DESIGNING AND
CONSTRUCTING A
SUSTAINABLE FUTURE
SEVERFIELD PLC ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 25 MARCH 2023
SUSTAINABLE
GROWTH IN NUMBERS
REVENUE
Over the last 5 years our revenue has grown by an
average of 16 per cent, reflecting organic growth and
strategic acquisitions to diversify our market sectors.
CAGR 16%
£275
million
£327
million
£363
million
£404
million
£492
million
2019
2020
2021
2022
2023
Read more about our operating performance on pages 44 to 51
UK AND EUROPE ORDER BOOK
Our high-quality order book continues to be well-diversified
and contains a good mix of projects across the Group’s key
market sectors
£295
million
£271
million
£301
million
£486
million
£510
million
2019
2020
2021
2022
2023
Read more about our order book on pages 12 and 13
WELCOME TO OUR
ANNUAL REPORT 2023
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
2023 has been another successful year
for Severfield. Our results and current
market position are 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.”
Our strong performance reflects the
high-quality of our operations and the
effectiveness of our overall strategy.
Our well-diversified order book and
strong balance sheet, coupled with
continuing operational improvements,
leaves us well positioned to deliver
increased revenues and make the right
long-term decisions for the business.”
Find us online @
www.severfield.com
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
O
V
E
R
V
I
E
W
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
Addresses and advisers
168
176
177
178
179
180
181
220
220
221
222
223
228
CONTENTS
OVERVIEW
A snapshot of what we do
Our structural framework
Our year in review
Chairman’s view
Our compelling 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
2
4
6
8
10
12
14
16
20
24
26
28
30
40
42
44
52
56
58
92
105
108
110
114
116
118
130
134
136
140
142
162
165
www.severfield.com
Stock Code: SFR
01
A SNAPSHOT
OF WHAT WE DO
AND HOW WE DO IT
WHAT WE DO
WHO WE SERVE
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.
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
macroeconomic conditions.
OUR STRUCTURAL
FRAMEWORK
Why we exist, what we want
to be, what our purpose is and
our strategy and values that
our people believe in to help us
achieve this.
Read more about how we
create value on pages 20 to 22
Read more about our market
sectors on pages 28 and 29
Read more about our
structural framework on
pages 4 and 5
HOW OUR ORDER BOOK
HELPS US TO PREPARE
FOR THE FUTURE
Our record UK and Europe order
book remains well-diversified and
contains a good mix of projects
across all of the Group’s key
market sectors. Knowing our
future contracted work gives
us strong visibility of the next
years’ earning potential and
highlights changing market and
macro economic trends, allowing
us to better deploy production
capacity, resource and capital.
HOW WE GOVERN
OURSELVES
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.
Our governance
We are committed to maintaining
the highest standards of
corporate governance and
ensuring that values and
behaviours are consistent across
our business. 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 more about our market
sectors on pages 12 and 13
Read more about our
governance on pages 106 to 165
Read more about how we
manage risk on pages 92 to104
02
Severfield plc Annual report and accounts
for the year ended 25 March 2023
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.
WHERE WE DO IT
Commercial and Industrial
• Dalton
• Lostock
• Sherburn
• Enniskillen
• Zevenbergen, Netherlands
• Rijssen Netherlands
• Maassluis, Netherlands
Nuclear and Infrastructure
• Bridlington
• Bolton
• Chepstow
• Glasgow
Modular Solutions
• Sherburn
• Monmouthshire
JSW Severfield Structures
• Mumbai, India
Read more about building a
responsible and sustainable
business on pages 58 to91
Read more about the scale
of our operations on pages
16 to 17
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 42 to 43
www.severfield.com
Stock Code: SFR
03
OVERVIEW 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 year we have made significant progress in
embedding our new divisional structure, providing better
service to our clients and allowing us to take a more
coordinated approach to project delivery, health and safety,
and ESG on all of our projects.
ALAN DUNSMORE
Chief Executive Officer
We are founded on our strong core values
and committed to achieving our purpose.”
Our governance
Our cultural characteristics
O V E R N A N CE AS A WHOLE
G
Values &
Culture
Purpose
We respect and
nurture
our talented
people
Delivering
quality
outcomes to
our clients
and partners
We encourage
openness and
transparency
Strategy
Sustainability
Framework
ESG GOVE R N A N C E
Collaborative
approach
towards
working with
customers
and suppliers
We bring
value to our
communities
and
environment
Our operational improvement programme and Project
Horizon, our new digitisation programme, have continued to
drive efficiencies and will ensure we stay at the forefront of
technology and innovation as market leaders in the industry.
The strength and quality of our high-quality 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.
04
Severfield plc Annual report and accountsfor the year ended 25 March 2023
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.
Customer focus
Our clients are paramount
in all that we do. We are
here to understand their
requirements and meet
their aspirations. Together
we will deliver projects of
which we can all be proud.
Integrity
We operate in a complex
and challenging industry,
one that often requires
innovative thinking and a
flexible approach to deliver
successful outcomes.
The one thing we’ll never
compromise on is our
integrity, which ensures
we’re able to maintain the
exceptionally high standards
we set for ourselves.
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.
Purpose
Our purpose is to
develop better ways to
build, for a world of changing
demands. As the world of work and
industry evolves, the buildings we use
and the things we demand from them
change 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.
Strategy
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.
Sustainability framework
Our aim is to deliver more sustainable solutions for our
people, our customers and the wider community and
environment in which we live. Our four sustainability
pillars: ‘Planet’, ‘People’, ‘Prosperity’ and ‘Principles of
Governance’ help us to achieve this.
Growth
Clients
India
Operational
excellence
People
People
Planet
Prosperity
Principles of
Governance
Read more about our sustainability framework
on pages 59 to 60
05
OVERVIEWwww.severfield.comStock Code: SFR
OUR YEAR
IN REVIEW
FINANCIAL HIGHLIGHTS
Revenue
£491.8m
Underlying profit
before tax
£32.5m
Profit before tax
£27.1m
£363.3
million
£403.6
million
£491.8
million
£24.3
million
£27.1
million
£32.5
million
£21.1
million
£21.0
million
£27.1
million
2021
2022
2023
2021
2022
2023
2021
2022
2023
Underlying
operating margin
6.7%
Operating margin
5.7%
Underlying basic
earnings per share
8.5p
7.0%
2021
6.7%
2022
6.7%
2023
6.2%
2021
5.3%
2022
5.7%
2023
6.4p
2021
7.2p
2022
8.5p
2023
Basic earnings
per share
7.0p
Greenhouse gas
intensity1
13.2t CO²e /£m
Underlying results are stated before non
underlying items of £5.4m (2022: £6.1m),
including the amortisation of acquired intangible
assets of £3.3m (2022: £5.2m), unwind of
discount on contingent consideration of £0.6m
(2022: £0.7m), fair value change in contingent
consideration of £0.3m credit (2022:£nil) and net
acquisition-related expenses of £1.8m (2022:
£0.7m). See note 31 for APM definitions.
1 Scope 1 and scope 2 emissions, using a
market-based approach
5.6p
2021
5.1p
2022
7.0p
2023
21.9
2021
19.9
2022
13.2
2023
06
Severfield plc Annual report and accounts
for the year ended 25 March 2023
OPERATIONAL HIGHLIGHTS
High-quality order books, good
earnings visibility through 2024 and
inflationary pressures being well
managed.
£486m), includes new industrial and
distribution, film studio, commercial
offices and nuclear orders
well as maintaining our ‘very good’
BES 6001 responsible sourcing
accreditation
• Share of profit from JSSL of £1.3m
• Maintained our carbon neutral
• Revenue up 22 per cent to £491.8m
(2022: £403.6m)
• Underlying1 profit before tax up
20 per cent to £32.5m (2022: £27.1m),
ahead of expectations due to strong
operational delivery
• Underlying1 basic earnings per share
up 18 per cent at 8.5p (2022: 7.2p)
• Total dividend increased by 10 per
cent to 3.4p per share (2022: 3.1p
per share), includes proposed final
dividend of 2.1p per share (2022: 1.9p
per share)
• Year-end net funds (on a pre-IFRS-16
basis1) of £2.7m (2022: net debt of
£18.4m), reflects improvement in
working capital
• High-quality, diversified UK and
Europe order book of £510m at
1 June 2023 (1 November 2022:
(2022: £0.8m), reflects record EBITDA
of £11m and output of 108,000 tonnes
• India order book of £139m at 1 June
2023 (1 November 2022: £143m)
• Post period-end €24m acquisition of
Voortman Steel Construction Holding
B.V. (‘VSCH’), an innovative, market-
leading Dutch steel fabrication
company, to accelerate our growth
strategy and strengthen our market
position in Europe
ESG
• Surpassed our interim target to
reduce scope 1 and 2 emissions by
25% from our 2018 baseline by 2025
• Listed in the Financial Times Europe
Climate Leader’s 2023 report for the
third year running
• Awarded a ‘B’ rating in the CDP index
and a supply chain score of ‘A-’ as
accreditation from the Carbon Trust
for scope 1, 2 and operational scope
3 emissions for our manufacturing,
office and construction operations
• On track to submit Science-Based
Target Initiative (‘SBTi’) targets
in 2024
• Member of the United Nations ‘Race
to Net Zero’ Campaign which requires
the establishment of a Net Zero target
in line with a 1.5-degree world
• Earned Gold membership of ‘The
5% Club’, demonstrating our
commitment to ‘earn and learn’
apprenticeships
• Adopted the National TOMs –
Themes, Outcomes and Measures –
methodology framework to focus our
future commitments on all areas of
social value
1 See note 31 for APM definitions
07
OVERVIEWwww.severfield.comStock Code: SFR CHAIRMAN’S
VIEW
KEVIN WHITEMAN
Non-executive chairman
2023 has been an exceptional year for
the Group, achieving strong results
and delivering against all areas of
our strategy. These achievements are
down to the resilience, dedication
and creativity of our teams, and the
support of our clients, supply chain
and stakeholders”
08
Our chairman’s view
2023 was another year of strong
progress for the Group despite market
headwinds. We have grown the
business, launched our new digitisation
programme, Project Horizon, and have
increased our presence in Europe in
April 2023 through the acquisition of
VSCH. These achievements are down to
the resilience, dedication and creativity
of our teams, and the support of our
clients, supply chain and stakeholders.
Revenue increased by 22 per cent
to £491.8m (2022: £403.6m) and
underlying1 profit before tax by 20 per
cent to £32.5m (2022: £27.1m), ahead of
our previous expectations and reflecting
a strong operating performance
both in the UK and India. This profit
performance has been supported by
good cash generation and our strong
balance sheet has enabled us to make
the right long-term decisions for the
business. Year-end net funds
(on a pre-IFRS 16 basis) were £2.7m,
an increase of over £20m on the
previous year.
Our total dividend for the year has
increased by 10 per cent to 3.4p per
share (2022: 3.1p), reflecting our results,
balance sheet and our confidence in the
Group’s future prospects.
Board changes
We continue to evolve the board to
ensure that it has the right balance of
knowledge, experience and outside-
in perspective. In October 2022, we
welcomed Mark Pegler as a non-
executive director, who brings with him
many years of business and leadership
experience in manufacturing and
international businesses and is a strong
addition to the board. His appointment
forms part of the board succession
process and it is intended that Mark will
become the audit committee chairman
following the retirement of Tony
Osbaldiston in July 2023.
Severfield plc Annual report and accountsfor the year ended 25 March 2023 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 order books at 1 June
2023 of £510m for the UK and Europe,
and of £139m for India, leaving us
well-positioned with a strong secured
workload for the 2024 financial year
and beyond.
In the UK and Europe, we have a
prominent position in market sectors
with strong growth potential and are
well-positioned to help accelerate
the journey to Net Zero. Our Nuclear
and Infrastructure division is well-
placed to meet the demand for ongoing
state-backed investment, including a
growing focus on infrastructure which
can mitigate climate change, such as
nuclear power. In our Commercial and
Industrial division, we continue to see
some significant opportunities, both
in the UK and continental Europe,
supported by the acquisition of VSCH.
This includes projects in support of a
low-carbon economy such as battery
plants, energy efficient buildings and
manufacturing facilities for renewable
energy.
Creating value in JSSL remains a key
strategic objective of the board. In India,
an improving pipeline of potential orders
reflects a continuing strong demand
for structural steel. This, together
with JSSL’s strong order book, leaves
the business very well-positioned to
take advantage of a strongly growing
economy which will drive the success
and long-term value of the business.
Health and safety
The health, safety and wellbeing of our
employees is of utmost importance,
and both our IFR and AFR continue to
outperform the industry averages.
Although we have seen another
reduction in our AFR to 0.14 from
0.16, our injury frequency rate (‘IFR’)
increased to 1.61 from 1.49. The slight
increase in IFR follows several years
of significant improvement but we
are not complacent and in 2023, we
have updated our behavioural safety
programme and launched our Safer@
Severfield initiative, which will further
ingrain our culture of employee
engagement, commitment and our life
saving rules.
Sustainability
Although the macroeconomic
environment is somewhat uncertain,
there is one enduring long-term
certainty and that is the need to act
against climate change. We have some
great initiatives underway to reduce
our carbon emissions and to help
our clients and supply chain reduce
theirs, including our involvement with
SteelZero. We have maintained our
accreditation as carbon neutral for
our manufacturing and construction
operations by Achilles, an important
building block in our journey towards
Net Zero by 2050.
In 2023, we were awarded a ‘B’ rating
in the CDP index and a supply chain
score of ‘A-’ as well as maintaining
our ‘very good’ BES 6001 responsible
sourcing accreditation, highlighting our
continued engagement with our supply
chain to promote sustainability. We are
delighted that our ESG progress has
also been recognised by the Group’s
inclusion, for the third year running, in
the Financial Times listing of Europe’s
climate leaders which showcases
corporate progress in fighting
climate change.
The Group took steps during the year
to help our employees manage the rise
in the cost-of-living. These included
agreeing a one-off cost-of-living
payment and providing enhanced
employee benefit packages. In addition,
our annual pay awards have taken into
account ongoing inflationary pressures,
and we have implemented higher pay
increases for our more junior and lower
paid colleagues.
Summary and outlook
The Group has substantial, high-quality
order books which provide us with
good earnings visibility in the future.
Whilst we remain mindful of the macro-
economic backdrop, ours is a strong,
diverse and resilient business, well
placed to overcome the challenges of
the coming year and to take advantage
of the many opportunities that we
are seeing.
We remain focused on our successful
strategy, have a solid platform
from which to continue Severfield’s
continued long-term development and
I look forward to the year ahead with
optimism.
Kevin Whiteman
Non-executive chairman
14 June 2023
1 See note 31 for APM definitions
Read more about our
strategy on pages 30 to 39
Read more about our
operating performance on
pages 44 to 51
Read more about our
financial performance on
pages 52 to 55
Read more about building a
responsible and sustainable
business on pages 58 to 91
Read more about our
board of directors on
pages 110 to 113
09
OVERVIEWwww.severfield.comStock Code: SFR OUR COMPELLING
INVESTMENT CASE
We are continuing to drive sustainable growth to create
long-term value for all stakeholders.
01 02 03
RESILIENT BUSINESS
THROUGH ECONOMIC
CYCLES
BUILT ON A PLATFORM
OF OPERATIONAL
EXCELLENCE
EXCITING GROWTH
PROSPECTS
• Our business covers 10
• We have significant
sector, geographical and
client diversity, insulating
us from downturns in
macroeconomic cycles.
• Our business is a
key provider of core
infrastructure, such as
transport, energy, defence,
health and education – all
areas that require continual
investment in a prosperous
economy.
• We have good earnings
visibility from our high-
quality order books
and a strong pipeline of
opportunities in the UK
and Europe across all of
our chosen sectors.
core sectors which serve a
diversified range of markets,
including those with strong
growth potential in the UK
and Europe.
• This is reinforced by the
recent acquisition of
Voortman Steel Construction
Holdings B.V. (‘VSCH’),
strengthening our market
position in Europe, giving us
a manufacturing presence
and access to new high-
growth sectors.
• We continue to strive to
diversify, looking for new
market areas where the
business has not operated
in the past and taking
advantage of our existing
capacity and expertise.
• Significant opportunity
to build value in India,
capitalising on the country’s
strong economic growth and
conversion from concrete to
steel as the primary building
material.
• We are in a prominent
market position in the ‘green’
high-growth markets of the
future, as the UK and world
aim to deliver on Net Zero
commitments.
10
Severfield plc Annual report and accounts
for the year ended 25 March 2023
• We have an ongoing
programme to drive
operational improvements
and efficiencies across the
Group. This allows us to
deliver high-quality projects
for our customers whilst
optimising costs.
• During the year we launched
Project Horizon, our new
digitisation project. This
is a long-term initiative to
support our strategy through
developing and enhancing
our systems and processes
and keeping us at the
forefront of technology and
innovation as the market
leader in the industry.
• We have invested over
£60m in capital expenditure
over the last ten years,
keeping our productions
facilities and operations
at the cutting edge. This
will continue as we further
automate our production
processes through the
use of robotics and other
innovative methods.
04 05
DELIVERING STRONG
RETURNS, CASH
GENERATION AND
PROGRESSIVE DIVIDENDS
ALL UNDERPINNED
BY A STRONG FOCUS
ON SUSTAINABILITY
• ROCE is an important metric
• We have established an
for us and our five year
average ROCE is greater
than 15%.
• Our operations generate
strong cash flows and we
target the conversion of
more than 85% of our annual
profit into cash.
• We have a progressive
dividend policy and look to
increase our core dividend
in line with profit growth
and we have historically
returned surplus capital
to shareholders through
special dividends.
internal roadmap to Net Zero
on scope 1 and 2 emissions
by 2040 and scope 3
emissions by 2050.
• Our market-leading
approach to ESG has been
recognised in our listing in
the Financial Times Europe
Climate Leader’s 2023 report
for the third time.
• Member of the United
Nations ‘Race to Net Zero’
Campaign which requires
the establishment of a Net
Zero target in line with a
1.5-degree world.
• We are a SteelZero signatory
– making the commitment
to procure 100 per cent low
carbon steel by 2050.
• Our manufacturing and
construction operations
are accredited as carbon
neutral.
www.severfield.com
www.severfield.com
Stock Code: SFR
Stock Code: SFR
11
11
OVERVIEW 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.
CORE CONSTRUCTION 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
Transport
infrastructure
Process industries
ORDER BOOK BALANCE
The Group’s growth strategy has
delivered a high-quality UK and Europe
order book with a broad diversity of
sectors, geographies and clients,
providing us with good earnings
visibility through 2024 and beyond.
Commercial offices
Stadia and leisure
Transport
Data centres and other
Industrial and distribution
Nuclear
£m
500
400
300
200
100
0
JUNE 2018
JUNE 2019
JUNE 2020
JUNE 2021
JUNE 2022
JUNE 2023
12
Severfield plc Annual report and accountsfor the year ended 25 March 2023 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
Modular solutions
UK
Europe and Ireland
June 2023
£510m
Nov 2022
£464m
Future trend
for Severfield
37%
19%
14%
3%
–
–
73%
12%
12%
2%
–
26%
1%
90%
10%
32%
14%
16%
3%
16%
–
66%
17%
15%
1%
–
33%
1%
95%
5%
13
OVERVIEWwww.severfield.comStock Code: SFR OUR
PROJECTS
Projects
1 V&A Museum, Dundee
Health and education
2 Everton FC, Liverpool
Stadia and Leisure
3 Envision Nissan Battery Plant,
Sunderland
Industrial and distribution
4 R8 Kings Cross, London
Transport
5 Excel Arena, London
Stadia and leisure
6 Titanic, Belfast
Stadia and leisure
7 Google Headquarters, King’s Cross
Commercial offices
8 30 Grosvenor Square, London
Commercial offices
9 Argyle Street, Glasgow
Commercial offices
10 The Shard
Commercial offices
11 Co-op Live, Manchester
Stadia and leisure
12 Allerdene Bridge, Gateshead
Transport
13 Large warehouse, Bristol
Industrial and distribution
14 Iport, Doncaster
Industrial and distribution
15 Symmetry Park, Rugby
Industrial and distribution
16 Panattoni Interchange Park,
Rotherham
Industrial and distribution
17 Wilton Park, Dublin
Commercial offices
18 Pinewood studios, London
Stadia and Leisure
19 P4 Datacentre, Peterborough
Data centres and other
20 Sky Studios, Hertfordshire
Stadia and leisure
21 Nuclear decommissioning,
Sellafield
Nuclear
22 AWE - Project Mensa, Aldermaston
Nuclear
23 Lonza, Switzerland
Industrial and distribution
14
24 Large data centre, Finland
Data centres and other
25 Large data centre, Belgium
Data centres and other
26 Large warehouse, Germany
Industrial and distribution
27 JSW HSM 3, Bellary
Industrial and distribution
28 Phoenix H10, Hyderabad
Commercial offices
29 Colt Data Centre, Mumbai
Data centres and other
30 Ctrl S Data Centre, Chennai
Data centres and other
Our offices and sites
A Dalton
B Sherburn
C Enniskillen
D Bridlington
E Bolton
F Rijssen
G Maassluis
H Monmouthshire and Chepstow
I Bellary, India
J York
K Glasgow
L Zevenbergen
UK & Ireland
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9
K
C
6
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12
3
A
B
D
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E
2
11
14
16
19
15
22
H
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Severfield plc Annual report and accountsfor the year ended 25 March 2023 India
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28
30
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Europe
F
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26
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5
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Greater London
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.
Dalton, Lostock, Sherburn, Enniskillen,
Zevenbergen, Netherlands
Voortman Steel Construction Holding
BV (‘VSCH’) (acquired April 2023)
Rijssen, Maassluis
Located in the Netherlands, with cutting
edge manufacturing sites in Rijssen and
Maassluis, VSCH specialises in steel
construction, industrial construction,
design and build solutions, and energy
construction.
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, Glasgow
Modular Solutions
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.
York - Head office plc team
15
OVERVIEWwww.severfield.comStock Code: SFR THE SCALE OF
OUR OPERATIONS
Across our construction operations we provide unrivalled capacity, capability
and technical expertise to the industry.
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
95 employees
Bolton
95 employees
Chepstow
10 employees
Glasgow
25 employees
CORE CONSTRUCTION SECTORS
Commercial & Industrial
Our Commercial & Industrial division designs,
fabricates and constructs structural steelwork for
a variety of different sectors 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.
Voortman Steel Construction Holding BV (‘VSCH’)
(acquired April 2023) (Netherlands)
Acquired in April 2023, VSCH is headquartered in
Rijssen, the Netherlands, and is a leading high-end
steel construction company, with business activities in
Europe. VSCH specialises in steel, industrial and energy
construction, as well as design and build solutions.
Over recent years, VSCH has transformed itself from a
bulk steel constructor to a provider of high-end tailor-
made steel solutions, produced in its cutting-edge
manufacturing facilities.
Zevenbergen, Netherlands
10 employees
Rijssen, Netherlands
130 employees
Maassluis, Netherlands
30 employees
Dalton
675 employees
Sherburn
55 employees
Lostock
275 employees
Enniskillen,
Northern Ireland
325 employees
16
Severfield plc Annual report and accounts
for the year ended 25 March 2023
CORE CONSTRUCTION SECTORS
In April 2023 we further strengthened this, by acquiring Voortman Steel
Construction Holdings B.V. (VSCH) in the Netherlands, giving us greater access to
a growing European market. Our joint venture operation in India is fundamental in
helping the Group achieve our strategic growth objectives.
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.
Modular Solutions
The Modular Solutions division consists of the growing
modular product ranges of Severfield (Products &
Processing) (‘SPP’) and of Construction Metal Forming
(‘CMF’), our cold rolled steel joint venture business.
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
135 employees
Monmouthshire
90 employees
www.severfield.com
Stock Code: SFR
17
OVERVIEW STRATEGIC
REPORT
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
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44
52
56
58
92
105
S
T
R
A
T
E
G
Y
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
OUR VALUE PROPOSITION
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.
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 1,800 staff,
including an in-house construction
team. We have the design and
engineering skills to serve a diverse
range of market sectors. The dedication,
expertise and experience of our
workforce ensure that we offer more
skills and variety than any other UK
steel contractor.
Partners
The Group spends a high percentage
of its operating costs on goods and
subcontractor services. Careful
management of the supply chain
is essential to drive efficiency, and
suppliers are monitored to ensure
that maximum benefits are delivered
to clients through contracting
processes. Our framework of robust
risk management and control ensures
that challenges are mitigated, allowing
us to deliver all projects to the highest
possible standard. We engage with
clients and the supply chain wherever
we operate, and long-term relationships
are forged with partners who meet our
commitment to quality, sustainability
and excellent client service.
20
Our customers
Clients serviced by the Group cover
a broad range of disciplines. We are
committed to delivering outstanding
customer service at every stage of the
project to our broad range of clients.
We draw upon our industry experience
to allow us to tailor our products and
services. An essential part of project
delivery is understanding our clients’
requirements and aspirations. This
builds secure, sustainable, and mutually
valuable relationships, creating 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.
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 with the same
level of professionalism, commitment,
care, safety and customer service.
We manage every aspect of the
fabrication and construction process,
from initial design, through detailing,
specification and manufacture, to the
eventual handover of a quality product
on-site.
By engaging with our clients in the
design stage, we can add 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.
Severfield plc Annual report and accountsfor the year ended 25 March 2023 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,
efficiencies and embedded
sustainability improvements.
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.
SUPPORTED BY A VIRTUOUS CYCLE OF:
Growth
Investments
Innovation
21
www.severfield.comStock Code: SFR 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.
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 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 current
and future generations.
A commitment to our own Group
charity, the Severfield Foundation,
which supports local charities to
help us give back to society.
8.5p
Underlying basic earnings
per share
(2022: 7.2p)
3.4p
Total dividend per share
(2022: 3.1p)
£491.8m
Revenue in 2023
(2022: £403.6m)
£99.5m
Paid in employee benefits
in 2023
(2022: £86.0m)
33%
Reduction in carbon
emissions since 2018
baseline
22
www.severfield.comStock Code: SFR
During the period, as part of
Project Horizon, we have made
good progress with our innovative
approach to drawing and design,
including the automation
of repetitive tasks and the
optimisation of engineering
software (including the use of
engineering apps), which is now
being used on an increasing
number of construction projects
across the Group. Other ongoing
initiatives include the digitalisation
of construction resource tracking
and the automation of the quality
assurance certification process.
Link to strategy:
PROJECT
HORIZON
Our new digitisation
project
Keeping Severfield
at the cutting edge
of technology –
delivering better
products and services
for our customers,
more value for our
shareholders and
future environmental
benefits.
01.
Aims to maximise the
automation of estimating,
design, production and
contract delivery processes.
02.
Involves a series of projects/
initiatives designed to further
standardise and automate
systems and processes.
03.
A long-term project to ensure
we remain at the forefront of
technology and innovation as
market leaders in the industry.
04.
Sits alongside our ongoing
operational improvement
programme.
ABOUT THIS PROJECT
During the year, the Group
launched Project Horizon,
our new digitisation project.
This is a long-term business
initiative that will support
our strategy and help shape
our future as we develop
and enhance our systems
and processes, to ensure we
remain at the forefront of
technology and innovation
as market leader in the
industry.
The objective is to maximise the
automation of our estimating,
design, production and contract
delivery processes to improve
customer service and deliver
efficiency and capacity benefits in
the future.
The overall project is made up of
around 100 individual projects and
initiatives designed to modernise
and further standardise processes
and systems across the Group.
We currently have 14 dedicated
colleagues working on the project
under the direction of Richard
Davies, our Group IT Director. The
project list is dynamic and will
evolve as new opportunities and
technologies present themselves
through the programme.
The project is initially self funding
through annual savings, with further
benefits expected to be realised as
more of the individual projects and
initiatives are implemented.
23
Severfield plc Annual report and accountsfor the year ended 25 March 2023
ABOUT THIS PROJECT
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:
894,000
Tonnes1
(2022: 803,000 tonnes)
Group production:
115,000
Tonnes
(2022:105,000 tonnes)
Group potential capacity2:
150,000
Tonnes
(2022: 130,000 tonnes)
UK and Europe order
book at 1 June 2023
£510m
(£464m at 1 November 2022)
1
2
As measured by the British
Constructional Steelwork Association
(‘BCSA’).
Including 20,000 tonnes for VSCH
acquired in April 2023
FAVOURABLE MARKET TRENDS
Favourable market trends
Steel continues to be overwhelmingly
the structural framing material of
choice. The total UK consumption of
constructional steel in calendar year
2022 was 894,000 tonnes, an increase
of 11 per cent on 2021, and back in line
with historic pre-pandemic levels. The
UK market overall is expected to remain
broadly at this level over the coming
years. Growth in the power and energy
sector, to meet increasing demands
as we move towards a greener future,
is offset by a reduction in demand for
industrial buildings, driven mainly by
distribution warehouses.
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. This
combined with the UK Government’s
commitment to reach Net Zero by 2050
will drive demand for new green energy
infrastructure, including nuclear energy,
battery plants, wind farms and the
construction of better public transport
infrastructure. 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.
Decarbonisation of the steel industry
is an important part of reaching the
Government’s target to achieve Net
Zero greenhouse gas emissions in the
UK by 2050.
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. In
addition, it is also recognised that steel
is an important part of a low-carbon
economy, being needed to make wind
turbines, electric vehicles, energy
efficient products and infrastructure.
Performance in 2023
The Group’s potential production
capability is approximately 150,000
tonnes, this includes 20,000 tonnes
relating to the newly acquired Voortman
Steel Construction Holding. The Group’s
output was approximately 115,000
tonnes (excluding VSCH) in the year.
In 2023, Group revenue of £491.8m
represented a 22 per cent increase,
reinforcing our market-leading
position and the continued delivery of
our strategic objectives. This strong
performance has been achieved
despite the continued challenging
macroeconomic conditions and
uncertainty and supply chain disruptions
caused by the conflict in Ukraine.
24
www.severfield.comStock Code: SFR In 2023, we increased our market share in
the stadia and leisure sector, as a result of
large projects such as Everton F.C., Co-op
Live and Excel arena, and maintained our
strong market positions in other sectors
such as industrial, transport and other,
which includes data centres.
We continue to be encouraged by the
current level of tendering and pipeline
activity across the Group, seeing some
significant opportunities both in the UK
and in continental Europe, supported by
the acquisition of VSCH. These include
data centres, stadia and leisure projects,
commercial offices, film studios and
projects in support of a low-carbon
economy such as battery plants, energy
efficient buildings and manufacturing
facilities for renewable energy.
In the UK and EU, we are seeing a
new wave of opportunities for battery
gigafactories to support domestic
zero carbon vehicle production, with
a number of facilities currently being
planned or considered. Furthermore,
the UK’s emergence as a major hub for
film, television, advertising and gaming
production is also leading to an increase
in demand for film and TV studios, and
demand for data centres in the UK and EU
is expected to continue, fuelled by cloud
computing, smart phones and artificial
intelligence, together with the continued
post-pandemic trend for remote working.
The Group’s manufacturing scale, speed
of construction and on-time delivery
capabilities, leaves us well-positioned to
win work from such projects, all of which
are likely to be designed in steel.
OUTLOOK
As part of the Autumn Statement in
November 2022, the UK Government
reconfirmed its commitment to deliver
major infrastructure projects, highlighting
investment in infrastructure and
sustainability, as central to boosting
growth and productivity. Despite the
expected delays to some aspects of the
Road Investment Strategy and HS2, which
the Government confirmed in March
2023, the Autumn Statement reaffirmed
its commitment to deliver Sizewell C,
HS2 to Manchester and core Northern
Powerhouse rail links as set out in the
£650 billion National Infrastructure
Strategy (NIS) from 2020.
The Group is well-placed to meet this
demand for ongoing state-backed
investment, including a growing focus
on infrastructure which can mitigate the
impacts of climate change and deliver
energy security. These requirements
dictate a significant transition in national
energy infrastructure including renewable
electricity generation and storage,
nuclear power (including small modular
reactors (‘SMRs’)) and several other
new energy supply initiatives. We have
already secured some significant road
and rail bridge awards, new nuclear and
rail electrification work and we continue
to make good progress with several other
similar opportunities in the pipeline. In
general, we remain well-positioned to
win work in the transport, nuclear and
power and energy sectors sector given
our in-house expertise and unmatched
scale and capability to deliver major
infrastructure projects, together with the
high entry barriers for competitors.
We also see good opportunities in the
modular sector, including steel sub-
assemblies and systems for factory-
built houses, temporary buildings, and
temporary accommodation. These
opportunities are being driven by the
market growth in the supply of modular
homes and modular buildings for
education and healthcare.
In April 2023 we completed the
acquisition of VSCH, which provides us
with a manufacturing base in Europe
to complement our existing European
business and will help accelerate
our European growth strategy. The
continued successful implementation
of our overall strategy means that the
Group has significant market sector,
geographical and client diversification.
ORDER BOOK
The high-quality UK and Europe order
book at 1 June stands at £510m (1
November 2022: £464m), including
£25m for VSCH, of which £375m is
planned for delivery over the next 12
months. The order book remains well-
diversified and contains a good mix of
projects across the Group’s key market
sectors. This provides us with good
earnings visibility for the 2024 financial
year and beyond.
In terms of geographical spread of
the order book of £510m, 90 per cent
represents projects in the UK, with the
remaining 10 per cent representing
projects for delivery in Europe and the
Republic of Ireland (1 November 2022:
95 per cent in the UK, 5 per cent in
Europe and the Republic of Ireland).
25
www.severfield.comStock Code: SFR THE MARKETS
WE SERVE
INDIA
Creating value in India remains a key strategic objective of the board
A strong India order book
of (at 1 June 2023):
£139m
(2022: £143m 1 November 2022)
Group after-tax share
of profit of:
£1.3m
(2022: £0.8m)
EBITDA:
£11.0m
(2022: £6.8m)
26
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.
Market developments
JSSL remains 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 per
cent of the market, compared with
more than 70 per cent in the UK and
50–60 per cent 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.
2023 performance
In 2023, the Indian joint venture (JSSL)
continued to grow. This is evident in
the Group’s higher after-tax share of
profit of £1.3m (2022: £0.8m) and a
record EBITDA of £11m. The improved
performance reflects an increase in
revenue of 37 per cent to £137.7m
(2022: £100.3m) and an improved
operating margin of 6.3 per cent (2022:
5.2 per cent). Financing expenses of
£5.1m (2022: £3.3m) are higher than the
previous year, reflecting an increase in
borrowings, partly driven by the impact
of inflation on working capital, and in
the cost of letters of credit which are
linked to higher steel prices. These
higher financing costs result in JSSL’s
operating profit of £8.7m (2022: £5.2m),
which has increased by 67 per cent
year-on-year, reducing to a profit before
tax of £3.6m (2022: £1.9m).
Total output for 2023 was 108,000
tonnes, including sub-contracted work,
an output equivalent to that of the
Group’s operations in the UK and Europe
and a record for the business. Despite
the increased activity, 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 nine-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.
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 more than threefold from
2020 to 2028. 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
$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.
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.
Following JSSL’s continued successful
recovery from the effects of COVID-19,
which is reflected its record EBITDA for
2023 of £11m, we have revalidated our
Indian business plan. This process has
reaffirmed the growth opportunities
that we previously identified, including
those in new and existing markets, and
the significant value creation potential
Severfield plc Annual report and accountsfor the year ended 25 March 2023 of JSSL. In conjunction with JSW, our
joint venture partner, our plans to
secure a plot of land in India to facilitate
the future expansion of the business
are well advanced. This land purchase
will allow the business to expand its
geographical footprint whilst providing
it with the platform to expand quickly
and add the necessary volume to
support the expected future market
growth.
Despite some recent market pressures,
JSSL’s clients have continued to place
orders, resulting in a strong order book
of £139m (1 November 2022: £143m).
In terms of mix, 55 per cent of the
order book represents higher margin
commercial work, with the remaining
45 per cent representing industrial
projects(1 November 2022: commercial
work of 36 per cent, industrial work of
64 per cent).
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 commercial,
data centre, healthcare, industrial and
infrastructure projects. This, together
with its strong order book, leaves the
business very well-positioned to take
advantage of an improving economy.
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. 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 Indian JV, JSW Severfield Structures
(‘JSSL’), was founded in 2008. The
facility is situated in the district of
Bellary, Karnataka, on a 65-acre site
and has an annual capacity of 100,000
tonnes serving a wide range of sectors
across the growing Indian market. 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.
Depending on mix, the capacity of the
Bellary facility is c.100,000 tonnes per
annum. The key characteristics of the
plant are as follows:
• The original configuration was two
fabrication lines. Four narrower
fabrication lines have been added
in new factory space, following
completion of the expansion in
2020. These service JSSL’s target
commercial and industrial sectors of
multi-mix commercial, healthcare,
data centres, retail and the industrial
and manufacturing sectors.
• A further INDISEC® plated beam line
was added in 2020 to the existing
two plated beam lines, together with
a bit shop and additional painting
facilities.
In response to the strong long-term
growth projections for India, in
conjunction with our joint venture
partner, we are well advanced in plans
to secure a plot of land. As Bellary is
now approaching its maximum capacity,
this land purchase will allow the
business to expand its geographical
footprint whilst providing it with the
platform to build quickly to facilitate the
future expansion of the business.
Outlook
JSSL is benefiting 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 STRATEGY 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 CORE CONSTRUCTION SECTORS
Our sectors
Tonnes
Percentage
l All industrial (including distribution)
l Power and energy
l Commercial offices
l Transport (including bridges)
l Health and education
l Other
l Leisure
l Retail
461
106
103
93
66
37
23
5
51%
12%
12%
10%
7%
4%
3%
1%
894
100%
The market sectors targeted by
the Group, and their estimated
size in tonnes during the 2022
calendar year (as defined by the
BCSA).
NUCLEAR AND INFRASTRUCTURE
Power and
energy
5–10%
Group
market share
Transport
(incl. bridges)
10–20%
Group
market share
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,
subsequently renamed as Severfield Nuclear
& Infrastructure, 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.
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, Sellafield long-term Programme and
Project Partners (‘PPP’) framework, Hinkley
Point, AWE
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,
Barking Riverside bridge, M42 Bridge, A1
Birtley to Coalhouse, Highways England and
Network rail HS2 bridge packages
Key: Global market future trends
Upward trend
Downward trend
No change
28
Severfield plc Annual report and accountsfor the year ended 25 March 2023 COMMERCIAL AND INDUSTRIAL
Commercial
offices
10–20%
Group
market share
Through our work in the commercial office
sector, we have made a significant impact
on the cityscapes of London and other major
commercial hubs around the UK and Europe. We
ensure our structural steel methods, products
and processes keep up with the needs and
challenges of this rapidly evolving sector.
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.
Successes
Envision battery plant, Iport Doncaster and
major contracts for BMW, Unilever, Sports Direct,
Ocado, ASDA, Sainsbury’s, Prologis, Gazeley,
Jaguar Land Rover, Rolls-Royce, DHL and B&M
and large industrial facilities in the Republic of
Ireland, Swindon and Littlebrook.
Successes
Wimbledon Centre Court (roof) and No.1 Court
roof, Paris Philharmonic Hall, First Direct (Leeds)
Arena, Olympic Stadium, Arsenal FC (Emirates
Stadium), Liverpool FC (redevelopment of Anfield
Stadium), Manchester City FC (south stand
redevelopment), Tottenham Hotspur F.C. (new
stadium), Lord’s Cricket ground (Compton and
Edrich stands), Sky Studios Fulham FC, Everton
FC (new stadium) and Co-op Live arena.
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.
The Group is a trusted partner to the industrial,
warehousing and distribution industries,
thanks to our strong reputation for engineering
excellence and versatility. Unrivalled capacity,
the ability to meet diverse and rigorous
requirements and other strengths such as
design capability, supply chain co-ordination
and delivery speeds set us apart from our
competitors.
Stadia and leisure complexes are important
sectors for the steelwork industry. The
Group has an unrivalled record in the design,
engineering and building of many of the UK’s
best-known sporting hubs. We have also
provided timely and cost-effective solutions for
key leisure destinations, ranging from exhibition
and conference centres to state-of-the-art
concert arenas.
Retail developments are becoming increasingly
complex and ambitious as towns and cities
position themselves as attractive shopping
destinations in today’s competitive economy.
Major redevelopment in cities and out-of-town
shopping facilities are challenging projects in
their own right, requiring different skills and
services. Project management and supply chain
linkage are vital to successful project execution.
Data centres are an ever-growing part of the
business world. In recent years, they have
become increasingly important to businesses
of all sizes as they look for cost-effective
alternatives to high in-house IT and other costs.
With a large proportion of data centres being
specified in steel, the Group is well placed to
meet the needs of this rapidly expanding sector,
and our cost, speed and flexibility have resulted
in several key contract awards.
Successes
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.
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.
www.severfield.com
Stock Code: SFR
29
Industrial and
distribution
10–20%
Group
market share
Stadia
and leisure
50–60%
Group
market share
Retail
<5%
Group
market share
Data centres
and other
20–30%
Group
market share
Health and
education
<5%
Group
market share
STRATEGY 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 strategic pillars and assisted
by our operational improvement
programme and Project Horizon, our
new digitisation programme.
The objective of Project Horizon
is to maximise the automation of
our estimating, design, production
and contract delivery processes
to improve customer service and
increase efficiency, and our operational
improvement programme represents
the consolidation of all the Group’s
other ongoing improvement projects,
established to help us deliver the
Group’s overall strategy.
These include improvements in business
processes, manufacturing efficiencies
(including those supported by capital
investment), quality control, cost
reduction programmes and new product
development, all set within the framework
of strong risk management and control.
These initiatives have served the Group
well during the pandemic, the recent
inflationary market conditions and other
periods of market turbulence.
OUR STRATEGY FOCUS
• Growth, both organic and
through acquisitions
• Operational improvements
• Building further value in
JSSL to achieve our purpose
to develop better ways
to build, for a world of
changing demands.
ACHIEVING PURPOSE
Growth
Clients
India
Operational
Excellence
People
GROWTH THROUGH ACQUISITIVE ACTIVITIES
DAM Structures
Core activities
Opportunities
• Acquired in 2021.
• Predominantly serving the
• UK Government £650bn
• Rebranded to become Severfield
Infrastructure, part of the Nuclear
and Infrastructure Division.
• Production facilities in Bridlington
and offices in Chepstow. Now
combined with the Bridge team
based out of Lostock.
transport sector through propping,
railway and piling products.
• Combined in 2022, Infrastructure
now includes the Bridge team,
providing bridge packages to serve
a range of infrastructure projects.
National Infrastructure Strategy,
including HS2 to Manchester,
Northern Powerhouse rail links
and Road investment strategy
provide long term significant
investment in the market sector.
Harry Peers
Core activities
Opportunities
• Acquired in 2019.
• Rebranded to become
‘Severfield Nuclear’ part of
the Nuclear and Infrastructure
Division.
• Production facilities in Bolton.
• Predominantly serving the
nuclear, power generation
and process industries
sectors.
• Extensive experience in the
highly regulated, specialist
sectors.
• UK Government £650bn National
Infrastructure strategy, including
Nuclear investment, including
Sizewell C in Suffolk.
• Key delivery partner to deliver
structural steelwork at Sellafield.
• Increased spend on national
infrastructure to mitigate climate
change and deliver green energy.
30
Severfield plc Annual report and accountsfor the year ended 25 March 2023 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.
Read more on page 32
1
5
2
6
3
7
4
A B C D E
F G H I
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
India
Our aim is to build value in JSSL and we remain very
positive about the long-term development of the
Indian market.
Read more on page 34
Operational excellence
Our emphasis is on delivering high-quality projects and
reducing costs by driving excellence through our core
business processes.
Read more on page 35
People
Our people are at the heart of our business and are vital
to the success of our vision and the achievement of our
strategic goals.
Read more on page 36
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
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
Key performance indicator reference number
Key to principal risks
1
2
3
4
5
6
7
Underlying operating profit and margin
(before JVs and associates)
Underlying basic earnings per share (‘EPS’)
Revenue growth
Operating cash conversion
Return on capital employed (‘ROCE’)
Order book
Injury frequency rate (‘IFR’)
In 2023, we continued to make good operational
and strategic progress, helping to generate
sustainable long-term value for our stakeholders.
A
B
C
D
E
F
G
H
I
Health and safety
Supply chain
People
Commercial and market environment
Mispricing a contract (at tender)
Cyber security
Failure to mitigate onerous contract terms
Sustainable and responsible business
Industrial relations
31
www.severfield.comStock Code: SFR STRATEGY 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
Achievements in 2023
Objectives for 2024
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
Increased Group revenue by 22 per
cent, despite some challenging market
conditions during the year. This is more
than double the revenue of £239m in
2016 when we started our strategic
journey, reflecting the benefit of our
significant market sector, geographical
and client diversification.
Achieved an underlying1 profit before
tax of £32.5m (2022: £27.1m), the first
time since 2009 that the Group’s profits
have exceeded £30m. This result has
been achieved despite inflationary
headwinds, demonstrating the
resilience of the Group’s operations.
The high-quality UK and Europe order
book at 1 June 2023 stands at £510m
(1 November 2022: £464m). 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.
Enhanced the Group’s presence in
Europe through the acquisition of VSCH
which provides immediate access to
new and growing market sectors to
help accelerate our European growth
strategy.
Continued to invest in organic
modular growth, further developing
our ‘Severstor’ and ‘Rotoflo’ product
ranges in SPP and developing CMF’s
cold formed product ranges to serve an
external client base, supported by the
recent expansion of CMF’s production
operations in Wales.
Continued to embed the new
divisional structure for our UK and
Europe operations providing us with a
better platform to fulfil our strategic
growth aspirations.
1 See note 31 for APM definitions
Continue to grow Group revenue,
maintain our strong balance sheet and
the quality of the order book to deliver
sustainable growth.
In our core construction operations,
increase our market share in existing
market sectors where the Group
already has specialist expertise (at
good margins and with acceptable
levels of risk). This includes some
significant growth opportunities in the
non-cyclical sectors of nuclear (new
and decommissioning), bridges and rail
electrification.
Continue to target projects in support
of a low-carbon economy including
battery plants, manufacturing facilities
for renewables, new nuclear, rail
electrification, HS2 and other energy
efficient buildings, helping to drive the
UK’s economic recovery.
Grow the Severfield brand and develop
our client base in Europe, supported
by the growth opportunities (access
to the high-growth electricity and
distribution sector and capabilities in
turnkey solutions) afforded by the VSCH
acquisition.
In our modular solutions division, we
are targeting a profitable result in 2024,
mainly driven by higher margin growth
opportunities for Severstor. We will
also continue to develop the product
offering and client base at CMF, taking
advantage of the expanded capacity.
Leverage the new divisional structure
to identify further selective acquisition
opportunities, to further enhance the
services we can offer.
Severfield plc Annual report and accountsfor the year ended 25 March 2023 CLIENTS
By understanding, anticipating and responding to client needs we aim
to build secure, sustainable and mutually valuable relationships and
create lasting client satisfaction.
Strategic priorities
Achievements in 2023
Objectives for 2024
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.
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.
Develop and deepen relationships with
VSCH’s varied European client base and
leverage VSCH’s capabilities to offer a
wider range of services to Severfield’s
existing clients.
Continue our focus on engineering
efficiency through Project Horizon,
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.
This ensures quality assured delivery
partners for customers, collaborative
innovation and ability to drive social
value creation, carbon reduction and
continuous improvements in projects.
Build relationships with a wider client
base as we continue to extend our
new modular product ranges including
our ‘Severstor’ and ‘Rotoflo’ product
offerings in SPP and through the
increased cold rolled steel products
offered by CMF.
Delivered over 100 projects during the
year in the UK, Ireland and continental
Europe in diverse market sectors,
including industrial and distribution
(including battery plants), stadia
and leisure (including film studios),
commercial offices, transport
infrastructure and nuclear.
Further strengthened our relationships
with key clients to ensure that 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 recently been selected as one
of two ‘key delivery partners’ to deliver
structural steelwork at Sellafield as
part of the long-term Programme and
Project Partners framework. This long
term engagement and visibility benefits
both Severfield and our clients.
During the year we collaborated
with certain clients on ESG matters,
including sustainable procurement,
low embodied carbon steel, material
passporting, offsetting and social value
considerations. 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.
33
www.severfield.comStock Code: SFR STRATEGY 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
Achievements in 2023
Objectives for 2024
Building value in India
Our aim is to build further value
in the business whilst the market
continues its conversion from
concrete to steel and to take
advantage of an economy which is
expected to grow significantly in
the medium term.
JSSL reported a high-quality order book
of £139m at 1 June 2023 (1 November
2022: £143m), reflecting the strong
underlying demand for structural steel
in India.
JSSL is continuing to ramp up its
Bellary facility towards its maximum
capacity and has recorded output for
FY23 of 108,000 tonnes, including
sub-contracted work. This is reflected
in an improved profitable performance
and a record EBITDA, driven by revenue
growth and higher margins.
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, our plans
to secure a plot of land, to facilitate
expansion of the business in the future,
are well advanced.
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.
Identify further opportunities for
organic growth including in adjacent
sectors, with potential new clients and
through widening the range of services
that JSSL currently offers.
Leverage the increased Bellary factory
capacity and maximise operational
efficiencies as JSSL continues to
increase its production volumes to
support market growth.
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 25 March 2023 OPERATIONAL EXCELLENCE
Our emphasis is on delivering high-quality projects and reducing
costs by driving excellence through our core business processes.
Strategic priorities
Achievements in 2023
Objectives for 2024
Drive operational improvements
and efficiencies
The objective is to improve our
level of automation (through
Project Horizon) and to further
enhance the Group’s risk
assessment, operational and
contract management processes
(through our ongoing operation
improvement programme).
Invest in market-leading
technology
We will make this investment
in the short and medium term
to support the Group’s ongoing
requirements and growth.
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 cost
pressures that were experienced by the
Group in 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.
We launched Project Horizon, our
digitisation programme, to modernise
and further standardise processes
and systems across the group. The
objective is to maximise the automation
of our estimating, design, productions
and contract delivery process to
improve customer service and increase
efficiency. Further details on page 23.
We made good progress with our
innovative approach to drawing and
design, including the automation of
repetitive tasks and the optimisation
of engineering software. We have
also developed engineering apps and
rolled out a number of digital quality
assurance initiatives, together with
ongoing roll out of mobile devices to
capture information at the point of use
and to provide live information to both
operatives and management.
We continued the expansion and
automation of our fabrication capability
and the ongoing improvements to real-
time factory information at our main
centre in Dalton. This included ‘right
first time’ initiatives to improve overall
quality including the targeted reduction
of factory and site NCRs (rework items)
and drawing office errors.
Roll out further Project Horizon
initiatives and workflows – we have
c.100 projects either ongoing on
planned over the next 2 years to
either generate cost savings or create
additional capacity in our workforce
to help us delivery on our growth
aspirations. These include looking at
new and innovative ways of working
and the optimisation of our software
systems to reduce manual tasks.
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.
Maintain our current momentum with
reducing our scope 1 and 2 greenhouse
gas (‘GHG’) emissions. This includes the
switch to ‘green’ electricity at all our
production facilities and other ESOS
related improvements, the monitoring
of our new waste reduction targets,
increase the use of hydrogenated
vegetable oil (‘HVO’) fuels and the
transition to electric and hydrogen
construction plant where possible.
35
www.severfield.comStock Code: SFR STRATEGY OUR
STRATEGY
PEOPLE
Our people are at the heart of our business and are vital to the
success of our vision and the achievement of our strategic goals.
Strategic priorities
Achievements in 2023
Objectives for 2024
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, healthy and
respectful working environment.
36
Our injury frequency rate (‘IFR’) and
accident frequency rate (‘AFR’) both
continued to significantly outperform
industry averages.
Our focus on increasing diversity
across our leadership roles saw the
appointment of Maeve Gallagher
(Production Director), Nicole Baker
(Divisional Commercial Director) and
Michaela Lindridge (Head of ESG).
Jennifer Magowan was also promoted to
Divisional Finance Director.
Our colleague ‘MyVoice’ forum has gone
from strength-to-strength providing
regular insight into the feelings of our
workforce. This year it has enabled us
to make improvements to health and
wellbeing provisions, facilities and
leadership communication.
Our MyPerformance review process
continued to be utilised across the
Group with a pilot taking place with
manufacturing colleagues and we
continued to improve our learning and
development offering.
We achieved the prestigious ‘Gold
Member’ status of ‘The 5% Club’
recognising our commitment to
providing opportunities to earn whilst
learning. Twenty seven apprentices
joined the Group in 2023, taking our
total number of colleagues undertaking
apprenticeships programmes or
qualifications to 62 (a threefold
increase on 2021).
We reviewed rates of pay across our
manufacturing locations to create
clearer pay progression and ensured
that all our colleagues are paid at or
above the real living wage.
Relaunching our new behavioural safety
training programme (Safer@Severfield)
and continuing to focus on delivering a
wide range of internally and externally
facilitated training courses. This will
be supported by the implementation of
MyLearning, our online platform.
Promote easy access to health care
through company funded private
provision for all colleagues as well as
the ongoing promotion of our enhanced
Employees Assistance Programme
(‘EAP’) and app (My Healthy Advantage).
Through ensuring all Leaders and
Managers undertake Dignity and
Respect training we will continue to
promote diversity and inclusion through
employment practices, that are free
from discrimination and in accordance
with human rights principles.
Continue to focus on early careers
with the recruitment of a further
30+ apprentices.
Continue to support employee-
led local community initiatives
and developing strong community
partnerships through the pilot of a paid
volunteering programme.
Launch additional talent development
programmes to retain and enhance the
skills of our identified future leaders
and specialists.
Maintain our focus on reducing our IFR
rate to ensure we are continuing to drive
the appropriate safety behaviours.
Severfield plc Annual report and accountsfor the year ended 25 March 2023 www.severfield.com
Stock Code: SFR
37
STRATEGY 38
Severfield plc Annual report and accountsfor the year ended 25 March 2023 OUR
STRATEGY
WE ARE WELL-POSITIONED FOR RESPONSIBLE GROWTH
ESG has been at the forefront of our strategic decision making and as a result the Group
is in a prominent market position in the high-growth markets of the future, helping to
accelerate the journey to Net Zero.
Low carbon
transport
Nuclear and
Infrastructure
About the opportunity
• Significant Government investment
in public transport, including HS2,
Northern Powerhouse rail links,
Transpennine upgrades and rail
electrification
• Severfield are well placed in the
infrastructure sector to support the
delivery of significant projects and our
bridge team have a strong reputation
and extensive experience in all types of
bridgework, including major transport
routes.
New
Nuclear
Nuclear and
Infrastructure
About the opportunity
• The Government has launched
‘Great British Nuclear’ to address
constraints in the nuclear market and
support new nuclear builds.
• Severfield’s Nuclear and Infrastructure
division has extensive experience in the
sector and is a key delivery partner for
existing nuclear projects at Sellafield.
Battery
Plants
Commercial
and Industrial
About the opportunity
• In the UK and EU, we are seeing a
new wave of opportunities for battery
gigafactories to support domestic
zero carbon vehicle production, with
a number of facilities currently being
planned or considered.
Renewable
Energy
Commercial
and Industrial
About the opportunity
• Decarbonising the power sector whilst
meeting a significant increase in
electricity demand, has the potential
to generate significant investment
from both the private and public
sectors.
• Recognising the significance of having
the vital supply chain in the UK, the
Government has allocated up to £1bn of
funding.
• Severfield has a strong position in the
sector and is currently building the
Envision battery plant for Nissan in
Sunderland.
• The UK currently has the largest
operational offshore wind farm in
Europe, with similar sized projects
planned or underway.
• Severfield has extensive sector
experience and our ability to meet
specific engineering requirements
enable us to continue serving this vital
sectors.
Low carbon
buildings
Commercial
and Industrial
Modular
Solutions
About the opportunity
• Increase in demand for low carbon
buildings, including offices and
modular buildings
• Our Commercial and Industrial division
is well placed to deliver low carbon
buildings, having worked on a number of
projects already.
• Severfield have invested in R&D
• Our Modular Solutions division
to optimise production processes
and reduce the subsequent carbon
footprint
specialises in modular products.
39
www.severfield.comStock Code: SFR STRATEGY 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.
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 2023 ‘building a responsible and
sustainable business’ report.
40
Shareholders
Customers
Colleagues
Suppliers
Local communities
Why we engage
We have c. six million shareholders,
including institutional and personal
investors, providing the Group with funds
for investment in long-term growth. The
board are 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,
benefiting 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 financial
health and our strong balance sheet.
Why we engage
Why we engage
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 and inclusive working
environment where everyone can be
themselves and be their best.
We develop long-term relationships with
our supply chain and work with them to
ensure we successfully deliver our projects
How we engage
efficiently and to a high standard.
How we engage
is recognised as an important part of the
delivery of our projects and is referenced,
where appropriate, in reports to the board
throughout the year.
• Our directors have taken up
opportunities to learn more about
engagement with community
stakeholders on specific projects
through our programme of site visits.
• Through social and charitable
committees within each business and
through the Severfield Foundation we
get involved with and raise money for
local events, such as school or college
talks or careers fairs, or supporting local
charities. More details of the work of the
Severfield Foundation can be found on
page 86.
• 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
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 for scope 1
and 2 emissions and 2050 for scope 3
emissions.
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.
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’).
• 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 Group.
• To be treated fairly and with respect.
• Prompt payment.
• Sound health and safety performance.
• Our policy is to treat our suppliers and
report (‘TCFD’) on page 61.
• Our MyVoice forum is a key component of
our listening strategy. Three times a year
colleague representatives from across
the group meet with our CEO, workforce
engagement director and HRD to provide
us with a view of colleague sentiment
and key topics of interest. Additional
meetings take place when the business
has key topics to discuss with the forum.
• We keep our colleagues informed of our
financial performance through emails
and articles on our intranet and through
annual colleague roadshows.
• On average we share around 10 articles
per month on our Connect platform
with colleagues having the opportunity
to comment, like or raise questions.
Articles range from project wins, to
benefits updates, to wellbeing guidance
and advice to surveys around specific
topics. Our executive committee review
engagement levels with the platform on
a monthly basis.
• Management teams run briefing
sessions locally throughout the year
on business goals, market conditions
and company performance and we have
commenced a roll out of bi monthly
update emails from business unit
directors to their respective teams.
• We offer share plans to colleagues
(including the opportunity to save for
three years under our SAYE scheme) to
encourage them to engage with business
performance and progress.
Their key material issues
• The cost-of-living crisis
• To work in a safe, suitable and respectful
• Investment in personal and professional
environment.
development.
• Consistent and fair treatment across all
aspects of our people practices.
• Access to healthcare support for both
physical and mental health concerns.
Severfield plc Annual report and accountsfor the year ended 25 March 2023 Shareholders
Customers
Colleagues
Suppliers
Local communities
Detailed below are the ways in which the Group as a whole engages with our stakeholders and more
information can be found in the governance report which describes how the board engages with its direct
stakeholders: the Group’s shareholders, employees, clients, suppliers and funders.
Why we engage
Why we engage
We have c. six million shareholders,
including institutional and personal
Our proven ability to work collaboratively
and innovatively with clients is
investors, providing the Group with funds
fundamental to our success and is critical
for investment in long-term growth. The
to securing new work and achieving our
board are committed to building and
strategic goals.
maintaining good positive relationships
with all shareholders and ensuring regular,
open dialogue with them throughout
the year.
How we engage
How we engage
• We focus on early contract engagement
with clients, anticipating the issues
they face, providing problem-solving
solutions and delivering the best
• Our executive directors communicate
results to balance time, cost and quality
regularly with institutional investors and
objectives, whilst ensuring that risk and
analysts and all shareholders are invited
reward are appropriately shared.
to the Group’s annual general meeting.
• Our aim is to secure work where possible
• Our non-executive directors are also
available to meet with shareholders.
• The Group’s website provides an
through partnerships, framework
arrangements or repeat business.
We nurture long-term relationships
important resource for communications
with our clients and partners, which
to all stakeholders, with a specific
section dedicated to investors.
can be achieved by taking the time to
understand their priorities and then
• The Group provides regular updates on
delivering on their project goals.
financial performance and significant
• On completion, clients are asked
events using a regulatory information
for feedback on their experience in
service and responds to queries received
face-to-face interviews using detailed
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
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.
climate-related strategic objectives.
Their key material issues
• Outstanding customer service,
benefiting 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 financial
health and our strong balance sheet.
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’).
• 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 Group.
• 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 86.
• 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
report (‘TCFD’) on page 61.
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 for scope 1
and 2 emissions and 2050 for scope 3
emissions.
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 and inclusive working
environment where everyone can be
themselves and be their best.
How we engage
• Our MyVoice forum is a key component of
our listening strategy. Three times a year
colleague representatives from across
the group meet with our CEO, workforce
engagement director and HRD to provide
us with a view of colleague sentiment
and key topics of interest. Additional
meetings take place when the business
has key topics to discuss with the forum.
• We keep our colleagues informed of our
financial performance through emails
and articles on our intranet and through
annual colleague roadshows.
• On average we share around 10 articles
per month on our Connect platform
with colleagues having the opportunity
to comment, like or raise questions.
Articles range from project wins, to
benefits updates, to wellbeing guidance
and advice to surveys around specific
topics. Our executive committee review
engagement levels with the platform on
a monthly basis.
• Management teams run briefing
sessions locally throughout the year
on business goals, market conditions
and company performance and we have
commenced a roll out of bi monthly
update emails from business unit
directors to their respective teams.
• We offer share plans to colleagues
(including the opportunity to save for
three years under our SAYE scheme) to
encourage them to engage with business
performance and progress.
Their key material issues
• The cost-of-living crisis
• To work in a safe, suitable and respectful
environment.
• Investment in personal and professional
development.
• Consistent and fair treatment across all
aspects of our people practices.
• Access to healthcare support for both
physical and mental health concerns.
41
www.severfield.comStock Code: SFR STRATEGY KEY PERFORMANCE
INDICATORS
FINANCIAL
1. UNDERLYING OPERATING PROFIT AND MARGIN1
2. UNDERLYING BASIC EARNINGS PER SHARE (EPS)
6.7%
7.0%
6.7%
£25.5
million
£26.9
million
£33.1
million
2021
2022
2023
Stakeholder linkage
Strategic pillar
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.
Progress during the year
Underlying operating profit has
increased by £6.2m (23.0 per cent)
over the prior year, reflecting strong
operational delivery. The consistent
margin, at 6.7 per cent, reflects the
dilutive effect of the increase in steel
prices.
6.4p
2021
7.2p
2022
8.5p
2023
Stakeholder linkage
Strategic pillar
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.
Progress during the year
EPS has increase by 18 per
cent, reflecting the increase in
underlying profit.
3. REVENUE GROWTH2 (ON A LIKE-FOR-LIKE BASIS)
4. OPERATING CASH CONVERSION
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.
Progress during the year
Revenue has increased by £88.2m
(21.8 per cent) compared to last year,
reflecting an increase in production
activity and order flow.
2 This now includes all acquisitions
(Prior year excluded DAM but has been
restated for comparability)
93%
2021
145%
2023
2022
-25%
Stakeholder linkage
Strategic pillar
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).
Progress during the year
Operating cash conversion was
+145 per cent, which is well ahead
of our target conversion rate of +85
per cent. This reflects the unwind
of the unusually high working
capital position in the prior year and
customer advances.
£363.3
million
£403.6
million
£491.8
million
2021
2022
2023
Stakeholder linkage
Strategic pillar
42
Severfield plc Annual report and accountsfor the year ended 25 March 2023 5. RETURN ON CAPITAL EMPLOYED
6. ORDER BOOK
13.6%
13.5%
15.8%
2021
2022
2023
Stakeholder linkage
Strategic pillar
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.
Progress during the year
ROCE has increased by 2.3 percentage
points to 15.8 per cent, reflecting
increased profitability. This is above
our benchmark of 10 per cent.
£301
million
£486
million
£510
million
2021
2022
2023
Stakeholder linkage
Strategic pillar
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 UK and Europe order book shows
the total value of future revenue
secured by contractual agreements.
Progress during the year
Our high-quality UK and Europe
order book stands at £510m at the
end of June 2023, representing a
£24m increase from June 2022. The
strong order book gives us good
earnings visibility and leaves us well
positioned to deliver our strategic
objectives.
7. 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.
How we calculate
IFR is the number of reportable
injuries per 100,000 hours worked.
Progress during the year
Following significant improvements in
previous years, our IFR has increased
to 1.61 from 1.49. Although our safety
statistics continue to be industry-
leading, we remain committed to
continually improving and focusing
on leading indicators in our pursuit of
‘no harm’.
1.48
2021
1.491
2022
1.61
2023
Stakeholder linkage
Strategic pillar
1 The 2022 IFR has been
adjusted to include
DAM structures.
Stakeholder linkage:
Strategic pillar:
Clients
Growth
Employees
Clients
Shareholders
Operational
Excellence
Communities
India
Suppliers
People
1 1 See note 31 for APM definitions and reconciliation to IFRS measures
43
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This increased activity is evident in
the Group’s higher after-tax share of
profit of £1.3m (2022: £0.8m), which
reflects an increase in revenue and a
record EBITDA of £11m. We remain very
positive about the long-term trajectory
of the market and of the value creation
potential of JSSL. Together with our
joint venture partner, our plans to
secure a plot of land in India to facilitate
the future expansion of the business
remain well advanced.
Based on the Group’s continued
progress, our strong balance
sheet and confidence in the future
prospects of the business, the board is
recommending an increase in the final
dividend to 2.1p per share, resulting in
a total dividend for the year of 3.4p per
share (2022: 3.1p per share), an increase
of 10 per cent on the prior year.
Strategic update
The Group’s well-established strategy
is unchanged, focused on growth and
diversification, both organic and through
selective acquisitions, operational
improvements and building further value
in JSSL, all of which, in combination,
will deliver strong EPS growth. Our clear
focus on balance sheet strength and
cash generation enables us to continue
making the right decisions for the
long-term, to maximise our competitive
advantage and to best position us
in our chosen markets for continued
sustainable, long-term growth.
Acquisitions
In April 2023, after the year-end, we
completed the acquisition of Voortman
Steel Construction Holding B.V. (‘VSCH’),
an innovative steel construction group
based in the Netherlands, for a net
consideration of €24m. This provides us
with a manufacturing base in Europe
to complement our existing European
business and will help accelerate
our European growth strategy. The
acquisition is expected to be earnings
enhancing in 2024.
In addition to VSCH’s core steel
fabrication markets in the Netherlands,
we are seeing opportunities for
growth through its access to the high
growth Dutch electricity distribution
sector and capabilities in design and
ALAN DUNSMORE
Chief Executive Officer
2023 was a very successful year,
achieving strong revenue and profit
growth and moving into next year with
a high-quality order book, highlighting
the successful evolution and execution
of our strategy.”
Introduction
2023 was a very successful year, with
the Group achieving record revenue,
delivering underlying profits of more
than £32m and securing a significant
value of new, high-quality work. This
strong performance reflects the
high quality of our operations and
highlights the successful evolution of
our strategy and the benefits of our
significant market sector, geographical
and client diversification. This has
resulted in a well-balanced Group which
has provided us with the resilience
to maintain and improve our market
positions and expert capabilities and
has enabled us to keep growing the
business despite the ongoing market
headwinds. The Group’s strong overall
performance is reflected in our high-
quality order books of £510m in the UK
and Europe and £139m in India.
In 2023, we increased our revenue by
22 per cent to £491.8m (2022: £403.6m)
and our underlying profit before tax by
20 per cent to £32.5m (2022: £27.1m).
This performance has converted into
cash, with operating cash conversion
of 145 per cent (2022: (25) per cent),
resulting in net funds (on a pre-IFRS-16
basis) at the year-end of £2.7m (2022:
net debt of £18.4m). Statutory profit
before tax, which includes non-
underlying items, was £27.1m (2022:
£21.0m), an increase of 29 per cent over
the prior year.
In 2023, the Indian joint venture (‘JSSL’)
recorded output of more than 100,000
tonnes, including sub-contracted
work, an output equivalent to that of
the Group’s operations in the UK and
Europe and a record for the business.
44
Severfield plc Annual report and accountsfor the year ended 25 March 2023 work in live operating environments.
In addition, when market pressures
stretched existing budgets or delayed
certain construction programmes,
our operational delivery capabilities
allowed us to help clients deliver
changes to these programmes quickly
and efficiently, to provide them with
problem-solving solutions and to ensure
that programme milestones were
achieved.
Business and operational improvement
In 2023, the Group launched Project
Horizon, our new digitisation project.
The objective is to maximise the
automation of our estimating, design,
production and contract delivery
processes to improve client service
and deliver efficiency and capacity
benefits. Workflows comprise over 100
short, medium and long-term individual
projects and initiatives designed to
modernise and further standardise
processes and systems across the
Group. We currently have 14 dedicated
colleagues working on the project,
which will initially be self-funded
through annual savings, with further
benefits expected to be realised as
more of the identified projects and
initiatives are implemented. The project
is a long-term initiative that we believe
will shape our future as we enhance our
systems and leverage digital solutions,
to ensure we remain at the forefront of
technology and innovation as market
leaders in the industry.
As part of Project Horizon, we continued
to make good progress with our
innovative approach to drawing and
design, including the automation of
repetitive tasks and the optimisation
of engineering software (including the
use of engineering apps), which is now
being used on an increasing number of
construction projects across the Group.
Other ongoing initiatives include the
digitisation of construction resource
tracking and the automation of the
quality assurance certification process.
From an operational improvement
perspective, initiatives worked on
during the year included the continued
expansion and automation of our
fabrication capability and the ongoing
improvements to real-time factory
information at our main production
facility in Dalton. This included
improvements in our paint shops, ‘right
first time’ initiatives to improve overall
quality including the targeted reduction
of factory and site NCRs (rework items)
and drawing office errors, together with
ongoing roll out of mobile devices to
capture information at the point of use
and to provide live information to both
operatives and management.
build (turnkey) solutions for simpler
structures, a business which is currently
in its infancy, serving SMEs and
smaller projects. The acquisition also
provides us with growth opportunities
through access to new European
clients, particularly in the industrial,
commercial and residential sectors, a
platform to broaden our service offering
and an ability to grow in different
sectors and geographies, enhancing our
position as one of Europe’s strongest
structural steel services groups.
VSCH is renowned in the Netherlands
for its in-house knowledge, innovation
and expertise. The business is well
invested with modern and highly
efficient production facilities, co-
located with Voortman Steel Machinery
Holding B.V. (‘VSMH’), a manufacturer
of steel fabrication machinery. The
acquisition will allow for areas of future
collaboration with VSMH including the
development of robotic production
technology, proprietary fabrication
software and bespoke equipment.
Clients
We continue to invest to meet the
needs of our clients, building our
capabilities and driving efficiency
across new and existing facilities, to
ensure our growth ambitions are fully
supported. We remain focused on
providing value added results for our
clients whilst balancing time, cost and
quality objectives, with an emphasis on
building strong and long-standing client
partnerships.
Our unique capability to deliver complex
design and engineering solutions, our
capacity and speed of fabrication and
our management of the integrated
construction process is vital for our
clients and a key differentiator for
the Group. This is fundamental to
our success and has been critical to
securing new work and growing our
revenues over recent years. This year we
have delivered challenging programmes
for clients, reduced costs through
both our pre-tender value engineering
and also post-award engineering
solutions and developed innovative
building solutions for temporary
works and pre-assembled sections to
45
www.severfield.comStock Code: SFR STRATEGY OUR OPERATIONAL
PERFORMANCE
UK and Europe review
The future success of the Group is
determined, amongst other things, by
the quality of the secured workload
and our discipline to maintain risk-
based contract selectivity irrespective
of economic conditions. The UK and
Europe order book at 1 June includes a
significant amount of new, high-quality
work and stands at £510m (1 November
2022: £464m), including £25m for VSCH,
of which £375m is planned for delivery
over the next 12 months. This provides
us with good earnings visibility for 2024
and beyond. The order book remains
well-diversified and contains a good
mix of projects across the Group’s key
market sectors. In terms of geographical
spread, 90 per cent of the order book
represents projects in the UK, with the
remaining 10 per cent representing
projects for delivery in Europe and the
Republic of Ireland (1 November 2022:
95 per cent in the UK, 5 per cent in
Europe and the Republic of Ireland).
As well as our secured workload, we
are encouraged by the current level
of tendering and pipeline activity
across the Group. We are seeing some
significant opportunities in the UK and
in continental Europe as, despite some
current softer market conditions in the
distribution sector and delays in client
decision-making, many of our chosen
markets continue to have a favourable
outlook – the Group has a prominent
position in market sectors with strong
growth potential and is well-positioned
to help accelerate the journey to Net
Zero. Many of these potential projects
play to the Group’s core competencies
– large complex projects that require
high quality, rapid throughput, on-time
performance and full co-ordination
between stakeholders.
As previously announced, with effect
from 1 April 2022, to align our existing
businesses more closely with the ten
market sectors that we serve and
our growing client base, the previous
structure of six mainly location-based
business units has been streamlined
into three new divisions. Under this new
divisional structure, we have separated
our core construction operations
(delivering steel superstructures) into a
Commercial and Industrial division and
a Nuclear and Infrastructure division,
and created a new Modular Solutions
division. The Modular Solutions division
consists of the growing modular product
ranges of Severfield (Products &
Processing) (‘SPP’) and of Construction
Metal Forming (‘CMF’), our cold rolled
steel joint venture business.
Commercial and Industrial
The Commercial and Industrial (‘C&I’)
division brings together the Group’s
strong capabilities in the industrial and
distribution, commercial offices, stadia
and leisure, data centres, retail, and
health and education market sectors.
During the year, we continued to work
on the new stadium for Everton F.C.,
the Co-op Live Arena in Manchester,
Pinewood Studios in Shepperton and
the Google Headquarters at King’s
Cross, which is now largely complete.
We also started work on the Envision
Battery Plant in Sunderland, creating
an electric vehicle hub supporting
next generation EV production, to help
accelerate the transition to Net Zero
carbon mobility. Other significant
revenue contributing projects include
several large distribution facilities
in the UK, the ExCel Arena in London
and a number of mid-sized office
developments, both in the UK and
Republic of Ireland (including Wilton
Park in Dublin and new developments
at King’s Cross and Canada Water in
London).
The C&I order book at 1 June of £372m
(1 November 2022: £308m) includes
a significant amount of new work
which we have secured over recent
months. This includes Sunset Studios
in Hertfordshire, a large data centre in
London, two large commercial office
developments in London, together
with various industrial and distribution
facilities in the UK. Most of our work
is derived through either negotiated,
framework or two-stage bidding
procurement processes, in line with
the risk profile of the work being
undertaken.
Despite some ongoing softness in the
distribution sector and delays in client
decision-making, we continue to be
encouraged by the current level of
tendering and pipeline activity across
the Group, seeing some significant
opportunities both in the UK and in
continental Europe, supported by the
acquisition of VSCH. These include data
centres, stadia and leisure projects,
commercial offices, film studios and
projects in support of a low-carbon
economy such as battery plants, energy
efficient buildings and manufacturing
facilities for renewable energy.
In the UK and EU, we are seeing a
new wave of opportunities for battery
gigafactories to support domestic
zero carbon vehicle production, with
a number of facilities currently being
planned or considered. Furthermore,
the UK’s emergence as a major hub
for film, television, advertising and
gaming production is also leading to
an increase in demand for film and
TV studios. Demand for data centres
in the UK and EU is also expected to
continue, fuelled by cloud computing,
smartphones and artificial intelligence,
together with the continued post-
pandemic trend for remote working.
The Group’s manufacturing scale, speed
of construction and on-time delivery
capabilities, leaves us well-positioned
to win work from such projects, all of
which are likely to be designed in steel.
Nuclear and Infrastructure
The Nuclear and Infrastructure (‘N&I’)
division encompasses the Group’s
market-leading positions in the nuclear
(new build, decommissioning and
defence), power and energy, transport
(road and rail) and process industries
sectors. During the year, we continued
to work on several HS2 bridge packages
for the Balfour Beatty and EKFB (Effage
Kier) consortia, together with road and
rail bridges including the A1 Birtley to
Coalhouse and A46 Binley bridges and
the M42 junction 6 and M25 junction
28 road improvement schemes. From a
nuclear perspective, ongoing contracts
include work at Hinkley Point and
some large projects at Sellafield and in
Berkshire for AWE.
46
Severfield plc Annual report and accountsfor the year ended 25 March 2023 other new energy supply initiatives. We
have already secured some significant
road and rail bridge awards, new
nuclear and rail electrification work and
we continue to make good progress with
several other similar opportunities in
the pipeline. In general, we remain well-
positioned to win work in the transport,
nuclear and power and energy sectors
sector given our in-house expertise
and unmatched scale and capability to
deliver major infrastructure projects,
together with the high entry barriers for
competitors.
The N&I order book at 1 June was
£133m (1 November 2022: £151m) of
which 47 per cent represents transport
infrastructure (1 November 2022: 52
per cent) and 47 per cent represents
nuclear projects (1 November 2022:
46 per cent). Notable recent awards
include some new bridge projects
reflecting investment in infrastructure
by Highways England and Network
Rail, and a large secondary steelwork
package for General Electric at Hinkley
Point. This involves a unique flat pack
delivery system for the steelwork
(access platforms and mechanical
handling steel for the two turbines at
Hinkley), greatly reducing site storage
space while providing greater cost
and programme certainty. Our nuclear
business has also recently been
selected as one of two ‘key delivery
partners’ to deliver structural steelwork
with an estimated value of c.£250m
at Sellafield as part of the long-term
Programme and Project Partners (‘PPP’)
framework.
As part of the Autumn Statement in
November 2022, the UK Government
reconfirmed its commitment
to deliver major infrastructure
projects, highlighting investment
in infrastructure and sustainability,
as central to boosting growth and
productivity. Despite the expected
delays to some aspects of the Road
Investment Strategy and HS2, which
the government confirmed in March
2023, the Autumn Statement reaffirmed
its commitment to deliver Sizewell C,
HS2 to Manchester and core Northern
Powerhouse rail links as set out in the
£650 billion National Infrastructure
Strategy (‘NIS’) from 2020.
The Group is well-placed to meet this
demand for ongoing state-backed
investment, including a growing focus
on infrastructure which can mitigate the
impacts of climate change and deliver
energy security. These requirements
dictate a significant transition in
national energy infrastructure including
renewable electricity generation and
storage, nuclear power (including small
modular reactors (‘SMRs’)) and several
47
www.severfield.comStock Code: SFR STRATEGY OUR OPERATIONAL
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Modular Solutions
The Modular Solutions (‘SMS’) division
consists of the growing modular product
ranges of SPP based in Sherburn
and of 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. The division
has 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 will help us to
achieve our future growth aspirations.
The SMS division consists of three main
business areas:
• Severstor – specialist equipment
housings for critical electrical
equipment and switchgear,
• Supply chain (steel components for
modular homes and buildings) – raw
material fabrication and modular
systems including steel cassettes and
framing, and
• Rotoflo – a high performance silo
discharge system for the bulk
handling of materials such as paints
and other dispersible solids.
In 2023, we have maintained our focus
on growing our Severstor product
ranges, which attract higher margins.
We continue to make significant
progress in growing our revenues and
client base. We have secured repeat
orders from several blue-chip clients in
the power, rail and oil and gas sectors
as well as continuing to develop our
growing pipeline of opportunities,
including in growth areas such as
renewable energy and data storage.
For supply chain, we see opportunities
to supply the modular sector with
steel sub-assemblies and systems for
temporary accommodation and other
buildings, and factory-built houses.
These opportunities are being driven
by the market growth in the supply of
modular buildings for education and
healthcare and for modular homes. To
this end, to complement our hot-rolled
capability, we have continued to develop
CMF’s cold-rolled product range which
now includes load bearing frame and
deck profiles, purlins and side rail
systems, supported by the business’s
48
The Group worked on over 100 projects with our clients during the year including:
Commercial
offices
Industrial and
distribution
Google King’s Cross, London
R8 Kings Cross
30 Grosvenor Square, London
30 South Colonnade, London
Wilton Park, Dublin
Large industrial facility, Republic of Ireland
Large distribution centres Bardon, Belvedere, Doncaster,
Stockton, Peddimore
Omega park, Corby
Envision Nissan Battery Plant, Sunderland
Atomic Weapons Establishment (various)
Nuclear
Sellafield SRP - Nuclear decommissioning
(Key delivery partner)
Hinkley Point - New Nuclear build
A1 Birtley to Coal House bridge package
Transport
infrastructure
HS2 bridge package
M42 J6 Bridges
Data centre, Republic of Ireland
Data centres and
other projects
Sky Studios, Elstree
Oslo datacentres
Stadia and
leisure
ExCel Arena, Phase 3, London
Everton FC, Liverpool
Co-op Live Arena, Manchester
Pinewood Studios, London
new manufacturing facility in South
Wales which is now operational. As
the modular market matures, clients
are seeking greater scale, reliability
and quality in the supply chain, all of
which Severfield can offer, to ensure
that its market share is maintained and
increased in line with market growth.
For our higher margin Rotoflo products,
we have an established foothold in the
UK water treatment sector and have
continued to develop the overseas
footprint of the business, aided by our
sales manager in India. We have quickly
established a presence in the Indian
paint manufacturing sector, where
we see some potentially interesting
opportunities. Future growth markets
also include chemical processing, food
processing and waste-water treatment
in the UK, US, India and Australia.
General market conditions
Inflationary pressures and supply
issues for both us and our clients
have continued to present challenges
throughout the year. Rising steel prices,
supply constraints on certain materials
and increased energy and labour costs
have continued to drive upward pressure
on total build costs, which in turn has
placed increased strain on the supply
chain. Towards the end of the financial
year there were signs that some of these
headwinds were starting to ease, with
inflation falling in certain areas.
We are continuing to manage these
pressures well and the Group’s scale,
financial and operational strengths and
disciplined processes have helped to
ensure that we have not experienced any
significant disruption or material impact
Severfield plc Annual report and accountsfor the year ended 25 March 2023 to profitability. For existing projects, any
additional costs have generally been
offset by a combination of operating
efficiencies, higher selling prices,
forward purchasing and contractual
protection as steel remains largely a
pass-through cost for the Group. For
steel, we also benefit from relationships
with supply chain partners in the UK and
continental Europe, reducing the risk of
interruptions to the Group’s steel supply.
India review
£m
Revenue
EBITDA
Operating profit
Operating margin
Finance expense
Profit before tax
Tax
Profit after tax
Group share of
profit after tax
(50%)
2023
137.7
11.0
8.7
6.3%
(5.1)
3.6
(1.0)
2.6
2022
100.3
6.8
5.2
5.2%
(3.3)
1.9
(0.4)
1.5
1.3
0.8
In 2023, JSSL recorded a record output
of more than 100,000 tonnes, including
sub-contracted work, which is an
output equivalent to that of the Group’s
operations in the UK and Europe. This
increased activity is evident in the
Group’s higher after-tax share of profit
of £1.3m (2022: £0.8m). The improved
performance reflects an increase in
revenue of 37 per cent to £137.7m
(2022: £100.3m) and an improved
operating margin of 6.3 per cent (2022:
5.2 per cent). Financing expenses of
£5.1m (2022: £3.3m) are higher than the
previous year, as a result of an increase
in borrowings, partly driven by the
impact of inflation on working capital,
and in the cost of letters of credit which
are linked to higher steel prices. These
higher financing costs result in JSSL’s
operating profit of £8.7m (2022: £5.2m),
which has increased by 67 per cent
year-on-year, reducing to a profit before
tax of £3.6m (2022: £1.9m).
Notwithstanding some current market
pressures in India, JSSL has continued
to win new work, resulting in a strong
order book of £139m at 1 June 2023
(1 November 2022: £143m). In terms
of mix, 55 per cent of the order book
represents higher margin commercial
work, with the remaining 45 per cent
representing industrial projects
(1 November 2022: commercial work
of 36 per cent, industrial work of 64
per cent).
Following JSSL’s continued successful
recovery from the effects of COVID-19,
which is reflected in its record EBITDA
for 2023 of £11m, we have revalidated
our Indian business plan. This process
has reaffirmed the numerous growth
opportunities that were identified
pre-pandemic, including those in new
and existing market sectors, and the
significant value creation potential of
JSSL. In conjunction with JSW, our joint
venture partner, our plans to secure
a plot of land in India to facilitate the
future expansion of the business remain
well advanced. This additional land
will allow the business to expand its
geographical footprint whilst providing
it with the platform to expand quickly
and add the necessary volume to
support the expected future market
growth.
In summary, JSSL’s strong order book,
improving pipeline of potential orders
and identified growth opportunities,
leave the business well-positioned to
take advantage of a very encouraging
outlook for the Indian economy and a
strong underlying demand for structural
steel in construction.
www.severfield.com
Stock Code: SFR
49
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www.severfield.comStock Code: SFR STRATEGY OUR OPERATIONAL
PERFORMANCE
ESG
Safety
The health, safety and wellbeing of
our staff, subcontractors, suppliers,
clients and the public remains the
Group’s top priority. In 2023, following
significant improvements in safety
performance in previous years, whilst
our accident frequency rate (‘AFR’)
reduced to 0.14 from 0.16, we saw our
injury frequency rate (‘IFR’) increase
to 1.61 from 1.49. Although the overall
IFR has increased, the result for 2023
reflects improved IFR performance in
many areas of the business, including
in our manufacturing operations and
for our recently acquired infrastructure
business (DAM Structures) which,
disappointingly, has been offset by
higher IFRs in some areas of our
construction operations. Whilst
our safety statistics continue to be
industry-leading, we remain committed
to continually improving and focusing on
leading indicators in our pursuit of ‘no
harm’. We have updated our behavioural
safety programme, which is based
on awareness, training, coaching and
visible leadership, and have launched
our Safer@Severfield initiative, which
will further ingrain our culture of
employee engagement, commitment
and our life saving rules.
Sustainability
ESG remains at the forefront of our
strategic decision making. As a result
of decisions made in recent years, the
Group remains in a prominent market
position in the high-growth markets
of the future and is well-positioned to
assist in accelerating the journey to Net
Zero in its core sectors. We align our
ESG approach with the UN Sustainable
Development Goals (‘SDGs’), through a
variety of central and local initiatives.
In 2023, we maintained our carbon
neutral accreditation from the
Carbon Trust for scope 1, 2 and
operational scope 3 emissions
for our manufacturing, office and
construction operations. As part of our
sustainability strategy towards Net
Zero, the Group monitors greenhouse
gas (‘GHG’) emissions in line with
the Streamlined Energy and Carbon
reporting (‘SECR’). An interim target
on this transition to Net Zero, is our
commitment to reducing our scope 1
and 2 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. By the end of the financial year,
we had achieved this target ahead of
schedule with the successful transition
to sustainability initiatives, including
the use of hydrogenated vegetable oil
(‘HVO’) at our factory and construction
sites and switching to renewable energy
contracts (‘REGO’).
50
Severfield plc Annual report and accounts
for the year ended 25 March 2023
In 2024, we will be submitting near and
long-term carbon emissions targets
for approval by the Science-Based
Target Initiative (‘SBTi’). These targets
are aligned with the objectives of the
Paris Agreement and a commitment
to reach Net Zero emissions by 2050
across scope 1, 2 and 3. We will disclose
progress against these targets on an
annual basis through our annual report
and our Carbon Disclosure Project
(‘CDP’) reporting.
Social
The Group actively engages with its
colleagues to hear their perspectives,
including through our Group-wide
‘MyVoice’ forums, which provide
valuable, ongoing insights and feedback
for the board. In 2023, these forums,
which form a significant part of our
listening and engagement strategy,
have facilitated improvements to health
and wellbeing provisions, facilities and
leadership communication.
2023 was a particularly challenging
time with the cost-of-living crisis and
the Group has provided support to its
colleagues, including one-off cost-
of-living payments and enhanced
employee benefit packages. In addition,
our annual pay awards have taken into
account ongoing inflationary pressures,
and we have implemented higher pay
increases for our more junior and lower
paid colleagues. All of our colleagues
are paid at or above the real living wage.
During the year, the Group further
bolstered its commitment to young
people, recruiting a record number
of UK apprentices, across a range
of disciplines and becoming a gold
member of ‘The 5% Club’, demonstrating
our commitment to ‘earning and
learning’. This will help improve the
innovative thinking and fresh ideas
required to sustain the industry and the
Group into the future.
In 2023, the board also reviewed the
performance and potential of an
expanded population of colleagues
from Executive Committee downwards
enabling us to make better informed
decisions on talent development
and succession planning. This
has facilitated the roll out of new
development programmes, including
through partnering with external bodies
to deliver events such as a Team Leader
Development Programme and Senior
Leadership Development Centres.
In 2023, for the third 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 2023, this list includes the c.500
European companies that have achieved
the greatest reduction in their GHG
intensity. In the FT listing, for businesses
with a rating from the CDP, only those
with a score of at least ‘B-’ were
considered. In 2023, we were awarded a
‘B’ rating in the CDP index and a supply
chain score of ‘A-’ as well as maintaining
our ‘very good’ BES 6001 responsible
sourcing accreditation, highlighting our
continued engagement with our supply
chain to promote sustainability.
As a SteelZero signatory, we previously
made the commitment to procure 100
per cent low carbon steel by 2050,
demonstrating the importance of
transitioning to low embodied carbon
steel production in the construction
sector. In 2023, we joined the SteelZero
policy taskforce collaborating with
the Climate Group and other members
on the most effective approach to
capturing and reporting data for the
Steel Zero framework. In 2024, we plan
to start disclosing our progress against
low carbon steel procurement to the
Climate Group.
Recognising the importance of social
value, we have adopted the National
TOMs – Themes, Outcomes and
Measures – methodology framework
to focus our future commitments on
all areas of social value both internally
and in partnership with our clients. This
has included monitoring and measuring
our social value contribution as a Group
including areas such as apprentices,
local spend and volunteering.
Board changes
In October 2022, the Group announced
the appointment of Mark Pegler as a
non-executive director, to serve on the
remuneration, nomination and audit
committees. This appointment forms
part of the board succession process
and it is intended that Mark will become
audit committee chairman following the
retirement of Tony Osbaldiston in July
2023. Mark spent over a decade as Chief
Financial Officer at Hill & Smith PLC,
overseeing the significant international
growth of the business, both organically
and through acquisition. This knowledge
will be highly beneficial to the Group as
it continues to build on the considerable
positive momentum within the
business.
Summary and outlook
In 2023, the Group has delivered a
strong financial performance whilst
managing inflationary pressures
well. We have significantly increased
revenues and profits in the UK and
India, our order books are substantial
and of high quality, and our balance
sheet and cash position remain healthy.
The Group’s businesses are well-
positioned in markets with excellent
opportunities, underpinned by our new,
simplified divisional structure and the
acquisition of VSCH. All this provides us
with an excellent platform to fulfil our
strategic growth aspirations.
Whilst there are signs of inflation
easing, we remain mindful of the macro-
economic backdrop. However, given
the Group’s performance to date and
the strength of our order books, we are
confident of delivering further progress
and a result for 2024 which is in line
with our expectations.
Alan Dunsmore
Chief Executive Officer
14 June 2023
51
www.severfield.comStock Code: SFR STRATEGY OUR FINANCIAL
PERFORMANCE
ADAM SEMPLE
Chief Financial Officer
Our high-quality order book and strong
balance sheet underpin our ambitions
to deliver sustainable growth.”
52
Trading performance
Revenue for the year of £491.8m
represents an increase of £88.2m (22
per cent) compared with the previous
year, predominantly reflecting an
increase in order flow and production
activity, together with an increase in
steel prices.
Underlying operating profit (before
JVs and associates) of £33.1m (2022:
£26.9m), represents an increase of
£6.2m (23 per cent) over the prior
year. The increase in profit reflects
the increase in production activity
and highlights 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. The
2023 operating margin of 6.7 per cent
remains below our previously stated
strategic margin range of 8 to 10 per
cent, reflecting the dilutive impact of
the increases in steel prices over recent
years which we continue to successfully
pass through to clients at zero margin
(the revised margin range is 6 to 8 per
cent with current high steel prices). This
dilutive effect on margins would reverse
if steel costs reduced to pre-2020 levels
in the future.
The statutory operating profit, which
includes the results of JVs and associates
and the Group’s non-underlying items,
was £30.2m (2022: £22.8m).
Underlying profit before tax, which is
management’s primary measure of
Group profitability, was £32.5m (2022:
£27.1m), an increase of 20 per cent over
the prior year. The statutory profit before
tax, which includes the Group’s non-
underlying items, was £27.1m (2022:
£21.0m), an increase of 29 per cent over
the prior year.
Share of results of JVs and associates
The share of results from JSSL was
a profit of £1.3m (2022: £0.8m),
reflecting revenue growth and margin
improvement. Within Modular Solutions,
our specialist cold rolled steel business,
CMF, contributed a share of profit of
£0.6m (2022: £0.5m). The CMF business
has expanded its production operations
Severfield plc Annual report and accountsfor the year ended 25 March 2023 in Wales and has continued to develop
its product range to drive organic
revenue growth.
Acquisition of VSCH
On 3 April 2023, after the year-end date,
the Group completed the acquisition
of VSCH for a net cash consideration
of €24m (£21.2m), on a cash free, debt
free basis assuming a normalised level
of working capital on completion. The
total cash consideration was €29.5m
(£26.1m) including VSCH’s cash and
cash equivalents of €5.5m (£4.9m),
which was funded by a combination of
Group cash reserves of £2.2m and a new
term loan of £19.0m, repayable over a
five-year period.
Non-underlying items
Non-underlying items have been
separately identified by virtue of their
magnitude or nature to enable a full
understanding of the Group’s financial
performance and to make year-on-year
comparisons. They are excluded by
management for planning, budgeting
and reporting purposes and for the
internal assessment of operating
performance across the Group and are
normally excluded by investors, analysts
and brokers when making investment
and other decisions.
Non-underlying items for the year
of £5.4m (2022: £6.1m) includes the
amortisation of acquired intangible
assets of £3.3m (2022: £5.2m) and net
acquisition-related expenses of £2.0m
(2022: £0.7m). 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 acquisition and similar
transaction costs associated with
the VSCH acquisition and movements
in the valuation of the contingent
consideration for the DAM Structures
acquisition which is payable over a five-
year period.
Taxation
The Group’s underlying taxable profits
of £30.6m (2022: £25.8m) resulted in an
underlying tax charge of £6.2m (2022:
£4.8m), which represents an effective
tax rate of 20.4 per cent (2022: 18.6 per
cent). The total tax charge of £5.5m (2022:
£5.4m) also includes a non-underlying
tax credit of £0.7m (2022: charge of
£0.6m). This comprises a tax credit on
non-underlying items of £0.6m (2022:
£1.0m) and tax adjustments relating to
prior years of £0.1m (2022: £0.2m). In the
prior year, a non-underlying tax charge
of £1.5m was recognised, relating to the
increase in future tax rates from 19 per
cent to 25 per cent which, in line with
the Group’s policy, was included in non-
underlying items.
Earnings per share
Underlying basic earnings per share
increased by 18 per cent to 8.5p (2022:
7.2p) based on the underlying profit
after tax of £26.2m (2022: £22.3m) and
the weighted average number of shares
in issue of 309.5m (2022: 308.8m). Basic
earnings per share, which is based on
the statutory profit after tax, was 7.0p
(2022: 5.1p), reflecting the increased
underlying profit after tax offset by
a slight decrease in non-underlying
costs. Diluted earnings per share,
which includes the effect of the Group’s
performance share plan, was 6.9p
(2022: 5.0p).
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
an important component of shareholder
returns and we have either increased
or maintained dividends every year
since they were reintroduced in 2015,
reflecting the strong cash generative
nature of the Group. Accordingly, based
on the outlook for the year ahead and
our strong financial position, the board
is recommending a final dividend of
2.1p per share (2022: 1.9p), payable
on 13 October to shareholders on the
register at the close of business on
53
www.severfield.comStock Code: SFR STRATEGY OUR FINANCIAL
PERFORMANCE
8 September. This together with the
interim dividend of 1.3p per share
(2022: 1.2p), will result in a total
dividend of 3.4p per share (2022: 3.1p).
Looking ahead, as in previous years, the
board expects the interim dividend to
be approximately one third of the prior
year’s full dividend.
Goodwill and intangible assets
Goodwill was £82.2m at 25 March 2023
(2022: £82.2m). In accordance with
IFRS, an annual impairment review has
been performed. No impairment was
required either during the year ended 25
March 2023 or the year ended 26 March
2022. Other intangible assets of £7.1m
(2022: £10.3m), 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.
Property, plant and equipment
The Group had property, plant and
equipment of £92.1m (2022: £91.4m)
at 25 March 2023. Capital expenditure
of £6.3m (2022: £7.4m) represents
the continuation of the Group’s
capital investment programme. This
predominantly consisted of new and
upgraded equipment for our fabrication
lines, the purchase of construction site
equipment and general improvements
to the Group’s offices and facilities.
Depreciation in the year was £7.2m
(2022: £6.9m), of which £1.8m
(2022: £1.7m) relates to right-of-use
assets under IFRS 16.
Joint ventures
The carrying value of our investment
in joint ventures and associates was
£31.8m (2022: £30.1m), which consists
of investments in India of £19.5m (2022:
£18.4m) and in CMF of £12.3m (2022:
£11.7m).
Pensions
The Group’s defined benefit pension
liability at 25 March 2023 was £12.9m
(scheme liabilities of £33.9m offset by
scheme assets of £21.0m), a decrease
of £1.5m from the 2022 position of
£14.4m. 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 lower-than-expected returns
on the scheme’s assets and the recent
short-term increase in inflation, which
has increased the scheme liabilities. All
other pension arrangements in the Group
are of a defined contribution nature.
Return on capital employed
The Group adopts ROCE as a KPI to help
ensure that its strategy and associated
investment decisions recognise the
underlying cost of capital of the
business. The Group’s ROCE is defined
in the APMs section (see note 31 to the
financial statements). For 2023, ROCE
was 15.8 per cent (2022: 13.5 per cent),
which exceeds the Group’s minimum
threshold of 10 per cent through the
economic cycle.
Cash flow
£m
Operating cash flow (before working capital
movements)
Cash generated from / (used in) operations
Operating cash conversion
Cash balances
Net funds / (debt) (pre-IFRS-16 basis)1
Net funds / (debt)
2023
2022
40.1
53.8
145%
11.3
2.7
(10.7)
32.6
(1.9)
(25%)
(4.0)
(18.4)
(30.1)
1 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. A
reconciliation of the Group’s underlying results to its statutory results is provided in the APMs
section (see note 31 to the financial statements).
54
Severfield plc Annual report and accounts
for the year ended 25 March 2023
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
funds (on a pre-IFRS 16 basis) of £2.7m
(2022: net debt £18.4m). Net funds at 25
March 2023 included cash balances of
£11.3m (2022: overdraft of £4.0m) offset
by the outstanding term loans of £8.9m
for acquisitions (2022: £14.9m).
Operating cash flow before working
capital movements was £40.1m
(2022: £32.6m). Net working capital
has decreased by £13.8m during the
year mainly reflecting the start of the
unwind of the unusually high working
capital position (10 per cent of revenue)
at the beginning of the year (£3.8m)
and new advance payments in H2
(£10.0m). The high 2022 working capital
position reflected the impact of steel
and other input price rises in the prior
year, and higher contract-specific steel
purchases at the previous year-end.
Year-end working capital represented
approximately 5 per cent of revenue
(2022: 10 per cent), back within our
well-established target range of 4 to
6 per cent. Operating cash conversion
(defined in note 25 of the financial
statements) for 2023 was 145 percent
(2022: minus 25 per cent), significantly
above our KPI target of 85 per cent.
Payment Practices Reporting
The Group’s relationships with its
supply chain partners are of major
strategic importance and the prompt
payment of its suppliers remains a
key component of this. Strong supply
chain relationships can provide a
competitive advantage and support
superior operational delivery. 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 formal
Payment Practices Reporting period of
1 October 2022 to 25 March 2023, all the
Group’s businesses that are signatories
of the Prompt Payment Code, reported
that between 86 and 92 per cent of
invoices were paid within 60 days.
Bank facilities committed until 2026
In March 2023, the Group increased its
existing £50m revolving credit facility
(‘RCF’), which matures in December
2026, to £60m. The increased facility
provides the Group with enhanced
liquidity, following the acquisition
of VSCH, and additional 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 25 March 2023.
In April 2023, as part of the VSCH
acquisition, a new term loan of £19m,
repayable over a five-year period, was
established as an amendment to the
existing facility agreement. This is also
subject to refinancing in December 2026.
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, and
• The Group’s cash position and its
bank finance facilities, which are
committed until December 2026,
including both the level of those
facilities and the three financial
covenants (see above) attached
to them.
The directors have reviewed the Group’s
forecasts and projections for 2024 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 ‘severe but plausible’
scenario is based on the combined
impact of securing only 25 per cent
of budgeted uncontracted orders for
the next 12 months, one-off contract
losses, a deterioration of market
conditions and other downside factors.
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
financial statements. For this reason,
the directors continue to adopt the
going concern basis in preparing the
financial statements.
Adam Semple
Chief Financial Officer
14 June 2023
55
www.severfield.comStock Code: SFR STRATEGY VIABILITY
STATEMENT
In accordance with the UK Corporate Governance Code (the ‘Code’), the directors
have assessed the viability of the Group over an appropriate time period, taking into
account the current position, future prospects and a robust assessment of the potential
impact of the principal risks and uncertainties on our business model. Based on this
assessment, 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 to 28 March 2026.
Our assessment also included
modelling the financial impact of
a ‘severe but plausible’ scenario
(consistent with the going concern
assessment), where the impact of
certain risks and uncertainties were
applied in combination. The range
of scenarios tested was considered
in detail by the directors, taking
into account the probability of
occurrence and the effectiveness of
any likely mitigation actions, including
adjustments to our strategic plan and
the reduction of any non-essential
or committed capital expenditure,
operating expenditure, bonuses and
dividend payments.
Based on the results of this analysis,
there are no individual or combination
of plausible scenarios that are
considered to have a material impact on
the Group’s viability. 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 assessment period.
Assessment period
The directors have determined that
a three-year period, ending on 28
March 2026, is an appropriate period
over which to make the assessment
and provide their viability statement.
The three-year period aligns with that
used for the Group’s annual strategic
planning process and gives good
visibility of contracted future work and
our pipeline. The majority of the Group’s
workload falls within three years as
the most significant construction
contracts follow an execution period
which is normally less than this time
frame, which in turn enables more
accurate forecasting. In making their
assessment, the directors took account
of the Group’s strategy, strong financial
position, forward order book of £510m,
encouraging pipeline of opportunities,
recent and planned investments and the
availability and covenants associated
with our main committed bank facilities
which mature in December 2026.
Risk assessment
The directors have assessed the
Group’s viability in conjunction with
their evaluation of going concern. For
the going concern assessment, 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 uses the
Group’s budgeted position, and a highly
pessimistic ‘severe but plausible’
scenario, being the combined impact on
the ‘base case’ of securing only 25 per
cent of budgeted uncontracted orders
for the next 12 months, one-off contract
losses, a deterioration of market
conditions and other downside factors.
Given the continued strong performance
of the Group in FY23, 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 92 to 104) 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, a prolonged
period of industrial action, or climate
change, and the impact of a serious
health and safety incident. The impact
of these were modelled through a
reduction in revenue and operating
margin 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.
56
Severfield plc Annual report and accountsfor the year ended 25 March 2023 www.severfield.com
Stock Code: SFR
57
STRATEGY BUILDING A RESPONSIBLE
AND SUSTAINABLE BUSINESS
A MESSAGE FROM THE CEO
As a next step, we will be submitting
near-term and long-term carbon
emissions targets for approval in
2024, aligning our commitments to the
Science-Based Target Initiative (‘SBTi’).
We will disclose progress against these
targets on an annual basis through our
annual report and our Carbon Disclosure
Project (‘CDP’) reporting, ensuring that
we maintain the momentum we
have achieved since setting our
original targets.
As a SteelZero signatory, we made the
commitment to procure 100 per cent
low carbon steel by 2050, demonstrating
the importance of transitioning to low
embodied carbon steel production in
the construction sector. In 2023, we also
joined the SteelZero policy taskforce,
collaborating with the Climate Group
and other members on the most
effective approach to capturing and
reporting data for the SteelZero
framework. For the third 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.
In 2023, we appointed Michaela
Lindridge as Head of ESG. This is a
new senior role that has been created
to oversee our ESG strategy, including
our climate change commitments, our
approach to biodiversity and nature
and our social value responsibilities.
Michaela will help support our internal
departments, suppliers, and clients as
we continue to progress our ESG agenda.
As a business, ESG continues to be at
the forefront of our strategic decision
making and as a result of decisions
made in recent years, the Group remains
well-positioned to assist in accelerating
the journey to Net Zero through meeting
our own sustainability targets and
supporting our clients to build the green
infrastructure of tomorrow.
Alan Dunsmore
Chief Executive Officer
14 June 2023
ALAN DUNSMORE
Chief Executive Officer
We are proud to announce we have
achieved our interim target to reduce
scope 1 and 2 emissions by 25% from
our 2018 baseline and we are now in the
process of having our near-term and
long-term targets verified as part of the
SBTi, ensuring we maintain our focus on
reducing our carbon emissions.”
As the UK’s market leader in the design,
fabrication and construction of structural
steel we recognise that we play a vital role
in creating spaces and infrastructure that
help communities to thrive and must do
so in a way that limits our impact on the
environment, through reducing carbon
emissions and the use of finite resources.
This year we have seen the launch of the
Government’s new Department for Energy
Security and Net Zero and an increasing
recognition that decarbonisation of the
steel industry will play an important role
in helping to reach the Government’s
target to achieve Net Zero greenhouse gas
emissions in the UK by 2050.
We have surpassed our interim target to
reduce our scope 1 and 2 GHG emissions
by 25 per cent by 2025 (against a 2018
baseline) during 2023.
58
Severfield plc Annual report and accountsfor the year ended 25 March 2023 BUILDING A RESPONSIBLE
AND SUSTAINABLE BUSINESS
OUR APPROACH TO SUSTAINABILITY
Prosperity
Deliver sustainable
profitable growth
whilst satisfying
our ethical, legal
and contractual
obligations.
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”
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 progress our sustainability agenda and embed
ESG principles into our corporate strategy.
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.
We illustrate our achievements over the last year against each pillar of the
sustainability framework in the table on pages 74 and 75. Progress against
each of the pillars is fundamental to achieving our long-term strategic
objective to deliver sustainable growth.
People
Support our teams to be
diverse, engaged, motivated
and competent.
Engage positively with projects
and the local communities in
which we work.
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.
www.severfield.com
Stock Code: SFR
59
59
www.severfield.comStock Code: SFR STRATEGY BUILDING A RESPONSIBLE
AND SUSTAINABLE BUSINESS
OUR APPROACH TO SUSTAINABILITY
We undertake regular materiality assessments, informed by our ongoing dialogue with
internal and external stakeholders. We continue to identify eight key areas of importance
which remain unchanged from our initial assessment.
Materiality index
1. Health and safety
1
2. Climate change and carbon emissions
2
3
3. Supply chain management
4. Sustainable construction
5. Diversity and inclusion
6. Training and development
7. Employee engagement
8. Waste management
4
d
l
e
i
f
r
e
v
e
S
o
t
e
c
n
a
c
i
f
i
n
g
i
S
6
7
5
8
Significance to stakeholder
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.
Our responsible and sustainable business
priorities are aligned to those of our stakeholders
(see page 40 and 41) and driven by our CEO, Alan
Dunsmore, who has overall responsibility for
climate change related matters at board level, and
also chairs the Group’s sustainability committee
(see page 64 for further details).
60
Severfield plc Annual report and accountsfor the year ended 25 March 2023
BUILDING A RESPONSIBLE
AND SUSTAINABLE BUSINESS
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (‘TCFD’)
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.
The board recognises the systematic
risk posed by climate change and
the need for urgent mitigating action
and are committed to addressing
climate-related risks and reducing
the Group’s environmental impact and
carbon emissions. To help achieve this,
we are committed to the disclosure
recommendations of the TCFD, providing
our stakeholders with transparent
information on material climate-related
risks and opportunities that are relevant
to our business.
The information set out on pages 58 to
91 of our annual report and accounts
aims to provide key climate-related
information that is aligned with the
11 recommendations, covering four
thematic areas, as set out by the TCFD.
We believe we are compliant with the
TCFD recommendations, including
the relevant material elements of the
‘Guidance for all sectors’, with the
exception of two areas, namely the
financial quantification of scenario
analysis and metrics and targets.
In 2023, our detailed climate scenarios,
which are selected from the risks
identified in the Group’s climate risk
register as described on pages 68 and
69, were modelled with the help of our
external consultants. We are currently
working through the outputs from
the scenario analysis and expect to
provide the more detailed quantitative
disclosures, and move towards
being fully compliant with the TCFD
recommendations, in our 2024 annual
report. Further detail is set out on pages
62 and 63.
Consistent with last year, 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,
goodwill 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 25 March 2023.
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
Governance
Strategy
TCFD recommendation
Board oversight
Section name
Corporate
governance report
Board at a glance
Building a
responsible and
sustainable
business
Risks and opportunities How we
Management role
Impact on organisation
Resilience of strategy
Risk
management
Risk identification and
assessment process
manage risk
Building a
responsible and
sustainable
business
How we
manage risk
Metrics and
targets
Risk management
process
Integration into overall
risk management
Climate-related metrics Building a
Scope 1, 2 and 3 GHG
emissions
Climate-related targets
responsible and
sustainable
business
Page ref
118 to 129
108 to 109
Next steps
Continue to review and assess governance
around climate-related risks and opportunities
65 to 91
92 to 104 We will use the outputs of the 2023 scenario
65 to 91
analysis to enhance our Net Zero strategy and
to continue to evolve our understanding of how
climate-related risks and opportunities could
impact on our business and strategy.
92 to 104
Continue to enhance and improve our risk
management approach for climate-related and
wider sustainability risks and opportunities.
65 to 91
Whilst a number of core metrics and targets are
reviewed internally, our next step is to further
develop our approach to monitoring progress.
This will ensure metrics and targets are the most
relevant to allow investors and wider stakeholders
in assessing our ESG progress.
VSCH will be incorporated into our sustainability framework in 2024, following its acquisition in April 2023.
61
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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 undertook a gap analysis of our current
climate-related disclosures and planned
activities against the TCFD framework and
our 2022 annual report confirmed that our
disclosures are compliant with the TCFD’s
recommendations with one exception
(detailed climate scenario analysis). This
was an action carried forward to the next
financial year.
62
Severfield plc Annual report and accounts
for the year ended 25 March 2023
2024
Next year, we aim to disclose the financial
impact of our climate scenario analysis. We
will incorporate our recent acquisition of
VSCH, in the Netherlands, in our in-depth
analysis.
We plan to further develop our approach to
monitoring progress and the disclosure of
our key metrics and targets.
2023
During the year, we undertook an in-depth
climate scenario analysis to assess how
climate related risks and opportunities
may change and impact us in a range
of future scenarios. Our assessment
considered three areas related to the
most significant risks and opportunities
identified within our TCFD report. The
data and information used to support our
analysis arises from a range of sources
aligned with a range of temperature
outcomes to 2100 (further detail of the
scenarios is contained on pages 71 to 73).
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 Science Based Targets initiative (‘SBTi’)
during early financial year 2024.
www.severfield.com
Stock Code: SFR
63
STRATEGY BUILDING A RESPONSIBLE
AND SUSTAINABLE BUSINESS
GOVERNANCE
Board oversight on climate-related
risks and opportunities
Our CEO, Alan Dunsmore, is actively
engaged and takes responsibility for the
Group’s strategic direction and progress
on climate-related issues. He assumes
overall board-level responsibility for
climate-related matters and he also
chairs Severfield’s sustainable and risk
committees, thereby ensuring continuity
throughout the business, particularly
from a governance perspective.
As summarised on the board skills
matrix on page 109, the board possess
significant climate-related experience,
and has a sound basis from which to
consider the risks and opportunities
facing the business as a result of
climate change. We use our board
skills matrix for succession planning
purposes to ensure there are no
skills gaps.
All board reporting at Severfield is
underscored by a focus on climate
change, sustainability and ESG. The
board is consistently updated on
climate-related matters on a monthly
basis and is briefed on any other
changes throughout the year. Where
relevant, we also arrange in-depth
briefings from industry subject experts
so as to draw attention to material ESG
matters throughout the year.
The work of the sustainability
committee, which mainly consists of
selected members of the executive
committee, has responsibility to
consider the impact of climate change
on the business on behalf of the board.
The committee (via the executive
directors) regularly updates the board
on the Group’s sustainability strategy
and progress against our targets. A
monthly sustainability board report is
prepared by the Group SHE director,
which includes a dashboard on
greenhouse gas emissions to ensure
ongoing monitoring.
Below are some of the examples
of strategic decisions, where we
demonstrate how the board gives full
and close consideration to ESG factors
and sustainability when assessing the
impact of the decisions it makes.
• The Group has taken steps to ensure
we offer recycled steel as an option
for our clients during the tender
process, reinforcing the sustainability
benefits of steel. This is also linked
to the identified risk of steel having a
high embedded carbon.
• The Group has further invested in
carbon offsets to ensure we remain
certified as carbon neutral. This
linked to the identified risks of
failing to meet emissions targets or
failing to comply with legislation or
expectations.
• The board has approved and
confirmed the Group’s Net Zero
roadmap and revised the Group
Sustainability Policy.
• Investing in climate-related research
and development to identify new
engineering techniques remains part
of our strategy, reinforced by the
launch of Project Horizon and our
operational improvement programme.
• The Group has embedded
sustainability considerations into its
capital expenditure approval process.
• In 2023, we joined the SteelZero
policy taskforce collaborating with
the Climate Group and other members
on the most effective approach to
capturing and reporting data for the
SteelZero framework. In 2024, we
plan to start disclosing our progress
against low carbon steel procurement
to the Climate Group.
• Consideration of investments in
UK-based carbon offsetting projects.
64
Severfield plc Annual report and accounts
for the year ended 25 March 2023
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 Head of ESG and Group
Head of Procurement
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.
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.
The Group’s sustainability committee
members include the following: Chief
Executive Officer, Chief Operating
Officer, Chief Financial Officer, Group
legal director and company secretary,
Group SHE director, Group HR director,
Group head of ESG and Group head of
procurement. This ensures that key
management is represented across all
business disciplines and that, crucially,
they share an aligned approach to
climate-related matters. Effectively,
this ensures that the Group’s overall
sustainability strategy is delivered
successfully.
Our Group legal director and Company
secretary, Mark Sanderson, is a member
of the executive committee and also
chairs the sustainability risk review
meetings. He is responsible for helping
to ensure 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.
Beyond the committees themselves,
business unit management teams are
responsible for managing climate-
related risks and opportunities on a
day-to-day basis – they, too, are driven
to deliver 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 Chief Financial
Officer are all members of the
sustainability committee and therefore
provide the board with regular written
and verbal updates on climate-related
matters.
65
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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 identify climate-related risks and
opportunities, assessing their likelihood
and quantifying their potential financial
and non-financial impacts and time
horizon. Those risks with a higher impact
are prioritised for action by the board.
We consider climate-related issues
within the time horizons used in our risk
management process (see table). Risks
and opportunities feed into our financial
planning to the extent we expect them
to impact our 3 year strategic plan.
Beyond that, we consider medium to
long-term risks and opportunities when
formulating the Group’s overall strategy.
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 considers the potential
impact and likelihood associated with
the crystallisation of each risk (the
assessment of impact takes into
account both financial and
reputational issues).
66
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.
Both transitional and physical risks
can be impacted as a result of climate
change and associated trends. The
sustainability risk committee considers
transition risks that may stem from the
Group’s transition to a Net Zero steel
industry, such as through regulatory,
legislative or technological changes,
and thereafter mitigates them
accordingly. Alternately, physical risks
arise from an increased frequency of
severe weather events, such as flooding
or cyclones, for example.
The table on pages 68 and 69
summarise key climate-related risks
(transition and physical), as well as
opportunities that have been identified
during our sustainability risk review
process; these risks are considered
as having the greatest impact on the
business in the short, medium, and
long-term.
Climate-related transition and physical
risks have been assessed as an overall
low risk to the Group. However, the risk
of being able to demonstrate that we are
a ‘sustainable and responsible business’
to meet stakeholder expectations is
identified as a medium risk in isolation
and is therefore included in our principal
risks (see page 96 for further details).
Our approach to ESG risk
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 94 to 95
for more details).
We monitor and identify climate and
other sustainability-related risks in our
sustainability risk register by assessing
their likelihood and quantifying their
potential financial, non-financial
impacts and the time horizons over
which they may occur. These are
reviewed quarterly to ensure that
material risks are identified, escalated
appropriately and managed effectively.
Severfield plc Annual report and accountsfor the year ended 25 March 2023 67
www.severfield.comStock Code: SFR STRATEGY BUILDING A RESPONSIBLE
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
• Loss of position as market leader and
climate-related legislation
by not meeting targets or
reporting requirements.
reputational damage.
• Loss of opportunities within our market sectors.
• Possible fines and penalties imposed.
Time
horizon
Short-term
(<5 years)
Assessment
Assessment of
of likelihood
financial impact
Current/future mitigation
Unlikely
Low
• Strong controls and governance on climate-related reporting to the board.
• Regular training and education on climate change matters to stay ahead of any
Reputation
Failure to comply with
climate-related stakeholder
expectations leading to loss
of position as market leader
and lost opportunities.
• Loss of position as market leader and
reputational damage.
Short-term
(<5 years)
• Loss of opportunities within our market sectors.
• Negative share price impact.
Policy and legal Failure to meet operational
emissions reduction targets
or increased costs due to
offset costs.
Market
Steel becomes
unsustainable due to
high carbon content, or
an 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.
• Possible fines and penalties imposed, including
carbon taxes.
• 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.
Medium-
term
(5-10 years)
• Shortage of material availability resulting in
project delays or cancellations.
• Significant fluctuations in steel prices linked to
Medium-
term
(5-10 years)
procured carbon.
• 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.
• 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.
Long-term
(>10 years)
Possible
Low
• Monitoring of weather forecasts to ensure employee safety and early steps taken to
Chronic
Operational disruption/
reduced capacity due
to increased frequency
of extreme weather,
e.g. drought.
• Project delays incurred due to unsafe working
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.
Long-term
(>10 years)
68
Unlikely
Significant
• We continue to maintain our strong relationships with our supply chain providers.
Possible
Moderate
• Regular engagement with all stakeholders, promoting open and transparent
Unlikely
Low
• Our Group’s Net Zero roadmap and sustainability framework continue be embedded in
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.
• Strong controls and governance on climate-related reporting to the board.
• This risk has been modelled as part of our scenario analysis – see pages 71 to 73 for
communication.
further detail.
our businesses processes and procedures to ensure our ambition is achieved.
• Regular monitoring and reporting of GHG to the board.
• Regular monitoring of offsetting prices and close monitoring of new development for
permanent carbon removals.
• We have discussed with our key suppliers their own strategies to become Net Zero and
undertaken research into low carbon alternatives.
• Contributing to the SteelZero network demonstrates our commitment 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.
• Performing regular material price sensitivity assessments and considering contingency
• This risk has been modelled as part of our scenario analysis – see pages 71 to 73 for
plans for procurement.
further detail
mitigate potential disruption to deliveries.
• Detailed risk reviews of project sites in areas of extreme weather or located close to
waterways. It is commonplace to agree allowances in our construction programmes to
accommodate potential adverse weather conditions, for example the impact of wind on
being able to lift significant steel structures.
• Review of insurance policies and arrangements.
• This risk has been modelled as part of our scenario analysis – see pages 71 to 73 for
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
• Review of insurance policies and arrangements.
• This risk has been modelled as part of our scenario analysis – see pages 71 to 73 for
further detail.
to waterways.
further detail
Severfield plc Annual report and accountsfor the year ended 25 March 2023 CLIMATE RELATED RISKS
Climate risk
Classification
Risk description
Potential impacts to the business
Transition
Policy and legal Failure to comply with
• Loss of position as market leader and
climate-related legislation
reputational damage.
by not meeting targets or
• Loss of opportunities within our market sectors.
reporting requirements.
• Possible fines and penalties imposed.
Time
horizon
Short-term
(<5 years)
Short-term
(<5 years)
climate-related stakeholder
reputational damage.
expectations leading to loss
• Loss of opportunities within our market sectors.
of position as market leader
• Negative share price impact.
and lost opportunities.
emissions reduction targets
carbon taxes.
term
or increased costs due to
• Carbon offsetting costs could increase if the
(5-10 years)
offset costs.
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.
unsustainable due to
project delays or cancellations.
term
high carbon content, or
• Significant fluctuations in steel prices linked to
(5-10 years)
an over demand for low
procured carbon.
carbon steel making it
• Pressure from customers to reduce emissions of
unaffordable and projects
materials as well as emissions associated with
being cancelled.
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
(>10 years)
extreme weather event, e.g.
materials to our factories.
flooding or wind damage.
• 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.
reduced capacity due
conditions on site and disruption to deliveries of
(>10 years)
to increased frequency
materials to our factories.
of extreme weather,
• Damage to construction sites and equipment.
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.
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.
• This risk has been modelled as part of our scenario analysis – see pages 71 to 73 for
further detail.
Policy and legal Failure to meet operational
• Possible fines and penalties imposed, including
Medium-
Unlikely
Low
• Our Group’s Net Zero roadmap and sustainability framework continue be embedded in
Assessment
of likelihood
Assessment of
financial impact
Unlikely
Low
Current/future mitigation
• Strong controls and governance on climate-related reporting to the board.
• Regular training and education 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.
Market
Steel becomes
• Shortage of material availability resulting in
Medium-
Unlikely
Significant
our businesses processes and procedures to ensure our ambition is achieved.
• Regular monitoring and reporting of GHG to the board.
• Regular monitoring of offsetting prices and close monitoring of new development for
permanent carbon removals.
• We continue to maintain our strong relationships with our supply chain providers.
• We have discussed with our key suppliers their own strategies to become Net Zero and
undertaken research into low carbon alternatives.
• Contributing to the SteelZero network demonstrates our commitment 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.
• Performing regular material price sensitivity assessments and considering contingency
plans for procurement.
• This risk has been modelled as part of our scenario analysis – see pages 71 to 73 for
further detail
Physical
Acute
Operational disruption/
• Project delays incurred due to unsafe working
Long-term
Possible
Low
• Monitoring of weather forecasts to ensure employee safety and early steps taken to
Chronic
Operational disruption/
• Project delays incurred due to unsafe working
Long-term
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. It is commonplace to agree allowances in our construction programmes to
accommodate potential adverse weather conditions, for example the impact of wind on
being able to lift significant steel structures.
• Review of insurance policies and arrangements.
• This risk has been modelled as part of our scenario analysis – see pages 71 to 73 for
further detail.
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.
• This risk has been modelled as part of our scenario analysis – see pages 71 to 73 for
further detail
69
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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
70
Identify new and increase existing
revenue streams from green
infrastructure and low carbon
projects.
The Group is well-placed to meet
the demand for infrastructure
which can mitigate the impacts of
climate change and deliver energy
security. These requirements dictate
a significant transition in national
energy infrastructure including
renewable electricity generation and
storage, nuclear power (new build and
decommissioning) and several other
new energy supply initiatives. We also
expect to see further projects aimed
at carbon reduction in transport, such
as the electrification of the UK rail
network.
Other projects in support of a
low-carbon economy include battery
plants (to facilitate the switch
to electric cars), energy efficient
buildings and manufacturing facilities
for renewable energy.
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 collaborate
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.
See page 39 for further details.
We have made good progress to
date, increasing the procurement
of renewable electricity. In
2023, 94 per cent of our total
purchased and consumed energy
was from green tariffs.
Short-term
(<5 years)
Short-term
(<5 years)
We have one remaining facility
to switch to green electricity
in 2024 and research the
availability of other renewable
energy sources for heating
and power as part of our ESOS
improvement works.
One of our strategic objectives
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 and to re-use steel
to assist our customers to
minimise the lifecycle carbon
emissions of their projects.
The implementation of Project
Horizon in the year is a step
forward in the requirement to
achieving this.
Severfield plc Annual report and accountsfor the year ended 25 March 2023 Climate scenario analysis (‘CSA’)
During the year, we conducted a CSA in line with TCFD guidance. The CSA focussed on how climate-related risks and
opportunities, identified through our risk assessment process described on pages 64 and 65, may change in a range of future
scenarios and considers the resultant financial impacts arising as a result of mitigations required. We expect to provide more
detailed quantitative disclosures on the financial impact in our 2024 annual report.
Our assessment prioritised risks considered to have the greatest impact on the business in the short, medium and long-term
(as defined in the table on page 66). We anticipate that our analysis will expand over time as our understanding of the impacts
of climate-related risks evolve and as external data on the potential impacts of climate change develops.
The areas assessed relate to the following primary risk drivers:
• The frequency and severity of extreme physical weather events and their impact on assets, projects and supply chains,
• Stakeholder expectations and the delivery of low carbon projects, and
• The steel market within the low carbon transition and Severfield’s procurement strategy.
The parameters, assumptions and data used to support our CSA are taken from various accredited sources that are
summarised below. The CSA models incorporate a range of different temperature outcomes to 2100, including a scenario of
less than 2°C.
Severfield PLC climate scenario
1. Physical risk assessment
Relative Concentration Pathway (RCP)1
Estimated 2100 warming projection
2. Stakeholder expectations and the delivery of low carbon projects
Carbon offset market scenario (Bloomberg NEF)2
RCP2.6
1.8°C
Low emissions
Regulated (carbon offset
market is regulated which
limits supply)
3. The Steel market within the low carbon transition
Mission Possible Partnership (‘MPP’) scenario3
Carbon pricing
Carbon cost (1.5°C aligned)4
$0/tCO2 in 2023 rising linearly
to $200/tCO2 in 2050
None
Technology constraints
Medium emissions
High emissions
RCP4.5
2.4°C
RCP8.5
4.3°C
Hybrid (combination of
regulated and voluntary
scenarios)
Voluntary (no
regulation over
carbon market)
Technology moratorium5 Baseline6
None
None
Only near-zero emissions
technologies permitted
from 2030 onward
None
1 RCP uses economic, social and physical assumptions within a set of scenarios to model possible future climate evolution. They are published by the
MET Office and adopted by the Intergovernmental Panel on Climate Change (‘IPCC’). The RCPs can be represented by the levels of temperature change
that can be used in conjunction with flood projection models.
2 Bloomberg NEF is a strategic research provider covering global commodity markets and the technologies driving the transition to a low-carbon
economy.
3 The Mission Possible Partnership (‘MPP’) is an alliance of climate leaders focussed on decarbonising specific industries, including steel. They have
sector transition strategies that set out illustrative scenarios to achieve Net Zero by 2050.
4 The Carbon Cost scenario illustrates how the steel sector might decarbonise if coordinated action to support low-CO2 steelmaking takes hold this
decade. This scenario assumes that, at each major investment decision, the steel asset switches to whichever technology offers the lowest total cost of
ownership (‘TCO’).
5 The Technology Moratorium scenario takes an alternative approach by confining investments to near-zero-emissions technologies from 2030 onwards
to reach Net Zero. As with the Carbon Cost scenario, the steel asset switches to whichever technology offers the lowest TCO at each major investment
decision.
6 Baseline scenario: to highlight the consequences of inaction, a reference case is modelled in which a steel asset switches to the technology with the
lowest TCO at each major investment decision, without a Net Zero constraint.
The assessment considers 4 time points 2025, 2030, 2040, 2050 which encompass the short, medium and long-term
time horizons set out on page 66.
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STRATEGY
Impact of physical climate risk on assets, projects and supply chains
Driver for assumptions
Long-term flood risk modelling (within
an RCP 8.5 scenario – see previous
page) was undertaken to identify our
UK operations with the highest flood
risks.
Risk profile and financial impact
Climate risk relating to the assets
sampled, and the associated financial
risk of our assets does not significantly
change to 2050 based on our current
modelling approach.
A sample of assets was further
assessed to consider the most extreme
risks arising from flood, sea level rise,
cyclone, heatwave, wildfire, and water
stress (in an RCP8.5 / SSP51 scenario –
see previous page).
The modelling uses General
Circulation Models based on the latest
international modelling efforts (CMIP6),
high-resolution historical observations
from satellites and a range of other
techniques to provide the greatest
degree of accuracy.
We have assessed potential
financial impacts arising as a result
of operational delays caused by
localised flooding to access roads,
based on historic flood impact events.
These have been mitigated by site
improvements to prevent flooding at
both Dalton and Enniskillen. In addition,
such is the economic importance
of the sites, climate risks are likely
to be further mitigated by future
infrastructure investment.
Strategic resilience
and planned mitigations
Our current and near-term insurance
policies and arrangements mitigate
against the risk of asset damage. Regular
discussion with insurers enables us to
identify near-term localised risk and to
implement measures to minimise risk
impacts.
Historic flood events and localised flood
mitigation works are monitored to assess
the changing risk profile for our operations
and to understand risk tolerance for
potential financial impacts.
Project risk mitigations are discussed in the
risks and opportunities table on pages 68
and 69.
We will continue to monitor physical climate
impacts within our wider risk management
approach.
1 Shared Socioeconomic Pathways’ (‘SSPs’) look at five (population, economic growth, education, urbanisation and the rate of technological development)
different ways in which the world might evolve in the absence of climate policy and how different levels of climate change mitigation could be achieved
when the mitigation targets of RCPs are combined with the SSPs.
Stakeholder expectations and the delivery of low carbon projects
Driver for assumptions
The steel sector is on a trajectory
to decarbonise, but stakeholder
expectations and demand may outpace
the availability of low carbon steel.
Whilst our long-term transition plan
focuses on a range of measures to
achieve decarbonisation (see our
Net Zero plan on pages 76 and 77), in
the shorter-term, we have assumed
carbon offsets will be needed to meet
stakeholder expectations.
The analysis considers our scope 3
procured emissions, customer demand
fluctuations, and market expectations
on carbon offset prices in a range of
scenarios.
Risk profile and financial impact
The price of carbon offsets could
significantly increase in a scenario
where the carbon offset supply is
limited to removal offsets that store or
sequester carbon, rather than avoiding
emissions that would otherwise occur.
Due to high demand, supply pressures
are likely to boost market prices.
The impact on Severfield depends
significantly on levels of customer
demand, decarbonisation of the sector
as a whole, and our procurement
strategy, and will be explored further
in future periods as we seek to reduce
dependence on the use of offsets
and drive clear progress toward
decarbonisation.
Strategic resilience
and planned mitigations
Our ongoing conversations with customers
and our supply chain provide meaningful
insight into customer-side demands for
low carbon projects, and supply side
trajectories toward increased availability of
low carbon steel.
Our involvement with SteelZero and wider
industry and government collaborations
provide increased awareness of the
challenges of the steel sector as a whole
and how these could be overcome. This
deeper understanding will feed into our Net
Zero plans.
We are investing in R&D to optimise
production processes and are exploring
methods to maximise circularity of our
materials and the re-use of steel, enhancing
our role in reducing the carbon content of
delivered projects. We are also focusing on
our own operational emissions within our
Net Zero roadmap.
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Severfield plc Annual report and accountsfor the year ended 25 March 2023 The steel market within the low carbon transition
Driver for assumptions
The current (raw material) steel-making
process is energy-intensive and largely
relies on the combustion of fossil fuels,
creating significant CO2 emissions
(Blast Furnace). Electric Arc Furnaces,
however, typically use recycled or scrap
steel and melt it through the use of an
‘electric arc’. The use of green electricity
in this process would therefore make
zero-carbon steel.
Additional technologies will be required
to achieve full decarbonisation of
the sector, including processes
which replace natural gas with green
hydrogen, incorporate an element of
carbon capture, and replace pulverised
coal with high-carbon biomass sources.
The Mission Possible Partnership
(‘MPP’) has conducted extensive
scenario analysis to assess possible
trajectories for the steel sector to
reach Net Zero by 2050, and this
information has been used to identify
and assess the implications for our own
procurement strategy and associated
financial impacts.
Risk profile and financial impact
In a scenario where the cost of steel is
highly impacted by the price of carbon,
the cost of producing traditional carbon
intensive steel is likely to significantly
increase to 2050. If our procurement
strategy remains constant, there could
be increase in procurement spend over
time toward 2050.
It is likely that novel and nascent
technologies will disrupt incumbent
technologies, as the cost of zero carbon
electricity and hydrogen declines over
the coming decade.
Assuming that we adopt a procurement
strategy that evolves with the best
available technologies, the financial
impact will be the most significant
within the ‘carbon cost’ scenario but
is unlikely to result in a significant
increase in deliverable project prices.
Within the existing economic
landscape, the impact of fluctuations
in energy prices and the conflict in
Ukraine have put pressure on steel
prices globally. In addition, market
demand for nascent technology may
drive market fluctuations in steel
prices. These factors combined place
significant uncertainty over the
projected scenarios modelled in a ‘low
carbon’ transition.
Strategic resilience
and planned mitigations
In addition to our previous comments, which
reflect our ongoing collaborative efforts
and R&D investment into achieving Net
Zero, we are signatories to SteelZero which
means that we are committed to procuring,
specifying, or stocking 100 per cent Net
Zero steel by 2050 (see pages 76 and 77 for
details on SteelZero).
We regularly assess how our strategic
partners are working toward meeting these
aims and are in the process of developing
an engagement plan, to enhance oversight
of our progress toward achieving Net Zero
throughout the value chain.
Our near-term market price modelling
assesses how the market price of steel
may fluctuate, as a result of a range of
events, and our pricing and contracting
strategies ensures that we are protected
against fluctuations in the price of steel, as
evidenced by our resilience in the face of
recent economic and political events.
Metrics and targets
We measure a wide range of metrics relating to energy and carbon, which can be found on pages 79 to 81. We also annually
report our detailed carbon ambitions and targets within CDP Climate disclosure which can be found on Severfield’s website. We
have undertaken a gap analysis to support full and transparent reporting to support our climate-resilience journey, taking into
account cross-industry metrics as identified by TCFD, and industry specific metrics as outlined by SASB and supported by the
ISSB through IFRS S2. This is an area of focus for the next reporting period.
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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:
PLANET
PEOPLE
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.
Support our teams to
be diverse, engaged,
motivated, and
competent. Engage
positively with
projects and the local
communities in which
we work.
Read more on
pages 76 to 81
Read more on
pages 82 to 87
Activities/KPIs
2023 performance
Activities/KPIs
2023 performance
GHG intensity
33% reduction in our scope
1 and 2 GHG emissions from
2018 (our base year) using
a market-based approach.
Exceeding our short-term
target to reduce emissions
by 25% by 2025
Gender Pay Equality
Diversity & Inclusion
CDP global evaluation rating Achieved CDP B rating,
which is above the industry
average (C).
Achieved CDP supplier
engagement leader with the
rating of A-
Other industry
accreditations achieved
Maintained our BES 6001
rating of “very good”
Listed on the Financial
Times – Europe’s Climate
Leaders index for the third
year in a row
94% of our total purchased
and consumed energy was
from green electricity tariffs
New in 2023: Established an
absolute reduction of waste
tonnage (excluding steel)
of 20% by 2030 against
2021/22 baseline
In 2024 we will refine our
approach to biodiversity
and set Group and divisional
targets
Accident frequency rate
Incident frequency rate
Director safety visits
undertaken
% of colleagues paid above
living wage
Social value target
Green electricity usage
Waste reduction target
Biodiversity target
74
1.02 male/female
normalised hourly rate ratio.
9% of our workforce are
female (same as FY22).
Of our three grade levels
below board female
representation is 20%, 27%
and 20% respectively.
Female representation
across our manufacturing
departments is 2%, 8%
within project delivery
departments and 39% in
core services.
13% improvement in 2023
to 0.14 (2022: 0.16).
An increase of 8% in 2023 to
1.61 (2022: 1.49).
We have achieved 85 visits
in 2023, unchanged from
2022.
100% of colleagues paid
at or above the Real Living
Wage.
In 2024 we will establish
a social value reporting
system and set Group and
divisional targets for social
value delivery.
Severfield plc Annual report and accountsfor the year ended 25 March 2023 PROSPERITY
PRINCIPLES OF GOVERNANCE
Deliver sustainable,
profitable growth whilst
satisfying our ethical,
legal and contractual
obligations.
Show leadership
in delivering a
sustainability
programme which
considers whole life
impact, taking us
beyond compliance and
ensuring continuous
improvements.
Read more on
pages 88 and 89
Read more on
pages 90 and 91
Activities/KPIs
2023 performance
Activities/KPIs
2023 performance
Economic value generated
and distributed
£491.8m (2022: £403.6m)
Board diversity
Economic value distributed
£467.5m (2022: £382.7m)
Board tenure
Net investment ((capex –
depreciation) / dividends)
Supply chain due diligence
Stable net investment at
10% (2022: 24%). Lower
than 2022 due to several
significant items being
leased in the year.
100% (2022: 100%) of
suppliers subject to annual
supply chain contractor due
diligence reviews.
Executive committee
diversity
Coverage of certified
environmental management
systems
Ethics training rate
New appointments
Corporation taxes paid
Prompt payment reporting
414 new employees in
the year (including 27
apprentices and graduates).
£3.5m (2022: £3.8m),
marginally lower than 2022
due to a refund for overpaid
amounts in a previous
period.
88% (2022: 93%) of
invoices paid within agreed
payment terms in latest
PPC reporting period for our
signatory companies.
20% (2022: 22%) of the
Group’s board are women.
7.4 years (2022: 7.1 years)
average tenure of our board
of directors.
18% (2022: 18%) of
the Group’s executive
committee are women.
Group-wide 100%
accreditation to
ISO 14001:2015
(environmental
management) (2022:
100%) and ISO 45001:2018
(occupational health and
safety) (2022:100 per cent).
91% of colleagues receiving
regular ethics training
(2022: 91%).
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Why is it important
Steel is the world’s most widely used
material and has a significant part
to play in a low carbon future. There
are decisive lifecycle advantages to
using steel in manufacturing, as it
can continually be recycled. Steel
structures can also 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 innovative design, Lean
manufacturing techniques and cost and
waste reduction programmes.
Carbon and energy reduction, improving
fuel efficiency and reducing waste are
an important strategic objective for
the Group. This year, we were able to
establish new group waste reduction
target, as well as new objective to
refine our approach to biodiversity for
the coming year. The sustainability
framework objectives set out on page 59
demonstrate the Group’s commitment to
protect and enhance the environment,
and to limit the environmental impact
of our operations on the planet and
natural environment, so it can support
the needs of the present and future
generations.
Management approach
Underpinned by the Group’s ISO14001
certified environmental management
system and BES 6001 Responsible
Sourcing certification (rating ‘very
good’), the Group is fully committed to
minimising its impact on climate change
and mitigating the business risks that
climate change presents. We have
developed plans to manage the risk and
embedded our climate-related risks
and opportunities into our strategy and
business model. We have set out our
approach to Net Zero below.
Our Net Zero roadmap
We continue to be committed to
our long-term target to achieve Net
Zero emissions (in line with the SBTi
definition) from our operations by 2040
and all emissions by 2050. Our roadmap
identifies key milestones along the
way – 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, and will be reviewed in line
with our submission of SBTi target for
verification in 2024.
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. Our current
roadmap is made up of a combination
of actions to reduce our emissions and
offsetting activities and is one of the key
steps we will take in supporting the low
carbon transition in the sector.
NET
ROADMAP
Sustainability is one of our key priorities, and we have engaged extensively with our customers, suppliers, colleagues,
and shareholders to understand the sustainability agenda of each group of stakeholders.
The subject of sustainability and reporting around it is constantly evolving. The Group’s plan will reflect this as it will continuously
develop over the coming years.
Our Net Zero Roadmap focuses on the strategic priorities we believe are suitable for the steel industry, the planet, and for our Group.
It combines actions to reduce our emissions and offset activities. The targets we have set are aligned with the 1.5°C pathway and are
supported by a collective action within the industry.
The Net Zero transition wouldn’t be possible without the continued support of the companies and individuals in our supply chain. We are
looking forward to working together with our partners to demonstrate how steel decarbonisation helps all of us to achieve global targets.
2021
2022
2023
2025
2030
2040
2050
Became SteelZero signatory.
Achieved carbon neutral in
line with PAS 2060.
Committed to Science Based
Targets initiative (SBTi).
Achieved carbon
neutral accreditation
(independently
verified by a
third party)
Procure 100% of our
electricity through green
and renewable energy.
Complete quantitative
climate scenario analysis in
line with Task Force on
Climate-Related Financial
Disclosures (TCFD)
recommendations.
Validation of our Net Zero
carbon targets for the
Group by SBTi.
To reduce our Scope 1 and
2 emissions by 25% by 2025
from our baseline year.
To procure 50% Net Zero
steel by 2030.
To achieve Net Zero
across our Scope 1 and 2
emissions by 2040.
To achieve Net Zero across
our Scope 3 emissions by
2050 and all scopes in line
with SBTi.
To procure 100% Net Zero
steel by 2050.
76
ZEROSeverfield plc Annual report and accountsfor the year ended 25 March 2023 Working with Steel suppliers aligned
with our climate ambition
The Net Zero transition requires the
continued support of our supply chain.
As part of SteelZero, a global initiative
to speed up the transition to a Net Zero
steel industry, we have committed to
procuring, specifying, or stocking 100
per cent Net Zero steel by 2050. This
means that we will procure:
• Steel produced by corporate owners
that have made public their long-
term emissions reduction pathway,
and their medium-term, quantitative
science based GHG emissions targets
• Steel certified as
“ResponsibleSteelTM” Certified Steel
or equivalent
• Low Embodied Carbon Steel, with a
defined specific emissions intensity
which takes into account the
proportion of end-of-life scrap
We have mapped our supply chain
partners with public Science Based
Targets commitments, many of which
are aligned with commitments to
SteelZero. Working with our supply
chain partners closely as part of our
sustainable procurement strategy, in
2024 we will continue to engage with
our supply chain through a formal plan
to understand the progress on their own
transition plans, as well as governments
and industry wide partners to
ensure that we are supporting the
decarbonisation of the sector as a
whole.
Carbon in procured steel and the
projects we deliver
As part of our own Net Zero journey, we
are undertaking a range of activities
to support the reduction in the carbon
content of the projects that we deliver.
Our key focus areas are as follows:
• Investing in R&D to develop more
efficient designs with lower steel
content
• Exploring methods to maximise
circularity of our materials and the
re-use of steel
• Working with steel suppliers aligned
with our climate ambition
• Collaborate with governments and
industry wide partners to drive the
decarbonisation of the sector
We know that the decarbonisation
process will not happen overnight and
will require changes to infrastructure
and capital expenditure to support the
transition. We recognise that within the
hard to abate industries, such as steel, a
significant proportion of our emissions
are generated within our supply chain
as a result of the steel that we procure.
We are dependent on the steel sector
decarbonising to fully address the
carbon in our value chain, and a core
part of our work around TCFD climate-
related scenario analysis focused on
the risks within our value chain, and our
commentary around action within this
area is set out below.
Optimisation of production processes
During 2023, we continued to invest in
operational improvements to enhance
production processes and optimise the
use of steel. This includes research into
using higher grades of steel so that the
overall embodied carbon within our
structures is reduced. This is part of our
strategy and is reflective of our drive
to remain at the forefront of the steel
industry.
Our Net Zero roadmap is
accompanied by a Group
transition plan that identifies the
main initiatives and technologies
to be explored or implemented
in order to achieve our 2040
ambition. The plan includes:
Switching to green energy
• To switch to green electricity
contracts on all wholly owned
facilities.
• To switch to green gas contracts
at all applicable locations.
Energy saving opportunities
scheme (‘ESOS’) Phase 3
recommendations
• Continue to implement
recommended projects around
compressed air, lighting, and
machinery as part of ESOS audit
results.
• Conduct a review of Group-wide
heating systems, considering
both fuel type and efficiency,
and future technologies.
Plant and equipment
• Continue to implement our
successful roll out of HVO
across all applicable plant at all
facilities and construction sites.
• As part of all future investment
decisions, priorities will be
given to alternative power
sources, including hybrid and
hydrogen, and any other new
technologies where practical.
Training
• Deliver a business-wide training
program on our Net Zero
strategy, including focus on
behavioural change.
• Design specialist training on
carbon reduction initiatives
and embodied carbon to all
departments that are key to
reducing both embodied and
operational carbon across
the Group.
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Reducing carbon emissions through
innovative transport solutions for a large
commercial warehouse
One project in particular exhibits our commitment
to reducing carbon emissions, where we faced large
amounts of steel to transport to site – approximately
6,600 floor beams and associated decking sections.
Severfield set out to reduce carbon emissions, costs,
and general congestion on UK roads by reducing the
number of truckloads by around 50 per cent.
The task proved to be complex, as highway regulations
and truck-bed weight capability stipulate exact
quantity and load-bearing capacity. Appreciating these
logistical demands, we worked with our transport
partners and innovatively introduced the use of an
extended trailer and a single, reusable steel beam
to each transport unit. Doing so meant that length
discrepancies were mitigated by the full-length steel
beam, the weight could be doubled, and all highway
regulations were satisfied.
As a result, each truckload held c.25 tonnes of steel
as opposed to c.12 tonnes, which resulted in just 230
deliveries as opposed to the original planned 460. This
achieved an approximate 36 tonne reduction in overall
CO2e associated with the deliveries. We have calculated
this would be the equivalent saving of over 214,000 km
driven in an average diesel car.
Sustainability initiatives such as these help Severfield
and our customers closer towards out target of
achieving Net Zero across scope 1 & 2 by 2040,
and scope 3 by 2050.
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Severfield plc Annual report and accounts
for the year ended 25 March 2023
Reporting our GHG emissions
As required by Streamlined Energy and Carbon Reporting (‘SECR’), we report on our CO2 emissions in accordance with the
internationally recognised Greenhouse Gas Protocol (GHG) and our metrics include scope 1 and scope 2 emissions.
For the year ended 31 March 2023, the Group’s global GHG emissions, using a location-based approach, and energy usage,
were as follows:
GHG emissions from:
Scope 1 – combustion of fuel and operation of facilities
Scope 2 – electricity, heat, steam and cooling purchased for own use
Total CO2e emissions (location-based)
Intensity measurement (location-based):
Absolute tonnes equivalent CO2e per £m of revenue
Tonnes of CO2e
2023
6,391
3,106
9,497
2022
7,359
3,374
10,733
2023
19.3
2022
26.6
For the year ended 31 March 2023, the Group’s global GHG emissions, using a market-based approach, and energy usage were
as follows:
GHG emissions from:
Scope 1 – combustion of fuel and operation of facilities
Scope 2 – electricity, heat, steam and cooling purchased for own use
Total CO2e emissions (market-based)
Intensity measurement (market-based):
Absolute tonnes equivalent CO2e per £m of revenue
Tonnes of CO2e
2023
6,391
116
6,507
2022
7,359
671
8,030
2023
13.2
2022
19.9
Scope 1 emissions are direct GHG emissions that occur from sources under our ownership or operational control. This includes fuel consumed in our
factories for fabrication, in our offices for heating and in company vehicles. There are no material exclusions from scope 1.
Scope 2 emissions are indirect GHG emissions from purchased energy. This includes electricity used for all our offices and factories across the Group.
There are no exclusions from scope 2.
Carbon offset credits are excluded from our GHG emissions reporting. There have been no changes in reported emissions or changes in methodology.
All scope 1 and scope 2 GHG emissions data is independently verified by Achilles, in accordance with the international
standard ISO 14064-1.
Using a market-based approach, which includes the positive impact of switching to green energy and use of alternative fuels
on site, our scope 1 and 2 GHG emissions have reduced by 33 per cent against a 2018 baseline. This means we have surpassed
our interim target to reduce our scope 1 and 2 GHG emissions by 25 per cent by 2025 (against a 2018 baseline).
Our scope 1 and 2 emissions reductions have been achieved through a combination of the following:
• continued to implement lean ways of working in our offices, factories and on construction sites,
• continued the transition to using hydrotreated vegetable oil (‘HVO’) across our facilities and construction sites,
• expanded the procurement of renewable electricity for our facilities and completed further research into the feasibility of
installing renewable energy generation at our facilities,
• 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, and
• worked with a number of our key suppliers, engaging on our mutual sustainability strategies and delivering decision-
enhancing, transparent carbon reporting on a range of our projects.
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ABSOLUTE EMISSIONS SCOPE 1 AND 2
9,202
9,779
9,331
8,341
9,895
7,862
10,733
8,030
9,497
6,507
2019
2019
2020
2020
2021
2021
2022
2022
2023
2023
Location-based methodology
Market-based methodology
Energy usage from:
Scope 1
Scope 2
Total MWh
2023
29,044
16,049
45,093
2022
30,410
16,397
46,807
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 81.
Tonnes of CO2e
2023
264
738
3,723
8,466
13,191
2022
279
484
1,188
4,589
6,540
Scope 3 emissions
GHG emissions from:
Waste
Business travel
Colleague commuting
Transport and distribution
Total verified scope 3 CO2e emissions
Our scope 3 GHG data is independently verified by Achilles, in accordance with the international standard ISO 14064-1.
Our scope 3 GHG data is independently
verified by Achilles, in accordance with
the international standard ISO 14064-1.
Scope 3 emissions account for all of
the other emissions an organisation
produces when fossil fuels are
burnt within its value chain and are
a significant proportion of our total
GHG emissions. In the context of the
2050 Net Zero target, this is the most
challenging category to address,
therefore we have undertaken further
mapping and analysis of our data to
include more detail around our scope 3
emissions.
Our verified scope 3 GHG emissions
have increased largely due to an
increase in transport and distribution
related emissions. This reflects the
geographical spread of the construction
sites we have worked on throughout the
year in relative distance to our factories.
We consider last year’s values to be
exceptionally low, as our current values
(when adjusted for growth) are more
aligned with 2021 emissions (2021:
11,137 tonnes of CO2e).
80
Severfield plc Annual report and accountsfor the year ended 25 March 2023 The higher scope 3 GHG emissions also reflect an increasing trend post-pandemic,
both nationally and internationally. Our colleagues have increased travel to face-to-
face meetings, and returned to our offices, in turn increasing both business travel
(including to India and Europe) and colleague commuting within the period. Waste
emissions have reduced slightly due to our increased focus to divert waste from
landfill. The reduction of scope 3 GHG emissions remains a focus for the Group.
Additional scope 3 categories
As part of our GHG emission reporting and facilitated by the value chain mapping
exercise in the previous year, we report on 8 of the 15 categories of scope 3
emissions relevant to our business. As part of SBTi targets submission, further
detailed inventory will expand our scope 3 categories going forward. This will
provide further understanding and overview of our value chain and provide us with
the ability to have additional scope 3 categories verified in the future.
GHG emissions from:
Purchased good and services
Fuel and energy related
End of life treatment
Investments
Total unverified scope 3 CO2e emissions
Consistent with most businesses in
the construction sector, the majority
of our GHG emissions are indirect
(scope 3), accounting for 97 per cent
of total emissions, on a market-based
approach. Within scope 3 emissions,
purchased goods and services
represent 92 per cent of emissions,
largely due to the embodied carbon in
steel. These often fluctuate due to the
timing, with the 2022 amount reflecting
high steel purchases in the previous
year, much of which was for project
delivery in 2023. 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 across all
emissions by 2050.
The Group has always held emission
reduction targets and recognised
the impact of its operation on the
environment. We committed to the
process to set science-based emissions
reduction targets across our entire
value chain in 2021, and we are on
schedule to submit them for validation
by the SBTi early in 2024.
Progress against our targets
The Group has made good progress
again during the year in managing its
energy, fuel consumption and emissions
and we have been recognised as leaders
Tonnes of CO2e
2023
213,586
2,589
93
1,665
217,933
2022
374,660
2,848
166
1,215
378,889
in our sector for our work to date in
reducing carbon emissions. For the third
year running, we have been included in
the Financial Times’ listing of Europe’s
climate leaders, published in April 2023.
This list includes c. 500 companies that
have achieved the greatest reduction
in their scope 1 and 2 GHG emissions
intensity over a five-year period
between 2016 and 2021.
During the year we surpassed our
interim target to reduce scope 1 and
2 emissions by 25 per cent by 2025,
having currently reduced them by 33
per cent against the 2018 baseline. This
has in part been achieved through the
successful switch to green electricity
tariffs and the use of HVO at our sites.
In 2023 we have continued to increase
our green electricity usage, with the aim
to have 100 per cent green electricity
across the Group.
In 2023, we achieved a ‘B’ rating
in the CDP index, which is above
the construction industry average
for construction ‘C’. This annual
rating is based on CDP’s evaluation
of the Group’s strategy, goals and
actual emission reductions as well
as transparency and verification
of our reported data and assesses
the completeness of the Group’s
measurement and management of our
carbon footprint, our risk management
process and our sustainability strategy.
We have also achieved a CDP supply
chain score of ‘A-’, which is well above
the construction industry average
of C, being amongst 38 per cent of
companies that reached Leadership
level in our activity group.
Since 2021, the Group has been
accredited as an operationally carbon
neutral organisation to the Achilles
‘carbon zero’ standard in accordance
with ISO 14064-1. We use carbon
offsetting to eliminate the combined
scope 1, scope 2 and operational
scope 3 GHG emissions generated
from our manufacturing facilities and
construction sites. In line with the SBTi
methodology, carbon offsetting can only
be used against the last 10% of residual
emissions so we will rely on them less
over time. However, at present, they are
an important step in our sustainability
journey towards Net Zero.
As part of our continued commitment to
excellence, we maintained accreditation
to the Gold Membership Standard of
the Steel Construction Sustainability
Charter. Through our Gold Membership
with the Supply Chain Sustainability
School, we complete learning pathways
and attend targeted sustainability
training in collaboration with our
stakeholders.
2024 areas of focus:
• Obtain our SBTi verified target in line
with climate science.
• Review our approach to biodiversity in
line with the expected requirements
as part of the Taskforce on Nature-
related Financial Disclosures (TNFD).
• Re-launch revised supply chain
engagement programme in line with
our sustainable procurement strategy.
• Implement waste reduction
engagement campaign as part of our
newly set target.
• Continue to refine our approach to
address the GHG impact in our supply
chain and other scope 3 emissions.
• Incorporate the recently acquired
VSCH into our GHG reporting and
assess our future targets accordingly.
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AND SUSTAINABLE BUSINESS
PEOPLE
Why is it important?
Our people are our biggest asset and 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 around 1,800 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
As life for many of our colleagues has
largely returned to normal following
the pandemic, our focus has been
on embedding new ways of working,
increasing our communication and
listening and finding ways we can
continue to improve our colleagues
experience of working at Severfield.
We have focussed 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
Our focus has been, and always will
be, safety and wellbeing first with no
exceptions, an approach supported
and guided by the board, management
and all employees. Operating within the
heavy manufacturing and construction
sector means many of our activities
carry an element of high risk 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’). In depth
reviews are also carried out on all
RIDDORs (accidents that have resulted
in a specified injury or has led to a
colleague’s absence from work for
more than seven consecutive days –
three days in Northern Ireland) and
high potential near miss incidents
(‘HiPo’), with input from the Group SHE
director, chief operating officer and
the managing director of each division.
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.
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for the year ended 25 March 2023
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. Colleagues have 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 keep our colleagues informed
and connected.
Through working closely with Louise
Hardy (the Group’s designated non-
executive director responsible for
workforce engagement) our MyVoice
Forum has enabled many colleagues
concerns to be raised and tackled.
Improvements to mental health
provision, enhanced facilities for our
manufacturing colleagues and better
health benefits for our workforce are
just a few of the topics that have been
raised and improved throughout the
year. Minutes of each meeting are
shared with the executive committee
and board and detailed communication
is shared with all colleagues through
our intranet.
We are committed to building diversity,
equality 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.
Male
Female
91%
9%
All
Colleagues
GENDER DIVERSITY STATISTICS
80%
20%
82%
18%
80%
20%
Senior
Leadership
Executive
Committee
Main Board
All colleagues have had the opportunity
to share with us their own diversity data
and information on ethnicity, disability,
sexual orientation, religion or belief
and gender has been collated giving
us a better understanding of under
represented groups in our workforce.
This data will become an integral part
of the decision-making process around
talent, performance, and reward. Using
the data we held on gender in our pay
review processes we have been able to
narrow the gap between the average
male and female salaries by 22 per cent
over the past 2 years. Using gender data
in our annual talent review process and
comparing this to the previous year we
were able to highlight certain areas
for improvement including around the
development of more junior females. A
female mentoring programme is being
piloted to help improve the career
prospects of these women in our
business.
Gender Diversity Statistics
Main Board
Executive Committee
Senior Leadership
All Colleagues
As of 25 March 2023, the board
had two female directors (20 per
cent). Female representation on our
executive committee is two (18 per
cent). The company have a ‘career
level structure’ (underpinned by AON’s
Joblink methodology) with the executive
committee (excluding executive
directors) being the most senior level.
For the two levels below this our female
representation is 27 per cent and 20 per
cent, respectively. Our median gender
pay gap for the Group stands at 18 per
which is a small increase on previous
years due to pay increases for certain
areas to address the recruitment
and retention challenges we faced.
We pay close attention to hourly rate
differentials between males and
females at each of our career levels
and are pleased to have achieved a
normalised hourly rate ratio of 1.02.
Male #
8
9
40
1,535
Female #
2
2
10
160
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BUILDING A RESPONSIBLE
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PEOPLE
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. Consistency and alignment
have been topics raised by our MyVoice
forum throughout the year and we have
started to address these. Our pension
offering to all colleagues (including
executive directors) is now 7 per cent
employee contribution matched by
a 7 per cent employer contribution.
Due to the cost-of-living crisis we
have however retained the option for
staff to opt out of this offer and take a
lower matched option of 5 per cent for
affordability reasons.
Performance, development
& 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. A thorough review
of the performance and potential of
655 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 number is up from 189 in 2022
demonstrating our commitment to the
robust identification and development
and career progression of future talent
across our business.
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. Fourteen
senior colleagues attended a two-day
development centre to enable them to
better understand their strengths and
development areas. The centres are run
by Pearn Kandola and form a key part
of our talent development strategy. In
addition, 20 per cent of the females
who participated in the process are
currently taking part in an externally run
mentoring programme.
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for the year ended 25 March 2023
Our progress against our targets
Safety first
In 2023, following significant
improvements in safety performance
in previous years, whilst our accident
frequency rate (‘AFR’) reduced to
0.14 from 0.16, we saw our injury
frequency rate (‘IFR’) increase to 1.61
from 1.49. Although the overall IFR has
increased, the result for 2023 reflects
improved IFR performance in many
areas of the business, including in
our manufacturing operations and for
our recently acquired Infrastructure
business (DAM Structures) which,
disappointingly, has been offset by
higher IFRs in some areas of our
construction operations.
Whilst our safety statistics continue
to be industry-leading, we remain
committed to continually improving and
focusing on leading indicators in our
pursuit of ‘no harm’. We have updated
our behavioural safety programme,
which is based on awareness, training,
coaching and visible leadership, and
have launched our Safer@Severfield
initiative, which will further ingrain
our culture of employee engagement,
commitment and our life saving rules.
Our SHE software management
platform remains a valuable database
and tool to support and assist our
decision-making process to continually
monitor and improve our SHE
performance into the next financial year.
Our Group management systems
remain accredited to ISO45001:2018
(Occupational Health and Safety)
and ISO14001:2015 (Environmental
Management). During the year, both
systems underwent audits, where we
maintained our achievement of zero
non-conformities, further assurance
that we continue to embed robust
policies and procedures across the
Group. The policies and procedures
developed in a way that supports our
fair and just culture with no harm to
people, premises or planet in line with
our Group SHE Strategy.
In addition to the management
system certifications, we continue
to hold a number of high-level
industry accreditations including
Constructionline Gold, RISQS (Railway
Industry Supplier Qualification Scheme)
and Achilles Building Confidence. In
the year we have also improved our
CHAS accreditation from Advanced to
Elite. All of which further confirms our
Group’s health and safety processes,
procedures and commitment meet
excellent standards.
We have increased the investment in
our learning academy team and are
looking forward to the implementation
of a learning management system in the
coming months to improve efficiency
and provide easy access to learning
to all our colleagues. Our focus is on
developing programmes for all levels
of our management and leadership
hierarchy and as part of this 95 team
leaders, supervisors and production
managers from across the Group took
part in a team leader development
programme. The four modules covered
a range of topics including: the role of
a team leader, communication skills,
being assertive, dealing with issues
and problem solving. Technical and
mandatory training continues to be
delivered through externally facilitated
courses and events, together with a
wide range of training courses that
are provided internally by our learning
academy team.
Our online performance review process,
MyPerformance, 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.
Recruitment, as for most industries,
has continued to be challenging this
year and we have continued to develop
our relationships with local training
providers and access government
funded support and schemes where
applicable providing opportunities to
the long term unemployed and those
currently struggling to get into work.
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AND SUSTAINABLE BUSINESS
PEOPLE
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 our MyVoice forum (now in its
second year) is key to this.
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.
The forum was of particular benefit
to the executive committee in sharing
information and gaining feedback on
the change to a Divisional Structure,
sessions were held with the MyVoice
representatives to give them the tools
to support the business in the roll out
of this change and also to open up
feedback channels about the change.
Mental health and wellbeing has
continued to be a topic raised by the
forum and this has resulted in more
individuals coming forward to be
trained as mental health first aiders and
driven us to improve communication
around the benefits of our Employee
Assistance Programme (which has seen
a significant increase in usage during
the year).
The regular feedback from the MyVoice
forum gives us insights into how our
workforce feel and view our approach
to a wide array of topics, in turn it gives
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 further
strengthening the relationship and
working closely with our colleague
representatives over the coming year.
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Future Skills
Our focus on early careers, to address
future skills shortages, has continued
to be strong with 4 graduates and 27
apprentices joining us on one of our
‘development on a different scale’
programmes. We plan to recruit
circa 40 apprentices in 2023 across
fabrication, maintenance, painting,
welding and the drawing office. This
commitment to providing opportunities
for earning whilst learning secured us
the prestigious Gold Member status
of ‘The 5% Club’ which recognises the
UK’s leading employers of apprentices,
graduates and degree placement
students. Across the Group we
currently employ 62 colleagues who are
either on a formal apprenticeship or
undertaking qualifications through the
apprenticeship route.
The Severfield Foundation
Through the Severfield Foundation
(‘the Foundation’), incorporated back
in 2016, 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.
Our four-year partnership with national
charity partner, Alzheimer’s Society,
raised over £92,000 and alongside that,
we have supported several other local
charitable bodies including Yorkshire
Air Ambulance, Bolton Hospice, Saint
Catherine’s, Young Lives vs. Cancer and
Air Ambulance Northern Ireland.
Nurturing our unique culture
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. 2023
was a particularly challenging time
with the cost-of-living crisis and the
Group has provided support to its
colleagues, including one-off cost-
of-living payments and enhanced
employee benefit packages (enhanced
employer pension contributions and
the introduction of a private healthcare
plan). In addition, our annual pay
awards have taken into account ongoing
inflationary pressures, and we have
implemented higher pay increases
for our more junior and lower paid
colleagues. All of our colleagues are
paid at or above the real living wage.
Delivering on social value
Many of our activities within ‘our people’
pillar, such as development of future
skills, increasing local employability
and learning and development, directly
contribute to us generating social value
within the business. We have spent
the last year refining our approach to
social value and adopted the National
‘Themes, Outcomes and Measures’
(TOMs) Framework to measure our
social value contribution. Since 2017,
the TOMs Framework has been used as
the principal tool for reporting Social
Value to a consistent standard and
based on the Social Value Act’s themes
of social, economic and environmental
wellbeing.
In line with our sustainability
framework, the TOMs Framework
is aligned to the UN 17 Sustainable
Development goals, which we believe
helps us measure and quantify our
social value impact. As part of our
future commitments on all areas of
social value both internally and in
partnership with our clients, we will
establish social value reporting system
within the business and set Group and
Divisional targets around social value
delivery.
Severfield plc Annual report and accountsfor the year ended 25 March 2023 In previous years, we have had a
national partner charity which received
50 per cent of all annual funds raised.
The remaining 50 per cent was divided
between our local charities. Moving
forward, the Severfield Foundation
has now decided to move away from
the national partner charity model in
favour of a more localised approach,
donating 100 per cent of funds raised to
charities selected by individual charity
committees, these include:
PLC – Martin House Children’s Hospice
Dalton – Yorkshire Air Ambulance
Lostock – Bolton Hospice
Bolton – Blood Bikes Manchester
Enniskillen – Supporting a number of
different local charities
Sherburn – St Catherine’s Hospice
Carnaby – The Hinge Centre
2024 areas of focus:
• Continue to implement the SHE
strategy with a focus on people,
communication & engagement and
systems & processes
• As a part of our health and safety
strategy, we will be introducing a new
behavioural safety initiative – Safer@
Severfield will be ingrained in all
we do, reminding everyone that the
safest way is the only way and by
doing this we will all be safer.
• Continue to deliver the wide range
of internally and externally provided
training courses.
• Provide access to a full range
of learning and development
opportunities through the launch of
the MyLearning platform.
• Ensure inclusivity and diversity
remains at the forefront of our
approaches through utilising the data
we now hold on gender, ethnicity,
disability, sexual orientation and
religion or belief to inform decisions
and track progress.
• Ensure all managers and leaders
undertake ‘dignity and respect’
training through our partner EA
Inclusion ensuring we create an
environment where everyone can feel
they belong.
• Continue to support employee-
led local community initiatives
and developing strong community
partnerships for causes close to
their hearts.
• Establish social value reporting
system and set Group and divisional
targets for social value delivery.
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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. 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.
Much 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.
Management approach
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.
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 Project Horizon (our new
digitisation project), 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 value of £491.8m (2022:
£403.6m), an increase of 22 per cent
from the prior year and distributed
£467.5m (2022: £382.7m), resulting
economic value retained of £27.1m
(2022: £21.0m).
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for the year ended 25 March 2023
The Group’s high-quality order book of
£510 at 1 June 2023 (2022: £464m at
1 November 2022) contains c. 50 per
cent of value from projects that are
contributing to positive environmental
outcomes, including battery plants
and 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
additional rail infrastructure projects
and fabrication of wind turbine blades.
In 2023, 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 and to help model the
climate change scenarios, which are
disclosed on pages 71 to 73.
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 sectors
emissions.
During the year, 100 per cent (2022:
100 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
minus’ CDP supplier engagement rating.
Recognising the importance of
dividends to our shareholders and to
our investment case, we paid ordinary
dividends of £9.9m (2022: £9.2m), a 7.6
per cent increase on the prior year.
2024 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 Project Horizon
and investment in research and
development.
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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 (see page 74). 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.
Scenario analysis progress
During the year, we conducted a climate
scenario analysis in line with TCFD
guidance (see page 71). We expect to
provide more detailed quantitative
disclosures in our 2024 annual report.
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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.
In 2023, the Group, again, had no
incidents of bribery or corruption
confirmed during the year (either
relating to 2023 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 2023 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.
Severfield plc Annual report and accountsfor the year ended 25 March 2023 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 of tax
avoidance schemes.
To comply with the Corporate Criminal
Offences (‘CCO’) rules, 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, including the recent IR35
rules. This year we completed a CCO
workshop, facilitated by external
experts, to keep our colleagues and
procedures up to date.
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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 2023
• Health & safety – reviewing
our strategy for maintaining
everyone’s focus on preventing
and mitigating safety related
incidents.
• Cyber security – ensuring we
continuously evaluated and
tested our cyber resilience
against known and emerging
threats.
• Sustainability risk – mitigating
the impact of uncertainty
around stakeholder
expectations as to how we
conduct a sustainable and
responsible business.
Our future priorities for 2024
Some of our main priorities (and
emerging risks) this year will be:
• Continued focus on mitigating
people risk, our ability to
identify, attract, develop and
retain talent, in particular in
our factories.
• Continued identification and
mitigation of sustainability
risks, including quantitative
climate scenario analysis
and the setting and defining
of targets in line with TCFD
requirements.
• Continued focus on mitigating
cyber security risk.
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Changes to principal risks
The following changes have been made
to the Group’s principal risks in 2023:
• People risk has been downgraded
from high risk to medium risk
reflecting a recent improvement in the
issues experienced across the Group
last year in recruiting and retaining
sufficient skilled people.
• Supply chain risk has been
downgraded from high risk to medium
risk due to the easing of certain
economic and geopolitical factors and
the diversification of suppliers for key
inputs.
• Indian joint venture risk has been
removed due to JSSL’s recovery and
strong performance post COVID-19.
• Industrial relations has been added
back into the register (it was removed
in 2018) due to the current backdrop
of inflationary pressures and
industrial action across the UK.
Other principal risks remain largely
unchanged from last year. Changes
have also been made to the detailed
descriptions of mitigation to reflect
ongoing activity in the year.
Risk appetite
The level of risk it is considered
appropriate to accept in achieving
the Group’s strategic objectives is
reviewed and validated by the board.
The appropriateness of the mitigating
actions is determined in accordance
with the board-approved risk appetite
for the relevant area.
The organisation’s approach is to
minimise exposure to reputational,
financial and operational risk, while
accepting and recognising a risk and
reward trade-off in the pursuit of its
strategic and commercial objectives.
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 successful integration of our recent
acquisitions.
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.
• 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
Severfield plc Annual report and accountsfor the year ended 25 March 2023 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:
• Project management procedures
• Health and safety
• Financial control
• Cash and working capital
management
Group oversight
Group policies
• Group authorisation policy
• Group finance manual
• Contract sign-off process
• Purchase guidelines
• Quality manual
• SHE policies
• Information security
management policy
Committees
• Executive committee, risk
committee, safety leadership
team, Group human resource
committee, 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.
The board/audit committee
Senior management/risk 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
94
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
Health and safety 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, Chief Financial
Officer 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,
Severfield plc Annual report and accountsfor the year ended 25 March 2023 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.
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.
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.
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.
During the financial year, any control
weaknesses identified through the
operation of our risk management
and internal control processes
were remediated and subsequently
monitored in line with normal business
operations. 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 the information
provided to the board and resulting
discussions.
we were audited successfully on our ISO
27001 accreditation for our information
security management system and
a separate committee reviews any
information security issues impacting
the Group. This continues to give further
assurance as 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.
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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
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 Sustainable and responsible business
9 Industrial relations
Strategic pillars
Link to KPIs
Movement
Scoring
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 financial and reputational
issues). Only high and medium risks are
considered sufficiently significant for
disclosure in the annual report.
Strategic pillar key
KPI key
Growth
Clients
Operational
excellence
People
1 Underlying operating profit and margin (before JVs and associates)
2 Underlying basic earnings per share (‘EPS’)
3 Revenue growth
Movement
Scoring
4 Operating cash conversion
Upward trend
High
Downward trend
Medium
No change
New
5 Return on capital employed (‘ROCE’)
6 Order book
7 Injury frequency rate (‘IFR’)
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Severfield plc Annual report and accountsfor the year ended 25 March 2023
1 HEALTH AND SAFETY
Description
The Group works on
significant, complex
and potentially
hazardous projects,
which require
continuous monitoring
and management of
health and safety risks.
Ineffective governance
over and management
of these risks could
result in serious injury,
death and damage to
property or equipment.
Impact
A serious health and
safety incident could
lead to the potential
for legal proceedings,
regulatory
intervention, project
delays, potential loss
of reputation and
ultimately exclusion
from future business.
Continued changes in
legislation can result
in increased risks to
both individuals and
the Group.
Mitigation
• Established safety systems, site visits, safety audits,
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.
• Our new safety initiative, ‘Safer@Severfield’ was
launched in 2023.
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2 SUPPLY CHAIN
Description
The Group is reliant
on certain key supply
chain partners for
the successful
operational delivery
of contracts to meet
client expectations.
The failure of a key
supplier, a breakdown
in relationships with
a key supplier or
the failure of a key
supplier to meet its
contractual obligations
could potentially
result in some short
to medium-term price
increases and other
short-term delay
and disruption to the
Group’s projects and
operations. There is
also a risk that credit
checks undertaken in
the past may no longer
be valid.
Impact
Interruption of supply
or poor performance
by a supply chain
partner could
impact the Group’s
execution of existing
contracts (including
the costs of finding
replacement supply),
its ability to bid for
future contracts
and its reputation,
thereby adversely
impacting financial
performance.
Mitigation
• Process in place to select supply chain partners
that match our expectations in terms of quality,
sustainability and commitment to client service –
new sources of supply are quality controlled.
• Ongoing reassessment of the strategic value of supply
relationships and the potential to utilise alternative
arrangements, including for steel supply.
• Contingency plans developed to address supplier and
subcontractor issues (including the failure of a supplier
or subcontractor).
• Monthly review process to facilitate early warning of
issues and subsequent mitigation strategies.
• Strong relationships maintained with key suppliers,
including a programme of regular meetings and reviews.
Trend
Link to strategy
Link to KPIs
1 2 3 4
5 6
Scoring
Medium
• Implementation of best practice improvement
initiatives, including automated supplier
accreditation processes.
• Key supplier audits are performed within
projects to ensure they can deliver
consistently against requirements.
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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.
Impact
Loss of key people
could adversely
impact the
Group’s existing
market position
and reputation.
Insufficient growth
and development of
its people and skill
sets could adversely
affect its ability to
deliver its strategic
objectives.
A high level of
staff turnover
or low employee
engagement could
result in a decrease
of confidence in the
business within the
market, customer
relationships being
lost and an inability
to focus on business
improvements.
Mitigation
• Training and development schemes to build skills and
experience, such as our successful graduate, trainee
and apprenticeship programmes.
• Detailed succession planning exercise completed in
2023 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 2022 and 2023.
• 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.
• 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.
• One-off cost-of-living payment agreed for the start
of 2024.
• Maintained our approach to flexible working practices
and remote working.
Trend
Link to strategy
Link to KPIs
1 2 3
6
Scoring
Medium
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4 COMMERCIAL AND MARKET ENVIRONMENT
Impact
A significant fall in
construction activity
and higher costs
could adversely
impact revenues,
profits, ability to
recover overheads
and cash generation.
Mitigation
• Regular reviews of market trends performed (as part of
Trend
the Group’s annual strategic planning and market review
process) to ensure actual and anticipated impacts
from macroeconomic risks are minimised and managed
effectively.
Link to strategy
• 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.
Link to KPIs
1 2 3 4
5 6
Scoring
Medium
• 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 ventures.
• The Group closely monitors the flows of goods and
people across borders for ongoing work with the EU and
specific risks and related mitigations are kept under
review by the executive committee. We have taken steps
to ensure we can continue to deliver on current and
future contractual commitments.
• Maintenance and establishment of supply chain in
mainland Europe.
• Close management of capital investment and focus on
maximising asset utilisation to ensure alignment of our
capacity and volume demand from clients.
• Close engagement with both customers and suppliers
and monitoring of payment cycles.
• Ongoing assessment of financial solvency and strength
of counterparties throughout the life of contracts.
• Continuing use of credit insurance to minimise impact of
customer failure.
• Strong cash position supports the business through
fluctuations in the economic conditions of the sector.
• Acquisition of Harry Peers, DAM Structures and VSCH in
recent years has broadened our reach and cross-selling
opportunities, resulting in improved market resilience.
Description
Changes in
government and client
spending or other
external factors could
lead to programme
and contract delays
or cancellations, or
changes in market
growth. External
factors include
national or market
trends, political or
regulatory change, the
impact of worldwide
events such as war
(including the impact
of the Ukraine crisis)
and the impact of
pandemics.
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 25 March 2023
5 MISPRICING A CONTRACT (AT TENDER)
Description
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.
Trend
Link to strategy
Link to KPIs
1 2 3 4
5
Scoring
Medium
• Improved contract selectivity (those that are right for
the business and which match our risk appetite) has
de-risked the order book and reduced the probability
of poor contract execution.
• 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.
• Use of price indexation clauses in certain contracts
101
www.severfield.comStock Code: SFR STRATEGY
HOW WE
MANAGE RISKS
6 CYBER SECURITY
Description
Cyber-attack could
lead to IT disruption
with resultant loss of
data, loss of system
functionality and
business interruption.
The Group’s core IT
systems must be
managed effectively,
to keep pace with
new technologies and
respond to threats to
data and security.
Impact
Prolonged or
major failure of
IT systems could
result in business
interruption, financial
losses, loss of
confidential data,
negative reputational
impact and breaches
of regulations.
Mitigation
• IT is the responsibility of a central function which
Trend
manages the majority of the systems across the Group.
Other IT systems are managed locally by experienced IT
personnel.
Link to strategy
• 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
Link to KPIs
1 2 4 5
Scoring
Medium
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.
102
Severfield plc Annual report and accountsfor the year ended 25 March 2023
7 FAILURE TO MITIGATE ONEROUS CONTRACT TERMS
Impact
Loss of profitability
on contracts as
costs incurred may
not be recovered,
and potential
reputational damage
for the Group.
Mitigation
• The Group has identified minimum standard terms
Trend
which mitigate contract risk.
Link to strategy
Link to KPIs
1 2 4 5
Scoring
Medium
• Robust tendering process with detailed legal and
commercial review and approval of proposed
contractual terms at a senior level (including the risk
committee) are required before contract acceptance
so that onerous terms are challenged, removed or
mitigated as appropriate.
• Regular contract audits are performed to ensure
contract acceptance and approval procedures have
been adhered to.
• We continue to work with the British Constructional
Steelwork Association to raise awareness of onerous
terms across the industry.
• Through regular project reviews we capture early those
occasions where onerous terms could have an adverse
impact and are able to implement appropriate mitigating
action at the earliest stage.
Description
The Group’s
revenue is derived
from construction
contracts and related
assets. Given the
highly competitive
environment in which
we operate, contract
terms need to reflect
the risks arising
from the nature
or the work to be
performed. Failure
to appropriately
assess those
contractual terms
or the acceptance
of a contract with
unfavourable terms
could, unless properly
mitigated, result in
poor contract delivery,
poor understanding
of contract risks and
legal disputes.
8 SUSTAINABLE AND RESPONSIBLE BUSINESS
Impact
Loss of position as
market leader and
wider losses of future
opportunities in the
short term.
Description
Risk of not being able
to meet stakeholder
expectations in the
light of uncertainty
as to the direction in
which stakeholder
expectations will
develop.
Mitigation
• We have demonstrated a commitment to reduce our
carbon footprint by becoming carbon neutral and
established other stakeholder influenced sustainability
related targets such as Net Zero by 2050.
Trend
Link to strategy
• We are rated B by CDP in the management band.
• We have appointed a head of ESG 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 7
Scoring
Medium
103
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HOW WE
MANAGE RISKS
9 INDUSTRIAL RELATIONS
Description
The Group (and the
industry in general)
has a significant
number of members
who are members
of trade unions.
Industrial action taken
by employees could
impact on the ability of
the Group to maintain
effective levels of
production.
Impact
Interruption to
production by
industrial action
could impact
both the Group’s
performance on
existing contracts,
its ability to bid for
future contracts
and its reputation,
thereby adversely
impacting
its financial
performance.
Mitigation
• Employee and union engagement takes place on a
Trend
regular basis.
• The Group has seven (including the recently acquired
VSCH facilities in Rijssen) main production facilities
so interruption at one facility could to some extent be
absorbed by increasing capacity at a sister facility.
• Processes are in place to mitigate disruptions as a
result of industrial action.
Link to strategy
Link to KPIs
1 2 3 5
Scoring
Medium
104
Severfield plc Annual report and accountsfor the year ended 25 March 2023 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
14 June 2023
• 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 2023 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
pages 40 and 41 of the strategic report.
The board’s direct engagement with
stakeholders is described on pages
126 and 127 in the governance report,
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
126 to 127.
105
www.severfield.comStock Code: SFR STRATEGY OUR
GOVERNANCE
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
108
110
114
116
118
130
134
136
140
142
162
165
G
O
V
E
R
N
A
N
C
E
GOVERNANCE
AT A GLANCE
Our board
The board comprises ten directors with a diverse and complementary range of
industry experience, technical knowledge, perspectives and personal strengths.
Independence
Gender diversity
Length of tenure
4
1
5
2
2
4
Chairman
Independent
Non-independent
Male
Female
BOARD AND COMMITTEE ATTENDANCE
8
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 Hardy2
Rosie Toogood3
Mark Pegler4
Board
Audit
committee
Remuneration
committee
Nominations
committee
10
10
10
10
10
10
10
10
10
10
4
3
4
4
0
3
3
0
2
2
4
4
4
4
4
3
4
4
4
4
4
1
1
2
As chairman, Kevin Whiteman is not a member of the audit committee but has attended meetings as a guest.
Louise Hardy was unable to attend one audit committee meeting due to an unavoidable clash with another board commitment and two others
due to personal reasons.
3
Rosie Toogood was unable to attend one virtually held audit committee meeting due to an IT outage.
Mark Pegler was appointed to the board on 5 October 2022 and has attended all board and committee meetings held since that date.
1
2
3
4
4
108
Severfield plc Annual report and accountsfor the year ended 25 March 2023 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
No. of directors with skill/experience
No. of directors without skill/experience
4
6
9
9
1
1
2
6
2
10
2
4
10
10
2
10
2
8
8
8
8
8
Major board activities in the year
• Appointed Mark Pegler as a non-executive director in October 2022.
• Board visit to India in February 2023.
• Completed an externally facilitated board evaluation, performed by Gould Consulting.
• Approved the acquisition of Voortman Steel Construction and associated £19m term loan facility and extension of the
existing revolving credit facility from £50m to £60m.
• Approved four major new tenders over £50m.
109
GOVERNANCEwww.severfield.comStock Code: SFR
OUR BOARD
OF DIRECTORS
Executives and non-executives
The quality of our workforce, senior leadership team and board leaves us well
placed to deliver on our strategic expectations and for long-term growth.
Alan Dunsmore
Chief Executive Officer
– Independent: No
– Appointed: 2010
Adam Semple
Chief Financial Officer
– Independent: No
– Appointed: 2018
Ian Cochrane
Chief Operating Officer
– Independent: No
– Appointed: 2013
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.
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 Chief Financial Officer
in February 2018, having held the role
on an acting basis since April 2017. He
was previously the Group’s financial
controller.
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.
110
Severfield plc Annual report and accountsfor the year ended 25 March 2023 N
R
A
N
R
Derek Randall
Executive director and managing
director at JSW Severfield Structures
– Independent: No
– Appointed: 2011
Kevin Whiteman
Chairman
– Independent: Yes
– Appointed: 2014 to the board
and 2020 as chair
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.
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.
He was chairman of the privately owned
NG Bailey from 2013 to 2023 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.
Committee membership:
N Nominations
A Audit
R Remuneration
Committee chair
Alun Griffiths
Senior independent director
– Independent: Yes
– 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
chairs the transaction committee at
the Ramboll Group (providing oversight
for major bids and M&A), has been
an independent board member of the
Remuneration Consultants Group since
2022 and was vice chair of the Port of
London Authority from 2014 to 2022.
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.
Alun will step down as chair of the
Remuneration committee in September
2023 and will be succeeded by Louise
Hardy.
111
GOVERNANCEwww.severfield.comStock Code: SFR OUR BOARD
OF DIRECTORS
Executives and non-executives
The quality of our workforce, senior leadership team and board leaves us well
placed to deliver on our strategic expectations and for long-term growth.
A
N
R
A
N
R
A
N
R
Louise Hardy
Non-executive director and
workforce engagement director
– Independent: Yes
– Appointed: 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.
Louise is a Fellow of the Institution
of Civil Engineers, the Chartered
Management Institute and the Women’s
Engineering Society. Louise won the
European Women in Construction and
Engineering, lifetime achievement in
construction award 2019.
Louise is a non-executive director at
Travis Perkins plc, Balfour Beatty plc
and Crest Nicholson Holdings plc.
Louise will become chair of the
remuneration committee when Alun
Griffiths steps down from the role in
September 2023.
Tony Osbaldiston
Non-executive director
– Independent: Yes
– Appointed: 2014
A chartered accountant having qualified
with PwC, Tony was previously finance
director of Max Factor UK, Volvo Cars
UK, Raymarine plc and FirstGroup
plc. He was also deputy group chief
executive officer and chief executive
officer of FirstGroup America. Tony
has been non-executive director and
chairman of the audit committee
of BSS Group plc, chairman of the
remuneration committee of Synstor
International plc and non-executive
director and chairman of the audit
and risk committee of the Serious
Fraud Office. He is currently chairman
of Encon, the insulation and building
products distributor.
Tony will be retiring from the board at
the end of July 2023.
Mark Pegler
Non-executive director
– Independent: Yes
– Appointed: October 2022
Mark is an experienced FTSE 250 board
director, having spent over a decade as
Chief Financial Officer at Hill & Smith
PLC, overseeing significant growth
through international expansion and
acquisitions.
Mark is a Non-Executive Director and
Chair of the Audit Committee at ELE
Advanced Technologies Ltd, a specialist
in the production of complex and high
integrity super alloy components for the
aerospace, industrial gas turbine and
commercial diesel engine markets. He is
also Non-Executive Chair of IWS Group,
a privately owned group of market-
leading product brands, manufacturers
and service companies, providing
essential services and products to the
logistics, material handling and other
industrial sectors primarily across the
UK and Europe.
He is a Fellow of the Institute of
Chartered Accountants in England
and Wales (ICAEW) and will become
chairman of the Audit Committee on the
retirement of Tony Osbaldiston at the
end of July 2023.
112
Severfield plc Annual report and accountsfor the year ended 25 March 2023 A
N
R
Rosie Toogood
Non-executive director
– Independent: Yes
– Appointed: 2021
Rosie is currently the chief executive
officer of Legal & General Homes
Modular 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.
Committee membership:
N Nominations
A Audit
R Remuneration
Committee chair
113
GOVERNANCEwww.severfield.comStock Code: SFR OUR EXECUTIVE
COMMITTEE
Rob Evans
Divisional managing director, Severfield
(Commercial & Industrial)
Rob is the divisional managing
director for the Group’s 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, during which 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.
Mike Mannion
Group manufacturing director
Mike is now the Group manufacturing
director, overseeing operations in
Dalton, Lostock, Northern Ireland,
Bolton, and Bridlington.
Prior to this, 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.
Previously managing director of Weir
Valves & Controls, Mike has over
25 years of business management
experience and an extensive knowledge
of manufacturing and supply chains,
obtained within sector-relevant,
international settings.
Jim Martindale
Divisional managing director,
Severfield (Nuclear & Infrastructure)
and Modular Solutions
Jim is the divisional managing
director for the Group’s nuclear and
infrastructure division and of the
modular solutions 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.
114
Severfield plc Annual report and accountsfor the year ended 25 March 2023 Phillipa Recchia
Group SHE director
Alan Dunsmore
Chief Executive Officer
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.
For details, see board of directors on
page 110.
Ian Cochrane
Chief Operating Officer
For details, see board of directors on
page 110.
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.
Samantha Brook
Group HR director
Richard Davies
Group IT 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.
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 of experience
in the construction sector, Richard has
been involved in the successful delivery
of many innovative IT projects.
Derek Randall
Executive director and managing
director at JSW Severfield Structures
For details, see board of directors on
page 111.
Adam Semple
Chief Financial Officer
For details, see board of directors on
page 110.
115
GOVERNANCEwww.severfield.comStock Code: SFR OUR CHAIRMAN’S VIEW
ON GOVERNANCE
Dear shareholder
I am pleased to introduce the Group’s
corporate governance report (on pages
118 to 129) 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
We continue to evolve the board to
ensure that it has the right balance of
knowledge, experience and outside
in perspective. In October 2022, we
welcomed Mark Pegler as a non
executive director, who brings with
him over many years of business and
leadership experience in manufacturing
and international businesses and is
a strong addition to the board. His
appointment forms part of the board
succession process and it is intended
that Mark will become audit committee
chairman following the retirement of
Tony Osbaldiston in July 2023.
Board evaluation
During the year, we undertook our first
externally facilitated board evaluation,
performed by Gould Consulting. 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. The
key points arising from the evaluation
have been documented and at the
time of writing this report are being
discussed with the board members
with a view to developing a board
improvement plan, further details of
which we aim to disclose next year.
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 130.
KEVIN WHITEMAN
NON-EXECUTIVE CHAIRMAN
This year we have ensured that strong
and robust corporate governance
continues to be at the heart of
everything we do. We have updated our
remuneration policy in consultation
with our major shareholders, taken
steps to ensure strong audit and
remuneration committee chair
succession and fully aligned executive
pension contributions with the
wider workforce.”
116
Severfield plc Annual report and accountsfor the year ended 25 March 2023 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.
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 to seek to attract a
more diverse workforce over time.
Relations with shareholders
The board and I recognise the
responsibility we have to a range of
stakeholders, including customers,
employees, subcontractors and
suppliers and the environment and
communities in which we operate.
We have an open and effective dialogue
with shareholders, with regular
meetings being held with institutional
shareholders, including a Capital
Markets Day which was held at Lord’s
in March 2023. The AGM will be held on
6 September 2023 and I encourage all
shareholders to submit any questions
in advance and to vote via proxy for the
resolutions.
Kevin Whiteman
Non-executive chairman
14 June 2023
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 118.
In July 2023 Tony Osbaldiston will retire
as audit committee chair and we thank
him for all his hard work and excellent
stewardship over the last nine years.
Mark Pegler will succeed him in this role.
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.
This year we have made a number of
changes to our remuneration policy as
part of the normal three yearly cycle,
consulted with our major shareholders
and taken on board their views in the
policy which is tabled in this annual
report for approval at the 2023 AGM. Our
new remuneration policy a summary of
how we intend to operate that policy in
2024, and a review of the remuneration
committee’s activities, together with
bonus and PSP performance in 2023,
can be found in the remuneration report
on pages 140 to 164.
In September 2023 Alun Griffiths will
step down as remuneration committee
chair. We thank him for his hard work
and excellent stewardship over the last
nine years. Louise Hardy will succeed
him in this role.
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 eight (soon to be seven)
male directors. Further details of their
skills and experience can be found on
pages 110 to113.
UK Corporate
Governance Code
Throughout the accounting
period, the Company has fully
complied with the requirements
of the 2018 Code, except for
provision 38, requiring alignment
of pension contributions
between directors and the wider
workforce. Our transition to being
compliant with this provision
has been mapped out in previous
years’ reports. As of 1st April 2023
we are now fully compliant with
the 2018 Code.
117
GOVERNANCEwww.severfield.comStock Code: SFR CORPORATE
GOVERNANCE REPORT
Board leadership and company purpose
The Group is controlled through the
board of directors of Severfield plc. We
believe that, consistent with Principle A
of the Code, the board is effective and
entrepreneurial. We have described in
the strategic report how opportunities
and risks to the future success of
the business have been considered
and addressed, together with the
sustainability of the Group’s business
model. In this section we describe
how our governance contributes to the
delivery of our strategy and how the
board monitors and drives culture and
purpose.
Structure of the board
The membership of the board is stated
on pages 110 to 113. The board currently
consists of the chairman, five other non-
executive directors and four executive
directors. However, Tony Osbaldiston
will be retiring at the end of July and will
be replaced by Mark Pegler as chair of
the audit committee and Alun Griffiths
will be replaced by Louise Hardy as
chair of the remuneration committee in
September 2023. No appointment has
yet been made to take over Alun’s role
as SID from the AGM onwards.
Alan Dunsmore has board-level
responsibility for sustainability matters
and employment matters and Ian
Cochrane has board-level responsibility
for health and safety matters.
Executive
directors
Executive
committees
Severfield plc board
Principal
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
118
Severfield plc Annual report and accountsfor the year ended 25 March 2023 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 25
March 2023 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
commencing on page 140. 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 110 to 113 (other
than Tony Osbaldiston, who is retiring)
will be standing for re-election at the
2023 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.
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 Chief Financial Officer’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.
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MEMBER(S)/COMMITTEE RESPONSIBILITIES
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 114 and 115. 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 Chief Financial Officer 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 Chief Financial Officer, 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. His 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.
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.
Senior independent
director
Alun Griffiths
Board committees
The board has established three standing committees, all of which operate within defined terms
of reference, which are available from the Company secretary by request and published on the
website.
The committees established are the audit committee, the remuneration committee, and the
nominations committee. Trading companies are managed by separate boards of directors. Any
matters of a material nature concerning the trading companies are reported to the board on a
monthly basis.
Details of the work of the audit, nominations and remuneration committees are set out on pages
130 to 164.
120
Severfield plc Annual report and accountsfor the year ended 25 March 2023 Board meetings
The directors’ attendance record at the scheduled board meetings and board committee meetings for the year ended 25 March
2023 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 Hardy2
Rosie Toogood3
Mark Pegler4
Board
10
Audit
committee
Remuneration
committee
Nominations
committee
3
4
4
10
10
10
10
10
10
10
10
10
4
3
3
0
2
2
4
4
4
4
4
3
4
4
4
4
1
1 As chairman, Kevin Whiteman is not a member of the audit committee but has attended meetings as a guest.
2 Louise Hardy was unable to attend one audit committee meeting due to an unavoidable clash with another board commitment and two others due to
personal reasons.
3 Rosie Toogood was unable to attend one virtual audit committee meeting due to an IT outage.
4 Mark Pegler was appointed to the board on 5 October 2022 and has attended all board and committee meetings held since that date.
Meetings were held at the Group’s offices in Dalton and York, 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, 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 in December. 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.
Board visit to India
This year, in February, the whole Board undertook a four-day visit to India. During a busy week the Board spent time with JSSL
managers in Mumbai, Bellary and Hyderabad getting to know more about the dynamics of the business as well as touring the
production facility and visiting construction sites. Time was also spent with some key JSSL clients and with our joint venture
partner JSW. These activities helped inform strategy discussions to take advantage of the clear growth opportunities in India.
121
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GOVERNANCE REPORT
Board meetings for the current year
During the financial year, the board discussed and implemented the following key actions:
April 2022
July 2022
• Meeting Severfield (NI)’s management team and
• Reviewed first quarterly forecast for the year ended 25
undertaking factory tour at Ballinamallard
March 2023
• Reviewed the statement of compliance in accordance
• Reviewed feedback on year-end results for the year
with the Modern Slavery Act
ended 26 March 2022
• Reviewed and approved the Group’s pre-close trading
• Received an update on the Atlas Ward pension scheme
statement issued on 20 April 2022
valuation
• Reviewed and approved proposed AGM arrangements
for 2023
• Reviewed proposals for capital expenditure for 2023
September 2022
June 2022
2 meetings
• Received feedback from the chairman of the nomination
committee on the board evaluation undertaken by the
senior independent director
• Presentation on the commercial and industrial division
from the divisional managing director Rob Evans
• Reviewed and approved annual report and accounts and
results announcement for the year ended 26 March 2022
• Reviewed and approved proposed payment of a final
dividend for the year ended 26 March 2022
• 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 proposed auditor fees for the
year ended 25 March 2023
• Reviewed and approved the final budget for the year
• Reviewed and approved a large tender over £50m
• Reviewed and approved proposed increase in the limit
under the Group authorisation policy for approval by the
Board of UK tenders due to steel price inflation
• Reviewed and approved AGM notice
• Reviewed and approved the Group’s AGM trading
statement issued on 8 September 2022
• 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 and approved proposed appointment of Mark
Pegler as a non-executive director and approved the
relevant RNS announcing the appointment
• Reviewed and approved proposed board and board
committee calendar of meetings for financial year
ending 30 March 2024
• Received an update on cyber risk from the Group’s IT
director, Richard Davies
• Reviewed and approved a large tender over £50m
• Reviewed a paper on the Group’s energy costs
October 2022
• Site visit and factory tour at Carnaby, home of Severfield
Infrastructure Limited, and a presentation on the nuclear
& infrastructure division from divisional managing
director Jim Martindale
122
Severfield plc Annual report and accountsfor the year ended 25 March 2023 November 2022
2 meetings
• Site visit and factory tour at Dalton and management
briefings from the Group manufacturing director Mike
Mannion and from the Group HR director Sam Brook
• Reviewed and approved half year results for the year
ended 25 March 2023
• Approved interim dividend for the year ended 25
March 2023
• Reviewed second quarterly forecast for the year ended
25 March 2023
• Approval for proceeding with due diligence on the
Voortman acquisition
January 2023
• Approval for completing the Voortman acquisition
• Reviewed investor feedback on interim results for the
year ended 25 March 2023
• Received an update on a recent cyber disaster recovery
test exercise undertaken by management with insurers
• Reviewed and approved proposed increase in the limit
under the Group authorisation policy for approval of
JSSL tenders by the Board due to steel price inflation
• Reviewed and approved a proposal to undertake an
externally facilitated board effectiveness review
• Reviewed and approved a large tender over £50m
February 2023
December 2022
• Off-site strategy day
• Reviewed and approved a large tender over £50m
• Board visit to India
March 2023
• Visited the Everton new stadium development project
and received briefings from the project team and met
with our client Laing O’Rourke’s project director
• Approved the budget for the year end 30 March 2024
• Reviewed and approved the Group’s pre-close trading
statement issued on 27th March 2023
• Reviewed the register of directors’ interests in shares
• Reviewed proposed pay review of the wider workforce
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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 126
and 127, there were no specific issues raised during the year that influenced these decisions.
Principal decision Action taken
Outcome
Key stakeholder groups considered
Pay review
Refinancing
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.
Reviewed the levels of our
existing senior lending facilities
and whether to seek an increase
and considered the timing of
when to renew.
One-off cost-of-living payments
and enhanced employee benefit
packages. In addition, we
have implemented higher pay
increases for our more junior and
lower paid colleagues. All of our
colleagues are paid at or above
the real living wage.
Extended our revolving credit
facility from £50m to £60m in
March 2023.
Strategy review
Comprehensively reviewed
progress against strategy.
Approved the three-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.
Our workforce, their families and
their communities.
The increased facility provides
the Group with enhanced liquidity,
following the acquisition of
VSCH, and additional long-term
financing to help support its growth
strategy. The decision considers
all stakeholders that benefit from
execution of the strategy and the
Group’s viability.
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.
Setting the annual
Group budget
and subsequent
forecast
modelling for
going concern
purposes
Reviewed Group budgets for
FY24 and high-level profit and
cash forecasts for the next 15
months.
Reviewed general market
conditions and key trends that
support the Group’s strategy.
Approved the viability statement
and going concern assumption.
In reviewing the budget and
subsequent forecasts, the board
considered the impact on all
stakeholders.
124
Severfield plc Annual report and accountsfor the year ended 25 March 2023 Principal decision Action taken
Outcome
Determining the
Group’s approach
to risk
Recommending a
final dividend
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.
Considered whether to declare a
final dividend for the year ended
26 March 2022 in the 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
but reduced to ‘medium risk’
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.
Recognising the importance of
the dividend to our investment
case and our shareholders, we
recommended the payment of
a final 2022 dividend of 1.9p
per share (an increase of 6 per
cent) 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.
Voortman
acquisition
The board reviewed
management’s proposals
to acquire the Voortman
Steel Construction group of
companies
The board approved
management’s proposals to make
its first European acquisition
Pension scheme
valuation
The board reviewed
management’s proposed
approach to funding the deficit
in the Atlas Ward pension
scheme
The board approved
management’s proposed funding
strategy
Key stakeholder groups considered
The board considered the impact on
all stakeholders, in particular those
identified in the principal risks
section on pages 92 to 102.
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 whilst considering
the broader interest of external
stakeholders, took a proactive
approach to considering how
to minimise the impact of its
operations on the environment.
The board, mindful of its duty
to promote the success of the
Company and deliver a strategy of
European growth and diversification
and the broader interest of external
stakeholders, took the decision to
make the relevant investment.
The board took into account the
needs of current and deferred
members of the pension scheme
and the wider interests of other
stakeholders in taking a balanced
approach to reducing the deficit
whilst maintaining sufficient cash
and working capital resources
to support the Group’s overall
business strategy.
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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/customers Workforce
Supply chain
Communities
Shareholders
Funders
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.
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 commitment to
good ESG practices.
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.
Robust
operational and
financial risk
management,
strong returns
on investment
decisions,
effective
communication
of strategy and
a progressive
dividend policy.
Strong cash
management,
robust working
capital
management and
risk management
and good
communication
through regular
financial updates.
With regard to our clients, supply chain
and communities, these groups are
recognised by the board as integral to
our business model and, as such, are
considered regularly by the board. In
practice, however, our clients, supply
chain and communities vary with each
Group company and therefore the
Group companies manage day-to-day
engagement with these important
stakeholder groups. Our Group
SHE director and our Group head
of procurement assist in managing
relationships with those subcontractors
and suppliers who are common to
more than one Group company. Further
details of our engagement with
communities can be found on page 41.
The board engages directly with the
Group’s shareholders, suppliers,
workforce and funders, and has
undertaken the following activities
in 2023:
Shareholders
Providing sustainable returns to our
shareholders is a key factor in the
board’s decision-making. The chairman
and the non-executive directors are
available to meet with shareholders to
listen to their views.
The board recognises the importance
of communicating with its shareholders
to ensure that its strategy and
performance is understood. The Group
encourages two-way communication
with both its institutional and private
investors and attempts to respond
quickly to all queries received verbally
or in writing.
The executive directors undertake a
programme of regular communication
with institutional shareholders and with
analysts covering the Group’s activities,
its performance and strategy, and
issues regular trading updates to
the market.
Alan Dunsmore and Adam Semple
attended several meetings with
institutional shareholders, private
investors and analysts during the year,
at the time of the announcements
of the Group’s annual and half-year
results. Feedback from those meetings
was reported to the board, including
the non-executive directors, and was
factored into the board’s strategy
review and its decision to declare a final
dividend and to appoint a joint broker.
In addition, a Capital Markets Day was
held in March 2023 at Lord’s where
we were able to make more detailed
presentations on the dynamics of
our new divisional structure and
Project Horizon. 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.
126
Severfield plc Annual report and accountsfor the year ended 25 March 2023 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.
We have continued to develop our
intranet ‘Severfield Connect’ in 2023
to enable us to communicate better
and develop a more integrated working
culture and to track engagement.
We consulted directly with our
major shareholders on our proposed
remuneration policy changes as set
out in more detail in the directors’
remuneration report.
Suppliers
The board reviewed and approved the
continuation of our prompt payment
policy and throughout the year we
continued to pay the majority of our
suppliers on time.
Workforce
Recognising the importance of input
and feedback from all colleagues in
helping us deliver on our strategic goals,
we made good progress with our 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, the Group CEO
Alan Dunsmore and the Group HRD
Samantha Brook, 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 have 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.
In 2023 we continued to develop our
intranet, ‘Severfield Connect’. This
has enabled us to communicate with
colleagues who are away from work,
to share updates and information with
them and to engage in dialogue through
the comments feature. Colleagues
across the Group have raised issues and
questions with management, and these
have been discussed openly with our
executive directors and have informed
our approach in many areas. 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 Chief Financial Officer 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 Chief Financial Officer
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 obtain funding for the acquisition
of VSCH and to increase our revolving
credit facility from £50m to £60m in
March 2023.
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.
127
GOVERNANCEwww.severfield.comStock Code: SFR CORPORATE
GOVERNANCE REPORT
The table below sets out how the board monitors our culture to ensure that behaviours remain aligned with our core values.
WHAT WE MONITOR AND MEASURE
BOARD ACTION IN 2023
Core value – customer focus
The executive directors keep the board updated on key
projects and customer relationships. The board reviews
material issues arising on contracts which may impact a
Group company or the Group as a whole.
Core value – safety first
The executive reports include information on health and
safety performance, including accident frequency rate,
incident frequency rate, near misses and high potential
incidents and absence days due to sickness/injury.
The board regularly reviews information on the safety
strategy, updates 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, ethics policy, competition law policy, anti-bribery
policy and expenses policy and these are regularly reviewed.
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.
Approved high value tenders.
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.
Introduced our new safety initiative ‘Safer@Severfield’ which
aims to further ingrain our culture of employee engagement,
commitment and our life saving rules.
Reviewed output from Cognito (our e-learning tool).
Reviewed payment practices reporting submissions and
prompt payment code disclosures.
Reviewed and approved our modern slavery statement (see
page 129).
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.
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.
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.
128
Severfield plc Annual report and accountsfor the year ended 25 March 2023 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 conducted
its first externally facilitated board
review by appointing Gould Consulting
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. Gould Consulting then
undertook detailed interviews with
each board member and the company
secretary and observed a board
meeting. The review concluded the
Board is operating effectively, but
recommended some practical changes
to further enhance engagement and
contribution. These are being developed
into a board improvement plan.
Professional development
Appropriate training and briefing is
provided to all directors on appointment
to the board, taking into account their
individual qualifications and experience.
This is supplemented with visits to the
Group’s operations and meetings with
senior business unit management to
develop each director’s understanding
of the business.
Training and updating in relation to
the business of the Group and the
legal and regulatory responsibilities
of directors was provided throughout
the year by a variety of means to board
members, including presentations by
executives, visits to business operations
and circulation of briefing materials.
Individual directors are also expected to
take responsibility for identifying their
training needs and to ensure they are
adequately informed about the Group
and their responsibilities as a director.
Non-executive directors are continually
updated on the Group’s business, its
markets, social responsibility matters,
changes to the legal and governance
environment and other changes
impacting the Group. During the year,
the directors received updates on
various best practice and regulatory and
legislative developments.
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 165) and a statement by the
auditor concerning their responsibilities
(pages 168 to 175). The directors also
report that the business is a going
concern (page 56) 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 20 to 105). The directors
have also made a statement about the
long-term viability of the Group, as
required under the Code (page 56).
Modern slavery
The board annually reviews and
approves the Group’s modern slavery
statement. The 2023 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 140 to 164. It sets out the
activities of the committee, the levels
and components of remuneration
and refers to the development of the
remuneration policy.
129
GOVERNANCEwww.severfield.comStock Code: SFR AUDIT COMMITTEE
REPORT
The audit committee reviews and reports to the Board on the Group’s financial reporting, internal
control and risk management systems and the independence and effectiveness of the Auditors.
Membership
All committee members during the
year were independent non-executive
directors in accordance with the Code.
The members have been selected to
provide the wide range of financial
and commercial expertise necessary
to fulfil the committee’s duties. Tony
Osbaldiston, Mark Pegler and Rosie
Toogood are all chartered accountants.
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 (until December 2022 and
then Matt Gamble), 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.
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.
TONY OSBALDISTON
CHAIR OF THE AUDIT
COMMITTEE
Number of meetings
3
Members
Tony Osbaldiston (chair)
Alun Griffiths
Louise Hardy
Rosie Toogood
Mark Pegler (from his appointment in October 2022)
2023 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 2023 interim
accounts and the year ended 25 March 2023.
• Reviewing management’s response to the FRC’s
request for information in November 2022 under
the FRC Corporate Reporting Review Operating
Procedures
130
Severfield plc Annual report and accountsfor the year ended 25 March 2023 The responsibility of the committee
principally falls into the following areas:
• To monitor the integrity of the
financial statements and formal
announcements and to review
significant financial reporting
judgements.
• To review the Group’s internal
financial and non-financial controls
and risk management.
• To make recommendations to the
board in relation to the appointment
and removal of the external auditor
and to approve its remuneration and
its terms of engagement.
• To review the nature of non-audit
services supplied and non-audit fees
relative to the audit fee.
• To provide independent oversight over
the external audit process through
agreeing the suitability of the scope
and approach of the external auditor’s
work, assessing its objectivity in
undertaking its work and monitoring
its independence, taking into account
relevant UK professional regulatory
requirements and the auditor’s period
in office and compensation.
• To oversee the effectiveness of the
internal audit process.
• To oversee the effectiveness of the
external audit process, particularly
with regard to the quality and cost-
effectiveness of the auditor’s work.
• To report to the board how it has
discharged its responsibilities.
Activities of the committee
The committee addressed the following
key agenda items in relation to the 2023
financial year:
• Reviewed the interim results for the
period ended 24 September 2022
and the year-end results for the year
ended 25 March 2023.
• 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
25 March 2023. 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 25
March 2023.
• Reviewed the Group’s risk register.
• Considered and reviewed JSSL’s
internal audit reports.
• Reviewed and agreed the external
auditor’s audit planning report in
advance of the audit for the year
ended 25 March 2023.
• 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.
• Considered the effectiveness of
the external auditor, KPMG LLP
(‘KPMG’), their independence and
reappointment for the year ending 30
March 2024.
• 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.
• Reviewing management’s response
to the FRC’s request for information
in November 2022 under the FRC
Corporate Reporting Review Operating
Procedures.
Fair, balanced and understandable
The committee was provided with, and
commented on, a draft copy of the
annual report for the year ended 25
March 2023. At the request of the board,
the committee also considered whether
the annual report was fair, balanced
and understandable and whether it
provided the necessary information
for shareholders to assess the Group’s
performance, business model and
strategy. To enable the board to make
this declaration, the committee received
a paper from management detailing the
approach taken in preparing the annual
report. The committee is satisfied that,
taken as a whole, the annual report
and accounts is fair, balanced and
understandable.
In carrying out the above processes,
key considerations included ensuring
that there was consistency between the
financial statements and the narrative
provided in the front half of the annual
report (and that the use of alternative
performance measures was appropriate
and clearly articulated); that there is
a clear and well-communicated link
between all areas of disclosure; and
that the strategic report focused on
the balance between the reporting of
weaknesses, difficulties and challenges,
as well as successes, in an open and
honest manner. In addition, the external
auditor reviewed the consistency
between the narrative reporting in
the annual report and the financial
statements.
Risk management and internal control
The board as a whole, including the
audit committee members, considers
the nature and extent of the Group’s
risk management and internal control
framework and the risk profile that
is acceptable in order to achieve the
Group’s strategic objectives.
131
GOVERNANCEwww.severfield.comStock Code: SFR AUDIT COMMITTEE
REPORT
Details of the Group risk management
and internal control processes and its
principal and emerging risks are set
out in the risk management section
of the strategic report on pages 92 to
104. 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 56 of
the strategic report.
Financial reporting and significant
accounting judgments
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.
Consistent with last year, ‘Contract
valuation, revenue and profit
recognition’, is classified as the only
significant accounting risk.
Contract valuation, revenue and profit
recognition
The committee reviewed and challenged
the report of the Chief Financial
Officer 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 2023 results. These include the
valuation of contingent consideration
for DAM Structures, going concern
and viability, the valuation of pension
scheme liabilities and ESG and climate
change disclosures.
Financial Reporting Council
The FRC performed a review of
the Group’s 2022 annual report
and accounts, the results of which
were communicated in a letter in
November 2022. They raised queries
and recommendations to enhance
future disclosures, which have been
considered by the Committee, and
communicated to the FRC in line
with their requirements. This allowed
132
Severfield plc Annual report and accountsfor the year ended 25 March 2023 the FRC to close their enquiries in a
satisfactory and timely manner.
Accordingly, the company has enhanced
certain disclosures made in the
financial statements in response to
the points raised. The FRC review
provides no assurance that the annual
report and accounts are correct in
all material aspects; the FRC’s role is
not to verify the information provided
but to consider compliance with the
reporting requirement. The letter was
issued by the FRC on the basis that the
FRC (which includes the FRC’s officers,
employees and agents) accepts no
liability for reliance on this letter by the
company or any third party, including
but not limited to investors and
shareholder.
Internal audit
The Group’s internal audit function
is currently outsourced to PwC.
The committee is responsible for
reviewing the role and effectiveness
of the internal audit function by
monitoring the results of its work and
the responses of management to its
recommendations. The scope of PwC’s
work focused on key financial controls
and non-financial reviews covering
areas of perceived higher business
risk. Results and management actions
arising from reviews undertaken by PwC
in the current year were also discussed
in detail at each of the committee’s
meetings.
External auditor independence and
effectiveness
KPMG has acted as the Group’s external
auditor for a period of eight 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 Craig Parkin, the
senior statutory auditor, ahead of
each committee meeting; and
• considering the external audit scope,
the materiality threshold and the level
of audit and non-audit fees.
Following this assessment of the
external audit process, the committee
agreed that the audit process,
independence and quality of the
external audit were satisfactory. The
committee will continue to assess the
performance of the external auditor to
ensure that they are satisfied with the
quality of services provided.
Reappointment of external auditor
The statutory audit services order (‘the
Order’) requires rotation of audit firms
every ten years unless there is a tender,
in which case the audit firm can remain
as auditor for up to 20 years.
As previously reported, KPMG were
selected as the Group’s auditor for the
year ended 31 March 2016, following a
competitive tender process, and were
appointed at the AGM on 2 September
2015. The external auditor is required to
rotate the senior statutory auditor every
five years. The senior statutory auditor
responsible for the Group audit for 2023
is Craig Parkin, whose appointment in
this role commenced with this audit.
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
Chief Financial Officer 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 25 March 2023 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.
There were no non-audit fees for 2023
or 2022.
Tony Osbaldiston
Chair of the audit committee
14 June 2023
133
GOVERNANCEwww.severfield.comStock Code: SFR NOMINATIONS
COMMITTEE REPORT
The committee ensures the continued effectiveness of the Board through appropriate
succession planning and supports the development of a diverse pipeline.
Role
The primary function of the committee
is to deal with key appointments to the
board, and related employment matters.
The responsibility and the objectives of
the committee principally fall into the
following areas:
• To review the structure, size and
composition of the board.
• To make recommendations to the
board for any changes considered
necessary.
• To approve the description of the
role and capabilities required for a
particular appointment.
• To ensure, having due regard for the
benefits of diversity on the board,
including gender, and the skills matrix
of the board, that suitable candidates
are identified and are recommended
for appointment to the board.
The committee’s terms of reference
were last 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 October 2022, Mark Pegler was
appointed as a new non-executive
director following a recruitment process
involving Korn Ferry. The board now
consists of ten 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.
KEVIN WHITEMAN
CHAIR OF THE NOMINATIONS
COMMITTEE
Number of meetings
4
Members
Kevin Whiteman (chair)
Tony Osbaldiston
Alun Griffiths
Louise Hardy
Rosie Toogood
Mark Pegler (since his appointment in October 2022)
2023 key achievements
• Recommending the appointment of Mark Pegler
as a new non-executive director and chair of the
audit committee to succeed Tony Osbaldiston on
his retirement.
• Recommending the appointment of Louise Hardy
as remuneration committee chair to succeed Alun
Griffiths.
• Instructing and then considering the results of an
externally facilitated board evaluation.
• Reviewing the Group’s succession plans for board
and executive committee appointments.
2024 areas of focus
• Using the board skills and diversity matrix,
developing a plan for the identification of suitable
candidates to recruit or appoint a new non-
executive chairman.
134
Severfield plc Annual report and accountsfor the year ended 25 March 2023 Board gender diversity
Senior management*
gender diversity
Executive committee direct reports
gender diversity
2
4
2
8
13
6
Male
Female
Disclosure under Listing Rules 9.8.6R(9) and 14.3.33R(1)
* Senior management comprises the
board and the executive committee.
Number of board members
Men
Women
Not specified/prefer not to say
Percentage
of the board
80
20
–
Number of senior
positions on the board
(CEO, CFO, SID and Chair)
4
–
–
Number in
executive
management
9
2
–
Percentage
of executive
management
82
18
–
White British or other White
(including minority-white groups)
Mixed/Multiple Ethnic Groups
Asian/Asian British
Black/African/Caribbean/Black British
Other ethnic group, including Arab
Not specified/ prefer not to say
We support the principle of seeking
to increase the number of women
and people from minority ethnic
backgrounds on FTSE boards, and to
improve representation in leadership
positions. We are committed to
continuing to broaden the diversity
of our own board in terms of both
gender and ethnicity, consistent with
appointing candidates based on
talent and capability. As part of our
recruitment process we have instructed
search consultants for some time to
provide balanced shortlists.
The board has two female directors
(20 per cent). Female representation
on our executive committee is two
(18 per cent) but at the career level
below the executive committee, female
representation is higher at 25 per cent
with many senior finance and HR roles
being held by women.
As can be seen from the data in the tables
none of the four senior board positions are
Number
of board
members
Percentage
of the board
Number of senior
positions on the board
(CEO, CFO, SID and Chair)
Number in
executive
management
Percentage
of executive
management
10
–
–
–
–
–
100
–
–
–
–
–
held by a woman and none of the directors
is from a minority ethnic background.
The four senior board positions have
not recently been changed and so there
has been no opportunity to address this
target. Of the three most recent Board
appointments two have been women
but none have been from an ethnic
background since none of the suitable
candidates who applied for those roles
were from those backgrounds. One male
non-executive director is due to retire
before the AGM at which point 22 per
cent of the Board and 40 per cent of the
non-executive directors will be 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.
4
–
–
–
–
–
11
–
–
–
–
–
100
–
–
–
–
–
Each year the committee meets
specifically to review succession
plans for the board and for senior
management and takes into account
the issues arising out of the evaluation
of the board’s effectiveness and its
commitment to diversity.
Evaluation
The committee appointed Gould
Consulting to perform a board
effectiveness evaluation. In their review,
they concluded the board is operating
effectively and, in the main, above our
FTSE peers, but recommended some
practical changes to further enhance
engagement and contribution. These
have been documented and at the
time of writing this report are being
developed into a board improvement
plan, further details of which we aim to
disclose next year.
Kevin Whiteman
Chair of the nominations committee
14 June 2023
135
GOVERNANCEwww.severfield.comStock Code: SFR DIRECTORS’
REPORT
The directors present their report together with the audited consolidated financial
statements for the year ended 25 March 2023.
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
105, 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 118 to 129 is incorporated in this
report by reference.
After the balance sheet date, but prior to
approval of the annual report, Severfield
completed the acquisition of Voortman
Steel Construction Holdings B.V. (‘VSCH’).
See note 28 for further details.
Directors
The present membership of the board is
set out on pages 110 to 113.
The chairman has no other significant
commitments.
The service agreements of the executive
directors and the letters of appointment
of the non-executive directors are
available for inspection at the Company’s
registered office. Brief details are also
included in the directors’ remuneration
report on page 152.
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
MARK SANDERSON
GROUP LEGAL DIRECTOR AND
COMPANY SECRETARY
The directors present their report
together with the audited consolidated
financial statements for the year ended
25 March 2023.”
136
Severfield plc Annual report and accountsfor the year ended 25 March 2023 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.
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
25 March 2023, there were 309,538,321
ordinary shares in issue and fully paid.
Further details relating to share capital,
including movements during the year,
are set out in note 23 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
22. No shareholder holds shares in the
Company which carry special rights with
regard to control of the Company. There
are no shares relating to an employee
share scheme which have rights with
regard to control of the Company that
are not exercisable directly and solely
by the employees.
Voting rights and restrictions on
transfer of shares
All of the issued and outstanding
ordinary shares of the Company have
equal voting rights, with one vote per
share. There are no special control
rights attaching to them save that the
control rights of any ordinary shares
held in the EBT can be directed by
the Company to satisfy the vesting of
outstanding awards under its various
employee share plans. In relation to
the EBT and any unallocated Company
shares held in it, the power to vote or
not vote is at the absolute discretion of
the trustee.
Significant shareholdings
As at 1 June 2023, 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
M&G Investment Management Ltd
Chelverton Asset Management
JO Hambro Capital Management
Unicorn Asset Management
Threadneedle Asset Management Ltd
Invesco (including Perpetual & Trimark)
Ordinary
2.5p share
28,969,891
24,513,305
24,030,296
22,000,000
16,910,396
16,373,939
%
9.36
7.92
7.76
7.11
5.46
5.29
The Company is not aware of any
agreements or control rights between
existing shareholders that may result
in restrictions on the transfer of
securities or on voting rights. The rights,
including full details relating to voting
of shareholders and any restrictions
on transfer relating to the Company’s
ordinary shares, are set out in the
articles and in the explanatory notes
that accompany the Notice of the
2023 AGM.
Powers for the Company to buy back
its shares and to issue its shares
At the Company’s annual general
meeting (‘AGM’) held on 8 September
2022, 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 2023
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 8 September 2022, 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 2023 AGM (or, if
earlier, until the close of business on 30
September 2023).
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 8 September 2022, 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
137
GOVERNANCEwww.severfield.comStock Code: SFR DIRECTORS’
REPORT
ordinary share capital. These authorities
apply until the end of the 2023 AGM (or, if
earlier, until the close of business on
30 September 2023). During the period,
the directors did not use these powers.
Dividends
The directors declared an interim
dividend for the six months ended 24
September 2022 of 1.3p per ordinary
share (2022:1.2p 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 55.
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.
Employment policies
The company gives full and fair
consideration to applications for
employment by disabled persons where
the candidates aptitude and abilities
adequately meet the requirements of
the role. It is the Company’s policy to
provide continuing development of, and
to arrange appropriate training wherever
practicable where an existing employee
becomes disabled. The company also
provides equal opportunities for the
training, career development and
promotion of disabled persons.
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 126 and 127
• Respect for human rights – page 91
• Social matters – page 51
• Equal opportunities (including for the
disabled) – page 138
• Environmental matters – pages
58 to 91
• Greenhouse gas emissions – pages
79 to 81
• Long-term incentive plans – page 157
of the directors’ remuneration report
• Statement of directors’ interests
– page 158 of the directors’
remuneration report
• Financial instruments – note 21 to the
Group financial statements
138
• Credit, market, foreign currency and
liquidity risks – note 21 to the Group
financial statements
• Related party disclosures – note 30 to
the Group financial statements
• TCFD recommendations – pages
159 to 161
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 25
March 2023. KPMG LLP has expressed
its willingness to continue in office
as external auditor and a resolution
to appoint it will be proposed at the
forthcoming AGM.
Annual general meeting
The notice concerning the AGM
on Wednesday 6 September 2023,
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 136 to
138 inclusive was approved by the board
and signed on its behalf by:
Mark Sanderson
Company secretary
14 June 2023
Severfield plc Annual report and accountsfor the year ended 25 March 2023 139
GOVERNANCEwww.severfield.comStock Code: SFR DIRECTORS’
REMUNERATION REPORT
This year we undertook a thorough review of our remuneration policy and incentive
framework for executive directors and the senior management team to ensure
that they support the Group’s long term strategic objectives and purpose and are
competitively positioned. This included consultation on proposed changes with the
top 10 shareholders and proxy voting agencies. We also completed the alignment of
executive pension contributions with the wider workforce.
Dear shareholder
As chairman of the remuneration
committee, I am pleased to present our
directors’ remuneration report (the ‘report’)
for the year ended 25 March 2023.
The report is split into the following
two sections:
• Part 1, the remuneration policy
report, which is being submitted to a
shareholder vote at the forthcoming
AGM on 6 September 2023 as part
of our regular three-year cycle, and
which sets out the remuneration
policy for the executive and non-
executive directors; and
• Part 2, the annual report on
remuneration, which discloses
how the remuneration policy was
implemented for the year ended
25 March 2023 and how it will be
implemented for the year ending
30 March 2024. The annual report
on remuneration will be subject to
an advisory shareholder vote at the
forthcoming AGM.
I will be retiring from the board shortly
and will be succeeded as committee
chair by Louise Hardy who is a well-
established member of the board and
remuneration committee and is currently
our workforce engagement director.
Remuneration policy review
This year the committee undertook a
thorough review of our remuneration
policy and incentive framework for
executive directors and the senior
management team to ensure they
support the Group’s long term
strategic objectives and purpose
and are competitively positioned.
The committee consulted with its 10
major shareholders (representing
approximately 61 per cent of the
Company’s issued share capital) and
three proxy voting agencies. After
careful consideration and confirming
support from major shareholders, the
committee proposes two key changes to
the remuneration policy.
ALUN GRIFFITHS
CHAIR OF THE
REMUNERATION
COMMITTEE
Number of meetings
4
Members
Alun Griffiths (Chair)
Kevin Whiteman
Tony Osbaldiston
Louise Hardy
Rosie Toogood
Mark Pegler (from his appointment in October 2022)
2023 key achievements
• Reviewing the remuneration policy and incentive
framework.
• Full alignment of executive pension contributions
with the wider workforce.
• Assessed performance against the bonus targets
and the PSP targets for the year ended 25
March 2023.
• Oversaw further remuneration package
improvements for the wider workforce.
140
Severfield plc Annual report and accountsfor the year ended 25 March 2023 1. Replace the current PSP with a
restricted share plan
The committee believes that restricted
shares alongside an annual bonus
arrangement will better support our
high-performance culture and is
the right approach for Severfield. In
particular:
• Restricted shares provide a
more meaningful approach to
incentivising the delivery of long-
term sustainable performance
and protecting shareholder value
throughout the industry cycle and
enabling participants to build up
their shareholding – therefore further
promoting effective stewardship of
the business.
• As a business, we will need to flex our
financial and non-financial priorities
in order to continue to deliver long
term sustainable returns in an
uncertain macro and geo-political
environment. This incentive structure
provides the committee with an agile
means of incentivising against key
financial and non-financial priorities
(through the annual bonus), which
ultimately support the long-term
success of the business.
• It is a simpler and more transparent
incentive structure.
2. Increase the maximum annual bonus
opportunity from 100 per cent to 125
per cent of salary
A maximum bonus opportunity of
100 per cent of salary has been in
place for over nine years. Under the
direction of the leadership team,
the Group continues to successfully
deliver against its sustainable growth
strategy, enhancing its UK and European
order book with a broad diversity of
sectors, geographies and clients. This
includes moving into the nuclear and
infrastructure market following the
acquisitions of Harry Peers in 2019 and
DAM Structures in 2021, making the
strategically significant acquisition in
Europe of Voortman Steel Construction
in 2023, building a modular offering,
and continued development of its
operations in India. Over the last five
years, the Group has delivered 16 per
cent CAGR in revenue and 15 per cent
CAGR in order book . Furthermore, the
Group is well positioned to continue
to build on this success. This has
undoubtedly resulted in an increase in
the Group’s size and complexity over
recent years.
With this in mind, and to ensure that
the remuneration arrangements
remain competitive against both FTSE
SmallCap companies of a similar size
and complexity and industry peers, the
maximum bonus opportunity under
the new policy has been increased to
125 per cent of salary for all executive
directors. We will also be including an
ESG metric alongside our health and
safety bonus target.
141
GOVERNANCEwww.severfield.comStock Code: SFR DIRECTORS’
REMUNERATION REPORT
Overview of changes to the incentive framework
Current policy
Proposed approach under new policy
ANNUAL BONUS
Maximum
opportunity
Deferral
100 per cent of salary.
50 per cent of amount
earned is deferred into
shares for three years.
LONG TERM INCENTIVE
Form of award PSP awards
Maximum
opportunity
Awards in recent years
have been granted at
100 per cent of salary
for the Chief Executive
Officer and Chief
Operating Officer and
75 per cent of salary
for the Chief Financial
Officer and Managing
director of JSSL. Overall
maximum opportunity of
150 per cent of salary.
Timeframe
Performance
Three year performance
period, two year holding
period.
Awards granted in recent
years have been subject
to EPS performance.
Increased maximum opportunity to 125 per cent of salary.
Maintain the current level of deferral in absolute terms. Meaning that, when considered
alongside the increase in maximum opportunity to 125 per cent of salary, 40 per cent of
any bonus earned is deferred into shares for three years. I.e. if the maximum bonus is
earned, 50 per cent of salary is deferred (40 per cent of 125 per cent of salary).
Rationale: The committee considers that this approach is appropriately aligned with
market practice (circa 40 per cent of FTSE SmallCap companies that operate bonus
deferral require at least one third but less than one half of any bonus to be deferred).
Additionally, until the shareholding guideline of 200 per cent of salary has been met,
executive directors are required to retain all shares from deferred bonus awards and
long term incentive awards that vest (net of tax).
Restricted share awards
Awards granted to executive directors in 2024 will be equal to 50 per cent of salary.
Rationale: The committee is mindful of market practice and shareholder
expectations as regards setting restricted share award levels at 50 per cent of the
maximum PSP opportunity. However, the committee considers that the maximum
PSP opportunity granted to the Chief Financial Officer and Managing director of
JSSL in recent years is below the lower end of market practice compared to FTSE
SmallCap companies of a similar size and complexity and industry peers. Therefore,
in 2023, all executive directors will be granted restricted share awards equal to 50
per cent of salary which represents a 50 per cent discount to the face value of PSP
awards recently granted to the Chief Executive Officer and Operating Officer, and
provides alignment across the executive director cohort.
Overall maximum opportunity of 75 per cent of salary.
Rationale: Represents a 50 per cent discount to the overall maximum PSP opportunity
under the current policy. Ensures that there is flexibility during the three year policy
period to provide competitive remuneration packages taking into account the size
and complexity of the Group and potential changes to business needs. Should the
committee propose an increase in the award level (i.e. above 50 per cent of salary)
during the life of the policy, we will engage with shareholders as appropriate.
Three year vesting period, two year holding period.
Awards will be subject to underpins based on the financial stability of the business,
sustainability of the Group’s underlying performance, risk management, safety
performance and ESG performance.
Impact of changes on total
compensation
The committee has been mindful of
the impact of the proposed changes
on the value of the executive directors’
remuneration packages. Following
the proposed changes, the executive
directors’ total target compensation
opportunities are broadly positioned
between the lower quartile and median
compared to FTSE SmallCap companies
of a similar size and complexity and
industry peers.
The committee is also mindful that
salary positioning for the Chief
Executive Officer and Chief Financial
Officer is positioned towards the lower
end of market practice compared to
FTSE SmallCap companies of a similar
size and complexity and industry peers
and the committee will keep this under
review during the life of the policy.
Remuneration for the wider workforce
Incentives and benefits provision for the
wider workforce were reviewed in 2022
and 2023 with the aim of achieving a
more consistent offering. Key changes
were as follows:
• The number of employees
participating in the annual bonus
has increased by circa 63 per cent.
Participants now include directors,
senior managers and selected
employees in specialist critical roles.
• Employees who do not participate
in the annual bonus receive a
discretional £750 payment in the
December payroll.
142
Severfield plc Annual report and accountsfor the year ended 25 March 2023 • The number of employees who
receive Private Medical Insurance has
increased by circa 69 per cent.
• The employer pension opportunity
available to the wider workforce has
recently been increased to 7 per cent
of salary, which is now aligned to
executive directors.
• All employees are currently paid at or
above the Real Living Wage.
A number of these points were raised
and discussed at the ‘MyVoice’ forum.
Performance and reward 2023
The Group has delivered on strategic and
operational priorities during the year
resulting in strong financial performance
and a robust forward order book. The
Group continues to strengthen its
presence in new markets and is well
positioned to optimise longer term
growth opportunities. This is testament
to the quality and commitment of our
executive leadership team.
Annual bonus outcome
Executive directors were granted an
annual bonus opportunity equal to 100
per cent of salary. 80 per cent of the
award was based on underlying PBT2
performance and 20 per cent based on
safety performance.
The Group achieved underlying PBT of
£32.5m which was above the maximum
bonus target and this element will pay
out in full. Notwithstanding our very
strong safety performance relative to the
sector in which we operate, with rates
well below the industry average, the
stretching IFR targets set for FY23 for
the Group were not met and this element
of bonus will not pay out. The UK based
executives therefore earned a bonus
of 80 per cent of salary, 50 per cent of
which is deferred into shares for
three years.
Derek Randall, as MD of JSSL, is
assessed on Group underlying PBT
and JSSL PBT (split 50:50) and JSSL
AFR in relation to safety performance.
JSSL PBT was on target and JSSL AFR
was above the maximum bonus target.
Therefore, Derek Randall earned a
bonus equal to 81 per cent of salary, 50
per cent of which is deferred into shares
for three years.
See page 155 for details
PSP vesting
Awards were granted on 18 December
2020 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 grant of the awards was deferred by
circa six months due to the uncertainty
caused by the COVID-19 pandemic. The
awards were subject to EPS targets for
the year ended 25 March 2023, which at
the time were considered appropriate
in the uncertain economic climate that
prevailed. The Group achieved EPS of
8.48p which was above the maximum
target of 8.36p. The awards will
therefore vest in full in December 2023.
Vested shares will be subject to a two
year holding period. See page 155
for details.
The Committee considers the vesting
outcome of the annual bonus and PSP
awards to be appropriate, recognising
that the Group has continued to
perform strongly, both financially and
strategically, in a challenging economic
environment over the last three years.
Furthermore, in respect of the PSP
awards, the Committee is satisfied that
no adjustment for potential windfall
gains is required taking into account the
share price at grant and current share
price. No discretion has therefore been
applied by the committee to adjust the
formulaic vesting outcome of the annual
bonus or PSP awards.
Implementation of policy for 2024
Base salaries and fees
Salaries for the executive directors were
reviewed in June 2023 and have been
increased by 5 per cent. The overall
salary increases for the wider workforce
ranged from 5-7 per cent of salary.
The chairman and non-executive
director fees are currently under review.
Annual bonus
The maximum annual bonus opportunity
will be 125 per cent of salary for
all executive directors. Given the
Group’s focus on sustainability, an
ESG performance metric has been
introduced alongside the underlying
PBT and safety performance metrics. 80
per cent of the annual bonus is subject
to PBT performance, 15 per cent is
subject to safety performance and 5 per
cent is subject to ESG performance.
Restricted share awards
It is the committee’s intention to grant
restricted share awards at 50 per cent
of salary to all executive directors,
subject to shareholder approval of this
change in policy. Awards will vest after
three years subject to the satisfaction of
performance underpins. Vested awards
will be subject to a two year holding
period. Details of the performance
underpins are set out on page 147.
Conclusion
The committee greatly appreciates the
feedback and level of support received
from shareholders regarding the
remuneration policy review. We strongly
believe that the proposed changes are
in the best interests of the business and
its shareholders.
We remain committed to a responsible
approach to executive pay. We believe
that the policy operated as intended
in respect of the financial year ended
25 March 2023 and consider that
the remuneration received by the
executive directors was appropriate
taking into account Group and personal
performance, and the experience of
shareholders and employees.
I look forward to answering any
questions shareholders might have, and
your continued support.
Alun Griffiths
Chairman of the remuneration
committee
14 June 20231
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.
2 A reconciliation of APMs is provided in
note 31.
143
GOVERNANCEwww.severfield.comStock Code: SFR DIRECTORS’
REMUNERATION REPORT
Part 1 – Remuneration policy
This section of the report sets out the
proposed directors’ remuneration policy
(‘policy’). This policy will be put forward
to shareholders for their approval at
the AGM on 6 September 2023 and, if
approved, will be effective from this
date. It is intended that the policy will
remain in place until the 2026 AGM.
The Annual Report on Remuneration
details how the existing directors’
remuneration policy has been
implemented over FY23 and how the
policy will be implemented in FY24.
Decision making process
The committee has undertaken
a comprehensive review of the
remuneration policy to ensure that
it continues to incentivise executive
directors and senior management to
achieve the Group’s strategic objectives
and deliver long-term sustainable
returns to shareholders. In determining
the changes to the remuneration
policy the committee followed a robust
process which included discussions on
the content of the remuneration policy
and remuneration structure at three
committee meetings. The committee
considered input from management and
our independent advisers and consulted
with major shareholders. Management
did not take part in any decision making
discussions as regards changes to
the remuneration policy in order to
avoid any conflicts of interest. The key
changes to the remuneration policy are
set out on page 141.
How the committee addressed the factors in Provision 40 of the UK Corporate Governance Code
The committee ensures that the remuneration structure for executive directors is aligned with our key remuneration principles,
which incorporate the principles of clarity, simplicity, risk, predictability, proportionality and alignment to culture set out in the
2018 UK Corporate Governance Code.
Clarity and
simplicity
We operate a simple and transparent remuneration framework, made up of three key elements: fixed pay
(including base salary, benefits and pension); annual bonus; and the Restricted Share Plan.
Alignment to
strategy and
culture
Risk is
appropriately
managed
The structure is simple to understand both for participants and shareholders.
The remuneration structure supports the Group’s business strategy through a balanced mix of short and
long-term performance related pay.
The remuneration principles encourage behaviours expected of executive directors in terms of setting the
standards and promoting a healthy culture across the Group.
Annual bonus opportunities and targets are positioned to reward strong performance, but not to encourage
inappropriate business risk taking.
Executive directors are subject to within-employment and post-employment shareholding guidelines to
further support sustainable decision making.
Malus and clawback provisions apply to annual bonus and restricted share awards and the committee has
the means to apply discretion and judgement to vesting outcomes.
Proportionality A significant proportion of executive remuneration is linked to performance through the incentive framework,
with a clear line of sight between performance against the selected performance conditions and the delivery
of long-term shareholder value. Performance conditions and the underlying targets for the annual bonus
are reviewed by the committee each year to ensure that they are directly aligned with the Group’s strategic
priorities.
Predictability
Through the all-employee share plans we encourage and enable long-term share ownership for all employees,
supporting the long-term nature of our business and its returns.
The ‘illustration of the application of the policy’ chart on page 149 indicates the potential values that may be
earned through the remuneration structure.
144
Severfield plc Annual report and accountsfor the year ended 25 March 2023 Policy table for executive directors
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.
The salary review takes into account the levels of increase across the broader workforce,
changes in responsibility, Group and personal performance and a periodic remuneration
review of comparable companies.
Maximum opportunity
There is no prescribed maximum base salary or salary increase.
Salary increases (in percentage of salary terms) will ordinarily be considered in relation to
those applied to the broader workforce. The committee retains discretion to award higher
increases in certain circumstances including, but not limited to: significant changes in
the scope and/or responsibilities of the role; a material change in the size and scale of
the Group; an executive director’s development or performance in role (e.g. to align a new
appointment’s salary with the market over time); and/or to take account of relevant market
movements.
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
Benefits include, but are not limited to: life assurance at four times salary; medical
insurance for self with option to purchase for family; and company car and fuel allowance.
Relocation expenses may be offered if considered appropriate and reasonable by the
committee.
In circumstances where an executive director 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 offer executive directors other employee benefits on broadly similar
terms as those offered to other employees from time to time. This includes participation
in any all-employee share plans operated by the Group, in line with the prevailing tax
legislation and 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 normally 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
None, although the committee
considers individual salaries each
year having regard to the factors
noted in the ‘operation’ section.
Performance conditions
No performance conditions apply
to benefits.
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REMUNERATION REPORT
PENSION
Purpose and link to strategy
To provide an appropriate level of retirement benefit.
Operation
Group contribution to defined contribution scheme (own or the Group’s), a cash
supplement or a combination of both.
Maximum opportunity
The maximum pension contribution or cash supplement (or combination of both) for
executive directors is aligned with the contribution available to the wider workforce
(currently 7 per cent of salary).
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 performance conditions (typically measured over a financial year)
set by the committee usually at the beginning of each financial year.
Up to 60 per cent of any amount earned is paid in cash with the remainder deferred into
shares for three years.
Dividends may accrue on deferred bonus shares. Any dividend equivalents would normally
be delivered in shares.
Malus and clawback provisions apply (see table on page 147).
Maximum opportunity
Maximum opportunity of up to 125 per cent of base salary in respect of a financial year.
Performance conditions
No performance conditions apply
to pension.
Performance conditions
At least 50 per cent of the annual
bonus will be based on financial
performance conditions.
The committee will review the
appropriateness of performance
conditions on an annual basis
taking into account the business
objectives and strategy at the
time.
For financial performance
conditions, vesting will normally
apply on a scale between 0 per
cent and 100 per cent with up to
50 per cent vesting for on-target
performance.
For non-financial performance
conditions, vesting will normally
apply on a scale between 0 per
cent and 100 per cent based on
the committee’s assessment of
the extent to which the relevant
condition has been met.
The committee has discretion
to adjust the bonus outcome if
it is not deemed to reflect the
underlying performance of the
Group, the performance of the
individual or the experience of
shareholders or employees during
the performance period.
146
Severfield plc Annual report and accountsfor the year ended 25 March 2023 RESTRICTED SHARE PLAN (‘RSP’)
Purpose and link to strategy
Reward for long-term sustainable performance and provide alignment with shareholders’
interests.
Operation
Annual awards will be granted in the form of nil-cost share options or conditional share
awards.
Awards are subject to continued service and the achievement of performance underpins
normally measured over a three-year period. The awards will vest following the
assessment of the performance underpins.
Vested awards will be subject to a two-year post-vesting holding period.
Dividends may accrue on awards. Any dividend equivalents would normally be delivered
in shares.
Malus and clawback provisions apply (see table on page 147).
Maximum opportunity
Maximum opportunity of up to 75 per cent of base salary in respect of a financial year.
For the year ending 30 March 2024, the maximum opportunity will be equal to 50 per cent
of base salary for each executive director.
Performance underpins
Performance underpins are
determined by the committee on an
annual basis.
If one or more of the performance
underpins are not achieved,
the committee will assess an
appropriate reduction to the vesting
outcome.
In addition, the committee has
discretion to reduce the vesting
outcome if it is not deemed to
reflect the underlying performance
of the Group, the performance of
the individual or the experience of
shareholders or employees during
the vesting period.
SHAREHOLDING GUIDELINES
Purpose and link to strategy
To strengthen the alignment between the interests of the executive directors and those of shareholders.
Operation
Within-employment
Executive directors are expected to build up and retain a shareholding equal to 200 per cent of salary. Executive directors
are required to retain shares acquired under equity incentive schemes, net of tax, until such time as they have built up the
expected holding.
Post-employment
Executive directors who step down from the Board are normally expected to retain a shareholding in ‘guideline shares’ equal to
200per cent of salary (or their actual shareholding at the point of stepping down if lower) for two years following stepping down
from the Board.
‘Guideline shares’ do not include shares that the executive director has purchased, shares that have been acquired under all-
employee share plans or shares that have been acquired pursuant to the vesting of performance share plan awards or deferred
bonus awards granted prior to 1 April 2020.
The committee retains discretion to waive this guideline if it is not considered appropriate in the specific circumstances.
Notes on policy table
Malus and clawback
Malus and clawback provisions apply to annual bonus, deferred bonus awards and restricted share awards over the following
time periods:
Annual bonus
Deferred bonus awards
Malus
To such time as payment is made.
To such time as the award vests.
Restricted share awards
To such time as the award vests.
Clawback
Up to three years following payment.
No clawback provisions apply (as malus provisions
apply for three years from the grant of the award).
Up to three years following vesting.
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REMUNERATION REPORT
Malus and clawback may apply in the following circumstances:
• Material misstatement of financial results.
• The bonus outcome or the number of shares granted or vesting under deferred bonus awards or restricted share awards was
based on error, inaccurate or misleading information.
• Substantial failure of risk control.
• Serious misconduct by the participant.
• Corporate failure.
• The Group suffers a material downturn in its financial or operational performance which is at least partly due to a material
failure in the management of the Group to which the individual made a material contribution.
• The Group suffers reputational damage which is at least partly due to a material failure in the management of the Group to
which the individual made a material contribution.
• Other exceptional circumstances as determined by the committee.
Choice of performance conditions
The performance conditions for the annual bonus reflect the Group’s annual financial and strategic priorities. The annual bonus
currently incorporates an underlying PBT, ESG and health and safety performance condition. Targets are set taking into account
the Group’s internal financial forecasts and ESG and health and safety performance expectations at the start of the financial
year. This reflects our commitment to maintaining a safe working environment for our people, our commitment to achieving our
emission reduction targets and our wider commitments to society.
The committee will review the performance underpins for restricted share awards on an annual basis to ensure that
they continue to safeguard the financial stability of the business and provide sufficient focus on strategic priorities, ESG
performance and regulatory compliance. Performance underpins will ordinarily be qualitative, and the committee will use its
judgement to assess “in the round” whether the level of vesting is appropriate having regard to the underpins and underlying
financial and operational performance. The performance underpins applying to the 2023 restricted share awards are set out on
page 147.
No performance targets are set for any 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.
The discretions retained by the committee in operating the annual bonus and the RSP
The committee will operate the annual bonus (including the deferred share element) and the RSP according to their respective
rules. The committee retains certain discretions, consistent with market practice, relating to the operation and administration
of these plans, including:
• The timing of the grant and/or vesting of awards.
• The quantum of awards (up to plan and policy limits).
• The determination of performance conditions, underpins and targets and resulting vesting levels.
• The determination of the treatment of individuals who leave employment and the treatment of awards in exceptional events
such as a change of control of the Company.
• The ability, in exceptional circumstances, to settle share-based awards in cash (for example, where share settlement is not
feasible due to regulatory restrictions).
• The ability to adjust or set different performance conditions or targets if events occur (such as a change in strategy, a
material acquisition and/or divestment of a Group business or a change in prevailing market conditions) which cause the
committee to determine that the performance conditions and/or targets are no longer appropriate and the amendment is
required so that they achieve their original purpose and are not materially less difficult to satisfy.
• The ability to make adjustments to existing awards in the event of a variation in share capital or a demerger, delisting, special
dividend or other exceptional event that may affect the Company’s share price.
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.
148
Severfield plc Annual report and accountsfor the year ended 25 March 2023 Legacy arrangements
The committee retains discretion to make any remuneration payment and/or payment for loss of office, to exercise any
discretion available in relation to such payment, notwithstanding that it is not in line with this policy where the terms of the
payment were agreed:
• Before 2 September 2014 (the date that the Company’s first shareholder approved remuneration policy came into effect).
• Before this policy came into effect (provided that the terms of the payment were consistent with the shareholder approved
remuneration policy in effect at the time the terms were agreed).
• At a time when the relevant individual was not a director of the Company and, in the opinion of the committee, the payment
was not in consideration of the individual becoming a director of the Company.
For these purposes, ‘payments’ includes the satisfaction of variable remuneration and, in relation to an award over shares, the
terms of the payment are ‘agreed’ no later than at the time the award is granted.
The executive directors’ legacy arrangements include unvested deferred bonus awards and performance share plan awards
(see page 156).
Illustration of application of the policy
The remuneration package comprises core fixed pay (base salary, benefits and pension) and performance based variable
pay (annual bonus and restricted share awards). The chart below illustrates the composition of the executive directors’
remuneration packages under the policy for minimum, target and maximum performance.
1,400,000
1,200,000
1,000, 000
800,000
600,000
400,000
£847,151
24%
29%
£398,659
900,000
£1,195,978
800,000
£1,098,313
18%
8%
17%
45%
42%
700,000
600,000
500,000
400,000
£749,231
£817,343
8%
18%
17%
45%
42%
£578,951
24%
29%
300,000
£272,448
200,000
100,000
0
100%
47%
36%
33%
Maximum
plus 50%
share price
growth
Below
threshold
Target
Maximum
Maximum
plus 50%
share price
growth
200,000
100%
47%
36%
33%
0
Below
threshold
Target
Maximum
Chief executive officer
Chief financial officer
Fixed
Annual bonus
RSP
Share price growth
The following assumptions have been made:
• Minimum — Fixed pay only with no vesting under the annual bonus or RSP.
• Target — Fixed pay plus a bonus outcome of 50 per cent of maximum opportunity (for 2024, 62.5 per cent of salary) and RSP
vesting in full (for 2024, 50 per cent of salary).
• Maximum – Fixed pay plus a maximum bonus outcome (for 2024, 125 per cent of salary) and RSP vesting in full (for 2024, 50
per cent of salary).
• Maximum plus 50 per cent share price appreciation: illustrating the effect of a 50 per cent growth in the Company’s share
price on the value of the restricted share awards.
Fixed pay comprises:
• Salaries effective as at 1 July 2023.
• Benefits received by each executive director in respect of 2023.
• Pension opportunity for 2024.
The scenarios for minimum, target and maximum performance do not include any share price growth.
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REMUNERATION REPORT
Executive directors’ service agreements and compensation for departure from office
All executive directors’ service agreements run on a rolling basis. Notice periods of 12 months are required to be given by either
party. Full details of the service agreements for each director are available from the Company secretary at the AGM.
The principles on which the determination of compensation for departure from office will be approached are set out below.
Provision
Payments in
lieu of notice
Policy
Service agreements include a payment in lieu of notice clause which provides that payments may be made
based on the value of base salary that would have accrued over the 12 month notice period or unexpired
proportion of the notice period.
Annual bonus
Payments in lieu of notice are subject to mitigation.
Discretionary payment based on the circumstances of the termination and after assessing performance
conditions and normally only for the service period worked.
The committee has discretion to pay the whole of any bonus earned for the year of departure and/or
preceding year in cash in appropriate circumstances.
The extent to which any unvested awards will vest will be determined in accordance with the Deferred Share
Bonus Plan (DSBP) rules.
Deferred bonus
award
Unvested awards will lapse where departure is by reason of dismissal for misconduct, fraud, performance
issues, taking up alternative employment at a competitor or for any other reason at the committee’s
discretion.
Where unvested awards do not lapse on departure, they will normally vest on the normal vesting date (other
than in exceptional circumstances (for example death) when vesting will be as soon as practicable following
departure).
The extent to which any unvested award will vest will be determined in accordance with the Severfield
Performance Share Plan rules.
Restricted
Share Plan
Unvested awards will normally lapse on departure. However, if the executive director departs as a good leaver
(death, injury or disability, retirement, the sale of the business or company that employs the individual or for
any other reason at the committee’s discretion), their unvested awards will vest on the normal vesting date
(other than in the case of exceptional circumstances (for example death) when vesting will be as soon as
practicable following departure). To the extent that the award vests, a two year holding period would then
normally apply (although no holding period will apply in exceptional circumstances).
Vesting will depend on the extent to which the performance underpins have been satisfied and will normally
be subject to a pro-rata reduction to reflect the proportion of the vesting period served (although the
committee has discretion to disapply time pro-rating if the circumstances warrant it).
Deferred bonus awards will normally vest in full in the event of a change of control.
Restricted share awards will normally vest in the event of a change of control. The level of vesting will be
determined taking into account the extent to which the performance underpins have been satisfied at the
date of the relevant event and will be subject to a pro-rata reduction to reflect the proportion of the vesting
period served (although the committee has discretion to disapply time pro-rating if the circumstances
warrant it).
In appropriate circumstances, payments may also be made in respect of items such as accrued holiday,
outplacement and legal fees.
Change of
control
Other
payments
The vesting of sharesave awards will be determined in accordance with the plan rules.
The committee will have the authority to settle any legal claims made against the Company in connection
with the departure.
150
Severfield plc Annual report and accountsfor the year ended 25 March 2023 Recruitment remuneration policy
The remuneration of a new executive director will normally include base salary, benefits, pension and participation in the
annual bonus and RSP in accordance with the policy table for executive directors. The committee also has discretion to include
other remuneration elements which it considers appropriate taking into account the specific circumstances of the recruitment,
subject to the principles and limits set out below. The key terms and rationale for any such element would be disclosed in the
Annual Report on Remuneration for the relevant year.
Element
Base salary
Policy
Base salary levels will be set taking into account the experience and calibre of the individual and the relevant
market rates at the time.
Where it is appropriate to offer a lower salary initially, progressive increases (possibly above those of the
wider workforce as a percentage of salary) to achieve the desired salary positioning may be given over the
following few years subject to individual performance and continued development in the role.
Benefits
Salary will be considered in the context of the total remuneration package.
Benefits will be provided in line with those offered to other employees, with relocation expenses/
arrangements provided for if necessary.
Should it be appropriate to recruit a director from overseas, flexibility is retained to provide benefits that take
account of those typically provided in their country of residence (e.g. it may be appropriate to provide benefits
that are tailored to the unique circumstances of such an appointment).
Pension contributions or a cash supplement (or a combination of both) up to the maximum level indicated in
the policy table will be provided, although the committee retains the discretion to structure any arrangements
as necessary to comply with the relevant legislation and market practice if an overseas director is appointed.
The maximum level of variable remuneration which may be awarded to new executive directors, excluding the
value of any buy-out arrangements, will be in line with the limits sets out in policy table.
Pension
Variable
remuneration
The committee may apply different performance conditions, performance periods and/or vesting periods
for initial awards made following appointment under the annual bonus and/or RSP, if it determines that the
circumstances of the recruitment merit such alteration.
If an executive director is appointed at a time in the year when it would be inappropriate to provide an
annual bonus or restricted share award for that year, subject to the limits on variable remuneration set out
in the policy table, the quantum in respect of the period employed during the year may be transferred to the
subsequent year.
The committee may offer additional cash and/or share-based elements to replace deferred or incentive
pay forfeited by an executive director leaving a previous employer when it considers these to be in the
best interests of the Company and its shareholders. It will, where possible, ensure that these awards are
consistent with awards forfeited in terms of the form of award, vesting periods and expected value. Such
elements may be made under section 9.4.2 of the Listing Rules where necessary.
Other elements may be included in the following circumstances:
• An interim appointment being made to fill an executive director role on a short-term basis.
• If exceptional circumstances require that the chairman or a non-executive director takes on an executive
role on a short-term basis.
Buy-out
arrangements
Other
elements of
remuneration
In the case of an internal hire, any ongoing remuneration commitments or variable pay awarded in relation to the previous role
will be allowed to continue according to its terms of grant (adjusted as relevant to take into account the Board appointment).
On the appointment of a new chairman or non-executive director, the fees will be set taking into account the experience and
calibre of the individual and the expected time commitments of the role.
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REMUNERATION REPORT
External appointments
The Board is supportive of executive directors accepting appropriate outside commercial non-executive director appointments
provided the aggregate commitment is compatible with their duties as executive directors. The executive directors concerned
may retain fees paid for these services, which will be subject to approval by the board.
Policy table for chairman and non-executive directors
FEES AND BENEFITS
Purpose and link to strategy
To attract and retain a high-calibre chairman and non-executive directors by offering market competitive fee levels.
Operation
The chairman and the non-executive directors receive a basic board fee, with supplementary fees payable for additional Board
/ committee responsibilities or exceptional time commitments.
The fee for the chairman is approved by the remuneration committee. The fees for the non-executive directors are approved by
the board, on the recommendations of the chairman and the Chief Executive Officer.
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 may take into
account changes in responsibility and/or time commitments.
Overall fees paid to the chairman and non-executive directors will remain within the limits set by the Company’s Articles of
Association.
The chairman and non-executive directors may be eligible to receive benefits linked to their duties. This includes, but is not
limited to, the reimbursement of any normal business-related expenses and any taxable benefit implications that may result.
The chairman and non-executive directors do not participate in any of the Group’s incentive arrangements or pension scheme.
Chairman and non-executive director letters of appointment
The chairman and non-executive directors are subject to re-appointment at each AGM. Notice periods of 1 month are required
to be given by either party. The chairman and non-executive directors are not entitled to any compensation on loss of office.
Kevin Whiteman
Louise Hardy
Alun Griffiths
Tony Osbaldiston1
Mark Pegler
Rosie Toogood
Date of letter
of appointment
16th June 2020
26th July 2019
1st October 2020
28th May 2014
3rd October 2022
15th June 2021
Letter of appointment expiry date
(subject to annual re-election
at each AGM)
31st July 2024
31st July 2028
5th September 2023
31st July 2023
4th October 2031
14th June 2030
1 Tony Osbaldiston will not be proposed for re-appointment at the 2023 AGM
Engaging with our shareholders
The committee engages directly with major shareholders where it considers there to be material changes to the remuneration
policy or executive remuneration framework. As part of the remuneration policy review, a comprehensive shareholder
consultation was undertaken and the committee carefully considered the feedback received from major shareholders and
proxy voting agencies as part of its decision making. The committee is very appreciative of the time taken by shareholders to
engage on the remuneration policy and is pleased with the level of support received.
Considerations of conditions and pay levels for workforce and workforce engagement on executive pay
In determining remuneration for executive directors, the committee takes account of general market conditions and pay levels
for the workforce as a whole. This includes reviewing 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 a sharesave scheme).
152
Severfield plc Annual report and accountsfor the year ended 25 March 2023 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 discuss how executive remuneration is aligned with the wider Company pay policy.
Part 2 – Annual remuneration report
In this section, we report on the implementation of our policy in the year ended 25 March 2023 as well as how the policy will
be implemented for 2024. 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 2023
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
Mark Pegler (since his appointment in October 2022)
Number of
meetings attended
4/4
4/4
4/4
4/4
4/4
3/3
The Group considers all members of the committee to be independent. Executive directors and the Group HR director 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.
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 25 March 2023 amounted to £69,650 (excluding VAT).
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REMUNERATION REPORT
Directors’ earnings for the 2023 financial year (audited)
Remuneration received by the directors
£000
Executives
Alan Dunsmore
Ian Cochrane
Derek Randall
Adam Semple
Non-executives
Kevin Whiteman
Alun Griffiths
Tony Osbaldiston
Louise Hardy
Rosie Toogood
Mark Pegler1
Salary
Fees Benefits2
Year ended 25 March 2023
Total
Fixed Pay
Bonus
Pension
LTIPs3
Total
Variable Pay
381
339
279
260
–
–
–
–
–
–
1,259
–
–
–
–
140
60
53
53
45
22
373
19
16
42
16
–
–
–
–
–
–
93
46
41
33
31
–
–
–
–
–
–
151
446
396
354
307
140
60
53
53
45
22
1,876
307
274
228
210
–
–
–
–
–
–
1,019
370
330
203
190
–
–
–
–
–
–
1,093
677
604
431
400
–
–
–
–
–
–
2,112
Total
1,123
1,000
785
707
140
60
53
53
45
22
3,988
1 Appointed 5 October 2022.
2 Taxable benefits include the provision of company cars, fuel for company cars, car allowances, accommodation and living allowances and private
medical insurance.
3 PSP awards granted in 2020 will in vest in full in December 2023 as the maximum EPS performance target was achieved (see page 155).
Directors’ earnings for the 2022 financial year (audited)
£000
Executives
Alan Dunsmore
Ian Cochrane
Derek Randall
Adam Semple
Non-executives
Kevin Whiteman
Alun Griffiths
Tony Osbaldiston
Louise Hardy
Rosie Toogood1
Salary
Fees Benefits2
Pension
Bonus LTIPs3
Year ended 26 March 2022
Total
Fixed Pay
369
328
270
252
–
–
–
–
–
1,219
–
–
–
–
140
60
53
53
36
342
19
16
40
16
–
–
–
–
–
91
70
49
46
43
–
–
–
–
–
208
458
393
356
311
140
60
53
53
36
1,860
63
56
111
43
–
–
–
–
–
273
–
–
–
–
–
–
–
–
–
–
Total
Variable Pay
63
56
111
43
–
–
–
–
–
273
Total
521
449
467
354
140
60
53
53
36
2,133
1 Appointed 15 June 2021
2 Taxable benefits include the provision of company cars, fuel for company cars, car allowances, accommodation and living allowances and private
medical insurance.
3 PSP award granted in 2019 lapsed in full.
Base salary increases received by the directors
The directors received a 4 per cent salary increase effective from 1 July 2022, which was in line with that received by our
colleagues (excluding those weekly paid in our factories). Due to a number of reviews of weekly pay rates across our factory
locations the average increase for this population was 11 per cent.
Past directors/loss of office payments (audited)
There have been no payments made to past directors or for loss of office during the year.
154
Severfield plc Annual report and accountsfor the year ended 25 March 2023 How pay linked to performance in 2023 (audited)
Bonus
Executive directors were granted an annual bonus opportunity equal to 100 per cent of salary. 80 per cent of the award was
based on underlying 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
Underlying Group
PBT*
Group IFR**
% of maximum
bonus
opportunity
Threshold
On-target
Maximum
Actual % of bonus
£27.1m
80%
20% above1.49
£28.5m
1.37 or less
£31.4m
1.25 or less
£32.5m
1.61
100%
0%
Payout as %
of salary
80%
0 %
80%
* For underlying Group PBT, ‘threshold’ represents 0 per cent, ‘on-target’ represents 50 per cent and ‘maximum’ represents 100 per cent 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.
Derek Randall (MD of JSSL)
Measure
Underlying Group
PBT *
JSSL (India) PBT*
JSSL (India) AFR**
% of maximum
bonus
opportunity
Threshold
On-target
Maximum
Actual % of bonus
40%
40%
20%
£27.1m
22.5 Cr
N/A
£28.5m
30.4 Cr
£31.4m
45.0 Cr
N/A At or below 0.08
£32.5m
30.6 Cr
0.00
100%
53%
100%
Payout as %
of salary
40%
21%
20%
81%
* Derek Randall’s profit based component is split 50:50 between underlying Group PBT and JSSL PBT. For underlying 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 0.08.
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
£307,400
£273,720
£228,123
£210,080
PSP awards vesting in respect of 2023
Awards were granted on 18 December 2020 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 grant of the awards was deferred by circa six
months due to the uncertainty caused by the COVID-19 pandemic.
The awards were subject to the achievement of an EPS performance condition measured over the three financial years ended
25 March 2023. Details of the EPS performance condition and performance outcome are set out below. The awards will vest in
December 2023 and vested shares will be subject to a two year holding period.
Threshold (25 % vesting)
Maximum (100 % vesting)
Actual performance
Vesting outcome
EPS for the year ended
25 March 2023
6.57p
8.36p
8.48p
100% of maximum
155
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REMUNERATION REPORT
Name
Alan Dunsmore
Ian Cochrane
Derek Randall
Adam Semple
Number
of shares
granted
529,809
472,133
291,210
271,739
Number
of shares
vesting
529,809
472,133
291,210
271,739
Dividend
equivalents1
61,882
55,145
34,013
31,739
Total value
of award on
vesting2
369,807
329,549
203,264
189,674
Amount of award attributable
to share price appreciation
since grant date
0%
0%
0%
0%
1 The 2020 PSP awards include dividend equivalent terms such that additional shares are awarded based on the value of dividends payable on the
number of vested shares between the grant date and vesting date. The value of the dividend equivalents has been calculated based on the period
between the grant date and 25 March 2023 but will be recalculated on vesting.
2 Calculated based on the three month average share price to 25 March 2023 (62.5p).
The Committee considers the vesting outcome of the annual bonus and PSP awards to be appropriate, recognising that the
Group has continued to perform strongly, both financially and strategically, in a challenging economic environment over the last
three years. Furthermore, in respect of the PSP awards, the Committee is satisfied that no adjustment for potential windfall
gains is required taking into account the share price at grant (69.0p) and the three month average share price to 25 March
2023 (62.5p). No discretion has therefore been applied by the Committee to adjust the formulaic vesting outcome of the annual
bonus or PSP awards.
Deferred bonus awards granted in 2023 (audited)
On 28 June 2022 the committee granted awards under the Group’s Deferred Share Bonus Plan to executive directors in relation
to the 2022 bonus outcome. The awards will vest on 28 June 2025, subject to continued employment.
Name
Alan Dunsmore
Ian Cochrane
Derek Randall
Adam Semple
Type
Nil–cost option
Nil–cost option
Nil–cost option
Nil–cost option
Number of
shares
50,116
44,633
88,512
34,254
Face value
of shares1 Vesting date
£31,323 28 June 2025
£27,896 28 June 2025
£55,320 28 June 2025
£21,409 28 June 2025
1 Face value calculated using the average mid-market share price for 24 and 27 June 2022 (62.5p).
PSP awards granted in 2023 (audited)
Awards were granted on 11 July 2022 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 at the time of grant equated to an underlying PBT
range of £31.5m to £38.0m for the financial year 2025. 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.
Type
Name
Alan Dunsmore Nil–cost option
Nil–cost option
Ian Cochrane
Nil–cost option
Derek Randall
Nil–cost option
Adam Semple
Number of
shares % of salary
100%
100%
75%
75%
634,076
564,604
348,144
325,000
Face value
(£)1
384,250
342,150
210,975
196,950
Performance
condition2
Performance
period
% vesting at
threshold
EPS
3 financial
years ending
29 March 2025
25%
1 Face value calculated based on the pre-grant date share price of 60.6p on 8 July 2022.
2 Performance conditions are based on EPS targets of 7.5p (minimum performance – 25 per cent vests) to 8.8p (maximum performance – 100 per cent
vests) with linear interpolation in between. This represents an underlying PBT range of £31.5m-£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. 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.
156
Severfield plc Annual report and accountsfor the year ended 25 March 2023 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
2019
2020
2021
2022
Vesting
date*
2022
2023
2024
2025
Performance
condition
EPS
EPS
EPS
EPS
2019
2020
2021
2022
2019
2020
2021
2022
2019
2020
2021
2022
2022
2023
2024
2025
2022
2023
2024
2025
2022
2023
2024
2025
EPS
EPS
EPS
EPS
EPS
EPS
EPS
EPS
EPS
EPS
EPS
EPS
Awards held
at 1 April
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
Awards
granted in
year
–
–
–
634,076
634,076
–
–
–
564,604
564,604
–
–
–
348,144
348,144
–
–
–
325,000
325,000
1,871,824
Awards
lapsed in
year
(490,196)
–
–
–
(490,196)
(436,835)
–
–
–
(436,835)
(269,433)
–
–
–
(269,433)
(231,092)
–
–
–
(231,092)
(1,427,556)
Awards
vested in
year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Awards held
at 25 March
2023
–
529,809
451,319
634,076
1,615,204
–
472,133
402,188
564,604
1,438,925
–
291,210
246,850
348144
886,204
–
271,739
231,481
325,000
828,220
4,768,553
Performance conditions are based on a range of EPS targets as follows:
2020 award1
2021 award2
2022 award3
Threshold
(25% vests)
6.57p
7.61p
7.50p
Maximum
(100% vests)
8.36p
9.92p
8.80p
1 Represents an underlying PBT range of £25.5m – £32.5m.
2 Represents an underlying PBT range of £30.0m – £40.0m.
3 Represents an underlying PBT range of £31.5m – £38.0m.
* Vesting date is June/July in the relevant years other than 2023 when it is December.
Statement of directors’ shareholding (audited)
As at 25 March 2023, all executive directors and their connected persons had a shareholding as follows:
Alan Dunsmore
Ian Cochrane
Derek Randall
Adam Semple
Shareholding
requirement1
200%
200%
150%
150%
Actual share ownership as a percentage of
shareholding requirement as at 25 March 20232
229%
391%
236%
59%
1 The proposed new policy is for all executive directors to have a shareholding requirement of 200 per cent of salary.
2 Value of actual share ownership was calculated with reference to the closing mid-market share price on 24 March 2023 of 61.9p. Actual share
ownership includes net of tax figures for DSBP shares granted but still within the three-year deferral period and / or unexercised.
157
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DIRECTORS’
REMUNERATION REPORT
Directors’ current shareholdings (audited):
The following table provides details on the directors’ beneficial interests in the Company’s share capital as at 25 March 2023.
Executives
Alan Dunsmore
Ian Cochrane
Adam Semple
Derek Randall
Non-executives
Kevin Whiteman
Alun Griffiths
Tony Osbaldiston
Louise Hardy
Rosie Toogood
Mark Pegler
Owned
shares1
Share
incentive
plan (SIP)2
Sharesave
scheme
DSBP3
PSP4
Total5
1,172,751
1,941,790
103,284
835,988
65,619
60,000
–
–
79,115
53,600
7,434
7,434
–
–
28,743
27,237
30,070
–
478,186
426,102
285,563
387,123
1,615,204
1,438,925
828,220
886,204
3,302,318
3,841,488
1,247,137
2,109,315
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
65,619
60,000
–
–
79,115
53,600
1
Includes shares owned by connected persons and excludes DSBP shares which have been granted but are either still within the three-year deferral
period or which consist of unexercised options.
2 SIP shares are unvested and held in trust.
3 The figures consist of the gross number of unexercised nil cost share options and the principal terms of the deferred share bonus plan are described on
page 156.
4 PSP shares are in the form of conditional awards which will only vest on the achievement of certain performance conditions. The total includes 2020
awards which have not yet vested.
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 25 March 2023.
158
Severfield plc Annual report and accountsfor the year ended 25 March 2023 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 2013 over the ten-year
period ended 25 March 2023.
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 2013.
£
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 2013
Mar 2014
Mar 2015
Mar 2016
Mar 2017
Mar 2018
Mar 2019
Mar 2020
Mar 2021
Mar 2022
Mar 2023
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).
Total remuneration (£000)
Annual bonus (%)
LTIP vesting (%)
Total remuneration (£000)
Annual bonus (%)
LTIP vesting (%)
2014
Dodds1
289
N/A
N/A
2014
Lawson2
233
34.0%
–
2015
Lawson
681
65.0%
–
2016
Lawson
946
63.0%
64.0%
2017
Lawson
1,228
95.0%
74.0%
2018
Lawson3
738
–
95.4%
2018
Dunsmore4
819
62.6%
95.4%
2019
Dunsmore
890
20.0%
100.0%
2020
Dunsmore
880
61.0%
85.0%
2021
Dunsmore
747
80.0%
–
2022
Dunsmore
521
17.0%
–
2023
Dunsmore
1,123
80.0%
100.0%
1 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.
2 Appointed on 1 November 2013.
3
Ian Lawson received compensation of £408,000 for loss of office in accordance with his contract.
4 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.
159
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DIRECTORS’
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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 2023 and 2022
Alan Dunsmore
Ian Cochrane
Derek Randall
Adam Semple
Kevin Whiteman
Alun Griffiths
Tony Osbaldiston
Louise Hardy
Rosie Toogood
Mark Pegler1
All UK employees
Base salary/
fees
3%
3%
3%
3%
0%
0%
0%
0%
0%
n/a
5%
Benefits
0%
0%
5%
0%
–
–
–
–
–
–
7%
Annual
bonus
387%
389%
105%
388%
–
–
–
–
–
–
107%
The significant increase in bonus in 2023 is driven by the achievement of the PBT element of the bonus scheme, leading to a
pay-out of 80 per cent compared to 17 per cent in 2022. When compared to 2021 (which also paid out at 80 per cent), bonuses
have increased by an average of 6 per cent, which is in line with the increase in base salaries. Employees that are not included
in the senior management and director bonus scheme received a discretionary £750 festive gift in both financial years.
Comparison between 2022 and 2021
Alan Dunsmore
Ian Cochrane
Derek Randall3
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 Whiteman4
Alun Griffiths
Tony Osbaldiston
Louise Hardy
All UK employees
Base salary/
fees
1%
1%
1%
2%
53%
26%
18%
33%
n/a
4%
Base salary/
fees
2%
2%
2%
7%
103%
6%
0%
0%
2%
Benefits
0%
0%
(49%)
0%
–
–
–
–
n/a
16%
Benefits
0%
0%
0%
0%
–
–
–
–
0%
Annual
bonus
(78%)
(78%)
(41%)
(78%)
–
–
–
–
n/a
(67%)
Annual
bonus
33%
33%
15%
38%
–
–
–
–
6%
1 Mark Pegler was appointed to the board with effect from 5 October 2022
2 Rosie Toogood was appointed to the board with effect from 16 June 2021
3 Derek Randall’s 2021 benefit included £40,000 of cost-of-living allowance relating to 2020 but wholly paid in 2021
4 Kevin Whiteman was appointed as chairman on 3 September 2020
160
Severfield plc Annual report and accountsfor the year ended 25 March 2023 Chief Executive Officer pay ratio disclosure
Year
2023
2022
2021
2020
Method of calculation adopted
Option A1
Option A1
Option A1
Option A1
25th percentile pay ratio
(CEO: UK employees)
35:1
19:1
25:1
30:1
Median pay ratio
(CEO: UK employees)
26:1
13:1
18:1
22:1
75th percentile pay ratio
(CEO: UK employees)
19:1
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 26:1 is 100 per cent higher than the median ratio of 13:1 in 2022. This increase in the Chief Executive Officer
pay ratio is due to the chief executive officer receiving a higher bonus and PSP vesting outcome in 2023 (bonus: 80 per cent of
maximum, PSP: 100 per cent of maximum) compared to 2022 (bonus: 17 per cent of maximum, PSP: 0 per cent of maximum).
The committee has confirmed that the ratio is consistent with the Company’s wider policies on employee pay, reward and
progression.
Total pay and benefits used to calculate the ratios
Pay details for the Chief Executive Officer and individual whose remuneration is at the median, 25th percentile and 75th
percentile amongst full-time equivalent UK-based employees are as follows:
Year 2023
Salary
Total pay and benefits
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
£000
30
381
32
1,123
Median 75th percentile
£000
55
58
£000
41
44
369
521
364
747
356
880
23
28
29
29
26
29
38
40
37
41
38
40
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
Underlying* operating profit
Dividends
*There were no share buybacks during the year.
2023
£000
99,479
491,753
33,067
9,877
2022
£000
86,034
403,563
26,881
9,229
% change
15.6%
21.9%
23.0%
7.0%
161
GOVERNANCEwww.severfield.comStock Code: SFR DIRECTORS’
REMUNERATION REPORT
Shareholder voting
The results below show the response to the 2022 AGM shareholder voting for the directors’ 2022 remuneration report
(excluding remuneration policy):
For
Against
Total votes cast (for and against)
Withheld votes
Total votes (including withheld votes)
Total
number
of votes
242,387,061
1,662,503
244,049,564
137,296
244,186,860
% of votes
cast
99.32
0.68
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)
Total
number of
votes
239,038,916
13,347,225
252,386,141
1,565,800
253,951,941
% of votes
cast
94.71%
5.29%
100%
N/A
N/A
Implementation of policy for 2024
The executive directors’ salaries
Salaries for the executive directors were reviewed in June 2023 and have been increased by 5 per cent. The overall salary
increases for the wider workforce ranged from 5–7 per cent of salary.
The executive directors’ salaries at the start of the 2024 financial year are as follows:
Alan Dunsmore
Ian Cochrane
Adam Semple
Derek Randall
£
£384,250
£342,150
£262,600
£281,300
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 the executive directors is 7 per cent of salary with effect from 1 April 2023. This is aligned with the level
available to the entire UK workforce.
Rewards for performance in 2024
Bonus
The maximum opportunity will be 125 per cent of salary for all executive directors in line with the 2023 remuneration policy.
Given the Group’s focus on sustainability, an ESG performance metric has been introduced alongside the underlying PBT and
safety performance metrics.
Profit performance-based component – 80 per cent
Maximum bonus based on actual underlying PBT versus budget.
162
Severfield plc Annual report and accountsfor the year ended 25 March 2023 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 2022 and external analyst consensus.
Underlying PBT % of budget
90 or below
100
110 or better
Sliding scale applies between points.
% of award
–
50
100
Safety performance-based component – 15 per cent
Group IFR (incident frequency rate) and JSSL AFR (accident frequency rate)†. IFR and AFR are industry-recognised and
measurable targets.
The committee believes that the underlying PBT and safety targets are commercially sensitive and therefore are not disclosed
at this time. Actual targets will be disclosed in next year’s Directors’ Remuneration Report.
† Whilst Derek Randall remains in India, the safety component of his bonus will be based on JSSL’s AFR.
ESG component — 5 per cent
The ESG metric is based on performance against the Group’s key 2024 ESG priorities set out in this annual report.
Restricted share awards
It is the committee’s intention to grant restricted share awards at 50 per cent of salary to all executive directors in line with the
2023 remuneration policy.
Awards will vest after three years subject to the satisfaction of performance underpins. Vested awards will be subject to a two
year holding period.
The proposed underpins are set out below. The committee believes that the selected underpins reflect an appropriate overall
balance and safeguard the financial stability of the business whilst providing sufficient focus on our strategic priorities, ESG
performance and regulatory compliance.
• Financial stability of the business. There is no breach of financial covenants in the Group’s principal banking activities.
• Sustainability of the Group’s underlying performance. There is not a material deterioration in the Group’s underlying
performance which significantly departs from any deterioration across the industrial building and construction sector.
• Risk management. There is no material failure in risk management resulting in significant reputational damage and/or
material financial loss to the Group.
• Health and safety performance. There is not a material deterioration in health and safety performance and there are no
material health and safety failures.
• ESG performance. Sufficient progress is made against the Group’s ESG strategy.
Prior to the vesting of restricted share awards, the committee will also assess whether the Group’s underlying financial and
operational performance has been satisfactory both on an absolute basis and relative to peers. A number of reference points
will be considered, including profit, dividend and shareholder return performance. The committee believes that this is the right
approach, rather than setting a quantitative financial underpin, as it enables the Committee to assess the Group’s financial and
operational performance in the round and take into account the cyclical nature of the industry.
163
GOVERNANCEwww.severfield.comStock Code: SFR DIRECTORS’
REMUNERATION REPORT
The non-executive directors fees for 2023 and 2024
Fees for the non-executive directors are currently under review. The results of that review will be disclosed in the next year’s
Directors’ remuneration report. The existing fees, that were last reviewed and increased in May 2021, 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
14 June 2023
140,000
45,000
7,500
7,500
7,500
164
Severfield plc Annual report and accountsfor the year ended 25 March 2023 STATEMENT OF DIRECTORS’
RESPONSIBILITIES
IN RESPECT OF THE ANNUAL REPORT AND ACCOUNTS
The directors are responsible for
preparing the annual report and the
Group and parent Company financial
statements in accordance with
applicable law and regulations.
Company law requires the directors to
prepare Group and parent Company
financial statements for each financial
year. Under that law they are required to
prepare the Group financial statements
in accordance with UK-adopted
international accounting standards
and applicable law and have elected to
prepare the parent Company financial
statements on the same basis.
Under company law the directors must
not approve the financial statements
unless they are satisfied that they give a
true and fair view of the state of affairs
of the Group and parent Company and of
the Group’s 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 and reliable;
• state whether they have been
prepared in accordance with UK-
adopted international accounting
standards;
• assess the Group and parent
Company’s ability to continue as
a going concern, disclosing, as
applicable, matters related to going
concern; and
• use the going concern basis of
accounting unless they either intend
to liquidate the Group or the parent
Company or to cease operations, or
have no realistic alternative but to
do so.
The directors are responsible for
keeping adequate accounting records
that are sufficient to show and explain
the parent Company’s transactions and
disclose with reasonable accuracy at
any time the financial position of the
parent Company and enable them to
ensure that its financial statements
comply with the Companies Act 2006.
They are responsible for such internal
control as they determine is necessary
to enable the preparation of financial
statements that are free from material
misstatement, whether due to fraud or
error, and have general responsibility
for taking such steps as are reasonably
open to them to safeguard the assets
of the Group and to prevent and detect
fraud and other irregularities.
Under applicable law and regulations,
the directors are also responsible for
preparing a Strategic Report, Directors’
Report, Directors’ Remuneration Report
and Corporate Governance Statement
that complies with that law and those
regulations.
The directors are responsible for the
maintenance and integrity of the
corporate and financial information
included on the company’s website.
Legislation in the UK governing the
preparation and dissemination of
financial statements may differ from
legislation in other jurisdictions.
In accordance with Disclosure Guidance
and Transparency Rule 4.1.14R, the
financial statements will form part of
the annual financial report prepared
using the single electronic reporting
format under the TD ESEF Regulation.
The auditor’s report on these financial
statements provides no assurance over
the ESEF format.
Responsibility statement of the
directors in respect of the annual report
and accounts
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.
Alan Dunsmore
Chief Executive Officer
14 June 2023
Adam Semple
Chief Financial Officer
14 June 2023
165
GOVERNANCEwww.severfield.comStock Code: SFR OUR
FINANCIALS
OUR FINANCIALS – GROUP
Independent auditor’s report
Consolidated income statement
Consolidated statement of
comprehensive income
Consolidated balance sheet
Consolidated statement of changes
in equity
Consolidated cash flow statement
Notes to the consolidated financial
statements
Five year summary
Financial calendar
OUR FINANCIALS – COMPANY
Company balance sheet
Company statement of changes in equity
Notes to the Company financial
statements
Addresses and advisers
168
176
177
178
179
180
181
220
220
221
222
223
228
166
Severfield plc Annual report and accountsfor the year ended 25 March 2023 I
F
N
A
N
C
I
A
L
S
www.severfield.com
Stock Code: SFR
167
INDEPENDENT
AUDITOR’S REPORT
TO THE MEMBERS OF SEVERFIELD PLC
1. OUR OPINION IS UNMODIFIED
We have audited the financial statements of Severfield plc
(“the Company”) for the 52-week period ended 25 March
2023 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 25 March 2023 and of the Group’s profit for the year
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 eight financial periods ended 25 March
2023. 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.
Overview
Materiality:
Group financial
statements as a
whole
Coverage
Key audit matters
Recurring risk
£1.4m (2022: £1.4m)
5.1% (2022: 4.9%) of profit before tax
(2022: adjusted profit before tax)
97% (2022: 98%) of group profit before
tax*
vs 2022
Carrying value of
construction contract
assets, and revenue and
profit recognition in relation
to construction contracts
Parent Company’s Key
audit matter: Carrying
value of parent Company’s
investments in subsidiaries
and joint ventures,
and recoverability of
intercompany debtors
* This is the profit and losses as a percentage of total profits and losses
that made up the group profit before tax.
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 (unchanged from 2022), 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.
168
Severfield plc Annual report and accountsfor the year ended 25 March 2023 Carrying
value of
construction
contract
assets, and
revenue
and profit
recognition
in relation to
construction
contracts
Revenue:
£491.8m
(2022:
£403.6m)
Contract
Asset:
£48.8m (2022:
£74.9m)
Refer to
page 130
Audit
Committee
Report, pages
181 to 189
(accounting
policies)
and note 18
(financial
disclosures).
The risk
Our response
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
contract modifications 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) 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: large carrying value of contract assets,
low margin or loss-making contracts with significant costs to
complete estimates, uncertainty over variable consideration,
and large contracts with significant costs to complete;
− Tests of detail: For the high risk contracts identified, assessing
management’s judgement that revenue recognised is highly
probable to not be reversed by agreeing to post period-end
revenue certification, customer variation agreement or cash;
− 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, current run rates
and known risks;
− 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;
− Site visits: For certain higher risk or larger value contracts,
attending in person site visits, with the involvement of our
own industry specialists for a sample of these, inspecting the
physical progress on site for individual projects and identifying
areas of complexity through observation and discussion with
site personnel;
− 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 (2022:acceptable).
169
www.severfield.comStock Code: SFR FINANCIALS INDEPENDENT
AUDITOR’S REPORT
TO THE MEMBERS OF SEVERFIELD PLC
The risk
Our response
Low risk, high value
The carrying amount of the
parent Company’s investments in
subsidiaries and joint ventures, and
the intra-group debtor balances
represent 46% (2022: 52%) and
32% (2022: 24%) of the Company’s
total assets respectively. 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.
− Tests of detail: Assessing 100% of the total group debtors
balance to identify, with reference to the relevant debtors’ draft
balance sheet, whether they have a positive net asset value
and therefore coverage of the debt owed, as well as assessing
whether those debtor companies have historically been
profit-making.
− 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, joint ventures and
intercompany debtors to be acceptable (2022: acceptable).
Carrying value
of parent
Company’s
investments in
subsidiaries
and joint
ventures, and
recoverability
of inter-
company
debtors
Investments:
£152.6m
(2022:
£152.6m)
Intercompany
receivables:
£105.6m
(2022:
£69.0m)
Refer to
page 223
(accounting
policies) and
page 225
(financial
disclosures).
170
Severfield plc Annual report and accountsfor the year ended 25 March 2023 3. OUR APPLICATION OF MATERIALITY AND AN
OVERVIEW OF THE SCOPE OF OUR AUDIT
and the rest, including the audit of the parent Company, was
performed by the Group team.
Materiality for the Group financial statements as a whole was
set at £1,370,000 (2022: £1,375,000), determined with reference
to a benchmark of Group’s profit before tax (2022: normalised
to exclude amortisation and costs as a result of acquisitions as
disclosed in note 5) of which it represents 5.1% (2022: 4.9%)
Materiality for the parent Company financial statements as a
whole was set at £959,000 (2022: £900,000), determined with
reference to a benchmark of Company’s total assets, of which it
represents 0.3% (2022: 0.3%).
In line with our audit methodology, our procedures on individual
account balances and disclosures were performed to a
lower threshold, performance materiality, so as to reduce
to an acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a
material amount across the financial statements as a whole.
Performance materiality was set at 75% (2022: 75%) of
materiality for the financial statements as a whole, which
equates to £1,020,000 (2022: £1,031,000) for the Group
and £719,000 (2022: £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 £68,000
(2022: £68,750), in addition to other identified misstatements
that warranted reporting on qualitative grounds.
Of the Group’s 15 (2022: 16) reporting components, we
subjected 7 (2022: 7) to full scope audits for group purposes.
The components within the scope of our work accounted for
the percentages illustrated opposite.
The remaining 5% (2022: 7%) of total Group revenue, 3% (2022:
2%) of Group profit before tax and 4% (2022: 4%) of total Group
assets is represented by 8 (2022: 9) reporting components,
none of which individually represented more than 4% (2022:
3%) of any of total Group revenue, Group profit before tax
or total Group assets. For these 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 set the component materialities, which ranged
from £411,000 to £1,096,000 (2022: £350,000 to £1,000,000)
having regard to the mix of size and risk profile of the Group
across the components.
The Group team visited 1 (2022: 0) component locations in
India (2022: India) to assess the audit risk and strategy. Video
and telephone conference meetings were also held with
the component auditors. At these visits and meetings, the
findings reported to the Group team were discussed in more
detail, and any further work required by the Group team was
then performed by the component auditor. The Group team
also reviewed the audit file of the component auditor.
Normalised profit before tax
£27,107,000 (2022: £27,098,000)
Group Materiality
£1,370,000 (2022: £1,375,000)
£1,370,000
Whole financial
statements materiality
(2022: £1,375,000)
£1,020,000
Whole financial
statements performance
materiality
(2022: £1,031,000)
£1,096,000
Range of materiality at seven
components (£411,000-
£1,096,000)
(2022: £350,000 to £1,000,000)
£68,000
Misstatements reported to the
audit committee (2022: £68,750)
Profit before tax
Group materiality
Group revenue
Group profit before tax
3
2
97%
(2022 98%)
98
97
5
7
95%
(2022 93%)
93
95
Group total assets
4
4
96%
(2022 96%)
96
96
The work on one of the seven components (2022: one of the
seven components) was performed by component auditors
Full scope for Group audit purposes 2023
Full scope for Group audit purposes 2022
Residual components
171
www.severfield.comStock Code: SFR FINANCIALS INDEPENDENT
AUDITOR’S REPORT
TO THE MEMBERS OF SEVERFIELD PLC
4. GOING CONCERN
The directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the
Group or the Company or to cease their operations, and as
they have concluded that the Group’s and the Company’s
financial position means that this is realistic. They have also
concluded that there are no material uncertainties that could
have cast significant doubt over their ability to continue as a
going concern for at least a year from the date of approval of
the financial statements (“the going concern period”).
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:
• ongoing economic issues including inflationary pressures
and the resulting challenging market.
• the potential for contract assets to increase as a result of
contractual disputes or operational difficulties, leading to
an increased working capital requirement.
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 55 is materially consistent with the financial
statements and our audit knowledge.
However, as we cannot predict all future events or conditions
and as subsequent events may result in outcomes that
are inconsistent with judgements that were reasonable at
the time they were made, the above conclusions are not a
guarantee that the Group or the Company will continue in
operation.
5. FRAUD AND BREACHES OF LAWS AND
REGULATIONS –ABILITY TO DETECT
Identifying and responding to risks of material misstatement
due to fraud
To identify risks of material misstatement due to fraud (‘fraud
risks’) we assessed events or conditions that could indicate
an incentive or pressure to commit fraud or provide an
opportunity to commit fraud.
Our risk assessment procedures included:
• Enquiring of directors, the audit committee, internal legal
counsel 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 underlying
profit before tax 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.
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.
• Assessing significant accounting estimates for bias
• Procedures over contract revenue performed for all full
scope components are detailed in section 2 of this report.
172
Severfield plc Annual report and accountsfor the year ended 25 March 2023 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.
6. WE HAVE NOTHING TO REPORT ON THE OTHER
INFORMATION IN THE ANNUAL REPORT
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does
not cover the other information and, accordingly, we do not
express an audit opinion or, except as explicitly stated below,
any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial statements
audit work, the information therein is materially misstated
or inconsistent with the financial statements or our audit
knowledge. Based solely on that work we have not identified
material misstatements in the other information.
Strategic report and directors’ report
Based solely on our work on the other information:
• we have not identified material misstatements in the
strategic report and the directors’ report;
• in our opinion the information given in those reports
for the financial year is consistent with the financial
statements; and
• in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration Report
to be audited has been properly prepared in accordance with
the Companies Act 2006.
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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 56) 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 Emerging and 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 56 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.
174
Severfield plc Annual report and accountsfor the year ended 25 March 2023 9. THE PURPOSE OF OUR AUDIT WORK AND TO
WHOM WE OWE OUR RESPONSIBILITIES
This report is made solely to the Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so
that we might state to the Company’s members those matters
we are required to state to them in an auditor’s report and for
no other purpose. To the fullest extent permitted by law, we
do not accept or assume responsibility to anyone other than
the Company and the Company’s members, as a body, for our
audit work, for this report, or for the opinions we have formed.
Craig Parkin (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
One Sovereign Square
Sovereign Street
Leeds
LS1 4DA
14 June 2023
7. 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.
8. RESPECTIVE RESPONSIBILITIES
Directors’ responsibilities
As explained more fully in their statement set out on page
165, the directors are responsible for: the preparation of the
financial statements including being satisfied that they give a
true and fair view; such internal control as they determine is
necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to
fraud or error; assessing the Group and parent Company’s
ability to continue as a going concern, disclosing, as
applicable, matters related to going concern; and using the
going concern basis of accounting unless they either intend
to liquidate the Group or the parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and
to issue our opinion in an auditor’s report. Reasonable
assurance is a high level of assurance, but does not
guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are
considered material if, individually or in aggregate, they could
reasonably be expected to influence the economic decisions
of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
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.
175
www.severfield.comStock Code: SFR FINANCIALS CONSOLIDATED
INCOME STATEMENT
YEAR ENDED 25 MARCH 2023
Underlying
year ended
25 March
2023
£000
491,753
(458,686)
Non-
underlying
year ended
25 March
2023
£000
–
(4,811)
Total
year ended
25 March
2023
£000
491,753
(463,497)
Underlying
year ended
26 March
2022
£000
403,563
(376,682)
Non-
underlying
year ended
26 March
2022
£000
–
(5,424)
Total
year ended
26 March
2022
£000
403,563
(382,106)
33,067
(4,811)
28,256
26,881
(5,424)
21,457
1,898
34,965
(2,489)
32,476
(6,238)
–
(4,811)
(558)
(5,369)
697
1,898
30,154
(3,047)
27,107
(5,541)
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)
26,238
(4,672)
21,566
22,303
(6,702)
15,601
8.48p
8.39p
(1.51)p
(1.49)p
6.97p
6.90p
7.22p
7.19p
(2.17)p
(2.16)p
5.05p
5.03p
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
Note
3
4
15
7
8
10
10
Further details of non-underlying items are disclosed in note 5 to the consolidated financial statements.
176
Severfield plc Annual report and accountsfor the year ended 25 March 2023 CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
YEAR ENDED 25 MARCH 2023
Items that will not be reclassified to profit and loss:
Actuarial (loss)/gain on defined benefit pension scheme
Tax relating to components that will not be reclassified
Items that may be reclassified to profit and loss:
Losses taken to equity on cash flow hedges
Reclassification adjustments on cash flow hedges
Exchange difference on foreign operations
Tax relating to components that may be reclassified
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
Year ended
25 March
2023
£000
Year ended
26 March
2022
£000
Note
29
20
24
24
24
20
(701)
175
(526)
(1,147)
243
(86)
153
(837)
(1,363)
21,566
5,938
(1,205)
4,733
(22)
13
40
21
52
4,785
15,601
20,203
20,386
177
www.severfield.comStock Code: SFR FINANCIALS CONSOLIDATED
BALANCE SHEET
AT 25 MARCH 2023
Assets
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Right-of-use assets
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
Bank overdraft
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
25 March
2023
£000
As at
26 March
2022
£000
Note
11
12
13
14
15
18
16
18
21
21
21
19
21
21
19
29
21
21
20
23
24
82,188
7,095
92,067
13,018
31,784
2,245
228,397
13,231
109,721
25
2,278
11,338
136,593
364,990
-
(102,699)
(4,150)
(2,172)
(109,021)
(2,377)
(12,871)
(4,800)
(11,224)
(6,979)
(38,251)
(147,272)
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)
217,718
203,960
7,739
88,522
5,959
115,498
217,718
7,738
88,511
4,485
103,226
203,960
The consolidated financial statements were approved by the board of directors on 14 June 2023 and signed on its behalf by:
Alan Dunsmore
Chief Executive Officer
Adam Semple
Chief Financial Officer
178
Severfield plc Annual report and accountsfor the year ended 25 March 2023
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
YEAR ENDED 25 MARCH 2023
At 27 March 2022
Total comprehensive income for the
year
Ordinary shares issued*
Equity-settled share-based payments
Dividends paid
At 25 March 2023
Note
23
Share
capital
£000
7,738
Share
premium
£000
88,511
Other
reserves
£000
4,485
Retained
earnings
£000
103,226
–
1
–
–
7,739
–
11
–
–
88,522
(991)
–
2,465
–
5,959
21,194
–
955
(9,877)
115,498
* The issue of shares represents shares allotted to satisfy the 2018, 2020 and 2021 Sharesave schemes.
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
Share
premium
£000
87,658
Other
reserves
£000
3,464
Retained
earnings
£000
92,101
–
32
–
–
7,738
–
853
–
–
88,511
32
–
989
–
4,485
20,354
–
–
(9,229)
103,226
* The issue of shares represents shares allotted to satisfy the 2018 and 2020 and Sharesave scheme.
Total
equity
£000
203,960
20,203
12
3,420
(9,877)
217,718
Total
equity
£000
190,929
20,386
885
989
(9,229)
203,960
179
www.severfield.comStock Code: SFR FINANCIALS CONSOLIDATED
CASH FLOW STATEMENT
YEAR ENDED 25 MARCH 2023
Year ended
25 March
2023
£000
50,292
Year ended
26 March
2022
£000
(5,685)
Note
25
317
(635)
(168)
(5,668)
–
(8,534)
(14,688)
(2,495)
(9,877)
12
–
(5,900)
(2,032)
(20,292)
15,312
(3,974)
11,338
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)
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
Payment of deferred and contingent consideration
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 increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
26
180
Severfield plc Annual report and accountsfor the year ended 25 March 2023 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
YEAR ENDED 25 MARCH 2023
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 228. 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 preparation
The consolidated financial statements are prepared in accordance with UK-Adopted international accounting standards and in
conformity with the Companies Act 2006.
The consolidated financial statements have been prepared under the historical cost convention, except for the revaluation of
financial instruments. The principal accounting policies adopted are set out below.
Climate change
The Group recognises the systematic risk posed by climate change and the need for urgent mitigating action and are
committed to addressing climate-related risks and reducing the Group’s environmental impact and carbon emissions.
The impact of climate change has been considered in the preparation of these financial statements across a number of areas,
including; the measurement of financial instruments, the carrying value and remaining useful lives of property, plant and
equipment, the carrying value of goodwill and the Group’s going concern and long-term viability assessments. None of these
had a material impact on the consolidated financial statements. The Group will continue to develop its assessment of the
financial impacts of climate change.
Financial period
The Group’s annual report and accounts are made up to an appropriate Saturday around 31 March each year. For 2023, trading
is shown for the 52-week period ended on 25 March 2023 (2022: 52-week period ended 26 March 2022). All references to ‘the
year ended 25 March 2023’, throughout the annual report, relate to the 52-week period ended 25 March 2023.
The financial statements of the Group’s joint venture, JSSL, are made up to the year ended 31 March 2023 (2022: year ended 31
March 2022).
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.
• Annual improvements to IFRS Standards 2018–2020;
• Amendments to IAS 16 ‘Property Plant and Equipment: Proceeds before intended use;
• Amendments to IAS 37: Onerous Contracts – Cost of Fulfilling a contract
• Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 ‘Interest rate benchmark reform - Phase 2’.
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 IFRS 3 ‘ Reference to the Conceptual Framework’;
• IFRS 17 ‘Insurance Contracts’ and Amendments to IFRS 17 ‘Insurance contracts’;
• Amendments to IAS 1 ‘Classification of Liabilities as Current or Non-Current’;
• Amendments to IAS 1 ‘Disclosure of accounting policies’;
• Amendments to IAS 1 ‘Non-Current Liabilities with Covenants’;
• Amendments to IAS 8 ‘Definition of accounting estimates’;
• Amendments to IFRS 16 ‘Lease liability in a sale and lease back’; and
• Amendments to IAS 12 ‘‘Deferred Tax Related to Assets’ and ‘Liabilities Arising from a Single Transaction’.
The group is assessing the impact of these new standards and the Group’s financial reporting will be presented in accordance
with these standards from the relevant accounting period
181
www.severfield.comStock Code: SFR FINANCIALS 1. Significant accounting policies continued
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; 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 current financial year, the Group continued to trade profitably with positive operating cash flows and has a significant
order book with strong earnings visibility into the next financial year and beyond. The directors have reviewed the Group’s
forecasts and projections for 2024 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 ‘severe but plausible’ scenario is based on the combined impact of securing only 25 per cent of
budgeted uncontracted orders for the next 12 months, one-off contract losses, a deterioration of market conditions and other
downside factors. 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 by virtue of their magnitude or nature to enable a full understanding of
the Group’s financial performance and to make year-on-year comparisons. They are excluded by management for planning,
budgeting and reporting purposes and for the internal assessment of operating performance across the Group and are
normally excluded by investors, analysts and brokers when making investment and other decisions. For an item to be
considered as non-underlying, it must satisfy at least one of the following criteria:
• A significant item, which may span more than one accounting period;
• An item directly incurred as a result of either a business combination, disposal, or related to a major business change or
restructuring programme; and
• An item which is unusual in nature (outside the normal course of business).
182
Severfield plc Annual report and accountsfor the year ended 25 March 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYEAR ENDED 25 MARCH 2023 1. Significant accounting policies continued
Non-underlying items have included the non-cash amortisation of acquired intangible assets, acquisition and similar
transaction costs, and fair value adjustments for contingent consideration, all of which arise from business combinations and
are classified as non-underlying because of the nature and expected infrequency of the events giving rise to them. Other non-
underlying items have included, but are not limited to, significant rectification and remediation costs for completed contracts
and certain one-off legal and consultancy costs.
Non-underlying items are presented as a separate column within their related consolidated income statement category on
a consistent basis for each half year and full year results. The exclusion of non-underlying items may result in underlying
earnings being materially higher or lower than total earnings. In particular, when items associated with purchase price
allocations on business combinations are excluded, underlying earnings will be higher than total earnings.
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.
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.
183
www.severfield.comStock Code: SFR FINANCIALS 1. Significant accounting policies continued
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.
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 progress towards complete satisfaction of
the performance obligation can be reasonably measured.
• 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 the transaction price when the customer has agreed the revised scope of work, or a new legally
enforceable right has arisen. Where a new legally enforceable right has arisen or a contract modification agreed, but the
corresponding change in price has not yet been agreed by the customer; only the amount that is considered highly probably
not to reverse in the future, and that can be measured reliably, is included in the transaction price and therefore revenue
when the associated performance obligations are met.
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• 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.
Contract assets
Contract assets primarily relate to the Group’s enforceable rights to consideration for work completed on construction
contracts that has not yet been billed at the reporting date. Contract assets are transferred to receivables when the right to
consideration becomes unconditional. This usually occurs when the Group issues an invoice to the customer.
Pre-contract tender costs are not considered material costs to the Group.
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.
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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.
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 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.
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Severfield plc Annual report and accountsfor the year ended 25 March 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYEAR ENDED 25 MARCH 2023 1. Significant accounting policies continued
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 equal to the lease liability and adjusted for the amount of any prepaid or accrued lease payments relating to the
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.
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.
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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. No expected credit losses (ECLs) have been provided for in respect of trade receivables,
contract assets and intercompany receivables as these are not material.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and demand deposits, and other short-term highly liquid investments that
are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Bank overdrafts
are shown in current liabilities on the balance sheet unless a right of offset exists, in accordance with IFRS 7, to allow net
presentation of a financial asset and a financial liability.
Bank borrowings
Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Finance charges,
including premiums payable on settlement or redemption and direct issue costs, are accounted for in the income statement
using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not
settled in the period in which they arise. The effective interest method is a method of calculating the amortised cost of a
financial liability and of allocating interest over the relevant period.
Trade payables
Trade payables are initially measured at fair value, and are subsequently measured at amortised cost.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
Share-based payment transactions
The Group issues equity-settled share-based payments. These share-based payments are measured at fair value at the date
of grant based on the Group’s estimate of shares that will eventually vest. The fair value determined is then expensed in the
consolidated income statement on a straight-line basis over the vesting period, with a corresponding increase in equity.
Further details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 22.
Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group
will be required to settle that obligation. Provisions are measured at the directors’ best estimate of the expenditure required
to settle the obligation at the balance sheet date and, as appropriate, are discounted to present value where the effect is
material.
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Severfield plc Annual report and accountsfor the year ended 25 March 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYEAR ENDED 25 MARCH 2023 1. Significant accounting policies continued
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 21.
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently
remeasured to their fair value at each balance sheet date. The resulting gain or loss is recognised in profit or loss, 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.
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 £21,000,000 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 £48,840,000 (2022: £74,898,000), see note 18.
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Critical accounting estimates
Valuation of contingent consideration
Contingent consideration is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the
contingent consideration which is deemed to be an asset or liability will be recognised in profit or loss. Significant judgement is
required on assessing discount rates and future cash flows of the company which drives the value of future payments required.
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
29). 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 £12,871,000 (2022: £14,396,000).
Of the items discussed above, revenue and profit recognition represents the key source of estimation uncertainty.
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
2023
£000
491,753
1,852
133
493,738
2022
£000
403,563
4,584
76
408,223
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. Management has identified multiple operating segments which are reported to the CODM on a regular basis,
however for the purpose of presentation under IFRS 8, the individual operating segments meet the aggregation criteria that
allows them to be presented as one reportable segment (‘construction contracts’) for the Group.
The constituent operating segments have been aggregated because the nature of the products across the business, whilst
serving different market sectors, are consistent in that they relate to the design, purchase and fabrication of steel products.
They have similar production processes and facilities, types of customers, methods of distribution, regulatory environments
and economic characteristics. This is reinforced through the use of shared production facilities across the Group.
The divisions presented in the strategic report were created from April 2022 to provide better client service and increased
organisational clarity, both internally and externally. These still meet the aggregation criteria to be presented as one reportable
segment under IFRS 8.
The disclosures requirements of IFRS 8 are therefore made on the basis of one reportable segment (construction contracts).
Revenues by product group
All revenue is derived from construction contracts and related assets.
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Severfield plc Annual report and accountsfor the year ended 25 March 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYEAR ENDED 25 MARCH 2023 3. Revenue and segmental analysis continued
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 continental Europe
2023
£000
2022
£000
452,679
39,074
491,753
337,520
66,043
403,563
Contract balances
The following table provides information about the receivables, contract assets and contract liabilities from contracts with
customers:
Trade and other receivables (note 18)
Contract assets (note 18)
Contract liabilities (note 17)
2023
£000
42,838
48,840
(19,584)
2022
£000
106,783
74,898
(17,930)
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.
The table below represents the aggregate amount of the transaction price allocated to the performance obligations that are
unsatisfied (or partially satisfied) as at 25 March 2023 and have an original expected contract duration of more than one year:
Construction contracts
2024
£000
111,249
2025
£000
9,099
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. The transaction price does not contain variable
consideration for items such as discounts or rebates. 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 £135,318,000 (2022: £57,619,000) relating to two (2022: one) major customers (spread over
several contracts), who individually contributed more than 10 per cent of Group revenue in the year ended 25 March 2023.
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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
– land and buildings
– motor vehicles
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.
2023
£000
307,766
99,479
45,364
79
179
190
234
5,407
1,840
(1,852)
458,686
4,811
463,497
45
650
25
–
2022
£000
253,734
86,034
33,802
178
359
118
176
5,163
1,702
(4,584)
376,682
5,424
382,106
25
450
25
–
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.
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 130 and 133. No
services were performed pursuant to contingent fee arrangements.
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Severfield plc Annual report and accountsfor the year ended 25 March 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYEAR ENDED 25 MARCH 2023 5. Non-underlying items
Operating costs
Finance expense
Non-underlying items before tax
Tax on non-underlying items (note 5)
Non-underlying items after tax
Non-underlying items before tax consist of:
Amortisation of acquired intangible assets – Harry Peers/DAM Structures
Acquisition-related expenses – VSCG
Unwinding of discount on contingent consideration – DAM Structures
Fair value adjustment to contingent consideration– DAM Structures
Other exceptional costs
Non-underlying items before tax
2023
£000
4,811
558
5,369
(697)
4,672
2023
£000
3,338
1,816
558
(343)
-
5,369
2022
£000
5,424
674
6,098
604
6,702
2022
£000
5,191
–
674
–
233
6,098
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 of £1,816,000, represent acquisition and transaction costs associated with the VSCG acquisition,
which was finalised in April 2023, after the year end date.
The basis for stating results on an underlying basis is set out on pages 182 and 183. 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 and are normally excluded by investors, analysts and brokers when
making investment and other decisions. 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 31.
6. Staff costs
Details of directors’ remuneration for the year are provided in the audited part of the directors’ remuneration report on
page 140.
The average number of persons employed by the Group (including executive directors) during the year was:
Production and site
Sales and administration
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Social security costs
Other pension costs
Employee remuneration costs under share-based payment schemes are set out in note 22.
2023
Number
1,402
317
1,719
2022
Number
1,322
256
1,578
2023
£000
86,131
9,188
4,160
99,479
2022
£000
73,885
7,842
4,307
86,034
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www.severfield.comStock Code: SFR FINANCIALS 7. Net finance expense
Finance income
Finance expense
Unwinding of discount on contingent consideration
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
2023
£000
(133)
2,622
558
3,047
2023
£000
(5,460)
51
(51)
60
(5,400)
(144)
(14)
17
(141)
(5,541)
2023
£000
27,107
(5,150)
(1,068)
234
380
77
(14)
(5,541)
2022
£000
(76)
1,205
674
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)
Corporation tax was calculated at 19 per cent (2022: 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.
Hence all deferred tax balances have been calculated at 25 percent.
9. Dividends
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 26 March 2022 of 1.9p per share (2022: 1.8p)
Interim dividend for the year ended 25 March 2023 of 1.3p per share (2022: 1.2p)
2023
£000
5,864
4,013
9,877
2022
£000
5,529
3,700
9,229
The directors are recommending a final dividend of 2.1p per share (2022: 1.9p). This, together with the interim dividend of 1.3p
per share (2022:1.2p) will result in a total dividend of 3.4p per share (2022: 3.1p).
194
Severfield plc Annual report and accountsfor the year ended 25 March 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYEAR ENDED 25 MARCH 2023 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
2023
£000
2022
£000
21,566
15,601
26,238
22,303
Number
Number
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
309,533,696 308,834,123
1,335,323
312,773,509 310,169,446
3,239,813
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 (note 5)
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 2022
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
6.97p
8.48p
6.90p
8.39p
2023
£000
21,566
4,672
26,238
5.05p
7.22p
5.03p
7.19p
2022
£000
15,601
6,702
22,303
£000
11,474
16,002
47,980
6,571
161
82,188
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 indicators 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.
195
www.severfield.comStock Code: SFR FINANCIALS 11. Goodwill continued
The Group has prepared cash flows for the next financial 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 (2022: 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 12.5 per
cent (2022: 10.6 per cent).
Following the impairment reviews performed by the Group, no impairment charge was recorded in the year ended 25 March 2023.
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 25 March 2023.
12. Other intangible assets
Intangible
assets
acquired on
acquisition
£000
Other
intangible
assets
£000
Total
£000
14,930
6,082
21,012
168
21,180
5,300
5,369
10,669
3,416
14,085
1,384
124
1,508
168
1,676
1,037
178
1,215
78
1,293
383
293
7,095
10,343
13,546
5,958
19,504
–
19,504
4,263
5,191
9,454
3,338
12,792
6,712
10,050
Cost
At 28 March 2021
Additions
At 27 March 2022
Additions
At 25 March 2023
Amortisation
At 28 March 2021
Charge for the year
At 27 March 2022
Charge for the year
At 25 March 2023
Carrying amount
At 25 March 2023
At 26 March 2022
196
Severfield plc Annual report and accountsfor the year ended 25 March 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYEAR ENDED 25 MARCH 2023 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 28 March 2021
Additions
At 27 March 2022
Additions
At 25 March 2023
Amortisation
At 28 March 2021
Charge for the year
At 27 March 2022
Charge for the year
At 25 March 2023
Carrying amount
At 25 March 2023
At 26 March 2022
Customer
relationships
£000
Brands
£000
9,070
5,853
14,923
–
14,923
2,128
3,188
5,316
3,190
8,506
6,417
9,607
813
–
813
–
813
222
148
370
148
518
295
443
Order
book
£000
3,663
105
3,768
–
3,768
1,913
1,855
3,768
–
3,768
Total
£000
13,546
5,958
19,504
–
19,504
4,263
5,191
9,454
3,338
12,792
–
–
6,712
10,050
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).
197
www.severfield.comStock Code: SFR FINANCIALS 13. Property, plant and equipment
Cost
At 28 March 2021
Additions
Disposals
At 27 March 2022
Additions
Disposals
At 25 March 2023
Accumulated depreciation
At 28 March 2021
Charge for the year
Disposals
At 27 March 2022
Charge for the year
Disposals
At 25 March 2023
Carrying amount
At 25 March 2023
At 26 March 2022
Freehold
land and
buildings
£000
Plant
and
machinery
£000
Fixtures,
fittings
and office
equipment
£000
Motor
vehicles
£000
70,664
2,759
–
73,423
635
–
74,058
7,334
678
–
8,012
748
–
8,760
50,624
1,911
(1,470)
51,065
5,008
(847)
55,226
30,145
3,250
(1,127)
32,268
3,405
(615)
35,058
11,415
479
(1)
11,893
660
(24)
12,529
3,809
1,118
(1)
4,926
1,165
(14)
6,077
390
117
(128)
379
–
(84)
295
107
117
(106)
118
89
(61)
146
Total
£000
133,093
5,266
(1,599)
136,760
6,303
(955)
142,108
41,395
5,163
(1,234)
45,324
5,407
(690)
50,041
65,298
65,411
20,168
18,797
6,452
6,967
149
261
92,067
91,436
198
Severfield plc Annual report and accountsfor the year ended 25 March 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYEAR ENDED 25 MARCH 2023 14. Right-of-use assets
The Group leases land and buildings, plant and equipment and motor vehicles and these are presented as non-current assets.
Information about leases for which the Group is a lessee is presented below:
Cost
At 28 March 2021
Additions
Disposals
At 27 March 2022
Additions
Disposals
At 25 March 2023
Accumulated depreciation
At 28 March 2021
Charge for the year
Disposals
At 27 March 2022
Charge for the year
Disposals
At 25 March 2023
Carrying amount
At 25 March 2023
At 26 March 2022
Land and
buildings
£000
Plant and
equipment
£000
Motor
Vehicles
£000
10,212
–
–
10,212
1,576
(421)
11,367
1,661
970
–
2,631
964
(421)
3,174
301
2,735
(3)
3,033
1,285
(2)
4,316
222
150
–
372
306
(2)
676
2,304
431
(658)
2,077
984
(771)
2,290
1,126
582
(459)
1,249
570
(714)
1,105
Total
£000
12,817
3,166
(661)
15,322
3,845
(1,194)
17,973
3,009
1,702
(459)
4,252
1,840
(1,137)
4,955
8,193
7,581
3,640
2,661
1,185
828
13,018
11,070
15. Interests in JVs and associates
The Group has an interest in an associated company and two joint ventures as follows:
Associated companies:
Fabsec Limited — Development of fire beam
Joint ventures:
JSW Severfield Structures Limited — Structural steelwork serving the Indian market
Construction Metal Forming Limited — Manufacturer of cold rolled metal products
Holding
%
Class of
capital
25.0
Ordinary
50.0
50.0
Ordinary
Ordinary
In 2008 a formal agreement was signed in India with JSW Building Systems Limited (a subsidiary of JSW Steel Limited of India)
to form a 50/50 joint venture, JSW Severfield Structures Limited, to create a structural steelwork business in Bellary and
Mumbai, India, primarily serving the Indian market.
The Group did not make any further investments in either CMF Limited, JSW Severfield Structures Limited, or Fabsec Limited
during the year (2022: £nil).
199
www.severfield.comStock Code: SFR FINANCIALS 15. Interests in JVs and associates continued
At 28 March 2021
Profit retained
At 27 March 2022
Profit retained
Deferred tax adjustments
At 25 March 2023
Share of net
assets/
(liabilities)
£000
23,464
1,346
24,810
1,898
(250)
26,458
Goodwill
£000
5,326
–
5,326
–
–
5,326
Total
£000
28,790
1,346
30,136
1,898
(250)
31,784
The Group’s share of the retained profit for the year of JVs and associates is made up as follows:
Share of results
2023
2022
JSW
Severfield
Structures
Limited
£000
1,315
796
Fabsec
Limited
£000
–
–
CMF
Limited
£000
583
550
Total
£000
1,898
1,346
Summarised financial information in respect of the Group’s JVs and associates is as follows:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Group’s share of net (liabilities)/assets
Goodwill
Investment
Impact of foreign exchange on share of net assets
Accounting policy alignment
Carrying amount of interest in JVs and associates
Revenue
Depreciation and amortisation
Net finance expense
Taxation
Profit after tax
Group’s share of profit after tax
JSW
Severfield
Structures
Limited
£000
110,568
27,328
(100,306)
(1,107)
36,483
18,242
–
–
671
552
19,465
137,749
(2,271)
(5,121)
(951)
2,631
1,315
Fabsec
Limited
£000
1,372
1
(15)
(2,239)
(881)
(220)
–
–
–
220
–
196
(1)
–
–
54
–
CMF
Limited
£000
10,627
9,051
(7,375)
(3,248)
9,055
4,528
5,326
2,444
–
21
12,319
40,626
(96)
(387)
(272)
1,166
583
2023
£000
122,567
36,380
(107,696)
(6,594)
44,657
22,550
5,326
2,444
671
793
31,784
178,571
(2,368)
(5,508)
(1,223)
3,851
1,898
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 (2022: none) associated with the Group’s JVs and associates.
200
Severfield plc Annual report and accountsfor the year ended 25 March 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYEAR ENDED 25 MARCH 2023 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 (note 19)
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
Trade receivables and other
2023
£000
12,328
903
13,231
2022
£000
12,112
5,893
18,005
2023
£000
2022
£000
91,678
(19,584)
72,094
106,783
(17,930)
88,853
722,342
(650,248)
72,094
584,344
(495,491)
88,853
2023
£000
2022
£000
40,593
48,840
89,433
7,281
11,027
1,980
109,721
2023
£000
2,245
2,245
27,004
74,898
101,902
6,062
7,580
2,315
117,859
2022
£000
4,881
4,881
Contract assets of £48,840,000 (2022: £74,898,000) mainly reflect the Group’s right to consideration for work completed but
not yet invoiced at the year end. These are transferred to trade receivables when there is an unconditional right to payment.
The reduction in contract assets is driven by the stage of completion of construction contracts. At 26 March 2022, there were
several significant contracts in the early stages of completion and therefore not yet eligible to be billed.
The average credit period taken on revenue, calculated on a count-back basis to make appropriate allowance for monthly
revenue phasing, is 85 days (2022: 69 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 25 March 2023 were £nil (2022: £nil).
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www.severfield.comStock Code: SFR FINANCIALS 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
2023
£000
36,284
4,432
37,645
19,584
4,754
102,699
2022
£000
47,326
3,460
41,776
17,930
1,200
111,692
In the current year, other creditors and accruals includes the outstanding contingent and deferred purchase consideration for
DAM Structures of £881,000 (2022: £8,500,000) which is payable in the next 12 months.
Contract liabilities of £19,584,000 (2022: £17,930,000) reflect advance payments from customers for construction contracts
for which revenue has not been recognised as at 25 March 2023.
Non-current liabilities
Other creditors and accruals
2023
£000
2,377
2,377
2022
£000
3,081
3,081
Non-current other creditors and accruals in the current and prior year reflects the outstanding contingent purchase
consideration for DAM Structures of £2,377,000 (2022: £3,081,000) 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 39 days (2022: 52 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:
2023
£000
(11,661)
4,682
(6,979)
2022
£000
(11,883)
4,717
(7,166)
Deferred tax liabilities
Deferred tax assets
202
Severfield plc Annual report and accountsfor the year ended 25 March 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYEAR ENDED 25 MARCH 2023 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 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 27 March 2022
Prior year adjustment
(Charge)/credit to income statement
Charge to other comprehensive income
At 25 March 2023
Excess
capital
allowances
£000
(7,131)
(79)
(155)
Acquired
intangible
assets
£000
(1,764)
–
986
Retirement
benefit
£000
4,252
–
(389)
(2,317)
–
–
–
(9,682)
1
(615)
–
(10,296)
(291)
(1,132)
–
–
(2,201)
–
834
–
(1,367)
941
–
(1,128)
(77)
3,599
–
(557)
175
3,217
Trading
losses
£000
220
–
226
–
–
–
–
446
–
(105)
–
341
Other
£000
262
152
(253)
210
280
17
4
672
16
285
153
1,126
Total
£000
(4,161)
73
415
(1,457)
(852)
(1,111)
(73)
(7,166)
17
(158)
328
(6,979)
* Relates to the finalisation of the acquisition accounting for DAM Structures in the prior year.
21. 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 funds/(debt)
Equity
Net debt to equity ratio
2023
£000
(8,950)
11,338
321
2,709
217,718
(1.2%)
2022
£000
(14,850)
(3,974)
402
(18,422)
203,960
9.0%
Equity includes all capital and reserves of the Group attributable to equity holders of the parent. There are no externally
imposed capital requirements.
The Group excludes IFRS 16 lease liabilities from its measure of net funds/(debt) as they are excluded from the definition of net
funds/(debt) as set out in the Group’s borrowing facilities.
203
www.severfield.comStock Code: SFR FINANCIALS 21. Financial instruments continued
ii) Return on capital employed
Underlying operating profit divided by the average of opening and closing capital employed. Capital employed is defined as
shareholders’ equity after adding back retirement benefit obligations (net of tax), acquired intangible assets and net (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 29)
Average capital employed
Return on capital employed
Categories of financial instruments
Financial assets
Cash and cash equivalents
Trade receivables and other (note 18)
Derivative financial instruments
Financial liabilities
Cash and cash equivalents
Trade creditors (note 19)
Other creditors and accruals (note 19)
Lease liabilities
2023
£000
33,067
1,898
34,965
217,718
(11,338)
8,950
(2,388)
(6,712)
9,654
218,272
220,902
15.8%
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%
Carrying value
2023
£000
2022
£000
11,338
42,838
25
–
(36,284)
(40,022)
(13,396)
–
31,885
670
(3,974)
(47,326)
(44,857)
(11,640)
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).
204
Severfield plc Annual report and accountsfor the year ended 25 March 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYEAR ENDED 25 MARCH 2023 21. Financial instruments continued
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
customers, encompassing both trade receivables and contract assets. 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 due to the amount 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 25 March 2023 were £7,146,000 (2022: £11,236,000).
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 by typically structuring
contracts to require payments on account or limit the amounts that the Group is outstanding at any one time.
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 has credit insurance for the majority of the Group’s debt portfolio.
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.
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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). In March 2023 the Group increased the existing facility to £60m. The extended facility
provides additional liquidity following the VSCH’ acquisition and to support the continued growth strategy of the Group. 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 25 March 2023.
As at 25 March 2023, £60,000,000 (2022: £43,987,000) of this facility was not drawn but available. Up to £15,000,000 of this
facility is available by way of an overdraft (2022: £15,000,000).
In accordance with IFRS 7, the following tables detail the Group’s remaining contractual maturity for its financial liabilities at
the reporting date. The amounts are gross, undiscounted and include contractual interest payments.
Liabilities – 2023
Trade and other payables
Financial liabilities – leases
Borrowings
Liabilities – 2022
Trade and other payables
Financial liabilities – leases
Borrowings
Maturity analysis
Carrying
value
£000
Less than
3 months
£000
3 months
to 1 year
£000
77,845
13,396
8,950
100,191
92,183
11,640
14,850
118,673
72,821
630
1,598
75,049
78,873
511
1,642
81,026
2,649
1,899
2,982
7,530
10,229
1,492
4,827
16,548
1–2
years
£000
658
2,187
2,654
5,499
410
1,897
4,463
6,770
2–5
years
£000
1,717
5,025
2,498
9,240
2,671
4,233
5,043
11,947
Reconciliation of movements of liabilities to cash flows arising from financing activities
Balance at 27 March 2022
Changes from financing cashflows
Payments of borrowings
Payments of lease liabilities
Total changes arising from financing cash flows
Other changes
Interest expense
Interest paid
New leases
Lease disposals
Total other changes
Balance at 25 March 2023
5+
years
£000
–
8,338
–
8,338
–
7,761
–
7,761
Total
£000
77,845
18,079
9,732
105,656
92,183
15,894
15,975
124,052
Loans
14,850
Lease
liabilities
11,640
(5,900)
–
(5,900)
465
(465)
–
–
–
8,950
–
(2,032)
(2,032)
367
(367)
3,855
(67)
3,788
13,396
Market risk
The Group’s activities expose it primarily to the market risks of 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.
206
Severfield plc Annual report and accountsfor the year ended 25 March 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYEAR ENDED 25 MARCH 2023 21. Financial instruments continued
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
2023
£000
(3,831)
(18)
(3,849)
2022
£000
(2,033)
(2)
(2,035)
2023
£000
10,672
2
10,674
2022
£000
12,235
4
12,239
Foreign currency sensitivity analysis
The Group only has material exposure to Euro and USD denominated financial assets and liabilities.
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
2023
£000
2
2022
£000
3
2023
£000
118
2022
£000
(1,234)
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 Group’s policy 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 25 March 2023, derivatives designated as cash flow hedges were an asset of £25,000 (2022:
£670,000) and recognised total losses of £904,000 (2022: losses of £9,000) in equity and gains of £256,000 (2022: losses of
£370,000) in profit and loss in the year.
At 25 March 2023, the Group had forward exchange contracts of 5.7m Euros (2022: 24.0m Euros) at an average exchange rate of
€1.13/£ (2022: €1.08/£) which mature within 12 months of the year end. In addition, the Group had forward exchange contracts
of nil CHF (2022: 6.4m) at an average exchange rate of N/A (2022: 1.03/£) which mature within 12 months of the
year end.
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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
25 March 2023 and the Group’s equity at that date would decrease by £173,000 (2022: £74,000). If the £60,000,000 facility is
fully utilised the exposure increases by £300,000. This is attributable to the Group’s exposure to interest rates on its variable
rate borrowings.
22. Share-based payments
The Group operates a share-based incentive scheme for the Company’s executive directors (being both board directors
and certain members of the executive committee) and selected senior management. 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 140 to 164. The Group recognised a total charge of
£3,420,000 (2022: £989,000) 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 £2,352,000 for the year (2022: £280,000) with a corresponding entry to reserves. The weighted average fair value of
share options granted during the year was £0.51 per share. Three outstanding awards had been granted to 25 March 2023:
During the year 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 was 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 ended 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 £986,000 (2022: £81,000).
During the period ended 26 March 2022 the remuneration committee granted 2,709,748 ordinary shares of 2.5p each at
£nil value.
208
Severfield plc Annual report and accountsfor the year ended 25 March 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYEAR ENDED 25 MARCH 2023 22. Share-based payments continued
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 £839,000 (2022: £199,000).
During the year ended 25 March 2023 the remuneration committee granted 3,204,413 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 25 March 2023 to 29 March 2025. The following vesting schedule applies:
Underlying EPS performance for year ended 29 March 2025
Equal to less than 7.50p
Equal to 8.80p or better
Between 7.50p and 8.80p
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 2022.
% of award vesting
0%
100%
between 25% and 100%
£0.62*
nil
108%
4.3%
3.3p
three years
The Black–Scholes pricing model produced, using the above assumptions, an annual charge of £527,000 (2022: £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
Outstanding at the end of the year
2023
Number
8,110,391
3,204,413
(2,818,577)
8,496,227
2022
Number
7,429,677
2,709,748
(2,029,034)
8,110,391
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www.severfield.comStock Code: SFR FINANCIALS 22. 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 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 (2022: £387,000) 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 (2022: £322,000) was recognised in the current period in
relation to the 2021 Sharesave scheme.
Under the 2022 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 2022 Sharesave scheme in 2025, these options will
become exercisable for a period of six months. A charge of £359,000 (2022: £322,000) was recognised in the current period in
relation to the 2022 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
23. Share capital
Issued and fully paid:
309,538,321 ordinary shares of 2.5p each (2022: 309,523,061 ordinary shares of 2.5p each)
2023
Number
5,918,097
3,023,688
(1,617,970)
(15,260)
7,308,555
2022
Number
5,742,520
2,300,899
(823,723)
(1,301,599)
5,918,097
2023
£000
2022
£000
7,739
7,738
The issue of shares represents shares stated to satisfy the 2018, 2020 and 2021 sharesave schemes.
The ordinary shares carry no right to fixed income. There are no share options outstanding as at 25 March 2023 (2022: nil).
210
Severfield plc Annual report and accountsfor the year ended 25 March 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYEAR ENDED 25 MARCH 2023 24. Other reserves
At 28 March 2021
Share-based payments
Gains taken to equity on cash flow hedges
Reclassification adjustments on cash flow hedges
Exchange difference on foreign operations
At 27 March 2022
Share-based payments
Losses taken to equity on cash flow hedges
Reclassification adjustments on cash flow hedges
Exchange difference on foreign operations
At 25 March 2023
Share-
based
payment
reserve
£000
2,397
989
–
–
–
3,386
2,465
–
–
–
5,851
Capital
redemption
reserve
£000
139
–
–
–
–
139
–
–
–
–
139
Hedge
accounting
reserve
£000
912
–
(22)
13
–
903
–
(1,147)
243
–
(1)
Currency
translation
reserve
£000
16
–
–
–
41
57
–
–
–
(87)
(30)
Total
£000
3,464
989
(22)
13
41
4,485
2,465
(1,147)
243
(87)
5,959
The movement in the share-based payment reserve represents the share-based payment charge of £3,420,000 (2022:
£989,000). This is offset by £955,000 being recycled to retained earning for the reserves built up on sharesave schemes for
which the options have now lapsed.
25. Net cash flow from operating activities
Operating profit from operations
Adjustments:
Depreciation of property, plant and equipment (note 13)
Gain on disposal of other property, plant and equipment
Amortisation of intangible assets (note 12)
Movements in pension scheme (note 29)
Share of results of JVs and associates (note 15)
Share-based payments (note 22)
Right-of-use asset depreciation (note 14)
Operating cash flows before movements in working capital
Decrease/(increase) in inventories
Decrease/(increase) in receivables
(Decrease)/increase in payables
Cash generated from/(used in) operations
Tax paid
Net cash flow from operating activities
2023
£000
30,154
5,407
(52)
3,416
(2,226)
(1,898)
3,420
1,840
40,061
4,774
10,701
(1,724)
53,812
(3,520)
50,292
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)
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www.severfield.comStock Code: SFR FINANCIALS
25. Net cash flow from operating activities continued
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
26. Analysis of net funds/(debt)
Borrowings
Cash and cash equivalents
Unamortised debt arrangement fees
2023
£000
53,812
317
(635)
(5,668)
47,826
33,067
145%
2023
£000
(8,950)
11,338
321
2,709
2022
£000
(1,902)
376
(2,759)
(2,507)
(6,792)
26,881
(25%)
2022
£000
(14,850)
(3,974)
402
(18,422)
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 31 for APM definitions.
27. 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 Company and its subsidiaries have provided unlimited multilateral guarantees to secure any bank overdrafts and loans of
all other Group companies. At 25 March 2023 this amounted to £nil (2022: £nil). The Group has also given performance bonds in
the normal course of trade.
28. Subsequent events
On 3 April 2023 the Group acquired 100 per cent of the share capital of Voortman Steel Construction Holding B.V. (‘VSCH’) and
its subsidiaries, an innovative European steel construction group located in the Netherlands. The businesses were acquired for
a net cash consideration of €24,000,000 (£21,200,000), payable on completion. This has been financed through a term loan of
£19,000,000 and the remainder through cash reserves of £2,200,000. The acquisition provides the group with a manufacturing
base in Europe, to complement our existing business, and access to new and high-growth market sectors.
£1,816,000 of costs relating to the acquisition have been included in non-underlying expenses. Further details are included in
note 5. The net assets acquired of €6.6m (£5.9m), include cash of €5.5m (£4.9m). Due to the proximity of the acquisition to
the approval of the annual report and accounts, a purchase price allocation has not yet been completed. For this reason, it is
considered impracticable to present a split of net assets acquired, an allocation of the purchase price in excess of net assets
and other related fair value disclosures. This exercise will be complete in the year ending 30 March 2024.
212
Severfield plc Annual report and accountsfor the year ended 25 March 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYEAR ENDED 25 MARCH 2023 29. 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 £4,160,000 (2022: £4,307,000) represents contributions payable to these schemes by
the Group at rates specified in the rules of the plans. As at 25 March 2023, contributions of £765,000 (2022: £519,000) 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 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.
Longevity risk
Interest risk
The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation was carried out at
25 March 2023 by Mr Chris Hunter, Fellow of the Institute of Actuaries. The present value of the defined benefit obligation, the
related current service cost and past service cost were measured using the projected unit credit method.
Key assumptions used:
Discount rate
Inflation (RPI)
2023
%
4.6
3.1
2022
%
2.9
3.6
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www.severfield.comStock Code: SFR FINANCIALS 29. Retirement benefit obligations continued
When considering mortality assumptions, a life expectancy to 86 at age 65 has been used for the year ended 25 March 2023
(2022: 86). For the year ended 25 March 2023, the Group updated the allowance for future mortality improvements from the CMI
2020 model to the CMI 2021 model. 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.
The discount rate and RPI inflation assumptions for the 2023 disclosures in this note have been calculated using a cash flow
weighted single-equivalent approach based on the iBoxx Corporate AA index yield curve and the Bank of England’s inflation
yield curve, respectively, in line with the prior year.
Impact on scheme liabilities of changes to key assumptions:
Assumption
Discount rate
Rate of mortality
Price inflation
Change in assumption
Increase/decrease by 0.5%
Reducing by 10%
Increase/decrease by 0.5%
Impact on scheme liabilities
Decrease/increase by 6.7%
Increase by 2.9%
Increase/decrease by 4.6%
Amounts recognised in income in respect of these defined benefit schemes are as follows:
Interest cost
Interest income
2023
£000
1,217
(844)
373
2022
£000
940
(538)
402
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 £19,600,000 (2022:
£18,899,000 ).
The actual return on scheme assets were a loss of £8,990,000 (2022: £478,000 gain).
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:
2023
£000
(33,933)
21,062
(12,871)
2022
£000
(43,562)
29,166
(14,396)
Equities
Bonds and gilts
Cash
Property
LDI funds
Other
2023
£000
3,307
5,287
1,598
2,534
4,993
3,343
21,062
2022
£000
5,921
6,403
4,394
3,103
6,952
2,393
29,166
2023
%
15.7
25.1
7.6
12.0
23.7
15.9
100.0
2022
%
20.3
22.0
15.1
10.6
23.8
8.2
100.0
Bonds and gilts include a mixture of corporate and government bonds and fixed and index-linked gilts. Approximately 18 per
cent of bonds have a sub-investment grade credit rating (BB+ or lower) and approximately 92 per cent of gilts are index-linked,
with 8 per cent being fixed.
214
Severfield plc Annual report and accountsfor the year ended 25 March 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYEAR ENDED 25 MARCH 2023 29. Retirement benefit obligations continued
Movements in the present value of defined benefit obligations were as follows:
At start of year
Interest cost
Actuarial gains
Benefits paid
At end of year
2023
£000
(43,562)
(1,217)
9,133
1,713
(33,933)
2022
£000
(50,316)
(940)
5,998
1,696
(43,562)
Actuarial gains arising from changes in demographic assumptions, changes in financial assumptions and gains or losses
arising from experience were gains of £19,000 (2022: gains of £43,000), gains of £10,464,000 (2022: gains of £6,112,000) and
losses of £1,350,000 (2022: losses of £157,000) respectively. The large gain on ‘changes in financial assumptions’ is driven by
an increase in the discount rate. The present value of defined benefit obligations at the year end is as follows:
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
Employer contributions
Benefits paid
At end of year
2023
£000
(19,811)
(14,122)
(33,933)
2023
£000
29,166
844
(9,834)
2,599
(1,713)
21,062
2022
£000
(26,163)
(17,399)
(43,562)
2022
£000
27,937
538
(60)
2,447
(1,696)
29,166
During the course of 2022 government bond yields increased markedly as central banks raised interest rates in an attempt to
reduce inflationary pressures. The present value (PV) of the Scheme liabilities are explicitly linked to bond yields and as these
increase the PV of the liabilities reduces, due to it increasing the discount rate. Likewise the Scheme’s investment strategy also
adopts a liability driven investing (LDI) strategy which invest in bonds/bond type instruments in order to hedge a proportion of the
expected movement in the value of the liabilities. Correspondingly Scheme assets also fell during the period largely due to the fall
in the value of the LDI portfolio.
The Group expects to contribute £224,000 (2022: £210,000) per month to its defined benefit pension scheme in the year to
30 March 2024.
History of experience of gains and losses:
Experience (losses)/gains on scheme assets (£000)
Percentage of scheme assets
Experience gains/(losses) on scheme liabilities (£000)
Percentage of the present value of scheme liabilities
Total amount recognised in the consolidated
statement of comprehensive income (£000)
Percentage of the present value of scheme liabilities
2023
(9,834)
(46.7%)
1,350
4.0%
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%
(701)
2.1%
5,938
13.6%
(4,906)
(9.8%)
255
0.6%
(3,702)
(8.1%)
The weighted average period over which benefits are expected to be paid, or the duration of the liabilities, is currently 14 years
(2022: 17 years). The reduction in duration is due to the increase in discount rates.
215
www.severfield.comStock Code: SFR FINANCIALS 29. Retirement benefit obligations continued
The Scheme’s investments in the Newton Real Return and M&G Alpha Opportunities Funds are quoted on a recognisable
exchange with respective stock market identifiers. However, the assets invested with Legal & General in their Liability Driven
Investing (LDI) Funds and the Standard Life Pooled Property Fund are not publicly quoted.
The Scheme invests in several pooled LDI funds, through unit linked insurance policies, with Legal & General which themselves
invest in a combination of gilts, gilt repos (synthetic gilts) and swap based instruments of varying duration and interest rate/
inflation characteristics. The composition of the funds is designed so as to hedge a proportion of the Scheme’s liabilities and
specifically the sensitivity of the liabilities to both changes in interest rates and longer term inflation expectations. Such funds
adopt a moderate degree of leverage (on average x.2) and as such depending on market movements the funds may call and/or
distribute additional capital in order to maintain leverage within a particular range set by the pooled fund manager.
The recognition of a pension scheme surplus is determined by IAS 19 and applying IFRIC 14 which is an interpretation providing
further guidance about when a surplus can be recognised. The group considers that under the Pension scheme rules, the group
has an unconditional right to a refund of surplus after all pension payments have been made. Hence if the scheme was ever in a
surplus, it would be recognised accordingly.
30. Related party transactions
In addition to the executive directors, members of the executive committee are considered as key management personnel of
the Group. Information about the remuneration of all key management personnel is as follows:
Short-term employee benefits
Contributions into the pension schemes
Share based payments
2023
£000
4,593
247
1,945
6,785
2022
£000
3,502
314
196
4,012
Short-term employee benefits include salary, bonus, national insurance contributions, the provision of company cars, fuel for
company cars, car allowances and private medical insurance.
Further detail on directors’ remuneration is provided in the audited part of the directors’ remuneration report on page 140.
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 (2022: £48,000). The amount due to Fabsec at 25 March 2023 was £117,000 (2022: £117,000).
During the year the Group has contracted with and purchased services from Construction Metal Forming Limited (‘CMF’)
amounting to sales of £nil (2022: £83,000) and purchases of £16,808,000 (2022: £10,748,000). The amount due from and to CMF
at 25 March 2023 was £4,637,000 (2022: £1,545,000) and £1,001,000 (2022: £106,000) respectively.
During the year the Group contracted with MET Structures Limited, amounting to sales of £8,337,000 (2022: £9,804,000) and
purchases of £nil (2022: £1,400,000). MET Structures shares common directors with the Group. The amount due from MET
Structures at 25 March 2023 was £2,109,000 (2022: £2,890,000).
During the year the Group incurred additional operating costs in relation to the day-to-day running of its Indian joint venture
(‘JSSL’) of £271,000 (2022: £236,000). Those costs were recharged to JSSL during the year and the amount due from JSSL at
25 March 2023 was £806,000 (2022: £575,000). During the year the Group contracted with and purchased services from JSSL
amounting to £nil (2022: £26,000). The amount due to JSSL at 25 March 2023 was £nil (2022: £nil).
216
Severfield plc Annual report and accountsfor the year ended 25 March 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYEAR ENDED 25 MARCH 2023 31. Alternative performance measures
The Group provides alternative performance measures, including underlying operating profit and underlying profit before tax,
to enable users to better understand the performance and earnings trends of the Group. The Group’s alternative performance
measures are not defined by IFRS and are therefore considered to be non-GAAP measures. The measures may not be
comparable to similar measures used by other companies and they are not intended to be a substitute for, or superior to,
measures defined under IFRS.
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’)
Definition
Rationale
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
Operating profit before non-underlying items
and the results of JVs and associates.
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.
217
www.severfield.comStock Code: SFR FINANCIALS 31. Alternative performance measures continued
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
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
15
Note
5
Note
10
5
2023
£000
33,067
(4,811)
1,898
30,154
2023
£000
32,476
(5,369)
27,107
2023
£000
32,476
(1,898)
30,578
(5,369)
25,209
2023
£000
26,238
(4,672)
21,566
2022
£000
26,881
(5,424)
1,346
22,803
2022
£000
27,098
(6,098)
21,000
2022
£000
27,098
(1,346)
25,752
(6,098)
19,654
2022
£000
22,303
(6,702)
15,601
Weighted average number of ordinary shares
10 309,533,696 308,834,123
8.48p
6.97p
7.22p
5.05p
2023
£000
(8,950)
11,338
321
2,709
(13,396)
(10,687)
2022
£000
(14,850)
(3,974)
402
(18,422)
(11,640)
(30,062)
Note
26
21
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 funds/(debt) (pre-IFRS 16)
IFRS 16 lease liabilities
Net debt (post-IFRS 16)
218
Severfield plc Annual report and accountsfor the year ended 25 March 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYEAR ENDED 25 MARCH 2023 31. Alternative performance measures continued
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
3
4
5
7
5
2023
£000
491,753
491,753
463,497
(4,811)
458,686
3,180
(558)
2,622
2022
£000
403,563
403,563
382,106
(5,424)
376,682
1,879
(674)
1,205
6,238
467,546
4,795
382,682
219
www.severfield.comStock Code: SFR FINANCIALS FIVE YEAR
SUMMARY
YEAR ENDED 25 MARCH 2023
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
2023
£000
2022
£000
2021
£000
2020
£000
2019
£000
491,753
403,563
363,254
327,364
274,917
33,067
32,476
(5,369)
26,881
27,098
(6,098)
25,470
24,331
(3,224)
26,978
28,621
(2,808)
23,256
24,711
–
21,724
15,601
17,304
20,415
20,162
228,397
27,572
(38,251)
217,718
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
8.48p
6.97p
8.39p
6.90p
3.40p
2.4
75.49p
46.65p
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
* The basis of stating results on an underlying basis is set out on pages 182 to 183.
FINANCIAL
CALENDAR
Preliminary announcement of full-year results
Publication of annual report
Annual general meeting
Announcement of interim results (provisional)
220
14 June 2023
July 2023
6 September 2023
21 November 2023
Severfield plc Annual report and accountsfor the year ended 25 March 2023
COMPANY
BALANCE SHEET
YEAR ENDED 25 MARCH 2023
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
Bank overdraft
Trade and other payables
Financial liabilities – borrowings
Financial liabilities – leases
Non-current liabilities
Trade and other payables
Financial liabilities – borrowings
Financial Liabilities – leases
Total assets less liabilities
Capital and reserves
Share capital
Share premium
Other reserves
Profit and loss account
Equity and total shareholders’ funds
Year ended
25 March
2023
£000
Year ended
26 March
2022
£000
Note
2
3
4
5
5
6
6
58,602
208
2,061
152,598
106,898
320,367
11,312
1,845
13,157
58,747
174
31
152,598
68,977
280,527
12,333
–
12,333
–
(179,121)
(4,150)
(287)
(183,558)
(5,389)
(129,903)
(5,900)
(36)
(141,228)
(2,377)
(4,800)
(1,786)
(8,963)
141,003
7,739
88,522
5,950
38,792
141,003
(3,081)
(8,950)
–
(12,031)
139,601
7,738
88,511
3,485
39,867
139,601
The Company reported a profit for the financial year ended 25 March 2023 of £7,847,000 (2022: profit of £10,479,000).
The financial statements were approved by the board of directors on 14 June 2023 and signed on its behalf by:
Alan Dunsmore
Chief Executive Officer
Adam Semple
Chief Financial Officer
Severfield plc
Registered in England No.1721262
221
www.severfield.comStock Code: SFR FINANCIALS COMPANY STATEMENT
OF CHANGES IN EQUITY
YEAR ENDED 25 MARCH 2023
At 27 March 2022
Total comprehensive income for the year
Ordinary shares issued*
Equity settled share-based payments
Dividends paid
At 25 March 2023
Share
capital
£000
7,738
–
1
–
–
7,739
Share
premium
£000
88,511
–
11
–
–
88,522
Other
reserves
£000
3,485
–
–
2,465
–
5,950
Retained
earnings
£000
39,867
7,847
–
955
(9,877)
38,792
* The issue of shares represents shares allotted to satisfy the 2018, 2020 and 2021 Sharesave schemes.
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
Share
premium
£000
87,658
–
853
–
–
88,511
Other
reserves
£000
2,496
–
–
989
–
3,485
Retained
earnings
£000
38,617
10,479
–
–
(9,229)
39,867
* The issue of shares represents shares allotted to satisfy the 2018 and 2020 and Sharesave scheme.
Total
equity
£000
139,601
7,847
12
3,420
(9,877)
141,003
Total
equity
£000
136,477
10,479
885
989
(9,229)
139,601
222
Severfield plc Annual report and accountsfor the year ended 25 March 2023 NOTES TO THE COMPANY
FINANCIAL STATEMENTS
YEAR ENDED 25 MARCH 2023
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 140 and in notes 6 and 22 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.
223
www.severfield.comStock Code: SFR FINANCIALS NOTES TO THE COMPANY
FINANCIAL STATEMENTS
YEAR ENDED 25 MARCH 2023
2. Tangible fixed assets
Cost
At 27 March 2022
Additions
At 25 March 2023
Accumulated depreciation
At 27 March 2022
Charge for the year
At 25 March 2023
Carrying amount
At 25 March 2023
At 26 March 2022
Freehold
land and
buildings
£000
65,925
204
66,129
7,385
547
7,932
58,197
58,540
Fixtures,
fittings
and office
equipment
£000
Motor
vehicles
£000
467
221
688
262
23
285
403
205
33
–
33
31
–
31
2
2
Total
£000
66,425
425
66,850
7,678
570
8,248
58,602
58,747
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 (2022: £600,000),
which is set at a rate only to cover certain of the costs of maintaining the properties.
Long
leasehold
land and
buildings
£000
Fixtures,
fittings
and office
equipment
£000
Motor
vehicles
£000
–
794
794
–
7
7
–
1,284
1,284
–
42
42
787
–
1,242
–
71
19
90
40
18
58
32
31
Total
£000
71
2,097
2,168
40
67
107
2,061
31
3. Right-of-use assets
Cost
At 27 March 2022
Additions
At 25 March 2023
Accumulated depreciation
At 27 March 2022
Charge for the year
At 25 March 2023
Carrying amount
At 25 March 2023
At 26 March 2022
224
Severfield plc Annual report and accountsfor the year ended 25 March 2023 4. 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 25 March 2023 is disclosed below. All of these had a reporting
period ended 25 March 2023, 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 2022.
** 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 2023.
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
2023
£000
119,671
32,927
152,598
2022
£000
119,671
32,927
152,598
225
www.severfield.comStock Code: SFR FINANCIALS NOTES TO THE COMPANY
FINANCIAL STATEMENTS
YEAR ENDED 25 MARCH 2023
4. Investments continued
Investment in subsidiaries
Cost
At 28 March 2022
At 25 March 2023
Provision for impairment
At 28 March 2022 and 25 March 2023
Net book value
At 25 March 2023
At 26 March 2022
£000
139,871
139,871
(20,200)
119,671
119,671
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 a prior year to fund the expansion of its production facilities.
5. Debtors – amounts falling due within one year
Current assets
Other debtors
Amounts owed by JVs and associates
Corporation tax recoverable
Non-current assets
Amounts owed by subsidiary undertakings
2023
£000
1,488
179
9,645
11,312
2023
£000
106,898
106,898
2022
£000
2,502
106
9,725
12,333
2022
£000
68,977
68,977
Amounts owed by subsidiary undertakings are non-interest bearing and repayable on demand. No impairment of the receivable
was recorded at 25 March 2023 or 26 March 2022.
226
Severfield plc Annual report and accountsfor the year ended 25 March 2023 6. 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 7)
Non-current liabilities
Other creditors and accruals
2023
£000
16,082
156,640
129
6,270
179,121
2023
£000
2,377
2,377
2022
£000
18,544
104,691
113
6,555
129,903
2022
£000
3,081
3,081
7. 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 28 March 2021
Current year credit
At 27 March 2022
Current year charge
At 25 March 2023
2023
£000
(6,779)
509
(6,270)
Excess
capital
allowances
£000
(5,236)
(1,616)
(6,852)
73
(6,779)
Other
temporary
differences
£000
183
114
297
212
509
2022
£000
(6,852)
297
(6,555)
Total
£000
(5,053)
(1,502)
(6,555)
285
(6,270)
8. Contingent liabilities
The Company has provided an unlimited multilateral guarantee to secure any bank overdrafts and loans of all other Group
companies. At 25 March 2023 these amounted to £nil (2022: £nil).
227
www.severfield.comStock Code: SFR 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 (Design & Build)
Limited
Ward House
Sherburn
Malton
North Yorkshire
YO17 8PZ
Severfield (NI) Limited
Fisher House
Ballinamallard
Enniskillen
Co Fermanagh
BT94 2FY
Severfield (Products &
Processing) Limited
Severs House
Dalton Airfield Industrial
Estate
Dalton, Thirsk
North Yorkshire
YO7 3JN
Severfield Europe B.V.
Gildelaan 11
4761 BA Zevenbergen
The Netherlands
Severfield (Nuclear &
Infrastructure) Limited
Elton Street
Bolton
Lancashire
BL2 2BS
Severfield Infrastructure
Limited
Severs House
Dalton Airfield Industrial
Estate
Dalton, Thirsk
North Yorkshire
YO7 3JN
JSW Severfield Structures
Limited
Office No. 302, Naman Centre
3rd Floor, Plot No. C-31
Bandra Kurla Complex
Bharat Nagar, Bandra East
Mumbai 400 051
India
Construction Metal Forming
Limited
Unit 3
Mamhilad Technology Park
Old Abergavenny Road
Mamhilad
Monmouthshire, NP4 0JJ
Voortman Steel Construction
Holding B.V. (acquired April
2023)
Plaagslagen 16,
7463 PH Rijssen
The Netherlands
Public Relations
Camarco
107 Cheapside
London
EC2V 6DN
Registrars
Computershare Investor
Services PLC
PO Box 82
The Pavilions,
Bridgwater Road
Bristol, BS99 7NP
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
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
Advisers
Auditor
KPMG LLP
Chartered Accountants
1 Sovereign Square
Leeds, LS1 4DA
Solicitor
Ashurst LLP
London Fruit and Wool
Exchange
1 Duval Square
London
E1 6PW
228
Severfield plc Annual report and accountsfor the year ended 25 March 2023 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
229
www.severfield.comStock Code: SFR FINANCIALS Severfield plc
Severs House, Dalton Airfield Industrial Estate
Dalton, Thirsk, North Yorkshire, YO7 3JN
Tel: (01845) 577896
Fax: (01845) 577411
www.severfield.com