26 March 2022
included an overdraft of £4.0m (2021 cash
of £25.0m) and the outstanding term loans
of £14.9m for acquisitions (2021: £20.7m).
Operating cash flow for the year before
working capital movements was £32.6m
(2021: £30.2m). Net working capital has
increased by £34.5m during the year
mainly reflecting the expected unwinding
of the unusually low working capital
position (two per cent of revenue) at
the start of the year, together with the
impact of steel and other input price
rises, and higher steel purchases to
meet production requirements in early
2023 when executing our record order
book. Furthermore, 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 this was also a contributory
factor in the Group’s higher working capital
position at the year-end.
Year-end working capital represented
approximately ten per cent of revenue
(2021: two per cent). Although this is
higher than our well-established target
range of four to six per cent, we expect an
52
improvement in working capital in 2023,
as some of the 2022 working capital
pressures abate. Similarly, although
we have missed our operating cash
conversion target of 85 per cent in 2022,
we expect to exceed this target once again
in 2023.
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. However, the business
operates in a sector where supply chains
and contractual terms are complex,
and prompt payment is often materially
impacted by resolution of disputes and
alignment to agreed contractual terms.
For the PPC reporting period of 1 October
2021 to 26 March 2022, all the Group’s
businesses that are signatories of the PPC,
reported that between 90 and 95 per cent
of invoices were paid within 60 days.
From 1 July 2021 the PPC introduced
the requirement to pay 95 per cent of
invoices to businesses with fewer than
50 employees within 30 days instead of
60 days. In the second half of 2022, the
Group paid over 80 per cent of its suppliers
identified with fewer than 50 employees
within the 30-day timeframe. Whilst we
acknowledge that not all businesses with
fewer than 50 employees have the latest
systems to ensure prompt payment, the
Group continues to take the appropriate
action to further streamline its systems
and processes, and work with them, to try
to meet the timeframe set out by the Code.
Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
Having also made appropriate enquiries,
the directors consider it reasonable to
assume that the Group has adequate
resources to be able to operate within
the terms and conditions of its financing
facilities 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.
Adam Semple
Group finance director
15 June 2022
Bank facilities committed
until 2026
In December 2021, the Group completed
a refinancing of its revolving credit facility
(‘RCF’). The new £50m RCF provides
additional liquidity above the £25m RCF
which it replaced and extends the term
of the facility which now matures in
December 2026. The new facility provides
the Group with enhanced liquidity and
long-term financing to help support its
growth strategy.
The RCF remains subject to three financial
covenants, namely interest cover, net debt
to EBITDA and debt service (cash flow)
cover. The Group operated well within
these covenant limits throughout the year
ended 26 March 2022.
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 the current inflationary
market conditions 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 operational improvement
programme, which has delivered
tangible benefits in 2022 and is
expected to continue doing so in 2023
and for the period under forecast, and
• The Group’s cash position and its
bank finance facilities (see note 22),
which are committed until December
2026, including both the level of those
facilities and the three financial
covenants attached to them (interest
cover (>4x), net debt to EBITDA (<3.0x)
and cash flow cover (<1x)).
In the previous year, the Group continued
to trade safely and profitably with positive
operating cash flows whilst operating
under various COVID-19 restrictions. The
directors expect the Group to remain
similarly resilient over the forecast period.
The directors have reviewed the Group’s
forecasts and projections for 2023 and
for 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 including a highly pessimistic
‘severe but plausible’ scenario. This
scenario is based on the combined impact
of securing no further orders and further
significant inflationary pressures for the
entirety of the going concern period. Given
the strong previous performance of the
Group, this scenario is only being modelled
to stress test our strong financial position
and demonstrates the existence of
considerable headroom in the Group’s
covenants and borrowing facilities in this
‘severe but plausible’ scenario.
53
www.severfield.comStock Code: SFR
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 ‘severe but plausible’ scenario
(incorporating the ‘severe but plausible’
scenario performed for going concern
purposes), where the impact of certain
risks and uncertainties highlighted above
were applied in combination. Based on
this assessment, 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.
VIABILITY
STATEMENT
In accordance with the UK Corporate
Governance Code (the ‘Code’), the directors
have carried out a robust assessment of
the principal risks and uncertainties and
assessed the prospects and the financial
viability of the Group over a three-year
period. The directors have concluded
that they have a reasonable expectation
that the Group will be able to continue in
operation and meet its liabilities as they
fall due over the period of the assessment.
Assessment period
This viability assessment has been
made using a three-year period ending
on 29 March 2025 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 making their
assessment, the directors took account
of the Group’s strategy, strong financial
position, forward order book of £486m,
encouraging pipeline of opportunities,
recent and planned investments and main
committed bank facilities (which matures
in December 2026).
Risk assessment
The directors have assessed the Group’s
viability in conjunction with their
assessment of going concern. For their
assessment of going concern, which
covers a period of at least 12 months
from the date of signing the financial
statements, we have modelled a ‘base
case’ scenario, which captures the
Group’s budgeted position, and a highly
pessimistic ‘severe but plausible’ scenario,
being the combined impact on the ‘base
case’ of securing no further orders for
the next 12 months, the potential future
impact of the current inflationary market
conditions and other downside scenarios.
Given the continued strong performance
of the Group in FY22, in the face of some
challenging market conditions, this
downside 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
throughout the viability assessment
period of other downside scenarios
resulting from the crystallisation of one
or more of the principal risks described in
the annual report (see pages 86 to 98) 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, mispricing a contract
(at tender), the failure to mitigate onerous
contract terms, business disruption
caused by a cyber-attack or climate
change, 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/retraction
of supplier payments 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
54
Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT 55
www.severfield.comStock Code: SFR STRATEGIC REPORT BUILDING A RESPONSIBLE
AND SUSTAINABLE BUSINESS
A MESSAGE FROM THE CEO
WE SUPPORT THE PARIS AGREEMENT
AND HAVE COMMITTED TO REDUCING
OUR SCOPE 1 AND 2 GREENHOUSE GAS
EMISSIONS BY 25 PER CENT AGAINST
OUR 2018 BASELINE BY 2025.
ALAN DUNSMORE
CHIEF EXECUTIVE OFFICER
In modern economies, steel is already the
material of choice in many construction
projects due to its versatility and high
recyclability, but we can and must go
further as steel, and the construction
industry, can play a significant role not only
in facilitating the UK government’s plan
to transform infrastructure to meet the
2050 net zero emissions target (including
HS2, wind power, new nuclear, rail
electrification, energy efficient buildings),
but to help drive economic recovery and
levelling up across the country.
Alan Dunsmore
Chief executive officer
15 June 2022
We create spaces that help communities
thrive, so we recognise that any decisions
we make can have a significant impact on
the environment and people’s lives. How
we conduct ourselves is important and we
take our responsibilities very seriously.
With that in mind, we’re committed to best
practice in all our sustainability activities,
and we show leadership in delivering a
sustainability programme which considers
whole life impact, taking us beyond
compliance and ensuring continuous
improvements. At Severfield, building a
responsible and sustainable business
means conducting our business ethically,
with openness, honesty and integrity.
We recognise the scale of the challenge
and the wide-range of changes required
to meet the UK net zero carbon target by
2050, and acknowledge that steel can
make a significant contribution to the
decarbonisation of the global economy.
To solidify our commitment to reducing
carbon emissions, we have signed up to
SteelZero, a global initiative to speed up
the transition to a net zero steel industry.
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.
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AND SUSTAINABLE BUSINESS
OUR APPROACH TO SUSTAINABILITY
Prosperity
Deliver sustainable profitable growth
whilst satisfying our ethical, legal and
contractual obligations.
People
Principles of Governance
Show leadership in delivering a sustainability
programme which considers whole life
impact, taking us beyond compliance and
ensuring continuous improvements.
Sustainability
Framework
"Delivering more sustainable solutions for
our people, our customers and the wider
community and environment in which we
work and live"
Planet
Continue to improve the environmental impact of
our process and projects. Support sustainable
construction through circularity, strive for net-
zero and enable efficient business practices.
Our Group’s 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. During the
year, we have continued to develop our
sustainability framework and embed
sustainability into our purpose and
corporate strategy to help us achieve
our vision of being world class leaders in
structural steel.
Our sustainability framework outlines
why we prioritise different elements
of our work encapsulated by our four
sustainability pillars ‘Planet’, ‘People’,
‘Prosperity’ and ‘Principles of governance’,
each informed by our people, customers,
suppliers and stakeholders.
In line with the Global Reporting Initiative
(‘GRI’) Standards, our sustainability
framework and reporting are structured
around our most material sustainability
issues. Alongside our existing risk
assessment process and stakeholder
engagement activity, we regularly
undertake a materiality assessment in
order to identify environmental, social
and governance-related issues that may
have a significant impact on the Group’s
business performance or substantively
influence the decisions of our
stakeholders. Using the materiality matrix
in this process enables the consistent
assessment and prioritisation of risks
identified across the business.
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AND SUSTAINABLE BUSINESS
OUR APPROACH TO SUSTAINABILITY
Our ongoing dialogue with our stakeholders, both internal and external, identified the following eight areas of importance, which have
remained unchanged from our initial assessment in 2021:
Materiality matrix
4
1. Health and safety
1
2. Climate change and carbon emissions
3. Supply chain management
4. Sustainable construction
2
5. Diversity and inclusion
3
6. Training and development
7. Employee engagement
8. Waste management
6
7
5
8
Significance to stakeholder
Smarter, Safer, more Sustainable
The four pillars of our sustainability
framework 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.
Our responsible and sustainable business
priorities are aligned to those of our
stakeholders (see page 38 to 39) and
driven by our CEO, Alan Dunsmore, who
has overall responsibility for climate
change related matters at board level, and
he also chairs the Group’s sustainability
committee (see page 62 for further
details).
d
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S
i
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Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT
BUILDING A RESPONSIBLE
AND SUSTAINABLE BUSINESS
CLIMATE-RELATED FINANCIAL DISCLOSURES
The board recognises the systematic
threat posed by climate change and the
need for urgent mitigating action and is
committed to addressing climate-related
risks and reducing our environmental
impact and carbon emissions.
reporting on climate-related disclosures
in line with the TCFD recommendations.
This year we are formally reporting on our
alignment with these recommendations,
which are structured around four thematic
areas:
Task Force on Climate-related
Financial Disclosures (‘TCFD’)
The TCFD aims to improve the reporting
and transparency of climate-related
risks and opportunities and its
recommendations encourage companies
to disclose information on the financial
implications of climate change to their
business and set out how these risks are
managed.
We report on sustainability and climate-
related matters throughout our 2022
annual report and accounts, continually
striving to improve the transparency of
our reporting. This includes evolving our
• Governance
• Strategy
• Risk management, and
• Metrics and targets.
The information set out on pages 56 to 85
in our 2022 annual report and accounts
aims to provide key climate-related
information and cross references to where
additional information can be found. We
believe we are closely aligned with the
TCFD recommendations save for one
exception, which is that we have not yet
undertaken a detailed quantitative climate
scenario analysis. We plan to undertake
a more quantitative scenario analysis in
2023 for disclosure in next year’s annual
report.
We are committed to the
recommendations of the TCFD, to provide
our stakeholders with transparent and
useful information on the Group’s climate-
related risks and opportunities and to help
communicate our strategy, sustainability
framework, targets and our progress
against these.
We have qualitatively assessed the
impact of climate risk on the Group’s
balance sheet, including the impact on the
measurement of financial instruments,
the Group’s owned land and buildings and
the Group’s going concern and long-term
viability, and have concluded that there
is no material impact on the financial
statements for the year ended 26 March
2022.
Some elements of our TCFD reporting are addressed elsewhere in our annual report and accounts. The table below outlines
where this information can be found.
Thematic area
TCFD recommendation
Section name
Page reference
Governance
Board oversight
Management role
Corporate governance report
Board at a glance
Building a responsible and sustainable
business
Strategy
Risks and opportunities
How we manage risk
Impact on organisation
Resilience of strategy
Building a responsible and sustainable
business
110 to 121
102 to 103
63 to 85
86 to 98
63 to 85
Risk management
Risk identification and assessment
process
How we manage risk
86 to 98
Risk management process
Integration into overall risk
management
Metrics and targets
Climate-related metrics
Scope 1, 2 and 3 GHG emissions
Climate-related targets
Building a responsible and sustainable
business
63 to 85
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BUILDING A RESPONSIBLE
AND SUSTAINABLE BUSINESS
OUR TCFD ROADMAP TO FULL DISCLOSURE
2021
2022
We established our sustainability working group to
oversee strategy implementation and review progress
against our strategic objectives.
Our 2021 annual report included numerous
sustainability disclosures, many of which were in
line with TCFD recommendations and were reported
earlier than the FCA’s Listing Rules reporting
requirements.
We engaged external consultants to undertake
a gap analysis of our current climate-related
disclosures and planned activities against the
TCFD framework.
In June, we issued our annual detailed Carbon
Disclosure Project (‘CDP’) report, which can be
found on our website at www.severfield.com.
Our 2022 annual report confirms that our
disclosures are compliant with the TCFD’s
recommendations with one exception (detailed
climate scenario analysis) and our 2022 reporting
continues to improve our climate-related
disclosures by including quantitative information
on our scope 3 emissions.
2023
2024
Our 2023 annual report will include a comprehensive
We intend our 2024 annual report to further
update on our quantitative climate scenario analysis,
improve on the information contained in the
in line with the TCFD recommendations.
2023 annual report.
We will disclose further details of our ongoing
We will complete our quantitative climate
assessment of the financial impact of an increase in
scenario analysis and report on how the results
global temperatures by two degrees Celsius and other
will help the Group assess and improve our
varying temperatures, the material risks modelled,
climate resilience.
approach taken, and high-level assumptions applied.
Having started the process of setting new long-term,
science-based net zero carbon targets for the Group,
we are on schedule to submit these for validation by
the SBTi during 2023.
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Severfield plc Annual report and accounts
for the year ended 26 March 2022
2021
2022
We established our sustainability working group to
We engaged external consultants to undertake
oversee strategy implementation and review progress
a gap analysis of our current climate-related
against our strategic objectives.
disclosures and planned activities against the
Our 2021 annual report included numerous
sustainability disclosures, many of which were in
In June, we issued our annual detailed Carbon
line with TCFD recommendations and were reported
Disclosure Project (‘CDP’) report, which can be
earlier than the FCA’s Listing Rules reporting
found on our website at www.severfield.com.
TCFD framework.
requirements.
Our 2022 annual report confirms that our
disclosures are compliant with the TCFD’s
recommendations with one exception (detailed
climate scenario analysis) and our 2022 reporting
continues to improve our climate-related
disclosures by including quantitative information
on our scope 3 emissions.
2023
2024
Our 2023 annual report will include a comprehensive
update on our quantitative climate scenario analysis,
in line with the TCFD recommendations.
We intend our 2024 annual report to further
improve on the information contained in the
2023 annual report.
We will disclose further details of our ongoing
assessment of the financial impact of an increase in
global temperatures by two degrees Celsius and other
varying temperatures, the material risks modelled,
approach taken, and high-level assumptions applied.
We will complete our quantitative climate
scenario analysis and report on how the results
will help the Group assess and improve our
climate resilience.
Having started the process of setting new long-term,
science-based net zero carbon targets for the Group,
we are on schedule to submit these for validation by
the SBTi during 2023.
www.severfield.com
Stock Code: SFR
6161
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AND SUSTAINABLE BUSINESS
GOVERNANCE
• The Group has committed to being
carbon neutral, which is directly linked
to the identified risks of failing to meet
emissions targets or failing to comply
with legislation or expectations.
• During the year, the sustainability
committee reviewed and confirmed
the Group’s net zero roadmap, to be
approved by the board in early 2023.
• The Group also revised its strategic
plan, which specifically included how
the Group is going to invest in climate-
related research and development to
identify new engineering techniques.
This is also directly linked to the
identified risks of failing to meet
emissions targets or failing to comply
with legislation or expectations.
Board oversight on climate-
related risks and opportunities
Our chief executive officer, Alan Dunsmore,
has overall responsibility for climate-
related matters at board level and chairs
our sustainability committee and risk
committee, ensuring continuity and
accountability. Alan is actively engaged
and takes responsibility for the Group’s
strategic direction and progress on
climate-related issues.
The board possesses significant climate-
related experience, as summarised on
the board skills matrix on page 103 and
has a sound basis from which to consider
the risks and opportunities facing the
business as a result of climate change.
Our board skills matrix is also used for
succession planning purposes to ensure
there are no skills gaps.
The board is updated on climate change
matters every quarter and received
briefings throughout the year on climate-
related matters, and we plan to arrange
further briefings on material ESG matters
throughout 2023 from subject matter
experts.
The sustainability committee, mainly
consisting of members of the executive
committee, is responsible on behalf of
the board for considering the impact
of climate change on the business. The
committee regularly updates the board
on the Group’s sustainability strategy
and progress against our targets, in
addition to the quarterly sustainability
presentation to the board by the Group
SHE director, which includes a dashboard
on greenhouse gas emissions.
The board gives full and close
consideration to ESG factors when
assessing the impact of the decisions it
makes. Examples of strategic decisions
made in recent years by the board and
board committees having consideration
of the Group’s sustainability strategy and
climate-related impact include:
• Signing up to SteelZero – a global
initiative to speed up the transition to a
net zero steel industry, which is directly
linked to the climate-related risk of steel
becoming unsustainable.
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Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT Management’s role in assessing and managing climate-related risks and opportunities
Board of directors
Responsible for the Group sustainability
strategy
Executive committee and Risk
committee
Reports to the board on the progress
and success of the sustainability
committee
Sustainability committee
Oversees strategy implementation and
reviews progress against our strategic
objectives and reports to the executive
committee and the board
Sustainability risk review
committee
Exercises oversight over climate-
related risks and the Group’s approach
to mitigating our impact on the
environment
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
The Group board, through the executive
committee and risk committee (both
chaired by the CEO), has delegated
oversight of the management of climate-
related risks and opportunities to the
sustainability committee and sustainability
risk review committee.
Members of the Group’s sustainability
committee include the chief executive
officer, chief operating officer, Group
finance director, Group legal director and
Company secretary, Group SHE director,
Group HR director and the Group’s
sustainability manager. This ensures that
key management across all the business
disciplines have an aligned approach to
climate-related matters to ensure that the
Group’s overall sustainability strategy is
successfully delivered.
Our Group legal director and Company
secretary, Mark Sanderson, is a member of
the executive committee and also chairs
the sustainability risk review committee,
through which he is responsible for
ensuring that an appropriate strategy is in
place to understand, identify, monitor and
control risks from climate change in line
with the Group’s risk appetite parameters.
Business unit management teams are
responsible for managing climate-related
risks and opportunities on a day-to-day
basis and delivering on the Group’s net
zero roadmap and sustainability strategy.
The sustainability committee meets every
two months and engages with a wide
range of senior managers and colleagues
from 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.
The chief executive officer, chief operating
officer and Group finance director are all
members of the sustainability committee
and provide the board with regular written
and verbal updates on climate-related
matters.
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AND SUSTAINABLE BUSINESS
STRATEGY
Climate-related risks and
opportunities the organisation
has identified over the short,
medium, and long term.
As part of our business processes, we
continually identify climate-related
risks and opportunities, assessing their
likelihood and quantifying their potential
financial and non-financial impacts and
time horizon. Those risks with higher
financial impact are prioritised for action
by the board. We consider climate-related
issues within the time horizons used in our
risk management process:
In line with our risk management process
and assessment of the Group’s principal
risks, only high and medium risks are
considered sufficiently significant for
disclosure in the annual report. The
scoring of each risk 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).
Short-term
< 5 years
Medium-term
5 – 10 years
Long-term
> 10 years
Aligns to how we assess the Group’s principal risks
and viability statement.
Aligns to longer-term projects with risks driven
by government policy, infrastructure needs and
market conditions.
Factors that could impact the Group’s ability to
achieve its strategic goals.
Climate-related transition and physical
risks have been assessed as an overall
low risk to the Group, but we do believe
that the risk of being able to demonstrate
that we are a ‘sustainable and responsible
business’ is a medium risk in the short
term and is therefore considered a
principal risk.
Our approach to climate risk
During the year, we have continued to
develop our sustainability risk register
capturing climate and other sustainability-
related risks to ensure that material risks
are identified and managed effectively.
Climate change can have an impact across
the Group’s risk environment through both
transition and physical channels. The
sustainability risk committee considers
transition risks to arise from the Group’s
transition to a net zero steel industry,
such as through regulatory, legislative
or technological changes. Physical risks
are considered to arise from increasing
severity or frequency of extreme weather
events, such as flooding and cyclones.
We continually identify climate-related
risks, assessing their likelihood and
quantifying their potential financial and
non-financial impacts and time horizon.
Those risks with higher financial impact
are prioritised for action by the board.
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AND SUSTAINABLE BUSINESS
STRATEGY
The tables below summarise the key climate-related risks (transition and physical) and opportunities identified as part of our
sustainability risk review process that are considered to have the greatest impact on the business in the short, medium and long term.
Climate-related risks
Climate risk Classification
Risk description
Potential impacts to the business
Transition
Policy and
legal
Failure to comply with
climate-related legislation
by not meeting targets or
reporting requirements.
• Loss of position as market leader and
reputational damage.
• Loss of opportunities within our market sectors.
• Possible fines and penalties imposed.
Time horizon
Short-term
(<5 years)
Reputation
Policy and
legal
Market
Failure to comply with
climate-related stakeholder
expectations leading to loss
of position as market leader
and lost opportunities.
Failure to meet emissions
reduction targets or
increased costs due to
offset costs.
Steel becomes
unsustainable due to
over demand for low
carbon steel making it
unaffordable and projects
being cancelled.
Physical
Acute
Operational disruption/
reduced capacity due to
extreme weather event, e.g.
flooding or wind damage.
Chronic
Operational disruption/
reduced capacity due
to increased frequency
of extreme weather, e.g.
drought.
66
• Loss of position as market leader and
reputational damage.
Short-term
(<5 years)
• Loss of opportunities within our market sectors.
• Negative share price impact.
• Possible fines and penalties imposed, including
carbon taxes.
Medium-term
(5-10 years)
• Carbon offsetting costs could increase if the
Group needs to purchase additional offsets
where we fail to reduce our GHG emissions.
• Offsetting prices will increase as demand for
these initiatives will increase.
• Shortage of material availability resulting in
project delays or cancellations.
Medium-term
(5-10 years)
• Pressure from customers to reduce emissions of
materials as well as emissions associated with
distribution and construction activities
• More stringent regulation for construction
materials and products.
• Increased R&D, design, IT and training costs
associated with developing new technology to
create innovative projects.
• Project delays incurred due to unsafe working
conditions on site and disruption to deliveries of
materials to our factories.
Long-term
(>10 years)
• Damage to construction sites and equipment.
• Design and procurement challenges to deliver a
project to withstand extreme weather effects.
• Increasing difficulty in obtaining insurance in
locations of extreme weather conditions.
• Project delays incurred due to unsafe working
conditions on site and disruption to deliveries of
materials to our factories.
Long-term
(>10 years)
• Damage to construction sites and equipment.
• Design and procurement challenges to deliver a
project to withstand extreme weather effects.
• Increasing difficulty in obtaining insurance in
locations of extreme weather conditions.
Assessment of
Assessment of
likelihood
financial impact
Current/future mitigation
Unlikely
Low
• Strong controls and governance on climate-related reporting to the board.
• Continual training and development on climate change matters to stay ahead of any
legislative changes.
• Engage external specialists, where appropriate, to provide advice on current sustainability risk
management processes and upcoming or potential changes to climate-related legislation.
Possible
Moderate
• Regular engagement with all stakeholders, promoting open and transparent
communication.
• Strong controls and governance on climate-related reporting to the board.
Unlikely
Low
• Our Group’s net zero roadmap and sustainability framework will be embedded in our
business processes and procedures to ensure our ambition is achieved.
• Regular monitoring and reporting of GHG to the board.
Unlikely
Significant
• Continue to maintain our strong relationships with our supply chain providers.
Possible
Low
• Monitoring of weather forecasts to ensure employee safety and early steps taken to
• We have discussed with our key suppliers their own strategy to become net zero and
undertaken research into low carbon alternatives.
• We have signed up to SteelZero, demonstrating that we aim to procure 100 per cent net
zero steel by 2050, with specific interim targets set for 2030.
• Provision of training for low-carbon design and new technologies.
• Engaging in discussions on climate-related matters early on in the project life cycle so we
can ensure our customers’ expectations are fully understood and achieved.
• Perform regular material price sensitivity assessments and consider contingency plans
for procurement.
mitigate potential disruption to deliveries.
• Detailed risk reviews of project sites in areas of extreme weather or located close to
waterways.
• Review of insurance policies and arrangements.
• Perform more detailed quantitative scenario analysis in 2023 to demonstrate the Group’s
resilience to climate-related risks.
mitigate potential disruption to deliveries.
• Detailed risk reviews of project sites in areas of extreme weather or located close to
waterways.
• Review of insurance policies and arrangements.
• Perform more detailed quantitative scenario analysis in 2023 to demonstrate the Group’s
resilience to climate-related risks.
Unlikely
Negligible
• Monitoring of weather forecasts to ensure employee safety and early steps taken to
Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT The tables below summarise the key climate-related risks (transition and physical) and opportunities identified as part of our
sustainability risk review process that are considered to have the greatest impact on the business in the short, medium and long term.
Climate-related risks
Climate risk Classification
Risk description
Potential impacts to the business
Assessment of
likelihood
Assessment of
financial impact
Current/future mitigation
Transition
Policy and
Failure to comply with
• Loss of position as market leader and
Unlikely
Low
• Strong controls and governance on climate-related reporting to the board.
legal
climate-related legislation
reputational damage.
by not meeting targets or
reporting requirements.
• Loss of opportunities within our market sectors.
• Possible fines and penalties imposed.
• Continual training and development on climate change matters to stay ahead of any
legislative changes.
• Engage external specialists, where appropriate, to provide advice on current sustainability risk
management processes and upcoming or potential changes to climate-related legislation.
Reputation
Failure to comply with
• Loss of position as market leader and
Possible
Moderate
• Regular engagement with all stakeholders, promoting open and transparent
communication.
• Strong controls and governance on climate-related reporting to the board.
Policy and
Failure to meet emissions
• Possible fines and penalties imposed, including
Medium-term
Unlikely
Low
• Our Group’s net zero roadmap and sustainability framework will be embedded in our
legal
carbon taxes.
(5-10 years)
business processes and procedures to ensure our ambition is achieved.
• Regular monitoring and reporting of GHG to the board.
Market
Steel becomes
• Shortage of material availability resulting in
Unlikely
Significant
• Continue to maintain our strong relationships with our supply chain providers.
• We have discussed with our key suppliers their own strategy to become net zero and
undertaken research into low carbon alternatives.
• We have signed up to SteelZero, demonstrating that we aim to procure 100 per cent net
zero steel by 2050, with specific interim targets set for 2030.
• Provision of training for low-carbon design and new technologies.
• Engaging in discussions on climate-related matters early on in the project life cycle so we
can ensure our customers’ expectations are fully understood and achieved.
• Perform regular material price sensitivity assessments and consider contingency plans
for procurement.
Physical
Acute
Operational disruption/
• Project delays incurred due to unsafe working
Possible
Low
• Monitoring of weather forecasts to ensure employee safety and early steps taken to
mitigate potential disruption to deliveries.
• Detailed risk reviews of project sites in areas of extreme weather or located close to
waterways.
• Review of insurance policies and arrangements.
• Perform more detailed quantitative scenario analysis in 2023 to demonstrate the Group’s
resilience to climate-related risks.
Chronic
Operational disruption/
• Project delays incurred due to unsafe working
Unlikely
Negligible
• Monitoring of weather forecasts to ensure employee safety and early steps taken to
mitigate potential disruption to deliveries.
• Detailed risk reviews of project sites in areas of extreme weather or located close to
waterways.
• Review of insurance policies and arrangements.
• Perform more detailed quantitative scenario analysis in 2023 to demonstrate the Group’s
resilience to climate-related risks.
67
Time horizon
Short-term
(<5 years)
Short-term
(<5 years)
Medium-term
(5-10 years)
Long-term
(>10 years)
Long-term
(>10 years)
climate-related stakeholder
reputational damage.
expectations leading to loss
of position as market leader
and lost opportunities.
• Loss of opportunities within our market sectors.
• Negative share price impact.
reduction targets or
increased costs due to
offset costs.
unsustainable due to
over demand for low
carbon steel making it
unaffordable and projects
being cancelled.
• Carbon offsetting costs could increase if the
Group needs to purchase additional offsets
where we fail to reduce our GHG emissions.
• Offsetting prices will increase as demand for
these initiatives will increase.
project delays or cancellations.
• Pressure from customers to reduce emissions of
materials as well as emissions associated with
distribution and construction activities
• More stringent regulation for construction
materials and products.
• Increased R&D, design, IT and training costs
associated with developing new technology to
create innovative projects.
reduced capacity due to
conditions on site and disruption to deliveries of
extreme weather event, e.g.
materials to our factories.
flooding or wind damage.
• Damage to construction sites and equipment.
reduced capacity due
to increased frequency
of extreme weather, e.g.
drought.
• Design and procurement challenges to deliver a
project to withstand extreme weather effects.
• Increasing difficulty in obtaining insurance in
locations of extreme weather conditions.
conditions on site and disruption to deliveries of
materials to our factories.
• Damage to construction sites and equipment.
• Design and procurement challenges to deliver a
project to withstand extreme weather effects.
• Increasing difficulty in obtaining insurance in
locations of extreme weather conditions.
www.severfield.comStock Code: SFR STRATEGIC REPORT BUILDING A RESPONSIBLE
AND SUSTAINABLE BUSINESS
STRATEGY
Climate-related opportunities
Opportunity
Classification
Description
Strategy to realise opportunity
Time horizon
Green revenue
streams
Market
Renewable
energy
Energy source
Research and
development
Products and
services
Identify new and increase existing
revenue streams from green
infrastructure projects. The Group is well
placed to capitalise on the anticipated
increase in demand for renewable energy
infrastructure, including battery plants
and wind farms to facilitate the UK’s
switch to electric cars and renewable
energy.
We expect increased demand for
innovative steel solutions that enable
the construction of urban and public
transport systems such as people movers
and bridges.
We expect to see further projects aimed
at carbon reduction in transport, such
as the decarbonisation of the UK rail
network.
Continuing the transition from using gas
oil and natural gas to renewable low-
carbon energy sources could give rise to
operational and supply chain efficiencies
and cost reductions.
With the increasing focus on climate-
related matters as the UK, and the world,
accelerates its efforts to decarbonise in
line with the Paris Agreement, we expect
to see a change in the requirements of
our customers to build projects that
reduce their carbon emissions.
Research and development into products
and processes will help us to provide
innovative solutions that meet the
complex and changing needs of our
customers.
Long-term
(>10 years)
We will continue to work with customers
and contractors to realise innovative
ways of construction and maintain our
position as market leader for structural
steel.
Building and maintaining relationships,
enhanced collaboration and dialogue
with new and existing potential
customers will allow us to continue to
be a first choice contractor for new and
innovative projects.
We have made good progress to date,
increasing the procurement of renewable
electricity for 89 per cent of our facilities.
Short-term
(<5 years)
Continue to switch the one remaining
facility to green electricity within 2023
and research the availability of other
renewable energy sources for heating
and power.
One of our strategic objectives, supported
by our business improvement initiatives,
is to continue to invest in climate-related
research and development to identify
new engineering techniques, innovative
technologies and source steel with low
embodied carbon to assist our customers
to minimise the life cycle carbon
emissions of their projects.
Short-term
(<5 years)
Scenario analysis progress
During the year, we have performed a
high-level qualitative assessment of the
likelihood and severity to the business
of all material climate-related risks and
opportunities in different climate-related
scenarios, concentrating in particular on
flood risk. We have not noted any changes
needed to our business model in response
to the identified material climate-related
risks and opportunities.
In a maximum +1.5°C scenario (aligned
to the Paris Agreement), it is assumed
that the physical risks of climate change
do not significantly differ from those we
are currently experiencing, including
occasional localised flash flooding.
Therefore, in this scenario transition risks
are expected to pose the biggest cost
to the Group. Whereas, in a +4°C (and
other varying temperatures) scenario,
it is assumed that the physical risks of
extreme weather events do occur. In this
scenario, it is anticipated that the Group is
less impacted by transition risks and more
impacted by physical risks resulting in
supply and operational disruptions at two
of our facilities (Dalton and Enniskillen),
which are located near rivers with the
surrounding areas and access routes
being at risk of flooding.
We are committed to performing a more
detailed quantitative scenario analysis in
2023, for disclosure in next year’s annual
report, and we continually reassess our
considerations around materiality as we
further develop our understanding of
climate-related scenario analysis.
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AND SUSTAINABLE BUSINESS
RISK MANAGEMENT
Processes for identifying and
assessing climate-related risks.
The Group’s process of identifying and
assessing climate-related risks and
opportunities is embedded in the Group’s
existing risk management process and
is fully aligned with our three lines of
defence model (see pages 86 to 89 for
more detail).
Our sustainability risk review committee,
with input from senior management from
all key disciplines of the business and
members of the sustainability committee,
continued to develop and review our
sustainability risk register during
the year, capturing climate and other
sustainability-related risks to ensure that
material risks are identified and managed
effectively.
We consider climate change within the
principal risk of being able to demonstrate
that we are a ‘sustainable and responsible
business’ and consider this to be a
medium risk in the short term. We define
principal risks as those with medium/
high risk rating, taking 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).
Processes for managing climate-
related risks.
Our process for mitigating, accepting and
controlling principal risks, which also
includes climate-related risks, is set out
on pages 90 to 98. We prioritise principal
risks through our Group risk register and
risk heat map. The impact-likelihood
rating, which is evaluated during risk
identification, is our primary metric for
prioritising risks.
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, this includes specific
consideration of climate-related risks.
Metrics and targets
Full details of climate-related metrics
and targets performance disclosures,
including GHG emissions, can be found
throughout the ‘Building a responsible and
sustainable business’ section on pages
70 to 85.
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AND SUSTAINABLE BUSINESS
Our sustainability framework also supports the United Nations Sustainable Development Goals (‘UN SDGs’). The table below illustrates
our key achievements in the year against our four sustainability pillars and our progress against the metrics and targets we use to
measure our performance in each area, as well as identifying the seven UN SDGs where the Group can have the biggest impact:
Pillar
Activities/KPI
2022 performance
Planet
Continue to improve the environmental
impact of our processes and projects.
Support sustainable construction through
circularity, strive for net zero and enable
efficient business practices.
• GHG intensity
18% reduction in our scope 1 and 2 GHG emissions from
2018 (our base year) using a market-based approach.
Slight 2% increase from 2021 reflecting the full year
impact of DAM Structures.
• CDP global
Improved our CDP rating to A- from a B rating.
evaluation rating
Maintained our CDP supplier engagement leader rating
of A.
Read more on pages 72 to 77
• Other industry
accreditations
achieved
Improved our BES 6001 rating to ‘very good’
Listed as the top UK construction company in 2022 in the
Financial Times - Europe’s Climate Leaders index.
• Green electricity
usage
16% improvement in 2022 to 89% green electricity used in
our wholly owned factories (2021: 73%).
People
Support our teams to be diverse, engaged,
motivated, and competent. Engage positively
with projects and the local communities in
which we work.
• Gender pay equality
0.94 male/female normalised hourly rate ratio.
• Diversity and
inclusion %
9% of our workforce are female (2021: 10%) and women
represent 3% of construction roles across the Group
(2021: 4%).
• Accident frequency
11% improvement in 2022 to 0.16 (2021: 0.18).
rate
Read more on pages 78 to 81
• Incident frequency
11% improvement in 2022 to 1.32 (2021: 1.48).
rate
• Director safety
73% improvement in 2022 to 85 (2021: 49).
visits undertaken
• % of employees
98% of employees paid at or above the Real Living Wage.
paid above Living
Wage
70
Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT Pillar
Activities/KPI
2022 performance
Prosperity
Deliver sustainable, profitable growth whilst
satisfying our ethical, legal and contractual
obligations.
• Economic value
generated and
distributed
11% improvement in 2022 to £403.6m (2021: £363.3m).
Read more on page 82
Principles of governance
Show leadership in delivering a
sustainability programme which considers
whole life impact, taking us beyond
compliance and ensuring continuous
improvements.
Read more on pages 84 to 85
• Economic value
11% improvement in 2022 to £382.6m (2021: £343.2m).
distributed
• Net investment
Stable net investment at 24%, consistent with the prior
year (2021: 25%).
• Supply chain due
diligence
100% (2021: 97%) of suppliers subject to annual supply
chain contractor due diligence reviews
• Corporation taxes
paid
£3.8m (2021: £4.6m) reflecting a 18% decrease due to
increased tax credits and capital allowances.
• Prompt payment
reporting
93% (2021: 95%) of invoices paid within agreed payment
terms in latest PPC reporting period for our signatory
companies.
• Board diversity
22% (2021: 22%) of the Group’s board are women.
• Board tenure
7.1 years (2021: 6.1 years) average tenure of our board of
directors
• Executive
18% (2021: 17%) of the Group’s board are women.
committee diversity
• Coverage
of certified
environmental
management
systems
Group-wide 100% accreditation to ISO 14001:2015
(environmental management) (2021: 100%) and ISO
45001:2018 (occupational health and safety) (2021:100%)
• Ethics training rate
10% improvement to 91% as percentage of colleagues
receiving regular ethics training (2021: 81%)
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PLANET
We have embedded our climate-related
risks and opportunities into our strategy
and business model. The progress we
have already made against our ambitious
interim sustainability target (to reduce our
scope 1 and 2 GHG emissions by 25 per
cent by 2025 against a 2018 baseline), and
our long-term target (to reach net zero for
our scope 1 and 2 carbon emissions by
2040), is set out below.
Our net zero roadmap
This year, we have focused our attention
on developing our ‘net zero roadmap’,
which focuses on the strategic priorities
we believe are right for the steel industry,
the world and for our Group. We engaged
extensively with our customers, suppliers,
employees and our shareholders to
understand what the sustainability
priorities of each stakeholder group are.
We are committed to our long-term target
to achieve net zero emissions from our
operations by 2040, and our roadmap
includes a number of milestones along
the way, including a short-term target to
reduce scope 1 and 2 GHG emissions by
25 per cent by 2025, set against a 2018
baseline. These targets are based on the
Paris Agreement, which seeks to limit
global warming to below 1.5 degrees
Celsius, compared to pre-industrial levels.
The main elements of our roadmap to
achieve our targets are set out below. We
acknowledge that sustainability matters
and reporting are constantly evolving and,
consequently, the Group’s plan will also
continuously develop over the forthcoming
years, but our current roadmap is made up
of a combination of actions to reduce our
emissions and offsetting activities.
Our net zero roadmap identifies the main
initiatives and technologies to be explored
or implemented in order to achieve our
2040 ambition and illustrates that the
Group is on track to achieve its interim
target by 2025.
10.0
9.8
18%
8.0
(25%)
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c
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t
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e
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r
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i
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e
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8
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(
(7%)
S
O
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s
e
i
t
i
n
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t
r
o
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p
o
(10%)
(8%)
i
g
n
n
a
r
T
i
s
a
g
g
n
h
c
t
i
i
w
S
(22%)
&
t
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F
Why is it important?
Steel is the world’s most widely used
material and global steelmakers are
continuing to make 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
(‘GHG’) 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 operational improvement initiatives
continue to focus on our environmental
impact through our Lean manufacturing
techniques and cost and waste reduction
programmes.
Notwithstanding this, carbon reduction
is an important strategic objective for the
Group and our sustainability framework
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 ISO14001 certified environmental
management system. We are also certified
to BES 6001 Responsible Sourcing,
increasing our rating within the period to
‘very good’.
72
Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT
and were accredited as an operationally
carbon neutral organisation by the
Carbon Trust. We continue to maintain
this accreditation, having been certified
to the Achilles ‘carbon reduce’ standard in
May 2022. The carbon reduce scheme, is
the UK’s only accredited GHG certification
scheme and maintaining the accreditation
is an important step in our sustainability
journey towards net zero. Carbon neutral
in this context means that we used carbon
offsetting to eliminate the combined
scope 1, scope 2 and operational scope
3 GHG emissions generated from our
manufacturing facilities and construction
sites. Projects that benefit from our carbon
offsetting include solar power projects
in India (chosen because of our existing
manufacturing footprint in India), 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.
Our progress against our targets
During the year, the Group commenced the
process to set science-based emissions
reduction targets across our entire value
chain. This process can take up to two
years and means that we will develop
longer-term commitments to make real
reductions to our emissions, in line with
the objectives of the Paris Agreement to
limit global warming to well below two
degrees Celsius above pre-industrial
levels and pursue efforts to limit warming
to 1.5 degrees Celsius. The Group will set
verifiable science-based targets through
the Science Based Targets initiative
(‘SBTi’), which independently assesses
corporate emissions reduction targets in
line with climate science.
Following the acquisitions of Severfield
(Nuclear & Infrastructure) (formerly
Harry Peers) in October 2019, and DAM
Structures in February 2021, we are
now able to include them in our carbon
accounting. This will allow us to use the
FY22 climate-related data to set a new
baseline year for our science-based
targets that is representative of our
growing business. We are on schedule to
submit these for validation by the SBTi
during 2023.
In August 2021, the Group successfully
achieved one of our short-term targets
The Group’s key initiatives include:
• Energy saving opportunities scheme
(‘ESOS’) recommendations
− Implement recommended projects
around heating, compressed air,
lighting, and machinery.
• Training
− Bring awareness on climate-related
risks and opportunities to the board.
− Identify departments that are key
to reducing both embodied and
operational carbon across the Group
and provide specialist training on
carbon reduction initiatives.
− Create and implement a business-
wide training programme on our net
zero strategy, including focus on
behavioural change.
• Green electricity
− To switch all wholly owned facilities on
to green electricity contracts.
− Continue to conduct energy audits to
ensure reductions in usage are also in
progress.
• Switching gas
− Switch to green gas contracts at
applicable locations.
− Continue to monitor the potential to
introduce gas at locations with no
existing gas connection.
• Plant and equipment
− Complete a gap analysis of plant
across the Group.
− Implement HVO roll-out across all
applicable plant at both facilities and
construction sites.
− Consider alternative power sources,
including hybrid and hydrogen,
and new technologies in all future
investment decisions.
• Heating
− Investigate heat recovery using
machinery already in situ.
− Conduct a review of Group-wide
heating systems, considering both
fuel type and efficiency, and future
technologies.
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PLANET
CARBON OFFSETTING -
GENERATING CLEAN ENERGY
FOR THE GRID IN INDIA
Supporting the global transition to renewable energy
We selected this renewable energy
offsetting project for its significant
impact in reducing the carbon intensity
of the energy grid in India, where our
joint venture, JSSL, is based. This project
is also aligned with the Group’s strategic
initiatives of building value in India and
aligns to four of our key UN SDGs.
India has a rapidly growing population,
which is increasing the demand for
energy throughout the country. 75 per
cent of India’s energy needs are met
through the burning of fossil fuels,
meaning greenhouse gas emissions
continue to rise.
Since 2013, India has accounted for
more than half of the increase in global
CO2 output. In order to achieve the goals
set out under the Paris Agreement it is
vital to reverse this trend, and increase
the prevalence of renewable energy
generation in India.
The Indian Government has estimated
that achieving its Paris emissions
reduction pledge will require £2 trillion in
carbon finance between now and 2030,
from domestic and international sources.
74
Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT In addition to this, we have made excellent
progress in reducing scope 1 and 2 GHG
emissions from our operations, with a total
reduction of 18 per cent by 26 March 2022,
using a market-based approach against a
2018 baseline. This result confirms that we
are on track to achieving our interim target
to reduce scope 1 and 2 GHG emissions
by 25 per cent by 2025. To achieve this, we
have:
• increased the procurement of renewable
electricity for all our facilities. We have
only one facility to transition to green
electricity, which will be completed in
2023,
• continued to implement Lean ways
of working in our construction sites,
offices, and factories,
• started the transition to using
hydrotreated vegetable oil (‘HVO’) across
our facilities and construction sites,
• performed further research into the
• worked with a number of our key
feasibility of installing renewable energy
generation at our facilities,
• successfully centralised our Group
procurement process, to consolidate
and streamline our use of energy,
materials and supplies,
• further developed our Group processes
to consider energy efficiency and
environmental criteria in design,
procurement, investment and
contracting decisions, including the
introduction of an internal carbon
calculator,
• monitored the levels of waste produced
during our fabrication and site
processes for the second year running,
which will allow us to set targets in the
next year in order to seek to reduce our
waste output, and
suppliers, engaging on our mutual
sustainability strategies and delivering
decision-enhancing, transparent carbon
reporting on a range of our projects.
As required by Streamlined Energy and
Carbon Reporting (‘SECR’), we report on
our CO2e emissions in accordance with the
internationally recognised Greenhouse
Gas Protocol and our metrics include
scope 1 and scope 2 emissions. During
the year, our absolute Group scope 1 and
2 emissions have increased by eight per
cent, using a location-based approach,
whilst our intensity measurement has
decreased by three per cent (21 per
cent against a 2018 baseline of 33.5
CO2e/£m revenue). The movement in the
year reflects the full-year effect of the
acquisition of DAM Structures.
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
2022
7,359
3,374
10,733
2022
26.6
2021
6,297
3,598
9,895
2021
27.5
Using a market-based approach, which includes the positive impact of switching to green energy, our absolute scope 1 and 2 GHG
emissions have increased by two per cent from the previous year (18 per cent against a 2018 baseline) and our intensity measurement
has reduced by 44 per cent against a 2018 baseline of 35.6 CO2e/£m revenue to 19.9 CO2e/£m revenue. For the year ended 26 March
2022, the Group’s global GHG emissions, using a market-based approach, 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
2022
7,359
671
8,030
2022
19.9
2021
6,297
1,565
7,862
2021
21.9
Our scope 1 and scope 2 GHG data is being independently verified by Achilles, in accordance with the international standard
ISO 14064-1.
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Absolute emissions scope 1 and 2:
9,779
9,202
9,331
8,341
9,895
10,733
7,862
8,030
FY19
(2018 baseline)
FY20
FY21
FY22
● Location-based methodology ● Market-based methodology
See tables at the bottom of page 75
Energy usage from:
Scope 1
Scope 2
Total MWh
2022
30,410
16,397
46,807
2021
25,452
15,431
40,883
The information in the table above represents absolute energy usage only, irrespective of whether this is from low carbon sources.
To see how successful we have been in reducing our GHG emissions from energy, see page 70.
The Group has made good progress during
the year in managing its energy, fuel
consumption and emissions and we have
been recognised as leaders in our sector
for our work to date in reducing carbon
emissions. For the second year running,
we have been included in the Financial
Times’ listing of Europe’s climate leaders,
published in May 2022. This highlights the
400 companies that have achieved the
greatest reduction in their scope 1 and 2
GHG emissions intensity over a five-year
period between 2015 and 2020.
In the prior year, we 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 89 per cent (2021: 73 per cent), with only
one facility remaining to switch in 2023.
In 2022, we improved our CDP index rating,
achieving an ‘A-’. 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.
During the year, alongside developing
the Group’s own net zero roadmap, we
were also a key contributor to developing
the British Constructional Steelwork
Association’s (‘BCSA’) UK structural
steelwork decarbonisation roadmap. This
roadmap sets out the new and developing
technologies that will enable the UK
structural steelwork sector to decarbonise
to meet the UK net zero carbon target
by 2050.
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.
Scope 3 emissions
During the year, the Group’s sustainability
strategy and management process has
developed to include further detail around
our scope 3 emissions. Scope 3 emissions
account for all of the other emissions an
organisation produces when fossil fuels
are burnt within its value chain. The GHG
Protocol identifies 15 categories of scope
3 emissions which can be managed by
an organisation, and these include both
upstream and downstream activities,
as well as activities undertaken by the
organisation which are not included within
scope 1 or scope 2. For many businesses,
scope 3 emissions make up a large share
of their total emissions, therefore, in the
context of the UK government’s 2050 net
zero target, it could be said to be the most
important category to address.
Our verified scope 3 GHG emissions have
reduced by 41 per cent to 6,540 CO2e
from the prior year (2021: 11,137 CO2e).
This significant reduction is largely due
to a 55 per cent reduction in transport
and distribution-related emissions,
owing to the favourable location of the
construction sites we have worked on
throughout the year to our factories. Waste
emissions have reduced slightly due to
our increased focus to divert waste from
landfill. Following the easing of lockdown
restrictions, our colleagues have increased
travel to face-to-face meetings, and
returned to our offices, in turn increasing
both business travel and colleague
commuting within the period.
76
Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT GHG emissions from:
Waste
Business travel
Colleague commuting
Transport and distribution
Total verified scope 3 CO2e emissions
Tonnes of
CO2e
2022
279
484
1,188
4,589
6,540
Tonnes of
CO2e
2021
332
246
404
10,155
11,137
Our scope 3 GHG data is being independently verified by Achilles, in accordance with the international standard ISO 14064-1.
Additional scope 3 categories
In order to develop scope 3 targets for the business in line with our ambitious targets for scope 1 and 2 emissions (those we own
and have control over), a gap analysis was conducted during the year on the 15 scope 3 categories as defined by the GHG Protocol.
Following this value chain mapping exercise, we concluded that our measurement of scope 3 emissions would include eight of the 15
categories of emissions. We have therefore enhanced our reporting of scope 3 emissions, to include the following four categories.
GHG emissions from:
Purchased goods and services
Fuel & energy related
End of life treatment
Investments
Total unverified scope 3 CO2e emissions
Tonnes of
CO2e
2022
374,660
2,848
166
1,215
378,889
As is the case with most businesses in the construction sector, the majority of our GHG emissions are indirect (scope 3), accounting for
98 per cent of total emissions, on a market-based approach. Within scope 3 emissions, purchased goods and services represent 97 per
cent of emissions, largely due to the embodied carbon in steel. We are committed to addressing our scope 3 emissions, in particular
those from purchased goods and services, in order to achieve our strategic objective of net zero by 2040, this commitment is reflected
by the Group signing up to SteelZero.
As we continue to develop our scope 3 reporting and set targets for the Group, we will review the requirement to have further scope 3
categories verified.
2023 areas of focus:
• We will set new long-term net zero carbon targets for the Group, approved by the SBTi, to further reduce carbon in our operations in
line with climate science.
• Perform more detailed qualitative and quantitative climate scenario analysis in line with the TCFD recommendations.
• Continue to refine our approach to address the GHG impact in our supply chain and other scope 3 emissions.
• Following a two-year period of data collection, we will set new diversion from landfill and other waste reduction targets.
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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.
We have over 1,650 employees across our
manufacturing facilities, construction
sites and offices. Our mix of designers,
project managers, quantity surveyors,
estimators, engineers, fabricators, steel
erectors and support function experts
work together with a clear, shared purpose,
to develop better ways to build, for a world
of changing demands.
Management approach
Through another year where compassion,
fairness and flexibility have been
paramount in our approach to our
colleagues we have continued to focus our
activities in the following main areas:
• Maintaining our commitment to our
core value – ‘safety first’. To provide
industry-leading safety, health and
environmental (‘SHE’) performance.
• Creating an environment where
Severfield colleagues feel listened to
and are fairly recognised and rewarded
for their contribution to the Group.
• Reviewing our performance,
development and recruitment
processes.
Safety first – striving for a
zero-harm workplace
As we emerge from the challenges of
the pandemic and the difficulties it has
brought to the way we all work, be it in
our factories, construction sites or in the
offices, we maintain our commitment
to provide industry-leading SHE
performance.
Our focus has been, and always will
be, safety first with no exceptions, an
approach supported and guided by the
board, management and all employees.
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 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.
Creating a culture of
inclusivity and diversity
We are committed to building a supportive,
diverse, and inclusive working environment
where all colleagues feel they belong.
Ensuring we have multiple avenues to
enable meaningful dialogue with our
people is key to achieving this aim. Our
intranet ‘Connect’ enables us to update
colleagues on the strategy, performance
and progress of the organisation, general
company news and health and wellbeing
issues. It has gone from strength to
strength during the year with colleagues
having the ability to comment on articles,
take part in surveys and share their views.
Monthly colleague engagement with the
platform is at 99 per cent. Toolbox talks,
manager briefings, emails, and Skyline,
our company magazine, all play their part
in keeping our colleagues informed and
connected.
78
Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT Through working closely with Louise Hardy
(the Group’s designated non-executive
director responsible for workforce
engagement) our executive committee
supported by our HR team continue to
develop our approaches to ensure the
views of our people are heard at board
level through face-to-face engagement,
listening groups and surveys.
We are committed to building diversity,
equity, and inclusion into everything
we do and continue to implement the
right conditions for all colleagues to
achieve their full potential and bring
their whole, authentic self to work. We
acknowledge we have a long way to go.
With only 9 per cent of our workforce being
female, greater focus is being placed
on our hiring practices and candidate
attraction. Through the implementation
of systems for managing HR processes,
we are gaining a better understanding
of under-represented groups in our
workforce and diversity data is becoming
an integral part of the decision-making
process around talent, performance, and
reward.
As of 26 March 2022, the board had two
female directors (22 per cent). Female
representation on our executive committee
is two (18 per cent) and of those reporting
directly to members of the executive
committee, female representation is much
higher at 25 per cent, with nearly all senior
finance and HR roles being held by women.
Our median gender pay gap stands at
16.3 per cent and is improving year on year.
1,502
91%
51
75%
9
82%
7
78%
153
9%
All employees
17
25%
2
18%
2
22%
Executive
committee direct
reports
Executive
committee
Board
● Male ● Female
As we faced another year of the pandemic,
fairness and compassion continued to
be at the forefront of our approach. For
those in our manufacturing facilities or
working on our construction sites, socially
distanced ways of working continued to
be the norm. We have continued to pay
enhanced sick pay to enable colleagues to
self-isolate when required, to protect their
colleagues and the wider community. Our
office-based colleagues have continued
to deliver whilst working remotely for the
majority of the 2022 financial year and
embraced a return to the office on three
days a week, improving collaboration,
project delivery and social wellbeing.
We have continued to offer all colleagues
the opportunity to share in the future
success of the business through investing
in an annual SAYE scheme, with 21 per
cent of the workforce participating in this
year’s scheme.
Performance, development and
recruitment
The future of the business depends on
our ability to attract, recruit, develop and
retain individuals with the right mix of
expertise, technical skills, and personal
qualities. As our focus on implementing
fit for purpose systems and processes
related to recruitment, onboarding and
performance reviews comes to an end we
have been able to shift our attention to
improving line manager ability and focus
on developing the skills we need for the
future. Development is delivered through
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.
Our online performance review process,
My Performance, is continuing to be
rolled out across the different levels in
our business and enables managers
and colleagues to have open, honest
conversations about their current
performance, future goals, personal
development, and career aspirations.
Through detailed workforce composition
analysis, we have identified skills and
knowledge gaps for the future and have
developed and implemented early careers
programmes to start to address these
needs, whilst increasing our focus here
and now on the recruitment of trainees
and apprentices for our manufacturing
facilities.
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AND SUSTAINABLE BUSINESS
PEOPLE
non-conformities, an assurance that we
have robust policies and procedures in
place across the Group. The policies and
procedures are developed in a way that
creates a fair and just culture with no
harm to people, premises or planet.
In addition to the management system
certifications, we have a number of high-
level industry accreditations, including
Constructionline Gold, which means our
environmental management, equalities
and diversity, quality management and
legislative compliance are subject to
increased scrutiny around governance and
risk management, and CHAS Advanced,
which further confirms our Group’s health
and safety processes meet excellent
standards.
In December 2020 we introduced a new
SHE software management platform
across the Group, Intelex, with an objective
of collating information across all of the
business units from incident reporting,
inspections and action management.
Over the past year, Intelex has further
embedded data analysis and outputs
into our decision-making process to
continually improve our SHE performance.
In 2022, we continued to work with our
occupational health provider to ensure
we are keeping our people healthy as well
as safe. Keeping our employees healthy
stretches beyond the workplace, we
recognise that the stresses and strains
of everyday life can affect us all and can
have an impact on our performance at
work. We continue to be partnered with
Health Assured to provide an employee
assistance program (‘EAP’), assisting with
issues such as personal finances, legal
issues and family issues.
Engaging with our people
We recognise the importance of input and
feedback from all our people in helping
us deliver on our strategic goals, and as a
result we launched a group-wide My Voice
Forum during the year.
The forum provides a formal way for
colleagues and management to connect,
gain feedback and exchange information
and views on any business-related topic.
The forum operates in the spirit of co-
operation and trust. Its aims are to build
a brighter future for all at Severfield,
ensuring voices are heard. Louise Hardy
(our designated non-executive director
responsible for workforce engagement),
Alan Dunsmore (Group CEO) and our
Group HR director regularly meet with the
forum representatives. These meetings
have provided valuable, ongoing insights
and feedback for the board during a period
of significant external change.
The regular feedback is helping us manage
transition back into the office following
the pandemic and has given us insights
into how our workforce views our approach
to wellbeing, communication and the
training and development we offer. In turn,
it has given us the opportunity to share
business updates and address concerns
over the impact of external factors with
our colleagues in an open forum (such as
energy costs and the ongoing situation in
Ukraine). We look forward to strengthening
the relationship and working closely with
our colleague representatives over the
coming year.
A thorough review of the performance
and potential of 189 senior and specialist
colleagues enabled the board to have
a complete and clear picture of talent
across the Group and to ensure strategies
are in place to further develop and
retain the leaders and specialists we
need for our future. This work enabled
us to review our succession plans for
the executive committee and business
unit management boards. 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.
Recruitment, as for most industries, has
proved challenging this year and we have
taken advantage of the government’s
kick start scheme and have forged new
relationships with external providers
working with the long-term unemployed,
ex-offenders and those currently
struggling to get into work.
Our progress against our
targets Safety first
Given the constraints that the pandemic
placed on us over the year, especially the
way we interact and communicate with
our colleagues, we are pleased that we
have once again reported a reduction in
our injury frequency rate (‘IFR’) for the year.
Our Group IFR for 2022 decreased by 11
per cent to 1.32 (2021: 1.48), ahead of both
our Group target and the industry average.
This gives us an excellent platform to
continue to build on over the next financial
year as the world of work returns to
relative normality.
Group management systems are
accredited to ISO45001:2018
(Occupational Health and Safety)
and ISO14001:2015 (Environmental
Management). During the year, both
systems underwent recertification, and
we are proud to have maintained zero
80
Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT • Continue to deliver our behavioural
safety training programme and the wide
range of other internally and externally
provided training courses.
• Promote the health and wellbeing of
our people and their families through
useful links to external resources or our
EAP service to ensure they receive all
the support necessary in these current
challenging economic times.
• Further develop processes to capture
and report on a range of employee-
related data that can help drive our
inclusivity and diversity strategy and
continue to foster our culture.
• Continue to support employee-led local
community initiatives and developing
strong community partnerships for
causes close to their hearts.
Future skills
During the year, to address future skills
shortages, we launched our ‘development
on a different scale’ graduate recruitment
programme which attracted more than
100 applicants (of which 16 per cent were
female). The first cohort of ten engineering
graduates are due to join the Group in the
summer. To demonstrate our commitment
to investing in the next generation and
developing the skills of our workforce, we
became members of the ‘5% Club’, publicly
announcing our commitment to have five
per cent of our workforce ‘earning and
learning’ over the next five years. During
the year, we had 15 apprentices join the
business across a range of disciplines,
taking the Group to a total of 21 colleagues
studying for qualifications via an
apprenticeship.
The Severfield Foundation
Our people are really passionate about
doing the right thing and giving back,
which is why The Severfield Foundation
(‘the Foundation’) was incorporated back
in 2016. Through the Foundation, we
support local charities and organisations,
with strong connections to our colleagues,
through charitable contributions and by
encouraging our people to donate their
time to local communities and charitable
initiatives.
Our employees coordinate the
Foundation’s activities, contributing to
and taking part in events. With their help,
our vision is to develop the Foundation
into a leading trust, which will help and
support disadvantaged people and local
communities for many years.
As well as supporting local charities
chosen by each of our Group companies,
including Bolton Hospice, Saint Catherine’s
Hospice, Yorkshire Air Ambulance and
Young Lives vs Cancer, the Foundation also
nominates a ‘partner’ charity. Previously,
we have partnered with Prostate Cancer
UK and our current national charity
partner 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
£80,000, helping the Alzheimer’s Society
to educate others about dementia, fund
research and improve care and support.
2023 areas of focus:
• We will launch our updated SHE
strategy, which will shape the future of
SHE at Severfield for the coming years
and continue to strive for zero harm. The
new SHE strategy has three main areas
of focus; people, communications &
engagement, and systems & processes.
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AND SUSTAINABLE BUSINESS
PROSPERITY
Why is it important?
Striving for continuous improvement
across our four sustainability pillars
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
We recognise that steel can make
a significant contribution to the
decarbonisation of the global economy
since steel is the backbone of most
modern economies and underpins many
industrial sectors, including construction
which accounts for more than half of all
steel used globally. We are committed
to facilitating the transition to a zero-
carbon economy as we strive to deliver
sustainable profitable growth in a way that
enables our customers to satisfy their own
net zero ambitions.
As outlined in the ‘principles of
governance’ section below, 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.
Through our central engineering team and
our operational improvement initiatives,
we are constantly striving to develop
innovative products and services that
deliver positive environmental or social
outcomes through the value chain and
will contribute to the Group’s sustainable
growth. In order to achieve this aim, the
recruitment, development and retention of
highly skilled employees who are proficient
in new and emerging digital technologies is
key and aligns to our second sustainability
focus area of ‘people’.
Our progress against our targets
During the year, the Group generated
economic value1 of £403.6m (2021:
£363.3m), an increase of 11 per cent from
the prior year, and distributed £382.6m
(2021: £343.2m), resulting in economic
value retained of £21.0m (2021: £20.1m).
In 2022, the Group continued its work
to embed its sustainability framework
into our purpose and corporate strategy
and further evolve our sustainability
reporting to provide our stakeholders
with transparent and useful information
on the Group’s climate-related risks
and opportunities, in line with the TCFD
recommendations. External advisers were
appointed to support management with
this task.
We continued our engagement with our key
suppliers and customers to help drive the
steel industry’s transition to low embodied
carbon steel production. We are involved
in the supply chain project with Balfour
Beatty, demonstrating how we are engaged
in their ambition to ‘Green the Chain’ since
the supply chain is responsible for c.80 per
cent of the construction sector’s emissions.
The Group’s record order book of £486m at
1 June 2022 (2021: £393m at
1 November 2021) contains projects that
are contributing to positive environmental
outcomes, including projects developing
the UK’s rail infrastructure, especially,
but not limited to, those for HS2 and the
electrification of the rail network.
Similarly, the current level of tendering
and pipeline activity across the Group is
very encouraging and also includes a good
proportion of projects which will contribute
to a global green, more sustainable
economy, including battery plants and
additional rail infrastructure projects and
fabrication of wind turbine blades.
During the year, 100 per cent (2021: 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. Our commitment
to bring our supply chain along on our
sustainability journey is underpinned by our
‘very good’ BES 6001 accreditation and ‘A-’
CDP supplier engagement rating.
Recognising the importance of dividends
to our shareholders and to our investment
case, we paid ordinary dividends of £9.2m
(2021: £8.9m), a 3 per cent increase on the
prior year.
2023 areas of focus:
• Continue to engage with key suppliers
on the availability of low-carbon steel
• Continue to develop and incorporate
new product development processes
through our business improvement
initiatives and investment in research
and development.
1 See note 32 for APM definitions.
82
Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT 83
www.severfield.comStock Code: SFR STRATEGIC REPORT BUILDING A RESPONSIBLE
AND SUSTAINABLE BUSINESS
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.
Our sustainability committee
Following the launch of our 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. This
is now a fully-fledged executive board
committee, meeting bi-monthly, and
continues 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 reports to the board.
This gives us a well-defined management
structure to help us achieve our
sustainability objectives with oversight
of all strategic sustainability risks and
opportunities affecting the Group.
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). These policies
are reviewed and updated every year.
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.
Our progress against our targets
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 maintained our ‘A’ rating in the CDP’s
annual supplier engagement rating. 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.
84
Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT In 2022, the Group, again, had no incidents
of bribery or corruption confirmed during
the year (either relating to 2022 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
health, safety and, environmental) or
relating to non-compliance with laws and
regulations during the year.
During the year, over 90 per cent 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,
• sustainability policy,
• modern slavery statement.
Modern slavery
The board annually reviews and approves
the Group’s modern slavery statement. The
2022 statement is available on our website
and explains the actions taken to ensure
that we provide the appropriate level of
training to members of our workforce,
raise awareness of modern slavery
among all members of staff, and 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 continued
to focus on our supply chain, refreshed
and added to our training of 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. This
year we have also taken steps to collect
diversity-related people data to help us to
continue to improve in this area.
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
or 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. This year we completed our
comprehensive programme to ensure
readiness for the changes to the IR35 rules
which came into effect in April 2021.
85
www.severfield.comStock Code: SFR STRATEGIC REPORT HOW WE
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 2022
• Challenging market conditions
– mitigating the impact of macro-
economic factors such as inflation
and shortages of labour.
• Supply chain - mitigating the
impact of inflation and materials
shortages post Brexit/pandemic
• Cyber security - ensuring we
maintained our cyber insurance in a
difficult market on renewal.
• Sustainability risk - mitigating
the impact of uncertainty around
stakeholder expectations as to
how we conduct a sustainable and
responsible business.
Our future priorities for 2023
Some of our main priorities (and
emerging risks) this year will be:
• Continued focus on mitigating
supply chain continuity risk and
inflation risk in the supply of
materials in the light of the Ukraine
crisis.
• Continued focus on mitigating
resourcing risk, in particular in our
factories.
• Continued identification and
mitigation of sustainability risks,
including quantitative climate
scenario analysis.
• Continued focus on mitigating cyber
security risk.
Changes to principal risks
The following changes have been made to
the Group’s principal risks in 2022:
• Sustainable and responsible business
risk has been introduced as a new
principal risk.
• People risk has been upgraded to
high risk due to the impact of macro-
economic factors such as inflation
and shortages of labour on our ability
to maintain and recruit the people
resources needed to deliver a high
order book.
• COVID-19 risk has been removed, and
• Mispricing a contract (at tender) has
been included as a principal risk
(it was removed in 2021) and supply
chain has been maintained as a high
risk due to the uncertainty created by
the impact of inflation and materials
price rises caused by the Ukraine
crisis and the greater risk of failing to
accurately capture such risks in a fixed
price at tender.
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, whilst 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 the impact of the war in Ukraine on
the price and availability of construction
materials.
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
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 sustainability
issues.
86
Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT • 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
sustainability 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 sustainability 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 sustainability 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
Third line of defence
Independent review
Divisional boards
Internal controls:
• External audit
• Internal audit
• Other third-party assurance
Management activity
Divisional boards
Internal controls:
Group oversight
Group policies
• Group authorisation policy
• Project management procedures
• Group finance manual
• Health and safety
• Financial control
• Cash and working capital
management
• 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, sustainability
committee and information
security management committee
• Audit committee
• Nominations committee
• Remuneration committee
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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.
On acquisition, as part of integration,
new businesses adopt these policies and
procedures on a phased basis.
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.
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Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT 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.
This continues to give further assurance
as 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 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, safety leadership
team, human resource committee,
sustainability committee and the
information security management
committee
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.
The remuneration committee
This committee ensures that the board
complies with regulations and best
practice regarding remuneration and that
remuneration policy remains appropriate
for attracting and retaining management
of the right calibre.
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Principal and emerging risks
The board has carried out a robust assessment of the principal and emerging 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. In reviewing our risk
registers we consider our principal and emerging risks and in assessing those risks, we take into account the correlation between
different risks and ensure they are weighted appropriately. This exercise informs our scenario analysis used in the viability statement.
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 People
4 Commercial and market
environment
5 Mispricing a contract (at tender)
6 Cyber security
7 Failure to mitigate onerous
contract terms
8 Indian joint venture
9 Sustainable and responsible
business
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
1 2 3 4 5 6 7
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.
Strategic pillar key
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’)
Growth
Clients
India
Operational
excellence
People
Movement
Scoring
Upward trend
Downward trend
High
Medium
No change
New
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Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT
1 Health and safety
Description
Potential impact Mitigation
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.
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.
• Established safety systems, site visits, safety audits,
Trend
Link to strategy
Link to KPIs
1 2 3 5
6 7
Scoring
High
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.
• 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.
• 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.
• A detailed gap analysis and strategy review was
undertaken in 2022.
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2 Supply chain
Description
Potential impact Mitigation
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.
• Process in place to select supply chain partners that
Trend
Link to strategy
Link to KPIs
1 2 3 4
5 6
Scoring
High
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.
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.
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Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT 3 People
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. This has
been exacerbated in
the last 12 months due
to macro-economic
factors such as the
impact of inflation and
shortages of labour.
Potential impact Mitigation
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.
• Training and development schemes to build skills and
Trend
Link to strategy
Link to KPIs
1 2 3
5 6
Scoring
High
experience, such as our successful graduate, trainee and
apprenticeship programmes.
• Detailed succession planning exercise completed in 2022
identifying for development future senior leaders within
the business.
• Attractive working environments, remuneration
packages, technology tools and wellbeing initiatives to
help improve employees’ working lives and above average
inflation pay review in 2021.
• 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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4 Commercial and market environment
Description
Potential impact Mitigation
A significant fall in
construction activity
and higher costs
could adversely
impact revenues,
profits, ability to
recover overheads
and cash generation.
• 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.
Trend
Link to strategy
Link to KPIs
1 2 3 4
5 6
Scoring
Medium
• 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 model and balance sheet 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.
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), the
impact of worldwide
events such as war
(including the impact
of the Ukraine crisis)
and the impact of
pandemics (including
the ongoing COVID-19
pandemic).
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.
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Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT
5 Mispricing a contract (at tender)
Description
Potential impact Mitigation
Failure to accurately
estimate and evaluate
the contract risks,
costs to complete,
contract duration and
the impact of price
increases could result
in a contract being
mispriced. Execution
failure on a high-profile
contract could result in
reputational damage.
If a contract is
incorrectly priced,
particularly on
complex contracts,
this could lead to
loss of profitability,
adverse business
performance and
missed performance
targets.
This could also
damage relationships
with clients and the
supply chain.
• Improved contract selectivity (those that are right for
Trend
the business and which match our risk appetite) has de-
risked the order book and reduced the probability of poor
contract execution.
Link to strategy
Link to KPIs
1 2 3 4
5 6
Scoring
Medium
• Estimating processes are in place with approvals by
appropriate levels of management.
• Tender settlement processes are in place to give senior
management regular visibility of major tenders.
• Use of the tender review process to mitigate the impact
of rising supply chain costs.
• Work performed under minimum standard terms (to
mitigate onerous contract terms) where possible.
• Use of Group authorisation policy to ensure appropriate
contract tendering and acceptance.
• Adoption of Group-wide project risk management
framework (‘PRMF’) brings greater consistency and
embeds good practice in identifying and managing
contract risk.
• Professional indemnity cover is in place to provide further
safeguards.
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6 Cyber security
Description
Potential impact Mitigation
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.
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.
• IT is the responsibility of a central function which
Trend
Link to strategy
Link to KPIs
1 2 4 5
Scoring
Medium
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 26 March 2022STRATEGIC REPORT 7 Failure to mitigate onerous contract terms
Description
Potential impact Mitigation
Loss of profitability
on contracts as
costs incurred may
not be recovered,
and potential
reputational damage
for the Group.
• The Group has identified minimum standard terms which
Trend
mitigate contract risk.
• Robust tendering process with detailed legal and
Link to strategy
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
Link to KPIs
1 2 3
4 5
Scoring
Medium
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.
8 Indian joint venture
Description
Potential impact Mitigation
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 has
impacted JSSL and
recovery is continuing.
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.
• 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
• 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.
Trend
Link to strategy
Link to KPIs
2 5
Scoring
Medium
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9 Sustainable and responsible business
Description
Potential impact Mitigation
Risk of not being able
to meet stakeholder
expectations in the
light of uncertainty
as to the direction in
which stakeholder
expectations will
develop.
Loss of position
as market leader
and wider losses of
future opportunities
in the short term.
• We have demonstrated a commitment to reducing
Trend
our carbon footprint by becoming carbon neutral and
established other stakeholder influenced sustainability
related targets, such as net zero by 2040.
Link to strategy
• We are rated A- by CDP in the leadership band.
• We have a dedicated sustainability manager who
monitors current legislation and expectations and
develops Group strategy to facilitate and implement
plans for compliance.
• We are raising internal awareness of the steps we are
taking and developing closer working relationships with
clients and suppliers.
• We monitor shareholder comments on the annual report
and accounts and in one-to-one meetings.
Link to KPIs
1 2 3 6
Scoring
Medium
ICON, HARLOW
Industrial &
distribution
Location:
Harlow, Essex
Client:
Icon (Harlow) Limited
Main contractor:
TSL Limited
Engineer:
Fairhurst
Architect:
Saunders Architects
Tonnage:
2,050 tonnes
Completion date:
September 2021
98
The project
ICON Harlow is a striking new warehouse
and logistics development. This project
saw Severfield deliver a three-storey van
park and warehouse (unit D) on this new
development in Harlow, Essex.
The overall ICON development provides
505,000 square feet of warehousing and
logistics space situated close to the M11
and M25 motorways. The three-storey van
park has a footprint of c.85,000 square
feet.
Severfield’s scope of work included
designing, fabricating and installing
c.1,700 tonnes of structural steelwork,
magnelis steel decking, barriers, external
stair towers and placement of precast
stairs.
A further 350 tonnes was fabricated
and installed for Unit D, an adjoining
warehouse of c.48,600 square feet
and including a mezzanine floor for an
office, external and internal stair towers
and supports, as well as placement of
precast stairs and lift shafts. Rails and
purlins from the Group’s joint venture,
Construction Metal Forming, were
also utilised in the construction of the
project. An adjoining canopy for weather
protection for moving vans from the van
park to the warehouse was also delivered
by Severfield.
The requirements of the project included
crash barriers with galvanised mesh
panels on slotted connections to allow
for deflections and movement. This
meant that special attention to detail
was required early in the process by the
drawing office team to ensure proper
fitment on site. The success of the project
served to showcase the Group’s end-to-
end construction capabilities.
Severfield plc Annual report and accountsfor the year ended 26 March 2022STRATEGIC REPORT 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 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
15 June 2022
• 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 2022 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
38 of the strategic report. The board’s
direct engagement with stakeholders is
described on page 118 in the governance
report, along with the board’s key
decisions and the stakeholder groups
considered during the decision-making
process and the board’s monitoring of
the Group’s culture is described on pages
119 to 120.
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www.severfield.comStock Code: SFR STRATEGIC REPORT OUR
GOVERNANCE
OUR GOVERNANCE CONTENTS
Governance at a glance
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
102
104
106
108
110
122
126
128
132
134
142
153
GOVERNANCE
AT A GLANCE
Our board
The board comprises nine directors with a diverse and complementary range of industry
experience, technical knowledge, perspectives and personal strengths.
Independence
Board gender diversity
Length of tenure
1
2
2
3
4
4
Chairman
Independent
Non-independent
Male
Female
Board and committee attendance
7
4
1-5 years
6-10 years
10+ years
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
Rosie Toogood2
Board
11
Audit
committee
Remuneration
committee
Nominations
committee
3
6
3
11
11
11
11
11
11
11
11
8
3
3
3
2
6
6
6
6
2
3
3
3
3
2
1 As chairman, Kevin Whiteman is not a member of the audit committee but has attended meetings as a guest.
2 Rosie Toogood was appointed to the board on 16 June 2021 and has attended all board and committee meetings held since that date.
102
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR GOVERNANCE Skill and diversity matrix
We truly value diversity and a culture of inclusion at all levels within the Group.
Skill/area of expertise/experience
Business development and strategy
Mergers and acquisitions
Banking and finance
Legal and regulatory
Innovation and technology
Client relationship management
Construction/engineering industry experience
Sustainability
Workforce engagement
Procurement and large capital programmes experience
International experience
Risk management
Governance
3
8
8
8
8
1
1
2
6
1
9
1
3
9
9
2
9
2
6
7
7
7
No. of directors with skill/experience
No. of directors without skill/experience
Major board activities in the year
• Appointed Rosie Toogood as a non-executive director in June 2021.
• Louise Hardy, our workforce engagement director, instigated our successful My Voice forums.
• Completed an internal board evaluation, performed by Alun Griffiths, senior independent director.
• Approved the Group’s refinancing agreement, extending the existing revolving credit facility from £25m to £50m and maturing in
December 2026.
• Approved the reorganisation of the Group from 1 April 2022, reflecting a simpler divisional structure aligning our existing businesses
more closely with our market sectors.
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OF DIRECTORS
Kevin Whiteman
Chairman
Independent: Yes
N R
Alan Dunsmore
Chief executive officer
Independent: No
Adam Semple
Group finance director
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 and
a non-executive director of Cadent Gas Limited
and chair of their remuneration committee from
2018 to 2021. 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. Since 2013 he has been chairman of
the privately owned NG Bailey Group.
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.
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.
Ian Cochrane
Chief operating officer
Independent: No
Derek Randall
Executive director and managing
director at JSW Severfield Structures
Rosie Toogood
Non-executive director
Independent: Yes
A N R
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.
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.
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.
104
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR GOVERNANCE Tony Osbaldiston
Non-executive director
(chairman of the audit committee)
NA
R
Alun Griffiths
A N R
Senior independent director (chairman
of the remuneration committee)
Louise Hardy
Non-executive director and
workforce engagement director
A N R
Independent: Yes
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 Synstar 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 leading
engineering consultancy WS Atkins plc from 2007
to 2014 and held a number of business leadership
and corporate roles, most recently as Group HR
director. Whilst at Atkins, he worked extensively
in the UK and internationally in Europe, the
Middle East, India, Asia and the USA on a range of
management consultancy assignments and on
major projects.
Alun has significant experience in HR and
organisation 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 (an
approving authority for major infrastructure
projects on the Thames) and chairs the transaction
committee at the Ramboll Group (providing
oversight for major bids and M+A).
His HR experience, together with his wider
business experience and understanding of the
views of investors, is well suited to his role here at
Severfield.
Appointed: September 2019
As an executive director, Louise was the European
project excellence director at AECOM, responsible
for project management across a portfolio of
10,000 projects 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 as the
delivery partner to the Olympic delivery authority
for the London 2012 Olympics. Prior to this, Louise
worked at Bechtel Ltd as a project director and
manager and worked for London Underground Ltd
on the Jubilee line extension project.
Louise is a Fellow of the Institution of Civil
Engineers, the Chartered Management Institute
and the Women’s Engineering Society. She
is a director of the North West Cambridge
Development. Louise won the European Women
in Construction and Engineering lifetime
achievement in construction award 2019.
Louise is a non-executive director at Balfour
Beatty plc, Genuit Group plc and Crest Nicholson
Holdings plc.
Committee membership
N Nominations
A Audit
R Remuneration
Committee chairman
105
www.severfield.comStock Code: SFR OUR GOVERNANCE OUR EXECUTIVE
COMMITTEE
Rob Evans
Divisional managing director, Severfield
(Commercial & Industrial)
Following the Group’s reorganisation in March
2022, Severfield moved to a divisional structure
which saw Rob become divisional managing
director for the Group’s new commercial and
industrial division encompassing Severfield
(UK), Severfield (Design & Build), Severfield (NI)
and Severfield Europe B.V.
Prior to this, Rob became managing director of
Severfield (UK) in February 2020, from which
time he was responsible for all aspects of the
contracting business for both Severfield (UK)
and Severfield Europe B.V. Rob joined the Group
over 24 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.
Jim Martindale
Divisional managing director, Severfield
(Nuclear & Infrastructure) and
Severfield (Products & Processing)
Following the reorganisation in March 2022,
Jim was appointed as divisional managing
director for the Group’s new Nuclear and
Infrastructure Division and of the Products and
Processing division.
Jim joined Severfield (Design & Build), formerly
Atlas Ward Structures, in 1994 as a design
engineer, which saw him heavily involved
with the commercial department. He became
engineering manager in 2002, design director in
2007 and deputy managing director in 2010, a
role that he performed until his appointment as
managing director in January 2014.
Jim has been involved in the successful
delivery of many major projects throughout
the UK during his career with Atlas Ward and
Severfield. He is also an associate member of
the Institution of Structural Engineers.
Alan Dunsmore
Chief executive officer
For details, see board of directors
on page 104
Ian Cochrane
Chief operating officer
For details, see board of directors
on page 104
Derek Randall
Executive director and managing
director at JSW Severfield
Structures
For details, see board of directors
on page 104
Adam Semple
Group finance director
For details, see board of directors
on page 104
106
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR 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.
Mike Mannion
Group manufacturing director
Mike joined Severfield in 2019 as operations
director (manufacturing) for Severfield (UK)
and was responsible for our manufacturing
operations at both our Dalton and Lostock sites.
Following a company reorganisation in
March 2022, Severfield moved to a divisional
structure which saw Mike become Group
manufacturing director, overseeing operations
in Dalton, Lostock, Northern Ireland, Bolton, and
Bridlington.
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.
Richard Davies
Group IT director
Richard joined Severfield (Design & Build),
formerly Atlas Ward Structures, in 1997 as
an apprentice plater welder, which provided
valuable experience and insight into key
production activities. He moved into IT support
in 1999 and went on to perform various roles
within IT, until his appointment as Group IT
director in January 2016.
Within this role, Richard is responsible for all
aspects of IT across the Severfield group.
With more than 20 years’ experience in the
construction sector, Richard has been involved
in the successful delivery of many innovative IT
projects.
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.
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www.severfield.comStock Code: SFR OUR GOVERNANCE OUR CHAIRMAN’S VIEW
ON GOVERNANCE
THIS YEAR WE HAVE ENSURED THAT STRONG
AND ROBUST CORPORATE GOVERNANCE
CONTINUES TO BE AT THE HEART OF
EVERYTHING WE DO, WE HAVE FOR THE FIRST
TIME REPORTED ON OUR ALIGNMENT WITH THE
TASK FORCE ON CLIMATE-RELATED FINANCIAL
DISCLOSURES (‘TCFD’) RECOMMENDATIONS ON
CLIMATE CHANGE AND WE HAVE CONTINUED TO
FOCUS ON STAKEHOLDER ENGAGEMENT.
KEVIN WHITEMAN
NON-EXECUTIVE CHAIRMAN
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 121.
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 122.
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 110.
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, a summary of
how we intend to operate that policy in
2023, and a review of the remuneration
committee’s activities, together with bonus
and PSP performance in 2022, can be
found in the remuneration report on pages
134 to 152.
Talent and diversity
The board is mindful of diversity and we
are committed to building a supportive,
diverse, and inclusive working environment
where all colleagues feel they belong. The
board is represented by a range of industry
experience and personal strengths and
consists of two female and seven male
directors. Further details of their skills
and experience can be found on pages
102 to 105.
Dear shareholder
I am pleased to introduce the Group’s
corporate governance report (at pages 110
to 121) on behalf of our board of directors
(‘the board’). The Group is committed to
business integrity, high ethical values and
professionalism in all of its activities and
this report explains how we manage the
Group and comply with the provisions of
the UK Corporate Governance Code
(‘the Code’).
Leadership and board composition
As highlighted last year, we appointed
Rosie Toogood in June 2021 as a non-
executive director, and this year Louise
Hardy as our workforce engagement
director. Louise has been at the heart of
our My Voice forums providing a formal
way for colleagues and management to
connect, gain feedback and exchange
information and views on any business-
related topic.
108
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR GOVERNANCE 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 8 September 2022
in London and I encourage all shareholders
to submit any questions in advance and to
vote via proxy for the resolutions.
Kevin Whiteman
Non-executive chairman
15 June 2022
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 employer and as a provider of
services and to achieving and maintaining
a workforce that broadly reflects the
communities in which we operate.
In addition, our succession plans reflect
our commitment to diversity.
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 are now monitoring
diversity in our recruitment and seek to
attract a more diverse workforce over time.
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
1 April 2021 to 15 June 2021, prior to
the appointment of Rosie Toogood to the
board, for the reasons outlined in last
year’s report.
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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 104 and 105. The board consists of the chairman, four other non-executive
directors and four executive directors.
Alan Dunsmore has board-level responsibility for sustainability 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
Information
security
management
committee
110
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR 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 26 March
2022 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 134. 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 104 and 105 will be
standing for re-election at the 2022 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.
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.
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GOVERNANCE REPORT
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 106 to 107. 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. He is also chair of the sustainability committee which meets
every two months to oversee implementation of our sustainability strategy and review progress
against our strategic objectives.
Senior independent
director
Alun Griffiths
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 terms of reference for the audit and nominations committees were updated during the year.
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
122 to 152.
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Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR GOVERNANCE Board meetings
The directors’ attendance record at the scheduled board meetings and board committee meetings for the year ended 26 March 2022 is
shown in the table below.
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
Rosie Toogood2
Board
11
Audit
committee
Remuneration
committee
Nominations
committee
3
6
3
11
11
11
11
11
11
11
11
8
3
3
3
2
6
6
6
6
2
3
3
3
3
2
1 As chairman, Kevin Whiteman is not a member of the audit committee but has attended meetings as a guest.
2 Rosie Toogood was appointed to the board on 16 June 2021 and attended all board and committee meetings held since that date.
Meetings were 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 to provide non-executive directors the opportunity to increase their knowledge and
understanding of the Group’s operations. During the year, some of these meetings were held remotely by video conference, either due to
COVID restrictions or in the interests of sustainability and efficiency.
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.
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Board meetings for the current year
During the financial year, the board discussed and implemented the following key actions:
April 2021
July 2021
• Business briefing from Severfield (UK)’s commercial
• Reviewed first quarterly forecast for the year ended
director on commercial management
26 March 2022
• Reviewed the statement of compliance in accordance with
• Reviewed feedback on year-end results for the year ended
the Modern Slavery Act
27 March 2021
• Reviewed and approved updated terms of reference for
• Reviewed a detailed paper on the Group’s cash strategy
the audit and nominations committees
• Reviewed and approved the Group’s pre-close trading
statement issued on 22 April 2021
• Reviewed and approved proposed auditor fees for the year
ended 26 March 2021
• Reviewed and approved a proposed increase in non-
executive director fees effective from 1 April 2021
June 2021
2 meetings
• Received feedback from the chairman of the nominations
committee on the board evaluation undertaken by the
senior independent director
• Presentation on the Group’s approach to sustainability
and carbon reduction by the Group SHE director
• Reviewed and agreed proposed Group’s strategic supply
arrangements
• Reviewed and approved proposed appointment of Rosie
Toogood as a non-executive director and approved the
relevant RNS announcing the appointment
• Reviewed and approved annual report and accounts and
results announcement for the year ended 27 March 2021
• Reviewed and approved proposed payment of a final
dividend for the year ended 27 March 2021
• Assessed going concern and longer-term viability of the
Group and reviewed the effectiveness of internal controls
• 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
• Reviewed and approved a paper recommending that, due
to the impact of the COVID-19 pandemic, attendance at
the 2021 AGM would be restricted to shareholders who
had pre-registered to attend and offering shareholders
the opportunity to ask questions in advance of the
meeting
• Reviewed and approved AGM notice
• Reviewed and approved proposed board and board
committee calendar of meetings for financial year ending
25 March 2023
September 2021
2 meetings
• Reviewed and approved management’s proposed
approach to the 2021 pay review
• Reviewed and approved the Group’s AGM trading
statement issued on 1 September 2021
• 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 paper on the proposed refinancing
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2 meetings
• Site visit and factory tour at Sherburn and management
briefing from Severfield (Products & Processing) by way of
general business update
January 2022
• Site visit and factory tour at Harry Peers in Bolton and
briefing from Harry Peers’ senior management team on
opportunities in the nuclear sector
• Reviewed investor feedback on interim results for the year
• Presentation on HR strategy from the Group HR director
ended 26 March 2022
• Management briefing from Severfield Europe’s managing
director on opportunities in Europe
• Reviewed and approved half year results for the year
ended 26 March 2022
March 2022
2 meetings
• Approved interim dividend for the year ended 26 March
• Site visit and factory tour at Dalton
2022
• Reviewed second quarterly forecast for the year ended
26 March 2022
• Reviewed and approved a refinancing proposal to extend
the Group’s revolving credit facility from £25m to £50m
and to extend its term to December 2026
December 2021
• Off-site strategy day
• Site visit and factory tour at Lostock and briefing from
Severfield (UK)’s managing director on bridge projects
• Reviewed third quarterly forecast for the year ended
26 March 2022
• Management briefing on organisational evolution from
CEO and Group HR director
• Agreed scope and content of board and chairman
evaluation
• Noted the register of directors’ interests in shares
• Reviewed and approved the budget for the year ending
25 March 2023
• Reviewed and approved proposed appointment of
Liberum Capital as joint broker with Jefferies
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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 pages
118 and 119, there were no specific issues raised during the year that influenced these decisions.
Principal
decision
Pay review
Action taken
Outcome
As part of our ongoing drive to improve
internal equity across our Group and
create an environment where everyone
feels valued and fairly rewarded for
the contribution they make, ‘pay and
benefits’ has been an area of focus for
us during the year.
A pay increase was agreed
for our collectively bargained
groups at a level which
recognised the ongoing
commitment they had shown
during the early days of
the pandemic. In addition,
we enhanced the holiday
allowance and employer
pension contributions for
a large proportion of our
workforce.
Extended our facility from
£25m to £50m in December
2021.
Refinancing
Reviewed the levels of our existing
senior lending facilities and whether to
seek an increase and considered the
timing of when to renew.
Strategy review
Comprehensively reviewed progress
against strategy.
Approved the four-year
strategic plan.
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.
Key stakeholder
groups considered
Our workforce and their families
and their communities.
In ensuring the Group has
available to it the cash resources
needed to enable it to deliver
its strategy, the board took
into account the interest of all
stakeholders who rely on the
Group’s ability to remain viable.
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 My Voice forums.
Appointment of
a joint broker
Considered the appointment of a joint
broker to work alongside Jefferies, to
increase equity sales.
Appointed Liberum Capital as
joint broker with Jefferies.
The board took account of
comments from investors and
acted in the long-term interests
of all shareholders (including
workforce members of our save as
you earn schemes).
116
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR GOVERNANCE Principal
decision
Setting the
annual Group
budget and
subsequent
forecast
modelling for
going concern
purposes
Action taken
Outcome
Reviewed Group budgets for FY23 and
high-level profit and cash forecasts for
the next 12 months.
Approved the viability
statement and going concern
assumption.
Reviewed general market conditions
and key trends that support the Group’s
strategy.
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 inflation.
Recommending
a final dividend
Considered the quantum of the final
dividend for the year ended 27 March
2021 in light of the Group’s overall
financial position and its other financial
commitments.
The Group’s
approach to
sustainability
and climate
The board reviewed management’s
proposed approach to sustainability
matters, including climate risk.
Maintained as ‘high’ risk our
assessment of the risk of a
serious health and safety
incident, the impact of
macro-economic factors such
as inflation and shortages
of labour on our ability to
maintain and recruit the
people resources needed to
deliver a high order book and
our assessment of supply
chain risk reflecting materials
shortages caused by the
Ukraine crisis.
Recognising the importance of
the dividend to our investment
case and our shareholders, we
recommended the payment of
a final 2021 dividend of 1.8p
per share (maintaining the
2020 dividend level), having
taken into account the Group’s
overall financial position and its
other financial commitments.
The board approved
management’s proposed
approach to the setting of
targets and goals on key
climate-related and other
sustainability matters.
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 considered
the future cash requirements
of the business, shareholder
expectations and the need to
provide our shareholders with
sustainable returns over the
longer term.
The board considered the impact
on all stakeholders, in particular
those identified in the principal
risks section on pages 86 to 98.
The board considered the
impact on its shareholders of its
progressive dividend policy and
balanced this with the needs of
other stakeholders.
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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GOVERNANCE REPORT
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
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.
A safe and
sustainable
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 and
sustainable
working
environment, with
opportunities for
repeat business.
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.
Operating ethically
and sustainably,
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.
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 39.
The board engages directly with the
Group’s shareholders, suppliers, workforce
and funders, and has undertaken the
following activities in 2022:
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 declare a final dividend and to
appoint a joint broker.
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 communicated
to shareholders at least 20 working days
before the meeting.
Suppliers
The board reviewed and approved the
continuation of our prompt payment policy
and throughout the year we continued
to pay our suppliers on time. During the
Ukraine crisis, we have engaged closely
with suppliers to monitor the effect of the
crisis on their ability to provide continuity
of service.
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.
118
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR GOVERNANCE Workforce
Recognising the importance of input and
feedback from all colleagues in helping us
deliver on our strategic goals, we launched
a group-wide My Voice forum during
the year, facilitated by Louise Hardy, the
Group’s designated non-executive director
responsible for workforce engagement.
The forum provides a formal way for
colleagues and management to connect,
gain feedback and exchange information
and views on any business-related topic.
Louise and the chief executive officer,
Alan Dunsmore, attend all My Voice forum
meetings. Louise provides verbal updates
to the board following each forum meeting
and written updates on what was heard
and discussed at the forums, and the
actions the executive committee has taken
to address these points, are provided to
the board by the Group HR director on a
quarterly basis.
In addition, 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.
We have continued to develop our intranet
‘Severfield Connect’ in 2022 to enable
us to communicate better and develop a
more integrated working culture and to
track engagement. Colleagues across the
Group have raised issues and questions
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.
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.
The good working relationship established
with our banks enabled us to bring forward
the timeline for extending our senior debt
facilities and increasing our total facility
from £25m to £50m in December 2021.
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 over the past two years 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. The board
recognised this in its approach to the pay
review in September 2021.
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 chairman, Kevin Whiteman,
continues to hold one-to-one meetings
with key managers in order to understand
culture better and we have continued
to have regular board briefings on a
wide range of topics from managers of
the business at different tiers of the
organisation.
The table overleaf sets out how the board
monitors our culture to ensure that
behaviours remain aligned with our core
values.
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GOVERNANCE REPORT
What we monitor and measure
Board action in 2022
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.
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.
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 covering a range of
ethical matters including 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.
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 and reported back to
the board on the key messages taken away from these visits.
Reviewed and refreshed our ongoing behavioural safety programme.
For more information, please read our building a responsible and
sustainable business report on page 56
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.
Reviewed statements of compliance from all directors and letters of assurance
(‘LoA’) from the Group’s 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 responsible and
sustainable business report on page 56
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.
120
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR GOVERNANCE 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 sustainability and climate
matters as set out in our sustainability
report and our TCFD disclosure.
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 153) and a statement by the
auditor concerning their responsibilities
(page 163). The directors also report that
the business is a going concern (page 53)
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 30 to 36). The directors have
also made a statement about the long-
term viability of the Group, as required
under the Code (page 54).
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.
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 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.
Modern slavery
The board annually reviews and approves
the Group’s modern slavery statement.
The 2022 statement is available on our
website at www.severfield.com and
explains the actions taken to ensure
that we provide the appropriate level of
training to members of our workforce,
raise awareness of modern slavery
among all members of staff, and 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 continued
to focus on our supply chain, refreshed
and added to our training of relevant
staff in awareness of modern slavery and
encouraged key suppliers to undertake
training through 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 132 to 152. 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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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.
TONY OSBALDISTON
CHAIRMAN OF THE AUDIT COMMITTEE
Number of meetings
3
Members
Tony Osbaldiston (chairman)
Alun Griffiths
Louise Hardy
Rosie Toogood
(from her appointment on
16 June 2021)
2022 key achievements
• 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 2022 interim accounts and
the year ended 26 March 2022.
• Reviewed management’s papers
on the accounting impact of the
acquisition of DAM Structures
Limited.
• Reviewed the carrying value of
the Group’s investment in JSSL
for impairment in the light of the
impact of the COVID-19 pandemic.
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. Kevin Whiteman, Alan
Dunsmore, Adam Semple, Mark Sanderson
and Gemma Mortimer, our Group financial
controller, 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.
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.
122
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR GOVERNANCE • Considered the effectiveness of the
external auditor, KPMG LLP (‘KPMG’),
their independence and reappointment
for the year ending 25 March 2023
together with arrangements being
proposed for succession on the
retirement of KPMG’s lead audit partner.
• Reviewed PricewaterhouseCooper
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 26 March 2022.
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, as part of
the audit, the external auditor reviewed
the consistency between the narrative
reporting in the annual report and the
financial statements.
123
• 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 2022
financial year:
• Reviewed the interim results for the
period ended 25 September 2021 and
the year-end results for the year ended
26 March 2022.
• 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 26
March 2022. 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 26 March 2022.
• 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 DAM Structures Limited.
• Reviewed the carrying value of
the Group’s investment in JSSL for
impairment 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
26 March 2022.
• 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 and the
process undertaken by executive
management to enable the board to
make these statements.
www.severfield.comStock Code: SFR OUR GOVERNANCE AUDIT COMMITTEE
REPORT
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.
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 86 to 98. 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 54 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 and this year it
is the only such risk.
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.
The external auditor performed detailed
audit procedures on this accounting
risk and reported their findings to the
committee. The committee was satisfied
that this matter 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 2022 results. These include
finalisation of the valuation of intangible
assets and contingent consideration for
DAM Structures, going concern, profit
recognition of the Indian joint venture
investment, the valuation of pension
scheme liabilities, ESG and climate change
disclosures 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.
124
External auditor independence
and effectiveness
KPMG has acted as the Group’s external
auditor for a period of seven 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 26 March 2016, following a
competitive tender process, and were
appointed at the AGM on 2 September
2015. The external auditor is required to
rotate the senior statutory auditor every
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR GOVERNANCE five years. The senior statutory auditor
responsible for the Group audit for 2022
is David Morritt, whose appointment in
this role commenced with the audit for
the financial year ended 30 March 2019.
David has announced his retirement
with effect from 30 September 2022 and
arrangements for his succession have
been discussed with KPMG.
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 26 March 2022 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-
audit services), are shown in note 4 to the
consolidated financial statements. The
total non-audit fees for 2022 represent
nil per cent (2021: ten 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
15 June 2022
125
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.
KEVIN WHITEMAN
CHAIRMAN OF THE NOMINATIONS COMMITTEE
Number of meetings
3
Members
Kevin Whiteman
Tony Osbaldiston
Alun Griffiths
Louise Hardy
Rosie Toogood (since her appointment
on 16 June 2021)
2022 key achievements
• Recommending the appointment
of Rosie Toogood as a new non-
executive director.
• Undertaking and considering the
results of the board evaluation.
• Reviewing the Group’s succession
plans for board and executive
committee appointments.
• Reviewing and developing a board
skills and diversity matrix and
taking this into account in its plans
for the appointment of replacement
non-executive directors in 2023.
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
In June 2021, Rosie Toogood was
appointed as a new non-executive director
following a recruitment process involving
Korn Ferry. The board now consists of nine
directors and 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 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, gender,
sexual orientation, beliefs and age and
encompasses culture, personality and
work-style.
2023 areas of focus
• Using the board skills and diversity
matrix, developing a plan for
the identification of suitable
candidates to replace those non-
executive directors retiring before
the 2023 AGM.
• Reconsidering the effectiveness of
an external board evaluation.
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.
126
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR GOVERNANCE Evaluation
The committee considered whether an
external board evaluation should be
procured and decided that it should not.
They asked Alun Griffiths, the senior
independent director, to perform an
internal evaluation using the process
described on page 121. 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
15 June 2022
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.
The board had two female directors (22
per cent). Female representation on our
executive committee is two (18 per cent)
and of those reporting directly to members
of the executive committee, female
representation is much higher at 25 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.
Board gender diversity
2
Female
Male
7
Senior management*
gender diversity
4
12
Female
Male
* Senior management comprises the board and
the executive committee.
Executive committee direct
reports gender diversity
16
47
Female
Male
127
www.severfield.comStock Code: SFR OUR GOVERNANCE DIRECTORS’
REPORT
THE DIRECTORS PRESENT THEIR
REPORT TOGETHER WITH THE AUDITED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 26 MARCH 2022.
MARK SANDERSON
COMPANY SECRETARY
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.
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 53, 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
110 to 121 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 104 to 105.
The other significant commitments of the
chairman consist of acting as chairman of
NG Bailey.
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 pages
140 to 141.
128
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR GOVERNANCE 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
2022 AGM.
These documents are available
on the Group’s website at
www.severfield.com.
Powers for the Company to
buy back its shares and to
issue its shares
At the Company’s annual general meeting
(‘AGM’) held on 1 September 2021,
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 2022 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 1 September 2021, 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 2022 AGM (or, if earlier, until the
close of business on 24 September 2022).
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 1 September 2021, 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 2022 AGM (or, if
earlier, until the close of business on 24
September 2022). During the period, the
directors did not use these powers.
129
Significant shareholdings
As at 1 June 2022, 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 Ltd
2. JO Hambro Capital Management
3. Chelverton Asset Management
4. Unicorn Asset Management
5. Threadneedle Asset Management Ltd
6. BennBridge Ltd
7. Invesco (including Perpetual & Trimark)
8. Legal & General Investment Management
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 26 March 2022, there were 309,523,061
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
Ordinary
2.5p share
29,851,481
25,216,899
24,513,305
22,100,000
19,203,537
16,279,803
16,238,865
16,033,415
%
9.64
8.15
7.92
7.14
6.20
5.26
5.25
5.18
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
www.severfield.comStock Code: SFR OUR GOVERNANCE DIRECTORS’
REPORT
Dividends
The directors declared an interim dividend
for the six months ended 25 September
2021 of 1.2p per ordinary share (2021:1.1p
per ordinary share).
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 December 2026 and can be terminated
upon a change of control of the Group.
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 53.
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 38 to 39
• Respect for human rights – page 85
• Social matters – page 85
• Equal opportunities (including for the
disabled) – page 85
• Environmental matters – pages 59 to 85
• Greenhouse gas emissions – pages
72 to 77
• Long-term incentive plans – page 146 of
the directors’ remuneration report
• Statement of directors’ interests – page
147 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
• TCFD recommendations - pages 59 to 69
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.
External auditor
KPMG LLP acted as the auditor for
the Company for the year ended
26 March 2022. 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
Thursday 8 September 2022, 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 128 to 130
inclusive was approved by the board and
signed on its behalf by:
Mark Sanderson
Company secretary
15 June 2022
130
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR GOVERNANCE 131
www.severfield.comStock Code: SFR OUR 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.
ALUN GRIFFITHS
CHAIRMAN OF THE REMUNERATION COMMITTEE
Number of meetings
6
Members
Alun Griffiths (chairman)
Kevin Whiteman
Tony Osbaldiston
Louise Hardy
Rosie Toogood (since her
appointment on 16 June 2021)
2022 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 26 March 2022.
• Approved exceptional pay award
to production staff in September
2021.
132
Overview
We believe that the remuneration policy
operated as intended during the year
in providing strong alignment with the
interests of our shareholders and other
stakeholders. However, the committee
noted that this was a year in which the
Group made good strategic progress as
reflected in the growth of the order book
and broadening capability in the nuclear,
rail and infrastructure markets, but in
which the executive directors received
limited pay-out against both short and
long-term incentives. The committee
will undertake a comprehensive review
of the remuneration policy ahead of the
shareholder vote scheduled for the 2023
AGM. As part of the review, the committee
will consider how to best ensure that
the incentive framework motivates and
incentivises executive directors to make
strategic and operational decisions today
which support the long-term growth of the
business.
Dear shareholder
As chairman of the remuneration
committee, I am pleased to present our
directors’ remuneration report (the ‘report’)
for the year ended 26 March 2022.
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 26 March 2022 and
how it will be implemented for the year
ending 25 March 2023. The annual
report on remuneration will be subject
to an advisory shareholder vote at the
forthcoming AGM on 8 September 2022.
Performance and reward 2022
2022 has been another challenging
financial year for the Group and all its
stakeholders. The Group has continued to
perform strongly despite difficult market
conditions significantly influenced by
inflationary pressures and, towards the
end of the financial year, events in Ukraine.
Notwithstanding these challenges, the
Group has delivered on strategic and
operational priorities during the year,
resulting in a strong forward order book,
a strengthened position in new markets
and is well positioned to take advantage of
longer-term growth opportunities. This is
testament to the quality and commitment
of our executive leadership team. However,
despite best efforts, there has been
no pay-out for our UK-based executive
directors on the profit element of bonuses
and no PSP awards vested (for the second
year in succession), based on the outcome
of performance targets. Whilst the
remuneration committee considers that
the executive directors have performed
strongly throughout recent years, we
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR GOVERNANCE executive directors’ pension allowances
to the level available to the entire UK
workforce, by reducing their allowance
to 12 per cent in April 2022 ahead of full
alignment by 1 January 2023.
Remuneration policy review
The current remuneration policy was
approved by shareholders at the 2020
AGM and is now approaching the end of
its three-year term. During the coming
year, the remuneration committee will
undertake a comprehensive review of
the remuneration policy and incentive
framework for executive directors and
senior management to ensure that it
remains fit for purpose. In particular, whilst
conscious of the external environment,
the committee will consider whether the
Group’s current remuneration offering is
market competitive and supports delivery
of the Group’s strategic priorities and
future growth. The committee will seek
consultation with our major shareholders
on any proposed material changes.
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. 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
15 June 20221
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 ISS.
133
determined that it was not appropriate to
apply discretion to adjust the formulaic
vesting outcomes when considering the
experience of shareholders and other
stakeholders in the round.
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. Eighty per
cent of the award was based on PBT
performance and 20 per cent based on
safety performance.
For the UK-based executive directors,
Group PBT performance was below the
threshold target but safety performance
was, however, such as to earn an overall
bonus outcome of 17 per cent of salary, 50
per cent of which is deferred into shares
for three years.
Derek Randall, as managing director
of the Indian joint venture (‘JSSL’), is
assessed on Group PBT and JSSL PBT
(split 50:50) and JSSL AFR in relation to
safety performance. On-target JSSL PBT
was achieved and the AFR target was
achieved. Therefore, Derek Randall earned
a bonus equal to 41 per cent of salary, 50
per cent of which is deferred into shares
for three years.
PSP vesting
The 2019 PSP awards capable of vesting
in June 2022 will lapse in full as the
threshold EPS target (which equated to
PBT of £31m) for the 2022 financial year
was not met.
Implementation of policy for 2023
Base salaries and fees
Salaries for the executive directors were
reviewed in June 2022 and have been
increased by 4% in line with overall salary
increases for the wider workforce.
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 will reflect
the levels of internal growth forecast as
well as the continued market uncertainty
in light of the COVID-19 pandemic,
inflationary pressures and recent events
in Ukraine. The committee reviewed the
balance of PBT and safety performance
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
of salary for other executive directors.
The performance targets are intended
to incentivise management to maintain
momentum and will require the Group to
deliver EPS in 2025 which equates to a
PBT range of £31.5m to £38.0m. Further
details are set out on page 145.
Update on pension alignment
This year we accelerated further the
timetable towards full alignment of
www.severfield.comStock Code: SFR OUR GOVERNANCE DIRECTORS’
REMUNERATION REPORT
Part 1 – Remuneration Policy
The remuneration policy was approved at
the 2020 AGM. Provided for information
only are the details of the policy that
were referenced in the committee’s
activities over the past reporting year
which includes the remuneration policy
table, the recruitment remuneration
arrangements, 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. 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:
• Simplicity: ensure the remuneration
• 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;
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.
134
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.
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR GOVERNANCE Benefits
Purpose and link to strategy
Cost-effective benefits, sufficient to recruit and retain directors of the calibre necessary to
execute the Group’s strategy.
Operation
The Group currently provides the following employee benefits:
Life assurance at four times salary.
Medical insurance for self with option to purchase for family.
Company car and fuel allowance.
Relocation expenses 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.
135
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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
1 April 2022
1 Jan 2023
12% UK workforce
level
12%
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.
136
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR GOVERNANCE 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.
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.
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 144.
137
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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.
138
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.
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.
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR GOVERNANCE All-employee share plan
Purpose and link to strategy
To foster wider employee share ownership.
Operation
The Group currently operates a share incentive plan and 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.
139
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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 the executive director leaves for alternative employment at a competitor.
Outstanding awards will lapse unless deemed a 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 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.
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.
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.
140
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR GOVERNANCE How are the non-executive directors paid?
The chairman and non-executive directors receive an annual fee (paid in monthly instalments by payroll). The fee for the chairman is
set by the remuneration committee and the fees for the non-executive directors are approved by the board, on the 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.
141
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Part 2 – Annual remuneration report
In this section, we report on the implementation of our policies in the year ended 26 March 2022 as well as how the policy will be
implemented for 2023. 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 2022
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)
Louise Hardy
Kevin Whiteman
Tony Osbaldiston
Rosie Toogood
Number of
meetings attended
6/6
6/6
6/6
6/6
2/2
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 and workforce engagement on executive pay
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. This includes
giving employees the opportunity through the MyVoice forum to challenge how executive remuneration is aligned with the wider
company pay policy.
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. Fees charged by Deloitte provided to the committee for
the year ended 26 March 2022 amounted to £19,875 (excluding VAT).
142
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR GOVERNANCE Directors’ earnings for the 2022 financial year (audited)
Remuneration received by the directors
£000
Salary
Fees
Benefits
Pension
Total
fixed pay
Bonus
LTIPs
Total
variable
pay
Year ended 26 March 2022
Executives
Alan Dunsmore
Ian Cochrane
Derek Randall
Adam Semple
Non-executives
Kevin Whiteman
Alun Griffiths
Tony Osbaldiston
Louise Hardy
Rosie Toogood (appointed
16 June 2021)
369
328
270
252
–
–
–
–
–
1,219
–
–
–
–
140
60
53
53
36
342
19
16
40
16
–
–
–
–
–
70
49
46
43
–
–
–
–
–
458
393
356
311
140
60
53
53
36
63
56
111
43
–
–
–
–
–
91
208
1,860
273
–
–
–
–
–
–
–
–
–
–
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 26 March 2022.
Directors’ earnings for the 2021 financial year (audited)
Year ended 27 March 2021
£000
Salary
Fees
Benefits
Pension
Total
fixed pay
Bonus
LTIPs
Total
variable
pay
273
2,133
Executives
Alan Dunsmore
Ian Cochrane
Derek Randall ¹
Adam Semple
Non-executives
Kevin Whiteman ²
Alun Griffiths ³
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
–
–
–
–
–
–
–
–
–
–
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 which lapsed based on performance to 27 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.
Base salary increases received by the directors
The directors received a 1 per cent salary increase effective from 1 July 2021, which was broadly in line with that received by office staff
but less than that received by production staff.
Past directors/loss of office payments (audited)
There have been no payments made to past directors/loss of office during the year.
143
Total
521
449
467
354
140
60
53
53
36
Total
747
649
609
503
91
48
45
40
54
63
56
111
43
–
–
–
–
–
291
259
213
197
–
–
–
–
–
www.severfield.comStock Code: SFR OUR GOVERNANCE DIRECTORS’
REMUNERATION REPORT
How pay linked to performance in 2022 (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 PBT 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
Group PBT*
Group IFR**
% of maximum
bonus
opportunity
Threshold
On-target
Maximum
Actual % of bonus
£28.6m
80%
20% above 1.48
£30.1m
below 1.48
£33.1m
below 1.29
£27.1m
1.32
0%
85%
Payout as
% of salary
0%
17%
17%
* For Group PBT, ‘threshold’ represents 0 per cent, ‘on-target’ represents 50 per cent and ‘maximum’ represents 100 percent of the bonus opportunity.
** For Group IFR, ‘threshold’ represents 0 per cent, ‘on-target’ represents 50 per cent and ‘maximum’ represents 100 per cent of the bonus opportunity. Actual
performance excludes DAM Structures, which was acquired by the Group in February 2021 and which was not included when the targets were set as no
comparable data was available. Performance of DAM Structures will be included for the calculation of the 2023 target.
Derek Randall (JSSL managing director)
Measure
Group PBT *
JSSL (India) PBT*
JSSL (India) AFR**
% of maximum
bonus
opportunity
Threshold
On-target
Maximum
Actual % of bonus
£28.6m
40%
7.5 Cr
40%
20% Above 0.11
£30.1m
10.4 Cr
Below 0.11
£33.1m
20.0 Cr
Below 0.09
£27.1m
10.9 Cr
0.00
0%
53%
100%
Payout as
% of salary
0%
21%
20%
41%
*
Derek Randall’s profit-based component is split 50:50 between Group PBT and JSSL PBT. For Group PBT and JSSL PBT, ‘threshold’ represents 0 per cent, ‘on-
target’ represents 50 per cent and ‘maximum’ represents 100 per cent of the bonus opportunity.
** For JSSL AFR, no ‘threshold’ or ‘on-target’ targets were set. 100 per cent of the bonus opportunity is earned on achieving a score of below 0.09.
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.
Alan Dunsmore
Ian Cochrane
Derek Randall
Adam Semple
£62,648
£55,793
£110,641
£42,819
PSP awards vesting in 2022
− The 2019 PSP awards were capable of vesting in June 2022, subject to the achievement of an EPS performance condition measured
over the three financial years ended 26 March 2022. The threshold EPS target required for vesting of 25 per cent of the award was
8.41p which equated to a PBT of £31m. The actual PBT achieved was £27.1m, which equated to EPS of 7.2p and therefore the awards
will lapse in full, for the second successive year.
As explained in the chairman’s statement on page 133, no discretion was applied by the committee to adjust the formulaic vesting
outcome of the annual bonus or PSP awards.
144
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR GOVERNANCE Deferred bonus awards granted in 2022 (audited)
On 28 June 2021 the committee made the following awards under the Group’s Deferred Share Bonus Plan to executive directors in
relation to the 2021 bonus outcome. The awards will vest on 28 June 2024, 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
183,032
163,106
134,137
123,899
£145,510
£129,670
£106,639
£98,500
Vesting date
28 June 2024
28 June 2024
28 June 2024
28 June 2024
1 Face value calculated using the average mid-market share price for 24 and 25 June 2021 (79.50p).
PSP awards granted in 2022 (audited)
Awards were granted in June 2021 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 £30m to £40m for the financial year 2024. 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.
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
451,319
402,188
246,850
231,481
100% £365,568
100% £325,772
75% £199,948
75% £187,500
EPS
3 financial
years ending
30 March
2024
25%
1 Face value calculated based on the pre-grant date share price of 81p on 16 June 2021.
2 Performance conditions are based on underlying EPS targets of 7.61p (minimum performance – 25% vests) to 9.92p (maximum performance – 100% vests)
with linear interpolation in between. This represents a PBT range of £30m-£40m.
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 which have impacted the
Company’s share price or market as a whole.
145
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REMUNERATION REPORT
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
2018
2019
2020
2021
2018
2019
2020
2021
2018
2019
2020
2021
2018
2019
2020
2021
Vesting
date*
Performance
condition
2021
2022
2023
2024
2021
2022
2023
2024
2021
2022
2023
2024
2021
2022
2023
2024
EPS
EPS
EPS
EPS
EPS
EPS
EPS
EPS
EPS
EPS
EPS
EPS
EPS
EPS
EPS
EPS
Awards
held at
28 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
Awards
granted in
year
–
–
–
451,319
451,319
–
–
–
402,188
402,188
–
–
–
246,850
246,850
Awards
lapsed in
year
(414,692)
–
–
–
(414,692)
(360,556)
–
–
–
(360,556)
(222,372)
–
–
–
(222,372)
–
–
–
231,481
231,481
1,331,838
(195,498)
–
–
–
(195,498)
(1,193,118)
Performance conditions are based on a range of EPS targets as follows:
2019 award1
2020 award2
2021 award3
1 Represents a PBT range of £31.0m - £38.3m. These awards will lapse in full as threshold EPS performance was not achieved.
2 Represents a PBT range of £25.5m - £32.5m.
3 Represents a PBT range of £30.0m - £40.0m
* Vesting date is June in the relevant years other than 2023 when it is December.
Awards
vested in
year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Awards
held at
26 March
2022
–
490,196
529,809
451,319
1,471,324
–
436,835
472,133
402,188
1,311,156
–
269,433
291,210
246,850
807,493
–
231,092
271,739
231,481
734,312
4,324,285
Threshold
(25% vests)
8.41p
6.57p
7.61p
Maximum
(100% vests)
10.39p
8.36p
9.92p
146
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR GOVERNANCE
Statement of directors’ shareholding (audited)
As at 26 March 2022, all executive directors and their connected persons had a shareholding as follows:
Alan Dunsmore
Ian Cochrane
Derek Randall
Adam Semple
Shareholding
requirement
200%
200%
150%
150%
Actual share ownership as a percentage of shareholding
requirement as at 26 March 20221
253%
437%
265%
62%
1 Value of actual share ownership was calculated with reference to the closing mid-market share price at 26 March 2022 of 67.00p. Actual share ownership
includes DSBP shares granted but still within the three-year deferral period and/or unexercised.
Directors’ current shareholdings (audited)
The following table provides details on the directors’ beneficial interests in the Company’s share capital as at 26 March 2022.
Executives
Alan Dunsmore
Ian Cochrane
Derek Randall
Adam Semple
Non-executives
Kevin Whiteman
Alun Griffiths
Tony Osbaldiston
Louise Hardy
Rosie Toogood
Owned
shares¹
Share
incentive plan
(SIP)²
Sharesave
scheme
DSBP3
PSP4
Total5
1,170,257
1,941,790
835,988
84,667
65,619
50,000
–
–
–
9,928
9,928
–
–
–
–
–
–
–
19,073
27,237
–
19,073
428,070
381,469
410,132
283,193
1,471,324
1,311,156
807,493
734,312
3,098,652
3,671,580
2,053,613
1,121,245
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
65,619
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 137.
4 PSP shares are in the form of conditional awards which will only vest on the achievement of certain performance conditions. The total includes 2019 awards
which had not actually lapsed as at 26 March 2022.
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. There have been no changes in the directors’ beneficial interests in trusts holding ordinary shares of the Company.
Position against dilution limits
Severfield plc complies with the Investment Association’s principles of executive remuneration. These principles require that
commitments under all of the Group’s share ownership schemes (including the share incentive plan (‘SIP’), sharesave scheme and the
PSP) must not exceed 10 per cent of the issued share capital in any rolling ten-year period. 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 was operating
within these limits as at 26 March 2022.
147
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REMUNERATION REPORT
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 2012 over the ten-year period ended
26 March 2022.
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 2012.
£
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 2012
Mar 2013
Mar 2014
Mar 2015
Mar 2016
Mar 2017
Mar 2018
Mar 2019
Mar 2020
Mar 2021
Mar 2022
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).
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
2022
Dunsmore
Total
remuneration
(£000)
Annual
bonus (%)
LTIP vesting
(%)
450
62
289
233
681
946 1,228
738
819
890
880
747
521
–
–
N/A
N/A 34.0% 65.0% 63.0% 95.0%
–
62.6% 20.0% 61.0% 80.0%
17%
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 30 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.
148
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR 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).
Comparison between 2022 and 2021
Alan Dunsmore
Ian Cochrane
Derek Randall1
Adam Semple
Kevin Whiteman
Alun Griffiths
Tony Osbaldiston
Louise Hardy
Rosie Toogood2
All UK employees
Comparison between 2021 and 2020
Alan Dunsmore
Ian Cochrane
Derek Randall
Adam Semple
Kevin Whiteman3
Alun Griffiths
Tony Osbaldiston
Louise Hardy
All UK employees
Base salary/
fees
Benefits
Annual
bonus
1%
1%
1%
2%
53%
26%
18%
33%
n/a
4%
0%
0%
(49%)
0%
–
–
–
–
n/a
16%
(78%)
(78%)
(41%)
(78%)
–
–
–
–
n/a
(67%)
Base salary/
fees
Benefits
Annual
bonus
2%
2%
2%
7%
103%
6%
0%
0%
2%
0%
0%
0%
0%
–
–
–
–
0%
33%
33%
15%
38%
–
–
–
–
6%
1 Derek Randall’s FY21 benefit included £40,000 of cost of living allowance relating to FY20 but wholly paid in FY21.
2 Rosie Toogood was appointed to the board on 16 June 2021.
3 Kevin Whiteman was appointed as chairman on 3 September 2020
Chief executive officer pay ratio disclosure
Year
2022
2021
2020
Method of calculation adopted
Option A1
Option A1
Option A1
25th percentile pay ratio
(CEO: UK employees)
Median pay ratio
(CEO: UK employees)
75th percentile pay ratio
(CEO: UK employees)
19:1
25:1
30:1
13:1
18:1
22:1
10:1
14:1
17:1
1 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 13:1 is 28 per cent lower than the median ratio of 18:1 in 2021. This reduction in the chief executive officer pay ratio
mainly reflects the chief executive officer receiving a 17 per cent annual bonus in 2022 (2021: 80 per cent).
The committee has confirmed that the ratio is consistent with the Company’s wider policies on employee pay, reward and progression.
149
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DIRECTORS’
REMUNERATION REPORT
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 2022
Salary
Total pay and benefits
Year 2021
Salary
Total pay and benefits
Year 2020
Salary
Total pay and benefits
Chief executive officer
25th percentile
£000
369
521
364
747
356
880
£000
23
28
29
29
26
29
Median
£000
38
40
37
41
38
40
75th percentile
£000
45
54
49
53
48
51
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 the last day of the relevant financial year. 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.
Relative importance of spend on pay
The following table shows the actual spend on pay for all employees relative to revenue and underlying operating profit before the
results of JVs and associates:
Staff costs
Revenue
Underlying1 operating profit
Dividends
There were no share buybacks during the year.
2022
£000
86,034
403,563
26,881
9,229
2021
£000
75,630
363,254
25,470
8,895
% change
13.8%
11.1%
5.5%
3.8%
Shareholder voting
The results below show the response to the 2021 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
248,106,442
232,819
248,339,261
54,717
248,393,978
99.91
0.09
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)
1 See note 32 for APM definitions.
150
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
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR GOVERNANCE Implementation of policy for 2023
The executive directors’ salaries
The executive directors’ salaries at the start of the 2023 financial year are as follows:
Alan Dunsmore
Ian Cochrane
Derek Randall
Adam Semple
£
£369,500
£329,000
£270,500
£252,500
Salaries for the executive directors were reviewed in June 2022 and have been increased by four per cent with effect from 1 July 2022,
in line with the overall salary increases for the wider workforce.
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.
Pension opportunity for all executive directors was reduced to 12 per cent, with effect from 1 April 2022 and, as disclosed on page 136,
executive pension contribution levels will be aligned with the level available to the entire UK workforce by 1 January 2023.
Rewards for performance in 2023
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 2021 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.
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REMUNERATION REPORT
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 29 March 2025
Equal to or less than 7.5p (equivalent to PBT of £31.5m)
Between 7.5p and 8.8p (equivalent to PBT between £31.5m and £38.0m)
Equal to 8.8p or better (equivalent to PBT of £38.0m )
Sliding 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 given that, notwithstanding our record order book, medium-term prospects for growth could be impacted by
significant rises in raw material prices (notably for steel), increased labour and overhead costs and the war in Ukraine. As a result, it is
appropriate that the committee reviewed the assumptions used one year ago when the targets for the 2021 awards were set. At that
time, we determined that the performance range for that award would be between £30.0m (the entry gate) and £40.0m (the maximum
gate). As a result, this year we have increased the entry gate by 5 per cent to £31.5m but lowered the maximum gate by 5 per cent
to £38.0m.
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.
How will the non-executive directors be paid in the 2023 financial year?
Salaries for the non-executive directors were reviewed and increased in May 2021. It is proposed that these are benchmarked as part
of the triennial policy review that is currently underway. No review is proposed until this work is completed later this year. The fees for
the chairman and non-executive directors at the start of the 2023 financial year are 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
15 June 2022
2022
140,000
45,000
7,500
7,500
7,500
2021
140,000
45,000
7,500
7,500
7,500
152
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR GOVERNANCE STATEMENT OF DIRECTORS’
RESPONSIBILITIES
IN RESPECT OF THE ANNUAL REPORT AND FINANCIAL STATEMENTS
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
15 June 2022
Adam Semple
Group finance director
15 June 2022
The directors are responsible for preparing
the annual report and the Group and
parent Company financial statements
in accordance with applicable law and
regulations.
• 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.
Directors’ responsibilities
statement
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
Accounting Standards in conformity with
the requirements of the Companies Act
2006 and in accordance with UK-adopted
International Financial Report Standards
(‘IFRS’) and have elected to prepare the
parent Company financial statements in
accordance with UK accounting standards
and applicable law, 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 International
Accounting Standards in conformity
with the requirements of the Companies
Act 2006 and UK-adopted International
Financial Reporting Standards;
• 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
153
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OUR
FINANCIALS
CONTENTS
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
156
164
165
166
167
168
169
206
206
207
208
209
214
INDEPENDENT
AUDITOR’S REPORT
TO THE MEMBERS OF SEVERFIELD PLC
Overview
Materiality:
Group financial
statements as a
whole
£1.4m (2021: £1.2m)
4.9% (2021: 4.9%) of profit before tax
Coverage
98% (2021: 98%) of Group profit before tax
Key audit matters
Recurring risk
vs 2021
Carrying value of construction
contract assets, and revenue
and profit recognition in
relation to construction
contracts
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 52 week period ended 26 March 2022 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 26 March
2022 and of the Group’s profit for the 52 week period then
ended;
• the Group financial statements have been properly prepared
in accordance with UK-adopted international accounting
standards;
• the parent Company financial statements have been properly
prepared in accordance with UK accounting standards,
including FRS 101 Reduced Disclosure Framework and as
applied in accordance with the provisions of the Companies Act
2006; and
• the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (‘ISAs (UK)’) and applicable law. Our
responsibilities 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 seven financial periods ended 26 March 2022. 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.
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Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR FINANCIALS 2. KEY AUDIT MATTERS: 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.
The risk
Our response
Carrying value
of construction
contract assets,
and revenue and
profit recognition
in relation to
construction
contracts
Revenue:
£403.6m
(2021:£363.3m)
Contract
assets £75.9m
(2021: £16.3m)
Refer to page 122
(audit committee
report), pages
169 and 177
(accounting
policies,
judgements
and estimates)
and note 17
(construction
contracts).
Subjective estimate
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 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. Therefore, auditor judgement
is required to assess whether the
directors’ estimates for total forecast
costs and variable consideration
falls within an acceptable range. The
financial statements (note 2.27(a))
disclose the nature and extent of the
estimates and judgements made by
the Group.
We performed the tests below rather than seeking to rely on any of
the Company’s controls because the nature of the balance is such
that we would expect to obtain audit evidence primarily through the
detailed procedures described.
Our procedures included:
− 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.
− Tests of detail: For the high risk contracts identified, agreeing
uncertain variable consideration to post-period-end cash, post-
period-end certification, or customer agreed variation schedules.
Involving our own major project advisory 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 period-end, along
with discussion and challenge of management’s costs to complete
estimates against original budgets and current run rates;
− 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;
− 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;
− KPMG specialists: For certain higher risk or larger contracts,
utilising KPMG Project specialists to identify the risks and
opportunities associated with the contract and develop a range
of possible contract out-turns and challenge the appropriateness
of revenue recognised and provisions held in relation to these
contracts;
− 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 (2021: acceptable).
157
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AUDITOR’S REPORT
TO THE MEMBERS OF SEVERFIELD PLC
The risk
Our response
Carrying value
of parent
Company’s
investments in
subsidiaries and
joint ventures
£152.6m
(2021: £152.7m)
Refer to page
209 (accounting
policy) and page
211 (financial
disclosures).
Low risk, high value
The carrying amount of the
parent Company’s investments
in subsidiaries and joint ventures
represents 52% (2021: 51%) 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.
We performed the tests below rather than seeking to rely on any of
the Company’s controls because the nature of the balance is such
that we would expect to obtain audit evidence primarily through the
detailed procedures described.
Our procedures included:
− 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 Company’s conclusion that there is no impairment of
its investments in subsidiaries to be acceptable (2021: acceptable).
We continue to perform procedures over Going Concern. However, given the successful refinancing and increased facility with
significant headroom, we have not assessed this as one of the most significant risks in our current period audit and, therefore, it is not
separately identified in our audit report this period.
In the prior period we reported a key audit matter in relation to the provisional valuation of intangibles and contingent consideration,
and related disclosures for acquisition of DAM Structures. No acquisitions took place in the current period and as such we have not
assessed this as one of the most significant risks in our current period audit and, therefore, it is not separately identified in our audit
report this period.
158
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR FINANCIALS 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 £1,375,000 (2021: £1,200,000), determined with reference to a
benchmark of Group profit before tax (2021: normalised to exclude
amortisation and costs as a result of acquisitions as disclosed in
note 5) of which it represents 4.9% (2021: 4.9%).
The Group team held video and telephone conference meetings
with 1 (2021:1) component location in India (2021: India).
At these meetings, the findings reported to the Group team were
discussed in more detail. 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.
Materiality for the parent Company financial statements as a
whole was set at £900,000 (2021: £1,000,000), determined with
reference to a benchmark of Company total assets, of which it
represents 0.5% (2021: 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.
£000.0m
Performance materiality was set at 75% (2021: 75%) of
materiality for the financial statements as a whole, which equates
to £1,031,000 (2021: £990,000) for the Group and £675,000
(2021: £750,000) 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 £68,750 (2021:
£60,000), in addition to other identified misstatements that
warranted reporting on qualitative grounds.
Of the Group’s 12 (2021: 12) reporting components, we subjected
6 (2021: 6) to full scope audits for Group purposes.
The components within the scope of our work accounted for the
percentages illustrated opposite.
The remaining 7% (2021: 5%) of total Group revenue,
2% (2021: 2%) of Group profit before tax and 4% (2021: 6%)
of total Group assets is represented by 5 (2021: 5) reporting
components, none of which individually represented more than
3% (2021: 5%) of any of total Group revenue, Group profit before
tax or total Group assets. For the 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 £350,000 to £1,000,000 (2021: £300,000 to
£900,000), having regard to the mix of size and risk profile of
the Group across the components. The work on one of the six
components (2021: 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.
Normalised profit before tax
£27,098,000 (2021: £24,331,000)
Group Materiality
£1,375,000 (2021: £1,200,000)
£1,375,000
Whole financial
statements materiality
(2021: £1,200,000)
£1,031,000
Whole financial
statements performance
materiality
(2021: £990,000)
£1,000,000
Range of materiality at six
components (£350,000-
£1,000,000)
(2021: £300,000 to £900,000)
£68,750
Misstatements reported to the
audit committee (2021: £60,000)
Profit before tax
Group materiality
Group revenue
Group profit before tax
2
2
98%
(2021 98%)
98
98
7
5
93%
(2021 95%)
95
93
Group total assets
4
6
96%
(2021 94%)
94
96
Full scope for Group audit purposes 2021
Full scope for Group audit purposes 2020
Residual components
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AUDITOR’S REPORT
TO THE MEMBERS OF SEVERFIELD PLC
4. Climate Change Risk
In planning our audit, we have considered the potential impact
of risks arising from climate change on the Group’s business and
its financial statements. Further information is provided in the
Group’s Task Force for Climate-related Financial Disclosures
(‘TCFD’) recommended disclosures on page 59.As a part of our
audit we have performed risk assessment procedures, including
making enquiries of directors and management, reading board
meeting minutes and applying our knowledge of the Group and
sectors in which it operates to understand the extent of the
potential impact of climate change risk on the Group’s financial
statements.
We continued to challenge the directors to consider climate-
related risks in their impairment model, but given the level of
headroom in that impairment assessment we have not assessed
climate-related risk to be significant to our audit this year. There
was no impact on our key audit matters. We have read the Group’s
TCFD in the annual report and considered consistency with the
financial statements and our audit knowledge.
5. 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’).
We used our knowledge of the Group, its industry, and the
general economic environment to identify the inherent risks to
its business model and analysed how those risks might affect
the Group’s and Company’s financial resources or ability to
continue operations over the going concern period. The risks that
we considered most likely to adversely affect the Group’s and
Company’s available financial resources and metrics relevant to
debt covenants over this period were:
• current changes in steel prices, and other ongoing economic
issues including inflationary pressures and the resulting
challenging market.
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
53 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.
6. 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
period and in future periods, 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.
160
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR FINANCIALS 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.
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, 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.
7. 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 period 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.
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AUDITOR’S REPORT
TO THE MEMBERS OF SEVERFIELD PLC
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
54) 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 54 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.
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.
8. We have nothing to report on the other matters on
which we are required to report by exception
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.
162
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR FINANCIALS 9. Respective responsibilities
10. The purpose of our audit work and to whom we
Directors’ responsibilities
owe our responsibilities
As explained more fully in their statement set out on page 153,
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.
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
15 June 2022
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.
The Company is required to include these financial statements
in an annual financial report prepared using the single electronic
reporting format specified in the TD ESEF Regulation. This
auditor’s report provides no assurance over whether the annual
financial report has been prepared in accordance with that
format.
163
www.severfield.comStock Code: SFR OUR FINANCIALS CONSOLIDATED
INCOME STATEMENT
YEAR ENDED 26 MARCH 2022
Underlying
year ended
26 March
2022
£000
Non-
underlying
year ended
26 March
2022
£000
Note
Total
year ended
26 March
2022
£000
Underlying
year ended
27 March
2021
£000
Non-
underlying
year ended
27 March
2021
£000
Total
year ended
27 March
2021
£000
3
4
403,563
(376,682)
–
(5,424)
403,563
(382,106)
363,254
(337,784)
–
(2,795)
363,254
(340,579)
26,881
(5,424)
21,457
25,470
(2,795)
22,675
1,346
28,227
(1,129)
27,098
(4,795)
–
(5,424)
(674)
(6,098)
(604)
1,346
22,803
(1,803)
21,000
(5,399)
(344)
25,126
(795)
24,331
(4,574)
–
(2,795)
(429)
(3,224)
771
(344)
22,331
(1,224)
21,107
(3,803)
22,303
(6,702)
15,601
19,757
(2,453)
17,304
7.22p
7.19p
(2.17)p
(2.16)p
5.05p
5.03p
6.43p
6.43p
(0.80)p
(0.80)p
5.63p
5.63p
15
7
8
10
10
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
Further details of non-underlying items are disclosed in note 5 to the consolidated financial statements.
164
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR FINANCIALS CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
YEAR ENDED 26 MARCH 2022
Actuarial gain/(loss) on defined benefit pension scheme*
(Losses)/gain 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
Year ended
26 March
2022
£000
5,938
(22)
13
40
(1,184)
4,785
15,601
20,386
Year ended
27 March
2021
£000
(4,906)
1,699
251
34
734
(2,188)
17,304
15,116
165
www.severfield.comStock Code: SFR OUR FINANCIALS CONSOLIDATED
BALANCE SHEET
AT 26 MARCH 2022
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
Cash and cash equivalents
Contract liabilities, trade and other payables
Financial liabilities – borrowings
Financial liabilities – leases
Non-current liabilities
Contract 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
As at
26 March
2022
£000
As at
27 March
2021
£000
Note
11
12
13
14
15
18
16
18
22
22
22
19
22
22
19
30
22
22
20
24
25
82,188
10,343
91,436
11,070
30,136
4,881
230,054
18,005
117,859
670
4,171
–
140,705
370,759
(3,974)
(111,692)
(5,900)
(1,756)
(123,322)
(3,081)
(14,396)
(8,950)
(9,884)
(7,166)
(43,477)
(166,799)
85,782
9,630
91,698
9,808
28,790
4,368
230,076
10,231
67,847
1,049
3,584
24,983
107,694
337,770
–
(77,803)
(5,900)
(1,744)
(85,447)
(10,639)
(22,379)
(14,850)
(9,365)
(4,161)
(61,394)
(146,841)
203,960
190,929
7,738
88,511
4,485
103,226
203,960
7,706
87,658
3,464
92,101
190,929
The consolidated financial statements were approved by the board of directors on 15 June 2022 and signed on its behalf by:
Alan Dunsmore
Chief executive officer
Adam Semple
Group finance director
166
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR FINANCIALS
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
YEAR ENDED 26 MARCH 2022
At 28 March 2021
Total comprehensive income for the year
Ordinary shares issued*
Equity settled share-based payments
Dividends paid
At 26 March 2022
Note
23
Share
capital
£000
7,706
–
32
–
–
7,738
Share
premium
£000
87,658
–
853
–
–
88,511
* The issue of shares represents shares allotted to satisfy the 2018 and 2020 and Sharesave scheme.
At 29 March 2020
Total comprehensive income for the year
Ordinary shares issued*
Equity settled share-based payments
Dividends paid
At 27 March 2021
Note
23
Share
capital
£000
7,648
–
58
–
–
7,706
Share
premium
£000
87,292
–
366
–
–
87,658
Other
reserves
£000
3,464
32
–
989
–
4,485
Other
reserves
£000
1,402
1,984
–
78
–
3,464
Retained
earnings
£000
92,101
20,354
–
–
(9,229)
103,226
Retained
earnings
£000
87,333
13,132
–
531
(8,895)
92,101
Total
equity
£000
190,929
20,386
885
989
(9,229)
203,960
Total
equity
£000
183,675
15,116
424
609
(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 schemes.
167
www.severfield.comStock Code: SFR OUR FINANCIALS CONSOLIDATED
CASH FLOW STATEMENT
YEAR ENDED 26 MARCH 2022
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 entity, 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 financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Year ended
26 March
2022
£000
Year ended
27 March
2021
£000
(5,685)
25,349
Note
26
376
(2,759)
(124)
(2,507)
–
(526)
(5,540)
(1,056)
(9,229)
885
–
(5,900)
(2,432)
(17,732)
(28,957)
24,983
(3,974)
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
27
168
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR FINANCIALS NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
YEAR ENDED 26 MARCH 2022
1. Significant accounting policies
General information
Severfield plc (‘the Company’) is a company incorporated in the United Kingdom under the Companies Act 2006. The address of the
registered office is provided on page 215. 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 also been prepared in accordance with UK-adopted international accounting standards.
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.
Financial Period
The Group’s annual report and accounts are made up to an appropriate weekend date around 31 March each year. For 2022, trading is
shown for the 52-week period ended on 26 March 2022 (2021: 52-week period ended 27 March 2021).
The financial statements of the Group’s joint venture, JSSL, are made up to the year ended 31 March 2022 (2021: year ended 31 March
2021).
Adoption of new and revised standards
The following new and amended standard, adopted in the current financial year, had no significant impact on the financial statements.
• COVID-19-related rent concessions beyond 30 June 2021 (amendment to IFRS 16).
Accounting standards not yet adopted by the Group
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 2023.
• Amendments to IAS 1 ‘Classification of Liabilities as Current or Non-current’
• Amendments to IAS 37: Onerous Contracts – Cost of Fulfilling a contract
• Amendments to IFRS 3 ‘Reference to the Conceptual Framework’
• Amendments to IAS 16 ‘Property, Plant and Equipment – Proceeds before Intended Use’
• Annual improvements to IFRS standard 2018-2020
• Amendments to IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ to introduce a new definition for accounting
estimates
• Amendments to IAS 1 ‘Presentation of Financial statements’ and IFRS Practice Statements 1 ‘Making Materiality Judgements’
• Amendments to IAS 12 ‘Income Taxes’ – ‘Deferred Tax Related to Assets’ and ‘Liabilities Arising from a Single Transaction’.
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.
169
www.severfield.comStock Code: SFR OUR FINANCIALS NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
YEAR ENDED 26 MARCH 2022
1. Significant accounting policies continued
The following factors were considered as relevant:
• The current market conditions and the impact of these (including the potential future impact of the current inflationary market
conditions 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 business improvement programme, which has delivered tangible benefits in 2022 and is expected to continue doing so in
the 2023 financial year and for the period under forecast, and
• The Group’s cash position and its bank finance facilities (see note 22), which are committed until December 2026, including both the
level of those facilities and the three financial covenants attached to them (interest cover (>4x), net debt to EBITDA (<3.0x) and cash
flow cover (<1x)).
In the previous year, the Group continued to trade safely and profitably with positive operating cash flows whilst operating under
various COVID-19 restrictions. The directors expect the Group to remain similarly resilient over the forecast period. The directors
have reviewed the Group’s forecasts and projections for the 2023 financial year and for a period of 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,
including a highly pessimistic ‘severe but plausible’ scenario. This scenario is based on the combined impact of securing no further
orders and further significant inflationary pressures for the entirety of the going concern period. Given the strong previous performance
of the Group, this scenario is only being modelled to stress test our strong financial position and demonstrates the existence of
considerable headroom in the Group’s covenants and borrowing facilities in this ‘severe but plausible’ scenario.
Having also made appropriate enquiries, the directors consider it reasonable to assume that the Group has adequate resources to be
able to operate within the terms and conditions of its financing facilities for at least 12 months from the approval of the Group financial
statements. For this reason, the directors continue to adopt the going concern basis in preparing the Group 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 in previous years to provide a better indication of the Group’s underlying
business performance. They are not considered to be ‘business as usual’ items and have a varying impact on different businesses and
reporting periods. They have been separately identified as a result of their magnitude, incidence or unpredictable nature.
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.
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.
170
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR FINANCIALS 1. Significant accounting policies continued
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, whilst 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.
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.
171
www.severfield.comStock Code: SFR OUR FINANCIALS 1. Significant accounting policies continued
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. 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 majority of 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.
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.
172
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR FINANCIALSNOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSYEAR ENDED 26 MARCH 2022 1. Significant accounting policies continued
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. Included in capitalised contract costs are pre-contract tender costs. 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.
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.
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www.severfield.comStock Code: SFR OUR FINANCIALS 1. Significant accounting policies continued
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, as 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.
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.
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Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR FINANCIALSNOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSYEAR ENDED 26 MARCH 2022 1. Significant accounting policies continued
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,
unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would
have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an
impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the
reversal of the impairment loss is treated as a revaluation increase.
Inventories
Inventories (raw materials and consumables and work in progress) 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.
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.
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www.severfield.comStock Code: SFR OUR FINANCIALS 1. Significant accounting policies continued
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 26 March 2022OUR FINANCIALSNOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSYEAR ENDED 26 MARCH 2022 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. However, due to the level of uncertainty, combination of
cost and income variables and timing across a large portfolio of contracts at different stages of their contract life, it is impracticable to
provide a quantitative analysis of the aggregated judgements that are applied at a portfolio level.
Within this portfolio, there are a limited number of long-term contracts where the Group has incorporated significant judgements over
revenue and profit, which have been recognised at a level that is considered highly probable not to significantly reverse. However, there
are a host of factors affecting potential outcomes in respect of these entitlements which could result in a range of reasonably possible
outcomes on these contracts in the following financial year, ranging from a gain of £17,000,000 to a loss of £6,000,000. Management
has assessed the range of reasonably possible outcomes on these limited number of contracts based on facts and circumstances that
were present and known at the balance sheet date. As with any contract applying long-term contract accounting, these contracts are
also affected by a variety of uncertainties that depend on future events, and so often need to be revised as contracts progress.
At the balance sheet date, amounts due from construction contract customers, included in contract assets, trade and other
receivables, was £74,898,000 (2021: £16,288,000), see note 3.
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 £14,396,000 (2021: £22,379,000).
Of the items discussed above, revenue and profit recognition represents the key source of estimation uncertainty.
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www.severfield.comStock Code: SFR OUR FINANCIALS 3. Revenue and segmental analysis
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
2022
£000
403,563
4,584
76
408,223
2021
£000
363,254
2,658
33
365,945
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
2022
£000
2021
£000
337,520
66,043
403,563
214,057
149,197
363,254
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)
2022
£000
106,783
74,898
(17,930)
2021
£000
56,541
16,288
–
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.
There was no revenue recognised in the current financial year from performance obligations satisfied or partially satisfied in
previous years.
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Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR FINANCIALSNOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSYEAR ENDED 26 MARCH 2022 3. Revenue and segmental analysis continued
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 26 March 2022 and have an original expected contract duration of more than one year:
Construction contracts
2023
£000
2024
£000
86,293
18,100
The total transaction price allocated to the remaining performance obligations represents the contracted revenue to be earnt 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 £57,619,000 (2021: £108,871,000) relating to one major customer (spread over several contracts), who
individually contributed more than 10 per cent of Group revenue in the year ended 26 March 2022.
4. Operating costs
Raw materials and consumables (including subcontractor costs)
Staff costs (note 6)
Other operating charges
Amortisation of other intangible assets (note 12)
Operating lease expense:
– plant and machinery
– other
Depreciation (notes 13 and 14):
– owned property, plant and equipment
– right-of-use assets
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.
2022
£000
253,734
86,034
33,802
178
535
118
5,163
1,702
(4,584)
376,682
5,424
382,106
25
450
25
–
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
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 £nil (2021: £39,000) 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 122 and 125. No services were
performed pursuant to contingent fee arrangements.
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www.severfield.comStock Code: SFR OUR FINANCIALS 5. Non-underlying items
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/DAM Structures
Acquisition-related expenses – DAM Structures
Contingent consideration movements – Harry Peers
Other exceptional costs
Unwinding of discount on contingent consideration – DAM Structures/Harry Peers
Non-underlying items before tax
2022
£000
5,424
674
6,098
604
6,702
2022
£000
5,191
–
–
233
674
6,098
2021
£000
2,795
429
3,224
(771)
2,453
2021
£000
2,842
689
(736)
–
429
3,224
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 and DAM Structures.
Acquisition-related expenses in the prior year of £689,000, represent non-recurring legal and consultancy fees associated with the
DAM structures acquisition.
The basis for stating results on an underlying basis is set out on page 6. 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, see note 32.
6. Staff costs
Details of directors’ remuneration for the year are provided in the audited part of the directors’ remuneration report on page 143.
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.
2022
Number
1,322
256
1,578
2022
£000
73,885
7,842
4,307
86,034
2021
Number
1,208
193
1,401
2021
£000
65,517
6,910
3,203
75,630
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Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR FINANCIALSNOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSYEAR ENDED 26 MARCH 2022 7. Net finance expense
Finance income
Finance expense
8. Taxation
a) The taxation charge comprises:
Current tax
UK corporation tax charge
Foreign tax relief/other relief
Foreign tax suffered
Adjustments to prior years’ provisions
Deferred tax (note 20)
Current year credit
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
Income not taxable
Tax effect of share of results of JVs and associates
Adjustments to prior years’ provisions
Rate differences
2022
£000
(76)
1,879
1,803
2022
£000
(4,178)
124
(125)
(251)
(4,430)
415
(1,457)
73
(969)
(5,399)
2022
£000
21,000
(3,990)
(536)
506
256
(178)
(1,457)
(5,399)
2021
£000
(33)
1,257
1,224
2021
£000
(3,940)
–
–
(69)
(4,009)
25
–
181
206
(3,803)
2021
£000
21,107
(4,010)
103
–
(8)
112
–
(3,803)
Corporation tax was calculated at 19 per cent (2021: 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 percent with effect from
1 April 2023. During the year, this change has been confirmed and hence all deferred tax balances have been calculated at 25 per cent.
181
www.severfield.comStock Code: SFR OUR FINANCIALS 9. Dividends
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 27 March 2021 of 1.8p per share (2020: 1.8p)
Interim dividend for the year ended 26 March 2022 of 1.2p per share (2021: 1.1p)
2022
£000
5,529
3,700
9,229
2021
£000
5,523
3,372
8,895
The directors are recommending a final dividend of 1.9p per share (2021: 1.8p). This, together with the interim dividend of 1.2p per
share (2021:1.1p) will result in a total dividend of 3.1p per share (2021: 2.9p).
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
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
2022
£000
2021
£000
15,601
17,304
22,303
19,757
Number
Number
308,834,123 307,337,645
112
310,169,446 307,337,757
1,335,323
5.05p
7.22p
5.03p
7.19p
2022
£000
15,601
6,702
22,303
5.63p
6.43p
5.63p
6.43p
2021
£000
17,304
2,453
19,757
£000
11,474
16,002
47,980
6,571
161
82,188
Following the finalisation of the acquisition accounting for DAM Structures in 2022, an amount of £3,594,000 was reclassified from
goodwill to intangible assets during the year. This reflects additional identified intangible assets on acquisition of £5,958,000, offset by
fair value adjustments of £1,514,000 and related deferred tax liabilities of £850,000. The fair value adjustments relate to adjustments
to contract balances, updated using the best estimates available, which are based on conditions existing at the date of acquisition (see
note 21).
Due to the proximity of the acquisition to the previous year-end date, the valuation of these assets was not finalised until the year
ended 26 March 2022.
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Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR FINANCIALSNOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSYEAR ENDED 26 MARCH 2022 11. Goodwill continued
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. There are four CGUs identified as part of the impairment, these mainly reflect the acquisitions
made by the Group.
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, together with cash flows based on projections for the following two years. After this period, cash flows have been
extrapolated using a growth rate of 1.5 per cent (2021: 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 10.6 per cent (2021: 10 per cent).
Following the impairment reviews performed by the Group, no impairment charge was recorded in the year ended 26 March 2022.
Management has analysed a number of sensitivity scenarios when performing the impairment reviews, including a reduction in
operating margin and an increased 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
26 March 2022.
12. Other intangible assets
Cost
At 29 March 2020
Additions
At 28 March 2021
Additions
At 26 March 2022
Amortisation
At 29 March 2020
Charge for the year
At 28 March 2021
Charge for the year
At 26 March 2022
Carrying amount
At 26 March 2022
At 27 March 2021
Intangible
assets
acquired on
acquisition
£000
Other
intangible
assets
£000
8,796
4,750
13,546
5,958
19,504
1,421
2,842
4,263
5,191
9,454
1,033
351
1,384
124
1,508
1,033
4
1,037
178
1,215
Total
£000
9,829
5,101
14,930
6,082
21,012
2,454
2,846
5,300
5,369
10,669
10,050
9,283
293
347
10,343
9,630
183
www.severfield.comStock Code: SFR OUR FINANCIALS 12. Other intangible assets continued
The intangible assets acquired on acquisition arise as a result of applying IFRS 3, which requires the separate recognition of acquired
intangibles from goodwill. The Group’s acquired intangible assets are as follows:
Cost
At 29 March 2020
Additions
At 28 March 2021
Additions
At 26 March 2022
Amortisation
At 29 March 2020
Charge for the year
At 28 March 2021
Charge for the year
At 26 March 2022
Carrying amount
At 26 March 2022
At 27 March 2021
Customer
relationships
£000
Brands
£000
6,070
3,000
9,070
5,853
14,923
709
1,419
2,128
3,188
5,316
9,607
6,942
813
–
813
–
813
74
148
222
148
370
443
591
Order
book
£000
1,913
1,750
3,663
105
3,768
638
1,275
1,913
1,855
3,768
Total
£000
8,796
4,750
13,546
5,958
19,504
1,421
2,842
4,263
5,191
9,454
–
1,750
10,050
9,283
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).
Following the finalisation of the acquisition accounting and intangible asset valuations for DAM Structures in 2022, an amount of
£5,958,000 has been reclassified from goodwill to acquired intangible assets.
184
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR FINANCIALSNOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSYEAR ENDED 26 MARCH 2022 13. Property, plant and equipment
Cost
At 29 March 2020
Additions
Acquisition of subsidiary
Disposals
At 28 March 2021
Additions
Disposals
At 26 March 2022
Accumulated depreciation
At 29 March 2020
Charge for the year
Disposals
At 28 March 2021
Charge for the year
Disposals
At 26 March 2022
Carrying amount
At 26 March 2022
At 27 March 2021
Freehold
and long
leasehold
land and
buildings
£000
70,447
247
–
(30)
70,664
2,759
–
73,423
6,658
676
–
7,334
678
–
8,012
Plant
and
machinery
£000
Fixtures,
fittings
and office
equipment
£000
Motor
vehicles
£000
44,806
5,075
1,103
(360)
50,624
1,911
(1,470)
51,065
27,826
2,622
(303)
30,145
3,250
(1,127)
32,268
10,608
823
37
(53)
11,415
479
(1)
11,893
2,796
1,034
(21)
3,809
1,118
(1)
4,926
400
130
–
(140)
390
117
(128)
379
117
102
(112)
107
117
(106)
118
Total
£000
126,261
6,275
1,140
(583)
133,093
5,266
(1,599)
136,760
37,397
4,434
(436)
41,395
5,163
(1,234)
45,324
65,411
63,330
18,797
20,479
6,967
7,606
261
283
91,436
91,698
185
www.severfield.comStock Code: SFR OUR FINANCIALS 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:
Land and
buildings
£000
Plant and
equipment
£000
Motor
Vehicles
£000
Cost
At 29 March 2020
Additions
Disposals
At 28 March 2021
Additions
Disposals
At 26 March 2022
Accumulated depreciation
At 29 March 2020
Charge for the year
Disposals
At 28 March 2021
Charge for the year
Disposals
At 26 March 2022
Carrying amount
At 26 March 2022
At 27 March 2021
9,420
792
–
10,212
–
–
10,212
830
831
–
1,661
970
–
2,631
7,581
8,551
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
300
48
(47)
301
2,735
(3)
3,033
137
85
–
222
150
–
372
2,005
458
(159)
2,304
431
(658)
2,077
618
653
(145)
1,126
582
(459)
1,249
Total
£000
11,725
1,298
(206)
12,817
3,166
(661)
15,322
1,585
1,569
(145)
3,009
1,702
(459)
4,252
2,661
79
828
1,178
11,070
9,808
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 (‘CMF’) Limited is registered in Chepstow in the United Kingdom. During the prior year, the Group invested
a £2,444,000 in the joint venture to support the expansion of the production facilities (which was matched by our joint venture partner,
Studwelders Composite Floor Decks Ltd).
The Group did not make any further investments in either CMF Limited, JSW Severfield Structures Limited, or Fabsec Limited during
the year (2021: £nil).
186
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR FINANCIALSNOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSYEAR ENDED 26 MARCH 2022 15. Interests in JVs and associates continued
At 29 March 2020
Unrecovered loss(net)
Investments made during the year
At 28 March 2021
Profit retained
At 26 March 2022
Share of net
assets/
(liabilities)
£000
21,364
(344)
2,444
23,464
1,346
24,810
Goodwill
£000
5,326
–
–
5,326
–
5,326
The Group’s share of the retained profit for the year of JVs and associates is made up as follows:
Share of results
2022
2021
Fabsec
Limited
£000
JSW Severfield
Structures
Limited
£000
–
–
796
(697)
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
Fabsec
Limited
£000
1,308
1
(54)
(2,239)
(984)
(246)
–
–
–
246
–
198
(1)
–
–
76
–
JSW Severfield
Structures
Limited
£000
89,768
28,673
(85,086)
(2,212)
31,143
15,572
–
–
2,454
374
18,400
100,340
(1,597)
(3,282)
(302)
1,592
796
CMF
Limited
£000
12,240
4,315
(7,881)
(777)
7,897
3,948
5,326
2,444
–
18
11,736
35,345
(79)
(67)
(259)
1,102
550
CMF
Limited
£000
550
353
2022
£000
103,316
32,989
(93,021)
(5,228)
38,056
19,274
5,326
2,444
2,454
638
30,136
135,883
(1,677)
(3,349)
(561)
2,770
1,346
There were no contingent liabilities or capital commitments (2021: none) associated with the Group’s JVs and associates.
Total
£000
26,690
(344)
2,444
28,790
1,346
30,136
Total
£000
1,346
(344)
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)
187
www.severfield.comStock Code: SFR OUR FINANCIALS 16. Inventories
Raw materials and consumables
Work-in-progress
17. Construction contracts
Contracts-in-progress at balance sheet date:
Amounts due from construction contract customers included in 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
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
Contract assets, trade and other receivables
2022
£000
12,112
5,893
18,005
2021
£000
5,980
4,251
10,231
2022
£000
2021
£000
106,783
(17,930)
88,853
56,541
–
56,541
584,344
(495,491)
88,853
496,720
(440,179)
56,541
2022
£000
27,004
74,898
101,902
6,062
7,580
2,315
117,859
2022
£000
4,881
4,881
2021
£000
35,885
16,288
52,173
6,212
7,331
2,131
67,847
2021
£000
4,368
4,368
Contract assets of £74,898,000 (2021: £16,288,000) mainly reflect the Group’s right to consideration for work completed but not billed
at the year end on construction contracts. The increase in the year mainly reflects the impact of steel and other input price rises,
together with higher steel purchases to meet production requirements in 2023.
The average credit period taken on revenue, calculated on a count-back basis to make appropriate allowance for monthly revenue
phasing, is 69 days (2021: 31 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 26 March 2022
were £nil (2021: £nil).
188
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR FINANCIALSNOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSYEAR ENDED 26 MARCH 2022 19. Contract liabilities, trade and other payables
Trade creditors
Other taxation and social security
Other creditors and accruals
Contract liabilities (note 17)
Amounts owed to JVs and associates
2022
£000
47,326
3,460
41,776
17,930
1,200
111,692
2021
£000
44,092
2,839
29,628
–
1,244
77,803
In the current year, other creditors and accruals includes the outstanding contingent purchase consideration for DAM Structures of
£8,500,000, which is payable in the next 12 months.
Contract liabilities of £17,930,000 reflect advance payments from customers for construction contracts for which revenue has not
been recognised against as at 26 March 2022. At 27 March 2021, there were no advance payments.
In the prior year, other creditors and accruals included outstanding purchase consideration for CMF Limited of £500,000. This was paid
in full in the current year.
Non-current liabilities
Other creditors and accruals
2022
£000
3,081
3,081
2021
£000
10,639
10,639
Non-current other creditors and accruals in the current and prior year reflects the outstanding contingent purchase consideration
for DAM Structures of £3,081,000 (2021: £10,639,000) which is payable in the next five years, 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 52 days (2021: 45 days).
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
2022
£000
(11,883)
4,717
(7,166)
2021
£000
(8,895)
4,734
(4,161)
189
www.severfield.comStock Code: SFR OUR FINANCIALS 20. Deferred tax assets and liabilities continued
Deferred tax is disclosed in the balance sheet as a deferred tax liability in the current and prior years.
At 29 March 2020
(Charge)/credit to income statement
On acquisition of subsidiary
Charge to other comprehensive income
At 28 March 2021
Prior year adjustment
(Charge)/credit to income statement
(Charge)/credit to income statement due
to rate change
On acquisition of subsidiary*
Charge to other comprehensive income
Charge to other comprehensive income
due to rate change
At 26 March 2022
Excess
capital
allowances
£000
(6,765)
(177)
(189)
–
(7,131)
(79)
(155)
(2,317)
–
–
–
(9,682)
Acquired
intangible
assets
£000
(1,401)
540
(903)
–
(1,764)
–
986
(291)
(1,132)
–
–
(2,201)
Retirement
benefit
£000
3,551
(231)
–
932
4,252
–
(389)
941
–
(1,128)
(77)
3,599
Trading
losses
£000
213
7
–
–
220
–
226
–
–
–
–
446
Other
£000
393
67
–
(198)
262
152
(253)
210
280
17
4
672
Total
£000
(4,009)
206
(1,092)
734
(4,161)
73
415
(1,457)
(852)
(1,111)
(73)
(7,166)
* Relates to the finalisation of the acquisition accounting for DAM Structures in the year.
21. Business combinations
Summary of prior year 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 believe that the acquisition will give the Group immediate access to attractive,
complimentary market sectors with strong growth potential including the propping, railway and steel piling market sectors.
The final net consideration of £22.9m comprised:
Gross initial cash consideration
Completion payment
Contingent consideration
Deferred consideration
Gross consideration
Net cash acquired (excluding payments in advance)
Net consideration
Provisional
£000
16,994
934
3,709
6,930
28,567
(5,521)
23,046
Movement
£000
–
(408)
268
–
(140)
–
(140)
Final
£000
16,994
526
3,977
6,930
28,427
(5,521)
22,906
DAM Structures was acquired for an initial gross consideration of £16,994,000, including cash and cash equivalents of £5,521,000,
which was 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 H1 2023. 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.
Following the finalisation of the acquisition accounting for DAM Structures in 2022, the completion payment was agreed at £526,000,
which has been paid in cash during the year, and the fair value of the contingent consideration has increased from the provisional stage
to £3,977,000. This represents management’s current assessment of the amount likely to be paid of £6,565,000 (out of the maximum
£8,000,000), discounted at DAM Structures’s cost of capital of 18.5 per cent.
190
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR FINANCIALSNOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSYEAR ENDED 26 MARCH 2022 21. Business combinations continued
The 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 (excluding payments in advance)
Total assets
Current liabilities
Trade and other payables
Current tax liabilities
Non-current liabilities
Deferred tax liabilities
Total liabilities
Net assets
Net cash acquired (excluding payments in advance)
Net identifiable assets acquired
Identified intangible assets
Goodwill
Net assets acquired
Provisional
£000
Movement
£000
Final
£000
1,990
–
1,990
2,235
10,141
5,521
17,897
19,887
(9,973)
(86)
(10,059)
(1,079)
(11,138)
8,749
(5,521)
3,228
4,750
15,068
23,046
–
(1,121)
–
(1,121)
(1,121)
(493)
(40)
(533)
(850)
(1,383)
(2,504)
–
(2,504)
5,958
(3,594)
(140)
2,235
9,020
5,521
16,776
18,766
(10,466)
(126)
(10,592)
(1,929)
(12,521)
6,245
(5,521)
724
10,708
11,474
22,906
The finalisation of the acquisition accounting for DAM Structures resulted in an amount of £3,594,000 being reclassified from goodwill
to intangible assets during the year. This reflects additional identified intangible assets on acquisition of £5,958,000, offset by fair
value adjustments of £1,514,000 and related deferred tax liabilities of £850,000. The fair value adjustments relate to adjustments to
contract balances, updated using the best estimates available, which are based on conditions existing at the date of acquisition. Due
to the proximity of the acquisition to the previous year-end date, the valuation of these assets was not finalised until the year ended
26 March 2022.
Goodwill of £11,474,000 represents both existing and new end user customers (including core fabrication and rail), 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 acquisition:
Gross initial cash consideration
Completion payment
Net cash acquired (including payments in advance)
Total cash outflow – investing activities
Contingent consideration – Harry Peers
Net initial cash consideration
2022
£000
–
526
–
526
–
526
2021
£000
16,994
–
(5,505)
11,489
6,000
17,489
Acquisition-related costs of £689,000 were fully expensed in the period to 27 March 2021 as non-underlying operating costs
(see note 5).
191
www.severfield.comStock Code: SFR OUR FINANCIALS 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 while optimising the
return to stakeholders. The capital structure of the Group consists of debt, which includes borrowings, cash and cash equivalents and
equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings.
The Group monitors capital using the following indicators:
i) Gearing ratio
Borrowing
Cash and cash equivalents
Unamortised debt arrangement fees
Net (debt)/funds
Equity
Net debt to equity ratio
2022
£000
(14,850)
(3,974)
402
(18,422)
203,960
9.0%
2021
£000
(20,750)
24,983
128
4,361
190,929
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
(debt)/funds as set out in the Group’s borrowing facilities.
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 (debt)/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
2022
£000
26,881
1,346
28,227
203,960
3,974
14,850
18,824
(10,050)
10,797
223,531
209,536
13.5%
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%
192
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR FINANCIALSNOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSYEAR ENDED 26 MARCH 2022 22. Financial instruments continued
Categories of financial instruments
Financial assets
Cash and cash equivalents
Trade receivables and other (note 18)
Derivative financial instruments
Financial liabilities
Cash and cash equivalents
Trade creditors (note 19)
Other creditors and accruals (note 19)
Lease liabilities
Carrying value
2022
£000
–
31,885
670
(3,974)
(47,326)
(44,857)
(11,640)
2021
£000
24,983
40,253
1,049
–
(44,092)
(40,267)
(11,109)
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.
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 26 March 2022 were £11,236,000 (2021: £11,502,000).
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.
193
www.severfield.comStock Code: SFR OUR FINANCIALS 22. Financial instruments continued
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.
On 1 December 2021, the Group completed a refinancing of its revolving credit facility (‘RCF’) with HSBC Bank PLC and Virgin Money
(formerly Yorkshire Bank). The new £50,000,000 RCF provides additional liquidity above the £25,000,000 RCF which it replaced and
extends the term of the facility which now expires in December 2026. The new facility provides the Group with enhanced liquidity and
long-term financing to help support its growth strategy. The RCF remains subject to three financial covenants, namely interest cover,
net debt to EBITDA and debt service (cash flow) cover. The Group operated well within these covenant limits throughout the year ended
26 March 2022.
As at 26 March 2022, £50,000,000 (2021: £25,000,000) of this facility was not drawn but available. Up to £15,000,000 of this facility is
available by way of an overdraft (2021: £10,000,000).
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 – 2022
Trade and other payables
Financial liabilities —
leases
Borrowings
Liabilities – 2021
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
92,183
78,873
10,229
410
2,671
–
92,183
11,640
14,850
118,673
459
1,475
80,807
1,297
4,425
15,951
1,533
4,150
6,093
3,208
4,800
10,679
5,143
–
5,143
11,640
14,850
118,673
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
194
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR FINANCIALSNOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSYEAR ENDED 26 MARCH 2022 22. Financial instruments continued
Market risk
The Group’s activities expose it primarily to the financial risks of changes in credit risks described above, in foreign currency exchange
rates and interest rates. The Group has entered into certain derivative financial instruments to manage its exposure to foreign
currency risk.
Market risk exposures are monitored and are supplemented by sensitivity analysis. There has been no change to the Group’s exposure
to market risks or the manner in which it manages and measures the risk.
Foreign currency risk management
The Group undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange rate fluctuations arise.
Exchange rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts.
The Group seeks to minimise the effects of currency risks by using derivative financial instruments when appropriate to hedge these
risk exposures against contracted sales. The use of financial derivatives is governed by the Group’s policies approved by the board
of directors. The Group does not enter into or trade financial instruments, including derivative financial instruments for speculative
purposes.
The carrying value of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date are as
follows:
Euro
US dollar
Liabilities
Assets
2022
£000
(2,033)
(2)
(2,035)
2021
£000
(8,329)
(32)
(8,361)
2022
£000
12,235
4
12,239
2021
£000
28,589
5
28,594
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
2022
£000
–
2021
£000
3
2022
£000
(1,234)
2021
£000
(252)
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
26 March 2022, derivatives designated as cash flow hedges were an asset of £670,000 (2021: £1,049,000) and recognised total losses
of £9,000 (2021: gains of £1,950,000) in equity and losses of £370,000 (2021: gains of £234,000) in profit and loss in the year.
At 26 March 2022, the Group had forward exchange contracts of 24.0m euros (2021: 20.0m euros) at an average exchange rate of
€1.079/£ (2021: €1.127/£) which mature within 12 months of the year end. In addition, the Group had forward exchange contracts of
6.4m CHF (2021: nil) at an average exchange rate of CHF 1.028/£ (2021: N/A) which mature within 12 months of the year end.
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www.severfield.comStock Code: SFR OUR FINANCIALS 22. Financial instruments continued
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 26 March
2022 and the Group’s equity at that date would decrease by £74,000 (2021: £104,000). If the £50,000,000 facility is fully utilised the
exposure increases by £250,000. This is attributable to the Group’s exposure to interest rates on its variable rate borrowings.
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 142 to 152. The Group recognised a total charge of £989,000 (2021: £1,167,000) 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
£280,000 for the year (2021: £593,000) with a corresponding entry to reserves. The weighted average fair value of share options granted
during the year was £0.71 per share. Three outstanding awards had been granted to 26 March 2022:
During the year ended 28 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
30 March 2019 to 26 March 2022. The following vesting schedule applies:
Underlying EPS performance for year ending 26 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 (2021: £nil).
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Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR FINANCIALSNOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSYEAR ENDED 26 MARCH 2022 23. Share-based payments continued
During the period ended 27 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 29 March 2020 to 25 March 2023. The following vesting schedule applies:
Underlying EPS performance for year ending 25 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 £81,000 (2021: £593,000).
During the year ended 26 March 2022 the remuneration committee granted 2,709,748 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 28 March 2021 to 30 March 2024. The following vesting schedule applies:
Underlying EPS performance for year ended 30 March 2024
Equal to less than 7.61p
Equal to 9.92p or better
Between 7.61p and 9.92p
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 June 2021.
% of award vesting
0%
100%
between 25% and 100%
£0.81*
nil
94%
0.3%
3.1p
three years
The Black–Scholes pricing model produced, using the above assumptions, an annual charge of £199,000 (2021: £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
2022
Number
7,429,677
2,709,748
(2,029,034)
–
8,110,391
2021
Number
6,292,368
2,983,529
(149,481)
(1,696,739)
7,429,677
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www.severfield.comStock Code: SFR OUR FINANCIALS 23. Share-based payments continued
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 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 became exercisable for a period
of six months. A charge of £nil (2021: £185,000) 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
10 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 £387,000 (2021: £389,000) was recognised in the current period in relation to the 2020 Sharesave
scheme.
Under the 2021 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 2021 Sharesave scheme in 2024, these options will become exercisable for a
period of six months. A charge of £322,000 (2021: £nil) was recognised in the current period in relation to the 2021 Sharesave scheme.
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:
309,523,061 ordinary shares of 2.5p each (2021: 308,221,462 ordinary shares of 2.5p each)
The issue of shares represents shares stated to satisfy the 2018 and 2020 sharesave schemes.
2022
Number
5,742,520
2,300,899
(823,723)
(1,301,599)
5,918,097
2021
Number
3,551,400
4,259,136
(1,471,382)
(596,634)
5,742,520
2022
£000
2021
£000
7,738
7,706
The ordinary shares carry no right to fixed income. There are no share options outstanding as at 26 March 2022 (2021: nil).
25. Other reserves
At 29 March 2020
Share-based payments
Gains taken to equity on cash flow hedges
Reclassification adjustments on cash flow hedges
Exchange difference on foreign operations
At 28 March 2021
Share-based payments
Losses taken to equity on cash flow hedges
Reclassification adjustments on cash flow hedges
Exchange difference on foreign operations
At 26 March 2022
Share-based
payment
reserve
£000
2,319
78
–
–
–
2,397
989
–
–
–
3,386
Capital
redemption
reserve
£000
139
–
–
–
–
139
–
–
–
–
139
Hedge
accounting
reserve
£000
(1,038)
–
1,699
251
–
912
–
(22)
13
–
903
Currency
translation
reserve
£000
(18)
–
–
–
34
16
–
–
–
41
57
Total
£000
1,402
78
1,699
251
34
3,464
989
(22)
13
41
4,485
The movement in the share-based payment reserve represents the share-based payment charge of £989,000 (2021: £1,167,000) offset
by amounts recycled to retained earnings of £nil (2021: £531,000) for share awards vested in the year and £nil (2021: £557,000) for tax
paid on these awards. There was no reserves movement in the current or prior year for sharesave schemes.
198
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR FINANCIALSNOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSYEAR ENDED 26 MARCH 2022 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
Release of deferred 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 (used in)/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 (debt)/funds
Borrowings
Cash and cash equivalents
Unamortised debt arrangement fees
2022
£000
22,803
5,163
(11)
–
5,369
(2,045)
(1,346)
989
1,702
32,624
(7,774)
(50,533)
23,781
(1,902)
(3,783)
(5,685)
2022
£000
(1,902)
376
(2,759)
(2,507)
(6,792)
26,881
(25%)
2022
£000
(14,850)
(3,974)
402
(18,422)
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
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. See note 32 for APM definitions.
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 26 March 2022 this amounted to £nil (2021: £nil). The Group has also given performance bonds in the normal
course of trade.
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www.severfield.comStock Code: SFR OUR FINANCIALS
29. Operating lease arrangements
The Group as lessee
The Group also leases certain items of plant and machinery and vehicles whose total future minimum lease rentals are as follows:
Minimum lease rentals due:
— Within one year
— After one year and within five years
2022
£000
48
15
63
2021
£000
21
7
28
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 £4,307,000 (2021: £3,203,000) represents contributions payable to these schemes by the Group at
rates specified in the rules of the plans. As at 26 March 2022, contributions of £519,000 (2021: £447,000) due in respect of the current
reporting period had not been paid over to the schemes.
Defined benefit schemes
The Group has a defined benefit scheme which is now closed to new members and no defined benefit membership rights will accrue
under the scheme.
The scheme exposes the Group to actuarial and other risks, the most significant of which are considered to be:
Investment risk The present values of the scheme liabilities are calculated using a discount rate determined by reference to
Interest risk
Longevity risk
Salary risk
corporate bond yields; if the return on scheme assets is below this rate, it will create a plan deficit. The Group holds
a significant proportion of growth assets (bonds, gilts and equities) to leverage the return generated by the scheme.
A decrease in the corporate bond interest rate will increase the scheme liabilities, although this will be partially
offset by an increase in the return on the scheme’s assets.
The present values of the scheme liabilities are calculated by reference to the best estimate of the mortality of
scheme participants which reflect continuing improvements in life expectancy. An increase in the life expectancy of
the scheme participants will increase the scheme’s liabilities.
The present values of the defined benefit scheme liabilities are calculated by reference to the future salaries of
scheme participants. As such, an increase in the salary of the scheme participants will increase the scheme’s
liabilities.
The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation 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
2022
%
2.9
3.6
3.3
2021
%
1.9
3.4
3.2
When considering mortality assumptions, a life expectancy to 86 at age 65 has been used for the year ended 26 March 2022 (2021: 86).
For the year ended 27 March 2021, the Group 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
improvement has been updated for 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 per cent per annum for both males
and females as improvement in life expectancies have continued to slow in recent years, even before allowing for the impact of the
COVID-19 pandemic. No adjustment has been made for the impact of COVID-19 on mortality assumptions as it is too early to conclude
on any evidence to support the impact.
200
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR FINANCIALSNOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSYEAR ENDED 26 MARCH 2022 30. Retirement benefit obligations continued
The RPI inflation for the 2022 disclosures in this note has been calculated using a cash flow weighted single-equivalent rate based
on the Bank of England’s inflation yield curve. This is a change in methodology from the prior year, which is estimated to reduce the
balance sheet liability by c.£1,700,000 at 26 March 2022.
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 4.4%
Increase by 3.0%
Increase/decrease by 3.2%
Amounts recognised in income in respect of these defined benefit schemes are as follows:
Interest cost
Interest income
2022
£000
940
(538)
402
2021
£000
989
(578)
411
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 £18,899,000 (2021: £24,837,000).
The actual return on scheme assets were a gain of £478,000 (2021: £2,800,000).
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
2022
£000
(43,562)
29,166
(14,396)
2021
£000
(50,316)
27,937
(22,379)
2022
%
20.3
22.0
15.1
10.6
23.8
8.2
100.0
2021
%
24.9
22.8
8.7
7.7
26.0
9.9
100.0
Bonds and gilts include a mixture of corporate and government bonds and fixed and index-linked gilts. Approximately nine per cent of
bonds have a sub-investment grade credit rating (BB+ or lower) and approximately 72 per cent of gilts are index-linked, with 28 per
cent being fixed.
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www.severfield.comStock Code: SFR OUR FINANCIALS 30. Retirement benefit obligations continued
Movements in the present value of defined benefit obligations were as follows:
At start of year
Interest cost
Actuarial gains/(losses)
Benefits paid
At end of year
2022
£000
(50,316)
(940)
5,998
1,696
(43,562)
2021
£000
(43,843)
(989)
(7,128)
1,644
(50,316)
Actuarial losses arising from changes in demographic assumptions, changes in financial assumptions and gains or losses arising from
experience were gains of £43,000 (2021: losses of £1,230,000), gains of £6,112,000 (2021: losses of £6,317,000) and losses of £157,000
(2021: gains of £419,000) respectively.
The present value of defined benefit obligations at the year end is as follows:
2022
£000
(26,163)
(17,399)
(43,562)
2021
£000
25,155
578
2,222
1,626
(1,644)
27,937
2018
(488)
(2.0%)
200
0.5%
Liability in respect of deferred members
Liability in respect of pensioner members
Movements in the fair value of scheme assets were as follows:
At start of year
Interest income
Actuarial (losses)/gains
Employer contributions
Benefits paid
At end of year
2022
£000
27,937
538
(60)
2,447
(1,696)
29,166
The Group expects to contribute £210,000 (2021: £210,000) per month to its defined benefit pension scheme in the year to
25 March 2023.
History of experience of gains and losses:
Experience (losses)/gains 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
2022
(60)
(0.2%)
157
0.4%
2021
2,222
8.0%
419
0.8%
2020
(1,093)
(4.3%)
(1,007)
(2.2%)
2019
651
2.5%
16
0.0%
5,938
13.6%
(4,906)
(9.8%)
255
0.6%
(3,702)
(8.1%)
3,606
8.6%
The weighted average period over which benefits are expected to be paid, or the duration of the liabilities, is currently 17 years.
202
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR FINANCIALSNOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSYEAR ENDED 26 MARCH 2022 31. Related party transactions
The remuneration of the directors is provided in the audited part of the directors’ remuneration report on page 143.
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
2022
£000
1,852
106
1,958
2021
£000
1,704
119
1,823
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
(2021: £48,000). The amount due to Fabsec at 26 March 2022 was £117,000 (2021: £117,000).
During the year the Group has contracted with and purchased services from Construction Metal Forming Limited (‘CMF’) amounting
to sales of £83,000 (2021: £41,000) and purchases of £10,748,000 (2021: £11,830,000). The amount due from and to CMF at 26 March
2022 was £1,545,000 (2021: £1,362,000) and £106,000 (2021: £740,000) respectively.
During the year the Group contracted with and purchased services from MET Structures Limited, amounting to sales of £9,804,000
(2021: £2,311,000) and purchases of £1,400,000 (2021: £777,000). MET Structures shares common directors with the Group. The
amount due from MET Structures at 26 March 2022 was £2,890,000 (2021: £51,000).
During the year the Group incurred additional operating costs in relation to the day-to-day running of its Indian joint venture (‘JSSL’) of
£236,000 (2021: £391,000). Those costs were recharged to JSSL during the year and the amount due from JSSL at 26 March 2022 was
£575,000 (2021: £770,000). During the year the Group contracted with and purchased services from JSSL amounting to £26,000 (2021:
£73,000). The amount due to JSSL at 26 March 2022 was £nil (2021: £387,000).
During the year the Group contracted with National Steel Stock Limited amounting to sales of £6,187,000 (2021: £nil). National Steel
Stock Limited shares common directors with the Group. The amount due from National Steel Stock Limited at 26 March 2022 was
£620,000 (2021: £nil).
203
www.severfield.comStock Code: SFR OUR FINANCIALS 32. Alternative performance measures
Our alternative performance measures (‘APMs’) present useful information which supplements the financial statements. These
measures are not defined under IFRS and may not be directly comparable with APMs for other companies. The APMs represent
important measures for how management monitors the Group and its underlying business performance. In addition, APMs enhance
the comparability of information between reporting periods by adjusting for non-underlying items. The APMs are not intended to be a
substitute for, or superior to, any IFRS measures of performance.
In order to facilitate understanding of the APMs used by the Group, and their relationship to reported IFRS measures, definitions and
numerical reconciliations are set out below.
Alternative performance
measure (‘APM’)
Underlying operating
profit (before JVs and
associates)
Underlying profit
before tax
Underlying basic
earnings per share
(‘EPS’)
Net funds/(debt)
(pre-IFRS 16)
Operating cash
conversion
Return on capital
employed
Economic value
generated and
distributed
Definition
Operating profit before non-underlying items and
the results of JVs and associates.
Rationale
Profit measure reflecting underlying trading
performance of wholly owned subsidiaries.
Profit before tax before non-underlying items.
Underlying profit after tax divided by the
weighted average number of shares in issue
during the year.
Balance drawn down on the Group’s revolving
credit facility, with unamortised debt
arrangement costs added back, less cash and
cash equivalents (including bank overdrafts)
before IFRS-16 lease liabilities.
Cash generated from operations after net capital
expenditure (before interest and tax) expressed
as a percentage of underlying operating profit
(before JVs and associates) (see note 26).
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 (see note 22)
Economic value generated reflects Group
revenue.
Economic value distributed is operating costs,
employee wages and benefits, payments to
providers of capital, payments to government by
country, and community investments.
Profit measure widely used by investors and
analysts.
Underlying EPS reflects the Group’s operational
performance per ordinary share outstanding.
Measure of the Group’s cash indebtedness before
IFRS-16 lease liabilities, which are excluded from
the definition of net funds/(debt) in the Group’s
borrowing facilities. This measure supports the
assessment of available liquidity and cash flow
generation in the reporting period.
Measure of how successful we are in converting
profit to cash through management of working
capital and capital expenditure. Widely used by
investors and analysts.
Measures the return generated on the capital we
have invested in the business and reflects our
ability to add shareholder value over the long term.
We have an asset-intensive business model and
ROCE reflects how productively we deploy those
capital resources.
A basic indication of how the Group has created
wealth for its stakeholders and an important ESG
measure.
Reconciliations to IFRS measures
Underlying operating profit (before JVs and associates)
Underlying operating profit (before JVs and associates)
Non-underlying operating items
Share of results of JVs and associates
Operating profit
Note
5
15
2022
£000
26,881
(5,424)
1,346
22,803
2021
£000
25,470
(2,795)
(344)
22,331
204
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR FINANCIALSNOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSYEAR ENDED 26 MARCH 2022 Underlying profit before tax
Underlying profit before tax
Non-underlying items
Profit before tax
Underlying taxable profit
Underlying profit before tax
Share of results of JVs and associates
Underlying taxable profit
Non-underlying items
Taxable profit
Underlying basic earnings per share
Underlying net profit attributable to equity holders of the parent Company
Non-underlying items after tax
Net profit attributable to equity holders of the parent Company
Note
5
Note
10
5
2022
£000
27,098
(6,098)
21,000
2022
£000
27,098
(1,346)
25,742
(6,098)
19,654
2022
£000
22,303
(6,702)
15,601
2021
£000
24,331
(3,224)
21,107
2021
£000
24,331
344
24,675
(3,224)
21,251
2021
£000
19,757
(2,453)
17,304
Weighted average number of ordinary shares
10 308,834,123 307,337,645
Underlying basic earnings per share
Basic earnings per share
Net funds/(debt) (pre-IFRS 16)
Borrowings
Cash and cash equivalents
Unamortised debt arrangement costs
Net (debt)/funds (pre-IFRS 16)
IFRS 16 lease liabilities
Net debt (post-IFRS 16)
Economic value generated and distributed
Revenue
Economic value generated
Operating costs
Non-underlying operating items
Underlying operating costs
Payments to providers of capital
Non-underlying finance expense
Underlying payments to providers of capital
Payments to government
Economic value distributed
Note
27
22
Note
3
4
5
7
5
7.22p
5.05p
2022
£000
(14,850)
(3,974)
402
(18,422)
(11,640)
(30,062)
2022
£000
403,563
403,563
382,106
(5,424)
376,682
1,879
(674)
1,205
6.43p
5.63p
2021
£000
(20,750)
24,983
128
4,361
(11,109)
(6,748)
2021
£000
363,254
363,254
340,579
(2,795)
337,784
1,257
(429)
828
4,795
382,682
4,574
343,186
205
www.severfield.comStock Code: SFR OUR FINANCIALS FIVE YEAR
SUMMARY
YEAR ENDED 26 MARCH 2022
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 6.
2022
£000
2021
£000
2020
£000
2019
£000
2018
£000
403,563
26,881
27,098
(6,098)
363,254
25,470
24,331
(3,224)
327,364
26,978
28,621
(2,808)
274,917
23,256
24,711
–
274,203
22,866
23,512
(1,333)
15,601
17,304
20,415
20,162
18,146
230,054
17,383
(43,477)
203,960
230,076
22,247
(61,394)
190,929
203,783
21,068
(41,176)
183,675
163,033
33,135
(21,161)
175,007
154,510
33,147
(18,660)
168,997
7.22p
5.05p
7.19p
5.03p
3.10p
2.4
84.80p
62.60p
6.43p
5.63p
6.43p
5.63p
2.90p
2.2
79.90p
51.20p
7.74p
6.68p
7.70p
6.64p
2.90p
2.7
96.00p
57.20p
6.65p
6.65p
6.58p
6.58p
2.80p
2.5
88.20p
64.60p
6.38p
6.05p
6.29p
5.97p
2.60p
2.6
88.00p
59.50p
FINANCIAL
CALENDAR
Preliminary announcement of full-year results
Publication of annual report
Annual general meeting
Announcement of interim results (provisional)
206
15 June 2022
July 2022
8 September 2022
22 November 2022
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR FINANCIALS
COMPANY
BALANCE SHEET
YEAR ENDED 26 MARCH 2022
Non-current assets
Tangible assets
Intangible assets
Right-of-use asset
Investments
Debtors – amounts falling due after one year
Current assets
Debtors – amounts falling due within one year
Cash at bank
Current liabilities
Cash at bank
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
Year ended
26 March
2022
£000
Year ended
27 March
2021
£000
Note
2
3
4
4
5
5
58,747
174
31
152,598
68,977
280,527
12,333
–
12,333
56,635
71
23
152,710
–
209,439
90,381
668
91,049
(5,389)
(129,903)
(5,900)
(36)
(141,228)
–
(132,602)
(5,900)
(20)
(138,522)
(3,081)
(8,950)
(12,031)
139,601
7,738
88,511
3,485
39,867
139,601
(10,639)
(14,850)
(25,489)
136,477
7,706
87,658
2,496
38,617
136,477
The Company reported a profit for the financial year ended 26 March 2022 of £10,479,000 (2021: profit of £12,974,000).
The financial statements were approved by the board of directors on 15 June 2022 and signed on its behalf by:
Alan Dunsmore
Chief executive officer
Adam Semple
Group finance director
Severfield plc
Registered in England No.1721262
207
www.severfield.comStock Code: SFR OUR FINANCIALS COMPANY STATEMENT
OF CHANGES IN EQUITY
YEAR ENDED 26 MARCH 2022
Share
premium
£000
Other
reserves
£000
Retained
earnings
£000
At 28 March 2021
Total comprehensive income for the year
Ordinary shares issued*
Equity settled share-based payments
Dividends paid
At 26 March 2022
Share
capital
£000
7,706
–
32
–
–
7,738
87,658
–
853
–
–
88,511
* The issue of shares represents shares allotted to satisfy the 2018 and 2020 and Sharesave scheme.
At 29 March 2020
Total comprehensive income for the year
Ordinary shares issued*
Equity settled share-based payments
Dividends paid
At 27 March 2021
Share
capital
£000
7,648
–
58
–
–
7,706
Share
premium
£000
87,292
–
366
–
–
87,658
2,496
–
–
989
–
3,485
Other
reserves
£000
2,418
–
–
78
–
2,496
38,617
10,479
–
–
(9,229)
39,867
Retained
earnings
£000
34,007
12,974
–
531
(8,895)
38,617
Total
equity
£000
136,477
10,479
885
989
(9,229)
139,601
Total
equity
£000
131,365
12,974
424
609
(8,895)
136,477
* The issue of shares represents shares allotted to satisfy the 2017 Performance Share Plan award which vested in June 2020 and the 2017 Sharesave schemes.
208
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR FINANCIALS NOTES TO THE COMPANY
FINANCIAL STATEMENTS
YEAR ENDED 26 MARCH 2022
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 UK-adopted international accounting standards, but makes amendments where necessary in order to
comply with the Companies Act 2006, and as 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 143 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. Expected credit losses on these balances is not considered material. The carrying value of these loans approximates
to 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.
209
www.severfield.comStock Code: SFR OUR FINANCIALS NOTES TO THE COMPANY
FINANCIAL STATEMENTS
YEAR ENDED 26 MARCH 2022
2. Tangible fixed assets
Cost
At 28 March 2021
Additions
At 26 March 2022
Accumulated depreciation
At 28 March 2021
Charge for the year
At 26 March 2022
Carrying amount
At 26 March 2022
At 27 March 2021
Freehold
and long
leasehold
land and
buildings
£000
63,288
2,637
65,925
6,884
501
7,385
58,540
56,404
Fixtures,
fittings
and office
equipment
£000
Motor
vehicles
£000
467
–
467
239
23
262
205
228
33
–
33
30
1
31
2
3
Total
£000
63,788
2,637
66,425
7,153
525
7,678
58,747
56,635
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 (2021: £600,000), which is set at a rate
only to cover certain of the costs of maintaining the properties.
210
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR FINANCIALS 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 26 March 2022 is disclosed below. All of these had a reporting period ended 26 March
2022, except where indicated.
Name of undertaking
100% owned by Severfield plc
Severfield (UK) Limited
Severfield (NI) Limited(i)
Severfield (Design & Build) Limited
Severfield (Products & Processing) Limited
Severfield Europe B.V.(ii)
Severfield (Nuclear & Infrastructure) Limited (formerly Harry Peers Steelwork Limited)
Severfield Reeve International Limited
Severfield Mauritius Limited(iii)
DAM Structures 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)
* Companies with a reporting period ended 31 December 2021.
** Dormant company.
Incorporated in
England and Wales
Northern Ireland
England and Wales
England and Wales
Netherlands
England and Wales
England and Wales
Mauritius
England and Wales
Class of
capital
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
England and Wales
Ordinary
England and Wales
Ordinary
India
Ordinary
England and Wales
Ordinary
‡ Unless otherwise stated, the registered office address for each of the above is Severs House, Dalton Airfield Industrial Estate, Dalton, Thirsk, North Yorkshire YO†7 3JN.
† Companies with a reporting period ended 31 March 2022.
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
2022
£000
119,671
32,927
152,598
2021
£000
119,783
32,927
152,710
211
www.severfield.comStock Code: SFR OUR FINANCIALS NOTES TO THE COMPANY
FINANCIAL STATEMENTS
YEAR ENDED 26 MARCH 2022
3. Investments continued
Investment in subsidiaries
Cost
At 28 March 2021
Liquidated entities
At 26 March 2022
Provision for impairment
At 28 March 2021 and 26 March 2022
Net book value
At 26 March 2022
At 27 March 2021
£000
139,983
(112)
139,871
(20,200)
119,671
119,783
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 prior year to fund the expansion of the existing production facilities.
4. Debtors – amounts falling due within one year
Current assets
Other debtors
Amounts owed by subsidiary undertakings
Amounts owed by JVs and associates
Corporation tax recoverable
Non-current assets
Amounts owed by subsidiary undertakings
2022
£000
2,502
–
106
9,725
12,333
2022
£000
68,977
68,977
2021
£000
1,979
79,514
48
8,840
90,381
2021
£000
–
–
Amounts owed by subsidiary undertakings are non-interest bearing and repayable on demand. During the year, the directors reviewed
the expectation of the timing of settlement of these balances and accordingly reclassified them to non-current assets. No impairment
of the receivable was recorded at 26 March 2022 or 27 March 2021.
212
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR FINANCIALS 5. Creditors – amounts falling due within one year
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
Other creditors and accruals
2022
£000
18,544
104,691
113
6,555
129,903
2022
£000
3,081
3,081
2021
£000
6,948
120,128
473
5,053
132,602
2021
£000
10,639
10,639
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 29 March 2020
Current year credit
At 27 March 2021
Current year charge
At 26 March 2022
2022
£000
(6,852)
297
(6,555)
Excess
capital
allowances
£000
Other
temporary
differences
£000
(5,285)
49
(5,236)
(1,616)
(6,852)
174
9
183
114
297
2021
£000
(5,236)
183
(5,053)
Total
£000
(5,111)
58
(5,053)
(1,502)
(6,555)
7. Contingent liabilities
The Company has provided an unlimited multilateral guarantee to secure any bank overdrafts and loans of all other Group companies.
At 26 March 2022 these amounted to £nil (2021: £nil).
213
www.severfield.comStock Code: SFR OUR 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
London Fruit and Wool Exchange
1 Duval Square
London
E1 6PW
Public Relations
Camarco
107 Cheapside
London
EC2V 6DN
Severfield (Design & Build) Limited
Ward House
Sherburn
Malton
North Yorkshire
YO17 8PZ
Severfield Europe B.V.
Gildelaan 11
4761 BA Zevenbergen
The Netherlands
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
Stockbrokers
Jefferies International Limited
Vintners Place
68 Upper Thames Street
London, EC4V 3BJ
Liberum Capital Limited
Ropemaker Place
Level 12
25 Ropemaker Street
London
EC2Y 9LY
Registrars
Computershare Investor Services PLC
PO Box 82
The Pavilions, Bridgwater Road
Bristol, BS99 7NP
Severfield (NI) Limited
Fisher House
Ballinamallard
Enniskillen
Co Fermanagh
BT94 2FY
Severfield (Nuclear & Infrastructure)
Limited (formally Harry Peers
Steelwork Limited)
Elton Street
Bolton
Lancashire
BL2 2BS
Construction Metal Forming Limited
Unit 3
Mamhilad Technology Park
Old Abergavenny Road
Mamhilad
Monmouthshire, NP4 0JJ
Bankers
HSBC Bank plc
Maingate
Kingsway North
Team Valley Trading Estate
Gateshead, NE11 0BE
Virgin Money UK plc
(formerly Yorkshire Bank)
94 Albion Street
Leeds, LS1 6AG
214
Severfield plc Annual report and accountsfor the year ended 26 March 2022OUR FINANCIALS SHAREHOLDER NOTES
The paper is Carbon Balanced with World Land Trust, an international conservation charity, who offset carbon
emissions through the purchase and preservation of high conservation value land.
Through protecting standing forests, under threat of clearance, carbon is locked in that would otherwise be
released. These protected forests are then able to continue absorbing carbon from the atmosphere, referred
to as REDD (Reduced Emissions from Deforestation and forest Degradation). This is now recognised as one of
the most cost-effective and swiftest ways to arrest the rise in atmospheric CO2 and global warming effects.
Additional to the carbon benefits is the flora and fauna this land preserves, including a number of species
identified at risk of extinction on the IUCN Red List of Threatened Species.
CBP013570
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