PART 2 – Annual Remuneration Report

In this section, we report on the implementation of our policies in the year ended 31 March 2017 as well as how the policy will be implemented for 2018. 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 2017

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)4/4
John Dodds4/4
Chris Holt4/4
Kevin Whiteman4/4
Tony Osbaldiston4/4

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

Advisers to the committee

The committee retained New Bridge Street (an Aon plc company) as an independent adviser to the remuneration committee throughout the year. New Bridge Street is a member of the Remuneration Consultants Group and is a signatory to its code of conduct. Neither New Bridge Street nor any other part of Aon plc provided other services to the Group during the year. The fees paid to New Bridge Street for work carried out during the year ended 31 March 2017 totalled £34,000 (2016: £9,000).

Directors' earnings for the 2017 financial year (audited)

Remuneration received by the directors

Year ended 31 March 2017
Ian Lawson37335928753701,205
Ian Cochrane2932823150218874
Alan Dunsmore2482391650179732
Derek Randall24319550179667
John Dodds100100
Tony Osbaldiston4545
Kevin Whiteman4545
Alun Griffiths4545
Chris Holt4040

Taxable benefits include the provision of company cars, fuel for company cars, car and accommodation allowances and private medical insurance. LTIPs reflect those PSP awards expected to vest based on performance to 31 March 2017.

*Calculated at 74 per cent of maximum award x the average share price over the period 1/1/17 to 31/3/17 of 79.05p.

Year ended 31 March 2016
Ian Lawson3662312873248946
Ian Cochrane2881812550123667
Alan Dunsmore2421521650101561
Derek Randall23610250101489
John Dodds100100
Tony Osbaldiston4545
Kevin Whiteman4545
Alun Griffiths4545
Chris Holt4040

Taxable benefits include the provision of company cars, fuel for company cars, car and accommodation allowances and private medical insurance.

* LTIPs reflect those PSP awards vesting based on performance to 31 March 2016 and are calculated as actual value of benefit at the actual vesting date based on the vesting share price of 68.50p for Ian Lawson, 43.75p for Derek Randall and 43.69p for the other executive directors.

Remuneration received by the directors

During the year the directors received a 2.5 per cent salary increase, which was broadly in line with that received by the UK workforce. In all cases the increases were effective from 1 July 2016.

Past directors/loss of office payments (audited)

There have been no payments made to past directors or any payment for loss of office.

How pay linked to performance in 2017


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.

Under the rules of the Group's deferred share bonus plan the participants will have beneficial ownership of the shares, the share certificates are retained by the Company secretary for a period of three years and, unless otherwise determined by the remuneration committee, are subject to forfeiture provisions in the event of termination of employment prior to the expiry of this period.

Ian Lawson£359,000
Ian Cochrane£282,000
Alan Dunsmore£239,000
Derek Randall£195,000

As reported last year, the bonus plan applicable to the executive directors for 2017 had two separate performance conditions:

  • Eighty per cent was payable on achieving budgeted Group PBT (with the exception of Derek Randall who, whilst he remains in India, 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 target Group AFR (with the exception of Derek Randall who, whilst he remains in India, has the AFR-based component of his bonus based on AFR (India)).

Our policy is to disclose annual PBT and AFR 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 2017 and the pay-out against these targets are set out below:

All directors (excluding Derek Randall):

Measure% of maximum bonus opportunityPerformance requiredActual% of
bonus paid
as % of salary
Group PBT*80%£16.0m£16.9m£20.2m£19.8m94%75%
Group AFR20%

* 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.

Derek Randall (JSSL managing director):

Measure% of maximum bonus opportunityPerformance requiredActual% of
as %
of salary
Group PBT*40%£16.0m£16.9m£20.2m£19.8m94%38%
JSSL (India) PBT*40%Loss of 10.9 CrBreak-evenProfit of 15.0 CrProfit of 1.37 Cr55%22%
JSSL (India) AFR20%

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


The 2014 PSP awards are due to vest in June 2017, subject to the achievement of an EPS performance condition measured over the three financial years ended 31 March 2017. The minimum EPS figure required for vesting of 25 per cent of the award was c.3.23p which equates to a PBT of £12.0m. The EPS figure required for vesting at maximum of 100 per cent of the award was c.6.45p which equates to a PBT of £24.0m. The actual PBT achieved was £19.8m which equates to EPS of 5.53p and therefore it is estimated that 74 per cent (taking into account linear interpolation) of these awards will vest subject to continued service. A summary is set out below:

PSP awards granted to directors in 2017 (audited)

Share awards were made in the year under the PSP scheme for the three-year period expiring on 31 March 2019. Details of the awards made to the executive directors are summarised below.

TypeNumber of shares% of salaryFace value (£)1Performance condition2Performance period% vesting at threshold
Ian LawsonNil-cost option741,186100%368,740EPS3 financial
years ending
31 March
Ian CochraneNil-cost option436,63775%217,227
Alan DunsmoreNil-cost option492,714100%245,125
Derek RandallNil-cost option359,07175%178,638

1. Face value calculated based on the pre-grant date share price of 49.75p on 28 June 2016.

2. Performance conditions are based on EPS targets of 5.06p (minimum performance — 25 per cent vests) to 6.53p (maximum performance – 100 per cent vests) with linear interpolation in between. This represents a PBT range of £18.6m–£24m.

The PSP and the annual bonus plan contain recovery and withholding (i.e. clawback) provisions 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 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
Vesting date (June)Performance conditionAwards held at
1 April 2016
Awards granted in yearAwards lapsed in yearAwards vested
in year
Awards held at 31 March 2017
Ian Lawson20132016EPS549,020(186,514)(362,506)
Ian Cochrane20132016EPS429,688(149,160)(280,528)
Alan Dunsmore20132016EPS353,359(122,664)(230,695)
Derek Randall20132016EPS353,359(122,664)(230,695)

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

Threshold (25% vests)Maximum (100% vests)
2014 award13.23p6.45p
2015 award24.30p6.45p
2016 award35.06p6.53p
  1. Represents a PBT range of £12.0m – £24.0m.
  2. Represents a PBT range of £16.0m – £24.0m.
  3. Represents a PBT range of £18.6m – £24.0m.

Directors' current shareholdings (audited):

The following table provides details on the directors' beneficial interests in the Company's share capital as at 31 March 2017:

Owned shares1Share incentive plan (SIP)2Sharesave schemeDSBP3PSP4Total5,6
Ian Lawson274,2167,03933,003230,9681,886,5022,431,728
Ian Cochrane2,857,39414,40033,003242,5331,111,4634,258,793
Alan Dunsmore172,05114,40033,003135,6691,047,6681,402,791
Derek Randall207,0054,66733,003154,693914,0251,313,393
John Dodds419,833419,833
Tony Osbaldiston
Kevin Whiteman
Alun Griffiths30,00030,000
Chris Holt53,09753,097
  1. Includes shares owned by connected persons.
  2. SIP shares are unvested and held in trust.
  3. The principal terms of the deferred share bonus plan are described here.
  4. PSP shares are in the form of conditional awards which will only vest on the achievement of certain performance conditions. The total includes 2014 awards which had not actually vested as at 31 March 2017.
  5. As at 31 March 2017, only Ian Cochrane satisfied the Company's shareholding guideline. The other executive directors will be required to retain a proportion of any net of tax shares which may vest from equity-based plans until the guideline is achieved.
  6. 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. 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 21 May 2017, 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 2017Total SIP
shares at
14 June
Ian Lawson2987,337
Ian Cochrane29914,699
Alan Dunsmore29914,699
Derek Randall4,667

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 10-year period. The Group's position against its dilution limit as at 31 March 2017 was well under the maximum 10 per cent limit at 4.6 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 2009 over the eight-year period ended 31 March 2017.

This index was selected as it represents a broad equity market index and an appropriate comparator group of companies over the period.

Total shareholder return

Source: Datastream (Thomson Reuters)

Chief executive officer remuneration change

The table below shows the total remuneration figure for the chief executive officer role over the same eight-year period. Total remuneration includes bonuses and the value of PSP awards which vested (or in the case of 2017 are expected to vest) based on performance in those years (at the share price at which they vested or, in the case of the 2017 figures, at the average share price for the quarter immediately prior to the year-end).

Dodds2, 3
Total remuneration (£000)1,265640701450622892336819461,205
Annual bonus (%)94.8%50.1%60.5%N/AN/A34.0%65.0%63.0%95.0%
LTIP vesting (%)100.0%100.0%N/AN/A64.0%74.0%
  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.

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 salaried employees in mainland UK as this geography provides the most appropriate comparator.

% change
Chief executive officer
Average employees

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 JVs and associates):

% change
Staff costs67,67560,59611.7%
Underlying operating profit (before JVs and associates)19,61413,68643.3%

Shareholder voting

The results below show the response to the 2016 AGM shareholder voting for the directors' 2016 remuneration report (excluding remuneration policy):

Total number
of votes
% of votes cast
Total votes cast (for and against)231,058,662100%
Withheld votes1,614,513N/A
Total votes (including withheld votes)232,673,175N/A

The results below show the response to the 2014 AGM shareholder voting for the directors' 2014 remuneration policy:

Total number
of votes
% of votes cast
Total votes cast (for and against)238,036,695100%
Withheld votes1,710,960N/A
Total votes (including withheld votes)239,747,655N/A

Implementation of policy for 2018

The executive directors' current salaries

The salaries of the executive directors will be reviewed in October 2017 and backdated to July 2017. Increases will be set in the context of overall salary increases for the wider workforce.

The executive directors' salaries at the start of the 2018 financial year are as follows:

Ian Lawson377,959
Ian Cochrane296,877
Alan Dunsmore*325,000
Derek Randall244,143

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. A pension contribution of £50,000 will be offered to each executive director, with the exception of Ian Lawson who will be offered 20 per cent of basic salary.

*Alan Dunsmore's current salary is for the role of acting chief executive officer since 28 March 2017 and was £251,253 immediately before that date.

Rewards for performance in 2018


The annual bonus for 2018 will operate on the same basis as for 2017 and will be consistent with the policy detailed in the remuneration policy section of this report in terms of the maximum bonus opportunity, deferral and clawback provisions. The measures have been selected to reflect a range of financial and operational goals that support the key strategic objectives of the Group.

The performance measures and weightings will be as follows:

Profit performance-based component — 80 per cent

The sliding scale range for bonus targets in 2018 is as follows:

Maximum bonus based on actual PBT versus budget

PBT % of budget% of award
95 or below
120 or better100

The committee believes that the budget PBT figures are commercially sensitive metrics and therefore are not disclosed at this time. Actual target figures will be disclosed on a retrospective basis when these sensitivities have been removed.

Other performance-based component — 20 per cent

AFR (accident frequency rate) will again be used throughout the Group.

AFR is an industry-recognised and measurable target. The pre-set targets have not been disclosed due to commercial sensitivities. Actual target figures will be disclosed on a retrospective basis when these sensitivities have been removed.

† Whilst Derek Randall remains in India the AFR component of his bonus will be based on AFR (India).

Rewards for performance in 2018


It is the committee's current intention to grant PSP awards of 100 per cent of salary to the chief executive officer and the Group finance director and 75 per cent of salary to the chief operating officer and the JSSL managing director. This is consistent with last year and with the proposed new policy.

This year we will set a performance condition for a three-year period commencing on 1 April 2017 and ending on 31 March 2020. These targets reflect the continuing expected recovery of profitability, recognising that market conditions remain challenging in many areas. At the lower threshold, below which no awards will vest, we have set a target EPS equivalent to PBT of £25.0m. If this level is achieved, 25 per cent of the shares granted will vest. At the higher end, we have set a target EPS equivalent to PBT of £29.5m. If this is achieved, 100 per cent of the shares granted will vest. Vesting at EPS levels between the lower and upper thresholds will be calculated by linear interpolation.

This represents an increase in the lower vesting threshold of £6.4m (34 per cent) and in the threshold at which maximum vesting takes place of £5.5m (23 per cent). When setting this target range the committee considered 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 reflects, 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 are considered more challenging than targets set for prior awards.

How will the non-executive directors be paid in the 2018 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

*A review of fees for the chairman concluded that the previous fee level of £100,000 per annum was materially below market and we concluded that this should rise to £125,000. Furthermore, given the recent management changes implemented for the duration of Ian Lawson's absence through ill-health, we increased John Dodds' remuneration to £175,000 for the duration of his temporary appointment as executive chairman. Both increases were effective from 1 April 2017.


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

Alun Griffiths
Chairman of the remuneration committee
14 June 2017