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 in Our board of directors. The board consists of the chairman, four other non-executive directors and four executive directors. Five of these directors have been directors for six years or fewer and have been heavily involved in setting and overseeing the delivery of the Group's strategy.

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

Severfield plc board

Executive directors

Executive committees

Executive committee

Risk committee

Safety leadership team ('SLT')

Group human resources ('GHR') committee

Principal committees

Audit committee

Remuneration committee

Nominations committee

Independence

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

At no time during the year ended 31 March 2020 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. 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 in Our board of directors, other than John Dodds who is retiring, will be standing for re-election at the 2020 AGM.

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

Role of the chairman, chief executive officer and senior independent director

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

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

The board also considers employee issues and key appointments. It also ensures that all directors receive appropriate training on appointment and then subsequently as appropriate. Other specific responsibilities are delegated to the board's committees described below as follows.
Non-executive chairman
John DoddsThe chairman, John Dodds, is mainly responsible for managing the business of the board, evaluating its performance and setting the agenda for board meetings to ensure that adequate time is allocated to the discussion of all agenda items, facilitating the effective contribution of all directors. The chairman acts as an ambassador for the Company and provides effective communication between the board and its shareholders.

The chairman, together with the Company secretary, ensures that the directors receive clear information on all relevant matters in a timely manner. Board papers are circulated sufficiently in advance of meetings for them to be thoroughly digested to ensure clarity of informed debate.
The board papers contain the chief executive officer's, the Group finance director's and chief operating officer's written reports, high-level papers on each business area, key metrics and specific papers relating to agenda items. The board papers are accompanied by a management information pack containing detailed financial and other supporting information. The board receives occasional ad hoc papers on matters of particular relevance or importance. The board also receives presentations from various business units and members of the executive committee.
Chief executive officer
Alan DunsmoreAs the senior executive of the Company, Alan Dunsmore is responsible to the chairman and the board for directing and prioritising the profitable operation and development of the Group. The chief executive officer is responsible for the day-to-day management of the operational activities of the Group, assessing and implementing strategy and implementing the board's decisions.

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

In addition, he chairs a safety leadership team ('SLT') and a Group human resources ('GHR') meeting once a month, both of which consist of certain other members of the executive management team and business unit managing directors.
Senior independent director
Kevin WhitemanKevin Whiteman is the senior independent non-executive director whose role is to provide a sounding board for the chairman and to serve as an alternative source of advice to the chairman for the other non-executive directors. The senior independent director is available to shareholders if they request a meeting or have concerns which contact through the normal channels has failed to resolve, or where such contact is inappropriate. He also leads the performance review of the chairman and the board, taking into account the views of the executive directors.
Board committees
The board has established three standing committees, all of which operate within defined terms of reference, which are available from the Company secretary by request and published on the website.

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

Board meetings

The directors' attendance record at the scheduled board meetings and board committee meetings for the year ended 31 March 2020 is shown in the table below.

BoardAudit
committee
Remuneration
committee
Nominations
committee
Total number of meetings11365
Executive directors
Alan Dunsmore1111      
Ian Cochrane1111      
Derek Randall1911      
Adam Semple²1011      
Non-executive directors
John Dodds311116635
Kevin Whiteman1111336655
Tony Osbaldiston1111336655
Alun Griffiths1111336655
Louise Hardy466223322

 Meetings attended  Possible meetings

1Derek Randall missed two board meetings when on bereavement leave.

2Adam Semple missed one board meeting due to illness.

3 John Dodds did not attend the two nomination committee meetings which were held to discuss his replacement as chairman.

4 Louise Hardy was appointed to the board with effect from 3 September 2019 and has attended all meetings whilst she has been a director.

Board meetings are held primarily at the Group's head office in Dalton, North Yorkshire, but also at various locations in London, and at the offices of the Group's other operating subsidiaries and, from time to time, at clients' sites to provide non-executive directors the opportunity to increase their knowledge and understanding of the Group's operations. Board meetings are also now being held by video conference as a result of the COVID-19 pandemic.

Board strategy review

In addition to regular scheduled board and board committee meetings, the board undertakes an annual strategy away day each year. The agenda for the strategy away day is agreed in advance, including specific strategic issues which have been raised at previous board meetings or requested by the board. The strategy review is supplemented by an annual market update following a similar format although shorter in length.

COVID-19 pandemic update

Since the board meeting on 26 March 2020 which focussed entirely on the impact of the COVID-19 pandemic on the Group, the board has held a weekly video call to discuss the continuing impact of the pandemic and the actions being taken to minimise disruption on the Group's operations, people and clients.

Board meetins for the current year

During the financial year, the board discussed and implemented the following key actions:

  Number of meetings

  • Strategic review undertaken and strategic plan updated
  • Reviewed the statement of compliance in accordance with the Modern Slavery Act
  • Reviewed feedback from board evaluation
  • Approved further investment for expansion at Construction Metal Forming (‘CMF’)

May 2019

June 2019

  • Reviewed and approved annual report and accounts
  • Approved proposed final dividend
  • Assessed going concern and longer-term viability of the Group
  • Presentation from managing directors of Severfield (Products & Processing) and Severfield (Design & Build)
  • Meeting with the directors of Severfield (Design & Build) and a tour of the Sherburn factory
  • Reviewed feedback on year-end results

July 2019

September 2019

  • Reviewed annual statements of compliance from directors and approved conflicts of interest
  • Approved appointment of new nonexecutive director; Louise Hardy
  • Presentation from JSSL’s HR director
  • Approved the acquisition of Harry Peers
  • Presentations from managing director of Severfield Europe BV and from Group SHE director on sustainability

October 2019

November 2019

  • Board meeting in Lostock and meeting with directors of Severfield (UK)
  • Strategic review of the Indian joint venture
  • Presentation on operational improvements from JSSL’s chief operating officer
  • Site visit to Google, King’s Cross project
  • Reviewed and approved half year results
  • Approved interim dividend
  • Off-site strategy day

December 2019

February 2020

  • Reviewed investor feedback on interim results
  • Dalton factory visit
  • Discussed impact on the Group of the COVID-19 pandemic
  • Reviewed Group budget for 2021 financial year
  • Board meeting in Dublin with presentation from senior management of Severfield (NI) (postponed due to (COVID-19)
  • Site visit to projects in Dublin (postponed due to COVID-19)
  • Agreed scope and content of board and chairman evaluation (postponed due to COVID-19)

March 2020

Key matters considered by the Board

Board and committee activities are organised throughout the year to address the matters reserved for the board.

An overview of the board's principal decisions during the year, including how the board has taken into account the factors set out in section 172 of the Companies Act 2006 ('the Act'), is set out below. From the board's engagement with its stakeholders, see Engaging with stakeholders, there were no specific issues raised during the year that influenced these decisions.

Principal DecisionAction takenOutcomeKey stakeholder groups considered
Dealing with the COVID-19 pandemicRegularly reviewed the challenges presented by the COVID-19 pandemic in the UK, Europe and in India and government announcements on social distancing and safety. These included detailed considerations as to how we could continue to operate safely in factories and on sites, and travel and accommodation issues for our workers.

Implemented a series of precautionary cash management measures to ensure the Group could continue to trade as normally as possible and to protect its financial strength.
Decision to carry on factory and site operations where, after analysis, we could continue to do so safely, particularly in March, April and May (before some easing of the lockdown commenced).The safety of our colleagues was our primary driver during this period, together with their and the Group's financial security. We also took into account the financial needs of our clients, supply chain, our shareholders and other stakeholders.
Proposed acquisition of Harry PeersReviewed proposal to acquire entire share capital of Harry Peers.Approved the acquisition which includes an earn-out arrangement with the principal shareholder and managing director.The long-term impact of the acquisition is, we believe, beneficial to all of our stakeholders.
Strategy reviewComprehensively reviewed progress against strategy.

Monitored market trends, including the macroeconomic environment, supported by comparative data and customer insight.

Considered the impact of the strategic plan on the retention and development of employees.

Reviewed the Group's long-term financial outlook and assessed and prioritised growth opportunities.

Reviewed the Group's four-year strategic plan and divisional strategic plans and priorities to ensure they remained fit for purpose.
Approved the four-year strategic plan.In approving the strategy and business plans, the views of all our stakeholders were considered. Our success depends on good relations with members of our workforce, customers and supply chain.
Setting the annual Group budget and subsequent forecast modelling following the COVID-19 outbreak for going concern purposesReviewed Group budgets for FY21 and, following the COVID-19 outbreak, high-level profit and cash forecasts for the next 12 months.

Reviewed general market conditions and key trends that support the Group's strategy.
Approved the viability statement and going concern assumption.In reviewing the budget and subsequent forecasts, the board considered the impact on all stakeholders.

Prior to approving and recommending dividend payments, the board considers the future cash requirements of the business, shareholder expectations and the need to provide our shareholders with sustainable returns over the longer term. This has been particularly important given COVID-19.
Determining the Group's approach to riskReviewed and made changes to the Group's principal risks and emerging risks that could impact the Group's strategic objectives.

Considered the impact of risks arising from uncertainties in the market and the wider economy, including COVID-19.
Maintained as 'high' risk our assessment of the risk of a serious health and safety incident and our assessment of the risk of the impact of adverse market conditions (including COVID-19 and an unfavourable conclusion to the Brexit trade negotiations).The board considered the impact on all stakeholders, in particular those identified in the principal risks section in How we manage risks.

Engagement with stakeholders

The board considers the needs and priorities of each of the Group's stakeholders during its discussions and as part of its decision-making process. This, together with considering the long-term consequences of decisions and maintaining our reputation, is integral to the way the board operates.

During the year we prepared a stakeholder map to identify key stakeholder relationships and the impact that the business has on each of those groups and our engagement with those groups. The table below summarises the board's understanding of the key interests of our stakeholders:

ClientsWorkforceSupply chainCommunitiesShareholdersFunders
Excellent customer service, with delivery of projects on time and to budget. Early contract engagement, providing problem solving solutions and balancing time, cost and quality objectives.A safe environment to work in, investment in personal development and career progression, and a fair, open and honest culture.Fair treatment and respect, with prompt payment for work undertaken in a safe working environment, with opportunities for repeat business.Operating ethically, causing minimal impact from our activities.
Creating social value through employment opportunities, helping people back to work and investing in the local community by using local suppliers and services.
Robust operational and financial risk management, strong returns on investment decisions, effective communication of strategy and a progressive dividend policy.Strong cash management, robust working capital management and risk management and good communication through regular financial updates.

With regard to our clients, supply chain and communities, these groups are recognised by the board as integral to our business model and as such are considered regularly by the board. In practice, however, our clients, supply chain and communities vary with each Group company and therefore the Group companies manage day-to-day engagement with these important stakeholder groups. Our Group SHE director and our Group head of procurement assist in managing relationships with those subcontractors and suppliers who are common to more than one Group company. Further details of our engagement with communities can be found in Engaging with stakeholders.

The board engages directly with the Group's shareholders, workforce and funders, and has undertaken the following activities in 2020:

Shareholders

Providing sustainable returns to our shareholders is a key factor in the board's decision-making. The chairman and the non-executive directors are available to meet with shareholders to listen to their views.

The board recognises the importance of communicating with its shareholders to ensure that its strategy and performance is understood. The Group encourages two-way communication with both its institutional and private investors and attempts to respond quickly to all queries received verbally or in writing.

The executive directors undertake a programme of regular communication with institutional shareholders and with analysts covering the Group's activities, its performance and strategy, and issues regular trading updates to the market.

Alan Dunsmore and Adam Semple attended several meetings with institutional shareholders, private investors and analysts during the year, at the time of the announcements of the Group's annual and half year results, during visits to the Group's head office in North Yorkshire and on an ad hoc basis as required. Feedback from those meetings was reported to the board, including the non-executive directors.

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

Funders

The Group's finance director meets with the Group's banks and performance bond issuers to discuss the full-year and half-year results, to update them on the Group's performance and discuss any issues that they wish to raise. These meetings are important in ensuring that the Group has sufficient facilities available. The Group finance director advised the board that no issues or concerns had arisen during the course of these meetings that the board needed to consider in its discussions and decision-making.

Following the COVID-19 outbreak the Group finance director held regular discussions with the Group's banks to discuss management's response to the crisis. Despite the challenges presented by the COVID-19 pandemic, the Group has a strong balance sheet and sufficient cash and committed funding in place during the current unprecedented period of uncertainty.

Board's monitoring of culture

The Group's purpose and culture are closely aligned with our core values which are focussed on driving the right behaviours for the Group to succeed. Our culture provides an environment in which our workforce can operate safely, act instinctively with integrity, develop strong and long-term relationships with clients and suppliers, and are treated fairly and with respect. This way we can innovate, evolve and successfully deliver our strategic objectives.

Our executive directors promote our core values throughout the Group. The board as whole is responsible for ensuring that our culture is maintained. It does this by meeting with employees and senior managers, undertaking regular site visits and reading regular reports and presentations from Group companies on how they are operating their businesses and taking into account internal audit reports on matters which are heavily influenced by culture and behaviour. The non-executive directors also draw on their own experiences in other organisations in order to challenge and verify that the Group's values and behaviours remain effective.

The table below sets out how the board monitors our culture to ensure that behaviours remain aligned with our core values.

What we monitor and measureBoard action in 2020
Core value – customer focus
The executive directors keep the board updated on key projects and customer relationships. The board reviews material issues arising on contracts which may impact a Group company or the Group as a whole.Reviewed Group company board summaries which included information on key clients and suppliers and the performance of contracts.
Reviewed market information and tender feedback information, together with business development plans which focus on key client relationships and new clients with whom we wish to have future business.
Approved Group company strategic plans which include information on key clients and client feedback. A client feedback exercise was undertaken as part of the Harry Peers due diligence process.
Core value – safety first
The executive reports include information on health and safety performance including accident frequency rate, incident frequency rate, near misses and high potential incidents and absence days due to sickness/injury.
The board regularly reviews information on the safety strategy, update on personal injury claims, training records and performance, interaction with the HSE, occupational health initiatives and key developments in the market which could impact of 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.

Reviewed ongoing behavioural safety programme and certain board members attended our inaugural safety awards event in York.

For more information please read our building a sustainable business report
Core value – integrity
The executive directors keep the board updated on the Group's ethical dealings with clients, suppliers and the workforce.

We report on e-learning on ethical matters; supplier payment terms, gender pay and any issues of concern raised by employees whether by way of formal whistleblowing or otherwise.

We have policies in place including the Group's authorisation policy, competition law policy, anti-bribery policy and expenses policy.
Reviewed output from Cognito (our e-learning tool)

Reviewed payment practices reporting submissions and prompt payment code disclosures

Reviewed and approved our modern slavery statement (see Modern Slavery)

Reviewed statements of compliance from all directors and letters of assurance ('LoA') from the Group's four managing directors.

Asking colleagues, customers and suppliers on factory and site visits for feedback on our performance

For more information please read our building a sustainable business report
Core value – commitment
The executive directors keep the board updated on how the Group is meeting its contractual and commercial commitments to our customers, our suppliers and our workforce.Challenging the executive directors on any relationship issues arising with any of our customers, suppliers or workforce.

Asking colleagues, customers and suppliers on factory and site visits for feedback on our performance

Listening to our employees' voice

We recognise the importance of listening to employees to understand their concerns and to act on them. During the year, the board visited various sites across the Group and met with groups of employees, discussing with them their experiences and views. In determining the most appropriate engagement method to adopt going forward, the board has agreed to undertake a comprehensive workforce engagement programme. The aim of this programme is to gather a deeper understanding of colleagues' perspectives on which to build a sustainable Group-wide approach for ongoing dialogue. Unfortunately, the COVID-19 pandemic has resulted in this work being delayed and it will be started as soon as practicably possible in the 2021 financial year.

Due to the COVID-19 pandemic we chose to accelerate the launch of a new company intranet. This has enabled us to communicate with colleagues who are away from work, to share updates and information with them and to engage in dialogue through the comments feature. Colleagues across the Group have raised issues and questions about COVID-19 with management and these have been discussed openly with our executive directors and have informed our approach in many areas (for example, our approach to going above and beyond our contractual requirements on payment for periods of self-isolation). Throughout the year our executive directors have kept our employees informed of our financial performance through newsletters, email notifications and briefing sessions, and made colleagues aware of any external factors and significant events that might have an impact on our business.

Board evaluation process

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

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

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

Professional development

Appropriate training and briefing is provided to all directors on appointment to the board, taking into account their individual qualifications and experience. This is supplemented with visits to the Group's operations and meetings with senior business unit management to develop each director's understanding of the business.

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

Non-executive directors are continually updated on the Group's business, its markets, social responsibility matters, changes to the legal and governance environment and other changes impacting the Group. During the year, the directors received updates on various best practice and regulatory and legislative developments. Particular attention was paid this year to the changes to the Code relating to stakeholder engagement, culture and to executive remuneration that took effect for the Group on 1 April 2019.

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 (Directors' responsibilities statement) and a statement by the auditor concerning their responsibilities (Independent auditor's report). The directors also report that the business is a going concern (Directors' remuneration report) 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. The directors have also made a statement about the long-term viability of the Group, as required under the Code (Our financial performance).

Modern slavery

The board annually reviews and approves the Group's modern slavery statement. The 2020 statement is available on our website at severfield.com and explains the actions taken to ensure that we do not undertake activities or engage suppliers or subcontractors who undertake activities that may be in breach of the Modern Slavery Act 2015.

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 sets out the activities of the committee, the levels and components of remuneration and refers to the development of the remuneration policy.