Part 2 – Annual remuneration report

In this section, we report on the implementation of our policies in the year ended 31 March 2020 as well as how the policy will be implemented for 2021. 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.

In determining the remuneration of executive directors and remuneration policy for the Group, the committee took account of general market conditions and pay levels for the workforce as a whole. In so doing, the committee reviewed wage growth generally and the proportion of earnings paid as bonus to groups of staff at each level – executive directors, senior staff and all other employees (who receive a profit share bonus and are eligible to participate in an SAYE scheme). The Group recognises a number of trade unions who are consulted regarding wage settlements on a site-by-site basis and seeks employee participation on a range of matters including safety.

Implementation of policy for 2020

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:

Number of meetings attended
Alun Griffiths (chairman)6/6
John Dodds6/6
Louise Hardy13/3
Kevin Whiteman6/6
Tony Osbaldiston6/6

1 Louise Hardy attended all meetings whilst she was a director.

The Group considers all members of the committee to be independent. Executive directors may attend remuneration committee meetings at the invitation of the committee chairman, but do not take part in any discussion about their own remuneration. The Company secretary acts as the secretary to the remuneration committee.

The terms of reference for the remuneration committee are available on the Company's website.

Advisers to the committee

Wholly independent advice on executive remuneration is received from the Executive Compensation practice of Aon plc. Aon is a member of the Remuneration Consultants Group and is a signatory to its Code of Conduct. Fees charged by Aon for advice provided to the committee for the year ended 31 March 2020 amounted to £38,000 (excluding VAT) (2019: £24,000).

Directors' earnings for the 2020 financial year (audited)

Remuneration received by the directors

Year ended 31 March 2020
Alan Dunsmore3562191971202867
Ian Cochrane3181951650179758
Derek Randall26118550148644
Adam Semple231143164221453
John Dodds125125
Louise Hardy (appointed 3 September 2019)2626
Tony Osbaldiston4545
Kevin Whiteman4545
Alun Griffiths4545

Taxable benefits include the provision of company cars, fuel for company cars, car allowance and private medical insurance. LTIPs reflect those PSP awards expected to vest based on performance to 31 March 2020.

* Calculated at 85 per cent of maximum award × the average share price over the period 1 March 2020 to 30 April 2020 of 68.41p and adjusted for extra dividend equivalent shares. This is different to the approach taken in recent years due to the impact of the COVID-19 pandemic on the share price since the year-end. The average share price for 1 January to 31 March 2020 inclusive was 80.72p.

Directors' earnings for the 2019 financial year (audited)

Remuneration received by the directors

Year ended 31 March 2019
Alan Dunsmore350701970381890
Ian Cochrane310621650338776
Derek Randall255154-50278737
Adam Semple22044164037357
John Dodds125125
Tony Osbaldiston4545
Kevin Whiteman4545
Alun Griffiths4545
Chris Holt (until 4 September 2018)¹1717

Taxable benefits include the provision of company cars, fuel for company cars, car allowance and private medical insurance. LTIPs reflect those PSP awards expected to vest based on performance to 31 March 2019.

* LTIPs reflect those PSP awards vesting based on performance to 31 March 2019 and are calculated as actual value of benefit at the actual vesting date (including extra dividend equivalent shares) based on the vesting share price of 68.80p.¹ Chris Holt resigned with effect from 4 September 2018.

Remuneration received by the directors

The directors received a 2.4 per cent salary increase, which was broadly in line with that received by the UK workforce, with the exception of Adam Semple who received an increase of 6.8 per cent for the reasons explained earlier.

Past directors/loss of office payments (audited)

There have been no payments made to past directors during the year.

How pay linked to performance in 2020


Performance was such that the executive directors would have received the bonuses set out in the table below, of which 50 per cent would have been paid in shares deferred for three years. However, consideration of entitlement to receive these bonuses has been deferred until October 2020 at the earliest.

Under the rules of the Group's deferred share bonus plan, the participants would receive nil cost options exercisable after three years over a seven-year period which would be forfeitable only in certain scenarios in accordance with the remuneration policy.

Alan Dunsmore£218,798
Ian Cochrane£194,980
Adam Semple£143,464
Derek Randall£185,198

As reported last year, the bonus plan applicable to the executive directors for 2020 had two separate performance conditions:

  • Eighty per cent was payable on achieving budgeted Group PBT (with the exception of Derek Randall who, whilst he is managing director of JSSL, has the profit performance-based component of his bonus split 50/50 between Group PBT and PBT for India). The financial element begins to pay out at 95 per cent of budgeted Group PBT, rising to 50 per cent of this element being payable for achieving budget and full pay-out for achieving 120 per cent of budget.
  • Twenty per cent was payable based on achieving a safety target based on Group IFR with a Group AFR underpin (with the exception of Derek Randall who, whilst he is managing director of JSSL, has the safety component of his bonus based on AFR (India)).

Our policy is to disclose annual PBT, AFR and IFR targets retrospectively following the end of the performance period, unless, in the view of the remuneration committee, this would compromise the commercial position of the Group.

The targets for 2020 and the performance against these targets are set out below:

For all directors (excluding Derek Randall)

Measure% of maximum bonus opportunityThresholdOn-targetMaximumActual% of bonusBonus performance as % of salary
Group PBT*80%£25.9m£27.3m£32.7m£27.4m51%41%
Group AFR20%
Group IFR**above 2.10below 2.00below 1.901.81100%

* For Group PBT, 'threshold' represents 95 per cent of budget, 'on-target' represents 100 per cent of budget and 'maximum' represents 120 per cent of budget.** For Group IFR, 'threshold' represents nil per cent pay-out, 'on-target' represents 50 per cent pay-out and 'maximum' represents 100 per cent pay-out.

Derek Randall (JSSL managing director)

Measure% of maximum bonus opportunityThresholdOn-targetMaximumActual% of bonusBonus performance as % of salary
Group PBT*40%£25.9m£27.3m£32.7m£27.4m51%20%
JSSL (India) PBT40%30.0 Cr40.0 Cr60.0 Cr50.0 Cr75%30%
JSSL (India) AFR**20%above 0.121below 0.12below 0.10-100%20%

* For Group PBT, 'threshold' represents 95 per cent of budget, 'on-target' represents 100 per cent of budget and 'maximum' represents 120 per cent of budget.** For JSSL AFR, 'threshold' represents nil per cent pay-out, 'on-target' represents 50 per cent pay-out and 'maximum' represents 100 per cent pay-out.

PSP awards vesting in 2020

The 2017 PSP awards are due to vest in June 2020, subject to the achievement of an EPS performance condition measured over the three financial years ended 31 March 2020. The minimum EPS figure required for vesting of 25 per cent of the award was c.6.76p which equates to a PBT of £25m. The EPS figure required for vesting at maximum of 100 per cent of the award was c.7.98p which equates to a PBT of £29.5m. The actual PBT achieved was £28.6m which equates to EPS of 7.75p and therefore it is estimated that 85 per cent of these awards will vest subject to continued service.

A summary is set out below:

PSP awards granted to directors in 2020 (audited)

Share awards were made in the year under the PSP scheme for the three year period expiring on 31 March 2022. Details of the awards made to the executive directors are summarised below.

MeasureTypeNumber of shares% of salaryFace value (£)¹Performance condition²Performance period% vesting at threshold
Alan DunsmoreNil-cost option490,196100%350,000EPS3 financial years ending 31 March 202225%
Ian CochraneNil-cost option436,835100%311,900
Derek RandallNil-cost option269,43375%192,375
Adam SempleNil-cost option231,09275%165,000

1 Face value calculated based on the pre-grant date share price of 71.40p on 20 June 2019. 2 Performance conditions are based on EPS targets of 8.41p (minimum performance – 25% vests) to 10.39p (maximum performance – 100 per cent vests) with linear interpolation in between. This represents a PBT range of £31.0m–£38.3m.

The PSP and the annual bonus plan contain malus and clawback provisions (together 'clawback') which can be applied before an award vests or for a period of three years post vesting or within three years of the bonus being paid. Clawback can be applied when it becomes apparent that a PSP award or bonus was larger than ought to have been the case due to the Company having materially misstated its financial results or having made an error in assessing any performance condition or bonus. Clawback can also be applied in the case of subsequently discovered misconduct of a relevant individual or where there has been a substantial failure of risk control. The triggers for which clawback can apply have been extended to cases of corporate failure, severe downturn of financial or operational performance and serious reputational damage, in addition to misconduct. The amount of the relevant clawback would be the net of tax amount (or the full amount to the extent that the individual can recover any tax paid) that had effectively been overpaid in the case of misstatement or error or would be at the committee's discretion in the case of misconduct. Clawback can be imposed by a reduction in the amount of any unvested PSP award, a reduction in the amount of any future bonus or by a requirement to pay back the amount in question (with a right to deduct from salary).

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:

DirectorYear of awardVesting date (June)Performance conditionAwards held at 1 April 2019Awards granted in yearAwards lapsed in yearAwards vested in year4Awards held at 31 March 2020
Alan Dunsmore20162019EPS492,714(554,348)
Ian Cochrane20162019EPS436,637(491,257)
Derek Randall20162019EPS359,071(403,988)
Adam Semple20162019EPS48,241(54,276)

Performance conditions are based on a range of EPS targets as follows:

Threshold (25% vests)Maximum (100% vests)
2017 award16.76p7.98p
2018 award27.88p9.75p
2019 award38.41p10.39p

1 Represents a PBT range of £25.0m–£29.5m.

2 Represents a PBT range of £29.5m–£36.5m.

3 Represents a PBT range of £31.0m–£38.3m.

4 Total of shares vested was higher than total of shares granted since, in accordance with the rules of the plan, additional shares were awarded at vesting representing dividend entitlement accrued during the three-year performance period.

Statement of directors' shareholding

As at 31 March 2020, all executive directors and their connected persons had a shareholding as follows:

Shareholding requirementActual share ownership as a percentage of shareholding requirement as at 31 March 20201
Alan Dunsmore200%157%
Ian Cochrane200%337%
Adam Semple150%13%
Derek Randall150%183%

1 Value of actual share ownership was calculated with reference to the closing mid-market share price at 31 March 2020 of 63.00p. The calculation exludes bonus shares earned and awarded in 2017, 2018 and 2019 for which the relevant three-year deferral period has not yet expired. If these are taken into account, then Alan Dunsmore's shareholding is 201 per cent and meets the requirement.

Directors' current shareholdings (audited):

The following table provides details on the directors' beneficial interests in the Company's share capital as at 31 March 2020.

Owned shares1Share incentive plan (SIP)2Sharesave schemeDSBP3PSP4Total5
Alan Dunsmore892,82720,47926,470249,1051,209,4372,398,318
Ian Cochrane1,707,35320,47926,470249,3691,067,2793,070,950
Adam Semple49,20211,25044,982458,245563,679
Derek Randall764,4354,667289,119713,7531,771,974
John Dodds419,833419,833
Tony Osbaldiston
Kevin Whiteman
Alun Griffiths30,00030,000
Louise Hardy

1 Includes shares owned by connected persons.

2 SIP shares are unvested and held in trust.

3The principal terms of the deferred share bonus plan are described in the Directors' remuneration report - policy.

4 PSP shares are in the form of conditional awards which will only vest on the achievement of certain performance conditions. The total includes 2017 awards which had not actually vested as at 31 March 2020.

5 There have been no changes in the directors' interests in the shares issued or options granted by the Company between the end of the period and the date of this annual report, except shares held pursuant to the SIP. There have been no changes in the directors' beneficial interests in trusts holding ordinary shares of the Company. Some of the executive directors continued their membership in the SIP after the end of the period and were therefore awarded further shares pursuant to the SIP rules. Between the end of the period and 25 May 2020 being the last practicable date prior to the publication of this annual report, the executive directors acquired further shares under the SIP as set out in the table below.

ExecutivesNew SIP shares since 31 March 2020Total SIP shares at
25 May
Ian Cochrane36320,842
Alan Dunsmore36320,842

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's position against its dilution limit as at 31 March 2020 was under the maximum 10 per cent limit at 8.0 per cent.

Performance graph

The following graph shows the Group's performance, measured by total shareholder return, compared with the performance of the FTSE Small Cap Index. It is based on the change in the value of a £100 investment made on 31 March 2010 over the ten-year period ended 31 March 2020.

This index was selected as it represents a broad equity market index and is considered to be the most appropriate comparator group of companies over a ten-year period commencing March 2010.

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 (or in the case of 2020 are expected to vest) based on performance in those years (at the share price at which they vested or, in the case of the 2020 figures, at the average share price over the period 1 March 2020 to 1 April 2020).

Dodds2, 3
Total remuneration (£000)640701450622892336819461,228738819890867
Annual bonus (%)50.1%60.5%N/AN/A34.0%65.0%63.0%95.0%62.6%20.0%61.0%
LTIP vesting (%)100.0%N/AN/A64.0%74.0%95.4%95.4%100.0%85.0%

1 Tom Haughey received compensation of £423,000 for loss of office in accordance with his contract.

2 John Dodds was appointed executive chairman in an interim capacity following Tom Haughey's resignation as chief executive officer on 23 January 2013 and prior to the appointment of Ian Lawson as chief executive officer on 1 November 2013. During this time he was awarded a discretionary bonus (no maximum was set) but not entitled to any PSP award. These figures do not include his fees as non-executive chairman.

3 Financial year 2013 represented the 15-month period to 31 March 2013.

4 Appointed on 1 November 2014.

5 Ian Lawson received compensation of £408,000 for loss of office in accordance with his contract.

6 Alan Dunsmore operated as interim chief executive officer from 1 April 2017 to 31 January 2018, during Ian Lawson's absence due to physical ill health. Alan's appointment to this role was made permanent from 1 February 2018. The figures in the table above represent Ian Lawson's remuneration for this period and Alan Dunsmore's remuneration for the period in which he was both interim and permanent chief executive officer.

How the change in chief executive officer 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 chief executive officer compared to the percentage change of each of those components of pay of the average of a group of employees. The committee has selected UK-based salaried employees as this geography provides the most appropriate comparator.

% change
Chief executive officer
Average employees

Chief executive officer pay ratio disclosure

25th percentile pay ratio
(CEO: UK employees)
Median pay ratio
(CEO: UK employees)
75th percentile pay ratio
(CEO: UK employees)
YearMethod of calculation adopted
2020Option A30:122:117:1

Pay details for the chief executive officer and individual whose 2020 remuneration is at the median, 25th percentile and 75th percentile amongst UK-based employees are as follows:

Chief executive officer25th percentileMedian75th percentile
Total pay and benefits867294051

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:

% change
Staff costs70,71464,6149.4%
Underlying operating profit26,97823,25616.0%

Shareholder voting

The results below show the response to the 2019 AGM shareholder voting for the directors' 2019 remuneration report (excluding remuneration policy):

Total number of votes% of votes cast
Total votes cast (for and against)241,991,788100%
Withheld votes1,632,127N/A
Total votes (including withheld votes)243,623,915N/A

The results below show the response to the 2017 AGM shareholder voting for the directors' 2017 remuneration policy:

Total number of votes% of votes cast
Total votes cast (for and against)232,485,950100%
Withheld votes60,928N/A
Total votes (including withheld votes)232,546,878N/A

Implementation of policy for 2021

The executive directors' current salaries

The salaries of the executive directors will be reviewed at the earliest in October 2020, with the exception of Adam Semple whose salary will be increased to £250,000 on 1 July 2020 for the reasons previously explained. Increases will be set in the context of overall salary increases for the wider workforce, unless special circumstances apply, as in the case of Adam Semple.

The executive directors' salaries at the start of the 2021 financial year are as follows:

Alan Dunsmore358,400
Ian Cochrane319,385
Adam Semple235,000
Derek Randall262,660

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. The company pension allowance level for new executive director appointments will be aligned to those available to the majority of the UK monthly paid workforce, from time to time. The current pension contribution being 7 per cent of base salary.

The maximum pension allowance in policy for incumbent directors will be reduced as from 1 April 2021. The pension contribution levels for incumbent directors will further reduce over the course of the policy to 15 per cent by the end of the policy as follows:

CurrentFrom 1 April 2021From 1 April 2022From 1 April 2023
Chief executive officer20%19%17%15%

Full alignment to the level of the majority of the UK workforce will be achieved by the end of the next policy at the latest.

Rewards for performance in 2021


The decision on whether to operate the annual bonus plan for executive directors for 2021 will be deferred until there is some greater clarity on the current COVID-19 pandemic and the wider implications for the Group. In any event, the maximum bonus opportunity for 2021 will be held at the level for the previous financial year, being 100 per cent of salary. Performance measures and targets will be disclosed in the relevant year.


Consideration of the grant of PSP awards for 2021 has been deferred until October 2020 at the earliest but if made will be no higher than 100 per cent of salary to the chief executive officer and the chief operating officer and 75 per cent of salary to the Group finance director and the JSSL managing director.

Any PSP grants will set a performance condition for a three-year period which will reflect the continuing expected recovery of profitability, recognising that market conditions remain challenging in many areas.

When setting a target range, the committee will consider a number of reference points including internal financial forecasts, external analyst consensus, the base EPS and a broad view of the wider construction industry. This will reflect, in the view of the committee, a realistic performance range whilst maintaining the targets at an appropriately stretching level. They will require management to deliver strong, sustainable performance over the period without encouraging undue risk-taking and in the context of the market environment will be at a level which are considered more challenging than targets set for prior awards.

How will the non-executive directors be paid in the 2021 financial year

The fees for the chairman and non-executive directors will be as follows:

Basic fee for other non-executive directors40,00040,000
Additional fee for SID role5,0005,000
Additional fee for chairman of audit and remuneration committees5,0005,000


This report was approved by the board of directors and signed on behalf of the board.

Alun Griffiths

Chairman of the remuneration committee

17 June 2020