Part 2 – Annual remuneration report
In this section, we report on the implementation of our policies in the year ended 26 March 2022 as well as how the policy will be implemented for 2023. 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 2022
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 |
| Louise Hardy | 6/6 |
| Kevin Whiteman | 6/6 |
| Tony Osbaldiston | 6/6 |
| Rosie Toogood | 2/2 |
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.
Shareholder engagement
The committee engages directly with major shareholders where it considers there to be material changes to the remuneration policy or executive remuneration framework.
Consideration of conditions and pay levels for the workforce and workforce engagement on executive pay
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. 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 26 March 2022 amounted to £19,875 (excluding VAT).
Directors' earnings for the 2022 financial year (audited)
Remuneration received by the directors
| Year ended 26 March 2022 |
| £000 | Salary | Fees | Benefits | Pension | Total fixed pay | Bonus | LTIPs | Total variable pay | Total |
| Executives | | | | | | | | | |
| Alan Dunsmore | 369 | – | 19 | 70 | 458 | 63 | – | 63 | 521 |
| Ian Cochrane | 328 | – | 16 | 49 | 393 | 56 | – | 56 | 449 |
| Derek Randall | 270 | – | 40 | 46 | 356 | 111 | – | 111 | 467 |
| Adam Semple | 252 | – | 16 | 43 | 311 | 43 | – | 43 | 354 |
| Non-executives | | | | | | | | | |
| Kevin Whiteman | – | 140 | – | – | 140 | – | – | – | 140 |
| Alun Griffiths | – | 60 | – | – | 60 | – | – | – | 60 |
| Tony Osbaldiston | – | 53 | – | – | 53 | – | – | – | 53 |
| Louise Hardy | – | 53 | – | – | 53 | – | – | – | 53 |
| Rosie Toogood (appointed 16 June 2021) | – | 36 | – | – | 36 | – | – | – | 36 |
| 1,219 | 342 | 91 | 208 | 1,860 | 273 | – | 273 | 2,133 |
Taxable benefits include the provision of company cars, fuel for company cars, car, accommodation and living allowances and private medical insurance. LTIPs reflect those PSP awards expected to lapse based on performance to 26 March 2022.
Directors' earnings for the 2021 financial year (audited)
| Year ended 27 March 2021 |
| £000 | Salary | Fees | Benefits | Pension | Total fixed pay | Bonus | LTIPs | Total variable pay | Total |
| Executives | | | | | | | | | |
| Alan Dunsmore | 364 | – | 19 | 73 | 456 | 291 | – | 291 | 747 |
| Ian Cochrane | 324 | – | 16 | 50 | 390 | 259 | – | 259 | 649 |
| Derek Randall ¹ | 267 | – | 79 | 50 | 396 | 213 | – | 213 | 609 |
| Adam Semple | 246 | – | 16 | 44 | 306 | 197 | – | 197 | 503 |
| Non-executives | | | | | | | | | |
| Kevin Whiteman ² | – | 91 | – | – | 91 | – | – | – | 91 |
| Alun Griffiths ³ | – | 48 | – | – | 48 | – | – | – | 48 |
| Tony Osbaldiston | – | 45 | – | – | 45 | – | – | – | 45 |
| Louise Hardy | – | 40 | – | – | 40 | – | – | – | 40 |
| John Dodds (resigned 3 September 2020) | – | 54 | – | – | 54 | – | – | – | 54 |
| 1,201 | 278 | 130 | 217 | 1,826 | 960 | – | 960 | 2,786 |
Taxable benefits include the provision of company cars, fuel for company cars, car, accommodation and living allowances and private medical insurance. LTIPs reflect those PSP awards which lapsed based on performance to 27 March 2021.
- £22,317 of the cost of living allowance paid to Derek Randall related to FY20 but was wholly paid in FY21.
- Kevin Whiteman was appointed as chairman on 3 September 2020.
- Alun Griffiths was appointed as senior independent director on 1 October 2020.
Base salary increases received by the directors
The directors received a 1 per cent salary increase effective from 1 July 2021, which was broadly in line with that received by office staff but less than that received by production staff.
Past directors/loss of office payments (audited)
There have been no payments made to past directors/loss of office during the year.
How pay linked to performance in 2022 (audited)
Bonus
As in previous years, executive directors were granted an annual bonus opportunity equal to 100 per cent of salary in line with the remuneration policy. 80 per cent of the award was based on PBT performance and 20 per cent based on safety performance.
The targets and the performance against these targets are set out below:
For all directors (excluding Derek Randall)
| Measure | % of maximum bonus opportunity | Threshold | On-target | Maximum | Actual | % of bonus | Payout as % of salary |
| Group PBT* | 80% | £28.6m | £30.1m | £33.1m | £27.1m | 0% | 0% |
| Group IFR** | 20% | above 1.48 | below 1.48 | below 1.29 | 1.32 | 85% | 17% |
| | | | | | | 17% |
*For Group PBT, 'threshold' represents 0 per cent, 'on-target' represents 50 per cent and 'maximum' represents 100 percent of the bonus opportunity.
** For Group IFR, 'threshold' represents 0 per cent, 'on-target' represents 50 per cent and 'maximum' represents 100 per cent of the bonus opportunity. Actual performance excludes DAM Structures, which was acquired by the Group in February 2021 and which was not included when the targets were set as no comparable data was available. Performance of DAM Structures will be included for the calculation of the 2023 target.
Derek Randall (JSSL managing director)
| Measure | % of maximum bonus opportunity | Threshold | On-target | Maximum | Actual | % of bonus | Payout as % of salary |
| Group PBT * | 40% | £28.6m | £30.1m | £33.1m | £27.1m | 0% | 0% |
| JSSL (India) PBT* | 40% | 7.5 Cr | 10.4 Cr | 20.0 Cr | 10.9 Cr | 53% | 21% |
| JSSL (India) AFR** | 20% | Above 0.11 | Below 0.11 | Below 0.09 | 0.00 | 100% | 20% |
| | | | | | | 41% |
* Derek Randall's profit-based component is split 50:50 between Group PBT and JSSL PBT. For Group PBT and JSSL PBT, 'threshold' represents 0 per cent, 'on-target' represents 50 per cent and 'maximum' represents 100 per cent of the bonus opportunity.
**For JSSL AFR, no 'threshold' or 'on-target' targets were set. 100 per cent of the bonus opportunity is earned on achieving a score of below 0.09.
The executive directors will receive the bonuses set out in the table below, of which 50 per cent will be paid in shares deferred for three years.
| Alan Dunsmore | £62,648 |
| Ian Cochrane | £55,793 |
| Derek Randall | £110,641 |
| Adam Semple | £42,819 |
PSP awards vesting in 2022
- The 2019 PSP awards were capable of vesting in June 2022, subject to the achievement of an EPS performance condition measured over the three financial years ended 26 March 2022. The threshold EPS target required for vesting of 25 per cent of the award was 8.41p which equated to a PBT of £31m. The actual PBT achieved was £27.1m, which equated to EPS of 7.2p and therefore the awards will lapse in full, for the second successive year.
As explained in the chairman's statement on Director's Remuneration Report, no discretion was applied by the committee to adjust the formulaic vesting outcome of the annual bonus or PSP awards.
Deferred bonus awards granted in 2022 (audited)
On 28 June 2021 the committee made the following awards under the Group's Deferred Share Bonus Plan to executive directors in relation to the 2021 bonus outcome. The awards will vest on 28 June 2024, subject to continued employment.
| Name | Type | Number of shares | Face value of shares¹ | Vesting date |
| Alan Dunsmore | Nil–cost option | 183,032 | £145,510 | 28 June 2024 |
| Ian Cochrane | Nil–cost option | 163,106 | £129,670 | 28 June 2024 |
| Derek Randall | Nil–cost option | 134,137 | £106,639 | 28 June 2024 |
| Adam Semple | Nil–cost option | 123,899 | £98,500 | 28 June 2024 |
1 Face value calculated using the average mid-market share price for 24 and 25 June 2021 (79.50p).
PSP awards granted in 2022 (audited)
Awards were granted in June 2021 equal to 100 per cent of salary for the chief executive officer and the chief operating officer and 75 per cent of salary for other executive directors. The targets set are intended to incentivise management to maintain forward momentum and will require the Group to deliver EPS which equates to a PBT range of £30m to £40m for the financial year 2024. The committee considers that this represents a vesting range which is realistic, whilst remaining appropriately stretching, particularly in the context of current expectations of the external market over the next performance cycle.
Details of the awards made to the executive directors are summarised below.
| Name | Type | Number of shares | % of salary | Face value (£)1 | Performance condition2 | Performance period | % vesting at threshold |
| Alan Dunsmore | Nil–cost option | 451,319 | 100% | £365,568 | EPS | 3 financial years ending 30 March 2024 | 25% |
| Ian Cochrane | Nil–cost option | 402,188 | 100% | £325,772 |
| Derek Randall | Nil–cost option | 246,850 | 75% | £199,948 |
| Adam Semple | Nil–cost option | 231,481 | 75% | £187,500 |
- Face value calculated based on the pre-grant date share price of 81p on 16 June 2021.
- Performance conditions are based on underlying EPS targets of 7.61p (minimum performance – 25% vests) to 9.92p (maximum performance – 100% vests) with linear interpolation in between. This represents a PBT range of £30m-£40m.
The committee retains discretion to adjust the formulaic vesting outcome if it is not considered to be appropriate, taking into account wider Group performance during the performance period. This includes consideration of any 'windfall gains' at the point of vesting. In assessing whether there is any 'windfall gain', the committee will take into account a number of factors, including share price performance over the vesting period, financial performance of the business, and any significant events which have impacted the Company's share price or market as a whole.
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 date* | Performance condition | Awards held at 28 March
2021 | Awards granted in year | Awards lapsed in year | Awards vested in year | Awards
held at
26 March 2022 |
| Alan Dunsmore | 2018 | 2021 | EPS | 414,692 | – | (414,692) | – | – |
| 2019 | 2022 | EPS | 490,196 | – | – | – | 490,196 |
| 2020 | 2023 | EPS | 529,809 | – | – | – | 529,809 |
| 2021 | 2024 | EPS | – | 451,319 | – | – | 451,319 |
| Total | | | | 1,434,697 | 451,319 | (414,692) | – | 1,471,324 |
| Ian Cochrane | 2018 | 2021 | EPS | 360,556 | – | (360,556) | – | – |
| 2019 | 2022 | EPS | 436,835 | – | – | – | 436,835 |
| 2020 | 2023 | EPS | 472,133 | – | – | – | 472,133 |
| 2021 | 2024 | EPS | – | 402,188 | – | – | 402,188 |
| Total | | | | 1,269,524 | 402,188 | (360,556) | – | 1,311,156 |
| Derek Randall | 2018 | 2021 | EPS | 222,372 | – | (222,372) | – | – |
| 2019 | 2022 | EPS | 269,433 | – | – | – | 269,433 |
| 2020 | 2023 | EPS | 291,210 | – | – | – | 291,210 |
| 2021 | 2024 | EPS | – | 246,850 | – | – | 246,850 |
| Total | | | | 783,015 | 246,850 | (222,372) | – | 807,493 |
| Adam Semple | 2018 | 2021 | EPS | 195,498 | – | (195,498) | – | – |
| 2019 | 2022 | EPS | 231,092 | – | – | – | 231,092 |
| 2020 | 2023 | EPS | 271,739 | – | – | – | 271,739 |
| 2021 | 2024 | EPS | – | 231,481 | – | – | 231,481 |
| Total | | | | 698,329 | 231,481 | (195,498) | – | 734,312 |
| | | | 4,185,565 | 1,331,838 | (1,193,118) | – | 4,324,285 |
Performance conditions are based on a range of EPS targets as follows:
| Threshold (25% vests) | Maximum (100% vests) |
| 2019 award1 | 8.41p | 10.39p |
| 2020 award2 | 6.57p | 8.36p |
| 2021 award3 | 7.61p | 9.92p |
- Represents a PBT range of £31.0m - £38.3m. These awards will lapse in full as threshold EPS performance was not achieved.
- Represents a PBT range of £25.5m - £32.5m.
- Represents a PBT range of £30.0m - £40.0m
* Vesting date is June in the relevant years other than 2023 when it is December.
Statement of directors' shareholding (audited)
As at 26 March 2022, all executive directors and their connected persons had a shareholding as follows:
| Shareholding
requirement | Actual share ownership as a percentage of shareholding
requirement as at 26 March 20221 |
| Alan Dunsmore | 200% | 253% |
| Ian Cochrane | 200% | 437% |
| Derek Randall | 150% | 265% |
| Adam Semple | 150% | 62% |
- Value of actual share ownership was calculated with reference to the closing mid-market share price at 26 March 2022 of 67.00p. Actual share ownership includes DSBP shares granted but still within the three-year deferral period and/or unexercised.
Directors' current shareholdings (audited)
The following table provides details on the directors' beneficial interests in the Company's share capital as at 26 March 2022.
| Owned shares¹ | Share incentive plan (SIP)² | Sharesave scheme | DSBP3 | PSP4 | Total5 |
| Executives | | | | | | |
| Alan Dunsmore | 1,170,257 | 9,928 | 19,073 | 428,070 | 1,471,324 | 3,098,652 |
| Ian Cochrane | 1,941,790 | 9,928 | 27,237 | 381,469 | 1,311,156 | 3,671,580 |
| Derek Randall | 835,988 | – | – | 410,132 | 807,493 | 2,053,613 |
| Adam Semple | 84,667 | – | 19,073 | 283,193 | 734,312 | 1,121,245 |
| Non-executives | | | | | | |
| Kevin Whiteman | 65,619 | – | – | – | – | 65,619 |
| Alun Griffiths | 50,000 | – | – | – | – | 50,000 |
| Tony Osbaldiston | – | – | – | – | – | – |
| Louise Hardy | – | – | – | – | – | – |
| Rosie Toogood | – | – | – | – | – | – |
- Includes shares owned by connected persons and excludes DSBP shares granted but still within the three-year deferral period.
- SIP shares are unvested and held in trust.
- The principal terms of the deferred share bonus plan are described on Remuneration Policy.
- PSP shares are in the form of conditional awards which will only vest on the achievement of certain performance conditions. The total includes 2019 awards which had not actually lapsed as at 26 March 2022.
- There have been no changes in the directors' interests in the shares issued or options granted by the Company between the end of the period and the date of this annual report. There have been no changes in the directors' beneficial interests in trusts holding ordinary shares of the Company.
Position against dilution limits
Severfield plc complies with the Investment Association's principles of executive remuneration. These principles require that commitments under all of the Group's share ownership schemes (including the share incentive plan ('SIP'), sharesave scheme and the PSP) must not exceed 10 per cent of the issued share capital in any rolling ten-year period. Within this 10 per cent limit, the Group can only issue 5 per cent of its issued share capital to satisfy awards under executive discretionary schemes. The Group was operating within these limits as at 26 March 2022.
Performance graph
The following graph shows the Group's performance, measured by total shareholder return, compared with the performance of the FTSE Small Cap Index. It is based on the change in the value of a £100 investment made on 1 April 2012 over the ten-year period ended 26 March 2022.
This index was selected as it represents a broad equity market index and is considered to be the most appropriate comparator group of companies over a ten-year period commencing April 2012.
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).
| 2013
Haughey1 | 2013
Dodds2, 3 | 2014
Dodds2 | 2014
Lawson4 | 2015
Lawson | 2016
Lawson | 2017
Lawson | 2018
Lawson5 | 2018
Dunsmore6 | 2019
Dunsmore | 2020
Dunsmore | 2021
Dunsmore | 2022
Dunsmore |
| Total remuneration (£000) | 450 | 62 | 289 | 233 | 681 | 946 | 1,228 | 738 | 819 | 890 | 880 | 747 | 521 |
| Annual bonus (%) | – | N/A | N/A | 34.0% | 65.0% | 63.0% | 95.0% | – | 62.6% | 20.0% | 61.0% | 80.0% | 17% |
| LTIP vesting (%) | – | N/A | N/A | – | – | 64.0% | 74.0% | 95.4% | 95.4% | 100.0% | 85.0% | – | – |
- Tom Haughey received compensation of £423,000 for loss of office in accordance with his contract.
- 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.
- Financial year 2013 represented the 15 month period to 30 March 2013.
- Appointed on 1 November 2013.
- Ian Lawson received compensation of £408,000 for loss of office in accordance with his contract.
- 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 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 2022 and 2021 | Base salary/fees | Benefits | Annual bonus |
| Alan Dunsmore | 1% | 0% | (78%) |
| Ian Cochrane | 1% | 0% | (78%) |
| Derek Randall1 | 1% | (49%) | (41%) |
| Adam Semple | 2% | 0% | (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% | 0% | 33% |
| Ian Cochrane | 2% | 0% | 33% |
| Derek Randall | 2% | 0% | 15% |
| Adam Semple | 7% | 0% | 38% |
| Kevin Whiteman3 | 103% | – | – |
| Alun Griffiths | 6% | – | – |
| Tony Osbaldiston | 0% | – | – |
| Louise Hardy | 0% | – | – |
| All UK employees | 2% | 0% | 6% |
- Derek Randall's FY21 benefit included £40,000 of cost of living allowance relating to FY20 but wholly paid in FY21.
- Rosie Toogood was appointed to the board on 16 June 2021.
- Kevin Whiteman was appointed as chairman on 3 September 2020
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) |
| Year | Method of calculation adopted | | | |
| 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 |
- Option A methodology was selected on the basis that it is a robust approach and is preferred by shareholders and proxy voting agencies. The calculations for the representative employees were performed at the final day of the relevant financial year.
A substantial proportion of the chief executive officer's total remuneration is performance related and delivered in shares. The ratios will therefore depend significantly on the chief executive officer's annual bonus and PSP outcomes and may fluctuate year-to-year.
The median ratio of 13:1 is 28 per cent lower than the median ratio of 18:1 in 2021. This reduction in the chief executive officer pay ratio mainly reflects the chief executive officer receiving a 17 per cent annual bonus in 2022 (2021: 80 per cent).
The committee has confirmed that the ratio is consistent with the Company's wider policies on employee pay, reward and progression.
Total pay and benefits used to calculate the ratios
Pay details for the chief executive officer and individual whose remuneration is at the median, 25th percentile and 75th percentile amongst full-time equivalent UK-based employees are as follows:
| Chief executive officer | 25th percentile | Median | 75th percentile |
| Year 2022 | £000 | £000 | £000 | £000 |
| 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.
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:
| 2022
£000 | 2021
£000 | % change |
| Staff costs | 86,034 | 75,630 | 13.8% |
| Revenue | 403,563 | 363,254 | 11.1% |
| Underlying1 operating profit | 26,881 | 25,470 | 5.5% |
| Dividends | 9,229 | 8,895 | 3.8% |
There were no share buybacks during the year.
Shareholder voting
The results below show the response to the 2021 AGM shareholder voting for the directors' 2020 remuneration report (excluding remuneration policy):
| Total number of votes | % of votes cast |
| For | 248,106,442 | 99.91 |
| Against | 232,819 | 0.09 |
| Total votes cast (for and against) | 248,339,261 | 100 |
| Withheld votes | 54,717 | n/a |
| Total votes (including withheld votes) | 248,393,978 | n/a |
The results below show the response to the 2020 AGM shareholder voting for the directors' 2020 remuneration policy:
| Total number of votes | % of votes cast |
| For | 239,038,916 | 94.71% |
| Against | 13,347,225 | 5.29% |
| Total votes cast (for and against) | 252,386,141 | 100% |
| Withheld votes | 1,565,800 | N/A |
| Total votes (including withheld votes) | 253,951,941 | N/A |
1 See note 32 for APM definitions.