SEVERFIELD PLC ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 30 MARCH 2024
CREATING BETTER WAYS
TO BUILD, FOR A WORLD
OF CHANGING DEMANDS
£28.6 m
£24.3 m
£27.1 m
£32.5 m
£36.5m
24
23
22
21
20
1 Underlying results are stated before non-underlying items.
See note 33 for APM definitions.
£25.8 m
£21.1 m
£21.0 m
£27.1 m
£23.0 m
24
23
22
21
20
£271m
£301m
£486m
£510m
£478m
24
23
22
21
20
2.9p
2.9p
3.1p
3.4p
3.7p
24
23
22
21
20
ORDER BOOK (UK AND EUROPE)
DIVIDEND PER SHARE
Profit before tax, which includes the
impact of non-underlying expenses of
£13.5m (2023: £5.4m), has decreased by
£4.1m to £23.0m.
Strong underlying profit before tax
growth of 13 per cent in 2024 and 6 per
cent annual compound growth since
2020, highlighting both organic growth
and growth from selective acquisitions.
SUSTAINABLE
GROWTH IN
NUMBERS
Read more about our performance
on pages 40 to 51
Read more about our performance
on pages 40 to 51
PROFIT BEFORE TAX (‘PBT’)
UNDERLYING¹ PROFIT BEFORE TAX
Our high-quality order book is
well-diversified and contains a good
mix of projects across the Group’s
key market sectors with a growing
amount in Europe.
The Group’s strong cash generation
allows a progressive dividend policy
whilst maintaining funding flexibility
to fulfil the Group’s strategy.
Read more about our order book
on pages 14 to 15
Read more about our dividends
on page 50
Severfield plc Annual report and accounts
for the year ended 30 March 2024
“It has been an absolute privilege to be
the Chair of Severfield. I am pleased
to be leaving a business in great
shape, which is performing strongly,
and which has a clear strategy for
further sustainable growth.”
“The Group demonstrated the
importance of its diversified
activities. Strong order books
and market leading positions by
delivering another year of underlying
profit growth against a back drop of
some challenging market conditions.”
KEVIN WHITEMAN
Chair
ALAN DUNSMORE
Chief Executive Officer
You can find out more about the Group on our website
www.severfield.com, which includes an investor
information section containing a wide range of
information of interest to institutional and private
investors, including:
• Latest news and press releases
• Financial reports and investor presentations
• Company share price
Find us online @
www.severfield.com
WELCOME TO OUR
ANNUAL REPORT 2024
Creating better ways to build, for a world
of changing demands.
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.
OVERVIEW
OVERVIEW
01
www.severfield.com
Stock Code: SFR
OUR GOVERNANCE
Governance at a glance
110
Board of directors
112
Our executive committee
114
Our Chair’s view on governance
116
Corporate governance report
118
Audit committee report
126
Nominations committee report
130
Directors' report
134
Directors' remuneration report
– Letter from the committee chair
138
– Policy
141
– Implementation
149
Statement of directors’ responsibilities
163
FINANCIAL STATEMENTS – GROUP
Independent auditor’s report
166
Consolidated income statement
174
Consolidated statement of
comprehensive income
175
Consolidated balance sheet
176
Consolidated statement of changes
in equity
177
Consolidated cash flow statement
178
Notes to the consolidated financial
statements
179
Five-year summary
221
Financial calendar
221
FINANCIAL STATEMENTS – COMPANY
Company balance sheet
222
Company statement of changes in equity
223
Notes to the Company financial
statements
224
Addresses and advisers
229
OVERVIEW
Our year in review
2
Operational highlights
3
View from the Chair
4
Our purpose, strategy and values
6
The Severfield Way
8
What we do
10
Where we do it
12
Our diversified portfolio
14
Our projects
16
Our compelling investment case
18
STRATEGIC REPORT
Our market sectors
22
The markets we serve: UK and Europe
24
The markets we serve: India
26
How we create value
28
Our strategy
30
Drive growth
31
Grow Indian presence
32
Optimise operations
33
Key performance indicators
34
Engaging with our stakeholders
36
Our operational performance
40
Our financial performance
48
Viability statement
52
Building a responsible and sustainable
business
54
Materiality assessment
58
Task force on climate-related financial
disclosures (‘TCFD’)
60
Governance
61
Strategy
63
The 4Ps Sustainability Framework
– Planet
74
– People
81
Case studies
The 5% Club
87
Female mentoring
87
– Prosperity
88
– Principles of governance
90
How we manage risk
92
Section 172 statement
105
Severfield plc Annual report and accounts
for the year ended 30 March 2024
02
OUR YEAR
IN REVIEW
Revenue
£463.5m
Underlying profit before tax
£36.5m
Profit before tax
£23.0m
£363.3m
£403.6m
£491.8m
£463.5m
24
23
22
21
£24.3m
£27.1m
£32.5m
£36.5m
24
23
22
21
£21.1m
£21.0m
£27.1m
£23.0m
24
23
22
21
Underlying
operating margin
8.1%
Operating margin
5.7%
Underlying basic
earnings per share
8.9p
7.0%
6.7%
6.7%
8.1%
24
23
22
21
6.2%
5.3%
5.7%
5.7%
24
23
22
21
6.4p
7.2p
8.5p
8.9p
24
23
22
21
Basic earnings
per share
5.2p
Greenhouse gas
intensity1
13.5t CO²e /£m
Except as otherwise stated ‘2023’ and ‘2024’
refers to the 52-week period ended 25 March
2023 and the 53-week period ended 30 March
2024 respectively. The Group’s accounts are
made up to an appropriate weekend date
around 31 March each year
Underlying results are stated before
non-underlying items of £13.5m (2023: £5.4m),
including the amortisation of acquired
intangible assets of £5.4m (2023: £3.3m),
legacy employment tax charge £4.4m (2023:
£nil), impairment of fixed assets £4.5m
(2023: £nil), unwind of discount on contingent
consideration of £0.3m (2023: £0.6m), fair value
change in contingent consideration of £1.1m
credit (2023: £0.3m credit), and net acquisition-
related expenses of £nil (2023: £1.8m). See note
33 for APM definitions.
1 Scope 1 and Scope 2 emissions, using a
market-based approach. Increase due to the
inclusion of VSCH, acquired in April 2023.
5.6p
5.1p
7.0p
5.2p
24
23
22
21
21.9
19.9
13.2
13.5
24
23
22
21
OVERVIEW
03
www.severfield.com
Stock Code: SFR
• Revenue of £463.5m (2023: £491.8m)
• Underlying1 profit before tax up 13 per cent to £36.5m (2023:
£32.5m), ahead of expectations due to strong operational
delivery
• Profit before tax, including non-underlying items, was
£23.0m (2023: 27.1m)
• Underlying1 basic earnings per share up 5 per cent at 8.9p
(2023: 8.5p)
• Basic earning per share of 5.2p (2023: 7.0p)
• Total dividend increased by 9 per cent to 3.7p per share
(2023: 3.4p per share), includes proposed final dividend of
2.3p per share (2023: 2.1p per share)
• Year-end net debt (on a pre-IFRS 16 basis1) of £9.4m (2023:
net funds of £2.7m), includes Voortman acquisition loan of
£15.2m, and reflects an operating cash conversion1 of 110%
(2023: 145%)
• High-quality, diversified UK and Europe order book of £478m
at 1 June 2024 (1 November 2023: £482m), includes higher
proportion of European orders
• Momentum and value is building in JSSL – increased share
of profit of £1.9m (2023: £1.3m), record EBITDA of £13m and
output of over 100,000 tonnes, Gujarat expansion expected
to commence in H2
• Record India order book of £181m at 1 June 2024 (1
November 2023: £165m)
• £10m share buyback programme launched in April 2024 to
return surplus capital to shareholders
1 See note 33 for APM definitions
• The Group was awarded ‘AAA’ under MSCI’s ESG rating for the
third year running
• Achieved CDP ‘A’ score for leadership on climate change
mitigation and ‘A-’ for supply chain engagement, as well as
maintaining our ‘very good’ BES 6001 responsible sourcing
accreditation
• Science-Based Target initiative (‘SBTi’) Net Zero targets
approved
• Maintained our carbon neutral accreditation from Achilles
for Scope 1, 2 and operational Scope 3 emissions for our
manufacturing, office and construction operations
• Listed in Financial Times Europe’s Climate Leaders report for
the fourth year running
• Procured 100 per cent of our energy from renewable sources
at all UK-owned facilities
• Measured social value against the National TOMs – Themes,
Outcomes and Measures – methodology framework
• Maintained Gold membership of ‘The 5% Club’,
demonstrating our commitment to ‘earn and learn’
apprenticeships
OPERATIONAL HIGHLIGHTS
ESG
Read more about our operating
performance on pages 40 to 47
Severfield plc Annual report and accounts
for the year ended 30 March 2024
04
VIEW FROM
THE CHAIR
2024 was another strong year for
the Group, reflecting the quality of
our operations and the talent and
commitment of our people. Despite
some market headwinds, the diversified
nature of our operations and our
market-leading positions have enabled
us to continue making significant
strategic progress, particularly in
Europe. The Group continues to win new,
high-quality work across all areas of
the business and this gives us a strong
platform for success in future years.
The Group’s underlying1 profit before
tax grew by 12 per cent to £36.5m
(2023: £32.5m), ahead of our previous
expectations, and this has been
supported by strong cash generation
with operating cash conversion in the
year of 110 per cent (2023: 145 per cent).
Our strong cash position and positive
cash flow supports the Group’s future
growth by enabling us to make the best
decisions and by giving potential clients
assurance of our long-term solvency and
availability of cash resources. Statutory
operating profit, which includes non-
underlying items, was £26.4m (2023:
£30.2m).
Our total dividend for the year has
increased by 9 per cent to 3.7p per
share, reflecting our results, strong
balance sheet and the board’s
confidence in the Group’s long-term
prospects. Furthermore, encouraged
by our cash position, we launched our
share buyback programme in April
2024 to repurchase up to £10m of our
ordinary shares, to further enhance
returns to our shareholders.
Board changes
This is my last report to you as Chair
of Severfield and I am pleased to be
handing over to Charlie Cornish with
the Group in a strong position and in
good hands. Charlie joined the board as
a non-executive director in May 2024
and will succeed me as Chair when I
step down from the board at the AGM
on 30 July 2024, having completed
my nine-year tenure. 2024 also saw
the retirement of Tony Osbaldiston
after nine years on the board, and the
departures of Rosie Toogood, who took
up a senior executive role at Wates,
a major customer, and Ian Cochrane,
previously our Chief Operating Officer,
who left us to pursue other interests. I
thank them all for contributions to the
board and to the Group’s success.
Markets and strategy
In the UK and Europe, we have a
prominent position in market sectors
with strong growth potential. Our
Nuclear and Infrastructure division is
well-placed to meet the demand for
ongoing state-backed investment,
including the requirement for clean and
domestically generated energy, such as
nuclear power, and improved transport
infrastructure. In our Commercial and
Industrial division, we continue to see
some significant opportunities, both in
the UK and continental Europe, where
we are making good progress with our
European growth strategy, supported by
the acquisition of VSCH. This includes
projects in support of a low-carbon
economy such as battery plants, energy
efficient buildings, manufacturing
facilities for renewable energy and
offshore wind projects, together with
data centres, where demand is being
fuelled by the growth in Artificial
Intelligence applications.
Creating value in JSSL remains a key
strategic objective of the board. In
India, momentum is building and a
growing order book and pipeline, and
the large number of identified growth
opportunities reflect a continuing strong
demand for structural steel.
“Despite the challenging market
conditions, the Group has delivered
another year of strong performance
– testament to the talent of our
people and success of our strategy”
KEVIN WHITEMAN
NON-EXECUTIVE CHAIR
Read about
strategy on
pages 30 to 33
Read about financial
performance on
pages 48 to 51
Read about
operating
performance
on pages
40 to 47
Read about
governance
and board of
directors on
pages
110 to 113
OVERVIEW
05
www.severfield.com
Stock Code: SFR
With these foundations, and with
the land in Gujarat, to develop a new
manufacturing facility and to expand the
geographical footprint of the business,
now secured, the business is very
well-positioned to take advantage of a
strongly growing economy, which will
drive the success and long-term value of
the business.
A responsible business
The health, safety and wellbeing of our
employees remains paramount and is
our number one priority. Encouragingly,
we have seen a further reduction in
our injury rates and have achieved our
targets for the year, supported by the
ongoing roll out of our Safer@Severfield
behavioural safety programme. Our
injury frequency rate (‘IFR’) of 1.23,
compares favourably to 1.61 in 2023,
and our accident frequency rate (‘AFR’)
has reduced to 0.12, compared to 0.14
in 2023. Despite this good performance,
we are not complacent and we are in
the process of adopting positive leading
indicators to drive further corrective
behaviours in our workforce in the
future.
During the year, we progressed our
efforts to measure and reduce our
carbon emissions and I am proud to
say that we have achieved a CDP A
score for our leadership on climate
change mitigation, and retained our AAA
environmental, social and governance
(ESG) rating from MSCI for the third
year running. We have also received
validation of our science-based targets,
have been verified and accredited
as carbon neutral for the fourth year
running and have, once again, been
recognised in the Financial Times
listing of Europe’s climate leaders,
which showcases corporate progress in
fighting climate change.
We have maintained our focus on
social value, which has been delivered
through a range of Group initiatives
such as supporting local supply chain
partners, fundraising and volunteering
schemes, through paying our colleagues
at or above the real living wage, and
‘earning and learning’ through our gold
membership of ‘The 5% Club’, including
increasing our intake of annual
apprentices.
Looking forward
Whilst there remains some uncertainty
in the wider economy, we are seeing an
improvement in market conditions. We
have strong order books spread across
a wide range of sectors and geographies
and are well-positioned in markets with
excellent long-term opportunities. As
I prepare to step down as Chair, I am
pleased to be leaving a business in great
shape, which is performing strongly,
and which has a clear strategy for
further sustainable growth. It has been
an absolute privilege to be the Chair of
Severfield. It is a unique and dynamic
business, driven by the commitment and
talent of its outstanding people, who
have been key to the Group’s enduring
success. I leave behind a strong and
entrepreneurial management team, led
by Alan Dunsmore, with whom I have
thoroughly enjoyed working. Finally,
I would like to personally thank all of
my board colleagues, the shareholders
and the wider Severfield team for their
continued support over the years.
KEVIN WHITEMAN
NON-EXECUTIVE CHAIR
19 JUNE 2024
1 See note 33 for APM definitions
Severfield plc Annual report and accounts
for the year ended 30 March 2024
06
OVERVIEW
OUR PURPOSE, STRATEGY
AND VALUES
Read about our approach
to sustainability on pages
51 to 91
Our purpose, strategy, and values are the pillars upon which sustainable success
is built, they shape our identity and guide our actions.
Our purpose ‘creating better ways to build for a world of
changing demands’ embodies our commitment to making a
positive impact on society and the world in which we live. As
demands change, our engineers continue to find ingenious,
intuitive and sustainable ways to deliver the buildings that
society needs. Our core strength is providing high-quality and
reliable engineering and construction solutions in the UK,
Republic of Ireland and continental Europe, whilst maintaining
our focus on serving our communities.
Through the continued focus on our well-established strategy
to drive growth in our core markets, grow our presence in
new and emerging markets and ensure continuous efficiency
improvement across all aspects of our business, we are
turning our purpose into action, creating long-term value for all
stakeholders, whilst staying true to our core purpose. Project
Horizon, our digitalisation programme, continues to play a vital
role in achieving this.
Over recent years, we have been on a journey with colleagues
to develop the values that define us. ‘The Severfield Way’
encompassed our new values (‘we set the bar high’, ‘we are in
it together’, ‘we do the right thing’ and ‘we find better ways’) will
guide our behaviour and shape our interactions both inside
and outside the organisation. They define the high standards
by which we conduct ourselves, the decisions we make, and
the relationships we cultivate. Upholding our values is non-
negotiable, as they personify our commitment to ethical conduct
and responsible business practices.
Our sustainability framework is a key enabler to achieving
our leadership on ESG and continues to be underpinned by
the four Ps: ‘Planet’, ‘People’, ‘Prosperity’ and ‘Principles of
Governance’.
By adhering to our purpose, continuing the delivery of our
well-established strategy, and upholding our values, we
aim to drive sustainable growth and to fulfil our broader
responsibilities to society.
OVERVIEW
07
www.severfield.com
Stock Code: SFR
OUR GROUP STRATEGY
Our well-established strategy is unchanged – focused on growth, both organic
and through selective acquisitions, growing our presence in India through our joint
venture (JSSL), and operational improvements.
Read more on page 31
Read more on page 32
Read more on page 33
Our focus on ESG
Our strategic priorities are underpinned by the sustainability framework, which along with our core values, enables us
to deliver our strategy. Our sustainability framework outlines why we prioritise different elements of our work and is
encapsulated by the 4Ps framework:
Planet
Continue to improve the environmental impact of
our processes and projects. Support sustainable
construction through circularity, strive for Net Zero
and enable efficient business practices.
People
Support our teams to be diverse, engaged, motivated
and highly skilled. Engage positively with projects and
the local communities in which we work.
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.
Read more on pages 74 to 88
DRIVE GROWTH
Our aim is to capitalise on growth
opportunities, both in the UK and
Europe, and to maximise
our market share.
01
GROW INDIAN PRESENCE
Our aim is to build value in
JSSL and we remain very
positive about the long-term
development of the
Indian market.
OPERATIONAL
EXCELLENCE
Our emphasis is on delivering
high-quality projects and
reducing costs by driving
excellence through our core
business processes.
02
03
Severfield plc Annual report and accounts
for the year ended 30 March 2024
08
The Severfield Way has been designed to harness the skills and expertise of our people
and promote the positive culture and ways of working that everyone at Severfield strives
to achieve.
THE IMPORTANCE OF CULTURE
Developing The Severfield Way
Severfield is known for its culture of accountability, continuous
improvement, and commitment to excellence, with a strong
emphasis on health and safety. Our success centres on the
collective talent, skills, and experience of our dedicated
colleagues across the Group.
We are committed to continuing to make Severfield a great
place to work, a place where everyone can perform at their
best and help us achieve our business objectives.
The Severfield Way embodies our collective identity and values
and is the product of a number of years of proactive colleague
engagement, focused on understanding what it was about our
dynamic business that our people liked, what they thought
our identity was, and crucially, where they thought we could
improve.
As Severfield continues to grow, we are working with more
clients, in new sectors and in new countries with our footprint
now extending into Europe. Through this growth, Severfield
has acquired a diverse set of working practices, principles, and
cultures. The Severfield Way has brought the best aspects of
each of these into one, unifying framework that all our people
can relate to.
Now refined to include our new values and behaviours, and
underpinned by our purpose, The Severfield Way is a clear
framework that promotes the culture and ways of working that
we want to encourage throughout the Group.
Our purpose has been one of the key driving forces of
Severfield’s market-leading operations for several years, and
The Severfield Way will enhance this. It not only showcases our
strengths and the organisational standards we aim to uphold,
but also serves as a catalyst for further growth, challenging
both our colleagues and leaders to strive for excellence in
themselves and the work they do.
THE SEVERFIELD WAY
“CREATING BETTER
WAYS TO BUILD,
FOR A WORLD
OF CHANGING
DEMANDS.”
Read more on pages 10 to 19
OVERVIEW
09
www.severfield.com
Stock Code: SFR
We set the bar high. Our passion drives us to go above and
beyond expectations. As experts in our field, we are focused
on staying on track, maintaining a positive approach, and
developing our own knowledge. Continually raising the
reputation of our teams and the work that they produce comes
from always challenging ourselves to do more, having an
unwavering commitment to deliver industry-leading projects,
and always taking the utmost pride in our work.
We are in it together. Everyone at Severfield understands
that we are part of one team. By working together and
recognising that we all have unique, valuable contributions,
we can achieve great things. This isn’t just about sharing in
everyone’s successes – it’s about creating better links between
all departments and locations, making people feel supported
and empowered by their colleagues, and encouraging a
collaborative approach across the Group.
We find better ways. We are always looking for opportunities
to improve. By always being open to change and taking best
practice from other colleagues and the wider industry, we
can make sure that we are adaptable in a world of changing
demands. Whether this is developing a procedure following
lessons learned, exploring different innovative ideas put
forward by colleagues, or adopting brand new ways of working,
we push the boundaries of what we do.
We do the right thing. Our focus is on what’s best for each other,
our business, our clients, and our communities. As market leaders
we are passionate about what we do. Whether it’s leading the
way in industry safety standards or sustainable practices, always
having open and honest communication with each other, or
speaking up if we make a mistake, we always do the right thing.
Our values
Our four core values define how we operate and
interact with clients, partners, colleagues, and
communities. They serve as guiding principles in our
day-to-day activities. Together, we remain committed to
upholding these values and working collaboratively to
drive success – for Severfield, our team, and beyond.
OVERVIEW
WE SET THE
BAR HIGH.
WE ARE IN IT
TOGETHER.
WE FIND
BETTER WAYS.
WE DO THE
RIGHT THING.
“ Our passion
drives us
to go above
and beyond
expectations. ”
“ Everyone
at Severfield
understands
that we are part
of one team. ”
“ We are always
looking for
opportunities
to improve. ”
“ Our focus is on
what’s best for
each other, our
business, our
clients, and our
communities. ”
10
Severfield plc Annual report and accounts
for the year ended 30 March 2024
10
WHAT WE DO
We provide value throughout the entire project life cycle...
We manage every aspect of the fabrication and construction process, from initial scheme design, through detailing,
specification and manufacture, to the eventual handover to our clients of a quality product on-site. By engaging with our
clients in the design stage, 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.
Project Horizon
Over the years we have continued to invest in operational improvements, including the launch of Project Horizon, our digital
transformation project, in 2023. 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.
01
02
03
Design
Our design process provides innovative
solutions and ‘value engineering,’
driven by our experienced engineers and
building information modelling (‘BIM’)
software. We can advise on all areas of the
project, including materials, fire protection,
and construction techniques, leading to
an optimum solution, cost savings and
sustainability benefits. Our engineers handle
temporary works for construction efficiency
and safety, essential for high-rise towers
and complex structures, working
closely with our in-house
construction team to ensure
optimal solutions.
Fabrication
The Group’s fabrication facilities
feature extensive stockyards and cutting,
fabrication, welding, and painting areas,
including some of the industry’s largest
finished goods and sub-assembly areas.
Significant and ongoing investment has led
to innovative, state-of-the-art processing
equipment designed for optimal layout, logistics,
and integration. Numerical control data
optimizes output, reducing waste and errors.
Our plate girder production line provides
efficient plated sections, optimal
profiles, and shop-applied
intumescent coatings for
structural steelwork.
Construction
The Group’s highly trained in-house construction workforce provides
a market-leading service using the latest on-site equipment. Supported by an
experienced contract management team, each contract manager serves
as the single client contact, ensuring optimal communication and
performance. The Group is an industry leader in construction
methodology and our integrated construction
process is vital for our clients and a key
differentiator for the Group.
11
www.severfield.com
Stock Code: SFR
OVERVIEW
11
www.severfield.com
Stock Code: SFR
…addressing societies’ infrastructure needs
Our businesses are well-positioned to win work in markets with positive long-term growth trends including those which are
benefiting from the green energy transition. At Severfield, we have significant experience in delivering a wide range of projects
across the sectors that support this expected growth. The Group’s manufacturing scale, speed of construction and on-time
delivery capabilities, leaves us well-positioned to win work from such projects, many of which are likely to be designed in steel.
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. Recognising
the importance of these facilities,
governments in the UK and Europe are
allocating funding to deliver globally
competitive local battery supply chains.
Severfield has a strong position in the
sector and is currently working on the
Envision battery plant in Sunderland.
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. The
UK currently has the largest operational
offshore wind farm in Europe, with
similar sized projects planned or
underway. This presents opportunities
for the Group including manufacturing
facilities for renewables, offshore wind
projects, onshore substations for wind
connecting offshore energy to the grid
and modular housings for offshore
applications.
The UK Government has launched
‘Great British Nuclear’, to facilitate the
design, construction, commissioning
and operation of nuclear energy
generation projects to address
constraints in the nuclear market. The
new Civil Nuclear Roadmap, published
in January 2024, describes how the
UK could meet its existing target to
generate up to 24GW of nuclear power
by 2050, 4 times the current capacity.
Similar projects are also being planned
in Europe. The Group has extensive
experience in this sector and is a key
delivery partner for existing nuclear
projects at Sellafield.
Battery plants
Renewable
energy
New nuclear
Demand for data centres
in the UK and EU is also
expected to continue, fueled
by cloud computing, 5G and
the recent advancement
of Artificial Intelligence
(‘AI’) applications which
are driving even greater
dependence on data centre
infrastructure. The Group
has a notable track record
in this sector, having already
delivered projects in the UK,
Ireland, Belgium, Finland, the
Netherlands and Germany
for a variety of different end
clients.
Data centres
In the UK, the National Grid’s
connection reform initiative
is accelerating connections
to the grid and similar
projects are underway in
the EU. The Group is well-
placed to meet this demand
which includes a significant
increase in the volume of
power transmission and
distribution projects being
brought to market, with
an acceleration of work to
strengthen and stabilise
power networks to meet
future energy demands.
Transmission
Significant UK Government
investment is planned in
public transport, including
HS2, Northern Powerhouse rail
links, TransPennine upgrades,
rail electrification projects
and in improving roads, buses
and railways in the north of
England, all of which could also
introduce new opportunities
for the Group. Severfield is well
placed in the infrastructure
sector to support the delivery
of such projects and our bridge
team has a strong reputation
and extensive experience in all
types of bridgework, including
major transport routes.
Low carbon
transport
Decarbonisation legislation
and Net Zero targets are
driving demand for low-
carbon buildings, including
modifications to existing
buildings or new build
projects. The Group has a
strong track record in the
commercial office sector,
regionally and in London,
as well as experience in ‘cut
and carve’ (retrofit) design
and construction, leaving us
well placed to win work from
these opportunities.
Low carbon
buildings
Severfield plc Annual report and accounts
for the year ended 30 March 2024
12
WHERE WE DO IT
Across our construction operations we provide unrivalled capacity,
capability and technical expertise to the industry.
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 B.V. (‘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.
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.
CORE CONSTRUCTION SECTORS
Dalton
Sherburn
Lostock
Enniskillen, Northern
Ireland
Zevenbergen, Netherlands
Rijssen, Netherlands
Maassluis, Netherlands
UK employees: 1,264
Europe employees: 184
Carnaby
Lostock
Cardiff
Glasgow
Total employees: 197
OVERVIEW
13
www.severfield.com
Stock Code: SFR
The acquisition of VSCH, which has recently been combined withour existing
European business, is strengthening our market position in Europe. Our joint
venture operation in India is also fundamental in helping the Group achieve our
strategic growth objectives.
Modular Solutions
The Modular Solutions division consists of the
growing modular product ranges of Severfield Modular
Solutions (‘SMS’) (formerly Severfield (Products &
Processing) and of Construction Metal Forming (‘CMF’),
our cold rolled steel joint venture business.
Severfield Modular Solutions 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. CMF has
further expanded its product range to include cold
formed products, the design and manufacture of steel
purlins and certain modular products.
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 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 Bellary
facility has a capacity of c.100,000 tonnes (excluding
subcontracted work).
Sherburn
140 employees
Monmouthshire
89 employees
Severfield plc Annual report and accounts
for the year ended 30 March 2024
14
Commercial
Offices
Retail
Industrial and
distribution
Health and
education
Data centres
Stadia and
leisure
Nuclear
Transport
infrastructure
Power
and energy
Process
industries
OUR DIVERSIFIED
PORTFOLIO
JUNE 2018
JUNE 2019
JUNE 2023
JUNE 2024
JUNE 2022
JUNE 2021
JUNE 2020
0
500
£m
300
400
200
100
Transport infrastructure
Commercial offices
Industrial and distribution
Stadia and leisure
Nuclear
Data centres and other
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 2025 and beyond.
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.
As the UK’s market-leading structural steel Group, we serve people every day,
whether for work, leisure or travel, or to provide essential services, including power
and energy, health and education.
CORE CONSTRUCTION SECTORS
Commercial and industrial
Nuclear and infrastructure
OVERVIEW
15
www.severfield.com
Stock Code: SFR
A DIVERSE, HIGH-
QUALITY ORDER BOOK
DIVERSIFIED UK AND EUROPE ORDER BOOK
Division/Sector
June 2024
£478m
Nov 2023
£482m
Future trend
for Severfield
Commercial and industrial:
Industrial and distribution
30%
37%
Stadia and leisure
1%
2%
Commercial offices
15%
21%
Data centres and other
19%
6%
Health and education
–
1%
Retail
–
–
TOTAL
65%
67%
Nuclear and infrastructure:
Transport infrastructure
18%
17%
Nuclear
15%
13%
Power and energy
1%
2%
Process industries
–
–
TOTAL
34%
32%
Modular Solutions
1%
1%
UK
68%
87%
Europe and Ireland
32%
13%
“The order book contains a good mix
of projects across the Group’s key
market sectors, with an increasing
amount in Europe – providing us
with good earning visibility for
2025 and beyond”
Severfield plc Annual report and accounts
for the year ended 30 March 2024
16
OUR
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
Commercial offices
5
Excel Arena, London
Stadia and leisure
6
Titanic, Belfast
Stadia and leisure
7
Google Headquarters, London
Commercial offices
8
30 Grosvenor Square, London
Commercial offices
9
Argyle Street, Glasgow
Commercial offices
10
The Shard, London
Commercial offices
11
Co-op Live, Manchester
Stadia and leisure
12
Allerdene Bridge, Gateshead
Transport infrastructure
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
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
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
PROJECTS
OUR OFFICES AND SITES
Our projects cover a diverse range of market sectors and geographies, with an increasing
amount of work in continental Europe.
UNITED KINGDOM AND IRELAND
9
11
14
21
22
3
C
D
B
A
E
H
J
K
1
12
19
15
13
16
17
2
6
Germany
The Netherlands
Belgium
Switzerland
OVERVIEW
17
www.severfield.com
Stock Code: SFR
INDIA
GREATER LONDON
28
27
I
EUROPE
Finland
24
23
G
F
L
29
30
25
26
18
10
8
5
4
7
20
Severfield plc Annual report and accounts
for the year ended 30 March 2024
18
RESILIENT BUSINESS
THROUGH ECONOMIC
CYCLES
• 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.
BUILT ON A PLATFORM
OF OPERATIONAL
EXCELLENCE
• 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.
• Project Horizon, our digital
transformation programme,
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 £70m
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.
EXCITING GROWTH
PROSPECTS
• Our business covers ten
core sectors, which serve a
diversified range of markets,
including those with strong
growth potential in the UK and
Europe.
• This was reinforced by the
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.
OUR COMPELLING
INVESTMENT CASE
01
02
03
Our well established strategy is creating sustainable growth to
create long-term value for all stakeholders.
OVERVIEW
19
www.severfield.com
Stock Code: SFR
DELIVERING STRONG
RETURNS, CASH
GENERATION AND
PROGRESSIVE DIVIDENDS
• ROCE is an important metric
for us and our five-year
average ROCE is greater than
15 per cent.
• Our operations generate
strong cash flows and we
target the conversion of more
than 85 per cent of our annual
profit into cash.
• The Group has a well
established capital allocation
policy to support and grow the
Group to increase value for
shareholders, whilst having a
progressive dividend policy to
pay sustainable core dividends
in line with profit growth.
• We recently announced a
share buyback programme
to retrurn up to £10m to
shareholders.
ALL UNDERPINNED BY
A STRONG FOCUS ON
SUSTAINABILITY
• Awarded ‘AAA’ under MSCI’s
ESG rating.
• Achieved CDP ‘A’ list rating,
recognising our transparency
on climate-related disclosures.
• In 2024, we received validation
from the SBTi (‘Science Based
Targets initiative’) of our Net
Zero targets for reducing GHG
emissions.
• We have delivered progress
against our SBTi targets,
achieving a 10 per cent
reduction in emissions in
the year.
• Our market-leading approach
to ESG has been recognised
in our listing in the Financial
Times Europe Climate Leader’s
report for the fourth year
running.
• Member of the United Nations
‘Race to Net Zero’ Campaign.
• 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
by Achilles.
04
05
Severfield plc Annual report and accounts
for the year ended 30 March 2024
20
Our market sectors
22
The markets we serve: UK and Europe
24
The markets we serve: India
26
How we create value
28
Our strategy
30
Drive growth
31
Grow Indian presence
32
Operational excellence
33
Key performance indicators
34
Engaging with our stakeholders
36
Our operational performance
40
Our financial performance
48
Viability statement
52
Building a responsible and sustainable
business
54
STRATEGIC
REPORT
Materiality assessment
58
Task force on climate-related financial
disclosures (‘TCFD’)
60
Governance
61
Strategy
63
The 4Ps Sustainability Framework
– Planet
74
– People
81
Case studies
The 5% Club
87
Female mentoring
87
– Prosperity
88
– Principles of governance
90
How we manage risk
92
Section 172 statement
105
21
www.severfield.com
Stock Code: SFR
Severfield plc Annual report and accounts
for the year ended 30 March 2024
22
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)
450
50%
l Power and energy
109
12%
l Commercial offices
110
12%
l Transport infrastructure (including bridges)
97
11%
l Health and education
64
7%
l Other
36
4%
l Leisure
22
3%
l Retail
5
1%
893
100%
The market sectors targeted by the
Group, and their estimated size in
tonnes during the 2023 calendar
year (as defined by the BCSA).
450
109
110
97
64 36
22
5
NUCLEAR AND INFRASTRUCTURE
POWER AND
ENERGY
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 the Voortman group of companies,
in particular De Haven B.V., has given us access to the
energy market in continental Europe.
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 secondary steelwork and TenneT
projects in the Netherlands.
TRANSPORT
INFRASTRUCTURE
(incuding bridges)
5-10%
Group market
share
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 such as HS2.
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, Network Rail and HS2 bridge
packages.
23
www.severfield.com
Stock Code: SFR
STRATEGIC REPORT
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, 81 Newgate Street, 105 Victoria
Street and 334 Oxford Street.
INDUSTRIAL AND
DISTRIBUTION
10–20%
Group market
share
The Group is a trusted partner to the industrial,
warehousing and distribution industries, thanks
to our strong reputation for engineering excellence
and versatility. Unrivalled capacity, the ability to
meet diverse and rigorous requirements and other
strengths such as design capability, supply chain
co-ordination and delivery speeds set us apart from
our competitors.
Successes
Envision battery plant, SeAH monopile factory,
Ineos petrochemical plant. Major contracts for
Amazon, BMW, Unilever, Sports Direct, Ocado, ASDA,
Sainsbury’s, Prologis, Gazeley, Jaguar Land Rover,
Rolls-Royce, DHL and B&M.
STADIA
AND LEISURE
40–50%
Group market
share
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.
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), Excel arena and
Co-op Live arena.
RETAIL
<5%
Group market
share
Retail developments are becoming increasingly
complex and ambitious as towns and cities position
themselves as attractive shopping destinations in
today’s competitive economy. Major redevelopment
in cities and out-of-town shopping facilities are
challenging projects in their own right, requiring
different skills and services. Project management
and supply chain linkage are vital to successful
project execution.
Successes
Bradford’s Westfield Shopping Centre, Stratford’s
Westfield Shopping Centre, Cherry Park Development,
Hereford Old Livestock Market, Birmingham John
Lewis, Bracknell’s The Lexicon, Coal Drops Yard and
projects for ASDA, Sainsbury’s, Tesco, Morrisons and
Costco.
DATA CENTRES
AND OTHER
20–30%
Group market
share
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), Google and other large data centres in the
Republic of Ireland, Belgium, Netherlands, Finland and
Sweden. Other projects include a research facility for
the European Spallation Source (Sweden).
HEALTH AND
EDUCATION
<5%
Group market
share
We have a long history of providing world-class steel
solutions for hospitals and other medical facilities,
which are increasingly being specified with structural
steel frames. Key factors giving us an advantage in
this sector include span length, enhanced flexibility,
adaptability and speed of construction. We have also
worked with many education clients and contractors
over the years, each project bringing its own specific
requirements and challenges.
Successes
Francis Crick Institute, Nigeria Syringe Factory, Guyana
Hospital, University of Strathclyde, Victoria & Albert
Museum (Dundee), Kings College Hospital, Graphene
Innovation Centre and Manchester University
Engineering Campus.
Key: Global market future trends
Upward trend
Downward trend
No change
Severfield plc Annual report and accounts
for the year ended 30 March 2024
24
THE MARKETS
WE SERVE
THE UK AND EUROPE
The market has shown resilience amidst
some global uncertainty as structural
steel continues to be an integral part of
the construction sector in the UK and
most of Europe. Total UK consumption
of constructional steelwork in 2023 was
slightly lower than in 2022, at 893,000
tonnes (2022 calendar year: 894,000
tonnes), reflecting reduced demand in
the industrial sector, particularly for
large distribution warehouses, offset by
growth in the commercial offices and
power and energy sectors to meet the
increasing demand for these structures
as we move towards a greener future.
The BCSA are forecasting for the market
to remain broadly flat in 2024, with
growth generated by large infrastructure
projects, and with some significant
opportunities in the Group’s chosen
market sectors.
Steel construction in the EU is largely
influenced by the same macroeconomic
factors and structural changes that
impact the UK. Similar to the UK,
demand in 2023 was impacted by some
challenging market conditions, in part
driven by an unstable geopolitical
landscape, and high inflation and
interest rates. The market is expected
to grow over the next couple of years,
catering for demands from the green
transition and national infrastructure
spending.
In both the UK and Europe, there
continues to be high demand for steel,
including investment in new and greater
infrastructure to support population and
economic growth. This, combined with the
green energy transition, is driving demand
for new energy infrastructure (including
nuclear energy) and the construction
of better and greener public transport
infrastructure, together with private
sector investment in support of a low-
carbon economy. The long-term trends
in the UK and EU construction market
remain positive with strong underlying
market drivers, providing the Group with
significant opportunities in the growth
markets we currently operate in.
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.
MARKET DEVELOPMENTS
As the UK’s largest and most diverse specialist structural steelwork
group, we are well-placed to win work in a variety of markets with
excellent long-term opportunities, providing us with a strong platform
to fulfil our strategic growth aspirations in the UK and Europe.
£478m
UK & Europe order book
Performance in 2024
The Group has a production capacity of approximately 150,000 tonnes per annum, which includes 130,000 in the UK and 20,000
in Europe. In 2024, the Group’s output was c.100,000 tonnes, which compared to c.115,000 tonnes in 2023. The reduction largely
reflects a changing mix of work, the pause in the construction of the Sunset Studios project and the decrease in output for the
distribution sector, reflecting some challenging market conditions, especially in the UK.
Group revenue reduced by 6 per cent to £463.5m (2023: £491.8m). The lower output, combined with the impact of lower steel
prices, has resulted in a fall in Group revenue, which was partly offset by new revenue from VSCH. Despite this, the Group
increased underlying profit by £4.1m to £36.5m, due to good project execution and maintained a strong order book of £478m
(1 November 2023: £482m), giving us good earnings visibility for 2025. The order book contains a good mix of projects across
various sectors and an increased share of work in continental Europe and Ireland, such as data centres in the Netherlands,
Belgium and Sweden. The statutory profit before tax, which includes non-underlying items, was £23.0m (2023: £27.1m).
25
www.severfield.com
Stock Code: SFR
STRATEGIC REPORT
The outlook is positive and our
businesses are well-positioned in
markets with excellent long-term
opportunities in sectors which will
benefit from the green energy transition.
Whilst there remains some uncertainty
in the wider economy, we are seeing
an improvement in market conditions
and a trading environment which is
generally becoming more manageable
and predictable.
We are continuing to see good project
opportunities in the UK where
tendering activity has increased
following the recent reduction in
inflation, stabilisation of interest rates
and improved economic outlook. The
picture is similar in Europe and our
European revenues are also expected
to increase as we continue to make
progress with our European growth
strategy, supported by the acquisition
of VSCH, which has provided us with a
manufacturing footprint in Europe.
In both the UK and EU, we are seeing
significant opportunities for battery
gigafactories to support domestic
zero carbon vehicle production,
with a number of facilities currently
being planned or considered. The UK
Government has allocated up to £1bn
in funding to support investment, whilst
the EU has announced up to €4bn for
new factories to produce car batteries,
heat pumps and solar panels.
Other projects in the pipeline
include energy efficient buildings,
manufacturing facilities for renewable
energy and offshore wind projects, also
in support of a low-carbon economy,
together with stadia and leisure
projects, TV and film studios and
commercial offices.
The UK Government continues to
recognise the importance of major
infrastructure projects on boosting
growth and achieving key sustainability
targets. The Government’s National
Infrastructure and Construction Pipeline
(NICP), published in 2024, outlines a
substantial investment in infrastructure
and construction projects over the next
decade. The pipeline plans to allocate
up to £775bn towards various projects,
with £164bn earmarked for the next
two years alone. Key features of the
pipeline include significant funding for
the energy and transport sectors, which
together represent the largest portions
of the planned expenditure. Specifically,
£234bn is dedicated to transport, and
£316bn to the energy sector. This,
together with previous government
commitments, provide significant
contract opportunities for the Group
such as:
• HS2 London to Birmingham
• Northern Powerhouse Rail
• Road Investment Strategy
• Rail enhancements including the
TransPennine Route Upgrades.
• New nuclear production facilities at
Hinkley Point C and Sizewell C
• Other areas including carbon capture,
small modular reactors and hydrogen
production
We are also seeing a growing Scope of
work at Sellafield where we are one of
two ‘key delivery partners’ to deliver
structural steelwork with an estimated
value of c.£250m as part of the long-
term Programme and Project Partners
(‘PPP’) framework.
Similar to the UK, the outlook in Europe
remains positive, with the green energy
transition driving public investment
in new infrastructure projects such
as transport infrastructure and
energy, where the volume of power
transmission and distribution projects
being brought to market is increasing
substantially. There is also significant
planned government investment in
many EU countries, including the €29bn
Netherlands ‘Infrastructure investment’
plan, as well as Europe wide investment
by the EU, such as the €5bn ‘Connecting
Europe’ programme and the continued
COVID-19 recovery and resilience plans.
In general, we remain well-positioned
to win work to meet the demand for
ongoing state-backed investment given
our in-house expertise and unmatched
scale and capability to deliver major
infrastructure projects, together
with the high barriers to entry for
competitors.
The demand for data centres in the
UK and EU is expected to continue,
fuelled by the ever-growing demand
for data and the emergence of new
artificial intelligence. This increased
demand for data, which has resulted
in some significant new projects being
brought to market, is also driving
higher energy use and consequently
new energy infrastructure. The
Group’s manufacturing scale, speed
of construction and on-time delivery
capabilities, leaves us well-positioned to
win work for such projects, all of which
are likely to be designed in steel.
We also see good opportunities in the
modular sector, including opportunities
being driven by the market growth in
the supply of modular homes, modular
buildings for education, healthcare and
data centres. As the modular market
matures, clients are seeking greater
scale, reliability and quality in the supply
chain, all of which we can offer, to ensure
that we continue to increase our share
of a growing market.
ORDER BOOK
The high-quality UK and Europe order
book at 1 June stands at £478m (1
November 2023: £482m), including
32 per cent of the order book now
representing projects in continental
Europe and Ireland (1 November 2023:
13 per cent). 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 2025
financial year and beyond.
OUTLOOK
Severfield plc Annual report and accounts
for the year ended 30 March 2024
26
THE MARKETS
WE SERVE
INDIA
£181m
A record order book
(as at 1 June 2024)
£1.9m
Group after-tax share profit
£13.2m
EBITDA
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
– creating value in JSSL remains a key
strategic objective of the board. 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.
2024 performance
In 2024, the Indian joint venture (JSSL)
delivered another step up in profitability.
Momentum is building in JSSL and
this is evident in the Group’s increased
after-tax share of profit of £1.9m
(2023: £1.3m) and a record EBITDA of
£13.2m (2023: £11.5m). The improved
performance reflects a better mix of
work and good contract execution
which has resulted in a higher operating
margin of 8.0 per cent (2023: 6.5 per
cent). Financing expenses of £5.5m
(2023: £5.5m) are unchanged from the
previous year, as a result of a continued
high 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 £10.5m (2023:
£8.9m), which has increased by c.20 per
cent year-on-year, reducing to a profit
before tax of £5.0m (2023: £3.4m).
Total output for 2024 was in excess
of 100,000 tonnes, including sub-
contracted work, for the second year
running, an output equivalent to that
of the Group’s operations in the UK
and Europe. Despite these high activity
levels, 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 (in 2020) has been recorded by its
construction activities over the same
ten-year period. This means that since
2020, JSSL has achieved over 20m
LTI-free hours and 41m hours with only
one LTI over a ten year period. The safety
performance of the business has been
recognised in previous years, resulting
in many certificates and awards
from clients and health and safety
organisations in India.
Market developments
JSSL 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.
India’s construction industry, and
the use of steel within construction,
is growing rapidly, fuelled by
the government’s emphasis on
infrastructure development, increased
foreign investment, rapid urbanisation,
and the sector’s own expansion. The
Indian population is also growing, and
as the economy is expected to grow
this should help create structural
tailwinds. Investments in power,
transport infrastructure, industrial,
hospitality commercial real estate
and housing projects are expected to
further stimulate industry expansion in
future years. The focus on investments
in the renewable energy sector is in
line with the government’s target to
increase renewable energy capacity
by 2030, resulting in additional growth
opportunities for the sector. Foreign
direct investment (FDI) is another key
growth driver, with the government’s
liberalisation policy allowing 100 per
cent FDI in almost all construction
sectors. The market size of India’s
construction industry was estimated to
be around US$ 778 billion in 2023 and
it is projected to grow at a compound
annual growth rate of 6 per cent from
2024 to 2033, reaching US$ 1.4 trillion
by 2033.
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,
the National Disaster Management Act
and Ease of Doing Business initiative.
The government’s simplification of GST
also aims to strengthen the real estate
sector, making it more resilient and
accessible.
The expanding market picture in India
is reflected in JSSL’s growing pipeline
of potential orders and in numerous
identified growth opportunities in
target markets, including commercial
real estate, data centres, warehouses,
infrastructure and in manufacturing
sectors such as steel, cement and
speciality chemicals. As part of its
growth strategy, JSSL is also targeting
new sectors and geographies including
potential opportunities in the north
and west of India and in near markets
such as Saudi Arabia, building on JSSL’s
brand and reputation for delivering high-
quality steel solutions.
Creating value in India remains a key strategic objective of the board.
27
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Stock Code: SFR
STRATEGIC REPORT
JSSL’s client base is strong and growing,
resulting in a high-quality order book of
£181m (1 November 2023: £165m), which
now contains two large commercial
projects in Delhi for DLF India, an
important strategic client. In terms
of mix, 71 per cent of the order book
represents higher margin commercial
work, with the remaining 29 per cent
representing industrial projects (1
November 2023: commercial work of 64
per cent, industrial work of 36 per cent).
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.
The business is also strengthening
its sales and estimating teams,
bringing people with new skills into
the business and enhancing its supply
chain partnerships to support future
expansion and to provide the business
with the springboard to deliver future
profitable growth.
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 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 in-house capacity of c.100,000
tonnes (c.150,000 including sub-
contracted work) 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 in the UK, taking the learnings
from that site. The management team at
JSSL are highly regarded in the industry.
Depending on mix, the in-house 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 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 2024,
JSSL acquired a plot of land in Gujarat,
in the west of India, to develop a new
manufacturing facility and to expand the
geographical footprint of the business.
As Bellary is now approaching its
maximum capacity, initial work on this
expansion is expected to commence in
the second half of the year and capacity
will be added incrementally to support
the expected future market growth.
Outlook
Momentum is building in JSSL and the
company is benefiting from a bright
market outlook as the construction
sector continues to grow rapidly and
the switch from concrete to steel in
construction in India accelerates.
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, and with
the land for expansion in Gujarat now
secured, it is well set to take further
advantage of both economic and sector
growth.
Overall, we remain very positive about
the long-term development of the Indian
market and of our ability to build further
value in JSSL.
Severfield plc Annual report and accounts
for the year ended 30 March 2024
28
HOW WE
CREATE VALUE
Severfield is the UK’s market-leading structural steel Group, providing unrivalled design,
fabrication and construction solutions, for a diverse range of market sectors.
Our people
Our market-leading position
is only possible with the right
people. We know our people
are what makes us stand out
from the competition and allow
us to successfully execute
our strategy. They are the
ones with the knowledge and
expertise in design, innovation
and engineering that makes us
industry leaders.
Our partners
Severfield are a vital part of the
supply chain and we recognise
the importance of building key
partnerships with suppliers
and subcontractors who meet
our commitment to quality,
sustainability and client service.
Our sustainable
mindset
Operating in a sustainable
manner is crucial to both the
current and future success of
the Group. To achieve this, we
are committed to motivating
and enabling our people and
our supply chain to deliver
high-quality, innovative buildings
in a sustainable and efficient way.
Our commitment to
health and safety
Health and safety is at the
heart of what we do and there
is never room for compromise.
Our reputation relies on high
standards of health and safety for
our employees, our supply chain
partners, our customers and the
wider public.
OUR KEY INPUTS AND RESOURCES
WE CREATE VALUE ACROSS THE ENTIRE PROJECT LIFECYCLE
Our commitment to
excellent customer
service
From initial engagement
and design, to construction
and finalisation of the
project, our teams are
committed to delivering
excellent customer service.
Our commitment to
improving the
environment
Our aim is to deliver more
sustainable solutions
for all our stakeholders,
and we have some great
initiatives underway to
reduce our own carbon
emissions and help the
supply chain reduce theirs,
including our commitment
to SteelZero.
Our competitive advantages/
what makes us unique
The Group’s fabrication
facilities include
expansive stockyard
areas and in-line cutting,
fabrication, welding and
painting and some of the
largest finished goods
and subassembly areas
in the industry.
Fabricate
02
Our engineers provide
clients with innovative
concepts and solutions
to realise and improve
designs, create
efficiencies and focus on
sustainability.
Design
01
Our dedicated and highly
experienced in-house
construction teams
ensure an efficient
and safe build. They
work closely with our
engineers to plan
temporary works to
avoid any potential site
issues – an essential
component for high-rise
and complex builds.
Construction
03
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STRATEGIC REPORT
Employees
We offer our employees stable
and secure employment in a
growing business and with
opportunities to develop and
progress. All our employees are
paid in excess of the National
Living Wage.
Suppliers
We develop long-term
relationships with our suppliers.
They play an instrumental
role in achieving successful
project delivery.
Customers
Our customers are key to our
success and we are committed
to delivering our projects to the
highest of standards to ensure
customer satisfaction.
Local communities
We are committed to serving
our communities through local
recruitment, fundraising through
the Severfield Foundation or
community initiatives, partnering
and volunteering.
Shareholders
The Group is cash generative
and reinvests to drive further
growth and cash generation.
Our well-established strategy
drives shareholder value and
we have a progressive dividend
policy, to ensure that shareholder
returns increase in line with
profit growth.
THE VALUE WE CREATE
Our innovative approach
We like a challenge. Our teams
have dealt with some complicated
designs and builds over the years
and our teams thrive on finding
innovative solutions to deliver
what our customers want.
Our growth strategy
The Group remains focused
on sustainable growth and
maximising profits for our
shareholders – through
organic growth from
expansion into new sectors,
markets and geographies or
selective acquisitions.
Reinvestment into
the business
Training and development for
our workforce, operational
excellence and Project
Horizon, selective acquisitions
and R&D.
Delivery
Our large scale allows us to
fabricate and deliver on time.
Detailed logistics planning allows
for the optimisation of space,
efficiencies in construction and
where possible, reducing our
carbon footprint from the number
of loads.
Project Management
The Group has a large and
highly experienced contract
management team. Each
contract manager is the single
point of contact for the client
and is supported by the Group’s
resources.
Severfield plc Annual report and accounts
for the year ended 30 March 2024
30
1 2 3 4 5 6
A B C D E F G
2 6 6
1 2 3 5 6
A B D E F G
Drive growth
Grow India presence
Operational excellence
D
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i
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e
g
r
o
w
t
h
O
p
e
r
a
t
i
o
n
a
l
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x
c
e
l
l
e
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o
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I
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e
Our purpose:
Creating better ways
to build, for a world of
changing demands
OUR STRATEGY
Our strategy sets out our clear priorities to drive long-term growth and deliver sustainable
value for our shareholders.
Our strategy remains unchanged and is built on our core strengths of engineering and construction in the UK, Republic of Ireland
and continental Europe. It is focused on growth, both organic and through selective acquisitions, operational improvements and
building value in JSSL. To deliver the three key areas of the strategy, there are strategic priorities that evolve over time as new
opportunities and challenges arise.
Key performance indicator reference number
1
Underlying operating profit and margin
2
Underlying basic earnings per share (‘EPS’)
3
Revenue
4
Operating cash conversion
5
Underlying return on capital employed (‘ROCE’)
6a
UK and Europe order book
6b
India order book
7
Injury frequency rate (‘IFR’)
Key to principal risks
A
Health and safety
B
Supply chain
C
People
D
Commercial and market environment
E
Mispricing a contract (at tender)
F
Cyber security
G
Failure to mitigate onerous contract terms
H
Industrial relations
Our strategic priorities are underpinned by the Sustainability Framework (‘The 4Ps’), which along with our core values,
enable us to deliver our strategy. Our Sustainability Framework drives us to take a responsible and sustainable
approach to managing and growing our business, which aims to create value for all our stakeholders.
Planet
People
Prosperity
Principles of Governance
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STRATEGIC REPORT
DRIVE
GROWTH
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 to win more work in Europe,
supported by the recent acquisition
of VSCH, and to build strong, lasting
relationships with new and existing
European clients.
STRATEGIC PRIORITIES
ACHIEVEMENTS IN 2024
OBJECTIVES FOR 2025
The Group achieved an underlying1 profit
before tax of £36.5m (2023: £32.5m)
an increase of 12 per cent from last
year. Statutory operating profit, which
includes non-underlying items, was
£26.4m (2023: £30.2m).
The Group’s strong contract execution
and new profit from VSCH has supported
continued profit growth despite some
difficult market conditions in some
sectors. This highlights the importance
of our client, geographic and sector
diversity.
The high-quality UK and Europe order
book at 1 June 2024 stands at £478m (1
November 2023: £482m). The order book
includes a growing proportion of work in
continental Europe, driven by our recent
acquisition of VSCH and our focus on
winning work in these markets.
VSCH is integrating well into the
Group’s operations and they have now
adopted the Severfield brand. VSCH
is providing us with greater access to
growing European market sectors and
strengthening our market position in
Europe. VSCH has now been combined
with our existing European business,
under the leadership of a new Managing
Director, who is part of the Group
Executive Committee, providing an
operational and strategic platform for
further sustainable growth in Europe.
We have made good progress in growing
our Severstor revenues and client base,
leading to our Modular Solution division
achieving a profit for the first time in
2024. In combination with the growing
product ranges and client base of CMF,
the outlook is positive for this growing
division.
1 See note 33 for APM definitions
Grow Group revenue and maintain our
strong balance sheet and the quality of
the order book.
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
transport infrastructure, as well as in
the recovering distribution sector and
the growing data centre sector driven by
advancements in AI.
Continue to target projects in support of
a low-carbon economy including battery
plants, manufacturing facilities for
renewables, offshore wind, new nuclear,
rail electrification, HS2 and other energy
efficient buildings, helping to drive
economic recovery.
Grow the Severfield brand and develop
our client base in Europe, supported
by the growth opportunities (including
access to the high-growth electricity
sector) afforded by VSCH.
Continue to identify further selective
acquisition opportunities, to further
enhance the services we can offer in
both the UK and Europe.
Our aim is to capitalise on growth opportunities, both in the UK and Europe,
and to maximise our market share.
Severfield plc Annual report and accounts
for the year ended 30 March 2024
32
GROW INDIAN
PRESENCE
Our aim is to build value in JSSL and we remain very positive about the long-term
development of the Indian market.
Building value in India
Our aim is to continue building
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 continue growing
significantly in the coming years.
Achieved a record EBITDA of £13.2m
(2023: £11.5m), a 15 per cent increase
on a strong prior year. This translated
to a 46 per cent increase in the Group’s
share of after-tax profits of £1.9m (2023:
£1.3m).
JSSL reported a high-quality order book
of £181m at 1 June 2024 (1 November
2023: £165m), with a good mix of higher-
margin commercial projects, reflecting
the growing underlying demand for
structural steel in India.
Achieved output of over 100,000 tonnes,
including sub-contracted work, for the
second year running. In 2024, JSSL
acquired a plot of land in Gujarat, in
the west of India, to develop a new
manufacturing facility and to expand the
geographical footprint of the business.
Once built, this will further increase
JSSL’s production capacity to meet the
growing demand for steel in India and in
selected near markets.
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. This is reflected in two
recent commercial project awards from
DLF India.
Reaffirmed significant growth
opportunities, including those in new
and existing market sectors, and the
significant value creation potential
of JSSL.
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 domestic sectors,
including commercial real estate, data
centres, warehouses, infrastructure and
in manufacturing sectors such as steel,
cement and speciality chemicals.
Target new sectors and geographies
including potential opportunities in
the north and west of India and in near
markets such as Saudi Arabia, building
on JSSL’s brand and reputation for
delivering high-quality steel solutions.
Leverage the increased Bellary factory
capacity and maximise operational
efficiencies as JSSL continues to
increase its production volumes to
support market growth.
Commence work on the new Gujarat site
in the west of India, with a plan to grow
capacity incrementally to align with a
sustainable growth plan and market
demand.
Continue to strengthen the sales and
estimating teams, bringing people
with new skills into the business and
enhancing supply chain partnerships to
support the expansion and to provide
the business with the springboard to
deliver future profitable growth.
STRATEGIC PRIORITIES
ACHIEVEMENTS IN 2024
OBJECTIVES FOR 2025
33
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STRATEGIC REPORT
OPERATIONAL
EXCELLENCE
Drive operational improvements and
efficiencies
The objective is to improve our
level of automation and digitisation
(through Project Horizon) and to
further enhance the Group’s risk
assessment, operational and
contract management processes
(through our ongoing operational
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.
Our emphasis is on delivering high-quality projects and reducing costs by
driving excellence through our core business processes.
STRATEGIC PRIORITIES
ACHIEVEMENTS IN 2024
OBJECTIVES FOR 2025
Through Project Horizon, our digital
transformation programme, we plan
to implement over 110 projects and
initiatives to modernise and further
standardise systems and processes.
During the year we have completed 22
projects, some of which are stand alone
and some of which are foundational to
establish a platform for future long-term
projects.
We have also grown and embedded
our dedicated project team, which
is funded through annual savings to
date. Completed ‘stand alone’ projects
include an automated quality assurance
system (SAM), to improve tracking
and client reporting, the integration
of pricing, design and production
databases to drive production and
planning efficiencies and new systems
for purchase order approvals. Completed
‘foundational’ projects include
construction site assets and resource
tracking tools and the use of barcoding
for steel to improve traceability through
production and onto sites.
During the year we have invested £11.4m
(2023: £6.3m) in capital projects at our
manufacturing sites, ensuring we have
the latest and most efficient machinery,
safest production environment and the
capacity and capability to deal with the
current demands from our ongoing and
future contracts.
We have fully embedded our divisional
structure, facilitating a better front
end experience for clients, better and
more co-ordinated project delivery
capabilities and more streamlined
and efficient production processes.
The centralisation of our Group
manufacturing capability, allows us to
plan and fabricate in the most efficiently
way across all of the Group’s production
facilities, making best use of the Group’s
production capacity and expertise.
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.
Roll out further Project Horizon
initiatives and workflows – we have
further projects ongoing or planned to
either generate cost savings or create
additional capacity in our workforce
to help us deliver on our growth
aspirations. These include looking at
new and innovative ways of working, the
optimisation of our software systems
to reduce manual tasks and greater
insight and real time information at our
production facilities.
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.
Severfield plc Annual report and accounts
for the year ended 30 March 2024
34
KEY PERFORMANCE
INDICATORS
1. UNDERLYING OPERATING PROFIT AND MARGIN1
4. OPERATING CASH CONVERSION
3. REVENUE GROWTH2
£26.9m
£33.1m
£37.7m
24
23
22
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 underlying 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 £4.6m (14 per cent)
over the prior year, reflecting strong
operational delivery and the acquisition
of VSCH.
Stakeholder linkage
2 3
Strategic pillar
A C
6.7%
6.7%
8.1%
£403.6m
£491.8m
£463.5m
24
23
22
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
continuing operations.
Progress during the year
Revenue has decreased by £28.3m
(6 per cent) compared to last year,
mainly reflecting the softness in the
distribution market, the cancellation of
Sunset Studios and the reduction
in steel prices.
Stakeholder linkage
1 2 3 4 5
Strategic pillar
A C
(25%)
145%
110%
24
23
22
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 110 per
cent, which is well ahead of our target
conversion rate of +85 per cent.
Stakeholder linkage
2 3 5
Strategic pillar
A
2. UNDERLYING BASIC EARNINGS PER SHARE (‘EPS’)1
7.2p
8.5p
8.9p
24
23
22
Why this is important
Underlying EPS is one of the key
metrics in measuring shareholder
value. 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
Underlying 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
Underlying EPS has increased by 5
per cent, reflecting the increase in
underlying profit.
Stakeholder linkage
2 3
Strategic pillar
A B C
35
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Stock Code: SFR
STRATEGIC REPORT
6A. UK AND EUROPE ORDER BOOK
6B. INDIA ORDER BOOK
5. UNDERLYING RETURN ON CAPITAL EMPLOYED (‘ROCE’)
1 See note 33 for APM definitions and reconciliation to IFRS measures
2 Revenue includes Voortman, which was acquired in April 2023
Stakeholder linkage
Clients
Employees
Shareholders
Communities
Suppliers
1
2
3
4
5
Strategic Pillar
A
B
C
Drive growth
Grow India presence
Operational excellence
13.5%
15.8%
17.5%
24
23
22
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
Underlying 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
Underlying ROCE has increased by 170
basis points to 17.5 per cent, reflecting
increased underlying profitability. This
is above our benchmark of 10 per cent.
Stakeholder linkage
3
Strategic pillar
A B C
£486m
£510m
£478m
24
23
22
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 £478m at 1 June 2024
(November 2023: £482m). The high-
quality order book gives us good
earnings visibility and leaves us
well-positioned to deliver our strategic
objectives.
Stakeholder linkage
3
Strategic pillar
A C
1.32
1.61
1.23
24
23
22
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. 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
Our IFR has decreased from 1.61 to 1.23
showing our commitment to continually
improving safety at Severfield and
focusing on leading indicators in our
pursuit of ‘no harm’.
Stakeholder linkage
1 2 3 4 5
7. INJURY FREQUENCY RATE (‘IFR’)
£158m
£139m
£181m
24
23
22
Why this is important
The order book is a key part of our focus
on building long-term value in JSSL. It
is an important measure of our success
in winning new work. Whilst the value in
the order book is reported externally, the
margin inherent within the order book
is also monitored internally to provide
visibility of future earnings.
How we calculate
Our India order book shows the total
value of future revenue secured by
contractual agreements. Note, this
revenue isn’t consolidated into the
Group revenue.
Progress during the year
The record order book stands at £181m,
and contains a good proportion of
higher margin commercial work of
71per cent (November 2023: £165m and
64 per cent commercial work).
Stakeholder linkage
3
Strategic pillar
A B
Severfield plc Annual report and accounts
for the year ended 30 March 2024
36
ENGAGING WITH OUR
STAKEHOLDERS
We maintain regular dialogue with our key stakeholders so that we can take account of their
views and act in their best 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.
We have included opinions of all key stakeholders group in this year’s revised materiality assessment (see pages 58 to 59)
SHAREHOLDERS
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
is committed to building and maintaining good positive relationships with all
shareholders and ensuring regular, open dialogue with them throughout the year.
What do they want
• 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.
What did we do
• Completed consultation on our proposed remuneration policy changes and
implemented the new policy with overwhelming shareholder support at the AGM.
• Our executive directors communicated regularly with institutional investors and
analysts and all shareholders were invited to the Group’s annual general meeting.
• Our non-executive directors were also available to meet with shareholders.
• The Group’s website provided an important resource for communications to all
stakeholders, with a specific section dedicated to investors.
• The Group provided regular updates on financial performance and significant
events using a regulatory information service and responded to queries received
from shareholders.
• We declared interim and final dividends in each case in accordance with our
progressive dividend policy.
• After the end of the year, we implemented a share buyback programme in order to
seek to improve capital returns to shareholders.
Our culture
We believe that a healthy corporate
culture is vital to the creation and
protection of long-term value. The
success of our business model is driven
by our culture, which is founded on
our values: The Severfield Way. The
Severfield Way gives colleagues clarity
on our collective ways of working and
expected behaviours so that we can
continue to deliver effectively and
efficiently for our customers, working
together with a clear, shared purpose, to
create better ways to build, for a world of
changing demands.
Our culture is characterised by a respect
for our talented people, a desire to
deliver the best possible outcomes for
our colleagues, customers 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
2024 ‘building a responsible and
sustainable business’ report
37
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Stock Code: SFR
STRATEGIC REPORT
CUSTOMERS
COLLEAGUES
Why we engage
Our proven ability to work collaboratively
and innovatively with customers is
fundamental to our success and is
critical to securing new work and
achieving our strategic goals.
What do they want
• Outstanding customer service,
benefitting from our employees’
technical knowledge and expertise.
• Projects to be delivered on time and
on budget.
• Innovative and cost-efficient methods
of working.
• Collaborative approach to lower
carbon emissions and improving
sustainability across all projects.
• The Group’s continued good financial
health and strong balance sheet.
What did we do
• We focused on early contract
engagement with customers,
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.
• We sought to secure work where
possible through partnerships,
framework arrangements or repeat
business. We took the time to
understand customers’ priorities and
then delivered on their project goals.
• On completion, customers were asked
for feedback on their experience in
face-to-face interviews using detailed
questionnaires. The results were
shared and analysed, in order to drive
further improvements.
• Customer feedback and key customer
strategic initiatives were regularly
reported to the board. The board also
took the lead in suggesting specific
customer collaborations.
Why we engage
Our people are our biggest asset and we are committed to effectively managing all
aspects of health, safety, wellbeing and performance through creating a safe and
inclusive working environment where everyone can be themselves and be their best.
What do they want
• Help with 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.
What did we do
• Our MyVoice forum continued to be the cornerstone of our listening strategy. Our
colleague representatives from across the Group met with our CEO, workforce
engagement director and Group HR director, three times during the year to provide
a view of colleague sentiment and key topics of interest.
• Local management teams held regular meetings with our union representatives
and works council (where applicable) and our MyVoice forum members met
regularly with management teams to discuss local issues outside of the
formal MyVoice forum meetings. Pay negotiations and changes to attendance
management policies are some examples of the topics of discussion.
• We have kept our colleagues informed of our financial performance, business
goals, market conditions and performance through our intranet and through
in-person business updates. During these updates, our colleagues had the
opportunity to ask questions of our senior leadership teams.
• Through our intranet (Connect) our colleagues had the opportunity to comment,
like or raise questions. Articles ranged from project wins, to benefits updates,
to wellbeing guidance and advice to surveys around specific topics. Throughout
2024 we introduced more video content so as to better engage with our diverse
workforce. Our executive committee reviewed engagement levels with the platform
on a monthly basis.
• Skyline, our Company magazine (produced three times a year) continued to go
from strength to strength and is now available in Dutch for our colleagues in the
Netherlands.
• For our UK-based colleagues, we offered the opportunity to save for three years
under our SAYE scheme to encourage them to engage with business performance
and progress.
Severfield plc Annual report and accounts
for the year ended 30 March 2024
38
ENGAGING WITH OUR
STAKEHOLDERS
SUPPLIERS
LOCAL COMMUNITIES
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, and in line with our
decarbonisation goals.
What do they want
• Repeat opportunities to work with
the Group.
• To be treated fairly and with respect.
• Prompt payment.
• Sound health and safety performance.
What did we do
• Most of our suppliers 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 achieved
preferred status benefitted from
long-term relationships and
repeat work.
• We paid our supply chain promptly.
Our larger businesses are all
signatories of the Prompt Payment
Code (‘PPC’).
• The board received feedback on the
performance of key suppliers and on
our prompt payment practices and
specific supplier initiatives.
• We have strengthened our sustainable
procurement approach (pages
63 to 73)
Why we engage
Engagement with the wide range
of communities in which the Group
operates is an important part of our
purpose.
What do they want
• Improvements to, and investment in,
the local environment and quality of
life of those that live and work in the
surrounding areas of our sites.
• Sustainable buildings and
infrastructure, which consider whole
life impact.
• Continuing commitment from the
board to reduce carbon emissions
to achieve the Group’s sustainability
target of Net Zero by 2050 across all
scopes.
What did we do
• Through social and charitable
committees within each business and
through The Severfield Foundation we
got involved with, and raised 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.
• Our directors have taken up
opportunities to learn more about
engagement with community
stakeholders on specific projects
through our programme of site visits.
• We have developed our approach
to social value through the TOMs
framework.
• We have introduced a volunteering
policy to provide opportunities for
colleagues to do more to support local
charities.
• The board receives regular ESG and
climate-related reports and updates
from the Group 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 60.
39
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Stock Code: SFR
STRATEGIC REPORT
39
www.severfield.com
Stock Code: SFR
Severfield plc Annual report and accounts
for the year ended 30 March 2024
40
OUR OPERATIONAL
PERFORMANCE
ALAN DUNSMORE
CHIEF EXECUTIVE OFFICER
OPERATING REVIEW
Introduction
The Group has had another successful
year in 2024. We have reported
underlying profits of more than £36m,
delivered strong operating cash
generation, made further strategic
progress in Europe on the back of the
Voortman (‘VSCH’) acquisition, and have
secured a significant amount of new
work across all areas of the business.
This strong performance is reflected in
our high-quality order books of £478m in
the UK and Europe and £181m in India,
providing us with good earnings visibility
for the remainder of the 2025 financial
year and beyond.
The Group delivered further underlying
profit growth in 2024 against a
backdrop of some challenging market
conditions, particularly in the UK.
The combination of our significant
market sector, geographical and client
diversification, the strength of our
operations and management teams, our
expert capabilities in engineering and
construction and our strong financial
position, underpin the performance and
resilience of the Group.
In 2024, we increased our underlying
profit before tax by 13 per cent to
£36.5m (2023: £32.5m), a result which
includes the acquisition of VSCH, which
is providing us with greater access to
growing European market sectors and
strengthening our market position in
Europe. VSCH, which has recently been
combined with our existing European
business, is integrating well into the
Group’s operations and has now adopted
the Severfield brand, increasing our
visual identity in Europe.
We have maintained a strong financial
position throughout the year, enabling
us to continue to support ongoing
investment in the business, grow the
core dividend and provide us with the
platform to launch our share buyback
programme to further increase
returns to our shareholders. The Group
continues to be highly cash generative,
with operating cash conversion in the
year of 110 per cent (2023: 145 per cent).
This resulted in net debt (on a pre-IFRS
16 basis) at the year-end of £9.4m
(2023: net funds of £2.7m), including the
outstanding VSCH acquisition loan of
£15.2m (2023: £nil). Our strong balance
sheet and consistent cash generation
provides the Group with the flexibility to
continue to invest in both organic and
inorganic growth opportunities.
In 2024, the Indian joint venture (‘JSSL’)
recorded output of more than 100,000
tonnes, including sub-contracted work,
for the second year running. This high
level of activity, an improved mix of work
and good contract execution is evident
in the Group’s higher after-tax share
of profit of £1.9m (2023: £1.3m), which
reflects a record EBITDA of £13.2m. With
the new land in Gujarat now acquired,
we expect to start work on a new
manufacturing facility in the second
half of the year, leaving the business
well-positioned to take advantage of a
very encouraging outlook in India. We
remain very positive about the long-term
trajectory of the market and of the value
creation potential of JSSL.
The board considers the dividend to be
a significant component of shareholder
returns and we have either increased
or maintained dividends every year,
since the dividend was reintroduced in
2015. Based on the Group’s continued
progress, our strong cash position and
confidence in the future prospects of
the business, the board is once again
recommending an increase in the final
dividend to 2.3p per share, resulting in
a total dividend for the year of 3.7p per
share (2023: 3.4p per share), an increase
of 9 per cent on the prior year.
Strategy
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, 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.
41
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Stock Code: SFR
STRATEGIC REPORT
The Group delivers steel superstructures
through its Core Construction
Operations, separated operationally
into a Commercial and Industrial
division (bringing 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), which now includes VSCH,
and a Nuclear and Infrastructure
division (encompassing the Group’s
market-leading positions in the nuclear,
power and energy, transport (road and
rail) and process industries sectors).
The Group’s Modular Solutions division
consists of the growing modular
product ranges of Severfield Modular
Solutions (‘SMS’) (previously Severfield
(Products and Processing)/’SPP’) and of
Construction Metal Forming (‘CMF’), our
specialist cold rolled steel joint venture
business.
Outlook
The Group is performing well, the
outlook is positive and our businesses
are well-positioned to win work in
markets with positive long-term trends,
providing us with a strong platform to
fulfil our strategic growth aspirations.
Whilst there remains some uncertainty
in the wider economy, we are seeing
an improvement in market conditions.
All this, together with our high-quality
order books, diversified activities and
operational delivery capabilities, mean
that we are well-placed for the future
and on track to deliver a result for 2025
which is in line with our expectations.
Results overview
2024 (£m)
Revenue
UOP*
UPBT*
Core Construction Operations
449.2
37.4
37.4
Modular Solutions
21.5
0.3
0.3
India
–
–
1.9
Central items/eliminations
(7.2)
–
(3.1)
Group
463.5
37.7
36.5
Underlying operating margin
–
8.1%
–
2023 (£m)
Revenue
UOP*
UPBT*
Core Construction Operations
476.8
33.7
33.7
Modular Solutions
22.8
(0.6)
(0.1)
India
–
–
1.3
Central items/eliminations
(7.8)
–
(2.5)
Group
491.8
33.1
32.5
Underlying operating margin
–
6.7%
–
* The basis for stating results on an underlying basis is set out on pages 180 and 181. A reconciliation
of the Group’s underlying results to its statutory results is provided in note 33.
Revenue of £463.5m (2023: £491.8m)
represents a decrease of £28.3m (6 per
cent) compared to the prior year. This
reflects a decrease in revenue from our
Core Construction Operations, mainly
representing a reduction in steel prices
and lower production activity, offset by
new revenue from VSCH, in the first year
of its acquisition.
Underlying operating profit (before
JVs and associates) of £37.7m (2023:
£33.1m) represents an increase of
£4.6m (14 per cent) over the prior year.
This reflects an increase in profit from
our Core Construction Operations
of £3.7m, which includes new profit
from VSCH and continued contract
execution improvements, which have
helped offset the impact of lower
revenue in the year. The higher profits
also include improved profitability
of £0.9m from SMS, within Modular
Solutions, reflecting the first time that
this business has reported a profit
for the full year. Statutory operating
profit was £26.4m (2023: £30.2m),
which includes non-underlying items
of £13.5m (2023: £5.4m) representing
the amortisation of acquired intangible
assets, asset impairment charges and a
legacy employment tax charge offset by
a net acquisition-related credit.
Severfield plc Annual report and accounts
for the year ended 30 March 2024
42
OUR OPERATIONAL
PERFORMANCE
The share of profit from the Indian joint
venture in the year was £1.9m (2023:
£1.3m), reflecting an improved work mix
and good contract execution. Within
Modular Solutions, CMF contributed a
share of profit of £0.1m (2023: £0.5m),
the reduction in profitability reflecting
the softer market conditions in the
distribution sector during the year and
some under-recovery of overheads
as the business ramps up its recently
expanded production operations
in Wales.
The Group’s underlying profit before tax
was £36.5m (2023: £32.5m), an increase
of 13 per cent compared to the previous
year. The statutory profit before tax was
£23.0m (2023: £27.1m).
Operational review
UK and Europe
The Group’s established approach to
strong risk management, commercial
discipline and careful contract selection
has been particularly important to
enable the business to navigate the
challenging market conditions of the
last financial year. This approach is
reflected in our high-quality UK and
Europe order book of £478m at 1 June
(1 November: £482m), of which £384m
is 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.
The composition of the order book
reflects the continued strengthening
of our market position in Europe,
supported by the acquisition of VSCH,
which has recently been combined with
our existing European business. 32 per
cent of the order book now represents
projects in continental Europe and
Ireland (1 November 2023: 13 per cent).
In the second half of the year, we have
continued to secure a significant
value of new work (c.£280m). We are
also continuing to see good project
opportunities in the UK, Ireland
and continental Europe, where we
are making good progress with our
European growth strategy. In the
distribution and infrastructure sectors,
we are seeing an increase in tendering
activity although pricing remains
competitive for some projects.
Looking further ahead, 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 win projects in
support of a low-carbon economy
and to deliver energy security.
These include opportunities in both
Commercial and Industrial and Nuclear
and Infrastructure, such as battery
plants, energy efficient buildings,
manufacturing facilities for renewable
energy and offshore wind projects,
together with work in the transport,
nuclear and power and energy sectors
given our capability to deliver major
infrastructure projects.
Project Horizon
Last year, the Group launched Project
Horizon, our digital transformation
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.
As part of Project Horizon, we continue
to make good progress with drawing
and design automation, which includes
automated connection design and
planning tools. Other projects either
being worked on or completed in the
last year include an automated quality
assurance reporting system, which
improves tracking and client reporting,
new systems for purchase order
approvals, the use of barcoding for steel
to improve traceability, better integration
between estimating and production
processes to improve factory planning
and to drive efficiencies, construction
site asset and construction resource
tracking tools, together with ongoing
work on artificial intelligence to improve
administrative processing times.
To date, based on the original plan,
we have successfully completed 22
projects and a further 22 of the 54
projects that we have classified as short
to medium term are currently ongoing.
Three additional projects have now
been added to the plan, increasing the
total number of short to medium-term
projects to 57. Our dedicated project
team is currently self-funded
through annual savings, with further
benefits being tracked as more of the
identified projects and initiatives are
implemented.
Clients
We continue to invest to meet the needs
of our clients, building our capabilities,
developing new technologies and
driving efficiency across our production
facilities, to ensure our growth
ambitions are fully supported. We
remain focused on measures that
matter most to our clients, providing
value-added results, whilst balancing
time and cost 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, developing our
client base and growing our revenues
over recent years. This year we have
delivered challenging programmes for
clients, reduced costs and minimised
waste through both our pre-tender
value engineering and also post-
award engineering solutions and
developed innovative building solutions
for reuseable temporary works and
pre-assembled sections to work in live
operating environments. In addition,
when market pressures stretched
existing budgets or caused delays,
or when we were asked to accelerate
existing 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.
43
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STRATEGIC REPORT
Core Construction Operations
£m
2024
2023
Change
Revenue
449.2
476.8
-6%
Underlying operating profit (before JVs
and associates)
37.4
33.7
+11%
Underlying profit before tax
37.4
33.7
+11%
Revenue:
Commercial and Industrial
361.8
382.1
-5%
Nuclear and Infrastructure
87.4
94.7
-8%
Revenue of £449.2m (2023: £476.9m)
represents a decrease of £27.7m
(6 per cent) compared to the prior year.
This reflects lower activity levels and
a reduction in steel prices of £87.1m
offset by revenue from VSCH of £59.5m.
Underlying operating profit of £37.4m
was up 11 per cent on the prior year
(2023: £33.7m), which mainly represents
profit from VSCH. Excluding VSCH,
underlying profitability has remained
broadly unchanged from the prior
year as continued contract execution
improvements have helped offset the
impact of lower revenue in the year.
Commercial and Industrial
Revenue has decreased by 5 per
cent to £361.8m (2023: £382.1m),
predominantly due to the impact of
the cancellation of the Sunset Studios
project and softer market conditions in
the distribution sector, which affected
the number of projects coming to market
during the year. This was partly offset
by revenue from VSCH. The removal of
Sunset Studios (c.£50m) from the order
book was driven by the client-driven
decision to pause construction on this
planned new contract in July 2023.
During the year, work progressed on
the new stadium for Everton F.C., the
Envision Battery Plant in Sunderland,
a manufacturing facility for BAE in
Scotland, and the LHR 11 data centre,
a commercial office at 81 Newgate and
the Excel Arena, all in London. We also
continued our work on the SeAH Wind
monopile manufacturing facility, which
forms part of the UK’s fast-growing
alternative energy sector, a focus of
the latest Government Energy Strategy.
The 800-metre-long building at the
Teesworks site will be the world’s largest
monopile facility when complete and is
the first of its kind in the UK, with annual
production of up to 200 monopiles,
which form the foundations of offshore
wind turbines.
The Commercial and Industrial order
book at 1 June of £312m (1 November:
£326m) includes a significant amount of
new work, which we have secured over
recent months, particularly in Europe.
This includes a package of data centres
in Sweden, two new data centres for
Google in Belgium and the Netherlands,
a petrochemical project for Ineos in
Belgium, and a logistics project for DHL
in Lyon. In the UK, project wins included
two commercial offices, including the
Edge Building at London Bridge, which
is set to be London’s most sustainable
office tower, and several distribution
centres, reflecting a market that is
showing signs of recovery. We have also
successfully secured additional work at
SeAH Wind and at Envision. The majority
of our work continues to be derived
through either negotiated, framework
or two-stage bidding procurement
processes, in line with the risk profile of
the work being undertaken.
We continue to see some large
opportunities including projects in
markets which are benefitting from the
green energy transition, such as energy
efficient buildings, manufacturing
facilities for renewable energy and
offshore wind projects, together with
stadia and leisure projects, TV and
film studios and commercial offices in
London and the regions. We are also
seeing opportunities for new battery
gigafactories to support domestic zero
carbon vehicle production in the UK
and EU, including the new Jaguar Land
Rover facility in Somerset, the Northvolt
facility in Sweden and a further
gigafactory in Sunderland for Nissan.
Demand for data centres in the UK
and EU is also expected to continue,
fuelled by cloud computing, 5G and
the recent advancement of Artificial
Intelligence (‘AI’) applications, which
are driving even greater dependence
on data centre infrastructure. The
Group’s manufacturing scale, speed
of construction and on-time delivery
capabilities, leaves us well-positioned
to win work from such projects, the
majority of which are likely to be
designed in steel.
Strategic targets: we are targeting
future revenue growth in line with GDP,
enhanced by the acquisition of VSCH,
with margins of 8–10 per cent (6–8 per
cent based on recent high steel prices).
Nuclear and Infrastructure
Revenue has decreased by 8 per cent
to £87.4m (2023: £94.7m). This reflects
some softer market conditions in the
infrastructure business during the
year offset by the normal revenue
timing differences inherent within our
nuclear operations. During the period,
we continued to work on several HS2
bridge packages for the Balfour Beatty
Vinci (‘BBV’) and Effage Kier (‘EKFB’)
consortia, road and rail bridges and some
large propping packages for Silvertown
Tunnel and at Old Oak Common for HS2.
From a nuclear perspective, ongoing
contracts include work at Hinkley Point
and some large projects at Sellafield and
in Berkshire for AWE.
The N&I order book at 1 June was
£160m (1 November: £152m) of which
54 per cent represents transport
infrastructure (1 November: 54 per cent)
and 42 per cent represents nuclear
projects (1 November: 41 per cent).
Notable recent awards include the Black
Cat to Caxton Gibbet road improvement
scheme for National Highways, some
bridge projects for the York Central
infrastructure scheme, secondary
steelwork packages at Hinkley Point and
a growing Scope of work at Sellafield
where we are one of two ‘key delivery
partners’ to deliver structural steelwork
with an estimated value of c.£250m as
part of the long-term Programme and
Project Partners (‘PPP’) framework.
The markets in which we operate are
showing signs of continued growth
backed by government supported
spending that prioritises modern and
reliable infrastructure to support
Severfield plc Annual report and accounts
for the year ended 30 March 2024
44
OUR OPERATIONAL
PERFORMANCE
economic growth and help tackle climate
change. In the UK, with an election
announced on 4 July, the requirement for
clean and domestically generated energy
and improved transport infrastructure
is a stated priority for the incumbent
Conservative party and Labour party
opposition. Investment in transport
and energy are both key components
of the green energy transition and of
the government’s £775bn National
Infrastructure and Construction Pipeline,
published in February 2024. The Group
is well-placed to meet this demand
for ongoing state-backed investment,
which includes a significant increase in
the volume of power transmission and
distribution projects being brought to
market, with an acceleration of work
to strengthen and stabilise the power
networks, together with areas such as
offshore wind, carbon capture, nuclear
(including small modular reactors and
Sizewell C) and hydrogen production.
We remain well-positioned to win work
from these structural opportunities given
our in-house expertise and unmatched
scale and capability to deliver major
infrastructure projects, together with the
high barriers to entry for competitors.
In the UK transport sector, the
government’s decision to cancel the
northern section of HS2 connecting
Birmingham and Manchester has
not impacted our order book, nor
our outlook for the business, and we
continue to make good progress with
several HS2 station opportunities
in the pipeline including at Old Oak
Common and Birmingham Interchange.
We also welcome the UK Government’s
reaffirmed commitment to HS2
at Euston and to deliver Northern
Powerhouse rail, all of which is likely to
have a significant steelwork content.
Aligned to the cancellation of the
northern section of HS2, the government
recently announced Network North, a
£36bn plan to improve roads, buses and
railways in the north of England, which
could also introduce new opportunities
for the Group.
Strategic targets: our medium-term
target is to grow revenues to over
£125m, representing a doubling of 2022
revenues, with margins of 8–10 per cent
(6–8 per cent based on recent high steel
prices).
Modular Solutions
£m
2024
2023
Change
Revenue
21.5
22.8
-6%
Underlying operating profit (before JVs
and associates)
0.3
(0.6)
+0.9
Share of results of CMF*
0.1
0.5
-0.4
Underlying profit before tax
0.3
(0.1)
+0.4
* In 2024, CMF reported revenue of £29.1m (2023: £40.6m) and a profit before tax of £0.2m
(2023: £1.0m)
Modular Solutions consists of the
growing modular product ranges of SMS
and CMF. With CMF, 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 organic growth
aspirations. The 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
• Bulk handling solutions – a high
performance silo discharge system for
the bulk handling of materials such
as paints and other dispersible solids
(of which Rotoflo is the premium
product).
Although revenue of £21.5m (2023:
£22.8m) represents a slight decrease
compared to the prior year, for the first
time, Modular Solutions has reported
an underlying operating profit for
the full year (2023: loss of £0.6m),
reflecting an improved mix of higher-
margin Severstor products. Divisional
underlying PBT of £0.3m (2023: loss of
£0.1m) also includes the post-tax share
of profit of CMF of £0.1m (2023: £0.5m).
The reduction in profitability at CMF
reflects the softer market conditions
in the distribution sector during 2024,
and some under-recovery of overheads
as the business continues the ramp
up of its recently expanded production
operations in Wales.
We have continued to make significant
progress in growing our Severstor
revenues and client base, including in
the power, rail and oil and gas sectors.
This is reflected in the expansion of
our pipeline of opportunities within
growth markets including renewables
and data centres, aided by new product
development including the development
of steel framing solutions for modular
building manufacturers.
CMF’s growing product range includes
load bearing frame and deck profiles,
purlins and side rail systems, mezzanine
floors and bespoke modular solutions
supported by the recent expansion,
which has increased its cold rolled
manufacturing capacity from c.10,000
tonnes to c.30,000 tonnes. During the
year, CMF has continued to invest in new
product development, its salesforce,
and in new factory machinery to grow
its client base and to expand into
new segments including nuclear and
transport infrastructure. As the modular
market matures, clients are seeking
greater scale, reliability and quality in
the supply chain, all of which we can
offer, to ensure that we continue to
increase our share of a growing market.
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STRATEGIC REPORT
For bulk handling solutions, we have an
established foothold in the UK water
treatment sector and in the expanding
Indian paint manufacturing sector. We
continue to introduce new products and
services as we target growth in the food
processing, water treatment and paint
sectors in the UK, India and through our
network of agents in the USA.
Strategic targets: our medium-term
target is to grow combined SPP and CMF
revenues to between £75m and £100m,
with margins of greater than 10 per cent.
In 2024, the Modular Solutions division
delivered total revenue of £50.6m (SMS:
£21.5m and CMF: £29.1m).
INDIA
£m
2024
2023
Change
Revenue
130.8
137.7
-5%
EBITDA
13.2
11.5
+15%
Operating profit
10.5
8.9
+18%
Operating margin
8.0%
6.5%
+150 bps
Finance expense
(5.5)
(5.5)
–
Profit before tax
5.0
3.4
+47%
Tax
(1.2)
(0.8)
-£0.4m
Profit after tax
3.8
2.6
+46%
Group share of profit after tax (50%)
1.9
1.3
+46%
In 2024, JSSL recorded an output of
more than 100,000 tonnes, including
sub-contracted work, for the second
year running. JSSL has also delivered
another step up in profitability in 2024,
which is evident in a record EBITDA of
£13.2m (2023: £11.5m) and the Group’s
after-tax share of profit of £1.9m (2023:
£1.3m), an increase of 46 per cent over
the prior year. This performance mainly
reflects an improved mix of work and
good contract execution resulting in an
operating margin of 8.0 per cent (2023:
6.5 per cent). Financing expenses of
£5.5m (2023: £5.5m) are unchanged
from the previous year, as a result of
a continued high level of 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 financing
costs result in JSSL’s operating profit
of £10.5m (2023: £8.9m) reducing to a
profit before tax of £5.0m (2023: £3.4m).
Severfield plc Annual report and accounts
for the year ended 30 March 2024
46
OUR OPERATIONAL
PERFORMANCE
India’s construction sector, and the use
of steel within construction, continues
to grow rapidly, driven by factors such as
an increasing population, urbanisation,
and a growing economy. The government
is also investing heavily in infrastructure
development, which is further driving
demand for construction services. This
position is evident in a record order
book at 1 June of £181m (1 November:
£165m), which now contains a mix of
higher margin commercial work of 71
per cent (1 November: 64 per cent),
including two large commercial projects
in Delhi. The expanding market picture
is also reflected in an improving pipeline
of potential orders and in numerous
identified growth opportunities in
target markets, including commercial
real estate, data centres, warehouses,
infrastructure and in manufacturing
sectors such as steel, cement and
speciality chemicals. As part of its
growth strategy, JSSL is also targeting
new sectors and geographies including
potential opportunities in near markets
such as Saudi Arabia, building on JSSL’s
brand and reputation for delivering
high-quality steel solutions.
In 2024, JSSL acquired a plot of land in
Gujarat, in the west of India, to develop
a new manufacturing facility and to
expand the geographical footprint
of the business. Initial work on this
expansion is expected to commence in
the second half of the year and capacity
will be added incrementally to support
the expected future market growth.
JSSL is also strengthening its sales
and estimating teams, bringing people
with new skills into the business and
enhancing its supply chain partnerships
to support this expansion and to provide
the business with the springboard to
deliver future profitable growth.
In summary, momentum is building
in JSSL and with the land in Gujarat
now secured, the business is well
positioned to take advantage of a very
encouraging outlook in India and a
strong underlying demand for structural
steel in construction. We remain very
positive about the long-term trajectory
of the market and of the value creation
potential of JSSL.
ESG
ESG remains an important part 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. To ensure we
continue to support the most relevant
ESG issues, the Group undergoes
periodic materiality assessments and
the outcomes of its 2024 assessment
reaffirmed the issues that we had
previously identified as important to
our stakeholders – health and safety,
the life cycle of our products, climate
change and carbon emissions, talent
management, sustainability governance
and waste management.
Safety
The Group’s top priority remains the
health, safety and wellbeing of all our
stakeholders. Our safety statistics
continue to be industry-leading, whilst
we remain focused on continually
improving our SHE culture including
through the ongoing roll out of our
Safer@Severfield behavioural safety
programme.
In 2024, we have seen a further
reduction in our injury rates, resulting
in an injury frequency rate (‘IFR’) of
1.23, compared to 1.61 in 2023, and
an accident frequency rate (‘AFR’),
which is based solely on the level of
RIDDORS (reportable accidents), of 0.12,
compared to 0.14 in 2023.
Notwithstanding this, we continue to
evaluate new solutions, including the
use of technology, to further improve
our safety performance, and are
in the process of adopting positive
leading indicators to drive preventative
behaviours in our workforce.
Sustainability
In 2024, the Group was awarded ‘AAA’
under MSCI’s ESG ratings for a third
consecutive year and achieved an ‘A’
score for leadership on climate change
mitigation from CDP. We have again
achieved a CDP score for supply chain
engagement of ‘A-’ as well as our ‘very
good’ BES 6001 responsible sourcing
accreditation, highlighting our continued
supply chain engagement to promote
sustainability. Other highlights in 2024
include:
• Being third-party verified and
accredited as carbon neutral for the
fourth year running for Scope 1, 2 and
operational Scope 3 GHG emissions
for our manufacturing, office and
construction operations.
• Received validation from the SBTi
(Science Based Targets initiative) of
our Net Zero targets, one of the few
companies in the UK construction and
engineering sector to have achieved
this validation.
• Being included in the Financial Times
(FT) listing of Europe’s climate leaders
for the fourth year running, which
showcases corporate progress in
fighting climate change.
• Procuring 100 per cent of our energy
from renewable sources at all
UK-owned facilities.
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STRATEGIC REPORT
We have continued to maintain our
focus on social value, including adopting
defined social value objectives for the
Group, and having established our
baseline, we continue to monitor how
much value we deliver annually in line
with the National TOMs methodology
framework. During the year, social
value was delivered by a wide range of
activities including supporting local
supply chain partners, fundraising and
volunteering schemes, through paying
our colleagues at or above the real living
wage and ‘earning and learning’ through
our gold membership of ‘The 5% Club’,
including increasing our intake of annual
apprentices.
As a SteelZero signatory, we have
committed to procure 100 per cent
low-carbon steel by 2050, with interim
carbon reduction targets in place for
2030. We continue to work with the
Climate Group and other SteelZero
members as the industry continues
its transition to low-carbon steel
production and, in 2024, we have started
to disclose our progress against certain
low-carbon steel procurement targets to
the Climate Group.
Culture and values
We have recently launched ‘The
Severfield Way’, a framework designed to
harness the skills and expertise of our
people and promote the positive culture
and ways of working that everyone at
Severfield strives for. The framework
is made up of our new Company
values and behaviours, as well as our
long-standing purpose – creating better
ways to build, for a world of changing
demands. Our four new core values – we
set the bar high, we are in it together,
we find better ways and we do the right
thing – are the fundamental beliefs
that underpin everything we do and will
serve the business well as we continue
to implement our successful growth
strategy.
Board changes
In April 2024, the Group announced
the appointment of Charlie Cornish as
non-executive Chair and director of
the Company. Charlie will take over as
chair after the AGM on 30 July 2024
when Kevin Whiteman steps down
from the board, having reached the
end of his tenure. Charlie is currently
non-executive Chair of Manchester
Airports Group (‘MAG’), Core Highways
Group and Ipsum Group and was
previously CEO of MAG for 13 years.
He also previously served on the board
of United Utilities Group plc for seven
years. He has substantial experience of
developing strategy and leading large
complex businesses across a number
of relevant sectors, all of which will
be highly beneficial to the Group as it
continues to grow and develop. During
the year there were several other
changes to the Board. Tony Osbaldiston
retired, having completed his nine year
tenure, and the Group also saw the
departures of Rosie Toogood, who took
up a senior executive role at Wates,
a major customer, and Ian Cochrane,
previously the Chief Operating Officer,
who left to pursue other interests.
ALAN DUNSMORE
CHIEF EXECUTIVE OFFICER
19 JUNE 2024
Severfield plc Annual report and accounts
for the year ended 30 March 2024
48
OUR FINANCIAL
PERFORMANCE
ADAM SEMPLE
CHIEF FINANCIAL OFFICER
FINANCIAL REVIEW
£m
2024
2023
Change
Revenue
463.5
491.8
-6%
Underlying* operating profit (before JVs and associates)
37.7
33.1
+14%
Underlying* operating margin (before JVs and associates)
8.1%
6.7%
+140 bps
Underlying* profit before tax
36.5
32.5
+13%
Underlying* basic earnings per share
8.9p
8.5p
+5%
Operating profit
26.4
30.2
-13%
Operating margin
5.7%
6.1%
-40 bps
Profit before tax
23.0
27.1
-15%
Basic earnings per share
5.2p
7.0p
-26%
Underlying* return on capital employed (‘ROCE’)
17.5%
15.8%
+170 bps
* The basis for stating results on an underlying basis is set out on pages 180 and 181. A reconciliation of the Group’s underlying results to its statutory
results is provided in note 33.
Revenue of £463.5m (2023: £491.8m)
was 6 per cent lower than the prior year
due to a reduction in steel prices and
lower production activity, offset by new
revenue from VSCH, in the first year of
its acquisition. Underlying operating
profit (before JVs and associates) of
£37.7m was 14 per cent higher than the
prior year, mainly due to new profit from
VSCH, continued contract execution
improvements, which have helped offset
the impact of lower revenue in the year,
and higher profit from SMS, within
Modular Solutions. Statutory operating
profit, which includes non-underlying
items, was £26.4m (2023: £30.2m).
Underlying profit before tax, which is
management’s primary measure of
Group profitability, was £36.5m (2023:
£32.5m), 13 per cent higher than the
prior year. The statutory profit before
tax was £23.0m (2023: £27.1m). The
underlying tax charge for the year was
£9.1m (2023: £6.2m), which represents
an effective tax rate of 26.2 per cent
(2023: 20.4 per cent). This broadly
equates to the statutory rate in the UK
and the Netherlands of between 25
and 26 per cent (2023: statutory rate
in the UK of 19 per cent). The total tax
charge of £7.1m (2023: £5.5m) includes
a non-underlying tax credit of £2.0m
(2023: £0.7m).
Underlying basic earnings per share
increased by 5 per cent to 8.9p (2023:
8.5p) based on the weighted average
number of shares in issue of 307.1m
(2023: 309.5m). Basic earnings per
share was 5.2p (2023: 7.0p), reflecting
the higher underlying profit after tax
offset by an increase in non-underlying
items. Diluted earnings per share,
which includes the effect of the Group’s
performance share plan, was 5.1p
(2023: 6.9p).
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STRATEGIC REPORT
Non-underlying items
Non-underlying items for the year of £13.5m (2023: £5.4m) consisted of the following:
£m
2024
2023
Amortisation of acquired intangible assets
5.4
3.4
Asset impairment charges
4.5
–
Legacy employment tax charge
4.4
–
Acquisition-related credits/charges
(0.8)
2.0
Non-underlying items
13.5
5.4
The asset impairment charges relate
to our leasehold facility at Sherburn,
currently being operated by SMS.
During the year, we were advised of the
landlord’s intention to terminate the
factory lease in November 2025. As a
result, an impairment review of property,
plant and equipment was performed,
resulting in a non-cash charge of £4.5m.
Given our growth aspirations for SMS,
and the Modular Solutions division
as a whole, we have factored this
development into our wider footprint
review which was already underway
prior to the decision to terminate the
lease, and we expect to relocate to a new
facility in the 2026 financial year.
The legacy employment tax charge
relates to an assessment raised by
HMRC for historical income tax and
national insurance (‘NIC’) liabilities
that are disputed by the Group. In
common with many other construction
companies, the Group pays its
site-based colleagues an income tax and
NIC free allowance to cover the costs
of accommodation and subsistence
that they incur whilst working away
from home on construction sites. HMRC
is asserting that, as a result of some
procedural matters, largely associated
with a change in tax legislation in 2016,
certain of these payments are subject
to income tax and NIC. The Group
disagrees with the assessment raised
and discussions are ongoing with HMRC
to bring this matter to a conclusion.
Notwithstanding this, since HMRC has
issued formal determinations for the
amounts it considers are due, a charge
of £4.4m has been recognised, including
interest of £0.4m.
The amortisation of acquired intangible
assets of £5.4m represents the
non-cash amortisation of customer
relationships, order books and brand
names. These assets are being
amortised over a period of 12 months to
five years.
Acquisition-related credits of £0.8m
represent the unwinding of the discount
on, and movements in, the contingent
consideration for DAM Structures, which
is payable over a five-year period. In the
prior year, acquisition-related charges of
£2.0m included acquisition and similar
transaction costs associated with the
VSCH acquisition.
Severfield plc Annual report and accounts
for the year ended 30 March 2024
50
OUR FINANCIAL
PERFORMANCE
Cash flow and financing
£m
2024
2023
Operating cash flow (before working capital movements)
41.4
40.1
Cash generated from/(used in) operations
52.4
53.8
Capital expenditure
(11.3)
(6.3)
Operating cash conversion
110%
145%
Net cash balances
10.4
11.3
Net (debt)/funds (pre-IFRS 16 basis)*
(9.4)
2.7
Net (debt)/funds
(28.4)
(10.7)
* The Group excludes IFRS 16 ‘lease liabilities’ from its measure of net funds/debt as they are excluded from the definition of net debt as set out in the
Group’s borrowing facilities. A reconciliation of the Group’s underlying results to its statutory results is provided in the APMs section (see note 33)
The Group’s business model generates
surplus cash flows and we have always
placed a high priority on cash generation
and working capital management. Net
debt (pre-IFRS 16 basis) at the year-end
was £9.4m (2023: net funds of £2.7m).
This included net cash of £10.4m (2023:
£11.3m) and term loans of £20.0m
(2023: £8.9m), which included the
outstanding acquisition loan for VSCH of
£15.2m (2023: £nil).
Operating cash flow before working
capital movements was £41.4m
(2023: £40.1m). Net working capital
has improved by £11.0m during the
year. Excluding advance payments,
year-end working capital represented
approximately 4 per cent of revenue
(2023: 5 per cent), which is within
our normal range of 4 to 6 per cent.
Capital expenditure of £11.3m (2023:
£6.3m) represents the continuation
of the Group’s capital investment
programme (compared to depreciation
in the year of £9.2m (2023: £7.2m), of
which £2.7m (2023: £1.8m) relates to
right-of-use assets under IFRS 16). This
predominantly consisted of new and
upgraded equipment for our fabrication
lines, an extension of the Dalton
factory and general infrastructure
improvements. Operating cash
conversion (defined in the APMs section
– note 33) for 2024 was 110 per cent
(2023: 145 per cent), significantly above
our KPI target of 85 per cent.
In April 2023, the Group completed
the acquisition of VSCH for a net cash
consideration of €25.7m (£22.6m),
on a cash free basis. The total cash
consideration was €29.5m (£26.3m)
including VSCH’s cash and cash
equivalents of €4.3m (£3.8m), which
was funded by a combination of Group
cash reserves of £3.6m and a term
loan of £19.0m, repayable over a
five-year period. In addition, contingent
consideration of £1.2m was paid in
relation to the acquisition of DAM
Structures, taking the total contingent
consideration paid to date to £2.7m. The
maximum contingent consideration is
£8.0m, payable if certain work-winning
targets in the railway and steel piling
sectors are achieved over a five-year
period, ending in April 2026.
The Group has a £60m revolving
credit facility (‘RCF’) with HSBC Bank
and Virgin Money, which matures in
December 2026. This provides the Group
with long-term financing to help support
its growth strategy. The RCF is subject
to three financial covenants, namely
interest cover, net debt to EBITDA
and debt service (cash flow) cover. In
addition to the RCF, amortising term
loans have been used to fund previous
acquisitions, of which £20m remained
outstanding at 30 March 2024.
Dividends and capital allocation
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
disciplined capital allocation policy:
• 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 strong balance sheet
position.
The board is recommending an
increased final dividend of 2.3p per
share (2023: 2.1p), payable on 11
October to shareholders on the register
at the close of business on 6 September.
This together with the interim dividend
of 1.4p per share (2023: 1.3p), will
result in a total dividend of 3.7p per
share (2023: 3.4p). Looking ahead, as in
previous years, the board expects the
interim dividend to be approximately
one-third of the prior year’s full dividend.
51
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STRATEGIC REPORT
Consistent with the framework set out,
in April 2023 the Group announced
a share buyback programme to
repurchase up to £10m of ordinary
shares, subject to market conditions.
The board is satisfied with the progress
of this buyback programme, with a total
of 1,370,000 shares purchased and
cancelled during the post balance sheet
period, at a cost of £1.0m.
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
33). For 2024, ROCE was 17.5 per cent
(2023: 15.8 per cent), which exceeds the
Group’s minimum threshold of 10 per
cent through the economic cycle.
Pensions
The Group’s net defined benefit pension
liability at 30 March 2024 was £11.5m
(scheme liabilities of £34.0m offset by
scheme assets of £22.5m), a decrease of
£1.4m from the 2023 liability of £12.9m.
The deficit has reduced as a result of
a higher discount rate, reflecting a rise
in bond yields, and employer deficit
contributions, offset by higher than
expected inflation. All other pension
arrangements in the Group are of a
defined contribution nature.
Going concern
In determining whether the Group’s
annual consolidated financial
statements can be prepared on the
going concern basis, the directors
considered all factors likely to affect its
future development, performance and
its financial position, including cash
flows, liquidity position and borrowing
facilities and the risks and uncertainties
relating to its business activities.
The following factors were considered as
relevant:
• The UK and Europe order book and the
pipeline of potential future orders;
• The Group’s cash position and its
borrowing 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)); and
• The current market trading conditions
and the potential impact of significant
downside risks linked to our principal
risks on the Group’s profits and
cash flows.
The directors have reviewed the Group’s
forecasts and projections for 2025 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
19 JUNE 2024
Severfield plc Annual report and accounts
for the year ended 30 March 2024
52
VIABILITY
STATEMENT
Assessment period
The directors have determined that a
three-year period, ending on 27 March
2027, 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 timeframe, 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 £478m, 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. For the purposes of
viability, it is assumed that an equivalent
facility is available to the Group past the
maturity date.
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% of 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 FY24, 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 page 92) 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, 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.
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.
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 27 March 2027.
STRATEGIC REPORT
53
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Severfield plc Annual report and accounts
for the year ended 30 March 2024
54
BUILDING A RESPONSIBLE
AND SUSTAINABLE BUSINESS
ALAN DUNSMORE
CHIEF EXECUTIVE OFFICER
A message from the CEO
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, but we must do so in a way that
limits our impact on the environment,
through reducing carbon emissions
and the use of finite resources. During
the year, Severfield has pressed ahead
with our sustainability strategy and
has made further enhancements to our
green credentials.
We received validation from the SBTi
(Science Based Targets initiative) of
our near-term, long-term, and overall
Net Zero targets for reducing GHG
emissions. The targets support our Net
Zero roadmap and align with the Paris
Climate Agreements aim to limit global
warming by 1.5°C. As one of the few
companies in the UK construction and
engineering sector to have all three of
our targets fully verified by SBTi, our
commitment to reducing our impact on
climate change has never been clearer.
We have been recognised for our
leadership in corporate transparency by
achieving an ‘A list’ rating from Carbon
Disclosure Project (‘CDP’) and we will
disclose progress against the SBTi
targets on an annual basis through
our CDP reporting, ensuring that we
maintain the momentum we have
achieved in setting these targets.
We have also refreshed our materiality
assessment this year, to ensure that
the important ESG issues previously
identified by our stakeholders remain
relevant. This helps us plan and shape
our business for the future.
To ensure we maintain our focus on
biodiversity, we have undertaken a risk
assessment and value chain mapping
exercise to ensure we consider all
aspects of sustainability.
Progress against our objectives and ESG
strategy has been recognised through
various achievements and awards during
the year, including being awarded ‘AAA’
under MSCI’s ESG rating for the third year
running , being listed in the FT’s Climate
Leaders for the fourth year running
and maintaining our ‘carbon neutral’
accreditation with Achilles.
As part of our colleague engagement,
we have introduced new training
on carbon awareness to embed our
sustainable way of thinking throughout
the organisation and across all levels.
Our colleagues have also been given
the opportunity to formally volunteer
in our local communities. After a
successful pilot, all colleagues are now
given a day per year for volunteering
activities, whether that’s engaging with
schools and our future generations or
volunteering for local charities through
our Foundation.
Over the past year, we have built on the
Group’s existing strong foundations by
integrating VSCH into our reporting and
sustainability strategy. As a business,
ESG continues to be at the forefront
of our strategic decision making
and as a result of our hard work, the
Group is well-positioned to meet our
sustainability targets and to support our
clients to build the green infrastructure
of tomorrow.
ALAN DUNSMORE
CHIEF EXECUTIVE OFFICER
19 June 2024
“During the year Severfield
has pressed ahead with our
sustainability strategy and has
further enhanced our green
credentials.”
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STRATEGIC REPORT
Our Group’s purpose is to
create 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 72 and 73.
Progress against each of the pillars
is fundamental to achieving our
long-term strategic objective to
deliver sustainable growth.
In line with the Global Reporting
Initiative (‘GRI’) Standards, our
sustainability framework and
reporting are structured around our
most material sustainability issues.
OUR APPROACH TO SUSTAINABILITY
Principles of Governance
Show leadership in
delivering a sustainability
programme, which
considers whole life
impact, taking us beyond
compliance and ensuring
continuous improvements.
Prosperity
Deliver sustainable
profitable growth, whilst
satisfying our ethical, legal
and contractual obligations.
Sustainability framework
‘Delivering more sustainable
solutions for our people, our
customers and the wider
community and environment
in which we work
and live’
People
Support our teams to
be diverse, engaged,
motivated and highly
skilled. 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.
Severfield plc Annual report and accounts
for the year ended 30 March 2024
56
BUILDING A RESPONSIBLE
AND SUSTAINABLE BUSINESS
Environment
Social
CDP
‘A LIST’
for climate leadership
achieved
The Severfield
Foundation
DONATED
OVER
£67,000
100% of our
workforce is paid
THE REAL
LIVING WAGE
or above
GOLD Member of
THE 5%
CLUB
since 2022
BES 6001
certified since 2011
CARBON NEUTRAL
since 2021
Science Based
NET ZERO
targets approved
More than 3,070 weeks of
APPRENTICESHIPS
provided in 2024
100%
RENEWABLE
ENERGY
procured for all UK
owned facilities
ISO 14001
certified since 2007
Over 2,329 weeks of
TRAINING
OPPORTUNITIES
provided via
NVQ in 2024
2024 COMPANY HIGHLIGHTS
STRATEGIC REPORT
57
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Stock Code: SFR
Governance
Carbon emissions externally
VERIFIED BY 3RD
PARTY
STEELZERO
MEMBERSHIP
committed to procure
100% Net Zero steel
by 2050
Suite of
ESG
POLICIES
in place
SUSTAINABILITY
STEERING
COMMITTEE
governing our ESG
strategy
Supply Chain
Sustainability School
GOLD member
RESPONSIBLE
PROCUREMENT
committed to EPDs,
FSC, PEFC.
Steel Construction
Sustainability Charter
GOLD
Severfield plc Annual report and accounts
for the year ended 30 March 2024
58
BUILDING A RESPONSIBLE
AND SUSTAINABLE BUSINESS
MATERIALITY ASSESSMENT
Prioritising the right sustainability issues,based on inputs from our key stakeholders
is crucial. In 2024, Severfield undertook a full materiality assessment to ensure we are
focussing on the issues that matter most to our stakeholders.
Our approach
The materiality assessment is subsequently used to ensure
our business strategy remains closely aligned with our
stakeholders’ economic, environmental, social and governance
drivers. Our review involved comprehensive engagement with
internal and external stakeholders to understand the issues
that mattered to them.
We partnered with Black Sun, a global group of engagement
specialists, to carry out a ‘double materiality’ assessment. The
aim was to identify and assess the impact of the most material
ESG issues on our business, as well as assessing the impact of
our business on the environment and society.
The concept of ‘double materiality’ refers to
how ESG information can be material both
in terms of its implications on the Company,
but also the impact of the Company on the
environment and society.
Working with Black Sun, we identified a comprehensive set of
material issues to our business and the stakeholder groups
that we would approach to evaluate them. Stakeholders
included a broad range of areas, such as employees, suppliers,
NGOs, investors, clients and industry organisations, ensuring
it represented a diverse range of views and backgrounds.
Through questionnaires and subsequent interview discussions
these material issues were ranked to create a hierarchy, which
was approved by our sustainability committee.
1
2
3
4
5
SCOPE
DEFINITION
DESKTOP
RESEARCH
STAKEHOLDER
ENGAGEMENT:
SURVEY
STAKEHOLDER
ENGAGEMENT:
INTERVIEW
ANALYSIS AND
FINAL REPORTS
Align understanding
on objectives,
process and
expectations.
Conversations
with key internal
stakeholder groups
and agreement on
those stakeholders
to engage with.
Navigate from a
long list of potential
issues, based
on internal and
external sources,
to a consolidated
issues-set. The
shortlist of issues
is used as a base
for stakeholder
engagement topics.
Administer a
quantitative
questionnaire to
assess and rank
the importance
of each issue
to different
stakeholders.
Explore and assess
stakeholders’
relationship with
the business,
identifying the most
pressing concerns
of key stakeholder
groups.
Consolidation of
material topic
insights from
all phases into
a materiality
assessment report.
This is
supplemented
by analysis
through a ‘double
materiality’ lens.
After each stage of the process, the priority of each issue is assessed and adjusted where necessary.
Double
materiality
Company
Planet and society
OUTWARD IMPACT
INWARD IMPACT
59
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Stock Code: SFR
STRATEGIC REPORT
Material issues for stakeholders
The results from the assessment above
are illustrated in the hierarchy table.
It confirmed that key material issues
identified from our previous assessment
had not changed significantly, with
health and safety continuing to be
of highest importance for all of our
stakeholders.
The ranking of ‘climate change and
carbon emissions’ remained similar to
our last assessment. The category has
however been split, to identify ‘product
lifecycle’ separately, which also features
as a critical issue. The product life cycle
is something we are already addressing
as part of our sustainability strategy
(see page 55 for further details).
The results showed an increase in the
importance of two categories, namely
‘attracting, developing and retaining
talent’ and ‘waste’. The first category
was previously referred to as ‘employee
engagement’, but it was considered
appropriate to include talent to
encompass a comprehensive approach
to effectively managing human
resources. The importance of attracting,
developing and retaining talent was
something primarily identified through
our internal stakeholders.
The second category involves the
responsible handling, reduction and
disposal of waste materials via reusing,
recycling and regenerating materials
and products, which our stakeholders
ranked as more material than last time.
The last material issue ‘sustainability
regulation’, highlights the requirement
from of our stakeholders for responsible
and ethical business practices.
The material issues identified
already form part of either our 4Ps
Sustainability Framework or principal
risks, reaffirming that the Group is
focussing on the right areas. The Group
will continue to make enhancements
to ensure material issues that are
important to our stakeholders, are fully
integrated into Our Business Plan and
risk management framework.
Health and safety
Product life cycle
Climate change and carbon emissions
Attracting, developing and
retaining talent
Sustainability governance
and management
Waste, resource use and circular economy
Sustainability regulation
Sustainable supply chain management
Diversity and inclusion
Other emissions, effluents and pollution
Human and labour rights
Communities and social impact
Biodiversity
Privacy and security
Water
Wider economic contribution
Board composition and remuneration
Material
Important
Emerging
Not material
Severfield plc Annual report and accounts
for the year ended 30 March 2024
60
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
54 to 91 of our annual report and
accounts provides key climate-related
information that is aligned with the
11 recommendations, covering four
thematic areas, as set out by the
TCFD. We are compliant with the
TCFD recommendations, including
the relevant material elements of the
‘Guidance for all sectors’.
In 2024, we updated the modelling
for our detailed climate scenarios,
selected from the risks identified in
the Group’s climate risk register as
described on pages 64 and 65, and
have provided the detailed quantitative
disclosures required by TCFD. The
detailed modelling was assisted by our
external consultants, IMS, who have
the necessary expertise of the detailed
economic and climate change models
required to perform the analysis.
Further to this, we have 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 30 March 2024.
Some elements of our TCFD reporting are addressed elsewhere in our annual report and accounts. The table below outlines
where this information can be found.
THEMATIC AREA
TCFD RECOMMENDATION
SECTION NAME
PAGE REF
NEXT STEPS
GOVERNANCE
Board oversight
Corporate governance
report
Board at a glance
118 to 120
112 to 120
Continue to review and assess
governance around climate-related
risks and opportunities.
Management role
Building a
responsible and
sustainable business
54 to 88
STRATEGY
Risks and opportunities
How we manage risk
92 to 104
We will use the outputs of the
scenario analysis to monitor any
potential risks to the business and to
continue to evolve our understanding
of how climate-related risks and
opportunities could impact on our
business and strategy.
Impact on organisation
Building a
responsible and
sustainable business
54 to 88
Resilience of strategy
RISK
MANAGEMENT
Risk identification and
assessment process
How we manage risk
92 to 104
Continue to enhance and
improve our risk management
approach for climate-related and
wider sustainability risks and
opportunities.
Risk management process
Integration into overall
risk management
METRICS AND
TARGETS
Climate-related metrics
Building a
responsible and
sustainable business
78 to 80
We disclose the metrics and targets
that are most relevant to our
stakeholders in assessing our ESG
progress. These are continuously
reviewed.
Scope 1, 2 and 3 GHG
emissions
Climate-related targets
BUILDING A RESPONSIBLE
AND SUSTAINABLE BUSINESS
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (‘TCFD’)
61
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STRATEGIC REPORT
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 sustainability and risk
committees, thereby ensuring continuity
throughout the business, particularly
from a governance perspective.
As summarised on the board skills
matrix on page 111, the board possess
expertise in climate-related and
sustainability matters, 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 updated on climate-related
matters on a monthly basis and is
briefed on any other key 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 examples of strategic
decisions, where we demonstrated
how the board gives full and close
consideration to ESG factors and
sustainability when assessing the
impact of the decisions it makes.
• Taking steps to ensure we offer
recycled steel as an option for our
clients reinforcing the sustainability
benefits of steel. This is also linked
to the identified risk of steel having a
high embedded carbon.
• Investing in carbon offsets to maintain
our carbon neutral certification. This
links to the identified risk of failing to
meet emissions targets or failing to
comply with legislation or stakeholder
expectations.
• Setting SBTi targets, completing
our TCFD climate scenario analysis
modelling and the further disclosure of
our metrics and targets.
• Investing in climate-related research
and development to identify
and maintain the most efficient
engineering techniques, supported by
our ongoing operational improvement
programme and Project Horizon.
• Embedding sustainability
considerations into our capital
expenditure approval process.
• Research into investing in UK-based
carbon offsetting projects.
Severfield plc Annual report and accounts
for the year ended 30 March 2024
62
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,
which includes specific consideration of
climate-related risks.
The Group’s sustainability committee
members include the following: Chief
Executive 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 areas and that 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 are also
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 and Chief
Financial Officer are both members
of the sustainability committee and,
therefore, provide the board with
regular written and verbal updates on
climate-related matters.
BUILDING A RESPONSIBLE
AND SUSTAINABLE BUSINESS
GOVERNANCE
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BUILDING A RESPONSIBLE
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 potential
time horizons. 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 forecasts and/or three-
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
ranking of each is determined based on
the scoring of the risk within the Group’s
risk register. This scoring considers the
potential impact (both financial and
reputational damage) and likelihood
associated with the crystallisation of
each risk.
SHORT-TERM
< 5 years
Aligns to how we assess the Group’s
principal risks and viability statement.
MEDIUM-TERM
5–10 years
Aligns to longer-term projects with risks
driven by government policy, infrastructure
needs and market conditions.
LONG-TERM
> 10 years
Factors that could impact the Group’s ability
to achieve its strategic goals.
Climate-related transition and physical
risks have been assessed as an overall
low risk to the Group, which aligns with
the Group’s principal risk assessment on
pages 96 to 104.
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 92 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. New and emerging
risks are included within the risk
assessment process, these are reviewed
quarterly to ensure that material risks
are identified, escalated appropriately
and managed effectively.
Both transition 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. Physical
risks could arise from an increased
frequency of severe weather events, such
as flooding or heat waves.
The table on pages 64 and 65 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 to have the greatest
impact on the business in the short,
medium, and long-term.
Severfield plc Annual report and accounts
for the year ended 30 March 2024
64
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
Time
horizon
TRANSITION
Policy and legal
Failure to comply with
climate-related legislation
by not meeting targets or
reporting requirements.
• Loss of position as market leader and reputational
damage.
• Loss of opportunities within our market sectors.
• Possible fines and penalties imposed.
Short-
term
(<5 years)
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.
• Loss of opportunities within our market sectors.
• Negative share price impact.
Short-
term
(<5 years)
Policy and legal
Failure to meet operational
emissions reduction targets
or increased costs due to
offset costs.
• 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)
Market
Steel becomes
unsustainable due to high
carbon content, or an over
demand for low-carbon
steel making it unaffordable
and projects being
cancelled.
• Shortage of material availability resulting in
project delays or cancellations.
• Significant fluctuations in steel prices linked to
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.
Medium-
term
(5–10
years)
PHYSICAL
Acute
Operational disruption/
reduced capacity due to
extreme weather event, e.g.
flooding or wind damage.
• 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)
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)
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Assessment
of likelihood
Assessment
of 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
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.
Unlikely
Moderate
• Regular engagement with all stakeholders, promoting open and transparent communication.
• Strong controls and governance on climate-related reporting to the board.
• Demonstrating our commitment to reducing our environmental impact through obtaining industry
recognition (such as CDP ‘A’ and MSCI ‘AAA’ ESG ratings) and SBTi validation.
• This risk has been modelled as part of our scenario analysis – see pages 67 to 70 for
further detail.
Possible
Low
• Our Group’s Net Zero roadmap and sustainability framework continue be embedded in 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.
Unlikely
Significant
• We maintain strong relationships with our supply chain.
• We have engaged with key suppliers to understand their own strategies to achieve 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 67 to 70 for
further detail.
Unlikely
Low
• Monitoring of weather forecasts to ensure employee safety and early steps taken to mitigate
potential disruption to site activities and 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.
• The Group has appropriate insurance policies and arrangements which we continually monitor.
• This risk has been modelled as part of our scenario analysis – see pages 67 to 70 for
further detail.
Possible
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.
• The Group has appropriate insurance policies and arrangements which we continually monitor.
• This risk has been modelled as part of our scenario analysis – see pages 67 to 70 for
further detail.
Severfield plc Annual report and accounts
for the year ended 30 March 2024
66
BUILDING A RESPONSIBLE
AND SUSTAINABLE BUSINESS
STRATEGY
CLIMATE-RELATED OPPORTUNITIES
Opportunity
Classification
Description
Strategy to realise opportunity
Time
horizon
GREEN
REVENUE
STREAMS
Market
Identify new and increase existing
revenue streams from green
infrastructure and low-carbon projects
that support the green energy transition.
The Group is well-placed to meet
the demand for infrastructure that
can mitigate the impacts of climate
change and deliver energy security.
These requirements dictate a
significant investment 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.
The Group has a strong reputation
in existing market sectors that are
key to delivering the green energy
transition.
We continue to seek out
opportunities in growing markets
through market research and
collaboration with our customers,
ensuring we are well placed to take
advantage of significant investment
in the green energy transition.
See page 11 for further details.
Long-term
(>10 years)
RENEWABLE
ENERGY
Energy source
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.
In 2024, 100 per cent of our total
purchased and consumed energy
was from green tariffs in the UK (for
wholly owned facilities).
We will expand our target to cover
our European operations during
2025. In the meantime, we continue
to assess the availability of other
renewable energy sources for
heating and power as part of our
decarbonisation strategy.
Short-term
(<5 years)
RESEARCH
AND
DEVELOPMENT
Products and
services
With the increasing focus on
climate-related matters as the UK,
and the world, accelerates their 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.
One of our objectives is to invest
in climate-related research and
development to identify new
engineering techniques and
innovative technologies. We aim to
re-use steel and minimise scrap to
allow our customers to minimise the
lifecycle carbon emissions of their
projects.
In 2024, we have successfully
applied for Innovate UK funding
as part of a collaborative project
with North Yorkshire Council. The
project will look at decarbonisation
opportunities within Dalton
Industrial Estate in conjunction
with other business partners on
the site.
Short-term
(<5 years)
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STRATEGIC REPORT
Climate scenario analysis (‘CSA’)
During the year, we further developed our CSA in line with TCFD guidance. The CSA focused on how climate-related risks and
opportunities, identified through our risk assessment process described on pages 61 and 62, may change in a range of future
scenarios and considers the resultant financial impacts arising as a result of mitigations required.
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 63). Our analysis will continue to evolve over time as our understanding of the impacts of
climate-related risks grow and as external data on the potential impacts of climate change develops.
The areas assessed relate to the following primary risks:
RISK
RATIONALE FOR SELECTION
Impact of physical climate
risk on assets, projects and
supply chains.
Climate change increases the risk of severe weather events such as floods, sea level rise, cyclone,
heatwave, wildfire, and water stress.
Physical risks could potentially affect Severfield in a range of ways:
• direct damage to assets;
• impacts on supply chains (delays to shipments, delays in the production activities of suppliers); and
• delays to projects arising from the supply chain disruption.
Severfield has manufacturing facilities in the UK and Netherlands (excluding our joint venture,
JSSL, in India) and key suppliers in the UK and Europe, however, the ultimate supply chains are more
geographically spread.
The focus of the modelling is on Severfield’s manufacturing sites and considers the impact of the severe
weather events referenced above.
Stakeholder expectations
and the delivery of
low-carbon projects.
The steel sector as a whole is on a trajectory to decarbonise by 2050, but stakeholder expectations and
demand may outpace the availability of low-carbon steel and, therefore, our ability to meet customer
demand to deliver low-carbon projects and stakeholder expectations to meet our emission targets may
not be possible.
Whilst our long-term transition plan focuses on a range of measures to achieve decarbonisation (see our
Net Zero plan on pages 74 and 76), in the shorter term there will be the need for carbon offsets to offset
residual emissions.
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.
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 towards decarbonisation.
The steel market within the
low carbon transition.
This was assessed as the risk of insufficient low-carbon steel in the market, or its price being so high as
to make steel an unsustainable construction product.
Various ways of producing steel exists, some of which can be very energy intensive. The most widely
used method is through the combustion of fossil fuels in a blast furnace, which creates significant
CO2 emissions. This production method will be the focus of increased scrutiny and a drive to reduce
emissions in the future, especially when more greener alternatives become more widely available.
Electric Arc Furnaces (‘EAF’) are a greener alternative, and whilst not a new technology, they are less
commercially used due to the significant investment required by producers to replace existing, fossil fuel
reliant, blast furnaces. EAF relies on recycled or scrap steel and melts it using an ‘electric arc’. Additional
use of green electricity in this process can further provide reductions in the embodied carbon of steel.
We are already seeing an increase in customer demand for low-carbon steel, as customers work towards
their own Net Zero targets.
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. Given the significant investment required, and time
taken to build new manufacturing facilities, there may be supply side limitations which amplify the
increased demand for greener steel.
Severfield plc Annual report and accounts
for the year ended 30 March 2024
68
BUILDING A RESPONSIBLE
AND SUSTAINABLE BUSINESS
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
LOW EMISSIONS
MEDIUM EMISSIONS
HIGH EMISSIONS
1. Physical risk assessment
Relative Concentration Pathway (RCP)1
RCP2.6
RCP4.5
RCP8.5
Estimated 2100 warming projection
1.8°C
2.4°C
4.3°C
2. Stakeholder expectations and the delivery of low-carbon projects7
Carbon offset market scenario (Bloomberg NEF)2
Regulated (carbon offset
market is regulated, which
limits supply)
Hybrid (combination of
regulated and voluntary
scenarios)
Voluntary (no
regulation over
carbon market)
3. The steel market within the low-carbon transition
Mission Possible Partnership (‘MPP’) scenario3
Carbon cost (1.5°C aligned)4
Technology moratorium5
Baseline6
Carbon pricing
$0/tCO2 in 2023 rising linearly to
$200/tCO2 in 2050
None
None
Technology constraints
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 focused 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
7 As discussed later in more detail, whilst this data set was considered as part of the CSA, our disclosures are made on a simplified basis
The assessment considers four time points 2025, 2030, 2040, 2050, which encompass the short, medium and long-term time
horizons set out on page 63.
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STRATEGIC REPORT
Impact of physical climate risk on assets, projects and supply chains
METHODOLOGY
FINANCIAL IMPACT
STRATEGIC RESILIENCE AND PLANNED MITIGATIONS
Long-term flood risk modelling (within an RCP8.5
scenario – see previous page) was undertaken to
identify our operations with the highest flood risks.
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). This included specific
manufacturing site locations and also localised
flooding, which could impact access roads.
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.
‘Value at risk’ calculations were undertaken to
assess asset exposure to a given hazard under
different scenarios, simulating multiple events at
different intensities. The value at risk calculations
consider both structural damage and business
interruption and are expressed as a single annual
value of expected loss. Business interruption
was assessed based on the fixed cost base of the
respective sites.
Mean loss:
<£0.3m per year
The combined financial
impact of both
physical damage and
business interruption
is less than £0.3m per
annum based on the
worst-case scenario
extending out to 2050.
The climate risk
relating to the assets
assessed, and the
associated financial
risk is low based on
our current modelling
approach.
Whilst no sites are currently considered at risk of flooding,
work has already been carried out to mitigate the risk and
reduce the impact of localised flooding at both the Dalton
and Enniskillen manufacturing sites. Access roads to the
Dalton site in particular has seen significant investment
from the North Yorkshire Council following flooding in
the past. Such is the economic importance of the site,
climate risks are likely to be further mitigated by future
infrastructure investment.
Our current and near-term insurance policies and
arrangements mitigate against the risk of asset damage
and business interruption. Regular discussion with
insurers enables us to identify near-term localised risk and
to implement measures to minimise risk impacts.
Historical 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 64 and 66.
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
METHODOLOGY
FINANCIAL IMPACT
STRATEGIC RESILIENCE AND PLANNED MITIGATIONS
We have considered the carbon offset market
scenario based on Bloomberg NEF data,
however, we consider there is too much
uncertainty to reliably model and quantify the
financial risk on a basis that would provide
the Company with a valid range of potential
outcomes. This is due to there being a wide
range of possible outcomes for the price of
carbon offsets.
This is an emerging risk for Severfield as there is
currently no significant demand from customers
for the use of carbon offsets on projects.
Furthermore, our SBTi targets only allow for
a residual amount of offset, therefore, our
expected use of carbon offsets in the short to
medium term will reduce.
Factoring in the above, we have simplified
the analysis to disclose the financial impact
of continuing to offset our residual carbon
emissions from operations, based on a 2024
cost baseline.
£0.2m for every
100 per cent increase
in the price of carbon
offset.
We are currently
accredited as carbon
neutral, and it is our
current intention to
continue to offset our
residual emissions
from operations to
maintain this. As such,
the financial impact is
quoted in the context
of an increase based
on our current spend
on carbon credits.
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. Any requirement for the delivery of lower carbon
projects, to the extent they are not our own controllable
emissions, would currently be implicitly priced into a
tender, as all market participants would incur the same
costs to deliver a project.
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 new machinery and more efficient
processes. We are exploring methods to maximise the
circularity of steel through its reuse, to reduce the carbon
content of delivered projects. We are also focusing on our
own operational emissions within our Net Zero roadmap.
Severfield plc Annual report and accounts
for the year ended 30 March 2024
70
BUILDING A RESPONSIBLE
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STRATEGY
The steel market within the low-carbon transition
METHODOLOGY
FINANCIAL IMPACT
STRATEGIC RESILIENCE AND PLANNED
MITIGATIONS
The Mission Possible Partnership (‘MPP’) has
conducted extensive scenario analysis to assess
possible trajectories for the steel sector to reach
Net Zero by 2050. Our modelling considers the three
potential pathways to 2050:
Baseline – Steel assets switch to the technology
with the lowest total cost of ownership at each major
investment decision, without a Net Zero constraint.
Carbon cost – This scenario models how the
introduction of a carbon price policy might impact
the technologies adopted by the market. Carbon
taxes create higher prices for the higher CO2 emission
technologies and, therefore, causing higher prices,
leading to a demand side change to lower emission
technologies.
Technology moratorium – Similar to the Baseline
scenario, but confining investments to (near-) zero
emissions technologies, through the use of regulation,
from 2030 onwards to reach Net Zero.
The modelling aligns our assumed steel procurement
under each scenario to the market supply, aligned with
our SteelZero commitments. We would aim to procure
based on the lowest cost for the lowest embodied
carbon steel, however, we assume constraints in supply
as every market participant cannot do the same.
The model assumed that there will be novel and
nascent technologies that will disrupt incumbent
technologies, as the cost of zero carbon electricity and
hydrogen declines over the coming decade.
We assume that we will adopt a procurement strategy
that evolves with the best available technologies.
The results of the
modelling show that
the increase in the
overall cost of steel to
Severfield, compared
to our current baseline,
does not exceed 10 per
cent for the periods
modelled (2030, 2040
and 2050).
The price of steel is largely a pass-through cost to
our customers, therefore, any increase in the cost of
steel over time would be borne by the customer.
A potential 10 per cent increase is not considered
unsustainable in light of the market response to a
more than doubling of steel prices in recent years
following macroeconomic events, including the
impact of the conflict in Ukraine. This highlighted
our resilience as a Company and also the
importance of steel as a building product.
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 towards
achieving Net Zero.
Resilience of our strategy
The outputs from the qualitative assessment and the quantitative scenario analysis detailed above, along with the planned
mitigations and existing strategic resilience, highlights the resilience of our business strategy to climate related risks.
Furthermore, our growth strategy means we are well positioned to take advantage of the opportunities associated with the green
energy transition.
Metrics and targets
We disclose metrics and targets that we consider to be significant for the business and relevant for our stakeholders. This is the
first year since implementation, therefore some metrics are not available for previous periods. We internally measure a range of
metrics to ensure our sustainability goals are on track and externally disclose measures that allow our stakeholders to assess
our progress and benchmark us against our peers. We are currently working towards reporting relevant metrics and targets in line
with the future requirements of IFRS S1 and S2.
Metrics used by the Group to assess climate-related risks and opportunities are in line with its strategy and risk
management process.
STRATEGIC REPORT
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Stock Code: SFR
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Our sustainability framework 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
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.
Read more on
pages 74 to 80
ACTIVITIES/KPIs
2024 PERFORMANCE
GHG emissions
9% reduction in our Scope 1
and 2 GHG emissions from our
SBTi base year of 2022 (using a
market-based approach).
CDP global evaluation
rating
Achieved CDP ‘A’ list rating.
Maintained CDP supplier
engagement leader with the
rating of A-.
Other industry
accreditations achieved
Awarded ‘AAA’ under MSCI’s ESG
rating.
Listed on the Financial Times –
Europe’s Climate Leaders index
for the fourth year in a row.
Maintained BES 6001 rating of
‘very good’.
Green electricity usage
100% of our total purchased and
consumed energy was from green
electricity tariffs in the UK for
wholly owned facilities.
Waste reduction target
Achieved an absolute waste
reduction (excluding steel) of 10%
against 2021 baseline.
Biodiversity
We have issued a Group-wide
biodiversity policy and established
biodiversity risk rating for our
factories and offices.
PEOPLE
Support our teams to
be diverse, engaged,
motivated, and highly
skilled. Engage positively
with projects and the
local communities in
which we work.
Read more on
pages 81 to 87
ACTIVITIES/KPIs
2024 PERFORMANCE
Gender Pay Equality
1.00 male/female normalised
hourly rate ratio.
Diversity and Inclusion
9% of our workforce are
female (same as 2023).
Of our three grade levels
below board, female
representation is 17%, 17%
and 23% respectively.
Female % representation
across our manufacturing
departments is 2%, 8% within
project delivery departments
and 39% in core services.
Accident frequency rate
15% improvement in 2024 to
0.12 (2023: 0.14).
Incident frequency rate
27% improvement in 2024 to
1.23 (2023: 1.61).
Director safety visits
undertaken
We have conducted 99 visits in
2024 (2023: 85).
Percentage of colleagues paid
above living wage
100% of colleagues paid at or
above the Real Living Wage.
Social value target
In 2024 we have delivered a
volunteering pilot at one of
our factories. In 2025, we will
encourage uptake of our newly
launched volunteering policy
across the Group.
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PROSPERITY
PRINCIPLES OF GOVERNANCE
Deliver sustainable,
profitable growth whilst
satisfying our ethical,
legal and contractual
obligations.
Read more on
pages 80
Show leadership in
delivering a sustainability
programme, which
considers whole life
impact, taking us
beyond compliance and
ensuring continuous
improvements.
Read more on
pages 90 to 91
ACTIVITIES/KPIs
2024 PERFORMANCE
ACTIVITIES/KPIs
2024 PERFORMANCE
Economic value generated
and distributed
£463.5m (2023: £491.8m)
Board diversity
12% (2023: 20%) of the
Group’s board are women.
Economic value distributed
£438.3m (2023: £467.5m)
Board tenure
7.4 years (2023: 7.4 years)
average tenure of our board of
directors.
Net investment
(capex–depreciation)/
dividends
Stable net investment at 44%
(2023: 10%).
Executive committee diversity
10% (2023: 18%) of the
Group’s executive committee
are women.
Supply chain due diligence
100% (2023: 100%) of
suppliers subject to annual
supply chain contractor due
diligence reviews.
Coverage of certified
environmental management
systems
Maintained Group-wide 100%
accreditation to:
ISO 14001:2015 –
Environmental management,
ISO 45001:2018 –
Occupational health and
safety, and
ISO 9001:2015 – Quality
management system
New appointments
354 new employees in the year
(including 29 apprentices and
graduates).
Key training for senior
management
All relevant senior
management have been
provided with training such as
criminal corporate offences
(‘CCO’), anti-bribery and
corruption and tax evasion. To
date c.80% have completed
this.
Corporation taxes paid
£6.4m (2023: £3.5m) – £2.9m
increase reflects higher
profitability in the period and
a repayment of overpaid taxes
in the 2023 comparative.
Prompt payment reporting
93% (2023: 88%) of invoices
paid within agreed payment
terms in latest PPC reporting
period for our signatory
companies.
Severfield plc Annual report and accounts
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Why is it important?
Steel is one of the world’s most widely
used materials and has a significant
part to play in a low-carbon future.
There are decisive life cycle advantages
to using steel in manufacturing, as
it can continually be recycled, a key
requirement for the ‘circular economy’.
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. Not only is
it more durable than other building
materials, but its versatility also
makes it an essential component of
sustainable construction. Technological
advancements have made steel lighter
and stronger, and lower in embodied
carbon as steel producers focus on
decarbonising production methods to
align to the demand created by Net Zero
targets.
Our operational improvement initiatives,
continue to focus on our environmental
impact through innovative design, lean
manufacturing techniques and cost and
waste reduction programmes, ensuring
steel continues to be a key input in the
buildings of the future.
Carbon and energy reduction, improving
fuel efficiency and reducing waste are
important strategic objectives for the
Group. This year, we worked on initiatives
to progress the Group waste reduction
target and refined our approach
to biodiversity. The sustainability
framework objectives set out on page 55
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 ISO 14001
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. The following sets out
our approach to Net Zero.
Our Net Zero roadmap
We are committed to our long-term
target to achieve Net Zero emissions,
in line with the SBTi, across all our
value chain by 2050. 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 as verified by SBTi.
• Near term, we commit to reduce
absolute Scope 1 and 2 GHG emissions
50.4 per cent and to reduce absolute
Scope 3 GHG emissions 50.4 per cent
by 2033.
• Long term, we commit to reduce
absolute Scope 1 and 2 GHG emissions
by 90 per cent by 2040 and to reduce
absolute Scope 3 GHG emissions by
90 per cent by 2050.
• Overall, our Net Zero target is to reach
Net Zero GHG emissions across the
value chain by 2050.
All targets are set from an 2023
base year.
To achieve Net Zero across
and all scopes in line with
SBTi.
To procure 100% Net Zero
steel by 2050.
To reduce absolute
Scope 1 and 2 GHG
emissions by 50.4%
from our baseline.
To reduce absolute
Scope 3 GHG emissions
by 50.4% from our
baseline.
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.
Procure 100% of renewable
electricity on all UK and
European wholly owned
facilities.
To reduce our Scope 1 and 2
emissions by 25% by 2025
from our baseline year.
Became SteelZero signatory.
Achieved carbon neutral
accreditation (independently
verified by a third party).
Committed to Science Based
Targets initiative (SBTi).
To procure 50% Net Zero
steel by 2030.
To achieve Net Zero
across our Scope 1 and 2
emissions by 2040 in line
with SBTi.
2021
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, verified by
the Science Based Targets initiative 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.
2023
2025
2030
2040
2050
NET
ROADMAP
ZERO
2033
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Our Net Zero roadmap is accompanied by a Group decarbonisation transition plan. This plan identifies the main initiatives
and technologies to be explored or implemented in order to achieve our near-term and long-term 2040 target for Scope 1 and
Scope 2. We acknowledge that sustainability criteria and reporting are constantly evolving and consequently, the Group’s plan
will also continuously develop over the forthcoming years. Our current plan is made up of a combination of actions to reduce our
emissions, temporary offsetting activities and key steps we will take in supporting the low-carbon transition in the sector.
Group decarbonisation transition plan
• To maintain green electricity contracts
on all wholly owned facilities in the UK
and switch to green contracts in our
European operations.
• Continue to implement recommended
projects around compressed air,
lighting, and machinery as part of
ESOS Phase 3 audit results.
• Continue to implement our roll out
of HVO across all applicable plant
and equipment 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.
• Continue to upskill our colleagues on
our Net Zero strategy, including focus
on behavioural change.
• Roll out 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.
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:
Carbon in procured steel and the
projects we deliver
• Reducing waste through efficient
design and manufacturing processes.
• Exploring methods to maximise
circularity of our materials and the
re-use of steel.
• Working with steel suppliers aligned
with our climate and sustainability
ambition.
• Collaborate with governments and
industry-wide partners to drive the
decarbonisation of the sector.
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 use.
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 actions within this
area is set out on page 67.
Severfield plc Annual report and accounts
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Our Renewed Approach to Sustainable Procurement
Continuous improvement plays a
key part in maintaining standards
such as BES 6001, and last year, as
part of our Supplier Engagement
Programme, we hosted a number
of supplier engagement meetings
focused on how we can improve
sustainability across our supply
chain. This was a pro-active step in
our own sustainability journey to
further identify and celebrate the
innovative practices our suppliers are
carrying out.
Through collaboration with our direct
suppliers we have focused on key
emerging themes that include Net
Zero roadmaps, SBTi targets, general
progress towards decarbonisation
and embodied carbon of their
products. These themes will form
the basis of future monitoring and
will support the advancement of
sustainability goals and targets
in future engagement. We will see
the benefits of these collaboration
realised over the medium and
long term.
These meetings along with other
elements of the Supplier Engagement
Programme resulted in the launch
of our Sustainable Procurement
Policy at the end of 2023, driven by
our values and strategic objectives,
and highlighting the expectations
we have from our suppliers and
subcontractors. We have also worked
on alignment of our processes
with ISO 20400 Sustainable
Procurement guidance, that we
believe offers a great framework to
embed sustainability further in our
procurement practices.
Whilst we have always had excellent
links with our supply chain, this
engagement programme helps focus
the drive of steel industry’s transition
to Net Zero, in line with our recently
approved SBTi Scope 3 target, where
supplier’s decarbonisation plays an
important part.
To ensure that our suppliers can
regularly report progress on their
targets, we have developed a
new supplier wide ‘Sustainability
Alignment Survey’ to allow us to more
accurately map the sustainability
progress of our supply chain partners.
We have also undertaken a revision
of due diligence of suppliers with
our on-boarding survey relating
to Environmental, Social and
Governance and included a number
of sections to support conversations
around supplier’s approach to
sustainability.
Our ongoing sustainable procurement
work is also guided by our SteelZero
commitments, as we continue to work
towards our sustainable procurement
goals and report on our progress in
future annual accounts. We have
continued progress towards procuring
50% Net Zero Steel by 2030, which
was largely based on our clients
demand towards Net Zero projects.
The Group continues to align
sustainability objectives with
suppliers to ensure a more
sustainable supply chain and ensure
collaboration across our supply chain
for our Net Zero targets.
We also 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 67 to 70.
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“Severfield’s commitment to sustainability
and reducing our impact on climate change
has never been clearer. As market leaders in
the steel industry, we have a responsibility
to display best practice when it comes
to environmental disclosure, and we are
pleased that CDP have recognised that we
are delivering on this.”
Severfield makes CDP’s ‘A List’ for climate change
Following the submission of our annual environmental
disclosure to CDP’s 2023 Climate Change questionnaire,
Severfield is one of a small number of companies that
achieved an ‘A’ out of over 21,000 companies scored.
What is CDP?
CDP is a global non-profit that runs the world’s environmental
disclosure system and holds the largest environmental
database in the world, and it scores organisations from ‘D’ to
‘A’, with ‘A’ representing ‘Leadership’ in the field. In order to be
awarded an ‘A’ for climate change by the CDP, and secure the
associated ‘leadership’ status, organisations need to have
shown that they are behaving like industry leaders when it
comes to their practices.
What does this mean?
Severfield’s place on the CDP’s ‘A List’ this year demonstrates
our thorough understanding of risks and opportunities
related to climate change, and that we have formulated
and implemented strategies to mitigate the effects of our
operations on the environment.
Looking forward
In a year of ever-increasing environmental concerns around
the world – the need for transformational, urgent, and
collaborative change is more important than ever. Severfield
looks forward to continuing its work on improving our ways
of working and making even more progress in relation to the
environment in the years to come.
MICHAELA LINDRIDGE
GROUP HEAD OF ESG AT SEVERFIELD PLC
Severfield plc Annual report and accounts
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Reporting our GHG emissions
As required by Streamlined Energy and Carbon Reporting (‘SECR’), we report on our CO2e emissions in accordance with the
internationally recognised Greenhouse Gas (‘GHG’) Protocol and our metrics include Scope 1 and 2 emissions.
For the year ended 30 March 2024, the Group’s global GHG emissions, using a location-based approach, and energy usage,
were as follows:
Tonnes of CO2e
GHG emissions from:
2024
2023
Scope 1 – combustion of fuel and operation of facilities
6,101
6,391
Scope 2 – electricity, heat, steam and cooling purchased for own use
3,478
3,106
Total CO2e emissions (location-based)
9,579
9,497
Intensity measurement (location-based):
2024
2023*
Absolute tonnes CO2 equivalent per £m of revenue
20.6
19.3
*On a like-for-like basis, 2023 would be 20.4 tonnes of CO2e per £m of revenue, when adjusted for the impact of higher steel
prices of c.£25m.
For the year ended 30 March 2024, the Group’s global GHG emissions, using a market-based approach, and energy usage were
as follows:
Tonnes of CO2e
GHG emissions from:
2024
2023
Scope 1 – combustion of fuel and operation of facilities
6,101
6,391
Scope 2 – electricity, heat, steam and cooling purchased for own use
157
116
Total CO2e emissions (market-based)
6,258
6,507
Intensity measurement (market-based):
2024
2023*
Absolute tonnes CO2 equivalent per £m of revenue
13.5
13.2
*On a like-for-like basis, 2023 would be 13.9 tonnes of CO2e per £m of revenue, when adjusted for the impact of higher steel
prices of c.£25m.
All data reported are for our UK and European operations (including VSCH) as described in our certification boundary.
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.
All Scope 1 and 2 GHG emissions data is independently verified by Achilles, in accordance with the international standard ISO
14064-1.
In 2024, using a market based approach, which includes the positive impact of switching to green energy and use of alternative
fuels on site, our intensity measured Scope 1 and Scope 2 GHG emissions have reduced by 3% year-on-year to 13.5 from 13.9
tonnes of CO2e per £m of revenue (after adjusting for the impact of higher steel prices of c.£25m in the prior year revenue).
Our 2024 reported emissions also include VSCH for the first time, and VSCH have not yet fully adopted the Group’s many carbon
reduction initiatives, including switching to green electricity. This is an ongoing area of focus.
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Location-based methodology
Market-based methodology
ABSOLUTE EMISSIONS SCOPE 1 AND 2
0
2000
4000
6000
8000
10000
12000
8,341
7,862
8,030
6,507
6,255
9,331
9,895
10,733
9,497
9,579
2024
2023
2022
2021
2020
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. We are, however,
committed to driving decarbonisation
throughout our value chain, which
is underpinned by our SBTi Scope 3
reduction target.
Our verified Scope 3 GHG emissions
have decreased, most notably we had
a reduction in waste emissions as part
of our focus on our waste reduction
target. For transport and distribution,
even with the inclusion of additional
WTT emissions, we reported an overall
reduction.
The higher emissions for business
travel reflect an increase in published
GHG emission factors that are applied
to business miles and a small increase
in travel to Continental Europe, as our
presence continues to grow through
our recent acquisition of VSCH and the
number of projects in Europe increases.
Energy usage from:
2024
2023
Scope 1
29,652
29,044
Scope 2
16,647
16,049
46,299
45,093
The information in the table above represents absolute energy usage only, irrespective of whether this is from low-carbon sources.
The energy usage includes Voortman, which is why increase is reported in this period.
Scope 3 emissions
Tonnes of CO2e
GHG emissions from:
2024
2023
Waste
254
264
Business travel
1,204
738
Colleague commuting
4,008
3,723
Transport and distribution
6,979
8,466
12,445
13,191
Our Scope 3 GHG data above is independently verified by Achilles, in accordance with the international standard ISO 14064-1. Our verified Scope 3 GHG
emissions in relation to any transport will now also include ‘Well To Tank’ (WTT) emission factors, as part of further data alignment with SBTi methodology.
WTT emissions, also known as upstream or indirect emissions, is an average of all the GHG emissions released into the atmosphere from the production,
processing and delivery of a fuel or energy vector. Our 2024 Scope 3 data also include Voortman.
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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
continue to complete learning pathways
and attend targeted sustainability
training in collaboration with our
stakeholders.
2025 areas of focus:
• Monitor and report on the Group’s
SBTi targets.
• Maintain our supply chain
engagement programme and track
suppliers’ sustainability targets in line
with our sustainable procurement
strategy.
• Continue to seek opportunities to
increase waste reduction across
the Group.
• Continue to upskill our colleagues in
knowledge on sustainability and wider
ESG topics.
• Work with VSCH to further embed
sustainability into their business
practice in line with Group.
Within Scope 3 emissions categories, we report on a total of 8 of the 15 categories
relevant to our business (VSCH’s impact included in this year’s report). 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. We continue to be
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 (as approved by SBTi).
Additional Scope 3 categories
Tonnes of CO2e
GHG emissions from:
2024
2023
Purchased goods and services
184,090
213,586
Fuel and energy related
2,504
2,589
End of life treatment
104
93
Investments
1,377
1,665
Total unverified Scope 3 CO2e emissions
188,075
217,933
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 in our
sector for our work to date in reducing
carbon emissions in a number of areas.
For the fourth year running, we have been
included in the Financial Times’ listing
of Europe’s climate leaders, published
in April 2024. 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 2017 and 2022.
As we continue to reduce our GHG
impact, we focused on the use of
diesel alternatives for our plant and
machinery. From the previous year, we
have decreased the use of diesel plant
and machinery by 18% as we introduced
further electric and hybrid options to our
operations.
We have also been recognised as ‘A List’
leaders for Climate in the annual CDP
disclosure. 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. The rating also
assesses the completeness of the Group’s
measurement and management of our
carbon footprint, our risk management
process and our sustainability strategy.
This demonstrates our thorough
understanding of risks and opportunities
related to climate change, and that
we have formulated and implemented
strategies to mitigate the effects of our
operations on the environment.
We have also maintained a CDP supply
chain score of ‘A-’, which is well above the
construction industry average of ‘B-’.
As part of embedding carbon awareness
within the business, we designed
and developed an internal e-learning
module on the subject. This module was
mandatory for both office and operational
staff as part of giving our colleagues the
knowledge and tools to help support our
Group-wide targets when it comes to
carbon reduction and sustainability.
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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 1,900 colleagues 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 create better ways to build,
for a world of changing demands.
We continue to build sustained business
performance through our rigorous
approach to ESG and through embedding
our values, The Severfield Way. The
Severfield Way gives our colleagues
clarity on our collective ways of working
and expected behaviours so that we
can continue to deliver effectively and
efficiently for our clients.
Ensuring our colleagues can be their
best everyday is critical to us achieving
our business goals and ambitions, to
enable this our focus remains on:
1. Looking after the people who work
for and with us
2. Developing and maintaining a
robust, diverse talent pipeline
3. Creating a culture of inclusivity
4. Delivering social value
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1. LOOKING AFTER THE PEOPLE WHO WORK WITH AND FOR US
Our Leadership Commitment
Safety, health and environment
remains at the top of the executive
committee agenda and our performance
is monitored closely with a focus on
ensuring the Group IFR continues to
improve, whilst supporting the need to
ensure all incidents are reported and
appropriately investigated.
The executive committee continues to
scrutinise High Potential Near reports
(‘HiPo’) and RIDDOR (Specified injury
or over seven-day incidents, three
days in Northern Ireland) reports to
ensure lessons learnt and appropriate
corrective actions are in place to prevent
reoccurrence.
Our progress
During the year, we introduced private
medical cover for all colleagues. Our
provision of mental and physical health
support has gone from strength to
strength with videos and personal
stories shared on our intranet (Connect)
and lunch and learn sessions delivered
virtually and in person on nutrition and
health. Our trained mental health first
aiders continue to be on hand to offer
support and guidance to colleagues
when they need it.
2024 has seen further improvements to
our performance, accident frequency rate
dropped to 0.12 from 0.14 and the IFR fell
to 1.23 from the 2023 figure of 1.61.
We have a positive reporting culture and
we look to proactive measures to further
improve health, safety and wellbeing
at Severfield. Our behavioural safety
initiative Safer@Severfield has moved
on to Stage 2 where the focus is on us
all to make the right decisions around
safety whether it is carrying out a task
or putting others to work, the message is
clear – make the right decision and we
will all be Safer@Severfield.
Our Group systems remain accredited
to the highest standards, we remain
certified to International Management
systems ISO45001 (Occupational
Safety and Health) and ISO14001
(Environmental Management). We
are accredited to industry-leading
compliance standards such as CHAS,
Constructionline and Achilles.
2025 areas of focus
In line with our strategy, we aim
to continue improving our safety
performance and are in the process of
adopting positive leading indicators to
drive preventative workforce behaviours.
We also plan to evaluate new solutions,
including the use of technology to
further improve our safety performance.
Safety, health and wellbeing remain of paramount importance to our business and
without exception, the board, management and our colleagues remain committed to
sector-leading performance.
We recognise the sector we work in comes with a high level of risk, both within our factories and on our construction sites, and
to this end we have sector-leading provisions for ensuring we keep everyone affected by our activities safe and well.
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Our Leadership Commitment
Our executive committee spend
significant time on reviewing our
strategic workforce plan and data from
our performance and potential reviews.
Reviews take place quarterly within
each of our business units. 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. Our board have regular
updates on all aspects of our approach to
managing performance, developing skills
and progressing careers.
Our progress
The performance and potential of c.800
colleagues was assessed in detail
during the year and enabled the board
to have a complete and clear picture of
talent across the Group, ensuring the
strategies are in place to further develop
and retain the leaders and specialists
we need for our future. In addition, this
important piece of work enabled us
to review our succession plans for the
executive committee and business unit
management boards. As a result of this
process, we identified individuals from
across our group to take part in a number
of personal and leadership development
activities. Our Strategic Leaders
Programme targeted those in roles one
level below our executive committee, our
two-day Development Centre put several
of our senior leaders through their paces
and our inaugural LEAD (leadership
discovery and exploration programme)
challenged the thinking of many aspiring
leaders from across our Group. These
three programmes build on each other
and form a strong ethos and culture of
development at all levels.
Our focus on early careers, to address
future skills shortages, has continued
to be strong with 29 graduates and
apprentices joining us on one of our
‘development on a different scale’
programmes. We plan to recruit c.40
apprentices in 2024 across fabrication,
maintenance, painting, welding and
the drawing office. This continued
commitment to providing opportunities
for earning whilst learning enabled
us to maintain our 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 81 colleagues who
are either on a formal apprenticeship or
undertaking qualifications through the
apprenticeship route.
We have continued to increase
investment in our Learning Academy with
the addition of MyLearning (a learning
management system) this has enabled
greater visibility of all aspects of training
data, improved roll out of compliance
eLearning and greater access to learning
materials for all our colleagues.
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.
2025 areas of focus
We will continue to deliver a wide range
of internally and externally provided
training courses, both face-to-face
and through eLearning. Throughout
2024, we will extend the reach of our
MyPerformance and MyCheck-In
process so that all colleagues have the
opportunity for feedback and to have
a discussion about their current and
future aspirations.
We are also exploring certain
international options to recruit
fabricators and welders to ensure we
have the skills necessary to support the
Group’s growth plans.
2. DEVELOPING AND MAINTAINING A STRONG AND DIVERSE TALENT PIPELINE
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.
Our industry continues to face significant skills shortages in relation to fabrication and welding and broader diversity
remains a challenge.
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3. CREATING A CULTURE OF INCLUSIVITY
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 60 per cent. Toolbox talks,
manager briefings, emails, and Skyline
(our Company magazine) all play their
part in keep our colleagues informed
and connected.
Employment policies
Our leadership teams are committed
to fair and transparent recruitment,
selection, development and promotion
processes, which are underpinned by
our Equal Opportunities and Diversity
Policy. In recruitment, through using
interviews, aptitude testing, styles
profiling and assessment centres,
we can ensure a candidate’s aptitude
and abilities adequately meet the
requirements of the role, regardless of
gender, ethnicity, disability or sexual
orientation. Training, development and
promotion opportunities are open to all
and reasonable adjustments are made
to accommodate the needs of those who
require them. If a colleague becomes
disabled during their employment
with us then appropriate training,
development, adjustments, and support
are made available to enable them to
remain in employment for as long as
practicable.
Our leadership commitment
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 benefits, enhanced
facilities for our manufacturing
colleagues and access to information
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. Each executive committee
member takes personal responsibility
for ensuring actions in their areas are
progressed and closed out.
Our progress
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. With only 9 per
cent of our workforce being female
greater focus is being placed on our
hiring practices, candidate attraction
and retention.
During the year, our first female
mentoring programme took place with
14 females from all aspects of our
business. The programme drew to a
close on International Women’s day
celebrating the progress and learnings
from the group.
All of our executive committee actively
participated in dignity and respect
training, leading the way for this to start
being rolled out across the organisation.
Following this, over 40 of our managers
and team leaders from our largest
manufacturing facility took part in
dignity and respect workshops in
advance of us welcoming a number of
new starters from Zimbabwe and South
Africa, ensuring a welcoming, supportive
and inclusive culture.
We continue to track diversity data and
this is shared with management teams
on a quarterly basis.
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.
BUILDING A RESPONSIBLE
AND SUSTAINABLE BUSINESS
PEOPLE
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This data has 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 8.7 per cent
over the past three years. 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 1.00. Our median gender pay
gap for the Group stands at 15 per cent,
which is a small increase on previous
years due to pay increases for certain
areas to address the recruitment and
retention challenges we faced. All of our
colleagues are paid at or above the real
living wage.
Male #
Female #
Main board
6
1
Executive committee
10
1
Senior leadership*
42
11
All colleagues
1,720
180
* Senior leadership is defined as the two career levels below the executive committee.
At 30 March 2024, the board had 1
female director (14 per cent). Female
representation on our executive
committee was 1 (9 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 10 per cent and 23 per
cent, respectively.
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 18 per cent of the
workforce participating in this year’s
scheme. Our pension offering to
all colleagues (including executive
directors) is 7 per cent employee
contribution matched by a 7 per cent
employer contribution. In December
2023, consistent with previous years, we
paid all employees that are not part of
the annual bonus scheme, a ‘festive gift’
of £750.
2025 areas of focus
Ensure all leaders undertake ‘dignity and
respect’ training through our partner
(EA Inclusion) ensuring we create an
environment where everyone can feel
they belong.
Embed The Severfield Way values into
all that we do.
Male
Female
All
colleagues
Senior
leadership
17%
9%
83%
91%
Main
board
14%
86%
Executive
committee
9%
91%
Gender diversity statistics
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BUILDING A RESPONSIBLE
AND SUSTAINABLE BUSINESS
PEOPLE
4. DELIVERING SOCIAL VALUE
We understand that focusing on the social value we create has a huge potential to help
us change the way we understand the world around us, and make better decisions about
where we invest our resources.
Our leadership commitment
Our sustainability steering committee
meets eight times a year and focuses on
all aspects of our ESG agenda (people,
planet, prosperity and principles of
governance).
Our progress
During the year, we have refined our
approach to social value and have
embraced the nationally recognised
‘Themes, Outcomes and Measures’
(‘TOMs’) Framework. The framework
enables us to measure our social value
contribution and is based on the Social
Value Act’s themes of social, economic
and environmental wellbeing and it
is aligned to the UN 17 Sustainable
Development goals.
We have defined our baseline year
(2022) in line with TOMs and are able
to report on a number of key indicators
associated with the framework.
Through The Severfield Foundation
(the ‘Foundation’), incorporated back
in 2016, we have continued to 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 and commitment, we will be able to
support disadvantaged people and local
communities for many years.
During the year, we have supported many
different charities, from air ambulances,
to hospices, to local community groups,
and have provided support and guidance
to help support those facing social and
financial deprivation. our colleagues
across the business have raised over
£67,000 for these causes.
Following feedback from our MyVoice
Forum we piloted a one-day paid
Colleague Volunteering Programme. The
six-month trial proved a big success and
we will be rolling the policy out across the
Group in 2024. Volunteering opportunities
will be limited to three key areas, these
are areas we have identified as being of
significant importance to the business
and our communities: Assisting the local
charities that we support through The
Severfield Foundation, supporting STEM
activities and undertaking activities
aligned to the projects we are delivering
in the communities where they have
an impact.
During the year, we have developed and
trialed a social value reporting system
enabling us to track and measure
the value we create through all of our
activities. This will ensure we continue
to focus on areas that have the biggest
impact on the communities in which we
operate.
2025 areas of focus
Roll out and encourage employees
volunteering policy uptake.
Throughout our activities we want to
achieve a year-on-year increase our
social value delivery (10 per cent).
Monitor Group and divisional targets
set for social value delivery before
seeking an external recognition for our
achievement.
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THE 5% CLUB – GOLD
This award recognises our significant contribution
to the continued development of all our
employees through ‘earn & learn’ schemes such as
apprenticeships, graduate schemes and sponsored
students course placements.
We are proud of our investment in early careers, which helps accelerate
skills in the workforce and address UK skill shortages, supporting our
Company and the wider economy. In the last year, we have recruited 26
apprentices and 3 graduates.
81
Earning & learning
2,329
NVQ training weeks
CASE STUDY
CASE STUDY
FEMALE MENTORING
Severfield champions diversity and attracting and
engaging women to its ever-growing workforce has
been a key focus in recent years.
There is a shortage of females in most roles across the construction
industry and we are tackling the issue head-on through a variety
of initiatives, including better engagement with those in education,
better maternity pay, training on unconscious bias, and breaking down
barriers through our newly launched female mentoring programme. The
programme pairs female colleagues with an external mentor, providing
insights from other career driven women, to help build experience and
grow confidence to create the leaders of tomorrow.
14
Colleagues on the
programme
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BUILDING A RESPONSIBLE
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.
Management approach
As outlined in the ‘principles of
governance’ section, 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.
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.
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
digital transformation 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 £463.5m (2023:
£491.8m), a reduction of 5.8 per cent
from the prior year and distributed
£438.3m (2023: £467.5m), resulting
in economic value retained of £23.0m
(2023: £27.1m).
In 2024, the Group continued its work
to embed its sustainability framework
into our purpose and corporate strategy
and to 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.
The Group’s high-quality order book of
£478m at 1 June 2024 (2023: £482m
at 1 November 2023) contains c.42 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 the green energy transition.
During the year, 100 per cent (2023:
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 £10.7m (2023: £9.9m), an
8.1 per cent increase on the prior year.
2025 areas of focus
• Continue to make progress with
our Project Horizon initiatives and
increase automation within the Group.
• Continue to grow our revenues
benefiting from the green energy
transition and our stronger market
position in Europe.
©CentralPhotography
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BUILDING A RESPONSIBLE
AND SUSTAINABLE BUSINESS
PRINCIPLES OF GOVERNANCE
Why is it important?
The Severfield Way is to do the right thing
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
Our sustainability committee oversees
the development and monitoring of our
sustainability strategy and sets and
monitors the Group’s sustainability
targets and metrics (see page 71). 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
This year, we have included in our TCFD
report (see page 68) the quantitative
outputs from the financial modelling
undertaken on the three climate-related
risks, which were disclosed last year
and we have disclosed our key ESG
metrics and targets and our approach
to monitoring progress against them.
This has allowed us to complete our
disclosure in line with the requirements
of TCFD and the recently introduced
requirements in the UK Companies Act
2006. Next year we commit to including
data from VSCH in our future analysis
once we have appropriate processes in
place to accurately capture and report
the data.
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
to not only operate in compliance with
applicable laws and regulations, but to
do so also in accordance with internal
controls and reporting requirements.
They are regularly reviewed and updated
and frequent training via our e-learning
platform, Cognexo, 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 2024, the Group, again, had no
incidents of bribery or corruption
confirmed during the year (either relating
to 2024 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. The Group
is in ongoing discussions with HMRC
regarding an assessment raised for
historical tax liabilities, which the Group
disputes. Further details are included in
note 5.
During the year, over 90 per cent of our
colleagues, including all office and senior
factory and site personnel, completed
regular ethics training (using Cognexo)
based on the Group’s following policies:
• health and safety policy;
• equal opportunities and diversity
policy;
• information security policy; and
• sustainability policy.
In addition, our senior managers were
given specific training via our online
learning management system on fraud
awareness, corporate criminal offences
including tax evasion and a refresher
course on anti-bribery and corruption.
Modern slavery
The board annually reviews and approves
the Group’s modern slavery statement.
The 2024 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 have updated our
modern slavery statement in line with
best practice, designed new awareness
training for our staff through our learning
management system, and devised an
improvement plan for our approach to
modern slavery with our suppliers.
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.
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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 anti-bribery policy
and our ethics policy (both of which were
updated this year) prohibit all forms
of bribery, both in giving and receiving,
wherever the Group operates. This
includes our colleagues and any agent,
contractor, consultant or business
partner acting on our behalf or under our
control whether in the UK or abroad. 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.
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 whistleblower.
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
and other relevant tax authorities,
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 HMRC
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 IR35 rules. In
2023 we completed a CCO workshop,
facilitated by external experts, to keep
our colleagues and procedures up to
date. Further enhancements have been
made following the workshop to address
recommendations to achieve best
practice.
During the year, we voluntarily published
a tax strategy on our website. Whilst the
Group is not currently legally required
to publish a tax strategy, we have
elected to do so as part of best practice
and in accordance with our policy of
transparent tax reporting. The Group
recognises the importance of corporate
social responsibility and understands
the importance of paying taxes in the
jurisdictions in which it operates.
Fraud
Following the introduction of the
Economic Crime and Corporate
Transparency Act 2023, we have
developed a comprehensive fraud
prevention policy and a fraud risk
assessment and have rolled out training
to all our senior managers on the key
issues they need to be aware of and the
actions they need to address in their
respective roles.
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HOW WE
MANAGE RISK
Strong and effective risk management is at the heart of how the directors run the
business and supports the achievement of the Group’s strategic objectives.
Our key focus areas in 2024
• 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.
Our future priorities for 2025
Some of our main priorities (and emerging risks) this year
will be:
• Health and safety – reviewing our strategy for preventing
and mitigating safety-related incidents including the use of
positive leading indicators to drive preventative workforce
behaviours
• Cyber security – ensuring we continuously evaluate and test
our cyber resilience against known and emerging threats.
Changes to principal risks
The following changes have been made to the Group’s principal
risks in 2024:
• Commercial and market environment risk has been
upgraded from medium risk to high risk, due to uncertainty
in the UK construction market in 2024.
• Cyber security risk has been upgraded from medium risk to
high risk reflecting uncertainty around the pace at which
the threat is escalating and the ever-increasing level of
protection that is required to mitigate the risk of a significant
breach.
• Removal of sustainable and responsible business as a
principal risk since we now have a clearer understanding of
stakeholder expectations and our ability to meet them.
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 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.
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• Divisional 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, the sustainability risk review committee
(comprising the Group legal director, the Group SHE director,
Group financial controller and the Group head of ESG) meet
on a quarterly basis to review sustainability risks facing the
Group and the people risk review committee meets on a
regular basis to review people risks facing the Group.
The outcome of these discussions is collated and reported to
the executive committee.
• All of these risk registers 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
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, sustainability
committee and information security
management committee
• Audit committee
• Nominations committee
• Remuneration committee
Independent review
Divisional boards
Internal controls:
• External audit
• Internal audit
• Other third-party assurance
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HOW WE
MANAGE RISK
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 are improved to ensure they are adequate for our
current circumstances. On acquisition, as part of integration,
new businesses adopt these policies and procedures on a
phased basis.
The key features of the Group’s framework of internal controls
are as follows:
Project management procedures
Project risk is managed throughout the life of a contract from
the tender stage to completion. Individual tenders for projects
are subject to detailed review with approvals required at
relevant levels and at various stages from commencement of
the tender process through to contract award. Tenders above
a certain value and those involving an unusually high degree
of technical or commercial risk must be approved at a senior
level within the Group. Robust procedures exist to manage
the ongoing risks associated with contracts. Regular monthly
contract reviews to assess contract performance, covering
both financial and operational issues, form an integral part of
contract forecasting procedures.
Health and safety
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 and Chief Financial 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.
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 and corruption policy,
the competition law compliance policy, the quality manual,
the health and safety policy and the environmental policy).
During the year, we were audited successfully on our ISO 27001
accreditation for our information security management system
and a separate committee reviews any information security
issues impacting the Group. This continues to give further
assurance as 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 EY, the
oup’s internal auditor, who replaced the incumbents PwC
during 2024.
The following main committees provide oversight of
management activities:
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The executive committee, risk committee,
sustainability committee and the information
security management committee
These committees are responsible for the identification,
reporting and ongoing management of risks and for the
stewardship of the Group’s risk management approach.
The audit committee
The board has delegated responsibility to this committee for
overseeing the effectiveness of the Group’s internal control
function and risk management systems.
The nominations committee
This committee ensures that the board has the appropriate
balance of skills and knowledge required to assess and
address risk and that appropriate succession plans are
in place.
The remuneration committee
This committee ensures that the board complies with
regulations and best practice regarding remuneration and that
remuneration policy remains appropriate for attracting and
retaining management of the right calibre.
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 and Marsh.
Internal auditor
The audit committee annually reviews and approves the
internal audit programme for the year. The committee reviews
progress against the plan at each of its meetings, considering
the adequacy of audit resource, the results of audit findings
and any changes in business circumstances which may require
additional audits.
The results of internal audits are reported to the executive
team and senior management and, where required, corrective
actions are agreed. The results of all audits are summarised
for the audit committee along with progress against agreed
actions.
Annual review of effectiveness
The risk management and internal control systems have
been in place for the year under review and up to the date of
approval of the annual report and are regularly reviewed by
the board. The board monitors executive management’s action
plans to implement improvements in internal controls that
have been identified following the processes described.
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.
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 following table.
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.
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Principal risk
Strategic pillars
Link to KPIs
Movement
Scoring
1 Health and safety
1 2 3 4 5 6 7
2 Supply chain
1 2 3 4 5 6 7
3 People
1 2 3 4 5 6 7
4 Commercial and market environment
1 2 3 4 5 6 7
5 Mispricing a contract (at tender)
1 2 3 4 5 6 7
6 Cyber security
1 2 3 4 5 6 7
7 Failure to mitigate onerous
contract terms
1 2 3 4 5 6 7
8 Industrial relations
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.
KPI key
1 Underlying op profit and margin
2 Underlying BEPS
3 Revenue
4 Operating cash conversion
5 ROCE
6a UK&E OB
6b India OB
7 Injury frequency rate (‘IFR’)
Strategic pillar key
Growth
Operational
excellence
India
Movement
Upward trend
Downward trend
No change
New
Scoring
High
Medium
HOW WE
MANAGE RISK
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1 HEALTH AND SAFETY
Description
Impact
Mitigation
The Group works on
significant, complex
and potentially
hazardous projects,
which require
continuous monitoring
and management of
health and safety risks.
Ineffective governance
over, and management
of, these risks could
result in serious injury,
death and damage to
property or equipment.
A serious health and
safety incident could
lead to the potential
for legal proceedings,
regulatory
intervention, project
delays, potential loss
of reputation and
ultimately exclusion
from future business.
Continued changes in
legislation can result
in increased risks to
both individuals and
the Group.
• Established safety systems, site visits, safety audits,
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 ‘Safer@
Severfield’ was launched this year.
• 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.
Trend
Link to strategy
Link to KPIs
1 2 3 5
6 7
Scoring
High
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2 SUPPLY CHAIN
Description
Impact
Mitigation
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.
Interruption of supply
or poor performance
by a supply chain
partner could
impact the Group’s
execution of existing
contracts (including
the costs of finding
replacement supply),
its ability to bid for
future contracts
and its reputation,
thereby adversely
impacting financial
performance.
• Process in place to select supply chain partners that
match our expectations in terms of quality, sustainability
and commitment to client service – new sources of
supply are quality controlled.
• Ongoing reassessment of the strategic value of supply
relationships and the potential to utilise alternative
arrangements, including for steel supply.
• Contingency plans developed to address supplier and
subcontractor issues (including the failure of a supplier
or subcontractor).
• Monthly review process to facilitate early warning of
issues and subsequent mitigation strategies.
• Strong relationships maintained with key suppliers,
including a programme of regular meetings and reviews.
• Implementation of best practice improvement initiatives,
including automated supplier accreditation processes.
• Key supplier audits are performed within projects
to ensure they can deliver consistently against
requirements.
Trend
Link to strategy
Link to KPIs
1 2 3 4
5 6
Scoring
Medium
HOW WE
MANAGE RISK
KPI key
1 Underlying op profit and margin
2 Underlying BEPS
3 Revenue
4 Operating cash conversion
5 ROCE
6a UK&E OB
6b India OB
7 Injury frequency rate (‘IFR’)
Strategic pillar key
Growth
Operational
excellence
India
Movement
Upward trend
Downward trend
No change
New
Scoring
High
Medium
Strategic pillar key
Growth
Operational
excellence
India
Movement
Upward trend
Downward trend
No change
New
Scoring
High
Medium
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3 PEOPLE
Description
Impact
Mitigation
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
recent years due to
macroeconomic factors
such as the impact of
inflation and shortages
of labour.
Loss of key people
could adversely
impact the
Group’s existing
market position
and reputation.
Insufficient growth
and development of
its people and skill
sets could adversely
affect its ability to
deliver its strategic
objectives.
A high level of
staff turnover
or low employee
engagement could
result in a decrease
of confidence in the
business within the
market, customer
relationships being
lost and an inability
to focus on business
improvements.
• Training and development schemes to build skills and
experience, such as our successful graduate, trainee and
apprenticeship programmes.
• Detailed talent identification and succession planning for
future leaders across the business.
• Attractive working environments, remuneration packages,
technology tools and wellbeing initiatives to help improve
employees’ working lives, recent above average inflation
pay and a commitment to pay the real living wage.
• 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.
• Robust people strategy focused on culture, and
continually enhancing all aspects of our approach to
performance, development, careers, recruitment and
reward.
• Maintained our approach to flexible working practices
and hybrid working.
Trend
Link to strategy
Link to KPIs
1 2 3
6
Scoring
Medium
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4 COMMERCIAL AND MARKET ENVIRONMENT
Description
Impact
Mitigation
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
geopolitical events.
Lower than anticipated
demand could result in
increased competition,
tighter margins and the
transfer of commercial,
technical and financial
risk down the supply
chain, through more
demanding contract
terms and longer
payment cycles.
A significant fall in
construction activity
and higher costs
could adversely
impact revenues,
profits, ability to
recover overheads
and cash generation.
• Regular reviews of market trends performed (as part
of the Group’s annual strategic planning and market
review process) to ensure actual and anticipated impacts
from macroeconomic risks are minimised and managed
effectively.
• Regular monitoring and reporting of financial
performance, orders secured, prospects and the
conversion rate of the pipeline of opportunities and
marshalling of market opportunities is undertaken on a
co-ordinated Group-wide basis.
• Selection of opportunities that will provide sustainable
margins and repeat business.
• Strategic planning is undertaken to identify and focus
on the addressable market (including new overseas and
domestic opportunities).
• Monitoring our pipeline of opportunities in continental
Europe and in the Republic of Ireland, supported by our
European operations.
• 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.
• Recent acquisitions have broadened our reach and
cross-selling opportunities, resulting in improved market
resilience.
Trend
Link to strategy
Link to KPIs
1 2 3 4
5 6
Scoring
High
HOW WE
MANAGE RISK
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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.
• 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.
Trend
Link to strategy
Link to KPIs
1 2 3 4
5
Scoring
Medium
KPI key
1 Underlying op profit and margin
2 Underlying BEPS
3 Revenue
4 Operating cash conversion
5 ROCE
6a UK&E OB
6b India OB
7 Injury frequency rate (‘IFR’)
Strategic pillar key
Growth
Operational
excellence
India
Movement
Upward trend
Downward trend
No change
New
Scoring
High
Medium
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6 CYBER SECURITY
Description
Impact
Mitigation
A cyber attack could
lead to IT disruption
with resultant loss of
data, loss of system
functionality and
business interruption.
The Group’s core IT
systems must be
managed effectively,
to keep pace with
new technologies and
respond to threats to
data and security.
Prolonged or major
failure of IT systems
could result in
business interruption,
financial losses, loss
of confidential data,
negative reputational
impact and breaches
of regulations.
• IT is the responsibility of a central function, which
manages the majority of the systems across the Group.
Other IT systems are managed locally by experienced IT
personnel.
• Significant investments in IT systems, which are subject
to board approval, including anti-virus software, off-site
and on-site backups, storage area networks, software
maintenance agreements and virtualisation of the IT
environment.
• Specific software has been acquired to combat the risk of
ransomware attacks.
• Group IT committee ensures focused strategic
development and resolution of issues impacting the
Group’s technology environment.
• Robust business continuity plans are in place and
disaster recovery and penetration testing are undertaken
on a systematic basis. A Group-wide cyber attack
simulation exercise was undertaken this year by the
executive committee.
• 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.
Trend
Link to strategy
Link to KPIs
1 2 4 5
Scoring
High
HOW WE
MANAGE RISK
KPI key
1 Underlying op profit and margin
2 Underlying BEPS
3 Revenue
4 Operating cash conversion
5 ROCE
6a UK&E OB
6b India OB
7 Injury frequency rate (‘IFR’)
Strategic pillar key
Growth
Operational
excellence
India
Movement
Upward trend
Downward trend
No change
New
Scoring
High
Medium
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7 FAILURE TO MITIGATE ONEROUS CONTRACT TERMS
Description
Impact
Mitigation
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.
Loss of profitability
on contracts as costs
incurred may not
be recovered, and
potential reputational
damage for the Group.
• The Group has identified minimum standard terms, which
mitigate contract risk.
• Robust tendering process with detailed legal and
commercial review and approval of proposed contractual
terms at a senior level (including the risk committee)
are required before contract acceptance so that
onerous terms are challenged, removed or mitigated as
appropriate.
• Regular contract audits are performed to ensure
contract acceptance and approval procedures have been
adhered to.
• We continue to work with the British Constructional
Steelwork Association to raise awareness of onerous
terms across the industry.
• Through regular project reviews we capture early those
occasions where onerous terms could have an adverse
impact and are able to implement appropriate mitigating
action at the earliest stage.
Trend
Link to strategy
Link to KPIs
1 2 4 5
Scoring
Medium
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8 INDUSTRIAL RELATIONS
Description
Impact
Mitigation
The Group (and the
industry in general)
has a significant
number of employees
who are members
of trade unions.
Industrial action taken
by employees could
impact on the ability of
the Group to maintain
effective levels of
production.
Interruption 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.
• Employee and union engagement takes place on a
regular basis.
• The Group has seven 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.
Trend
Link to strategy
Link to KPIs
1 2 3 5
Scoring
Medium
HOW WE
MANAGE RISK
KPI key
1 Underlying op profit and margin
2 Underlying BEPS
3 Revenue
4 Operating cash conversion
5 ROCE
6a UK&E OB
6b India OB
7 Injury frequency rate (‘IFR’)
Strategic pillar key
Growth
Operational
excellence
India
Movement
Upward trend
Downward trend
No change
New
Scoring
High
Medium
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STRATEGIC REPORT
SECTION 172
STATEMENT
The board recognises the importance of effective stakeholder engagement and the
need to consider stakeholders’ views in making important decisions. During the year,
the directors believe they have acted to promote the long-term success of the Group
as required by section 172 (1) (a) to (f) of the Companies Act 2006.
Matters considered by the board
Below are details of considerations and decisions of the board during the year and how stakeholder views and inputs and other
section 172 (1) factors were taken into account.
S. 172 FACTORS
Consequences of
decisions in the
long term
Interests of the
Group’s employees
Foster the
Group’s business
relationships
with suppliers,
customers and
others
Impact of
operations on
communities and
the environment
High standards of
business conduct
Acting fairly
between members
Pages 28 to 30
How we deliver
sustainable value
Pages 28 to 30
How we deliver
sustainable value
Pages 28 to 30
How we deliver
sustainable value
Pages 28 to 30
How we deliver
sustainable value
Pages 28 to 30
How we deliver
sustainable value
Pages 25 to 38
Engaging with our
stakeholders
Pages 22 to 27
The markets we
serve, our market
sectors
Pages 54 to 91
Building a
sustainable
and responsible
business
Pages 22 to 27
The markets we
serve, our market
sectors
Pages 54 to 91
Building a
sustainable
and responsible
business
Pages 54 to 91
Building a
sustainable
and responsible
business
Pages 134 to 137
Directors’ report
Pages 30 to 33
Our strategy
Pages 36 to 38
Engaging with our
stakeholders
Pages 54 to 91
Building a
sustainable
and responsible
business
Pages 36 to 38
Engaging with our
stakeholders
Pages 92 to 104
How we
manage risk
Pages 54 to 91
Building a
sustainable
and responsible
business
Pages 92 to 104
How we manage risk
Pages 36 to 38
Engaging with our
stakeholders
Pages 118 to 125
Corporate
governance report
Pages 36 to 38
Engaging with our
stakeholders
Pages 138 to 162
Directors’
remuneration report
Pages 92 to 104
How we
manage risk
Pages 92 to 104
How we manage risk
Pages 138 to 162
Directors’
remuneration report
Severfield plc Annual report and accounts
for the year ended 30 March 2024
106
SECTION 172
STATEMENT
Non-financial and sustainability information statement
The information below summarises how we comply with non-financial performance and sustainability reporting requirements
and is produced to comply with sections 414CA and 414CB of the Companies Act 2006.
REPORTING REQUIREMENT
SEVERFIELD POLICY/STANDARD
READ MORE
Environmental matters
Sustainability policy
Pages 54 to 91 – Building a sustainable and
responsible business
Employees
Code of conduct, ethics policy, equal
opportunities and diversity policy, health and
safety policy, whistleblowing policy
Pages 81 to 85 – People
Pages 90 to 91 – Principles of governance
Social matters
Sustainability policy
Pages 86 to 87 – People
Human rights
Code of conduct, modern slavery policy, data
protection policy, CCTV policy
Pages 90 to 91 – Principles of governance
Anti-corruption and
anti-bribery
Anti-bribery policy and ethics policy
Pages 90 to 91 – Principles of governance
Business model
Description of the Group’s business model
Pages 28 to 30 – How we deliver
sustainable value
Non-financial KPIs
Description of the non-financial key
performance indicators relevant to the
Group’s business
Pages 72 to 74
Principal risks
Description of the principal risks relating to
the matters set out in section 414CB(1) of
the Companies Act 2006 arising in relation
to the Group’s operations, and how those
principal risks are managed
Pages 92 to 104 – How we manage risks
Pages 64 to 65 – Climate-related risks
Implementation of policies
Online training on key policies is carried out across the Group.
The training modules include scenarios and tests to enhance
the understanding of, and compliance with, the policies by all
employees.
All employees, contractors and third parties are encouraged
to report any circumstances where there is a suspected or
actual breach of any of the policies, applicable laws, or any
other wrongdoing under our whistleblowing policy. Further
information on whistleblowing can be found on page 91
(principles of governance). Severfield regards infringements
of the policies, procedures and related guidance seriously
and reserves the right to take disciplinary action in the
event of non-compliance. All reported incidences of actual
or suspected breach of any of the policies are promptly and
thoroughly investigated. The executive committee receive
assurance via twice yearly letters of assurance from divisional
managing directors of compliance with the policies.
The board and the audit committee receive regular compliance
updates from the Group legal director.
Climate-related financial disclosures
For information on climate-related financial disclosures,
please see the TCFD table on page 60. 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
19 June 2024
STRATEGIC REPORT
107
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Governance at a glance
110
Board of directors
112
Our executive committee
114
Our Chair’s view on governance
116
Corporate governance report
118
Audit committee report
126
Nominations committee report
130
Directors' report
134
Directors' remuneration report
138
– Letter from the committee chair
138
– Policy
141
– Implementation
149
Statement of directors’ responsibilities
163
GOVERNANCE
REPORT
Severfield plc Annual report and accounts
for the year ended 30 March 2024
108
109
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Stock Code: SFR
GOVERNANCE AT A GLANCE
OUR BOARD
The board comprises eight directors with a diverse and complementary range of
industry experience, technical knowledge, perspectives and personal strengths.
1
4
3
1
7
4
3
1
BOARD AND COMMITTEE ATTENDANCE
Board
Audit
committee
Remuneration
committee
Nominations
committee
Total number of meetings
11
3
7
7
Executive directors
Alan Dunsmore
11
Derek Randall
11
Adam Semple
11
Ian Cochrane1
3
Non-executive directors
Kevin Whiteman2
11
0
7
3
Mark Pegler
11
3
7
7
Louise Hardy3
11
2
7
6
Alun Griffiths
11
3
7
7
Rosie Toogood4
9
2
6
5
Tony Osbaldiston5
4
1
3
1
1 Ian Cochrane attended all board meetings held prior to his resignation on 26 July 2023
2 As Chair, Kevin Whiteman was not a member of the audit committee but attended meetings as a guest. Kevin was conflicted from attending four
nominations committee meetings held to discuss the recruitment of his successor
3 Louise Hardy was unable to attend one audit committee meeting and one nominations committee meeting due to an unavoidable clash with other board
commitments
4 Rosie Toogood attended all board and audit, remuneration and nominations committee meetings held prior to her resignation on 12 February 2024
5 Tony Osbaldiston attended all board and audit, remuneration and nominations committee meetings held prior to his retirement on 31 July 2023
Independence
Length of tenure
Gender diversity
Chair
Independent
Non-independent
1–5 years
6–10 years
10+ years
Male
Female
Severfield plc Annual report and accounts
for the year ended 30 March 2024
110
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
7
1
Mergers and acquisitions
7
1
Banking and finance
6
2
Legal and regulatory
5
3
Innovation and technology
5
3
Client relationship management
8
Construction/engineering industry experience
7
1
Sustainability
3
5
Workforce engagement
8
Procurement and large capital programmes experience
7
1
International experience
6
2
Risk management
7
1
Governance
7
1
No. of directors with skill/experience
No. of directors without skill/experience
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GOVERNANCE
N
N
R
R
A
A
BOARD OF
DIRECTORS
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.
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).
ALAN DUNSMORE
Chief Executive Officer
– Independent: No
– Appointed: 2010
Alan was appointed Chief
Executive Officer in February
2018. Prior to this he held
the position of Group finance
director from March 2010
to March 2017 and acting
chief executive officer from
April 2017 to January 2018.
He joined the Group from
Smiths Group plc. He joined
Smiths Group’s medical
division in 1995, holding
various positions throughout
the business and from 2004
was director of finance for
Smiths Detection. Prior to
joining Smiths, he was with
Coopers and Lybrand in
Glasgow, where he qualified
as a chartered accountant
in 1992.
LOUISE HARDY
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.
ADAM SEMPLE
Chief Financial Officer
– Independent: No
– Appointed: 2018
Adam joined the Group
in 2013 from Firth Rixson
Group, prior to which he was
with PwC in both Leeds and
London, where he qualified
as a chartered accountant
in 2002. He was appointed
as 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.
EXECUTIVES AND NON-EXECUTIVES
CURRENT MEMBERS RETIRING AT THE AGM
KEVIN WHITEMAN N
R
Chair
• Independent: Yes
• Appointed: 2014 to the board and 2020 as Chair
ALUN GRIFFITHS
N
R
A
Senior independent director
• Independent: Yes
• Appointed: 2014
Severfield plc Annual report and accounts
for the year ended 30 March 2024
112
Key to committee membership:
N Nominations
A Audit
R Remuneration
Committee chair
N
R
A
N
R
A
DEREK RANDALL
Executive director and Chair
at JSW Severfield Structures
– Independent: No
– Appointed: 2011
Derek previously held the
position of executive director
for business development
and was managing director
of JSW Severfield Structures
Limited (JSSL), our joint
venture in India, for 11 years
until April 2024. He is now
non-executive Chair of JSSL.
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.
CHARLIE CORNISH
Non-executive director
(and Chair designate)
– Independent: Yes
– Appointed: May 2024
Charlie, who joined the board
on 1 May 2024, is set to take
over as chair following the
AGM on 30 July 2024 when
Kevin Whiteman steps down.
Charlie spent 13 years as CEO
of Manchester Airports Group
(‘MAG’) and managing director
of United Utilities Group
plc’s (‘UU’) Utilities Solutions
business, and brings a wealth
of experience to Severfield.
During his time as CEO of
MAG, he was responsible
to the board for developing
corporate strategies,
delivering financial returns,
securing stretching growth
targets, leading M&A
opportunities, developing
relationships with key
governmental officials and
leadership of the Group.
He has substantial experience
of developing strategy,
leading, and managing
change in large complex
businesses in a variety of
different sectors in the UK
and internationally.
KEVIN WHITEMAN
Chair
– Independent: Yes
– Appointed: 2014 to the
board and 2020 as Chair
A chartered engineer, Kevin
was chief executive of Kelda
Group and Yorkshire Water
for a period of eight years.
Kevin was non-executive
Chair of both companies
from 2010 to March 2015.
He was Chair of the privately
owned NG Bailey from 2013
to 2023, and a non-executive
director and chair of the
remuneration committee
of Cadent Gas Limited 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 chair for Wales
and West Gas Networks
(UK) Limited and has been a
trustee for WaterAid UK.
N
R
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.
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), is an independent
board member of the
Remuneration Consultants
Group, a member of the
council of the University of
Bath and is on the board of
the Ports of Jersey.
113
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GOVERNANCE
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.
EXECUTIVES AND NON-EXECUTIVES
OUR EXECUTIVE
COMMITTEE
ROB EVANS
Divisional managing director,
Severfield Commercial &
Industrial
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 Everton FC
stadium, Tottenham Hotspur
FC stadium, Liverpool FC
stadium, 22 Bishopsgate
and several projects at
Wimbledon.
NORBERT NIJHUIS
Divisional managing director,
Severfield Europe
Norbert joined Severfield in
January 2024 and brings a
wealth of experience with
a career spanning 25 years
within the construction
industry.
Norbert has held a number
of diverse roles in production,
sales, and general
management. His latest role
was with a family-owned
company in the Netherlands
as managing director of their
prefabrication division.
JIM MARTINDALE
Divisional managing director,
Severfield Nuclear &
Infrastructure and Modular
Solutions
Jim joined Severfield 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.
He is also an associate
member of the Institution of
Structural Engineers.
LEVENTE HEGEDUS
Group manufacturing
director
Levente joined Severfield
in January 2024 and has
over 25 years of experience
in operations and business
management. Before
joining Severfield, he held
successive and increasing
roles of responsibility,
including as vice president
of manufacturing at Vibrantz
Technologies, and director of
operations at Imerys.
Prior to that, he served in
various management and
leadership positions with
KUKA Robotics and ZENNER.
Levente received a master’s
degree in mechanical
engineering from Politehnica
University of Timisoara
and a postgraduate degree
in Economics from the
University of Szeged.
Severfield plc Annual report and accounts
for the year ended 30 March 2024
114
MARK SANDERSON
Group legal director and
company secretary
Mark joined Severfield in
2013 and 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
Sam joined Severfield in
2020 and has a HR career
spanning over 25 years in
manufacturing, construction,
energy, hospitality, retail
and financial services. The
majority of her career has
been spent in Yorkshire
based businesses and
her previous HR senior
leadership roles were
in Drax Plc and Croda
International Plc.
She is a Fellow of the
Chartered Institute or
Personnel and Development,
holds a Master’s Degree in
Career Management from
the University of London, and
a Management Degree from
Aston University. Throughout
her career she has
overseen all aspects of HR
transformation from learning
and development to reward,
HR systems, recruitment,
diversity, engagement, talent
and organisational design.
RICHARD DAVIES
Group IT director
Richard joined Severfield
(Design & Build), formerly
Atlas Ward Structures, in
1997 as an apprentice plater
welder, which provided
valuable experience and
insight into key production
activities. He moved into
IT support in 1999 and
went on to perform various
roles within IT, until his
appointment as Group IT
director in January 2016.
Within this role, Richard
is responsible for all
aspects of IT across the
Severfield Group.
With more than 20 years
of experience in the
construction sector, Richard
has been involved in the
successful delivery of many
innovative IT projects.
ALAN DUNSMORE
Chief Executive Officer
For details, see board of
directors on page 112.
ADAM SEMPLE
Chief Financial Officer
For details, see board of
directors on page 112.
DEREK RANDALL
Executive director and
Chair at JSW Severfield
Structures
For details, see board of
directors on page 113.
KEVIN FURNISS
Group SHE director
Kevin joined the Group
in May 2024. During his
30-year career, Kevin has
held executive leadership
positions in complex and
high hazard industry sectors
including for some of the
world’s leading Companies.
In addition to his day-to-day
role, Kevin holds several non-
executive board positions
in global and regional NGOs
supporting and contributing
to the United Nations ‘Make
Roads Safe’ campaign.
He is also a board trustee of
the Institute of Occupational
Safety and Health (IOSH), the
world’s leading professional
body for people responsible
for safety and health in the
workplace.
115
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Stock Code: SFR
GOVERNANCE
OUR CHAIR’S VIEW
ON GOVERNANCE
This is my last annual report as Chair as I am retiring at the AGM following the
appointment of a new chair, Charlie Cornish, to succeed me.
Dear shareholder
I am pleased to introduce the Group’s
corporate governance report (on pages
118 to 125) 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. I handed over chairship
of the nominations committee to Alun
Griffiths this year, and he oversaw a
process for recruiting a new chair with
a specification which ensured that we
retained the right mix of skills around
the board table.
Board evaluation
During the year, we developed and
implemented a board improvement plan,
further details of which are set out in the
governance report.
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 128.
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 62.
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.
Last year, we made a number of changes
to our remuneration policy as part of
the normal three-yearly cycle, and
these were supported overwhelmingly
at last year’s AGM. Following that vote,
Alun Griffiths was able to step down as
Chair of the remuneration committee
and is ably succeeded by Louise Hardy.
A summary of our new remuneration
policy, a summary of how we intend
to operate that policy in 2025, and a
review of the remuneration committee’s
activities, together with bonus and PSP
performance in 2024, can be found in
the remuneration report on pages 138
to 162.
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
one female and seven male directors.
Further details of their skills and
experience can be found on pages 112
to 113.
“This year we have ensured that
strong and robust corporate
governance continues to be at the
heart of everything we do, and I am
confident that this will continue to
be the case. We have implemented
a board improvement plan this year
and made a number of changes in
personnel at Board level.”
KEVIN WHITEMAN
NON-EXECUTIVE CHAIR
Severfield plc Annual report and accounts
for the year ended 30 March 2024
116
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 stakeholders
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.
The board recognises the importance
of capital returns to shareholders and,
given the strong financial performance of
the Group, considered a share buyback
to be in the interests of stakeholders.
We have an open and effective dialogue
with shareholders, with regular
meetings being held with institutional
shareholders. The AGM will be held
on 30 July 2024 and I encourage all
shareholders to submit any questions
in advance and to vote via proxy for the
resolutions.
KEVIN WHITEMAN
NON-EXECUTIVE CHAIR
19 June 2024
UK Corporate
Governance Code
Throughout the accounting
period, the Company has fully
complied with the requirements
of the 2018 Code, except for:
• Kevin Whiteman and Alun
Griffiths exceeded the
nine-year term prescribed by
provision 19 for the reasons
explained in last year’s AGM
notice, namely the need to
recruit a replacement chair.
They were re-elected at last
year’s AGM with a 96% and
97% vote in favour, respectively
and are stepping down at the
AGM following the recruitment
of a new chair and an effective
handover.
117
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GOVERNANCE
CORPORATE
GOVERNANCE REPORT
Board leadership and
Company purpose
The Group is controlled through the
board of directors of Severfield plc. We
believe that, consistent with Principle A
of the Code, the board is effective and
entrepreneurial. We have described in
the strategic report how opportunities
and risks to the future success of
the business have been considered
and addressed, together with the
sustainability of the Group’s business
model. In this section we describe how
our governance contributes to the
delivery of our strategy and how the
board monitors and drives culture and
purpose.
Structure of the board
The membership of the board is stated
on pages 112 to 113. The board currently
consists of the chair, four other non-
executive directors and three executive
directors.
Alan Dunsmore has board-level
responsibility for health and safety
matters, sustainability matters and
employment matters.
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
30 March 2024 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 138. 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 112 to 113 will be
standing for re-election at the 2024
AGM, other than those who are retiring
at the 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 chair, Chief Executive
Officer and senior independent
director
The board has agreed a clear division
of responsibility between the chair
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.
Severfield plc Annual report and accounts
for the year ended 30 March 2024
118
MEMBER(S)/COMMITTEE
RESPONSIBILITIES
Non-executive Chair
Kevin Whiteman
The Chair, 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 chair acts as an ambassador for the Company and provides effective
communication between the board and its shareholders.
The chair, 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 and the Chief Financial Officer’s written
reports, high-level papers on each business area, key metrics and specific papers relating to
agenda items. The board papers are accompanied by a management information pack containing
detailed financial and other supporting information. The board receives occasional ad hoc papers
on matters of particular relevance or importance. The board also receives presentations from
various business units and senior managers, including members of the executive committee.
Chief Executive Officer
Alan Dunsmore
As the senior executive of the Company, Alan Dunsmore is responsible to the chair 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, 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 and the Group legal director on a weekly basis to
discuss any key issues affecting the business.
In addition, he chairs a safety meeting once a month with other members of the executive
management team and business unit managing directors, and meets regularly with the Group
HR director. Alan is also chair of the sustainability committee, which meets every six weeks to
oversee implementation of our sustainability strategy and review progress against our strategic
objectives.
Senior independent
director
Alun Griffiths
The role of the senior independent non-executive director is to provide a sounding board for the
chair and to serve as an alternative source of advice to the chair 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 chair and the board,
taking into account the views of the executive directors.
Board committees
The board has established three standing committees, all of which operate within defined terms
of reference, which are available from the Company secretary by request and published on the
website.
The committees established are the audit committee, the remuneration committee, and the
nominations committee. Trading companies are managed by separate boards of directors. Any
matters of a material nature concerning the trading companies are reported to the board on a
monthly basis.
Details of the work of the audit, nominations and remuneration committees are set out on pages
126 to 162.
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GOVERNANCE
Board meetings
The directors’ attendance record at the scheduled board meetings and board committee meetings for the year ended
30 March 2024 is shown on page 110.
Meetings were held at the Group’s offices in Dalton and York, North Yorkshire and at the offices of the Group’s other operating
subsidiaries to provide non-executive directors the opportunity to increase their knowledge and understanding of the Group’s
operations. 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 that have been
raised at previous board meetings or requested by the board.
CORPORATE
GOVERNANCE REPORT
Severfield plc Annual report and accounts
for the year ended 30 March 2024
120
Board principal activities
During the financial year, the board discussed and implemented the following key actions:
STRATEGY
BUSINESS AND OPERATIONAL
• Presentation to the board on our strategy for growth in India
• Off-site strategy day
• Presentation on capital markets from Jefferies, the Company’s
brokers
• Presentation on the Modular Solutions division from the
divisional managing director Jim Martindale
• Regular updates of progress in delivering the Group’s strategic
objectives from the executive directors
• Regular updates on progress of our key contracts and projects
and on the markets we serve, our order book and pipeline
• Regular updates on health and safety, sustainability and
people matters
• More detailed briefings on key sustainability-related
developments and monitoring and reporting requirements
FINANCIAL
LEADERSHIP AND PEOPLE
• Reviewed and approved annual report and accounts and
results announcement for the year ended 25 March 2023
• Reviewed and approved proposed payment of a final dividend
for the year ended 25 March 2023
• Assessed going concern and longer-term viability of the Group
and reviewed the effectiveness of internal controls
• Reviewed quarterly financial forecasts
• Reviewed and approved a change in our agreed method of
satisfying share scheme awards by buying forward the required
shares via our EBT and satisfying out of market purchase
rather than free issue shares
• Reviewed and approved an on-market share buyback proposal
• Reviewed and approved proposed auditor fees for the year
ended 30 March 2024
• Reviewed and approved the final budget for the year ended
30 March 2024
• Reviewed and approved half-year results for the year ended
30 March 2024
• Approved interim dividend for the year ended 30 March 2024
• Approved Group tax strategy
• Regular updates on health and safety, sustainability and
people matters including updates from the MyVoice forum
• Management briefing from the Group HR director including
approval of gender pay gap report
• Management briefing from the Group SHE director including
new Group SHE strategy
• Annual update on succession plan and talent review
• Reviewed proposed pay review for the wider workforce
• 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
• Search process for a new chair to succeed Kevin Whiteman at
the end of his nine-year tenure
RISK MANAGEMENT AND CONTROLS
GOVERNANCE AND STAKEHOLDERS
• Assessed the effectiveness of our internal control and risk
management systems
• Approved changes to the Group Authorisation Policy
• 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
• Received an update on cyber risk from the Group IT director
• Reviewed the Group’s risk register
• Briefing on the new failure to prevent fraud offence under the
Economic Crime and Corporate Transparency Act
• Received feedback from the chair of the nominations
committee on the results of the externally facilitated board
effectiveness review and developed a board improvement plan
• Reviewed and approved AGM notice
• Reviewed investor feedback on year-end results for the year
ended 25 March 2023 and interim results for the year ended
30 March 2024
• Reviewed a paper summarising investor representatives’
comments ahead of the AGM
• Received an update on the Atlas Ward pension scheme
valuation
• Reviewed the register of directors’ interests in shares
• Reviewed the statement of compliance in accordance with the
Modern Slavery Act
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GOVERNANCE
S172 statement
Details as to how the board took account
of stakeholder views and the matters set
out in section 172 of the Companies Act
2006 in board discussions and decision
making are set out on page 105 An
example of this is set out below.
Strategy day
At our annual off-site strategy day the
directors undertook a comprehensive
review of progress against the Group’s
four-year strategic plan and divisional
strategic plans and priorities to ensure
they remained fit for purpose. In doing
so, they:
• reviewed 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.
In approving the strategy and business
plans and purpose, the views of all our
stakeholders were considered.
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. Further details of stakeholder
engagement are set out at page 105
(s. 172 statement) and at pages 36 to 38
(Engaging with our stakeholders).
With regard to our customers, 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 customers, 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 38. The board
engages directly with the Group’s
shareholders and colleagues as set
out below.
Shareholders
Providing sustainable returns to our
shareholders is a key factor in the
board’s decision making. The chair 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 after the year-end to
implement a share buyback programme.
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.
Colleagues
Recognising the importance of input
and feedback from all colleagues in
helping us deliver on our strategic
goals, we continued to make good
progress with our Group-wide MyVoice
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 Chief Executive Officer and the
Group HR director, attend all MyVoice
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 2024 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.
CORPORATE
GOVERNANCE REPORT
Severfield plc Annual report and accounts
for the year ended 30 March 2024
122
Board’s monitoring of culture
The Group’s purpose and culture
are closely aligned with our values,
which are focused on driving the right
behaviours for the Group to succeed.
The Severfield Way gives each and every
colleague clarity on our collective ways
of working and expected behaviours
so that we can continue to deliver
effectively and focus on what’s best for
each other, our business, our clients and
our communities.
Our culture provides an environment in
which everyone understands that we are
part of one team and that we are always
looking for opportunities to improve.
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.
Our executive directors promote our
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 that
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, 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 2024
to enable us to communicate better,
develop a more integrated working
culture and to track engagement.
The table below sets out how the board
monitors our culture to ensure that
behaviours remain aligned with our
values.
WHAT WE MONITOR AND MEASURE
BOARD ACTION IN 2024
Client focus
The executive directors keep the board updated on key
projects and customer relationships. The board reviews
material issues arising on contracts that may impact a Group
company or the Group as a whole.
Reviewed Group company board summaries, which included
information on key clients and suppliers and the performance
of contracts.
Reviewed market information and tender feedback
information, together with business development plans,
which focus on key client relationships and new clients with
whom we wish to have future business.
Approved Group company strategic plans, which include
information on key clients and client feedback.
Safety focus
The executive reports include information on health and
safety performance, including accident frequency rate, injury
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.
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.
Developed further our safety initiative ‘Safer@Severfield’,
which has been designed to make sure that every individual’s
safety and wellbeing remains our top priority. By fostering a
strong safety culture, we can create an environment where
everyone feels confident to challenge unsafe behaviour, has
respect for everyone’s opinions when it comes to safety in
their daily work, and feels secure in the workplace.
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GOVERNANCE
WHAT WE MONITOR AND MEASURE
BOARD ACTION IN 2024
Doing the right thing
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 payment practices reporting submissions and
prompt payment code disclosures.
Reviewed and approved our modern slavery statement (see
page 125).
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.
Implemented a new fraud prevention plan.
Setting the bar high and finding better ways
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.
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 chair
meets with the non-executive directors
at least annually to review their
performance.
During the early part of the year ended
30 March 2024, we developed a board
improvement plan to implement some
practical changes to further enhance
engagement and contribution following
last year’s externally facilitated board
effectiveness review. This involved
amending our board schedule to allow
more time for the board to review key
strategic matters and to spend less time
discussing routine operational matters.
There have been several changes to the
composition of the board in the last year,
which have seen the board reduce in
size from ten to eight members:
• In July 2023, Tony Osbaldiston retired
as non-executive director and chair
of the audit committee, having
completed his nine-year term, and has
been succeeded by Mark Pegler, who
joined the board in October 2022.
• In September 2023, Ian Cochrane,
COO, left the Company in order to
pursue other interests, and his
position has, deliberately, not been
replaced, with the COO’s former
duties being re-assigned to other
executive directors and the senior
leadership team.
• In September 2023, Louise Hardy,
non-executive director, replaced Alun
Griffiths as Chair of the remuneration
committee.
• Between November 2023 and May
2024 Alun Griffiths chaired the
nominations committee in its search
for a new chair to replace Kevin
Whiteman.
• In February 2024 Rosie Toogood,
non-executive director, stepped
down from the board in order to
avoid a conflict of interest with a new
executive role she had taken up at
Wates, a key client of the Group.
• More recently, since the year-end,
a new chair has been appointed
leading to the planned retirement of
Kevin Whiteman as Chair and Alun
Griffiths as SID, both of whom have
completed their nine-year terms, at
this year’s AGM.
In the light of these changes, it was
decided this year the board evaluation
normally undertaken in March 2024
would be postponed until October 2024
once the new chair and the new board
had been operating for a meaningful
period of time.
CORPORATE
GOVERNANCE REPORT
Severfield plc Annual report and accounts
for the year ended 30 March 2024
124
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 updates 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 163) and a statement by the
auditor concerning their responsibilities
(pages 166 to 173). The directors also
report that the business is a going
concern (page 180) 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 22 to 106). The directors
have also made a statement about
the long-term viability of the Group, as
required under the Code (page 52).
Modern slavery
The board annually reviews and
approves the Group’s modern slavery
statement. The 2024 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 amongst
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. We also
sought and obtained suitable assurance
from our newly acquired Europe division
that they were complying with local best
practice in this area (in the absence of
any equivalent legislation) and from our
joint venture in India.
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 138 to 162. It sets out the
activities of the committee, the levels
and components of remuneration
and refers to the development of the
remuneration policy.
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GOVERNANCE
AUDIT COMMITTEE
REPORT
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. Mark Pegler is a
chartered accountant.
By invitation, there were a number
of other regular attendees, including
internal and external auditors. Kevin
Whiteman, Alan Dunsmore, Adam
Semple, Mark Sanderson and 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, and effectiveness of, the external
auditor. The ultimate responsibility for
reviewing and approving the annual
report remains with the board.
The responsibility of the committee
principally falls into the following areas:
• To monitor the integrity of the
financial statements and formal
announcements and to review
significant financial reporting
judgements.
• To review the Group’s internal financial
and non-financial controls and risk
management.
• To make recommendations to the
board in relation to the appointment
and removal of the external auditor
and to approve its remuneration and
its terms of engagement.
“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.”
MARK PEGLER
CHAIR OF THE AUDIT COMMITTEE
Number of meetings
3
Members
Mark Pegler (Chair)
Alun Griffiths
Louise Hardy
Charlie Cornish (from 1 May 2024)
Rosie Toogood
(until 12 February 2024)
Tony Osbaldiston
(until 31 July 2023)
2024 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 2024 interim
accounts and the year ended
30 March 2024.
• Agreed to undertake a tender
in 2025 for the appointment of
the external auditor for 2026
and agreed a process for the
appointment of the internal
auditors for 2025.
• Reviewed and approved the
Group’s tax strategy.
Severfield plc Annual report and accounts
for the year ended 30 March 2024
126
• 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 2024
financial year:
• Reviewed the interim results for the
period ended 23 September 2023 and
the year-end results for the year ended
30 March 2024.
• Reviewed the significant management
judgements reflected in the Group’s
results, including significant contract
judgements and material
non-underlying items.
• Discussed the report received from
the external auditor regarding the
audit of the results for the year ended
30 March 2024. 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
30 March 2024.
• 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
30 March 2024.
• 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 29
March 2025.
• Considered the process to implement
for tendering the external auditor
appointment for 2026 and the internal
auditor appointment for 2025.
• Reviewed and approved outputs from
financial modelling undertaken on
climate-related risks and proposed
disclosure together with key ESG
metrics and targets.
• Reviewed and approved the Group’s tax
strategy.
• Reviewed and approved proposed
changes to the Group Authorisation
Policy.
• Received and considered a briefing
on the implications for the Group of
the Economic Crime and Corporate
Transparency Act 2023.
• 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.
• Approved the appointment of EY
as internal auditor following the
retirement of PwC at the year-end.
127
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Stock Code: SFR
GOVERNANCE
AUDIT COMMITTEE REPORT
Fair, balanced and
understandable
The committee was provided with,
and commented on, a draft copy of
the annual report for the year ended
30 March 2024. 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 considered 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.
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. No
disclosures were made in the year.
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 52 of
the strategic report.
Financial reporting and
significant accounting
judgements
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 a significant
accounting risk and this year, following
the acquisition of Voortman Steel
Construction in April 2023, the
accounting treatment of the acquisition
is also classified as a 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 challenged by the external
auditor and that the disclosures made in
the annual report were appropriate.
Other judgements
The committee considered
management’s classification of non-
underlying items and the consistency
of application of the Group’s accounting
policy. The committee was satisfied that
the legacy employment tax charges and
the asset impairment charge in relation
to the exit of the Sherburn lease meet
the necessary criteria to be recognised
as non-underlying.
In addition, the committee considered
a number of other judgements, which
have been made by management. These
include going concern and viability
and the valuation of pension scheme
liabilities.
Severfield plc Annual report and accounts
for the year ended 30 March 2024
128
External auditor independence
and effectiveness
KPMG has acted as the Group’s external
auditor for a period of nine 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 chair 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.
The committee has recommended to
the board that a resolution proposing
the appointment of KPMG as external
auditor for 2025 be put to the
shareholders at the forthcoming AGM.
External audit tender for 2026
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. Under the current tenure rules,
the last year that KPMG can audit the
financials without a formal competitive
tender process having taken place
is 2025.
Accordingly, the committee has
determined that it is in the best
interests of shareholders to commence
a competitive tender of external audit
services, with the tender to take place
in the second half of 2025, following
which a resolution would be submitted
to the AGM in 2026 recommending
the appointment of the successful
candidate. There are no contractual
obligations that restrict the committee’s
choice of external auditor. KPMG,
alongside other firms, will be invited to
tender.
Internal audit
The Group’s internal audit function
was outsourced to PwC during the
year. 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.
PwC have stepped down from the role
since the year-end as they wished to
tender for the external auditor role and
their regulatory rules required them to
do so. Following a procurement exercise
EY have now been appointed as the
Group’s internal auditor for 2025.
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
30 March 2024 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. With the exception of the
half year review, there were no other
non-audit fees for 2024 or 2023.
MARK PEGLER
CHAIR OF THE AUDIT COMMITTEE
19 June 2024
129
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Stock Code: SFR
GOVERNANCE
NOMINATIONS
COMMITTEE REPORT
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
This year has seen a number of changes,
with the retirement of Tony Osbaldiston,
the resignations of Ian Cochrane and
Rosie Toogood and the appointment of
Charlie Cornish. The board now consists
of eight directors, two of whom (Kevin
Whiteman and Alun Griffiths) will retire
at the AGM. We consider each of our
non-executive directors on the board to
be independent. Korn Ferry supported
the board in the selection process for a
new chair 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
7
Members
Kevin Whiteman (Chair)
Alun Griffiths (Chair of meetings
on chair succession)
Louise Hardy
Mark Pegler
Charlie Cornish (since 1 May 2024)
Rosie Toogood
(until 12 February 2024)
Tony Osbaldiston
(until 31 July 2023)
2024 key achievements
• Ran a recruitment process and
recommended the appointment
of Charlie Cornish as a new
non-executive director and
Chair designate with effect from
1 May 2024.
• Reviewed the Group’s succession
plans for board and executive
committee appointments.
• Reviewed the Group’s progress on
diversity and inclusion.
2025 areas of focus
• Running a process for the
appointment of a new
non-executive director and
appointing a senior independent
director to succeed Alun Griffiths.
“The committee ensures the
continued effectiveness of
the board through appropriate
succession planning and supports
the development of a diverse
pipeline.”
Severfield plc Annual report and accounts
for the year ended 30 March 2024
130
Disclosure under Listing Rules 9.8.6R(9) and 14.3.33R(1)
Percentage
of the board
Number of senior
positions on the
board (CEO, CFO, SID
and Chair)
Number
in executive
management
Percentage
of executive
management
Men
88
4
14
88
Women
12
–
2
12
Not specified/prefer not to say
–
–
–
–
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
White British or other White
(including minority-white groups)
8
100
4
16
100
Mixed/Multiple Ethnic Groups
–
–
–
–
–
Asian/Asian British
–
–
–
–
–
Black/African/Caribbean/Black
British
–
–
–
–
–
Other ethnic group, including Arab
–
–
–
–
–
Not specified/prefer not to say
–
–
–
–
–
1
7
2
14
12
45
Board gender diversity
Executive committee direct
reports gender diversity
Senior management gender
diversity*
Male
Female
Male
Female
Male
Female
* Senior management comprises the board
and the executive committee
131
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Stock Code: SFR
GOVERNANCE
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 one female director
(12 per cent) since Rosie Toogood
stepped down in February 2024, prior
to which the percentage was 25%.
Female representation on our executive
committee is one (9 per cent) since
Phillipa Recchia resigned as Group
SHE director on 31 March 2024, prior to
which it was 20 per cent. At the career
level below the executive committee,
female representation is higher at 21
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 held by a woman and none
of the directors are from a minority
ethnic background.
Three of the four senior board positions
have not recently been changed and
so there has been no opportunity to
address this target. Of the four 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.
Succession planning
The committee ensures the continued
effectiveness of the board through
appropriate succession planning and
ensures that the Company has in place
a succession planning programme
designed to identify and develop future
senior leaders and to achieve diversity.
Each year, the committee meets
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
During the early part of the year, we
developed a board improvement plan
to implement some practical changes
to further enhance engagement and
contribution following last year’s board
effectiveness review. This involved
amending our board schedule to allow
more time for the board to review key
strategic matters and to spend less time
discussing routine operational matters.
As a result of the number of recent
board changes, and the appointment
of my successor with effect from the
AGM, the board, on the committee’s
recommendation, decided to postpone
its annual effectiveness review until the
second half of 2025.
KEVIN WHITEMAN
CHAIR OF THE NOMINATIONS COMMITTEE
19 June 2024
NOMINATIONS
COMMITTEE REPORT
Severfield plc Annual report and accounts
for the year ended 30 March 2024
132
133
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Stock Code: SFR
GOVERNANCE
DIRECTORS’ REPORT
This directors’ report and the strategic report on pages 22 to 106 together comprise
the ‘management report’ for the purposes of Disclosure Guidance and Transparency
Rule 4.1.5R.
Information incorporated by reference
The information shown in the table below is provided in other appropriate sections of this annual report and financial statements
and is incorporated into this directors’ report by reference.
INFORMATION
REPORTED IN
PAGES
Corporate governance
Corporate governance report
118 to 125
Statement of directors’ responsibilities
163
Directors
Our board of directors
112 to 113
Directors’ remuneration report – directors’ shareholdings and
share interests
156
Employee engagement
The Severfield Way
8
Engaging with our stakeholders – Colleagues
37
Building a responsible and sustainable business – People
81 to 87
Employment of disabled persons
Building a responsible and sustainable business – People,
creating a culture of inclusivity
84 to 85
Engaging with suppliers, customers and others
Engaging with our stakeholders
36 to 38
Financial instruments
Consolidated financial statements – note 22
203 to 208
Going concern
Note 1 to the consolidated financial statements
180
Environmental matters
Building a responsible and sustainable business – Planet
74 to 80
TCFD disclosures
Building a responsible and sustainable business – TCFD
60
Greenhouse gas emissions
Building a responsible and sustainable business – Planet
78 to 80
Important events since the end of the financial
year
Our operational performance
40 to 47
Subsequent events
218
Likely future developments
Our operational performance
40 to 47
MARK SANDERSON
COMPANY SECRETARY
Severfield plc Annual report and accounts
for the year ended 30 March 2024
134
INFORMATION
REPORTED IN
PAGES
Results and dividends
Our financial performance
48 to 51
Research and development
Building a responsible and sustainable business – Governance
61
Building a responsible and sustainable business – Strategy
66
Building a responsible and sustainable business – Planet
Notes to the consolidated financial statements
74
179
Respect for human rights
Building a responsible and sustainable business – Principles of
governance
90
Social matters
Building a responsible and sustainable business – People
86
The only relevant item required to be
disclosed under Listing Rule 9.8.4R
relates to the waiver of dividends, details
of which are set out on the following
page (Rights under employee share
schemes).
Political donations
No donations were made to any
political parties during the current or
preceding year.
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
30 March 2024, there were 309,538,321
ordinary shares in issue and fully paid
(2023: 309,538,321). No shares were
issued during the year. Since the year
end, commencing on 24 April 2024 and
up until 18 June 2024 the Company
has purchased 1,370,344 shares as
part of the share buyback programme
announced on 17 April 2024. All of these
shares were cancelled. Further details
relating to share capital are set out in
note 24 to the financial statements.
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.
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
2024 AGM.
Securities carrying special rights
No person holds shares in the Company,
which carry special rights with regard to
control of the Company.
Substantial holdings
As at 1 June 2024, the Group had
been notified under requests made
to shareholders under section 793
of the UK Companies Act 2006 of the
following voting rights to the Company’s
shares and accordingly, this information
is provided in accordance with the
Disclosure Rules and Transparency
Rules of the UK Listing Authority.
135
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Stock Code: SFR
GOVERNANCE
DIRECTORS’ REPORT
Name
Ordinary
2.5p share
%
JO Hambro Capital Management
29,509,052
9.56
M&G Investment Management Ltd
28,404,328
9.20
Chelverton Asset Management
22,281,598
7.22
Unicorn Asset Management
20,863,000
6.76
Threadneedle Asset Management Ltd
15,619,689
5.06
The directors were also granted
authority at the AGM, under two
separate resolutions, to disapply
pre-emption rights. These resolutions,
which followed the Pre-emption Group’s
Statement of Principles (March 2015)
on disapplying pre-emption rights
applicable at that time, sought the
authority to disapply pre-emption rights
over 10 per cent of the Company’s issued
ordinary share capital. These authorities
apply until the end of the 2024 AGM (or,
if earlier, until the close of business on
30 September 2024). During the period,
the directors did not use these powers.
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.
Rights under employee share
schemes
As at 30 March 2024, Ocorian Limited
(‘Ocorian’) as the trustee of the
Severfield Employee Benefit Trust,
owned 3,157,982 ordinary shares
(1.0202% of the Company’s issued share
capital at that date). These shares are
made available to satisfy share-based
awards granted to senior management
under the Group’s remuneration
arrangements. Ocorian does not
exercise any voting rights in respect of
these shares and waives any dividends
receivable.
In addition, as at 30 March 2024,
Ocorian held 1,608,291 ordinary
shares (0.5196% of the Company’s
issued share capital at that date) in a
nominee capacity on behalf of senior
management in connection with the
Company’s PSP and DSBP. Ocorian votes
to the extent instructed by the holders of
the beneficial interests in these shares
(the ‘Beneficial Holders’) and distributes
any dividends received to the Beneficial
Holders.
As at 30 March 2024, Howells Trustees
Ltd (‘Howells’) held 165,369 ordinary
shares (0.0534% of the Company’s
issued share capital at that date) on
trust for the benefit of members of the
Severfield Share Incentive Plan. Howells
does not exercise any voting rights in
respect of the shares held by the trust
(although beneficiaries may authorise
Howells to vote in accordance with
their instructions). Howells distributes
dividends received to beneficiaries
under the trust.
In addition, as of 30 March 2024, Ocorian
held 66,715 ordinary shares (0.0216%
of the Company’s issued share capital
at that date) in a nominee capacity on
behalf of members in connection with
the Company’s Share Incentive Plan.
Ocorian votes to the extent instructed by
the holders of the beneficial interests in
these shares (the ‘Beneficial Holders’)
and distributes any dividends received
to the Beneficial Holders.
Powers for the Company to buy
back its shares and to issue its
shares
At the Company’s annual general
meeting (‘AGM’) held on 6 September
2023, 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. This authority will expire at the
2024 AGM and a renewal will be sought.
The Company did not purchase any of its
shares during the year, but on 17 April
2024 announced the launch of a share
buyback programme, which does involve
making market purchases of ordinary
shares in accordance with the authority
granted at the AGM.
The Directors were also granted
authority at the AGM 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 2024 AGM (or, if
earlier, until the close of business on
30 September 2024). During the period,
the directors did not use their power to
issue shares under the authorities.
Severfield plc Annual report and accounts
for the year ended 30 March 2024
136
Appointment and
replacement of directors
In accordance with the Company’s
articles, directors shall be no fewer than
two and no more than 12 in number.
Subject to applicable law, a director may
be appointed by an ordinary resolution
of shareholders in general meeting
following nomination by the board or
a member (or members) entitled to
vote at such a meeting, or following
retirement by rotation if the director
chooses to seek re-election at a general
meeting. In addition, the directors may
appoint a director to fill a vacancy or
as an additional director, provided
that the individual retires at the next
AGM. A director may be removed by the
Company as provided for by applicable
law, in certain circumstances set out in
the Company’s articles of association
(for example bankruptcy or resignation),
or by a special resolution of the
Company. We have decided this year
to continue to adopt voluntarily the
practice that all directors stand for
re-election on an annual basis, in line
with the recommendations of the Code.
Powers of the directors
The business of the Company is
managed by the board, who may
exercise all the powers of the Company
subject to the provisions of the
Company’s articles of association, the
Companies Act 2006 (the ‘Act’) and any
ordinary resolution of the Company.
Directors’ indemnities
The articles entitle the directors of
the Company to be indemnified, to the
extent permitted by the Act and any
other applicable legislation, out of the
assets of the Company in the event that
they suffer any loss or incur any liability
in connection with the execution of their
duties as directors.
In addition, and in common with many
other companies, the Company had,
during the year, and continues to have in
place, directors’ and officers’ insurance
in favour of its directors and other
officers in respect of certain losses or
liabilities to which they may be exposed
due to their office.
Subsidiaries and branches
A list of the Group’s subsidiaries and
the branches through which the Group
operates are listed in note 4 to the
Company financial statements.
Disclosure of information
to the external auditor
The directors who held office at the
date of approval of this directors’
report confirm that, so far as they are
each aware, there is no relevant audit
information of which the Company’s
auditor is unaware and each director
has taken all the steps that they ought
to have taken as a director in order to
make themselves aware of any relevant
audit information and to establish that
the Company’s auditor is aware of that
information.
This confirmation is given and should
be interpreted in accordance with the
provisions of section 418 of the Act.
External auditor
KPMG LLP acted as the auditor for
the Company for the year ended
30 March 2024. 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
Tuesday 30 July 2024, 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 134
to 137 (inclusive) was approved by the
board and signed on its behalf by:
MARK SANDERSON
COMPANY SECRETARY
19 June 2024
137
www.severfield.com
Stock Code: SFR
GOVERNANCE
DIRECTORS’
REMUNERATION REPORT
“This year we embedded our new
remuneration policy and incentive
framework for the executive
directors and senior management
team.”
LOUISE HARDY
CHAIR OF THE REMUNERATION COMMITTEE
Dear shareholder
As chair of the remuneration committee,
I am pleased to present our directors’
remuneration report (the ‘report’) for
the year ended 30 March 2024, my first
since taking over as chair in September
2023. I would like to thank Alun for
his time chairing the remuneration
committee and for his support as part of
the transition process.
The report is split into the following two
sections:
• Part 1, the remuneration policy report,
which sets out the remuneration
policy for the executive and
non-executive directors, and which
was approved at our 2023 AGM with
c.99% of votes cast in favour; and
• Part 2, the annual report on
remuneration, which discloses
how the remuneration policy was
implemented for the year ended
30 March 2024 and how it will be
implemented for the year ending
29 March 2025. The annual report
on remuneration will be subject to
an advisory shareholder vote at the
forthcoming AGM.
Performance and reward 2024
The Group has delivered on strategic
and operational priorities during
the year resulting in good financial
performance and a strong forward order
book in the context of the challenges of
UK construction market uncertainty and
the cancellation or postponement of
some strategically significant projects.
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
125 per cent of salary. Of the award,
80 per cent was based on underlying
PBT2 performance, 15 per cent based
on safety performance and 5 per cent
was based on performance against the
Group’s key 2024 ESG priorities. Further
details are set out on page 151.
The Group achieved underlying PBT of
£36.5m, which was above the threshold
target and will, therefore, result in a
pay-out of 30 per cent of maximum for
the PBT element. The Group Incident
Frequency Rate (‘IFR’) outperformed the
maximum bonus target, meaning the
safety element will pay out in full. The
Group delivered against its key 2024
ESG priorities, meaning that the ESG
element will also pay out in full. The
UK-based executive directors will,
therefore, receive a bonus of 44 per cent
of the maximum (55 per cent of salary),
40 per cent of which is deferred into
shares for three years.
Number of meetings
7
Members
Louise Hardy (Chair from
6 September 2023)
Mark Pegler
Charlie Cornish (from 1 May 2024)
Alun Griffiths (Chair until
6 September 2023)
Kevin Whiteman
Tony Osbaldiston
(until 31 July 2023)
Rosie Toogood
(until 12 February 2024)
2024 key achievements
• Agreed a new ESG bonus target.
• Assessed performance against
the bonus and PSP targets for the
year ended 30 March 2024.
• Granted our first RSP awards
under the new shareholder
approved remuneration policy.
• Continued to keep wider
workforce remuneration
arrangements under review,
taking these into account when
considering remuneration
arrangements for the executive
directors.
• Reviewed and agreed
non-executive chair pay.
• Transitioned to new chair.
Severfield plc Annual report and accounts
for the year ended 30 March 2024
138
Derek Randall, who formerly MD of JSSL
in 2024 was subject to the same 80/15/5
split but the PBT element is assessed
on Group underlying PBT and JSSL
PBT (split 50:50), the safety element is
assessed on JSSL Accident Frequency
Rate (‘AFR’). JSSL PBT was on target and
JSSL AFR outperformed the maximum
bonus target. Therefore, Derek Randall
will receive a bonus of 52 per cent of the
maximum (65 per cent of salary), 40 per
cent of which is deferred into shares for
three years.
PSP vesting
Awards were granted on 17 June 2021
equal to 100 per cent of salary for the
Chief Executive Officer and 75 per
cent of salary for the other executive
directors. The awards were subject
to EPS targets for the year ended
30 March 2024 of 7.61p (25 per cent
vesting) to 9.92p (100 per cent vesting).
The Group achieved EPS of 8.94p, which
equates to a vesting of 74 per cent of
maximum. Vested shares will be subject
to a two-year holding period. See page
153 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.
Non-executive chair and
non-executive director fees
The remuneration committee reviewed
the non-executive chair fee during the
year and decided to increase the fee,
with effect from 1 September 2023, from
£140,000 to £150,000.
The board reviewed the non-executive
director fees during the year (without
the non-executive directors’ being
present) and decided to increase, with
effect from 1 September 2023, the base
fee from £45,000 to £50,000. There was
no change to the additional fee payable
for specific roles.
The board considered the increases to
be reasonable, noting that the
non-executive chair fee of £150,000
and non-executive director base fee of
£50,000 are positioned between the
lower quartile and median compared to
FTSE SmallCap companies, and that the
previous fee increase was in July 2021.
Executive Director changes
Ian Cochrane stepped down as Chief
Operative Officer and left the Company
on 30 September 2023. The treatment of
his remuneration arrangements are set
out on page 151.
Implementation of policy for
2025
CEO and CFO salary increase
The Committee noted in the 2023
Directors’ Remuneration Report that
it was mindful that salaries of the
Chief Executive Officer (‘CEO’) and the
Chief Financial Officer (CFO) are both
positioned towards the lower end of
market practice and, whilst it did not
consider it appropriate to address
market positioning at the time given the
economic climate, it would keep this
under review.
Our policy is for salary increases (in
percentage of salary terms) for executive
directors to 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
and a material change in the size and
scale of the Group.
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Stock Code: SFR
GOVERNANCE
DIRECTORS’
REMUNERATION REPORT
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 the continued development
of its joint venture operations in India.
Over the last five years, the Group has
delivered 12 per cent CAGR in revenue
and an increase in profits of 50 per
cent, despite some significant market
challenges over this period including
the COVID-19 pandemic. A significant
proportion of this growth has been as
a direct result of these acquisitions.
Furthermore, the Group is well
positioned to continue to build on this
success. The Group has undoubtedly
increased in size and complexity over
recent years and the scope of the CEO’s
and CFO’s roles have also increased
substantially with the departure of the
former Chief Operating Officer during
the last year, as a number of his former
duties have now been assumed by the
CEO and the CFO.
The Committee uses benchmarking
data with caution. However, to provide
an up-to-date sense-check on salary
positioning, the Committee has
benchmarked Alan Dunsmore’s and
Adam Semple’s salary and target total
compensation positioning against two
relevant peer groups:
• Companies listed on the London
Stock Exchange (excluding financial
services companies) with a market
capitalisation ranging from £100m
to £350m.
• Industry peers listed on the London
Stock Exchange with a market
capitalisation of less than £350m
(Costain, Galliford Try, Porvair, Henry
Boot, Forterra).
This exercise demonstrated that both
salaries are currently positioned below
the lower quartile of the pan-sectoral
peer group of equivalent market
capitalisation and towards the lower end
of the industry peer group identified for
the benchmarking exercise.
After further and careful reflection,
the Committee considers that it is now
both appropriate and necessary to
increase Alan’s and Adam’s salaries so
that they are competitively positioned
against the market, and fairly reflect
their experience, performance, and
stature in the sector. The Committee
determined that Alan’s salary should be
increased from £403,500 to £460,000
(representing a 14 per cent increase)
and that Adam’s salary should be
increased from £275,750 to £315,000
(representing a 14 per cent increase)
with effect from 1 July 2024. Following
this increase, Alan’s and Adam’s
salaries and total target compensation
opportunity will be positioned between
the lower quartile and median of the
pan-sectoral peer group of equivalent
market capitalisation and modestly
positioned within the range of the
industry peer group.
Base salaries
Salaries for the other executive directors
were reviewed in June 2024 and have
been increased by 4 per cent, effective
from 1 July 2024. The overall salary
increases for the wider workforce
ranged from 4–8 per cent of salary.
Annual bonus
The maximum annual bonus opportunity
will be 125 per cent of salary for all
executive directors. Of the annual
bonus, 80 per cent 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
Restricted share awards will be granted
to the executive directors at 50 per
cent of salary. Awards will vest in June
2027 subject to the satisfaction of
performance underpins (see page 144).
Vested awards will be subject to a
two-year holding period.
Non-executive chair and
non-executive director fees
Charlie Cornish was appointed to the
board as a non-executive director from
1 May 2024 and will succeed Kevin
Whiteman as non-executive Chair
after the AGM on 30 July 2024. Charlie
Cornish’s fee as non-executive Chair
will be set at £162,500 per annum. The
remuneration committee believes this
is an appropriate fee in the context of
recruiting a high calibre and experienced
individual and taking into account the
size and complexity of the Group. The fee
remains positioned between the lower
quartile and median compared to FTSE
SmallCap companies.
Fees for the non-executive directors
were reviewed in June 2024 and
increased in line with the wider
workforce, by 4%, with effect from 1
July 2024.
Conclusion
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
30 March 2024 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.
LOUISE HARDY
CHAIR OF THE REMUNERATION
COMMITTEE
19 June 20241
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 33
Severfield plc Annual report and accounts
for the year ended 30 March 2024
140
Part 1 – Remuneration policy
The remuneration policy (the ‘policy’) was approved at the 2023 AGM. Provided for information only are the details of the policy
that were referenced in the committee’s activities over the past reporting year, which includes the remuneration policy table, the
recruitment remuneration arrangements, the executive director service contracts and compensation for departure from office
and terms and conditions for non-executive directors.
The full policy report, as approved by shareholders, can be found from page 144 onwards of the 2023 annual report.
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.
The structure is simple to understand both for participants and shareholders.
Alignment to strategy and culture
The remuneration structure supports the Group’s business strategy and business model 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 in line with the Group’s
newly implemented values.
Risk is appropriately managed
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.
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.
Predictability
The ‘illustration of the application of the policy’ chart on page 149 of the 2023 annual report
indicates the potential values that may be earned through the remuneration structure.
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GOVERNANCE
DIRECTORS’
REMUNERATION REPORT
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.
Performance conditions
None, although the committee
considers individual salaries each
year having regard to the factors
noted in the ‘operation’ section.
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.
Performance conditions
No performance conditions apply to
benefits.
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).
Severfield plc Annual report and accounts
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142
PENSION
Purpose and link to strategy
To provide an appropriate level of retirement benefit.
Performance conditions
No performance conditions apply to
pension.
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.
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.
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 144).
Maximum opportunity
Maximum opportunity of up to 125 per cent of base salary in respect of a financial year.
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RESTRICTED SHARE PLAN (‘RSP’)
Purpose and link to strategy
Reward for long-term sustainable performance and provide alignment with shareholders’
interests.
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.
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 144).
Maximum opportunity
Maximum opportunity of up to 75 per cent of base salary in respect of a financial year.
For the year ending 29 March 2025, the maximum opportunity will be equal to 50 per cent of
base salary for each executive director.
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 200 per
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:
MALUS
CLAWBACK
Annual bonus
To such time as payment is made.
Up to three years following payment.
Deferred bonus awards
To such time as the award vests.
No clawback provisions apply (as malus
provisions apply for three years from the
grant of the award).
Restricted share awards
To such time as the award vests.
Up to three years following vesting.
Severfield plc Annual report and accounts
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144
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
2024 restricted share awards are set out
on page 144.
No performance targets are set for any
sharesave plan awards since these form
part of all-employee arrangements that
are purposefully designed to encourage
share ownership across all employees.
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.
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.
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GOVERNANCE
DIRECTORS’
REMUNERATION REPORT
The principles on which the determination of compensation for departure from office will be approached are set out below.
PROVISION
POLICY
Payments in lieu of notice
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.
Payments in lieu of notice are subject to mitigation.
Annual bonus
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.
Deferred bonus award
The extent to which any unvested awards will vest will be determined in accordance with the
Deferred Share Bonus Plan (‘DSBP’) rules.
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).
Restricted Share Plan
The extent to which any unvested award will vest will be determined in accordance with the
Severfield Performance Share Plan rules.
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).
Change of control
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).
Other payments
In appropriate circumstances, payments may also be made in respect of items such as accrued
holiday, outplacement and legal fees.
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.
Severfield plc Annual report and accounts
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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
POLICY
Base salary
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.
Salary will be considered in the context of the total remuneration package.
Benefits
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
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.
Variable remuneration
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 the
policy table.
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.
Buy-out arrangements
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 of remuneration
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 chair or a non-executive director takes on an
executive role on a short-term basis.
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 chair 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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GOVERNANCE
DIRECTORS’
REMUNERATION REPORT
Policy table for Chair and non-executive directors
FEES AND BENEFITS
Purpose and link to strategy
To attract and retain a high-calibre chair and non-executive directors by offering market competitive fee levels.
Operation
The chair 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 chair is approved by the remuneration committee. The fees for the non-executive directors are approved by the board,
on the recommendations of the chair 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 chair and non-executive directors will remain within the limits set by the Company’s Articles of Association.
The Chair 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 Chair and non-executive directors do not participate in any of the Group’s incentive arrangements or pension scheme.
Chair and non-executive director letters of appointment
The chair and non-executive directors are subject to re-appointment at each AGM. Notice periods of one month are required to be
given by either party. The chair and non-executive directors are not entitled to any compensation on loss of office.
Name
Date of letter of appointment
Letter of appointment expiry date
(subject to annual re-election
at each AGM)
Kevin Whiteman1
16 June 2020
30 July 2024
Louise Hardy
26 July 2019
31 July 2028
Alun Griffiths1
1 October 2020
30 July 2024
Mark Pegler
3 October 2022
4 October 2031
Charlie Cornish2
1 May 2024
30 April 2033
1 Kevin Whiteman and Alun Griffiths will not be proposed for re-appointment at the 2024 AGM
2 Charlie Cornish will take over as Chair after the AGM on 30 July 2024
Severfield plc Annual report and accounts
for the year ended 30 March 2024
148
Part 2 – Annual remuneration report
In this section, we report on the implementation of our policy in the year ended 30 March 2024 as well as how the policy will
be implemented for 2025. 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 2024
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:
Name
Number of meetings attended
Louise Hardy (chair from 6 September 2023)
7/7
Mark Pegler
7/7
Kevin Whiteman
7/7
Alun Griffiths (chair until 6 September 2023)
7/7
Tony Osbaldiston (until 31 July 2023)
3/3
Rosie Toogood (until 12 February 2024)
6/6
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 chair, 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.
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.
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).
The Group recognises a number of trade unions who are consulted regarding wage settlements on a site-by-site basis and seeks
employee participation on a range of matters. This includes giving employees the opportunity through the MyVoice forum to
challenge how executive remuneration is aligned with the wider Company pay policy.
Advisers to the committee
Wholly independent and objective advice on executive remuneration is received from the committee’s external advisers.
Deloitte were appointed in December 2020 following a tender organised by the committee. Deloitte is one of the founding
members of the Remuneration Consultants Group and is a signatory to its Code of Conduct. Fees charged by Deloitte provided to
the committee for the year ended 30 March 2024 amounted to £12,325 (excluding VAT).
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GOVERNANCE
DIRECTORS’
REMUNERATION REPORT
Directors’ earnings for the 2024 financial year (audited)
Year ended 30 March 2024
£000
Salary
Fees
Benefits4
Pension
Total
fixed pay
Bonus
LTIPs5
Total
variable
pay
Total
Executives
Alan Dunsmore
399
–
19
28
446
220
267
487
933
Derek Randall
292
–
44
20
356
191
146
337
693
Adam Semple
272
–
16
19
307
150
137
287
594
Ian Cochrane1
175
–
8
12
195
–
–
–
195
Non-executives
Kevin Whiteman
–
146
–
–
146
–
–
–
146
Alun Griffiths
–
59
–
–
59
–
–
–
59
Mark Pegler
–
53
–
–
53
–
–
–
53
Louise Hardy
–
60
–
–
60
–
–
–
60
Rosie Toogood2
–
41
–
–
41
–
–
–
41
Tony Osbaldiston3
–
18
–
–
18
–
–
–
18
1,138
377
87
79
1,681
561
550
1,111
2,792
1 Stepped down from the board on 30 September 2023
2 Stepped down from the board on 12 February 2024
3 Stepped down from the board on 31 July 2023
4 Taxable benefits include the provision of company cars, fuel for company cars, car allowances, accommodation and living allowances and private medical
insurance.
5 PSP awards granted in 2021 will vest at 74 per cent of maximum (see page 139)
Directors’ earnings for the 2023 financial year (audited)
Remuneration received by the directors
Year ended 25 March 2023
£000
Salary
Fees
Benefits2
Pension
Total
fixed pay
Bonus
LTIPs3
Total
variable
pay
Total
Executives
Alan Dunsmore
381
–
19
46
446
307
370
679
1,125
Ian Cochrane
339
–
16
41
396
274
330
582
978
Derek Randall
279
–
42
33
354
228
203
433
787
Adam Semple
260
–
16
31
307
210
190
401
708
Non-executives
Kevin Whiteman
–
140
–
–
140
–
–
–
140
Alun Griffiths
–
60
–
–
60
–
–
–
60
Tony Osbaldiston
–
53
–
–
53
–
–
–
53
Louise Hardy
–
53
–
–
53
–
–
–
53
Rosie Toogood
–
45
–
–
45
–
–
–
45
Mark Pegler1
–
22
–
–
22
–
–
–
22
1,259
373
93
151
1,876
1,019
1,093
2,095
3,971
1 Appointed to the board on 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
Base salary increases received by the directors
The directors received a 5 per cent salary increase effective from 1 July 2023, which was less than or in line with that received
by our wider workforce. Our colleagues working in our factory locations received increases of, on average 8 per cent and all other
colleagues received increases of between 5-7%. In addition 1,540 colleagues received a cost of living payment.
Severfield plc Annual report and accounts
for the year ended 30 March 2024
150
Past directors/loss of office payments (audited)
Ian Cochrane stepped down as Chief Operating Officer and left the Company on 30 September 2023. The treatment of Ian
Cochrane’s remuneration arrangements is set out in the table below.
ELEMENT
AGREED TREATMENT
Base salary, pension and benefits
Received his base salary, pension allowance, car allowance and
benefits up to 30 September 2023.
Annual bonus
Was not eligible to receive a bonus in respect of the year ended
30 March 2024.
DSBP
Unvested deferred share bonus plan awards will continue to vest
in full on the normal vesting dates.
PSP
PSP awards granted in December 2020 vested at the normal
vesting date in full in December 2023. This reflected that Ian
Cochrane had been in service for the whole of the performance
period. The vested award remains subject to a two year holding
period until December 2025. The gain on exercise of the award
was £308,000.
PSP awards granted in June 2021 and June 2022 lapsed in full
Other
Received a contribution of £2,000 in respect of legal costs
incurred in relation to him stepping down from the board.
Ian Cochrane is required to comply with the post-employment shareholding requirement as set out in the Directors’ Remuneration
Policy.
There have been no payments made to past directors although the December 2020 PSP vested in December 2023 as stated above
after Ian Cochrane ceased to be a director.
How pay linked to performance in 2024 (audited)
Bonus
Executive directors were granted an annual bonus opportunity equal to 125 per cent of salary. Of the award, 80 per cent was
based on underlying PBT performance, 15 per cent based on safety performance and 5 per cent based on ESG performance.
The targets and the performance against these targets are set out below:
For all directors (excluding Derek Randall)
Measure
% of maximum
bonus
opportunity
Threshold
On-target
Maximum
Actual
% of bonus
Payout as %
of salary
Underlying
Group PBT1
80%
£34.3m
£38.1m
£41.9m
£36.5m
30%
30%
Group IFR2
15%
above1.55
1.48 or less
1.41 or less
1.23
100%
19 %
ESG3
5%
100%
6 %
55%
1 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
2 For Group IFR, ‘threshold’ represents 0 per cent, ‘on-target’ represents 50 per cent and ‘maximum’ represents 100 per cent of the bonus opportunity
3 For ESG, performance was assessed against the Group’s sustainability objectives as shown on the following page
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GOVERNANCE
DIRECTORS’
REMUNERATION REPORT
ESG PRIORITIES
ASSESSMENT OF PERFORMANCE AGAINST OBJECTIVES
DURING 2024
PAYOUT AS
PERCENTAGE OF
SALARY
Achieving 2025 target of reducing
Scope 1 and 2 greenhouse gas
emissions by 25 per cent (measured
against a 2018 baseline).
The Group has surpassed the 2025 interim target of 25%, by
reducing UK GHG emissions by 40%.
6 per cent
Making progress against the
sustainability objectives as defined
in the 2023 annual report on page
81.
The Group has made significant progress against our
sustainability objectives:
1. achieving a place on the CDP ‘A List’
2. achieved 100% of total purchased and consumed energy from
green electricity tariffs for all UK facilities
3. being accredited as carbon neutral for the third year running
after third party verification of our Net Zero targets for reducing
GHG emissions; and
4. achieved SBTi net zero target verification in January 2024 as
per schedule for our near-term, long-term and overall Net Zero
targets for reducing GHG emissions.
Derek Randall (MD of JSSL)
Measure
% of maximum
bonus
opportunity
Threshold
On-target
Maximum
Actual
% of bonus
Payout as %
of salary
Underlying
Group PBT1
40%
£34.3m
£38.1m
£41.9m
£36.5m
30%
15%
JSSL (India)
PBT1
40%
RS 30 Cr
RS 40 Cr
RS 60 Cr
RS 40 Cr
50%
25%
JSSL (India)
AFR2
15%
n/a
n/a
At or below
0.08
0.00
100%
19%
ESG3
5%
100%
6%
65%
1 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
2 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
3 Performance against ESG is disclosed in the table above
Severfield plc Annual report and accounts
for the year ended 30 March 2024
152
The executive directors will receive the
bonuses set out in the table below, of
which 40 per cent will be paid in shares
deferred for three years.
Alan Dunsmore
£250,000
Derek Randall
£218,000
Adam Semple
£171,000
PSP awards vesting in respect of 2024
Awards were granted on 17 June 2021
equal to 100 per cent of salary for the
Chief Executive Officer and 75 per cent
of salary for other executive directors.
The awards were subject to the
achievement of an EPS performance
condition measured over the three
financial years ended 30 March 2024.
Details of the EPS performance
condition and performance outcome are
set out below.
The awards will vest in June 2024 and
vested shares will be subject to a
two-year holding period.
EPS for the
year ended
30 March
2024
Threshold (25% vesting)
7.61p
Maximum (100% vesting)
9.92p
Actual performance
8.94p
Vesting outcome
74% of
maximum
Measure
Number of shares
granted
Number of
shares vesting
Dividend
equivalents1
Total value
of award on
vesting2
Amount of award attributable
to share price appreciation
since grant date
Alan Dunsmore
451,319
334,427
58,513
217,846
0%
Derek Randall
246,850
182,915
32,004
119,151
0%
Adam Semple
231,481
171,527
30,011
111,733
0%
1 The 2021 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 30 March 2024 but will be recalculated on vesting
2 Calculated based on the three-month average share price to 30 March 2024 (55.44p)
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 (81p) and the three-month average share price to 30 March 2024 (55.44p).
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 2024 (audited)
On 28 July 2023, the committee granted awards under the Group’s Deferred Share Bonus Plan to executive directors in relation to
the 2023 bonus outcome. The awards will vest on 28 July 2026, subject to continued employment.
Measure
Type
Number of shares
Face value of shares1
Vesting date
Alan Dunsmore
Nil-cost option
211,416
£153,700
28 July 2026
Ian Cochrane
Nil-cost option
188,253
£136,860
28 July 2026
Derek Randall
Nil-cost option
156,893
£114,061
28 July 2026
Adam Semple
Nil-cost option
144,484
£105,040
28 July 2026
1 Face value calculated using the average mid-market share price between 26 and 27 July 2023 (72.7p)
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GOVERNANCE
DIRECTORS’
REMUNERATION REPORT
RSP awards granted in 2023 (audited)
Awards were granted on 15 September
2023 equal to 50 per cent of salary
for all executive directors (excluding
Ian Cochrane). The awards will vest in
June 2026 subject to continued service
and the satisfaction of performance
underpins. Vested awards will be
subject to a two-year holding period. The
underpins are:
• 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.
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.
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.
Details of the awards made
to the executive directors are
summarised below.
Name
Type
Number of shares
% of salary
Face value (£)1
Alan Dunsmore
Nil-cost option
335,133
50%
£201,750
Derek Randall
Nil-cost option
245,432
50%
£147,750
Adam Semple
Nil-cost option
229,028
50%
£137,875
1 Face value calculated based on the pre-grant date share price of 60.2p on 14 September 2023
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.
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
Year of
award
Vesting
date2
Performance
condition
Awards held
at 1 April
2023
Awards
granted in
year
Awards
lapsed in
year
Awards
vested in
year
Awards held
at 30 March
2024
Alan Dunsmore
2020
2023
EPS
529,809
–
–
(529,809)
–
2021
2024
EPS
451,319
–
–
–
451,319
2022
2025
EPS
634,076
–
–
–
634,076
2023
2026
n/a1
–
335,133
–
–
335,133
Total
1,615,204
335,133
(529,809)
1,420,528
Derek Randall
2020
2023
EPS
291,210
–
–
(291,210)
–
2021
2024
EPS
246,850
–
–
–
246,850
2022
2025
EPS
348,144
–
–
–
348,144
2023
2026
n/a1
–
245,432
–
–
245,432
Total
886,204
245,432
(291,210)
840,426
Adam Semple
2020
2023
EPS
271,739
–
–
(271,739)
–
2021
2024
EPS
231,481
–
–
–
231,481
2022
2025
EPS
325,000
–
–
–
325,000
2023
2026
n/a1
–
229,028
–
–
229,028
Total
828,220
229,028
(271,739)
785,509
1 The 2023 award was an RSP award with performance underpins.
2 Vesting date is June/July in the relevant years other than 2023 when it was December
Severfield plc Annual report and accounts
for the year ended 30 March 2024
154
Former director
Year of
award
Vesting
date2
Performance
condition
Awards held
at 1 April
2023
Awards
granted in
year
Awards
lapsed in
year
Awards
vested in
year
Awards held
at 30 March
2024
Ian Cochrane1
2020
2023
EPS
472,133
–
–
(472,133)
–
2021
2024
EPS
402,188
–
(402,188)
–
–
2022
2025
EPS
564,604
–
(564,604)
–
–
Total
1,438,925
–
(966,792)
(472,133)
–
4,768,553
809,593
(966,792)
(1,564,891)
3,046,463
1 Stepped down from the board on 30 September 2023
2 Vesting date is June/July in the relevant years other than 2023 when it was December
3 There are no vested but unexercised awards
Performance conditions are based on a range of EPS targets as follows:
Name
Threshold (25%
vests)
Maximum (100%
vests)
2021 award1
7.61p
9.92p
2022 award2
7.50p
8.80p
1 Represents an underlying PBT range of £30.0–40.0m
2 Represents an underlying PBT range of £31.5–38.0m
Statement of directors’ shareholding (audited)
As at 30 March 2024, all executive directors and their connected persons had a shareholding as follows:
Name
Shareholding
requirement1
Actual share
ownership as a
percentage of
shareholding
requirement as at
30 March 20241
Alan Dunsmore
200%
239%
Derek Randall
200%
252%
Adam Semple
200%
93%
1 Value of actual share ownership was calculated with reference to the closing mid-market share price on 28 March 2024 of 54.8p. Actual share ownership
includes net of tax figures for DSBP shares granted but still within the three-year deferral period and/or unexercised
155
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GOVERNANCE
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 30 March 2024 (or
date of stepping down from the board if earlier).
Owned shares1
Share incentive
plan (SIP)2
Sharesave
scheme
DSBP3
PSP4
RSP
Total5
Executives
Alan Dunsmore
1,521,539
5,403
28,743
444,564
1,085,395
335,133
3,420,777
Adam Semple
342,605
–
30,070
302,637
556,481
229,028
1,460,821
Derek Randall
1,035,945
–
–
379,542
594,994
245,432
2,255,913
Ian Cochrane6
1,941,790
6,654
27,237
614,355
472,133
–
3,062,169
Non-executives
Kevin
Whiteman
65,619
–
–
–
–
–
65,619
Alun Griffiths
60,000
–
–
–
–
–
60,000
Louise Hardy
–
–
–
–
–
–
–
Mark Pegler
53,600
–
–
–
–
–
53,600
Tony
Osbaldiston7
–
–
–
–
–
–
–
Rosie Toogood8
79,115
–
–
–
–
–
79,115
1 Includes shares owned by connected persons and excludes DSBP shares that 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 153
4 PSP shares are in the form of conditional awards that will only vest either on the achievement of certain performance conditions or in the case of RSP
awards, which are subject to performance underpins. The total includes 2021 awards that 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
6 Stepped down from the board on 30 September 2023
7 Stepped down from the board on 31 July 2023
8 Stepped down from the board on 12 February 2024
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 30 March 2024.
Severfield plc Annual report and accounts
for the year ended 30 March 2024
156
Performance graph
The following graph shows the Group’s performance, measured by total shareholder return, compared with the performance of
the FTSE SmallCap Index. It is based on the change in the value of £100 investment made on 1 April 2014 over the ten-year period
ended 30 March 2024.
The 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 2014.
FTSE Small Cap Index
Severfield plc
Total shareholder return
£
0
50
100
150
200
250
300
Mar 2024
Mar 2023
Mar 2022
Mar 2021
Mar 2020
Mar 2019
Mar 2018
Mar 2017
Mar 2016
Mar 2015
Mar 2014
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).
2015
Lawson
2016
Lawson
2017
Lawson
2018
Lawson1
Total
remuneration
(£000)
681
946
1,228
738
Annual bonus
(%)
65.0%
63.0%
95.0%
–
LTIP vesting (%)
–
64.0%
74.0%
95.4%
2018
Dunsmore2
2019
Dunsmore
2020
Dunsmore
2021
Dunsmore
2022
Dunsmore
2023
Dunsmore
2024
Dunsmore
Total
remuneration
(£000)
819
890
880
747
521
1,125
933
Annual bonus
(%)
62.6%
20.0%
61.0%
80.0%
17.0%
80.0%
44%
LTIP vesting (%)
95.4%
100.0%
85.0%
–
–
100.0%
74%
1 Ian Lawson received compensation of £408,000 for loss of office in accordance with his contract
2 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
157
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GOVERNANCE
DIRECTORS’
REMUNERATION REPORT
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 2024
Base salary/
fees
Benefits
Annual bonus
Alan Dunsmore
5%
5%
(27%)
Derek Randall
5%
5%
(16%)
Adam Semple
5%
-
(29%)
Ian Cochrane5
(48%)
(50%)
(100%)
Kevin Whiteman
4%
–
–
Alun Griffiths
(2%)
–
–
Tony Osbaldiston6
(66%)
–
–
Louise Hardy
13%
–
–
Rosie Toogood2
(9%)
–
–
Mark Pegler1
140%
–
–
All UK employees
6%
164%
(41%)
The main differences between 2024 and 2023 are lower bonus pay outs in 2024 and the departure of directors during the year.
The large increase in employee benefits reflects the cost-of-living payment made in 2024.
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 2023 and 2022
Base salary/
fees
Benefits
Annual bonus
Alan Dunsmore
3%
–
387%
Ian Cochrane
3%
–
389%
Derek Randall
3%
5%
105%
Adam Semple
3%
–
388%
Kevin Whiteman
–
–
–
Alun Griffiths
–
–
–
Tony Osbaldiston
–
–
–
Louise Hardy
–
–
–
Rosie Toogood
–
–
–
Mark Pegler1
n/a
–
–
All UK employees
5%
7%
107%
Severfield plc Annual report and accounts
for the year ended 30 March 2024
158
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.
Comparison between 2022 and 2021
Base salary/
fees
Benefits
Annual bonus
Alan Dunsmore
1%
–
(78%)
Ian Cochrane
1%
–
(78%)
Derek Randall3
1%
(49%)
(41%)
Adam Semple
2%
–
(78%)
Kevin Whiteman
53%
–
–
Alun Griffiths
26%
–
–
Tony Osbaldiston
18%
–
–
Louise Hardy
33%
–
–
Rosie Toogood2
n/a
n/a
n/a
All UK employees
4%
16%
(67%)
Comparison between 2021 and 2020
Base salary/
fees
Benefits
Annual bonus
Alan Dunsmore
2%
–
33%
Ian Cochrane
2%
–
33%
Derek Randall
2%
–
15%
Adam Semple
7%
–
38%
Kevin Whiteman4
103%
–
–
Alun Griffiths
6%
–
–
Tony Osbaldiston
–
–
–
Louise Hardy
–
–
–
All UK employees
2%
–
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 and stepped down on 12 February 2024
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 Chair on 3 September 2020
5 Ian Cochrane stepped down from the board on 30 September 2023
6 Tony Osbaldiston stepped down from the board on 31 July 2023
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GOVERNANCE
DIRECTORS’
REMUNERATION REPORT
Chief Executive Officer pay ratio disclosure
Year
Method of calculation adopted
25th percentile pay
ratio
(CEO: UK employees)
Median
pay ratio
(CEO: UK employees)
75th percentile
pay ratio
(CEO: UK employees)
2024
Option A1
27:1
19:1
15:1
2023
Option A1
35:1
26:1
19:1
2022
Option A1
19:1
13:1
10:1
2021
Option A1
25:1
18:1
14:1
2020
Option A1
30:1
22:1
17:1
1 Option A methodology was selected on the basis that it is a robust approach and is preferred by shareholders and prow 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 19:1 is 27 per cent lower than the median ratio of 26:1 in 2023. This decrease in the Chief Executive Officer
pay ratio is due to the Chief Executive Officer receiving a lower bonus and PSP vesting outcome in 2024 (bonus: 44 per cent of
maximum; PSP: 74 per cent of maximum) compared to 2023 (bonus: 80 per cent of maximum; PSP: 100 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 individuals whose remuneration is at the median, 25th percentile and 75th
percentile amongst full-time equivalent UK-based employees are as follows:
Chief Executive Officer
25th percentile
Median
75th percentile
£000
£000
£000
£000
Year 2024
Salary
399
32
45
56
Total pay and benefits
933
35
49
64
Year 2023
Salary
381
30
41
55
Total pay and benefits
1,125
32
44
58
Year 2022
Salary
369
23
38
45
Total pay and benefits
521
28
40
54
Year 2021
Salary
364
29
37
49
Total pay and benefits
747
29
41
53
Year 2020
Salary
356
26
38
48
Total pay and benefits
880
29
40
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.
Severfield plc Annual report and accounts
for the year ended 30 March 2024
160
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:
2024
£000
2023
£000
% change
Staff costs
116,440
99,479
17.0%
Revenue
463,465
491,753
(5.8)%
Underlying* operating profit
37,690
33,067
14.0%
Dividends
10,714
9,877
8.5%
* There were no share buybacks during the year
Shareholder voting
The results below show the response to the 2023 AGM shareholder voting for the directors’ 2023 remuneration report (excluding
remuneration policy):
Total number
of votes
% of votes
cast
For
233,706,876
99.08
Against
2,177,930
0.92
Total votes cast (for and against)
235,884,806
100
Withheld votes
53,411
n/a
The results below show the response to the 2023 AGM shareholder voting for the directors’ 2023 remuneration policy:
Total number
of votes
% of votes
cast
For
232,598,556
98.61
Against
3,272,944
1.39
Total votes cast (for and against)
235,871,500
100
Withheld votes
66,717
n/a
Implementation of policy for 2025
The executive directors’ salaries
The executive directors’ salaries at the start of the 2025 financial year are as follows:
£
Alan Dunsmore
403,500
Adam Semple
275,750
Derek Randall
295,500
Salaries for the executive directors were reviewed in June 2024 and have been increased with effect from 1 July 2024. Alan
Dunsmore’s salary has been increased by 14.0 per cent to £460,000 and Adam Semple’s salary has been increased by 14% to
£315,000 for the reasons stated on pages 139 and 140. Derek Randall’s salary has been increased by 4% in line with the salary
increases to the wider workforce of 4-8%.
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. This is aligned with the level available to the entire UK
workforce.
161
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GOVERNANCE
Rewards for performance in 2025
Bonus
The maximum opportunity will be 125 per cent of salary for all executive directors in line with the 2023 remuneration policy and
will be subject to metrics based on underlying PBT, safety performance and ESG performance.
Profit performance-based component – 80 per cent
Maximum bonus based on actual underlying PBT versus budget. The committee believes that the threshold and maximum targets
(as a percentage of budget) are appropriately positioned, taking into account levels of growth forecast in the board’s strategy
review in December 2023 and external analyst consensus.
Underlying PBT % of budget
% of award
90 or below
–
100
50
110 or better
100
A sliding scale applies between the points.
Safety performance-based component – 15 per cent
This year we have moved away from an IFR based safety bonus target to a target based on a series of leading safety indicators. We
believe the historic approach has been successful in reducing both the number and severity of our incidents to a point where a
fresh approach is required to ensure we continue to improve.
We have identified metrics based on those indicators which we believe will drive the identification and control of risks that
can cause incidents and injuries. When considering performance against these metrics the Remuneration Committee will be
required to exercise its judgement with the underpin that there should be no significant step backwards in safety performance (as
measured by IFR). 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.
ESG component – 5 per cent
The ESG metric is based on performance against the Group’s key sustainability objectives set out in this annual report.
Restricted share awards
Restricted share awards will be granted to the executive directors at 50 per cent of salary. Awards will vest in June 2027 subject
to the satisfaction of performance underpins, which will be the same as those set out for the 2023 award on page 144. Vested
awards will be subject to a two-year holding period. 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.
The non-executive directors fees for 2024 and 2025
Charlie Cornish was appointed to the board as a non-executive director from 1 May 2024 and will succeed Kevin Whiteman as
non-executive Chair after the AGM on 30 July 2024. Charlie Cornish’s fee as non-executive Chair will be set at £162,500 per annum
(and he will be paid the basic fee for a non-executive director for the period 1 May until 30 July). The remuneration committee
believes this is an appropriate fee in the context of recruiting a high calibre and experienced individual and taking into account the
size and complexity of the Group. The fee remains positioned between the lower quartile and median compared to FTSE SmallCap
companies.
Fees for the non-executive directors were reviewed in June 2024 and increased in line with the wider workforce, by 4%, with effect
from 1 July 2024. The adjusted fees for the non-executive directors are set out in the table below.
£
Basic fee for other non-executive directors
52,000
Additional fee for SID role
7,500
Additional fee for chair of audit and remuneration committees
7,500
Additional fee for workforce engagement director role
7,500
Approval
This report was approved by the board and signed on its behalf.
LOUISE HARDY
CHAIR OF THE REMUNERATION COMMITTEE
19 June 2024
DIRECTORS’
REMUNERATION REPORT
Severfield plc Annual report and accounts
for the year ended 30 March 2024
162
STATEMENT OF DIRECTORS’
RESPONSIBILITIES
In respect of the annual report and financial statements
The directors are responsible for
preparing the annual report and the
Group and parent Company financial
statements in accordance with
applicable law and regulations.
Company law requires the directors to
prepare Group and parent Company
financial statements for each financial
year. Under that law they are required to
prepare the Group financial statements
in accordance with UK-adopted
international accounting standards
and applicable law and have elected to
prepare the parent Company financial
statements in accordance with UK
accounting standards and applicable
law, including FRS 101 Reduced
Disclosure Framework.
Under company law the directors must
not approve the financial statements
unless they are satisfied that they give a
true and fair view of the state of affairs
of the Group and parent Company and of
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
and, in respect of the parent Company
financial statements only, prudent;
• for the Group financial statements,
state whether they have been
prepared in accordance with UK-
adopted international accounting
standards;
• for the parent Company financial
statements, state whether applicable
UK accounting standards have been
followed, subject to any material
departures disclosed and explained
in the parent Company financial
statements;
• assess the Group and parent
Company’s ability to continue as
a going concern, disclosing, as
applicable, matters related to going
concern; and
• 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 (“DTR”) 4.1.16R,
the financial statements will form part
of the annual financial report prepared
under DTR 4.1.17R and 4.1.18R. The
auditor’s report on these financial
statements provides no assurance over
whether the annual financial report has
been prepared in accordance with those
requirements.
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
ADAM SEMPLE
CHIEF FINANCIAL OFFICER
19 June 2024
163
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Stock Code: SFR
GOVERNANCE
Independent auditor’s report
166
Consolidated income statement
174
Consolidated statement of
comprehensive income
175
Consolidated balance sheet
176
Consolidated statement of changes
in equity
177
Consolidated cash flow statement
178
Notes to the consolidated financial
statements
179
Five year summary
221
Financial calendar
221
Company balance sheet
222
Company statement of changes in equity
223
Notes to the company financial
statements
224
Addresses and advisers
229
FINANCIALS
REPORT
Severfield plc Annual report and accounts
for the year ended 30 March 2024
164
165
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Stock Code: SFR
INDEPENDENT AUDITOR’S REPORT
to the members of Severfield plc
We were first appointed as auditor by the shareholders on 2 September 2015. The
period of total uninterrupted engagement is for the nine financial years ended 30
March 2024. 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
£1.5m (2023: £1.4m)
4.7% of normalised group profit before tax (2023: 5.1% of
group profit before tax)
COVERAGE
94% (2023: 97%) of group profit before tax
KEY AUDIT MATTERS
VS 2023
RECURRING RISKS
Carrying value of construction contract
assets and onerous contract provisions, 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
EVENT DRIVEN
New: Identification and separate recognition
of intangible assets and the resulting goodwill
from the Voortman business combination
2. Key audit matters: our assessment of risks of
material misstatement
Key audit matters are those matters that, in our professional judgement, were of
most significance in the audit of the financial statements and include the most
significant assessed risks of material misstatement (whether or not due to fraud)
identified by us, including those which had the greatest effect on: the overall audit
strategy; the allocation of resources in the audit; and directing the efforts of the
engagement team. We summarise below the key audit matters, in decreasing order of
audit significance, in arriving at our audit opinion above, together with our key audit
procedures to address those matters and, as required for public interest entities, our
results from those procedures. These matters were addressed, and our results are
based on procedures undertaken, in the context of, and solely for the purpose of, our
audit of the financial statements as a whole, and in forming our opinion thereon, and
consequently are incidental to that opinion, and we do not provide a separate opinion
on these matters.
1. Our opinion is unmodified
We have audited the financial
statements of Severfield plc (“the
Company”) for the 53 week period
ended 30 March 2024 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 30 March 2024 and of
the Group’s profit for the period then
ended;
– the Group financial statements have
been properly prepared in accordance
with UK-adopted international
accounting standards;
– the parent Company financial
statements have been properly
prepared in accordance with UK
accounting standards, including
FRS 101 Reduced Disclosure
Framework; and
– 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.
Severfield plc Annual report and accounts
for the year ended 30 March 2024
166
THE RISK
OUR RESPONSE
Carrying value of
construction contract
assets and onerous
contract provisions,
and revenue and profit
recognition in relation to
construction contracts
Subjective estimate
The Group’s activities are undertaken
via long-term construction contracts.
The carrying value of the construction
contract assets and onerous contract
provisions, 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. In addition, during the
current year, the Group has identified a
number of loss-making contracts, and
therefore has recognised a contract
loss provision.
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 and onerous contract provisions,
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 Group’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 forecast costs
to complete in the sample of high risk contracts by
understanding contract performance and costs incurred
post period-end, along with discussion and challenge
of management’s costs to complete estimates through
comparison with 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 extent to which
management are able to accurately forecast contract
revenue and costs by comparing initial forecasted
margins against the actual margins achieved for all
contracts open at both the current and prior year end;
– Site visits: For certain higher risk or larger value
contracts, attending in person site visits, with the
involvement of our own industry specialists, inspecting
the physical progress on site for individual projects and
identifying areas of complexity through observation and
discussion with site personnel;
– Our major projects expertise: For certain higher
risk or larger contracts, using specialists from our
Major Projects Advisory team 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 onerous contract
provisions and associated revenue and profit recognition.
Our results
We found the carrying value of construction contract assets and
onerous contract provisions, and revenue and profit recognition
in relation to construction contracts, to be acceptable
(2023: acceptable).
Revenue: £464.6m
(2023: £491.8m)
Contract Asset:
£36.8m (2023: £48.8m)
Onerous contract
provisions: £8.4m
(2023: £nil)
Refer to page 126 Audit
Committee Report, pages
179 to 187 (accounting
policies) and note 18
(financial disclosures).
167
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Stock Code: SFR
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
to the members of Severfield plc
THE RISK
OUR RESPONSE
Identification and
separate recognition
of intangible assets
acquired and the
resulting goodwill from
the Voortman business
combination
Significant judgement:
On 3rd April 2023 the Group acquired
100 per cent of the share capital of
Voortman Steel Construction Holding
B.V. and its subsidiaries for a net cash
consideration of €24m (£21.2m).
Goodwill of £16.3m and identified
intangible assets of £3.9m have
been recognised in respect of this
acquisition.
Accounting for the acquisition involves
the use of a high level of judgement to
identify and recognise intangible assets
separately from goodwill.
We performed the tests below rather than seeking to rely on
any of the Group’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 valuation expertise: Using our own valuation
specialists to assess the methodology used to
identify the separate intangible assets that should be
recognised, and challenging the completeness of these by
considering other possible intangible assets which could
have been recognised;
– Test of details: Re-performing management’s
calculations in relation to the goodwill, consideration and
intangible assets recognised on acquisition;
– Test of details: Inspecting the purchase agreements,
board minutes and market announcements and
assessing whether the purchase price allocation
accounting reflected these documents, as well
as comparing the intangible assets identified by
management to our understanding of the rationale for the
purchase based on our inspection of these documents;
– Assessing valuer’s credentials: Assessing the
competence, capabilities and objectivity of the external
valuation experts engaged by the Group to assist in
identifying the intangible assets.
– Assess transparency: Assessing the adequacy of the
Group's disclosures in respect of the judgements involved
in determining the identification and separate recognition
of intangible assets acquired and the resulting goodwill.
Our results
We found the Group’s conclusions with regards to the
identification and separate recognition of intangible assets
acquired and the resulting goodwill to be acceptable.
Intangible assets
acquired: (£3.9m)
Resulting goodwill:
(£16.3m)
Refer to page 126 Audit
Committee Report, page
181 (accounting policy)
and page 213 (financial
disclosures).
Severfield plc Annual report and accounts
for the year ended 30 March 2024
168
THE RISK
OUR RESPONSE
Carrying value of parent
Company’s investments
in subsidiaries and
joint ventures, and
recoverability of
intercompany debtors
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 61% (2023:
46%) and 14% (2023: 32%) respectively
of the Company’s total assets. Their
recoverability is not at a high risk of
significant misstatement or subject to
significant judgement.
However, due to their materiality in the
context of the parent Company financial
statements, this is considered to be the
area that had the greatest effect on our
overall parent Company audit.
We performed the tests below rather than seeking to rely on any
of the Company’s controls because the nature of the balance
is such that we would expect to obtain audit evidence primarily
through the detailed procedures described.
Our procedures included:
– Tests of detail: Comparing the carrying amount of
100% of the investments balance with the relevant
subsidiaries’ and joint ventures’ draft balance sheets to
identify whether their net assets, being an approximation
of their minimum recoverable amount, were in excess
of their carrying amount and assessing whether those
subsidiaries and joint ventures have historically been
profit making;
– Tests of detail: Assessing 100% of group debtors 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.
– Assessing subsidiary audits: Assessing the work
performed by the subsidiary/joint venture audit team,
and considering the results of that work, on their net
assets and profits, including assessing the ability of
the subsidiary/joint venture to obtain liquid funds and
therefore their ability to fund the repayment of the
receivable.
– Comparing valuation: 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 that
subsidiary’s or joint venture’s 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
(2023: acceptable).
Investments: (£181.6
million; 2023: £152.6m)
Amounts owed by
subsidiary undertakings:
(£42.4 million;
2023: £106.9)
Refer to page 126 Audit
Committee Report, page
224 (accounting policy)
and page 227 (financial
disclosures).
3. Our application of materiality
and an overview of the scope of
our audit
Materiality for the Group financial
statements as a whole was set at
£1,500,000 (2023: £1,370,000),
determined with reference to a
benchmark of Group profit before tax
, normalised to add back this year’s
legacy employment tax charges and
asset impairment charges as disclosed
in note 5 (2023: Group profit before
tax), of which it represents 4.7%
(2023: 5.1%). We adjusted for these
items because they do not represent
the normal, continuing operations of
the Group. Materiality for the parent
company financial statements as a
whole was set at £1,200,000 (2023:
£959,000), determined with reference to
a benchmark of Company total assets,
of which it represents 0.4% (2023: 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% (2023: 75%) of materiality for
the financial statements as a whole,
which equates to £1,125,000 (2023:
£1,020,000) for the Group and £900,000
(2023: £719,000) 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
£75,000 (2023: £68,000), in addition to
other identified misstatements that
warranted reporting on qualitative
grounds.
169
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Stock Code: SFR
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
to the members of Severfield plc
Of the Group’s 24 (2023: 15) reporting
components, we subjected 7 (2023: 7) to
full scope audits for group purposes.
The components within the scope of
our work accounted for the percentages
illustrated opposite.
The remaining 11% (2023: 5%) of total
Group revenue, 6% (2023: 3%) of Group
profit before tax and 15% (2023: 4%)
of total Group assets is represented
by 17 (2023: 8) reporting components,
none of which individually represented
more than 6% (2023: 4%) 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 on.
The Group team approved the
component materialities, which ranged
from £600,000 to £1,200,000 (2023:
£411,000 to £1,096,000) having regard
to the mix of size and risk profile of the
Group across the components.
The work on 1 of the 7 components
(2023: 1 of 7 components) was
performed by component auditors
and the rest, including the audit of the
parent Company, was performed by the
Group team. The group team performed
procedures on the items excluded from
normalised group profit before tax.
The scope of the audit work performed
was predominately substantive as we
placed limited reliance upon the Group’s
internal control over financial reporting.
The Group team visited the component
team in the Netherlands (2023: 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.
£1,500,000
Whole financial
statements materiality
(2023: £1,370,000)
£1,125,000
Whole financial
statements performance
materiality
(2023: £1,020,000)
Normalised profit before tax
£31,976,000 (2022: £27,107,000
based on profit before tax)
Group Materiality
£1.50m (2023: £1.37m)
Normalised PBT
Group materiality
11
5
89
95
89%
(2023: 95%)
15
4
85
96
85%
(2023: 96%)
6
3
94
97
94%
(2023: 97%)
Group revenue
Group total assets
Group profit before tax
Full scope for group audit purposes 2023
Full scope for group audit purposes 2024
Residual components
£75,000
Misstatements reported to the
audit committee (2023: £68,000)
£1,200,000
Range of materiality at seven
components (£600,000-
£1,200,000)
(2023: £411,000 to £1,096,000)
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
Severfield plc Annual report and accounts
for the year ended 30 March 2024
170
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; and
• the potential for contract assets to
increase as a result of contractual
disputes or operational difficulties,
leading to an increased working
capital requirement.
We considered whether these risks
could plausibly affect the liquidity
or covenant compliance in the going
concern period by assessing the
degree of downside assumption that,
individually and collectively, could result
in a liquidity issue, taking into account
the Group’s current and projected cash
and facilities (a reverse stress test).
We assessed the completeness of the
going concern disclosure.
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 51
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.
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, and
through discussion with the directors
and other management (as required by
auditing standards), and from inspection
of the Group’s legal correspondence
and discussed with the directors and
other management the policies and
procedures regarding compliance with
laws and regulations. As the Company
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
audit team to component audit teams of
171
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Stock Code: SFR
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
to the members of Severfield plc
relevant laws and regulations identified
at the Group level, and a request for
component auditors to report to the
Group audit team any instances of non-
compliance with laws and regulations
that could give rise to a material
misstatement at the Group level.
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,
data protection laws, anti-bribery
and 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.
For the legacy employment taxation
matter discussed in note 5 we assessed
disclosures against our understanding
from correspondence with the taxation
authorities and used our taxation
specialists to help us assess the matter.
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.
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 52) 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.
Severfield plc Annual report and accounts
for the year ended 30 March 2024
172
We are also required to review the
viability statement, set out on page 52
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. We have nothing to
report in this respect.
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 163, 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 under
Disclosure Guidance and Transparency
Rule 4.1.17R and 4.1.18R. This auditor’s
report provides no assurance over
whether the annual financial report has
been prepared in accordance with those
requirements.
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
1 Sovereign Street
Sovereign Square
Leeds
LS1 4DA
19 June 2024
173
www.severfield.com
Stock Code: SFR
FINANCIAL STATEMENTS
Note
Underlying
year ended
30 March
2024
£000
Non-
underlying
year ended
30 March
2024
£000
Total
year ended
30 March
2024
£000
Underlying
year ended
25 March
2023
£000
Non-
underlying
year ended
25 March
2023
£000
Total
year ended
25 March
2023
£000
Revenue
3
463,465
–
463,465
491,753
–
491,753
Operating costs
4
(425,775)
(13,225)
(439,000)
(458,686)
(4,811)
(463,497)
Operating profit before share of
results of JVs and associates
37,690
(13,225)
24,465
33,067
(4,811)
28,256
Share of results of JVs and
associates
15
1,950
–
1,950
1,898
–
1,898
Operating profit
39,640
(13,225)
26,415
34,965
(4,811)
30,154
Net finance expense
7
(3,095)
(300)
(3,395)
(2,489)
(558)
(3,047)
Profit before tax
36,545
(13,525)
23,020
32,476
(5,369)
27,107
Taxation
8
(9,076)
1,957
(7,119)
(6,238)
697
(5,541)
Profit for the year attributable
to the equity holders of the
parent
27,469
(11,568)
15,901
26,238
(4,672)
21,566
Earnings per share:
Basic
10
8.94p
(3.76)p
5.18p
8.48p
(1.51)p
6.97p
Diluted
10
8.85p
(3.72)p
5.13p
8.39p
(1.49)p
6.90p
Further details of non-underlying items are disclosed in note 5 to the consolidated financial statements.
CONSOLIDATED
INCOME STATEMENT
Year ended 30 March 2024
Severfield plc Annual report and accounts
for the year ended 30 March 2024
174
Note
Year ended
30 March
2024
£000
Year ended
25 March
2023
£000
Items that will not be reclassified to profit and loss:
Actuarial loss on defined benefit pension scheme
30
(745)
(701)
Share of other comprehensive income of JVs and associates accounted for using
the equity method
15
869
–
Tax relating to components that will not be reclassified
21
186
175
310
(526)
Items that may be reclassified to profit and loss:
Gains/(losses) taken to equity on cash flow hedges
25
1,239
(1,147)
Reclassification adjustments on cash flow hedges
25
(314)
243
Exchange difference on foreign operations
25
(264)
(86)
Tax relating to components that may be reclassified
21
(398)
153
263
(837)
Other comprehensive income for the year
573
(1,363)
Profit for the year from continuing operations
15,901
21,566
Total comprehensive income for the year attributable to equity holders of the parent
16,474
20,203
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
Year ended 30 March 2024
175
www.severfield.com
Stock Code: SFR
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
At 30 March 2024
Note
As at
30 March 2024
£000
As at
25 March 2023
£000
Assets
Non-current assets
Goodwill
11
98,469
82,188
Other intangible assets
12
5,508
7,095
Property, plant and equipment
13
96,434
92,067
Right-of-use assets
14
18,651
13,018
Interests in JVs and associates
15
37,364
31,784
Deferred tax assets
21
1,828
–
Contract assets, trade and other receivables
18
1,050
2,245
259,304
228,397
Current assets
Inventories
16
11,648
13,231
Contract assets, trade and other receivables
18
88,334
109,721
Derivative financial instruments
22
675
25
Current tax assets
4,646
2,278
Cash and cash equivalents
22
13,803
11,338
119,106
136,593
Total assets
378,410
364,990
Liabilities
Current liabilities
Bank overdraft
22
(3,409)
–
Contract liabilities, trade and other payables
19
(78,934)
(102,699)
Provisions
20
(11,819)
–
Financial liabilities – borrowings
22
(6,200)
(4,150)
Financial liabilities – leases
22
(2,931)
(2,172)
(103,293)
(109,021)
Non-current liabilities
Contract liabilities, trade and other payables
19
(1,095)
(2,377)
Retirement benefit obligations
30
(11,464)
(12,871)
Financial liabilities – borrowings
22
(13,800)
(4,800)
Financial liabilities – leases
22
(16,142)
(11,224)
Deferred tax liabilities
21
(11,865)
(6,979)
(54,366)
(38,251)
Total liabilities
(157,659)
(147,272)
Net assets
220,751
217,718
Equity
Share capital
24
7,739
7,739
Share premium
88,522
88,522
Other reserves
25
4,728
5,959
Retained earnings
119,762
115,498
Total equity
220,751
217,718
The consolidated financial statements were approved by the board of directors on 19 June 2024 and signed on its behalf by:
ALAN DUNSMORE
ADAM SEMPLE
CHIEF EXECUTIVE OFFICER
CHIEF FINANCIAL OFFICER
Severfield plc Annual report and accounts
for the year ended 30 March 2024
176
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
Year ended 30 March 2024
Note
Share
capital
£000
Share
premium
£000
Other
reserves
£000
Retained
earnings
£000
Total
equity
£000
At 26 March 2023
7,739
88,522
5,959
115,498
217,718
Total comprehensive income for the
year
–
–
1,530
14,944
16,474
Equity-settled share-based payments
25
–
–
(1,234)
3,007
1,773
Purchase of own shares
25
–
–
(4,500)
–
(4,500)
Allocation of owned shares
25
–
–
2,973
(2,973)
–
Dividends paid
–
–
–
(10,714)
(10,714)
At 30 March 2024
7,739
88,522
4,728
119,762
220,751
Note
Share
capital
£000
Share
premium
£000
Other
reserves
£000
Retained
earnings
£000
Total
equity
£000
At 27 March 2022
7,738
88,511
4,485
103,226
203,960
Total comprehensive income for the
year
–
–
(991)
21,194
20,203
Ordinary shares issued*
1
11
–
–
12
Equity-settled share-based payments
25
–
–
2,465
955
3,420
Dividends paid
–
–
–
(9,877)
(9,877)
At 25 March 2023
7,739
88,522
5,959
115,498
217,718
* The issue of shares represents shares allotted to satisfy the 2018, 2020 and 2021 Sharesave schemes.
177
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Stock Code: SFR
FINANCIAL STATEMENTS
CONSOLIDATED CASH FLOW STATEMENT
Year ended 30 March 2024
Note
Year ended
30 March
2024
£000
Year ended
25 March
2023
£000
Net cash flow from operating activities
26
45,136
50,292
Cash flows from investing activities
Proceeds on disposal of other property, plant and equipment
408
317
Purchases of land and buildings
(410)
(635)
Purchases of intangible assets
–
(168)
Purchases of other property, plant and equipment
(10,911)
(5,668)
Acquisition of subsidiary, net of cash acquired
29
(22,551)
–
Investment in JVs and associates
(2,801)
–
Payment of deferred and contingent consideration
(1,183)
(8,534)
Net cash used in investing activities
(37,448)
(14,688)
Cash flows from financing activities
Interest paid
(3,220)
(2,495)
Dividends paid
(10,714)
(9,877)
Proceeds from shares issued
–
12
Purchase of own shares (net of SAYE cash received)
(3,120)
–
Proceeds from borrowings
19,000
–
Repayment of borrowings
(7,950)
(5,900)
Repayment of lease liabilities
(2,628)
(2,032)
Net cash used in financing activities
(8,632)
(20,292)
Net (decrease)/increase in cash and cash equivalents
(944)
15,312
Cash and cash equivalents at beginning of year
11,338
(3,974)
Cash and cash equivalents at end of year
27
10,394
11,338
Severfield plc Annual report and accounts
for the year ended 30 March 2024
178
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Year ended 30 March 2024
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 229. The registered number of the Company is 1721262. The nature of the Group’s
operations and its principal activities are set out on pages 6 to 15. 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
some 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 2024, trading is
shown for the 53-week period ended on 30 March 2024 (2023: 52-week period ended 25 March 2023). All references to ‘the year
ended 30 March 2024’, throughout the annual report, relate to the 53-week period ended 30 March 2024.
The financial statements of the Group’s joint venture, JSSL, are made up to the year ended 31 March 2024 (2023: year ended 31
March 2023).
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.
• IFRS 17 ‘Insurance Contracts’ and Amendments to IFRS 17 ‘Insurance contracts’;
• Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies
• Amendments to IAS 8 Account policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates
• Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction
• Amendments to IAS 12 Income Taxes: International Tax reform – Pillar Two Model Rules
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 2024.
• Amendments to IAS 1 ‘Classification of Liabilities as Current or Non-Current’;
• Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosure: Supplier Finance Arrangements.
• Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability
• Amendments to IAS 1 ‘Non-Current Liabilities with Covenants’ and;
• Amendments to IFRS 16 ‘Lease liability in a sale and lease back’.
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.
179
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Stock Code: SFR
FINANCIAL STATEMENTS
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 UK and Europe order book and the pipeline of potential future orders;
• The Group’s cash position and its borrowing 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)); and
• The current market trading conditions and the potential impact of significant downside risks linked to our principal risks on the
Group’s profits and cash flows.
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 2025 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).
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, certain one-off legal
and consultancy costs, and impairments.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Year ended 30 March 2024
Severfield plc Annual report and accounts
for the year ended 30 March 2024
180
1. Significant accounting policies continued
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.
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.
181
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Stock Code: SFR
FINANCIAL STATEMENTS
1. Significant accounting policies continued
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 probable 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.
• 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.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Year ended 30 March 2024
Severfield plc Annual report and accounts
for the year ended 30 March 2024
182
1. Significant accounting policies continued
• 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.
183
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Stock Code: SFR
FINANCIAL STATEMENTS
1. Significant accounting policies continued
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
1 per cent straight-line
Long leasehold buildings
Shorter of 1 per cent straight-line or lease term
Plant and machinery
10 per cent straight-line
Fixtures, fittings and office equipment
10 per cent written down value
Computer equipment
20 per cent straight-line
Motor vehicles
25 per cent written down value
Site safety equipment
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.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Year ended 30 March 2024
Severfield plc Annual report and accounts
for the year ended 30 March 2024
184
1. Significant accounting policies continued
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.
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 assets
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:
Amortisation
period
Customer relationships
3–5 years
Brands
5 years
Order book
18 months
185
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Stock Code: SFR
FINANCIAL STATEMENTS
1. Significant accounting policies continued
Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount
of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash
flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which
the asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an
indication that the asset may be impaired.
The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an
expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a
revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A
reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in
which case, the reversal of the impairment loss is treated as a revaluation increase.
Inventories
Inventories (raw materials and consumables and work in progress) are stated at the lower of cost and net realisable value. Cost
comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the
inventories to their present location and condition. Net realisable value represents the estimated selling price less all estimated
costs of completion and costs to be incurred in marketing, selling and distribution.
Financial instruments
Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the
contractual provisions of the instrument.
Trade and other receivables
Trade and other receivables are 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 bank overdrafts. Bank overdrafts are shown in current liabilities on the
balance sheet unless a legally enforceable 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.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Year ended 30 March 2024
Severfield plc Annual report and accounts
for the year ended 30 March 2024
186
1. Significant accounting policies continued
Share-based payment transactions
The Group issues equity-settled share-based payments. These share-based payments are measured at fair value at the date
of grant based on the Group’s estimate of shares that will eventually vest. The fair value determined is then expensed in the
consolidated income statement on a straight-line basis over the vesting period, with a corresponding increase in equity. Further
details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 23.
Provisions
Provisions are recognised when (i) the Group has a present legal or constructive obligation as a result of a past event, (ii) it
is probable that an outflow of resources will be required to settle the obligation; and (iii) the amount of the obligation can be
estimated reliably. Provisions are recognised for items such as legal claims, disputes and onerous contracts.
When the Group expects some or all of a provision to be reimbursed, for example under and insurance contract or a back-to-
back contractual agreement, the reimbursement is recognised as a seperate asset, but only when the reimbursement is virtually
certain. The expense relating to a provision is presented in the statement of profit or loss net of any reimbursement where the
virtually certain recognition criteria is met.
Provisions are discounted where appropriate to do so and the impact is material.
Derivative financial instruments and hedge accounting
The Group enters into certain foreign exchange forward contracts to manage its exposure to currency movements. Further details
of derivative financial instruments are disclosed in note 22.
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured
to their fair value at each balance sheet date. The resulting gain or loss is recognised in profit or loss, except where hedge
accounting is used, provided the conditions specified by IFRS 9 are met. Hedge accounting is applied in respect of hedge
relationships where it is both permissible under IFRS 9 and practical to do so. When hedge accounting is used, the relevant
hedging relationships are classified as cash flow hedges.
Where the hedging relationship is classified as a cash flow hedge, to the extent that the hedge is effective, changes in the fair
value of the hedging instrument will be recognised directly in other comprehensive income rather than in the income statement.
When the hedged item is recognised in the financial statements, the accumulated gains and losses recognised in other
comprehensive income will be recycled to the income statement (operating costs).
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer
qualifies for hedge accounting. At that point in time, any cumulative gain or loss on the hedging instrument recognised in other
comprehensive income is kept in other comprehensive income until the forecast 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.
A contract loss provision is measured at the present value of the lower of expected costs of terminating the contract and the
expected net costs of continuing with the contact, which is determined based on the incremental costs of fulfilling the obligation
under the contract and an allocation of other costs directly related to fulfilling the contract.
187
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Stock Code: SFR
FINANCIAL STATEMENTS
2. Critical accounting judgements and estimates continued
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 at which a significant reversal of revenue is highly probable not to
occur. 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 £7,000,000. 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 £36,800,000 (2023: £48,840,000), see note 18.
Contingent liabilities
On an ongoing basis the Group is a party to uncertain contract positions, various actions, disputes and circumstances that
could give rise to actions and disputes, the outcomes of which cannot be assessed with a high degree of certainty. A liability is
recognised only where, based on the directors' best estimate and taking into account legal and expert advice, it is considered
probable that an outflow of resources will be required to settle a present obligation that can be measured reliably. Disclosure of
contingent liabilities is made in note 28 unless the possibility of a loss arising is considered remote. These potential liabilities
are subject to uncertain future events, may extend over several years and their timing may differ from current assumptions.
Management applies its judgement in determining whether or not a liability on the balance sheet should be recognised or a
contingent liability should be disclosed.
Identification of intangible assets arising on the acquisition of VSCH
Under IFRS 3, Business Combinations, the identification of intangible assets acquired in a business combination requires
judgment. This judgment involves determining whether identifiable intangible assets exist apart from goodwill and recognising
them separately. An intangible asset is identifiable if it meets either the separability criterion or the contractual-legal criterion.
Management have used external advisers to assist with the process of identification of intangible assets and are comfortable
that this is in line with the requirements of IFRS 3. Further details are disclosed in note 29.
Retirement benefit obligations
The Group’s defined benefit pension scheme has been valued in accordance with IAS 19 ‘Employee Benefits’. The benefit obligation
is calculated using a number of assumptions, including forecast discount and mortality rates (as disclosed in note 30). The
present value of the benefit obligations is calculated by discounting the benefit obligation using market rates on relevant AA
corporate bonds at the balance sheet date.
Significant judgement is required in setting the criteria for the valuation of the liability. Effects of changes in the actuarial
assumptions underlying the benefit obligation, discount rates and the difference between expected and actual returns on the
scheme’s assets are classified as actuarial gains and losses.
The defined benefit obligation recognised at the balance sheet date was £11,464,000 (2023: £12,871,000).
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:
2024
£000
2023
£000
Revenue from construction contracts
463,465
491,753
Other operating income (note 4)
1,870
1,852
Interest received (note 7)
320
133
Total income
465,655
493,738
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Year ended 30 March 2024
Severfield plc Annual report and accounts
for the year ended 30 March 2024
188
3. Revenue and segmental analysis continued
Segmental results
In line with the requirements of IFRS 8, operating segments are identified on the basis of the information that is regularly reported
and reviewed by the chief operating decision maker (‘CODM’). The Group’s CODM is deemed to be the executive committee, who
are primarily responsible for the allocation of resources and the assessment of performance of the segments. Consistent with
previous periods, management continues to identify multiple operating segments, primarily at an individual statutory entity level,
which are reported and reviewed by the CODM. For the purpose of presentation under IFRS 8, the individual operating segments
meet the aggregation criteria that allows them to be aggregated and presented as one reportable segment for the Group. However,
in the current year, management consider it appropriate to disclose two operating segments as described below.
• Core Construction Operations – comprising the combined results of the Commercial and Industrial (‘C&I’) and Nuclear and
Infrastructure (‘N&I’) divisions, including the results of Voortman Steel Construction Holding ('VSCH').
• Modular Solutions – Comprising Severfield Modular Solutions ('SMS') and the Group’s share of profit (50%) from the joint
venture company, Construction Metal Forming Limited (‘CMF’).
The separate presentation of the modular businesses, as ‘Modular solutions’, aligns with the maturity of the SMS business,
which was established in 2018. In the current year it has reduced the levels of intercompany fabrication work as it grows external
revenues from its core products.
The constituent operating segments that make up ‘Core Construction Operations’ have been aggregated because the nature
of the products across the businesses, whilst serving different market sectors, are consistent in that they relate to the design,
fabrication and erection 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 C&I and N&I divisions were established in 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 and
are therefore presented as such within Core Construction Operations.
Segment assets and liabilities are not presented as these are not reported to the CODM.
Year ended 30 March 2024:
Core
Construction
Operations
£000
Modular
Solutions
£000
JSSL
£000
Central
costs/
eliminations
£000
Total
£000
Revenue
449,168
21,489
–
(7,192)
463,465
Underlying operating profit
37,430
260
–
–
37,690
Underlying operating profit margin
8.3%
1.2%
8.1%
Results from joint ventures (note 15)
- Construction Metal Forming Limited
–
92
–
–
92
- JSSL
–
–
1,858
–
1,858
Finance expense (note 7)
–
–
–
(3,095)
(3,095)
Underlying profit before tax
37,430
352
1,858
(3,095)
36,545
Non-underlying items (note 5)
(14,270)
(115)
–
860
(13,525)
Profit before tax
23,160
237
1,858
(2,235)
23,020
Other material items of income and expense
– Depreciation of owned property, plant and
equipment (note 13)
(6,317)
(163)
–
–
(6,480)
– Depreciation of right-of-use assets (note 14)
(2,644)
(39)
–
–
(2,683)
– Other operating income (note 4)
1,625
245
–
–
1,870
189
www.severfield.com
Stock Code: SFR
FINANCIAL STATEMENTS
3. Revenue and segmental analysis continued
Year ended 25 March 2023*:
Core
Construction
Operations
£000
Modular
Solutions
£000
JSSL
£000
Central
costs/
eliminations
£000
Total
£000
Revenue
476,815
22,820
–
(7,882)
491,753
Underlying operating profit
33,705
(638)
–
–
33,067
Underlying operating profit margin
7.1%
(2.8%)
6.7%
Result from joint ventures (note 15)
– Construction Metal Forming Limited
–
583
–
–
583
– JSSL
–
–
1,315
–
1,315
Finance expense (note 7)
–
–
–
(2,489)
(2,489)
Underlying profit before tax
33,705
(55)
1,315
(2,489)
32,476
Non-underlying items (note 5)
(3,338)
–
–
(2,031)
(5,369)
Profit before tax
30,367
(55)
1,315
(4,520)
27,107
Other material items of income and expense
– Depreciation of owned property, plant and
equipment (note 13)
(5,247)
(160)
–
–
(5,407)
– Depreciation of right-of-use assets (note 14)
(1,816)
(24)
–
–
(1,840)
– Other operating income (note 4)
1,659
193
–
–
1,852
* Comparative information has been restated to provide additional segmental disclosures.
Revenue
All revenue is derived from construction contracts and related assets. Additional disclosures are made under IFRS 15 to enable
users to understand the relative size of the divisions. An analysis of the Group’s revenue is as follows:
2024
£000
2023*
£000
– Commercial and Industrial
361,734
382,055
– Nuclear and Infrastructure
87,434
94,760
Total revenue from Core Construction Operations
449,168
476,815
Modular Solutions
21,489
22,820
Elimination of inter-segment revenue (Modular Solutions)
(7,192)
(7,882)
Total Group revenue
463,465
491,753
* Comparative information has been restated to provide additional segmental disclosures.
Geographical information
The following table presents revenue according to the primary geographical markets in which the Group operates. This
disaggregation of revenue is presented for the Group’s two operating segment described above.
Core Construction Operations – revenue by destination
2024
£000
2023*
£000
United Kingdom
367,127
437,741
Republic of Ireland and continental Europe
82,041
39,074
449,168
476,815
* Comparative information has been restated to provide additional segmental disclosures.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Year ended 30 March 2024
Severfield plc Annual report and accounts
for the year ended 30 March 2024
190
3. Revenue and segmental analysis continued
Modular Solutions – revenue by destination
2024
£000
2023*
£000
United Kingdom
17,486
18,195
Rest of world
4,003
4,625
21,489
22,820
Elimination of intercompany revenue (UK)
(7,192)
(7,882)
14,297
14,938
Non-current asset geography
The following table provides information about the geography of non-curent assets excluding goodwill as this asset is not
attributable to a geographical location.
Non-current assets by destination
2024
£000
2023*
£000
United Kingdom
151,856
146,111
Rest of world
8,979
98
160,835
146,209
Contract balances
The following table provides information about the receivables, contract assets and contract liabilities from contracts with
customers:
2024
£000
2023
£000
Trade and other receivables (note 18)
38,788
42,838
Contract assets (note 18)
36,800
48,840
Contract liabilities (note 19)
(4,489)
(19,584)
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 30 March 2024 and have an original expected contract duration of more than one year:
2025
£000
2026
£000
Construction contracts
111,948
26,823
The total transaction price allocated to the remaining performance obligations represents the contracted revenue to be earned by
the Group for goods and services which the Group has promised to deliver to its customers, where the original contract duration
is more than one year. This includes performance obligations which are partially satisfied at the year end or those which are
unsatisfied but which the Group has committed to providing. 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
Group revenue includes revenue of £100,189,000 (2023: £135,318,000), relating to one major client (2023: two major clients), who
individually contributed more than 10 per cent of Group revenue in the year ended 30 March 2024.
191
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Stock Code: SFR
FINANCIAL STATEMENTS
4. Operating costs
2024
£000
2023
£000
Raw materials and consumables (including subcontractor costs)
234,916
307,766
Staff costs (note 6)
116,440
99,479
Other operating charges
66,524
45,364
Amortisation of other intangible assets (note 12)
90
79
Operating lease expense:
– plant and machinery
217
179
– land and buildings
137
190
– motor vehicles
158
234
Depreciation (notes 13 and 14):
– owned property, plant and equipment
6,480
5,407
– right-of-use assets
2,683
1,840
Other operating income
(1,870)
(1,852)
Operating costs before non-underlying items
425,775
458,686
Non-underlying items (note 5)
13,225
4,811
439,000
463,497
Other operating charges include:
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts
60
45
Fees payable to the Company’s auditor for other services:
– the audit of the Company’s subsidiaries pursuant to legislation
840
650
– audit-related assurance services
96
25
– other assurance services
–
–
Other operating income mainly represents research and development tax credits.
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 126 and 129. No
services were performed pursuant to contingent fee arrangements.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Year ended 30 March 2024
Severfield plc Annual report and accounts
for the year ended 30 March 2024
192
5. Non-underlying items
2024
£000
2023
£000
Operating costs
13,225
4,811
Finance expense
300
558
Non-underlying items before tax
13,525
5,369
Tax on non-underlying items (note 5)
(1,957)
(697)
Non-underlying items after tax
11,568
4,672
Non-underlying items before tax consist of:
2024
£000
2023
£000
Amortisation of acquired intangible assets (note 12)
5,399
3,338
Legacy employment tax charge
4,413
–
Asset impairment charges (note 13)
4,543
–
Unwinding of discount on contingent consideration – DAM Structures
300
558
Fair value adjustment to contingent consideration– DAM Structures
(1,130)
(343)
Acquisition-related expenses – VSCH
–
1,816
Non-underlying items before tax
13,525
5,369
The amortisation of acquired intangible assets of £5,399,000 (2023: £3,338,000) represents the amortisation of customer
relationships, order books and brand name, which were identified on the acquisitions of Harry Peers, DAM Structures and VSCH in
2020, 2021 and 2023, respectively.
The asset impairment charge of £4,543,000 relates to the impairment of assets at our leasehold facility in Sherburn. During the
year, we were advised of the landlord's intention to terminate the factory lease. As a result, an impairment review of property,
plant and equipment was performed, resulting in a non-cash charge.
The legacy employment tax charge of £4,413,000 relates to an assessment raised by HMRC for historical income tax and national
insurance ('NIC') liabilities. The Group disputes the charge and is in ongoing discussions with HMRC to bring this matter to a
conclusion. Notwithstanding this, since HMRC has issued formal determinations for the amounts it considers are due, a charge of
£4,413,000 has been recognised, including interest of £428,000.
In the prior year acquisition-related expenses of £1,816,000, represent acquisition and transaction costs associated with the
VSCH acquisition.
The basis for stating results on an underlying basis is set out on pages 180 and 181. 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 33.
6. Staff costs
Details of directors’ remuneration for the year are provided in the audited part of the directors’ remuneration report on
page 138.
The average number of persons employed by the Group (including executive directors) during the year was:
2024
Number
2023
Number
Production and site
1,551
1,402
Sales and administration
367
317
1,918
1,719
193
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Stock Code: SFR
FINANCIAL STATEMENTS
6. Staff costs continued
The aggregate payroll costs of these persons were as follows:
2024
£000
2023
£000
Wages and salaries
100,061
86,131
Social security costs
11,587
9,188
Other pension costs
4,792
4,160
116,440
99,479
In addition, in 2024 there were share-based payment charges of £1,589,000 (2023: £3,420,000), as detailed in note 23.
7. Net finance expense
2024
£000
2023
£000
Finance income
(320)
(133)
Finance expense
3,395
2,622
3,095
2,489
Unwinding of discount on contingent consideration
300
558
3,395
3,047
8. Taxation
a) The taxation charge comprises:
2024
£000
2023
£000
Current tax
Corporation tax charge
(5,649)
(5,460)
Foreign tax relief/other relief
70
51
Foreign tax suffered
(70)
(51)
Adjustments to prior years’ provisions
136
60
(5,513)
(5,400)
Deferred tax (note 21)
Current year charge
(973)
(144)
Impact of change in future years’ tax rates
–
(14)
Adjustments to prior years’ provisions
(633)
17
(1,606)
(141)
(7,119)
(5,541)
b) Tax reconciliation
The charge for the year can be reconciled to the profit per the income statement as follows:
2024
£000
2023
£000
Profit before tax
23,020
27,107
Tax on profit at standard UK corporation tax rate
(5,755)
(5,150)
Expenses not deductible for tax purposes
(1,381)
(1,068)
Income not taxable
97
234
Effect of overseas tax rate
(57)
–
Tax effect of share of results of JVs and associates
474
380
Adjustments to prior years’ provisions
(497)
77
Rate differences
–
(14)
(7,119)
(5,541)
Legislation to increase the UK standard rate of corporation tax from 19% to 25% was substantively enacted on 24 May 2021,
effective from 1 April 2023, which has resulted in a UK corporation tax rate of 25% in 2024. The UK deferred tax is calculated at
25%. The overseas tax is calculated at the rates prevailing in the respective jurisdictions.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Year ended 30 March 2024
Severfield plc Annual report and accounts
for the year ended 30 March 2024
194
9. Dividends
2024
£000
2023
£000
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 25 March 2023 of 2.1p per share (2023: 1.9p)
6,423
5,864
Interim dividend for the year ended 30 March 2024 of 1.4p per share (2023: 1.3p)
4,291
4,013
10,714
9,877
The directors are recommending a final dividend of 2.3p per share (2023: 2.1p). This, together with the interim dividend of 1.4p per
share (2023:1.3p) will result in a total dividend of 3.7p per share (2023: 3.4p).
10. Earnings per share
Earnings per share is calculated as follows:
2024
£000
2023
£000
Earnings for the purposes of basic earnings per share being net profit
attributable to equity holders of the parent Company
15,901
21,566
Earnings for the purposes of underlying basic earnings per share being underlying
net profit attributable to equity holders of the parent Company
27,469
26,238
Number
Number
Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings per share
307,131,912
309,533,696
Effect of dilutive potential ordinary shares
3,093,177
3,239,813
Weighted average number of ordinary shares for the purposes of diluted earnings per share
310,225,089
312,773,509
Basic earnings per share
5.18p
6.97p
Underlying basic earnings per share
8.94p
8.48p
Diluted earnings per share
5.13p
6.90p
Underlying diluted earnings per share
8.85p
8.39p
Reconciliation of earnings
2024
£000
2023
£000
Net profit attributable to equity holders of the parent Company
15,901
21,566
Non-underlying items (note 5)
11,568
4,672
Underlying net profit attributable to equity holders of the parent Company
27,469
26,238
Basic earnings per share is calculated by dividing the profit after tax attributable to equity holders of the parent by the weighted
average number of ordinary shares in issue during the year, excluding those shares held in employee benefit trusts. Shares held in
employee benefit trusts are treated as cancelled because, except for a nominal amount, dividends have been waived.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all
potentially dilutive ordinary shares from the vesting of share awards. Underlying earnings per share calculations are included to
give a better indication of the Group's underlying performance.
195
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Stock Code: SFR
FINANCIAL STATEMENTS
11. Goodwill
The goodwill balance was created on the following acquisitions:
£000
On the Voortman Steel Construction Holdings acquisition in 2023
16,281
On the DAM Structures acquisition in 2022
11,474
On the Harry Peers acquisition in 2019
16,002
On the Fisher Engineering acquisition in 2007
47,980
On the Atlas Ward acquisition in 2005
6,571
On the Watson Steel Structures acquisition in 2001
161
98,469
All of the acquisitions above are included in one reported segment (Core Construction Operations) 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 five 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.
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 2.0 per cent (2023: 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 13.0 per cent (2023: 12.5
per cent).
Following the impairment reviews performed by the Group, no impairment charge was recorded in the year ended 30 March 2024.
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
30 March 2024.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Year ended 30 March 2024
Severfield plc Annual report and accounts
for the year ended 30 March 2024
196
12. Other intangible assets
Intangible
assets
acquired on
acquisition
£000
Other
intangible
assets
£000
Total
£000
Cost
At 27 March 2022
19,504
1,508
21,012
Additions
–
168
168
At 26 March 2023
19,504
1,676
21,180
Additions
3,902
–
3,902
At 30 March 2024
23,406
1,676
25,082
Amortisation
At 27 March 2022
9,454
1,215
10,669
Charge for the year
3,338
78
3,416
At 26 March 2023
12,792
1,293
14,085
Charge for the year
5,399
90
5,489
At 30 March 2024
18,191
1,383
19,574
Carrying amount
At 30 March 2024
5,215
293
5,508
At 25 March 2023
6,712
383
7,095
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:
Customer
relationships
£000
Brands
£000
Order
book
£000
Total
£000
Cost
At 27 March 2022
14,923
813
3,768
19,504
At 26 March 2023
14,923
813
3,768
19,504
Additions
2,512
–
1,390
3,902
At 30 March 2024
17,435
813
5,158
23,406
Amortisation
At 27 March 2022
5,316
370
3,768
9,454
Charge for the year
3,190
148
–
3,338
At 26 March 2023
8,506
518
3,768
12,792
Charge for the year
3,714
295
1,390
5,399
At 30 March 2024
12,220
813
5,158
18,191
Carrying amount
At 30 March 2024
5,215
–
–
5,215
At 25 March 2023
6,417
295
–
6,712
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
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Stock Code: SFR
FINANCIAL STATEMENTS
13. Property, plant and equipment
Land and
buildings
£000
Plant
and
machinery
£000
Fixtures,
fittings
and office
equipment
£000
Motor
vehicles
£000
Total
£000
Cost
At 27 March 2022
73,423
51,065
11,893
379
136,760
Additions
635
5,008
660
–
6,303
Disposals
–
(847)
(24)
(84)
(955)
At 26 March 2023
74,058
55,226
12,529
295
142,108
Additions
410
7,929
2,322
660
11,321
Acquisition of subsidiary (note 29)
–
3,732
156
690
4,578
Disposals
–
(3,307)
(723)
(342)
(4,372)
Exchange adjustments
–
(162)
(5)
(27)
(194)
At 30 March 2024
74,468
63,418
14,279
1,276
153,441
Accumulated depreciation
At 27 March 2022
8,012
32,268
4,926
118
45,324
Charge for the year
748
3,405
1,165
89
5,407
Disposals
–
(615)
(14)
(61)
(690)
At 26 March 2023
8,760
35,058
6,077
146
50,041
Charge for the year
797
4,052
1,307
324
6,480
Impairments
4,428
89
26
–
4,543
Disposals
–
(3,201)
(633)
(223)
(4,057)
At 30 March 2024
13,985
35,998
6,777
247
57,007
Carrying amount
At 30 March 2024
60,483
27,420
7,502
1,029
96,434
At 25 March 2023
65,298
20,168
6,452
149
92,067
The impairment charge to land and buildings is included in the consolidated income statement as part of operating costs and is
classified as a non-underlying item. See note 5 for further details.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Year ended 30 March 2024
Severfield plc Annual report and accounts
for the year ended 30 March 2024
198
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:
Land and
buildings
£000
Plant and
equipment
£000
Motor
Vehicles
£000
Total
£000
Cost
At 27 March 2022
10,212
3,033
2,077
15,322
Additions
1,576
1,285
984
3,845
Disposals
(421)
(2)
(771)
(1,194)
At 26 March 2023
11,367
4,316
2,290
17,973
Additions
888
1,495
1,095
3,478
Acquisition of subsidiary (note 29)
4,880
–
161
5,041
Disposals
–
(54)
(500)
(554)
Exchange adjustments
(131)
–
(8)
(139)
At 30 March 2024
17,004
5,757
3,038
25,799
Accumulated depreciation
At 27 March 2022
2,631
372
1,249
4,252
Charge for the year
964
306
570
1,840
Disposals
(421)
(2)
(714)
(1,137)
At 26 March 2023
3,174
676
1,105
4,955
Charge for the year
1,419
700
564
2,683
Disposals
(2)
(54)
(426)
(482)
Exchange adjustments
(5)
–
(3)
(8)
At 30 March 2024
4,586
1,322
1,240
7,148
Carrying amount
At 30 March 2024
12,418
4,435
1,798
18,651
At 25 March 2023
8,193
3,640
1,185
13,018
15. Interests in JVs and associates
The Group has an interest in an associated company and three joint ventures as follows:
Holding
%
Class of
capital
Associated companies:
Fabsec Limited — Development of fire beam
33.0
Ordinary
Joint ventures:
JSW Severfield Structures Limited — Structural steelwork serving the Indian market
50.0
Ordinary
Construction Metal Forming Limited — Manufacturer of cold rolled metal products
50.0
Ordinary
Bouwcombinatie Van Wijnen — Dormant
50.0
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.
During the year the Group invested a further £2,767,000 (2023: £nil) into JSW Severfield Structures Limited for the purchase of
land in Gujarat to facilitate future expansion. The Group did not make any further investments in Construction Metal Forming
Limited, Fabsec Limited or Bouwcombinatie Van Wijnen during the year (2023: £nil).
199
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Stock Code: SFR
FINANCIAL STATEMENTS
15. Interests in JVs and associates continued
Goodwill
£000
Share of net
assets/
(liabilities)
£000
Total
£000
At 27 March 2022
5,326
24,810
30,136
Profit retained
–
1,898
1,898
Deferred tax adjustments
–
(250)
(250)
At 26 March 2023
5,326
26,458
31,784
Profit retained
–
1,950
1,950
Share of other comprehensive income
–
869
869
Acquisition of subsidiary (note 29)
–
94
94
Investments
–
2,801
2,801
Deferred tax adjustments
–
(134)
(134)
At 30 March 2024
5,326
32,038
37,364
The Group’s share of the retained profit for the year of JVs and associates is made up as follows:
Share of results
Fabsec
Limited
£000
JSW
Severfield
Structures
Limited
£000
CMF
Limited
£000
Bouwcombinatie
Van Wijnen
£000
Total
£000
2024
–
1,858
92
–
1,950
2023
–
1,315
583
–
1,898
Summarised financial information in respect of the Group’s JVs and associates is as follows:
Fabsec
Limited
£000
JSW
Severfield
Structures
Limited
£000
CMF
Limited
£000
Bouwcombinatie
Van Wijnen
£000
2024
£000
2023
£000
Current assets
184
118,352
10,459
219
129,214
122,567
Non-current assets
–
26,001
24,685
–
50,686
36,380
Current liabilities
(17)
(98,268)
(14,826)
(36)
(113,147)
(107,696)
Non-current liabilities
–
(2,724)
(9,532)
–
(12,256)
(6,594)
Net assets
167
43,361
10,786
183
54,497
44,657
Group’s share of net (liabilities)/
assets
84
21,681
5,393
91
27,249
22,550
Goodwill
–
–
5,326
–
5,326
5,326
Investment
–
–
2,444
–
2,444
2,444
Impact of foreign exchange on
share of net assets
–
923
–
–
923
671
Accounting policy alignment
(84)
1,357
116
33
1,422
793
Carrying amount of interest in
JVs and associates
–
23,961
13,279
124
37,364
31,784
Revenue
177
130,773
29,107
–
160,057
178,571
Depreciation and amortisation
(1)
(2,674)
(136)
–
(2,811)
(2,368)
Net finance expense
–
(5,590)
(638)
–
(6,228)
(5,508)
Taxation
–
(575)
50
–
(525)
(1,223)
Profit after tax
1,049
3,716
184
–
4,949
3,851
Group’s share of profit after tax
–
1,858
92
–
1,950
1,898
There were no contingent liabilities or capital commitments (2023: none) associated with the Group’s JVs and associates.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Year ended 30 March 2024
Severfield plc Annual report and accounts
for the year ended 30 March 2024
200
16. Inventories
2024
£000
2023
£000
Raw materials and consumables
11,377
12,328
Work-in-progress
271
903
11,648
13,231
17. Construction contracts
2024
£000
2023
£000
Contracts-in-progress at balance sheet date:
Amounts due from construction contract customers included in contract assets, trade and other
receivables
75,558
91,678
Amounts due to construction contract customers included in trade and other payables (note 19)
(4,489)
(19,584)
71,069
72,094
Contract costs incurred plus recognised profits less recognised losses to date
489,085
722,342
Less: progress billings received
(418,016)
(650,248)
71,069
72,094
18. Contract assets, trade and other receivables
Current assets
2024
£000
2023
£000
Amounts due from construction contract customers (note 17):
Trade and other receivables
37,738
40,593
Contract assets
36,800
48,840
Total
74,538
89,433
Other receivables
5,232
7,281
Prepayments and accrued income
8,199
11,027
Amounts due from JVs and associates
365
1,980
88,334
109,721
Non-current assets
2024
£000
2023
£000
Trade and other receivables
1,050
2,245
1,050
2,245
Contract assets of £36,800,000 (2023: £48,840,000) 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 average credit period taken on revenue, calculated on a count-back basis to make appropriate allowance for monthly revenue
phasing, is 57 days (2023: 85 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 where
possible 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 as required. The Group has rigorous
procedures in place for monitoring and obtaining settlement of retentions in a prompt manner. Overdue retentions at 30 March
2024 were £nil (2023: £nil).
201
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Stock Code: SFR
FINANCIAL STATEMENTS
19. Contract liabilities, trade and other payables
2024
£000
2023
£000
Trade creditors
28,690
36,284
Other taxation and social security
5,777
4,432
Other creditors and accruals
37,502
37,645
Contract liabilities (note 17)
4,489
19,584
Amounts owed to JVs and associates
2,476
4,754
78,934
102,699
In the current year, other creditors and accruals includes the outstanding contingent purchase consideration for DAM Structures
of £120,000 (2023: £881,000) which is payable in the next 12 months.
Contract liabilities of £4,489,000 (2023: £19,584,000) reflect advance payments from customers for construction contracts for
which revenue has not been recognised as at 30 March 2024.
Non-current liabilities
2024
£000
2023
£000
Other creditors and accruals
1,095
2,377
1,095
2,377
Non-current other creditors and accruals in the current and prior year reflects the outstanding contingent purchase consideration
for DAM Structures of £1,095,000 (2023: £2,377,000) which is payable in the next two 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 36 days (2023: 39 days).
20. Provisions
Legacy
employment
tax
Loss
provisions
Total
Balance at 26 March 2023
–
–
–
Provisions made during the year
4,413
8,446
12,859
Provisions used during the year
(1,040)
–
(1,040)
Balance at 30 March 2024
3,373
8,446
11,819
For all provisions, the resulting cash outflows are expected to occur within 12 months.
Legacy employment tax charge
During the year, HMRC raised an assessment for historical income tax and national insurance (‘NIC’) liabilities. The Group disputes
the charge and is in ongoing discussions with HMRC to bring this matter to a conclusion. Notwithstanding this, since HMRC
has issued formal determinations for the amounts it considers are due, a provision has been recognised to reflect the amounts
claimed by HMRC.
Loss provisions
The Group has provided for certain losses where the costs of fulfilling our obligations under construction contracts exceed the
current forecast revenue. These are assessed in line with the details set out in our critical accounting judgement, in note 2, and
the criteria stipulated in IFRS 15.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Year ended 30 March 2024
Severfield plc Annual report and accounts
for the year ended 30 March 2024
202
21. 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:
2024
£000
2023
£000
Deferred tax liabilities
(11,865)
(11,661)
Deferred tax assets
3,493
4,682
(10,037)
(6,979)
Deferred tax assets and liabilities are offset against each other in the balance sheet where this is permitted and/or required by
IAS 12. Where they are not offset, this is shown as a non current asset in the balance sheet. At the year end £1,828,000 (2023:
£nil) related to foreign deferred tax assets and deferred tax assets on right of use assets and hence have been classified as non
current assets.
Excess
capital
allowances
£000
Acquired
intangible
assets
£000
Retirement
benefit
£000
Trading
losses
£000
Other
£000
Total
£000
At 27 March 2022
(9,682)
(2,201)
3,599
446
672
(7,166)
Prior year adjustment
1
–
–
–
16
17
(Charge)/credit to income statement
(615)
834
(557)
(105)
285
(158)
Charge to other comprehensive income
–
–
175
–
153
328
At 26 March 2023
(10,296)
(1,367)
3,217
341
1,126
(6,979)
Prior year adjustment
(140)
(312)
–
–
(181)
(633)
(Charge)/credit to income statement
(1,402)
1,367
(538)
(341)
(59)
(973)
(Charge)/credit to other comprehensive
income
–
–
186
–
(398)
(212)
Acquisition of subsidiary (note 29)
(373)
(1,007)
–
–
140
(1,240)
At 30 March 2024
(12,211)
(1,319)
2,865
–
628
(10,037)
22. Financial instruments
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while optimising the
return to stakeholders. The capital structure of the Group consists of debt, which includes borrowings, cash and cash equivalents
and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings.
The Group monitors capital using the following indicators:
i) Gearing ratio
2024
£000
2023
£000
Borrowings
(20,000)
(8,950)
Cash and cash equivalents (net of overdraft)
10,394
11,338
Unamortised debt arrangement fees
235
321
Net (debt)/funds
(9,371)
2,709
Equity
220,751
217,718
Net debt to equity ratio
4.2%
(1.2%)
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 (debt)/funds as they are excluded from the definition of net
(debt)/funds as set out in the Group’s borrowing facilities.
203
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Stock Code: SFR
FINANCIAL STATEMENTS
22. Financial instruments continued
ii) Return on capital employed
Underlying operating profit divided by the average of opening and closing capital employed. Capital employed is defined as
shareholders’ equity after adding back retirement benefit obligations (net of tax), acquired intangible assets and net (debt)/funds.
2024
£000
2023
£000
Underlying operating profit
Underlying operating profit (before JVs and associates)
37,690
33,067
Share of results of JVs and associates
1,950
1,898
39,640
34,965
Capital employed:
Shareholders’ equity
220,751
217,718
Cash and cash equivalents (net of overdrafts)
(10,394)
(11,338)
Borrowings
20,000
8,950
Net debt/(funds) (for ROCE purposes)
9,606
(2,388)
Acquired intangible assets (note 12)
(5,215)
(6,712)
Retirement benefit obligations (net of deferred tax) (note 30)
8,599
9,654
233,741
218,272
Average capital employed
226,007
220,902
Return on capital employed
17.5%
15.8%
Categories of financial instruments
Carrying value
2024
£000
2023
£000
Financial assets
Cash and cash equivalents
13,803
11,338
Trade and other receivables (note 18)
38,788
42,838
Derivative financial instruments
675
25
Financial liabilities
Bank overdrafts
(3,409)
–
Trade creditors (note 19)
(28,690)
(36,284)
Other creditors and accruals (note 19)
(38,597)
(40,022)
Lease liabilities
(19,073)
(13,396)
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).
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Year ended 30 March 2024
Severfield plc Annual report and accounts
for the year ended 30 March 2024
204
22. Financial instruments continued
Derivative financial instruments and contingent consideration are 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 30 March 2024 were £5,332,000 (2023: £7,146,000).
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.
The Group manages the collection of retentions through its post-completion project monitoring procedures and ongoing contact
with customers so as to ensure that potential issues that could lead to the non-payment of retentions are addressed as soon as
they are identified.
Amounts outstanding from construction contract customers are due with reference to the payment terms for each particular
contract but the majority would be receivable within four months from the end of the reporting period. Amounts due for
settlement after 12 months are disclosed in note 18.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as and when they fall due. The ultimate
responsibility for liquidity risk rests with the board.
The Group generates cash through its operations and aims to manage liquidity by ensuring that it will always have sufficient
financing facilities to meet its liabilities when due, under both normal and stress conditions, without incurring unacceptable
losses or risking damage to the Group’s reputation. Forecast and actual cash flow is continuously monitored.
The Group has a £60m revolving credit facility (‘RCF’) with HSBC Bank PLC and Virgin Money which matures in December 2026.
This facility provides additional liquidity following the VSCH acquisition and to support the continued growth strategy of the
Group. The RCF is 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 30 March 2024.
205
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Stock Code: SFR
FINANCIAL STATEMENTS
22. Financial instruments continued
As at 30 March 2024, £56,591,000 (2023: £60,000,000) of this facility was not drawn but available. Up to £15,000,000 of this
facility is available by way of an overdraft (2023: £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.
Maturity analysis
Carrying
value
£000
Less than
3 months
£000
3 months
to 1 year
£000
1–2
years
£000
2–5
years
£000
5+
years
£000
Total
£000
Liabilities – 2024
Trade and other
payables
67,287
61,185
4,923
619
560
–
67,287
Financial liabilities –
leases
19,073
1,436
2,727
3,248
6,245
9,996
23,652
Borrowings
20,000
1,900
5,537
7,003
8,199
–
22,639
118,179
76,340
13,187
10,870
15,004
9,996
125,397
Liabilities – 2023
Trade and other
payables
77,845
72,821
2,649
658
1,717
–
77,845
Financial liabilities –
leases
13,396
630
1,899
2,187
5,025
8,338
18,079
Borrowings
8,950
1,598
2,982
2,654
2,498
–
9,732
100,191
75,049
7,530
5,499
9,240
8,338
105,656
The Group’s debt facility consists of the revolving credit facility of which £nil is drawn and the overdraft facility of which £3.4m
is drawn. This agreement expires in December 2026. In addition £20m is outstanding on the acquisition term loans, which is
repayable in instalments until December 2026. Interest on both agreements is charged at a floating rate based on SONIA plus a
variable margin.
Reconciliation of movements of liabilities to cash flows arising from financing activities
Loans
Lease
liabilities
Balance at 26 March 2023
8,950
13,396
Changes from financing cashflows
Payments of borrowings
(7,950)
–
New borrowings
19,000
–
Interest paid
(1,696)
(882)
Payments of lease liabilities
–
(2,628)
Total changes arising from financing cash flows
9,354
(3,510)
Other changes
Interest expense
1,696
882
Acquired on acquisition
–
5,042
New leases
–
3,324
Lease disposals
–
(61)
Total other changes
1,696
9,187
Balance at 30 March 2024
20,000
19,073
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.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Year ended 30 March 2024
Severfield plc Annual report and accounts
for the year ended 30 March 2024
206
22. 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:
Liabilities
Assets
2024
£000
2023
£000
2024
£000
2023
£000
Euro
(14,574)
(3,831)
35,314
10,672
US dollar
(5)
(18)
16
2
(14,579)
(3,849)
35,330
10,674
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.
US dollar currency
impact
Euro currency
impact
2024
£000
2023
£000
2024
£000
2023
£000
Profit or loss and equity
1
2
230
118
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 30 March 2024, derivatives designated as cash flow hedges were an asset of £675,000 (2023: £25,000) and
recognised total gains of £925,000 (2023: losses of £904,000) in equity and losses of £274,000 (2023: gains of £256,000) in profit
and loss in the year.
At 30 March 2024, the Group had forward exchange contracts of 18.5m Euros (2023: 5.7m Euros) at an average exchange rate of
€1.14/£ (2023: €1.13/£) which mature within 12 months of the year end. In addition, the Group had forward exchange contracts of
498m SEK (2023: nil) at an average exchange rate of 13.34 (2023: N/A) which mature within 12 months of the year end.
207
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Stock Code: SFR
FINANCIAL STATEMENTS
22. Financial instruments continued
Interest rate risk management
The Group is exposed to interest rate risk as described under the market risk paragraph earlier in this note. The Group does not
currently hedge any of its interest rate exposure.
Interest rate sensitivity analysis
The sensitivity analysis below has been determined based on the exposure to interest rates at the balance sheet date. For floating
rate liabilities, the analysis is prepared assuming the gross amount of liability outstanding at balance sheet date was outstanding
for the whole period. A 0.5 per cent increase or decrease is used when reporting interest rate risk internally to key management
personnel and represents management’s assessment of the reasonably possible change in interest rates.
If interest rates had been 0.5 per cent higher and all other variables were held constant, the Group’s profit for the year ended 30
March 2024 and the Group’s equity at that date would decrease by £172,000 (2023: £173,000). 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.
23. 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 audited section of the directors’ remuneration report on pages 134 to 162. The Group recognised a total charge of
£1,589,000 (2023: £3,420,000) relating to its performance share plan and Sharesave scheme.
Performance share plan
The vesting of awards under PSP is subject to performance conditions set by the remuneration committee. The Group recognised
a total charge of £428,000 for the year (2023: £2,352,000) with a corresponding entry to reserves. The weighted average fair value
of share options granted during the year was £0.61 per share. Three outstanding awards had been granted to 30 March 2024:
During the year ended 26 March 2022 the remuneration committee granted 2,709,748 ordinary shares of 2.5p each at £nil value.
The vesting of these awards was 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
% of award vesting
Equal to less than 7.61p
0%
Equal to 9.92p or better
100%
Between 7.61p and 9.92p
between 25% and 100%
The assumptions used to measure the fair value of the shares granted are as follows:
Share price on date of grant
£0.81*
Exercise price
nil
Expected volatility (using historical performance)
94%
Risk-free rate
0.3%
Dividend
3.1p
Actual life
three years
* Granted on 17 June 2021.
The Black Scholes pricing model was used, with the above assumptions, to produce a grant date fair value of £1,929,000.
Subsequently, in line with IFRS 2, an annual charge is calculated based on the expected number of options to vest when factoring
in changes to non-market conditions. For FY24 this charge was £87,000 (FY23: £839,000).
During the period ended 25 March 2023 the remuneration committee granted 3,204,413 ordinary shares of 2.5p each at
£nil value.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Year ended 30 March 2024
Severfield plc Annual report and accounts
for the year ended 30 March 2024
208
23. 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 25 March 2023 to 29 March 2025. The following vesting schedule applies:
Underlying EPS performance for year ended 30 March 2024
% of award vesting
Equal to less than 7.50p
0%
Equal to 8.80p or better
100%
Between 7.50p and 8.80p
between 25% and 100%
The assumptions used to measure the fair value of the shares granted are as follows:
Share price on date of grant
£0.62*
Exercise price
nil
Expected volatility (using historical performance)
108%
Risk-free rate
4.3%
Dividend
3.3p
Actual life
three years
* Granted on 17 June 2022.
The Black Scholes pricing model was used, with the above assumptions, to produce a grant date fair value of £1,564,000.
Subsequently, in line with IFRS 2, an annual charge is calculated based on the expected number of options to vest when factoring
in changes to non-market conditions. For FY24 this charge was £1,000 (FY23: £527,000).
Restricted share plan
During the year ended 30 March 2024 the remuneration committee granted 1,480,979 ordinary shares of 2.5p each at
£nil value.
The vesting of these awards will be dependent on the Group achieving the 5 performance underpins as agreed by the
remuneration committee and disclosed on page 154.
The assumptions used to measure the fair value of the shares granted are as follows:
Share price on date of grant
£0.70*
Exercise price
nil
Expected volatility (using historical performance)
111%
Risk-free rate
4.8%
Dividend
3.4p
Actual life
three years
* Granted on 15 September 2023.
The Black Scholes pricing model was used, with the above assumptions, to produce a grant date fair value of £1,020,000.
Subsequently, in line with IFRS 2, an annual charge is calculated based on the expected number of options to vest when factoring
in changes to non-market conditions. For FY24 this charge was £340,000 (FY23: nil).
Reconciliation of share awards outstanding under the performance/restricted share plans are as follows:
2024
Number
2023
Number
Outstanding at the beginning of the year
8,496,227
8,110,391
Granted during the year
1,480,979
3,204,413
Vested during the year
(2,825,886)
–
Lapsed during the year
(1,145,757)
(2,818,577)
Outstanding at the end of the year
6,005,563
8,496,227
209
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Stock Code: SFR
FINANCIAL STATEMENTS
23. Share-based payments continued
Save As You Earn share option plan (‘Sharesave’)
The plan, which was established in 2015 and expires in 2025, is open to all employees on the UK payroll. Participants may
elect to save up to £500 per month over the life of the plan under three-yearly savings schemes, each with a separate
savings contract.
Under the 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 (2023: £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 (2023: £359,000) was recognised in the current period in relation to
the 2022 Sharesave scheme.
Under the 2023 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 2023 Sharesave scheme in 2026, these options will become
exercisable for a period of six months. A charge of £481,000 (2023: £nil) was recognised in the current period in relation to the
2023 Sharesave scheme.
Reconciliation of share awards outstanding under the Sharesave plan are as follows:
Save As You Earn option plan (‘Sharesave’)
2024
Number
2023
Number
Outstanding at the beginning of the year
7,308,555
5,918,097
Granted during the year
3,489,038
3,023,688
Lapsed during the year
(2,603,678)
(1,617,970)
Vested during the year
(2,073,852)
(15,260)
Outstanding at the end of the year
6,120,063
7,308,555
24. Share capital
2024
£000
2023
£000
Issued and fully paid:
309,538,321 ordinary shares of 2.5p each (2023: 309,538,321 ordinary shares of 2.5p each)
7,739
7,739
The ordinary shares carry no right to fixed income. There are no share options outstanding as at 30 March 2024 (2023: nil).
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Year ended 30 March 2024
Severfield plc Annual report and accounts
for the year ended 30 March 2024
210
25. Other reserves
Share-
based
payment
reserve
£000
Shares
held in
trust
Revaluation
reserve
Capital
redemption
reserve
£000
Hedge
accounting
reserve
£000
Currency
translation
reserve
£000
Total
£000
At 27 March 2022
3,386
–
–
139
903
57
4,485
Share-based payments
2,465
–
–
–
–
–
2,465
Losses taken to equity on cash
flow hedges
–
–
–
–
(1,147)
–
(1,147)
Reclassification adjustments on
cash flow hedges
–
–
–
–
243
–
243
Exchange difference on foreign
operations
–
–
–
–
–
(87)
(87)
At 26 March 2023
5,851
–
–
139
(1)
(30)
5,959
Share-based payments
(1,234)
–
–
–
–
–
(1,234)
Shares acquired by employee
benefit trust
–
(4,500)
–
–
–
–
(4,500)
Shares utilised
–
2,973
–
–
–
–
2,973
Share of other comprehensive
income of JV’s and associates
accounted for using the equity
method
–
–
869
–
–
–
869
Gains taken to equity on cash
flow hedges
–
–
–
–
1,239
–
1,239
Reclassification adjustments on
cash flow hedges
–
–
–
–
(314)
–
(314)
Exchange difference on foreign
operations
–
–
–
–
–
(264)
(264)
At 30 March 2024
4,616
(1,527)
869
139
924
(293)
4,728
Reconciliation of share based payment transactions in the statement of changes in equity
Year ended 30 March 2024
Year ended 25 March 2023
Other
reserves
Retained
earnings
Other
reserves
Retained
earnings
Share based payment charge1
1,589
–
3,420
–
Tax paid on vesting of 2020 award1
(1,196)
–
–
–
SAYE cash received2
1,380
–
–
–
Awards vested/lapsed in the year
(3,006)
3,006
(955)
955
Equity settled share based payments
(1,234)
3,006
2,465
955
Purchase of own shares2
(4,500)
–
–
–
Allocation of owned shares on vesting
2,973
(2,973)
–
–
Total reserves movements
(2,761)
33
2,465
955
1 Operating cash flows
2 Cash flows from financing activities
During the year the company instructed the employee benefit trust to purchases shares for total value of £4,500,000 which were
used in the vesting of the PSP and SAYE schemes during the year. A reconciliation of shares held in the trust is shown below:
£000
Shares
Brought forward 26 April 2023
–
–
Purchased in the year
4,500
6,705,486
Used during the year
(2,973)
(4,299,077)
Closing 30 April 2024
1,527
2,406,409
211
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Stock Code: SFR
FINANCIAL STATEMENTS
26. Net cash flow from operating activities
2024
£000
2023
£000
Operating profit from operations
26,415
30,154
Adjustments:
Depreciation of property, plant and equipment (note 13)
6,480
5,407
Depreciation of right-of-use assets (note 14)
2,683
1,840
Gain on disposal of other property, plant and equipment
(92)
(52)
Fixed asset impairment (note 5,13)
4,543
–
Amortisation of intangible assets (note 12)
5,489
3,416
Movements in pension scheme (note 30)
(2,152)
(2,226)
Share of results of JVs and associates (note 15)
(1,950)
(1,898)
Share-based payments (note 25)
392
3,420
Exchange adjustments
(373)
–
Operating cash flows before movements in working capital
41,435
40,061
Decrease in inventories
1,729
4,774
Decrease in receivables
31,232
10,701
Decrease in payables
(21,962)
(1,724)
Cash generated from operations
52,434
53,812
Tax paid
(7,298)
(3,520)
Net cash flow from operating activities
45,136
50,292
2024
£000
2023
£000
Cash generated from operations
52,434
53,812
Proceeds on disposal of other property, plant and equipment
408
317
Purchases of land and buildings
(410)
(635)
Purchases of other property, plant and equipment
(10,911)
(5,668)
41,521
47,826
Underlying operating profit (before JVs and associates)
37,690
33,067
Operating cash conversion
110%
145%
27. Analysis of net (debt)/funds
2024
£000
2023
£000
Borrowings
(20,000)
(8,950)
Cash and cash equivalents (net of overdraft)
10,394
11,338
Unamortised debt arrangement fees
235
321
(9,371)
2,709
The Group excludes IFRS 16 lease liabilities from its measure of net debt/funds as they are excluded from the definition of net
debt as set out in the Group’s borrowing facilities. See note 33 for APM definitions.
28. Contingent liabilities
Liabilities have been recorded for the directors’ best estimate of uncertain contract positions, known legal claims, legal actions
in progress and circumstances that could give rise to claims or actions. The Group takes legal advice as to the likelihood of the
success of and the likely value of such claims and actions and no liability is recorded where the directors consider, based on
that advice, that the claim or action is unlikely to succeed, or that the Group cannot make a sufficiently reliable estimate of the
potential obligation or liability arising out of such claim or action.
The Company and its subsidiaries have provided unlimited multilateral guarantees to secure any bank overdrafts and loans of all
other Group companies. At 30 March 2024 this amounted to £nil (2023: £nil). The Group has also given performance bonds in the
normal course of trade.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Year ended 30 March 2024
Severfield plc Annual report and accounts
for the year ended 30 March 2024
212
29. Business combinations
Summary of acquisition
On 3 April 2023, the Company acquired 100 per cent of the share capital of VSCH.
VSCH is profitable, cash generative and provides a manufacturing base in Europe, allowing Severfield to benefit from VSCH’s
strong reputation in the Netherlands and its growing pipeline of opportunities.
The board believes that the acquisition is enhancing the Group’s reputation and presence in the European market, building on its
existing European business, and is helping to accelerate Severfield’s European growth strategy.
The acquisition provides Severfield with immediate access to new and attractive market sectors, providing the Group with further
market and geographical diversification outside its core UK operations. VSCH is highly regarded by its clients and is presenting
Severfield with a number of opportunities for further profitable growth, including access to a wider European client base and a
platform to offer a wider range of services to its existing clients.
The net consideration of €25.7m (£22.6m) comprises:
£000
Gross consideration
26,348
Net cash acquired (excluding payments in advance)
(3,797)
Net consideration
22,551
VSCH was acquired for an initial gross consideration of £26,348,000, including cash and cash equivalents of £3,797,000, which
has been funded by a combination of Group cash reserves and a new term loan.
The fair value of the assets and liabilities recognised as a result of the acquisition are as follows:
£000
Non-current assets
Investment in joint ventures
94
Property, plant and equipment
4,578
Right of use assets
5,041
9,713
Current assets
Inventories
146
Contract assets, trade and other receivables
8,367
Cash and cash equivalents (excluding payments in advance)
3,797
12,310
Total assets
22,023
Current liabilities
Trade and other payables
(9,577)
Lease liabilities
(212)
(9,789)
Non-current liabilities
Lease liabilities
(4,829)
Deferred tax liabilities
(233)
Total liabilities
(14,851)
Net assets
7,172
Net cash acquired (excluding payments in advance)
(3,797)
Net identifiable assets acquired
3,375
Identified intangible assets
3,902
Deferred tax on intangibles
(1,007)
Goodwill
16,281
Net assets acquired
22,551
213
www.severfield.com
Stock Code: SFR
FINANCIAL STATEMENTS
29. Business combinations continued
Goodwill of £16,281,000 represents the ability and skill of employees and management, know-how and the quality of goods
and services provided, which do not meet the criteria to be separately recognised in accordance with IFRS3 (Revised) 'Business
combinations'. The goodwill arising from the acquisition is not expected to be deductible for income tax purposes.
Analysis of amounts disclosed in the cash flow statement in connection with the acquisition:
2023
£000
Gross initial cash consideration
26,348
Net cash acquired (including payments in advance)
(3,797)
Total cash outflow – investing activities
22,551
Acquisition-related costs of £1,816,000 were fully expensed in the period ended 25 March 2023 as non-underlying operating
costs (see note 5).
The acquired business contributed, to the Group, revenues of £59,480,000 and profit after tax of £4,934,000 since the
acquisition date.
30. Retirement benefit obligations
Defined contribution schemes
The Group operates two defined contribution retirement benefit schemes. The assets of the schemes are held separately from
those of the Group in funds under the control of trustees.
The total cost charged to income of £4,792,000 (2023: £4,160,000) represents contributions payable to these schemes by the
Group at rates specified in the rules of the plans. As at 30 March 2024, contributions of £950,000 (2023: £765,000) 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.
Interest risk
A decrease in the corporate bond interest rate will increase the scheme liabilities, although this will be
partially offset by an increase in the return on the scheme’s assets.
Longevity risk
The present values of the scheme liabilities are calculated by reference to the best estimate of the mortality
of scheme participants which reflect continuing improvements in life expectancy. An increase in the life
expectancy of the scheme participants will increase the scheme’s liabilities.
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.
2024
%
2023
%
Key assumptions used:
Discount rate
4.8
4.6
Inflation (RPI)
3.4
3.1
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Year ended 30 March 2024
Severfield plc Annual report and accounts
for the year ended 30 March 2024
214
30. Retirement benefit obligations continued
When considering mortality assumptions, a life expectancy to 85 at age 65 has been used for the year ended 30 March 2024
(2023: 86). For the year ended 30 March 2024, the Group updated the allowance for future mortality improvements from the CMI
2021 model to the CMI 2022 model. The 2022 model includes a partial allowance (a weight of 25%) for mortality experience in
2022 to reflect emerging evidence that current rates may now be more indicative of future experience. The 0.25% early years
adjustment has been removed as it is now less appropriate to assume lower early years mortality in light of post pandemic
mortality experience in the general population.
The discount rate and RPI inflation assumptions for the 2024 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
Change in assumption
Impact on scheme liabilities
Discount rate
Increase/decrease by 0.5%
Decrease/increase by 6.0%
Rate of mortality
Reducing by 10%
Increase by 2.4%
Price inflation
Increase/decrease by 0.5%
Increase/decrease by 4.2%
Amounts recognised in income in respect of these defined benefit schemes are as follows:
2024
£000
2023
£000
Interest cost
1,517
1,217
Interest income
(987)
(844)
530
373
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 £20,345,000 (2023:
£19,600,000 ).
The actual return on scheme assets were a gain of £693,000 (2023: loss of £8,990,000).
The amount included in the balance sheet arising from the Group’s obligations in respect of the defined benefit retirement
scheme is as follows:
2024
£000
2023
£000
Present value of defined benefit obligations
(34,003)
(33,933)
Fair value of scheme assets
22,539
21,062
(11,464)
(12,871)
The major categories of scheme assets as a percentage of the total scheme assets are as follows:
2024
£000
2023
£000
2024
%
2023
%
Equities
3,337
3,307
14.8
15.7
Bonds and gilts
6,378
5,287
28.3
25.1
Cash
4,067
1,598
18.1
7.6
Property
1,876
2,534
8.3
12.0
LDI funds
6,521
4,993
28.9
23.7
Other
360
3,343
1.6
15.9
22,539
21,062
100.0
100.0
Bonds and gilts include a mixture of corporate and government bonds and fixed and index-linked gilts. Approximately 8 per cent
of bonds have a sub-investment grade credit rating (BB+ or lower) and approximately 76 per cent of gilts are index-linked, with 24
per cent being fixed.
215
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Stock Code: SFR
FINANCIAL STATEMENTS
30. Retirement benefit obligations continued
Movements in the present value of defined benefit obligations were as follows:
2024
£000
2023
£000
At start of year
(33,933)
(43,562)
Interest cost
(1,517)
(1,217)
Actuarial (losses)/gains
(451)
9,133
Benefits paid
1,898
1,713
At end of year
(34,003)
(33,933)
Actuarial gains arising from changes in demographic assumptions, changes in financial assumptions and gains or losses arising
from experience were gains of £1,084,000 (2023: gains of £19,000), losses of £317,000 (2023: gains of £10,464,000) and losses of
£1,218,000 (2023: losses of £1,350,000) respectively. The large gain in 2023 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:
2024
£000
2023
£000
Liability in respect of deferred members
(15,237)
(19,811)
Liability in respect of pensioner members
(18,766)
(14,122)
(34,003)
(33,933)
Movements in the fair value of scheme assets were as follows:
2024
£000
2023
£000
At start of year
21,062
29,166
Interest income
987
844
Actuarial losses
(294)
(9,834)
Employer contributions
2,682
2,599
Benefits paid
(1,898)
(1,713)
At end of year
22,539
21,062
During the course of 2024, bond yields increased slightly, which increased the discount rate. However this has been offset by higher
assumed future price inflation. The present value (PV) of the Schemes liabilities are explicitly linked to both bond yields and inflation,
with the net effect being a marginal decrease to the PV of the liabilities. 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 the return on Scheme assets was marginally lower than assumed during the period.
The Group expects to contribute £231,000 (2023: £224,000) per month to its defined benefit pension scheme in the year to
29 March 2025.
History of experience of gains and losses:
2024
2023
2022
2021
2020
Experience (losses)/gains on scheme assets (£000)
(294)
(9,834)
(60)
2,222
(1,093)
Percentage of scheme assets
(1.3%)
(46.7%)
(0.2%)
8.0%
(4.3%)
Experience gains/(losses) on scheme liabilities (£000)
(451)
1,350
157
419
(1,007)
Percentage of the present value of scheme liabilities
(1.3%)
4.0%
0.4%
0.8%
(2.2%)
Total amount recognised in the consolidated
statement of comprehensive income (£000)
(745)
(701)
5,938
(4,906)
255
Percentage of the present value of scheme liabilities
2.2%
2.1%
13.6%
(9.8%)
0.6%
The weighted average period over which benefits are expected to be paid, or the duration of the liabilities, is currently 12 years
(2023: 14 years). The reduction in duration is due to the increase in discount rates and the use of more up to date membership
data following the completion of the 5 April 2023 triennial valuation. Annual increases are provided to pensions in payment at the
lower of of RPI and 5% for the majority of members.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Year ended 30 March 2024
Severfield plc Annual report and accounts
for the year ended 30 March 2024
216
30. Retirement benefit obligations continued
The Scheme’s investments in the BNY Mellon Real Return Fund (formerly referred to as the Newton Real Return Fund), non-
Liability Driven Investment (LDI) funds invested with Legal & General, 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 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 x2) 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 schemes operate under trust law and are managed and administered by trustees on behalf of the members in accordance
with the terms of the trust deed and rules and relevant legislation. Defined benefit contributions are determined in consultation
with the trustees, after taking actuarial advice. The trustees are responsible for establishing the investment strategy and ensuring
that there are sufficient assets to meet the cost of current and future benefit.
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.
Subsequently to the balance sheet date the pension schemes principal employer was transferred to another company within the
group. As a result the pension schemes assets and liabilities were transferred at fair value. The scheme continues to benefit from
a parent company guarantee from Severfield plc.
31. Related party transactions
Directors
Key management
2024
£000
2023
£000
2024
£000
2023
£000
Short-term employee benefits
1,138
1,259
2,640
3,334
Contributions into the pension schemes
79
151
93
96
Share based payments
200
1,377
137
568
Total income statement charge
1,417
2,787
2,870
3,998
PSP awards vesting based on respective performance year1
550
1,093
316
428
Gain on exercise of share options2
1,076
–
430
–
1 2024 relates to the 2021 PSP awards vesting June 2024, with a 2024 performance period. 2023 relates to the 2020 PSP award vested December 2023, with
a 2023 performance period.
2 2024 relates to the gain on exercise of 2020 share options. No share options were exercised in 2023.
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 138.
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 (2023: £48,000). The amount due to Fabsec at 30 March 2024 was £117,000 (2023: £117,000).
During the year the Group has purchased services from Construction Metal Forming Limited (‘CMF’) at a cost of £9,085,000 (2023:
£16,808,000). The amount due from and to CMF at 30 March 2024 was £nil (2023: £4,637,000) and £2,126,000 (2023: £1,001,000)
respectively.
During the year the Group incurred additional operating costs in relation to the day-to-day running of its Indian joint venture
(‘JSSL’) of £234,000 (2023: £271,000). Those costs were recharged to JSSL during the year and the amount due from JSSL at 30
March 2024 was £132,000 (2023: £806,000).
217
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Stock Code: SFR
FINANCIAL STATEMENTS
32. Subsequent events
On 17 April 2024, the Group announced and launched a share buyback programme, with the intention to purchase its ordinary
shares of 2.5 pence, with a maximum aggregate consideration of £10m (excluding stamp duty and other expenses). The purpose
of this buyback programme is to return surplus capital to shareholders.
The Company has entered into an irrevocable non-discretionary agreement with Liberum Capital Limited ('Liberum'), pursuant
to which Liberum shall purchase Ordinary Shares as riskless principal (and not as agent of Severfield) for the subsequent sale
on to, and purchase by, Severfield, up to the maximum aggregate consideration of £10m. Liberum will make its trading decisions
in relation to the Ordinary Shares independently of, and uninfluenced by, the Company, within the programme terms and certain
pre-set parameters.
Any purchase of Ordinary Shares under the Buyback will take place in open market transactions and may be made from time to
time depending on market conditions, share price and trading volumes. Any Ordinary Shares purchased by the Company will be
cancelled and the number of Ordinary Shares in issue reduced accordingly.
As at 18 June, the Group had purchased and cancelled 1,370,344 Ordinary Shares at a cost of £968,000.
33. 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)
Operating profit before non–underlying items
and the results of JVs and associates.
Profit measure reflecting underlying trading
performance of wholly owned subsidiaries.
Underlying profit
before tax
Profit before tax before non–underlying items.
Profit measure widely used by investors and
analysts.
Underlying basic
earnings per share
(‘EPS’)
Underlying profit after tax divided by the
weighted average number of shares in issue
during the year.
Underlying EPS reflects the Group’s
operational performance per ordinary share
outstanding.
Net (debt)/funds
(pre-IFRS 16)
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.
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.
Operating cash
conversion
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).
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.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Year ended 30 March 2024
Severfield plc Annual report and accounts
for the year ended 30 March 2024
218
Alternative performance
measure (‘APM’)
Definition
Rationale
Underlying return on
capital employed
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)
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.
Economic value
generated and
distributed
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.
A basic indication of how the Group has
created wealth for its stakeholders and an
important ESG measure.
Reconciliations to IFRS measures
Underlying operating profit (before JVs and associates)
Note
2024
£000
2023
£000
Underlying operating profit (before JVs and associates)
37,690
33,067
Non-underlying operating items
5
(13,225)
(4,811)
Share of results of JVs and associates
15
1,950
1,898
Operating profit
26,415
30,154
Underlying profit before tax
Note
2024
£000
2023
£000
Underlying profit before tax
36,545
32,476
Non-underlying items
5
(13,525)
(5,369)
Profit before tax
23,020
27,107
33. Alternative performance measures continued
219
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Stock Code: SFR
FINANCIAL STATEMENTS
33. Alternative performance measures continued
Underlying basic earnings per share
Note
2024
£000
2023
£000
Underlying net profit attributable to equity holders of the parent Company
10
27,469
26,238
Non-underlying items after tax
5
(11,568)
(4,672)
Net profit attributable to equity holders of the parent Company
15,901
21,566
Weighted average number of ordinary shares
10
307,131,912
309,533,696
Underlying basic earnings per share
8.94p
8.48p
Basic earnings per share
5.18p
6.97p
Net funds/(debt) (pre-IFRS 16)
Note
2024
£000
2023
£000
Borrowings
(20,000)
(8,950)
Cash and cash equivalents
10,394
11,338
Unamortised debt arrangement costs
235
321
Net funds/(debt) (pre-IFRS 16)
27
(9,371)
2,709
IFRS 16 lease liabilities
22
(19,073)
(13,396)
Net debt (post-IFRS 16)
(28,444)
(10,687)
Economic value generated and distributed
Note
2024
£000
2023
£000
Revenue
3
463,465
491,753
Economic value generated
464,588
491,753
Operating costs
4
439,000
463,497
Non-underlying operating items
5
(13,225)
(4,811)
Underlying operating costs
425,775
458,686
Payments to providers of capital
3,715
3,180
Non-underlying finance expense
5
(300)
(558)
Underlying payments to providers of capital
3,415
2,622
Payments to government
9,076
6,238
Economic value distributed
438,266
467,546
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Year ended 30 March 2024
Severfield plc Annual report and accounts
for the year ended 30 March 2024
220
FIVE YEAR
SUMMARY
Year ended 30 March 2024
2024
£000
2023
£000
2022
£000
2021
£000
2020
£000
Results
Revenue
463,465
491,753
403,563
363,254
327,364
Underlying* operating profit (before JVs and
associates)
37,690
33,067
26,881
25,470
26,978
Underlying* profit before tax
36,545
32,476
27,098
24,331
28,621
Non-underlying items before tax
(13,525)
(5,369)
(6,098)
(3,224)
(2,808)
Profit attributable to equity holders
of Severfield plc
15,901
21,566
15,601
17,304
20,415
Assets employed
Non-current assets
257,476
228,397
230,054
230,076
203,783
Net current assets
12,764
27,572
17,383
22,247
21,068
Non-current liabilities
(49,184)
(38,251)
(43,477)
(61,394)
(41,176)
Net assets
221,056
217,718
203,960
190,929
183,675
Key statistics
Earnings per share:
Basic – underlying*
8.94p
8.48p
7.22p
6.43p
7.74p
Basic
5.18p
6.97p
5.05p
5.63p
6.68p
Diluted – underlying*
8.85p
8.39p
7.19p
6.43p
7.70p
Diluted
5.13p
6.90p
5.03p
5.63p
6.64p
Dividends per share
3.70p
3.40p
3.10p
2.90p
2.90p
Dividend cover (times) – underlying* basis
2.4
2.4
2.4
2.2
2.7
Share price – high
76.20p
75.49p
84.80p
79.90p
96.00p
– low
48.10p
46.65p
62.60p
51.20p
57.20p
* The basis of stating results on an underlying basis is set out on pages 180 to 181.
FINANCIAL
CALENDAR
Preliminary announcement of full-year results
19 June 2024
Publication of annual report
July 2024
Annual general meeting
30 July 2024
Announcement of interim results (provisional)
20 November 2024
221
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Stock Code: SFR
FINANCIAL STATEMENTS
COMPANY BALANCE SHEET
Year ended 30 March 2024
Note
Year ended
30 March
2024
£000
Year ended
25 March
2023
£000
Non-current assets
Tangible assets
2
54,778
58,602
Intangible assets
167
208
Right-of-use asset
3
1,713
2,061
Investments
4
181,607
152,598
Debtors – amounts falling due after one year
5
18,091
106,898
256,356
320,367
Current assets
Debtors – amounts falling due within one year
5
8,060
11,312
Cash at bank
–
1,845
8,060
13,157
Current liabilities
Bank overdraft
(4,541)
–
Trade and other payables
6
(100,699)
(179,121)
Provisions
(3,373)
–
Financial liabilities – borrowings
(6,200)
(4,150)
Financial liabilities – leases
(327)
(287)
(115,140)
(183,558)
Non-current liabilities
Trade and other payables
6
(1,095)
(2,377)
Financial liabilities – borrowings
(13,800)
(4,800)
Financial Liabilities – leases
(1,458)
(1,786)
(16,353)
(8,963)
Total assets less liabilities
132,923
141,003
Capital and reserves
Share capital
7,739
7,739
Share premium
88,522
88,522
Other reserves
3,189
5,950
Profit and loss account
33,473
38,792
Equity and total shareholders’ funds
132,923
141,003
The Company reported a profit for the financial year ended 30 March 2024 of £5,361,000 (2023: profit of £7,847,000).
The financial statements were approved by the board of directors on 19 June 2024 and signed on its behalf by:
ALAN DUNSMORE
CHIEF EXECUTIVE OFFICER
ADAM SEMPLE
CHIEF FINANCIAL OFFICER
Severfield plc
Registered in England No.1721262
Severfield plc Annual report and accounts
for the year ended 30 March 2024
222
COMPANY STATEMENT OF
CHANGES IN EQUITY
Year ended 30 March 2024
Share
capital
£000
Share
premium
£000
Other
reserves
£000
Retained
earnings
£000
Total
equity
£000
At 26 March 2023
7,739
88,522
5,950
38,792
141,003
Total comprehensive income for the year
–
–
–
5,361
5,361
Equity-settled share-based payments
–
–
(1,234)
3,007
1,773
Purchase of own shares
–
–
(4,500)
–
(4,500)
Allocation of owned shares
–
–
2,973
(2,973)
–
Dividends paid
–
–
–
(10,714)
(10,714)
At 30 March 2024
7,739
88,522
3,189
33,473
132,923
Share
capital
£000
Share
premium
£000
Other
reserves
£000
Retained
earnings
£000
Total
equity
£000
At 27 March 2022
7,738
88,511
3,485
39,867
139,601
Total comprehensive income for the year
–
–
–
7,847
7,847
Ordinary shares issued*
1
11
–
–
12
Equity settled share-based payments
–
–
2,465
955
3,420
Dividends paid
–
–
–
(9,877)
(9,877)
At 25 March 2023
7,739
88,522
5,950
38,792
141,003
* The issue of shares represents shares allotted to satisfy the 2018, 2020 and 2021 and Sharesave scheme.
223
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Stock Code: SFR
FINANCIAL STATEMENTS
NOTES TO THE COMPANY
FINANCIAL STATEMENTS
Year ended 30 March 2024
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 138 and in notes 6 and 23 to the consolidated financial statements.
Investments
Investments in subsidiaries, joint ventures and associates are stated at cost less, where appropriate, provisions for impairment.
Amounts owed by subsidiary undertakings
The Company holds intercompany loans with subsidiary undertakings which are repayable on demand. None of these loans are
past due nor impaired. Expected credit losses on these balances is not considered material. The carrying value of these loans
approximates to their fair value.
Severfield plc Annual report and accounts
for the year ended 30 March 2024
224
2. Tangible fixed assets
Land and
buildings
£000
Fixtures,
fittings
and office
equipment
£000
Motor
vehicles
£000
Total
£000
Cost
At 26 March 2023
66,129
688
33
66,850
Additions
–
1,210
–
1,210
Disposals
–
–
(33)
(33)
At 30 March 2024
66,129
1,898
–
68,027
Accumulated depreciation
At 26 March 2023
7,932
285
31
8,248
Charge for the year
559
45
–
604
Impairments
4,428
–
–
4,428
Disposals
–
–
(31)
(31)
At 30 March 2024
12,919
330
–
13,249
Carrying amount
At 30 March 2024
53,210
1,568
–
54,778
At 25 March 2023
58,197
403
2
58,602
The Company’s 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 (2023: £600,000), which is set at a rate only to cover certain
of the costs of maintaining the properties.
The impairment charge against fixed assets is included in the consolidated income statement as part of operating costs and is
classified as a non-underlying item (see note 5 to the Group's consolidated financial statements).
3. Right-of-use assets
Long
leasehold
land and
buildings
£000
Fixtures,
fittings
and office
equipment
£000
Motor
vehicles
£000
Total
£000
Cost
At 26 March 2023
794
1,284
90
2,168
Disposals
–
–
(45)
(45)
At 30 March 2024
794
1,284
45
2,123
Accumulated depreciation
At 26 March 2023
7
42
58
107
Charge for the year
79
258
10
347
Disposals
–
–
(44)
(44)
At 30 March 2024
86
300
24
410
Carrying amount
At 30 March 2024
708
984
21
1,713
At 25 March 2023
787
1,242
32
2,061
225
www.severfield.com
Stock Code: SFR
FINANCIAL STATEMENTS
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 30 March 2024 is disclosed below. All of these had a reporting period ended 30
March 2024, except where indicated.
Name of undertaking
Incorporated in
Class of
capital
100% owned by Severfield plc
Severfield Commercial and Industrial Limited (formerly Severfield (UK) Limited)
England and Wales
Ordinary
Severfield Commercial and Industrial (NI) Limited(i) (formerly Severfield (NI) Limited)
Northern Ireland
Ordinary
Severfield (Design & Build) Limited
England and Wales
Ordinary
Severfield Modular Solutions Limited (formerly Severfield (Products & Processing)
Limited)
England and Wales
Ordinary
Severfield Europe B.V.(ii)
Netherlands
Ordinary
Severfield Europe Holdings B.V.(vii)
Netherlands
Ordinary
Severfield (Nuclear & Infrastructure) Limited
England and Wales
Ordinary
Severfield International Limited
England and Wales
Ordinary
Severfield Mauritius Limited(iii)
Mauritius
Ordinary
Severfield Infrastructure Limited
England and Wales
Ordinary
Leeds 27 Limited**
England and Wales
Ordinary
100% owned by Severfield Europe Holdings B.V.
Voortman Design and Build B.V.(vii)
Netherlands
Ordinary
Severfield Steel Construction Netherlands B.V.(vii)
Netherlands
Ordinary
Severfield Steel Projects B.V.(vii)
Netherlands
Ordinary
Severfield De Haven B.V.(vii)
Netherlands
Ordinary
Severfield Sales & Projects Management B.V.(vii)
Netherlands
Ordinary
Severfield International Steel Projects B.V.(vii)
Netherlands
Ordinary
50% owned by Severfield plc
Construction Metal Forming Limited*(iv)
England and Wales
Ordinary
50% owned by Severfield Mauritius Limited
JSW Severfield Structures Limited(v)†
India
Ordinary
50% owned by Severfield Steel Projects B.V.
Bouwcombinatie Van Wijnen(vii))†
Netherlands
Ordinary
33% owned by Severfield plc
Fabsec Limited*(vi)
England and Wales
Ordinary
* Companies with a reporting period ended 31 December 2022.
** Dormant company.
‡ Unless otherwise stated, the registered office address for each of the above is Severs House, Dalton Airfield Industrial Estate,
Dalton, Thirsk, North Yorkshire YO7 3JN.
† 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
(vii) Plaagslagen 16 7463 PH Rijssen, Netherlands
NOTES TO THE COMPANY
FINANCIAL STATEMENTS
Year ended 30 March 2024
Severfield plc Annual report and accounts
for the year ended 30 March 2024
226
4. Investments continued
2024
£000
2023
£000
Investment in subsidiaries
146,079
119,671
Investment in joint ventures
35,528
32,927
181,607
152,598
Investment in subsidiaries
£000
Cost
At 26 March 2023
119,671
Investment in the year
26,408
At 30 March 2024
146,079
Provision for impairment
At 30 March 2024
–
Net book value
At 30 March 2024
146,079
At 26 March 2023
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 the financial year the company invested £2,781,000 in the joint
venture for the purchase of land in Gujarat to facilitate future expansion, taking the total equity investment in JSSL to £26.2m
(2023: £23.4m). The investment is carried in Severfield Mauritius Limited, a wholly owned subsidiary of the Company.
5. Debtors – amounts falling due within one year
Current assets
2024
£000
2023
£000
Other debtors
2,035
1,488
Amounts owed by JVs and associates
252
179
Corporation tax recoverable
5,773
9,645
8,060
11,312
Non-current assets
2024
£000
2023
£000
Amounts owed by subsidiary undertakings
18,091
106,898
18,091
106,898
Amounts owed by subsidiary undertakings are non-interest bearing and repayable on demand. They are classified as non-current
where we don't expect a repayment in the next 12 months. No impairment of the receivable was recorded at 30 March 2024 or 25
March 2023.
227
www.severfield.com
Stock Code: SFR
FINANCIAL STATEMENTS
6. Creditors – amounts falling due within one year
Current liabilities
2024
£000
2023
£000
Other creditors and accruals
7,611
16,082
Amounts owed to subsidiary undertakings
86,186
156,640
Amounts owed to JVs and associates
346
129
Deferred tax liability (note 7)
6,556
6,270
100,699
179,121
Non-current liabilities
2024
£000
2023
£000
Other creditors and accruals
1,095
2,377
1,095
2,377
7. Provisions
Legacy
employment
tax
Total
Balance at 26 March 2023
–
–
Provisions made during the year
4,413
4,413
Provisions used during the year
(1,040)
(1,040)
Balance at 30 March 2024
3,373
3,373
For all provisions, the resulting cash outflows are expected to occur within 12 months.
Legacy employment tax charge
During the year, HMRC raised an assessment for historical income tax and national insurance (‘NIC’) liabilities. The Group disputes the
charge and is in ongoing discussions with HMRC to bring this matter to a conclusion. Notwithstanding this, since HMRC has issued
formal determinations for the amounts it considers are due, a provision has been recognised to reflect the amounts claimed by HMRC.
8. 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.
2024
£000
2023
£000
Deferred tax liabilities
(7,027)
(6,779)
Deferred tax assets
471
509
(6,556)
(6,270)
Deferred tax – movement for the year:
Excess
capital
allowances
£000
Other
temporary
differences
£000
Total
£000
At 27 March 2022
(6,852)
297
(6,555)
Current year credit
73
212
285
At 26 March 2023
(6,779)
509
(6,270)
Current year charge
(248)
(38)
(286)
At 30 March 2024
(7,027)
471
(6,556)
9. Contingent liabilities
The Company has provided an unlimited multilateral guarantee to secure any bank overdrafts and loans of all other Group
companies. At 30 March 2024 these amounted to £3,409,000 (2023: £nil).
NOTES TO THE COMPANY
FINANCIAL STATEMENTS
Year ended 30 March 2024
Severfield plc Annual report and accounts
for the year ended 30 March 2024
228
The production of this report supports the work of the
Woodland Trust, the UK’s leading woodland conservation
charity. Each tree planted will grow into a vital carbon store,
helping to reduce environmental impact as well as creating
natural havens for wildlife and people.
Registered office and Headquarters
Severfield plc
Severs House
Dalton Airfield Industrial Estate
Dalton, Thirsk
North Yorkshire
YO7 3JN
Operational businesses
Severfield Commercial &
Industrial Limited (formerly
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 Commercial &
Industrial NI Limited (formerly
Severfield NI Limited)
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
Severfield Europe Holding
B.V. (formerly Voortman Steel
Construction Holding B.V.)
Plaagslagen 16,
7463 PH Rijssen
The Netherlands
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
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
229
www.severfield.com
Stock Code: SFR
ADDITIONAL INFORMATION
ADDRESSES
AND ADVISERS
Severfield plc
Severs House, Dalton Airfield Industrial Estate
Dalton, Thirsk, North Yorkshire, YO7 3JN
Tel: (01845) 577896
Fax: (01845) 577411
www.severfield.com