Engagement with stakeholders
The board considers the needs and priorities of each of the Group's stakeholders during its discussions and as part of its decision-making process. This, together with considering the long-term consequences of decisions and maintaining our reputation, is integral to the way the board operates.
Our stakeholder map identifies our key stakeholder relationships and the impact that the business has on each of those groups and our engagement with those groups. The table below summarises the board's understanding of the key interests of our stakeholders:
| Clients | Workforce | Supply chain | Communities | Shareholders | Funders |
|---|
| Excellent customer service, with delivery of projects on time and to budget. Early contract engagement, providing problem-solving solutions and balancing time, cost and quality objectives. | A safe and sustainable environment to work in, investment in personal development and career progression, and a fair, open and honest culture. | Fair treatment and respect, with prompt payment for work undertaken in a safe and sustainable working environment, with opportunities for repeat business. | Operating ethically and sustainably, causing minimal impact from our activities.
Creating social value through employment opportunities, helping people back to work and investing in the local community by using local suppliers and services. | Robust operational and financial risk management, strong returns on investment decisions, effective communication of strategy and a progressive dividend policy. | Strong cash management, robust working capital management and risk management and good communication through regular financial updates. |
With regard to our clients, supply chain and communities, these groups are recognised by the board as integral to our business model and, as such, are considered regularly by the board. In practice, however, our clients, supply chain and communities vary with each Group company and therefore the Group companies manage day-to-day engagement with these important stakeholder groups. Our Group SHE director and our Group head of procurement assist in managing relationships with those subcontractors and suppliers who are common to more than one Group company. Further details of our engagement with communities can be found on Engaging with our stakeholders.
The board engages directly with the Group's shareholders, suppliers, workforce and funders, and has undertaken the following activities in 2022:
Shareholders
Providing sustainable returns to our shareholders is a key factor in the board's decision-making. The chairman and the non-executive directors are available to meet with shareholders to listen to their views.
The board recognises the importance of communicating with its shareholders to ensure that its strategy and performance is understood. The Group encourages two-way communication with both its institutional and private investors and attempts to respond quickly to all queries received verbally or in writing.
The executive directors undertake a programme of regular communication with institutional shareholders and with analysts covering the Group's activities, its performance and strategy, and issues regular trading updates to the market.
Alan Dunsmore and Adam Semple attended several meetings with institutional shareholders, private investors and analysts during the year, at the time of the announcements of the Group's annual and half-year results. Feedback from those meetings was reported to the board, including the non-executive directors, and was factored into the board's strategy review and its decision to declare a final dividend and to appoint a joint broker.
The board generally uses the AGM to communicate with private investors and encourages their participation. The notice of the AGM, detailing all proposed resolutions, is communicated to shareholders at least 20 working days before the meeting.
Suppliers
The board reviewed and approved the continuation of our prompt payment policy and throughout the year we continued to pay our suppliers on time. During the Ukraine crisis, we have engaged closely with suppliers to monitor the effect of the crisis on their ability to provide continuity of service.
Workforce
Recognising the importance of input and feedback from all colleagues in helping us deliver on our strategic goals, we launched a group-wide My Voice forum during the year, facilitated by Louise Hardy, the Group's designated non-executive director responsible for workforce engagement. The forum provides a formal way for colleagues and management to connect, gain feedback and exchange information and views on any business-related topic. Louise and the chief executive officer, Alan Dunsmore, attend all My Voice forum meetings. Louise provides verbal updates to the board following each forum meeting and written updates on what was heard and discussed at the forums, and the actions the executive committee has taken to address these points, are provided to the board by the Group HR director on a quarterly basis.
In addition, during the year, members of the board visited various sites across the Group and met with groups of employees, discussing with them their experiences and views.
We have continued to develop our intranet 'Severfield Connect' in 2022 to enable us to communicate better and develop a more integrated working culture and to track engagement. Colleagues across the Group have raised issues and questions with management, and these have been discussed openly with our executive directors and have informed our approach in many areas (for example, our approach to going above and beyond our contractual requirements on payment for periods of self-isolation). Throughout the year, our executive directors have kept our employees informed of our financial performance through newsletters, email notifications and briefing sessions, and made colleagues aware of any external factors and significant events that might have an impact on our business.
Funders
The Group's finance director meets with the Group's banks and performance bond issuers to discuss the full-year and half-year results, to update them on the Group's performance and discuss any issues that they wish to raise. These meetings are important in ensuring that the Group has sufficient facilities available. The Group finance director advised the board that no issues or concerns had arisen during the course of these meetings that the board needed to consider in its discussions and decision-making.
The good working relationship established with our banks enabled us to bring forward the timeline for extending our senior debt facilities and increasing our total facility from £25m to £50m in December 2021.
Board's monitoring of culture
The Group's purpose and culture are closely aligned with our core values which are focused on driving the right behaviours for the Group to succeed. Our culture provides an environment in which our workforce can operate safely, act instinctively with integrity, develop strong and long-term relationships with clients and suppliers, and are treated fairly and with respect. This way we can innovate, evolve and successfully deliver our strategic objectives. We do not experience the typical indications of poor culture such as high staff turnover and absenteeism or a poor attitude to training and the board was encouraged by the constructive approach taken by the workforce and by management over the past two years to dealing with the impact of the COVID-19 pandemic by changing ways of working, travelling patterns and participating in other measures such as temperature testing and COVID-19 testing. The board recognised this in its approach to the pay review in September 2021.
Our executive directors promote our core values throughout the Group. The board as a whole is responsible for ensuring that our culture is maintained. It does this by meeting with employees and senior managers, undertaking regular site visits and reading regular reports and presentations from Group companies on how they are operating their businesses and taking into account internal audit reports on matters which are heavily influenced by culture and behaviour. The non-executive directors also draw on their own experiences in other organisations in order to challenge and verify that the Group's values and behaviours remain effective. Our chairman, Kevin Whiteman, continues to hold one-to-one meetings with key managers in order to understand culture better and we have continued to have regular board briefings on a wide range of topics from managers of the business at different tiers of the organisation.
The table below sets out how the board monitors our culture to ensure that behaviours remain aligned with our core values.
| What we monitor and measure | Board action in 2022 |
|---|
| Core value – customer focus | |
|---|
| The executive directors keep the board updated on key projects and customer relationships. The board reviews material issues arising on contracts which may impact a Group company or the Group as a whole. | Reviewed Group company board summaries which included information on key clients and suppliers and the performance of contracts.
Reviewed market information and tender feedback information, together with business development plans, which focus on key client relationships and new clients with whom we wish to have future business.
Approved Group company strategic plans which include information on key clients and client feedback. |
| Core value – safety first | |
|---|
The executive reports include information on health and safety performance, including accident frequency rate, incident frequency rate, near misses and high potential incidents and absence days due to sickness/injury.
The board regularly reviews information on the safety strategy, update on personal injury claims, training records and performance, interaction with the HSE, occupational health initiatives and key developments in the market which could impact on safety performance. | Regular monitoring of health and safety performance is a priority for the board and is the first agenda item for all board meetings.
Board members attended site and factory safety visits during the year, encouraging employees to suggest improvements and share best practice and reported back to the board on the key messages taken away from these visits.
Reviewed and refreshed our ongoing behavioural safety programme.
For more information, please read our Building a responsible and sustainable business. |
| Core value – integrity | |
|---|
The executive directors keep the board updated on the Group's ethical dealings with clients, suppliers and the workforce.
We report on e-learning covering a range of ethical matters including supplier payment terms, gender pay and any issues of concern raised by employees whether by way of formal whistleblowing or otherwise.
We have policies in place, including the Group's authorisation policy, competition law policy, anti-bribery policy and expenses policy and these are regularly reviewed. | Reviewed output from Cognito (our e-learning tool).
Reviewed payment practices reporting submissions and prompt payment code disclosures.
Reviewed and approved our modern slavery statement.
Reviewed statements of compliance from all directors and letters of assurance ('LoA') from the Group's managing directors.
Asking colleagues, customers and suppliers on factory and site visits for feedback on our performance.
For more information, please read our Building a responsible and sustainable business. |
| 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. |
Board evaluation process
The board considers that the balance of relevant experience amongst the various board members enables the board to exercise effective leadership and control of the Group. It also ensures that the decision-making process cannot be dominated by any individual or small group of individuals.
The Code attaches importance to boards having processes for individual and collective performance evaluation. The performance of individual directors is evaluated annually in conjunction with the remuneration review. The chairman meets with the non-executive directors at least annually to review their performance.
During the year, the board asked Alun Griffiths, the senior independent director, to undertake a formal evaluation of board effectiveness. This process was undertaken using a questionnaire which was completed by all members of the board and the company secretary and focused on the performance of the chairman and overall cohesiveness of the board. The key points arising from the evaluation were documented and discussed with the chairman.
Professional development
Appropriate training and briefing is provided to all directors on appointment to the board, taking into account their individual qualifications and experience. This is supplemented with visits to the Group's operations and meetings with senior business unit management to develop each director's understanding of the business.
Training in relation to the business of the Group and the legal and regulatory responsibilities of directors was provided throughout the year by a variety of means to board members, including presentations by executives, visits to business operations and circulation of briefing materials. Individual directors are also expected to take responsibility for identifying their training needs and to ensure they are adequately informed about the Group and their responsibilities as a director.
Non-executive directors are continually updated on the Group's business, its markets, social responsibility matters, changes to the legal and governance environment and other changes impacting the Group. During the year, the directors received updates on various best practice and regulatory and legislative developments. Particular attention was paid this year to sustainability and climate matters as set out in our sustainability report and our TCFD disclosure.
All directors have access to the advice and services of the Group legal director and Company secretary who ensures that board processes are followed and good corporate governance standards are maintained. Any director who considers it necessary or appropriate may take independent professional advice in furtherance of their duties at the Company's expense. No directors sought such advice in the year.
The board is confident that all its members have the knowledge, ability and experience to perform the functions required of a director of a listed company.
Audit, risk and internal control
Financial and business reporting
The financial statements contain an explanation of the directors' responsibilities in preparing the annual report and the financial statements (Statement of directors' Responsibilities) and a statement by the auditor concerning their responsibilities (Independent auditor's report). The directors also report that the business is a going concern (Our financial performance) 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 (Our strategy). The directors have also made a statement about the long-term viability of the Group, as required under the Code (Viability statement).
Modern slavery
The board annually reviews and approves the Group's modern slavery statement. The 2022 statement is available on our website at www.severfield.com and explains the actions taken to ensure that we provide the appropriate level of training to members of our workforce, raise awareness of modern slavery among all members of staff, and do not undertake activities or engage suppliers or subcontractors who undertake activities that may be in breach of the Modern Slavery Act 2015. This year we continued to focus on our supply chain, refreshed and added to our training of relevant staff in awareness of modern slavery and encouraged key suppliers to undertake training through the Supply Chain Sustainability School.
Annual report
The board is responsible for the preparation of the annual report and the financial statements to ensure that the annual report taken as a whole is fair, balanced and understandable.
The annual report is drafted by executive management with reviews undertaken by third-party advisers as required. Additional steps have been built into the reporting timetable to ensure that directors are given sufficient time to review, consider and comment on the annual report. Our external auditor reviews the narrative sections of the annual report to identify any material inconsistencies between their knowledge acquired during the audit and the directors' 'fair, balanced and understandable' statement and whether the annual report appropriately discloses those matters that they have communicated to the audit committee. A substantially final draft is reviewed by the audit committee prior to approval by the board.
Remuneration
The Directors' remuneration report sets out the activities of the committee, the levels and components of remuneration and refers to the development of the remuneration policy.