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Annual Report 2021
Morgan Sindall Group plc
Annual Report 2021
W
e a
r
e a l
e
a
d
i
n
g U
K c
o
n
s
t
r
u
c
t
i
o
n
a
n
d
r
e
g
en
er
a
t
i
on
g
r
o
u
p
.
O
u
r
p
ur
p
o
s
e
i
s
insp
ir
in
g
t
a
l
e
n
t
t
o
d
e
li
v
e
r
e
x
c
e
l
len
c
e
i
n
t
h
e
b
u
i
l
t
en
v
i
r
on
m
en
t
.
In 2
0
2
1
, we d
el
iver
ed r
ec
or
d r
esu
lt
s,
mai
nt
a
ined our s
tron
g balanc
e
s
heet a
nd gr
ew ou
r or
der bo
ok.
W
e
wer
e in
dependent
ly
r
ecognis
ed as
a le
ad
e
r fo
r ou
r e
nvir
onm
en
tal, so
ci
a
l
and
g
over
nance p
er
forma
nce
.
Contents
Strategic repor
t
2021 in numbers
1
The Group at a glance
2
Chief Executive’s statement
3
Business model
5
Purpose, strategy and values
6
Key performance indicators
7
Section 172 statement
10
Our stakeholders
11
Responsible business strategy
and performance
16
Financial and operating review
39
Managing risk
55
Climate reporting
71
Non-nancialinformationstatement
81
Goingconcernandviabilitystatement
83
Gover
nance
Chair’sstatement
87
UKGovernanceCodecompliancestatement
89
Board of directors
90
Group management team
95
Directors’andcorporategovernancereport
98
Directors’ remuneration report
126
Other statutory information
155
Financial s
t
atement
s
Independent auditor’s report
160
Consolidatednancialstatements
170
Companynancialstatements
206
Shareholder
information
215
Appendix – carbon emissions background
and terminology
217
Dig
it
al rs
t
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designed to optimise online
viewing and contains hyperlinks.To
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yoursharecerticate.
Strategic report
Governance
Financial statement
s
01
_
Mor
g
an S
in
da
ll G
ro
up p
l
c
Annual Repor
t 20
21
Strong operating
per
formance
£3,213m
Revenu
e
(2020:
£
3
,
03
4
m) (201
9:
£
3
,
0.71
m
)
£131.3m
Operating prot
(
a
djus
ted
*
)
(2020:
£6
8.
5m) (
201
9:
£93
.
1
m)
£129.8m
Operating
prot
(20
20
: £6
5.4m) (2
01
9: £9
1
.3m
)
£8,614m
Secure
d work
load
(20
2
0: £8,29
0m
) (20
1
9: £7
,59
3m
)
So
cial and
environme
nt
al value
807
Ap
prentices and
sp
onsor
ships for
graduates
and
national v
ocational
and
profess
ional
qualicatio
ns
(2020:
76
1
) (
201
9:
82
3)
35%
Reduc
tion in S
cope 1 and 2 c
arbon
emiss
ions
from
201
9
ba
seline
1
(2020:
1
0%)
71p
Monet
ar
y
value
of
so
cial
a
c
tiv
ities
per
£
1
of
proje
c
t
spend on
1
1
2
projec
t
s
measured
(2020
2
: 68p on 83 p
rojec
t
s measured)
AAA
MSCI
3
environment
al, social
and
gover
nance
rating
(2020:
A
A)
(
201
9:
A
A)
Fina
nci
al
s
treng
th
an
d
shar
eholder
returns
£127.7m
Prot
before tax
(
adjus
ted
*
)
(2020:
£63
.9m) (
201
9:
£9
0
.4
m)
£126.2m
Prot
before tax
(2020:
£60
.
8
m) (201
9:
£8
8
.6
m)
£291.4m
Average
dail
y
net
cash
(2020:
£
1
8
0
.
7m
) (201
9
: £1
0
8
.9m)
92.0p
T
otal dividend per
share
(2020:
6
1
.0
p) (201
9
: 21
.
0
p)
T
r
a
d
i
n
g a
h
e
a
d o
f p
r
e
-
p
a
n
d
e
m
i
c l
e
v
e
l
s w
h
i
l
e
s
o
c
i
al
a
n
d
e
n
v
i
r
o
nm
e
n
t
al
v
a
lu
e
i
n
c
r
e
as
e
d
*
See note 2 to the consolidated
nancial statements
for
alternative
performance measure
denitions
and
reconciliations.
1
Scope 1
emissions
are
direct from
owned or controlled sources and
Scope 2
are
generated
from purchased
energy. Scope 1 and 2 emissions in
2019 totalled 20,903 tonnes CO
2
e.
2
Data collection started in 2020.
3
MSCI provides decision support tools
and services
for
the
global investment
community.
202
1
in
numbers
Strategic report
Governance
Financial statement
s
02
_
Mor
g
an S
in
da
ll G
ro
up p
l
c
Annual Repor
t 20
21
Cons
truc
tion &
Infras
tru
c
ture
£1,520m
revenue
Morgan Sindall Construction &
Infrastructure provides
construction
services in the education, healthcare,
commercial, defence,
industrial,
leisure and retail markets and delivers
infrastructure projects
in
the
highways,
rail, energy, water and nuclear markets.
Infrastructure also
includes
the
BakerHicks design
activities
based
in the
UK and Switzerland.
morgansindallconstruction.com
morgansindallinfrastructure.com
bakerhicks.com
Fit Out
£795m
revenue
Overbury specialises
in
t
out and
refurbishment in
commercial,
central
and local
government
oces,
as well
as further
education.
Morgan Lovell
provides
oce
interior
design and
build
services
direct to
occupiers.
overbury.com
morganlovell.com
Proper
t
y
Ser
v
ices
£134m
revenue
Morgan Sindall Property Services
provides responsive repairs and
planned maintenance
for
social
housing and
the
wider
public sector.
morgansindallpropertyservices.com
Par
tner
ship
Housin
g
£572m
revenue
Lovell Partnerships works in
partnerships with local authorities and
housing associations. Activities include
mixed-tenure developments,
building
and developing
homes
for
open market
sale and
for
social/aordable
rent,
design and
build
house
contracting
and planned maintenance and
refurbishment.
lovellpartnerships.com
Urban Regene
ration
£203m
revenue
Muse Developments
focuses
on
transforming the
urban
landscape
through partnership working and
the development
of
multi-phase
sites and mixed-use regeneration.
musedevelopments.com
The
Grou
p
at
a
gla
nce
T
r
a
ns
f
o
r
m
in
g
t
he
bu
i
l
t
en
v
i
r
on
m
en
t
We
are
a group
of
ve specialis
t and
complemen
ta
r
y di
visions
, deli
ver
ing
constr
uc
t
ion and regeneration
across t
he UK for the p
ublic,
commercial a
nd reg
ulated s
ec
tor
s.
Our c6,900 talented people work to create
positive
change in
the built
environment
and
long-term
value for
our stakeholders.
Cons
truc
tion
Regeneration
Strategic report
Governance
Financial statement
s
03
_
Mo
rg
an S
in
da
ll G
r
ou
p pl
c
Annual Repor
t 20
21
Chief
E
xec
utive’s
st
atemen
t
A
r
e
c
o
rd
ye
a
r
“
202
1 has been an excellent year
for the G
roup. W
e had four
prot upgrades and delivered
a record set of resul
t
s 42%
above our las
t peak in 201
9. Our
achievemen
t reec
t
s the high
qualit
y of our opera
tions and th
e
huge talen
t and commitm
ent
of our people, w
ho I t
hank.”
Group
revenue increased
by 6%
to
£3,213m
(2020:
£3,034m), adjusted
operating prot
by
92% to £131.3m (2020: £68.5m) and operating
margin
by 180bps
to 4.1%
(2020:
2.3%). Trading
was
substantially ahead
of 2019
levels
before
the
pandemic (see
page1). We
maintained
a
strong
balance sheet
and increased
our
average
daily
net cash
by £110.7m.
We
continued to
win work
throughout
2021:
the Group’s secured workload at the year end
was £8,614m, up 4% on the prior year (2020:
£8,290m).
Over 46%
(£3,975m) of
this
workload
is
secured for
2024 onwards.
Our
strong performance
was due
in
part
to
our relentless
focus over
many
years on
being
selective with
contracts, managing
risks,
delivering excellent projects, developing long-
term relationships and improving our quality
of
earnings. This
focus supports
our
strategy of
organic growth and will continue.
Just as vital to our success is our strong culture,
driven
by our
Core Values
(see
page6). We
view
all our stakeholders as customers, and we put
our
customers rst.
We make
sure
we have
people with the right skills and qualities to help
us
succeed both
now and
in
the future,
and we
motivate them to deliver exceptional projects
and
customer service.
We encourage
our
people
to
challenge the
status quo
and
think dierently
so
that the
business can
keep
improving. Our
decentralised approach empowers our teams
and
makes the
business agile
and
resilient.
Being
a responsible
business has
always
been
part
of our
culture. Our
Core
Values were
established
four decades
ago and
our
strategy
to deliver social and environmental value was
formalised
in 2008
with the
introduction
of our
ve
Total Commitments
to: protecting
people;
developing
people; improving
the environment;
working
together with
our supply
chain;
and
enhancing communities.
We
have made
good progress
towards
delivering
our objective
of net
zero
carbon by
2030, which we announced last year, and are
pursuing Group-wide and divisional initiatives
to
reduce carbon
on our
projects
and oset
responsibly.
I am
very proud
that,
for the
second
year
running, we
achieved an
‘A’
score from
CDP
1
for
leadership on
climate change,
one
of only
206
companies worldwide
to do
so.
Also for
the
second year running, CDP awarded us Supplier
Engagement
Leader status
in recognition
of
our
work
with our
supply chain
to
reduce carbon.
In
2021, we
analysed the
results
of a
diversity
and inclusion survey that we conducted
towards
the end
of 2020
across
all employees
in
the Group.
We value
diversity
of thought,
perspective and experience to help us challenge
the status quo and drive innovation, and we
want
everyone in
the Group
to
feel included
and
valued. The
survey results
indicated
that
we need to do more to address inclusivity. As a
result, our divisions have introduced action plans
relevant
to their
business needs
but
broadly
aligned
to changing
behaviours, improving
recruitment and retention processes, promoting
construction as a career and supporting diversity
and inclusion in our supply chain.
See
pages 16
to 38
for
our performance
in the
year
against our
targets across
all
our Total
Commitments.
1
CDP is
a
not-for-prot
charity that
runs
the global
disclosure system
for
investors,
companies, cities,
states
and regions to manage their environmental impacts.
John
Morgan
Chief
Executive
Strategic report
Governance
Financial statement
s
0
4
_
Mor
ga
n Si
nd
al
l Gr
o
up p
lc
A
nnual Report 202
1
Chief Exec
uti
ve
’s stat
eme
nt
continued
Div
isional per
formance
Construction
& Infrastructure
delivered a
very
strong
set of
results, with
operating
prot
increasing 63% to £58.1m (2020: £35.7m)
despite revenue reducing 7% to £1,520m (2020:
£1,637m),
while its
margin was
up
160bps to
3.8% (2020: 2.2%). Fit Out delivered another
excellent
performance, with
revenue, prot
and
margin all increasing. Revenue grew 14% to
£795m
(2020: £700m),
while prot
increased
by
38%
to £44.2m
(2020: £32.1m)
at
a margin
of
5.6%
(2020: 4.6%).
Property Services
performed
well, delivering improved results on 2020 as
volumes
recovered from
the disruption
caused
by
Covid in
2020. Revenue
increased
by 20%
to
£134m (2020:
£112m) and
operating
prot
1
increased 310% to £4.1m (2020: £1.0m). Its
operating margin
1
of 3.1%
represented an
increase
of 220bps
(2020: 0.9%).
In regeneration, Partnership Housing had a very
strong
year, making
signicant strategic
and
operational progress. Revenue was up 21% to
£572m (2020
2
:
£474m) while
operating prot
increased
substantially, more
than doubling
to
£33.2m,
an increase
of 108%
(2020
2:
£16.0m).
Its operating margin increased to 5.8%, up
from
3.4%
2
and its return on capital was up to
21%
in the
year. Urban
Regeneration
made
good progress with its long-term regeneration
schemes
and delivered
an operating
prot
of
£12.1m
in the
year, an
increase
of 38%
(2020
2
:
£8.8m).
The division’s
return on
capital
employed
in the year increased to 13%.
1
Before intangible
amortisation
of
£1.5m (2020:
£1.2m).
2
Restated. All
2020
and
2019 comparative
numbers,
including order
book
and
capital employed,
have
been
restated to
include
the
impact of
the
revised reporting
segments.
Across
the Group,
inationary pressures
and
supply
issues have
been a
feature
of most
of the
year,
although the
impact has
been
managed
in most cases at a divisional and local level
without disruption to operations. General cost
ination
also placed
some project
budgets
under pressure, particularly in Construction
&
Infrastructure. Inationary
pressures are
expected
to continue
into much
of
2022,
however we expect that the impact will continue
to
be minimised
by focused
sourcing
through
our supply chain and ongoing operational
eciency.
Upgrade
d
divisio
nal
target
s
To
provide a
framework for
our
next stage
of
organic growth,
we have
upgraded
our
medium-term
targets for
the divisions.
The
targets,
eective from
24 February
2022,
relate
to revenue, operating margin, return on capital
employed
and/or prot
and are
set
out in
the
operating review on pages 41 to 54.
Capit
al alloc
ation framewo
rk
In
2021, we
introduced a
formalised
capital
allocation
framework for
the Group:
maintaining
balance sheet
strength to
enhance our competitive advantage and win
future
work;
ensuring downside protection – maintaining
a
‘buer’ in
the event
of
a macroeconomic
downturn;
maximising
investment
in
the
current business
to
drive growth,
specically investment
in
regeneration
activities; and
maintaining an attractive dividend policy: we
expect
dividend cover
to be
in
the range
of 2.0
times
to 2.5
times on
an
annual basis,
eective
from
2021 onwards.
Our
capital allocation
framework is
designed
to
balance
the needs
of all
our
stakeholders while
enhancing the Group’s market competitiveness
and
capabilities and
maintaining our
nancial
strength.
Our underlying commitment to maintaining a
strong
balance sheet
and substantial
net
cash
position continues to allow us to make the right
long-term
decisions for
the business.
Divide
nd
The
nal dividend
has increased
by
55% to
62.0p per share (2020: 40.0p), resulting in a total
dividend
for the
year of
92.0p
per share
(2020:
61.0p),
an increase
of 51%.
This
represents
dividend
cover of
2.46 times
and
reects our
result
for the
year, our
strong
balance sheet
and
the
Board’s condence
in the
future
prospects
of
the Group.
Outloo
k for 202
2
The
Group is
in its
best
shape ever.
We continue
to make strong progress in our chosen markets,
with
the size
and quality
of
our secured
workload
increasing in
the year.
This
leaves us
well-positioned
for the
future and
on
track to
deliver
a result
for 2022
which
is slightly
above
our previous expectations.
Joh
n Morg
an
Chief
Executive
“ Our
underlying
commitment to
maintaining a strong
balance
sheet and
substantial
net cash
position continues to
allow us to make the right
long-term
decisions for
the
business.”
05
_
Mo
rg
an S
in
da
ll G
r
ou
p pl
c
Annual Repor
t 202
1
Strategic report
Governance
Financial statement
s
Business
model
A
ba
l
a
n
c
ed
bu
s
i
ne
s
s
de
l
i
v
e
r
i
n
g
o
r
g
an
i
c
g
ro
w
t
h
a
n
d
l
o
ng
-
t
e
r
m
v
alu
e
We are g
eared towards th
e UK
’s
increasing demand
for aordable
housing, urban regeneration and
invest
ment in public, com
mercial
and social inf
ras
tr
uc
ture.
We
are diversied
across key
growth
sectors.
We
use cash
from our
construction
activities to
invest
in long-term
regeneration schemes,
which
in
turn provide
opportunities for
construction.
Our
decentralised approach
allows our
specialist
divisions
to respond
quickly to
the
needs of
their
markets, while
collaboration between
them
enables
us to
deliver large,
complex
schemes.
How
w
e
o
p
er
a
t
e
Ou
r
v
a
l
u
ed
r
es
o
u
r
c
es
V
a
l
u
e
w
e
c
re
a
te
C
ons
tr
uc
tion
Construction & Infrastructure
Fit Out
Property Services
Reg
eneration
Partnership Housing
Urban Regeneration
G
e
n
e
r
a
t
e
s
c
a
s
h
v
i
a
s
h
o
r
t
-
t
e
r
m
r
e
t
u
r
n
s
I
n
v
e
s
t
s
c
a
s
h
t
o
c
r
e
a
t
e
l
o
n
g
-
t
e
r
m
v
a
l
u
e
P
r
o
v
i
d
e
s
c
o
n
s
t
r
u
c
t
i
o
n
o
p
p
o
r
t
u
n
i
t
i
e
s
Talented people
Long-term client relationships
Technology
for innovation,
eciency, safety
and security
High standards of health, safety and
wellbeing
National network of supply chain partners
Strong
balance sheet
and a
signicant
net cash balance
Transforming the built environment
Sectors
contributing over
5%
of Group
revenue:
Community/other
public services
(
21%
), Commercial
(
21%
),
Education
(
15%)
, Mixed-tenure
housing (
12%
),
Social
housing (
12%
),
Transport (
11%
)
Excellence in delivery:
88%
Perfect Delivery;
5 Star
homes
Helping our people succeed:
535
promoted internally
Social value:
71p per £1 spent on 112 projects
Environmental value:
37%
carbon reduction
since 2019
Shareholder returns:
92.0p
total dividend
per share
226.0p
adjusted* earnings
per share
Ability to build sustainably
 Purpose, strategy
and values
6
 Our stakeholders
11
 Responsible business
strategy and
performance
16
 Financial and
operating review
39
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Governance
Financial statement
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Mor
ga
n Si
nd
al
l Gr
ou
p p
lc
A
nnual Report 202
1
Our
purpose
i
s
in
spi
ring
talent
to
deliver
exc
el
len
ce
in
the
bui
lt
envir
on
ment
We
belie
ve
we
c
an
make
a
dierence
by:
recruiting
people with
diverse
perspectives,
who are
passionate about
what
they do
and willing
to
challenge
the
status quo;
creating
places of
exceptional quality
where
people can
live, work,
learn
and
play;
pursuing
our strategy
to reach
net
zero
carbon
emissions by
2030;
adding
value to
the communities
where
we
work by
procuring locally,
providing
job
and training
opportunities, and
supporting
local charities;
and
being
guided by
our Core
Values
in
everything
we do.
Our
s
trateg
y i
s
t
o
pursue
organic
grow
th
by
f
ocus
in
g
on
our
well-es
t
abli
shed
cor
e stren
g
ths
of
construc
tion
and
reg
eneration
Our s
tra
tegic pr
ior
it
ies
The
following priorities
are essential
to
achieving our
purpose and
strategy:
 
Increase our quality of earnings,
through
project selectivity,
operational
eciency and
investment.
 
Maintain a strong balance sheet
and
signicant levels
of cash
at
all times.
 
Secure long-term workstreams,
through
client and
partner
relationships,
repeat business,
negotiated
work, frameworks,
long-term
contracts and
regeneration
schemes.
 
Consistently deliver
on our
ve
Total Commitments to being a
responsible business:
Protecting
people
Developing
people
Improving
the environment
Working
together with
our
supply
chain
Enhancing
communities
 
Excel in project delivery
for
our
clients,
partners and
the end
users
of
our buildings.
 Key performance
indicators 7
 Responsible business
strategy and
performance
16
 Financial and
operating review
39
 Principal risks
58
Our
Co
r
e
V
alues
dri
v
e our
cul
ture
The
customer comes
rst
Talented people are
key to our success
We must challenge the
status quo
Consistent achievement is
key to our future
We operate a decentralised
philosophy
Our
Core
Values,
established
in the
1980s
and
embedded
across
our
divisions, drive
the
culture
and
behaviours
that help
us
implement
our
strategy
and
achieve our
purpose.
They
are
interlinked:
for example,
our
decentralised
approach
empowers
our
people
to
challenge
the
status quo,
achieve
their
potential
and
consistently
deliver an
exceptional
service
for
our
stakeholders, all
of
whom
we
regard
as our
customers.
Purpos
e, s
tra
teg
y and values
See pages 105
to 109
for
detail on
how our
Board monitors our culture and how our
culture supports our strategic priorities.
Strategic report
Governance
Financial statement
s
07
_
Mor
g
an S
in
da
ll G
ro
up p
l
c
Annual Repor
t 20
21
Strat
egic priorities
Key
per
formance
indicator
s
Performance
Medium
-ter
m target
s and drivers
Per
formance commentar
y
Priorities goi
ng forward
Incre
ase
our
qualit
y
of
ear
nings
Construction
operating margin
21
20
19
3.2%
1.2%
2.8%
2.5%-3.0%
Our
construction
divisions
exceeded
their
medium-term
targets, with
the exception
of
Property Services
which continued
to
be
impacted by
Covid. In
regeneration,
there
was signicant
prot growth,
particularly
in Partnership
Housing.
Partnership
Housing’s return
on capital
employed
was above
the medium-term
target,
while Urban
Regeneration’s
performance
was impacted
by a
specic
non-cash
impairment in
a joint
venture.
See
pages 41
to 54
for
detailed
commentary
on each
division’s
performance.
We
will continue
to
operate
in our
target
sectors and optimise
the
substantial potential
for
growth in
our
regeneration
markets.
We
will also
maintain
our commitment to
contract
selectivity and
operational
discipline.
To
provide a
framework
for
future growth,
we
have
upgraded our
divisional
medium-term
targets
which will
apply
from
24 February
2022
(see
pages 44
to 54).
Infrastructure
operating margin
21
20
19
4.4%
2.8%
1.8%
3.5%
Fit
Out operating
prot
21
20
19
£44.2m
£32.1m
£36.9m
c£35m
Property Services
operating
prot
21
20
19
£4.1m
£1.0m
£4.3m
£10m
Partnership Housing
return on average
capital employed
1
(last
12 months)
2
10%
Over 20%
Partnership Housing
operating margin
21
20
2
19
2
5.8%
3.4%
4.2%
6%
Urban Regeneration
return on capital
employed
3
(average
last
three years)
21
12%
Up towards 20%
Sec
ure
l
ong-term
work
s
treams
Long-term secured
workload
21
20
19
£8,614m
£8,290m
£7,593m
We
monitor our
secured workload
for
the
current year
and beyond
as
well as
the
pipeline of
projects for
which
we are
‘preferred
bidder’ (where
we have
been
verbally
awarded the
project but
there
is
no
formal contract
or letter
of
intent in
place).
We
have a
high-quality secured
workload
with
46% secured
for 2024
or
later. Of
the
total, 64%
is with
public
sector or
regulated
industry clients
and, within
the
Construction
& Infrastructure
division,
over
90% has
been secured
through
frameworks
and partnerships.
We
will continue
to
focus
on developing
and
maintaining
long-term
partnerships,
working in
sectors
where
we
have a
proven
track record.
K
ey per
formance ind
icators
M
a
k
i
n
g
g
o
o
d
p
r
o
g
r
e
s
s
a
c
r
o
s
s
o
u
r
s
t
r
a
t
e
g
i
c
p
r
i
o
r
i
t
i
e
s
Strategic report
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Financial statement
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8
_
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r
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n Si
nd
al
l Gr
ou
p p
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A
nnual Report 202
1
Key per
for
mance ind
icato
rs
continued
Strat
egic priorities
Key
per
formance
indicator
s
Performance
Medium
-ter
m target
s and drivers
Per
formance commentar
y
Priorities goi
ng forward
Excel
in pr
ojec
t
deli
ver
y
Projects achieving
‘Perfect Delivery’
4
21
20
19
88%
90%
85%
Each
division is
responsible for
driving
Perfect
Delivery on
its projects.
Results
are
regularly monitored,
reported, and
reviewed
at divisional
board level.
Perfect
Delivery performance
dipped
slightly
compared to
2020, impacted
by
the
signicant increase
in the
volume
of
work
undertaken in
2021 while
operating
within
new site
procedures introduced
at
the
start of
the pandemic.
Partnership
Housing was
awarded a
5Star
rating
5
in 2021,
based on
feedback
from
homebuyers including
how satised
they
are with
the nish
of
their new
properties,
the service
received and
whether
they would
recommend Lovell
Partnerships
to a
friend.
The
divisions will
continue to drive
excellence
by focusing
on
quality of
delivery
and customer
experience.
Maintain
st
rong
balance
sheet
and
signic
ant
levels
of
c
ash
Average daily net cash
21
20
19
£291.4m
£180.7m
£108.9m
We
have not
set a
target
for this
key
performance
indicator, but
our cash
levels
are monitored
on a
daily
basis.
Our
average daily
net cash
increased
signicantly
compared to
the prior
year.
We
will continue
to
maintain
a strong
balance
sheet and
signicant
levels of
cash,
which
enable us
to
make
the right
decisions
for
the business.
Prot
ec
t
ing
people
Lost time incident
rate
(LTIR)
6
21
20
19
0.29
0.23
0.23
0.21
7
For
detailed commentary
on our
performance
in delivering
against
our
Total Commitments,
together with
the
actions we
are taking
and
our
priorities going
forward, see
pages
16 to
38.
Developing
people
Number of training
days
8
per year per
employee
21
20
19
3.5 days
2.3 days
4.1 days
5
days
7
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Financial statement
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r
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Strateg
y
Key perf
ormance indicator
s
Performance
Ta
r
g
e
t
s
Per
formance commentar
y
Improv
ing
the
env
ironment
Reduction
in Scope
1
9
and 2
10
carbon
emissions
from 2019
baseline of
20,903
tonnes CO
2
e
21
20
35%
10%
30%
7
For
detailed commentary
on our
performance
in delivering
against
our Total
Commitments, together
with
the actions
we are
taking
and our
priorities going
forward,
see pages
16 to
38.
Reduction
in operational
Scope 3
11
carbon
emissions
from 2019
baseline of
6,339
tonnes CO
2
e
21
20
45%
37%
30%
7
Supply
chain (by
spend) providing
their
own
12
carbon data
21
13
£589m
£500m
7
Reduction in carbon emissions from the
Group’s
vehicle eet
from 2019
baseline
of
12,078 tonnes
CO
2
e
21
20
39%
25%
30%
7
W
ork
ing
wit
h
our
suppl
y
chain
Percentage of total invoices paid within
30
days
21
20
14
67.8%
64.8%
70%
7
Enhancing
communities
Average monetary value of social activities
delivered
per £1
spent
21
20
71p
per £1 spent on
112 projects measured
68p per £1 spent on
83 projects measured
14
85p per £1 spent
7
Key per
for
mance ind
icato
rs
continued
1
Return on average capital employed = adjusted
operating prot
divided
by
average capital
employed.
2
Restated. All
Partnership
Housing
2020 and
2019
comparative numbers,
including
order
book and
capital
employed, have
been
restated
to include
the
impact of
the revised
reporting
segments.
3
Return on average capital employed = (adjusted
operating prot
plus
interest
from joint
ventures)
divided
by average
capital
employed.
4
Perfect Delivery
status
is
granted to
Construction,
Infrastructure and
Fit
Out
projects that
meet
all four
client service
criteria
specied
by the
division.
5
The 5
Star
homes
rating is
the
highest awarded
by
the
Home Builders
Federation
based
on its
National
New
Homes Customer
Satisfaction
Survey.
The 2021
rating
was awarded
in
March
2021.
6
Number of
lost
time
incidents x
100,000
divided by
the
number of
hours
worked.
Lost time
incidents
are those
resulting in
absence
from
work for
a
minimum of
one
working day,
excluding
the
day the
incident
incurred.
7
Total Commitment
targets
are
for 2025
–
see pages
17
to 35
for
2030
Total Commitment
targets
and horizon
ambitions.
8
A training
day
is
a minimum
of
six hours
of
training.
9
Direct emissions
from
sources
owned or
controlled
by
the Group.
10 Indirect emissions generated
from
purchased energy.
11 All indirect emissions
not
included in
Scope
2
that occur
in limited
categories
of
our value
chain
as measured
by
the Toitū
‘carbonreduce’
scheme
(see page
80).
12 Wider Scope 3
emissions
outside of
operational
Scope
3.
See Appendix
for
further
information.
13 Data collection started
in
2021.
14 Data collection started
in
2020.
Note: 2019
baseline
numbers
have been
applied
as 2020
performance was
impacted
by
the Covid
pandemic.
Strategic report
Governance
Financial statement
s
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_
Mor
ga
n Si
nd
al
l Gr
ou
p p
lc
A
nnual Report 202
1
Sec
tion 1
7
2 s
tatement
M
a
k
in
g
in
f
o
r
m
e
d
d
e
c
i
s
io
ns
The objec
t
i
ve of
the Board
and Group manag
ement team, when taking
s
trateg
ic, nancial and
operational decisions
, is
to
promote
the success
of the
Group for
the bene
t of
all
our
s
t
akeholders
, in
line
wi
th their
direc
tor
s
’ duties as set
out in
Sec
tion 1
72 of
the Companies Act 200
6
.
How our direc
tor
s pe
r
for
m their dutie
s
The
Board sets
the Group’s
purpose,
values
and
strategy and
ensures they
are
aligned
with
our culture.
 
See pages
102 to
109.
The
Board reviews
the Group’s
strategy
and
conducts
strategy reviews
with each
division,
to
ensure the
long-term sustainable
success
of
the business
with good
outcomes
for all
our
stakeholders.
 
See pages
102 to
103.
The
Board sets
the Group’s
risk
appetite,
assesses
the principal
risks that
could
impact
on our
strategy, performance
and
stakeholders,
and reviews
the mitigations
we
have
in place.
 
See pages
55 to
70.
The
Board engages
directly or
indirectly
with
our
stakeholders, monitors
the impact
of
our
activities
on multiple
stakeholder groups,
and
takes
their interests
and priorities
into
account
when
making decisions.
 
See pages
11 to
15
and 102
to 104.
The
health, safety
and environment
(HSE)
committee
monitors our
performance
against
our ve
Total Commitments
to
our
stakeholders
and wider
society and
reports
to
the
Board on
its activities.
 
See pages
123 to
125.
Directors
and senior
managers undertake
training
on directors’
duties and
other
relevant
topics.
 
See pages
98 and
100.
Se
c
t
ion 172 f
ac
tor
Relevant disclosures
The
likely consequences
of any decision in the
long term
Purpose
and strategy
6
Business
model
5
Capital
allocation framework
4
Pipeline
of work
40
Divisional
markets
44,
48, 51,
54
The interests of the
Company’s employees
Employee
engagement
11
Protecting
people
17
Developing
people
21
Employee
policies
81
The
work of
the HSE
committee
123
Rewarding
employees fairly
132,
140
The need to foster the
Company’s business
relationships with suppliers,
customers and others
Supply
chain engagement
13
Working
together with
our supply
chain
32
Human
rights and
modern slavery
19, 82,
109
Client
and partner
engagement
13
Funder
engagement
15
The impact of the
Company’s operations on
the community and the
environment
Community
engagement
14
Enhancing
communities
35
Improving
the environment
25
Environmental policies
81
The
work of
the HSE
committee
123
The Company’s reputation
for high standards of
business conduct
Non-nancial
information statement
81
Culture and values
6
Code
of Conduct
19,
82, 100
Raising
concerns
109
Board’s
oversight of
workforce policies
and
practices
108
Internal
nancial controls
120
The need to act fairly
as between members of the
Company.
Shareholder
engagement
15
AGM
155
Rights
attached to
shares
156
Voting
rights
156
Strategic report
Governance
Financial statement
s
11
_
Mo
rg
an S
in
da
ll G
r
ou
p pl
c
Annual Repor
t 20
21
Our st
ak
ehold
ers
Un
d
e
r
s
t
a
n
d
i
ng
ou
r
s
t
a
k
e
hol
d
e
r
s
’
p
r
i
o
r
i
t
i
e
s
The
qualit
y of our rela
tionships
wit
h our k
ey st
akeholders is
ess
ential for t
he success and
grow
th of o
ur busines
s.
We believe the best approach to developing
and nurturing long-term relationships is to base
them on trust, by maintaining regular dialogue,
listening attentively, being open and transparent
when giving information, and working
collaboratively.
As well as ongoing dialogue with our
stakeholders, we conduct a biennial ‘materiality’
survey with our employees and a selection
of clients, suppliers, trade associations and
investors about how they would prioritise
a range of responsible business ambitions.
The latest materiality survey took place in
2020 and the results aligned with our Total
Commitments and our continued support of
the
UNSustainable Development
Goals (see
our
2020 responsible business data sheet on our
website for more information).
Group and B
oard engageme
nt
The Board engages directly with our people,
shareholders, analysts and funders, while our
divisions manage their relationships with their
people, supply chain, clients and partners
and local communities. In addition, our chief
executive regularly visits all parts of the business,
including
oces and
sites, and
speaks
with
employees, clients and subcontractors.
The executive directors supervise the divisions’
engagement with their stakeholders principally
through monthly board meetings with divisional
senior management teams and monthly
meetings with the Group management team.
The executive directors then update the Board
as appropriate.
 
Seepages102to104forhowtheBoard
considered the needs and concerns of our
stakeholders when making key decisions.
O
u
r p
e
o
p
l
e
Who they are and why they
’re
impor
tant to us
We directly employ around 6,900 people
across the Group. They possess a broad
range of expertise to support our clients
through all stages of the project life cycle, from
development to design, build, maintenance
and refurbishment. Thirty-seven per cent of our
people have been with the Group for six years or
more, accumulating technical experience and an
in-depth understanding of our values which they
can convey to newer recruits.
Their k
ey priorit
ies
A fair, respectful and safe environment to
work in; regard for their health and wellbeing;
investment in their personal development and
career
progression; support
for exible
working;
and an open and honest culture that promotes
diversity and inclusion.
How t
he G
rou
p en
gage
s wi
th th
em
New starters receive formal induction
programmes which include introducing them
to our Core Values and Total Commitments.
Personal development conversations are held
throughout their careers with us. Our divisions
update their people on their business goals,
market conditions and operational performance
using
newsletters, emails
and brieng
sessions.
Internal digital communications channels
include intranets, social media platforms such as
Yammer,
Microsoft Teams
and our
sta
benets
portals. Employees are invited to submit ideas
via ‘innovation portals’ for ways of improving the
business
or on
specic topics
such
as carbon
reduction.
Annual conferences held by the divisions give
senior managers and functional heads the
chance to communicate key messages, and
our employees the opportunity to share ideas
and
experiences with
colleagues from
dierent
roles and regions. Group-wide and divisional
forums focusing on issues such as employee
concerns and health and safety meet regularly
to exchange views and propose changes.
The divisions conduct regular employee surveys,
analyse the feedback, and communicate
the results to their employees together with
the actions to be undertaken in response.
Infrastructure, BakerHicks, Fit Out and Property
Services
conducted employee
surveys in
2021,
with the remaining divisions scheduling surveys
in 2022. Construction engaged with employees
via its newly launched People Forum which met
three times in 2021, while Partnership Housing
received feedback through focus groups and an
Investors
in People
(IIP) survey
(following
which
the division achieved a Gold IIP accreditation).
How t
he B
oar
d en
gage
s w
ith t
he
m
The executive directors keep everyone informed
of
the Group’s
nancial performance
through
newsletters, emails and videos released to
coincide with the full-year and half-year results
announcements and will make people aware
of
any external
factors and
signicant
events
that
might have
an impact.
We
oer a
Group-
wide
Savings-Related Share
Option Plan
(SAYE
scheme) that also helps to keep people engaged
with the Group’s performance and progress.
Over the years, we have seen a progressive
increase in participation in the scheme, with a
41% take-up in 2021.
Strategic report
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Annual Repor
t 20
21
Our stakeholders: our people
continued
With regard to provision 5 in the UK Corporate
Governance Code 2018, we believe the most
eective
way for
the Board
to
engage with
our people is by distributing the responsibility
equally between all non-executive directors.
As part of their annual strategy reviews with
the
divisions (see
page 103),
the
non-executive
directors engage in project site visits and meet
with
and are
presented to
by
employees. Sites
visited by the non-executive directors in 2021
included:
the Civic
Centre Opportunities
Site,
St
Albans; the
Barking Riverside
Extension,
Essex; Coutts, London; Man Group, London;
The Mill, Canton, Wales; Lewisham Gateway,
London;
and New
Bailey, Salford.
Presentations
from employees covered topics such as
sustainability, diversity and inclusion, training
and development, and updates on operations
in
specic market
sectors. In
addition
to the
strategy reviews, the non-executive directors
attended employee conferences held by the
divisions as well as the Group’s annual two-day
management conference.
Several
of the
divisional managing
directors
presented to the health, safety and environment
committee in 2021 on safety and wider
responsible business activities within their
respective
divisions (see
page 124
for
more
detail)
.
How w
e re
sp
ond
ed t
o fe
ed
ba
ck in 2
021
The following are examples of actions taken as a
result of feedback from employees:
Construction retained its periodical, all-
employee survey rather than replacing it with
more frequent ‘pulse surveys’; enhanced
its family-friendly policies and paternity and
maternity pay; and is testing an agile working
approach with site-based colleagues on a
project
in St
Albans.
Infrastructure launched an ‘adaptable
working’ approach; set up a new process that
enables employees to have regular career
conversations with their line managers;
relaunched its employee forum, ‘Let’s talk’,
appealing for underrepresented groups, such
as those who are paid weekly, to join; and is
training line managers to support colleagues
struggling
with their
wellbeing (see
pages
19
and 21).
BakerHicks began a project to revitalise job
descriptions and create clear career pathways;
and held a variety of social and team activities.
Fit Out supported each of its teams in
developing bespoke action plans in response
to its all-employee survey, with common
themes including agreeing a communications
strategy and annual programme of events to
promote wellbeing.
Property
Services enhanced
the content
and frequency of its communications; and is
implementing ideas received through its new
‘Diversity
of Thought’
innovation portal.
Partnership Housing focused on ensuring
each of its regions has a succession plan and
‘people plan’ in place.
Urban Regeneration launched its volunteering
policy and a ‘buddy’ programme to support
new employees joining the business.
The Board was provided with a report at
its
December meeting
on the
divisions’
engagement with their employees during the
year. The report was discussed in detail, and the
non-executive directors shared feedback from
their meetings with employees held during their
divisional strategy reviews. The Board noted that,
overall, the levels of employee engagement by
the divisions were good and that the employees
with whom the non-executives met were open,
positive and engaged, with the Group’s culture
coming across strongly and clearly.
The
Board considered
the eectiveness
of
its
selected process for employee engagement
and concluded that it should be continued, as
it enables the non-executive directors to meet
a broad range of employees from multiple
divisions and engage with them in a variety of
ways
(at meetings
and presentations
or
on site,
and without management present).
The Board was also presented with a report
on
the ndings
of the
Group’s
diversity and
inclusion survey circulated in 2020 and how the
divisions
were responding.
See pages
23
and
24 for information on the survey results and the
divisions’ responses.
 
Read more on how we develop our
people and protect their health and
wellbeing(pages17to24).
Divi
sional strateg
y reviews by
non
-
executi
ve director
s in 2021
Non-executive director
Division
Jen Tippin
Construction
1
and
Property
Services
Tracey Killen
Infrastructure
1
Michael Findlay
BakerHicks
1
David
Lowden
Fit Out
Tracey Killen,
David
Lowden
Partnership Housing
Malcolm Cooper
Urban Regeneration
1
Construction, Infrastructure and BakerHicks constitute the
Construction & Infrastructure division.
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Our stakeholders:
continued
S
u
p
p
l
y ch
ai
n
Who they are and why they
’re
impor
tant to us
We have a national network of carefully selected
suppliers and subcontractors, ranging from
large
organisations to
small local
rms,
who are
aligned to our values and standards of delivery.
They are strategically important to the Group
as we depend on them to deliver our projects
eciently
and to
a high
standard.
We view
our
supply chain as long-term partners and work
together to overcome challenges, innovate and
improve.
Their k
ey priorit
ies
Work opportunities, including for smaller
businesses; prompt payment; a safe working
environment; fair treatment and respect.
How t
he G
rou
p en
gage
s wi
th th
em
When appointing suppliers, we put in place
clearly written contracts setting out roles
and responsibilities along with agreed
payment terms. Our divisions monitor their
subcontractors’ performance against set criteria
and give constructive feedback. We hold a
Group networking event for suppliers every two
to three years and provide learning and support
through
the Supply
Chain Sustainability
School
(see
page 32).
Our divisions
communicate
our
culture, values and standards to subcontractors
on our sites, and health, safety and wellbeing
and modern slavery are discussed in site
induction programmes and toolbox talks.
Fit Out has launched a new supply chain
portal which enables subcontractors to
monitor how they are performing on live
projects
(see page
32).
Our Group director of sustainability and
procurement assists in managing relationships
with those subcontractors and suppliers who
are common to more than one division.
How t
he B
oar
d is ke
pt in
for
me
d
The executive directors receive information
on supply chain relationships at the monthly
divisional board meetings. The Board regularly
reviews the divisions’ payment practices and
health and safety statistics, together with the
Group’s strategies and actions to prevent
modern slavery.
In 2021, two non-executive directors, Malcolm
Cooper and Kathy Quashie, attended our
suppliers’ event, ‘Meeting the Challenge’, held at
Silverstone
(see page
33).
How w
e re
sp
ond
ed t
o fe
ed
ba
ck in 2
021
We have continued to invest in changes to
our payment systems and cash commitment
across all our divisions to shorten payment
terms for our suppliers. We have enhanced
our relationship management with the Morgan
Sindall
Supply Chain
Family members
(see
page
32) to
further promote
collaboration,
for
example sharing our pipeline of opportunities
and organising ‘lunch and learn’ sessions. In
addition, we have focused on providing our
supply chain with carbon education, for example
at the Meeting the Challenge event, the theme
of which was addressing climate change.
 
Read more on how we work together with
oursupplychain(pages32to34).
C
l
i
e
nt
s an
d p
ar
t
n
e
r
s
Who they are and why they
’re
impor
tant to us
We work with clients from the public,
commercial
and regulated
sectors (such
as
water and transport) and our partners include
local authorities, landowners and housing
associations. In addition, we consider the needs
of the ‘end users’: those who will occupy or use
the spaces and infrastructure we create.
Long-term relationships with our clients and
partners are key to our organic growth strategy.
Where possible, we aim to secure work through
partnerships, frameworks or repeat business.
Their k
ey priorit
ies
Excellent customer service and experience;
technical knowledge and expertise; perfect
delivery of projects on time and to budget; a
positive, solutions-driven approach; to work with
a responsible and collaborative partner; help in
achieving sustainability, including lower carbon
output, in their projects and buildings; solvency,
cash resources and a strong balance sheet.
How w
e en
gage w
it
h the
m
Our divisions work to maintain long-term
relationships with their clients. Our national
coverage and decentralised approach enable
us to engage with clients and partners at a local
level and tailor our services as needed. Regular
dialogue helps us to understand their priorities
and expectations and ensure that we have the
skills and capabilities for their projects.
“The development provided us with the
best of both worlds – we were able to
buy a house that was surrounded by
idyllic countryside, while still being in close
proximity to all the amenities and transport
links we could ever need. Not only did we
fall in love with the property’s location, but
we also enjoyed being able to design our
interiors exactly how we wanted them
with the help of Lovell’s Inspirations team…
Having a fresh, blank canvas that we could
personalise and make our own before we
even moved into the property made the
buying process so easy.”
T
oni Robins
on and family,
Partnership Housing home purchasers,
Weston Woods, Cheshire
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Our s
t
akehol
der
s: clie
nt
s and pa
r
tne
rs
continued
Our clients’ priorities and objectives are
discussed with them at the start of each project
and we keep them informed throughout, making
sure the process is as smooth as possible.
We focus on the customer experience, for
example
Property Services
launched a
new
‘customer charter’ in 2021 that covers topics
such as listening, respect and understanding
when engaging with residents. We ask for
clients’ feedback on project completion via
questionnaires and interviews. The results are
shared with the project teams and analysed by
the divisional managing directors to drive further
improvements. We monitor levels of satisfaction
using
metrics appropriate
to the
divisions
(see
page 8).
How t
he B
oar
d is ke
pt in
for
me
d
The divisional managing directors keep the
executive directors informed about client
relationships at their monthly meetings, who
then inform the Board of any matters of interest
such as key contracts or new relationships.
How w
e re
sp
ond
ed t
o fe
ed
ba
ck in 2
021
On Construction’s project for Wintringham
primary
school (see
page 42),
the
sta at
the
school were heavily involved in the design,
their input ensuring they had a space that met
their needs.
Fit Out has appointed dedicated social value
champions on key projects in response to
its clients’ increased focus on social value.
The division has also introduced ‘client
cornerstone’ training for its operational
teams, giving them the skills to gain a deep
understanding from each client of their key
objectives on their project.
In response to demand to speed up the
construction of new homes, Partnership
Housing has been using a new and faster
modern method of construction. The i-House
is a prefabricated, watertight shell that
provides the ‘inner skin’ of a house ready
for follow-on trades such as bricklaying and
plumbing. The material used in the i-House
has an excellent thermal performance which
reduces heat loss.
Feedback requested from homebuyers by
Urban Regeneration resulted in the division:
bringing its customer service function back
in-house; developing an improved customer
relationship management system that digitally
generates paperwork within minutes of a
home demonstration or handover; and
quality enhancements to various customer
touchpoints. The changes were launched
on Urban Regeneration’s Lock 17 project
at
Hale Wharf
in Tottenham
(see
page 53)
and
resulted in
a 29%
increase
(to 81%)
in
customer satisfaction for dealing with defects
and
a 14%
increase (to
86%)
in satisfaction
with the condition of the property, compared
to the previous 12-month rolling period.
Urban Regeneration pioneered a virtual
sign-o
process for
the design
concepts
on its project for the Marriott’s Moxy Hotel
and
Residence Inn
in Slough
(see
page 42)
in
order to
increase speed
and
eciency,
as the Marriott team were based in multiple
locations. The interior designer used CGIs and
materials samples to produce design concepts
online, and once these were approved, full-
scale mock-ups of bedrooms and bathrooms
were
built. These
were the
rst
Marriott hotels
in
the world
to be
signed
o in
this way.
The
attention to detail in achieving the highest-
possible
standards through
early sign-os
and
sample rooms were quoted as the best the
Marriott had ever seen.
“Salford
City Council
has been
working
with
Muse in delivering the long-term aspirations
of
the Salford
Central Plan.
It’s
been amazing
what we’ve achieved to date. I think it’s
even more exciting as we move on to the
major regeneration that will be happening
further
down, at
Crescent Salford,
in
taking
environmentally conscious development to the
next level and in truly leading from the front
in tackling and contributing to resolving the
climate crisis. This project [the Eden building] is
going
to strengthen
Salford City
Council’s
green
credentials for a number of reasons – not only is
it going to feature Europe’s largest living façade,
it is also going to operate solely on renewable
energy.
This is
really going
to
make it
Salford’s
most
iconic and
pioneering and
net
zero
scheme in the city to-date.”
Sarah A
shurs
t,
Head of Investment and Programmes,
Salford
City Council
 
Seepage27formoreinformationaboutthe
Eden building.
L
o
c
a
l c
o
mmu
n
i
t
i
e
s
Who they are and why they
’re
impor
tant to us
We view local communities as well as wider
society as a key stakeholder group. We can
generate social and economic value for local
communities through our construction and
regeneration schemes, while society more
broadly
benets from
our focus
on
reducing
carbon emissions and pollution and increasing
biodiversity. Local residents are a potential
source of recruits and of suppliers with local
knowledge.
“We
can see
the new
Glebe
Farm School
being built from our house, we are literally
next door. It’s a big development but
Morgan
Sindall are
a delight
to
have as
neighbours. My son, Ben, has special needs
and
Morgan Sindall
has opened
up
the
site to him, allowing him to come in and
interview the workers on site to track how
the school is being built for his blog. They’ve
built my little boy up so much. Everyone
on the site knows his name, every morning
the guy who lets the lorries in waves to him.
They’ve
given him
a little
Morgan
Sindall
uniform of his own – it hangs up in his
room. It’s given everyone in the community
an insight into the development from the
inside.”
Rhian Evans,
resident near the Construction’s Glebe
Farm
School site
in Milton
Keynes
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Our s
t
akehol
der
s: lo
cal co
mmuniti
es
continued
Their k
ey priorit
ies
Enhancements to the local surroundings
and quality of life that meet local needs and
requirements; buildings and developments that
are sustainable; a considerate constructor that
causes minimal disruption; and investment in
the local economy through job creation and use
of local suppliers and services.
How w
e en
gage w
it
h the
m
Our divisions have dedicated teams responsible
for liaising with local residents and communities
before and during our projects. Where
appropriate, they engage members of the local
community in consultation on the project’s
development; for example, Urban Regeneration
arranges planning consultations on all its
projects and phases. We partner with schools
to introduce construction as a career option.
Project teams in all divisions get involved in local
charities and events.
How t
he B
oar
d is ke
pt in
for
me
d
The Board is kept informed of the divisions’
community initiatives and any issues through
the executive directors’ board meetings with the
divisions.
How w
e re
sp
ond
ed t
o fe
ed
ba
ck in 2
021
No material issues arose in the year.
 
Read more about how we engage with and create
valueforlocalcommunities(pages35to38).
S
h
a
r
e
h
ol
d
e
r
s
Who they are and why they
’re
impor
tant to us
Our shareholders provide the Group with funds
for investment in long-term growth. We value
the stewardship of our institutional investors
and the views of all shareholders and analysts.
Their k
ey priorit
ies
Robust
nancial and
risk management;
good
governance;
eective communication
of
strategy; share price growth; sound capital
investment decisions; a progressive dividend
policy; a responsible business that creates social
and environmental value; and a remuneration
policy that promotes sustainable growth.
How t
he B
oar
d en
gage
s w
ith t
he
m
We keep all our shareholders updated via
regulatory newswires, our website and our
annual report. Our chair, senior independent
director and committee chairs are available to
meet with shareholders at any time.
The executive directors communicate regularly
with institutional shareholders and analysts
covering the Company’s activities through
private meetings and presentations following
our results announcements. Any written
feedback we receive following these interactions
is distributed to all members of the Board. In
addition, feedback and reports from Institutional
Shareholder
Services, the
Investment
Association and Pensions & Investment
Research Consultants are circulated to the
Board ahead of our AGM each year.
In 2021, our half-year results presentation was
delivered as an in-person event, with a live video
communications link that enabled investors and
analysts unable to attend in person to take part
in the live Q&A discussion.
All shareholders are invited to attend our
AGM and, outside of any pandemic-related
restrictions, we encourage everyone to attend
for the opportunity to meet and put questions
to the directors. In 2021, a closed AGM was held
as public gatherings were prohibited by the UK
government.
Shareholders were
notied of
this
in advance and encouraged to appoint the chair
as proxy with their voting instructions. The chair
invited shareholders to email any questions
which would then be published on our website
in
advance of
the meeting
(no
questions were
submitted). Our 2022 AGM is intended to be
held
as a
live event
on
Thursday, 5
May (see
the Notice of Meeting on our website for more
detail).
The executive directors engaged with investors
during the year via email and meetings. Topics
covered included general information about the
Group, 2020 full-year and 2021 half-year results,
areas for growth, cash management and capital
allocation.
How w
e re
sp
ond
ed t
o fe
ed
ba
ck in 2
021
All resolutions were passed at our 2021
AGM. The feedback received following the
full- and half-year results was very positive, and
additionally we received some very encouraging
feedback on our environmental performance.
The Group’s new capital allocation framework
and dividend policy were received positively by
investors.
During
the year,
our remuneration
committee
consulted with our largest shareholders on
two proposed amendments to our executive
remuneration.
See pages
126 to
128
for detail
on the feedback received and the committee’s
decision-making process.
F
u
n
d
e
r
s an
d p
e
r
f
o
r
m
an
c
e
bond issuer
s
Who they are and why they
’re
impor
tant to us
Our funders and performance bond issuers
provide us with access to competitively priced
banking,
bonding and
debt facilities.
See
page 39
for
further information
on the
Group’s
nancing
facilities.
Their k
ey priorit
ies
Robust management of working capital and risk.
How w
e en
gage w
it
h the
m an
d
keep t
he B
oar
d inf
or
me
d
The
Group’s nance
director and
director
of
tax and treasury meet with our banks and
performance bond issuers following the
full-year and half-year results to update them
on the Group’s performance and discuss any
expectations they may have. These meetings
help
us to
maintain sucient
loan
and bond
facilities.
Our nance
director reports
to
the
Board on any updates relating to the Group’s
funding requirements.
How w
e re
sp
ond
ed t
o fe
ed
ba
ck in 2
021
No issues or concerns arose during meetings
with our funders and performance bond issuers
during the year that required consideration by
the Board.
Strategic report
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Responsi
ble business stra
teg
y and per
forma
nce
O
u
r T
o
t
a
l C
o
m
m
i
t
m
e
n
t
s a
r
e a
s
t
r
a
t
e
g
i
c p
r
i
o
r
i
t
y f
o
r t
h
e G
r
o
u
p
Deli
vering on our Commi
tment
s
suppor
t
s our purp
ose and he
lps
us achieve sus
t
ainable g
row
t
h.
Our Total Commitments focus on the needs
of our stakeholders and the environment and
provide the framework for our responsible
business strategy.
Being a responsible business means conducting
our activities ethically, sensitively and without
causing harm to people or the environment. It is
about delivering social value and environmental
protection and enhancement that remain long
after we have completed our work.
O
u
r
To
t
a
l
Commitment
s
Protecting
People
Developing
people
Improving the
environment
Working together
with our
supply chain
Enhancing
communities
What so
cial value means for u
s
Social
value is
about supporting
our
people,
our supply chain and the wider communities in
which we work. Our Total Commitments help
us create social value by keeping people who
come into contact with our work safe and well,
developing our employees and subcontractors
through education and training, building long-
term supplier relationships and enhancing local
communities by providing training and work
opportunities and supporting local community
projects. The promotion of diversity and
inclusion is important to us, both within our
own organisation and through the creation of
opportunities for people who live locally to our
projects, including young people and those who
have been out of work for a long time.
Through our core activities of construction
and regeneration, we provide new, improved
and
ecient housing,
workplaces, health
and
education facilities and national infrastructure.
Where we can, we procure locally and from
smaller businesses, which together with our
contribution towards upskilling people from
local communities, helps to create economic
resilience. In addition, the regeneration of towns
and cities attracts people and businesses to the
area and stimulates local economies.
In 2021, we delivered 71p of social value per
£1 spent through 112 projects, as measured
by our social value bank; trained 650 of our
Property
Services engineers
in domestic
abuse
awareness; and paid 67.8% of our suppliers’
invoices
within 30
days.
Improving the e
nvironme
nt
We are a leader in our sector in addressing
climate change and have been independently
recognised as such. In 2021, we reduced our
Scope
1, Scope
2 and
operational
Scope 3
carbon
emissions by
37% against
our
2019
baseline of 27,242 tonnes CO
2
e and invested in
creating nine new woodlands on the Blenheim
Estate in Oxfordshire. We achieved an ‘A’ score
for
leadership on
climate change
from
CDP
1
for the second year running, one of only 206
companies globally to attain this level. This is the
sixth year our leadership in this area has been
acknowledged
by CDP.
In addition,
in
January
2022, the Group was awarded ‘AAA’ under
MSCI’s
2
environmental, social and governance
ratings, upgraded from ‘AA’; and in February,
we were awarded a Platinum ‘Carbon Reduce’
certicate
from Toitū
for having
been
measuring
our emissions for over 10 years and maintaining
our commitment to managing and reducing our
emissions.
Our people are highly engaged in our
commitment
to achieving
net zero
carbon
emissions
by 2030
and contribute
through
their
signicant eorts
to switch
to
low-carbon
solutions, for example when selecting fuel,
energy or materials.
1
CDP is
a
not-for-prot
charity that
runs
the global
disclosure system for investors, companies, cities, states
and regions to manage their environmental impacts.
2
MSCI provides
decision
support
tools and
services
for the
global investment community.
Using t
arget
s to drive and
track our per
formance
Our Total Commitments are driven by key
performance
indicators (KPIs)
and clear
targets.
We regularly review our targets to ensure they
are
suciently challenging
and t
for
the future.
Following a review in 2020, we updated our KPIs
and targets and used them to measure our
2021 performance.
Our performance in the year against our 2025,
2030
and horizon
targets is
set
out on
pages 17
to
38.
Our performance against our full set of
responsible business metrics is contained in our
responsible business data sheet, on our website.
Our Total Commitments are aligned with
the
UN Sustainable
Development Goals,
the
following six being those where we believe
we can have the biggest impact:
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2021 per
formance
0.29
lost time incident rate
1
20
25 t
a
rg
et
0.21
20
3
0 t
ar
ge
t
0.18
Horizon a
mbition
Zero incidents
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ons
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y and p
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P
rote
c
t
i
n
g
p
e
o
p
l
e
We want to provide our employees
and subcontrac
tor
s wi
th a s
afe
and healt
hy work e
nvironm
ent
and suppor
t th
eir physic
al and
ment
al wellbeing
. Our goal is
that ev
er
yone w
ho comes into
conta
c
t w
ith o
ur ac
ti
v
it
ies
, on or
osite,goeshomes
afean
dwell.
Health and s
afet
y
In 2021, the number of lost time incidents in the
Group
increased to
134 (2020:
108;
2019: 127).
The
number of
RIDDOR
1
accidents rose to 44
in
2021 (2020:
28; 2019:
41)
and our
accident
frequency
rate rose
to 0.09
(2020:
0.06; 2019:
0.08).
During
the year,
we continued
to
manage
the challenges posed by Covid and the
large number of changes to government
guidance, ensuring we remained aligned to the
Construction Leadership Council’s site operating
procedures. We were disappointed with our
safety performance as we always endeavour to
improve year on year. Our divisions responded
to the drop in performance experienced early
in 2021 by sharing learning and producing
targeted improvement plans. As a result, we
saw an improvement in performance during
the second half of the year, when the number
of
RIDDOR accidents
reduced by
37%
and the
number of lost time incidents by 19%.
1
The Reporting
of
Injuries,
Diseases and
Dangerous
Occurrences Regulations
2013.
A large number of our accidents in 2021 were
caused by falls at the same level and being hit
by falling or moving objects. To reduce these
incidents, in addition to encouraging everyone
to be more aware of the basic risks, we have
applied principles of ‘safe by design’, where
safety is considered throughout the design
process so that safe behaviours become
instinctive. We have also undertaken campaigns
to prevent hand injuries and raise awareness of
the need to tether tools and maintain tidy sites.
Ac
t
ion t
ake
n to pr
eve
nt ac
cid
en
ts
Outlined below are examples of steps taken
by the divisions to increase awareness and
promote safe behaviours.
Construction: developed an animation,
‘Introduction
to 100%
Safe’ which
is
included
as part of site registration; produced new
visual safety standards and guidance;
continued to deploy its ‘observations tool’ to
identify trends and patterns; and developed
new ‘Behavioural Essentials’ e-learning
modules for its employees and supply chain
including how to design a safe site set up.
In response to an increased number of
underground services strikes in late 2020 to
early 2021, the division refreshed its standards
and guidance and launched a national training
campaign, and has since seen a reduction in
such incidents.
Infrastructure increased investment in its
‘human factors’ programme. Human factors
is about taking into consideration, when
planning a project, the tasks people are being
asked to undertake, the environment in which
they are working, and human and individual
characteristics
that inuence
behaviours
at
work. Eective
planning can
reduce
the
likelihood of accidents resulting from human
error
or interfaces
between dierent
trades.
The programme uses models such as AWIC
(Accessible,
Workable, Intelligent,
Correct),
a guide that helps identify any potential
for misunderstanding or error in a new
procedure;
and CSHEL
(Culture, Software,
Hardware, Environment, Live), a model that
takes into account that a human being is
rarely, if ever, the sole cause of an accident.
In 2021, Infrastructure: increased its human
factors
training and
awareness (40
human
factor practitioners were trained in the year);
applied its models to some of the division’s
more
complex projects
and specic
risk
areas
such as reducing hand injuries; piloted a trade
interface management tool; and introduced
new tools to investigate incidents and prevent
practical drift away from desired performance
levels.
To
date, improvements
have been
identied
in the collection and analysis of data, while the
eect
of the
programme on
the
number of
incidents will be monitored during 2022.
O
u
r To
t
a
l
Commitments
Protecting
People
Developing
people
Improving the
environment
Working together
with our
supply chain
Enhancing
communities
1
Number of lost time incidents x 100,000
divided by the number of hours worked. Lost
time incidents are those resulting in absence
from work for a minimum of one working day,
excluding the day the incident incurred.
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Keeping hands s
afe
Hand injuries accounted for a third of
injuries within Infrastructure in 2021.
These injuries are often caused by poor
perception of risk, lack of concentration,
or fatigue. To address this, the business
conducted
a ‘Safe
Hands’ campaign
which
resulted in employees designing a pair of
safety gloves printed with the message
‘Don’t
be an
Oucher!’. The
gloves
use the
‘nudge’ theory to remind people to keep
their hands safe.
In addition to progressing its human factors
programme, Infrastructure: produced and ran
a
high-impact ‘Reducing
the Risk’
safety
lm
in the year, showing actual and high potential
incidents; held safety forums for project
managers; and reviewed how it engages with
subcontractors on safety.
Fit
Out launched
a Safety
Improvement
Plan
in 2021 for its employees and subcontractors.
The Plan focuses on the division’s key causes
of accidents and high potential incidents:
movement and storage of materials,
housekeeping,
management of
oor voids
and slips and trips. The launch was supported
by a poster campaign with QR codes through
which ‘Toolbox Talks’ could be downloaded. Fit
Out’s
high potential
incidents reduced
from
13
in 2020 to three in 2021.
Fit Out has also created a new role within
its safety team of ‘supply chain health and
safety manager, tasked with ensuring that
all suppliers comply with the division’s site
standards. The new manager works with the
project teams to understand their priorities
and produce a plan of action; this includes
site inspections and audits, engagement with
the directors of supplier companies where
necessary,
and eecting
change through
improvement planning, coaching support and
training. Progress will be regularly monitored
and reviewed.
Partnership Housing launched ‘L7 Minimum
Standards’
in the
year to
address
seven areas
that most commonly lead to serious injury,
ill health or damage, such as excavations,
housekeeping, occupational health and
scaolding.
In their 2021 strategy reviews with the divisions,
the non-executive directors reviewed the
divisions’ performance against the objectives
of the Group’s health, safety and wellbeing
framework which had been updated at the start
of
the year
(see page
124
for details).
Ac
tion taken to protect occupational health
All
divisions are
now accredited
to
ISO 45001,
the international standard for occupational
health and safety that provides a framework
to increase safety and enhance health and
wellbeing at work. Our occupational health
policies and standards cover all employees as
well as subcontractors working on our projects.
During
the year,
we increased
our
occupational
health surveillance with the end objective of
eradicating incidents of hand-arm vibration and
noise-induced hearing loss.
Construction organised online events and
blogs for its employees and supply chain
covering topics such as hand-arm vibration
management, dust management, skin care
and summer working, manual handling
and noise on site, and developed a series
of ‘Managers’ Guides’ for employees and
suppliers to promote occupational health
knowledge. With the support of a supplier,
the division held seven project-based dust
awareness sessions and trained 70 individuals
in
its supply
chain in
formal
‘face t
testing’ of
dust masks.
Infrastructure introduced £200 contributions
for employees towards hearing tests and, if
needed,
hearing aids.
The oer
is
extended
to those who work in an operational
environment, currently wear a hearing aid
at work, or are referred by the division’s
occupational health partner.
Fit
Out has
run project-specic
initiatives,
such
as
a challenge
for engineering
students
to nd
solutions to reducing hand-arm vibration and
hosting a seminar on noise reduction. The
division also provided free health screenings
to all employees.
Partnership Housing ran a health surveillance
programme in the year for its direct-employed
labourers, including the following tests:
hearing, vision, colour blindness, respiratory,
dermatology, musculoskeletal, hand-arm
vibration syndrome and blood pressure.
Resp
ons
ible b
usin
es
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y and p
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form
ance: prot
ec
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ple
continued
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ons
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es
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ec
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ple
continued
Physical and m
ent
al wellbeing
The pandemic has increased the challenges and
importance of maintaining physical and mental
wellbeing.
We continue
to oer
our
colleagues
a
range of
benets that
include
access for
all employees to a digital GP service and an
employee assistance programme that provides
legal
and counselling
services. Sixty-one
per
cent of our employees are covered for private
medical support and 81% for death-in-service
benets.
Our divisions
provide mental
health
rst
aid training
and publish
regular
bulletins
containing tips and guidance on wellbeing
including links to national campaigns such as
Mental
Health Awareness
Day. Financial
worries
can be a major source of stress, and, using a
third-party specialist, we provide employees
with an educational resource to help them
manage
their nances.
In December
2021,
we
worked with the Financial Conduct Authority
during its annual loan fee fraud campaign to
raise awareness and protect our employees and
subcontractors from becoming victims. A toolkit
of materials, including posters, was shared
across divisions whose subcontractors are
statistically at higher risk of such fraud, including
Construction,
Property Services
and Partnership
Housing.
The following are examples of initiatives taken
by the divisions in 2021 to promote physical and
mental wellbeing:
Construction launched: a ‘Wellbeing Toolkit’
displaying
all employee
benets in
one
place;
a
‘Sleep School’
app; and
live
webinars on
topics such as work/life balance, alcohol use
and exercise.
Infrastructure: conducted a ‘Wellbeing and
Feeling
Safe’ survey
and in
response
to
the feedback ran new campaigns such as
‘Healthy Heart’; provided advice on optimising
conversations between employees and line
managers
(see page
21); and
introduced
‘Building better mental health’ awareness
training for line managers to help identify and
support anyone struggling with wellbeing.
Towards the end of the year, a follow-up
survey
indicated that
93% of
respondents
felt
safe at work.
BakerHicks organised social activities to
keep people engaged and connected, such
as
its #BakerHicksinBloom
sunower and
Photographer of the Year competitions, and
physical activity challenges that promote
health and wellbeing, such as Reach for the
Skye
and Virgin
Pulse GO.
Fit Out reviewed the performance of its
‘BeWell’ app and agreed goals and targets for
mental
health rst
aid and
awareness
training.
Partnership Housing sponsored its employees
to undertake 50-mile walks, swims, runs
or cycles and collectively undertake 50
days of volunteering, to celebrate the 50th
anniversary
of its
rst partnership.
Urban Regeneration held events such as
‘lunch
and learn’
sessions, o-site
team
building activities, ‘at-desk’ de-stress massages,
and photograph competitions. The division
also
increased mental
health rst
aid
training
and the use and function of social spaces in
its
oces.
As more people are working from home
more often, Construction, Infrastructure and
Partnership Housing each developed ‘adaptable
working’ policies, with toolkits and guidance to
help employees and managers agree working
arrangements that suit both the individual and
the business.
Human right
s
We fully support human rights and do not
prevent or deter anyone who works for us from
joining or taking part in a trade union. In 2021,
we launched a new Group Code of Conduct
stating
our commitment
to the
UN
Declaration
on Human Rights and providing a framework
for how we should act when engaging with our
clients, colleagues and suppliers. The Code is
rooted in our culture, being structured around
our Core Values and Total Commitments. Every
employee received a copy direct from our chief
executive and was required to undertake an
e-learning module to help embed the Code’s
principles. The Code was circulated to the
members
of our
Supply Chain
Family
as we
expect them to apply the same standards in
their dealings with their clients, employees and
suppliers.
ReadmoreaboutourCodeofConductonpages81
and82andonpage100.
“
Our Group Code
of Conduct states
our commitment
to the UN
Declaration
on
Human Rights.”
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Preventing modern slaver
y
In late 2020, we took part in a modern slavery
pilot study along with some of our peers, to
develop a methodology for trying to identify the
extent of modern slavery in the construction
industry. An independent third party, &Wider,
conducted an anonymous survey among
subcontractors working on a number of projects
(including
nine of
our own)
about
their working
conditions.
Following the initial pilot survey, a number of
issues
with the
survey process
were
identied
such as that many of our projects are delivered
to short programmes: the call cycles for the
survey take place every six weeks and we may
have
dierent subcontractors
working on
our sites from one cycle to the next. We are
staying in touch with &Wider as they continue
to develop their survey for the construction
industry, to monitor whether it becomes
possible to apply the process on our larger
projects.
During
2021, we
undertook the
following
to
manage our modern slavery risk:
commenced the evaluation of our labour
practices
against the
ELS BES
6002
Ethical
Labour
Standard;
commenced
our assessment
for ISO
20400:2017 Responsible Procurement
registration;
included a section on modern slavery in our
Code of Conduct e-learning module;
were assisted by our labour desk, run by
ve
specialist recruitment
agencies, in
better
managing
the risks
of o-payroll
working
and in remaining compliant when recruiting
contingent
labour and
temporary sta,
by
providing
second and
third verication
of
candidates. The agencies also ensured that
we maintained scrutiny of payment and
entitlements provided to workers hired
through the labour desk;
encouraged
our divisions
to use
Sedex,
an
organisation that audits working conditions in
supply chains, to review the labour practices
of their material suppliers;
prepared a guide for our site teams to help
to identify signs of modern slavery and the
questions they should ask if they suspect
there may be an issue;
claried
the support
available for
site
teams
should an incidence of modern slavery be
suspected;
liaised regularly with the Gangmasters and
Labour
Abuse Authority
(GLAA);
liaised
with Safecall
(our raising
concerns
helpline service provider) to ensure that their
teams are able to detect if a call relates to a
modern slavery issue, and with our site teams
to ensure that our raising concerns posters
are being displayed on all sites.
While no instances of modern slavery were
raised internally or via our whistleblowing
service, we assisted both the police and the
GLAA with their inquiries into two separate
allegations concerning right-to-work permissions
and modern slavery. Each of these inquiries
arose from isolated incidents in our supply chain
and
no wrongdoing
was identied
on
our part.
Our 2021 modern slavery statement will be
published in June 2022. Further details on our
commitment to preventing modern slavery can
be found on page 109 and in our 2020 modern
slavery statement on our website.
Addressing domes
tic abuse
Property
Services partnered
with the
Domestic
Abuse
Housing Alliance
(DAHA) to
develop
the
DAHA
Contractors Accreditation
by developing
systems and processes for identifying people
who may be at risk. The division became the
rst
contractor to
receive formal
accreditation,
evidencing how its frontline employees have
been able to detect signs of domestic abuse
when
carrying out
repairs. Property
Services
also
provided business support and advice to the
domestic
abuse charity,
Your Sanctuary,
via
the
Pilotlight charity and social enterprise support
scheme.
In
2021, Property
Services trained
650
employees in identifying signs of domestic
abuse via 200 one-and-a-half-hour sessions.
The division runs four training modules
tailored
for dierent
roles.
Infrastructure launched a domestic abuse
policy and guidance in the year and engaged
an
Independent Domestic
Violence Adviser
(IDVA)
to provide
support to
any
employee
who may need it. The division worked with the
domestic abuse charity, Hestia, which helped
source
the IDVA.
The support
oered
extends
to
all employees
and also
oers
the facility
to allow a manager to make an additional
payment to an employee facing domestic
abuse, to help them to leave the home.
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e
v
e
lopi
n
g
p
e
op
le
O
u
r To
t
a
l
Commitments
Protecting
People
Developing
people
Improving the
environment
Working together
with our
supply chain
Enhancing
communities
We want an inclusive wor
k
environment where ever
yone has
access to the knowledge, technolog
y
and ser
v
ices t
hey nee
d to achieve
their p
er
sonal ambi
tions
, deli
ver
the be
s
t outcomes fo
r our client
s
and dri
ve the busines
s for
ward.
We are working to increase o
ur
diver
si
t
y a
nd to ensure that no
discr
imination o
ccur
s, h
owever
unintentional i
t may be.
We recruit talented people and give them the
resources they need to perform well. These
include
collaborative oce
environments,
exible
working arrangements,
and training
and
mentoring to help them increase their skills and
knowledge. We promote internally where we
can.
T
raining and caree
r
development
During
the year
we provided
an
average of
3.5
training
days per
employee (2020:
2.3
days)
and
sponsored 532
people completing
national
vocational
and professional
qualications (2020:
540).
Our divisions work with industry bodies and
initiatives to attract people into the industry.
These include Women into Construction and
the 5% Club, a national campaign to generate
opportunities for graduates and apprentices.
The table below shows the percentage of Group
employees making up the 5% Club.
2021
2020
Apprentices
231
197
New graduates recruited
61
44
Sponsored
students
44
24
Total structured trainees
336
265
Percentage of total
employees
1
5%
4.3%
1
Based on
number
of
UK employees
at
31 December.
We support our employees in progressing
their careers through personal development
plans, access to training courses that suit their
needs and interests, mentoring and ‘buddy’
programmes. General skills training includes
topics such as inclusive leadership, media and
presentation skills and assertiveness.
The divisions use their intranets to provide
access for their employees to a wide range of
learning and development resources, with some
divisions running online ‘Academies’.
In 2021, Infrastructure launched a new
range of learning resources to help people
boost their skills together with a suite of
videos, workshops and guidance called
‘It’s my conversation’ that aims to improve
the quality and outcomes of conversations
around development and careers between
employees and their line managers.
Partnership Housing launched seven new
e-learning topics to its Academy, on topics
such as safety and customer care.
We ensure that people are trained in new
technical developments and software to keep
their skills up to date and future-proofed.
For example, in 2021 we enrolled 12 people
from across the Group on an in-depth
CISL
(Cambridge Institute
for Sustainability
Leadership) carbon learning course run by
Cambridge University. In addition:
BakerHicks rolled out company-wide LinkedIn
Learning in the year, a library of instructional
videos to equip employees with the latest
business, technology and creative skills.
Partnership
Housing trained
37 site
managers and assistant site managers in Asta
Powerproject to ensure they have the latest
digital skills for programming and project
management.
2021 per
formance
3.5
training days
1
per employee
per year
20
25 t
a
rg
et
5 days
20
3
0 t
ar
ge
t
6 days
Horizon a
mbition
7days
1
A training day is a minimum of six hours of training.
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Employees
identied within
succession plans
are given further support such as one-to-one
business coaching and training in topics such
as site manager development, management
excellence, business leadership and
organisational resilience. At Group level, we run
an
o-site leadership
development programme
aimed at providing participants with enhanced
leadership and management skills. In 2021,
two
cohorts (20
people in
total)
took part
in the
programme, fewer than usual owing to social
distancing rules in place and the importance of
face-to-face interaction for this course. In 2022,
four
cohorts are
scheduled to
take
part (around
54 people in total).
Leadership training run by the divisions in 2021
included the following:
Construction developed a management and
leadership behavioural framework and rolled
it out to its entire senior management team of
c80 people.
Infrastructure
introduced a
‘Stepping up
to
Management and Leadership’ programme,
with
138 people
taking part
in
the year.
BakerHicks introduced a ‘core competencies’
programme
oering employees
training in
modules such as ‘emotional intelligence’ or
‘range
of inuence’
to develop
skills
suited to
the roles they aspire to.
Fit Out launched a succession planning
initiative, assisted by an external specialist
agency, to examine what a leader in Fit Out
looks like. Bespoke development plans will
be
produced for
future leaders
identied
through the process. The division also ran
an ‘exceptional leadership’ programme for
selected employees.
Property
Services developed
and expanded
its ‘people management training programme’
and
is now
oering 11
dierent
modules
to line managers to improve their line
management skills.
Urban Regeneration ran one-to-one
coaching sessions as part of individual career
development and overall succession planning.
The division has been Investors in People
‘Gold’ accredited for the past 10 years.
Investing in secure and
innovative
technolog
y
We continue to invest in new technology to
enable people to attain high standards while
enjoying a better working experience. This
includes data analytics and business intelligence
as
well as
enhancements to
business-specic
operational, procurement, commercial and
nancial
systems. In
2021, we
invested
£3.2m
in technology and business innovation. We
invested c£1m in transitioning more systems
to new cloud-based solutions for improved
eciency,
reliability and
accessibility. Our
divisions invested c£2m in digital, commercial,
client engagement and responsible business
solutions – these included Property
Services’
goldeni software
(see page
47)
and
Construction & Infrastructure’s Carbon
i
Ca
carbon
measurement tool
(see page
27)
along
with
BIM (Building
Information Modelling),
risk
management and project management tools.
We have also continued to invest in the latest
security
technology and
strategies (see
page68
for information on how we manage cyber
security risk).
“I left school at 16 and joined Overbury as
a management trainee. I started on site,
labouring, and looking back it was a fantastic
place to gain an understanding of our sites,
our teams and our product. I was sponsored
through college, and then through university,
where I studied quantity surveying. For me,
challenging the status quo is such a precious
Core
Value of
Morgan Sindall
–
it empowers
you, gives you a voice, and a complete forum to
be yourself. Overbury enabled me to
experience
working within
dierent positions
across the business. The trust the Group puts
into people who live by the Core Values shows
the level of opportunity within Overbury and
the
Morgan Sindall
Group. If
you
can prove
you
can do it, it’s there for you.”
Ol
le
y Wa
t
so
n
,
Managing
Director, Overbury’s
London-based
corporate partnerships and education team
2
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Resp
ons
ible b
usin
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s st
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y and p
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form
ance: deve
lopi
ng pe
ople
continued
Diver
sit
y and inclus
ion
Diversity
of thought,
perspectives and
experience is vital to our long-term success,
helping us to challenge the status quo and drive
innovation. We consider diversity in the broadest
sense, including age, gender, ethnicity, culture,
socio-economic background, disability and
sexuality.
Over the past decade, we have introduced a
number of initiatives across the Group, such
as
exible working
and family-friendly
working
practices, to attract more diverse employees. We
employ
people from
a variety
of
dierent socio-
economic and educational backgrounds and
when recruiting, we consider the future potential
of each individual candidate as well as their past
education and experience.
Our chief executive has made each division
responsible for devising its own diversity and
inclusion strategy.
We give full and fair consideration to job
applications made by disabled people, commit
to making reasonable adjustments to their
roles
and responsibilities,
and oer
the
training
and support they need to give them the same
opportunities for career progression as our
other employees.
In
2021, Property
Services reviewed
the
support it provides employees with a disability
or
health condition
that aects
their
role and
committed to introducing an informal ‘check
in’ to ensure that people’s changing needs
continue to be met.
We
oer work
experience, training
and
apprenticeships in local communities where
we work; undergraduate sponsorships
and graduate training programmes; and
returnships for people who have had a career
break; all of which bring new and varied talent
into the business. We also engage with local
schools and colleges to encourage young
people
to pursue
careers in
construction.
See
pages
35 and
36 for
more
detail on
how we
oer
training and
work opportunities
to
local
residents of our projects.
Our representation of people from a Black,
Asian,
or minority
ethnic (BAME)
background
has
remained unchanged from 2020 at 15%, while
our female representation has increased slightly
from
24% to
25% (see
table
below left
for the
numbers) and we recognise that we have further
work to do to ensure that we have a fully diverse
and inclusive business. Our key challenge is to
improve diversity in our senior management
teams and their succession pipelines. The
percentage of women who are direct reports
of the Group management team has increased
to
21% (2020:
14%). See
pages
112 and
113
for more information on Board and Group
management team diversity.
Our g
en
der p
ay gap
Our 2021 median gender pay gap based on
our
April data
is 29.6%
(2020:
33.6% at
April and
29.1% at November
1
). The gap remains high
and
reects a
higher number
of
senior male
employees in the Group. We recognise that we
need to make further progress in helping more
of our female employees progress into senior
positions.
Women make
up 11%
(2020:
10%) of
the
upper pay
quartile compared
to
39% (2020:
40%) in the lower quartile. Although initiatives
have been introduced across the Group to
attract more women into the industry at junior
levels, and to develop and retain women who
already work across the Group, it will take time
for their careers to be developed into more
senior roles and therefore to reduce our pay
gap.
See our
gender pay
gap
report on
our
website for more information.
1
Our 2020 data was impacted by a number of people
across the Group agreeing to reduce their salaries for
a two- or three-month period either due to the impact
of Covid and the number of people on furlough in April
2020. We therefore re-ran our data in November 2020
when the payroll data was not distorted by Covid-related
measures.
Th
e out
com
es o
f our 2
02
0 di
ver
s
it
y
and inclusion sur
vey
In 2020, we surveyed all our employees to
understand how they perceive the Group in
respect of diversity and inclusion.
In 2021, the divisions communicated the key
ndings
to their
employees together
with
the strategies and actions they would be
implementing as a result. The results of the
survey varied between divisions, but overall
indicated that we need to do more work to
address our inclusivity.
In response to the feedback, the divisions set
up employee working groups and developed
strategic plans to drive diversity and improve
people’s sense of inclusion. While the actions
being undertaken vary according to the
specic
business needs
of each
division,
they
are broadly aligned to the following themes:
changing behaviours; recruitment and retention
processes; promoting construction as a career;
and supporting diversity and inclusion in
our supply chain. Examples of actions being
undertaken are summarised on the following
page.
Our diversit
y s
tatis
tics
The table below shows the gender split throughout the Group.
2021
2020
Men
Women
Men
Women
Board
1
5
3
5
2
Senior
management (Group
management team)
1
10
1
10
1
Group management team direct reports
2
60
21
54
10
All employees
4,904
1,605
4,668
1,496
Number
of UK
employees at
31
December,
on which data is based
6,509
6,164
1
John Morgan
and
Steve
Crummett included
in
both Board
and
senior
management numbers.
2
Excludes John Morgan’s direct reports as these are all members of the Group management team.
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Changing behav
iours to
become more inclusive
Training and awareness programmes to
improve people’s understanding of inclusion
and
how their
behaviour can
aect
others,
including unconscious bias training and
diversity and inclusion leadership courses for
managers.
The launch of a campaign to increase
awareness of invisible diversity such as mental
health.
Programmes such as ‘Allyship’ and ‘Active
Bystander’ to encourage support for
colleagues from minority groups.
The formation of a diversity and inclusion
committee to gain feedback from employees
and explore areas for improvement.
Recruitment and retention
Review of existing policies and processes.
Improving wording on careers websites and
in job advertisements to remove barriers and
ensure the language is accessible to everyone.
Increasing diversity in graduate programmes
(Fit
Out’s intake
in 2021
were
50% women
and
15% from a BAME background); BakerHicks’
graduate
scheme welcomed
six women
(55%
of its graduate intake) into the business in
2021, more than in any single prior year.
New work/life balance initiatives such as
Urban Regeneration’s parental transition
programme to support male and female
colleagues in their journey to becoming
parents
and its
oer of
paid
leave for
employees undergoing IVF treatment or to
support their partners through the process.
Monitoring employees’ careers to ensure
everyone is being given the opportunity to
succeed.
Prom
oti
ng co
ns
tr
uc
tio
n as a c
ar
ee
r
Promoting the industry and contributing to
social mobility in local communities through
outreach programmes for groups such as
schools, charities, long-term unemployed, ex-
oenders
and veterans.
Construction developed partnerships in the
year with Working Families/Working Mums,
BPIC
(Black Professionals
in Construction)
and
Build Force UK.
Property
Services has
partnered with
the
Women’s Trade Network to attract women
into trade roles; piloted the ‘Phoenix’
programme
with Westminster
Council to
oer
training opportunities to domestic abuse
survivors;
and joined
the Housing
Diversity
Network mentoring scheme through which it
has
enrolled ve
employees to
date.
Partnership Housing works with Women in
Construction and BAME in Property to help
increase diversity in candidate pools.
Suppor
ting di
versit
y and inclusion
in our supply chain
Working with our supply chain to help
improve their recruitment practices and raise
awareness of the importance of inclusive
management.
Promoting procurement from smaller
businesses led by minority groups.
A full report on the divisions’ plans and activities
in response to the diversity and inclusion survey
was presented to the Board for consideration at
its
December meeting
and, following
a
detailed
discussion, the Board agreed to continue to
review the Group’s progress on diversity and
inclusion in 2022.
Resp
ons
ible b
usin
es
s st
rateg
y and p
er
form
ance: deve
lopi
ng pe
ople
continued
“I did an architectural engineering degree.
It looks at the systems within a building and
I found myself being drawn to the building
services
modules, so
when I
had
nished
my degree, I worked at an engineering
consultancy and that was it. I went on to study
for a Masters in environmental design and
engineering at UCL. Moving to BakerHicks was
a strategic move. I’d had some mechanical
experience but I knew I wanted to build on
that. I’ve been taken aback by how easy it is to
speak to someone senior at BakerHicks. I’ve
had knowledge shared – that genuine, easy,
free-owing
communication and
contact with
people who are at a much more senior level
than you. That’s so unusual. I feel I can build a
whole career here… you have people who you
can talk to, to help you understand. That’s very
pivotal for someone in their career, to help
you learn and progress. You can carry it with
you and also pay it forward. One day, I’d like to
be able to give someone the same amount of
time and care that I received.”
Sochima Onyeneme
lu,
Mechanical Engineer, BakerHicks
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Resp
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usin
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s st
rateg
y and p
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form
ance
continued
We are ac
ting to combat climate
change by work
ing towards net
zerocarb
onemissionsby203
0and
reducing the l
evel of c
arbo
n in the
projec
t
s and building
s we de
live
r
.
We are focusing on increasing
biodi
ver
sit
y and reducing air
pollut
ion, water us
age and was
te.
In
2021, we
achieved a
73%
reduction in
our total carbon emissions since we began
measuring
them in
2010, and
a
37% reduction
from our 2019 baseline. Our carbon intensity
(tonnes
CO
2
e emissions per £m revenue)
reduced
to 5.3
from 7.5
in
2020. By
reducing our
gas
oil consumption,
we saved
3,217
tonnes of
carbon
in our
Scope 1
emissions.
We replaced
598,200 litres of gas oil with hydrotreated
vegetable
oil (HVO),
an initiative
led
by our
Partnership Housing division for which HVO
constitutes 50% of its bulk fuel purchases.
While we have been successful in reducing
our
Scope 1,
Scope 2
and
operational Scope3
emissions, our challenge continues to be to
address
our wider
Scope 3
emissions,
incurred
from our supply chain and the running of
buildings and infrastructure once handed over
to our clients. We are working with our clients
and supply chain to help them report and
reduce their emissions.
I
mp
r
ov
i
ng
t
h
e
en
v
i
r
on
m
en
t
O
u
r To
t
a
l
Commitments
Protecting
People
Developing
people
Improving the
environment
Working together
with our
supply chain
Enhancing
communities
2021 pe
r
fo
rmance
35%
reduction in
Scope
1
and 2
carbon
emissions from 2019 baseline
1
20
25 t
a
rg
et
30%
20
3
0 t
ar
ge
t
60%
Horizon a
mbition
Zero emissions
45%
reduction in
operational
Scope3
carbon emissions from 2019
baseline
2
20
25
ta
r
get
30%
20
3
0 t
ar
ge
t
60%
Horizon a
mbition
Zero emissions
£589m
supply chain by spend providing
their own carbon data
3
20
25 t
a
rg
et
£500m
20
3
0 t
ar
ge
t
£1bn
Horizon a
mbition
100%
of supply chain spend by spend
39%
reduction in carbon emissions from
the Group’s
vehicle
eet
from 2019
baseline
4
20
25 t
a
rg
et
30%
20
3
0 t
ar
ge
t
60%
Horizon a
mbition
100%
ofvehicleeetfullyelectric
 Seepage71forTaskForceonClimate-relatedFinancialDisclosures(includingclimatechangescenarios).
 Seepage80forStreamlinedEnergyandCarbonReportingdisclosures(includinggreenhousegasemissionsandenergyuse).
1
Scope 1
is
direct
emissions from
sources
owned or
controlled
by
the Group
and
Scope2 is
indirect
emissions
generated from
purchased
energy. The
2019
baseline
was 20,903
tonnes
CO
2
e.
A 2019 baseline has been applied as 2020 performance was impacted by Covid.
2
All indirect
emissions
not
included in
Scope
2 that
occur
in
limited categories
of
our value
chain
as
measured by
the
Toitū ‘carbonreduce’
scheme
(see
page 80).
The
2019 baseline
was
6,339tonnes CO
2
e.
3
Wider Scope
3
emissions
outside of
operational
Scope 3.
See
Appendix
for further
information.
4
The 2019 baseline was 12,078 tonnes CO
2
e.
26
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Resp
ons
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usin
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s st
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er
form
ance: impr
ovin
g the env
iron
ment
continued
In this section, we address how we can reduce
carbon emissions in our own activities and help
reduce emissions in the design and operation of
buildings.
On page
33, we
describe
how we
are
working with our supply chain to reduce their
emissions.
Our roadmap to ne
t zero
carb
on emiss
ions
Based on sc
ience
We have committed to a policy of achieving net
zero
carbon emissions
by 2030
based
on our
Scope
1, 2
and operational
Scope
3 emissions.
We drive progress using targets accredited by
the
Science-Based Targets
Initiative, and
in
2021,
revised our targets to align with restricting global
warming to the lower limit of 1.5
o
C required in
the 2015 Paris Agreement and reinforced in the
2021 Glasgow Climate Pact. Our new targets
will
be submitted
to the
Science
Based Targets
Initiative for approval using the latest audited
emissions data.
Using science and modelling, we have calculated
the amounts by which we will need to reduce
our
carbon emissions
from specied
activities
each
year to
achieve net
zero
by 2030,
taking
into account the growth of the business over
the period. Our roadmap entails reducing travel
emissions, switching to alternative fuel and
renewable
energy, achieving
site eciencies
and
adopting and supporting new technologies.
Our carbon action panel consists of
representatives from each division and meets
four times a year to report on progress in
emissions reduction and share best practice
across
the Group.
During 2021,
the
panel
oversaw the implementation of our net
zero
carbon strategy
and the
roll
out of
our
Carbon
i
Ca carbon
measurement tool
(see
page27).
An online
database of
project
case
studies was developed, to improve information-
sharing on emissions reduction initiatives. This
database enabled us to further strengthen our
2021
CDP climate
disclosure and
achieve
an
‘A’score
(see page
16).
Greener fuel
and energy use
Our
Scope 1,
Scope 2
and
operational Scope
3
emissions arise predominantly from bulk fuel
used
on sites,
our vehicle
eet
and electricity
use.
We have
signicantly reduced
fossil
fuel emissions by reducing the use of diesel
generators, using solar-powered site cabins,
switching from gas oil to HVO and replacing
petrol and diesel-fuelled vehicles with hybrid
and electric. Currently, 72% of our electricity is
purchased from renewable sources, and we are
working towards 100% in 2022. A key factor of
many of Urban Regeneration’s schemes is to
develop areas around public transport nodes,
encouraging workers, residents and visitors to
use public transport rather than drive.
Our divisions are using HVO on as many site
vehicles as possible and encouraging their
supply chains to replace diesel with HVO in their
vehicles. HVO is made largely of vegetable oil
and waste animal fat and reduces emissions by
up to 90%. Partnership Housing is also rolling
out the use of HVO fuel to power the generators
on its sites.
Currently,
43% of
our total
Group
eet and
70%
of
our car
eet are
hybrid
or electric.
Property
Services, which
accounts for
24%
of
the Group’s
eet, replaced
22
(7.2%) of
its
389
small/medium diesel
vans with
electric
in 2021, returning the rented diesel vans to
their owner. The switch will reduce carbon
emissions
from the
eet by
52.8
tonnes CO
2
e
per year. Replacing the division’s 85 large
vans will depend on advances in technology,
as these vans currently require heavier
batteries which reduce the loads they can
carry.
Property Services
has committed
to
switching all its small/medium vans to electric
by
2023, excluding
any contracts
where
there
is an unusually high daily mileage. In addition,
the division is installing electric charging
points
at all
its oces,
while
also exploring
the
possibility of installing charging points at the
homes of its engineers.
Partnership Housing is also working to ensure
all
of its
oces have
electric
charging points
as
more employees switch to electric cars.
Telehandlers are a major source of emissions on
site for some divisions.
Partnership Housing introduced a policy in the
year to limit engine idling time and has trialled
an electric telehandler.
Construction used an electric telehandler on a
school
project, saving
30 tonnes
of
carbon.
PropertyServices’electricvaneet
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ons
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ovin
g the env
iron
ment
continued
Driv
ing innovation
in carbon reduc
tion
From 1 January 2021, we introduced a Group-
wide internal carbon charge to drive innovation
in reducing emissions. The charge is based
on the volume of emissions incurred by our
divisions and the money raised has been placed
in a climate fund for investment in climate
change initiatives.
In 2021, our divisions developed climate change
strategies and action plans appropriate to their
respective needs. At our senior management
conference in October, seven teams put
forward ideas for carbon reduction projects and
a shortlist of projects are being reviewed for
potential investment from the climate change
fund.
Other carbon reduction initiatives in the year
included the following:
Construction developed a ‘Carbon Literacy
Project’ that will promote change in how the
Group, and the industry as whole, designs,
procures and builds in order to reduce carbon
emissions. The project, due to launch in 2022,
will
entail training
30 employees
to
present to
clients, the supply chain and local schools and
communities.
During
National Environment
Week in
October, Construction launched a ‘10-tonne
carbon challenge’ to those working on live
sites to reduce emissions on their projects
by a minimum of 10 tonnes CO
2
e. As a result,
1,471 tonnes of carbon were saved on 14
projects using methods such as sourcing
lower-carbon steel, replacing reinforced
concrete with a lightweight steel frame,
and upgrading insulation and air tightness.
On many of these projects, we used our
Carbon
i
Ca tool
(see below)
to
verify the
carbon savings.
Infrastructure launched a ‘Great Green
Challenge’ inviting employees to suggest
ways of reducing carbon in key areas such
as materials procurement, alternative fuels,
behaviour change, and site set up and
accommodation.
The Ca
rbon
i
Ca carbon calculator
Our Carbon
i
Ca tool, developed by a team led by
one of our colleagues who is an expert in carbon
modelling
(see box
at right),
and
independently
veried
to the
RICS standard
by
engineering
and design consultancy, Arup, can be used to
promote lower-carbon designs to our clients.
Carbon
i
Ca calculates the total carbon emissions
of a project and building at an early stage of
the design, including carbon embodied in the
materials
(incurred in
production, transport
and waste) and projected emissions from
the building throughout its life cycle. The tool
highlights elements in the design that will result
in higher emissions and suggests lower-carbon
alternatives for the client, designer and supply
chain to consider. Having been piloted in 2020
by Construction, Carbon
i
Ca was rolled out to the
other divisions during 2021.
On Construction’s project to build a health
and community hub in Gorton, Manchester,
Carbon
i
Ca was used to save over 500 tonnes
of carbon through sourcing lower-carbon
steel.
Fit Out used the tool to demonstrate on its
current project for Arup that around 25% of
the embodied carbon would come from a
steel staircase in the design. The client opted
instead for a wooden version, reducing the
carbon footprint of this element of the project
from 18 tonnes CO
2
e to nearer four.
In 2021, 41 of our projects used the Carbon
i
Ca
carbon reduction tool.
Looking forward, we are developing a web-
based Carbon
i
Ca app that will be ready for use
by the second quarter of 2022. The app will
provide a secure platform on which to accelerate
our research and development and enhance
the tool’s performance across the Group. We
have pledged to use Carbon
i
Ca, or an equivalent
client-mandated tool, on all projects across the
Group
valued over
£10m from
1
January 2023.
Th
e ca
pab
ili
t
y to b
uil
d to
Passivhau
s stan
dards
A Passivhaus building requires very little energy
to achieve a comfortable temperature year
round,
typically oering
space-related heating
and cooling energy savings of up to 75%
compared to the average new build.
Construction is building a Passivhaus school
pilot
project for
the Department
of
Education
in North Lincolnshire.
BakerHicks has been involved in the design
of Passivhaus school buildings, including
North
Muirton Primary
School, the
rst
Passivhaus
primary school
in Scotland;
two
of
the business’s
architects achieved
certied
Passivhaus designer status in 2021, and more
are undergoing training.
Urban Regeneration obtained planning
approval
for a
115,000 sq
ft
oce building
at
New Bailey,
Salford, which
will
be the
rst
in the region to meet the UK Green Building
Council’s
(UKGBC) ‘net
zero’ in
operation
targets. The Eden building, now under
construction,
will be
as resource-ecient
as
possible with enhanced insulation in line with
“The problem that many people put down
on the table is that business and the
economy don’t go hand in hand with saving
the planet. But I just think that is a problem
to solve. And when we look at issues like
this pragmatically – what the business
wants to achieve and what’s better for the
planet – often there are solutions in there,
we
just need
to nd
them.
Carbon
i
Ca is a
tool I created that allows users to answer
a series of simple questions which are
then converted into carbon data so they
can actually see the carbon involved in the
whole life cycle of their building. It then
suggests lower-carbon alternatives for a
more sustainable design and build.”
Tim Clement,
Head of Carbon and the Environment,
Morgan
Sindall Construction
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the Passivhaus standard, improved ventilation,
an air source heat pump to provide low-
carbon heating and cooling and CO
2
heat
pumps
to provide
highly energy-ecient
hot
water. The building will be wrapped in one of
Europe’s largest living walls, which will help
cool the structure, improve the wellbeing of
its occupants and contribute to biodiversity.
Eden has been selected as a London Energy
Transformation Initiative Pioneer. Urban
Regeneration
is working
to dene
new
Passivhaus levels of performance to be
applied to all new homes in its developments.
Th
e
imp
or
t
an
ce of
l
ow
-
ca
rb
on t
out
According to the UKGBC, the built environment
contributes around 25% of the UK’s total carbon
footprint. Additionally, 80% of buildings that we
will be using in 2050 have already been built.
While new buildings might be more energy
ecient,
decarbonising existing
properties
will have a much bigger impact on reducing
carbon emissions.
Fit Out’s design and build business designed
the
London oces
of ethical
investment
rm,
Generation Investment Management, to
reduce
its environmental
impact and
reect
the
rm’s ethical
ethos. New
lighting
and
air conditioning systems were installed to
increase
energy eciency,
while reclaimed
timber,
repurposed furniture
and wall
nishes
made from recycled paper, moss and bamboo
helped reduce the use of virgin materials. The
project
achieved a
SKA Gold
environmental
rating.
Ene
rg
y
-
e
cie
nt homes to
red
uce
ca
rb
on em
is
si
ons a
nd f
ue
l bil
ls
Partnership Housing has secured a contract
to
retrot 69
homes for
Orbit
Group (see
page 51) with the goal of increasing energy
eciency.
The division’s
development for
LiveWest
in Exeter
(see page
51)
will be
the
rst
to meet
the housing
association’s
new
sustainable homes standards. All homes
will be insulated to a higher standard than
required
by building
regulations and
tted
with solar photovoltaic panels to generate
their own electricity.
Property
Services is
leading a
programme
for
Basildon Council to install insulation to the
outside walls of council homes which helps to
maintain
a constant
temperature inside.
Since
2018, the division has installed the external
wall insulation to 581 homes with c200 more
planned
for 2022,
together with
double-glazed
windows and doors and eco-tech combi
boilers. As well as reducing emissions, the new
insulation will cut energy bills for residents.
“By insulating homes as much as possible in
construction, we can avoid the need to return in
years
to come
and add
more.
Similarly, installing
solar panels from day one means that all of
the necessary infrastructure is in place so that
they can be upgraded in future as technology
improves. Reducing electricity bills is a vital step
in tackling fuel poverty and we look forward to
the day when our rooftops can generate enough
electricity to meet a family’s entire energy needs.”
Adam Preece,
New Business Manager for LiveWest
Resp
ons
ible b
usin
es
s st
rateg
y and p
er
form
ance: impr
ovin
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iron
ment
continued
The pote
ntial for dec
arbonisin
g const
ruc
tion
The ‘Circular Twin’ project was a theoretical exercise to explore what changes would need to be
made to the design of a building if the key priority was to reduce embodied and whole life carbon.
A
school built
by Construction
ve
years previously
was digitally
redesigned,
with the
virtual, mirror
version
achieving a
reduction of
more
than two
thirds in
whole
life carbon
(67%) and
almost
three
quarters
in embodied
carbon (72%).
The
project was
a collaboration
involving
architects Lungsh
and HLM, engineering consultancy Cundall and 25 supply chain partners, and demonstrated the
potential for reducing carbon in the built environment through the use of technology and new
ways of working.
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continued
T
ransp
are
nt and
res
po
ns
ib
le
o
s
et
tin
g
To
achieve net
zero carbon
by
2030, we
aim to
reduce
our Scope
1, Scope
2
and operational
Scope
3 emissions
by 60%
and
invest in
osetting
the residual
emissions. We
want
to
be
clear and
transparent about
how
we oset.
We intend our investments in carbon removal
to be long-term, sustainable, multi-generational
and based in the UK. We expect the projects
that
we invest
in to
achieve
added benets
of
biodiversity, increase in natural capital and the
promotion of wellbeing.
In
preparation for
osetting our
residual
emissions, we have signed an agreement with
Blenheim Estate in Oxfordshire to create nine
new woodlands, planting more than a quarter
of
a million
trees across
138
hectares (see
box
at right).
We are also investing in a scheme which will
match
clients with
ethical oset
schemes
in
communities local to their own construction
and regeneration projects. The scheme will
oer
clients high-quality
carbon credits
and
the income raised will be used to support local
authorities and housing associations with home
improvements and to help address fuel poverty.
We
have achieved
a CDP
‘B’
score again
this
year for our forest disclosure. We are unlikely to
be able to achieve a higher rating as we do not
produce timber products ourselves or manage
the production of timber as a raw material.
Per
s
onal c
ar
bo
n pl
ed
ge fo
r em
plo
yee
s
In 2021, our chief executive wrote to every
employee asking them to sign a personal carbon
pledge to make tangible changes to the way they
work that will help cut carbon. The pledge was
incorporated within an e-learning programme
on carbon and how it contributes to climate
change.
Improving bio
diver
sit
y and
the natural environment
Biodiversity
net gain
(BNG) is
an
approach to
development that leaves biodiversity in a better
state than before, or ‘nature positive’. It typically
involves creating new habitats or enhancing
existing ones and begins with a survey of
the existing plot to establish a baseline. It is
anticipated
that from
Summer 2023,
a
minimum
of 10% BNG will be legally required for all
development projects in England.
We measure the biodiversity impacts on our
projects and target a net gain where we can.
A large element of our work is regenerating city
centres and developing areas of landscaped
public realm such as parks, canal sides and cycle
paths which help increase biodiversity, as well
as air quality and the wellbeing of local residents
and workers.
Urban Regeneration has set goals for
enhancing biodiversity on its developments
as part of its newly introduced sustainable
development action plan.
We
are signatories
to UK
Constructors
Declare
Climate and Biodiversity Emergency, and during
the year BakerHicks signed up to Architects
Declare
and Engineers
Declare. We
are
a
founder member of Get Nature Positive, a
campaign to engage businesses in protecting
natural resources and promoting biodiversity,
and a contributor to its Nature Handbook for
businesses.
Our largest current biodiversity project is our
woodlands
scheme in
Oxfordshire (see
box
right).
In addition to the Blenheim project:
Construction commits to a BNG target on
every project and has been working with a
specialist consultancy to identify how it can
increase its BNG.
The
business has
trialled DEFRA’s
new
Biodiversity
Metric 3.0
(a tool
that
measures nature losses and gains resulting
from development or changes in land
management) on a community engagement
project in Liverpool. The project involved
clearing a disused piece of land and planting
it
with wildower
seeds to
create
a site
for
the charity Blackburne House’s BEE You
project, which teaches young people the art
of beekeeping.
Having assessed the project in-house using
DEFRA’s
tool, it
was found
to
have achieved
a
BNG of 1,424.7%.
O
set
ting
carbon a
nd
promoting bio
diver
sit
y
at Blenh
eim
Over the next 25 years, the nine woodlands
we are planting at the Blenheim Estate in
Oxfordshire will absorb a total of 22,000
tonnes of carbon from the atmosphere.
Seven
woodlands are
being planted
in
winter 2021/2022, with the remaining two
in
2022/2023. The
28 varieties
of
carefully
chosen trees will purify the air, their roots
will
hold the
soil of
the
sloping elds
and
they will provide a home to birds, insects,
animals and fungi. A small percentage of
conifer will be planted to provide winter
habitats for wildlife. Clover-rich grass
seeding has already been completed,
which starts the carbon sequestering
and biodiversity increase straight away
before the trees are planted. We have also
completed our baseline soil and biodiversity
surveys which will be used to measure
increase in biodiversity over the coming
years. We are creating a forest school and
amphitheatre on the site, where people can
come to learn about biodiversity.
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Natural spaces are a feature of Urban
Regeneration’s development schemes,
contributing to wellbeing for local residents
and workers as well as biodiversity. On its
Manor Road project in Newham, the division
is creating a two-acre linear park, while at
Stockport
Exchange a
265 sqm
green
‘living’
wall is being installed in a multi-storey car
park. The wall will enhance biodiversity, reduce
the
‘urban heat
island’ eect
and
slow the
ow
of extreme rainfall.
Various project-level initiatives across the
Group have included hedgehog houses and
highways, wildlife cameras, bug hotels, bee
bricks and bird boxes.
Using water responsibly
We do not use an extensive volume of water
in our operations and have not set targets for
water reduction. However, our aim is to reduce
our water usage, harvest rainwater where
possible, procure less water-intense materials
and use less water-intense equipment. To
reduce our reliance on fresh water, we use
recycled water for dust suppression, cleaning,
plant watering, toilets and industrial process
use. We use sustainable drainage systems in
our developments, which reduce surface water
ooding
and improve
water quality,
and
install
water-saving
devices such
as ow
saver
taps
in
the new
homes we
build;
Property Services
installed 1,205 showers in 2021 with integrated
water-saving devices.
We
maintained our
CDP ‘C’
score
for our
water
disclosure in 2021. We are reviewing what we
need to do over the next two to three years in
order to improve our water management.
The
divisions look
for dierent
ways
to reduce
water use on their projects.
At Glebe Farm school in Milton Keynes,
Construction is recycling water from the
machine that washes the wheels of vehicles
as they exit the site, meaning it only needs
to
be lled
with water
once,
at the
start of
the project; and on its Novotel project in
Paddington Village, Liverpool, the division used
‘side
stream ltration’
to ush
the
heating and
cooling systems as part of the commissioning
process, saving around 7,200 litres of mains
water per hour.
Infrastructure’s new site solar-powered
welfare
cabin (see
page 34)
harvests
rainwater, a feature that the division worked
with the supplier to create.
Maintaining air qualit
y
We aim to reduce the impact of our activities
on air quality. Our construction divisions’
environmental management systems contain
procedures to prevent pollution on our projects.
One way of achieving this is by switching to
cleaner
fuel (see
page 26).
Infrastructure introduced ‘telemetry’ on some
sites in the year, using drones rather than
vehicles to conduct detailed inspections of its
vast sites.
Property
Services’ goldeni
tool (see
page47)
monitors the air quality in homes and issues
an alert if a boiler needs servicing or replacing.
Initial analysis of the data is helping identify
properties at risk of damp and mould which
can impact air quality. The tool is also being
used to monitor air quality in Property
Services’
oces, which
will provide
a
baseline
to ensure employees are working in a healthy
environment.
On
its project
The Spine,
a
multi-storey oce
building in Liverpool, Fit Out ensured high
levels of air quality on site by using dust
cube
air cleaners
and air
ushing
to remove
pollutants, and by training its site operatives
in dust management. Materials were selected
for the project that had low ‘volatile organic
compounds’
(a type
of pollutant)
and
the air
quality in the building was tested prior to the
client moving in.
Our
net zero
plan is
based
on the
following principles:
Report
: ensuring all our relevant
carbon data is measured, reported
and
independently veried;
including
Scope1,
Scope 2
and operational
Scope3
in our
net zero
boundary;
and using our new carbon charge
to measure the cost of carbon we
produce.
Remove:
assessing various carbon
reduction initiatives to remove carbon
from our activities where possible.
Reduce:
encouraging stakeholders
to reduce their own and the Group’s
emissions, through initiatives such as
supplier
engagement (supply
chain
portal) and employee engagement
(climate
pledge and
e-learning).
Replace:
considering low-carbon
alternatives, such as electric vehicles,
and
designing low-
and zero-carbon
buildings, to replace carbon intensive
activities.
Oset:
we will
only oset
any
residual
emissions once removal, reduction and
replacement have been applied.
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continued
Reducing
and rec
ycling was
te
In
2021, we
reduced our
total
waste by
30% to
859,081
tonnes (2020:
1,223,394), of
which
99%
was
diverted from
landll. Our
waste
intensity
(total
tonnes of
waste produced
per
£m of
revenue)
decreased by
34% to
267
(2020: 403).
Our construction waste reduced by 47% to
40,662
tonnes (2020:
77,360) and
97%
of our
construction
waste was
diverted from
landll.
The amount of waste that we produce varies
according
to the
nature of
our
activities (for
example, tunnelling generates a higher volume
than constructing buildings). For our projects,
we mostly purchase products that have been
designed and manufactured rather than raw
materials.
We aim to support the circular economy
by reducing waste and recycling or reusing
waste that we cannot reduce. Our sustainable
procurement policy requires our employees to
adopt
best practice
(reduce, reuse
and
recycle)
in their buying decisions. We decided at the
start of 2021 to participate in a greater number
of manufacturer take-back schemes and to
improve our ordering and material selection with
waste reduction as an objective. For example, we
have worked with a supplier to return protection
boards to the factory after use for reconstitution
into new boards.
Our site waste management plans are
supported by our waste service providers,
resulting in the sharing of best practice and
lessons learned and increased opportunities
to reduce waste at source or recycle. In 2021,
we agreed a process for a new waste desk to
help us reduce and manage our waste more
eectively
by consolidating
the number
of
waste
service providers that we use and providing
access
to waste
liaison ocers
and
improved
waste reporting systems. The desk will be piloted
in
the Infrastructure
business in
the
rst quarter
of 2022.
During
the year,
the Group
signed
up to
The
Pallet Loop, a circular economy pallet reuse
scheme for the construction sector. Pallets
are used to transport building materials and
are usually used once and discarded – fewer
than 10% are currently recycled. The Pallet
Loop replaces the single-use approach with a
system for returning pallets to be repaired and
reused, thereby cutting waste, timber use and
carbon. Pallet Loop pallets are made from 100%
FSC
timber and
engineered to
be
over 100%
stronger, allowing them to be reused multiple
times.
New initiatives by the divisions to reduce or
recycle waste included:
Construction
joined the
SCAPE public
sector
framework’s ‘Construction Waste Portal’, a
platform that helps construction companies
predict, manage, reduce and prevent
construction waste.
On a project for the University of Glasgow,
Construction recycled 100 bar stools, 1,000
carpet tiles, 58 mattresses and 14 microwave
ovens.
Infrastructure worked with a supplier to use
a precast road safety barrier on a number
of projects for National Highways, reducing
waste and enabling quicker installation.
Fit Out and Partnership Housing have
replaced plastic site signage with recyclable
products.
Fit Out has worked with the online platform,
REYOOZ, to recycle unwanted materials and
furniture from its projects. On one project in
London, over £62,000 of goods were donated
to local causes.
The Pallet Loop
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We have built long
s
t
anding
relationship
s wi
th our supp
ly
chain par
tner
s
. T
ogether we are
alway
s look
ing for innovati
ve
ways to ac
hieve qualit
y for our
client
sandf
ullourre
sponsible
business goals. Where needed,
we work w
it
h our suppl
y chain
par
t
ners to help them succeed.
Our supply chain partners play a fundamental
role
in our
resilience and
success
(see page
13).
Our
Morgan Sindall
Supply Chain
Family
of
suppliers and manufacturers, set up nearly
20years
ago, now
has 413
members.
These relationships are critical to ensure that
we can maintain the supply of key materials
for our projects. We have Group-wide
procurement agreements in place that give our
subcontractors access to better pricing. In 2021,
81% of our supplier spend was through Group-
wide
agreements (2020:
72%).
Our subcontractors are monitored for
performance against set criteria and given
feedback either to recognise their achievement
or, if appropriate, help them improve.
Construction, which holds regional award
ceremonies for its supply chain, held a national
event in 2021, presenting awards in nine
categories
including safety,
Perfect Delivery,
social
value and
innovation. Some
divisions
award their subcontractors preferred status
when they perform exceptionally well.
Fit
Out has
319 rms
on
its preferred
subcontractor list, having promoted 29 in
2021, which together account for 61% of the
division’s
total subcontractor
spend. During
the year, Fit Out launched a supply chain
portal for its subcontractors which was built
using their feedback and input. The portal
provides subcontractors with a real-time
overview of how they are performing on their
projects in areas such as health and safety,
risk assessments, environmental aspects and
snags.
We were a founder member of, and continue to
support,
the Supply
Chain Sustainability
School
(SCSS)
which provides
free training
in
topics such
as waste management, energy management,
biodiversity, modern slavery, fairness, inclusion
and respect, mental health and wellbeing, and
community liaison.
In 2021, Construction and Infrastructure,
which each operate an online ‘Academy’ for
employees, extended their learning platforms
to their supply chains, and around 100
subcontractors to date have accessed the
training. Modules cover topics such as carbon,
technical training, and advance learning
required for access to certain sites such as rail.
Construction and Fit Out extended their
employee assistance programmes to their
subcontractors during the year, giving around
6,400 people access to a range of legal and
counselling advisory services.
Procuring loc
ally, from
smaller suppli
ers
We use smaller, local suppliers and
subcontractors where we can.
Of
Fit Out’s
supply chain,
85%
are classied
as
small- to
medium-sized businesses.
On
one particular project in London, the division
sourced 75% of the project value from UK
manufacturers.
On
Partnership Housing’s
browneld
regeneration
(see page
35), 90%
of
the works
are being carried out by employees and
subcontractors who live within 15 miles of the
sites.
Resp
ons
ible b
usin
es
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rateg
y and p
er
form
ance
continued
W
or
k
i
n
g
t
o
g
e
t
h
er
w
i
t
h
o
ur
s
up
p
l
y
c
h
a
in
O
u
r To
t
a
l
Commitments
Protecting
People
Developing
people
Improving the
environment
Working together
with our
supply chain
Enhancing
communities
2021 per
formance
67.8%
of total
invoices
paid
within 30
days
20
25 t
a
rg
et
70%
20
3
0 t
ar
ge
t
80%
Horizon a
mbition
95%
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On its development of the old library site
in
Slough (see
page 53),
29%
of Urban
Regeneration’s project spend was procured
locally while 51% was with small- to medium-
sized
businesses.
On the Moxy Hotel and Residence Inn in
Slough,
delivered by
Construction on
the
same
development, 300
people working
for
regional subcontractors were from the local
area.
Work
Radar
Construction was a founding member of
the Work Radar scheme, launched in 2020,
which connects individual tradespeople,
microbusinesses and social enterprises with
large
construction rms
working on
projects
in
their area. Those who have signed up receive
alerts of local opportunities while contractors
are able to develop local supply chains. The
platform is funded by contractors’ subscriptions
and free for those who register to work. It is
being used by thousands of organisations
and is expected to address issues such as
skills shortages, unemployment and diversity
and to help reduce carbon emissions by
shortening the distances being travelled to
projects.
As at
31 December
2021,
a total
of 129
tradespeople were registered with Work Radar,
175 microbusinesses and 10 social enterprises.
These
gures include
users not
connected
with
the Group.
Pa
ying promptly
We aim to pay our suppliers fairly and have
worked hard to reduce our average days to pay
invoices, in line with the Prompt Payment Code.
Partnership Housing converted more of its
suppliers to electronic invoicing, from 61% of
invoices in 2020 to 76% in 2021, helping to
reduce payment times.
Working tog
ether on
sourcing supplie
s
Our strong supplier relationships have
continued to help us manage the reduced
availability of certain materials. We share our
project delivery requirements early enough
to
allow advance
planning, sucient
lead-in
periods, and for suppliers to build their capacity.
Partnership Housing has, where necessary,
purchased materials a little earlier than it
would normally have done to enable suppliers
to hold stock.
Working together to imp
rove safet
y
On its Lewisham Gateway scheme, Urban
Regeneration worked with its supplier to
design a safety cage around the base of
cranes that would prevent people from
climbing them. A prototype was trialled and
has now been adopted by the supplier as its
new standard for all crane installations.
Working toge
ther on climate chan
ge
In
2021, we
were again
awarded
Supplier
Engagement
leader status
by CDP
for
our action
to measure and reduce environmental risks
within our supply chain.
To help measure and reduce our indirect
Scope3
carbon emissions
(see page
25),
we
are working with our supply chain to encourage
and assist them in measuring, reporting and
reducing their own emissions. In 2021, we rolled
out a new carbon portal to all our suppliers
that enables them to upload their emissions.
To
date, 60
of 147
suppliers
contacted (16%
of Group supplier spend) have submitted data
via the portal. As it was proving challenging to
collect data this way, due to our supply chain
being large, mobile and decentralised, we set
up a collaboration with three Tier 1 contractors
together
with the
SCSS, and
now
have 900
companies registering to provide data, with c200
having already submitted their data.
In
2021, we
held an
event
for our
Supply Chain
Family called ‘Meeting the Challenge’ on the
theme of how we can work together to tackle
climate change. The event brought together
1,000 suppliers, employees and clients at
Silverstone,
and provided
an opportunity
for
our suppliers to meet with our procurement
and management teams, our clients, and each
other to share ideas about new products
and innovations and discuss other industry
challenges such as materials supply. Our
divisions exhibited tools such as Carbon
i
Ca
(see
page 27)
and goldeni
(see
page 47)
and
Construction hosted a stand titled ‘Come and
speak to us about carbon’.
Resp
ons
ible b
usin
es
s st
rateg
y and p
er
form
ance: wor
king to
gethe
r wit
h our sup
pl
y chain
continued
Dr
iv
in
g pro
mpt p
ay
me
nt of s
upp
lie
r
s
Our divisions have reported the following
data under the payment practices
regulations for the six months to
31December
2021.
Construction & Infrastructure, our largest
division by revenue, further improved
and reduced its average time taken to
pay invoices to 25 days from 27, with
98% of invoices paid within 60 days. Fit
Out reported its average time taken to
pay
invoices as
23 days,
with
97% paid
within 60 days, while Partnership Housing
reported
32 days
as its
average
time to
pay, an improvement of one day from
the last reporting period, with 96% of
its invoices being paid within 60 days.
Property
Services showed
an average
of
37
days to
pay invoices,
an
improvement
of one day from the prior reporting period
and with 96% of invoices being paid within
60 days. Urban Regeneration paid 94% of
invoices within 60 days, taking an average
of 26 days to pay. We do not use any
supplier
nance arrangements.
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continued
As a result of the event, Partnership Housing
has installed a solar hybrid generator on
two of its sites to date, and trialled a battery
generator and an electric telehandler.
Together with our supply chain we continuously
explore ways of reducing carbon in our projects.
These include reducing embodied carbon in
materials, consolidating deliveries, reducing
fossil
fuel use
and nding
more
sustainable
construction methods. Our supply chain was
instrumental in providing us with embodied
carbon data for our Carbon
i
Ca tool. We are
currently working with our supply chain on
logistical solutions ahead of the planned
expansion
of low
emission zones
over
the next
two to three years. We have also developed
a
plant alliance
with 32
companies,
which is
assisting in driving the transition to HVO fuel
across the Group.
Construction worked with two suppliers on
the
Summerdown special
educational needs
school project in Eastbourne to source a
lower-carbon concrete. The alternative used
contains 70% ‘ground granulated blast furnace
slag’, recycled from the iron manufacturing
process, which is as strong and durable as
concrete but reduced the project’s carbon by
more than 52 tonnes. The Carbon
i
Ca tool was
used to calculate the carbon savings.
Construction has developed a ‘carbon
maturity framework’ to rank the progress of
supply chain partners in reducing their carbon
emissions.
Level 1
indicates that
key
sta will
have received some training on carbon in
the
built environment,
while Level5
signies
science-based carbon-reduction targets in
place and circular economy thinking. The
rankings are designed not to reward or
penalise, but to identify where we can help
and advise subcontractors on improving their
own carbon performance.
During
Supply Chain
Carbon Week
in
September,
Construction circulated
a digital
newsletter to 2,955 individuals within the
Group’s
Supply Chain
Family, informing
them of the carbon maturity framework and
the kind of data we will be requesting from
them
to help
us report
our
indirect Scope
3
emissions; how they can support us in our
10-tonne challenge; sustainability e-learning
modules available through the new online
supply
chain Academy
(see page32);
an
invitation to sign up to the Group’s carbon
pledge, adapted for the supply chain to
help them achieve Level 1 of the maturity
framework; and videos showing examples
of suppliers who have innovated to reduce
carbon.
Fit Out hosted a webinar for manufacturers
setting out practical steps for obtaining
environmental
certicates for
their products.
The live virtual event was addressed by three
industry experts and attended by around 70
people, with more requesting a copy of the
recording afterwards. The event generated
signicant
interest within
Fit Out’s
supply
chain
and the division is planning further sessions
on the subject in 2022.
Partnership Housing developed written
guidance
for its
small- to
medium-sized
supply
chain partners on what will be expected of
them as the industry moves towards net
zero.
The guidance
includes: a
description
of the Group’s science-based targets and
the data that our supply chain will need to
record; a ‘plant charter’ that sets out minimum
standards for non-road mobile machinery; a
recommendation to use HVO fuel; and tips on
reducing waste.
Eco
-
frie
ndly site facilitie
s
Sometimes
hundreds of
people may
be
working on
a large
infrastructure
site, often
throughout
the
night. Having
access to
modern
welfare units
with a
kitchen,
canteen, oce,
hot water
and
hygienic sanitary facilities is vital. Infrastructure worked with supplier Welfare Hire, to introduce
next generation mobile welfare units. Replacing traditional models, which predominantly run on
generators, these innovative eco-friendly facilities use lithium battery and solar hybrid power to
reduce noise pollution, fuel use and carbon emissions. The units have the capability to save more
than 1,000kg of CO
2
e per month.
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We want to leave a positi
ve le
gac
y by
improv
ing the buil
t env
ironmen
t and
creating so
cial and economic va
lue
for the communit
ies w
here we wor
k.
Through our core activities of construction and
regeneration, we deliver new, improved and
more
ecient housing,
workplaces, education
facilities and national infrastructure, and
regenerate towns and cities. In addition, we
contribute to local communities by procuring
locally, providing training and work opportunities,
and supporting community projects and
charities.
During
2021, our
Group social
value
panel,
made up of representatives from across the
divisions, presented divisional social value
strategies to our Group director of sustainability
and procurement for inclusion in the Group
social
value approach
(see page
16),
organised
the delivery of virtual work experience and met
to
share best
practice such
as
Property Services’
workstream
for identifying
domestic abuse
(see
page 20).
Regenerating town
s and citie
s
Our regeneration schemes revive town
centres with new housing, leisure, work and
retail facilities, and landscaped open spaces,
with
a focus
on developing
browneld
sites
and underutilised public-owned land. Urban
Regeneration works with local communities,
local authorities and other stakeholders to
repurpose each town centre with the right mix
of uses according to its historical strengths and
characteristics. This is particularly important
as town centres are becoming less dominated
by retail, a trend that has been accelerated
by the Covid pandemic. Local economies
are stimulated as a regeneration scheme
progresses, through local procurement and the
attraction of people and businesses to the area.
The
completion of
the rst
phase
of Urban
Regeneration’s development at Hale Wharf
in
Tottenham (see
page 53)
has
transformed
an underused waterside area to create
249 mixed-tenure new homes with public
spaces and walking routes. A new bridge
has improved movement for local residents
between the high street and Lea Valley,
provides easier access to transport routes and
creates attractive canal-side public realm.
Partnership Housing has acquired four
browneld
sites in
the West
Midlands
to deliver 709 multi-tenure homes, 48%
aordable,
and high-quality
open public
space. The division has secured £10.5m of
browneld
funding from
the West
Midlands
Combined Authority and obtained full
planning consent for all sites.
Partnership
Housing built
3,130 new
homes
in
2021 and refurbished c7,150.
Local ap
prentices
hips
, work
and training oppor
tunities
We endeavour to develop a genuine
understanding of communities where we work
that are in particular need of support. We run
social enterprises in these areas that provide job
and training opportunities for local young people
and disadvantaged groups, including people
who have been out of work for long periods of
time
and ex-oenders.
Morgan
Sindall All
Together Cumbria
is
a
community interest company, owned by
Construction & Infrastructure, that works with
recruitment specialists to connect local people
in Cumbria looking for work with businesses
that need their skills.
O
u
r
To
t
a
l
Commitments
Protecting
People
Developing
people
Improving the
environment
Working together
with our
supply chain
Enhancing
communities
E
nh
a
n
c
i
ng
c
o
mmu
n
i
t
i
e
s
2021 per
formance
71p
of social value per £1 spent
on 112 projects
20
25 t
a
rg
et
85p
per £1 spent
20
3
0 t
ar
ge
t
90p
per £1 spent
Horizon a
mbition
£1.01
per £1 spent
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continued
Property
Services oers
training in
trades
and employability skills, structured work
experience, pre-apprenticeships and
employment opportunities to local residents
of its social housing schemes. To date, 100
residents in Basildon have completed the
‘BasWorx’ training initiative, 41 residents in
Westminster have completed the ‘CityFutures
Work to Learn’ programme and 12 residents
have
taken part
in Property
Services’
‘employability academy’ for college students in
Yorkshire.
In addition to the social enterprises:
Construction
oers dedicated
learning
facilities called ‘Knowledge Quads’ on its
projects, where requested by the client.
The Quads focus on four key areas: ‘skills’,
‘education’, ‘employment’ and ‘discovery’. The
success
of the
Knowledge Quad
on
The Spine
project
in Liverpool
(see page
30)
has led
to
new facilities being established on projects at
Salford
University and
Kingsbrook Secondary
School
in Buckinghamshire.
In
Scotland, Construction
has joined
with
Tigers
(Training Initiatives
Generating Eective
Results
Scotland) to
create an
apprenticeship
programme for local young people, some of
whom have experienced multiple barriers
into employment. The programme includes
a mix of classroom learning and onsite
training and provides technical, digital and
sustainability knowledge as well as personal
and
employability skills.
Across South
Ayrshire
and
Glasgow, 31
candidates have
completed
their training and been employed by the
division as apprentices.
Construction
and Property
Services have
joined
the government’s
Kickstart Scheme,
where employers are given funding to
create six-month work placements for 16- to
24-year-olds on Universal Credit who are at
risk
of long-term
unemployment. During
the
year, Construction provided 10 placements
and
Property Services
provided 20.
Roles
have varied between marketing, construction,
administration, customer service, gardening
and property maintenance.
Urban Regeneration launched a
comprehensive sustainable development
strategy in 2021 aimed at improving the life
chances of people who live in the areas it
develops. At the outset of every project, the
division, in conjunction with local community
groups and the local authority, develops a
detailed social value strategy, setting targets
based on meeting local needs. The strategy
includes
oering training,
apprenticeship
and employment opportunities to the local
community including those out of full-time
work or education. The division works closely
with its supply chain to help deliver the
strategy, commits to a project charter and
monitors and reports on performance using
the
social value
bank (see
page
37).
Working with s
chool
s and colleges
We work closely with schools, colleges and
universities to encourage young people to
consider careers in construction, to help
increase diversity and address potential skills
shortages in the industry. Our activities range
from
mentoring, STEM
(science, technology,
engineering and mathematics) activities and
workshops to career talks, site visits and work
experience.
On
its Repton
project in
Norfolk
(see page51),
Partnership Housing has worked with a non-
prot
education trust
(The Wensum
Trust),
to sponsor two students from the local Acle
Academy which will lead to apprenticeships on
the scheme in 2022. In the longer term, the
division will be providing 11- to 16-year-olds with
on-site learning. The division has also organised
career talks for young people on next steps after
completing
their GCSEs
and virtual
or
on-site
work experience.
The Group has to date entered 42 formal
partnerships with schools – 21 through
Construction, nine through Infrastructure,
and 12 through Partnership Housing – that
pledge to support pupils with learning and
development so that they make career choices
that are right for them, the industry and the local
community. The partnerships commit to the
Gatsby benchmarks of good career guidance.
Gatsby is a charitable foundation committed to
strengthening the UK’s science and engineering
skills. A template of the schools partnership
agreement was rolled out across the Group
in2021.
Social
distancing restrictions
introduced as
a
result of the pandemic have not only interrupted
children’s education but also threatened
teenagers’ access to work experience. Our
divisions have used digital technology to
overcome this challenge.
Construction,
Infrastructure, Property
Services
and Partnership Housing have worked with
Speakers
for Schools
to oer
virtual
work
experience
(VWEx) programmes.
Speakers
for
Schools is
a charity
that
aims to
give state
school students the same access to top
speakers and work experience as those from
fee-paying schools. Using Google Classroom,
the week-long placements task students with
projects such as designing a building, with
experts from the divisions providing guidance.
The students can develop skills such as
maths, digital design, science, English, art and
collaborative working. In 2021, 716 students
took part, up from 204 in 2020.
Property
Services worked
with the
Construction Youth Trust and Fulham Boys
School
in the
year on
the
Trust’s ‘Building
Brighter Futures’ programme, which aims
to help young people discover construction
and built environment professions that suit
their skills and interests. Volunteers from
Property
Services ran
virtual sessions
for
a
group of Year 9 students, introducing them to
the range of careers available in the industry;
challenging them to design a wellbeing space
in their school for students and teachers;
and giving guidance on budget, location and
sourcing materials. The students presented
their proposals to the school and Property
Services
and a
selection of
ideas
were
implemented.
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continued
Communit
y proje
c
ts an
d charities
Our divisions regularly support local charities
and community schemes while working on their
projects.
Partnership Housing planted 100 trees at its
Ymyl Yr Afon housing development in Merthyr
Vale and invited local primary school children
to
help plant
the nal
30.
The trees
were
planted as part of the Queen’s Green Canopy
initiative to mark the Platinum Jubilee in 2022.
The division also donated a bench, which
was installed on a polished concrete slab, for
residents and the wider community to enjoy.
We run corporate volunteering schemes where
employees are given a day’s paid leave per
year to volunteer with a registered charity. The
divisions support requests for charity donations
and
oer nancial
contributions and
goods
in
kind, such as refurbishing community facilities
or volunteering on allotments and community
gardens. More than £124,000 was raised for or
donated to charities in the year by the Group.
Addressing local needs
Property
Services, which
carries out
repairs
and
maintenance to social housing, is well-placed
to help address local needs. The division runs
community initiatives that include:
Training engineers to detect signs of
vulnerability
such as
domestic abuse
(see
page 20), poor living conditions, overcrowding,
hoarding, mental ill health, physical disability,
vulnerable children or language barriers. The
engineers
relay signicant
issues to
the
local
authority so that they can organise help. In
2021, the engineers reported c700 cases of
vulnerability.
Virtual energy workshops for social housing
tenants, giving participants guidance on
making
their homes
more energy
ecient
and
paying energy bills and providing them with
access to the government’s Energy Redress
Scheme;
during the
winter of
2020–2021,
the
division supported
371 households
with
vouchers
worth c£34,000
in total
to
help ght
fuel poverty.
A ‘digital inclusion’ scheme for residents in
sheltered housing schemes, to give them the
skills they need to keep in touch with friends
and family online as well as doing shopping
and other tasks. With the help of two of the
division’s
Kickstart trainees,
the rst
session
took place in November in Waltham Forest
and will be rolled out to other locations in
2022.
Property
Services’ new
goldeni software
that
helps keep social housing on its schemes
healthy, legally compliant and more energy
ecient
(see page
47).
Measuring th
e social value we create
We use a social value bank tool, developed with
Simetrica-Jacobs
and aligned
to HM
Treasury’s
Green Book, to measure in monetary terms
the social, economic and environmental value
we add to local communities. In 2021, we used
the bank on 112 projects and it calculated that
we contributed 71p of social value for every £1
spent. Examples of social value delivered on
these projects included:
545 apprenticeships and training
opportunities for young people;
643
job opportunities
for unemployed
people;
407 job opportunities for local people;
7,979 hours supporting schools; and
9,620 hours community volunteering.
The social value bank has been adapted in the
year to encourage robust whole life assessment
and reduction of carbon and the adoption of
Carbon
i
Ca.
Property
Services uses
the ‘Wellbeing
Valuation
Approach’
of external
verier HACT
(Housing
Association Charitable Trust) to calculate
its social value impact. The HACT valuation
conrmed
that between
April 2020
and
March
2021
(HACT’s reporting
cycle), the
division
achieved over £1.8m of social value, with every
£1 spent generating £12 in social value across its
contracts.
During
the rst
year of
phase
two of
Urban Regeneration’s Lewisham Gateway
development, the division used a tool called
the
Social Value
Portal to
measure
over £61m
of social and economic value generated for
the local community. Key impacts included
£52m
spent locally;
93,820 car
miles
saved; 40
hours’
career support
sessions; 23
weeks’
work
experience; and £7,148 community support.
We
have been
working with
Simetrica-Jacobs
to
adapt our social value bank so that it is tailored
to our regeneration divisions. The new version of
the social value bank is being piloted by Urban
Regeneration and is expected to be rolled out in
the third quarter of 2022.
PropertyServicesengineer
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The Cat
al
ys
t Programme
Construction has developed a new initiative to
optimise its social value activity, support carbon
reduction and leave a positive lasting impact for
communities. The programme’s goals are to:
reduce harm to the planet;
improve people’s life chances; and
identify the value of Construction’s actions for
individuals and organisations.
To achieve these objectives, the programme will
introduce:
Catalyst Materials Marketplace, a web-based
platform to redistribute redundant materials
for use by local communities and other
projects;
Catalyst Outreach, a scheme that will
use
Work Radar
(see page
33)
to identify
microbusinesses and social enterprises to
work with the division on its projects and
provide them with access to upskilling support
so that they can meet minimum standards
and secure work;
The Catalyst Knowledge Quad, which will
provide multi-purposed bases on projects
providing training, education and employment
(see
page 36
for information
on
Knowledge
Quads already in place on Construction
projects); and
Catalyst Community, of digital alumni: people
who
have already
beneted from
the
division’s
social value, employment and training activity
provided through its projects and will provide
skills and employment opportunities to new
participants.
The programme is scheduled for launch in the
second quarter of 2022.
Hackney Brit
annia
Construction put social value at the heart of two projects completed for Hackney Council in 2021.
A new secondary school and leisure centre were delivered at Hackney Britannia, a mixed-use
community
development that
forms part
of
the council’s
plans to
regenerate
the area.
During
the
project, the
team became
involved
in the
Shoreditch Trust
charity,
events to
support local
residents such as an ‘Elders Feast’, school careers talks and job fairs. They also worked with
Women into Construction to support 15 local women with mentoring, employment skills and
CVsupport.
£78m
social value
34
apprentices
57
new jobs created
800+
volunteer hours
Strategic report
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Financial and op
erating rev
iew
Financial pe
r
fo
rmance
Revenue for the year increased 6% to £3,213m
(2020:
£3,034m), with
adjusted* operating
prot
increasing 92% to £131.3m (2020: £68.5m).
This resulted in an adjusted* operating margin
of 4.1%, an increase of 180bps compared to
the prior year (2020: 2.3%). Reported operating
prot
was up
98% to
£129.8m
(2020: £65.4m).
The
net nance
expense decreased
to
£3.6m
(2020: £4.6m) primarily due to the Group
drawing down on its committed bank facilities
as a precautionary measure in the prior year,
during the early stages of the pandemic.
Adjusted*
prot before
tax was
£127.7m,
up
100% (2020: £63.9m).
The
tax charge
for the
year
is £28.3m,
which
equated
to an
eective tax
rate
of 22.4%
and
was higher than the UK statutory rate of 19%
due
to the
eect of
changing
the tax
rate used
to
calculate deferred
tax to
account
for the
future increase in the UK statutory rate to 25%
from
1 April
2023. The
adjusted
tax charge
is
£23.5m (2020: £14.5m). Almost all of the Group’s
operations
and prots
are in
the
UK, and
we
maintain an open and constructive working
relationship with HMRC.
The adjusted* earnings per share increased
108% to 226.0p (2020: 108.6p). Reported basic
earnings per share was 212.4p (2020: 99.8p).
The total dividend for the year increased 51% to
92.0p per share (2020: 61.0p).
Details on performance by division are shown
on pages 41 to 54.
Financing fa
cilities
During 2021, the Group increased the size of its
main revolving credit facility by £15m to £165m,
and (with the agreement of the lending banks)
exercised
an option
to extend
the
maturity
date of the facility to 2024. Together with an
additional £15m revolving credit facility agreed
during the year, which also matures in 2024,
the Group has maintained a total of £180m
of available bank facilities. No drawings on the
facilities were made during the year. The banking
facilities
are subject
to nancial
covenants,
all of
which were met throughout the year.
In the normal course of our business, we
arrange
for nancial
institutions to
provide
client guarantees (bonds) to provide additional
assurance that the client will have the ability
for the works to be carried out. We pay a
fee and provide a counter-indemnity to the
nancial
institutions for
issuing the
bonds.
As
at
31December 2021,
contract bonds
in
issue
under
uncommitted facilities
covered £137.2m
(2020: £124.6m) of our contract commitments.
Further information on the Group’s capital
management
strategy and
use of
nancial
instruments is given in note 25 to the
consolidated
nancial statements.
T
a
x strateg
y
The
Group’s tax
strategy, which
is
approved by
the Board (see page 108), is published on our
website at morgansindall.com.
A
s
t
r
o
n
g
p
e
r
f
o
r
m
a
nc
e
acr
o
s
s
t
he
G
r
ou
p
2021
2020
Revenue
£3,213m
£3,034m
Operating
prot –
adjusted*
£131.3m
£68.5m
Operating
prot –
reported
£129.8m
£65.4m
Prot
before tax
– adjusted*
£127.7m
£63.9m
Prot
before tax
– reported
£126.2m
£60.8m
Earnings
per share
– adjusted*
226.0p
108.6p
Basic
earnings per
share –
reported
212.4p
99.8p
Year-end net cash*
£358.0m
£332.8m
Average daily net cash*
£291.4m
£180.7m
Total dividend per share
92.0p
61.0p
*
See note
2 to
the
consolidated nancial
statements
for
alternative performance
measure
denitions and
reconciliations.
Stev
e Crum
me
t
t
Finance Director
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Financ
ial and op
erati
ng rev
iew
continued
Secure
d work
load
The Group’s secured workload
1
at 31 December 2021 was £8,614m, an increase of 4% on the prior
year end (2020: £8,290m). The divisional split is shown below.
2021
£m
2020
£m
Change
%
Construction & Infrastructure
2,715
2,537
+7%
Fit Out
897
410
+119%
Property Services
945
970
-3%
Partnership Housing
1,498
1,445
+4%
Urban Regeneration
2,574
2,929
-12%
Inter-divisional orders
(15)
(1)
Total
8,614
8,290
+4%
1
Secured workload is the sum of the committed order book, the framework order book and (for the regeneration divisions
only) the Group’s share of the gross development value of secured schemes (including the development value of open
market housing schemes). The committed order book represents the Group’s share of future revenue that will be derived
from signed
contracts
or
letters of
intent.
The framework
order
book
represents the
Group’s
expected share
of
revenue
from
the frameworks
on
which
the Group
has
been appointed.
This
excludes
prospects where
conrmation
has been
received
as
preferred bidder only, with no formal contract or letter of intent in place. Divisional comparatives for Partnership Housing and
Urban Regeneration
have
been
restated to
reect
the reorganisation
of
the
Investments division.
Net ca
sh
Operating
cash ow
in the
year
was an
inow of
£117.6m,
after reducing
the capital
employed
invested in regeneration activities by £10m (Partnership Housing: £10m and Urban Regeneration:
£23m).
The net
cash inow
for
the year
was £25.2m,
resulting
in closing
net cash
of
£358.0m
(2020:
£332.8m).
The
average daily
net cash*
for
the year
increased by
£110.7m
to £291.4m
(2020: £180.7m),
providing
signicant
balance sheet
strength and
competitive
advantage.
Net work
ing capi
tal
Net
working capital
is dened
as
‘inventories plus
trade and
other
receivables (including
contract
assets), less trade and other payables (including contract liabilities) adjusted’. Net working capital has
increased by £51.9m to (£153.6m) as shown below:
2021
£m
2020
1
£m
Change
£m
Inventories
288.5
294.2
-5.7
Trade and other receivables
2
559.9
405.1
+154.8
Trade and other payables
3
(1,002.0)
(904.8)
-97.2
Net working capital
(153.6)
(205.5)
+51.9
1
Includes the
restatement to
correct
a
historic error
(see
basis of
preparation
on
page 174).
2
Adjusted to
exclude capitalised
arrangement
fees
of £1.0m
(2020:
£1.3m).
3
Adjusted to
exclude accrued
interest
of
£0.5m (2020:
£0.4m).
1 Adjusted
.
2
‘Non-cash adjustments’
include
depreciation
£20.5m, movement
of
shared equity
loans
receivable
£1.9m and
share
option
expense £12.1m;
less
share
of equity
accounted
joint ventures
£5.4m.
3
Includes repayment
of
lease
liabilities £15.2m,
purchase
of property,
plant
and
equipment £6.7m
and
purchase of
intangible
xed assets
£1.3m;
less
proceeds on
disposal
of property,
plant
and
equipment £1.4m.
4 Includes provision movements £26.4m, impairment of investments £1.2m, shared equity redemptions £2.1m, proceeds on
disposal of
investment
properties
£1.9m, interest
from
joint ventures
£0.6m;
less
gain on
disposal
of property,
plant
and
equipment £0.5m.
0
50
100
150
200
Cash
flow
(£m)
Operating
profit
1
Non-cash
adjustments
2
Net capex
and finance
leases
3
Other
working
capital
Other
4
Operating
cash flow
Net interest
(non-joint
venture)
Tax
Free
cash flow
131.3
29.1
-21.8
-52.7
31.7
117.6
-1.7
-28.3
87.6
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C
o
n
s
tr
u
c
ti
o
n
&
I
n
f
r
a
s
tr
u
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t
u
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e
Financ
ial and op
erati
ng rev
iew
continued
Const
ruc
tion & Inf
ras
tr
uc
t
ure
deliv
ered a ver
y s
t
rong set of
result
s in th
e year
, wi
th subs
t
antial
margin and prot grow
th
.
Although revenue reduced to £1,520m (2020:
£1,637m),
operating prot
grew 63%
up
to
£58.1m
(2020: £35.7m)
with the
operating
margin increasing to 3.8%, up 160bps on the
prior year (2020: 2.2%). Both Construction and
Infrastructure (including Design)
1
contributed
strongly to this overall result.
Of the divisional revenue split by type of
activity, Construction accounted for 46% of
divisional revenue at £694m, with 54% being
Infrastructure
1
at £826m.
The division also performed well in terms of
winning work and growing its future workload.
The secured order book at the year end was
£2,715m,
up 7%
compared to
the
prior year.
1 Design results are reported within Infrastructure.
C
on
s
t
r
uc
t
i
on
Construction’s revenue increased 4% to £694m
(2020:
£670m) while
operating prot
increased
167%
to £21.9m
(2020: £8.2m).
The
focus
on improved operational delivery, disciplined
contract selectivity and risk management
over many years, together with a favourable
project
mix in
the year,
all
contributed towards
increasing its operating margin to 3.2% (2020:
1.2%).
The rst
half margin
was
2.4%, which
increased to 3.9% in the second half primarily
due to a higher weighting of project completions
in the second half, particularly projects in the
education sector.
In addition, Construction had a very strong
year of winning work. The order book at the
year end was £810m, an increase of 58% on
the prior year (2020: £512m) and up 25% from
the half-year position (HY 2021: £648m). Of
the
total, £599m
(74% by
value)
is secured
for
2022. Construction also had c£540m of work
at preferred bidder stage at the year end.
In
line with
the preferred
risk
prole of
work
undertaken, c99% of the order book value is
derived through either negotiated, framework or
two-stage bidding procurement processes.
In education, Construction’s largest sector,
project wins included: a £61m project for the
University of Hertfordshire to build a new
home for its School of Physics, Engineering
and
Computer Science;
Maybole Community
Campus, a new £54m primary and secondary
education
campus in
South Ayreshire;
a
£23m
contract to build a new combined primary
school campus (Carnbroe and Sikeside) in North
Lanarkshire;
and the
new £31m
Glebe
Farm
School in Milton Keynes.
The
division also
won projects
to
expand
Horsforth School in Leeds (£5m) which will
create 365 new places, and Chantry Academy in
Ipswich (£3m) which will create 150 new places
and a facility for children with special educational
needs and/or disability (SEND). In addition,
Construction was appointed to deliver a number
of dedicated SEND schools, including the £18m
Freemantle
secondary school
in Woking,
Surrey;
the
£16.1m Summerdown
School in
Eastbourne;
and the £9.8m Salmon’s Brook Special School
in
Eneld for
children with
social,
emotional and
mental health needs.
Re
v
e
n
u
e (
£
m)
-7%
from 2020, +2% from 2019
Op
era
tin
g
pro
t (£m)
+63%
from 2020, +80% from 2019
Operating margin (%
)
+160bps
from 2020, +160bps from 2019
21
20
19
1,520
1,637
1,486
21
20
19
58.1
35.7
32.3
21
20
19
3.8
2.2
2.2
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Completions
in the
year included
the
£7.6m
Castleward Spencer Academy primary school
in Derby, delivered via the public sector
procurement
authority, SCAPE;
and the
£14.2m
Wintringham Primary Academy in St Neots,
Cambridgeshire.
In healthcare, Construction has been selected
to deliver the initial works as part of the wider
redevelopment of the North Manchester
General Hospital in Crumpsall, one of the
40 new hospitals pledged under the UK
government’s health infrastructure plan, and
appointed to build a new £13m facility for the
London Institute of Healthcare Engineering at
St Thomas’ campus, London.
In other sectors, project wins included: the
£107m
Manor Road
Quarter scheme
in
Canning
Town, London,
a 34-storey,
mixed-
use development of 355 apartments (50%
aordable)
and 8,000
sq ft
of
commercial and
retail space, being delivered through Urban
Regeneration’s
English Cities
Fund joint
venture;
and a c£18m manufacturing facility in East
Sussex
for GW
Pharmaceuticals. Completions
included
a £48m,
nine-storey Moxy
Hotel
and
Residence Inn in Slough (both Marriott hotels),
delivered through Urban Regeneration’s Slough
Urban Renewal joint venture, which opened
three
months ahead
of schedule;
and
Hackney
Britannia Leisure Centre (see page 38), set over
four storeys and featuring rooftop sports pitches
to make the best use of space.
Framework appointments included: the SCAPE
Construction frameworks to deliver education,
healthcare, housing and government building
projects across England, Wales and Scotland,
with a cumulative value of £5bn over four
years (two lots in England and Wales, valued
up
to £7.5m
and £7.5m–£75m,
and
two lots
in
Scotland,
valued up
to and
over
£7.5m); Lots
4
(£7m–£14m),
5 (£14m–£25m)
and 6
(£25m+)
on
the new £1.6bn Public Buildings Construction
and Infrastructure (PB3) framework run by
public
sector procurement
organisation, LCH;
and
the medium
band (£6m–£12m)
of
the
Department for Education’s four-year, £5bn
construction framework.
I
n
f
ras
t
r
u
c
t
u
r
e
Although Infrastructure’s revenue was 15%
lower
at £826m
(2020: £967m)
primarily
due
to the timing of its project workload, operating
prot
increased signicantly,
up 32%
to
£36.2m
(2020:
£27.5m). This
resulted in
an
operating
margin of 4.4%, up from 2.8% in the prior year
and was driven by strong operational delivery on
site and by the type of work.
The
rst half
margin was
3.3%,
while this
increased
to 5.5%
in the
second
half, beneting
from
work mix,
eciencies and
nal
account
settlements on a number of projects.
Financial and operating review: Cons
truc
tion & Infrastr
uc
ture
continued
Sus
tainabili
t
y at its core
Wintringham
Primary Academy
in Cambridgeshire
was
designed for
maximum contact
with
the
outdoors. Each
classroom faces
a
central courtyard
containing a
planted
‘grove’, providing
daylight from both sides. Vegetables and herbs are grown in the grove and made into soup, as
part of an approach that encourages children to love the environment. The school is built of
cross-laminated timber instead of steel, which is both sustainable and quicker to install.
“This school already has a fantastic impact on the children. It encourages them to learn and it
inspires them. The children are in awe of it but the teachers made it beautiful as well, because the
school has to have a heart, it has to have an identity and it’s really important that we the people
who work in it, give it that heart, and give it that identity. Morgan Sindall were really supportive
and
they involved
us all
the
way through.
The process
meant
we were
incredibly excited
about
it,
we could talk to our children about it as it was happening and it allowed them to become involved
and
then it
becomes much
more
yours. The
experience just
enhanced
what we
have already.”
Tr
a
c
y
B
r
y
d
e
n
,
Head Teacher
4
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Financial and operating review: Cons
truc
tion & Infrastr
uc
ture
continued
Infrastructure’s order book at the year end
was £1,905m, down 6% on the previous year
end (2020: £2,025m), however was up 1% on
the half year position (HY 2021: £1,894m). In
excess
of 90%
of the
value
of the
order book
is
derived through frameworks, consistent with the
strategic focus on long-term workstreams from
its clients.
The focus for the division remained on its key
sectors of highways, rail, nuclear, energy and
water.
In highways, work won included the
appointment by National Highways (formerly
Highways England) to the Concrete Roads
Programme
– Reconstruction
Works Framework,
a four-year programme worth c£130m to
repair or replace the concrete surface of
motorways
or major
A roads
in
England; and
the
detailed design for the Carlisle Southern Link
Road by Cumbria County Council. In addition,
Infrastructure was awarded a place on National
Highways’ new Scheme Delivery Framework,
a
£3.6bn, six-year
programme to
deliver
vital
renewals
to maintain
safety and
reliability;
the division was selected for the General Civil
Engineering Central Region. Work completed in
the year on enhancements to the M1 junction
23 and A512 scheme in Loughborough to
improve journey times and safety for motorists,
delivered for Leicestershire County Council
through the Midlands Highways Alliance.
In rail, Infrastructure secured a position as
one of three partners on Lot 1 of Transport
for London’s London Rail Infrastructure
Improvement Framework and was subsequently
awarded early contractor involvement works for
Surrey
Quays and
Surrey Canal
Road
stations. In
addition, the division was appointed as principal
contractor on Northumberland County Council’s
framework
to build
six new
stations
on the
Northumberland Line. The initial part of the
Northumberland project, which aims to restore
regular passenger trains between Ashington
and Newcastle by 2024, will see the conclusion
of comprehensive design and delivery plans for
the stations and bridges. Subject to government
conrmation
of funding
and approval
of
the
Transport and Works Act Order application, the
framework provides for the division to undertake
£40m of construction work, set to start in early
2022. Other wins included a £28m contract for
Network
Rail to
construct an
extension
to the
rockfall shelter over the railway line between
Dawlish
and Holcombe
in Devon;
a
c£9m
project to upgrade Maidenhead and Slough
Crossrail stations as part of Network Rail’s CP6
framework,
Western region;
and c£9m
of
station
upgrade and access-for-all schemes via the
Merseyrail framework. Work completed on: the
remodelling
of London
King’s Cross
station;
the
£160m Werrington Grade Separation project for
Network
Rail to
increase passenger
capacity;
and
the construction of the new Whitechapel Station
for Crossrail, including a new ticket hall and step-
free access.
In nuclear, the division secured a third term
extension
to the
Infrastructure Strategic
Alliance
for
Sellaeld Ltd
and continued
to
deliver
the £1.6bn Programme and Project Partners
contract, a 20-year programme to clean up the
legacy of early operations at Europe’s largest
nuclear site. Infrastructure also continued
its work on the 10-year Clyde Commercial
Framework for the Defence Infrastructure
Organisation.
In energy, National Grid awarded Infrastructure
a place on its RIIO-2 electricity construction EPC
(Engineer, Procure and Construct) framework
which involves the construction, refurbishment
and decommissioning of overhead line and
underground cable systems operating between
33kV to 400kV across its transmission network.
The
framework, expected
to be
worth
up to
£1.5bn,
is for
an initial
term
of ve
years with
an
option for
a two-year
extension.
The division
secured additional work as part of the Scottish &
Southern Electricity Networks (SSEN) overhead
lines framework. Work completed on a £31.9m
project in Cairngorms National Park to replace
overhead lines and transmission towers with
underground cables between Boat of Garten
and
Nethy Bridge,
the rst
project
in SSEN’s
VISTA (Visual Impact of Scottish Transmission
Assets) initiative.
Bark
ing
, R
iver
side
Infrastructure, working in joint venture, is
helping to connect communities in East
London
through the
4.5km extension
of
the
Gospel Oak to Barking Overground line east
of Barking Station. The line will terminate
at a new elevated station in the main
square of the Barking Riverside residential
development. This infrastructure will
serve 10,800 homes being built at Barking
Riverside and provide the new community
with transport links to Central London. The
works include a 1.5km viaduct, terminus
station and new railway line, as well as
modications
to existing
infrastructure.
The station will be a focal point of the local
community, with retail space and communal
areas. During 2021, work completed on the
viaduct, platforms, electrical systems, and
the station’s glazed façade. The line is due to
open to passengers in 2022.
4
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Financial and operating review: Cons
truc
tion & Infrastr
uc
ture
continued
In water, work continued as part of the long-
term
AMP7 framework
with Welsh
Water
and
on
the Thames
Tideway ‘super
sewer’
project
to
expand London’s
sewer network
and
help
prevent pollution in the Thames.
In the BakerHicks design business, projects
underway include: the provision of principal
designer advisory services on the Medicines
Manufacturing Innovation Centre (MMIC) in
Renfrewshire;
a new
advanced manufacturing
facility
in Maccleseld
to enable
AstraZeneca
to
meet demand
for its
cancer
drug Zoladex;
an
extension to
GlaxoSmithKline’s Aseptic
Manufacturing
Facility in
Barnard Castle;
the
provision of construction and design support
for Boehringer Ingelheim’s new biologicals
development
centre in
Biberach, Germany;
civil and structural engineering services for the
£42.5m Allander Health and Leisure Centre in
Bearsden,
East Dunbartonshire;
and the
design
of a new substation in Barking which will power
10,800 homes, local businesses and a new rail
station.
Divi
sional outlook
The focus for Construction & Infrastructure
remains on contract selectivity and risk
management, operational delivery and
developing long-term relationships with its
clients.
The new medium-term target for Construction
has been upgraded, with a target of increasing
revenue to £1bn per year while maintaining
its operating margin within the previous range
of
2.5%–3.0% per
year. Progress
towards
this
target
is expected
in 2022
with
its margin
moving back to within its target range.
Infrastructure’s new and upgraded medium-
term target is to achieve revenue of £1bn per
year while delivering an operating margin within
the
range of
3.5%–4.0% per
year.
Progress
towards
this target
is expected
in
2022, although
due to the timing and nature of the business’s
project workload for the year, its margin is
expected
to move
back to
within
its target
range,
o
slightly lower
revenue compared
to
2021.
Infras
tr
uc
ture
Upgrade
d medium
-
term t
arget
s
£1bn
Revenue
3.5%–4.0%
Operating marg
in
Route map
Long-term relationships and workstreams
Continuous concentration on operational
eciency
JVs only when clear competitive
advantage
Market conditions
Fairly strong market for infrastructure
Clients increasingly value strong
relationships and partnerships
Stable market for our design business
Constr
uc
tion
Upgrade
d medium
-
term t
arget
s
£1bn
Revenue
2.5%–3.0%
Operating marg
in
Route map
Maintain margin quality over volume
Continue disciplined risk management
Use enhanced geographical presence to
grow market share
Market conditions
Balance sheet more important to clients
Cost and conversion risk presented by
ination
and resource
availability, which
are being managed
Social, environmental and carbon
agendas remain high
Increased framework opportunities
4
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Financ
ial and op
erati
ng rev
iew
continued
Fi
t Out de
livere
d an excellent
per
forman
ce in the year
, dri
ven
by consis
tent
l
y s
trong p
rojec
t
deliv
er
y
, a continued foc
us on
enhanced customer exper
ience
and a
high-
qualit
y worklo
ad.
With
revenue increasing
14% to
£795m
(2020:
£700m),
operating prot
increased 38%
to
£44.2m, a record result for the division. The
operating margin of 5.6% was up 100bps on
prior year (2020: 4.6%).
As with previous years, there was a second half
weighting to the operating margin (H1 2021:
5.1%, H2 2021: 6.0%) which was driven by
project
mix and
by the
successful
completion of
a number of contracts falling towards the end of
the year.
As
expected, the
proportion of
revenue
derived
from
the commercial
oce sector
reverted
back
to more
normal levels,
contributing
76%
of revenue (2020: 66%), with work in the public
sector and for local authorities dropping back
to 16% of revenue (2020: 25%). The higher
education and retail banking sectors made up
the remainder as usual.
King
sl
ey
Napley
, London
–
fas
t-
track
t
o
ut
Overbury
transformed 55,000
sq ft
of
shell and
core across
six
oors into
a modern,
activity-
based
working environment
that brought
together
three oces
into one
unied
workforce
for
leading UK
law rm,
Kingsley
Napley. To
meet the
client’s
crucial move-in
date, the
team
fast-tracked the
t out
by
working with
their consultants
and
supply chain
during a
10-week preconstruction period to prepare detailed design and construction programmes.
By
coordinating these
plans with
the
procurement of
labour, materials
and
nishes, as
well as
carrying
out building
surveys while
the
base build
completed, the
t
out works
were guaranteed
to get going from day one.
F
it
O
ut
Re
v
e
n
u
e (
£
m)
+14%
from 2020, -5% from 2019
Op
era
tin
g
pro
t (£m)
+38%
from 2020, +20% from 2019
Operating margin (%
)
+100bps
from 2020, +120bps from 2019
21
20
19
795
700
839
21
20
19
44.2
32.1
36.9
21
20
19
5.6
4.6
4.4
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Governance
Financial statement
s
Financ
ial and op
erati
ng rev
iew
: Fi
t Out
continued
Revenue outside of the London region increased
strongly to 42% of the total, up from 31% in
the prior period, however the London region
remained the division’s largest market at 58% of
revenue (2020: 69%). Looking ahead to future
periods, the proportion of revenue from the
London
region is
expected to
revert
back to
a
more
normal proportion
of c70%
of
divisional
revenue.
In terms of type of work delivered in the
year,
80% related
to traditional
t
out work
(2020: 86%), while 20% related to design and
build (2020: 14%). The proportion of revenue
generated
from the
t out
of
existing oce
space
increased slightly
to 78%
(2020:
72%),
with
the t
out of
new
oce space
reducing to
22%
(2020: 28%).
Of the
t
out of
existing oce
space, work was broadly split evenly between
refurbishment
‘in occupation’
and non-occupied
space.
The market for Fit Out’s services remains strong.
At the year end, the secured order book was
£897m,
more than
double the
size
of the
order
book at the previous year end (2020: £410m)
and an increase of 54% on the position at the
half year (HY 2021: £581m). Within this total, the
division secured a number of larger contracts
which will generate revenue over a number
of years, giving the division better long-term
visibility compared to its usual project cycle.
Of
the year-end
order book
of
£897m, £528m
(59%) relates to 2022 and this level of orders for
the
next 12
months is
36%
higher than
it was
at the same time last year. In addition to these
secured orders, the division had over £100m
of
potential work
‘pending decision’
at
the year
end,
as well
as in
excess
of £500m
of tender
opportunities
identied for
the rst
quarter
of
2022. The average value of enquiries received
through the year was around £4m.
Traditional
t out
projects won
in
the year
included:
366,000 sq
ft of
oce
space at
Five
Bank
Street, Canary
Wharf; 200,000
sq
ft for
BP
in
North Colonnade,
Canary Wharf;
200,000
sq
ft for BT in Bristol, awarded following completion
of
a 186,000
sq ft
project
for BT
in Birmingham;
150,000 sq ft of Cat A space in Thames Valley
Park,
Reading; 93,000
sq ft
of
oce, sales
and
support
facilities for
MathWorks in
Cambridge;
90,000 sq ft of Cat A space in Coventry for
landlord
IM Properties;
and 30,000
sq
ft for
landlord
Quadrature Capital
in the
Leadenhall
Building, London.
Project completions included Norton
Motorcycles’
new 70,000
sq ft
state-of-the-art
facility
in Solihull,
and a
56,000
sq ft
oce in
Bristol for the BBC.
In
design and
build, signicant
wins
included:
the
Cat A
t out
of
180,000 sq
ft at
Campus
Reading,
one of
the largest
oce
developments
in
the Thames
Valley; Hutchison
3G
UK/Three’s
new
117,000 sq
ft workspace
in
Reading; nine
projects for space provider Instant Group,
creating
135,000 sq
ft of
lettable
oce space;
and
17,000 sq
ft in
Bracknell
for big
data
analytics provider, IRI.
Fit Out’s public sector portfolio continued to
expand
in 2021
as the
division
secured: a
12,000 sq ft refurbishment of the North West
Regional Control Centre for National Highways
(formerly
Highways England);
a 60,000
sq
ft t
out for the University of Leicester via the Pagabo
framework;
and multiple
projects totalling
£51.8m
under The
Mayor’s Oce
for
Policing
and Crime (MOPAC) framework with a further
£40.7m
secured for
2022 and
beyond.
Divi
sional outlook
Fit Out’s new and upgraded medium-term target
is
to deliver
average annual
operating
prot
through
the cycle
of £40m–£45m
per
year. For
2022, based on timing of projects in the order
book and the current visibility the division has
of future workload later in the year, Fit Out is
expected
to deliver
a performance
which
is
around the mid-point of this target range.
Fit Out
Upgrade
d medium
-
term t
arget
£40m–£45m
Average annual
operating
pro
t thro
ugh the
c
yc
le
Route map
Retain
market share
in commercial
oce
and higher education market
Increase ratio of public sector business
Expand
life sciences
oering
Expand
design and
build oering
Drive high levels of repeat business from
large space occupier
Increase average job size
Market conditions
Market remains buoyant
Clients seeking to repurpose space for
the new working environment
Several large pre-let projects in
construction
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Financ
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continued
Proper
t
y Ser
v
ices per
forme
d
well in the year
, deli
ver
ing
improved resul
t
s on the pr
ior
year as volumes recovere
d from
Covid disruption in
2020.
Revenue increased by 20% to £134m and
operating
prot
1
increased 310% to £4.1m.
The operating margin of 3.1% represented an
increase of 220bps ahead of prior year.
The division has continued to focus on delivering
repairs and planned maintenance with a strong
social
value oering,
servicing public
sector
housing through its integrated contracts with
housing associations and local authorities.
Although most of the division’s repairs contracts
were restored to more normal volumes in the
year following the impact of Covid in 2020,
planned maintenance activity was slower to
recover.
Investment continues in Property Services’
technology
oering for
managing repairs
and
maintenance and planned activities, with a
signicant
focus on
the provision
of
data insight
and the improvement of the all-round customer
experience.
During the
year, the
division
launched its new software platform, goldeni (see
box
right), that
provides social
housing
landlords
and residents with real-time data to help ensure
their properties are healthy, compliant and
energy
ecient. Of
the overall
investment
in
goldeni,
£0.6m was
expensed during
the
year
and included in the operating result.
P
r
op
er
t
y
S
er
v
i
c
e
s
goldeni
-
helping
to
keep
homes healthy
and
ener
g
y
-
e
ci
ent
Using discreet sensors, Property Services’ goldeni software collects data on temperature, air
pressure,
light levels,
humidity and
carbon
dioxide in
homes. It
monitors
energy consumption,
can
detect
water leaks
and oers
practical
advice such
as opening
more
windows to
prevent mould
or
suggesting when a boiler needs servicing. By tracking which homes are using central heating too
often or too little, goldeni can help identify properties that need more insulation and help social
housing providers understand the prevalence of fuel poverty in their communities. goldeni is
already being used on social housing in Basildon, St Albans and Hammersmith and Fulham.
Re
v
e
n
u
e (
£
m)
+20%
from 2020,
+17%
from
2019
Op
era
tin
g
pro
t
1
(£
m)
+310%
from 2020, -5% from 2019
Operating marg
in
1
(%)
+220bps
from 2020, -60bps from 2019
21
20
19
134
112
115
21
20
19
4.1
1.0
4.3
21
20
19
3.1
0.9
3.7
1
Before intangible amortisation of £1.5m (2020: £1.2m).
4
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: Prop
er
t
y S
er
vi
ces
continued
At the year end, the secured order book was
£945m, down 3% from the prior year end
(2020:
£970m) and
down 3%
from
the half-
year
position (HY
2021: £973m).
Of
this total,
in
excess
of 85%
is for
2023
and beyond.
In
addition (and
not yet
reected
in the
order
book), the division was selected to deliver a
new 10-year contract with South East housing
association, Moat, to provide services to
11,500 homes across south east London, Kent,
Essex
and Sussex.
The contract
is
worth over
£200m
and has
the potential
to
be extended
by
a further
ve years.
Moat
residents were
consulted
extensively during
the tendering
process, with over 1,000 providing feedback
on how Moat’s new partner could deliver
social value through the scheme. Contracts
are
expected to
be signed
in
the rst
quarter
of 2022 with the project to start in April 2022
following a three-month mobilisation period.
Divi
sional outlook
Based on the current order book and pipeline
of opportunities, together with the division’s
operating model, the new medium-term target
for Property Services has been upgraded to it
delivering
£15m operating
prot per
year.
This target will be delivered through both
revenue growth and continued margin
improvement and progress will be made
towards this in 2022.
Proper
t
y Ser
vices
Upgrade
d medium
-
term t
arget
£15m
Op
era
tin
g
pro
t
Route map
Revenue and margin growth
Targeting long-term contracts of 10 years
plus
Increasing use of technology as
competitive advantage
Market conditions
Large available market
Maintaining contract selectivity is key
Social value increasingly important
Barrier to entry increasing - market
consolidating
Labour shortages an issue
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Financ
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continued
Par
tne
rship Housing ha
d a ver
y
s
trong year
, wit
h signican
t strate
gic
and operational progress made.
Revenue
for the
year was
up
21% to
£572m
(2020:
£474m), with
both mixed
tenure
and
contracting performing well. Split by type
of
activity, mixed-tenure
revenue was
up
16% to £323m (56% of divisional revenue)
and contracting revenue (including planned
maintenance
and refurbishment)
was up
27%
to
£249m (44% of divisional total).
Operating
prot increased
substantially, more
than doubling to £33.2m, an increase of 108%
(2020: £16.0m). The operating margin increased
to 5.8%, up from 3.4% supported by the higher
mixed-tenure
and contracting
revenue as
well
as beneting
from continued
operational
eciencies.
During
the year,
the division
experienced
a
number
of signicant
price increases
in
certain
product categories and some increases in
lead times for product deliveries to site. Any
additional costs attached to sourcing some
materials
have generally
been oset
by
a
combination
of operational
eciencies and
sales
price
ination.
The secured order book at the year end was
£1,498m, an increase of 4% on the prior year
end (2020
1
: £1,445m).
The average capital employed for the last
12-month period was £155.8m, a reduction of
£11.2m on the prior year. The return on capital
employed increased to 21%, a much improved
performance
and signicantly
in excess
of
prior
years. The capital employed at year end was
£155.6m, an increase of £25.0m from the prior
year end.
Mixed tenure
A key aspect of the division’s growth strategy is
to
increase the
number and
size
of its
mixed-
tenure
sites. Signicant
progress has
been
in
this
area, with
currently a
total
of 48
mixed-
tenure sites at various stages of construction
and sales (up from 39 at the prior year end),
with an average of 143 open market units per
site (up from 101 at the prior year end). Average
site duration is 48 months, providing long-term
visibility of activity.
P
a
r
t
ne
r
s
h
i
p
Hou
s
i
n
g
Re
v
e
n
u
e (
£
m)
+21%
from 2020, +10% from 2019
Average capital employed
2
(la
s
t 1
2 mon
th
s) (£m)
-£11.2m
from 2020
Op
era
tin
g
pro
t (£m)
+108%
from 2020, +53% from 2019
Capit
al employed
2
at yea
r en
d (£m)
+£25.0m
from 2020
Operating margin (%
)
+240bps
from 2020, +160bps from 2019
Return on capital employed
3
(la
s
t 1
2 mon
th
s) (%)
21
20
1
19
1
572
474
520
21
20
1
155.8
167.0
21
20
1
19
1
33.2
16.0
21.7
21
20
1
155.6
130.6
21
20
1
19
1
5.8
3.4
4.2
21
20
1
21
10
1
Restated. All 2020 and 2019 comparative numbers, including order book and capital employed, have been restated to
include the impact of the revised reporting segments.
2
Capital employed
is
calculated
as total
assets
(excluding goodwill,
intangibles
and
cash) less
total
liabilities (excluding
corporation tax,
deferred
tax,
inter-company nancing
and
overdrafts).
3
Return on average capital employed = (adjusted operating prot plus interest from joint ventures) divided by average capital
employed.
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: Par
tn
er
ship Ho
usin
g
continued
During the year, 1,653 units were completed
across open market sales and social housing
(including
through joint
ventures), signicantly
higher than in the prior year (2020: 1,216 units).
The average sales price of £249k compared to
the prior year average of £229k.
Work won included the regeneration of the
former Llanwern and Whiteheads steelworks
sites in Newport, valued at £105m and £85m
respectively. The two schemes, being delivered
in partnership with Pobl Group, have started
on site and will deliver a combined total of over
1,000
homes. Other
signicant wins
included:
a £120m scheme with Abri housing association
to
build 500
homes in
Weymouth;
and a
188-
unit development in Whalley, Lancashire with
Traord
Housing Trust.
In addition,
the
division
exchanged
contracts for
the former
site
of a
Philips factory in Hamilton, South Lanarkshire
to
develop 166
new homes
(42
aordable) for
Clyde
Valley Housing
Association; and
secured
planning
permission for
a further
766
homes
on its One Woolwich programme with the Royal
Borough of Greenwich.
Converting browneld
sites
into new communities
Partnership Housing formed a strategic
partnership in 2019 with West Midlands
Combined Authority to unlock 4,000 homes
on
browneld sites.
As part
of
the agreement,
the division pledged to deliver: high-quality
mixed-tenure
housing; collaborative
solutions
to
meet local
housing needs;
opportunities
on
browneld
land close
to schools
and
public
transport;
innovative construction
solutions;
low-carbon technologies, with a pledge to build
zero-carbon
homes by
2040; and
local
jobs
and apprenticeships to tackle youth and long-
term employment.
The
former industrial
site at
Saints
Quarter,
Steelhouse Lane, Wolverhampton, located
near the city centre and West Midlands
Metro,
was the
rst to
be
identied as
a
sustainable location for a new community. The
project
delivered 151
mixed-tenure homes
in
32months, c12
months faster
than
a
traditional open market housing scheme.
40%
aordable housing
129 electric vehicle charging points and
830sqm
of solar
panels
£14,000 investment in local community
organisations and initiatives
24 apprentice positions created or sustained
259
hours of
work experience
and
community or education engagement
90% of work procured from within 15 miles
using LM3
1
, for every £1 spent, £2.32
generated for the local economy
Named as a good place to live after receiving
the government-endorsed Building for Life
accreditation
1
Local Multiplier 3 (LM3) is a tool which measures
how every pound spent on a project with suppliers,
subcontractors and
employees
can
benet the
local
community. It calculates where and how the money is
re-spent and what proportion remains local.
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continued
Partnership
Housing formally
executed a
new,
long-term joint venture in the year with West
Sussex
County Council,
with an
initial
10 sites
(582 units) immediately under option. The aim
of the joint venture is to develop surplus land
owned by the council into new homes and
commercial premises that will generate funds
for reinvestment in frontline services. Preferred
bidder status was achieved in December 2021
for a similar long-term strategic joint venture
with
Suolk County
Council. An
initial
ve sites
will be committed to the joint venture, including
two
signicant urban
extensions, potentially
delivering
approximately 2,800
homes across
the county. Contract close is aimed for by Spring
2022.
Work started in the year on four new projects
with Together Housing Trust to deliver: 650
units
in Pendleton,
Lancashire; 244
in
Kirk Ella,
East
Yorkshire; 153
in Holmewood,
Chestereld;
and
175 in
Howden, East
Yorkshire.
In the
Midlands, project starts included 234 homes
in Oldbury, 329 in Donnington and 123 in
Birmingham. Planning permission was secured
and work started on two sites acquired from
Homes England: 412 homes in Drummond Park,
Wiltshire;
and 119
in Thorp
Arch,
Yorkshire.
Contracting
In contracting, the total number of equivalent
units
built was
1,477, up
from
978 in
the prior
year.
Of the total divisional order book, the contracting
secured order book was 6% lower at £506m
(2020: £538m), of which £224m is for 2022.
Key contracting schemes awarded in the year
included: a £50m, 211-unit scheme at Tolworth
for
Guinness Partnerships;
a contract
with
Norfolk County Council-owned Repton to build
400
plus homes
in Norfolk;
301
homes at
Crick
Road, Portskewett for Monmouthshire County
Council;
and the
appointment onto
the
Your
Housing Group framework, including the initial
award of a £25m, 216-unit scheme at Edge Lane,
Openshaw.
The division was awarded a refurbishment
project
by Orbit
Group to
retrot
69 homes
in
Warwick to
increase their
energy
eciency.
Partnership Housing worked with Orbit to
secure £4m towards the project from the
Social Housing Decarbonisation Fund (SHDF)
demonstrator, run by the Department for
Business, Energy & Industrial Strategy (BEIS), to
improve
the energy
eciency of
social
housing.
Work started in the year at Ringswell Avenue
in
Exeter to
provide 60
aordable
homes for
LiveWest, the South West’s largest housing
association.
The development
will be
the
rst
to meet LiveWest’s new sustainable homes
standards
following the
launch of
its
‘Creating
Greener Futures Together’ strategy.
Divi
sional outlook
Partnership
Housing has
made signicant
strategic and operational progress over
recent years, which has been evidenced
by
its vastly
improved nancial
results.
The
market opportunity for the division remains
substantial
and the
pathway for
its
next stage
of development is set out in its new and
upgraded
medium-term targets:
rstly, to
generate a return on average capital employed
of up towards 25% and secondly, to deliver an
operating margin of 8%. In 2022, the average
capital
employed is
expected to
increase
up towards c£190m and further progress is
expected.
Par
tne
r
ship Ho
using
Upgrade
d medium
-
term t
arget
s
25%
Return on capital employed
up tow
ard
s 2
5%
8%
Op
era
tin
g
pro
t
Route map
More and larger schemes
Increase
number of
mixed tenure
schemes
More UK geographical coverage
Market conditions
Market remains strong
Large partnership schemes coming to
market
Cost
ination currently
oset by
sales
ination
Impact of challenges with materials and
trade resources being managed
The
new West
Sussex joint
venture
will
act as a platform to build a new South
Central Region
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continued
U
r
b
a
n
R
e
g
en
er
a
t
i
on
Urban Re
generation deli
vered an
operat
ing
prot of
£1
2.
1
m
in
t
he year
,
an increase of 38
% on the pr
ior year
(2020:
£8
.8m).
The retur
n on
capit
al
employed in t
he year increased to
1
3%
, base
d on the average c
apit
al
employed in
the year
of £98.
7
m.
Key
contributors to
performance were
prot
and development fees generated from: the
Salford Central regeneration scheme, being
delivered by the English Cities Fund (ECF) joint
venture with Legal & General and Homes
England;
the delivery
of 520
new
homes at
New
Victoria
in Manchester;
a land
sale
at Hucknall;
the continuation of development at Phase 2 of
Lewisham
Gateway; and
completion of
the
rst
phase at Hale Wharf in Tottenham via Waterside
Places, the division’s joint venture with the Canal
&
River Trust
(see page
53).
Prots were
also
earned from the sale of new homes at: Salford
Central;
Wapping Wharf,
Bristol; Grion
Fields,
Hucknall;
Novus, Slough;
Northshore, Stockton-
on-Tees;
and Millbay,
Plymouth.
The operating result also includes the
£5.6m non-cash impairment of the division’s
investment in the Bournemouth Development
Company, a joint venture with Bournemouth
Christchurch and Poole Council. The impairment
relates
to one
specic scheme
within
the joint
venture
where construction
cost ination
as
well
as other factors have challenged the viability
of the scheme. Following the impairment, the
carrying value of the division’s investment in the
joint venture is reduced to £3.2m.
Adjusting for the impact of this impairment, the
return on capital employed for the year would
be 19%.
During the year, Urban Regeneration signed
a major deal at New Victoria, Manchester with
Morgan Capital investing £60m to take forward
a
150,000 sq
ft oce
building,
the second
and
nal
phase of
the £190m
scheme.
In addition,
agreements
were exchanged
for 96
aordable
homes
designed to
the Passivhaus
‘Classic’
energy performance standard at Salford
and a land sale was completed at Chester to
Progressive Living for the development of up
to 128 homes. The last remaining plot at Logic
Leeds was sold to MCM Investments.
Re
v
e
n
u
e (
£
m)
+64%
from 2020, +69% from 2019
Capit
al employed
2
at yea
r en
d (£m)
-£16.8m
from 2020
Op
era
tin
g
pro
t (£m)
+38%
from 2020, -39% from 2019
Return on capital employed
3
(la
s
t 1
2 mon
th
s) (%)
Average capital employed
2
(la
s
t 1
2 mon
th
s) (£m)
-£25.3m
from 2020
Return on capital employed
3
(
average last three years)
(%)
21
20
1
19
1
203
124
120
21
20
1
84.0
100.8
21
20
1
19
1
12.1
8.8
19.9
21
20
1
13
7
21
20
98.7
124.0
21
12
1
Restated. All 2020 and 2019 comparative numbers, including order book and capital employed, have been restated to
include the impact of the revised reporting segments.
2
Capital employed
is
calculated
as total
assets
(excluding goodwill,
intangibles
and
cash) less
total
liabilities (excluding
corporation tax,
deferred
tax,
inter-company nancing
and
overdrafts).
3
Return on average capital employed = (adjusted operating prot plus interest from joint ventures) divided by average
capital employed.
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Financ
ial and op
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ng rev
iew
: Urb
an Rege
nerat
ion
continued
Connec
ting communities at Hale W
har
f, T
otte
nham
The
rst phase
of Hale
Wharf,
delivered as
part of
the
Waterside Places
joint venture
with
Canal
&
River Trust,
has transformed
an
underused waterfront
to create
249
mixed-tenure homes
and
attractive
public realm.
The new
Hale
Wharf Bridge,
extending across
the
river Lee
Navigation,
connects local communities, provides easier access to transport routes and creates walking
routes for everyone to enjoy. The pedestrian bridge represents a vital part of Haringey Council’s
‘green
and open
space’ strategy,
giving
local residents
of Tottenham
access
from the
high street
to
the Lea
Valley. The
Hale
Wharf scheme
is part
of
the Mayor
of London’s
Housing
Zones
programme.
Signicant
new appointments
included:
preferred
development partner
to West
Sussex
County Council to deliver Horsham Enterprise
Park, a new, 18.5 acre neighbourhood situated
on a former Novartis site that will provide
up
to 270,000
sq ft
of
oces, research
and
development
facilities, an
‘Enterprise Hub’,
up
to 300
new homes
(35%
aordable), local
amenities
and generous
outdoor spaces;
preferred development partner to Barnet
Council to redevelop Bunns Lane car park
in London, which will provide c130 homes
for
rent (50%
aordable), commuter
parking
and
retail and
leisure space;
and,
via the
Pagabo framework, development partner to
Scarborough Borough Council to deliver a new
bus interchange integrated into the town’s
rail station, a new commercial building for the
council,
redevelopment of
the council’s
oce
building, repurposing of a Victorian spa building,
and public realm. In addition, Bury Council
approved a joint venture with the division to
regenerate Prestwich village, with proposals
including
a community
hub, library,
tness
suite
and performance area.
Construction began during the year on two
developments
at Salford
Central: a
175,000
sq
ft
oce for
BT; and
115,000
sq ft
of speculative
oce
space that
will be
ultra-low
in energy
consumption and fossil-fuel free (see description
of
the Eden
building on
pages
14, 27
and 28).
Work
also started
on two
oce
buildings in
Birkenhead totalling 150,000 sq ft, both pre-let
to
Wirral Council;
residential-led schemes
at
Islington Wharf (106 homes), Manor Road
Quarter
(355 homes
with 50%
aordable)
and
West
Cli Mansions,
Bournemouth (44
homes);
and a 144-room Holiday Inn in Blackpool.
Enabling works began on Phase 2 of Hale Wharf
and Phase 3 of Brentford Lock West.
Residential developments completed included
256 new homes at Wapping Wharf, Bristol, 211
at Atelier and Valette Square in Salford Central
and 46 for rent at Treetops, Bournemouth. Work
also completed on a new Jobcentre Plus in South
Shields;
a 45,000
sq ft
oce
development for
Eli
Lilly in
Basingstoke; and
the
transformation
of the old library site in Slough, delivering a
Moxy
Hotel and
Residence Inn
together
with
64apartments.
The division achieved a number of planning
consents in the year, including for: 1.4m sq ft of
mixed-use
development at
Birkenhead, Wirral;
312 new homes and public realm at Stoke
Wharf,
Slough; 274
homes (51%
aordable)
at
Stroudley
Walk, London;
212 homes
at
Montem
Lane,
Slough; a
64,000 sq
ft
oce development
and 400-space multi-storey car park at Stockport
Exchange;
and One
City Park,
a
56,400 sq
ft
oce
development in
Bradford.
5
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A
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Strategic report
Governance
Financial statement
s
Financ
ial and op
erati
ng rev
iew
: Urb
an Rege
nerat
ion
continued
Urban Regeneration’s development portfolio
continues to be both active and diverse, with
14 projects on site at the year end across
11 developments, totalling £980m gross
development
value, and
a further
17
projects
expected
to start
on site
in
2022.
At the year end, the division’s regeneration order
book
amounted to
£2.57bn, a
reduction
of 12%
on the prior year end, and within this there is a
diverse geographic and sector split:
by value, 38% is in the North West, 52% in
London and the South East, 8% in Yorkshire
and the North East and 2% in the rest of the
UK;
and
by sector, 52% by value relates to residential,
33%
to oces,
and the
remainder
is broadly
split between retail, leisure, and industrial.
Divi
sional outlook
Based
on the
current prole
and
type of
scheme
activity across the portfolio, the average capital
employed
for 2022
is expected
to
increase to
c£110m.
The medium-term target for Urban
Regeneration has not changed and is to increase
its rolling three-year average return on capital
employed up towards 20%. Good progress
towards
this target
is expected
in
2022.
Urb
an Regeneration
Medium
-
term t
arge
t
20%
Three
-
year rolling av
erage return on
capit
al employed up towards 20%
Route map
Larger schemes
More
ecient use
of capital
Increase geographical coverage, with
focus on the Midlands and South West
Secure additional partnerships
Potential growth via The English Cities
Fund and wider relationship with Homes
England through its new position on the
Pagabo procurement framework
Market conditions
Demand side strong
Construction
ination challenging
viability
ofschemes
Strategic report
Governance
Financial statement
s
55
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21
Managing
ris
k
O
u
r
a
p
p
r
o
ach
t
o
r
is
k
is
b
a
s
e
d
o
n
s
o
un
d
g
o
v
e
r
n
an
c
e
Risk is inherent in our busine
ss and
cannot b
e completel
y eliminated,
however our risk go
vernance model
ensures tha
t our pr
incipal r
isk
s
and robus
t inter
nal controls are
under regular rev
iew a
t all levels
.
Our operational teams are highly skilled in their
relative
elds and
valued for
their
ability to
identify
and manage
the risk
embedded
in our
day-to-day
operations, and
the mix
of
skills and
experience
of our
people is
a
valuable resource
at
all key
stages, from
project
selection, through
bidding
to project
delivery. A
detailed
system
of
delegated authorities
allows our
people
the
agility
to perform
while at
the
same time
being
responsible
and accountable
for their
actions.
Our senior management teams at divisional
and
Group level,
aided by
our
internal reporting
process, maintain oversight to ensure that all
actions
and outcomes
remain in
line
with our
expectations
and risk
appetite.
R
i
s
k
g
o
v
er
na
n
c
e
Group Boar
d
Responsible for
setting
the
Group’s risk
appetite and for
ongoing
risk
management, including
assessing
the
principal risks
that
threaten
our
strategy and
performance.
Internal audit
The Group
head
of
audit and
assurance reviews and
collates
the
divisional risk
registers
and
draws from
them
when
compiling
the Group
risk
register.
An annual
review
across
the
Group is
undertaken,
focusing
on signicant
projects and trends,
and
areas
of concern.
Audit commit
te
e
Assists the
Board
in
monitoring risk
management and internal
control
and
by conducting
formal
reviews
of Group
and
divisional
risk
registers.
Divi
sional boards
Each division
identies
the
risks facing
its business and
takes
measures
to mitigate
the
impacts. Senior
managers
take
ownership of
specic risks and
ensure
that
tolerance
levels are
not
exceeded.
Ris
k commit
tee
Consists of
heads
of
key Group
functions, including legal,
company
secretarial,
IT,
nance, internal
audit,
tax,
treasury and
commercial. Identies risks
for
the
Group risk
register and
reviews
Group
and divisional
risk registers before
they
are
presented to
the Board
and
audit
committee. Ensures
that inherent and
emerging
risks
across the
Group are
identied
and
managed appropriately.
Divi
sional repor
ting
The divisional risk registers record the
activities needed to manage each risk,
with mitigating
activities
embedded
in
day-to-day operations
for
which
every
employee has
some
responsibility.
Rigorous reporting procedures are
in place
to
monitor
signicant risks
throughout the divisions and ensure
they are
communicated
to
the Group’s
board reporting
and
delegated
authorities process.
Strategic pla
nning
Risk management
is
part
of our
annual
business planning
process.
Objectives
and strategies
are
set
to align
with the
risk appetite
dened
by
the Board.
Any
changes are
reviewed
at
the monthly
Group and
divisional
board
meetings
to ensure matters are addressed in an
ongoing and
timely
manner.
Delegated au
thorities
Our nance
director
and
Group head
of audit
and
assurance
have produced
a schedule
of
delegated
authorities
(updated in 2021) that assigns approval
of material
decisions
–
such as
project
selection, tender pricing and capital
requirements –
to
appropriate
levels
of management.
Board
approval
is
required before
undertaking
large
or
complex projects.
The
approval
system
is regularly
reviewed.
Risk rev
iews
Twice a
year
each
division carries
out a
detailed
risk
review, recording
signicant matters
in
its
risk register.
Each risk
is
evaluated,
both before
and
after the
eect
of
mitigation, as
to its
likelihood of
occurrence
and
severity of
impact on
strategy.
The
Group head
of
audit and
assurance
follows
the same
process for
identifying
and
reviewing
Group risks,
conferring
with
the risk
committee.
 Read more
about risk
governance
on pages
119
to 122.
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Governance
Financial statement
s
Managing
risk
continued
The Group
’s risk
prole continues
to be suppor
ted by a s
t
rong
bala
nce s
heet a
nd secur
ed
work
load
, and a continue
d
focus on cont
rac
t se
lec
t
i
vi
t
y
.
Following
initial Covid
issues, all
divisions
are
fully
operational. We
recognise there
may
be
subsequent
waves and
remain vigilant.
However
the
Group is
well placed
to
maintain future
activity
without material
disruption.
We
have not
had to
make
any signicant
change
to our
business model
or
the markets
in
which we
operate as
a
result of
Brexit, Covid
or
increasing carbon
regulations. Indeed
our
markets have largely continued to receive
high
levels of
government support
owing
to
their
contribution to
the UK
economy
and
underlying
demand. In
addition, the
Group
has
demonstrated resilience and agility during these
periods,
which provides
comfort should
future
events
occur.
O
u
r
r
i
s
k
p
r
o
l
e
This
resilience is
a result
of
a number
of factors,
including
our decentralised
approach and
ability
to respond quickly to change, and our long-
term
focus on
contract selectivity,
high
quality of
delivery, prudent risk management and strong
client and supply chain relationships (see pages
13
and 14).
Should any
further
restrictions
come
into place
as a
result
of Covid
variants, our
strict
adherence to
safe operating
procedures,
together
with the
government’s clear
directive
that construction activity should continue,
give
us condence
that future
activity
can be
maintained
without material
disruption.
The macro
environme
nt
UK
construction continues
to benet
from
sustained government
investment
commitments,
conrmed in
its Spending
Review
and
National Infrastructure
Strategy, both
of
which
continue to
support our
business
model,
particularly
in housebuilding
and regeneration
(primary
UK areas
targeted for
growth)
and
construction
and infrastructure.
In addition,
our
diversity
of oering
protects the
business
from
cyclical
changes in
individual markets.
Materials a
vailabilit
y and
inati
on
We
have witnessed
signicant materials
demand
and
inationary pressures
as a
result
of the
discrepancy
between high
demand and
lagging
supply,
dwindling product
stockpiles, logistical
challenges
and a
particularly busy
housing
market.
Despite
the considerable
challenges presented
by
these issues,
our project
teams
have
managed
the impacts
well, resulting
in
minimal
disruption
to our
operations. Our
supply
chain
partners
have been
very supportive,
due
partly
to the
Group’s standing
in
the industry
but
also, importantly,
to the
excellent
working
relationships
and practices
we have
established
with
them in
recent years.
Our
preferred and
predominant two-stage
and
negotiated
procurement routes
help signicantly
by
allowing early
collaboration with
the
client
and supply chain and providing increased price
and
programme certainty.
Outside of
these
arrangements,
other options
available include
contingency
allowances and/or
indexation
provisions
on contracts.
During construction,
we
closely monitor the procurement and delivery
of
materials and
intervene with
support
for our
supply
chain where
required.
In
limited cases,
ination has
stretched
budgets
and resulted in us, our clients and our partners
delaying
decisions; however,
our current
order
book
and predominant
public sector
focus
do
oer
some resilience,
particularly as
underlying
demand
is still
strong.
There is a risk that some supply chain partners
may
be trading
with strained
nances
as a
result
of
inationary pressures
compounded by
the
introduction
of the
VAT reverse
charge
and
unwind
of government
pandemic measures.
Our
teams are
aware of
this
and are
increasing
their
due diligence
as well
as
providing support
where
appropriate. We
do expect
to
see some
disruption
during 2022,
but not
material.
Partn
ers
hips and public
sec
tor clie
nts
The
divisions remain
focused on
long-term
partnerships,
our favoured
route to
market
as
it allows
us to
work
with clients
and in
environments
where we
have a
track
record
in
delivery, thereby
enabling more
predictable
outcomes.
In addition,
a substantial
proportion
of
our regeneration
schemes and
construction
order
book are
supported by
public
sector
and
regulated clients,
via frameworks
and
joint
venture arrangements
secured over
the
medium
to longer
term. Our
regeneration
activities
consist mostly
of lower
risk,
non-
speculative arrangements that ensure more
ecient
use of
capital, underpinned
by
a long-
term
visible pipeline.
Division
al perspectives
Construction
& Infrastructure’s
long-term focus
on
selecting the
right projects
has
resulted in
its underlying margin and positive cash position
and
reects the
work of
the
division over
the
past
few years
to improve
risk
management
in
all areas
of its
operation.
Construction &
Infrastructure’s
future order
book predominantly
consists
of public
sector work
via
two-stage or
negotiated
procurement routes.
Fit
Out, while
more susceptible
to
GDP and
macroeconomic
uctuations, also
enjoys a
high
level
of two-stage/negotiated
work within
its
order
book. Despite
predictions of
the
demise
of
the oce
as a
result
of the
pandemic, the
division
has not
witnessed any
signicant
change
in
client behaviour;
on the
contrary,
its order
book
is at
record levels
and
its pipeline
shows
good
visibility into
the early
part
of 2022.
57
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Financial statement
s
Manag
ing risk
:
our risk
pro
le
c
ontinued
Property
Services has
resumed normal
levels
of
activity
following Covid
restrictions. Any
future
challenges around access to properties should
be
manageable by
adhering to
strict
operating
procedures.
Partnership
Housing and
Urban Regeneration
continue
to witness
high levels
of
residential
demand
with sales
exceeding expectations
across
a broad
UK portfolio.
Following
the
challenges
that accompanied
the start
of
the
pandemic, the
speed of
decision-making
by
potential partners
for new
development
schemes
improved during
2020 and
is
now back
to
normal levels.
While we
work
closely with
our
local authority partners, challenges relating to
planning delays continue to have the potential
to
impact development
programmes. Our
work
in
preparation for
the government’s
Building
Safety
Bill, which
will tighten
safety
regulations
for
residential buildings,
is well
advanced,
with
key
divisions having
reviewed and
updated
their
methodology and approach to ensure that
project
specications are
compliant and
quality
is
maintained.
In
the medium
term, we
are
reassured that
our
housing
capability is
geared towards
the
UK’s
underlying
need for
housing, and
the
fact that
the
homes we
build, aimed
at
the aordable
end
of the
market, remain
in
demand. This
is
currently
reected in
the high
level
of forward
reservations
into 2022.
There
are a
number of
macro
uncertainties,
such
as ination,
reductions in
government
incentives and increases in interest rates that
could
put pressure
on our
residential
portfolio.
However,
mortgage availability
and employment
prospects remain positive and options are
available
to help
mitigate and
manage
any
negative
uctuations should
they arise.
The
majority
of our
schemes are
subject
to viability
conditions,
are eligible
for gap
funding
and
include
prot-sharing arrangements
which
reduce
our risk.
In addition,
future
phases can
be
remodelled or
deferred, the
pace
of build
can
be accelerated
or reduced,
robust
risk
and capital controls are in place to manage
exposure,
and there
is the
possibility
of further
government interventions to help stimulate the
market.
Financing
In
terms of
resourcing our
medium-
and long-
term plans, the Group remains in a strong
nancial
position (see
pages 39
and
40 for
detail
of
our average
daily net
cash
and committed
credit
facility).
Peop
le
Voluntary
employee turnover
within the
divisions
is
at healthy
levels and
where
we are
recruiting,
we
are witnessing
signicant interest
in
the new
positions
we have
created to
help
us achieve
our
strategic objectives.
A culture
where
people
feel
included and
empowered continues
to
be a
key
ingredient of
our success
and
initiatives such
as our commitment to reduce climate impacts
and
tackle responsible
business topics
are
considered
key in
our ability
to
attract and
retain
the
talent we
need to
grow
the business.
Read
more
on how
we engage
with
and develop
our
people
on pages
11, 12
and
21 to
24.
This
review should
be read
in
conjunction with
the
viability statement
on pages
83
to 85.
Strategic report
Governance
Financial statement
s
58
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1
Managing
risk
continued
Our pr
incipal r
isk
s are
those we consider the
mos
t signica
nt in
terms
of potential impa
c
t to the
business a
nd have bee
n
ex
tensivel
y reviewe
d.
The risks have not changed
signicantly:
those that
have
changed
reect UK
macroeconomic
uncertainty
and inationary
headwinds
that require
navigating,
which
the Group
is well
placed
to
manage. The
risk map
at
right
indicates
the Group’s
principal risks
(after
mitigation) in
terms of
severity
and
resilience. In
2021, the
Board
conducted
its annual
review of
the
Group’s
risk appetite
and concluded
that
no signicant
changes had
occurred.
The adjacent
table
indicates our risk appetite and risk
velocity
(the speed
at which
the
risk
would
impact the
Group).
P
r
in
c
ip
a
l
r
i
sk
s
Ri
sk a
pp
eti
te an
d ve
lo
cit
y
Principal risk
Risk
appetite
Risk
velocity
Risk
cate
gor
y
Internal or
ex
ternal
risk
Str
ategic pri
ority
A
Economic change and
uncertainty
Medium
Strategic
External
B
Exposure to the UK
residential market
Medium
Strategic
External
C
Climate change
Low
Strategic
External
D
Health and safety incident
Low
Operational
Internal
E
Talent retention and
attraction
Medium
People
Internal
F
Partner insolvency
or adverse change of
behaviour
Low
Financial
and
Operational
Internal
G
Inadequate funding
Low
Financial
Internal
H
Mismanagement of
working capital and
investments
Low
Financial
Internal
I
Poor contract selectivity
Medium
Operational
Internal
J
Poor project delivery
Low
Operational
Internal
K
Cyber activity/Failure to
invest in IT
Low
Operational
External
and internal
Risk severity and r
esilience
G
H
J
D
K
E
C
F
I
B
A
Increase our
quality
of earnings
Secure long-term
workstreams
Excel project
delivery
for our
clients
Maintain a strong
balance sheet
Consistently
deliver on
our Total
Commitments
Strategy key
Risk change key
 Increase
 Stable
 Decrease
Risk velocity
PPP
Within three months
PP
Within one year
P
Over a year
Low risk
High risk
High resilience
Low resilience
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continued
Economic change and uncer
t
aint
y
Increase
– Despite
possible economic
headwinds,
our market
sectors remain
structurally
secure which,
together with
our
strong
balance sheet
and short-
to
medium-term secured
workload, provides
comfort.
We
believe the
quality and
volume
of our
pipeline of
opportunities
and secured
workload in
both
regeneration
and construction
will provide
a
level of
insulation against
any
specic adverse
market conditions
should
they occur.
Principal risk
and impact
Update
on
risk
status
Mitigation
There
could be
fewer or
less
protable opportunities
in our
chosen
markets
including a
decline in
construction
activity caused
by
macroeconomic
weakness and/or
further UK
lockdowns.
Allocating resources and capital to declining markets or less
attractive
opportunities would
reduce our
protability
and cash
generation.
Responsibility:
The Board
The
continued scrutiny
of UK
construction
balance sheets
underpins our competitive position in the sector and gives
condence
to our
clients, employees
and
supply chain.
The
UK is
expected to
continue
investing in
areas that
complement
our strategy,
including aordable
housing,
infrastructure
and regeneration.
Our business
model
is designed
to
provide a
mix of
earnings
across dierent
market cycles.
The
Group has
shown strong
credentials
throughout the
pandemic
and we
expect to
navigate
any subsequent
variant
waves
without material
disruption.
Our
public and
regulated sector
focus,
pipeline and
order book,
coupled
with a
strong underlying
demand
for buildings
in these
sectors,
provides some
comfort around
inationary
challenges
provided
government funding
continues to
accommodate
price
increases.
The
diversity of
our operations
protects
against uctuations
in
individual
markets while
our decentralised
approach
enables our
divisions
to respond
quickly to
change.
The
Board regularly
reviews the
economic
environment in
which
we
operate to
assess whether
any
changes to
the outlook
justify
a
reassessment of
our risk
appetite
or business
model.
We
stress test
our business
plan
against the
current economic
outlook
to ensure
our nancial
position
is suciently
exible and
resilient.
We
are strategically
focused on
a
high-quality order
book
underpinned
by a
strong balance
sheet
and nancial
strength.
A
high proportion
of our
secured
workload is
with public
sector
and
regulated entities
via long-term
arrangements,
with a
healthy
level of
demand and
typically
preferential terms.
We
continue to
be very
selective
and our
procurement
routes,
margins, contract
terms and
secured
workload remain
favourable.
We
use analytical
software to
enhance
our understanding
of
our
medium-term pipeline
quality, enabling
us
to predict
trends
more
accurately and
adjust our
strategy
in response.
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Managing
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continued
E
xposure to th
e UK reside
ntial market
Increase
– Government
support for
housing
and the
dynamics of
underlying
demand complement
our product
positioning.
Cost
ination continues
to challenge
viability,
although it
has been
manageable
to
date.
While government
housing incentives
have
reduced, homebuyers
continue to
be
supported by
mortgage availability,
employment
levels
(including high
job vacancies),
wage
growth and
loan-to-value ratios
which
are favourable
and expected
to
remain so
over the
short
to medium
term.
Principal risk
and impact
Update
on
risk
status
Mitigation
The
UK housing
sector is
strongly
inuenced by
government
stimulus
and consumer
condence.
Inationary
pressures could
challenge scheme
viability,
slowing
down
our secured
order book
conversion.
If
mortgage availability,
aordability or
consumer
condence is
reduced, this could impact on demand, make existing schemes
dicult
to sell
and future
developments
unviable, reducing
protability
and tying
up capital.
Responsibility:
The Board
Executive directors
Divisional senior management teams
Residential sales and volumes have returned to pre-Covid levels
and,
on certain
schemes, we
have
accelerated build
to meet
increased
demand.
Some
tapering is
expected into
2022
but underlying
demand
is
still expected
to be
healthy
which, combined
with the
geographical
characteristics of
our residential
portfolio,
should
help
even out
any regional
imbalances,
should they
occur.
There
continues to
be clear
government
support for
new
aordable
housing, which
supports our
business
model and
market
positioning.
In
Urban Regeneration,
there are
short-term
viability challenges
to
navigate while
inationary costs
get
absorbed into
the
consumer
market.
Negative housing dynamics such as a reduction in consumer
condence
(or the
prospect of
increased
interest rates)
could
impact
sales; however,
government stimuli,
such
as ‘Help
to Buy:
Equity
Loan’ and
the recently
introduced
mortgage guarantee
scheme
for properties
up to
£600k,
complement our
product
oering.
Constrained
planning remains
a frustration
and
has the
potential
to
delay our
schemes. However,
anticipated
improvements in
the
system could
allow further
eciencies
and the
speed at
which
we bring
development forward.
There
are some
headwinds to
navigate
including the
prospect
of
a further
increase in
interest
rates, although
this is
from
historic
lows and
expected to
remain
gradual if
applied (all
highly
uncertain as the government seeks various options to tackle
the
post-pandemic economy).
In terms
of
household ination,
commentators
suggest that
this should
ease
in the
second half
of
2022 which
should help
alleviate
aordability issues.
A
rigorous, three-stage
formal appraisal
approval
process is
undertaken
before committing
to development
schemes
and
capital
commitments.
We
work closely
with public
sector
partners and
government
agencies
such as
Homes England
to
secure extra
development
funding
if required.
We
use mostly
non-speculative, risk-sharing
development
models,
subject to
viability conditions
that
lessen any
negative
impacts
from market
uctuations.
On
selected large-scale
residential schemes,
we
seek to
forward
sell
and/or fund
sections to
targeted
institutional investors
in
order
to reduce
risk.
Our
residential portfolio
has a
wide
geographical spread,
oering
protection against regional market variations, and is geared
towards
providing an
aordable product.
Rather
than building
up a
land
bank, we
prefer to
target
option
agreements
with landowners
that limit
and/or
defer long-term
exposure
and boost
return on
capital
employed.
We
regularly monitor
and forecast
our
pipeline of
development
opportunities
and secured
workload, which
includes
monitoring
key
UK statistics
such as
unemployment,
lending and
aordability.
For
a large
proportion of
current
schemes in
our portfolio,
we
have
the ability
to slow
down
(or accelerate)
build rates
should
the
need arise.
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continued
Climate change
Stable
– We
have been
recognised
as leaders
in our
sector
for our
work in
reducing
carbon
emissions (see
page 16).
However,
there is
still much
to
do as
we progress
towards
our
2030 goal
of net
zero.
Principal risk
and impact
Update
on
risk
status
Mitigation
The
Group’s key
environmental impact
is
via the
carbon emissions
and
waste that
we produce.
Our
activities can
be impacted
by
changes in
temperature, high
winds
from increasing
severity of
storms
and ooding.
We
have not
needed to
change
our business
model in
response
to
any
longer-term impacts
associated with
climate
change. However,
we
do need
to ensure
that
we can
adapt to
the
changing needs
of
our
clients and
maintain the
necessary
credentials to
be awarded
work.
See
pages 25
to 31
for
more information
on our
broader
environmental
performance..
Responsibility:
Executive directors
Group management team
Divisional senior management teams
Group climate action panel
We
are considered
leaders in
our
sector in
addressing climate
change
and have
been independently
recognised
as such,
having
received a
leadership score
of
A from
CDP (see
page
71).
We
introduced an
internal carbon
charge
in 2020
to help
encourage
our divisions
to reduce
their
own emissions.
The
money
raised will
be used
to
fund future
climate change
initiatives.
We
are working
with our
supply
chain to
encourage and
support
them
in reporting
their own
emissions
so that
we can
have
a
better
understanding of
our wider
Scope
3 emissions
and can
introduce
meaningful reduction
plans.
During
2020, we
introduced Carbon
i
Ca, a tool that calculates
building
carbon footprints
and lifecycle
emissions
and suggests
alternative
lower-carbon methods.
We are
currently
optimising
the
tool with
a software
solution
and discussing
its future
development
with leading
industry and
technology
innovators.
Our
credentials in
responding to
climate
change ensure
we can
support
clients with
the tools
and
capability needed
to meet
their
requirements and
maintain and/or
grow
our work-winning
capability
and market
share.
We
retain a
cautious approach
in
using new
products and
techniques
to reduce
the impact
of
climate change
until
suciently
proven. This
is to
avoid
overpromising and
possible
latent
defects that
could ultimately
prove
costly.
Our
divisions are
responsible for
delivering
relevant actions
to
meet
our net
zero target
and
for day-to-day
management of
climate-related
risks and
opportunities.
Our
carbon action
panel shares
best
practice on
climate-related
matters.
We
have accredited
science-based targets.
All
our construction
divisions have
ISO
14001- compliant
environmental
management systems
in place.
Engaging
with consultants
and specialists
during
our project
planning
phase to
ensure that
climate
impacts such
as ood
risk
are
considered.
Avoid
building on
oodplains and
areas
at high
risk of
increased
physical climate impacts and are actively involved in securing
pipeline
projects relating
to climate-change
adaptation
(such as
ood
resilience projects).
Climate
change presents
opportunities for
the
Group including
government
plans to
increase spend
in
infrastructure,
repurposing
existing buildings
and the
ability
to attract
clients
through
our track
record in
delivering
climate-related solutions.
 Read more
about climate-related
risks
and opportunities
in
our statement
on Task
Force
on Climate-related
Financial
Disclosures (TCFD)
on pages
71
to 79.
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continued
We cause a major heal
th and saf
et
y incid
ent and
/
or adopt a po
or safe
t
y culture
Stable
– We
were disappointed
with
our safety
performance in
the
rst half
of 2021
and
took
steps to
remedy this.
As
a result,
we witnessed
improvements
during the
second half,
when
the
number of
RIDDOR
and
lost time
incidents reduced.
Principal risk
and impact
Update
on
risk
status
Mitigation
Our
number one
priority is
to
protect the
health and
safety
of our
key
stakeholders and
the wider
public.
Health
and safety
will always
feature
signicantly in
the risk
prole
of
a construction
business. We
carry
out a
signicant portion
of
our
work
in public
areas and
complex
environments.
Accidents
could result
in legal
action,
nes, costs
and insurance
claims
as well
as project
delays
and damage
to reputation.
Poor
health
and safety
performance could
also
aect our
ability to
secure
future work
and achieve
targets.
Responsibility:
The Board
Group management team
Health,
safety and
environment committee
Divisional senior management teams
We
continued to
manage the
challenges
posed by
Covid and
changes
to government
guidance, ensuring
we
remained
aligned
to the
Construction Leadership
Council’s
site operating
procedures.
We
have applied
the principles
of
‘safe by
design’, where
safety
is
considered
throughout the
design process.
The
divisions took
renewed steps
in
the year
to increase
safety
awareness
and promote
safe behaviours,
including
campaigns
to
prevent hand
injuries and
remind
people of
the need
to
tether
tools and
maintain tidy
sites.
Construction developed
an
animation, ‘Introduction
to 100%
Safe’,
and developed
new
‘Behavioural
Essentials’ e-learning
modules for
its
employees and
supply
chain.
We
increased our
occupational health
surveillance
with the
end
objective
of eradicating
incidents of
hand-arm
vibration and
noise-induced
hearing loss.
Our
divisions will
continue to
share
learning, innovation
and best
practices
and work
together to
reduce
the overall
number of
accidents,
with the
following initiatives
being
considered in
2022:
–
Construction: visualisation
of information
and
guides, which
the
division has
found to
result
in better
uptake than
text-
based
versions;
–
Infrastructure: shifting
the focus
from
accidents to
high
potential incidents;
–
Fit Out:
new safety
improvement
plan on
the theme
of
‘site
conditions’;
–
Property services:
prioritising reducing
hand
injuries, with
particular attention to cuts; and
–
Partnership Housing:
improving adherence
to
high-risk trade
supervisor-to-worker
ratios and
maintaining absolute
focus
on
root cause
investigation and
escalation
procedures.
We
have a
Board health,
safety
and environment
committee
that
focuses on
our health
and
safety culture
to drive
better
behaviour
and performance.
Individuals
in each
division, and
on
the Board
and Group
management
team, are
given specic
responsibility
for health
and
safety matters.
Our
Group health
and safety
forum
meets quarterly,
with
representatives
from all
divisions sharing
share
best practice
and
exchanging
information on
emerging risks.
We
have well-established
procedures in
place
including safety
systems, audits, site visits, incident investigation and root-cause
analysis,
monitoring and
reporting, and
reporting
of near-miss
incidents and incidents that could potentially have resulted in
serious
injury.
Our
regular health
and safety
training
includes behavioural
change, housekeeping on site and leadership engagement in
driving
site standards.
Each
division’s health
and safety
policy
is communicated
to all
its
employees and senior managers are appointed to ensure the
policies
are implemented.
We
have developed
major incident
management
and business
continuity
plans, which
are periodically
tested
and reviewed.
All
divisions are
accredited to
ISO
45001 (see
page 120).
We
continue to
oer our
colleagues
a range
of benets
that
promote
physical and
mental wellbeing
(see
page 19).
 Read more
about our
commitment
to health,
safety
and wellbeing
on pages
17
to 20.
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continued
We fail to attrac
t an
d ret
ain the tal
ent we nee
d to maintain and g
row the busin
ess
Stable
– Our
current success
is
helping us
attract and
retain
people, and
we are
focusing
on
increasing the
Group’s diversity.
Principal risk
and impact
Update
on
risk
status
Mitigation
Talented
people are
needed to
provide
excellence in
project
delivery
and client
service.
Skills
shortages in
the construction
industry
will remain
an issue
for
the
foreseeable future.
If
we fail
to attract
and
retain the
talent required
to
meet our
clients’
and other
stakeholders’ expectations,
this
could damage
our
reputation and
our ability
to
secure future
work and
meet
our
targets.
Responsibility:
The Board
Group management team
Divisional senior management teams
Improvements
continue to
be made
to
the working
environment
and
investment made
in technology
and
leadership training.
We
are responding
to the
challenge
of an
ageing employee
population
and undertaking
work to
improve
our diversity
and
inclusion
(see pages
23 and
24).
We
are considered
a leader
in
the sector
in addressing
climate
emissions,
which should
help attract
younger
recruits.
We
give our
people empowerment
and
responsibility together
with
clear leadership
and support.
We
oer them
a strong
Group
culture and
attractive working
environments, remuneration packages, technology tools and
wellbeing
initiatives to
help improve
their
working lives.
We
conduct employee
engagement surveys
and
monitor joiner
and
retention metrics
including voluntary
sta
turnover. We
carry
out annual
appraisals that
provide
two-way feedback
on
performance
and conduct
exit interviews
when
people leave.
Our
succession planning
includes identifying
and
developing
future
skills.
We
provide training
and development
to
build skills
and
experience, such as our leadership development and graduate,
trainee
and apprenticeship
programmes.
 Read more
about our
commitment
to developing
people
on pages
21 to
24.
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Managing
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continued
Partn
er insol
venc
y and/or adver
se be
havioural change
Increase
– Some
partners may
be
trading with
stretched nances
following
the pandemic
and the
unwind
of
government measures
that were
introduced
to support
business recovery.
More
recent inationary
eects
are likely
to have
increased
the pressure
on our
partners’
balance sheets
which could
lead
to
a greater
likelihood of
failure.
Principal risk
and impact
Update on
risk
status
Mitigation
An
insolvency of
a key
client,
subcontractor, joint
venture partner
or
supplier could
disrupt project
works,
cause delay
and incur
the
costs
of nding
a replacement,
resulting
in signicant
nancial loss.
There is a risk that credit checks undertaken in the past may no
longer
be valid.
Responsibility:
Executive directors
Divisional senior management teams
As
we are
less able
to
rely on
historical credit
checks,
our teams
have
heightened sensitivity
and are
looking
for signs
of stress
that
would enable
early intervention
and
options to
resolve; this
includes
measures to
gain greater
control
and transparency.
The
reverse-charge VAT
initiative has
stretched
many of
our
supply
chain partners’
balance sheets.
However,
the strength
of
our balance
sheet gives
us
the option
to step
in
and cover
short-term
supply chain
issues, such
as
cash ow,
if deemed
appropriate.
Our
strategy has
been to
reduce
payment days
(our average
time
to pay
is 27
days),
and our
supply chain
partners
regard us
as
dependable and
responsible. In
addition,
we do
not hold
any
cash
in the
form of
retention
from our
preferred supply
chain
partners
which helps
reduce their
cash
ow pressures
and the
likelihood
of failure.
Our
business model
and order
book
are predominantly
focused
on
public sector
and regulated
industries
and commercial
customers
in sound
market sectors,
reducing
the likelihood
of a
material
customer failure.
We
carry out
rigorous due
diligence
on commercial
clients and
supply
chain partners,
obtaining where
necessary
relevant
securities
in the
form of
guarantees,
bonds, escrows
and/or
more
favourable payment
terms.
We
conduct a
formal, multi-stage
tender
review and
approval
process
before entering
into contracts,
with
a focus
on client
payment
behaviours and
liquidity.
Formal
due diligence
is carried
out
when selecting
joint ventures,
including
seeking protection
in the
event
of default
by one
of
the
partners.
Joint ventures
require executive
director
approval.
We
work with
preferred or
approved
suppliers where
possible,
which
aids visibility
of both
nancial
and workload
commitments.
We
monitor our
supply chain
utilisation
to ensure
we do
not
overstress
their nances
or operational
resource.
We
rigorously monitor
work in
progress,
debts and
retentions.
Strategic report
Governance
Financial statement
s
65
_
Mo
rg
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in
da
ll G
r
ou
p pl
c
Annual Repor
t 20
21
Managing
risk: principal risks
continued
Inadeq
uate fundin
g
Decrease
– Our
committed bank
facilities
and strong
cash position
provide
signicant headroom.
Principal risk
and impact
Update
on
risk
status
Mitigation
A
lack of
liquidity could
impact
our ability
to continue
to
trade
or
restrict our
ability to
achieve
market growth
or invest
in
regeneration
schemes.
Responsibility:
The Board
Group tax and treasury director
Divisional senior management teams
£180m
of bank
facilities are
undrawn
and are
committed until
2024.
During
the reporting
period and
for
the foreseeable
future,
our
average net
daily cash
continues
to be
healthy and
clearly
indicates
the cash-backed
nature of
the
business.
Our
balance sheet
continues to
provide
assurance for
our
stakeholders
and allows
us to
continue
investing in
regeneration
schemes
while remaining
selective in
construction.
We
have a
Group-led, disciplined
capital
allocation process
for
signicant
project-related capital,
which takes
into
consideration
future
requirements and
return on
investment.
We
monitor our
cash levels
daily
and conduct
regular forecasting
of
future cash
balances and
facility
headroom.
Our
long-term cash
forecasts are
regularly
stress tested.
Mismanagement of wo
rking c
apit
al and inves
tment
s
Decrease
– Our
strong balance
sheet
and cash
position continue
to
support investment
in long-term
regeneration
schemes
and protect
against economic
downturn,
allowing us
to make
the
right long-term
decisions.
Principal risk
and impact
Update
on
risk
status
Mitigation
Poor
management of
working capital
and
investments leads
to
insucient
liquidity and
funding problems.
Responsibility:
Executive directors
Group tax and treasury director
Divisional senior management teams
Our
ongoing focus
on working
capital
management has
enabled
us
to maintain
levels similar
to
prior years
while continuing
to
improve our supply chain payment practices and investment in
regeneration.
Our
cash position
is not
supported
by any
form of
supply
chain
debtor
nance and
gives a
clear
indication of
our nancial
health.
We
continue to
maintain a
positive
momentum in
cash
management
in construction
due to
a
combination of
improved
returns,
cash optimisation
and cash
conversion.
Our
average net
daily cash
for
the period
demonstrates our
disciplined
working capital
management.
The
government’s introduction
of the
VAT
reverse-charge has
positively
impacted our
year-end net
cash
by c£66m.
Our delegated authorities require that capital and investment
commitments
are notied
and signed
o
at key
stages with
senior
level approval.
We
reinforce a
culture within
our
bidding and
project teams
of
focusing
on cash
returns to
ensure
they meet
expectations.
We
monitor and
manage our
working
capital with
an acute
focus
on
any overdue
work in
progress,
debtors or
retentions.
We
monitor cash
levels daily
and
produce weekly
cash forecasts.
We
manage our
capital on
regeneration
schemes eciently,
for
example through phased delivery, institutional and government
funding
solutions, and
forward funding
where
possible.
Strategic report
Governance
Financial statement
s
6
6
_
Mo
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ga
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nd
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ou
p pl
c
A
nnual Report 202
1
Managing
risk: principal risks
continued
Poor contrac
t sel
ec
ti
vit
y and
/
or bidding
Increase
– The
quality of
our
long-term secured
workload should
safeguard
our future
performance, allowing
us
to
continue selecting
the right
projects.
Principal risk
and impact
Update
on
risk
status
Mitigation
In
a volatile
market where
competition
is high,
a division
might
accept
a contract
outside its
core
competencies or
for which
it
has
insucient
resources.
If
a contract
is incorrectly
bid,
this could
lead to
contract
losses
and
an overall
reduction in
gross
margin. It
might also
damage
our
relationship
with the
client and
supply
chain, leading
to a
reduction
in
work volumes.
Responsibility:
Executive directors
Divisional senior management teams
Our
order book
consists of
a
high proportion
of public
sector,
regulated
industry and
framework clients
with
typically healthier
risk
proles and
is secured
in
limited competition.
We
have not
changed the
sectors
or markets
we operate
in
and
are therefore
unlikely to
engage
in a
project outside
of
our
capability. In
construction, a
high
proportion of
our work
has
been secured
via negotiated
and
two-stage procurement
routes
1
.
Materials
availability and
ination have
been
challenging in
the
period, requiring
signicant additional
management,
but
have
not resulted
in any
major
issues. This
is due
largely
to our
standing
in the
market, the
dedication
of our
people and
supply
chain
(see page
33), and
our
focus on
preferred procurement
routes.
In
construction, inationary
inuences have
in
general been
isolated
to projects
secured in
the
rst quarter
of 2021
and
starting
in the
second. The
main
impact has
been the
full
expenditure
of project
contingencies to
accommodate
the
ination.
Projects procured
during and
after
the second
quarter
have
incorporated ination
allowances and
supply
chain
commitments.
It
is part
of our
strategy
and culture
to be
selective
in our
work.
We
target optimal
markets, sectors,
clients
and projects.
We
limit
our participation
in open
market
bids, conducting
a large
proportion
of our
projects via
framework
or joint
venture
arrangements
with repeat
clients who
share
our values.
This
provides
a high
probability of
predictable
and successful
outcomes.
When
bidding, we
aim for
negotiated
and two-stage
procurement routes
1
that allow
us early
engagement.
Our
divisions select
projects according
to
pre-agreed types
of
work,
project size,
contract terms
and
risk prole.
A multi-stage
process
of bid
review and
approval
includes tender
review
boards,
risk-proling and
a system
of
delegated authorities
to
ensure
approval at
appropriate levels
of
management.
We
prole the
skills and
capabilities
required for
the project
to
ensure
that we
allocate the
right
people.
Our divisions have processes in place to select supply chain
partners
who match
our expectations
in
terms of
quality,
sustainability
and availability.
We
conduct a
robust review
of
our pipeline
and bids
at
key
stages, including rigorous due diligence and risk assessment,
and
obtain senior
level approval.
1
Negotiated and
two-stage
procurement
routes allow
us
early engagement
in
the
project and
greater
visibility and
inuence
over
pricing and
programming.
Strategic report
Governance
Financial statement
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g
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l
c
Annual Repor
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21
Managing
risk: principal risks
continued
Poor projec
t d
eliver
y (
including changes to contrac
t
s and contrac
t di
sputes)
Stable
– Our
focus on
project
selectivity and
the quality
of
our order
book and
supply
chain
partners reduce
the probability
of
poor performance.
Inationary pressures
increase
the risk
but are
considered
manageable.
Principal risk
and impact
Update
on
risk
status
Mitigation
Changes to contracts and contract disputes could lead to costs
being
incurred that
are not
recovered,
loss of
protability and
delayed
receipt of
cash.
Failure to meet client expectations could incur costs that erode
prot
margins, lead
to the
withholding
of cash
payments and
impact
working capital.
It may
also
result in
reduction of
repeat
business
and client
referrals.
Not
understanding the
project risks
may
lead to
poor delivery
and
could
result in
reputational damage
and
loss of
opportunities.
Ultimately,
we may
need to
resort
to legal
action to
resolve
disputes,
which can
prove costly
with
uncertain outcomes
as well
as
damaging relationships.
Responsibility:
Executive directors
Divisional senior management teams
The
high proportion
of repeat,
framework-related,
two-stage and
negotiated
work in
our current
order
book continues
to reduce
the
likelihood of
unforeseen changes
and
disputes. meaning
we
are
more likely
to achieve
sustainable
and predictable
outcomes.
There
is a
recognised shortfall
in
the construction
labour market,
exacerbated
by impacts
from Covid
and
Brexit. However,
in the
short
term, while
we have
seen
a limited
number of
issues,
we,
together
with our
supply chain,
are
managing the
situation.
Our
divisions have
worked closely
with
our supply
chain for
many
years, providing
predictable workloads
and
prompt
payment.
Maintaining good
supply chain
relationships
has
helped
us navigate
labour and/or
materials
availability issues.
In
advance of
the proposed
Building
Safety Bill
which primarily
deals
with building
regulations and
re
safety, Construction
and
Urban
Regeneration have
updated their
methodology
to ensure
that
project specications
remain compliant.
This
includes a
complete
refresh of
design management
and
procedures,
increased
onsite scrutiny
and records
and
engagement of
independent
re consultants
on more
complex
schemes.
We
have well-established
systems of
measuring
and reporting
project
progress and
estimated outturns
that
take into
account
contract variations and their impact on programme, cost and
quality.
The
strength of
our supply
chain
relationships and
preference
to
work with
selected partners
reduces
the probability
of project
failure
and helps
to ensure
we
deliver predictable
outcomes.
Where
legal action
is necessary,
we
notify the
Board, take
appropriate
advice and
make suitable
provision
for costs.
Formal
internal peer
risk reviews
highlight
areas of
improvement
and
share best
practice and
‘lessons
learned’.
Various
Perfect Delivery
1
initiatives delivered in Construction and
Urban
Regeneration focus
on improvements
in
product quality
and
predictability and
client experience.
Regular
formal and
informal stakeholder
feedback
allows us
to
intervene when
required and
rene
our oering
to provide
exceptional
outcomes.
We
continue to
use and
enhance
our digital
project
management tools and commercial metrics that highlight areas
for
focus and
provide early
warnings,
enabling early
intervention
in
the construction
cycle.
Following
the Grenfell
Tower tragedy,
all
our divisions
undertook
an
in-depth analysis
of their
portfolios.
Expert advice
was sought
to
review compliance
with legislation
at
the time
of construction
and
in the
context of
amendments
made to
the building
regulations
in 2018.
Where there
have
been concerns
over the
compliance
of cladding
materials or
with
the overall
re-safety
of
buildings, appropriate
remedial activity
and
expenditure has
been
undertaken to
rectify these.
In
common with
the rest
of
the industry,
the Group
will
begin
paying
the Residential
Property Developer
Tax
in 2022.
1
Perfect Delivery
status
is
granted to
Construction,
Infrastructure and
Fit
Out
projects that
meet
all four
client
service
criteria specied
by
the division.
Strategic report
Governance
Financial statement
s
6
8
_
Mor
ga
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al
l Gr
ou
p pl
c
A
nnual Report 202
1
Managing
risk: principal risks
continued
UK c
y
ber ac
tiv
it
y an
d failure to invest in info
rmation techno
log
y
Stable
– To
protect against
increasing
UK cyber-attacks,
we invest
in
security controls
and partners,
including
government
security advisers.
Principal risk
and impact
Update
on
risk
status
Mitigation
Investment
in IT
is necessary
to
meet the
future needs
of
the
business
in terms
of expected
mobility,
growth, security
and
innovation
to enable
its long-term
success.
It
is also
essential to
avoid
a signicant
cyber incident
that
could
cause
reputational and
operational impacts
and/or
a loss
of data
or
intellectual property
that could
result
in signicant
nes and/or
prosecution.
There
continues to
be an
exponential
increase in
criminal activity
and,
while we
are condent
in
our security
strategy, it
is
continually
checked
and challenged.
Responsibility:
The Board
Group management team
IT
security steering
group, reporting
to
the Group
nance director
During
the period
we achieved
re-certication
to ISO
27001 and
the
government’s Cyber
Essentials Plus
Scheme.
We
have enhanced
our visibility
of
security metrics
using new
technology.
We
have an
established security
improvement
plan in
place and,
to
ensure we
keep pace
with
change, have
provided our
security
steering
group with
additional funding
to
introduce new
cyber
tools
as needed.
All
our people
have undertaken
cyber
security awareness
training
during the
year.
We
commission an
external industry
expert
to conduct
regular
cyber
risk analysis
on every
device
used in
our network.
The
data
collected
is independent
of our
other
security systems
and acts
as
an audit
of our
security
controls.
Big
data, digital
construction and
analytics
are at
the forefront
of
our latest
technological developments
and
we continue
to
develop
the use
of these.
The
next steps
will be
to
develop
predictive
tools to
help identify
issues
early in
the construction
cycle including programme, technical and commercial issues and
to
enhance our
current safety
practices.
We
have a
dedicated Group
team
focused on
providing a
stable
and
resilient IT
environment with
continued
investment in
core
infrastructure,
security and
applications. Our
divisional
IT teams
focus
on business-specic
product support.
We
adopt best
practices to
secure
our people
and data.
We
adhere
to the
National Institute
of
Science and
Technology’s
Cybersecurity
Framework.
We
engage with
industry-leading partners
to
adopt appropriate
technologies
to protect
the Group.
Our security steering group provides governance and oversight
of
the Group’s
cyber strategy
and
strength, resources
and
funding.
We
run regular
audits using
dierent
parties (both
technical and
non-technical)
to conrm
that our
controls
remain eective.
Audit
reports are
shared with
the
security steering
group.
We
train all
our people
in
data protection
and information
security
including awareness
and responsibilities.
Our
investment in
IT enables
all
our people
to work
remotely
with
minimal inconvenience.
Strategic report
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Financial statement
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Mor
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Annual Repor
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21
Managing
risk
continued
The G
roup
’s st
rateg
ic planning
process includes identif
ying
emerg
ing risks that may
aec
t our
abilit
y to de
live
r our objec
ti
ves
over the medium to lo
nger term.
This
is supplemented
by additional
reviews
that
take
place as
part of
our
twice-yearly internal
risk management process and monthly Board
reporting,
which focus
on any
matters
likely to
impact
the Group’s
strategy.
We
consider the
following emerging
risks
to be
signicant
but not
to require
any
adjustment
to
our strategy.
However, we
will
continue to
monitor
these risks
for any
signicant
changes.
Em
e
r
g
i
n
g
r
i
s
k
s
Covid
’s i
mpac
t
on
oce
demand
Issue/risk
Update
Comment/outlook
Covid could potentially result in clients
reassessing
the way
they balance
oce
requirements
with remote
working.
This
could impact
the oce
market
and, in
particular,
reduce Fit
Out’s proportion
of
oce-
related
work.
Fit
Out’s record
order book
and
engagement
with
its
clients
and
consultants
suggest that
the
demand
for oce
space will
be
maintained,
along
with exibility
for remote
working,
due
to
the business
benets and
mental
wellbeing
that
result from
social interaction.
The
eects of
the pandemic
create
opportunities
when clients
need their
oce
space
recongured to
accommodate the
new
balance
of oce-
and home-working.
Long-
term s
carcit
y of skille
d labour in the in
dus
tr
y
Issue/risk
Update
Comment/outlook
This
is a
UK-wide issue
and,
while the
sector
works
to broaden
its appeal
as
a career
option,
will
require considerable
government and
sector
interaction
to resolve.
This
could impact
our ability
to
deliver long-term
growth
and/or disrupt
project delivery.
It
could lead
to the
ultimate
resizing of
the
industry
and the
Group.
We
have witnessed
some short-term
issues
but
this has
been largely
mitigated
by our
predominant
two-stage procurement
approach;
this enables
early engagement
of
the
supply chain,
which helps
them
manage
longer-term
labour resourcing
and planning.
The
relationships our
divisions have
built
up
with
their supply
chain helps
mitigate
the
eects
of labour
and/or materials
availability
issues
(see page
33).
Osite,
modular and
new methods
of
construction are already helping reduce the
need
for onsite
resource and
assisting
with the
skill
gap/shortage.
Technology
will also
play its
part
in reducing
the
need for
site-based resource
and
attracting
people into
the industry
but
will
require
some upskilling
to be
undertaken.
There is ongoing government action, such
as
incentivisation of
school leavers
and
new
education
schemes.
We
are engaging
with schools
and
local
communities
to encourage
people to
join
the
industry and
provide training
and
work
opportunities
(see pages
35 and
36).
Our
diversity and inclusion initiatives (see pages 23
and
24) will
increase the
talent
pool available.
As
more young
people join
the
sector and
develop
their careers,
the industry
will
in turn
become
more attractive.
Strategic report
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Financial statement
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70
_
Mor
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21
T
echnolog
y
’s advancing pace
Issue/risk
Update
Comment/outlook
We
do not
adapt to
(or
adopt) new
ways of
working,
invest in
technology or
develop
skills
and/or
supply chain
relationships that
allow
us to
compete
in the
future marketplace.
We
fail to
embrace innovative
technologies
to
increase
eciency for
the Group
and
our clients,
resulting
in a
loss of
competitive
advantage and
a
reduced
ability to
secure repeat
business.
Our divisions generate, develop and manage
new
technological tools
and ideas
that
allow
them
to remain
competitive in
their
markets.
Where
appropriate, these
tools are
shared
across
the Group
to facilitate
continuous
improvement.
Our
divisions continue
to evolve
their
use of
data
analytics, business
intelligence tools,
and
their respective operational, procurement,
commercial
and nancial
systems (see
page
22
for
detail on
our investment
in
technology.)
Microsoft
collaboration tools
have provided
seamless
homeworking for
all our
people,
giving employees easy access to systems
whether
working at
home, on
site
or on
the
move,
and strengthening
our cyber
security.
We
continue to
increase our
adoption
of new
and
sustainable methods
of construction
across
the Group,
including prefabrication,
modular
and osite
production techniques
(via
our
supply chain
partners). We
are
remaining
cautious,
however, to
avoid any
longer-term
defect
and/or legacy
issues.
Articial
intelligence, machine
learning, IoT
(‘Internet
of Things’),
augmented reality,
robotics,
exoskeletons, 3D
printing, and
virtual
reality
are evolving
within the
sector
but are
currently
considered immature.
We have
taken
some initial steps into these areas and are
keeping a close eye on developments as they
are
set
to provide
greater eciencies
and
safer
working
environments as
they become
more
established.
To
reduce carbon
emissions on
our
projects,
we
are using
on-site energy
generation
and
alternative
fuels for
our vehicle
eet
and
generators.
We have
started designing
low-
carbon
buildings and
are using
more
energy-
ecient
construction methods
according to
requirements.
We
expect to
accelerate our
uptake
of
alternative construction
technology
signicantly
over the
next few
years,
including
using alternative products, plant materials and
techniques.
Government
’s approach to building s
afet
y
Issue/risk
Update
Comment/outlook
Costs
arising from
remediating any
buildings
that
fall in
line with
the
criteria set
out in
the
10January
2022 letter
from the
Secretary
of State
for
Levelling Up,
Housing and
Communities
to
the
residential property
developer industry.
We
have considered
the scope
of
relevant
cases
across our
business and
this
review is
ongoing.
It is
possible that
a
relatively small
number
of cases
will be
identied
where we
have
a liability
leading to
remediation.
While
any costs
incurred are
not
expected to
be
material and
will likely
span
a number
of
years,
the industry-wide
solution to
the
issues
set out in the 10 January 2022 letter is still
being
determined and
therefore any
liability
arising
cannot be
reliably estimated
(see
page200).
Managing
risk: emerging risks
continued
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‘
Improving the environment
’ is one
of our
ve T
ot
al Commitment
s which
are a s
trateg
ic prior
it
y for t
he Group.
In
this section
of our
strategic
report, we
provide
our comprehensive TCFD disclosure, including
details
on climate
change scenarios
and
how
they
may aect
our business
in
the short,
medium
and long
term.
We
have included
in our
annual
report
climate-related
disclosures consistent
with the
TCFD recommendations and recommended
disclosures.
In certain
instances, there
may
be
information
reported outside
of the
annual
report
which supports
and provides
additional
detail
to the
information below.
The
table below
sets
out where
information outside
of
that
included
in this
TCFD disclosure
can
be found.
We
have received
a climate
change
A score
from
CDP
for the
second year
running
and further
details
can be
found in
our
CDP response
at
www.cdp.net
(requires registration
to access).
T
a
s
k
F
or
c
e
on
C
l
i
m
a
te
-
re
la
te
d
F
i
n
a
nci
a
l
D
is
c
l
o
s
u
re
s
(
T
C
F
D)
TCFD reporting pillar
Reporting reference
Governance
a) Describe
the Board’s oversight
of climate-related risks
and opportunities.
b) Describe
management’s role in
assessing and
managing climate-related
risks and opportunities.
We outline
the Group’s internal
governance structure and
how each
relevant Board
committee
considers
climate-related issues.
We also outline
management’s role and
how climate
risks and
opportunities
are
considered across
the business. See
the section on
governance on
page 72.
See the
governance report on
pages 86 to
158 for
further details
about
how
the
Group is
governed
and
actions taken
by the Board
during the year.
See the
governance section of
our 2021 CDP
response for
information on
our
governance
specic
to climate
change.
Strategy
a) Describe
the climate-related risks
and opportunities
the organisation
has identied over
the short, medium
and long
term.
b) Describe
the impact of
climate-related risks and
opportunities on
the organisation’s business,
strategy
and nancial
planning.
c) Describe
the resilience of
the organisation’s strategy,
taking into
consideration dierent climate-related
scenarios, including a 2
o
C or
lower scenario.
We outline
our climate-related risks
identied over the
short, medium
and long
term
within
this
disclosure
(see section
on our key
risks on page
74). We
also outline
the
opportunities
that
may benet
the
Group
(see
section on
our key opportunities
on page 75).
The impact
of those climate-related
risks and opportunities
on our
business are
outlined
within
the
risk table
on page
61 and the
opportunities section on
page 75
and are
explored
further
within
the scenario
analysis
section on
page 76.
Ultimately these
risks and opportunities
will impact upon
our revenues,
costs, assets
and
liabilities,
and
as our
understanding of the
impact of these
risks and
opportunities deepens,
our
quantitative
nancial
disclosures in
this area will
increase.
We include
a qualitative analysis
of the resilience
of our
strategy within
the
resilience
of
our strategy
section
on page
77. This explores
the actions we
are taking
to mitigate
and
protect
against
certain risks
and
opportunities, and
areas which we
are looking to
further explore.
Risk management
a) Describe
the organisation’s process
for identifying and
assessing climate-related
risks.
b) Describe
the organisation’s processes
for managing
climate-related risks.
c) Describe
how processes for
identifying, assessing and
managing climate-related risks are integrated into the
organisation’s overall
risk management.
Our process
for identifying, assessing
and managing climate-related
risks is
set out
in
the
approach
to risk
management section
of this disclosure
on page 73.
During the
year we
have
worked
toward
developing a
deeper understanding
of how climate-related
risks may exacerbate
or impact
upon our
wider
view
of
our
risks and
this is outlined
in the approach
to scenario
analysis section
of
this
disclosure
on page
76.
For further
details of our
risk governance and
management, including
our disclosure
on
our
principle
risk
relating to
climate change, see
pages 55 to
70.
Metrics and targets
a) Disclose
the metrics used
by the organisation
to
assess climate-related risks and opportunities in line
with its
strategy and risk
management process.
b) Disclose
Scope 1, Scope
2, and if
appropriate, Scope
3
greenhouse gas
(GHG) emissions, and
the related risks.
c) Describe
the targets used
by the organisation
to
manage climate-related risks and opportunities and
performance against
targets.
We report
on a wide
range of metrics
and targets
to measure
our
impact
on
the environment,
our
compliance with
policy and regulation,
and our wider
societal impacts,
which help
us
to
monitor
and assess
our impacts
in key risk
areas. These are
outlined in
more depth
within
the
metrics
and targets
section
on
pages 78
and 79.
Our commentary
on our Total
Commitment to improving
the environment
on pages
25
to
31
provides
details of
our performance against
our metrics and
targets, sets
out our
key
impact
areas
and our
net
zero
strategy, and
provides case studies
and detail around
the actions
being taken
to
improve
our
resilience to
climate change.
Our carbon
reporting can be
found within the
Streamlined Energy
and Carbon
Reporting
(SECR)
disclosure
on page
80.
See our
2021 CDP response
for additional information
on our
metrics and
targets
relating
to
climate change.
Climate re
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Governance of climate
-
re
lated ris
k
s and oppo
r
tunitie
s
The
Board considers
the impact
of
climate change
on our
stakeholders
as part
of its
annual
strategic
review
process and
is responsible
for
overseeing the
Group’s environmental
performance.
It reviewed
the
Group’s climate-related
risks and
opportunities
as part
of its
annual
risk appetite
review. The
Board
delegates
some elements
of its
responsibilities
to its
various committees.
Over
the last
12 months,
there
has been
an increased
focus
on climate-related
matters at
Board
level
as the
landscape continues
to
evolve with
further regulatory
developments
and changes
in
stakeholder
expectations. The
expertise of
the
Board has
been further
enhanced
through regular
interaction
with management
on matters
such
as our
net zero
strategy.
The
audit committee
is responsible
for
supporting the
Board in
its
responsibilities with
respect to
climate
change including
overseeing compliance
with
climate change
reporting and
considering
climate
change risks
as part
of
the bi-annual
review of
principal
and emerging
risks. The
audit
committee
considered papers
in December
2021
on the
Group’s viability
and
going concern
and TCFD
disclosure.
The
health, safety
and environment
(HSE)
committee is
responsible on
behalf
of the
Board for
considering
the impact
of climate
change
on the
Group’s performance
and
for overseeing
the Group’s
approach
to mitigating
our environmental
impact.
The
remuneration committee
is responsible
for
determining our
remuneration policy,
including
how
environmental,
social and
governance factors
are
considered in
the policy.
Management
is
responsible for
managing on
a
day-to-day
basis
climate-related
risks and
opportunities
faced
by the
Group and
for
delivering our
roadmap to
achieve
the net
zero strategy
set
by
the Board.
Responsibility
for implementation
of our
net
zero strategy
and ensuring
appropriate
actions are
taken
to
meet our
Total Commitment
targets
is delegated
by the
Board
to the
Group management
team.
Our
Group management
team is
responsible
for setting
targets and
key
performance indicators
for
our
Total Commitments,
which include
action
on climate
change.
Our
divisions are
responsible and
held
accountable for
monitoring progress
against
our
environmental
targets and
for determining
their
local roadmaps
to achieving
net
zero, including
monitoring
metrics and
targets at
a
local level.
They are
also
responsible for
day-to-day management
of
climate-related risks
and opportunities.
A
TCFD steering
group, comprised
of
our head
of audit
and
assurance, company
secretary,
representatives
from our
divisions and
representatives
from our
carbon action
panel,
monitored
progress
against the
TCFD requirements
and
the publication
of our
annual
disclosure and
reported to
the
Group nance
director and
audit
committee.
Our
Group climate
action panel
is
responsible for
informing the
Group
management team,
the
divisions and,
ultimately the
HSE
committee on
climate-related risks
and
opportunities and
appropriate
management measures
to be
taken.
The panel
supports divisional
teams
in identifying
potential opportunities and developing innovative solutions to manage climate-related risks, such as
the
Group’s carbon
calculator, Carbon
i
Ca
(see page
27).
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Our approa
ch to risk manageme
nt
The
Board has
overall responsibility
for
determining the
Group’s
risk appetite, ensuring that risk is managed appropriately and that
there
is an
eective risk
management
framework in
place.
During
2021, we
undertook a
series
of workshops
to better
integrate
climate-related risk
management into
our
wider risk
management
processes, deepen
our understanding
of
these
risks,
and assess
the resilience
of
our strategy
against a
range
of
climate
scenarios. These
actions have
strengthened
our depth
of
understanding around climate-related risks and opportunities and
enabled
us to
identify gaps
within
our risk
assessment process.
We
have developed
an internal
register
of climate-related
risks
and
opportunities to
ensure that
any
material risks
are identied
and
managed eectively.
This register
identied
30 risks
and
19opportunities.
Each of
the divisions
assessed
the likelihood
and
severity
or benet
of each
as
part of
their risk
reviews
in October.
At
this stage
of our
analysis,
we have
not identied
risks
and
opportunities
that are
material to
our
business, however
as our
understanding
of scenario
analysis and
climate
risk increases
we
will
continually revisit
and readdress
our
considerations around
materiality.
Going
forward, the
Group head
of
audit and
assurance will
be
responsible
for formally
reviewing and
managing
the register
of
risks
and opportunities
identied and
to
determine whether
or not
they
remain appropriate.
The
adjacent table
sets out
the
time horizons
we use
to
manage
risk,
and the
risk management
processes
in place.
Short-term
0-1 year
Medium
-ter
m
1-3 years
Long-term
3+ years
Twice
a year,
each division
carries
out a
detailed
risk review,
recording signicant
matters
in its
risk register.
Each
risk is
evaluated
both before
and after
the
eect
of
mitigation. During
the year,
the
divisions
assessed
a ‘shortlist’
of climate-related
risks
and
opportunities to
consider whether
they
should
be included
in this
biannual
risk
assessment
process.
Climate change is considered a principal
risk
for the
Group and
its
impact is
reviewed
along with
wider corporate
risks.
Emerging
risks such
as shifts
towards
more
sustainable
methods of
construction and
emerging
legal and
regulatory frameworks
are
also reviewed
as part
of
this process.
Our
Total Commitments,
including carbon
mitigation initiatives and targets, are
monitored
annually.
In
order
to
satisfy
ourselves
that
the
Group
has adequate resources to continue in
operation
for the
foreseeable future,
we
undertake
an annual
viability assessment
covering a three-year period commencing
1
January, which
is in
line
with the
Group’s
budgeting
cycle (see
pages 83
to
85).
The
majority of
our projects
are
generally
short- to medium-term in nature and are
likely to see similar climate impacts to
today.
Our in-depth
project risk
reviews
ensure
that project-specic
environmental
risks
such as
re and
ood
are assessed,
with
each project
including the
development
of risk
management plans
to
minimise
the impact
of such
risks.
Each
of our
divisions is
certied
to the
ISO
14001 Environmental
Management
System
which ensures
that we
have
robust
risk assessment and risk management
processes in place around environmental
incidents
and management.
Our long-term risks and opportunities
are
assessed in
line with
our
strategic
planning,
which considers
emerging
markets
and changing
client behaviours,
technologies, and legal, regulatory and
political
changes. This
process helps
to
identify
mitigation measures
which may
need
to be
incorporated into
our
Group
strategy.
These risks
and opportunities
take
into account
our long-term
carbon
targets,
including science-based
targets.
While
our projects
are generally
short-
to
medium-term,
we recognise
that the
projects
we build
and the
developments
we
put in
place will
need
to be
resilient
against
a changing
future. Our
projects
therefore
include environmental
risk
assessments
which
consider
the
long-term
physical risk impacts on our developments,
to
ensure that
our buildings,
infrastructure
and
developments are
and will
be
resilient
in
a changing
future.
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Our key risk
s
This
table below
summarises the
broader
climate-related risks
and potential
impacts
faced by
the Group.
Mitigating
actions
can be
found in
the
resilience of
our strategy
section
of this
disclosure on
page
77.
Risks
Drivers
Timing of
impact
Risk description
Potential impact
on business
Transition
risks
Political and
regulatory
Short
to
medium term
Increasing
regulation and
policy to
mitigate
climate change
and air
quality.
Loss
of licence
to operate
Penalties
and nes
Increased
operational costs
Negative stakeholder perception
Changes
to building
regulations to
mitigate
climate change,
adapt to
climate
change, or
to drive
a
more circular
and sustainable
economy.
Revised
design specications
and materials
requirements
leading to
increased
costs, changes
to standardised
building
methodologies and
alterations
to the
way we
engage
with our
supply chain
Reputational
Medium to
long term
Carbon
commitments are
insucient for
client
or investor
expectations;
are
not met,
leading to
reputational
damage; or
are costly
to
meet.
Increased
spend required
for climate
change
mitigation
Failure
to win
contracts, secure
lending
or attract
investors
Market
and technology
Loss
of competitive
advantage by
not
keeping pace
and using
the
latest
technology.
Failure
to win
contracts
Risk
of adopting
immature products
or
services.
Increased
litigation or
re-work risk
from
use of
immature technologies
or
services, increasing costs
Selection
of low-carbon
products or
techniques
results in
supply chain
pressures
and increases
costs while
sales
values lag
in the
market.
The
need to
procure low-carbon
products
and services
leads to
changes
to
budgeting and
stretching of
product
viability, increasing
overall
product
costs whilst
sales values
do
not increase
Long term
Trend toward
building
or
improving
existing
structures
replaces full
builds.
Failure to
win contracts
Failure to provide services
Physical
risks
Acute and
chronic
Long term
Project and
supply
chain
level
exposures
to
increasing climate
impacts
(oods,
re, water
shortages, site-run
o
and pollution,
high winds).
Project
delays and
increased operating
costs
Increased
risk of
environmental nes
or
penalties
Increased
risk of
re-work
Supply
chain disruption
or change
to
materials costs
Increased
levels of
unviable land
(for
example, ood
plains) and
reduced
building
plots.
Increased
cost of
land
Increased
sales prices
and damage
to
reputation
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Our key oppor
tuniti
es
Ensuring
we incorporate
climate-related opportunities
into
our strategy
will help
us
to remain
competitive
and potentially
to improve
overall
market share.
We have
identied
the following
opportunities
for the
Group:
Res
ou
rce eci
en
cie
s
and ener
g
y
sou
rce
s
We
could achieve
cost savings
through
increased operational
and supply
chain
eciencies from
waste,
water and
energy use
reductions,
and by
transitioning to
renewable
and low-carbon
energy
sources.
Products and services
By
expanding our
range of
products
and services
to meet
increased
demand for
climate mitigation
and
adaptation
projects such
as ood
defence
systems
and
sustainable
drainage, net
zero buildings,
retrot
domestic heating
solutions and
electric
vehicle charging
points.
Resilience
We
will increase
our resilience
by
retaining and
enhancing our
leadership
approach to
climate
change
through the
development of
tools
and technology
to assess
the
carbon impacts
of buildings
and
to ensure
continued engagement
from
our supply
chain. We
also
collaborate on
research
and
development projects
for new
technologies
and ways
of working
to
help minimise
our climate
change
impact further.
We
have set
an internal
carbon
charge to
ensure resilience
against
potential legal
and regulatory
changes
and to
develop an
internal
fund for
investment in
new
carbon initiatives.
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Our approa
ch to scenario anal
ysi
s
We
have considered
two very
dierent
futures, one
which is
aligned
to the
Paris Agreement
and
the
other is
‘business as
usual’.
We have
considered a
time
horizon to
2030 as
the
agility
of our
business models
means
that many
projects are
short-term
in nature
and can
respond
to market
changes quickly.
However,
our
longer-term strategy
and desire
to
achieve our
net zero
ambition
in 2030
highlights the
importance
of
considering our
risks and
opportunities
over a
longer time
horizon,
and how
our organisation
may
need
to adapt
in the
longer
term to
meet future
needs.
Details
of the
key considerations
identied
under each
scenario are
set
out below.
Paris-aligned
Business-as-usual
Key attributes of scenario
1.5
o
C-2
o
C
warming by
the end
of
the century
Rapid
policy and
regulatory changes
to
drive decarbonisation
Widespread
adoption of
new technologies
Improved
resource eciency
Increased
concern around
sustainability
2.4
o
C-3
o
C
warming by
the end
of
the century
Low
investment in
technology
Increased
resource-use intensity
Degradation
of environmental
systems
Increase
in frequency
and intensity
of
physical climate
events
What will our clients
look like?
The
future-conscious client
will demand
low
resource-intensive products,
energy-
ecient
appliances and
environmentally friendly
developments
that are
benecial for
health
and wellbeing.
The carbon
impact
of buildings
and services
will
be considered
as
part of
purchasing decisions.
Clients
will increasingly
demand infrastructure
which
adapts to
the changing
needs
of
the future
such as
ood-resilience
projects or
retrot solutions
to
ensure buildings
and
developments are
capable of
withstanding
the extremes
of the
future.
Clients
will
increasingly want
properties that
are
not on
or near
ood
plains or
will demand
properties
that are
resilient against
such
climate impacts.
What will we need to
implement in terms of
design and materials?
Electric
vehicle charging
points will
be
required, and
hydrogen gas
or
electricity will
replace
natural gas
as the
primary
method of
heating. Materials
used
for construction
will
be
sustainable, result
in the
lowest
amount
of
embodied
carbon,
and have
the best
thermal
properties to
reduce energy
intensity
in use.
Design
parameters will
need to
take
account of
the demands
of
a warming
planet
with
signicant changes
to meteorological
activities
and increased
temperature
uctuations.
Buildings and
infrastructure will
be
increasingly subject
to intense
storms
and oods
and will
be
required to
withstand intense
summer
temperatures,
as
well as
having the
insulation
properties of
today. Material
prices
may increase
or
uctuate,
due to
weather-related impacts
on
the supply
chain, or
alternatively
may
result
in operational
delays to
projects
as a
result of
delayed
materials sourcing.
Water
shortages
may be
commonplace.
How will our developments
and construction be rolled
out?
More
areas will
be designated
air
quality zones
and our
operations
will need
to
operate
on low-carbon
energy sources.
Our
plant and
eet vehicles
will
need to
be
electric
and emit
no harmful
gases.
There will
be increased
focus
on the
reuse of
materials
and minimising
waste, with
trends
towards the
improvement of
existing
structures,
rather than
full builds.
Sites
will be
subject to
more
intense levels
of rain
and
ood, and
increased summer
temperatures
leading to
operational delays
and
potential damage
to works
in
progress.
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continu
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Resilience of our s
trateg
y
Our
two scenarios
are not
intended
to be
forecasts of
what
the
future
will look
like, but
enable
us to
assess the
resilience
of
our
strategy within
a range
of
potential futures
and to
identify
associated
opportunities to
ensure that
we
are ready
to respond
when
markets shift.
In reality,
we
expect that
over the
next
decade,
we
will need
to ensure
risk
mitigation and
resilience against
a
more
centralised scenario,
which incorporates
aspects
of both
the
Paris-aligned,
and business-as-usual
strategy. Our
analysis
below
highlights
the key
aspects of
our
work which
will mitigate
expected
changes,
and enable
resilience within
a
range of
potential futures.
Paris-
aligned scenario
We
carry out
regular horizon
scanning
to consider
changes to
regulation,
legislation and
policy. Our
designs
and buildings
all
meet
the latest
regulatory requirements
and
will be
adapted to
ensure
the requirements
of the
Part
L building
regulations and
Future
Homes Standard
are met,
where
relevant. Our
designs
and
developments are
frequently delivered
to
a BREEAM
Excellent
rating
and incorporate
green living
spaces
and eco-building
designs.
We are
currently working
to
develop our
rst net
zero
building
(the Eden
building), which
will
be completed
in May
2023.
We
collaborate with
sustainability consultants,
engineers
and
research
bodies to
assess the
latest
technologies and
construction
methodologies
and are
aware of
the
need to
develop the
skills
and
capabilities
required for
implementation. It
is
important to
ensure
that lengthy research and technology processes are undertaken
prior
to the
adoption of
new
technologies, and
we collaborate
with
clients, insurers
and the
wider
market to
ensure acceptability.
Generally,
we are
led by
the
needs and
requirements of
our
clients,
and we
are expecting
increased
demand for
low-carbon
developments
and retrot
solutions such
as
the installation
of
electric
vehicle charging
points and
replacement
gas boilers.
Our
ability
to be
agile and
adaptable
means we
are well
positioned
to
oer
greener alternatives,
and will
help
to ensure
our positioning
as
a sustainability
leader, as
and
when the
market shifts.
We
have set
science-based targets
and
have a
net zero
roadmap
in
place to
ensure we
meet
our mitigation
targets. We
comply
with
a wide
range of
sustainability
reporting requirements
such as
GRI,
CDP, MSCI
and FTSE4Good.
We
have policies
and processes
in
place to
reduce pollution,
such
as advocating
the use
of
solar
and
alternative fuels,
and are
working
with our
supply chain
to
secure
equipment with
low-carbon solutions.
We
are transitioning
our
company cars
and commercial
eet
to an
electric eet,
and
are
advocating electric
plant hire
and
electric generators
where
possible,
which is
likely to
result
in operational
eciencies. We
introduced
an internal
carbon charge
in
January this
year to
help
encourage
our divisions
to reduce
their
own emissions.
The
carbon
charge fund
will be
used
to nance
future climate-related
projects.
We
have developed
a carbon
measurement
tool, Carbon
i
Ca, to
help
us and
our clients
to
understand the
carbon impact
of
the
buildings
we design
and develop.
We
can use
Carbon
i
Ca to help
our supply chain reduce their environmental impacts and to
increase
the resilience
of resourcing
(see
page 27).
Our carbon
action
panel meets
regularly to
share
best practice
on the
lowest
carbon
materials and
products, and
our
projects are
increasingly
focused
on minimising
waste, which
may
result in
operational
eciencies.
Business-as-usual sc
enario
All
of our
buildings are
built
with longevity
in mind,
and
we engage
with
consultants and
specialists during
our
project planning
phase
to ensure
that climate
impacts
such as
ood risk
are
taken
into account.
In many
cases,
uplifts are
applied to
current
climate
models to
ensure that
our
buildings, infrastructure
and
developments
are and
will be
resilient
in a
changing future.
We
know
that the
climate impacts
being
witnessed today
are often
unprecedented and more extreme than predicted and that the
latest
climate modelling
practices are
being
continually developed
over
time. We
will continue
to
apply best
practice throughout
our
projects.
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We
avoid building
on oodplains
and
areas at
high risk
of
increased
physical climate
impacts where
possible,
and are
actively
involved
in securing
pipeline projects
relating
to climate-change
adaptation
(such as
ood-resilience projects).
Our
strong supplier
and
client
relationships
enable collaborative
partnerships with
land
owners
to ensure
that potential
increases
in the
cost of
land
are
mitigated
where possible,
and land
costs
are built
into the
sales
value
of our
projects, mitigating
direct
impacts to
the Group.
Our
operations may
also be
subject
to more
extreme weather
events.
Our projects
are generally
short-
to medium-term
in
nature
and may
therefore not
be
impacted by
the longer-term
climatic
changes expected
in a
business-as-usual
scenario,
however
we are
already seeing
changes
in some
of the
physical
climate
impacts which
could increasingly
impact
us in
the future.
When
bidding projects,
we agree
terms
for managing
risk or
include risk management contingencies to cover potential
climate-related
events such
as ood
and
extreme heat,
and our
method
of working
is adapted
to
suit changing
requirements. We
also
ensure that
risk assessments
are
carried out
prior to
work
commencement
to ensure
that we
have
appropriate protections
against
the worst
climate-related risks.
We
know that
our buildings
and
structures will
require increased
protection
against heating
and cooling,
and
our projects
are
designed
and built
in line
with
client demands
and the
latest
technologies,
project scope
permitting. However,
with
increased
requirement
for cooling,
we will
need
to stay
ahead of
cooling
technologies
which do
not have
a
detrimental climate
impact, and
our
collaborations and
supply chain
partnerships
will help
us in
this
area.
Climate change may also result in increased pressure on our
supply
chains and
materials, either
as
a result
of increased
demand,
or from
physical climate
changes
which alter
levels
of
production, for
example for
timber.
A lot
of our
projects
are
short-term,
which helps
to reduce
the
risk of
signicant price
uctuations.
In addition,
we seek
to
try and
ensure that
materials
are
forward bought
where necessary
and
to ensure
that the
most
sustainable
materials are
incorporated into
building
specications
during
the project
design phase
where
possible. We
also aim
to
minimise
resource use
where possible,
use
modular components
on
our projects
where appropriate,
and
diversify our
procurement
dependencies,
to provide
resilience in
the
event that
specic
resources
become more
stretched.
Collaborations
While
many of
our project
specications
are determined
by our
clients,
we seek
to drive
demand
toward a
greener and
more
sustainable
built environment.
Making climate-related
changes
requires
support and
collaboration across
a
range of
industries
and
markets and
may be
driven
by regulatory
change. Our
collaborative
approach will
help us
to
be ready
with low-carbon
options
as and
when the
market
shifts. We
regularly communicate
with
our clients,
supply chain
and
wider stakeholders
about
actions
we are
taking to
mitigate
climate-related impacts.
Actions
we have
taken in
the
last 12
months include:
working
with insurers
and mortgage
providers
to understand
whether
new technologies
and processes
which
support low-
carbon
options will
be accepted
by
the market;
liaising
with research
bodies, sustainability
consultants
and
engineering
experts to
ensure identication
and
awareness
of
the latest
building specications
and
to identify
areas that
may
warrant further
assessment and
integration
into our
methodologies;
supporting
the Supply
Chain Sustainability
School
which
provides
our supply
chain with
materials
to help
them manage
their
own climate-related
regulatory and
reporting
obligations
and
which helps
us to
manage
the carbon
footprint of
our
supply chain;
our
strong relationships
with our
supply
chain also
means that
we
have greater
visibility of
materials,
availability and
pricing,
and
ensures that
we can
use
a diverse
material palette
to
avoid
reliance on scarce materials; and
we
are members
of the
Mayor
of London’s
Business Climate
Leaders
Group which
is helping
to
shape new
climate-related
regulations
and activities
in the
City.
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continu
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Metric
s and t
arget
s
We
measure and
manage a
wide
range of
metrics which
help
us to
assess how
well
we
are doing
to
minimise our
risks in
a
changing future.
These include
metrics
to measure
our ability
to
meet
our
carbon
commitments, but
also those
relating
to wider
environmental and
regulatory
risks.
In
order to
meet these
targets,
as well
as reducing
our
direct GHG
emissions, we
recognise
that
we
need
to inuence
our clients,
suppliers,
subcontractors, and
other partners
along
the value
chain
more
eectively. We
are developing
better
ways of
delivering products
and
services to
help generate
lower-carbon
emissions during
project delivery
and
product life
cycle. We
have
committed to
use
Carbon
i
Ca on
all projects
with
a value
of £10m
plus,
by 2023.
To
help our
clients to
make
better-informed decisions
to reduce
the
level of
carbon in
both
the
construction
and operation
of buildings,
we
have therefore
committed to
completing
life cycle
assessments,
and providing
clients with
alternative
carbon design
options for
all
signicant projects
by
2023 (where
possible). We
are
also working
with our
supply
chain to
encourage and
support
them
in
reporting their
own emissions
so
that we
can have
a
better understanding
of our
wider
Scope
3
emissions
and can
introduce meaningful
reduction
plans. During
2019, we
developed
a carbon
portal
for
suppliers and
produced guidance
for
our top
1,000 suppliers
by
spend to
capture their
Scope
1
and
2 data.
Guidance on
the
importance of
carbon emissions
reduction
as well
as information
to
help
suppliers
and subcontractors
reduce their
own
emissions is
provided. This
data
will help
us achieve
our
science-based targets.
Numerous
underlying metrics
support and
complement
our net
zero target
and
our broader
Improving
the environment
Commitment, including
reducing
the carbon
footprint of
our
divisions,
enhancing
the natural
value of
the
buildings we
construct and
develop,
recycling and/or
reusing
materials
and reducing
our waste.
Our
metrics are
tracked and
monitored
by each
division. They
are
presented to
senior management
on
a six-monthly
basis, with
accountability
at the
local level.
We
continually review
our metrics
and
targets
as needed,
to ensure
that
the data
we measure
aligns
with our
strategy, and
is
providing
the
information
the business
and our
stakeholders
need to
eectively monitor
our
performance and
demonstrate
our progress.
See pages
16
to 38
for more
information.
Details
of the
key performance
indicators
we assess
and measure,
and
their connection
to our
key
risks
and opportunities,
are outlined
in
the adjacent
table.
Risks
Political and
regulatory
Scope
1, 2
and operational
Scope
3 GHG
emissions
Projects
achieving BREEAM,
CEEQUAL, LEED,
SKA
or other
relevant rating
Monetary
value of
nes for
non-compliance
with
environmental
laws and
regulations
Reputational
Carbon
commitments noted
above
Market and
technology
Hybrid
or electric
vehicles in
eet
Physical
Environmental incidents
Opportunities
Resource
eciency
Energy consumption
Electricity
purchased from
renewable sources
Gas
purchased from
renewable sources
Waste
produced
Waste
diverted from
landll
Products and
services
Projects
achieving BREEAM,
CEEQUAL, LEED,
SKA
or other
relevant rating
Resilience
Subcontractors
requested to
report their
own
emissions
Subcontractors
with accredited
science-based targets
based
targets
Physical
Environmental incidents
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1
Emissions
are predominantly
from bulk
fuel
used on
sites,
our
vehicle eet
and electricity
use.
In line
with our
science-
based
targets, we
committed to
reduce
our Scope
1 and
Scope
2 emissions
by 30%
against
our 2019
baseline of
20,903
tonnes CO
2
e
by 2025.
Our Group
director
of sustainability
and
procurement
is responsible
for overseeing
the
divisions’ delivery
of
this
target.
We
submitted our
second report
for
the Group
under the
Energy
Savings
Opportunity Scheme
(ESOS) in
June
2019 and
will make
our
next submission
in December
2023.
GH
G em
is
si
on
s (ton
ne
s CO
2
e)
2021
2020
2019
baseline
Scope
1 –
operation of
facilities
1
11,243
16,031
18,124
Scope
2 –
indirect emissions
(purchased energy)
2
2,352
2,789
2,779
Total
Scope 1
and Scope
2
emissions
13,595
18,820
20,903
Operational
Scope 3
– other
indirect emissions (related
activities)
3
3,502
3,970
6,339
Total emissions
17,097
22,790
27,242
1
Direct emissions
from
sources
owned or
controlled
by the
Group.
2
Indirect emissions
generated
from
purchased energy.
3
All indirect
emissions
not
included in
Scope
2 that
occur
in
limited categories
of
our value
chain
as
measured by
the
Toitū ‘carbonreduce’
scheme.
Carbon inten
sit
y
2021
2020
2019
baseline
Total Scope
1 and Scope
2
emissions (tonnes CO
2
e)
13,595
18,820
20,903
Total Scope
1, Scope 2
and
operational Scope
3 emissions
(tonnes CO
2
e) (total emissions)
17,097
22,790
27,242
Revenue
£3,213m
£3,034m
£3,071m
Carbon intensity
for Scope 1
and
Scope 2
emissions
4.2
6.2
6.8
Carbon intensity
for total
emissions
5.3
7.5
8.9
During
2021, we
implemented the
following
energy-eciency
improvements:
continued
to encourage
the use
of
Microsoft Teams
to increase
operational
eciency and
reduce the
need
for travel;
continued
to work
with our
energy
broker to
ensure the
robustness
of our
energy consumption
data;
and worked
with
our
divisions to
improve the
recording
of purchased
water
consumption;
reduced
energy consumption
in our
oces,
for example
through
the use
of LED
and
energy-ecient lighting;
implemented
energy eciency
benchmarks on
new
equipment,
such
as automatic
computer shutdowns
rather
than
hibernation;
decarbonised
our eet,
including cars,
vans
and telehandlers
by
phasing
out the
least ecient
models
and purchasing
or hiring
more
fuel-ecient, electric
or hybrid
alternatives;
switched
to hydrotreated
vegetable oil
(HVO)
fuel where
possible;
increased
our use
of electricity
on
site, including
the installation
of
eco cabins;
and
encouraged
our employees
to reduce
their
carbon footprint
from
travel, for
example by
providing
bicycle racks,
showers
and
other facilities
on site,
promoting
car-sharing and
capturing
shared
car miles
in our
monthly
reporting.
Climate repor
ting
continued
We suppor
t t
he Paris A
gre
ement and have
commit
ted to
reduce
our Scope
1 and
Scope 2
greenhou
se gas
(
GHG) emissions by
60% against
our 20
1
9 baseline of 2
0,903 tonnes C
O
2
e by
2030.
This
report has
been prepared
in
accordance with
the
requirements
of the
measure-step of
the
Toitū carbon
marks,
which
is based
on the
Greenhouse
Gas Protocol:
A Corporate
Accounting
and Reporting
Standard (2004)
and
ISO 14064-
1:2018
Specication with
Guidance at
the
Organization Level
for
Quantication
and Reporting
of Greenhouse
Gas
Emissions and
Removals.
Where relevant,
the inventory
is
aligned with
industry or
sector
best practice
for emissions
measurement
and reporting.
In
addition,
GHG emissions
are externally
veried
by Achilles
to meet
the
requirements of
the Toitū
‘carbonreduce’
certication standard
(formerly
CEMARS, the
Carbon &
Energy
Management And
Reduction
Scheme). Achilles
is a
global
data validation
company
that
provides assurance
services for
GHG
emissions data.
Emissions
reported correspond
with our
nancial
year and
include
all
areas for
which we
have
operational
control
in
the UK,
excluding
joint
ventures. The
materiality threshold
has
been set
5%
1
with
all
operations estimated
to contribute
more
than 1%
of the
total
emissions
included. No
material emissions
have
been omitted.
Our
total energy
consumption used
to
calculate our
2021 UK
and
oshore emissions
was 103,892,314
kWh
(2020: 90,802,086
kWh)
and these
total emissions
reect
the emissions
of our
UK
operations.
1
The allowance
built
into
the ‘carbonreduce’
accreditation
that permits
+/-5%
variance in the gross emissions total in case a miscalculation is discovered
following a
carbon
audit.
S
t
r
e
a
m
lin
e
d
E
n
e
r
g
y
an
d
C
ar
b
o
n
Re
p
o
r
t
i
n
g
(
S
EC
R
)
Strategic report
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Financial statement
s
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Annual Repor
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21
We
aim to
comply with
the
non-nancial reporting
regulations contained
in
sections 414CA
and 414CB
of
the
Companies Act
2006. Our
divisions
communicate Group
and divisional
policies
to their
employees
and
supply chains.
Our due
diligence
with regard
to ‘environmental
matters’,
‘employees’ and
‘social matters’
is
driven
by our
Total Commitments,
which
are a
strategic priority
for
the Group
(see page
6).
Policies
Annual report
page references
Environmental
matters
Code
of Conduct,
published on
our
website: commits
to caring
for
the environment.
Sustainable
procurement policy:
commits to
being
socially and
environmentally conscientious
in
our procurement.
Supplemental
timber policy:
requires procurement
from
sustainable sources.
Sustainable
water policy:
commits to
building
to the
highest standards
as
those detailed
within
the RIBA
Climate Challenge
2030
water usage;
retrotting water-ecient
kit;
avoiding
procuring
materials or
equipment which
require
intensive water
use in
their
manufacture,
installation
or use;
procuring water-ecient
products;
incorporating SuDS
(sustainable
drainage
systems); and
advising on
saving
water.
Due
diligence, pages
25 to
31.
Impacts,
pages 25
to 31
and
page 80.
Minimising our
environmental
impact increases
our
ability to
win work
and
attract talented
employees.
Principal
risks, page
61.
Employees
Code of
Conduct: commits
to
conducting business
in an
open
and ethical
way in
line
with
our
Core
Values and
Total Commitments.
Group
health, safety
and wellbeing
management
policy framework:
incorporates the
Group
occupational
health and
safety policy
which
commits to
providing a
safe
and healthy
working
environment
for our
employees and
others
involved in
or aected
by
our works.
Divisional
occupational health
and safety
policies:
cover all
employees and
extend
to our
subcontractors
and suppliers
working on
our
projects.
Due
diligence, pages
11, 12,
17
to 24,
62, 105
to
109 and
123 to
125.
Impacts,
pages 11,
12, 17
to
24 and
109. A
diverse
and qualied
team of
people
helps
us
win in
our target
markets
and in
pursuing innovative
solutions
for our
clients.
Principal
risks, page
63.
Social matters
We
are committed
to providing
a
better built
environment for
all.
A large
proportion of
our
work
is for
the public
sector
and therefore
falls under
the
Public Services
(Social Value)
Act
2012.
Sustainable
procurement policy:
commits to
being
socially and
environmentally conscientious
in
our procurement.
Due
diligence, pages
35 to
38.
Our divisions
monitor their
suppliers’
adherence to
our
procurement
policy, giving
feedback or
taking
appropriate action
as required.
Impacts,
pages 35
to 38.
We
have developed
a social
value
bank that
monetises
activities
that add
value to
local
communities on
our projects
(page
37).
Social
matters are
not regarded
as
a principal
risk. However,
each
division carries
out
regular
risk assessments
to identify
those
areas of
its business
and
markets that
may
be
susceptible to
risk, and
embeds
appropriate procedures
in its
day-to-day
operations.
Non-
nanc
ial
inform
ati
on
statement
Strategic report
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Financial statement
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Policies
Annual report
page references
Human rights
Code of
Conduct:
states
our
commitment
to the
Universal Declaration
on
Human
Rights,
providing
equal opportunities,
creating a
diverse
and inclusive
workplace, and
preventing
modern
slavery in
our operations
and
supply chain.
It prohibits
employing
people either
directly
or through
third parties
who
we believe
to be
subject
to forced
labour and
engaging
in
any activities
involving people
or
countries subject
to UN,
US,
EU or
UK sanctions.
The
Code
prohibits
bullying, harassment,
and discrimination
on
the basis
of sex,
pregnancy
or maternity,
gender
reassignment, sexual
orientation, religion
or
belief, marriage
and civil
partnership,
age,
race
or disability;
it requires
fair
and objective
employment decisions
based
on merit.
Modern
slavery policy:
states the
Group’s
and its
suppliers’ obligations
with
regard to
human
tracking,
forced labour,
recruitment fees,
document
retention, contracts
of employment,
deposits,
humane treatment,
workplace equality,
wages
and benets,
working hours,
freedom
of
movement and
personal freedom
and
the use
of employment
agencies.
Modern
slavery statement:
published on
our
website.
Whistleblowing
policy and
procedure.
Due
diligence, pages
19, 20
and
105 to
109. Adherence
to
our Code
of Conduct
and
human
rights related
policies is
regularly
monitored and
reviewed. Ultimate
oversight
belongs
to the
Board, audit
committee
and our
Group general
counsel.
The Board
is
notied
of any
non-compliance alerted
via
the raising
concerns facility,
while
divisional
HR
leads and
managers deal
direct
with individual
cases as
appropriate.
We conduct
regular
internal audits
which would
uncover
any instances
of non-compliance
such
as
anti-competitive
behaviour, bribery
or corruption.
Impacts,
pages 20
and 109.
See
also our
modern slavery
statement
on our
website.
Human
rights breaches
are not
considered
a principal
risk to
the
Group, although
there
is
a risk
of breach
by
an overseas
supplier and
of
people working
on our
sites
without
the
legal right
to work
in
the UK.
We require
all
suppliers to
comply with
legislation
and
to
carry out
checks on
rights
to work,
and we
expect
that they
require the
same
of
their
own
suppliers.
Anti-corruption and
anti-bribery
Code
of Conduct:
states that
we
will not
tolerate any
form
of bribery
or corruption.
Bribery
Act guidance
note: provides
guidance
on the
Bribery Act
2010
and how
it is
relevant
to
the
Group.
Group-wide
dealing policy:
claries to
all
employees regulations
relating to
the
misuse of
inside
information.
Dealing
code: states
directors’ and
others’
obligations to
comply with
market
abuse regulation.
Competition
law compliance
policy: claries
requirements
under the
Competition Act
1998
and
Enterprise Act
2002. Each
division
provides its
employees with
guidelines
tailored to
the
division’s
activities.
Due
diligence, pages
108, 109
and
120.
Impacts,
page 109.
There was
no
evidence of
any systemic
bribery
and corrupt
activity
in
2021.
We
do not
regard corruption
and
bribery as
a principal
risk
to the
Group.
Copies
of our
policies can
be
obtained from
the Group’s
company
secretary on
request. Our
business
model
is set
out on
page
5 and
non-nancial key
performance
indicators on
pages 7
to
9.
Non
-
nan
cial informati
on
s
tat
eme
nt
continued
Strategic report
Governance
Financial statement
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1
Viabili
t
y
As
required by
provision 31
of
the UK
Corporate Governance
Code,
the directors
have assessed
the
prospects and
nancial
viability
of the
Group and
have
concluded that
they have
a
reasonable
expectation that
the Group
will
be able
to continue
in
operation
and meet
its liabilities
as
they fall
due over
the
period of
the
assessment.
This
assessment took
account of
the
Group’s current
position and
the
potential nancial
and reputational
impact
of the
principal risks
(as
set out
on pages
58
to 68)
on the
Group’s
ability to
deliver the
Group’s
business plan.
This assessment
describes
and tests
the
signicant
solvency and
liquidity risks
involved
in delivering
the
strategic
objectives within
our business
model.
The
assessment has
been made
using
a period
of three
years
commencing
on 1
January 2022
which
is in
line with
the
Group’s
budgeting
cycle. This
gives good
visibility
of future
work as
the
majority
of the
Group’s workload
falls
within three
years and
enables
more specic
forecasting as
the
Group’s contracts
follow
a
life cycle
of three
years
or fewer.
There is
inherently
less visibility
over
the expected
workload beyond
three
years, and
increased
uncertainty
around the
forecasted costs
to
deliver. Consequently,
it
is deemed
most appropriate
to
perform its
medium-term
planning
over a
three-year period.
The
directors have
compiled cash
ow
projections incorporating
each
division’s detailed
business plans
with
an overlay
of
Group
level contingency.
At Group
level,
the base
case nancial
projections
assume modest
revenue growth,
and
improvements
in
both prot
margin and
return
on capital
employed in
line
with
the
Group’s strategy
and medium-term
targets.
As
per the
business model,
operating
cash ows
are assumed
to
broadly
follow forecast
protability in
the
Group’s construction
activities,
but are
more independently
variable
in regeneration,
driven
by the
timing of
construction
spend and
programmed
completions
on schemes.
The
base case
business plan
includes
the Group
maintaining
positive
daily average
net cash
for
the entirety
of the
period
reviewed,
with no
drawings under
its
loan facilities.
The Group
has
£180m of
committed revolving
credit
facilities, undrawn
at
31
December 2021,
of which
£165m
is committed
until the
nal
quarter
of 2024
and £15m
is
committed until
the end
of
the rst
quarter
2024. The
£165m facility
has
a one-year
extension option,
with
the agreement
of the
lending
banks. For
the purposes
of
testing
viability, it
is assumed
that
equivalent facilities
are available
past
these maturities
as the
Group
has a
track record
of
renewing
these
facilities.
The
impact of
a number
of
plausible downside
scenarios on
the
Group’s
funding headroom
(including nancial
covenants
within
committed
bank facilities)
have been
modelled
with consideration
of
the Group’s
principal risks
that
could have
a direct
impact
on
operational
cash ows.
Going
conc
ern
an
d
viabi
lit
y
statement
Going concern
The
Group’s business
activities, together
with
the factors
likely to
aect
our future
development, performance
and
position, are
set
out
in this
strategic report.
As
at 31
December 2021,
the
Group had
net cash
of
£358.0m
and
committed banking
facilities of
£180m
which are
in place
for
more
than one
year. The
directors
have reviewed
the Group’s
forecasts
and projections,
which show
that
we will
have a
sucient
level
of headroom
within facility
limits
and covenants
over the
period
of assessment
which the
directors
have dened
as the
date
of approval
of the
31
December 2021
nancial statements
through
to 28
February 2023.
After
making enquiries,
including
the
review of
sensitivities for
plausible
downside scenarios
to the
forecasts,
the directors
have a
reasonable
expectation that
the
Company
and the
Group have
adequate
resources to
continue
in
operational existence
for the
foreseeable
future. Thus
they
continue
to prepare
the annual
nancial
statements on
the
going
concern basis.
See page
174
for the
going concern
basis
of
preparation
in the
consolidated nancial
statements.
Strategic report
Governance
Financial statement
s
8
4
_
Mor
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A
nnual Report 202
1
The
table below
gives an
overview
of
the
scenarios modelled
and the
mapping
to
the
relevant Group’s
principal risks.
Scenario
Principal risk
mapping
Reduced revenues in the construction divisions
The
cash performance
of the
construction
divisions is
correlated to
the
levels of
revenue achieved.
We
have modelled
a scenario
of
reduced revenue
that could
be
caused by
changes in
the
UK
economic conditions
or
the insolvency
of a
key
client/partner.
Economic
change and
uncertainty
Partner
insolvency and/or
adverse behavioural
change
Reduced margins in the construction divisions
The
cash performance
of the
construction
divisions is
also correlated
to
the level
of margin
achieved
by
each
division.
We
have modelled
a scenario
of
reduced margins
that could
be
caused by
changes in
the
UK
economic conditions
and
also ineciencies
that could
be
a result
of poor
project
selection, poor
project delivery,
resourcing
issues,
health
and safety
issues and
the
impact of
disruption that
could
be caused
by cyber
activity
or
climate change.
Economic
change and
uncertainty
Poor
project selectivity
Poor
project delivery
We
cause a
major health
and
safety incident
and/or adopt
a
poor safety
culture
We
fail to
attract and
retain
the talent
we need
to
maintain and
grow the
business
Climate
change
Cyber
activity
Working capital deterioration in the construction divisions
We
have modelled
a scenario
including
a deterioration
of working
capital
in the
construction divisions
that
could
be
caused
by delays
in receiving
payments
from customers.
Mismanagement
of working
capital and
investments
Partner
insolvency and/or
adverse behavioural
change
Project delays and cost increases in regeneration divisions
We
have modelled
a scenario
where
there were
project delays
in
respect of
the regeneration
divisions
and
also
reduced
margins.
This
scenario could
be the
result
of changes
in the
UK
economic conditions,
including changes
in
the
UK residential
market,
and also
ineciencies that
could
be a
result of
poor
project delivery,
resourcing issues,
health
and
safety
issues,
or the
impact of
disruption
that could
be caused
by
cyber activity
or climate
change.
Economic
change and
uncertainty
UK
residential market
exposure
Partner
insolvency and/or
adverse behavioural
change
Poor
project delivery
We
cause a
major health
and
safety incident
and/or adopt
a
poor safety
culture
We
fail to
attract and
retain
the talent
we need
to
maintain and
grow the
business
Climate
change
Cyber
activity
Severe downside case
We
have also
modelled a
scenario
where all
of the
scenarios
above are
combined at
the
same
time.
All
of the
above
Going concer
n
and viabilit
y sta
teme
nt
c
ontinued
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Going concer
n
and viabilit
y sta
teme
nt
c
ontinued
There
are no
individual scenarios
which
are considered
to materially
impact
the Group’s
viability, and
our
assessment included
modelling the
nancial
impact on
the business
plan
of severe
downside
scenario
where the
impact of
a
reasonably plausible
combination of
the
divisional risks
were applied
in
aggregate.
In
the event
of this
severe
collection of
scenarios occurring,
there
is still
a reasonable
expectation
that
the
Group will
be able
to
continue in
operation and
meet
its liabilities.
In
addition, the
Board has
considered
a range
of potential
mitigating
actions that
may be
available
if
this worst-case
collection of
scenarios
arose. These
primarily include
a
reduction in
investment in
working
capital and
the actions
successfully
deployed during
the disruptions
to
the Group’s
operations
during
the rst
impact of
the
Covid pandemic
in March
2020.
These however
exclude any
further
government
assistance.
As
part of
the sensitivity
analysis,
the directors
also modelled
a
scenario that
stress tests
the
Group’s
forecasts
and projects,
to determine
the
scenario under
which the
headroom
would exceed
the
committed bank
facility. The
model
showed that
the Group’s
operating
prot would
need to
deteriorate
substantially for
the headroom
to
exceed the
committed facility.
The
directors consider
there
is no
plausible scenario
where
cash inows
would deteriorate
this
signicantly.
Based
on the
results of
its
review and
analysis, the
Board
has a
reasonable expectation
that
the
Group
will
be able
to continue
in
operation and
meet its
liabilities
as they
fall due
over
the
three-year period
of
its assessment
until 31
December
2024.
Assessing
the Group's
prospects beyond
the
review period,
the directors
consider
that demand
will
remain
strong across
all divisions.
The
Group has
maintained a
well-capitalised
balance sheet,
has a
strong
order book
and operates
a
resilient business
model.
Th
is strat
eg
ic repo
r
t
was appr
ove
d
by
the Boar
d
and sign
ed on
its beha
lf by:
John Morgan
Chief
Executive
24
February 2022
Str
ate
gi
c rep
or
t
Gover
nance
Financial statements
Str
ate
gi
c rep
or
t
Gover
nance
Financial statements
Str
ate
gi
c rep
or
t
Gover
nance
Financial statements
Chair
’s s
t
atement
87
UK Corpor
ate Gov
ernan
ce Code compliance s
t
ateme
nt
89
Boa
rd of direc
tor
s
90
Group management team
95
Direc
tors’ and corporate governanc
e repor
t
98
– Nomination c
ommit
tee repor
t
1
1
0
– Audi
t commi
t
tee repo
r
t
1
1
5
– Heal
th, s
afe
t
y an
d env
ironmen
t commit
tee repo
r
t
1
23
Direc
tors’ remuneration r
epor
t
1
26
O
ther s
t
a
tutor
y i
nform
atio
n
1
55
Governance
86 _ M
o
rg
an S
in
da
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ro
up p
lc
A
nnual Repor
t 20
2
1
87
_
Mo
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in
da
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r
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p pl
c
Annual Repor
t 20
21
Str
ate
gi
c rep
or
t
Gover
nance
Financial statements
Chair
’s s
t
ate
ment
Board changes
Succession planning for the Board and the Group as a whole was
a key area of focus for the nomination committee. In order to
further the diversity and skill set on the Board, we were delighted
to announce the appointment of Kathy Quashie as non-executive
director. She joined the Board on 1 June 2021.
Board evaluation
The nomination committee conducted an internal evaluation of
the Board and its committees in 2021. The overall outcome of the
review
conrmed that
the Board
continues
to work
well, with
the
right issues being discussed and appropriate Board involvement in
key decisions. Further information on the process and outcomes
can be found in the nomination committee report.
Strateg
y rev
iew
The Board is committed to the delivery of its clear strategy
underpinned by our Core Values. In setting the strategy, the
Board recognises its duties and responsibilities to shareholders
and other stakeholders, including the communities in which
we operate. We believe that our purpose and supporting Core
Values continue to drive our strategy and our ongoing resilience
and progress in respect of each of our strategic priorities,
including consistently delivering on our responsible business
TotalCommitments,
set out
in further
detail
on page
6.
The continuing focus this year has been to maintain the Group’s
strong
nancial position,
through disciplined
contract
selectivity,
improved quality of earnings and operational delivery and
ensuring that our purpose, values, and strategy remain aligned
with our desired culture. For more information on our strategy
see page 6 and for the Board’s review of strategy, see pages 102
and 103. Our stakeholders’ views and how they are impacted are
important considerations in Board decision-making (see pages
102
to 104).
The Board
recognises
that continuing
eective
engagement across all our stakeholder groups will ensure the
continuing resilience of the business over the longer term. In this
report, we set out the principal decisions the Board made during
the year, together with the stakeholder groups we considered
during our discussions. Our section 172 statement can be found
in our strategic report on page 10.
Our pe
ople
The performance of our c6,900 employees and the large number
of subcontractors used by the divisions to deliver their projects are
key to our long-term success. The Board’s top priority remains the
health, safety and wellbeing of our employees and all those who
work on or visit our sites. Throughout the year, I have continued
to regularly attend the health, safety and environment committee
meetings which provide the Board with additional focus and
insight in respect of the Group’s health and safety performance.
Dear Sharehol
der
I have pleasure in presen
ting the 2021 corporate
governance repor
t
. Throug
hout 2021
, the B
oard
has remained
focuse
d on
eec
t
i
ve leadership
and promoting t
he long-ter
m success of t
he
Group w
hile ensuring tha
t good governance is
embedded through our governanc
e framework
.
Our 202
1 year
-
en
d result
s demo
nst
rate th
e
continue
d resilience in our busin
ess m
odel.
Our commit
ment to our busines
s s
trateg
y
is resulting in or
ganic grow
th an
d increased
market share which enabl
es us to deli
ver long-
term sust
ainable value for
the bene
t of
all
our
st
akeholders. T
hroughout the year
, we remained
commit
ted to our cult
ure and values an
d
ensuring tha
t we have considered the in
teres
t
s
of our s
t
akeholder
s in our de
cision
-mak
ing.
Michael Findlay
Chair
8
8
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ate
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nance
Financial statements
Chair
’s s
t
atement
continued
I joined the Group because I was so impressed with the open and
transparent culture of the business that facilitates a decentralised,
empowering
environment. Over
the last
ve
years as
chair, I
have
seen the Group go from strength to strength. I am proud of the
quality and professionalism of our teams who deliver a huge range
of projects, from repairs and maintenance of people’s homes to
large-scale infrastructure projects and supporting the regeneration
of cities and towns across the UK. Across the business, our people
are open, driven and dedicated to making the business better
and better. Employee engagement remains high on the agenda
of the directors and the divisional teams. The Board reviews the
outcomes
and proposed
actions of
divisional
sta engagement
activities and surveys and is responsible as a whole for engaging
with our employees, primarily as part of its annual strategy review
process. With the easing of government Covid guidelines and
restrictions during 2021, the Board was pleased to be able to
meet face to face with a number of employees during the year.
At our December meeting, we had a dedicated feedback session
including
a review
of the
appropriateness
and eectiveness
of our
employee engagement mechanism for non-executive directors
(see page 113 for further details).
Diver
sit
y and inclus
ion
We remain committed to having a Board and employee base that
is diverse in its widest sense and we are continuing to work on
improving diversity and inclusion at all levels across the Group.
This includes ensuring that we recruit people from a range
of
dierent socio-economic,
educational and
industry
sector
backgrounds. The results of the diversity and inclusion survey
conducted in 2020 and management’s proposed response were
discussed in the early part of the year and supported by the
Board. The Board also reviewed, at its meeting in December, the
actions being taken throughout each of our divisions during the
year to increase diversity and inclusion. Further details can be
found on pages 23 and 24.
T
ask Force on C
limate
-
relate
d Financial Disclo
sures
In the strategic report, we have reported fully under the TCFD (see
pages 71 to 79). The Group has a long-established responsible
business strategy and we pride ourselves in being leaders in
sustainability and reporting with transparency and openness
about our goals and how we will achieve them. Our actions to
combat climate change and reduce waste remain a key focus
of the Board and the Group. Our Total Commitments, set out
on page 6, continue to provide challenging targets to ensure we
work responsibly and conduct our activities ethically as well as
adding additional social value in the communities in which we
operate. We also announced our commitment to becoming a
net
zero company
by 2030,
reecting
our continued
dedication
to being a market leader in this area. We recognise that it will not
be possible to eliminate all embodied carbon from our activities
and we will be looking to continue to invest in projects such as our
partnership
with Blenheim
Estate (see
page
29) to
oset these.
Further detail on our strategy to achieve net zero, along with
the actions and initiatives we are currently taking are set out on
pages 25 to 29. The Board, supported by the health, safety and
environment committee, keeps our progress in achieving our Total
Commitment goals under review.
In conclusion, we continue to have a clear strategy, a strong
nancial
position and
a great
team
of employees.
This positions
us well to continue to capitalise on the UK’s growing need for new
housing, improved infrastructure and urban regeneration and to
create long-term value for all our stakeholders.
Michael Findlay
Chair
24 February 2022
“I joined the Group because I was
so impressed with the open and
transparent culture of the business
that facilitates a decentralised,
empowering environment. Over
the
last ve
years
as
chair,
I
have
seen the Group go from strength
tostrength.”
 Strategic report
for our
performance
in 2021
 Nomination committee
report 110
 Key matters
considered by
the
Board in
2021
102
 Section 172
statement 10
 Our stakeholders
11
 Diversity and
inclusion 23,
112
 Improving the
environment 25
89
_
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rg
an S
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da
ll G
r
ou
p pl
c
Annual Repor
t 20
21
Str
ate
gi
c rep
or
t
Gover
nance
Financial statements
UK Co
rpora
te Gov
erna
nce C
ode co
mpli
anc
e st
atement
A
s a
UK premium-lis
ted company
, we
have
adopted a gover
nance st
ru
c
ture b
ased
on the
Principle
s of
the UK
Corporate
Gover
nance C
ode published i
n July 20
1
8 (the
Code
), which is
available on
the Financial
Repor
ting Council
’s website
at frc.org.uk.
Further details of how we have applied the Code’s Principles
and complied with its Provisions are set out in the directors’ and
corporate governance report, the remuneration report and, where
appropriate, cross references to our strategic report.
The Company has applied all the Principles, and complied with
all Provisions of the Code, except for Provision 38. The executive
directors’ pension contributions will be aligned with the majority
of employees from 1 January 2023 as set out on page 128 of the
remuneration committee report.
The strategic report discloses information on our engagement
with our employees, suppliers, customers and other stakeholders.
In line with the Companies Act 2006 Regulations, further
information on how the directors have performed their duties
under section 172 of the Companies Act 2006 is also contained in
the strategic report.
Board lea
der
ship and company purp
ose
A.
Board eectiveness
98
B.
Purpose, values, strategy and culture
105
C.
Governance framework and Board resources
99
D.
Engagement with stakeholders
11
E.
Oversight of workplace policies and practices
108
Div
ision of resp
onsibilities
F.
Role of the chair
100
G.
Independence
101
H.
External commitments
and conicts
of
interest
101
I.
Key matters considered by the Board in 2021
102
Composition, succes
sion and evaluation
J.
Appointments to the Board and succession planning
111
K.
Board composition and length of tenure
110
L.
Board evaluation
113
Audit
, risk and internal control
M.
Financial
reporting
External
audit and
internal audit
–
independence and
eectiveness
117
N.
Fair, balanced and understandable assessment
117
O.
Risk management and internal controls
119
Remuneration
P.
Remuneration philosophy
130
Q.
Remuneration policy
133
R.
Annual report on remuneration
143
A
p
p
l
y
i
n
g
t
h
e
C
o
d
e
’
s
P
r
i
nc
i
pl
e
s
acr
o
s
s
t
he
bu
s
i
ne
s
s
Code Pri
nciples
This table provides an overview of where the application of Principles (A to R) of the Code have been
addressed in the annual report.
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ate
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Financial statements
A
s at t
he date of this repor
t
, th
e Board consis
t
s of the
chair
, tw
o ex
ecu
ti
ve director
s and ve non-
e
xecuti
ve
direc
tor
s
, each bring
ing a range of skills, e
xpe
rience,
know
ledge, and b
ack
ground to B
oard discus
sions.
Each Board member has considerable experience in strategy development
and implementation, corporate governance, and regulatory requirements
which enables them to discharge their Board responsibilities and promote
the long-term sustainable success of the Group.
All of the non-executive directors, including the chair, are considered by the
Board to be independent in character and judgement and, as at the date of
this report, no cross-directorships exist between any of the directors.
Board
of direc
tor
s
Appointed:
October 2016
Committee membership:
nomination (chair)
Independent on appointment:
Yes
Responsibilities
Responsible
for leadership
and eectiveness
of the Board including succession planning,
diversity
and inclusion,
eective communications
with stakeholders and setting the meeting
agenda. Michael leads the nomination
committee.
Skills and experience
Michael has spent his career in investment
banking and advised the boards of many
leading UK public companies on a wide range of
strategic,
nance and
governance matters.
He
also
has signicant
public board
experience.
Contribution to long-term success
The
Board benets
from Michael’s
extensive
experience
in business
and corporate
nance
together with his expertise in property, risk
management
and communications.
His
contribution assists the Company in pursuing its
strategy, maximising the value of the business,
and delivering long-term, sustainable value for
all
our stakeholders.
Michael’s leadership
of
the
Board encourages a collaborative approach and
open debate by all Board members.
Current external roles
Michael is non-executive chair of London Stock
Exchange plc, a subsidiary of London Stock
Exchange Group plc, and non-executive director
of
Royal Mail
plc and
Jarrold
& Sons
Limited. He
was appointed as chair of the Financial Conduct
Authority’s
markets practitioner
panel in
July
2021.
Career experience
Michael was previously the co-head of
investment banking for the UK and Ireland
at Bank of America Merrill Lynch, senior
independent director at UK Mail Group PLC,
chair of Fin Capital Limited and a non-executive
director of The International Exhibition Co-
Operative Wine Society Limited.
M
i
ch
a
e
l
F
i
n
dla
y
Chair
91
_
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Boar
d of dire
c
tor
s
continued
Appointed:
October 1994
Independent:
No
Responsibilities
Responsible for leading the Group, developing
and implementing the strategy and policies
approved by the Board, embedding values
and culture, and driving diversity and inclusion
throughout the business. John leads the Group
management team.
Skills and experience
John co-founded Morgan Lovell in 1977 which
merged with William Sindall plc in 1994 to form
Morgan
Sindall Group
plc. He
instituted
and
champions
the Group’s
decentralised business
model that empowers the divisions to challenge
the status quo and keep innovating and winning
in their respective markets.
Appointed:
February 2013
Independent:
No
Responsibilities
Steve
leads the
Group’s nancial
strategy
and
has overall responsibility for corporate reporting,
nance,
treasury, taxation,
and IT.
He
contributes
to the development and implementation of the
strategy and policies approved by the Board.
Steve
is chair
of the
Group’s
risk committee
and
leads
the Group’s
responsible business
strategy
through the Group management team.
Skills and experience
Steve is a chartered accountant and has wide-
ranging
nancial, accounting
and UK
public
company experience.
Contribution to long-term success
The
Board benets
from John’s
in-depth
knowledge and experience of both the
construction
and regeneration
sectors. His
signicant
leadership and
people management
skills
continue to
drive forward
the
Group’s
strategy to ensure quality of earnings and
grow
the business
organically for
the
benet
of all our stakeholders. John is responsible for
ensuring that career opportunities within the
Group are accessible to people from a variety
of backgrounds so that we can recruit the best
people from a wide pool of talent.
Current external roles
John is chair of the Royal National Institute for
Deaf People (RNID).
Contribution to long-term success
The
Board benets
from Steve’s
considerable
experience
in nance,
audit, treasury,
risk
management and information technology and
security.
His expertise
has contributed
towards
the
Group’s nancial
resilience and
strong
balance sheet, which enables the Group to
make the right decisions for the long term. Steve
is responsible for the ongoing smooth running
of
the Group’s
nancial operations
and
for
driving our strategy to achieve net zero carbon
emissions by 2030.
Current external roles
Steve does not currently hold any external
appointments.
Career experience
Steve
was nance
director of
Essentra
plc from
2008 to 2012, and audit committee chair and
non-executive director of Consort Medical plc
until
2020. He
has previously
held
senior nance
roles with a number of listed companies.
J
o
h
n
M
o
r
ga
n
Chief Executive
S
t
e
ve
C
r
u
m
m
e
t
t
Finance Director
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Boar
d of dire
c
tor
s
continued
Appointed: November 2015
Committee membership:
audit (chair); health,
safety and environment (chair); nomination;
remuneration
Independent:
Yes
Responsibilities
To constructively challenge the executive
directors
and monitor
delivery of
the
Group’s
strategy within the risk and internal control
framework set by the Board. Malcolm leads
the audit and health, safety and environment
committees.
Skills and experience
Malcolm
is a
qualied accountant
and
treasurer,
and an experienced FTSE 250 audit committee
chair.
He has
an extensive
background
in
corporate
nance and
wide experience
in
infrastructure,
property and
construction. He
is
considered to have competence in accounting
as required by the Disclosure and Transparency
Rules and the Code. Malcolm has experience
in health and safety through his former role as
managing director at National Grid Property,
where he was responsible for land remediation,
demolition and construction and was a member
of the UK health and safety committee.
Appointed:
May 2017
Committee membership:
audit; health, safety
and environment; nomination; remuneration
(chair)
Independent:
Yes
Responsibilities
To constructively challenge the executive
directors and monitor delivery of the strategy
within the risk and control framework set by the
Board and lead the remuneration committee.
Skills and experience
Tracey has wide-ranging expertise in the retail
sector including the development of strategy,
business planning and corporate governance.
She has extensive corporate and main board
experience, including nomination, remuneration
and corporate responsibility board sub-
committees.
Contribution to long-term success
The
Board benets
from Malcolm’s
considerable
experience in construction, housebuilding
and infrastructure and his wide knowledge of
government
policy and
direction. Malcolm’s
knowledge and experience in the areas of
health and safety and the impacts of climate
change
as well
as in
nance,
audit, treasury,
and
risk management,
benets the
Board
in his
respective roles as chair of the health, safety and
environment and audit committees.
Current external roles
Malcolm is senior independent director and
credit committee chair of MORhomes plc,
non-executive director and audit committee
chair at Southern Water Services Limited. In
September 2021 he was appointed as a non-
executive director of Local Pensions Partnership
Investments Ltd (previously an independent
member) before becoming chair of the audit
committee
eective from
1 January
2022.
Career experience
Malcolm’s
prior executive
roles include
managing director of National Grid Property,
managing
the sale
of National
Grid’s
gas
distribution business, and global tax and
treasury
director of
National Grid.
He
was
previously senior independent director and
audit
committee chair
at CLS
Holdings
plc, a
non-executive
director of
StWilliam Homes
LLP, president of the Association of Corporate
Treasurers and a member of the Financial
Conduct
Authority’s Listing
Authority Advisory
Panel.
Contribution to long-term success
The
Board benets
from Tracey’s
extensive
commercial, corporate responsibility, and
people
management experience.
Her depth
of
knowledge and understanding of remuneration
issues and corporate governance relating
to remuneration enable her as chair of the
remuneration
committee to
lead on
the
Group’s
remuneration philosophy to ensure that we
motivate and retain executive directors of the
calibre required to deliver our strategy.
Current external roles
Tracey is a Fellow of Be the Business, a not-
for-prot
organisation that
helps rms
across
the UK to improve their performance. She was
appointed a trustee for Dorset and Somerset Air
Ambulance from 14 September 2021.
Career experience
Tracey was executive director of people for
the John Lewis Partnership, where she was a
member of the executive team and responsible
for shaping and delivering a distinctive and
competitive employment proposition. She
was chair of the Golden Jubilee Trust for the
Partnership, providing opportunities for partners
and charities alike.
M
a
l
co
l
m C
o
o
p
e
r
Non-executive
Director
Tr
a
c
e
y
K
i
l
l
e
n
Non-executive
Director
93
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ate
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nance
Financial statements
Boar
d of dire
c
tor
s
continued
Appointed:
September 2018
Committee membership:
audit; nomination;
remuneration
Independent:
Yes
Responsibilities
In addition to his responsibilities as a non-
executive director, David as senior independent
director supports the chair in the delivery of his
objectives and, together with the nomination
committee, ensures that an orderly succession
process is in place for the Board.
Skills and experience
David is a highly experienced non-executive
director, senior independent director, and
chair of UK-listed companies in several sectors.
He
has experience
in both
nancial
and
general management through his prior roles
of
nance director
and chief
executive,
where
he
supported growth
and protability
through
the
ecient design
of business
operations
and
appropriate use of systems and processes.
Appointed:
March 2020
Committee membership:
audit; nomination;
remuneration
Independent:
Yes
Responsibilities
To constructively challenge the executive
directors and monitor delivery of the strategy
within the risk and internal control framework
set by the Board.
Skills and experience
Jen has extensive strategic and commercial
experience developed through her career in
nancial
services and
in the
engineering
and
airline sectors through her prior roles with
Invensys and British Airways. In addition, she
has wide experience in business leadership and
transformation,
human resources,
eciency,
sourcing, supply chain management and
property, together with a deep understanding of
customer experience.
Contribution to long-term success
David’s
strong strategic
understanding and
nancial,
marketing, and
commercial skills,
gained
through his
many years’
experience
working in international businesses, are
invaluable to the Board as the Group pursues
its
strategy for
growth. David’s
experience
as a
senior independent director supports the chair
in the delivery of his objectives.
Current external roles
David is currently chair of the board of
PageGroup plc and senior independent director
at
Capita
plc.
He
was
appointed as
non-executive
director and chair-designate of Diploma plc with
eect
from 19
October 2021
and
became chair
with
eect from
the conclusion
of
Diploma plc’s
AGM held on 19 January 2022. David will step
down as chair of PageGroup on 30 April 2022.
Career experience
David
was formerly
chair of
Huntsworth
plc,
chair of the audit and risk committee at William
Hill
plc, and
senior independent
director
of
Berendsen, chair of the audit committee at
Cable & Wireless Worldwide plc and was chief
executive of Taylor Nelson Sofres plc having
joined
as group
nance director
in
1999.
Contribution to long-term success
The
Board benets
from Jen’s
strengths
in
consumer-facing markets and her insight into
information technology, people management
and complex supply chain management, all
of
which are
relevant to
the
Group’s strategy
to deliver long-term sustainable value to our
stakeholders.
Current external roles
Jen is the group chief people and transformation
ocer
for NatWest,
responsible for
the
execution of strategy, customer journeys,
investment,
HR, eciency,
property and
procurement. She is a member of the NatWest
Group
and NatWest
Holdings’ executive
committee. She is also on the board of City
University, University of London where she
is a member of the council and chair of the
remuneration committee. In January 2022
she was appointed as a board member of the
Financial Services Skills Commission.
Career experience
Prior to joining NatWest, Jen spent 15 years
at Lloyds Banking Group in a variety of roles,
including as group director, people and
productivity where she was a member of their
group executive committee. Prior to that she
was the group organisation design and cost
management director, group customer services
director and MD business banking. Before
working
in nancial
services, Jen
worked
in both
the engineering and airlines sectors. Jen has sat
on the boards of Lloyds Bank Corporate Markets
and
Kent Community
NHS Foundation
Trust.
D
a
v
id
L
o
wde
n
Senior Independent Director
J
e
n
T
i
p
p
i
n
Non-executive
Director
9
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Financial statements
Boar
d of dire
c
tor
s
continued
Appointed:
June 2021
Independent:
Yes
Responsibilities
To constructively challenge the executive
directors and monitor delivery of the strategy
within the risk and control framework set by the
Board.
Skills and experience
Kathy has extensive strategic, commercial, and
digital transformation experience developed
through her career in the telecommunications
sector. She has also been a key advocate for
building a diverse and inclusive culture.
Contribution to long-term success
Kathy’s
experience further
broadens the
expertise
on the
Board. Her
wealth
of digital
and sales experience in particular adds valuable
knowledge and insight into Board discussions
and
helps ensure
that the
Group’s
continued
investment in digital capability meets the current
and future needs of the business in terms of
both
innovation and
security. In
addition,
Kathy’s
insight and knowledge of driving positive and
sustainable growth through inclusion is an asset
to the Group as we continue to progress our
diversity and inclusion programme.
Current external roles
Kathy was until December 2021 director of
enterprise indirect partnerships at Vodafone
where she was responsible for leading the
market channel for partnerships across the UK.
In January 2022, she was appointed as chief
growth
ocer at
Capita plc
where
she will
be
responsible for ensuring Capita has the right
business development competencies, systems,
and strategies to deliver on their organic growth
objectives.
Career experience
Prior
to joining
Vodafone, Kathy’s
previous
leadership roles were with BT Group, T-Mobile,
Carphone Warehouse and TalkTalk Group.
She was previously a non-executive director of
the Enterprise Board of Transport for London
Museum and recognised in Empower Top
Executive Role model lists 2021.
The members of the Board attended the following meetings during 2021.
2021 Board and commit
tee meeting at
tendan
ce
Board
Audit
Health,
safety and
environment
Nomination
Remuneration
Total number of meetings in 2021
9
3
4
3
6
Michael Findlay
1
9
3
2
4
2
3
6
2
John Morgan
9
3
2
3
2
Steve Crummett
9
3
2
3
2
1
2
Malcolm Cooper
9
3
4
3
6
Tracey Killen
9
3
4
3
6
David Lowden
9
3
3
6
Jen Tippin
9
3
3
5
3
Kathy Quashie
6
4
1
2
1
2
1
Michael Findlay attended all Board and nomination committee meetings during the year and was also present at all meetings
of the audit, health, safety and environment, and remuneration committees.
2
Attended by invitation.
3
Jen Tippin was unable to attend the remuneration committee meeting in June 2021, due to alternative commitments in her
executive role which could not be changed at short notice.
4
Kathy Quashie was appointed to the Board in June 2021 and attended all Board meetings from that date.
K
ath
y
Q
u
a
s
h
ie
Non-executive
Director
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Role
Clare is responsible for ensuring sound
information
ows to
the Board
and
between
senior management and non-executive
directors and advising the Board on corporate
governance matters. In addition to her
governance responsibilities, Clare manages
the Group secretariat function, the insurance
programme, long-term incentive schemes,
pension arrangements, Group-wide employee
benets
and Group
reporting on
our
responsible business strategy and performance.
She
is a
member of
the
Board’s health,
safety
and
environment committee,
the Group’s
risk
committee and our social value panel; director of
the captive insurance company; and trustee of
the pension scheme.
Skills and experience
Clare is a member of the Chartered Governance
Institute UK & Ireland. She has been with
the Group for more than 20 years, and was
appointed as company secretary in 2014, having
previously been deputy company secretary.
Role
Andy supports the divisions to develop and
implement
eective commercial
strategies
at preconstruction stage and within key
operational
activities. He
also oers
advice
and assistance, acting as a critical friend to the
divisions throughout the life cycle of a project.
Andy
is a
member of
the
Board’s health,
safety
and
environment committee,
the Group’s
risk
committee and the Group health and safety
forum where he oversees the implementation
and
monitoring of
the Group’s
health,
safety and
wellbeing framework.
Skills and experience
Andy joined the Group in 2014. Previously he
was managing director of Bullock Construction
and
prior to
that, Andy’s
career
included 20
years with Kier Group, culminating in the role
of
commercial director
at Kier’s
construction
division where he had overall responsibility for
the commercial and procurement functions.
J
o
h
n M
o
r
ga
n
Chief Executive
See page 91 for biography.
S
t
e
ve C
r
u
m
m
e
t
t
Finance Director
See page 91 for biography.
Group m
ana
gemen
t tea
m
The G
roup management team suppor
t
s
the executi
ve director
s in implementing the
s
trateg
y and p
olicies approve
d by the B
oard.
Meetings are chaired by the chief executive and focus on strategic
and
operational matters
aecting the
Group
as a
whole. The
team
also supports the directors in embedding our culture and core
values across the decentralised business, driving our responsible
business strategy, and ensuring that we are acting consistently
across the Group to promote diversity and inclusion.
C
l
are
S
h
e
r
i
d
an
Company Secretary
A
n
d
y S
a
u
l
Group Commercial Director
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Role
Pat leads the Construction business within
Construction
& Infrastructure.
He is
responsible
for delivering sustainable growth, promoting a
safe and inclusive culture and creating inspiring
communities where we all live, work, learn and
play.
He is
a trustee
of
the Pagabo
Foundation,
which raises awareness of mental health and
wellbeing for those working in construction.
Skills and experience
Pat
has over
30 years’
experience
in the
construction
industry. He
joined the
Group
in
2014 from Lend Lease, where he was head of
its public sector construction division. Prior to
this, Pat held various wide-ranging senior level
roles
within Laing
O’Rourke, including
regional
director,
group HR
director and
managing
director
of Select
Plant Hire.
Role
Simon leads the Infrastructure business within
Construction & Infrastructure which focuses on
the rail, highways, aviation, nuclear, energy and
water sectors. In addition, Simon oversees our
in-house
plant
and
engineering
businesses.
He
is
responsible for delivering long-term, sustainable
growth
in the
division’s key
sectors
and ensuring
a safe, and inclusive working environment.
Skills and experience
Simon is a chartered quantity surveyor with 30
years’
multi-sector experience.
Having joined
the
Group in 2011, he was appointed as managing
director
of Construction
& Infrastructure’s
infrastructure business in 2017.
Role
Martin
is responsible
for our
BakerHicks
business, based in the UK and Switzerland and
oering
design, engineering
and project
delivery.
BakerHicks
specialises in
multi-sector complex
infrastructure, process and built environments
across the full project life cycle. Martin is
responsible for developing and implementing
BakerHicks’
strategic plan,
building a
team
of
exceptional individuals and managing overall
performance.
Skills and experience
Martin
is a
qualied chartered
accountant
and
has over
20 year’s
property
professional
services
experience. He
joined the
Group
in
October 2015 from Colliers International where
he
was the
UK chief
operating
ocer. Prior
to this he had been the EMEA chief operating
ocer
for CBRE.
Martin’s early
career
started at
PricewaterhouseCoopers and McKinsey before
taking
senior roles
at Sears
Group
and Hilton
International.
Role
Chris has overall responsibility for the Fit Out
division, which includes the Overbury and
Morgan
Lovell brands.
He is
responsible
for
driving the strategy of excellence in operational
delivery and exceptional customer experience in
the
division’s oce
t out,
refurbishment,
design
and build, higher education and life sciences
projects.
Skills and experience
Chris
has over
25 years’
experience
in the
Fit
Out sector having joined Overbury in 1994,
progressing through divisional management to
become
managing director
of Overbury’s
Major
Projects
team in
2003. He
was
appointed to
the
Fit
Out divisional
board as
chief
operating ocer
in 2010, before being appointed as overall
managing director in 2013.
Group management team
continued
Pa
t
B
o
y
l
e
Managing Director, Construction
S
i
m
o
n
S
mi
t
h
Managing Director, Infrastructure
M
a
r
t
i
n
L
ub
i
e
n
i
e
ck
i
Managing Director, Design
C
h
r
i
s B
o
o
t
h
Managing Director, Fit Out
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Role
Alan is in charge of our Property Services division
which provides responsive repairs and planned
maintenance services to more than 200,000
homes and public buildings nationwide, for both
the
public and
private sectors.
He
is responsible
for
the division’s
strategic direction,
building
on
the service to deliver value-added activities that
better support social housing residents and
ensuring a sustainable and innovative business
for all clients and other stakeholders.
Skills and experience
Alan joined the Group in August 2017 with over
15
years’ experience
in the
sector.
His previous
roles
included positions
both as
nance
director
and managing director in national building,
infrastructure and facilities management
businesses. Alan has experience across a range
of sectors including defence, health, corporate
and housing.
Role
Steve
leads our
Partnership Housing
business
operations, people and ventures. The division
provides innovative residential construction and
regeneration developments from decentralised
regional
oces across
the UK.
He
ensures
it places responsible business and trusting
partnerships at the heart of all its decision-
making.
Skills and experience
Steve joined the Group in April 2018, bringing
with him a wealth of knowledge and experience
in construction. Previously, he spent 25 years
at
Laing O’Rourke,
including as
commercial
director of its European hub, managing director
of UK infrastructure, and managing director of
its UK construction business. Steve holds a RICS
fellowship.
Role
From
1 April
2022, Kate
will
lead the
division’s
regeneration activities across the UK. She is
responsible for delivering a range of commercial
and residential schemes with both public and
private sector clients to bring sustainable and
transformational change to towns and cities
across the UK.
Skills and experience
Kate joined the Group in November 2021. She
was
previously the
chief nancial
ocer
of The
Crown Estate, a £14bn property and land owner
and
manager, leading
its nance
and
business
technology teams. Kate joined The Crown
Estate in 2016 from intu Properties plc where
she
had been
director of
nance.
Kate qualied
as a chartered accountant with Coopers &
Lybrand (now PricewaterhouseCoopers) in 1995,
working
in their
Canadian and
corporate
nance
practices.
Group management team
continued
A
l
an
Ha
y
w
ar
d
Managing Director, Property Services
S
t
e
ve C
o
l
e
b
y
Managing Director, Partnership Housing
K
a
t
e B
o
w
ye
r
Managing Director, Urban Regeneration
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Board
e
ec
ti
venes
s
The Board provide
s eec
t
ive leader
ship through its oversig
ht and
revie
w
of the
business
. T
o suppor
t the Board, we have
a
governance framewor
k
in place
that requires
sucient super
v
ision at
appropriate levels of
the
organis
ation to
dri
ve per
for
mance of
our
s
trateg
y and ensure
that risks
and oppor
t
unitie
s are
regularl
y assess
ed, monitored and manag
ed.
The
Board uses
its four
committees
to manage
its time
eectively
and, at
each Board
meeting,
the
directors
are made
aware of
the
key discussions,
recommendations, and
decisions
of the
committees
by
the respective
committee chairs.
The nomination committee is responsible for ensuring that the Board and its committees are made up
of
a combination
of executive
and
independent non-executive
directors, with
the
appropriate balance
of
skills, experience
and backgrounds
to
contribute to
Board discussions
and
facilitate eective
decision-making.
It is
also responsible
for
annually assessing
Board and
committee
eectiveness
through
the Board
evaluation process.
In
addition, each
individual director’s
performance,
including ongoing
training, contribution
and
time
commitment,
is reviewed
annually to
ensure
they continue
to full
their
responsibilities to
the Board
and
contribute eectively.
Such training
includes
access to
the Company’s
e-learning
modules and
presentations
on specic
areas of
focus
or other
matters of
strategic
importance delivered
by the
Company’s
advisers or
internal and
external
specialists. In
2021, the
Board
was given
deep-dive
presentations
on information
security, including
the
mitigation of
cyber risk,
and
participated in
in-depth
discussions on
key areas
which
included capital
allocation, diversity
and
inclusion, the
Group’s
pathway to
net zero
and
employee engagement.
In
order for
our directors,
particularly
the non-executives,
to discharge
their
responsibilities and
contribute
constructively, it
is important
that
they understand
the business
of
each division
and how
it
complements the
Group’s strategy
and
contributes to
the delivery
of
our strategic
priorities. (see
page
6: purpose,
strategy and
values
and page
5: business
model).
Non-executive directors
therefore
undertake
a detailed
induction programme
on
appointment (see
page 111)
and
the Board
meets
regularly
throughout the
year with
divisional
senior managers
and their
wider
teams. Individual
non-
executive
directors undertake
a strategy
review
each year
with the
divisions
they are
assigned to,
which
includes meetings
and site
visits
(see page
103). In
addition
to the
formal strategy
reviews,
the
non-executive
directors are
actively encouraged
to
meet with
divisional teams
and
visit their
projects
during
the year.
The
Board ensures
eective engagement
with,
and participation
from, our
shareholders
and other
stakeholders
in order
to understand
their
views so
that their
interests
and the
matters set
out
in
section
172 of
the Companies
Act
2006 (see
pages 10
to
15) are
considered in
Board
discussions
and
decision-making.
These
engagement mechanisms
are kept
under
review by
the Board
to
verify that
they are
appropriate
and remain
eective.
Directors
’
and
corpora
te
gover
nanc
e
repo
r
t
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Dire
c
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’ and
corporat
e
governan
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rep
or
t
c
ontinued
Th
e Bo
ard
The Board
has
ultimate
responsibility for
the management, governance,
direction,
and
performance of
the
Group
as a
whole
and
ensuring
that we
conduct
our
business in
an open
and
transparent
manner. The
Board denes the
Group’s
purpose
and sets
the
Group’s
strategic direction
and
governance
framework,
determines our
risk
appetite
and works
to
deliver
sustainable stakeholder
value over the
longer
term.
See page
100
for
more detail
on
the
role
and responsibilities
of
the
Board and
the
chair.
Cros
s
-
d
iv
i
sio
nal healt
h
and saf
et
y,
H
R
and
comm
er
cial dire
c
tor
s
’ foru
ms
, IT
sec
uri
t
y
st
ee
ri
ng
gr
oup, and
sup
pl
y
cha
in, soci
al
val
ue and
clima
te act
ion pane
ls
Divisional representatives
meet
on
a regular
basis to focus
on
specic topics
and
share
ideas and
best practice. The
forums
assist the Board and Group management team in ensuring
good governance
is
adopted
at all
levels of the
Group.
Chief
ex
ecutive
The chief
executive,
supported
by the
nance director, is
responsible for
leadership
of
the Group,
developing and
implementing strategy,
managing
overall
Group performance
and ensuring
an
eective
leadership team.
Bo
ard commi
t
te
es
The Board
delegates
certain
matters to
its committees. The
Board
and
its committees
are
supported
by the
company
secretary
who provides
advice and assistance,
particularly
in
relation to
corporate
governance and
training
and
induction. The
appointment and removal
of
the
company secretary
is
a
matter for
the
Board
as a
whole.
Audit
commit
tee
Oversees the
Group’s
corporate nancial
reporting, the
internal
controls and risk
management systems,
the work,
ndings
and eectiveness
of the internal and
external audit and the
appointment of the
external auditor.
See
page 115.
Hea
lth
, safe
t
y
and
environment
commit
tee
Oversees the
Group’s
responsible business
strategy, targets
and
performance with a
particular focus on
health, safety
and
the
environment.
See
page 123.
Nomination
commit
tee
Oversees Board
and committee
composition, Board
evaluation and
succession planning,
giving consideration
to diversity,
including
development
opportunities for all
our employees.
See
page 110.
Remuneration
commit
tee
Responsible for
recommending overall
remuneration policy
and the setting of
remuneration for our
executive directors
and members of the
Group management
team.
See
page 126.
Group
management
team
Meets regularly
to consider
operational
matters aecting
the Group as a
whole including:
health and
safety; strategy;
risk; the
Group
budget; and
our responsible
business strategy.
See pages 95
to 97.
Divisional
boards
Each of our
divisions operates
autonomously
with its own
board of directors
that includes
the Group chief
executive and
nance director.
See
page
100
for
the
divisional
boards’
responsibilities.
Biographies
of
the
managing
directors
of
the
divisions
are
set
out
on
pages
95
to
97.
Risk
commit
tee
Meets twice a
year to
assist
the
Board and audit
committee in
monitoring risk
management
including
climate risk and
overseeing the
internal control
framework.
See
page 55.
Governance
framework
One
of our
Core Values
is
our decentralised
philosophy
which allows
our divisions
autonomy
to
operate in
a way
that
most eciently
meets
the
needs of
their respective
markets
and
stakeholders.
This enables
each division
to
respond
quickly and
eectively to
any
changes
in
its operating
environment. We
believe
this
approach remains fundamental to each of
our
complementary businesses’
continual
delivery
of strategy
and the
long-term
success
of
the Group.
Our governance
framework
is
therefore structured around supporting this
philosophy,
facilitated by
our long-established
culture
of openness,
transparency and
individual
accountability.
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rep
or
t
c
ontinued
Board
resource
s
Board
and committee
meetings are
organised
throughout the
year and
are
structured to
allow
enough
time for
open discussion.
A
formal programme
of meetings
is
put in
place each
year
to
ensure
that
the Board
monitors and
reviews
all signicant
aspects of
the
Group’s activities.
The agendas
for
scheduled
Board meetings
are developed
by
the chair,
chief executive
and
company secretary
who
consider
both the
Board’s responsibilities,
the
current status
of projects,
strategic
workstreams and
operational
matters arising.
Board papers
are
reviewed regularly
to ensure
they
remain focused
and
allow
sucient time
for consideration
and
constructive contribution
by all
directors
to each
agenda
item.
The Board
papers provide
an
overview of
performance covering
a
range of
nancial and
non-
nancial
matters and
are designed
to
assist the
Board in
reviewing
performance against
our key
performance
indicators (KPIs);
interim reports
are
circulated between
the scheduled
meetings.
This
helps ensure that the resources integral to our business model are being maintained and that the
needs
of our
stakeholders are
continuously
monitored.
Despite
the continuing
pandemic, a
relaxation
in government
guidelines meant
that,
after our
virtually-held
February meetings,
all of
the
pre-scheduled Board
and committee
meetings
were held
in
person, as
were the
meetings
with the
divisions for
the
formal strategy
review process.
The
Board
and
committees hold
additional, ad-hoc
virtual
meetings as
required and
held
three such
meetings
in
2021, primarily
to discuss
and
review the
performance of
the
Group and
approve required
announcements
to the
stock market.
Board
and committee
papers are
distributed
electronically
in
advance of
each meeting
to
provide quick
and secure
access
and minutes
are circulated
to
all
directors
after each
meeting. If
any
director has
any concerns
about
the operation
of the
Board
or
the
management
of the
business, they
are
encouraged to
raise them
so
they can
be discussed
and
that
any
unresolved concerns
can be
recorded
in the
minutes. No
such
concerns were
raised during
2021.
All
directors have
access to
the
advice and
services of
the
company secretary
and there
are
agreed
procedures
by which
directors can
take
independent professional
advice, at
the
expense of
the
Company,
on matters
relating to
their
duties. No
such independent
advice
was sought
by any
director
during
the year.
Div
ision of
resp
onsibilitie
s
Res
po
ns
ibi
lit
ie
s
of
the Boar
d
In
respect of
the Group,
the
Board, assisted
by its
committees,
is responsible
for:
determining
overall strategy
and long-term
objectives
to align
with our
purpose;
ensuring
that the
divisions have
appropriate
strategies and
resources in
place
and a
culture that
drives
the right
behaviours;
monitoring
of key
performance indicators;
oversight
of material
social and
environmental
risks and
opportunities;
approving
the annual
business plan
and
budget;
determining
risk appetite
and principal
risks;
overall
corporate governance
arrangements, including
establishing
a framework
of prudent
and
eective
controls which
enable risk
to
be assessed
and managed;
approving
the nancial
results statements,
annual
report and
accounts and
other
statutory
announcements;
and
considering
all policy
matters relating
to
the Company’s
activities, including
any
major changes
of
policy.
Rol
e
of
the chair
The
chair is
responsible for
the
overall eectiveness
of the
Board
and for
promoting a
culture
of
openness
and debate
at meetings
which
support well-informed
and transparent
decision-making
through
constructive dialogue.
To ensure
accountability
and oversight,
there is
a
clear division
of
responsibilities
between the
chair, chief
executive
and senior
independent director,
set
out in
writing,
approved
by the
Board and
summarised
on our
website at
morgansindall.com.
Res
po
ns
ibi
lit
ie
s
of
the div
is
ion
al
bo
ard
s
There
is a
clear division
of
responsibilities between
the running
of
the Board
and the
running
of
the
business,
set out
in writing
as
follows:
matters
reserved solely
for the
Board’s
decision-making and
the terms
of
reference of
each of
the
Board’s
committees which
are regularly
reviewed
and can
be found
on
our website;
a
schedule of
delegated authorities,
setting
out which
signicant operational
decisions
the divisions
must
refer to
the Board
for
approval;
directors’
duties under
the Companies
Act
2006 and
other legislation,
which
are communicated
via
induction
packs and
e-learning modules;
and
a
Code of
Conduct for
all
of our
employees on
the
Group’s expected
standards to
prevent
misconduct
and breach
of ethical
practices.
The Code
of Conduct
and
other supporting
policies are
published
on each
division’s intranet
and
supplementary training
is provided
(see
page 108).
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tor
s
’ and
corporat
e
governan
ce
rep
or
t
c
ontinued
The
divisions are
responsible for
setting
their own
ve-year strategic
plans
and annual
budgets, for
sign-o
by the
Board, for
their
operational performance
and for
managing
relationships with
their
stakeholders
(see pages
11 to
15).
In managing
their operations,
the
divisions adhere
to the
schedule
of
delegated authorities
referred to
above.
The schedule
clearly denes
all
key business
issues and
levels
of accountability,
stating which
decisions
are signicant
to the
Group
and therefore
need to
be
referred
for approval
to: divisional
managing
directors; designated
ocers of
the
Group; the
executive
directors;
or to
the Board
as
a whole.
Each division
then
sets its
own detailed
procedures
to
cover day-
to-day
operational matters
within its
own
internal management
systems to
ensure
decisions within
the
delegated
authorities are
taken at
the
right level
within the
business.
The executive
directors, together
with
the Group
head of
audit
and assurance,
who reports
to
the audit
committee, are
responsible
for
monitoring
the divisions’
compliance with
the
schedule of
delegated authorities.
The
executive directors
meet with
the
divisional boards
each month
to
review divisional
performance
against
their medium-term
targets and
strategic
plan. In
preparation for
these
meetings, the
divisions
prepare
a monthly
board pack
detailing
performance against
strategy and
their
KPIs and
any issues
pertaining
to their
stakeholders. In
turn,
the Board
receives an
executive
summary of
the divisional
board
packs as
part of
each
set of
Board meeting
and
interim papers.
This ensures
that
the
Board
is
kept fully
apprised of
each
division’s performance
and any
material
issues arising
with their
stakeholders.
For example,
during the
rst
half of
the year,
the
Board was
kept regularly
updated
on
material
and labour
shortages in
our
supply chain
and IT
security
through the
newly-established IT
security
steering group,
while in
the
second half
of the
year,
wider Group
succession planning
and
ination
were key
topics. In
addition,
the Board
normally holds
informal
meetings with
the directors
and
senior management
teams of
two
divisions each
year to
allow
the non-executive
directors to
meet
operational
managers and
discuss a
range
of topics
in a
less
formal setting.
In June
and
October
2021,
the
Board collectively
met with
senior
teams from
Urban Regeneration
and
Construction respectively.
As
part of
these sessions,
both
divisions were
asked to
perform
a teach-in
for the
Board
on
their key
clients,
procurement process,
key areas
of
client focus
and any
challenges.
Members of
the Board
also
attended
our Supply
Chain Family
event
held in
September (see
page
33) to
give them
the
opportunity
to
meet members
of the
supply
chain and
nd out
how
they are
adapting their
products
and
services
to
address the
impacts of
climate
change.
Independence
On
pages 90
to 94,
the
Board has
set out
which
directors are
considered independent.
As
at
31
December
2021, 63%
of our
Board
(excluding the
chair) are
considered
independent. When
our chair
was
appointed to
the Board
in
October 2016,
he was
considered
to be
independent. The
tenure
of
our
non-executive directors
is regularly
reviewed
as part
of our
succession
planning process
(see
pages
110 to
112) to
ensure
regular refreshment
of the
non-executive
directors and
to maintain
independence.
The Board
allocated time
at
the end
of each
of
the six
scheduled meetings
held
during
the
year for
the chair
to
meet with
the senior
independent
director and
non-executive directors
without
the executive
directors present.
No
material issues
were raised
in
the year
at any
of
these
meetings.
E
x
te
rna
l
comm
itm
ent
s and
con
ic
t
s
of
inte
re
s
t
Prior
to their
appointment, new
directors
are asked
to disclose
any
signicant commitments
they have,
together
with
an indication
of the
time
involved,
so
that
the Board
can take
these
external
demands
on
their
time into
account and
assess
any potential
conicts of
interest.
We also
have a
process
in
place
through
which all
existing directors
seek
Board approval
prior to
accepting
an external
appointment.
Directors’
current external
appointments are
disclosed
on pages
90 to
94.
In accordance
with this
process,
during the
year, the
Board
approved the
appointments of
Michael
Findlay to
the Financial
Conduct
Authority’s markets
practitioner panel,
Malcolm
Cooper’s change
in role
at
Local Pensions
Partnership
Investments Ltd,
David Lowden’s
appointment
to Diploma
plc, Jen
Tippin’s
appointment
to
the Financial
Services Skills
Commission
and Tracey
Killen’s appointment
as
trustee for
Dorset and
Somerset
Air Ambulance.
In connection
with
David Lowden’s
appointment to
Diploma
plc, and
prior
to
its approval,
the Board
took
into account
David’s intention
to
step down
as chair
of
PageGroup
plc
prior
to their
2022 AGM.
The
Board has
an agreed
approach
for dealing
with directors’
conicts
of interest
duties under
the
Companies Act
2006, whereby
a
director is
restricted from
voting
on any
matter in
which
they
might
have a
personal interest
unless
the Board
unanimously decides
otherwise.
Responsibility for
authorising
conicts of
interest in
accordance
with the
Company’s articles
of
association is
a matter
reserved
for the
Board. For
example,
prior to
the appointment
of
Kathy Quashie
to the
Board,
the
Board
assessed any
potential conicts
of
interest and
took into
account
her external
commitments
to
satisfy itself
that she
had
sucient time
to meet
her
Board responsibilities.
In addition,
the
Board
undertook
a review
of potential
conicts
of interest
prior to
Kathy’s
appointment at
Capita plc.
In
December
2021, the
Board undertook
its
annual review
of potential
conict
matters and
conrmed
that
it was
aware of
no
situations that
may or
did
give rise
to conicts
with
the
interests of
the
Company
other than
those that
may
arise from
directors’ other
directorships
or employment
as
disclosed
on pages
90 to
94.
102
_
Mo
rg
an S
in
da
ll G
ro
u
p pl
c
Annual Repor
t 20
21
Str
ate
gi
c rep
or
t
Gover
nance
Financial statements
Dire
c
tor
s
’ and
corporat
e
governan
ce
rep
or
t
c
ontinued
Key
mat
te
rs
conside
red
by
th
e
Board
in
2
021
In
line with
our governance
framework
and decentralised
approach, our
Board
normally makes
a
limited
number of
principal decisions
during
the year
that are
material
to the
Group as
a
whole.
The
Board uses
the Group’s
purpose
and strategic
priorities as
its
framework for
robust decision-
making
and to
ensure the
long-term
success of
the business,
recognising
that each
decision will
not
necessarily
result in
a positive
outcome
for every
stakeholder group.
There
were no
material contracts
in
2021 that
required referral
to
the Board
under the
matters
reserved solely
for the
Board’s
decision-
making,
although each
division required
approval
from the
executive directors
on
certain contracts
over
thresholds set
out in
our
schedule of
delegated authorities.
Throughout
2021, the
Board had
direct
engagement principally
with our
employees
and shareholders
and
was kept
fully informed
of
the material
issues of
other
stakeholders through
the executive
directors,
reports from
divisional management
and
external advisers
(see pages
11
to 15).
An
overview of
the Board’s
principal
decisions during
the year
is
set out
below, including
how
the
Board
acted to
promote the
long-term
success of
the Company
for
the benet
of shareholders
while
having
due regard
to matters
set
out in
section 172(1)(a)
to
(f) of
the Act.
Strateg
y
review
Ac
t
io
n
ta
ken
Comprehensively reviewed
progress
against
strategy,
tracking performance
against
agreed
KPIs.
Reviewed divisional
medium-term
targets
including
each division’s
contribution
to
the overall
Group
strategy and
long-term
strategic
plan.
Monitored market trends and the macroeconomic
environment, referring
to
comparative
data and
client
insight.
Attended presentations
from
each
divisional managing
director on their strategic plan including meetings with
employees and
visits
to
some of
their projects.
Reviewed each
division’s
contribution
to the
Total
Commitments and
monitored
the
Group’s progress
towards our
responsible
business
strategy and
targets.
Reviewed the
Group’s
long-term
nancial outlook
and
assessed and
prioritised
growth
opportunities.
Outcome
Conrmed our
strategy
remains
t for
the future
and our
business
model
is sustainable,
taking into
consideration future
risk
and
opportunities.
Consideration
of
stakeholders
See page
103
for
more detail
on actions taken
by
the
Board and how it took the needs and interests of
our stakeholders
into
consideration
when reviewing
strategy.
De
ter
min
ing the
Gro
up
’s risk app
eti
te
Ac
t
io
n
ta
ken
Considered any
changes
to
the Group’s
principal risks
and emerging
risks
that
could impact
our long-term
strategic plans.
Considered the
balance
and
breadth of
the Group’s
activities to
ensure
we
have a
reasonable level of
protection against risks arising from uncertainties in
the macroeconomic
environment.
Reviewed general
market
conditions
and key
trends to
identify and
assess
future
risks and
opportunities.
Conducted a
detailed
analysis
of the
risks associated
with information
technology,
including
cyber security.
Outcome
Approved the
appropriateness
of
the Group
risk
appetite and the risk management framework to
provide long-term
resilience
for
the business.
Consideration
of
stakeholders
See page
104
for
more detail
on actions taken
by
the
Board and how it took the needs and interests of our
stakeholders into consideration when determining the
Group’s risk
appetite.
Con
rm
ing the
Gr
oup
’
s
cap
it
al allo
cat
io
n
fra
mew
or
k
and div
ide
nd poli
c
y
Ac
t
io
n
ta
ken
Reviewed management’s
proposed
capital
allocation
framework and
introduction
of
a formal
dividend
policy.
Outcome
Approved the
capital
allocation
framework and
the
implementation of
a
formal
dividend policy
of 2.0 to
2.5
times dividend
cover.
Consideration
of
stakeholders
Prior to
recommending
dividend
payments, the
Board
considered the
Group’s
cash
position, future
cash
requirements, shareholder
expectations
and
feedback,
and the
need
to
provide shareholders
with sustainable
returns over
the
longer
term.
See page
104
for
more detail
on actions taken
by
the
Board and how it took the needs and interests of
our stakeholders into consideration when setting the
capital allocation
framework
and
dividend policy.
Se
t
ti
ng the
annua
l
Gro
up budge
t
Ac
t
io
n
ta
ken
Tracked performance of the Group budget against
agreed KPIs.
Reviewed Group
and
divisional
budgets which
form the
basis for
setting
the
overall Group
budget.
Reviewed general
market
conditions
and key
trends
that support
the
Group’s
future growth
(see pages 5
and 56
to
57).
Reviewed budgeted
expenditure
on
training, health
and safety
and
employee
wellbeing to
ensure that it
was broadly
equivalent
to
the prior
year’s budget.
Reviewed the
contribution
that
the budget
will make to
delivery of
the
Group’s
ve-year strategic
plan.
Outcome
Approved the
Group
budget,
ensuring that
it is suitably
stretching but
achievable
to
contribute to
the Group’s
long-term growth.
Consideration
of
stakeholders
In approving
the
budget,
the Board
considered
the impact
on
our
employees, suppliers,
clients,
shareholders and
wider
stakeholders.
Prin
cip
al deci
sio
ns
103
_
Mo
rg
an S
in
d
al
l Gr
ou
p pl
c
Annual Repor
t 202
1
Str
ate
gi
c rep
or
t
Gover
nance
Financial statements
Strateg
y
review
Th
e Grou
p
’s succes
s dep
end
s on ensur
ing we maint
a
in
goo
d relat
ion
s wit
h our empl
oye
es
, clie
nt
s and
supp
l
y chain
. In
app
rov
in
g st
ra
teg
y,
th
e vie
w
s and
inte
re
s
t
s of
all our s
t
akeho
lde
r
s are consid
ere
d.
The
Board conducted
its formal
review
of each
divisional
strategic
plan during
the second
half
of the
year. Each
non-
executive
director (with
the exception
of
Kathy Quashie
who
was
undertaking her
induction programme)
was
allocated either
one
or two
divisions to
review.
As part
of the
process,
and to
facilitate
the assessment
of the
long-term
sustainable success
of
the
Group and
the impact
and
outcomes for
key stakeholders,
the
directors undertook
a number
of
pre-meetings with
their
allocated
divisions. These
meetings included:
a
review of
recent
operational
and nancial
performance including risk
management
and safety
performance;
an
overview of
the division’s
market and pipeline of
opportunities;
a
review of
the adequacy
of
resources
to deliver
on the
division’s
strategic priorities;
meeting
with employees
without management
present;
a
review of
the results
of
employee
engagement
surveys
conducted;
a
review of
the division’s
outlook
and medium-term
targets;
visiting
one or
two live
projects
and meeting
with a
variety
of people,
including
employees,
subcontractors
and
suppliers; and
reviewing
the division’s
initiatives
to reduce
the
impact of its operations on
the
environment and
to
deliver
added social
value to
the communities in which it
operates.
The
Board continues
to adopt
an
alternative method
to the
three
suggested
options for
employee engagement
as
set out
in the
Code,
with this
responsibility shared
by
all the
non-executive
directors.
Given the
structure and
culture
of
our business
and the
size
of our
Board, we
consider
that this
continues to
be
the most
eective
way for
the Board
to
engage with
as many
employees
as
possible.
This is
why, as
part
of the
strategy review
process,
the
directors
meet with
a wide
range
of employees
to understand
their
views about
the division
in
which they
work and
the
wider
Group,
and to
ascertain the
degree
in which
behaviours are
aligned
with the
Group’s Core
Values
and culture.
In particular,
this
year, the
directors focused
on
how well
the agreed
health,
safety
and wellbeing
framework had
been
embedded in
each
business.
The directors
were pleased
to
observe that
the
framework
was fully
embedded and
that
all employees
take
their
own safety
and that
of
their colleagues
seriously. Directors
also
attended the
annual divisional
employee
conferences,
held
during the
year either
in
person or
virtually. Meeting
with
employees
provides insights
on how
Board
decision-making may
impact
employees so
that this
feedback
can be
factored into
future
Board discussions
and decision-making.
Through
its proactive
engagement with
the
divisions during
the
formal
strategy review
process, and
by
rotating the
divisions
between
non-executive directors
each year,
the
Board as
a
whole
gains an
in-depth understanding
of
the key
concerns and
issues
of our
divisions’ stakeholders.
The
Board will
continue to
engage
directly with
stakeholders on
certain
issues, while
wider
stakeholder
engagement will
continue to
take
place primarily
within
the divisions
(see pages
11
to 15)
with the
Board
receiving
regular
updates.
Following
the pre-meetings,
detailed review
meetings
were
held
with each
division, attended
by
the chair,
chief executive,
allocated
non-executive director
and the
divisional
managing
director.
At these
meetings, the
non-executive
director provided
feedback
on the
division’s strategic
plan,
including how
the
division’s
stakeholders had
been taken
into
consideration.
The
Board then
collectively held
a
strategy review
day in
October
where
an overview
of each
division’s
strategic plan
and priorities
was
undertaken by
the whole
Board.
The non-executive
directors
provided
the Board
with a
summary
of their
observations and
opinions
on the
divisional plans
so
that the
overall Group
strategy
could
be approved.
Employee
feedback gathered
was shared
by
the directors
at
the
Board meeting
in December
2021.
The feedback
from the
non-executive
directors conrmed
that the
Group
has a
strong
positive
culture and
that employees
genuinely
feel empowered
and
are very
positive and
engaged.
Everyone they
had spoken
to
was open
and transparent
and
the non-executives
did
not
feel that
there were
any
additional issues
that needed
to
be
addressed or
considered in
decision-making
that are
not
currently
addressed by
the Board
or
by the
divisions themselves.
The
Board will
continue to
ensure
that the
Group’s decentralised
approach
and positive
culture is
maintained
and that
adequate
processes
and procedures
are in
place
to ensure
the safety
of
employees
and subcontractors
working on
our
projects as
well as
members
of the
public visiting
them.
At
the Board
meeting held
in
December 2021,
the Board
reviewed
the employee
engagement process
and
concluded
that:
the
feedback gathered
gives
the
directors collectively
and
individually a
better
understanding of the points
of
view of
employees and
subcontractors working on
our
projects;
it
provides direct
insights
into
employees’ working
environments,
their
behaviours
and practices,
their attitudes and
approaches to colleagues
and other stakeholders and
the practical application of
policies
and standards;
and
the process used remains
appropriate and allows the
non-executive
directors to
meet the broadest selection
of
employees, given
our
decentralised
business.
The
following pages
describe how
the
Board took
our stakeholders
into
consideration when
reviewing strategy
and
risk
appetite and
formalising our
capital
allocation framework.
Dire
c
tor
s
’ and
corporat
e
governan
ce
rep
or
t
c
ontinued
10
4
_
Mor
ga
n Si
nd
al
l G
ro
up p
lc
A
nnual Report 202
1
Str
ate
gi
c rep
or
t
Gover
nance
Financial statements
Ri
sk appe
ti
te
rev
ie
w
In appro
v
ing th
e risk app
et
ite
, the
Bo
ard cons
ide
red th
e impac
t on
our emp
loy
ee
s, sup
pli
er
s
, clien
t
s
,
shareholders and
wider
st
akeholders,
in par
ti
cul
ar tho
se iden
ti
ed in the
pr
inc
ipa
l risk
s se
c
t
ion on page
s 58 to
6
8.
Each
year, the
Board reviews
the
nature and
extent of risk we are prepared to accept in the
pursuit
of our
purpose and
strategy,
taking
into account the potential consequences of its
decisions
in the
short, medium
and
long term.
In
deciding risk
appetite, the
Board
recognises
that a prudent and robust approach to
mitigation
must be
carefully balanced
with
a
degree
of exibility
so that
our
decentralised
culture
is not
inhibited. Our
risk
appetite is
taken
into consideration
when setting
strategy
and
targets, making
decisions, and
allocating
resources,
and is
compared to
current
risk
levels
to determine
whether our
mitigations
are
sucient. Specic
limits and
guidelines
for
risk-taking are
reected in
our
governance
framework,
structures and
policies (for
example,
the delegated
authorities process).
In
certain circumstances,
we accept
that
risks
may result
in some
limited
exposure,
but we will not pursue these unless returns
are
reasonably probable
and predictable
(for
example, open
market sales
risks
in our
residential
developments). In
order for
the
Group to sustain a path of organic growth
while being able to maintain predictable
outcomes,
the Board
has continued
to
set
low-to-moderate
exposure in
the delivery
of
operational
targets, including
those from
both
construction
and development
programmes
(see
page 58).
In
its discussions,
the Board
reviews
the
economic
environment in
which we
operate
and in particular the impact of its decisions on
our
employees and
our ability
to
continue to
attract
and retain
the necessary
talent
to grow
the
business (see
page 63).
In
addition, and
against
this backdrop,
the Board
considers
the
current prole
of our
construction
projects
and development
schemes, the
Group’s
nancial standing,
the signicance
of
environmental,
social and
governance matters
to
the business
of the
Group
and our
ability
to
continue to
provide a
secure
IT platform.
The Board as a whole is responsible for
reviewing
the risks
associated with
information
technology
security and
they receive
bi-
annual
updates from
the IT
team
overseen
by
the Group
nance director.
There
were no
material
IT security
issues identied
in
2021.
Another
signicant topic
is health
and
safety
risk mitigation and the protection of our
wider
workforce which
remain high
priorities,
together
with ensuring
that our
‘Protecting
people’
Total Commitment
target (see
page17)
is met
and improved
year
on year.
The
Board seeks
to drive
down
health and
safety
risk to
as close
as
possible to
zero (see
page58).
The
Board’s risk
appetite review
in
October
2021
concluded that,
overall, no
signicant
changes
had occurred.
The audit committee assists the Board in
reviewing
the eectiveness
of the
Group’s
internal controls and risk management
systems
(see pages
119 to
122).
Imp
le
men
t
ati
on of
a capi
t
al alloc
at
ion
fra
mew
or
k
and forma
l
di
vi
de
nd polic
y
In
approv
ing
management
’s
proposed
ca
pi
t
al alloc
at
io
n
fra
me
wor
k and
for
mal
di
v
ide
nd polic
y,
t
he Boar
d
consi
der
ed
th
e
nee
ds of
a
ll
s
t
akeho
ld
er
s
inc
lud
ing
fee
db
ack recei
v
ed from inves
to
r
s
and the
Comp
an
y
’s
bro
kers
.
Over
the course
of the
rst
half of
2021,
the
Board had
several discussions
on
the
appropriateness of implementing a formal
capital allocation framework and formal
dividend
policy, in
particular to
provide
further
clarity
for shareholders.
In approving
the
adoption
of the
capital allocation
framework,
the Board ensured it was designed to balance
the needs of all stakeholders while protecting
the
Group’s market
competitiveness,
capabilities,
disciplines and
nancial strength.
During
its discussions,
the Board
took
into
account
feedback received
directly from
investors
and the
Company’s brokers
following
the
announcement of
the 2020
full-year
results.
The framework is designed to:
maintain balance sheet strength to enhance
the
Group’s competitive
advantage and
win
future
work;
ensure
downside protection
by maintaining
a
signicant net
cash ‘buer’
in
the event
of
a
macroeconomic downturn;
maximise
investment in
the current
business
to drive
growth; and
maintain
an attractive
dividend policy.
The Board will continue to assess the needs of
the business and the optimum balance sheet
structure within the context of the framework
described
above, and
any capital
then
deemed
surplus to
these requirements
may
in
the
future be
returned to
shareholders.
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Financial statements
Purpose
,
values
,
strateg
y
and
cul
ture
Our
Group purpose,
values and
culture
are set
out on
page
6. A
strong culture
is
integral
to our
purpose;
it helps
us not
just
to attract
but also
to
retain the
talent we
need
to
conduct our
business
responsibly
and with
integrity and
to
continue to
be responsive
so
that we
maintain the
long-term
relationships
we have
built with
many
of our
clients, supply
chain
and other
stakeholders.
Our
executive directors
and senior
managers
promote the
Core Values
and
Total Commitments
and
ensure they
are cascaded
and
embedded throughout
the Group.
The
Core Values
and Total
Commitments
are explained
to all
new
joiners across
the Group
as
part of
their induction
programme
and
they are
reinforced through
Group
policies, various
Group-wide e-learning
programmes
(see page
108)
and at
sta conferences.
Our
chief executive
runs sessions
on
the Core
Values as
part
of
our
leadership
development programme.
The
Board as
a whole
is
responsible for
monitoring our
culture
to ensure
it is
maintained,
and
that
it
continues to
align to
our
purpose and
strategy. In
order
to make
a comprehensive
assessment,
the
directors meet
with a
wide
range of
employees as
part
of the
strategy review
process
(see
page
103).
In addition,
the Board
receives
regular reports
on specic
key
performance indicators
and
principal
risks that
are relevant
to
our Core
Values and
reviews
them to
detect any
gaps
between
our
performance
and our
desired culture
(see
following table).
Overall,
the Board
is satised
that
the Group’s
culture remains
strongly
aligned with
our values
and
has continued
to play
a
vital part
in achieving
our
strategic priorities
and creating
value
for
our
stakeholders.
The
cus
tomer
comes
rs
t
We
take a
broad view
of
who our
customers are,
ranging from the organisations that commission us
for
projects, to
all other
stakeholders:
our people,
our
supply chain,
our shareholders
and
local communities
where
we work.
Strategic
priorities:
What
we
monitor
Divisional
customer
satisfaction
surveys, client
ratings
such as
Perfect
Delivery
1
statistics.
Biennial
surveys with
stakeholders on responsible
business.
Feedback
from suppliers.
The
executive directors
keep the
Board
updated with
key
projects
over a
certain threshold.
Additionally,
the executive
directors
update the
Board with
any
material issues
arising on
contracts
which may
impact a
division
or the
Group as
a
whole.
Board
action
in
2021
Reviewed
divisional board
summaries which include
information
on key
clients
and suppliers and the
performance
of contracts.
Members from the Board
attended
the Group
Supply
Chain
Family event
held in
September
(see page
33).
Strategic
report
1
Perfect Delivery
status
is
granted to
projects
that meet
all
four
customer
service criteria
specied
by
Construction, Infrastructure
and
Fit Out.
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Str
ate
gi
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or
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Gover
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Financial statements
T
alented people
are
key
to
our success
We
recruit, develop
and retain
those
who can
contribute most,
both
today and
in the
future.
We
ensure we
have an
attractive
culture,
working environment,
reward employees
fairly,
respect their
rights and
invest
in developing
their talent,
promote
diversity
and in
wellbeing initiatives.
Strategic
priorities:
Wh
at we
mon
ito
r
Health
and safety
policies, practices
and
performance
Voluntary
sta turnover
Number
of apprentices
and new
graduates
Average
training days
per employee
E-learning
responses
Lost
time incidents
Absence
days due
to sickness
per
person per
year
Succession planning and talent pipelines
Results
from employee
engagement surveys
and
resulting
actions taken
Diversity
of our
employees, including
gender
pay gap
information
Board
action
in
2021
Regular
monitoring of
health and
safety
performance is
a
priority
for the
Board and
is
the rst
agenda item
at
every
meeting.
The Board
noted some
increase
in incidents
compared
to
the prior
year. In
response,
the Group
launched safety
improvement
plans and
there was
a
reduction in
lost time
incidents
in the
second half
of
the year.
The
health, safety
and environment
committee
received an
update on ongoing mental health awareness and wellbeing
activities
being carried
out across
the
divisions.
When
possible, and
as part
of
the strategy
review process,
directors
visit our
sites to
talk
to managers
and employees.
At
its December
meeting, the
Board
reviewed the
feedback
received
by directors
from their
engagement
with employees
during
the year.
The Board
also
reviewed each
division’s key
engagement
and inclusion
activities and
was
pleased to
note
the
high response
rates to
surveys
as well
as the
breadth
of
activities being
carried out
to
gather new
ideas, improve
wellbeing
and develop
a consistent
approach
to adaptable
or
agile
working (see
pages 11
and
12).
Reviewed
and approved
our 2020
gender
pay gap
report, which
is
available on
our website.
Our
2021 gender
pay gap
report
will
be
reviewed by
the Board
in
the rst
quarter of
2022.
Discussed
the results
of our
2020
diversity and
inclusion survey
(see
pages 23
and 24),
considered
the divisions’
proposed
initiatives,
and provided
feedback and
support
for their
approach
to managing
employee development
and
increasing
diversity
and inclusion
across the
Group.
Reviewed
Group succession
planning, including
reports
on
how
the divisions
are managing
employee
development and
addressing
diversity and
inclusion in
the
context of
succession
planning.
Reviewed
and approved
our modern
slavery
statement for
publication
on our
website.
Considered
wider pay
across the
Group
to ensure
it aligns
with
strategy
and is
appropriate to
attract
and retain
the right
talent.
We
mu
st ch
allenge
the
st
atus
quo
There
is always
a better
way
of doing
things. This
is
key
to
ensuring that
we can
adapt,
innovate and
respond to
the needs of our customers and the communities in
which we work while ensuring we address our responsible
business
commitments to
retain competitive
advantage.
Strategic
priorities:
What
we
monitor
The
Board receives
information on
various
initiatives
being
adopted across
the divisions
to
support our
Total
Commitments.
For example,
in 2021
we
rolled out
across
the
Group our
externally validated
carbon
calculator tool,
Carbon
i
Ca, which
estimates, manages
and
reduces carbon
emissions
throughout a
project’s life
cycle;
and Property
Services
launched goldeni,
a software
platform
which helps
to
bring
eciencies for
the division’s
clients
and their
tenants (see
page
47).
Board
action
in
2021
The
health, safety
and environment
committee
monitored our
progress
in the
year against
our
responsible business
strategy
centred
around our
Total Commitment
targets,
performance
and
action plans
(environmental, social
and
governance
framework)
for achieving
our KPIs,
including
carbon reduction.
Health, safety
and environment
committee
report
Strategic
report
Health, safety
and environment
committee
report
Nomination committee
report
Directors’ remuneration
report
Strategic
report
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da
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ou
p pl
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Annual Repor
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21
Str
ate
gi
c rep
or
t
Gover
nance
Financial statements
We
op
erate
a
de
centralise
d
philosophy
We
empower our
teams to
deliver
exceptional results
for all
our
stakeholders.
Strategic
priorities:
What
we
monitor
The
executive directors
ensure the
divisions
are addressing
the needs
of
their clients
and markets,
and
that
decisions are
not held
up
by
unnecessary
bureaucracy.
Compliance
with corporate
policies
including
the Group’s
arrangements
to
allow our
employees and
others
working
on our
projects to
raise
concerns
condentially.
The
Board reviews
the appropriateness
of the delegated authorities to ensure
that the right authorities are in place so
that
our employees
can make
decisions
appropriate to their experience and
competence.
A
robust risk
management process,
including
processes to
identify
emerging
risks, is
built into
our
governance
framework which
is
monitored
by the
audit committee.
Board
action
in
2021
Held
regular meetings
with divisional
management
and invited
employees
to present at Board and committee
meetings.
Reviewed
the work
of the
internal
audit
to
examine and
identify any
cultural
issues
as part
of its
remit.
Approved
the new
Group Code
of
Conduct
to be
issued across
the
Group
and
to members
of our
Supply
Chain
Family.
Reviewed
our raising
concerns
procedures
and bi-annual
reports
of the number and nature of
whistleblowing reports made during the
period.
Reviewed
the results
of e-learning
programmes.
Consis
tent
achievement is
key
to our
fu
ture
Ensuring
we get
things right
rst
time is
a necessity
and
not an
option.
Strategic
priorities:
What
we
monitor
Financial
performance of
each division
and
of the
overall Group
Perfect
Delivery or
other success
measures,
e.g. Home
Builders
Federation
star rating,
customer
experience
questionnaires,
Net
Promoter scores
Supplier
relationships and
payments
Average
daily net
cash
The
executive directors
monitor divisional
performance
on a
monthly basis
via
divisional
board meetings
and Group
management
team meetings.
Board
action
in
2021
Reviewed
payment practices
reporting
and
divisional actions
to continue
to
maintain or
improve on
average
payment
days.
Continued
to monitor
the resilience
of
the supply
chain, including
the
availability
of materials
and resources.
The Board and audit committee
reviewed
the divisional
risk registers
and
ensured they
aligned to
the
Group risk register and the Group risk
appetite.
Reviewed
and approved
the going
concern
and long-term
viability
statements.
Approved
full-year and
half-year results
announcements,
and approved
a nal
and
interim dividend
payment.
Approved
the introduction
of a
capital
allocation framework and formal
dividend
policy.
Reviewed
Group and
divisional
performance
against strategy.
Strategic
report
Audit
committee report
Strategic
report
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Gover
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Financial statements
Over
sight of
work
place
policies and
prac
t
ices
As
a Group,
we are
committed
to conducting
all
of our
activities to
the
highest standards
of
integrity
and honesty,
and in
an
open and
ethical
way.
The Board
reviews and
approves
all key
policies
to ensure
they align
with
the Group’s
purpose,
strategy and
values.
In
2021, the
Board approved
our
new Code
of
Conduct which
replaced our
ethics
policy
and
provides a
framework for
how
we engage
with
clients, colleagues,
business partners,
suppliers and the wider communities in which
we work and sets out what our clients and
subcontractors
can expect
from us.
The
Code of
Conduct
provides
a
clear
summary
of
acceptable
and
unacceptable behaviours
and gives
practical
guidance
to help
each employee
live
our Core
Values
and achieve
our Total
Commitments.
Our
Code of
Conduct was
also
distributed
to
members of
our Supply
Chain
Family (see
page19)
and requires
them to
maintain
the standards set out in it within their own
businesses.
Before accessing
any of
our
sites, all
workers
are instructed
on the
policies
they are
expected
to follow,
including those
in
respect of
occupational
health and
safety, whistleblowing
and
modern slavery.
The
Code of
Conduct covers
the
following areas:
maintaining
a healthy
and safe
workplace;
caring
for the
environment;
anti-bribery
and corruption;
competing
ethically;
respecting
others;
avoiding
conicts of
interest;
communicating
carefully;
maintaining
nancial integrity
(including tax);
and
protecting
company information.
The
chief executive
sent a
copy
of the
Code
of
Conduct to
each employee
and
this was
followed
up with
an e-learning
module
on the
Code
which also
rearmed awareness
of
our
whistleblowing
helpline, (raising
concerns). As
at
the date
of this
report,
over 5,000
employees
had
completed this
e-learning module.
A
number
of supporting
policies are
available
on
the Company’s
and divisions’
intranets,
along
with a
suite of
more
in-depth e-learning
modules
on key
elements of
the
Code which
all
new employees
undertake as
part
of their
induction
programme. Refresher
courses are
issued
periodically to
existing employees
to
ensure that our policies remain embedded into
our
business practices.
All employees
across
the Group are required to complete modules
on
compliance issues
including: anti-bribery
and
corruption;
competition law;
modern slavery;
data
protection; market
abuse regulation;
and
information
security. The
Board directors
also
complete
all the
compulsory compliance
training
modules
to give
them a
deeper
understanding
of
how the
Code of
Conduct
and related
policies
are
embedded into
the organisation.
During
the
year,
each of
the executive
and
non-executive
directors
completed the
Company’s new
Code
of
Conduct
e-learning module,
and directors
who
had completed their market abuse regulation
training
three years
before completed
a
refresher
e-learning module.
Other Group-led
modules
focus on
business specic
topics
such
as
directors’ duties,
and tax
modules
covering
VAT
and the
Construction Industry
Scheme
(CIS),
and these
are undertaken
by
selected
individuals
as needed.
Each division
undertakes
its
own risk
assessments and
develops
additional
training modules
for their
employees
as
appropriate.
The
Board will
not tolerate
any
form of
bribery
or corruption in our business practices and this
message
is reinforced
in our
Code
of Conduct.
We
have an
established policy
framework
which
aims to
minimise exposure
to
bribery
and corruption and maintain a culture where
these
behaviours are
never acceptable.
The
audit
committee receives
information from
our
head of internal audit and assurance on our
policies
and procedures
in place
to
prevent
bribery
and corruption
and for
detecting
and
preventing
fraud. We
also require
our
suppliers,
subcontractors
and business
partners to
have
similar
policies in
place and
anti-bribery,
ethics
and
modern slavery
are all
referenced
in our
standard
subcontracts. If
any breaches
of
our
policies are
identied either
through
our
internal
audit programme,
our raising
concerns
(whistleblowing)
service, or
any other
channel,
they
are investigated
thoroughly, acted
upon,
and
any signicant
ndings are
brought
to both
the
Board and
audit committee’s
attention
(see
page
109).
Our
non-nancial reporting
statement on
pages
81 and
82 contains
further
information
on
Group policies
that drive
good
behaviour in
employee,
social and
environmental matters,
and
the diligence
with which
we
pursue them.
Our ta
x
st
rate
g
y
We
take our
obligations as
a
taxpayer seriously
and
focus on
ensuring that,
across
the wide
range
of taxes
that we
deal
with, we
have the
governance
and risk
management processes
in
place to allow us to meet all our continuing tax
obligations.
The Board
has overall
responsibility
for
our tax
strategy, risk
assessment
and tax
compliance.
Our tax
strategy, which
was
last
approved
by the
Board in
December
2021, is
available
on our
website.
We
have an
open and
transparent
relationship
with
HMRC and
seek to
anticipate
any tax
risks
at
an early
stage, including
clarifying
areas of
uncertainty
with HMRC
as they
become
evident.
We
keep HMRC
informed of
how
our business
is structured and respond to all questions or
requests
promptly.
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tor
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ate
gi
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or
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nance
Financial statements
Mo
der
n
sla
ver
y
We
are committed
to respecting
the
human
rights
of our
employees, subcontractors
and
members
of the
communities in
which
we work.
We
encourage our
supply chain
to
prevent,
mitigate
and address
any threats
to
human
rights.
Our Code
of Conduct
includes
the
Group’s
policy on
respecting others
including
our
commitment to
the Universal
Declaration
on
Human
Rights and
to prevent
modern
slavery in
our
operations and
supply chain.
In
addition, the
Group
has a
modern slavery
policy,
prohibiting
activities
linked to
slavery, servitude,
forced
or
involuntary
labour and
human tracking
and
a
procurement policy
requiring goods
and
services
to be
sourced eciently
and
fairly. The
divisions
are responsible
for their
employee
and supplier relationships and compliance
with
these Group
policies. The
divisions
are
supported
by the
Group director
of
sustainability
and
procurement, the
Group commercial
director,
the general
counsel, company
secretary
and
the Group
head of
audit
and assurance.
All
new employees
who join
the
Group take
our
e-learning module
on modern
slavery
and
our
site induction
includes ‘toolbox
talks’
to
raise
awareness of
modern slavery
for
our own
employees
and site
operatives employed
within
our
supply chain.
The
Board annually
reviews the
approach
and
progress
of work
taken by
management
and the
divisions
to identify
areas where
there
is any
risk
of
human tracking
and modern
slavery
in our
business
prior to
the approval
of
the Group’s
modern
slavery statement.
The Group’s
2020
statement
which was
approved in
early
2021 is
available
on our
website.
During
2021, the
evaluation of
our
labour
practices
against ELS
BES 6002
Ethical
Labour
Standard,
which demonstrates
our commitment
to
eliminating any
possibility of
tracking
or
modern slavery
in our
supply
chain, was
submitted
for assessment.
We are
also
hoping
to
complete our
registration for
ISO
20400:2017
during
2022. These
two actions
will
help to
demonstrate our commitment to sustainable
procurement.
Whilst
no instances
of modern
slavery
have
been
raised internally
or via
our
whistleblowing
service,
we have
assisted both
the
Police and
the
Gangmasters and
Labour Agency
with
their inquiries into two separate allegations
concerning right to work permissions and
modern
slavery. Each
of these
inquiries
have
arisen
from isolated
incidents in
our
supply
chain
and no
wrongdoing has
been
identied on
our
part.
See page 20 for further information on all our
activities
during 2021.
In our
2021
statement,
which
will be
approved by
the
Board prior
to its
publication
in the
rst half
of
2022, we
will be
reporting
against the
following KPIs:
employee
training;
investigations undertaken
into reports
of
modern slavery
and remedial
actions
taken
in
response; embedding
the use
of
Sedex
across
the Group;
and evaluation
of
our labour
practices
against ELS
BES 6002.
Rai
si
ng concer
ns (whi
st
le
bl
owi
ng
) revi
ew
Organisational
culture plays
a critical
role
in
ensuring
that we
work in
an
environment
where
people are
encouraged to
raise
any
concerns
they have,
and for
those
concerns
to
be objectively
considered and
appropriate
actions
taken to
address them.
The
Group uses
a
third-party operated,
condential service
which
is
available 24
hours a
day
to all
our employees
and
subcontractors who
work on
our
projects
to
raise any
concerns about
behaviours
or
decisions that do not uphold the standards set
by
our Code
of Conduct.
The
service enables
people
to report
concerns anonymously
and
in
condence,
and can
be accessed
by
telephone,
email,
or via
the service’s
website.
The hotline
reporting mechanisms are explained to all our
employees
and subcontractors
on induction,
repeated
throughout our
e-learning courses
and published on our intranets as well as on
oce
and site
notice boards.
A
direct link
to the
reporting
page also
appears on
our
intranets.
The
Group’s general
counsel, with
the
assistance
of
the company
secretary and
head
of internal
audit
and assurance,
oversees the
hotline.
Twice
a
year, the
Board reviews
our
arrangements
for
raising concerns
to ensure
they
are suitably
robust
and monitors
all reports
of
non-
compliance
with our
procedures. In
total,
the
Group
received 39
reports in
2021
(2020: 16),
of
which
18 came
via our
raising
concerns service.
This
number is
higher than
in
2020 which
may,
in
part, be
as a
result
of a
return to
more
normal
operating
conditions in
our oce
locations
and also an increased number of telephone
complaints
being agged
as a
potential
concern.
Overall,
the number
of reports
received
indicates
that the
Group’s employees
have
a
good
level of
awareness of
ethical
issues and
are
willing to
speak up.
In
2021, we
received one
report
per 275
employees versus
one
report per
350
employees for
Safecall’s construction
clients.
While
no specic
complaints were
escalated
for
Board attention
during the
investigation
process,
or outside
the Board’s
normal
review
timetable,
the Board
is satised
that
all reports
were
correctly investigated
and that,
where
any
further actions were needed in respect of the
issues
raised, these
had been
dealt
with and
resolved
in an
appropriate way.
The
top three
issues
raised related
to concerns
over:
HR
issues;
breach of
company policy;
and
dishonest
behaviour.
The Board
is satised
that
none of
the
issues raised
are systemic
across
the Group
and
that they
were isolated
to
individuals or
specic
circumstances.
Dire
c
tor
s
’ and
corporat
e
governan
ce
rep
or
t
c
ontinued
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t
continued
Nom
i
n
a
t
i
on
c
om
m
i
t
t
e
e
r
ep
or
t
Dear Sharehol
der
I am pleased to pre
sent to you
the repor
t f
rom the no
mination
commit
tee for 202
1
. D
uring
the year
, we were delig
hted to
welcome K
athy Quashie to th
e
Board. K
at
hy
’s skills
, par
tic
ularl
y
her ex
tensive s
trategic
, commerci
al
and digi
t
al trans
fo
rmat
ion
exper
ience, have
broadened
the e
xper
tis
e on the B
oard, and
added va
luable know
ledge and
insight to Bo
ard discus
sions.
Key responsibiliti
es:
Board and committee composition.
Identifying potential skills and
experience gaps.
Leading the Board appointment
process.
Reviewing succession planning for the
Board and Group management team.
Reviewing divisional succession plans.
Overseeing the Board evaluation
process.
The committee’s full role and
responsibilities are set out in its terms
of reference which are available on our
website.
Member
ship and meeting
s
Members
1
Member since
Attended/
scheduled
Michael
Findlay
2
(chair)
2016
3/3
Malcolm
Cooper
2015
3/3
Tracey Killen
2017
3/3
David Lowden
2018
3/3
Jen Tippin
2020
3/3
1
Biographies of members are set out on pages 90, 92 and
93. John Morgan and Steve Crummett are not members
of the committee although they are invited to attend
meetings.
2
Michael Findlay is not permitted to chair meetings where
his own succession and performance are discussed.
Following the review by the committee of the
specic
areas for
discussion highlighted
by
the
2020 evaluation, the committee was considered
to be working well with good open discussion
including in relation to management succession.
It was agreed that the focus of the committee
would remain on succession planning at both
Group, executive and divisional levels as well
as improving diversity and inclusion across
the Group and on the main Board. The 2021
evaluation of the Board, which was carried out
during the year, concluded that the committee
was continuing to work well. It was agreed
the key focus areas going forward will remain
succession planning, in particular Group
management team (GMT) succession and
improving diversity and inclusion.
Board comp
osition and
leng
th of tenure
The composition of the Board and its
committees has remained a key area of focus
along with succession planning for the Board
and the GMT.
Annually, the committee reviews the
composition of the Board together with a
consideration of the skills, knowledge and
experience needed to deliver Group strategy,
both in the short and longer term. These reviews
include consideration of the size and structure
of the Board and its committees, the range of
expertise required and any gaps in skills and
knowledge
identied, diversity
in its
broadest
sense, any feedback received from the annual
Board evaluation and the tenure of existing
Board members. As part of the 2021 review,
each Board member was required to complete
a self-assessment of their skills. The information
was then fed into a formal Board skills matrix to
enable the committee to monitor the balance
of skills, expertise and experience on the Board
against the Group’s strategic priorities. Following
the review, the committee concluded there was
a good mix of experience on the Board and
open dialogue that provides the appropriate
balance of support and challenge to the
executives.
The standard term for non-executive directors
is three years. Non-executive directors normally
serve for a maximum of nine years, through
three terms, each of three years’ duration. All
directors are subject to annual re-election by
shareholders at our AGM and the Board has
set out on pages 90 to 94 for each director the
specic
reasons why
their contribution
is,
and
continues to be, important to the Company’s
long-term sustainable success (further
information on the 2022 AGM can also be
found in the Notice of Meeting to shareholders
accompanying this annual report or on our
website). The committee also recommended to
the Board a renewal of both Malcolm Cooper’s
and David Lowden’s term for a further three
years
each, as
the Board
continues
to benet
from their considerable experience in Board
discussions.
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continued
Board appointment proces
s
Nomination committee requests proposals from
independent
search rms.
The
chair and
chief executive
then
dene a
shortlist of
candidates.
Candidates are interviewed by the chair and chief executive,
and a selection of the shortlisted candidates are then
interviewed by other Board members.
Following Board approval, based on a recommendation
from the nomination committee, the appointment of the
new director to the Board and relevant committees is
announced.
Once appointed, the new director undertakes a tailored
induction programme. The induction programme includes
meetings with the chair, company secretary, executive
directors, divisional management directors and site visits.
Nomination committee reviews and approves an outline
brief
and role
specication including
time
commitment
required
and appoints
a search
rm
to facilitate
the search.
The
chair and
chief executive
discuss
the specication
with
the search
rm, who
prepares
an initial
longlist of
candidates.
Tenure of non-executive directors
as at 31 December 2021 (%)
0-1 yea
rs
1-2 yea
rs
3-4 yea
rs
4-5 yea
rs
5-6 yea
rs
6-7 yea
rs
16.7
16.7
16.7
16.7
16.7
16.7
Date of appointment
Expiry of current term
Michael Findlay
3 October 2016
3 October 2022
Jen Tippin
1 March 2020
1 March 2023
Tracey Killen
5 May 2017
5 May 2023
Kathy Quashie
1 June 2021
1 June 2024
David Lowden
10 September 2018
10 September 2024
Malcolm Cooper
9 November 2015
9 November 2024
Ap
pointment
s to the Bo
ard and
succes
sion plannin
g
Following the review of succession planning in 2020, the
committee reported in the 2020 annual report that it would be
commencing a search for a new non-executive director. It was
agreed that the new non-executive would be an individual with
broad strategic commercial experience in a customer-focused
industry who recognised the importance of environmental, social
and governance matters to long-term value and an enhanced
corporate reputation, and that the new non-executive should
bring additional diversity to the Board to ensure an appropriate
mix of age, experience and backgrounds. In April 2021, on the
recommendation of the nomination committee, the Board
was delighted to announce the appointment of Kathy Quashie,
eective
from 1
June 2021.
Following
her appointment,
Kathy
undertook a detailed induction programme where she met with
the
chair, chief
executive, nance
director,
company secretary
and each of the divisional managing directors to broaden her
knowledge
of the
business and
enable
her to
contribute eectively
to Board discussions and decision-making.
The committee takes into consideration the length of tenure of
each non-executive director in their succession planning and the
skills
required for
each of
the
committee chairs
and is
satised
that
there is
a sucient
balance
of skills
amongst the
existing
non-executives to manage an orderly succession of the Board. The
committee recognises that careful planning will be required for the
replacement of Malcolm Cooper as chair of the audit and health,
safety
and environment
committees at
the
end of
his nal
three-
year term in 2024.
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or
t
continued
We follow the process set out above when
making Board appointments. We disclose the
name
of the
independent search
rm
and any
other connection they have with the Group
in the annual report published following the
search. Audeliss were appointed in connection
with the recruitment of Kathy Quashie. In line
with the Code, Audeliss have a commitment
to promoting diversity and ensuring access to
a diverse pool of candidates. Audeliss has no
connection to the Group or individual directors,
other than providing executive search services.
The committee formally reviewed succession
planning for the executive directors and GMT
during the year. The review took account of
the opportunities and challenges facing the
Group and the skills and expertise that will
be required in the future. Our chief executive
manages the formation of succession plans for
senior management which are overseen by the
committee. We seek to ensure that we have
identied
appropriate opportunities
for people
who are key to delivering our strategy and any
areas needing further development. Where we
have not been able to identify an immediate
successor for a role, we have short-term
contingency cover in place while the committee
monitors the external market, as well as training
and development for potential future successors
in the medium to longer term.
During the year, the committee also reviewed
each division’s plans to oversee how its
management is developing its own talent
pools for future succession. Delivering on
our purpose means that we must ensure we
continue to develop and retain a talented
team, together with a pipeline of successors,
as this is fundamental to achieving excellence
in project delivery and customer service.
Our leadership development programme
provides core and consistent leadership training
for senior employees across the Group. In
addition, each division runs its own technical
and business training programmes to develop
the skills its business and its employees need.
These programmes range from apprenticeships
and graduate training to continued learning and
supporting employees through professional
qualications
(see pages
21 and
22
for more
detail).
Each division uses succession and development
planning tools appropriate to the size and
requirements of its business. As with succession
plans for the executive directors and GMT,
the divisional succession plans are structured
around planning for the short, medium and
longer term. Where practically possible, each
division considers its existing employees for new
roles and development opportunities and, in
2021, 535 employees across the Group were
promoted internally.
Diversit
y and inclusion
We
believe that
a diverse
Board,
reecting a
broad mix of skills, backgrounds, perspectives
and experience, is critical for innovation and
will
enable us
to benet
from
a wider
range
of ideas and expertise. We consider diversity
in the broadest sense, including in terms of
age, gender, ethnicity, culture, socio-economic
background, disability and sexuality.
The chair leads the Board diversity agenda, with
the aim to continuously improve the diversity
of the Board. As a committee, we ensure our
selection processes for directors provide access
to a diverse range of candidates and will only
use
executive search
rms who
have
signed up
to the UK Standard Voluntary Code of Conduct
on Gender Diversity. Board appointments will be
made based on merit and objective criteria such
as the skills and experience needed, without
resorting to quotas but with due regard for the
benets
of diversity.
Our full
Board
diversity
policy, which was approved during 2020 and
sets out our ambition to become exemplary in
our industry, can be found in the Governance
section of our website.
With our strategy focused on growing the
business organically and generating long-term
prot
and social
value, it
is
important that
we
drive changes to ensure that we have diversity,
not only at Board level, but at all levels of the
business. While our Board diversity policy
applies to the Board and the GMT, it sets the
tone
Group-wide and
is reected
in
the divisions’
policies. It establishes our commitment to
embracing diversity and inclusion within our
culture and values so that every employee
is given the opportunity to use their abilities,
skills and experience to help us deliver on
our strategic priorities. Improving diversity
and inclusion across all levels of the Group is
therefore critical to implementing our strategy.
A diverse, talented team will align us better to
our client base and to society as a whole, and will
help us make better decisions for our business
and our stakeholders.
The chief executive is responsible, on behalf of
the Board, for improving diversity and inclusion
across the Group and ensuring a fully inclusive
culture. We recognise that historically our
industry has not been attractive to a wide talent
pool of candidates, in particular female talent,
however, we are pleased that this is changing
and the Board is being kept apprised on each
division’s progress and initiatives to improve
diversity and inclusion (see pages 23 and 24).
While it will take time, we are committed to
levelling up diversity in its widest sense across
all levels of our organisation through the
identication
of barriers
which are
unique
to
our sector in order to drive changes to policies
and practices. We are working towards women
making up at least one third of our senior
management team (see page 23 for further
details of the gender balance of the GMT and
their direct reports). During 2021, we made
progress in increasing diversity among the GMT
direct reports which is now 26% female (2020:
16%), however gender diversity of the GMT itself
The Board meets the Parker Review target to have at
least one director from an ethnic minority background
by 2024. In addition, the Board meets the Hampton
Alexander Review target of ensuring women make up
at least 33% of the Board.
Board diversity
as at 31 December 2021 (%)
Women
Men
38
62
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continued
remains low at 9% and increasing diversity and
inclusion, particularly at the level of the GMT
and their successors, is a key area of continuing
focus.
The Board as a whole reviewed the outcome of
the Group-wide diversity and inclusion survey
carried out in the fourth quarter of 2020; the
committee is responsible for monitoring the
impact of the divisions’ diversity initiatives. The
Board has continued to take an active role
in reviewing the divisions’ plans to improve
inclusivity and ensure all their employees are
fully engaged, and is pleased to note that, during
the course of 2021, the divisions continued
to work hard on their diversity road map.
Actions taken by the divisions to improve
workplace inclusivity have included reviewing
their recruitment strategies, organising
behavioural training, and providing opportunities
for employees to get together to discuss ideas
(read more on page 24). We have continued
to raise awareness among young people of
the variety of careers in the industry through
our engagement with schools and colleges to
help attract wider pools of potential talent. As
part of this engagement, we have interviewed a
cross-section of current employees to showcase
as real life and relatable examples of the variety
of backgrounds our employees have and the
career paths that are achievable (see examples
on pages 22 and 24). Going forward, the Board
will continue to review the Group’s progress
and consider what actions need to be taken to
ensure that we introduce more outcome-based
initiatives to enable us to measure the progress
we are making.
Developing people 21
Understanding our stakeholders’ priorities 11
Board evaluation
The Board has undertaken internal evaluations of its performance for the last couple of years which comprised a detailed questionnaire and individual
reviews
with each
director to
assess
the eectiveness
of the
Board
and committees,
together with
reviews
of
each director’s
performance and
their
contribution to the Board’s decision-making. The table below sets out details of actions undertaken in 2021 against the agreed actions from the 2020 Board
evaluation. Details of the outcomes and agreed actions from the 2021 evaluation are set out on page 114.
202
0 B
oar
d eva
lua
tio
n – ac
t
ion
s ag
re
ed a
nd t
aken
2020 agreed actions
Actions taken in 2021
Once the Covid restrictions have been lifted, the
Board will arrange additional meetings with the
GMT.
Due to Covid, no separate meetings were held with the GMT but the Board met with all members
of the GMT at the senior management conference and held sessions with the senior teams of
Construction and Urban Regeneration during the year.
All directors remain responsible for employee
engagement and for getting a sense of how our
employees feel about the business, and each of
the non-executive directors will maximise their
opportunities for employee engagement in 2021.
The non-executive directors attended a number of online meetings during the year and in the
second half they held a number of face-to-face meetings as part of their divisional strategy reviews.
The re-introduction of face-to-face meetings enabled the non-executives to meet and engage with
various employees from across the Group.
Members of the Board attended our senior management conference held in October.
Members of the Board attended the Supply Chain Family event where they also had opportunities
to meet with employees.
Dedicated Board feedback session on employee engagement where the Board reviewed and
discussed divisional employee engagement activities, including results of employment engagement
and pulse surveys, to give a better understanding of any issues across the business and actions
being undertaken to address them.
During the year, a number of divisions will be
invited to give a presentation to the Board setting
out their current priorities and key challenges.
These sessions will allow non-executive directors
to meet with senior teams of those divisions where
they have not been involved in the divisional
strategic review process.
The Board met with representatives from Urban Regeneration and Construction for informal
meetings in June and October.
The health, safety and environment committee were given presentations from representatives
from Construction, Infrastructure, Fit Out, Partnership Housing and Property Services, focusing on
safety performance and responsible business plans.
To ensure the Board’s skills remain appropriate for
the longer term, the directors will complete a skills
matrix based on broad general skills for review by
the Board as a whole.
The nomination committee reviewed and approved the Board skills matrix at its meeting in
February 2021 and concluded that there was a good mix of experience on the Board.
Each committee will be responsible for reviewing
the areas for discussion highlighted for their
respective committees and agreeing any actions to
be taken.
Each
committee reviewed
its areas
of
discussion at
the rst
meeting
held in
2021 and
the
agreed
actions were taken as appropriate throughout the year (see individual committee reports for
further details).
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The evaluation
questionnaire was
developed, based on
the key areas of focus.
The senior
independent director
led the Board
appraisal of the chair’s
performance.
The chair presented
the key themes for
Board discussion at
the December 2021
meeting and agreed
actions to be taken.
The Board reviewed
the actions taken
following the
recommendations
from the 2020 Board
evaluation process.
The Board and the
committee
conrmed
that they were
satised
with the
contributions and time
commitment of each
non-executive director
and the chair.
The questionnaire
was circulated and
responses collated
and analysed by the
chair and company
secretary.
The chair discussed
with each director the
feedback received
and reviewed
each director’s
contributions with
them individually.
2021 Board evaluation
process
Details of the 2021 evaluation process is set out in the table below. The 2021 evaluation sought
feedback from the Board on the following topics:
overall Board performance;
progress
on key
strategic challenges
identied
during the
2020 evaluation;
the
eectiveness of
communications of
our
environmental, social
and governance
credentials;
the
eectiveness of
the Board’s
engagement
with the
divisions and
employees,
the sharing
of
feedback received and the consideration of this feedback in decision-making; and
progress to improve the use of technology and data across the Group.
2021 Board evaluation
– actions agree
d
The
Board discussed
the ndings
from
the evaluation
at its
meeting
in December
2021. Overall,
the
Board concluded that the Board is working well, with the right issues being discussed and appropriate
Board
involvement in
key discussions.
A
number of
areas were
identied
for the
Board to
focus
on
to
ensure the Group continues to deliver long-term value for all our stakeholders. They include:
succession planning;
Group culture;
ensuring
Partnership Housing
delivers its
potential
in accordance
with its
ve-year
strategic plan;
continuing to deliver on our Total Commitments and ensuring our performance against our
Commitments and social impact is communicated clearly.
We will report on the actions taken against these areas of focus in our 2022 annual report.
Following
the individual
meetings with
each
director, the
committee agreed
it
is condent
that each
of the non-executive directors remains independent, will be in a position to discharge their duties
and
responsibilities for
the coming
year
and continues
to be
an
eective member
of the
Board.
In
accordance with the UK Corporate Governance Code, all directors will stand for re-election at the
forthcoming AGM.
As disclosed in our 2020 annual report, an external evaluation of the Board and its committees will be
commissioned in 2023.
Look
ing ahead
In 2022, the committee will continue to focus on:
succession planning for the Board and GMT;
reviewing succession planning in the divisional management teams; and
reviewing progress to further improve diversity and inclusion across the Group and the introduction
of more outcome-based initiatives.
Michael Findlay
Chair of the nomination committee
24 February 2022
Dire
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s
’ and cor
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: nom
inatio
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continued
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A
u
d
i
t
c
om
m
i
t
t
e
e
r
ep
or
t
Dear Sharehol
der
On behal
f of the Bo
ard,
Iam pleased to
present the
commit
tee
’s repor
t for
the year
ending 31 December 202
1
.
Key responsibiliti
es:
Monitoring the integrity of the
nancial
results of
the Company
and
reviewing
signicant nancial
reporting
judgements contained therein
Reviewing the external audit process
and making recommendations to
the Board in relation to the external
auditor’s appointment/re-appointment/
removal.
Reviewing
the Company’s
internal
nancial
controls and
internal control
and risk management systems.
Monitoring and reviewing the
eectiveness
of the
Company’s internal
audit function.
Reviewing the approach taken by the
Group to consider and address climate-
related
nancial risk.
The committee’s full role and
responsibilities are set out in its terms
of reference and are available on our
website.
Member
ship and meeting
s
Members
1
Member
since
Attended/
scheduled
Malcolm
Cooper
2
(chair)
2015
3/3
Tracey Killen
2017
3/3
David Lowden
2018
3/3
Jen Tippin
2020
3/3
1
Biographies of members are set out on pages 92 and
93. In addition to committee members, meetings are
regularly attended
by
the:
chair of
the
Board; nance
director; company
secretary;
Group
nancial controller;
Group head of audit and assurance; and representatives
from the external auditor.
2
Malcolm Cooper
is
a
qualied accountant
and
experienced FTSE 250 audit committee chair. He
continues to
have
recent
and relevant
nancial
experience for the audit committee of a company in the
construction and regeneration sectors.
All committee members during the year and up to the date
of this report are independent non-executive directors in
accordance with
the
Code,
and the
committee
as a
whole
has the competence, diverse skills and experience relevant
to the sector.
This report sets out how the committee has
discharged its responsibilities and provided
assurance on the integrity of the 2021
annual report, along with an overview of the
committee’s main activities and insight into the
key focus areas considered during the year.
Over the year, the committee’s key focus was on
the
integrity of:
the Group’s
nancial
reporting;
nancial
judgements; levels
of materiality;
process of risk management and internal
controls; and providing appropriate challenge of
the assumptions and key judgements made by
management. In addition, the committee was
asked to provide its input into the four trading
updates released to the market in February,
April, July and November, each of which
provided positive upgrades to expected full-year
performance.
The committee follows a formal agenda at
each meeting to ensure that all elements of its
remit are covered and meetings are scheduled
in
line with
the Company’s
nancial
reporting
timetable. As chair of the audit committee, I met
with
the nance
director and
the
external audit
partner individually during the year. In addition,
the committee held discussions with the
external auditor and the Group head of audit
and assurance, without the management team
present.
No matters
of signicance
were
raised
during any of these discussions.
The committee’s authorities and calendar of
work
remain in
line with
the
requirements of
the
Code,
having regard
to the
recommendations
of
the Financial
Reporting Council
(FRC)
in its
guidance on audit committees.
Following the review by the committee of the
specic
areas for
discussion highlighted
by
the
2020 evaluation, the committee was considered
to
be well
chaired and
working
eectively. It
was
agreed that the committee would: carry out
further detailed reviews of selected key risks
and emerging risks at each meeting; oversee a
review undertaken with the internal audit teams
to consider any improvements to the internal
audit processes; and continue to monitor any
changes
to requirements
following the
Brydon
report and BEIS review. Further information on
each can be found later in this report.
The Board evaluation for 2021 also included an
evaluation of the audit committee (see page 114
for further details on how the evaluation process
was conducted). Overall, the committee is
considered
to be
operating eectively.
Following
the 2021 evaluation, the committee agreed it
would continue to conduct risk deep dives at
each meeting and hold an annual meeting with
one of the subsidiary lead auditors.
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Activ
it
y
Ac
t
i
on
s t
ake
n
Outcomes
Financial repor
ting
Considered the
accounting
policies
and
practices
applied.
Reviewed
the half-year
and full-year
nancial
and narrative
statements and
trading
updates.
Undertook fair, balanced and understandable review of the 2020 annual report.
Reviewed
signicant accounting
judgements for
the
2020 audit.
Reviewed the 2020 viability assessments and management’s process and assumptions for assessing viability.
Reviewed the 2020 going concern statement and management’s forecasts and projections for 2021.
Conducted
a review
of the
half-year
2021 going
concern assessment
and
an initial
review of
the
2021
full-year
going concern and viability assessments.
Advised the Board in relation to the fair, balanced and
understandable
assessment of
the Company’s
position
and
prospects.
Conrmed
to the
Board that
the
committee was
satised
with the clarity and accuracy of the half-year and full-year
nancial
statements and
that the
going
concern and
viability
assessments were appropriate.
Ex
ter
nal auditor
Ensured the smooth handover from Deloitte LLP to Ernst & Young LLP.
Reviewed and monitored the independence and objectivity of the external auditor.
Evaluated
the performance
of the
auditor
during the
2020 audit
and
the eectiveness
of the
external
audit
process
following completion
of detailed
questionnaires
by management
and group
and
divisional nance
teams.
Monitored compliance with our Group policy on the engagement of the external auditor to supply non-audit
services.
Recommended the appointment of EY as external auditor for
the
nancial year
ended 2021.
Approved the audit fee for the year ended 2021.
Recommended the reappointment of EY for the year ended
2022.
Risk mana
gement
and
internal controls
Formally
reviewed the
eectiveness of
the
risk identication
process and
Group
and divisional
risk registers.
Conducted
deep dives
into key
risk
areas.
Reviewed
the eectiveness
of the
Group’s
internal nancial
controls and
internal
control and
risk
management systems.
Monitored
and reviewed
the eectiveness
and
performance of
the Group
head
of assurance
in connection
with the 2021 agreed internal audit plan.
Reviewed the outcome of the external evaluation of the internal audit function.
Considered
the potential
impact of
changes
proposed by
the government’s
consultation
‘Restoring trust
in
audit and corporate governance’.
Reviewed the appropriateness of the 2022 proposed internal audit plan.
Reviewed
the TCFD
statement and
the
Group’s approach
to TCFD.
Advised the Board in relation to the outcome of its risk
management reviews, including its oversight of the risk
identication
process, to
facilitate the
Board’s
assessment of
the
Group’s emerging and principal risks and risk appetite review.
The risk management and internal control systems were
considered
to be
eective.
Approved the 2022 internal audit plan.
Approved
the Group’s
draft 2021
TCFD
statement including
details of the Group’s risks and opportunities in relation to
climate change and scenario analysis.
Key acti
v
ities during t
he year
The committee’s key activities during the year are set out below, and further information on its work, including full descriptions of the risk management and internal control processes, is set out on the following
pages.
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Financial rep
or
tin
g
The committee is responsible for reviewing
and reporting to the Board on the clarity
and accuracy of the half-year and full-year
nancial
statements. The
key activities
table
on the previous page sets out the actions
and outcomes of the committee’s reviews
undertaken during the year to ensure that
the
nancial statements
present a
‘true
and
fair’ view. In order to facilitate its reviews, the
committee receives regular reports from the
nance
director, the
Group’s nancial
controller
and the external auditor, who also regularly
attend meetings of the committee.
The directors are responsible for preparing
the annual report and accounts. In February
2022, the committee considered the 2021
annual report, including the preliminary results
announcement, and its detailed review of the
year-end position, by reference to the year-end
accounts, assisted the Board in making the
going
concern statement
set out
on
page83. In
addition,
the committee
reviewed the
signicant
accounting
judgements for
the 2021
nancial
statements (see below) and considered and
approved the key assumptions in the long-
term viability statement. This year, the key
assumptions in the viability statement included
modelling a series of separate downside
scenarios, which were individually mapped to
the principal risks on the Group risk register and
then combined to create an extreme downside
scenario, in order to provide a more detailed
disclosure
of risks
considered (see
page
84 for
further information). The committee did not ask
the
external auditor
to look
at
any specic
areas
during the course of conducting its audit.
Fair
, balanced and unders
tandable
assessment
One
of the
key provisions
of
the Code
is for
the
Board
to conrm
that the
annual
report, taken
as a whole, is fair, balanced and understandable
and provides the information necessary for
shareholders
to assess
the Company’s
position,
performance, business model and strategy (see
the strategic report from the inside front cover
to
page 85).
To enable the Board to make this declaration,
a formal review is embedded in the year-end
process to ensure the committee and the
Board as a whole have access to all relevant
information and, in particular, management’s
papers
on signicant
issues faced
by
the Group.
The committee receives a paper from the
company secretary detailing the approach taken
in preparing the annual report. The committee
and the Board as a whole receive drafts of the
annual
report in
sucient time
to
facilitate
their review and enable them to challenge the
disclosures where necessary.
Applic
ation of acc
ounting policies,
judgements
and estimat
es
In carrying out its duties, the committee is
required
to assess
whether suitable
accounting
policies have been adopted and to challenge
the
robustness of
signicant judgements
and
estimates
reected in
the nancial
results.
This process involves reviewing relevant papers
prepared
by the
nance team
in
support of
the
policies adopted and judgements and estimates
made
and conrm
that they
remain
appropriate
for the Group. The papers are discussed with
the
nance director,
the external
auditor
and,
where appropriate, the Group head of audit and
assurance. In addition, the committee reviews
the year-end report to the audit committee
from the external auditor based on the work it
performed
and ndings
from the
annual
audit.
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E
x
ternal audit
Independence
and
eec
tiveness
The
committee oversees
the Company’s
relationship with the external auditor and
compliance
with the
requirements of
the
Code
and
the Competition
and Markets
Authority
Order
published in
2014 which
requires
all
public interest companies to conduct an audit
tender at least every 10 years and to rotate their
audits after at least 20 years. To ensure that the
external auditor remains independent of the
Company,
the committee
carries out
an
annual
assessment of the auditor’s independence along
with
an appraisal
of its
qualications,
expertise
and
resources. To
full these
obligations,
the
committee reviewed the external auditor’s
presentation of its policies and safeguards to
ensure its continued independence within
the meaning of all regulatory and professional
requirements
and that
the objectivity
of
the
audit
engagement partner
and audit
sta
had
not been impaired. In addition, key members
of
the audit
team will
rotate
o the
Company’s
audit
after a
specic period
of
time.
Following a formal tender process detailed in
our 2020 annual report, Ernst & Young LLP
(EY) were recommended by the committee to
be
appointed as
the Company’s
auditor
with
eect
from the
Company’s 2021
audit
and their
appointment was approved by shareholders
at our AGM held in May 2021. Deloitte LLP,
who
had held
oce as
the
Company’s previous
auditor
since 1994,
ceased to
hold
oce from
the conclusion of the AGM. Peter McIver was
appointed as the lead audit engagement
partner. Peter is a senior partner with over 30
years’ experience and has led EY’s London audit
practice and their Real Estate, Hospitality and
Construction
audit team.
Sig
ni
c
ant mat
te
rs cons
ide
re
d
in relat
ion to
the
na
ncia
l
st
a
tem
en
ts
The
following table
shows what
we
consider to
be the
key
accounting matters
which required
the
exercise
of judgement
during the
year.
These are
all
considered to be recurring matters.
Issue
Basis of assurance
Conclusion
Contract revenue, margin, receivables
andpayables
The recognition of revenue and margin on
long-term
contracts in
the nancial
statements,
and the associated contract receivables and
payables
require management
to make
judgements and estimates.
In addition to updates on the key contract issues at
Board meetings, at which management identify any
signicant
dierences in
contract valuations
that
exist
with either clients or suppliers, the committee has
reviewed the status of these key contract issues at each
audit committee meeting.
Based on its review and discussions with the
management team and external auditor, the
committee concluded that the treatment
of contract revenue, margin, receivables
and
payables in
the nancial
statements
is
appropriate.
Impairment of goodwill
The value of goodwill is supported by a value-in-use
model prepared by the management team. This is
based
on cash
ows extracted
from
the Group
budget
and strategic plan, which have both been approved by
the Board. The committee reviewed and challenged
the management team on the assumptions used in the
value-in-use model.
Based on its review and discussion with the
management team and the external auditor,
the
committee was
satised that
the
value of
goodwill is appropriate.
Viability and going concern assessment
In order
to
satisfy
itself
that
the Group
has adequate
resources to continue in operation for the foreseeable
future and that there are no material uncertainties in
respect of the Group’s ability to continue as a going
concern, the committee considered the Group’s viability
statement, cash forecasts, including sensitivities to
risks that could reasonably impact the future operating
results, and available borrowing facilities.
Based on its review and discussion with the
management team and the external auditor,
the committee recommended to the Board
the adoption of the going concern statement
and the viability statement for inclusion in the
annual report.
As
a result
of its
reviews
as
detailed above,
the committee
was
pleased
to advise
the Board
that
the
2021 annual
report and
nancial
statements
(the ‘annual
report’)
is fair,
balanced and
understandable
and provides
the necessary
information
for our
shareholders to
assess
the
Company’s position,
prospects,
business model and strategy.
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Following the committee’s review of EY’s policies
and
safeguards, together
with the
Company’s
own policies on engaging the external auditor
for non-audit work (see below) and employment
by
the Company
of former
employees
of the
external
auditor,
the
committee
conrmed
that
it
was
satised with
EY’s continued
independence
and objectivity.
As part of its responsibility for assessing
the
eectiveness of
the external
audit,
the
committee discussed the external audit plan
at the committee meeting held in August 2021
and reviewed progress against the audit plan at
the meeting held in December 2021, noting at
that time the scope of work to be undertaken
and the key audit matters being addressed
by the external auditor. At the meeting prior
to the announcement of the full-year results,
the committee reviewed the external auditor’s
fullment
of the
agreed audit
plan
and the
key areas of audit focus as described in the
independent auditor’s report on pages 160 to
169.
During the year, an internal evaluation of
the external audit process was undertaken,
having
regard to
the FRC’s
Guidance
to
Audit
Committees and
with the
assistance
of the Group head of audit and assurance.
The review is undertaken in the early part
of the year following the conclusion of the
full-year audit and is carried out by way of
questionnaire
circulated to
senior members
of
the
Company and
the divisions’
nance
teams.
The feedback received in 2021, which covered
matters
including the
quality of
the
process,
the
adequacy of
resources employed
by
the
external auditor, its communication skills and
its independence, objectivity and professional
scepticism, was then reviewed by the committee
as part of its assessment of the external auditor’s
eectiveness.
The review
was carried
out
on
Deloitte in relation to the 2020 audit and no
concerns arose in the course of these reviews,
which indicated that there were no issues with
the
eectiveness of
Deloitte as
the
prior external
auditor. EY shadowed the working of Deloitte
during the 2020 year-end audit to ensure a
smooth handover ahead of the 2021 audit.
The
rst review
of the
eectiveness
of EY
will be
undertaken following the conclusion of the 2021
audit in early 2022.
Policy on the aud
itor providing
non-
audit
ser
vices
The
Company’s policy
on the
engagement
of the external auditor for non-audit related
services,
which applied
during the
2021
nancial
year,
complies with
the FRC’s
Revised
Ethical
Standard. The policy is designed to ensure that
the provision of non-audit services does not
impair the external auditor’s independence or
objectivity
or create
a conict
of
interest. The
policy
applies to
the Company
and
all its
wholly-
owned subsidiaries and provides guidance on
the type of work that is acceptable or prohibited
for the external auditor to undertake, and
the process to be followed for approval. The
categories of services that are prohibited are in
line with the legislation and precluded Deloitte
(prior
to when
they ceased
to
hold oce)
and
now preclude EY (post their appointment) from
providing certain services, such as valuation work
and
preparing accounting
records and
nancial
statements. For other services not falling within
the prohibited services list, the external auditor
is
eligible for
selection by
the
Company provided
that its skills and experience make it competitive
and the most appropriate supplier of these
services. Permitted services can be carried out
by the external auditor subject to the advance
approval
of the
nance director
or,
if the
fees for
such services exceed a threshold of £50,000,
the advance approval of the audit committee
chair. In addition, Deloitte and EY have their own
safeguards
in place
to conrm
that
non-audit
work
prohibited by
the FRC’s
Ethical
Standard is
not provided to the Group.
The committee monitors compliance with the
Company’s
policy throughout
the year
and,
during 2021, neither Deloitte nor EY, during
their
respective periods
of oce,
provided
any
non-audit
services that
required the
approval
of
the committee. There were no fees for non-audit
services incurred by EY during the year.
Reappointment of exte
rnal auditor
Having regard to the considerations referred to
above,
the committee
has satised
itself
that EY,
the current external auditor with responsibility
for
the 2021
nancial year
end,
remains
independent
and eective.
As a
result,
the
committee has recommended to the Board that
a resolution proposing the reappointment of EY
as external auditor be put to shareholders at the
forthcoming AGM.
Ris
k management and
internal contro
ls
The Group’s risk management process and
system of internal controls were in place for the
whole year and up to the date of approval of
the
annual report
and are
in
line with
the FRC’s
Guidance
on Risk
Management, Internal
Control
and Related Financial and Business Reporting.
The audit committee is tasked with assessing
and
reviewing the
Company’s principal
and
emerging risks and keeping the internal control
system under review.
Risk review
In August and December 2021, the committee
conducted a formal appraisal of the Group
and divisional risk registers, following detailed
reviews by the divisions and the risk committee.
This included an evaluation of the process by
which
signicant current
and emerging
risks
are
identied.
Risks are
identied by
the
divisions,
escalated through the risk management and
Board reporting processes and consolidated
into a Group risk register as either principal or
emerging risks. Documented against each are
the
matters the
Company has
in
place in
order
to prevent or mitigate any impacts. During
the year, the risk registers presented to the
committee included deep dives into key focus
areas relating to our principal risks, including:
economic uncertainty and the prospect of
longer-term
inationary pressures;
materials
availability;
partners’ stretched
nances; our
preparedness for the upcoming Building Safety
Bill; and longer-term residential drivers. The
registers also included deep dives into a number
of emerging risks and scenarios, including
consideration of potential long-term impacts of
climate change challenges, the advancing pace
of technology and scarcity of skilled labour in the
industry.
Following its assessment at the year end, the
committee noted there was a slight increase
in risk predicated by; economic headwinds,
continued material/labour supply constraints
and
the ‘prospect’
of a
prolonged
inationary
period/base
rate rise.
The Covid
principal
risk
disclosed in the 2020 report was downgraded
following the implementation of safe working
procedures on our sites, the UK’s vaccination
programme and the easing of lockdown
restrictions,
although Covid
variants are
recognised as having the ability to disrupt.
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The committee therefore concluded that, while
there continues to be uncertainty in the UK
macroeconomic environment, the Group’s risk
prole
remains relatively
stable. This
is
due
primarily to the markets in which the Group
operates being predominantly in the public and
regulatory sectors, which the committee regards
to be structurally secure, coupled with continued
government support for the construction,
infrastructure and regeneration sectors. Our
order
book quality
and our
robust
working
capital
management, which
are reected
in
our strong cash position and balance sheet,
continue to support long-term decision-making
and ensure we continue to select projects that
match our risk appetite and are right for our
business.
Following its reviews, the committee reports to
the Board to facilitate the Board’s annual risk
appetite discussion.
Board
risk appetite
review
58
Principal risks (for
details of
the
Group’s principal
risks and
how they
are
being managed
and
mitigated) 58
Emerging risks (for
information on
the
procedures
in place
to identify
and
monitor emerging
risks)
69
The TCFD statement
(for more
information
on
steps taken
to ensure
that
material climate-related
matters are
being properly
considered
in the
annual report) 71
Internal controls
Financial
Financial reporting system
– to ensure
the
eective safeguarding
of assets,
proper
recognition of liabilities and accurate
reporting
of prots;
a comprehensive
budgeting and forecasting system,
regularly reviewed and updated; a
management reporting system, including
monthly divisional reports to the Board;
and
nancial reviews
in the
annual
internal
audit plan to validate the integrity of
divisional management accounts.
Investment and capital expenditure
–
detailed
procedures and
dened levels
of authority, depending on the value and
nature of the investment or contract,
in relation to corporate transactions,
investment,
capital expenditure,
signicant
cost commitments and asset disposals.
Working capital
– continual monitoring
of current and forecast cash and working
capital balances through a regime of daily
and monthly reporting.
Operational
Group structure
– divisional boards, with
certain key functions such as tax, treasury,
internal audit, IT, pensions and insurance
retained
at Company
level; and
a
system
of delegated authorities to ensure that
decisions are made at the appropriate level
(governance framework page 99).
Tender, project selection and contract
controls
– tenders reviewed in detail with
approval
required at
relevant levels
and
at various stages from the start of the
bidding process through to contract award;
assessment
of the
nancial standing
of
clients and key subcontractors; and robust
procedures to manage ongoing contract
risks, with monthly operational reviews of
each contract’s performance including a
detailed appraisal of related commercial
performance via our cost and value process.
Compliance
Legal compliance
– monitored by divisional commercial directors and HR managers, and
the Group commercial director and general counsel; training provided on health and safety,
competition law, bribery and corruption and market abuse.
ISO accreditation
– includes
9001 (quality),
14001
(environmental), 45001
(occupational
health and safety) and 27001 (information security management).
Corporate governance framework and Group policies
– written guidance and policies
(see
pages 81
and 82
for
more detail
on our
policies)
at Group
and divisional
levels.
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Review of internal controls
The
committee reviewed
the eectiveness
of
the Group’s system of internal controls which is
described
briey in
the adjacent
box.
The review
includes assessing: the relationship between
the internal and external audit function; the
results of internal audit work; and the overall
eectiveness
of the
internal audit
process.
As part of the year-end close procedures, a
historic
accounting error
was identied
and
corrected (refer to basis of preparation, note (e)
to
the nancial
statements on
page
174). The
committee has considered the impact of the
historic accounting error and is taking action to
investigate the root causes of this matter, and to
rectify the related internal controls.
In addition, the committee was kept informed of
additional processes proposed by the executive
directors in preparation for new regulations
that may follow the government’s consultation,
‘Restoring
trust in
audit and
corporate
governance’, particularly the more formalised
accountability of directors over internal controls
and the additional disclosures they will need to
make as a result.
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Internal audit
The internal audit function is managed by the
Group’s head of audit and assurance, who
oversees the divisional heads of internal audit
and assists with risk management. The internal
audit function conducts its work to align with the
Internal
Audit Charter,
which has
been
drafted
in accordance with the recommendations of the
International Institute of Internal Auditors. The
internal audit function is subject to validation by
an
independent, external
organisation every
ve
years
and its
ndings are
reported
directly to
the
audit committee (see page 122).
Each year, in advance of the committee’s
approval, the annual internal audit plan is
developed from a consideration of the principal
and key risks, the prior cycle of internal audit
testing,
management requests
and input
from
the committee. The 2021 annual internal audit
plan included 62 separate audits, c95% of which
were carried out on the operational activity of
the Group, including:
project – operational, commercial, change
management and risk (all business units);
development – approvals, risk and capital
structuring, partner performance, funding,
programme,
return on
capital, prot;
nance
reviews –
cash, debt,
payroll,
management accounting (selected business
units); and
project performance reviews – commercial
and operational reporting and forecasting.
Other areas of focus included audits of cyber
security, design management, digital project
management
and nance
systems. In
response
to
the Covid
pandemic, a
number
of internal
audits in early 2021 were carried out virtually
or, where possible and subject to safe working,
in person. However, once restrictions had been
eased and for the remainder of the year, the
audits were carried out face to face.
A subjective assessment of culture is embedded
into each individual audit. The internal audit
team
retains an
element of
exibility
in the
Plan
and uses business intelligence tools and metrics
to identify projects for review.
The internal audit function has developed
a process for formalising its view of the
eectiveness
of the
Group’s system
of
internal
controls (see page 120). The assessment
involves a comprehensive evaluation of the
control environment (on a three-point scale)
ranging
from ‘eective’
through to
‘ineective’.
For 2021, the internal audit function, based
on its proportion of audits, concluded that
the control environment as a whole was
appropriate
to maintain
an eective
system
of
internal control. There were a small number
of improvements suggested, which have been
implemented.
In obtaining an overview of the Group’s
performance, the internal audit function
also gains meaningful insight from its
functional colleagues in: health, safety and
environmental; IT and IT security; legal; company
secretariat;
nance; tax
and treasury;
business
improvement; and HR, with whom it engages
on a regular basis. The internal audit process is
supplemented by a rolling programme of peer
group reviews (overseen by internal audit) in
Construction
& Infrastructure
and Partnership
Housing, which assist in the professional
development of the individual employees
concerned while providing a mechanism for the
cross-fertilisation of ideas and dissemination of
best practice.
At each meeting, the committee receives a
report from the Group head of audit and
assurance that includes details of audit
assignments carried out across the Group,
including:
operational, project
and nancial
reviews; metrics showing progress made against
the audit plan; updates on Group and divisional
risk registers; a log of any concerns raised;
market soundings on macroeconomic and
sector conditions; and an update on the internal
audit resource.
For 2022, the audit plan will follow a similar
pattern of reviews as detailed above, focused on
areas
the Board
considers the
most
signicant in
terms of risk and or materiality.
Independence
and
eec
tiveness
Each year, the committee assesses the
eectiveness
of the
internal audit
function.
In its
2021 internal assessment, the committee:
met with the Group head of audit and
assurance separately without the executive
directors
present to
discuss the
eectiveness
of the internal audit function – no new matters
or issues were raised that had not already
been reported by the executive directors;
reviewed and assessed the audit plan;
reviewed whether necessary actions were
being taken promptly to address any failing or
weakness
identied by
internal control
audits;
reviewed whether the causes of the failing
or weakness indicates poor decision-making,
a need for more extensive monitoring or
a
reassessment of
the eectiveness
of
management’s ongoing processes; and
assessed
the role
and eectiveness
of
the
internal audit function in the overall context of
the
Company’s risk
management system
and
whether the function is able to continue to
meet the needs of the Group.
The results of the latest assessment were
reviewed by the committee in December 2021,
and
it was
satised that:
the
internal audit
and
internal
controls were
operating eectively;
the
internal
audit team
was adequately
staed
and
remained independent; and the risk to the audit
team’s independence and objectivity was low.
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Ex
ternal assessment
The International Standards for the Professional
Practice of Internal Auditing introduced a
requirement
for an
external assessment
of
all
internal audit services to be concluded at least
once
every ve
years by
a
qualied, independent
reviewer from outside the organisation. In the
rst
quarter of
2021, the
committee
appointed
Blackmores
(UK) Ltd
on behalf
of
the Company
to
validate the
Company’s internal
assessment
against
the requirements
of the
following
standards:
International Standards for the Professional
Practice of Internal Auditing
IA
Code of
Practice
The purpose of the external assessment is to
help improve the delivery of the internal audit
service to the Group and is designed to identify
opportunities for development and enhance
the overall value of the internal audit function
to the Group. The external assessment was
overseen
by Steve
Crummett, following
which
the results of the review were provided to
the committee. The committee then oversaw
the implementation of the (relatively minor)
recommendations.
Look
ing ahead
In 2022, the committee will continue its focus on:
the
integrity of
the Group’s
nancial
reporting;
risk management and internal controls; and
continuing to monitor the forthcoming
changes to legislation as a result of the
proposed reforms in the BEIS White Paper
‘Restoring
trust in
audit and
corporate
governance’.
Malcolm Cooper
Chair
of the
audit committee
24 February 2022
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H
e
a
l
t
h
,
s
a
f
e
t
y
a
n
d
en
v
i
r
on
m
en
t
c
om
m
i
t
t
e
e
r
ep
or
t
Dear Sharehol
der
We recognise that we ope
rate in
a potentiall
y challenging in
dus
tr
y
and that o
ur div
isions are faced
wi
th a var
iet
y of healt
h, s
afet
y
and env
ironment
al r
isks
, som
e of
which are
unique to
the specic
work they each under
t
ake.
Key responsibiliti
es:
Monitoring the Group’s duties and
performance in relation to safety.
Reviewing the Group’s responsible
business strategy, initiatives, risk
exposure, targets and performance
against the Total Commitments.
Reviewing the impact of the Group’s
operations on the health and wellbeing
of employees.
Monitoring the impact of the Group’s
operations on the environment
and how the Group is adapting its
operations in the light of climate
change.
The committee’s full role and
responsibilities are set out in its terms
of reference which are available on our
website.
Member
ship and meeting
s
Members
1
Member
since
Attended/
scheduled
Malcolm
Cooper
2
(chair)
2017
4/4
Andy Saul
2015
4/4
Clare Sheridan
2018
4/4
Tracey Killen
2020
4/4
1
Members’ biographies are disclosed on pages 92 and 95.
Although not a member of the committee, Michael Findlay
attends the meetings on a regular basis and attended all
the health, safety and environment committee meetings
in 2021.
2
Malcolm has in-depth knowledge and experience of
health and safety and the impacts of climate change from
his appointments at National Grid and Southern Water.
We therefore focus on controlling and managing
these risks to ensure we have the right
management and processes in place to promote
a positive health and safety culture throughout
the Group and protect everyone connected with
our activities.
The health, safety and environment (HSE)
committee undertakes various activities
throughout the year to monitor each division’s
performance against and compliance with our
health, safety and wellbeing framework, as we
want everyone who works for us to get home
safe and well at the end of each day.
Following the announcement of our
commitment to achieving net zero carbon by
2030, the committee has continued to support
the Board in monitoring compliance with
environmental regulation and progress against
our environmental targets. We are proud of
our historical achievements, our continued
commitment to embed sustainability throughout
our business operations, and the independent
recognition we have received from organisations
such as CDP. The committee will continue
to monitor how we work closely with our
stakeholders
to meet
the challenges
that
ghting
climate change will bring, as well as how we can
benet
from opportunities
that come
from
an
ability to build sustainably over the long term.
Following the review by the committee of the
specic
areas for
discussion highlighted
by
the
2020 evaluation, the committee was considered
to be working well with broadly the right level of
information received and good debate on its key
areas of responsibility. It was agreed that, during
2021, the committee would: invite an external
perspective on the Task Force on Climate-
related Financial Disclosures (TCFD) ahead of the
Group reporting fully under these requirements;
request more data on trends, remediation and
follow-up actions taken to assist with monitoring
safety performance; and request more data
to demonstrate the improvement in safety
performance
of the
divisions over
the
last ve
to six years. Further information on each can be
found later in this report.
The Board evaluation for 2021 also included an
evaluation
of the
HSE committee
(see
page114
for further details on how the evaluation process
was conducted). Overall, the committee is
considered to be working well and focused on
the right topics. Following the 2021 evaluation,
the committee agreed it will: keep abreast
of the increasing and varied demands from
stakeholders on environmental, social and
governance (ESG) matters, including the ESG
approaches of peer group companies; and
identify ways in which we can reduce RIDDOR
1
incidents further, including considering health,
safety and wellbeing practices in companies
outside our sector.
1
The Reporting of Injuries, Diseases and Dangerous
Occurrences Regulations 2013.
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Respons
ible
busi
ness
The committee is responsible on behalf of the
Board for ensuring that the Group conducts
business in an ethical and responsible manner
and
manages non-nancial
risks appropriately
and for overseeing material environmental
and social issues. Our responsible business
strategy is developed and agreed by the Group
management team, which is supported by
our Group health and safety forum, HR forum,
supply chain panel, social value panel and
climate action panel, each made up of specialist
representatives from across the divisions.
Our responsible business strategy is driven
by our Total Commitments which align to
six UN Sustainable Development Goals. The
committee assists the Board in monitoring
our performance and progress against each
of our Total Commitments and in particular
our Commitments to Protecting people
and Improving the environment. The Board,
nomination and remuneration committees,
through their activities, also assist in monitoring
and reviewing performance against our
Commitments to Developing people, Working
together with our supply chain and Enhancing
communities.
Responsible business strategy and performance
(for full details of our performance against each
Total Commitment)
Protec
ting p
eopl
e
Our number one priority is to protect the health,
safety and wellbeing of everyone connected
with our business, including employees,
subcontractors and suppliers working on our
projects. Our ‘100% Safe’ ambition is supported
by creating a culture that promotes people’s
health and wellbeing and by ensuring that
our health, safety and wellbeing framework is
integrated into each division’s business strategy.
Within this overarching framework (see box
right), and with the support of the health and
safety forum, each of our divisions sets health
and safety goals and objectives each year so that
its individual performance can be analysed and
help drive continuous improvement.
However,
despite the
continuing eorts
of
all
our divisions, we are disappointed that we
have seen a deterioration in our overall safety
statistics compared with 2020 (see page 17).
The dominant trend of the RIDDOR accidents
in
2021 were
slips and
trips
where we
suered
18incidents
(2020: 7)
which have
occurred
despite enforcing and maintaining high
standards of site presentation and nine hand
injuries (2020: four). All RIDDOR accidents and
high potential incidents were fully investigated
and learning was shared and reported to both
the committee and the Board. All our divisions
took steps to increase safety awareness and
promote safe behaviours during the year
focusing on their key accident causes, for
example Infrastructure conducted a ‘Safe Hand’s’
campaign in response to the increase of hand
injuries (see page 18) and as a result of these
initiatives we saw an overall reduction in the
number of RIDDOR and lost time incidents in
the second half of the year.
Health, safe
t
y and
wellbeing framework
Each division to have appropriate
arrangements in place to ensure
the continuous improvement for
occupational health and wellbeing.
Each division to contribute to a
collaborative Group approach and
agreed framework to address the
requirements of the Fire Safety Act.
Improve sharing of learning, innovation
and best practices across the divisions.
Embrace and integrate the
appropriate recommendations from
the Loughborough University Covid
research into divisional improvement
plans
and monitor
eectiveness on
a
regular basis.
The committee approved the updated
health, safety and wellbeing framework in
2021 on behalf of the Board.
We did not undertake any site visits as a
committee as the non-executive directors
visited a number of sites as part of this year’s
divisional strategy reviews where each of the
non-executives observed and discussed with
employees how well the health, safety and
wellbeing framework had been embedded
in each division (see page 103 for more
details). However, over the course of our four
committee meetings held throughout the year,
we invited representatives from Construction,
Infrastructure, Fit Out, Property Services and
Partnership Housing to present their health,
safety and wellbeing plans in detail, along with
details
of their
division-specic areas
of
focus,
key activities and progress made.
Our divisional health and safety teams have
continued to work hard throughout the year
reviewing the risks and challenges that they
face,
ensuring that
induction training
is
eective
and that our employees, subcontractors and
suppliers working on or visiting our projects
are aware of our health and safety policies,
understand
site-specic risks
and follow
the
correct health and safety procedures. With social
distancing restrictions being lifted during the
year, we were able to return to pre-Covid site
operating procedures, although our divisions
retained some of the new working practices
introduced in response to the pandemic as they
were
benecial to
health, safety
and
wellbeing
as well as productivity for our employees and
supply chain partners.
In June, the committee conducted a detailed
review of the divisions’ mental health and
wellbeing activities as a follow-up to the deep
dive that had been conducted during the early
stages of the Covid pandemic. The review
showed how each division was continuing to
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develop its programmes, enabling the Board
to ensure that appropriate levels of support
are being maintained for our employees and
subcontractors. Overall, the committee noted
the continuing good cultural ethos and drive
in all our divisions to improve and embrace
new safety initiatives and promote health
and wellbeing, and in particular, noted the
exceptional work Property Services has been
doing around identifying situations of domestic
abuse (see page 20).
Following the 2020 evaluation of the committee,
the committee’s papers were refreshed to assist
it in monitoring and challenging our divisions to
improve their safety performance.
Going into 2022, our divisions will ensure that
our teams continue to remain focused, follow
procedures and do not take unnecessary
risks. Each division has been asked to continue
to address the dominant trends in RIDDOR
accidents as part of their health and safety plans
and the committee will review and monitor this
throughout the year. Providing social distancing
restrictions are not reinstated, the committee
intends to carry out at least one site visit in the
second half of 2022.
Responsible business strategy and performance –
protecting people
Improving the e
nvironme
nt
We are committed to caring for the environment
and to minimising the environmental impact of
our activities on the natural environment and
the communities we work in, both now and in
the longer term.
As part of its review of strategy and risks, the
Board considers the impacts of climate change
on our markets and operations. Further
narrative describing the Board and leadership’s
oversight and management of climate-related
risks and opportunities can be found in our
TCFD statement on pages 71 to 79.
The committee monitors compliance
with environmental regulations and our
environmental performance. In support of
this the committee receives updates on our
environmental KPIs, environmental audits and
the initiatives being undertaken by each division
to reduce the impact of its operations on the
environment. The committee also ensures we
continue with our clear and transparent path
to reducing our carbon emissions and reaching
our ambition of at least net zero by 2030 at the
latest. There were no environmental incidents to
report for the Group in 2021.
To facilitate the committee’s review of the
Group’s performance against the Streamlined
Energy and Carbon Reporting (SECR) reporting
regulations, as well as reviewing the Group’s
disclosure under the four core elements of the
TCFD, the committee, during the course of 2021:
was briefed by the company secretary at the
June meeting on the TCFD requirements, the
Group’s position and actions being taken to
report fully against the TCFD requirements;
received a half-yearly and annual presentation
from the Group’s director of sustainability
and procurement on activities and progress
against all our Total Commitments;
received presentations and perspectives from
external advisers on responsible business,
best practice and emerging trends;
reviewed the Group’s scores against its peers
in both environment and social rankings,
including areas where our practices exceeded
those of our peers and where there are
further opportunities for improvement; and
arranged for representatives from the
committee to attend our Supply Chain Family
event (see page 33) which focused on climate
change and supply change resilience.
As a result of its reviews, the committee is
satised
that a
wide range
of
activities are
being
undertaken across the Group to support our
Commitment to Improve the environment
and to combat climate change. The committee
will continue to monitor the Group’s progress
against its target of net zero by 2030 for Scope 1,
Scope 2 and operational Scope 3 emissions, and
its activities to increase biodiversity and reduce
water usage and waste on our projects.
Responsible business strategy and performance
– improving the environment
Look
ing ahead
In 2022, the committee will:
continue to challenge the divisions to seek
further reductions in the number of lost time
incidents and all accidents;
review high potential incidents;
review the divisions’ continuing actions to
help our employees maintain their health and
wellbeing;
review the Group’s environmental
performance, including risks and
opportunities in relation to climate change;
review our performance against our Total
Commitments;
review our responsible business strategy and
health, safety and wellbeing framework; and
where possible, undertake an in-person site
visit.
Malcolm Cooper
Chair of the health, safety and environment
committee
24 February 2022
12
6
_
Mor
g
an S
in
da
ll G
ro
up p
l
c
Annual Repor
t 20
21
Str
ate
gi
c rep
or
t
Gover
nance
Financial statements
E
xecutive remune
ration in contex
t
Our remuneration policy is designed to be
sustainable and simple, and to encourage the
eective
stewardship that
is vital
to
delivering
our
strategy of
creating long-term
value
for all
stakeholders.
We are committed to being open and
transparent
in our
approach to
executive
remuneration
and, as
a committee,
we
strive
to keep remuneration arrangements clear,
consistent
and simple,
to facilitate
eective
stakeholder scrutiny. Performance-related
components
of remuneration
form a
signicant
portion of the total remuneration opportunity,
with
the maximum
potential reward
only
available
through the
achievement of
stretching
performance targets based on measures that
the
committee believes
reect the
interests
of
shareholders.
The extent of their responsibilities means
executive
directors are
well paid,
but
the policy
is designed to, among other things, ensure that
they
are not
overpaid. Reference
points
such
as
the ratio
of the
chief
executive’s pay
to the
median pay for all employees and the policy for
wider
workforce remuneration
are important
to
us, in addition to the use of external benchmark
data
when considering
executive pay
levels.
In
determining
the remuneration
of the
executive
directors
and senior
managers, we
consider
the performance of the business during the
nancial
year in
question and
over
the longer
term,
as well
as the
experience
of our
dierent
stakeholder groups. We are committed to being
open and transparent in our approach.
2021 consult
ation with s
hareholde
rs
During
the year,
the committee
consulted
with
Morgan
Sindall’s largest
shareholders on
two
proposed amendments: an amendment to the
methodology
used to
calculate the
achievement
of the earnings per share (EPS) targets under the
2019,
2020 and
2021 LTIP
cycles,
and a
lowering
of
the pension
contributions for
executive
directors
to align
them with
the
broader
workforce
rate. The
sections below
provide
further details on the proposed amendments,
the
feedback received
and our
decision-making
process in both of these areas.
Am
en
dm
ent t
o L
TIP EP
S t
ar
ge
ts
As set out in the 2020 remuneration report, the
executive
directors and
wider leadership
team
responded
quickly to
adapt to
the
new trading
environment
created by
the pandemic.
The
Group
continued to
deliver shareholder
value
during
2020, the
rst year
of
the pandemic,
and
we
were able
to distribute
an
interim dividend
of
21p in
December 2020
and
a nal
dividend
of
40p in
May 2021,
signicantly
higher than
the
2019 total
dividend of
21p.
We achieved
an
adjusted* prot
before tax
(PBTA*)
of
£63.9m
for 2020
– signicantly
higher
than our
peers – and repaid all deferred taxes, monies
received
under the
furlough scheme
and
employees
who had
voluntarily taken
a
salary
reduction
(excluding the
Board and
the
Group
management
team). Our
revenue over
the
past
three years has increased from £3,071m in 2019
to
£3,213m in
2021, with
PBTA*
increasing from
£90.4m
to £127.7m
over the
same
period.
*
See note 2
to
the consolidated
nancial
statements
for
alternative performance
denitions
and
reconciliations.
Directors
’ remuner
ati
on repor
t
R
em
u
n
er
a
t
i
on
c
om
m
i
t
t
e
e
r
ep
or
t
Key objectives of the
remuneration commit
tee:
To assess and make recommendations
to
the Board
on the
policies
for executive
remuneration
and reward
packages for
the
individual executive
directors.
Responsibilities:
Determining,
on behalf
of the
Board,
the
policy on the remuneration of the chair,
the
executive directors
and the
Group
management team.
Determining the total remuneration
packages
for these
individuals, including
any compensation on termination of
oce.
Approving
the design
of our
annual
bonus arrangements and Long-Term
Incentive
Plan (LTIP)
awards, including
the performance targets that apply.
Operating
within recognised
principles
of
good governance.
Preparing
an annual
report on
directors’
remuneration.
Member
ship and meeting
s
Members
1
Member since
Attended/
scheduled
Tracey Killen
(chair)
2017
6/6
Malcolm
Cooper
2015
6/6
David
Lowden
2018
6/6
Jen Tippin
2
2020
5/6
1
Biographies of
members
are
set out
on
pages 92
and
93.
Michael Findlay,
John
Morgan,
Steve Crummett
and
Kathy
Quashie attended
meetings
by
invitation.
2
Jen Tippin
was
unable
to attend
the
meeting on
4
June
2021, due
to
alternative
commitments in
her
executive
role which
could
not
be changed
at
short notice.
Dear Sharehol
der
I am pleased to pre
sent our
remuneration rep
or
t for the year
ended 31 December 2021
. This
repor
t set
s out how the G
roup
pay
s direc
tor
s, de
cisions made
on their p
ay and how much t
hey
have recei
ved in relation to 2021
.
12
7
_
Mo
rg
an S
in
da
ll G
ro
u
p pl
c
Annual Repor
t 20
21
Str
ate
gi
c rep
or
t
Gover
nance
Financial statements
Despite
this strong
performance, executive
directors’
total remuneration
fell by
58%
in 2020
as a
result
of voluntary
reductions in
salary,
no payout
under the
annual
bonus scheme,
and a
signicant
decrease
from previous
years in
vesting
levels for
the 2018
LTIP.
No adjustments
were considered
by
the
committee, recognising
both investor
and
broader stakeholder
sentiment at
the
time.
The
Group’s strong
performance continued
throughout
the whole
of 2021,
resulting
in a
total
shareholder
return (TSR,
being share
price
growth plus
dividends) of
69.6%
being achieved
this year
(which
brings our
total return
to
shareholders over
the last
ve
years to
almost 300%,
around
7
times
that
delivered through
an investment
in
the FTSE
250).
However,
unlike at
many comparable
companies
which have
also recovered
well
from the
lows
of
the pandemic,
our use
of
cumulative EPS
targets (which
capture
EPS in
every year
of
the
three-
year
performance period)
in the
LTIP
would have
had a
disproportionate
and unfair
impact on
the
experience
of our
executives over
the
next couple
of years
compared
to peers,
our shareholders
and
wider
stakeholders.
Consequently,
in order
to acknowledge
the
exceptional circumstances
created by
the
pandemic
and
ensure that
executives remain
adequately
incentivised, the
committee consulted
with
major
shareholders
on amending
the calculation
of
EPS performance
targets for
outstanding
LTIP awards
from
cumulative to
point-to-point (i.e.
capturing
EPS in
the nal
year
of the
three-year performance
period),
with the
revised targets
continuing
to be
based on
the
same 6–13%
p.a. growth
used
to
determine
the original
cumulative targets.
A
similar adjustment
has been
approved
by the
committee
in
respect of
other below-Board
LTIP
participants, as
well as
for
other employees
who are
participants
in our Share Option Plan.
The
table below
sets out
the
current cumulative
EPS targets
alongside
the new
EPS targets,
calibrated
on
a point-to-point
basis (i.e.
based
on EPS
in the
nal
year of
the performance
period).
LTIP award
Current targets
Cumulative EPS
over the three-
year performance period
(based
on the sum of EPS in all three years)
New targets
Point-to-point
(based on EPS in only the
nal year
of the
performance
period)
Threshold
Stretch
Threshold
Stretch
2019
award
512p
584p
180.8p
219.0p
2020
award
543p
620p
192.0p
232.6p
2021
award
450p
485p
197.7p
239.5p
Under
the revised
approach, to
avoid
taking advantage
of a
low
start point
in 2020
for
the
2021
awards,
a ‘normalised’
2020 EPS
of
166.0p was
used as
the
base for
calculating the
EPS
growth
for the
2020–2023
cycle (calculated
using the
mid-point
between the
Group’s forecast
EPS
in the
February
2020 management accounts of 166.3p and the broker market consensus forecast as at February
2020 of 165.6p).
This
is signicantly
higher than
our
actual 2020
EPS of
108.6p,
and ensures
that our
new
targets
for
the
2020 award
remain extremely
stretching,
being c53%
higher than
that
if we
had used
the
actual
EPS
for 2020,
and equivalent
to
22% to
30% p.a.
growth
on actual
2020 EPS.
For
the committee,
the nal
decision
around the
EPS targets
centred
around two
important –
but
in
this
instance, competing
– principles
for
executive pay:
(i)
alignment of
outcomes for
executives,
shareholders and
broader stakeholder
groups;
and
(ii)
avoiding making
retrospective changes
to
the terms
of awards.
Both
of these
principles are
clearly
important
to investors,
as evidenced
by
the range
of feedback
received.
Our
view is
that the
committee
is ultimately
responsible for
ensuring
that the
approach to
remuneration
taken is
fair and
balanced,
and both
incentivises and
rewards
the delivery
of our
strategy,
to the
benet of
all
stakeholders.
Taking
this into
account, and
following
a robust
discussion at
its
December 2021
meeting, the
committee
unanimously supported
the decision
to
proceed with
the proposed
amendments
to EPS
targets.
In addition,
the committee’s
other
considerations in
making this
amendment
included:
Although
cumulative measurement
rewards sustained
growth,
a single
‘bad’ year
can
impact the
vesting
of three
LTIP cycles,
rather
than a
single cycle
using
point-to-point measurement.
This is
appropriate
where the
downturn in
performance
is a
result of
management
actions, but
more
dicult
to justify
where it
has
been driven
by factors
outside
of management’s
control.
The
growth rate
on which
the
amended targets
are based
are
no less
challenging than
originally
disclosed or intended.
Based
on consensus
estimates at
the
time of
contemplating the
proposals,
moving to
a point-
to-point
measurement would
mean that
all
outstanding LTIP
cycles would
have
some chance
of
vesting,
thereby reinforcing
a continued
focus
on growth.
Our analysis
at
the time
suggested that
the
amendment would
move anticipated
vesting
from either
0% (2019,
2020
cycle) or
100% (2021
cycle),
to between
25% and
83%
of maximum.
Direc
tor
s’ re
muneration repor
t
: remuneration commit
tee rep
or
t
continued
12
8
_
Mo
rg
an S
in
da
ll G
r
ou
p pl
c
Annual Repor
t 202
1
Str
ate
gi
c rep
or
t
Gover
nance
Financial statements
Direc
tor
s’ re
muneration repor
t
: remuneration commit
tee rep
or
t
continued
The possible future outcomes on the EPS
metric
for these
cycles, following
this
revision,
correlate
very well
with the
possible
future
outcomes
also on
the LTIP
TSR
metric, as
our
TSR performance against our benchmark
shows
signicant outperformance
based on
our performance to the end of 2021 (see
chart
below).
For
the avoidance
of doubt,
no
change is
being
made
to the
TSR conditions
for
these LTIP
cycles.
0
50
100
150
200
250
300
350
Shareholder return
to 31 December 2021
Last five years
Last three years
Last 12 months
Morgan Sindall
FTSE 250 xIT
In
total, the
committee received
feedback
from
11
shareholders during
its consultation,
with
the
majority of
respondents supportive
of
the
proposal and the underlying rationale for making
this adjustment. Opposition to the proposal
included
two of
our top
ten
shareholders,
with
some respondents
oering alternative
suggestions to the committee, including the
award
of an
exceptional LTIP
in
2022.
The
committee recognises
that some
investors
prefer
to avoid
any revisions
to
outstanding
incentive
targets, and
instead for
discretion
to
be applied only at the end of the performance
period. The committee considered, but had to
reject,
this alternative
approach as
the
LTIP
rules, as currently drafted, do not permit the
application
of upwards
discretion, only
the
ability to alter the performance condition if the
committee considers it appropriate.
The committee appreciates that some
shareholders may not support this decision or
may
be wary
about setting
a
precedent in
this
area.
However, our
hope is
that
most investors
will
see this
amendment as
it
is intended
by the
committee:
a one-o
adjustment to
correct
for
an
exceptional, unforeseen
event which
our
remuneration
structures were
not designed
to
accommodate, and
which produces
a
fair,
equitable
and aligned
outcome for
executives
and
other stakeholders
in a
period
during which
a
very strong
performance has
been
delivered.
Cha
nge
s to exe
cu
ti
ve dir
ec
tor
pension contributions
In
light of
recent changes
in
market practice
that
seek to
align the
interests
of executives,
shareholders
and wider
stakeholders, the
committee
also consulted
with investors
on
a
proposal
to lower
the pension
level
for current
executive
directors to
that oered
to
the
majority
of employees
(currently 6%
of
salary)
from
1 January
2023. The
committee
received
only
positive feedback
from shareholders
on
this
change,
and accordingly
we will
be
proceeding
with
the harmonisation
of pension
contributions
at
the end
of the
2022
nancial year.
Separately, the Group is currently undertaking
a
review of
pension contributions
for
all
employees
across its
dierent divisions,
which
will
be concluded
in 2022.
Regardless
of the
outcome
of this
review, the
committee
will
maintain
the principle
of alignment
between
the
oering
to executive
directors and
that
to the
majority
of employees
going forward.
2021 remuneration
2021
2020
2019
Revenue
£3,213m
£3,034m
£3,071m
Prot
before tax
adjusted*
£127.7m
£63.9m
£90.4m
Average
daily net
cash
£291.4m
£180.7m
£108.9m
Earnings
per share*
226.0p
108.6p
161.2p
Share
price (end
of year)
£25.20
15.32p
16.20p
*
See note 2
to
the consolidated
nancial
statements
for
alternative performance
denitions
and
reconciliations.
The
Group has
delivered a
very
strong
performance
in 2021,
delivering EPS
growth
of
49% since
31 December
2018
(2018 EPS:
151.8p),
which reects
our responsible
business
approach,
the quality
of the
work
we have
won
and our
operational delivery.
We
have
been
able to
provide further
support
to some
of
the vulnerable
communities in
which
we
operate
and have
made long-term
investments
to address the impact of climate change.
The strength of our balance sheet and cash
generation
have remained
high priorities
for
the
Board,
enabling us
to continue
to
do the
right
thing
for all
stakeholders and
ensure
that we
select
the right
construction contracts
and
invest
in
long-term regeneration
schemes that
will
secure future earnings.
Throughout
the year,
the directors
have
continued to focus on our strategy, ensuring that
the
business is
in the
best
position nancially
to
withstand economic
uncertainty, and
able
to
take
advantage of
opportunities as
and
when
they
arise. Reecting
these positive
results,
the
executive
directors will
each receive
a
bonus of
125%
of salary,
of which
30%
will be
deferred
in
shares for
three years.
LTIP
awards granted
in
2019, which
vest on
three-year
performance
to
31 December
2021 (two
thirds
on EPS
and
one
third on
relative TSR),
will
vest at
100%. The
committee
satised itself
that this
outcome
reected
the underlying
performance of
the
business
over the
relevant period.
The committee has not exercised its discretion
in respect of the annual bonus payable to
the
executive directors
for the
year.
As stated
above,
the committee
has amended
the
basis of
calculation for the EPS performance condition
for
the 2019,
2020 and
2021
LTIP awards
from
cumulative
to point-to-point.
For the
2019
cycle,
the committee is reassured that the amended
EPS
target, which
resulted in
full
vesting, was
also
reected in
the relative
TSR
outcome,
which
for the
three-year period
resulted
in full
vesting
on the
basis of
Morgan
Sindall materially
outperforming
its peers
and the
full
vesting TSR
level
required under
the LTIP.
ESG metri
cs
The
committee has
again reviewed
whether
or
not to
introduce environmental,
social
and
governance
(ESG) metrics
to the
incentives
for
executive
directors. ESG
remains integral
to
the
delivery
of our
strategy and
long
term success;
however,
the committee
does not
currently
believe
that introducing
explicit ESG
metrics
to
the
incentives for
the executive
directors
and
the
wider Group
would have
any
material impact
on
their continuing
to deliver
against
our Total
Commitments.
12
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Annual Repor
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21
Str
ate
gi
c rep
or
t
Gover
nance
Financial statements
In
order to
maintain a
clear,
transparent,
well-understood
remuneration structure,
the committee has decided that additional
ESG performance conditions should not be
included
in the
incentives this
year.
However,
the
committee has
resolved to
consider
this
in
greater detail
over the
course
of the
coming
year,
and in
conjunction with
the
upcoming
Policy
review.
202
2 remuneration
In
setting the
remuneration for
2022
for
the
executive directors
and the
Group
management team, the committee considered
the
remuneration oered
to employees
as
a
whole
and proposed
changes. This
included
considering the structure of remuneration
oerings
within each
division to
ensure
there
remains
a strong
rationale for
how
packages
evolve
across the
dierent levels
of
the
organisation.
No material
changes were
made
to
the remuneration
structures in
the
divisions
during the year.
Although the committee has not engaged
directly
with employees
on remuneration,
it
reviewed
feedback received
by the
divisions
on remuneration at their employee forums.
Only
a few
employees raised
questions
about
remuneration and no fundamental concerns
were
raised. The
majority of
questions
related to
the
pension arrangements
and benets
oered.
The
committee will
trial a
process
for engaging
with
employees on
remuneration in
2022.
In
addition to
competitiveness and
fairness
being a core principle of the remuneration
policy, there is a clear culture in the Group of
ensuring
we oer
competitive and
fair
pay to
all
employees. Five
of our
businesses
currently
pay
the real
living wage
or
above (two
of
whom
are accredited
Living Wage
Foundation
employers). Our other three businesses are
looking to ensure that their direct employees
are
paid the
real living
wage
or above
in 2022.
The committee also takes into consideration
the appropriateness of key pay ratios, including
the
chief executive
pay ratio.
Full
details can
be
found on page 150.
Salaries
of both
the chief
executive
and nance
director
will be
increased by
3%
with eect
from
1 January
2022, in
line
with the
broader
workforce
across the
Group. Slightly
higher
increases
have been
budgeted in
one
of the
Group’s
divisions, reecting
a broader
talent
review
and the
roll-out of
a
revised salary
matrix.
The pension
contribution for
executive
directors
will remain
at 10%
of
salary for
2022,
to
be reduced
to 6%
of
salary with
eect from
1January
2023, and
no changes
have
been
made
to benet
provisions.
The
executive directors
will be
eligible
for an
annual
bonus of
up to
125%
of basic
salary, of
which
30% will
be subject
to
deferral in
shares
for three years. The bonus targets for 2022
are
again based
on adjusted
prot
before tax*
(PBTA*)
for consistency
and simplicity.
For
2022,
the bonus trigger point for the annual bonus
will
be 90%
and the
maximum
trigger point
will
change
to 110%
of budgeted
PBTA*.
Full details
of
the targets
will be
disclosed
in the
2022
remuneration report.
Executive
directors will
each receive
LTIP
awards
in
2022 equivalent
to 150%
of
basic salary.
Any
LTIP shares
that vest
will
be subject
to a
further
two-year holding
period post-vesting.
For
2022,
the committee
will use
a
point-to-point
calculation
for the
EPS metric
(two
thirds of
the
award),
with a
threshold 2024
EPS
target of
226p and a stretch target of 259p. This range
has been determined through consideration
of a number of internal and external reference
points,
including the
very strong
performance
in 2021, broker forecasts for the next three
years
and typical
growth rates
in
our sector.
In
respect of
the TSR
metric
(one third
of the
award),
the performance
range will
again
be
median to
median plus
10%
per year
outperformance
versus the
constituents of
the
FTSE
250 (excluding
Investment Trusts)
Index.
The
committee believes
that the
stretch
targets
are
broadly equivalent
to an
upper
quartile level
of performance.
Look
ing ahead
The
2023 AGM
will mark
the
third anniversary
of
the adoption
of the
current
directors’
remuneration
policy, which
received 97.4%
support
when passed
at our
2020
AGM. In
accordance
with UK
reporting regulations,
we
will be
required to
submit
a new
Policy to
shareholders
for approval
at this
time.
The
committee is therefore planning to conduct
a
full review
of the
existing
remuneration
arrangements
during 2022
and will
look
to
engage major shareholders to seek their input
later in the year.
We
will continue
to monitor
corporate
governance
and market
practice developments
throughout
the 2022
AGM season,
and
will
consider the appropriateness of any emerging
trends for the Group.
In
conclusion, the
committee believes
that,
overall,
we have
maintained a
balanced
and
considered outcome in respect of remuneration
with
a clear
link between
performance
and
reward.
The remuneration
outcomes, as
outlined
throughout the
report, clearly
reect
the
factors detailed
in provision
40
of the
UK
Corporate
Governance Code
(see page
142
for
further information).
We
value the
support which
shareholders
have
provided, as
reected in
the
vote on
remuneration
at our
2021 AGM
which
received
98.4%
support. We
hope to
continue
to receive
your support at the forthcoming AGM on
5May2022.
T
racey K
illen
Chair of the remuneration committee
24 February 2022
Remuneration policy 133
Ensuring transparency of the remuneration policy
142
Annual report on remuneration 143
Single total
gures of
remuneration
143
Outstanding interests under share schemes 146
Other disclosures 148
Implementation of the remuneration policy for
2022 152
Direc
tor
s’ re
muneration repor
t
: remuneration commit
tee rep
or
t
continued
13
0
_
Mor
g
an S
in
da
ll G
ro
up p
l
c
Annual Repor
t 20
21
Str
ate
gi
c rep
or
t
Gover
nance
Financial statements
Summar
y of 2
021
executive re
muneration
R
em
u
n
er
a
t
i
on
ph
i
los
oph
y
The
key principles
of our
approach
to executive
remuneration are
to
ensure that
it:
aligns
management and
shareholder interests;
is
competitive in
the marketplace;
helps
retain and
motivate executive
directors
of the
calibre required
in
order to
deliver the
Group’s
strategy; and
rewards
growth in
earnings over
the
long term,
thereby driving
growth
in value
to our
shareholders.
C
h
i
e
f e
x
e
cu
t
i
v
e
re
m
u
n
e
r
atio
n
G
e
nd
e
r
pa
y
g
ap r
e
p
o
r
t
i
n
g
R
e
mu
n
e
r
a
t
i
o
n
a
cr
o
s
s t
h
e G
r
o
u
p
£2,765,647
1
single gure
2021
(2020: £1,094,909) (see page 143)
153%
change in total remuneration
from 2020
(2020: -58%)
100%
change in
annual
bonus
received
from 2020
(2020: -100%)
100%
of 2019
LTIP
award
vesting
(2020: 43%)
30%
mean gender pay gap
(2020: 30%
2
)
30%
median gender pay gap
(2020: 29%
2
)
57%
mean bonus gap
(2020: 62%)
36%
median bonus gap
(2020: 42%)
For further information see
page 23.
543,700,000
spend on total pay
(2020: £508,900,000)
87%
of employees
received
a
pay increase
(2020: 69%)
3%
average pay
increase
across
the Group
(2020: 2%)
71%
of employees
received
a
bonus
(2020: 63%)
£9,577
average bonus
paid
(2020: £7,155)
1
In 2020,
the
chief
executive took
a
voluntary 20%
reduction
in
base salary
and
pension contributions
for
a
three-
month period from 1 April 2020 to 30 June 2020.
2
This gure
was
calculated
using the
methodology
set out
in
the
Gender Pay
Gap
Regulations; however,
it
was
based
on our
November
2020
payroll data
rather
than our
April
2020
payroll data,
which
was the
payroll
period
we are
required to
report
on
under the
Regulations.
Based on
the
Group’s
payroll data
as
at April
2020,
the
2020 mean
and median
gender
pay
were 33.7%
and
33.6% respectively;
however,
the
April data
was
impacted by
the
number
of people
across
the
Group who
had
agreed to
reduce
their
salaries for
either
two or
three
months
to 30
June
2020
and the
number
of
people on
furlough.
The November
payroll
data
was not
distorted
by Covid-related
measures
and
therefore paints a more accurate picture.
Basic salary
547
509
436
406
Benets
26
25
25
24
Pension allowance
55
51
44
41
Annual cash bonus paid in cash
478
–
382
–
Annual cash bonus deferred into shares
205
–
163
–
Value of
long-term incentives
vested
1,455
510
1,160
407
2021 Maximum
(excluding share
price growth)
£000
2021 Actual
(excluding share
price growth)
£000
2021 Actual
(including share
price growth)
£000
John Morgan
Fixed pay
628
628
628
Annual bonus
683
683
683
LTIP
803
803
1,455
Total
2,113
2,113
2,766
Steve Crummett
Fixed pay
505
505
505
Annual bonus
545
545
545
LTIP
640
640
1,160
Total
1,689
1,689
2,210
Direc
tor
s’ re
muneration repor
t
continued
0
500
1,000
1,500
2,000
2,500
3,000
2,766
John Morgan
(£m)
2021
2020
1,095
0
500
1,000
1,500
2,000
2,500
2,210
Steve Crummett
(£m)
2021
2020
878
131
_
Mo
r
ga
n Si
nd
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l Gr
ou
p pl
c
A
nnual Report 202
1
Str
ate
gi
c rep
or
t
Gover
nance
Financial statements
202
2 remuneration
The
table below
shows how
we
intend to
operate the
policy
in 2022.
The structure
of
the
executive remuneration
package ensures
that
executive directors
have a
vested
interest in
delivering performance
over
the
short and
long term.
The
table below
sets out
how
each element
of remuneration
links
to
strategy and
the performance
and
retention periods
for each:
Element
Link to strategy
Maximum
2022
2023
2024
2025
2026
2027
Fixed pay
Salary
Supports the attraction and
retention of the best talent.
Any increases are generally
in
line with
those for
the
workforce
as a
whole.
Chief
executive
£563,150
(+3%);
nance
director
£449,150
(+3%).
Benets
Market-competitive and
cost-
eective
benets supports
the
attraction and retention of talent.
Market-competitive.
Benets provided.
Pension
10%
of basic
salary.
Pension paid.
Variable pay
Annual bonus
Incentivises
delivery of
nancial
and strategic targets.
Focuses
on key
nancial metrics
and
the individual’s
contribution
to
the Group’s
performance.
125%
of salary
with 30%
of any bonus earned
deferred.
Targets for annual
cash bonus set at
start of the year.
Cash element of
bonus paid (up
to
70% of
bonus
earned).
Nil
cost options
issued (at least
30%
of bonus
earned).
Nil
cost options
vest.
LTIP
Rewards
consistent long-term
performance
in line
with the
Group’s
strategy.
Provides
focus on
delivering
superior long-term returns to
shareholders.
150%
of salary.
LTIP awards
granted in March.
LTIP
performance
conditions tested
Holding period
ends.
Additional
governance
Recovery
and
withholding
All
incentives.
Malus and
clawback:
misstatement,
serious
misconduct,
error
in calculation,
corporate failure.
Share
ownership
requirement
Ensures
alignment between
the
interests
of executive
directors
and shareholders.
200%
of salary.
Post-
employment
LTIP
and deferred
bonus
plan shares.
Holding
requirement for
LTIP shares
and
net deferred
bonus nil
cost
options that
have not
vested
or
been
exercised.
Required to
hold equivalent
of
200% of
salary for
year
one post-employment,
reducing to
100%
of
salary
in year
two.
Direc
tor
s’ re
muneration repor
t
: remuneration philos
ophy
continued
13
2
_
Mor
ga
n Si
nd
al
l G
ro
up p
lc
A
nnual Report 202
1
Str
ate
gi
c rep
or
t
Gover
nance
Financial statements
Remuneration p
olic
y and p
rac
tice
The
table below
illustrates how
remuneration
policy and
practice compare
across
the dierent
groups of
employees.
Salary
Benets
Pension
Short-term incentive
Long-term incentive
Executive directors
Basic salary
levels
take
into
account
market-competitive
levels.
Any increases
are normally
in
line with
those for
the
wider
workforce.
A
range of
market-competitive
benets
are oered
in line
with
the
wider workforce.
Up
to 10%
of salary
employer
contribution to the Morgan Sindall
Retirement
Savings Plan
(‘the
Retirement
Plan’). For
incumbent
executive
directors, the
contribution
will be
reduced to
the
wider
workforce rate
(currently 6%
of salary) from 1 January 2023.
Annual cash bonus plan linked
100%
to
Group
performance.
30%
of
the total
award is
deferred
in nil
cost options.
The
LTIP is
a share
award
with
performance linked to three-year
EPS and TSR performance
Group management
team
Annual cash bonus plan linked
100%
to divisional
or Group
performance.
Senior management
Divisional
or Group
annual
cash bonus plan linked to
both business and personal
performance.
Senior management may be
oered
share options
under the
2014 Share Option Plan (2014
SOP).
Wider workforce
Basic
salary levels
are set
in line
with
market requirements
or
subject
to industry-wide
working
rule
agreements
where
applicable.
Five
of our
businesses pay
employees
the real
living wage
or
above. Construction
and
Property
Services are
Living Wage
Foundation accredited employers.
A
range of
market-competitive
benets
are oered.
Individual
benets
received depend
on role
and seniority.
Varies
by division.
Typical
employer
contribution of
6% of
salary. Monthly-paid employees
are
oered the
Retirement Plan
and
weekly-paid employees
are
oered
the opportunity
to join
the
B&CE’s People’s
Pension. Both
plans
are dened
contribution.
Weekly-paid employees are
oered
contributions in
line
with
the industry
working rule
agreements.
Depending on role, a proportion
of
employees will
participate
in
their divisional
or the
Group
annual cash bonus plan linked to
a mix of business and/or personal
performance.
Depending on role, employees
may
be invited
to participate
in
the 2014 SOP. All employees
are
invited to
participate in
the
Savings-Related
Share Option
Plan.
Direc
tor
s’ re
muneration repor
t
: remuneration philos
ophy
continued
13
3
_
Mor
ga
n Si
n
da
ll G
ro
up p
l
c
Annual Repor
t 20
21
Str
ate
gi
c rep
or
t
Gover
nance
Financial statements
R
e
mu
n
e
ra
t
i
o
n
p
o
l
ic
y
This
part of
the report
sets
out the
Company’s policy
for
the remuneration
of executive
and
non-executive
directors (referred
to as
either
‘the remuneration
policy’ or
‘the
policy’). The
policy is
determined
by
the
remuneration
committee and
is not
subject
to audit
by the
external
auditor. The
policy was
last
approved
by shareholders
at the
7
May 2020
AGM and
received
97.41% of
votes in
favour.
The
policy is
designed
to
be straightforward
and sustainable,
and
to encourage
the eective
stewardship
that is
vital to
delivering
our
strategy of
creating long-term
value
for all
stakeholders. It
promotes
long-term sustainable
performance
through signicant
deferral of
remuneration
in shares.
Executive directors
are
expected to
build and
maintain
substantial
personal shareholdings
in the
business.
The extent
of their
responsibilities
means
executive directors
are well
paid,
but the
policy is
designed
to, among
other things,
ensure
that
they are
not overpaid.
The
committee did
not formally
consult
with employees
in respect
of
the
design of
the
remuneration policy
but will
keep
this under
review.
Fixed elements
Purpose and link to strategy
Operation
Maximum opportunity
Performance targets
Base salary
To provide
competitive xed
remuneration.
To
attract, retain
and motivate
executive
directors
of the
calibre required
in
order
to
deliver the
Company’s strategy
and
enhance
earnings over
the long
term.
Basic
salary is
reviewed annually
by
the committee
or, if
appropriate,
in the
event of
a
change in
an individual’s
position or responsibilities.
Salary
levels are
set by
reference
to market
rates,
taking
into account
individual performance,
experience,
company performance and the pay and conditions of
other senior management in the Group.
The
committee will
take into
account
the general
increase for the broader employee population but
on occasion may need to recognise, for example, an
increase in the scale, scope or responsibility of the role.
There is no prescribed maximum annual increase.
Current
salary levels
are presented
on
page 143.
Not
applicable.
Benets
To
provide market-competitive
levels of
benets,
including insured
benets to
support
the individual
and their
family
during periods of ill health, accidents or in
the
event of
death.
Car
or travel
allowances to
facilitate
eective
travel.
Current
benets include:
travel
allowance;
private
medical insurance;
annual
health screening;
ill
health income
protection insurance;
life
assurance;
holiday
and sick
pay;
employee
assistance programme;
professional
advice in
connection with
their
directorship;
travel,
fuel, subsistence
and accommodation
as
necessary;
and
occasional
gifts, for
example appropriate
long-service
or
leaving gifts.
Other
benets may
be provided
where
appropriate in
line
with benets
oered to
other
employees.
The
value of
benets is
based
on the
cost to
the
Company and is not predetermined.
The
travel allowance
is £17,000.
Not
applicable.
Direc
tor
s’ re
muneration repor
t
continued
13
4
_
Mo
rg
an S
in
da
ll G
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c
Annual Repor
t 20
21
Str
ate
gi
c rep
or
t
Gover
nance
Financial statements
Fixed elements
Purpose and link to strategy
Operation
Maximum opportunity
Performance targets
Pension
To
provide a
pension arrangement
to
contribute
towards retirement
planning.
The
Company will
contribute to
the
dened contribution
pension
scheme, The
Morgan Sindall
Retirement
Savings
Plan
(‘the Retirement
Plan’) or
to
personal pension
arrangements
at the
request of
the
individual.
The
Company may
also consider
a
cash alternative
(for
example
where a
director has
reached
the HMRC’s
lifetime
or annual
allowance limit).
Employer
contributions are
10% of
base
salary
for
existing directors.
New executive
directors
will
receive an
employer’s contribution
in
line
with
that oered
to the
majority
of employees
(currently
6% of
salary).
Directors
who are
members of
the
Retirement
Plan may elect to exchange part of their salary or
bonus
award in
return for
pension
contributions,
where
the Company
will enhance
the
additional
contributions
by half
of the
saved
employer’s
National
Insurance contribution.
Employer
contributions will
be aligned
with
the
majority of employees from 1 January 2023.
Not
applicable.
Annual bonus
Rewarding the
achievement
of
demanding
annual performance metrics.
Performance
measures and
targets are
reviewed
annually by the committee.
70%
of any
bonus earned
is
payable in
cash and
30%
is
normally deferred
for three
years
and satised
in
Company
shares. Dividends
accrue during
the
deferral
period and may be paid in cash or shares at the time of
release.
The
committee has
discretion: (i)
to
override the
formulaic outturn of the bonus to determine the
appropriate
level of
bonus payable
where
it believes
the
outcome
is not
truly reective
of
performance; and
(ii) to
ensure fairness to both shareholders and participants.
Any
additional measures
which may
be
introduced in
the
future
would be
aligned to
our
strategy and
we would
provide
details at
the relevant
time.
The
maximum opportunity
is 125%
of
base salary.
Financial targets incorporate an appropriate
sliding scale range around a challenging target.
Target
performance will
typically deliver
up
to 50%
of
maximum bonus,
with threshold
performance
typically
paying up
to 15%
of
maximum bonus.
All or a majority of the bonus
will
be based
on adjusted*
prot
before tax
(PBTA*),
set
relative to
the Group’s
budget
or such
other nancial
measures as the committee
deems appropriate.
Financial
targets will
account
for
not less
than 80%
of
the
annual bonus.
A minority of the bonus may
be
based on
non-nancial,
strategic and/or personal
objectives
linked to
the
strategic
objectives of
the
Group
to provide
a rounded
assessment of Group and
management’s
performance.
Direc
tors
’ remuneration repor
t
: remuneration polic
y
continued
13
5
_
Mor
ga
n Si
nd
al
l G
ro
up p
lc
A
nnual Report 202
1
Str
ate
gi
c rep
or
t
Gover
nance
Financial statements
Fixed elements
Purpose and link to strategy
Operation
Maximum opportunity
Performance targets
2014 Long-Term
Incentive Plan
(LTIP)
To
balance performance
pay between
the
achievement of
nancial performance
objectives
and delivering
sustainable stock
market out-performance.
To
encourage share
ownership and
provide
further alignment
with the
interests of shareholders.
Annual
awards of
conditional shares
or
nil (or
nominal)
cost
options are
granted with
vesting
dependent on
the
achievement
of performance
conditions over
a
three-
year period.
Net
LTIP shares
vesting will
typically
be subject
to a
two-
year
holding period,
creating a
total
of ve
years between
the
award being
granted, and
the
rst opportunity
to sell.
Performance
targets are
reviewed annually
by
the
committee
for each
new award.
Targets
take account
of internal strategic planning and external market
expectations for the Group and are appropriate to
the
economic outlook
and risk
factors
prevailing at
the
time, ensuring that such targets remain challenging in
the
circumstances, while
remaining realistic
enough
to
motivate
and incentivise
management.
The TSR performance condition is monitored on the
committee’s
behalf by
its advisers,
while
EPS is
derived
from
the Group’s
audited nancial
statements.
Dividends
that accrue
during the
vesting
period may,
at
the committee’s
discretion, be
paid
in cash
or shares
at
the time
of vesting.
The
calculation of
the dividend
equivalent
may assume
the reinvestment
of
dividends.
The
committee has
discretion: (i)
to
override the
formulaic outturn of the performance targets to
determine
the appropriate
level of
vesting
of the
LTIP
where
it believes
the outcome
is
not truly
reective
of
performance; and
(ii) to
ensure
fairness to
both
shareholders and participants.
Any
use of
committee discretion
with
respect to
waiving
or
modifying performance
conditions will
be
disclosed in
the
relevant annual
report.
150%
of base
salary.
Awards are
subject to
performance conditions
based
on the
Company’s EPS
and
on relative
TSR compared
to a group of UK-listed peers.
The committee has discretion
to introduce additional
performance condition(s) (to
complement EPS and TSR)
for up to one third of future
awards.
For both the EPS and TSR
conditions, no more than
25%
of the
awards will
vest
for
achieving threshold
performance, increasing to
100%
vesting for
achievement
of stretching performance
targets.
Direc
tors
’ remuneration repor
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: remuneration polic
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continued
13
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Gover
nance
Financial statements
Fixed elements
Purpose and link to strategy
Operation
Maximum opportunity
Performance targets
All-employee
Savings-Related
Share Option Plan
(‘SAYE’)
To
encourage share
ownership
and
provide further
alignment with
shareholders.
This
is an
HMRC tax-advantaged
plan
under which
regular
monthly savings
can be
made
over a
period of
three years and can be used to fund the exercise of an
option to purchase shares.
Options
are granted
at up
to
a 20%
discount.
This
scheme is
open to
all
employees including
executive
directors.
Prevailing
HMRC limits
apply.
The
executive directors
will be
eligible
to
participate in any other HMRC all-employee share
plans that may be implemented.
Not
applicable.
Non-executive
directors’ fees
Set
to attract,
retain and
motivate
talented
individuals.
Non-executive
directors receive
a basic
annual
fee
in
respect of
their Board
duties.
Additional fees
may
be paid to the chairs of the committees and the
senior
independent director
to reect
their
additional
responsibilities.
The non-executive
directors’ fees
are
reviewed
by the
Board rather
than
the committee.
The
chair receives
a xed
annual
fee.
Fees
are normally
reviewed annually.
The
committee and
the
Board are
guided by
fee
levels in
the non-executive
director market and may recognise an increase in certain
circumstances, such as assumed additional responsibility
or an increase in the scale or scope of the role.
Non-executive
directors are
reimbursed for
reasonable
expenses
and any
tax arising
on
those expenses
will be
settled directly by the Company. To the extent that these
are
deemed taxable
expenses, they
will
be included
in
the
annual remuneration
report as
required.
Non-executive
directors may
take independent
professional
advice relating
to their
role
as a
director at
the expense of the Company.
For
the non-executive
directors, there
is
no
prescribed maximum annual increase.
The
Company’s articles
of association
(‘the
Articles’)
provide that
the total
aggregate
remuneration paid to the chair of the Company
and
non-executive directors
will be
determined
by
the Board
within the
limits
set by
shareholders
and
detailed in
the Company’s
Articles.
Not
applicable.
Share ownership
guidelines
To
provide close
alignment between
the
longer-term interests
of executive
directors and shareholders in terms of the
Company’s
growth and
performance.
Executive
directors are
expected to
build
up and
maintain
shareholdings with
a value
set
at 200%
of basic
salary.
Until
this threshold
is achieved
there
is a
requirement for
executive
directors to
retain no
less
than 50%
of the
net
of
tax value
of vested
incentive
awards.
Not
applicable.
Not
applicable.
Direc
tors
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: remuneration polic
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13
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Gover
nance
Financial statements
Fixed elements
Purpose and link to strategy
Operation
Maximum opportunity
Performance targets
Post-employment
shareholdings
To
encourage long-term
alignment with
shareholders.
The
committee requires
executive directors
to
maintain
a
level of
shareholding for
two
years after
stepping down
from
the Board.
The
committee will
retain discretion
about
the
application of post-employment shareholding guidelines
in
individual cases.
Executive
directors will
maintain the
following
shareholdings
after they
have stepped
down
from
the
Board:
For
the rst
12 months,
the
lower of:
their
shareholding at
the time
of
leaving the
business
(excluding individually-purchased
shares);
and
200%
of basic
salary (this
being
the current
in-post shareholding guideline).
For
the second
12months (i.e.
between
12
months and
24 months),
the
lower of:
their
shareholding at
the time
of
leaving the
business
(excluding individually-purchased
shares);
and
100%
of basic
salary (this
being
half of
the
current in-post shareholding guideline).
At
the end
of 24
months,
the directors
will be
free
to
sell their
remaining shareholding
if
they wish.
Not
applicable.
Direc
tors
’ remuneration repor
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: remuneration polic
y
continued
13
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Financial statements
E
xis
ting arrangement
s
We
will honour
existing awards
to
executive directors,
and incentives,
benets
and contractual
arrangements
made to
individuals prior
to
their promotion
to the
Board
and/or prior
to the
approval
and
implementation of
this policy.
For
the avoidance
of doubt,
this
includes payments
in respect
of
any
award
granted under
the previous
remuneration
policy. This
will last
until
the existing
incentives vest
(or
lapse) or
the benets
or
contractual arrangements
no longer
apply.
This does
not apply
to
pension
contributions
for any
newly-promoted executive
directors
which will
be aligned
with
the rate
oered to
the
majority of
employees on
promotion
to the
Board.
Ser
v
ice agr
eements
Executi
ve direc
tors
Executive
directors have
rolling service
contracts
that provide
for 12
months’
notice on
either side.
There
are no
special provisions
that
apply in
the event
of
a change
of control.
Date of
service contract
John Morgan
20 February 2012
Steve Crummett
5 February 2013
The
Company allows
executive directors
to
hold external
non-executive directorships,
subject
to the
prior
approval of
the Board,
and
to retain
fees from
these
roles.
Non-
execut
ive di
rectors
All
non-executive directors
have specic
terms
of engagement
being an
initial
period of
three years
which
thereafter may
be extended
by
mutual consent,
subject to
the
requirements for
re-election,
the
Listing Rules
of the
Financial
Conduct Authority
(FCA) and
the
relevant sections
of the
Companies
Act 2006.
Appointment
letter date
Month/year
initial three-year term
was extended
Month/year
second three-year
term was
extended
Michael Findlay
1 October 2016
October 2019
–
Malcolm Cooper
9 November
2015
November
2018
November 2021
Tracey Killen
5 May 2017
May 2020
–
David Lowden
10
September 2018
September 2021
Jen Tippin
1 March 2020
–
–
Kathy Quashie
1 June 2021
The
non-executive directors
are subject
to
annual re-election
by shareholders.
T
ermination provision
s
Current
executive
directors’
service
agreements
are
terminable
on
12
months’
notice.
In
circumstances
of
termination on
notice, the
committee
will determine
an equitable
compensation
package, having
regard
to the
particular circumstances
of
the case.
The committee
has
discretion to
require notice
to
be
worked or
to make
payment
in lieu
of notice
or
to place
the director
on
garden
leave for
the notice
period.
In respect
of new
hires,
the initial
notice period
for
a service
contract may
be
longer
than the
policy
of a
12-month notice
period,
provided it
reduces to
12
months within
a short
space
of
time.
In
case of
payment in
lieu
or garden
leave, base
salary,
accrued holiday,
employer pension
contributions
and employee
benets will
be
paid for
the period
of
notice served
on garden
leave
or
paid
in lieu.
The committee
will
endeavour to
make payments
in
phased instalments
and to
apply
mitigation
in the
case of
osetting
payments against
earnings elsewhere.
If
a director
leaves under
a
settlement agreement,
life assurance
cover
may continue
for up
to
three
months after
a director
leaves
the Company,
subject to
the
director not
obtaining alternative
employment.
In addition,
the Company
may
agree that
a director
will
remain covered
under the
private
medical scheme
until the
next
policy renewal
date or
if
a director
is mid-treatment
at
their
leaving
date until
the course
of
treatment is
concluded. The
same
provisions are
available to
all
employees
in the
Company who
receive
these benets.
The
annual bonus
may be
payable
in respect
of the
period
of the
bonus scheme
year
worked
by
the
director; there
is no
provision
for an
amount in
lieu
of bonus
to be
payable
for
any part
of the
notice
period not
worked. The
bonus
would be
payable at
the
normal date.
Leavers would
normally
retain
deferred bonus
shares, albeit
release
would normally
be at
the
end of
the deferral
period,
with
committee
discretion to
treat otherwise.
Long-term
incentives granted
under the
LTIP
will be
determined by
the
LTIP rules
which contain
discretionary
good leaver
provisions for
designated
reasons (that
is, participants
who
leave early
on
account
of: injury;
disability; death;
a
sale of
their employer
or
business in
which they
were
employed;
statutory
redundancy; retirement;
or any
other
reason at
the discretion
of
the committee).
In these
circumstances,
a participant’s
awards will
not
be forfeited
on cessation
of
employment and
instead
will
vest on
the normal
vesting
date. In
exceptional circumstances,
the
committee may
decide that
the
participant’s
awards will
vest early
on
the date
of cessation
of
employment. In
either case,
the
extent
to
which the
awards will
vest
depends on
the extent
to
which the
performance conditions
have
been
satised
and a
pro rata
reduction
of the
awards will
be
applied by
reference to
the
time
of cessation
(although
the committee
has discretion
to
disapply time
pro rating
if
the circumstances
warrant it).
Leavers
would normally
retain vested
LTIP
shares subject
to a
holding
period and
these would
normally
be released
at the
end
of the
holding period
with
committee discretion
to treat
otherwise.
Where
an executive
director leaves
by
mutual consent,
the Company
may
reimburse reasonable
legal
fees
and tax
advice costs,
and
pay for
professional outplacement
services.
Direc
tors
’ remuneration repor
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: remuneration polic
y
continued
13
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gi
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t
Gover
nance
Financial statements
Recruitme
nt remuneration
The
committee considers
the need
to
attract, retain
and motivate
the
best person
for each
position,
without
paying more
than is
necessary.
Ex
ternal appointme
nts
For
external appointments,
the committee
would
seek to
align the
remuneration
package with
the remuneration
policy
approved
by shareholders,
as follows:
Fixed elements
Approach
Maximum annual
grant value
Base salary
The
base
salaries
of
new
executive directors
will be
determined
by reference
to relevant
market
data, experience
and skills
of
the
individual,
internal
relativities and
their current
basic
salary. In
the event
that
the committee
elects to
set
the
initial basic
salary of
a
new appointee
below
market,
any shortfall
may be
managed
with phased
increases over
a
period of
two to
three
years
subject to
the individual’s
development
in the
role.
Pension
New executive
directors will
receive
Company contributions
or cash
alternative
in
line with
that oered
to
the majority
of employees
(currently
6%
of salary).
Benets
New
executive directors
will be
eligible
to receive
benets which
may
include (but
are not
limited
to)
travel allowances,
private medical
insurance, ill health income protection insurance, health screening, employee assistance programme, life assurance, holiday and sick pay,
professional
advice in
connection with
their
directorship, travel,
subsistence and
accommodation
as necessary,
occasional gifts,
for
example
appropriate
long-service or
leaving gifts,
and
any necessary
relocation and/or
incidental
expenses.
The
Company may
oer a
cash
amount on
recruitment to
reect
the value
of benets
a
new
recruit may
have received
from
a former
employer.
Annual bonus
The
structure described
in the
policy
table will
apply to
new
executive directors,
with the
maximum
opportunity
being pro-rated
to reect
the
proportion
of the
nancial year
served.
125%
of base
salary
LTIP
New
appointees will
be granted
awards
under the
LTIP on
the
same terms
as other
executives,
as
described in
the policy
table.
150% of
base
salary
SAYE
New
appointees will
also be
eligible
to participate
in all-employee
share
schemes.
Shareholding guidelines
New
executive
directors
will
be
expected
to build
up a
shareholding
equivalent
to 200%
of basic
salary
in accordance
with the
terms
set out
in
the policy table.
Post-employment shareholding
The
structure in
the policy
table
will apply
to new
executive
directors.
In
determining appropriate
remuneration, the
committee
will take
into consideration
all
relevant factors
to ensure
that
arrangements
are in
the best
interests
of both
the Company
and
its shareholders.
The
committee
may additionally
make awards
or
payments in
respect of
deferred
remuneration arrangements
forfeited on
leaving
a
previous employer.
The
committee will
look to
replicate
the arrangements
being forfeited
as
closely as
possible and,
in
doing
so, will
take account
of
relevant factors,
including the
value
of deferred
remuneration; the
performance
conditions;
and the
time over
which
they would
have vested
or
been paid.
Any such
arrangements
would
typically have
an aggregate
fair
value no
higher than
the
awards being
forfeited.
Direc
tors
’ remuneration repor
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: remuneration polic
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continued
14
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Financial statements
Internal promotion
In
cases of
appointing a
new
executive director
by
way of
internal promotion,
the
committee will
act
in a
manner consistent
with
the policy
for
external appointees detailed on page 139 and
the
provisions for
existing arrangements,
as
set
out
on page
138, will
apply.
Shareholders
will be
informed of
the
remuneration package and all additional
payments
to a
newly-appointed executive
director at the time of their appointment.
Non-
execut
ive di
rectors
For
the appointment
of a
new
non-executive
director,
the fee
arrangement would
be
set in
accordance
with the
approved remuneration
policy at that time.
Over
v
iew of remune
ration
polic
y for other emp
loyees
While
our remuneration
policy follows
the
same fundamental principles across the
Group,
packages oered
to employees
reect
dierences
in role
and seniority.
For
example,
the remuneration package elements for our
Group management team are essentially the
same
as for
the executive
directors
with some
minor
dierences, such
as lower
levels
of share
awards
and a
lower shareholding
requirement.
Employees
across the
Group below
Board
level
may be eligible to participate in an annual bonus
arrangement.
Long-term incentive
awards
and/or discretionary share options may be
awarded
to certain
other senior
executives
and
employees,
for which
the maximum
opportunity
and
the performance
conditions may
vary
by
organisational
level.
All employees are eligible to participate in the
Group’s
SAYE scheme
and to
join
either the
Group’s
Retirement Plan
or the
B&CE’s
People’s
Pension.
The Group
also oers
a
broad range
of
benets that
are open
to
employees with
eligibility
for the
dierent benets
determined
on
seniority. Benets
oered include:
private
medical
insurance; digital
GP service;
income
protection;
child care
vouchers; holiday
plus
scheme (option to purchase some additional
holiday);
death in
service; employee
assistance
programme;
and access
to nancial
education.
Use of discre
tion
The
committee will
operate the
incentive
plans
in
accordance with
their respective
rules,
the
Listing
Rules and
HMRC rules
where
relevant.
The
committee, consistent
with market
practice,
retains
discretion over
a number
of
areas
relating to the operation and administration of
certain plan rules. These include (but are not
limited
to) the
following:
who
participates in
incentives;
the
timing of
grant of
awards
and/or
payments;
the
size of
awards (up
to
plan/policy limits)
and/or
payments;
where
the result
indicated by
the
relative
TSR performance condition should be
scaled
back (potentially
to zero)
in
the event
that
the committee
considers that
nancial
performance has been unsatisfactory and/
or the outcome has been distorted due to
the TSR for the Company or any comparator
company
TSR being
considered abnormal;
measurement
of performance
in the
event
of
a
change of
control or
reconstruction;
determination
of good
leaver status
(in
addition
to any
specied categories)
for
incentive
plan purposes;
payment
of dividends
accrued during
the
vesting
period;
adjustments
required
in certain
circumstances
(for example, rights issues, corporate
restructuring
and special
dividends);
adjustments to existing performance
conditions
for exceptional
events so
that
they
can
still full
their original
purpose;
the release of deferred bonus shares for
leavers;
retention
of LTIP
shares subject
to
a holding
period
for leavers;
and
the application of the post-employment
shareholding guidelines.
Malus and clawb
ack
Awards
under the
annual bonus,
the
deferred
bonus
and the
LTIP are
subject
to malus
and
clawback
provisions which
can be
applied
to
both
vested and
unvested awards.
Clawback
provisions
will apply
for a
period
of three
years
post
vesting. Circumstances
in which
malus
and
clawback may
be applied
include:
for
overpayments
due to
material misstatement
of
the Company’s
nancial accounts;
gross
misconduct
on the
part of
the
award-holder; an
error
in calculating
the vesting
outcomes;
or in
the
event of
corporate failure.
Participants
in the
Company’s
LTIP and
deferred bonus
scheme
are
required
to acknowledge
their understanding
and
acceptance of
malus and
clawback
provisions
prior to
receiving their
awards.
The
committee is
satised that
the
recovery
provisions
are enforceable.
Direc
tors
’ remuneration repor
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: remuneration polic
y
continued
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Gover
nance
Financial statements
Remuneration sce
narios for the e
xecutive direc
tors
The
charts below
provide an
indication
of the
level of
remuneration
that would
be received
by
each
executive director
under the
following
three assumed
performance scenarios:
Below
threshold performance
Fixed elements
of remuneration
only –
base salary,
benets
and
pension
On-target performance
Assumes
50% payout
under the
annual
bonus
Assumes
16.7% payout
under the
LTIP
(aligned with
threshold performance)
Maximum performance
1
Assumes
100% payout
under the
annual
bonus (125%
of salary)
Assumes
100% payout
under the
LTIP
(150% of
salary)
1
Maximum shown
both
with
and without
the
impact of
share
price
appreciation on
the
potential value
of
long-term
incentive awards.
For
the purposes
of
this
illustration, three-year
share
price appreciation
is
assumed
to be
50%
in line
with
the
reportingregulations.
0
500
1,000
1,500
2,000
2,500
3,000
Minimum
On-target
Maximum
Maximum
+ 50% share
price growth
John Morgan
Chief Executive
(£m)
48%
27%
25%
£2,616
39%
32%
30%
£2,194
12%
31%
57%
£1,138
100%
£645
£0
£500
£1,000
£1,500
£2,000
£2,500
£3,000
Minimum
On-target
Maximum
Maximum
+ 50% share
price growth
Steve Crummett
Finance Director
(£m)
Fixed
Annual bonus
LTIP
48%
27%
25%
£2,091
38%
32%
30%
£1,754
12%
31%
57%
£912
100%
£519
Notes:
Base salary
levels
are
as at
1
January 2022.
The value
of
benets
has been
estimated
based on
amounts
received
in respect
of
2021.
The value
of
pension
receivable is
the
equivalent of
10%
of
base salary.
Direc
tors
’ remuneration repor
t
: remuneration polic
y
continued
14
2
_
Mor
ga
n Si
nd
al
l Gr
o
up p
lc
A
nnual Report 202
1
Str
ate
gi
c rep
or
t
Gover
nance
Financial statements
Ensuring transp
arenc
y of t
he remuneration p
olic
y
The
following table
summarises how
the
remuneration policy
fulls the
factors
set out
in provision
40
of
the 2018
UK Corporate
Governance
Code.
Criteria
How the
Company
fulls
the
criteria
Example
Clarity
Remuneration arrangements should be
transparent
and promote
eective engagement
with
shareholders and
the workforce.
The
committee is
committed to
providing
open and
transparent disclosures
to
shareholders, employees
and
other
stakeholders with
regard to
executive
remuneration arrangements.
The committee
determines
the
remuneration
policy and
agrees the
remuneration
of each
executive director
and
the Group
management team.
The
committee reviews
the eectiveness
of
the remuneration
policy and
its
alignment with
strategy annually,
unless
circumstances require
additional review.
The
annual bonus
plan, deferred
bonus
plan, 2014
LTIP and
2014
SOP
are established
by the
committee
and kept
under regular
review.
The
remuneration report
sets out
the
remuneration arrangements
for the
executive
directors in
a clear
and
transparent
way. We
encourage shareholders
to
ask questions
at the
AGM
and we
consult with
shareholders
over
any proposed changes to the policy.
The
annual bonus
plan is
based
on PBTA*
which
aligns with
the published
accounts.
Simplicity
Remuneration
structures should
avoid
complexity and their rationale and operation
should be easy to understand.
Our
remuneration arrangements
for executive
directors,
as well
as those
for
employees across
the Group,
are
simple
in nature
and well
understood
by participants.
Remuneration
for the
executive directors
consists
of xed
pay (salary,
benets,
pension) and
variable pay
(annual
bonus
plan and
long-term incentive
plan).
No complex
structures are
used
in our
variable pay
plans.
The
LTIP is
based on
point-to-point
EPS
and TSR.
Risk
Remuneration arrangements should ensure
that reputational and other risks arising from
excessive
rewards, and
behavioural risks
that
can
arise from
target-based incentive
plans,
are
identied
and mitigated.
Targets
are reviewed
annually to
ensure
they are
suitably stretching
and
do not
encourage excessive
risk
taking.
Malus
and clawback
provisions also
apply
to both
the annual
bonus
and long-term
incentive plans.
Members
of the
committee are
provided
with regular
briengs on
developments
and trends
in executive
remuneration.
The
PBTA* and
EPS targets
are
based on
the latest budget and market consensus.
Predictability
The
range of
possible values
of
rewards to
individual
directors and
any other
limits
or
discretions
should be
identied and
explained
at
the
time of
approving the
remuneration
policy.
The
possible reward
outcomes can
be
easily quantied,
and these
are
reviewed by
the committee
annually.
In
addition,
performance is
reviewed regularly
so
there are
no surprises
at
the end
of period
assessment.
The
potential value
and composition
of
the executive
directors’ remuneration
packages
at below
threshold, target
and
maximum scenarios
are provided
in
the remuneration
policy.
The remuneration scenarios on
page141
set out
the potential
range
of
remuneration
for the
executive directors.
Proportionality
The
link between
individual awards,
the
delivery
of strategy and the long-term performance of
the Company should be clear. Outcomes should
not
reward poor
performance.
Annual
bonus payments
and LTIP
awards
require robust
performance against
challenging
conditions that
are
aligned
to the
Company’s strategy.
The
committee retains
discretion to
override
formulaic outcomes
to ensure
that
payments under
the variable
incentives
are appropriate
and reective
of
overall performance.
To trigger any element of the annual
bonus,
90% of
budget must
be
achieved
and
that will
only trigger
a
15% payment.
Alignment to culture
Incentive
schemes should
drive behaviours
consistent
with company
purpose, values
and
strategy.
The
variable incentive
schemes and
performance
measures are
designed to
be
consistent with
the Group’s
purpose,
values and
strategy.
At
the heart
of the
policy
is a
focus on
the
long-term success
of the
business.
This
reects our
culture which
is
aligned
to creating
long-term value
for
all stakeholders.
Our
values and
unique culture
are
critical
to the
Group’s long-term
success.
Remuneration
targets will
only be
achieved
if the
Group consistently
delivers
on our commitments to all stakeholders.
Direc
tors
’ remuneration repor
t
: remuneration polic
y
continued
14
3
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Annual Repor
t 20
21
Str
ate
gi
c rep
or
t
Gover
nance
Financial statements
A
n
n
u
a
l
r
ep
or
t
on
r
em
u
n
er
a
t
i
on
The
information provided
in this
section
of the
remuneration report
which
is subject
to audit,
has
been
highlighted.
Single
total
gure
s
of
remun
eration
(
audited)
Executi
ve direc
tors
Fixed pay
Variable pay
Fees/basic salary
£000
Benets
£000
Pension
contributions
£000
Total
xed pay
£000
Annual
bonuses
£000
Value of long-
term incentives
£000
Total variable
pay
£000
Total remuneration
£000
John Morgan
2021
547
26
55
628
683
1,455
2,138
2,766
2020
509
25
51
585
–
510
510
1,095
Steve Crummett
2021
436
25
44
505
545
1,160
1,705
2,210
2020
406
24
41
471
–
407
407
878
Notes:
The executive
directors
voluntarily
took a
20%
reduction in
basic
salary
and pension
contributions
for a
three-month
period
from 1
April
2020 to
30
June
2020.
Benets relate
to
travel
allowance, medical
benets,
ill health
income
protection,
employee assistance
programme
and life
assurance.
As the
market
price
on the
date
of vesting
for
the
2019 awards
is
currently unknown,
the
LTIP
value shown
is
estimated using
the
average
market value
over
the last
quarter
of
2021 of
£23.75.
The 2020
comparative
gures
for the
value
of the
long-term
incentives and
total
remuneration
have been
revised
from last
year’s
report
to reect
the
actual share
price
used
for the
vesting
and the
value
of
dividend equivalent
shares
awarded. Awards
granted
in
2018, which
vested
based on
performance
to
31December 2020,
are
valued
using the
mid-market
closing price
on
5
March 2021,
the
date prior
to
the
date of
vesting
(6 March
2021),
of
£18.00. (The
mid-market
closing share
price
on
8 March
2021
was £18.46.)
Annual cash bonu
s outtur
n (
audited)
Annual
bonus gures
represent the
full
amount earned
for 2021.
Of
this amount,
30% will
be
deferred
in nil-cost
share options
for
three years.
The table
below
shows performance
against PBTA*
targets
for
2021
representing 100%
of the
annual
bonus potential:
Threshold target
£m
50% target
£m
Maximum target
£m
Actual performance
£m
Percentage
of maximum
%
Group
PBTA* at
31 December
2021
77.08
82.0
86.92
127.7
100
Direc
tor
s’ re
muneration repor
t
continued
14
4
_
Mo
r
ga
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A
nnual Report 202
1
Str
ate
gi
c rep
or
t
Gover
nance
Financial statements
2014 Lon
g-T
e
rm I
nce
nti
ve Pl
an – 2
019 award ou
t
tu
rn (aud
ite
d)
LTIP
awards granted
in 2019
are
due to
vest on
4
March 2022.
As set
out
in
the table
below,100% of
the
2019–2021 awards
are expected
to
vest:
Performance condition
Weighting
Threshold
target
(EPS: 12.5%
vest, TSR:
25% vest)
Stretch target
(100% vest)
Actual
performance
Percentage
vesting
Adjusted*
EPS in
FY21
66.67%
180.8p
219.0p
226.0P
66.67%
Relative
TSR (vs.
FTSE 250
excluding
investment trusts)
33.33%
Median
10%
per year
outperformance
of median
22.8%
per year
outperformance
of median
33.33%
Total vesting
100%
As
the market
price on
the
date of
vesting is
currently
unknown, the
values shown
are
estimated
using
the
average market
value over
the
last quarter
of 2021
of
£23.75, an
81% increase
on
the
share price
at
the date
of grant
of
£13.10. Accordingly,
c45% of
the
‘value of
long-term incentives’
gure
shown
in
the
single-gure table
on page
143
is a
result of
share
price appreciation,
amounting to
c£653k
and
c£520k
for John
Morgan and
Steve
Crummett respectively.
As disclosed
in
the chair’s
letter on
pages
126
to 128,
the committee
amended
the basis
of calculation
for
the cumulative
EPS performance
condition
to point-to-point
for the
2019
LTIP awards.
The committee
has
not exercised
any additional
discretion
in respect
of the
achieved
outcomes. The
value of
2021
long-term incentives
in the
single-
gure
table on
page 143
does
not include
the value
of
any dividend
equivalent shares
that
may
be due
for
the 2019
awards on
the
date of
vesting.
The
net awards
received (after
the
deduction of
tax and
national
insurance) will
be subject
to
a
two-year
holding period
in which
the
director will
not be
able
to sell
the shares
but
will
be entitled
to
receive
dividends and
vote on
the
shares. The
shares will
be
transferred to
the director
at
the
end of
the holding period.
Non
-
executi
ve directo
rs (audited)
Fees
1
£000
Taxable benets
2
£000
Total
£000
2021
2020
2021
2020
2021
2020
Michael Findlay
184
171
–
–
184
171
Malcolm Cooper
70
65
–
–
70
65
Tracey Killen
60
56
–
–
60
56
David Lowden
60
56
–
–
60
56
Jen Tippin
3
50
38
–
–
50
38
Kathy Quashie
4
29
–
–
–
29
–
1.
The
chair and
the
non-executive directors
voluntarily
took
a 20%
reduction
in their
fees
for
three months
from
1 April
2020
to
30 June 2020.
2.
Taxable
benets include
taxable
relevant travel
and
accommodation
expenses for
attending
Board meetings
and
related
business. Any
value
disclosed
is inclusive
of
tax arising
on
the
expense, which
is
settled by
the
Company.
3.
Jen
Tippin joined
the
Board on
1
March
2020.
4.
Kathy
Quashie joined
the
Board
on 1
June
2021.
The
aggregate remuneration
for executive
and
non-executive directors
in 2021
was
£2.8m (2020:
£1.4m).
Aggregate remuneration
comprises salary,
fees,
benets, pension
contributions and
bonus
payments.
Direc
tor
s’ re
muneration repor
t
: annual repor
t on remune
ration
continued
14
5
_
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ga
n S
in
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up p
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c
Annual Repor
t 20
21
Str
ate
gi
c rep
or
t
Gover
nance
Financial statements
Share awards granted dur
ing the year (
audited
)
201
4 Long-
T
er
m Incentive Plan
On
5 March
2021, LTIP
awards
were made
to the
executive
directors, which
will vest
subject
to
performance over
the three
nancial
years to
31 December
2023.
Of these
awards, 67%
are
subject
to an
EPS
performance
condition and
33% are
subject
to a
TSR performance
condition,
full details
of which
are
included
in last
year’s annual
report
on remuneration.
Date of grant
Percentage of
salary awarded
Five-day average
share
price at date of grant
No. of
shares
over which
award
was granted
Face value
of award
Percentage of
awards
vesting at
threshold
Performance period
John Morgan
5 March 2021
150%
£17.17
47,764
£820,108
16.7%
(12.5% for
EPS element,
25%
for TSR
element)
Three
nancial years
to
31 December 2023
Steve
Crummett
38,086
£653,937
As
disclosed in
the chair’s
letter
on pages
126 to
128,
the committee
resolved to
amend
the
basis of
calculation for
the
cumulative EPS
performance condition
to
point-to-point for
the 2021
LTIP
awards.
The
share
price used
to calculate
the
awards at
the date
of
grant was
based on
the
average
share price
for the
ve
dealing days
preceding the
date
of grant.
The closing
share
price
on 4
March 2021
was
£17.56.
Deferre
d bonus share options
No
annual bonus
was earned
in
2020 and
therefore no
deferred
bonus share
options were
awarded
in
2021.
Direc
tor
s’ re
muneration repor
t
: annual repor
t on remune
ration
continued
14
6
_
Mo
rg
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t 20
21
Str
ate
gi
c rep
or
t
Gover
nance
Financial statements
Out
s
tandin
g interes
t
s under share sch
emes (audited)
Details
of the
executive directors’
interests
in long-term
incentive awards
as
at 31
December 2021
and
movements
during the
year are
as
follows:
Per
formance shares
Date of
award
No. of
shares
outstanding as at
1 January 2021
No. of
shares
awarded
No. of
shares
vested
No. of
dividend
equivalent shares
awarded
Total no. of
shares vested
No. of
shares
lapsed
No. of
awards
outstanding as at
31 December 2020
End of
performance
period
Date awards
vest
John Morgan
6.3.2018
61,666
–
26,515
1,826
28,341
35,151
–
31.12.2020
6.3.2021
4.3.2019
61,272
–
–
–
–
–
61,272
31.12.2021
4.3.2022
2.3.2020
43,297
–
–
–
–
–
43,297
31.12.2022
2.3.2023
5.3.2021
–
47,764
–
–
–
–
47,764
31.12.2023
5.3.2024
Total
166,235
47,764
26,515
1,826
28,341
35,151
152,333
Steve Crummett
6.3.2018
49,171
–
21,142
1,456
22,598
28,029
-
31.12.2020
6.3.2021
4.3.2019
48,857
–
–
–
–
–
48,857
31.12.2021
4.3.2022
2.3.2020
34,524
–
–
–
–
–
34,524
31.12.2022
2.3.2023
5.3.2021
–
38,086
–
–
–
–
38,086
31.12.2023
5.3.2024
Total
132,552
38,086
21,142
1,456
22,598
28,029
121,467
Notes:
43% of
the
awards
granted in
2018
vested due
to
the
EPS and
TSR
targets being
achieved.
Three-year
cumulative EPS
for
the Group
as
at
31 December
2020
was 421.6p,
which
resulted
in 33%
of
the EPS
element
of
the award
vesting.
The Group
also
achieved
a TSR
of
0.8%,
which exceeded
the
median of
the
comparator
group and
resulted
in 63%
of
the
TSR element
of
the award
vesting.
Of the
awards
granted
in 2019,
100%
vested due
to
the
EPS and
TSR
targets being
achieved.
The
Group’s 2021
EPS
was 226.0p,
which
resulted
in 100%
of
the EPS
element
of
the award
vesting.
The Group
also
achieved
a TSR
of
29.4% per
year,
which
exceeded
the median
of
the
comparator group
by
22.8% per
year
and
resulted in
100%
of the
TSR
element
of the
award
vesting. The
net
awards
received (after
the
deduction of
tax
and
national insurance)
will
be subject
to
a
two-year holding
period
in which
the
director
will not
be
able
to sell
the
shares but
will
be
entitled to
receive
dividends and
vote
on
the shares.
The
shares will
be
released
to the
director
at the
end
of
the holding
period.
The awards
of
performance
shares over
150%
of salary
granted
in
2020 and
2021
are subject
to
a
point-to-point EPS
growth
target and
a
TSR
performance condition.
Direc
tor
s’ re
muneration repor
t
: annual repor
t on remune
ration
continued
147
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1
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ate
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nance
Financial statements
De
fe
rre
d b
onu
s pl
an nil
-
co
s
t opt
ion
s
Date of grant
No. of
options
outstanding as at
1 January 2021
No. of
options granted
No. of
dividend
equivalent shares
awarded
No. of
options
exercised
No. of
options
lapsed
No. of
options
outstanding as at
31 December 2021
Date from
which
exercisable
John Morgan
6.3.2018
14,967
–
1,031
15,998
–
–
6.3.2021
4.3.2019
14,872
–
–
–
–
14,872
4.3.2022
2.3.2020
9,758
–
–
–
–
9,758
2.3.2023
Total
39,597
–
1,031
15,998
–
24,630
Steve Crummett
6.3.2018
11,934
–
822
12,756
–
–
6.3.2021
4.3.2019
11,858
–
–
–
–
11,858
4.3.2022
2.3.2020
7,781
–
–
–
–
7,781
2.3.2023
Total
31,573
–
822
12,756
–
19,639
Notes:
The mid-market
price
of
a share
on
31 December
2021
was
£25.20 and
the
range during
the
year
was £14.38
to
£26.85.
No bonus
was
earned
by the
executive
directors in
respect
of
the 2020
nancial
year and,
accordingly,
no
options were
awarded
under the
deferred
bonus
plan in
2021.
The deferred
bonus
plan
nil-cost share
options
granted on
6
March
2018 became
exercisable
on 6
March
2021
and on
vesting,
each nil-cost
option
granted
carried a
right
to receive
an
amount
linked to
dividends
paid. The
dividend
equivalent
was settled
in Ordinary
shares
of
the Company
and
was added
to
the
original award.
The
share price
used
to
determine the
number
of dividend
equivalent
shares
was the
closing
middle market
quotation
on
5
March 2021
which
was £18.00.
The
options
and dividend
equivalent shares
are
exercisable
until the
tenth
anniversary of
their
grant
date.
Steve Crummett
exercised
his
options granted
on
6 March
2018
and
the associated
dividend
equivalent shares
on
the
10 March
2021
at a
sale
price
of £17.76
per
share.
John Morgan
exercised
his
options granted
on
6 March
2018
and
the associated
dividend
equivalent shares
on
9
April 2021
at
a sale
price
of
£18.72 per
share.
Direc
tor
s’ re
muneration repor
t
: annual repor
t on remune
ration
continued
14
8
_
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rg
an S
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c
Annual Repor
t 20
21
Str
ate
gi
c rep
or
t
Gover
nance
Financial statements
Direc
tor
s’ re
muneration repor
t
continued
O
t
h
er
d
i
s
c
los
u
r
e
s
Remuneration commit
te
e meet
ings
The committee met on six occasions during the year. All members attended each meeting, except
Jen Tippin who missed one meeting due to not being able to attend as a result of pre-existing
commitments in her executive role which could not be changed at short notice. The chair of the
Board attended all meetings of the committee, the chief executive attended three meetings of the
committee,
and the
company secretary
acted
as secretary
to the
committee.
The nance
director
and Kathy Quashie attended one of the committee meetings. No person was present during any
discussion relating to their own remuneration.
Over the course of the year, the committee received advice on remuneration matters from
remuneration advisers Mercer|Kepler (Mercer) and, following their appointment, Ellason LLP (Ellason).
Ellason were appointed by the committee as the Company’s remuneration advisers in October 2021
following a competitive tender process. The committee has also relied on information and advice
provided by the company secretary and has consulted the chief executive (albeit not in relation
to his own remuneration). Both Mercer and Ellason are signatories of the Code of Conduct for
Remuneration Consultants, details of which can be found at remunerationconsultantsgroup.com, and
the
committee is
satised that
the
advice it
receives –
formerly
from Mercer
and currently
from
Ellason
–
is independent
and objective.
The
fees paid
by the
Company
to Mercer
during the
nancial
year
up
to their cessation of appointment for advice to the committee in relation to the above were £38,412
(2020: £14,660), on the basis of time and materials. Mercer also provided advice to the Company on
accounting for share awards but provided no other material services to the Company or the Group.
The
fees paid
by the
Company
to Ellason
from their
appointment
date during
the nancial
year
were
£23,630 (2020: Nil). Ellason provided no other services to the Company or the Group.
Sharehold
er voting (
audited
)
At last year’s AGM held on 7 May 2021, the remuneration report (excluding the remuneration policy)
for the year ended 31 December 2020 was approved by shareholders. The following table shows
the results of the advisory vote on the 2020 annual remuneration report as well as the results of the
binding vote on the remuneration policy, which was last approved by shareholders at the 2020 AGM:
Voting for
Voting against
Number of
shares
Percentage
Number
of shares
Percentage
Total
votes cast
Votes
withheld
1
Annual
remuneration
report
33,718,309
98.36
560,488
1.64
34,278,797
5,623
Remuneration
policy
34,252,837
97.41
911,648
2.59
35,164,485
191,258
1 Shareholders who have indicated that they wish to actively abstain from voting are counted as a vote withheld. A vote
withheld is not a vote in law and is not counted in the calculation of the proportion of votes cast ‘for’ and ‘against’ a resolution.
Dilution and share u
sage unde
r employee share p
lans
Shares
required for
the 2007
Employee
Share Option
Plan are
satised
by shares
purchased in
the
market
via The
Morgan Sindall
Employee
Benet Trust
(‘the Trust’)
and
shares for
the Company’s
other
share plans
may be
satised
using either
new issue
shares
or market-purchased
shares. Our
present intention is to use market-purchased shares to satisfy these awards; however, we retain the
ability to use new issue shares and may decide to do so up to the dilution limits recommended by
the Investment Association (10% of issued ordinary share capital for all employee share plans over a
10-year period and, within this limit, no more than 5% of issued ordinary share capital for executive
or discretionary share plans). The outstanding level of dilution against these limits equates to 8.52%
(2020: 9.13%) of the current issued ordinary share capital under all-employee share plans, of which 0%
relates to discretionary share plans.
As at 31 December 2021, the Trust held 1,051,664 shares (2020: 278,383), which may be used to
satisfy awards.
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Direc
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’ remuneratio
n repor
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: other dis
closures
continued
Chief executi
ve remuneration an
d per
formance graph
Historical TSR performance
The graph below shows the value to 31 December 2021of £100 invested in the Company on 1 January
2012 compared with the value of £100 invested in the FTSE All-Share Index and the FTSE All-Share
(Construction & Materials Index), these being indices of which the Company has been a constituent
over the period shown. The graph also shows the value of £100 invested in the FTSE 250 Index
(excluding investment trusts), the constituents of which are used for the purposes of the TSR element
of
the LTIP.
In all
cases,
the other
points plotted
are
the values
at intervening
nancial
year
ends.
0
100
200
300
400
500
600
700
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
Morgan Sindall
FTSE All-Share Index
FTSE 250 Index (excluding investment trusts)
FTSE All-Share Construction and Materials Index GBP
Value of £100 invested at 31 December 2011
Historical pay
vs performance
The
graph below
shows the
TSR
and PBTA*
for the
Company
over the
last 10
nancial
years.
The chief
executive remuneration table provides a summary of the total remuneration received by the chief
executive over the last 10 years, including details of annual bonus payout and long-term incentive
award vesting level in each year. The annual bonus payout and long-term incentive award vesting level
as a percentage of the maximum opportunity are also shown for each of these years.
0
100
200
300
400
500
600
700
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
Morgan Sindall TSR
Morgan Sindall PBTA*
John Morgan single figure
TSR and PBTA* indexed to 100
as at 31 December 2011
John Morgan single figure
of remuneration (£000)
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2012
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Paul
Smith
John
Morgan
Total remuneration £000
1,327
671
507
519
905
1,467
2,447
2,555
2,599
1,095
2,766
Annual bonus percentage
of maximum
26
30
–
–
80
100
100
100
93
–
100
Long-term incentive award
vesting percentage of
maximum share awards
49
n/a
n/a
–
–
62
100
100
100
43
100
Long-term incentive award
vesting percentage of
maximum share options
46
46
–
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Notes:
The 2020
total
remuneration
has been
revised
from last
year’s
report
to reect
the
actual share
price
used
for the
vesting
and the value of dividend equivalent shares awarded under the 2014 LTIP (see page 143 for further information).
John Morgan was appointed chief executive on 5 November 2012, having previously been executive chair. He waived his
bonus entitlement in 2013.
Paul Smith resigned on 5 November 2012 and ceased employment on 31 December 2012.
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: other dis
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continued
Chief executi
ve pay ratio
Financial year
Chief executive pay ratio
Calculation
methodology
P25
(lower quartile)
P50
(median)
P75
(upper quartile)
2021
B
60:1
53:1
32:1
2020
B
30:1
22:1
15:1
2019
B
58:1
43:1
27:1
The lower quartile, median and upper quartile employees were determined based on the hourly-
rate data as at 5 April 2021, collected for the Group’s reporting under the gender pay gap legislation
(Option B). The gender pay gap data reviews the pay of all UK employees. This calculation methodology
was chosen as the data was readily available from our work in determining the gender pay gap.
Furthermore,
with our
decentralised business
model
and signicant
UK workforce,
calculating
the
single
gure of
remuneration for
each
employee (Option
A) would
be
prohibitively time-consuming
and expensive.
The
committee has
considered the
pay
data for
the three
individuals
identied and
believes that
it
fairly
reects pay
at the
relevant
quartiles among
our UK
workforce.
The three
individuals identied
were
full-time employees
during the
year.
No adjustments
or assumptions
were
made by
the
committee, with the total remuneration of these employees calculated in accordance with the
methodology
used to
calculate the
single
gure of
the chief
executive
for the
2021 nancial
year.
The
table
below sets
out the
remuneration
details for
the individuals
identied:
Salary
Chief executive
P25
P50
P75
Basic salary, £k
547
34
41
79
Total annual pay
1
£k
1,311
46
53
85
Total pay
2
£k
2,766
46
53
85
The ratio of 53:1 is 141% higher than the median ratio of 22:1 in 2020. In 2020, the chief executive
received no annual bonus and only 43% of the long-term incentive awards vested. However, in 2021
the chief executive received 100% annual bonus and 100% of the long-term incentive award vested,
together
with the
long-term incentive
award
beneting from
signicant share
price
growth over
its
vesting period. For comparison, the pay ratio in 2019 when 93% of the annual bonus was paid and
100% of the long-term incentive awards granted in 2017 vested was 43:1.
None
of the
median employees
in
each quartile
identied this
year
received benets
under the
Company’s
long-term incentive
schemes. With
a
signicant proportion
of the
pay
of our
chief executive
linked to the Company’s performance and share price movements over the longer term, it is expected
that the ratio will depend a lot on long-term incentive outcomes each year, and accordingly may
uctuate.
The committee
has therefore
also
produced pay
ratios for
basic
salary and
total annual
pay
as shown in the table below.
Ratio
P25
P50
P75
Basic salary
16:1
13:1
7:1
Total annual pay
1
28:1
25:1
15:1
Total pay
2
60:1
53:1
32:1
1
Total annual pay includes, where applicable, basic salary, annual bonus, pension, travel or car allowance and the cash value of
employee benets
received,
such
as death
in
service, private
medical,
group
income protection,
EAP,
etc.
2
Total pay includes total annual pay plus the cash value of any long-term incentives received under either the 2014 LTIP or the
2014 SOP.
Percent
age change in remuneration level
s
The
table below
shows details
of
the percentage
change in
base
salary,
benets and
annual bonus
for
the
chair, the
executive and
non-executive
directors over
the last
three
nancial years,
compared to
the average percentage change for other employees of the Group over the same periods.
Percentage change
in base salary
Percentage change
in benets
Percentage change
in bonus payment
2020–21
2019–20
2020–21
2019–20
2020–21
2019–20
Chair
7.4%
-2.3%
n/a
n/a
n/a
n/a
Chief executive
7.4%
-2.1%
2.4%
2.6%
100%
-100%
Finance director
7.4%
-2.2%
3.2%
-0.2%
100%
-100%
Audit & HSE committee chair
(M Cooper)
6.8%
-3.7%
n/a
n/a
n/a
n/a
Remuneration committee
chair (T Killen)
7.0%
-3.4%
n/a
n/a
n/a
n/a
Senior independent director
(D Lowden)
7.0%
-3.4%
n/a
n/a
n/a
n/a
J Tippin
30.2%
n/a
n/a
n/a
n/a
n/a
K Quashie
n/a
n/a
n/a
n/a
n/a
n/a
All employees
2.6%
4.8%
1.5%
8.0%
50.6%
-9.1%
The chief ex
ecutive’s
and nance
director’s bonus
decreased
by 100%
in 2020
due
to the
impact of
the Covid pandemic on the Group’s performance which meant that no bonus was paid. The chair,
executive directors and non-executive directors each took a voluntary 20% reduction in fees or salary
(as applicable) for three months from 1 April to 30 June 2020.
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Direc
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s
’ remuneratio
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: other dis
closures
continued
Relative imp
or
t
ance of spe
nd on pay
The
table below
shows pay
for
all employees
compared to
other
key nancial
indicators.
2021
2020
Change
Employee remuneration
£543.7m
£505.9m
7%
Basic
earnings per
share (adjusted*)
226.0p
108.6p
108%
Dividends paid during the year
£32.3m
£9.6m
236%
Employee headcount
1
6,666
6,736
-1%
1 Employee headcount is the monthly average number of employees on a full-time equivalent basis. More detail is set out in
note 2
to
the
consolidated nancial
statements.
Shareholdin
g guideline
s (
audited)
Through participation in performance-linked share-based plans, there is strong encouragement
for
senior executives
to build
and
maintain a
signicant shareholding
in
the business.
Shareholding
guidelines are in place requiring the executive directors to build and maintain a shareholding in the
Company equivalent to 200% of base salary. Until this threshold is achieved, there is a requirement for
executives to retain no less than 50% of the net of tax value of vested incentive awards.
Percentage of salary
required under
shareholding guidelines
Percentage of salary held
at 31 December 2021
John Morgan
200
16,038
Steve Crummett
200
735
The share price used to value the shares as at 31 December 2021 was £25.20.
Direc
tor
s
’ inte
res
t
s (
audite
d)
The
gures below
set out
the
shareholdings benecially
owned by
directors
and their
family interests
at 31 December 2021.
31 December 2021
No. of shares
31 December 2020
No. of shares
Michael Findlay
4,173
4,173
John Morgan
3,479,537
4,106,058
Steve Crummett
127,098
164,579
Malcolm Cooper
10,000
10,000
Tracey Killen
611
611
David Lowden
4,000
4,000
Jen Tippin
1,000
1,000
Kathy Quashie
–
–
There have been no changes in the interests of the directors between 31 December 2021 and
24February
2022.
E
x
ternal app
ointment
s
At the discretion of the Board, executive directors are allowed to act as non-executive directors
of other companies and retain any fees relating to those posts. Neither of the executive directors
currently hold external appointments for which they are remunerated.
Payments to
pas
t
direc
tor
s
or
f
or
loss
of
o
ce
(
audited)
No payments were made during the year.
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Financial statements
Direc
tor
s
’ remuneratio
n repor
t
: other dis
closures
continued
I
m
p
lem
en
t
a
t
i
on
o
f
t
h
e
r
em
u
n
er
a
t
i
on
p
o
l
i
c
y
f
or
2
0
2
2
Base s
alarie
s
In setting the 2022 base salaries, the committee considered the budgeted level of increases in base
salary for senior executives below Board level and the workforce generally, which averaged 3%. The
committee determined that the base salaries for John Morgan and Steve Crummett should increase
by
3% with
eect from
1
January 2022.
In conrming
the
salary increases,
the committee
took
account
of the performance of each executive director and their respective responsibilities.
From
1 January 2022
£
From
1January 2021
£
Increase
John Morgan
563,150
546,742
3%
Steve Crummett
449,150
435,958
3%
Pension
The Company contributes up to 10% of base salary to a personal pension plan and/or as a cash
supplement. This is in line with the maximum pension contribution for the employee population.
Consistent with all employees participating in the Retirement Plan, relevant executive directors may
exchange part of their gross salary and bonus awards in return for pension contributions. Where
additional pension contributions are made through the salary exchange process, the Company
enhances the contributions by half of the saved employer’s national insurance contribution.
The
majority of
employees in
the
Group are
entitled to
a
company pension
contribution of
up
to
6%
of basic salary if they contribute 6% themselves. Senior employees within the Group are entitled to a
company pension contribution of up to 10% of basic salary as per the executive directors.
Following a review during 2021, and noted in the chair’s statement on page 128, the pension
contributions
for existing
directors will
be
aligned with
those of
the
majority of
employees from
1 January 2023.
Annual bo
nus
The maximum annual bonus potential for 2022 will be 125% of base salary with 70% of any bonus
earned paid in cash and the remaining 30% deferred in nil cost share options for three years. To
ensure
that management
is focused
on
the Group’s
nancial performance
in
2022, 100%
of the
bonus
will continue to be based on a PBTA* target range set in relation to the Group budget. The annual
bonus,
including the
deferred shares,
will
be subject
to malus
and
clawback provisions.
The targets for the forthcoming year are set in relation to the Group budget, which is considered
commercially sensitive. For 2022, the bonus trigger point for the annual bonus will be 90% and the
maximum trigger point will be 110% of budgeted PBTA*. Retrospective disclosure of the targets and
performance against them will be disclosed in next year’s remuneration report.
Long-term incentives
The committee intends to make awards to the executive directors under the 2014 LTIP in March 2022.
The awards to be granted in 2022 will be up to 150% of base salary. Two thirds of awards (100% of
salary) will be based on an EPS performance target with the remaining one third of awards (50% of
salary) based on the Company’s TSR performance. Further details on these performance conditions
are set out below.
Net
shares vesting
under LTIP
awards
granted in
2022 will
be
subject to
a mandatory
two-year
holding
period
at the
end of
the
vesting period.
All awards
are
subject to
malus and
clawback
provisions.
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EP
S pe
r
f
orm
anc
e con
dit
ion (t
wo th
ird
s of aw
ard
)
Our very strong earnings performance in 2021 followed a challenging year in 2020 which was heavily
impacted by the pandemic. In order to set appropriate EPS targets for the 2022 cycle, the committee
considered a number of internal and external reference points, broker forecasts for the Company and
sector peers over the next two to three years, and typical growth rates in our sector. For the awards
granted in 2022, EPS targets will be based on a point-to-point assessment, with a threshold target of
2024
EPS of
226p and
a
stretch target
of 259p.
The
committee is
satised this
range
is
appropriately
stretching given forecasts for the sector, and is broadly consistent with the long-term target range of
6–13%
p.a. taking
into account
the
recent volatility
in EPS.
Vesting of the EPS component will be based on achievement against this range in 2024, and will
also
be subject
to review
by
the remuneration
committee to
ensure
vesting is
commensurate with
underlying Company performance, taking into account, for example, imposed tax changes.
The vesting range for the EPS targets is shown in the graph below:
0%
226p
259p
25%
12.5%
50%
75%
100%
2024 EPS (pence)
ESP performance condition
% of EPS element of award vesting
(two thirds of award)
T
SR p
er
for
man
ce co
ndi
tio
n (one th
ird o
f awar
d)
TSR targets for 2022 awards will be expressed as an outperformance of median as per the last three
cycles.
The TSR comparator group will again be based on the constituents of the FTSE 250 Index (excluding
investment trusts). Full vesting will require 10% per year outperformance of comparator median, a
level
which remains
broadly equivalent
to
an upper
quartile level
of
diculty.
The target range for the TSR performance condition is shown in the graph below:
0%
0%
10%
25%
12.5%
50%
75%
100%
TSR % outperformance of FTSE 250 (excl. investment trust) median (per year)
TSR performance condition
% of TSR element of award vesting
(one third of award)
The committee has discretion to scale back (potentially to zero), vesting outcomes under the TSR
element
in the
event it
considers
that nancial
performance has
been
unsatisfactory and/or
the
outcome has been distorted due to the TSR for the Company or any comparator company being
considered abnormal.
Direc
tor
s
’ remuneratio
n repor
t
: other dis
closures
continued
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Direc
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’ remuneratio
n repor
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: other dis
closures
continued
Fe
es f
or th
e no
n
-
e
xec
uti
ve d
ire
c
to
rs
The committee determined that the chair’s fee for 2022 be increased by 3%, and the Board deemed
that the base fee for non-executive directors should also be increased by 3% in line with the increase
for wider employees across the Group. There will be no increases to the additional fees made in
respect of committee chairmanship or for acting as the senior independent director. Accordingly, the
annual fees from 1 January 2022 are as follows:
2022
£
2021
£
Increase
%
Chair
189,110
183,600
3%
Non-executive directors
Base fee
51,450
49,932
3%
Additional fees:
Audit committee chair
10,000
10,000
–
Health, safety and environment committee chair
10,000
10,000
–
Remuneration committee chair
10,000
10,000
–
Senior independent director
10,000
10,000
–
Non-executive directors do not receive pension contributions, private medical insurance, group
income protection insurance or life assurance and do not participate in any short-term or long-term
incentive schemes.
This report was approved by the Board and signed on its behalf by:
T
racey K
illen
Chair of the remuneration committee
24 February 2022
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Oth
er s
t
atutor
y inf
ormation
The directors have pleasure in submitting
the Group’s annual report, together with the
consolidated
nancial statements
of the
Group
for
the year
ended 31
December
2021. This
year,
the directors
have produced
the
report in
a
digital-rst
format, after
taking into
consideration
that
the majority
of our
annual
reports are
viewed
online and
that the
requests
for printed
copies
have steadily
declined to
a
minimal
number.
The strategic report is presented on the inside
front
cover to
page 85
(inclusive).
The directors’
report required under the Act comprises this
report, the directors’ and corporate governance
report and the remuneration report, together
with
explanatory notes
incorporated by
reference.
The Board has chosen, in accordance with
section
414C (11)
of the
Act,
to include
in the
strategic
report the
following information
that
it
considers to
be of
strategic
importance that
would otherwise be required to be disclosed in
the directors’ report:
an
explanation of
the steps
the
directors
have
taken to
foster the
Company’s
business
relationships with suppliers, customers and
others;
employment
policies, employee
consultation
and involvement;
disclosures
concerning employment
of
disabled persons;
additional
details of
the Group’s
approach
to
diversity
and inclusion,
and environmental,
social and governance disclosures;
disclosures concerning greenhouse gas
emissions,
energy consumption,
energy
eciency
action and
an intensity
ratio
appropriate
for our
business;
the
likely future
developments in
the
business
of
the Group;
detail
on principal
risks; and
details
of research
and development
activities.
There
were no
signicant events
since
the
balance
sheet date.
The management
report
as
required
by the
Financial Conduct
Authority’s
(FCA’s)
Disclosure Guidance
and Transparency
Rules
(Rule 4.1)
comprises the
strategic
report
which
includes the
principal risks
to
our
business.
The table below shows the location in the annual
report
of information
required to
be
disclosed
under
Rule 9.8.4
R of
the
Listing Rules
(LR):
LR
Relevant
information
Page
9.8.4 (4)
Long-term incentive
schemes
152
9.8.4 (5)
Waiver of
emoluments
by
a director
130
9.8.4 (12)
Dividend
waiver by
Employee
Benet Trust
157
9.8.4 (13)
Shareholder
waiver of
future
dividends
157
Direc
tor
s
Biographical details are shown earlier in the
directors’
and corporate
governance report.
The
directors
of the
Company who
served
during
the
year are
shown on
pages
143 and
144 in
the
remuneration report.
Further details
of
directors’ contracts, remuneration and interests
in
shares of
the Company
are
also given
in the
remuneration
report.
The rules regarding the appointment and
removal
of directors
are contained
in
the
Company’s
articles of
association (the
‘Articles’).
The Articles require each director to submit
themselves
for election
by shareholders
at
the
rst AGM
after their
appointment,
and
for
re-election every
three years
thereafter.
Notwithstanding the provisions in the Articles,
in accordance with the Code, all directors retire
and,
assuming they
wish to
continue
to stand,
oer
themselves for
election or
re-election
at the
Company’s
AGM.
Annual general me
eting
The
AGM of
the Company
will
be held
on 5
May
2022
at 10.00am.
It is
intended
that this
will be
held
as a
live event
at
the oces
of Slaughter
and
May, One
Bunhill Row,
London
EC1Y 8YY.
The
Notice of
Meeting is
available
to view
on the
Company’s
website in
the Investors
section
at
morgansindall.com.
Powers of dire
c
tors
Subject
to the
Articles, the
Act
and any
directions
given by
the Company
by
special
resolution,
the business
of the
Company
will be
managed
by the
Board who
may
exercise all
the
powers of
the Company,
whether
relating
to
the management
of the
business
or not.
In
particular,
the Board
may exercise
all
the powers
of
the Company
to borrow
money,
to mortgage
or
charge any
of its
undertakings,
property,
assets
(present and
future) and
uncalled
capital,
to issue debentures and other securities, and to
give
security for
any debt,
liability
or obligation
of
the
Company or
of any
third
party.
Direc
tor
s
’ in
demnitie
s
The
Articles entitle
the directors
of
the Company
to
be indemnied,
to the
extent
permitted by
the
Act and
any other
applicable
legislation,
out
of the
assets of
the
Company in
the event
that
they suer
any loss
or
incur any
liability in
connection
with the
execution of
their
duties
as
directors. Neither
the indemnity
nor
any
applicable insurance provides cover in the event
that
a director
(or ocer
or
company secretary
as
the case
may be)
is
proved to
have acted
fraudulently
or dishonestly.
In
addition, and
in common
with
many other
companies,
the Company
had during
the
year
and continues to have in place appropriate
directors’
and ocers’
liability insurance
in
favour
of
its directors
and other
ocers
in respect
of
certain
losses or
liability to
which
they may
be
exposed
due to
their oce.
The
Company has
also
indemnied
each
Board
director
and certain
directors
of its
Group companies
to
the extent
permitted
by law
against any
liability
incurred
in relation to acts or omissions arising in the
ordinary
course of
their duties.
The
indemnity
arrangements
are categorised
as a
qualifying
third-party
indemnity provisions
under the
Act
and
will continue
in force
for
the purposes
of the
Act
and for
the benet
of
directors (or
ocers
or
company secretary
as the
case
may be)
on
an
ongoing basis.
The Company
also
had and
continues to have in place a pension trustee
liability
insurance policy
in favour
of
the trustees
of
The Morgan
Sindall Retirement
Savings
Plan
in respect
of certain
losses
or liabilities
to
which
they may
be exposed
due
to their
oce.
This
constitutes a
‘qualifying pension
scheme
indemnity
provision’ for
the purposes
of
the Act.
15
6
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nnual Report 202
1
Str
ate
gi
c rep
or
t
Gover
nance
Financial statements
Ar
ticles of a
ssociatio
n
The
Company’s constitution,
known as
‘the
articles’,
is essentially
a contract
between
the
Company
and its
shareholders, governing
many
aspects
of the
management of
the
Company.
The
articles may
be amended
in
accordance
with
the provisions
of the
Act
by way
of special
resolution
by the
Company’s shareholders.
The
Company’s articles
were updated
during
the
year to
incorporate best
practice,
including
the
requirements of
the new
UK
Corporate
Governance
Code, and
to increase
exibility
in
conducting
hybrid (but
not exclusively
electronic)
shareholder
meetings and
they were
approved
by
shareholders at
the 2021
AGM.
No changes
to
the articles
of association
are
being proposed
at
this year’s
AGM.
Capit
al str
uc
ture
During
the year,
21,535 ordinary
shares
were
allotted
to satisfy
amounts under
the
Group’s
Savings-Related
Share Option
Plan.
As
at 31
December 2021,
the
issued share
capital
totalled 46,374,873
ordinary shares
of
5p
each. Further
details of
the
issued share
capital are shown in note 22 to the consolidated
nancial
statements.
Power to issue an
d allot shares
At
each AGM,
the Board
seeks
authorisation
from
its shareholders
to allot
shares.
The
directors
were granted
authority at
the
AGM
on
6 May
2021 to
allot
relevant securities
up to
an
aggregate nominal
amount of
£772,625.75.
That
authority will
apply until
the
conclusion of
this
year’s AGM
or close
of
business on
6 August
2022, whichever is the earlier, and a resolution
to
renew the
authority will
be
proposed at
this
year’s
AGM, as
explained further
in
the Notice
of
Meeting to
shareholders accompanying
this
annual
report.
Special resolutions will also be proposed to
renew
the directors’
power to
make
non-
pre-emptive
issues for
cash, as
explained
in
the
Notice of
Meeting to
the
shareholders
accompanying
this annual
report. The
Board
conrms
that the
Company has
not
used this
authority
in the
last three
years
and there
are no
immediate
plans to
make use
of
this provision.
Right
s and ob
ligations
at
t
aching to share
s
Subject
to applicable
statutes, shares
may
be
issued with such rights and restrictions as the
Company
may by
ordinary resolution
decide
or
(if there
is no
such
resolution or
so far
as
it
does
not make
specic provision)
as
the Board
as
dened in
the Company’s
Articles
may
decide.
Subject to
the Articles,
the
Act and
other
shareholders’ rights, unissued shares are at the
disposal
of the
Board.
Subject
to the
Act, if
at
any time
the share
capital
of the
Company is
divided
into dierent
classes
of shares,
the rights
attached
to any
class
of shares
may be
varied
with the
written
consent
of the
holders of
not
less than
75%
in
nominal value
of the
issued
shares of
that
class
(calculated excluding
any shares
held
as
treasury
shares), or
with the
sanction
of a
special
resolution passed at a separate general meeting
of
the holders
of those
shares.
The
rights conferred
upon the
holders
of any
shares
shall not,
unless otherwise
expressly
provided in the rights attaching to those shares,
be
deemed to
be varied
by
the creation
or issue
of
further shares
ranking pari
passu
with them.
V
oting
Subject
to any
other provisions
of
the articles,
every
member present
in person
or
by proxy
at
a
general meeting
has, upon
a
show of
hands,
one
vote and,
upon a
poll,
one vote
for every
share
held by
them. In
the
case of
joint holders
of
a share,
the vote
of
the senior
holder who
tenders
a vote,
whether in
person
or by
proxy,
shall
be accepted
to the
exclusion
of the
votes
of
the other
joint holders
and,
for this
purpose,
seniority
shall be
determined by
the
order
in
which the
names stand
in
the register
of
members
in respect
of the
joint
holding (the
rst-named
being the
most senior).
No
member shall
be entitled
to
vote at
any
general
meeting in
respect of
any
share held
by
them
if any
call or
other
sum then
payable by
them
in respect
of that
share
remains unpaid
or
if
a member
has been
served
with a
restriction
notice
(as dened
in the
articles)
after failure
to
provide the
Company with
information
concerning interests in those shares required to
be
provided under
the Act.
No
person has
any special
rights
of control
over
the
Company’s share
capital and
the
directors
are
not aware
of any
agreements
between
holders
of
shares which
may result
in
restrictions
on
voting rights.
Res
tric
tion on tran
sf
er of shares
There
are no
restrictions on
the
transfer of
securities
in the
Company, except:
that
certain restrictions
may, from
time
to
time,
be imposed
by laws
and
regulations (for
example,
insider trading
laws); and
pursuant
to the
Listing Rules
of
the FCA
whereby
certain employees
of the
Company
require
its approval
to deal
in
the Company’s
shares.
The
Company is
not aware
of
any agreements
between
holders of
securities that
may
result in
restrictions
on the
transfer of
securities
or voting
rights.
Purchase of own share
s
At
the AGM
on 6
May
2021, a
resolution was
passed
giving the
directors authority
to
make
market
purchases of
Company shares
up
to
4,635,754
shares of
5p each
at
a maximum
price
based on
the market
price
of a
share at
the
relevant time,
as set
out
in the
resolution.
No
purchases of
shares were
made
during the
year
pursuant to
this authority.
The
authority
expires
on the
date of
this
year’s AGM
or close
of
business on
6 August
2022,
whichever is
earlier.
A resolution
to renew
this
authority will
be
proposed at
this year’s
AGM,
as explained
further
in the
Notice of
Meeting
to shareholders
accompanying
this annual
report.
Other s
tatu
tor
y information
continued
157
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Mo
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Annual Repor
t 202
1
Str
ate
gi
c rep
or
t
Gover
nance
Financial statements
Div
idend
s and dis
tribu
tions
The
Company may,
by ordinary
resolution,
from time
to time,
declare
dividends not
exceeding the
amount
recommended by
the Board.
Subject
to the
Act, the
Board
may pay
interim dividends,
and
also
any xed
rate dividend,
whenever
the nancial
position of
the
Company, in
the opinion
of
the
Board,
justies its
payment. An
interim
dividend of
30p per
share
was paid
on 26
October
2021
and
the
directors recommend
a nal
dividend
of 62p,
making a
total
for the
year of
92p.
Further
details
can
be found
in note
7
to the
consolidated nancial
statements
on page
190. Subject
to
shareholder
approval
at the
2022 AGM,
the
nal dividend
will be
paid
on 18
May 2022
to
shareholders
on the
register
at close
of business
on
29 April
2022.
The
Board may
withhold payment
of
all or
any part
of
any dividends
or other
monies
payable
in
respect
of the
Company’s shares
from
a person
with a
0.25%
interest if
such a
person
has
been
served
with a
restriction notice
(as
dened in
the articles)
after
failure to
provide the
Company
with
information
concerning interests
in those
shares
required to
be provided
under
the Act.
Other than
as
referred to
under ‘Morgan
Sindall
Group Employee
Benet Trust’
below,
during the
year there
were
no
arrangements under
which a
shareholder
has waived
or agreed
to
waive any
dividends nor
any
agreement
by a
shareholder to
waive
future dividends.
Morgan
Sindall
Group
Employee
Bene
t
T
ru
s
t
Zedra
Trust Company
(Guernsey) Limited,
as
Trustee of
the Trust,
holds
shares on
trust for
the
benet
of
our employees
and former
employees
of the
Group and
their
dependants that
have not
been
exercised
or vested.
The voting
rights
in relation
to these
shares
may be
exercised by
the
Trustee
and
there
are no
restrictions on
the
exercise of
the voting
of,
or the
acceptance of
any
oer
relating to,
those
shares. The
terms of
the
Trust provide
that any
dividends
payable on
the shares
held
by
the
Trust
are waived
unless to
the
extent otherwise
directed by
the
Company from
time to
time.
The
Trust
waived
its right
to the
2020
nal and
2021 interim
dividend
paid during
2021 and
abstained
from
voting
at the
AGM. Details
of
the shares
so held
may
be found
in the
consolidated
nancial
statements
on
page 179.
Subs
tantial share
holding
s
As
at 31
December 2021
the
following information
has been
disclosed
to the
Company under
the
FCA’s
Disclosure Guidance
and Transparency
Rules
(DTR 5),
in respect
of
notiable interests
in the
voting
rights in
the Company’s
issued
share capital:
Total voting
rights
1
% of
total
voting rights
2
Direct
or indirect
holding
Name of holder
abrdn plc
4,635,152
9.99
Indirect
Numis
Nominees (Client)
Limited <Morgan02>
and
<Morgan03>
3
3,479,537
7.51
Direct
BlackRock,
Inc
2,954,899
6.36
Indirect
Ameriprise
Financial, Inc
2,627,969
5.93
Indirect
J.P.
Morgan Asset
Management Holdings
Inc
2,310,035
5.17
Indirect
1
Total voting
rights
attaching
to the
ordinary
shares of
the
Company
at the
time
of disclosure
to
the
Company.
2
Percentage of
total
voting
rights at
the
date of
disclosure
to
the Company.
3
John Morgan’s
and his
connected
person’s
shareholding.
No
other notications
have been
received
between 31
December 2021
and
24 February
2022.
Related par
t
y trans
ac
tion
s
During
the year,
the Board
reviewed
all related
party transactions
and,
save as
disclosed in
note
24,
there
were no
signicant related
party
transactions in
the year
to
31 December
2021.
Change of control
The
Group’s banking
facilities, which
are
described on
page 39
in
the nancial
review, require
repayment
in the
event of
a
change of
control. The
Group’s
facilities for
surety bonding
require
provision
of cash
collateral for
outstanding
bonds upon
a change
of
control. In
addition, the
Company’s
employee share
incentive schemes
contain
provisions whereby,
upon a
change
of control,
outstanding
options and
awards would
vest
and become
exercisable by
the
relevant employees,
subject
to the
rules of
the
relevant schemes.
There
are no
agreements between
the
Company and
its directors
or
employees providing
for
compensation
for loss
of oce
or
employment in
the event
of
a takeover
bid.
Other s
tatu
tor
y information
continued
15
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Str
ate
gi
c rep
or
t
Gover
nance
Financial statements
Financial ins
trument
s and ri
sk
s
The
nancial risk
management objectives
and
policies
can be
found in
the
principal risks
on
pages
64 and
65. Information
about
the use
of
nancial instruments
by the
Company
and
its subsidiaries and details about the Group’s
exposure
to credit,
liquidity and
market
risks is
given
in note
25 to
the
consolidated nancial
statements.
Political contributions
No
contributions were
made to
any
political
parties
during the
current or
preceding
year. As
a
precautionary measure,
shareholder approval
is
being sought
at the
forthcoming
AGM for
the
Company and
its subsidiaries
to
make
donations
and/or incur
expenditure, which
may
be
construed as
political by
the
wide denition
of
that term
included in
the
relevant legislation.
Further
details are
provided in
the
Notice of
Meeting
to shareholders
accompanying this
report.
Disclos
ure of information
to the ex
ternal au
ditor
The
directors who
held oce
at
the date
of
approval of
the directors’
and
corporate
governance
report conrm
that, so
far
as they
are each aware:
there
is no
relevant audit
information
of which
the
Company’s auditor
is unaware;
and
each
director has
taken all
reasonable
steps
that he
or she
ought
to have
taken
as
a director
in order
to
ascertain any
relevant
audit information
and to
ensure
that
the Company’s
auditor is
aware
of such
information.
This
conrmation is
given and
should
be
interpreted
in accordance
with the
provisions
of
section
418 of
the Act.
Direc
tor
s
’ re
spo
nsibiliti
es
The
directors are
responsible for
preparing
the
annual
report and
the nancial
statements
in
accordance
with applicable
law and
regulations.
Company
law requires
the directors
to
prepare
nancial
statements for
each nancial
year.
Under
that law
the directors
are
required to
prepare
the Group
nancial statements
in
accordance
with UK
adopted International
Accounting
Standards (UK
IAS) and
have
elected
to
prepare the
Parent Company
nancial
statements
in accordance
with United
Kingdom
Generally
Accepted Accounting
Practice (United
Kingdom
Accounting Standards
and applicable
law),
including FRS
101 ‘Reduced
Disclosure
Framework’.
Under company
law, the
directors
must
not approve
the accounts
unless
they are
satised
that they
give a
true
and fair
view of
the
state
of aairs
of the
Company
and of
the prot
or
loss of
the Company
for
that period.
In
preparing the
Parent Company
nancial
statements, the directors are required to:
select suitable accounting policies and then
apply
them consistently;
make
judgements and
accounting estimates
that are reasonable and prudent;
state
whether applicable
UK Accounting
Standards
have been
followed, subject
to
any
material departures disclosed and explained
in
the nancial
statements; and
prepare
the nancial
statements on
the
going
concern basis unless it is inappropriate to
presume
that the
Company will
continue
in
business.
In
preparing the
Group nancial
statements,
International
Accounting Standard
1 requires
that directors:
properly
select and
apply accounting
policies;
present
information, including
accounting
policies, in a manner that provides relevant,
reliable, comparable and understandable
information;
provide additional disclosures when
compliance
with the
specic requirements
in
IFRSs are
insucient to
enable
users
to
understand the
impact of
particular
transactions, other events and conditions
on
the entity’s
nancial position
and
nancial
performance;
and
make
an assessment
of the
Company’s
ability
to
continue as
a going
concern.
The
directors are
responsible for
keeping
adequate
accounting records
that are
sucient
to
show and
explain the
Company’s
transactions
and
disclose with
reasonable accuracy
at
any
time
the nancial
position of
the
Company
and
enable them
to ensure
that
the nancial
statements
comply with
the Act.
They
are also
responsible
for safeguarding
the assets
of
the
Company
and therefore
taking reasonable
steps
for
the prevention
and detection
of
fraud and
other
irregularities.
The
directors are
responsible for
the
maintenance
and integrity
of the
corporate
and
nancial
information included
on the
Company’s
website.
Legislation in
the United
Kingdom
governing
the preparation
and dissemination
of
nancial
statements may
dier from
legislation
in
other jurisdictions.
Other s
tatu
tor
y information
continued
Respo
nsibilit
y st
atem
ent
We,
the directors,
conrm that
to
the
best
of our
knowledge:
the
nancial statements,
prepared in
accordance
with the
relevant nancial
reporting
framework, give
a true
and
fair
view of
the assets,
liabilities,
nancial
position
and prot
or loss
of
the Company
and
the undertakings
included in
the
consolidation
taken as
a whole;
the
strategic report
includes a
fair
review
of
the development
and performance
of
the business
and the
position
of the
Company
and the
undertakings included
in
the consolidation
taken as
a
whole,
together
with a
description of
the
principal
risks and
uncertainties
that
they face;
and
the
annual report
and nancial
statements,
taken as
a whole,
are
fair,
balanced and understandable and
provide
the information
necessary
for
shareholders to
assess the
Company’s
performance, business
model
and strategy.
The
Directors’ report
was approved
by
the
Board
and signed
on its
behalf
by:
John Morgan
Chief
Executive
24
February 2022
Independen
t auditor
’s repor
t
1
60
Consolidat
ed
nancial
s
t
atements
1
70
 
Com
pany
nancial
s
t
atement
s
206
Shareholder
information
2
1
5
Ap
pendix
–
c
arbo
n
emissions
back
ground
and
terminolog
y
21
7
Financial statements
Str
ate
gi
c repor
t
Gover
nance
Financial stateme
nts
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A
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Str
ate
gi
c repor
t
Gover
nance
Financial stateme
nts
Independen
t audit
or
’s repor
t
I
n
d
ep
en
d
en
t
a
u
d
i
t
or
’
s
r
ep
or
t
to th
e mem
be
r
s of Mo
rg
an Si
nda
ll Gr
oup p
lc
Opinion
In our opinion:
Morgan
Sindall Group
plc’s (‘the
Group’)
nancial statements
and Parent
Company
nancial
statements
(the ‘nancial
statements’) give
a
true and
fair view
of
the state
of the
Group’s
and
of
the
Parent Company’s
aairs as
at
31 December
2021 and
of
the Group’s
prot for
the
year
then
ended;
the
Group nancial
statements have
been
properly prepared
in accordance
with
UK adopted
international
accounting standards;
the
Parent Company
nancial statements
have
been properly
prepared in
accordance
with United
Kingdom
Generally Accepted
Accounting Practice;
and
the
nancial statements
have been
prepared
in accordance
with the
requirements
of the
Companies
Act 2006.
We
have audited
the nancial
statements
of Morgan
Sindall Group
plc
(the ‘Parent
Company’) and
its
subsidiaries
(the ‘Group’)
for the
year
ended 31
December 2021
which
comprise:
Group
Parent
Company
Consolidated
statement of
nancial position
as
at
31December
2021
Statement
of nancial
position as
at
31December
2021
Consolidated
income statement
for the
year
then
ended
Statement
of changes
in equity
for
the year
then
ended
Consolidated
statement of
comprehensive
income
for the
year then
ended
Related
notes 1
to 3
to
the nancial
statements
including
a summary
of signicant
accounting
policies
Consolidated
statement of
changes in
equity
for
the
year then
ended
Consolidated
cash ow
statement for
the
year
then ended
Related
notes 1
to 26
to
the nancial
statements,
including
a summary
of signicant
accounting
policies
The
nancial reporting
framework that
has
been applied
in the
preparation
of the
Group nancial
statements
is applicable
law and
UK-adopted
international accounting
standards. The
nancial
reporting
framework that
has been
applied
in the
preparation of
the
Parent Company
nancial
statements
is applicable
law and
United
Kingdom Accounting
Standards, including
FRS
101, ‘Reduced
Disclosure
Framework’, (United
Kingdom Generally
Accepted
Accounting Practice).
Basis for opinion
We
conducted our
audit in
accordance
with International
Standards on
Auditing
(UK) (ISAs
(UK)) and
applicable
law. Our
responsibilities under
those
standards are
further described
in
the auditor’s
responsibilities
for the
audit of
the
nancial statements
section of
our
report. We
believe that
the
audit
evidence
we have
obtained is
sucient
and appropriate
to provide
a
basis for
our opinion.
Independence
We
are independent
of the
Group
and Parent
in accordance
with
the ethical
requirements that
are
relevant to
our audit
of
the nancial
statements in
the
UK, including
the FRC’s
Ethical
Standard
as
applied to
listed public
interest
entities, and
we have
fullled
our other
ethical responsibilities
in
accordance
with these
requirements.
The
non-audit services
prohibited by
the
FRC’s Ethical
Standard were
not
provided to
the Group
or
the
Parent
Company and
we remain
independent
of the
Group and
the
Parent Company
in conducting
the
audit.
Conclusions relating t
o going c
oncern
In
auditing the
nancial statements,
we
have concluded
that the
directors’
use of
the going
concern
basis
of accounting
in the
preparation
of the
nancial statements
is
appropriate. Our
evaluation of
the
directors’ assessment
of the
Group
and Parent
Company’s ability
to
continue to
adopt the
going
concern
basis of
accounting included:
In
conjunction with
our walkthrough
of
the Group’s
nancial statement
close
process, we
conrmed
our
understanding of
management’s going
concern
assessment process
and also
engaged
with
management
early to
ensure key
factors
were considered
in their
assessment,
including factors
which
we determined
from our
own
independent risk
assessment.
161
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Str
ate
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Gover
nance
Financial stateme
nts
We
obtained management’s
Board-approved forecast
cash
ows and
covenant calculation
which
covers
the period
to 28
February
2023. As
part of
this
assessment, management
have modelled
ve
downside scenarios.
Scenarios one
and
two assume
a reduction
in
revenues and
margin
respectively,
in the
construction businesses.
Scenario
three assumes
a deterioration
in
working
capital
in the
construction businesses
and
scenario four
assumes project
delays
and cost
increases
in
the regeneration
businesses. Lastly,
scenario
ve is
a severe
downside
scenario and
models the
combined
impact of
scenarios one
to
four.
We
assessed the
appropriateness of
the
scenarios modelled
by management
which
included
assessing
how these
compare with
principal
risks and
uncertainties of
the
Group.
We
assessed the
reasonableness of
the
cash ow
forecast by
analysing
management’s historical
forecasting
accuracy, and
evaluating the
key
assumptions used
in the
forecast.
This included
considering
the forecasts
on a
division-by-division
basis and
assessing whether
key
factors specic
to
each of
the divisions,
such
as Covid,
the economic
environment
and market/sector
trends, were
considered
in
management’s
assessment.
We
also
assessed
the
completeness
and
appropriateness
of
the scenarios
modelled by
management
which included
assessing the
relevance
to each
division
and
how they
compare with
principal
risks of
the Group.
We
considered management’s
assessment
of
the impact
of climate
change
on the
Group’s cash
ow
forecasts.
We
have considered
the methodology
used
to prepare
the forecast
and
covenant calculations.
We
also
tested the
clerical accuracy
and
logical integrity
of the
model
used to
prepare the
Group’s
going
concern
assessment.
We
considered whether
the Group’s
forecasts
in the
going concern
assessment
were consistent
with
other forecasts
used by
the
Group in
its accounting
estimates,
including the
assessment of
goodwill
impairment.
We
performed further
sensitivity analysis
and
our own
reverse stress
testing
in order
to identify
what
scenarios (for
example, the
extent
operating prot
would need
to
deteriorate) could
lead
to
the Group
utilising all
liquidity
and/or breaching
the nancial
loan
covenants during
the going
concern
period, and
whether these
scenarios
were plausible.
Our
analysis also
considered the
mitigating
actions that
management could
undertake
in an
extreme
downside scenario
and whether
these
were achievable
and in
control
of management.
We
also conrmed
the continued
availability
of credit
facilities through
the
going concern
period and
reviewed
their underlying
terms, including
covenants,
by examination
of executed
documentation.
We
considered whether
the going
concern
disclosures included
in the
annual
report were
appropriate
and in
conformity with
applicable
reporting standards.
Our key
obser
vation
s
The
results from
both management’s
evaluation
and our
independent sensitivity
analysis
and
reverse
stress testing
indicates that
in
order to
breach its
covenants
and exhaust
its available
funding
throughout
the going
concern period,
the
Group’s operating
prot would
need
to deteriorate
to a
loss,
which
is signicantly
worse than
the
nancial eect
of the
disruption
caused by
the Covid
pandemic
during
2020.
As
at 31
December 2021,
the
Group has
a secured
order
book of
£8.6bn, of
which
£2.9bn
relates to
the
12 months
ending 31
December
2022, and
it has
a
net cash
balance of
£358.0m
(which
includes
£55.7m
that relates
to the
Group’s
share of
cash held
with
jointly controlled
operations). The
Group
also
has substantial
borrowing facilities
available
to it
during the
going
concern period.
The undrawn
committed
facilities available
at 31
December
2021 amounted
to £180m.
These
comprise a
£165m
facility
expiring in
October 2024
and
a £15m
facility expiring
in
March 2024.
Based
on the
work we
have
performed, we
have not
identied
any material
uncertainties relating
to
events or
conditions that,
individually
or collectively,
may cast
signicant
doubt on
the Group
and
Parent
Company’s ability
to continue
as
a going
concern for
the
period to
28 February
2023.
In
relation to
the Group
and
Parent Company’s
reporting on
how
they have
applied the
UK
Corporate
Governance
Code, we
have nothing
material
to add
or draw
attention
to in
relation to
the
directors’
statement
in the
nancial statements
about
whether the
directors considered
it
appropriate to
adopt
the
going concern
basis of
accounting.
Our
responsibilities and
the responsibilities
of
the directors
with respect
to
going concern
are
described
in the
relevant sections
of
this report.
However, because
not
all future
events or
conditions
can
be predicted,
this statement
is
not a
guarantee as
to
the Group’s
ability to
continue
as
a going
concern.
Independent
audito
r
’s report
continued
162
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Str
ate
gi
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t
Gover
nance
Financial stateme
nts
Over
v
iew of our audi
t approach
Audit scope
We
performed
an
audit
of
the complete
nancial
information
of three
components,
audit
procedures
on
specic
balances
for
nine
components,
and
specied
procedures
on
one
further
component.
These 13
components
accounted
for 98%
of
prot
before
tax
and
100%
of
revenue.
Key audit matters
Contract
revenue
and
margin
recognition (including
valuation
of
contract
assets,
unagreed
income
and
contract
liabilities)
Recoverability and
valuation
of
inventory balances
held
(Lovell
Partnerships
Limited
only)
Impairment of
goodwill
and
investment in
subsidiary
undertakings
(Parent
Company
only)
Materiality
Overall
Group materiality
of
£6m
which represents
5%
of
prot before
tax.
An over
v
iew of the scop
e of the Parent Company and Group audit
s
T
ailorin
g the scope
Our
assessment of
audit risk,
our
evaluation of
materiality and
our
allocation of
performance
materiality
determine our
audit scope
for
each entity
within the
Group.
Taken together,
this enables
us
to
form an
opinion on
the
consolidated nancial
statements. We
take
into account
size, risk
prole,
the
eectiveness
of Group-wide
controls and
changes
in the
business environment
when
assessing the
level
of work
to be
performed
at each
entity.
In
assessing the
risk of
material
misstatement to
the Group
nancial
statements, and
to ensure
we
had
adequate quantitative
coverage of
signicant
accounts in
the nancial
statements,
we selected
13
entities
across all
ve divisions
within
the Group.
Of
the 13
components selected,
we
performed an
audit of
the
complete nancial
information of
three
components
(‘full scope
components’) which
were
selected based
on their
size
or risk
characteristics.
These
covered the
majority of
the
Construction &
Infrastructure, Fit
Out
and Partnership
Housing
divisions.
For nine
‘specic scope
components’,
we performed
audit procedures
on
specic accounts
within
that component
that we
considered
had the
potential for
the
greatest impact
on the
signicant
accounts
in the
nancial statements
either
because of
the size
of
these accounts
or their
risk
prole.
These
included the
Urban Regeneration
and
Property Services
divisions, as
well
as smaller
subsidiaries
of
the other
divisions. For
the
remaining one
component (a
joint
venture) we
performed specied
procedures
over the
Group’s investment
in
this entity.
The
reporting components
where we
performed
audit procedures
accounted for
98%
of the
Group’s
prot
before tax
and 100%
of
the Group’s
revenue. The
full
scope components
contributed 76%
of
the Group’s
prot before
tax
and 82%
of the
Group’s
revenue. The
specic scope
components
contributed
21% of
the Group’s
prot
before tax
and the
remaining
18% of
the Group’s
revenue.
The
audit scope
of these
components
may not
have included
testing
of all
signicant accounts
of
the
component
but will
have contributed
to
the coverage
of signicant
accounts
tested for
the Group.
The
component
for which
we performed
specied
procedures contributed
1% of
the
Group’s prot
before
tax.
Of
the remaining
components that
together
represent 2%
of the
Group’s
prot before
tax, none
contained
individually material
balances. For
these
components, we
performed other
procedures,
including
analytical review
to respond
to
any potential
risks of
material
misstatement to
the Group
nancial
statements. The
charts below
illustrate
the coverage
obtained from
the
work performed
by
our
audit teams.
Profit
before tax
(%)
Full scope components
Specific
scope components
Specified
procedures
Other
procedures
76
21
1
2
Revenue (%)
Full scope components
Specific
scope components
82
18
Independent
audito
r
’s report
continued
16
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Financial stateme
nts
Involvement with component teams
In
establishing our
overall approach
to
the Group
audit, we
determined
the type
of work
that
needed
to
be undertaken
at each
of
the components
by us,
as
the primary
audit engagement
team,
or
by
component
auditors from
other EY
UK
oces or
global network
rms
operating under
our instruction.
Where
the work
was performed
by
teams from
other EY
oces,
we worked
closely with
them
and
determined
the appropriate
level of
involvement
to enable
us to
determine
that sucient
audit
evidence
had been
obtained as
a
basis for
our opinion
on
the Group
as a
whole.
The
primary audit
team visited
all
of the
Group’s ve
divisions
over the
course of
the
audit
to discuss
the
audit approach
with component
teams
and any
issues arising
from
their work,
meet with
local
management,
and review
relevant audit
working
papers on
risk areas.
The
primary team
also
participated
in interim
and year-end
audit
close meetings
for all
divisions.
These visits
and meetings
were
supplemented by
frequent video
calls
between the
primary team
and
component teams
throughout
all stages
of the
audit,
and the
primary team
reviewed
relevant working
papers and
were
responsible
for the
scope and
direction
of the
audit process.
This,
together with
the procedures
performed
at Group
level, gave
us
appropriate evidence
for our
opinion
on the
Group nancial
statements.
Climate change
There
has been
increasing interest
from
stakeholders as
to how
climate
change will
impact the
Group.
The Group
has determined
that
the most
signicant future
impacts
from climate
change on
its
operations will
be from
severe
weather events,
and the
carbon
emissions and
waste it
produces.
These
matters are
explained on
pages
71 to
79 in
the
required Task
Force for
Climate-related
Financial
Disclosures
and on
page 61
in
the principal
risks and
uncertainties,
which form
part of
the
‘other
information’
rather than
the audited
nancial
statements. Our
procedures on
these
disclosures
therefore
consisted solely
of considering
whether
they are
materially inconsistent
with
the nancial
statements
or our
knowledge obtained
in
the course
of the
audit
or otherwise
appear to
be
materially
misstated.
As
explained in
the basis
of
preparation section
of the
nancial
statements, governmental
and societal
responses
to climate
change risks
are
still developing,
and are
interdependent
upon each
other,
and
consequently nancial
statements cannot
capture
all possible
future outcomes
as
these are
not
yet
known. The
degree of
certainty
of these
changes may
also
mean that
they cannot
be
taken
into
account
when determining
asset and
liability
valuations and
the timing
of
future cash
ows under
the
requirements
of UK-adopted
international accounting
standards.
Our
audit eort
in considering
climate
change was
focused on
ensuring
that the
eects of
material
climate
risks disclosed
on pages
61
and 74
have been
appropriately
considered in
asset values
and
associated
disclosures where
values are
determined
through the
modelling of
future
cash ows
which
are
used to
assess the
Group’s
ability to
continue to
operate
as a
going concern
and,
the
impairment
of
goodwill. Details
of our
procedures
and ndings
on the
goodwill
impairment assessment
are
included
in our
key audit
matters
below. We
also challenged
the
directors’ considerations
of climate
change
in their
assessment of
going
concern and
viability and
associated
disclosures.
Whilst
the Group
has stated
its
commitment to
achieve net
zero
emissions by
2030, the
Group
is
currently
unable to
determine the
full
future economic
impact on
their
business model,
operational
plans
and customers
to achieve
this
and therefore
as set
out
above the
potential impacts
are
not
fully
incorporated
in these
nancial statements.
Key audit mat
ter
s
Key
audit matters
are those
matters
that, in
our professional
judgment,
were of
most signicance
in
our
audit of
the nancial
statements
of the
current period
and
include the
most signicant
assessed
risks
of material
misstatement (whether
or
not due
to fraud)
that
we identied.
These matters
included
those
which had
the greatest
eect
on: the
overall audit
strategy;
the allocation
of resources
in
the
audit;
and directing
the eorts
of
the engagement
team. These
matters
were addressed
in the
context
of
our audit
of the
nancial
statements as
a whole,
and
in our
opinion thereon,
and
we
do not
provide
a
separate opinion
on these
matters.
Independent
audito
r
’s report
continued
16
4
_
Mor
g
an S
in
da
ll G
ro
up p
l
c
A
nn
ua
l Rep
o
r
t 2021
Str
ate
gi
c repor
t
Gover
nance
Financial stateme
nts
Risk
Our response
to the risk
Key observations
communicated
to the
audit committee
Contract revenue and margin recognition
(including valuation of contract assets,
unagreed income and contract liabilities)
Revenue:
£3,212.8m
Operating
prot: £129.8m
Contract
assets: £232.6m
Contract
liabilities: £78.5m
Refer to the audit committee report (page 118);
accounting policies (pages 176 and 177); and notes
1
and 15
of the
consolidated
nancial statements
(pages 183, 196 and 197).
The
Group recognises
revenue over
time
in the
Construction
& Infrastructure,
Fit Out,
Property
Services,
Urban Regeneration
and Partnership
Housing
(in respect
of pre-let,
forward-sold
developments)
divisions. The
Group also
recognises
revenue under
the point
in
time
method
in the
Partnership Housing
and
Urban
Regeneration
divisions.
There
is a
risk that
revenue
recognised over
time
is materially
misstated as
there
is signicant
judgement
involved in
determining the
inputs
that
drive
contract revenue
and margin
recognition
(e.g.
forecast revenue,
recoverability of
unagreed
income,
and forecast
costs to
complete).
Therefore
these
inputs could
be susceptible
to
management
bias
or manipulation.
There
is also
a risk
that
revenue recognised
under
the point-in-time
method is
recorded
in
the
incorrect period
either due
to
cut o
error
or
management bias
resulting in
a
material
misstatement.
Contract revenue and margin recognised over time
We
worked together
with our
component
teams to
perform a
risk
assessment of
the contract
population
and
selected a
sample
of higher-risk
contracts (based
on
value and/or
complexity) across
the
Group, and
obtained an
understanding
of
the:
(1) contract
terms; (2)
key
operational or
commercial issues;
(3)
judgements impacting
the contract
position;
and
(4)
contract
revenue and
margin recognised.
Factors
we considered
when determining
higher-risk
contracts to
select included:
(1)
the size
of the
contract;
(2)
contracts
with
signicant unagreed
income amounts;
(3)
low margin
and loss-making
contracts
or contracts
with a
signicant
deterioration
in margin;
and (4)
stage
of completion.
Our audit
approach
for higher-risk
contracts has
been
outlined
below.
Performed walkthroughs
of
the
signicant classes
of
revenue
transactions
recognised
over
time
and
assessed
the
design
eectiveness
of
key
controls;
Discussed management’s
contract
risk
tracker with
divisional
management
and
the
Group
commercial
director;
Performed site
visits
at
a selection
of
higher-risk
contracts
in
order
to
corroborate
the
contract
positions
in
person
through
review
of
the
operations
and
discussions
with
contract
personnel
on
site
to
form
an independent
view
on
the judgements
taken;
Detailed review
of
the
signed contract
agreements
to
understand
the
commercial
terms
and
review
of
any
legal
correspondence
or
expert
advice
that
has
been
obtained
to
support
any
contract
positions
recorded;
Assessed the
appropriateness
of
supporting evidence
and
the
requirements
of
IFRS
15
and
the
Group’s
accounting
policies
(e.g.
where
contracts
include
additional
entitlements
for
variations
and
claims,
both
for
and
against the
Group);
Assessed the
appropriateness
of
the accruals
at
year
end
and
ensure
these
have
been
incurred
and
not
materially
overstated/
understated;
Challenged the
level
of
unagreed income
or
contract
assets
and
the
adequacy
of
the
evidence
(e.g.
future
certications
and
cash
receipts)
to
assess
their
recognition
and
recoverability;
Reviewed contract
asset
balances
and challenged
management
on
the
recovery
of
balances
at
the
year
end
which
have
not
been
provided
for,
including
consideration
of
counterparty
risk;
Assessed the
reasonableness
of
calculations of
estimated
costs
to
complete,
which
included
understanding
the
risks/
outstanding
works
on
the
contract,
the
impact
of
any
delays
or
other
delivery
issues and
the
related
provisions for
cost
escalations
that
have
been
recognised;
Assessed the
appropriateness
of
cost allocations
across
contracts
including
evaluation
of
whether
there
has
been
any
manipulation
of
costs
between
prot-making
and
loss-making
contracts;
Challenged the
rationale
for
material provisions
held
at
a
contract/division
level
and
concluded
if
these
are
appropriate;
Challenged the
level
of
onerous contract
provisions
recognised
for
loss-making
contracts
as
well
as
any
cost
contingencies
on
the
remaining
contracts
at
year
end;
Assessed the
correlation
between
revenue, receivables
and
cash
balances
using
data
analytical
tools
or
through
other
substantive
test
of
detail
procedures;
and
Reviewed material
manual
journals
recorded to
assess
whether
these
have
been
properly
authorised,
are
appropriately
substantiated
and
are
for
a
valid
business
purpose.
Based
on our
audit
procedures
performed,
we
concluded that
the
recognition
of revenue
(including
the valuation
of
contract
assets, unagreed
income
and contract
liabilities)
was appropriate,
and
the key
judgements
made
by management
are
consistent
with the
Group’s
accounting
policies.
The presentation and
disclosure
of revenue,
contract
assets and
contract
liabilities
are
materially correct
and
appropriate.
Independent
audito
r
’s report
continued
16
5
_
Mor
ga
n Si
nd
al
l Gr
ou
p p
lc
A
n
nu
al Re
po
r
t 2021
Str
ate
gi
c repor
t
Gover
nance
Financial stateme
nts
Risk
Our response
to the risk
Key observations
communicated
to the
audit committee
Contract revenue and margin recognition
(including valuation of contract assets,
unagreed income and contract liabilities)
continued
Contract revenue and margin recognised under the point in time method
Performed walkthroughs
of
the
revenue recognition
process
under
the
point
in
time
method
and
assessed
the
design
eectiveness
of
key
controls;
Reviewed signed
contract
agreements
to understand
the
commercial
terms
and
ensure
the
correct
revenue
recognition
method
is
applied
in
line
with
the
requirements
of
IFRS
15
and
the
Group’s accounting
policies;
Tested a
sample
of
transactions by
agreeing
to
contracts,
bank
receipts
and
obtaining
evidence
of
fullment
of
performance
obligations;
Performed cut-o
testing
to
assess whether
revenue
recorded
either
side
of
the
year
end
is
included
in
the
correct
accounting
period; and
Reviewed material
manual
journals
recorded in
relation
to
revenue
recognised
under
the
point
in
time
method
to
assess
whether
these
have
been
properly
authorised,
are
appropriately
substantiated
and
are
for
a
valid business
purpose.
We
performed full
and specic
scope
audit procedures
over 100%
of
the Group’s
revenue.
Recoverability and valuation of inventory
balances held (Lovell Partnerships Limited
only)
Inventory
in Lovell
Partnerships Limited:
£235.3m
Refer to the accounting policies (page 179); and
note
14 of
the consolidated
nancial
statements
(page 196).
Lovell
Partnerships Limited
works in
partnerships
with
local authorities
and housing
associations.
Activities
include mixed-tenure
developments,
building
and developing
homes for
open
market
sale
and for
social/aordable rent,
design
and
build
house contracting
and planned
maintenance
and
refurbishment.
Inventory
is held
at the
lower
of cost
and net
realisable
value. Therefore
there is
a
high degree
of
management judgement
required to
determine
the
valuation of
inventory pertaining
to
land and
housing
developments under
construction in
the
Partnership
Housing division.
Performed procedures
to
assess
the ownership
of
the
inventories
held
(e.g.
review
of
sale
purchase
agreements,
and
land
title
deeds)
in
order
to
evaluate
whether
Lovell
Partnerships
Limited
has
appropriate
title
over
the inventory
held;
Performed a
walkthrough
of
the impairment
analysis
and
calculation
process
and
evaluated
how
management
look
for
indicators
of
inventory
impairment;
Reviewed a
sample
of
planning permissions
obtained
or
submitted
as
well
as
environmental
assessment
reports
(where
relevant)
to
assess
their
impact
on
the
inventory
on
hand
at
year
end;
Assessed the
nature
of
costs capitalised
in
the
year
end
inventory
balance
by
vouching
a
sample
of
these
back
to
supporting
documentary
evidence,
ensuring
these
meet
the
criteria
for
capitalisation
and
have
been
charged
to the
correct
project;
Challenged the
costs
to
complete by
agreeing
a
sample
of
items
to
supporting
documentation
(e.g.
subcontractor
quotes,
actual
invoices
issued,
contracts
executed,
management
reports)
and
through
enquiry
of
the
division’s
commercial team;
Recalculated the
prot
recognised
for the
year
based
on
forecast
revenue
and
costs;
Compared the
forecast
sale
prices and
price
per
sq
ft
of
the
unsold
units
in
management’s
forecast
to
the
range
of
prices
achieved
on
the
units
completed
and
exchanged,
or
compared
to
prices
to
independent
sources; and
Inspected site
plans
and
reviewed a
sample
of
post
year-end
sales
(where
appropriate)
to
evaluate
management’s
forecast
sales
prices.
Based
on our
audit
procedures,
we have
concluded
that the
inventory
balances
are not
materially
misstated.
Independent
audito
r
’s report
continued
16
6
_
Mor
ga
n Si
nd
al
l G
ro
up p
lc
A
n
nu
al Re
p
or
t 2021
Str
ate
gi
c repor
t
Gover
nance
Financial stateme
nts
Risk
Our response
to the risk
Key observations
communicated
to the
audit committee
Impairment of goodwill and investment in
subsidiary undertakings (Parent only)
Goodwill:
£217.7m
Parent
Company’s investment
in subsidiary
undertakings:
£459.6m
Refer to the audit committee report (page 118);
accounting policies (pages 178 and 179); note 9 of the
consolidated
nancial statements
(page 191)
and
note
2
of the
Company nancial
statements
(page 209).
Intangible
assets with
an indenite
useful
life
must
be evaluated
for impairment
annually,
or
whenever
indicators of
impairment are
noted
per
IAS
36.
Due
to the
degree of
estimation
involved in
calculating
the expected
future cash
ows
from
Cash
Generating
Units
(CGUs)
and
determining
the
appropriate
long-term growth
rates and
discount
rates
specic to
each CGU,
we
have identied
a
signicant
risk regarding
the assessment
of
any
impairment
against the
goodwill carrying
values,
as
well as
the identication
of
any indicators
of
impairment.
There
is also
a risk
that
the recoverable
amount
of
the investment
in subsidiary
undertakings
may
be
less than
the investment
balance
on the
Parent
Company’s
statement of
nancial position.
Performed a
walkthrough
of
the impairment
analysis
and
calculation
process
and
evaluated
the
identication
of
CGUs
performed
by
management;
Assessed and
challenged
the
key inputs
of
the
forecast
cash
ows
at
the
CGU
level.
As
part
of
these
procedures
we:
–
challenged
the
discount
rate
used
by
obtaining
the
underlying
data
used
in
the
calculation and
substantiating
this
against
reputable
independent
assessments
with
the
support
of
our
EY
valuation
specialists;
–
validated
the
growth
rates
assumed
by
comparing
them
to
economic
and
industry
forecasts
and using
the
support
of our
EY
valuation
specialists,
where
required;
and
–
challenged
management
on
the
achievability of
the
cash
ow
forecasts
and
assess
the
projected nancial
information
against
results
achieved
to
date
and
other
market
data
to
assess
the
robustness
of
management’s forecasting
process.
This
included
considering
the
impact
of
climate
change
on
future
cash
ows.
Analysed the
historical
forecasting
accuracy (budgets
to
actual
results)
to
determine
whether
forecast
cash
ows
are
reliable
based
on
past
experience
especially
factoring
in
any
anomalies
(e.g.
any
ongoing
impact
of Covid);
Understood the
commercial
challenges
for each
CGU
(e.g.
any
ongoing
impact
of
Covid,
project-specic
delays
or
industry-
specic
impacts)
and
challenged/evaluated
how
these
have
been
incorporated
into
management’s
assessment;
Performed sensitivity
analysis
by
changing key
assumptions
in
management’s
model
to
see
the
impact
on
the
headroom
between
carrying
value
and
fair
value
(including
combining
the
eects
of
dierent
sensitivities);
Assessed the
appropriateness
of
the net
asset
values
and
component
specic
cash
ows
for
each
of
the
investment
in
subsidiary
undertakings
held
by
the
Parent
Company,
factoring
in
any
audit
adjustments
or
appropriate sensitivities
to
conclude
on
the
available
headroom;
Performed a
comparison
between
the carrying
value
of
the
CGUs
against
the
value
of
these
CGU
investments
on
the
Parent
Company’s
statement
of
nancial
position.
We
also
considered
the
carrying
value
of
the
CGUs in
the
context
of the
market
capitalisation
of
the
Group;
and
Considered the
appropriateness
of
the related
disclosures,
especially
with
regard
to
any
impairment
recognised
(if
the
carrying
value
of
CGU
exceeds
the
value-in-use)
or
the
justication
of
why
the
value
of goodwill
exceeds
the
market capitalisation
of
the
Group.
Based
on our
audit
procedures,
we have
concluded
that the
goodwill
and
investment in
subsidiary
undertakings
are not
impaired.
The disclosures
relating
to goodwill
are
appropriate.
Independent
audito
r
’s report
continued
167
_
Mo
rg
an S
in
d
al
l Gr
ou
p pl
c
A
nn
ua
l Re
po
r
t 2021
Str
ate
gi
c repor
t
Gover
nance
Financial stateme
nts
Our applic
ation of materialit
y
We
apply the
concept of
materiality
in planning
and performing
the
audit, in
evaluating the
eect
of
identied
misstatements on
the audit
and
in forming
our audit
opinion.
Materialit
y
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be
expected
to inuence
the economic
decisions
of the
users of
the
nancial statements.
Materiality provides
a
basis for determining the nature and extent of our audit procedures.
We
determined materiality
for the
Group
to be
£6m, which
is
5% of
prot before
tax.
We
believe
that
prot before
tax provides
us
with an
appropriate basis
for
materiality and
is the
most
relevant
measure
for stakeholders
as it
is
a focus
of both
management
and investors.
We
determined materiality
for the
Parent
Company to
be £3m,
which
is 2%
of equity.
During
the course
of our
audit,
we reassessed
initial materiality
and
found no
reason to
change
from
our
original assessment
at planning.
Performance materi
ality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to
an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements
exceeds materiality.
On
the basis
of our
risk
assessments, together
with our
assessment
of the
Group’s overall
control
environment,
our judgement
was that
performance
materiality was
50% of
our
planning materiality,
namely
£3m. We
have set
performance
materiality at
this percentage
due
to this
being our
rst
year
of
auditing
the Group.
Audit
work at
component locations
for
the purpose
of obtaining
audit
coverage over
signicant
nancial
statement accounts
is undertaken
based
on a
percentage of
total
performance materiality.
The
performance materiality
set for
each
component is
based on
the
relative scale
and risk
of
the
component to
the Group
as
a whole
and our
assessment
of the
risk of
misstatement
at
that
component.
In the
current year,
the
range of
performance materiality
allocated
to components
was
£0.6m
to £1.8m.
Repor
ting thr
eshold
An
amount below
which identied
misstatements
are considered
as being
clearly
trivial.
We
agreed with
the audit
committee
that we
would report
to
them all
uncorrected audit
dierences
in
excess
of £0.3m,
which is
set
at 5%
of planning
materiality,
as well
as dierences
below
that
threshold
that,
in our
view, warranted
reporting
on qualitative
grounds.
We
evaluate any
uncorrected misstatements
against
both the
quantitative measures
of
materiality
discussed
above and
in light
of
other relevant
qualitative considerations
in
forming our
opinion.
Othe
r information
The
other information
comprises the
information
included in
the annual
report
set out
on
pages1
to 158,
other than
the
nancial statements
and our
auditor’s
report thereon.
The directors
are
responsible for
the other
information
contained within
the annual
report.
Our
opinion on
the nancial
statements
does not
cover the
other
information and,
except to
the
extent
otherwise explicitly
stated in
this
report, we
do not
express
any form
of assurance
conclusion
thereon.
Our
responsibility is
to read
the
other information
and, in
doing
so, consider
whether the
other
information
is materially
inconsistent with
the
nancial statements
or our
knowledge
obtained in
the
course of
the audit,
or
otherwise appears
to be
materially
misstated. If
we identify
such
material
inconsistencies
or apparent
material misstatements,
we
are required
to determine
whether
this
gives
rise to
a material
misstatement
in the
nancial statements
themselves.
If, based
on the
work
we
have
performed, we
conclude that
there
is a
material misstatement
of
the other
information, we
are
required
to report
that fact.
We
have nothing
to report
in
this regard.
Opinions on oth
er mat
ter
s pres
cribe
d by the Companies Ac
t 2
0
0
6
In
our opinion,
the part
of
the directors’
remuneration report
to
be audited
has been
properly
prepared
in accordance
with the
Companies
Act 2006.
In
our opinion,
based on
the
work undertaken
in the
course
of the
audit:
the
information given
in the
strategic
report and
the directors’
report
for the
nancial year
for
which
the
nancial statements
are prepared
is
consistent with
the nancial
statements;
and
the
strategic report
and the
directors’
report have
been prepared
in
accordance with
applicable
legal
requirements.
Independent
audito
r
’s report
continued
16
8
_
Mor
ga
n Si
nd
al
l G
ro
up p
lc
A
n
nu
al R
ep
or
t 2021
Str
ate
gi
c repor
t
Gover
nance
Financial stateme
nts
Mat
ter
s on which we are re
quired to rep
or
t by exception
In
the light
of the
knowledge
and understanding
of the
Group
and the
Parent Company
and
its
environment
obtained in
the course
of
the audit,
we have
not
identied material
misstatements in
the
strategic
report or
the directors’
report.
We
have nothing
to report
in
respect of
the following
matters
in relation
to which
the
Companies
Act
2006
requires us
to report
to
you if,
in our
opinion:
adequate
accounting records
have not
been
kept by
the Parent
Company,
or returns
adequate for
our
audit have
not been
received
from branches
not visited
by
us; or
the
Parent Company
nancial statements
and
the part
of the
directors’
remuneration report
to be
audited
are not
in agreement
with
the accounting
records and
returns;
or
certain
disclosures of
directors’ remuneration
specied
by law
are not
made;
or
we
have not
received all
the
information and
explanations we
require
for our
audit.
Corporate governance s
tate
ment
We
have reviewed
the directors’
statement
in relation
to going
concern,
longer-term viability
and that
part
of the
corporate governance
statement
relating to
the Group
and
Company’s compliance
with the
provisions
of the
UK Corporate
Governance
Code specied
for our
review
by the
Listing Rules.
Based
on the
work undertaken
as
part of
our audit,
we
have concluded
that each
of
the
following
elements
of the
corporate governance
statement
is materially
consistent with
the
nancial statements
or
our knowledge
obtained during
the
audit:
directors’
statement with
regards to
the
appropriateness of
adopting the
going
concern basis
of
accounting
and any
material uncertainties
identied
set out
on page
83;
directors’
explanation as
to its
assessment
of the
Company’s prospects,
the
period this
assessment
covers
and why
the period
is
appropriate set
out on
pages
83 to
85;
director’s
statement on
whether it
has
a reasonable
expectation that
the
Group will
be able
to
continue
in operation
and meets
its
liabilities set
out on
page
83;
directors’
statement on
fair, balanced
and
understandable set
out on
page
158;
Board’s
conrmation that
it has
carried
out a
robust assessment
of
the emerging
and principal
risks
set
out on
pages 58
and
69;
the
section of
the annual
report
that describes
the review
of
eectiveness of
risk management
and
internal
control systems
set out
on
pages 119
to 122;
and
the
section describing
the work
of
the audit
committee set
out
on page
115 to
122.
Respo
nsibilitie
s of direc
tor
s
As
explained more
fully in
the
directors’ responsibilities
statement set
out
on page158,
the directors
are
responsible for
the preparation
of
the nancial
statements and
for
being satised
that they
give
a
true
and fair
view, and
for
such internal
control as
the
directors determine
is necessary
to
enable
the
preparation
of nancial
statements that
are
free from
material misstatement,
whether
due to
fraud or
error.
In
preparing the
nancial statements,
the
directors are
responsible for
assessing
the Group
and
Parent
Company’s ability
to continue
as
a going
concern, disclosing,
as
applicable, matters
related to
going
concern and
using the
going
concern basis
of accounting
unless
the directors
either intend
to
liquidate
the Group
or the
Parent
Company or
to cease
operations,
or have
no realistic
alternative
but
to
do so.
Auditor
’s
respon
sibilities for
the audit
of the
nancial
st
ateme
nts
Our
objectives are
to obtain
reasonable
assurance about
whether the
nancial
statements as
a whole
are
free from
material misstatement,
whether
due to
fraud or
error,
and to
issue an
auditor’s
report
that
includes our
opinion. Reasonable
assurance
is a
high level
of
assurance, but
is not
a
guarantee
that
an audit
conducted in
accordance
with ISAs
(UK) will
always
detect a
material misstatement
when
it
exists. Misstatements
can arise
from
fraud or
error and
are
considered material
if, individually
or
in
the
aggregate, they
could reasonably
be
expected to
inuence the
economic
decisions of
users taken
on
the basis
of these
nancial
statements.
E
xp
lan
ati
on as t
o wh
at ex
ten
t the a
udi
t wa
s con
si
der
ed c
ap
ab
le of d
ete
c
ti
ng ir
re
gu
lar
iti
es
,
including fraud
Irregularities,
including fraud,
are instances
of
non-compliance with
laws and
regulations.
We design
procedures
in line
with our
responsibilities,
outlined above,
to detect
irregularities,
including fraud.
The
risk of
not detecting
a
material misstatement
due to
fraud
is higher
than the
risk
of
not detecting
one
resulting from
error, as
fraud
may involve
deliberate concealment
by,
for example,
forgery or
intentional
misrepresentations, or
through collusion.
The
extent to
which our
procedures
are capable
of
detecting irregularities,
including fraud
is
detailed below.
Independent
audito
r
’s report
continued
169
_
Mo
r
ga
n Si
nd
al
l Gr
ou
p pl
c
A
n
nu
al Re
po
r
t 2021
Str
ate
gi
c repor
t
Gover
nance
Financial stateme
nts
However,
the primary
responsibility for
the
prevention and
detection of
fraud
rests with
both those
charged
with governance
of the
Company
and management.
We
obtained an
understanding of
the
legal and
regulatory frameworks
that
are applicable
to the
Group
and determined
that the
most
signicant are
those that
relate
to the
reporting framework
(UK-adopted
International Accounting
Standards, the
Companies
Act 2006
and the
UK
Corporate
Governance
Code) and
the relevant
tax
compliance regulations
in the
UK.
We
understood how
Morgan Sindall
Group
plc is
complying with
those
frameworks by
making
enquiries
of management
at Group
level
and within
the divisions,
internal
audit, those
responsible
for
legal and
compliance procedures
and
the company
secretary. We
corroborated
our enquiries
through
our review
of board
minutes
and papers
provided to
the
Board and
audit committee,
noting
the strong
emphasis of
transparency
and honesty
in the
Group’s
culture and
the levels
of
oversight
the Board
and Group
management
have over
each division
despite
the decentralised
operating
model of
the Group.
We
assessed the
susceptibility of
the
Group’s nancial
statements to
material
misstatement,
including
how fraud
might occur
by
meeting with
management in
each
division to
understand
where
it considered
there was
a
susceptibility to
fraud. We
also
considered performance
targets
and
their propensity
to inuence
eorts
made by
management to
manage
earnings. We
considered
the
programmes and
controls that
the
Group has
established to
address
risks identied,
or that
otherwise
prevent, deter
and detect
fraud;
and how
senior management
at
Group level
and within
the
divisions monitor
those programmes
and
controls. Where
the risk
was
considered to
be higher,
we
performed audit
procedures to
address
each identied
fraud risk.
These
procedures are
set out
in
the key
audit matters
section
of this
report and
were
designed to
provide reasonable
assurance
that
the nancial
statements were
free
from fraud
and error.
Based
on this
understanding we
designed
our audit
procedures to
identify
non-compliance with
such
laws and
regulations. Our
procedures
involved journal
entry testing
at
each component
in
the scope
of our
Group
audit with
a focus
on
journals indicating
unusual transactions
based
on
our understanding
of the
business,
enquiries of
Group and
divisional
management, and
focused
testing as
referred to
in
the key
audit matters
section
above. In
addition, we
completed
procedures
to conclude
on the
compliance
of the
disclosures in
the
annual report
and accounts
with
the requirements
of the
relevant
accounting standards,
UK legislation
and
the UK
Corporate
Governance
Code.
A
further description
of our
responsibilities
for the
audit of
the
nancial statements
is located
on
the
Financial
Reporting Council’s
website at
frc.org.uk/auditorsresponsibilities.
This description
forms
part
of our
auditor’s report.
Othe
r mat
ter
s we are require
d to addres
s
Following
the recommendation
from the
audit
committee, we
were appointed
by
the Company
on 6
May
2021 to
audit the
nancial
statements for
the year
ending
31 December
2021 and
subsequent
nancial
periods.
The
period of
total uninterrupted
engagement
including previous
renewals and
reappointments
is
one
year, covering
the year
ended
31 December
2021.
The
audit opinion
is consistent
with
the additional
report to
the
audit committee.
Use of our rep
or
t
This
report is
made solely
to
the Company’s
members, as
a
body, in
accordance with
Chapter
3
of Part
16
of the
Companies Act
2006.
Our audit
work has
been
undertaken so
that we
might
state
to the
Company’s
members those
matters we
are
required to
state to
them
in an
auditor’s report
and
for
no
other
purpose. To
the fullest
extent
permitted by
law, we
do
not accept
or assume
responsibility
to
anyone
other than
the Company
and
the Company’s
members as
a
body, for
our audit
work,
for
this
report,
or for
the opinions
we
have formed.
Pet
er M
cI
ver (S
en
ior s
t
at
uto
r
y aud
ito
r)
for
and on
behalf of
Ernst
& Young
LLP, Statutory
Auditor
London
24
February 2022
Independent
audito
r
’s report
continued
17
0
_
Mor
ga
n Si
n
da
ll G
ro
up p
lc
A
nnual Report 202
1
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
C
ons
o
l
i
d
a
t
e
d
s
t
a
t
e
m
e
n
t
o
f
c
om
p
r
e
h
e
ns
i
ve
i
n
c
om
e
for the year ended 31 December 2021
C
o
n
s
ol
i
d
a
t
e
d
i
nc
o
me
s
t
a
t
e
me
nt
for the year ended 31 December 2021
Notes
2021
£m
2020
£m
Prot for the year
97.9
45.4
Items that may be reclassied subsequently to
prot or loss:
Foreign exchange movement on translation of overseas
operations
–
(0.2)
(Loss)/gain arising during the year on net investment in
foreign operations
(0.2)
0.2
(0.2)
–
Other comprehensive (expense)/income
(0.2)
–
Total comprehensive income
97.7
45.4
Attributable to:
Owners
of the
Company
97.7
45.4
Notes
2021
£m
2020
£m
Revenue
1
3,212.8
3,034.0
Cost of sales
(2,830.0)
(2,718.2)
Gross prot
382.8
315.8
Administrative expenses
(258.3)
(252.3)
Share
of net
prot of
joint
ventures
12
5.4
2.3
Other operating income
1.4
2.7
Operating prot before amortisation of
intangible assets
131.3
68.5
Amortisation of intangible assets
9
(1.5)
(3.1)
Operating prot
129.8
65.4
Finance income
5
0.6
0.9
Finance expense
5
(4.2)
(5.5)
Prot before tax
126.2
60.8
Tax
6
(28.3)
(15.4)
Prot for the year
3
97.9
45.4
Attributable to:
Owners of the Company
97.9
45.4
Earnings per share
Basic
8
212.4p
99.8p
Diluted
8
204.4p
98.1p
There were no discontinued operations in either the current or comparative years.
171
_
Mor
ga
n Si
nd
al
l Gr
o
up p
lc
A
nnual Report 202
1
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
C
o
n
s
o
l
i
d
a
t
ed
s
t
a
t
e
m
e
n
t
o
f 
n
a
n
c
i
a
l
po
s
i
t
i
o
n
at 31 December 2021
Notes
2021
£m
2020
re-stated
1
 
£m
01 January 2020
re-stated
1
 
£m
Assets
Goodwill and other intangible assets
9
221.9
222.1
223.6
Property, plant and equipment
10
66.6
65.8
79.5
Investment property
11
0.8
2.7
5.1
Investments
in joint
ventures
12
94.1
91.4
84.3
Other investments
–
–
1.3
Shared equity loan receivables
13
–
5.5
8.4
Non-current assets
383.4
387.5
402.2
Inventories
14
288.5
294.2
338.1
Contract assets
15
232.6
171.8
186.8
Trade and other receivables
16
328.3
234.6
275.7
Current tax assets
4.7
–
–
Shared equity loan receivables
13
1.5
–
–
Cash and cash equivalents
25
468.6
400.5
251.2
Current assets
1,324.2
1,101.1
1,051.8
Total assets
1,707.6
1,488.6
1,454.0
Liabilities
Contract liabilities
15
(78.5)
(55.6)
(56.2)
Trade and other payables
17
(891.4)
(847.9)
(842.3)
Current tax liabilities
–
(1.0)
(9.6)
Lease liabilities
20
(13.4)
(12.1)
(12.8)
Borrowings
25
(110.2)
(67.3)
(58.5)
Provisions
19
(33.4)
(4.9)
(7.1)
Current liabilities
(1,126.9)
(988.8)
(986.5)
Net current assets
197.3
112.3
65.3
Notes
2021
£m
2020
re-stated
1
 
£m
01 January 2020
re-stated
1
 
£m
Trade and other payables
17
(32.6)
(1.7)
(3.8)
Lease liabilities
20
(39.4)
(38.9)
(46.9)
Borrowings
25
(0.4)
(0.4)
–
Retirement
benet obligation
18
(0.2)
(0.2)
–
Deferred tax liabilities
6
(10.0)
(12.5)
(8.1)
Provisions
19
(23.9)
(26.0)
(21.8)
Non-current liabilities
(106.5)
(79.7)
(80.6)
Total liabilities
(1,233.4)
(1,068.5)
(1,067.1)
Net assets
474.2
420.1
386.9
Equity
Share capital
22
2.3
2.3
2.3
Share premium account
45.8
45.5
38.5
Other reserves
(1.0)
(0.8)
(0.8)
Retained earnings
427.1
373.1
346.9
Equity attributable to owners of
the Company
474.2
420.1
386.9
Total equity
474.2
420.1
386.9
1 The prior year balances for trade and other payables and retained earnings have been re-stated as described in the basis of
preparation, along with their respective totals.
The
consolidated nancial
statements of
Morgan
Sindall Group
plc (Company
number:
00521970)
were approved by the Board on 24 February 2022 and signed on its behalf by:
Jo
hn Mo
rg
an
Ste
ve Cru
mm
et
t
Chief Executive
Finance Director
17
2
_
Mo
rg
an S
in
da
ll G
r
ou
p pl
c
Annual Repor
t 20
21
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
Notes
2021
£m
2020
£m
Investing activities
Interest received
0.6
1.2
Proceeds on disposal of property, plant and equipment
1.4
1.4
Purchases of property, plant and equipment
10
(6.7)
(4.2)
Purchases
of intangible
xed assets
9
(1.3)
(1.6)
Net
decrease/(increase) in
loans to
joint
ventures
12
1.5
(12.9)
Proceeds
on disposal
of interests
in
joint ventures
12
–
8.3
Proceeds from the disposal of other investments
–
0.5
Acquisition
of subsidiaries,
joint ventures
and
other businesses
–
(0.1)
Net cash outow from investing activities
(4.5)
(7.4)
Financing activities
Interest paid
(1.7)
(3.8)
Dividends paid
7
(32.3)
(9.6)
Repayments of lease liabilities
20
(15.2)
(15.1)
Proceeds from borrowings
–
180.4
Repayment of borrowings
–
(180.0)
Proceeds on issue of share capital
22
0.3
7.0
Payments by the Trust to acquire shares in the Company
(33.6)
(9.6)
Proceeds on exercise of share options
1.7
0.9
Net cash outow from nancing activities
(80.8)
(29.8)
Net increase in cash and cash equivalents
25.2
140.5
Cash and cash equivalents at the beginning of the year
333.2
192.7
Cash and cash equivalents at the end of the year
25
358.4
333.2
Cash
and
cash
equivalents presented
in the
consolidated
cash
ow
statement
include
bank
overdrafts.
See note 25 for a reconciliation to cash and cash equivalents presented in the consolidated statement
of
nancial position.
Notes
2021
£m
2020
£m
Operating activities
Operating
prot
129.8
65.4
Adjusted
for:
Amortisation of intangible assets
9
1.5
3.1
Share
of net
prot of
equity
accounted joint
ventures
12
(5.4)
(2.3)
Depreciation
10
20.5
22.0
Share option expense/(credit)
23
12.1
(0.1)
Gain
on disposal
of interests
in
joint ventures
3
–
(2.7)
Gain on disposal of property, plant and equipment
(0.5)
(1.0)
Revaluation of investment properties
11
–
0.6
Movement
in fair
value of
shared
equity loan
receivables
13
1.9
0.5
Impairment of investments
3
1.2
3.3
Proceeds on disposal of investment properties
11
1.9
1.8
Repayment of shared equity loan receivables
13
2.1
2.4
Increase in provisions
19
26.4
2.0
Operating cash inow before movements in working
capital
191.5
95.0
Decrease in inventories
5.7
43.9
(Increase)/decrease in contract assets
(60.8)
15.0
(Increase)/decrease in receivables
(94.0)
41.6
Increase/(decrease) in contract liabilities
22.9
(0.6)
Increase in payables
73.5
2.7
Movements in working capital
(52.7)
102.6
Cash inow from operations
138.8
197.6
Income taxes paid
(28.3)
(19.9)
Net cash inow from operating activities
110.5
177.7
C
o
n
s
o
l
i
d
a
t
ed
c
a
s
h 
o
w
s
t
a
t
e
m
e
n
t
for the year ended 31 December 2021
17
3
_
Mo
rg
an S
in
da
ll G
r
ou
p pl
c
Annual Repor
t 202
1
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
Notes
Share
capital
£m
Share
premium
account
£m
Other
reserves
£m
Retained
earnings
£m
Total
equity
£m
1 January 2020
2.3
38.5
(0.8)
356.8
396.8
Adjustment
for correction
of
an historic error (see basis of
preparation)
–
–
–
(9.9)
(9.9)
1 January 2020 (re-stated)
2.3
38.5
(0.8)
346.9
386.9
Prot
for the
year
–
–
–
45.4
45.4
Total comprehensive income
–
–
–
45.4
45.4
Share option credit
23
–
–
–
(0.1)
(0.1)
Tax relating to share options
6
–
–
–
(0.8)
(0.8)
Issue of shares at a premium
22
–
7.0
–
–
7.0
Purchase of shares in the
Company by the Trust
–
–
–
(9.6)
(9.6)
Exercise of share options
–
–
–
0.9
0.9
Dividends paid
7
–
–
–
(9.6)
(9.6)
1 January 2021
2.3
45.5
(0.8)
373.1
420.1
Prot
for the
year
–
–
–
97.9
97.9
Other comprehensive expense
–
–
(0.2)
–
(0.2)
Total comprehensive (expense)/
income
–
–
(0.2)
97.9
97.7
Share option expense
23
–
–
–
12.1
12.1
Tax relating to share options
6
–
–
–
8.2
8.2
Issue of shares at a premium
22
–
0.3
–
–
0.3
Purchase of shares in the
Company by the Trust
–
–
–
(33.6)
(33.6)
Exercise of share options
–
–
–
1.7
1.7
Dividends paid
7
–
–
–
(32.3)
(32.3)
31 December 2021
2.3
45.8
(1.0)
427.1
474.2
Other
reserves
Other reserves include:
Capital redemption reserve of £0.6m (2020: £0.6m) which was created on the redemption of
preference shares in 2003.
Hedging
reserve of
(£0.8m) (2020:
(£0.6m))
arising under
cash ow
hedge
accounting and
net
investments
in foreign
operations. Movements
on
the eective
portion of
hedges
are recognised
through
the hedging
reserve, while
any
ineectiveness is
taken to
the
income statement.
Translation reserve of (£0.8m) (2020: (£0.8m)) arising on the translation of overseas operations into
the Group’s functional currency.
Ret
ained ear
nings
Retained
earnings include
shares in
Morgan
Sindall Group
plc purchased
in
the market
and held
by
the Morgan
Sindall Employee
Benet
Trust (‘the
Trust') to
satisfy
options under
the Company’s
share incentive schemes. The number of shares held by the Trust at 31 December 2021 was
1,051,664 (2020: 278,383) with a cost of £25.3m (2020: £5.3m). All of the shares held by the Trust
were unallocated at the year end and dividends on these shares have been waived. Based on the
Company’s
share price
at 31
December
2021 of
£25.20 (2020:
£15.32),
the market
value of
the
shares
was £26.5m (2020: £4.3m).
C
o
n
s
o
l
i
d
a
t
ed s
t
a
t
e
m
e
n
t o
f c
h
a
n
g
e
s i
n e
q
u
i
t
y
for the year ended 31 December 2021
174
_
Mor
ga
n Si
n
da
ll G
ro
up p
l
c
Annual Repor
t 20
21
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
Repor
ting
entit
y
Morgan
Sindall Group
plc (the
‘Group’
or ‘Company’)
is domiciled
and
incorporated in
the United
Kingdom. The nature of the Group’s operations and its principal activities are set out in note 2 and in
the strategic report on page 2.
Basi
s
of
pre
paration
(a)
Statement of
compliance
The
consolidated nancial
statements have
been
prepared on
the going
concern
basis as
set out
on
page 83
and in
accordance
with UK
adopted International
Accounting
Standards (UK
IAS).
(b)
Basis of
accounting
The
consolidated nancial
statements have
been
prepared under
the historical
cost
convention,
except where otherwise indicated.
(c) Going concern
In
determining the
appropriate basis
of
preparation of
the nancial
statements,
the directors
are
required to consider whether the Group and Company can continue in operational existence
during
the going
concern period,
which
the directors
have dened
as
the date
of approval
of
the
31December
2021 nancial
statements through
to
28 February
2023.
As at 31 December 2021, the Group held cash of £468.6m, including £55.7m which is the Group’s
share
of cash
held within
jointly
controlled operations,
and total
loans
and borrowings
of £110.6m,
including £110.2m of overdrafts repayable on demand (together net cash of £358.0m). Should further
funding
be required,
the Group
has
signicant committed
nancial resources
available
including
unutilised
bank facilities
of £180m,
of
which £165m
matures in
October
2024 and
£15m matures
in
March
2024. The
Group’s secured
order
book at
31 December
2021
is £8.6bn
(2020: £8.3bn),
of
which
£2.9bn relates to the 12 months ended 31 December 2022.
The Group has continued to operate safely during the Covid pandemic under the site operating
procedures
agreed by
the Construction
Leadership
Council and
following the
advice
from the
UK
government, the devolved administrations and public health authorities. The Group has operated
protably
with positive
operating cash
ows
for the
year ended
31
December 2021
while under
these restrictions and, while there continues to be uncertainty over any further restrictions due to the
pandemic, the Group expects the business to remain resilient under any guidelines issued for the
foreseeable future until the end of the pandemic.
The
directors have
reviewed the
Group’s
forecasts and
projections for
the
going concern
period,
including sensitivity analysis (detailed on pages 84 and 85, including reduced revenues, margins, a
working
capital deterioration
and project
delays)
to assess
the Group’s
resilience
to the
potential
nancial
impact on
the Group
of
any plausible
losses of
revenue
or operating
prot which
could
arise
from
one of
the principal
risks
to the
business occurring
(these
risks are
discussed on
pages
58
to 68
and
include the
directors' assessment
of
the impact
of climate
change).
The analysis
also includes
a
reasonable
worst-case scenario
in which
the
Group’s principal
risks manifest
in
aggregate to
a severe
but
plausible level
involving the
aggregation
of the
impacts of
a
number of
these risks.
The
modelling
showed
that the
Group would
remain
protable throughout
the going
concern
period and
there is
considerable headroom above lending facilities such that there would be no expected requirement
for
the Group
to utilise
the
bank facility,
which underpins
the
going concern
assumption on
which
these
nancial statements
have been
prepared.
As part
of the
sensitivity
analysis, the
directors also
modelled
a scenario
that stress
tests
the Group’s
forecasts and
projections,
to determine
the scenario
in
which the
headroom above
the
committed bank
facility would
be
exceeded. This
model showed
that
the Group’s
operating prot
would
need to
deteriorate substantially
for
the headroom
to exceed
the
committed bank
facility. The
directors
consider there
is no
plausible
scenario where
cash inows
would
deteriorate
this
signicantly.
However,
as
part
of
their
analysis
the Board
also considered
further
mitigating
actions at
their discretion,
such
as a
reduction in
investments
in working
capital, to
improve
the
position identied
by the
reasonable
worst-case scenario.
In all
scenarios,
including the
reasonable
worst
case, the
Group is
able
to comply
with its
nancial
covenants, operate
within its
current
facilities,
and meet its liabilities as they fall due.
Accordingly,
the directors
consider there
to
be no
material uncertainties
that
may cast
signicant
doubt
on
the
Group’s
ability
to
continue
to
operate
as
a
going
concern.
They
have
formed
a
judgement
that there is a reasonable expectation that the Group and Company have adequate resources to
continue in operational existence for the going concern period. For this reason, they continue to adopt
the
going concern
basis in
the
preparation of
these nancial
statements.
The period
from the
date
of
signing
of these
nancial statements
to
28 February
2023 has
been
assessed following
consideration
of
the budgeting
cycles and
typical
contract lengths
undertaken across
the
Group.
(d)
Functional and
presentation currency
These
consolidated nancial
statements are
presented
in pounds
sterling which
is
the Group’s
presentational
currency and
the Company’s
functional
currency. All
nancial information,
unless
otherwise stated, has been rounded to the nearest £0.1m.
(e)
Correction of
an historic
error
On 27 July 2007 the Group acquired Amec Developments Limited and certain assets and businesses
carried on by Amec Investments Limited and the assets, liabilities and contracts relating to the Design
and
Project Services
(DPS) division
of
Amec plc,
save for
certain
excluded assets
and liabilities
(together
‘Amec’).
S
i
g
n
i
c
a
n
t
ac
c
ou
n
t
i
n
g
p
ol
i
ci
e
s
for the year ended 31 December 2021
17
5
_
Mor
ga
n Si
nd
al
l G
ro
up p
lc
A
nnual Report 202
1
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
Signi
c
ant accounting policie
s
c
ontinued
A
dierence has
been identied
relating
to the
acquired business
of
Amec. This
error is
an
historic
unsubstantiated asset of £9.9m that has continued to be recorded on the consolidated statement
of
nancial position
in accrued
expenses
within trade
and other
payables.
Therefore, the
error has
been
corrected by
restating each
of
the aected
nancial statement
line
items for
the prior
periods,
as
follows:
Impact
on equity
((decrease) in
equity)
31 December
2020
£m
1 January
2020
£m
Trade and other payables
9.9
9.9
Total liabilities
9.9
9.9
Net impact on equity
(9.9)
(9.9)
The change has no impact on the consolidated income statement, consolidated statement of
comprehensive income, basic and diluted earnings per share or the Group’s operating, investing and
nancing
cash ows
for each
period
presented. In
accordance with
IAS
1, a
restated balance
sheet
at
1January
2020 has
been presented.
(f)
Climate change
risk
While the Group is committed to achieving its net zero emissions target by 2030, the governmental
and
societal responses
to climate
change
risks are
still developing
and
therefore the
Group is
currently
unable
to determine
the full
future
economic impact
of climate
change
risks on
their business
model,
to
achieve this.
As such,
the
potential impacts
of climate
change
risk are
not fully
incorporated
in
these
nancial
statements.
(g)
Adoption of
new and
amended
standards and
interpretations
(i) New
and amended accounting
standards adopted by
the Group
During the year, the Group has adopted the following new and amended standards and
interpretations.
Their adoption
has not
had
any signicant
impact on
the
accounts or
disclosures in
these
nancial statements.
Interest
Rate Benchmark
Reform –
Amendments
to IFRS
9 ‘Financial
Instruments’,
IAS 39
‘Financial
Instruments
– recognition
and measurement’,
IFRS
7 ‘Financial
Instruments: Disclosures’,
IFRS
4
‘Insurance
Contracts’ and
IFRS 16
‘Leases’
Amendments
to IFRS
16 ‘Covid-19
Related
Rent Concessions’
(ii) New
and amended accounting
standards and interpretations
which were
in issue
but
were
not
yet
eective and
have not been
adopted early by
the Group
At
the date
of the
nancial
statements, the
Group has
not
applied the
following new
and
revised
IFRSs
that
have been
issued but
are
not yet
eective:
IFRS
17 ‘Insurance
Contracts’
IFRS
10 and
IAS 28
(amendments)
‘Sale or
Contribution of
Assets
between an
Investor and
its
Associate or Joint Venture’
Amendments
to IAS
1 ‘Classication
of
Liabilities as
Current or
Non-current’
Amendments
to IFRS
3 ‘Reference
to
the Conceptual
Framework’
Amendments
to IAS
16 ‘Property,
Plant
and Equipment
– Proceeds
before
Intended Use’
Amendments
to IAS
37 ‘Onerous
Contracts
– Cost
of Fullling
a
Contract’
Annual Improvements to IFRS Standards 2018-2020 Cycle
Amendments
to IAS
1 ‘Presentation
of
Financial Statements’
and IFRS
Practice
Statement 2
‘Making
Materiality
Judgements –
Disclosure of
Accounting
Policies’
Amendments
to IAS
8 ‘Accounting
Policies,
Changes in
Accounting Estimates
and
Errors –
Denition
of Accounting Estimates’
Amendments
to IAS
12 ‘Income
Taxes
– Deferred
Tax related
to
Assets and
Liabilities arising
from
a
Single Transaction’
The Group is currently assessing the impact of the standards but do not expect that the adoption of
the
standards listed
above will
have
a material
impact on
the
nancial statements
of the
Company
in
future periods.
The accounting policies as set out below have been applied consistently to all periods presented in
these
consolidated nancial
statements.
Basi
s
of
cons
olidation
The
consolidated nancial
statements incorporate
the
nancial statements
of the
Company
and the
entities
controlled by
the Company,
together
with the
Group’s share
of
the results
of joint
ventures
made up to 31 December each year. Control is achieved when the Company has (i) the power over
the investee; (ii) is exposed, or has rights, to variable returns from its involvement with the investee;
and
(iii) has
the ability
to
use its
power to
aect
its returns.
The Company
reassesses
whether
or not
it
controls an investee if facts and circumstances indicate that there are changes to one or more of the
three elements of control listed above. Business combinations are accounted for using the acquisition
method.
176
_
Mor
ga
n Si
nd
al
l Gr
ou
p p
lc
A
nnual Report 202
1
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
(a)
Subsidiaries
Subsidiaries
are entities
that are
controlled
by the
Group. The
nancial
statements of
subsidiaries are
included
in the
consolidated nancial
statements
of the
Group from
the
date that
control is
obtained
to the date that control ceases. The accounting policies of new subsidiaries are changed where
necessary to align them with those of the Group.
If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill),
liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is
recognised
in prot
or loss.
Any
investment retained
is recognised
at
fair value.
(b)
Joint arrangements
A
joint arrangement
is a
contractual
arrangement whereby
two or
more
parties undertake
an
economic
activity that
is subject
to
joint control,
which requires
unanimous
consent for
strategic,
nancial
and operating
decisions.
(i) Joint
ventures
A
joint venture
generally involves
the
establishment of
a corporation,
partnership
or other
entity in
which
each venturer
has rights
to
the net
assets of
the
joint venture
and joint
control
over
strategic,
nancial
and operating
decisions. The
results,
assets and
liabilities of
jointly
controlled entities
are
incorporated
in the
nancial statements
using
the equity
method of
accounting.
Goodwill
relating to
a joint
venture
which is
acquired directly
is
included in
the carrying
amount
of
the
investment and is not amortised. After application of the equity method, the Group’s investments in
joint
ventures are
reviewed to
determine
whether any
additional impairment
loss
in relation
to the
net
investment in
the joint
venture
is required,
and if
so
it is
written o
in
the
period in
which those
circumstances
are identied.
When there
is
a change
recognised directly
in
the equity
of the
joint
venture, the Group recognises its share of any change and discloses this, where applicable, in the
statement of comprehensive income.
Where
the Group’s
share of
losses
exceeds its
equity accounted
investment
in a
joint venture,
the carrying amount of the equity interest is reduced to nil and the recognition of further losses
is discontinued except to the extent that the Group has incurred legal or constructive obligations.
Appropriate
adjustment is
made to
the
results of
joint ventures
where
material dierences
exist
between
a joint
venture’s accounting
policies
and those
of the
Group.
Dividend income from investments is recognised when the shareholders’ rights to receive payment
have been established.
(ii) Joint operations
Construction
contracts carried
out as
a
joint arrangement
without the
establishment
of a
legal entity
are
joint operations.
The Group’s
share
of the
results and
net
assets of
these joint
operations
are
included
under
each
relevant heading
in the
income
statement
and
the
statement
of
nancial
position.
(c) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expense arising from intra-
group
transactions, are
eliminated in
preparing
the consolidated
nancial statements.
Unrealised
gains arising from transactions with equity accounted investments are eliminated to the extent of the
Group’s
interest in
that investment.
Unrealised
losses are
eliminated in
the
same way
as unrealised
gains, but only to the extent that there is no evidence of impairment.
Revenue
and
margin
recognition
Revenue and margin are recognised as follows:
(a)
Construction and
infrastructure contracts
A
signicant portion
of the
Group’s
revenue is
derived from
construction
and infrastructure
services
contracts. These services are provided to customers across a wide variety of sectors and the size and
duration
of the
contracts can
vary
signicantly from
a few
weeks
to more
than 10
years.
The
majority of
contracts are
considered
to contain
only one
performance
obligation for
the purposes
of
recognising revenue.
While the
scope
of works
may include
a
number of
dierent components,
in
the context of construction and infrastructure services activities these are usually highly interrelated
and produce a combined output for the customer.
Contracts
are typically
satised over
time.
For xed
price construction
contracts
progress is
measured
through
a valuation
of the
works
undertaken by
a professional
quantity
surveyor, including
an
assessment of any elements for which a price has not yet been agreed such as changes in scope. For
cost reimbursable infrastructure services contracts progress is measured based on the costs incurred
to
date as
a proportion
of
the estimated
total cost
and
an assessment
of the
nal
contract
price
payable.
Variations are not included in the estimated total contract price until the customer has agreed the
revised
scope of
work.
Where the scope has been agreed but the corresponding change in price has not yet been agreed,
only the amount that is considered highly probable not to reverse in the future is included in the
estimated
total
contract
price.
Where
delays
to
the
programme
of
works
are
anticipated
and
liquidated
damages would be contractually due, the estimated total contract price is reduced accordingly. This
is only mitigated by expected extensions of time or commercial resolution being achieved where it is
highly
probable that
this will
not
lead to
a signicant
reversal
in the
future.
For cost reimbursable contracts, expected pain share is recognised in the estimated total contract
price immediately while anticipated gain share and performance bonuses are only recognised at the
point that they are agreed by the customer.
Signi
c
ant accounting policie
s
c
ontinued
17
7
_
Mo
rg
an S
in
d
all G
r
ou
p pl
c
Annual Repor
t 202
1
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
In
order to
recognise the
prot
over time
it is
necessary
to estimate
the total
costs
of
the contract.
These
estimates take
account of
any
uncertainties in
the cost
of
work packages
which have
not
yet
been let and materials which have not yet been procured, the expected cost of any acceleration of or
delays
to the
programme or
changes
in the
scope of
works
and the
expected cost
of
any
rectication
works
during the
defects liability
period.
Once the outcome of a construction contract can be estimated reliably, margin is recognised in the
income statement in line with the corresponding stage of completion. Where a contract is forecast to
be
loss-making, the
full loss
is
recognised immediately
in the
income
statement.
(b)
Service contracts
Service contracts include design, maintenance and management services. Contracts are typically
satised
over time
and revenue
is
measured through
an assessment
of
time incurred
and materials
utilised as a proportion of the total expected or percentage of completion depending upon the nature
of the service.
(c)
Sale of
land and
development
properties
The
Group derives
a signicant
portion
of revenue
from the
sale
of land,
and the
development
and
sale of residential and commercial properties.
Contracts
are typically
satised at
a
point in
time. This
is
usually deemed
to be
legal
completion
as
this is the point at which the Group has an enforceable right to payment. The only exception to this is
pre-let
forward sold
developments where
the
customer controls
the work
in
progress as
it is
created;
or where the Group is unable to put the asset being constructed to an alternative use due to legal or
practical
limitations and
has an
enforceable
right to
payment for
the
work completed
to date.
Where
these conditions are met, the contract is accounted for as a construction contract in accordance with
paragraph (a) above.
Revenue from the sale of land, residential and commercial properties is measured at the transaction
price agreed in the contract with the customer. While deferred payment terms may be agreed in rare
circumstances,
the deferral
never exceeds
12
months. The
transaction price
is
therefore not
adjusted
for
the eects
of a
signicant
nancing component.
The Group
no
longer utilises
shared equity
loan
schemes for the sale of residential properties.
In
order to
recognise the
prot,
it is
necessary to
estimate
the total
costs of
a
development.
These
estimates
take account
of any
uncertainties
in the
cost of
work
packages which
have not
yet
been
let
and materials
which have
not
yet been
procured and
the
expected cost
of any
rectication
works
during the defects liability period which is 12 months for commercial property and 24 months for
residential property.
Prot
is recognised
by allocating
the
total costs
of a
scheme
to each
unit at
a
consistent
margin. For
mixed-tenure schemes which also incorporate a construction contract, the margin recognised for the
open
market units
is consistent
with
the construction
contract element
of
the development.
(d)
Contract balances
Contract assets
Contract
assets primarily
relate to
the
Group’s right
to consideration
for
construction work
completed
but not invoiced at the balance sheet date. The contract assets are transferred to trade receivables
when
the amounts
are certied
by
the customer.
On most
contracts,
certicates are
issued by
the
customer on a monthly basis.
Contract liabilities
Contract liabilities primarily relate to the advance consideration received from customers in respect
of
performance obligations
which have
not
yet been
fully satised
and
for which
revenue has
not
been recognised. Contract liabilities are recognised as revenue when performance obligation to the
customer
has been
satised.
(e)
Contract costs
Costs to obtain a contract are expensed unless they are incremental, i.e. they would not have been
incurred
if the
contract had
not
been obtained,
and the
contract
is expected
to be
suciently
protable
for them
to be
recovered.
Costs
to full
a contract
are
expensed unless
they relate
to
an identied
contract, generate
or
enhance resources that will be used to satisfy the obligations under the contract in future years and
the
contract is
expected to
be
suciently protable
for them
to
be recovered,
in which
case
they
are
capitalised to the extent they will be recovered in future periods.
Where costs are capitalised, they are amortised over the shorter of the period for which revenue and
prot
can be
forecast with
reasonable
certainty and
the duration
of
the contract
except where
the
contract
becomes loss-making.
If the
contract
becomes loss-making,
all capitalised
costs
related to
that contract are immediately expensed.
(f)
Government grants
Funding received in respect of developer grants, where funding is awarded to encourage the building
and
renovation of
aordable housing,
is
recognised as
revenue on
a
stage of
completion basis
over
the
life of
the project
to
which the
funding relates.
Funding
received to
support the
construction
of housing
where current
market
prices would
otherwise
make a
scheme nancially
unviable
is recognised
as revenue
on
a legal
completion basis
when the properties to which it relates are sold.
Government grants are initially recognised as deferred income at fair value when there is reasonable
assurance that the Group will comply with the conditions attached and the grants will be received.
Signi
c
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s
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ontinued
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ate
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Governance
Financial st
atement
s
Leases
Where the Company is a lessee, a right-of-use asset and lease liability are recognised at the outset of
the lease other than those that are less than one year in duration or of a low value.
The lease liability is initially measured at the present value of the lease payments that are not paid
at
that date
based on
the
Group’s expectations
of the
likelihood
of lease
extension or
break
options
being exercised. In calculating the present value of lease payments, the Group uses its incremental
borrowing rate at the lease commencement date because the interest rate implicit in the lease is not
readily determinable.
The
lease liability
is subsequently
adjusted
to reect
imputed interest,
payments
made to
the lessor
and
any lease
modications.
The right-of-use asset is initially measured at cost, which comprises the amount of the lease liability,
any lease payments made at or before the commencement date, less any lease incentives received,
any initial direct costs incurred by the Group and an estimate of any costs that are expected to be
incurred at the end of the lease to dismantle or restore the asset.
The right-of-use assets are presented within the property, plant and equipment line in the statement
of
nancial position
and depreciated
in
accordance with
the Group’s
accounting
policy on
property,
plant and equipment. The amount charged to the income statement comprises the depreciation of
the right-of-use asset and the imputed interest on the lease liability.
Lease payments on short-term leases and leases of low-value assets are recognised as expense on a
straight-line basis over the lease term.
Finance
income
an
d
expen
se
Finance
income and
expense is
recognised
using the
eective interest
method.
Income
tax
The income tax expense represents the current and deferred tax charges. Income tax is recognised in
the income statement except to the extent that it relates to items recognised directly in equity.
Current
tax is
the Group’s
expected
tax liability
on taxable
prot
for the
year using
tax
rates
enacted or
substantively
enacted at
the reporting
date
and any
adjustments to
tax
payable in
respect of
previous
years.
Taxable
prot diers
from that
reported
in the
income statement
because
it is
adjusted for
items
of
income
or expense
that are
assessable
or deductible
in other
years
and is
adjusted for
items
that
are
never assessable or deductible.
Current tax relating to items recognised directly in equity is recognised in equity and not in the
statement
of prot
or loss.
Deferred
tax is
recognised using
the
liability method,
providing for
temporary
dierences between
the
carrying
amount of
assets and
liabilities
for nancial
reporting purposes
and
the corresponding
tax
bases used in tax computations. Deferred tax is not recognised for the initial recognition of assets or
liabilities
in a
transaction that
is
not a
business combination
and
aects neither
accounting nor
taxable
prot,
or dierences
relating to
investments
in subsidiaries
and joint
ventures
to the
extent that
it
is
probable that they will not reverse in the foreseeable future. Deferred tax is not recognised for taxable
temporary
dierences arising
on the
initial
recognition of
goodwill.
Deferred
tax is
recognised on
temporary
dierences which
result in
an
obligation at
the reporting
date
to pay more tax, or a right to pay less tax, at a future date, at the tax rates expected to apply when they
reverse, based on the laws that have been enacted or substantively enacted at the reporting date.
Deferred
tax assets
are recognised
to
the extent
that it
is
regarded as
more likely
than
not
that they
will
be recovered.
Deferred tax
assets
and liabilities
are not
discounted
and are
only oset
where
there
is
a legally
enforceable right
to
oset current
tax assets
and
liabilities.
Good
will
and
other
intangible asset
s
Goodwill arises on business combinations and represents the excess of the cost of an acquisition
over
the Group’s
share of
the
identiable net
assets of
the
acquiree at
the acquisition
date.
The
consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred,
the liabilities incurred and equity interests issued by the Group in exchange for control of the
acquiree. Consideration transferred also includes the fair value of any asset or liability resulting from
a contingent consideration arrangement. Acquisition related costs are expensed in administrative
expenses
as incurred.
All identiable
assets
and liabilities
acquired and
contingent
liabilities assumed
are initially measured at their fair values at the acquisition date.
Where
the cost
is less
than
the Group’s
share of
the
identiable net
assets, the
dierence
is
immediately recognised in the income statement as a gain from a bargain purchase.
Goodwill arising on acquisitions before the date of transition to IFRS has been retained at the previous
UK
GAAP amounts
subject to
being
tested for
impairment at
that
date.
Signi
c
ant accounting policie
s
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ate
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Governance
Financial st
atement
s
Other
intangible assets
identied on
acquisition
by the
Group that
have
nite useful
lives are
recognised at fair value and measured at cost less accumulated amortisation and impairment losses.
Those that are acquired separately, such as software, are recognised at cost less accumulated
amortisation and impairment losses. Amortisation is recognised on a straight-line basis over their
estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of
each
reporting period,
with the
eect
of any
changes in
estimate
being accounted
for on
a
prospective
basis.
The estimated
useful lives
for
the Group’s
nite life
intangible
assets are
three years.
Proper
t
y,
plant
and
equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognised
impairment loss. Depreciation is charged over their estimated useful lives using the straight-line
method on the following basis:
freehold land
not depreciated
plant and equipment
between 8.3% and 33% per year
xtures
and ttings
over the
period
of
the
lease
Right-of-use assets
over the period of the lease
Residual values of property, plant and equipment are reviewed and updated annually.
Gains and losses on disposal are determined by comparing the proceeds from disposal against the
carrying amount and are recognised in the income statement.
Investm
ent
proper
t
y
Investment property, which is property held to earn rentals and/or capital appreciation is stated at its
fair value at the reporting date. Gains or losses arising from changes in the fair value of investment
property are included in the income statement for the period in which they arise.
Shared
equit
y
loan
receivabl
es
The Group has granted loans under shared equity home ownership schemes allowing qualifying
homebuyers to defer payment of part of the agreed sales price, up to a maximum of 25%, until the
earlier of the loan term (10 or 25 years depending upon the scheme), remortgage or resale of the
property. On occurrence of one of these events, the Group will receive a repayment based on its
contributed
equity percentage
and the
applicable
market value
of the
property
as determined
by a
member of the Royal Institution of Chartered Surveyors. Early or part repayment is allowable under
the scheme and amounts are secured by way of a second charge over the property. The loans are
non-interest bearing.
The shared equity receivable balance designated as at FVTPL under IFRS 9. Fair value movements
are
recognised in
operating prot
and
the resulting
nancial asset
is
presented as
a non-current
receivable. Fair value movements include accreted interest. There have been no transfers between
categories in the fair value hierarchy in the current and preceding year.
Inventories
Inventories
are stated
at the
lower
of cost
and net
realisable
value. The
cost of
work
in
progress
comprises raw materials, direct labour, other direct costs and related overheads. Net realisable value
is the estimated selling price less applicable costs.
Impairment of
non
-
nancial
asset
s
The Group assesses at each reporting date, whether there is an indication that an asset may be
impaired. If any indication exists, or when annual impairment testing for an asset is required, the
Group estimates the asset’s recoverable amount. When the carrying amount of an asset exceeds its
recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
Further
disclosures relating
to the
impairment
of non-nancial
assets are
provided
in note
9 -
goodwill
and other intangible assets.
T
rade
receivab
les
Trade receivables are initially recognised at fair value and are subsequently measured at amortised
cost
using the
eective interest
rate
method with
an appropriate
allowance
for estimated
irrecoverable amounts recognised in the income statement.
Cash and
ca
sh
equival
ent
s
Cash and cash equivalents can include cash in hand, demand deposits and other short-term, highly
liquid
investments that
are readily
convertible
to a
known amount
of
cash and
are subject
to
an
insignicant
risk of
changes in
value.
The carrying
amount of
these
assets approximates
to their
fair
value.
Bank
borrowings are
generally considered
to
be nancing
activities. However,
bank
overdrafts
which
are repayable
on demand
form
an integral
part of
an
entity's cash
management. In
these
circumstances,
bank overdrafts
are included
as
a component
of cash
and
cash equivalents
for the
purpose
of presentation
in the
consolidated
cash ow
statement. A
characteristic
of such
banking
arrangements
is that
the bank
balance
often uctuates
from being
positive
to overdrawn.
Signi
c
ant accounting policie
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ate
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t
Governance
Financial st
atement
s
T
rade
payables
Trade payables are recognised initially at fair value and are subsequently measured at amortised cost
using
the eective
interest rate
method.
Retirement benet schemes
(a)
Dened contribution
plan
A
dened contribution
plan is
a
post-retirement benet
plan under
which
the Group
pays xed
contributions to a separate entity and has no legal or constructive obligation to pay further amounts.
The
Group recognises
payments to
dened
contribution pension
plans as
sta
costs in
the income
statement as and when they fall due. Prepaid contributions are recognised as an asset to the extent
that a cash refund or reduction on future payments is available.
(b)
Dened benet
plan
A
dened benet
plan is
any
post-retirement plan
other than
a
dened contribution
plan. For
dened
benet
retirement benet
schemes, the
cost
of providing
benets is
determined
using the
projected
unit credit method, with actuarial valuations being carried out at the end of each reporting period.
Remeasurement
comprising actuarial
gains and
losses,
the eect
of the
asset
ceiling (if
applicable)
and the return on scheme assets (excluding interest) are recognised immediately in the statement
of
nancial position
with a
charge
or credit
to the
statement
of comprehensive
income in
the
period
in which they occur. Remeasurement recorded in the statement of comprehensive income is not
recycled.
Past service
cost is
recognised
in prot
or loss
when
the plan
amendment or
curtailment
occurs,
or when
the Group
recognises
related restructuring
costs or
termination
benets, if
earlier.
Gains
or losses
on settlement
of
a dened
benet plan
are
recognised when
the settlement
occurs.
Net
interest is
calculated by
applying
a discount
rate to
the
net dened
benet liability
or
asset.
Dened
benet costs
are split
into
three categories
(i) service
costs,
which includes
current service
cost, past service cost and gains and losses on curtailments and settlements; (ii) net interest expense
or income; and (iii) remeasurements.
The Group presents service costs within cost of sales and administrative expenses in its consolidated
income
statement. Net
interest expense
or
income is
recognised within
nance
costs.
The
retirement benet
obligation recognised
in
the consolidated
statement of
nancial
position
represents
the decit
or surplus
in
the Group’s
dened benet
schemes.
Any surplus
resulting from
this
calculation is
limited to
the
present value
of any
economic
benets available
in the
form
of
refunds
from the schemes or reductions in future contributions to the schemes.
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of
a
past event,
it is
probable
that an
outow of
resources
will be
required to
settle
the
obligation and
the
amount of the obligation can be estimated reliably. Provisions are recognised for events covered by
the Group’s captive or self-insurance arrangements, legal claims and restructuring.
When the Group expects some or all of a provision to be reimbursed, for example, under an insurance
contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is
virtually
certain. The
expense relating
to
a provision
is presented
in
the statement
of prot
or
loss
net
of any reimbursement where the reimbursement has met the virtually certain recognition criteria.
If
the eect
of the
time
value of
money is
material,
provisions are
discounted using
a
current
pre-tax
rate
that reects,
when appropriate,
the
risks specic
to the
liability.
When discounting
is used,
the
increase
in the
provision due
to
the passage
of time
is
recognised as
a nance
cost.
Impairment of
nancial
asset
s
The Group always recognises lifetime expected credit losses for trade receivables, contract assets
and
loans to
joint ventures.
The
expected credit
losses on
these
nancial assets
are estimated
using
a
provision matrix
based on
the
Group’s historical
credit loss
experience,
adjusted for
factors that
are
specic to
the debtors,
general
economic conditions
and an
assessment
of both
the current
as
well as the forecast direction of conditions at the reporting date, including time value of money where
appropriate.
Share
-
ba
sed
payme
nts
Equity-settled share-based payments to employees are measured at the fair value of the equity
instruments
at the
grant date.
The
fair value
is expensed
in
employee benets
expenses on
a
straight-
line basis over the vesting period, based on the Group’s estimate of equity instruments that will
eventually vest.
At each reporting date, the Group revises its estimate of the number of equity instruments expected
to
vest as
a result
of
the eect
of non-market-based
vesting
conditions. The
impact of
the
revision
of
the
original estimates,
if any,
is
recognised in
prot or
loss
such that
the cumulative
expense
reects
the
revised estimate,
with a
corresponding
adjustment to
equity reserves.
No
expense is
recognised for
awards
that do
not ultimately
vest
because non-market
performance
and/or
service conditions
have not
been
met. Where
awards include
a
market or
non-vesting
condition,
the transactions
are treated
as
vested irrespective
of whether
the
market or
non-vesting
condition
is satised,
provided that
all
other performance
and/or service
conditions
are satised.
The
dilutive eect
of outstanding
options
is reected
as additional
share
dilution in
the computation
of
diluted earnings per share (further details are given in note 23).
Signi
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Financial st
atement
s
Deri
vative nancial
ins
trume
nts and
he
dge
a
ccounting
Derivative
nancial instruments
may be
used
in joint
ventures to
hedge
long-term oating
interest rate
and Retail Prices Index (RPI) exposures and in Group companies to manage their exposure to foreign
exchange
rate risk.
Interest rate swaps, RPI swaps and foreign exchange forward contracts are stated in the statement
of
nancial position
at fair
value.
At the
inception of
the
hedge relationship,
the entity
documents
the
relationship
between the
hedging instrument
and
the hedged
item, along
with
its risk
management
objectives
and its
strategy for
undertaking
various hedge
transactions. Furthermore,
at
the inception
of the hedge and on an ongoing basis, the Group documents whether the hedging instruments that
are
used in
hedging transactions
are
highly eective
in osetting
changes
in fair
values or
cash
ows
of hedged items.
Where
nancial
instruments are
designated as
cash
ow
hedges
and
are deemed
to be
eective,
gains
and
losses on
remeasurement relating
to
the eective
portion are
recognised
in equity
and gains
and
losses
on the
ineective portion
are
recognised in
the income
statement.
Net investment hedges may be used to hedge exposure on translation of net investments in foreign
operations.
Any gain
or loss
on
the hedging
instrument relating
to
the eective
portion of
the
hedge
is
recognised in
other comprehensive
income;
the gain
or loss
relating
to the
ineective portion
is
recognised immediately in the income statement. In the event of disposal of a foreign operation,
the gains and losses accumulated in other comprehensive income are recognised in the income
statement.
There have been no transfers between categories in the fair value hierarchy in the current and
preceding year.
Signi
c
ant accounting policie
s
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18
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nnual Report 202
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Str
ate
gi
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Governance
Financial st
atement
s
C
r
i
t
i
c
a
l
a
c
c
o
u
n
t
i
n
g
j
u
d
g
e
m
e
n
t
s
a
n
d
e
s
t
i
m
a
t
e
s
for the year ended 31 December 2021
The
preparation of
nancial statements
under
IFRS requires
the Company’s
management
to make
judgements,
assumptions and
estimates that
aect
the application
of accounting
policies
and the
reported
amounts of
assets, liabilities,
income
and expense.
Actual results
may
dier from
these
estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the estimate is revised if the revision
aects
only that
period, or
in
the period
of the
revision
and future
periods if
the
revision
aects both
current and future periods.
Critical
judgement
s
and
estimate
s
in
app
ly
ing
the
G
roup
’s
accounting
policies
The
following are
the critical
judgements
and estimates
that the
directors
have made
in the
process
of
applying the
Group’s accounting
policies
and that
have the
most
signicant eect
on the
amounts
recognised
in the
nancial statements:
Revenue
recognition –
mixed use
schemes
(judgement)
The Group acts as developer and/or contractor on a number of mixed-use schemes. In some
instances,
judgement is
required to
determine
whether the
revenue on
a
particular element
of the
scheme
should be
recognised as
work
progresses (recognised
over time)
or
upon legal
completion
(recognised at a point in time). A detailed assessment is performed of the contractual agreements
with the customer as well as the substance of the transaction to determine performance obligations
have
been satised.
Relevant factors
that
are considered
include the
point
at which
legal ownership
of
the
land passes
to the
customer,
the degree
to which
the
customer can
specify the
major
structural
elements
of the
design prior
to
construction work
commencing and
the
degree to
which the
customer
can
specify modications
to the
major
structural elements
of the
building
during construction.
Revenue
and prot
recognition for
long
term contracts
(judgement and
estimate)
In
order to
determine the
revenue
and prot
recognition in
respect
of the
Group’s construction
contracts,
the Group
has to
estimate
the total
costs to
deliver
the contract
as well
as
the
nal contract
value. The Group has to allocate total expected costs between the amount incurred on the contract to
the end of the reporting period and the proportion to complete in a future period. The assessment of
the
total costs
to be
incurred
and nal
contract value
requires
a degree
of judgement
and
estimation.
The
nal contract
value may
include
assessments of
the recovery
of
variations which
have yet
to
be
agreed with client, as well as additional compensation claim amounts. The amount of variations and
claims are often not fully agreed with the customer due to timing and requirements of the normal
contractual process. Therefore, assessments are based on an estimate of the potential cost impact of
the compensation claims and revenue is constrained to amounts that the Group believes are highly
probable of being received. The estimation of costs to complete is based on all available relevant
information
and may
include judgements
and
estimates of
any potential
defect
liabilities or
liquidated
damages for unagreed scope or timing variations. Costs incurred in advance of the contract that are
directly attributable to the contract may also be included as part of the total costs to complete the
contract. Judgement is required to consider when any pre-contract costs are directly attributable to a
specic
contract.
Impairment
testing of
goodwill (estimate)
The assessment of whether any impairment of goodwill is required requires an estimation of the value
in
use of
the Cash
Generating
Units (CGUs)
to which
goodwill
has been
allocated. The
value
in
use
calculation
requires an
estimate of
the
future cash
ows expected
from
these CGUs,
including the
anticipated growth rate of revenue and costs as well as resulting operating margin and requires the
determination
of a
suitable discount
rate
to calculate
the present
value
of the
cash ows.
Details
of
the
goodwill impairment review calculations performed is included in note 9.
18
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1
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
N
o
t
e
s
t
o t
h
e
c
o
n
so
l
i
d
a
t
e
d
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
1
Revenue
An analysis of the Group’s revenue is as follows:
2021
£m
2020
£m
Construction contracts
2,203.9
2,218.5
Other services
234.2
217.1
Construction activities revenue
2,438.1
2,435.6
Regeneration activities revenue
774.7
598.4
Total revenue
3,212.8
3,034.0
2021
2020
Recognised
on
performance
obligations
satised over
over time
£m
Recognised
on
performance
obligations
satised at
a point in
time £m
Total
Revenue
£m
Recognised
on
performance
obligations
satised over
over time
£m
Recognised
on
performance
obligations
satised at a
point in time
£m
Total
Revenue
£m
Construction
693.5
–
693.5
670.3
–
670.3
Infrastructure and design
826.1
–
826.1
966.5
–
966.5
Construction and
Infrastructure
1,519.6
–
1,519.6
1,636.8
–
1,636.8
Traditional
t out
634.7
–
634.7
600.6
–
600.6
Design and build
160.7
–
160.7
99.5
–
99.5
Fit Out
795.4
–
795.4
700.1
–
700.1
Property Services
133.8
–
133.8
111.7
–
111.7
Contracting
249.2
–
249.2
196.2
–
196.2
Mixed
tenure
55.1
267.9
323.0
47.3
230.4
277.7
Partnership Housing
304.3
267.9
572.2
243.5
230.4
473.9
Urban Regeneration
154.9
47.6
202.5
67.3
57.2
124.5
Inter-segment revenue
(10.7)
–
(10.7)
(13.0)
–
(13.0)
Total revenue
2,897.3
315.5
3,212.8
2,746.4
287.6
3,034.0
Finance income of £0.6m (2020: £0.9m) is excluded from the table above.
As from 1 January 2021, the activities of the former Investments division were reorganised and
the
businesses formerly
reported within
Investments
transferred to
Partnership Housing,
Urban
Regeneration
and Group
activities. The
prior
year comparatives
have been
restated
to reect
this
reorganisation as described in Note 2.
18
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Annual Repor
t 20
21
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
Note
s
to
the consolid
ated nancial st
atem
ent
s
c
ontinued
2 Busine
ss se
gment
s
For
management purposes,
the Group
is
organised into
ve operating
divisions:
Construction &
Infrastructure,
Fit Out,
Property Services,
Partnership
Housing and
Urban Regeneration,
and
this is
the
structure of
segment information
reviewed
by the
chief operating
decision
maker (CODM).
The
divisions’ activities are as follows:
Construction
& Infrastructure:
Morgan Sindall
Construction
& Infrastructure
Ltd provides
construction services in the education, healthcare, commercial, defence, industrial, leisure and
retail
markets and
delivers infrastructure
projects
in the
highways, rail,
energy,
water and
nuclear
markets.Infrastructure
also includes
the BakerHicks
Limited
design activities
based in
the
UK and
Switzerland.
Fit
Out: Overbury
plc specialises
in
t out
and refurbishment
in
commercial, central
and local
government
oces, as
well as
further
education. Morgan
Lovell plc
provides
oce interior
design
and build services direct to occupiers.
Property
Services: Morgan
Sindall Property
Services
Limited provides
responsive repairs
and
planned maintenance for social housing and the wider public sector.
Partnership
Housing: Lovell
Partnerships Limited
works
in partnerships
with local
authorities
and
housing associations. Activities include mixed-tenure developments, building and developing homes
or
open market
sale and
for
social/aordable rent,
design and
build
house contracting
and planned
maintenance and refurbishment.
Urban
Regeneration: Muse
Developments Limited
focuses
on transforming
the urban
landscape
through
partnership working
and the
development
of multi-phase
sites and
mixed-use
regeneration
Group activities represent costs and income arising from corporate activities which cannot be
meaningfully allocated to the operating segments. These include the costs of the Group Board,
treasury
management, corporate
tax coordination,
Group
nance and
internal audit,
insurance
management, company secretarial services, information technology services, interest revenue and
interest expense.
As from 1 January 2021, the activities of the former Investments division were reorganised with it no
longer
operating as
a separate
division.
The operational
management of
the
joint venture
property
partnerships and Later Living business formerly reported within Investments were transferred to
Partnership
Housing, Urban
Regeneration and
Group
activities. The
prior year
comparatives
have
been
restated to
reect this
reorganisation.
Adjusted
performance measures
The divisions are the basis on which the Group reports its segmental information as presented.
In
addition to
monitoring and
reviewing
the nancial
performance of
the
operating segments
and
the
Group on
a statutory
basis,
management use
adjusted performance
measures
which are
also
disclosed in the annual report. These measures are not an alternative or substitute to statutory IFRS
measures but are seen by management as useful in assessing the performance of the business on a
comparable
basis. These
nancial measures
are
also aligned
to the
measures
used internally
to assess
business performance in the Group’s budgeting process and when determining compensation. The
Group
also uses
other non-statutory
measures
which cannot
be derived
directly
from the
nancial
statements. There are four alternative performance measures used by management and disclosure in
the annual report which are:
‘Adjusted’
In
all cases
the term
‘adjusted’
excludes the
impact of
intangible
amortisation of
£1.5m (2020:
£3.1m).
This is used to improve the comparability of information between reporting periods to aid the use of
the annual report in understanding the activities across the Group’s portfolio. The below segmental
analysis
reconciles the
statutory operating
prot
measure to
the ‘adjusted’
measure
and is
used
in
reviewing the
segmental performance.
Adjusted
prot before
tax is
used
only in
monitoring the
Group’s performance which is the statutory measure excluding the impact of intangible amortisation
of
£1.5m (2020:
£3.1m). Adjusted
basic
earnings per
share and
adjusted
diluted earnings
per share
is the statutory measure excluding the post-tax impact of intangible amortisation of £1.2m (2020:
£2.5m)
and the
deferred tax
charge
arising due
to changes
in
UK corporation
tax rates
of
£5.1m
(2020:
£1.5m).
See note
8 for
a
detailed reconciliation
of the
adjusted
earnings per
share measures.
‘Net cash’
Net
cash is
dened as
cash
and cash
equivalents less
borrowings
and non-recourse
project nancing.
Lease liabilities are not deducted from net cash. A reconciliation of this number at the reporting date
can be found in note 25. In addition, management monitor and review average daily net cash as good
discipline
in managing
capital. Average
daily
net cash
is dened
as
the average
of the
365
end-of-day
balances of the net cash over the course of a reporting period.
‘Operating cashow’
Management
use an
adjusted measure
for
operating cash
ow as
it
encompasses other
cash ows
that
are key
to the
ongoing
operations of
the Group
such
as repayments
of lease
liabilities,
investment
in property, plant and equipment, investment in intangible assets, and returns from equity accounted
joint
ventures. The
gures can
be
derived from
the consolidated
cash
ow statement
being: Cash
inow
from operations
(£138.8m) plus
dividend
from joint
ventures (£nil),
interest
received from
joint
ventures (£0.6m, reported within £0.6m Interest received) and proceeds from the disposal of property,
plant and equipment (£1.4m), less repayments of lease liabilities (£15.2m), purchase of property, plant
and
equipment (£6.7m),
and purchase
of
intangible assets
(£1.3m). Operating
cash
ow conversion
is
operating
cash ow
as dened
above
divided by
adjusted operating
prot
as dened
above.
‘Return on
capital employed’
Management
use return
on capital
employed
(ROCE) in
assessing the
performance
and ecient
use
of capital
within the
regeneration
activities. ROCE
is calculated
as
adjusted operating
prot plus
interest
received from
joint ventures
divided
by average
capital employed.
Average
capital employed
is the 12-month average of total assets (excluding goodwill, intangibles and cash) less total liabilities
(excluding
corporation tax,
deferred tax,
intercompany
nancing and
overdrafts).
18
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nnual Report 202
1
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
Note
s
to
the consolid
ated nancial st
atem
ent
s
c
ontinued
2 Busine
ss se
gment
s continued
The Group reports its segmental information as presented below:
2021
Construction &
Infrastructure
£m
Fit Out
£m
Property
Services
£m
Partnership
Housing
£m
Urban
Regeneration
£m
Group
activities
£m
Eliminations
£m
Total
£m
External revenue
1,509.0
795.3
133.8
572.2
202.5
–
–
3,212.8
Inter-segment revenue
10.6
0.1
–
–
–
–
(10.7)
–
Total revenue
1,519.6
795.4
133.8
572.2
202.5
–
(10.7)
3,212.8
Operating prot/(loss) before amortisation of intangible assets
58.1
44.2
4.1
33.2
12.1
(20.4)
–
131.3
Amortisation of intangible assets
–
–
(1.5)
–
–
–
–
(1.5)
Operating prot/(loss)
58.1
44.2
2.6
33.2
12.1
(20.4)
–
129.8
Finance income
0.6
Finance expense
(4.2)
Prot before tax
126.2
Other information:
Depreciation
(12.3)
(3.0)
(1.0)
(2.4)
(0.8)
(1.0)
(20.5)
Average number of employees
3,966
839
786
884
88
103
6,666
18
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ate
gi
c rep
or
t
Governance
Financial st
atement
s
2 Busine
ss se
gment
s continued
Year ended 31 December 2020 (restated)
Construction &
Infrastructure
£m
Fit Out
£m
Property
Services
£m
Partnership
Housing
£m
Urban
Regeneration
£m
Investments
£m
Group
activities
£m
Eliminations
£m
Total
£m
External revenue
1,623.8
700.1
111.7
473.9
124.5
–
–
–
3,034.0
Inter-segment revenue
13.0
–
–
–
–
–
–
(13.0)
–
Total revenue
1,636.8
700.1
111.7
473.9
124.5
–
–
(13.0)
3,034.0
Operating
prot/(loss) before
amortisation of
intangible
assets
35.7
32.1
1.0
16.0
8.8
–
(25.1)
–
68.5
Amortisation of intangible assets
–
–
(1.2)
–
–
–
(1.9)
–
(3.1)
Operating
prot/(loss)
35.7
32.1
(0.2)
16.0
8.8
–
(27.0)
–
65.4
Finance income
0.9
Finance expense
(5.5)
Prot
before tax
60.8
Other information:
Depreciation
(12.2)
(2.5)
(1.6)
(3.6)
(0.9)
–
(1.2)
(22.0)
Average number of employees
4,084
823
759
864
91
–
116
6,737
Note
s
to
the consolid
ated nancial st
atem
ent
s
c
ontinued
18
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p p
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A
nnual Report 202
1
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
2 Busine
ss se
gment
s continued
Year ended 31 December 2020 (as reported)
Construction &
Infrastructure
£m
Fit Out
£m
Property
Services
£m
Partnership
Housing
£m
Urban
Regeneration
£m
Investments
£m
Group
activities
£m
Eliminations
£m
Total
£m
External revenue
1,623.8
700.1
111.7
441.4
122.8
34.2
–
–
3,034.0
Inter-segment revenue
13.0
–
–
–
–
–
–
(13.0)
–
Total revenue
1,636.8
700.1
111.7
441.4
122.8
34.2
–
(13.0)
3,034.0
Operating
prot/(loss) before
amortisation of
intangible
assets
35.7
32.1
1.0
16.1
9.2
(6.9)
(18.7)
–
68.5
Amortisation of intangible assets
–
–
(1.2)
–
–
(1.9)
–
–
(3.1)
Operating
prot/(loss)
35.7
32.1
(0.2)
16.1
9.2
(8.8)
(18.7)
–
65.4
Finance income
0.9
Finance expense
(5.5)
Prot
before tax
60.8
Other information:
Depreciation
(12.2)
(2.5)
(1.6)
(3.0)
(0.8)
(0.7)
(1.2)
(22.0)
Average number of employees
4,084
823
759
850
77
49
95
6,737
Segment
assets and
liabilities are
not
presented as
these are
not
reported to
the CODM.
Note
s
to
the consolid
ated nancial st
atem
ent
s
c
ontinued
18
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Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
3
Prot
for
th
e
year
Prot
before tax
for the
year
is stated
after charging/(crediting):
2021
£m
2020
£m
Gain
on disposal
of interests
in
joint ventures
–
(2.7)
Depreciation charge:
Plant,
equipment, xtures
and ttings
7.0
7.9
Right-of-use assets
13.5
14.1
Government grants received
(12.4)
(4.0)
Amortisation of intangible assets
1.5
3.1
Impairment of Investments
1.2
3.3
In December 2020, the Group disposed of its 45% interest in PSBP NW Holdco Limited for
consideration of £7.3m. The resulting gain on disposal recognised in 2020 was £2.7m.
During 2021 the Group recognised £1.2m of impairments of investments (2020: £3.3m). The 2020
impairments
included the
£2.0m impairment
of
an interest
in joint
venture
in the
Partnership Housing
division.
Auditor's remuneration
2021
£m
2020
£m
Audit of the Company’s annual report
0.3
0.3
Audit
of the
Company’s subsidiaries
and
joint ventures
1.2
1.1
Total audit fees
1.5
1.4
Total non-audit fees
–
–
Total audit and non-audit fees
1.5
1.4
Non-audit fees totalled £nil for the year ended 31 December 2021 (2020: £6,500). The prior year non-
audit fees relate to agreed-upon procedures in relation to the half-year results announcement.
4
Sta
cost
s
2021
£m
2020
£m
Wages and salaries
468.6
440.6
Social security costs
54.3
50.8
Other pension costs (note 18)
20.8
17.5
543.7
508.9
During
2020, the
Group claimed
£9.5m
from HMRC
under the
UK
government’s CJRS
furlough
scheme, upon which corporation tax of £1.8m was paid. Later in 2020, the Group voluntarily repaid
the CJRS furlough claims. The repayment was such that £7.7m was repaid directly (being 81% of
the
total received),
taken through
central
Group costs,
with the
remaining
£1.8m repaid
to HMRC
in
additional corporation tax. The receipt of the furlough amounts claimed through the CJRS furlough
scheme (£9.5m) and the expense for the amounts repaid directly (£7.7m) were recognised within
sta
costs during
2020. Although
£1.8m
corporation tax
was paid
upon
the furlough
claim receipt,
the
£7.7m repayment was not tax-deductible.
5
Finance
income and
ex
pen
se
Notes
2021
£m
2020
£m
Interest
receivable from
joint ventures
0.6
0.6
Other interest income
–
0.3
Finance income
0.6
0.9
Interest
expense on
bank overdrafts
and
borrowings
–
(1.3)
Interest expense on lease liabilities
20
(1.5)
(1.7)
Loan arrangement and commitment fees
(2.5)
(1.7)
Other interest expense
(0.2)
(0.8)
Finance expense
(4.2)
(5.5)
Net nance expense
(3.6)
(4.6)
Included within other interest expense is £0.2m discount unwind on deferred land payments (2020:
£0.7m).
Note
s
to
the consolid
ated nancial st
atem
ent
s
c
ontinued
189
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Str
ate
gi
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or
t
Governance
Financial st
atement
s
6
T
ax
Tax
expense for
the year
2021
£m
2020
£m
Current tax:
Current year
22.9
10.9
Adjustment
in respect
of prior
years
(0.3)
0.9
22.6
11.8
Deferred tax:
Current year
1.7
2.8
Eect
of change
in tax
rate
used to
calculate deferred
tax
balances
5.1
1.5
Adjustment
in respect
of prior
years
(1.1)
(0.7)
5.7
3.6
Tax expense for the year
28.3
15.4
UK
corporation tax
is calculated
at
19.00% (2020:
19.00%) of
the
estimated taxable
prot for
the
year.
The
table below
reconciles the
tax
charge for
the year
to
tax at
the UK
statutory
rate:
2021
£m
2020
£m
Prot
before tax
126.2
60.8
Less:
post tax
share of
prots
from joint
ventures
(5.4)
(2.3)
120.8
58.5
UK
corporation tax
rate
19.00%
19.00%
Income
tax expense
at UK
corporation
tax rate
23.0
11.1
Tax eect of:
Adjustments
in respect
of prior
years
(1.4)
0.2
Non-taxable income and expenses (including CJRS furlough
repayment)
1
0.3
2.7
Tax
liability upon
joint venture
prots
2
0.7
0.6
Gain
on disposal
of joint
ventures
not giving
rise to
a
tax liability
–
(0.5)
Change in tax rate used to calculate deferred tax balances
5.1
1.5
Other
0.6
(0.2)
Tax expense for the year
28.3
15.4
1
During 2020,
the Group
claimed
£9.5m
from HMRC
under
the UK
government's
CJRS
furlough scheme,
upon
which
corporation tax of £1.8m was paid. Later in 2020 the Group voluntarily repaid the CJRS furlough claims. The repayment was
structured such that £7.7m was repaid directly (being 81% of the total received), recognised in central Group costs, with the
remaining £1.8m
repaid
to
HMRC in
additional
corporation tax,
as
the
repayment through
central
Group costs
was
not
tax-
deductible.
2
Certain of
the Group’s
joint
ventures
are partnerships
for
which prots
are
taxed
within the
Group
rather than
within
the
joint
venture.
Note
s
to
the consolid
ated nancial st
atem
ent
s
c
ontinued
19
0
_
Mo
rg
an S
in
da
ll G
ro
u
p pl
c
Annual Repor
t 20
21
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
6
T
ax c
ontinued
Deferred
tax assets/(liabilities)
Asset amortisation
and depreciation
£m
Short-term timing
dierences
£m
Share-based
payments
£m
Total
£m
1 January 2020
(14.8)
1.8
4.9
(8.1)
(Charge) to income statement
–
(0.4)
(1.7)
(2.1)
(Charge) to equity
–
–
(1.4)
(1.4)
Eect
of change
in tax
rate:
(Charge)/credit to income statement
(1.6)
0.1
–
(1.5)
Credit to equity
–
–
0.6
0.6
1 January 2021
(16.4)
1.5
2.4
(12.5)
(Charge)/credit to income statement
(0.6)
1.0
(1.0)
(0.6)
Credit to equity
–
–
8.2
8.2
Eect
of change
in tax
rate:
(Charge) to income statement
(5.1)
–
–
(5.1)
31 December 2021
(22.1)
2.5
9.6
(10.0)
Certain
deferred tax
assets and
liabilities,
as shown
above, have
been
oset as
the Group
has
a
legally
enforceable right to do so.
During
2021, it
was announced
that
the UK
statutory tax
rate
will increase
from 19%
to
25%
from 1
April
2023. Consequently,
the applicable
tax
rate for
the Group
(taking
into account
its December
year
end) is expected to be 19% in 2021 and 2022, 23.5% in 2023, and 25% in 2024 (and beyond). Deferred
taxes at the balance sheet date are measured at the enacted rates that are expected to apply to the
unwind of each asset or liability. Accordingly, deferred tax balances as at 31 December 2021 have
been calculated at a mix of 19%, 23.5% and 25%. Deferred tax balances as at 31 December 2020 were
calculated at 19%. This change in the deferred tax calculation rate has resulted in a £5.1m increase in
the tax charge for the year.
During
2020, it
was announced
that
a previously
announced reduction
in
the UK
statutory tax
rate
from 19% to 17% would not occur. Deferred tax balances as at 31 December 2019 were calculated at
17%, and deferred tax balances as at 31 December 2020 were calculated at 19%. This change resulted
in a £1.5m increase in the tax charge for 2020.
During 2021, it was announced that Residential Property Developer Tax (RPDT) will be introduced
from
1 April
2022 at
a
rate of
4%, on
prots
arising from
residential property
development.
A
£25m
annual tax-free allowance will apply in aggregate for the Group. The Group expects RPDT to increase
its
eective tax
rate from
2022
onwards, as
a result
of
the operations
of its
Partnership
Housing
and
Urban
Regeneration businesses.
As RPDT
had
not been
substantively enacted
as
at 31
December
2021,
the deferred
tax balances
have
not been
revalued to
take
account of
RPDT. However,
if
the
deferred
tax balances
had been
revalued
to take
into account
the
eect of
RPDT then
the
eect
would
not
have been
signicant.
At
31 December
2021, the
Group
had unused
tax losses
of
£5.0m (2020:
£4.6m) available
for
oset
against
future prots.
No deferred
tax
assets have
been created
in
respect of
these losses
due
to
the
unpredictability
of future
prot streams
against
which the
losses may
be
utilised. The
losses may
be
carried
forward indenitely.
7
Divid
ends
Amounts recognised as distributions to equity holders in the year:
2021
£m
2020
£m
Final dividend for the year ended 31 December 2020 of 40.0p
per share
18.5
–
Interim dividend for the year ended 31 December 2021 of 30.0p
per share
13.8
–
Interim dividend for the year ended 31 December 2020 of 21.0p
per share
–
9.6
32.3
9.6
The
proposed nal
dividend for
the
year ended
31 December
2021
of 62.0p
per share
is
subject
to
approval by
shareholders at
the
AGM and
has not
been
included as
a liability
in
these
nancial
statements.
Note
s
to
the consolid
ated nancial st
atem
ent
s
c
ontinued
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ate
gi
c rep
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Governance
Financial st
atement
s
8
Earnings
per share
2021
£m
2020
£m
Prot
attributable to
the owners
of
the Company
97.9
45.4
Adjustments:
Amortisation of intangible assets net of tax
1.2
2.5
Deferred
tax charge
arising due
to
change in
UK corporation
tax
rates
5.1
1.5
Adjusted
earnings
104.2
49.4
2021
Number
of shares
(millions)
2020
Number
of shares
(millions)
Basic weighted average number of ordinary shares
46.1
45.5
Dilutive
eect of
share options
and
conditional shares
not vested
1.8
0.8
Diluted weighted average number of ordinary shares
47.9
46.3
Basic earnings per share
212.4p
99.8p
Diluted earnings per share
204.4p
98.1p
Adjusted
earnings per
share
226.0p
108.6p
Diluted
adjusted earnings
per share
217.5p
106.7p
The
average market
value of
the
Company’s shares
for the
purpose
of calculating
the dilutive
eect
of
share
options and
long-term incentive
plan
shares was
based on
quoted
market prices
for the
year.
The average share price for the year was £21.39 (2020: £13.60).
A total of 865,271 share options that could potentially dilute earnings per share in the future were
excluded from the above calculations because they were anti-dilutive at 31 December 2021 (2020:
1,724,145).
9
Goodw
ill
and
othe
r
intangible asset
s
Goodwill
£m
Other
intangible
assets
£m
Total
£m
Cost
1 January 2020
217.7
39.2
256.9
Additions
–
1.6
1.6
1 January 2021
217.7
40.8
258.5
Additions
–
1.3
1.3
31 December 2021
217.7
42.1
259.8
Accumulated amortisation
1 January 2020
–
(33.3)
(33.3)
Amortisation
–
(3.1)
(3.1)
1 January 2021
–
(36.4)
(36.4)
Amortisation
–
(1.5)
(1.5)
31 December 2021
–
(37.9)
(37.9)
Net book value at 31 December 2021
217.7
4.2
221.9
Net
book value
at 31
December
2020
217.7
4.4
222.1
Goodwill
represents the
value of
people,
track record
and expertise
acquired
within acquisitions
that
are
not capable
of being
individually
identied and
separately recognised.
Goodwill
is allocated
at
acquisition
to the
cash-generating units
that
are expected
to benet
from
the business
combination.
The
allocation is
as follows:
Construction
& Infrastructure
£151.1m (2020:
£151.1m),
Partnership
Housing
£50.6m (2020:
£50.6m) and
Urban
Regeneration £16.0m
(2020: £16.0m).
At 31 December 2020 we reported Goodwill allocated to the previous Investments division of £3.8m.
This Goodwill has been reallocated to Partnership Housing following the reorganisation described in
note 2.
Other intangible assets relate to internally generated software in Property Services £4.2m (2020:
£4.4m). The cost and accumulated amortisation amounts for acquired intangible assets (excluding
goodwill) that are fully written down at 31 December 2021 are £32.3m and (£32.3m) respectively.
Note
s
to
the consolid
ated nancial st
atem
ent
s
c
ontinued
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ate
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Governance
Financial st
atement
s
9
Goodw
ill
and
othe
r
intangible asset
s
continued
The Group tests goodwill annually for impairment, or more frequently if there are indications that
goodwill might be impaired. In testing goodwill and other intangible assets for impairment, the
recoverable amount of each cash-generating unit has been estimated from value-in-use calculations.
The
key assumptions
for the
value-in-use
calculations are
those regarding
the
forecast revenue
and
margin,
discount rates
and long-term
growth
rates by
market sector.
Forecast
revenue and
margin
are
based on
past performance,
secured
workload and
workload likely
to
be achievable
in the
short
to
medium
term, given
trends in
the
relevant market
sector as
well
as macroeconomic
factors.
Cash
ow forecasts
have been
determined
by using
Board approved
strategic
plans for
the next
three
years.
Cash ows
beyond three
years
have been
extrapolated into
perpetuity
using an
estimated
nominal growth rate of 2.1% (2020: 2.1%). This growth rate does not exceed the long-term average for
the
relevant markets.
Discount
rates are
pre-tax and
reect
the current
market assessment
of
the time
value of
money
and
the
risks specic
to the
cash-generating
units. The
risk-adjusted nominal
rates
used for
the cash-
generating
units with
goodwill balances
are
10.7% (2020:
10.4%) for
Construction
& Infrastructure,
10.7%
(2020: 10.4%)
for Partnership
Housing
and 10.7%
(2020: 10.3%)
for
Urban Regeneration.
In
carrying out
this exercise,
no
impairment of
goodwill or
other
intangible assets
has been
identied.
No reasonably foreseeable change in the assumptions used within the value in use calculations would
cause an impairment in any of the segments.
Consideration
of the
impact of
climate
change
In
terms of
the possible
impacts
of climate
change, the
two
key assumptions
that could
be
sensitive
to this are the growth rate and discount rates noted above. If climate change has a negative impact
on revenues and/or the operating costs of the Group, there could be a potential impact on the
discounted
cash ow
growth rates
used
within the
valuation model.
Lower
future growth
rates would
reduce
the level
of the
discounted
cash ow
valuation and
hence
the amount
of headroom
available
to
the Group
above an
impairment
trigger. At
present, the
material
short- to
medium-term risks
presented by possible climate change impacts are considered to be factored into the growth and
discount
rates where
they are
known
and can
be quantied.
Using
the current
assumptions, no
reasonably
foreseeable change
in the
assumptions
used within
the value-in-use calculations would cause an impairment in any of the segments. Therefore, at
present, changes in the long-term assumptions due to the impact of climate change would also not be
expected to trigger an impairment.
1
0
Prop
er
t
y
,
plant
an
d
equipment
Freehold
property and
land
£m
Plant,
equipment,
xtures &
ttings
£m
Right of Use Assets
Total
£m
Leasehold
property
£m
Plant and
equipment
£m
Cost
1 January 2020
2.4
57.3
59.9
19.1
138.7
Additions
–
4.2
2.2
5.6
12.0
Transfers
–
(1.3)
–
1.3
–
Disposals
–
(9.9)
(6.7)
(4.4)
(21.0)
1 January 2021
2.4
50.3
55.4
21.6
129.7
Additions
–
6.7
3.6
12.3
22.6
Disposals
–
(7.9)
(3.6)
(6.4)
(17.9)
31 December 2021
2.4
49.1
55.4
27.5
134.4
Accumulated depreciation
1 January 2020
–
(37.5)
(12.7)
(9.0)
(59.2)
Depreciation charge
–
(7.9)
(8.6)
(5.5)
(22.0)
Transfers
–
0.6
–
(0.6)
–
Disposals
–
9.5
3.5
4.3
17.3
1 January 2021
–
(35.3)
(17.8)
(10.8)
(63.9)
Depreciation charge
–
(7.0)
(7.2)
(6.3)
(20.5)
Disposals
–
7.0
3.3
6.3
16.6
31 December 2021
–
(35.3)
(21.7)
(10.8)
(67.8)
Net book value at 31 December 2021
2.4
13.8
33.7
16.7
66.6
Net
book value
at 31
December
2020
2.4
15.0
37.6
10.8
65.8
The
Group holds
some plant,
property
& equipment
that is
fully
depreciated. The
cost and
accumulated depreciation amounts of this fully written down plant, property and equipment are
£21.9m and (£21.9m) respectively.
Note
s
to
the consolid
ated nancial st
atem
ent
s
c
ontinued
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ate
gi
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or
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Financial st
atement
s
1
1 Investm
ent prope
r
t
y
2021
£m
2020
£m
Valuation
1 January
2.7
5.1
Disposals
(1.9)
(1.8)
Revaluation
–
(0.6)
31 December
0.8
2.7
Investment properties comprise certain residential properties constructed by the Group as part of
larger, mixed-tenure projects for rental to social or private residential clients.
The fair value of the Group's investment property at 31 December 2021 is based on a valuation
carried out at that date by the directors. The valuation, which conforms to International Valuation
Standards,
was determined
based on
the
market comparable
approach that
reects
recent
transaction
prices for
similar properties.
The
fair value
measurement is
classied
as Level
3 as
dened
by IFRS 13 ‘Fair Value Measurement’.
1
2 Inves
tment
s in joint venture
s
The Group has interests in the following joint ventures:
Anthem Lovell LLP 50% partner
Anthem
Lovell LLP
is a
joint
venture with
Anthem Homes
Limited
(a subsidiary
of Walsall
Housing
Group
Limited) carrying
out a
strategic
development project
of a
residential
nature.
Brentwood Development Partnership LLP 50% share
Brentwood
Development Partnership
LLP is
a
partnership with
Seven Arches
Investments
Limited
(a wholly-owned subsidiary of Brentwood Borough Council) which is developing a series of sites in
Brentwood over a 30-year period.
Chalkdene Developments LLP 50% share
Chalkdene
Developments LLP
is a
partnership
with Herts
Living Ltd
(a
wholly-owned subsidiary
of
Hertfordshire
County Council)
which is
developing
a series
of sites
across
Hertfordshire over
a 15-year
period.
Claymore Roads (Holdings) Limited 50% share
Claymore
Roads (Holdings)
Limited is
a
joint venture
with Infrastructure
Investments
(Roads) Limited
and is responsible for the upgrade and operation of the A92 between Dundee and Arbroath in
Scotland.
English Cities Fund Limited Partnership 22.9% equity participation
English
Cities Fund
is a
limited
partnership with
Homes England
and
Legal &
General to
develop
mixed-use regeneration schemes in assisted areas. Joint control is exercised through the board of the
general partner at which each partner is represented by two directors and no decision can be taken
without the agreement of a director representing each partner.
Health Innovation Partners Limited 50% share
Through
the Health
Innovation Partners
joint
venture with
Arcadis BAC
Limited,
the Group
has a
25%
interest in
The Oxleas
Property
Partnership LLP
(TOPP), a
joint
venture with
the Oxleas
NHS
Foundation
Trust. TOPP
is a
10-year
partnership that
will work
to
develop the
Trust’s estate
and
surplus assets, helping to reduce costs and maximise revenue for the Trust which can be reinvested
into healthcare delivery.
hub West Scotland Limited 54% share
hub
West Scotland
Limited is
a
joint venture
between Wellspring
Partnership
Limited (itself
a joint
venture
between Morgan
Sindall Investments
Limited
and Apollo
(Hub West)
Limited),
Scottish
Futures
Trust Investments
Limited, East
Dunbartonshire
Council, East
Renfrewshire Council,
West
Dunbartonshire
Council, Glasgow
City Council,
NHS
Greater Glasgow
Health Board,
The
Board of
Strathclyde
Fire and
Rescue, Strathclyde
Joint
Police Board
and Clydebank
Property
Company Limited).
The joint venture is delivering a pipeline of public sector health, education, and community projects in
the Glasgow area.
Laurus Lovell LLP 50% partner
Laurus
Lovell LLP
is a
joint
venture with
THT Developments
Limited
(a subsidiary
of Traord
Housing
Limited),
established to
carry out
a
strategic development
project of
a
residential nature
in the
North
West
of England.
Lingley Mere Business Park Development Company Limited 50% share
Lingley
Mere Business
Park Development
Company
Limited is
a joint
venture
with United
Utilities
Property
Services Limited
(a wholly-owned
subsidiary
of United
Utilities PLC),
delivering
development
at
a site
in Warrington.
Note
s
to
the consolid
ated nancial st
atem
ent
s
c
ontinued
19
4
_
Mor
g
an S
in
da
ll G
ro
up p
l
c
Annual Repor
t 20
21
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
1
2 Inves
tment
s in joint venture
s continued
Lovell Flagship LLP 50% partner
Anthem
Lovell LLP
is a
joint
venture with
Flagship Housing
Developments
Limited (a
subsidiary of
Flagship
Housing Group
Limited), established
to
carry out
strategic development
and/or
regeneration
projects of a primarily residential nature.
Lovell Latimer LLP 50% partner
Lovell
Latimer LLP
is a
joint
venture with
Latimer Developments
Limited
(a subsidiary
of Clarion
Housing
Group Limited),
established to
carry
out a
strategic development
project
of a
residential
nature
in the
North West
of
England.
Lovell Together LLP 50% partner
Lovell
Together LLP
is a
joint
venture with
Together Commercial
Limited
(a subsidiary
of Together
Housing
Group Limited),
carrying out
three
strategic development
projects of
a
residential nature
in
Eastern England.
Lovell/Abri Weymouth LLP 50% partner
Lovell/Abri
Weymouth LLP
is a
joint
venture with
Radian Developments
Limited
(a subsidiary
of Abri
Group
Limited) carrying
out a
strategic
development project
of a
residential
nature.
Lovell Together (Pendleton) LLP 50% partner
Lovell
Together (Pendleton)
LLP is
a
joint venture
with Together
Commercial
Limited (a
subsidiary
of
Together Housing
Group Limited),
established
to carry
out a
strategic
development project
of a
residential
nature in
the North
West
of England.
Morgan-Vinci Limited 50% share
Morgan-Vinci
Limited is
a joint
venture
with Vinci
Newport DBFO
Limited
and is
responsible for
the
construction
and operation
of the
Newport
Southern Distributor
Road.
Slough Urban Renewal LLP 50% share
Slough
Urban Renewal
LLP is
a
partnership with
Slough Borough
Council
which is
developing a
series
of sites in Slough over an initial term of 15 years, extendable by 10 years.
The Bournemouth Development Company LLP 50% share
The
Bournemouth Development
Company LLP
is
a partnership
with Bournemouth,
Christchurch
and
Poole
Council which
is developing
a
series of
sites in
Bournemouth
over a
20-year period.
The Compendium Group Limited 50% share
The
Compendium Group
Limited is
a
joint venture
with The
Riverside
Group Limited
and is
a
company
formed to carry out strategic development and regeneration projects of a primarily residential nature.
Waterside Places (General Partner) Limited 50% equity participation
Waterside
Places (General
Partner) is
a
joint venture
with The
Canal
and River
Trust to
undertake
regeneration of waterside sites.
Wapping Wharf (Alpha) LLP 50% partner
Wapping
Wharf (Alpha)
LLP is
a
joint venture
with Wapping
Wharf
(Umberslade) Limited
which
has
completed development
of the
rst
phase of
residential apartments
within
the Harbourside
Regeneration Area of Bristol.
Wapping Wharf (Beta) LLP 40% partner
Wapping
Wharf (Beta)
LLP is
a
joint venture
with Wapping
Wharf
(Umberslade) Limited
which will
develop
the second
phase of
residential
apartments within
the Harbourside
Regeneration
Area of
Bristol.
West Sussex Property Development LLP
West
Sussex Property
Development LLP
is
a joint
venture with
Edes
Estates Limited
(a subsidiary
of
West
Sussex County
Council), established
to
carry out
strategic developments
of
residential homes,
town
centre regeneration
and extra
care
provision across
West Sussex.
Wirral Growth Company LLP 50% partner
Wirral
Growth Company
LLP is
a
joint venture
with Wirral
Borough
Council and
was set
up
to
undertake
regeneration of
numerous sites
in
the Wirral
region of
North
West England.
Note
s
to
the consolid
ated nancial st
atem
ent
s
c
ontinued
19
5
_
Mor
ga
n Si
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Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
1
2 Inves
tment
s in joint venture
s continued
Investments in equity accounted joint ventures are as follows:
2021
£m
2020
£m
1 January
91.4
84.3
Equity
accounted share
of net
prots
5.4
2.3
Loans
advanced to
joint ventures
28.1
27.0
Loans
repaid by
joint ventures
(29.6)
(14.1)
Non-cash
impairment
(1.2)
(2.5)
Disposal of interest in joint venture
–
(5.6)
31 December
94.1
91.4
During 2021, a £5.6m non-cash impairment was recognised in the Group’s investment in The
Bournemouth
Development Company
LLP, a
joint
venture with
Bournemouth, Christchurch
and
Poole
Council.
The impairment
relates to
one
specic scheme
within the
joint
venture where
construction
cost
ination as
well as
other
factors have
challenged the
viability
of the
scheme. The
impairment
is
reported
through both
the equity
accounted
share of
net prots
and
non-cash impairment
lines in
the table above. Following the impairment, the carrying value of the division’s investment in this joint
venture is reduced to £3.2m.
In
December 2020,
the Group
disposed
of it
45% interest
in
PSBP NW
Holdco Limited
for
consideration of £7.3m. The resulting gain on disposal recognised in 2020 was £2.7m. The carrying
value of the interest disposed was £4.6m.
During
2020, the
Group also
disposed
of its
50% shareholding
in
HB Community
Solutions Living
Limited
which had
a carrying
value
of £0.9m.
No gain
or
loss was
recognised on
disposal
as
the
consideration received was equal to the carrying value.
Summarised
nancial information
related to
equity
accounted joint
ventures is
set
out below:
2021
£m
2020
£m
Non-current
assets (100%)
241.5
238.0
Current assets (100%)
448.8
444.1
Current liabilities (100%)
(187.4)
(187.2)
Non-current
liabilities (100%)
(389.3)
(371.3)
Net assets reported by equity accounted joint ventures
(100%)
113.6
123.6
Revenue (100%)
315.0
256.4
Expenses (100%)
(298.0)
(249.5)
Net prot (100%)
17.0
6.9
Results of equity accounted joint ventures:
2021
£m
2020
£m
Group
share of
prot before
tax
5.6
2.4
Group share of tax
(0.2)
(0.1)
Group share of prot after tax
5.4
2.3
Note
s
to
the consolid
ated nancial st
atem
ent
s
c
ontinued
19
6
_
Mor
g
an S
in
da
ll G
ro
up p
l
c
Annual Repor
t 20
21
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
1
3 Shared equit
y loan rece
ivable
s
The Group has granted loans under shared equity home ownership schemes allowing qualifying
homebuyers to defer payment of part of the agreed sales price, up to a maximum of 25%, until the
earlier of the loan term (10 or 25 years depending upon the scheme), re-mortgage or resale of the
property.
2021
£m
2020
£m
1 January
5.5
8.4
Net
change in
fair value
recognised
in the
income statement
(1.9)
(0.5)
Repayments by borrowers
(2.1)
(2.4)
31 December
1.5
5.5
Current
1.5
–
Non-current
–
5.5
31 December
1.5
5.5
The Group's maximum credit exposure is limited to the carrying value of the shared equity loan
receivables granted. The Group’s credit risk is partially mitigated as the shared equity loan receivables
are secured by way of a second charge over the property. There were no defaults during the year
(2020: no defaults).
Basis of valuation and assumptions made
There is no directly observable fair value for individual loans arising from the sale of properties
under the scheme. Therefore the Group has developed a model for determining the fair value of the
portfolio of loans based on national property prices, expected property price increases, expected loan
defaults
and a
discount factor
which
reects the
interest rate
expected
on an
instrument of
similar
risk
and duration in the market.
The
fair value
measurement for
shared
equity loan
receivables is
classied
as Level
3 as
dened
by
IFRS 7 'Financial Instruments: Disclosures'.
1
4 Inventories
2021
£m
2020
£m
Work
in progress
288.5
294.2
Work
in progress
comprises land
and
housing, commercial
and mixed-use
developments
in the
course of construction.
1
5 Contract as
set
s and liabilitie
s
2021
£m
2020
£m
Contract assets
232.6
171.8
Contract liabilities
(78.5)
(55.6)
The contract assets primarily relate to the Group’s right to consideration for construction work
completed but not invoiced at the balance sheet date. The contract assets are transferred to trade
receivables
when
the
amounts
are
certied
by
the
customer.
On
most
contracts,
certicates are
issued
by the customer on a monthly basis. All contract assets held at 31 December 2021 are expected to be
invoiced and transferred to trade receivables within the next 12 months.
The Group has taken advantage of the practical expedient in paragraph 94 of IFRS 15 to immediately
expense the incremental costs of obtaining contracts where the amortisation period of the assets
would have been one year or less.
The contract liabilities primarily relate to the advance consideration received from customers in
respect
of performance
obligations which
have
not yet
been fully
satised
and for
which revenue
has not been recognised. All contract liabilities held at 31 December 2021 are expected to satisfy
performance obligations in the next 12 months.
Signicant
changes in
the contract
assets
and the
contract liabilities
during
the period
are as
follows:
2021
2020
Contract
assets
£m
Contract
liabilities
£m
Contract
assets
£m
Contract
liabilities
£m
As at 1 January
171.8
(55.6)
186.8
(56.2)
Revenue recognised:
–
performance obligations
satised in
the current year
3,157.2
55.6
2,977.8
56.2
– adjustments to performance
obligations
satised in
previous years
–
–
–
–
Cash received for performance
obligations
not yet
satised
–
(78.5)
–
(55.6)
Amounts transferred to trade
receivables
(3,096.4)
–
(2,992.8)
–
31 December
232.6
(78.5)
171.8
(55.6)
Note
s
to
the consolid
ated nancial st
atem
ent
s
c
ontinued
197
_
Mor
ga
n Si
nd
al
l Gr
o
up p
lc
A
nnual Report 202
1
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
1
5 Contract as
set
s and liabilitie
s continued
The Group secured workload is the sum of the construction secured order book and the regeneration
secured order book, less any inter-divisional eliminations. The ‘secured order book’ is the sum of the
‘committed order book’, the ‘framework order book’ and (for the regeneration businesses only) the
Group’s share of the gross development value of secured schemes (including the development value
of open market housing schemes). The ‘committed order book’ represents the Group’s share of future
revenue that will be derived from signed contracts or letters of intent. The ‘framework order book’
represents the Group’s expected share of revenue from the frameworks on which the Group has
been
appointed. This
excludes prospects
where
conrmation has
been received
as
preferred bidder
only, with no formal contract or letter of intent in place.
The following table sets out the Group secured workload by operating segment which is deemed to
be the revenue expected to be recognised in the future related to performance obligations that are
unsatised
or partially
unsatised at
the
balance sheet
date:
2022
£m
2023
£m
2024 +
£m
Total
£m
Construction
& Infrastructure
1,274.4
729.6
711.1
2,715.1
Fit Out
528.3
143.1
225.8
897.2
Property
Services
118.4
110.4
716.0
944.8
Partnership
Housing
581.4
410.0
506.5
1,497.9
Urban
Regeneration
399.6
358.8
1,815.7
2,574.1
Eliminations
(14.4)
(0.3)
–
(14.7)
2,887.7
1,751.6
3,975.1
8,614.4
1
6 T
rade an
d other rece
ivable
s
2021
£m
2020
£m
Trade receivables (note 25)
250.2
202.9
Amounts owed by joint ventures
13.5
0.9
Prepayments
13.2
11.3
Insurance receivables
30.4
–
Other receivables
21.0
19.5
328.3
234.6
The directors consider that the carrying amount of trade and other receivables approximates to their
fair value.
Trade receivables are stated after provisions for impairment losses of £1.2m (2020: £1.2m).
The Group holds third party insurances that may mitigate the contract and legal liabilities described
in note 19 - provisions. Insurance receivables are recognised when reimbursement from insurers is
virtually certain.
1
7 T
rad
e and other payabl
es
2021
£m
2020
re-stated
1
£m
Trade payables
157.6
189.2
Amounts owed to joint ventures
0.2
0.2
Other tax and social security
107.5
40.5
Accrued expenses
602.7
587.8
Deferred income
8.9
17.7
Other payables
14.5
12.5
Current
891.4
847.9
Other payables
32.6
1.7
Non-current
32.6
1.7
1 The prior year balances for Accrued expenses within Trade and other payables have been re-stated as described in the basis
of preparation, along with their respective totals.
The
directors consider
that the
carrying
amount of
trade payables
approximates
to their
fair value.
No
interest
was incurred
on outstanding
balances.
Non-current other
payables have
been
discounted by
£3.3m
(2020: £0.1m)
to reect
the
time value
of money.
Note
s
to
the consolid
ated nancial st
atem
ent
s
c
ontinued
19
8
_
Mor
ga
n Si
n
da
ll G
ro
up p
l
c
Annual Repor
t 20
21
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
1
8
Ret
irement
bene
t
scheme
s
Dened
contribution plan
The
Morgan Sindall
Retirement Benets
Plan
(‘the Retirement
Plan’) was
established
on 31
May 1995
and
currently operates
on dened
contribution
principles for
employees of
the
Group. The
assets of
the
Retirement Plan
are held
separately
from those
of the
Group
in funds
under the
control
of
the
Trustee
of the
Retirement Plan.
The
total cost
charged to
the
income statement
of £21.1m
(2020:
£17.5m)
represents contributions
payable to
the
dened contribution
section of
the
Retirement Plan
by the Group.
As at 31 December 2021, contributions of £2.6m (2020: £2.2m) were due in respect of December’s
contribution
not paid
over to
the
Retirement Plan.
Dened
benet plan
The
Retirement Plan
includes a
dened
benet section
comprising liabilities
and
transfers of
funds
representing
the accrued
benet rights
of
active and
deferred members
and
pensioners of
pension
plans
of companies
which are
now
part of
the Group.
These
include salary
related benets
for
members
in respect
of benets
accrued
before 31
May 1995
(and
benets transferred
in from
The
Snape
Group Limited
Retirement Benets
Scheme
accrued up
to 1
August
1997). No
further dened
benet
membership rights
can accrue
after
those dates.
The scheme
duration
is an
indicator of
the
weighted-average
time until
benet payments
are
expected to
be made.
For
the scheme
as a
whole,
the duration is around 14 years.
On
23 May
2018 the
Trustees
of the
Retirement Plan
completed
a buy-in
transaction with
Aviva
to
insure
the benets
of the
dened
benet members.
The buy-in
policy
is an
asset of
the
Plan
that
provides
payments that
are an
exact
match to
the pension
payments
made to
the dened
benet
members covered by the policy.
During the year ended 31 December 2020, additional liabilities were recognised due to a court ruling
on
20 November
2020 in
respect
of guaranteed
minimum pension
(GMP)
equalisation for
past
transfers out. The additional liability recognised as a result of this ruling at 31 December 2021 is £0.2m
(2020: £0.2m).
The
present value
of the
dened
benet liabilities
was measured
using
the projected
unit credit
method. The following table shows the key assumptions used:
Key assumptions used:
2021
%
2020
%
Discount rate
1.9
1.2
Rate
of ination
3.1
2.5
Rate of future pension increases
(a)
3.0–3.5
3.0–3.5
Average life expectancy for pensioner retiring now at age 65 years
87.3
87.2
Average life expectancy for pensioner retiring in 20 years at age
65years
89.1
89.1
(a)
depending on their date of joining, members receive pension increases of 3.0% or 3.5%.
2021
2020
Assets
£m
Liabilities
£m
Total
£m
Assets
£m
Liabilities
£m
Total
£m
1 January
12.7
(12.9)
(0.2)
10.7
(10.7)
–
Finance
income/(expense)
0.1
(0.1)
–
0.2
(0.2)
–
Actuarial
(loss)/gain
(0.8)
0.8
–
1.1
(1.1)
–
Past
service cost
including
curtailments
–
–
–
–
(0.2)
(0.2)
Benets
paid
(1.9)
1.9
–
0.7
(0.7)
–
31 December
10.1
(10.3)
(0.2)
12.7
(12.9)
(0.2)
Sensitivity analysis
As the buy-in policy is valued in line with the corresponding liability value, there would be a
corresponding change in assets and liabilities for any change in assumptions used to value the
liabilities, with no impact on the net position.
There was no actuarial gain or loss recognised in the statement of comprehensive income during the
current or prior year.
For IAS 19 purposes, the buy-in asset is valued as equal to the accounting value of the liabilities
covered. This results in the total plan assets being equal to the IAS 19 liabilities, excluding the £0.2m
GMP
equalisation liability.
No
contributions are
expected to
be
paid to
the dened
benet
section of
the Retirement
Plan
during
2022.
Note
s
to
the consolid
ated nancial st
atem
ent
s
c
ontinued
19
9
_
Mor
g
an S
in
da
ll G
ro
up p
l
c
Annual Repor
t 20
21
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
1
9 Provisions
Self-insurance
£m
Contract & legal
£m
Other
£m
Total
£m
1 January 2020
20.1
–
8.8
28.9
Utilised
(1.1)
–
(3.0)
(4.1)
Additions
4.7
–
2.6
7.3
Released
(0.9)
–
(0.3)
(1.2)
1 January 2021
22.8
–
8.1
30.9
Utilised
(1.6)
–
(5.0)
(6.6)
Additions
4.5
22.7
0.2
27.4
Reclassications*
–
10.7
–
10.7
Released
(4.5)
–
(0.6)
(5.1)
31 December 2021
21.2
33.4
2.7
57.3
Current
33.4
–
33.4
Non-current
21.2
–
2.7
23.9
31 December 2021
21.2
33.4
2.7
57.3
*
A number
of items
previously
presented as
accruals
have
been reclassied
to
provisions in
the
current
year.
Self-insurance provisions
Self-insurance provisions comprise the Group’s self-insurance of certain risks and include £10.8m
(2020:
£11.4m) held
in the
Group’s
captive insurance
company, Newman
Insurance
Company Limited
(the ‘Captive’).
The
Group makes
provisions in
respect
of specic
types of
claims
incurred but
not reported
(IBNR).
The
valuation of
IBNR considers
past
claims experience
and the
risk
prole of
the Group.
These
are
reviewed periodically and are intended to provide a best estimate of the most likely or expected
outcome.
Contract and legal provisions
Contract and legal provisions include liabilities, loss provisions, defect and warranty provisions on
contracts that have reached completion.
The Group also holds third-party insurances that may mitigate the liabilities. Third-party insurance
reimbursement is recognised as a separate asset, but only when the reimbursement is virtually
certain. See note 16 for details of mitigating insurance assets recognised at the period end.
Other provisions
Other provisions include property dilapidations and other personnel related provisions.
The majority of the provisions are expected to be utilised within 10 years.
20 Leas
e liabilities
The Group leases several assets including the buildings, plant and vehicles to enable the Group to
carry
out its
day-to-day operations.
The
average lease
term is
ve
years. There
are no
variable
terms
to
any
of the
leases. The
maturity
prole for
the lease
liabilities
at 31
December 2021
is
set
out below:
2021
2020
Property
£m
Plant and
equipment
£m
Total
£m
Property
£m
Plant and
equipment
£m
Total
£m
Within
one year
7.4
6.0
13.4
7.5
4.6
12.1
Within
two to
ve years
20.4
10.2
30.6
21.2
5.4
26.6
After
more than
ve years
8.8
–
8.8
12.3
–
12.3
31 December
36.6
16.2
52.8
41.0
10.0
51.0
2021
2020
Property
£m
Plant and
equipment
£m
Total
£m
Property
£m
Plant and
equipment
£m
Total
£m
1 January
41.0
10.0
51.0
49.0
10.7
59.7
Additions
3.5
12.5
16.0
3.4
5.1
8.5
Terminations
(0.3)
(0.2)
(0.5)
(3.8)
–
(3.8)
Repayments
(8.7)
(6.5)
(15.2)
(9.0)
(6.1)
(15.1)
Interest expense
1.1
0.4
1.5
1.4
0.3
1.7
31 December
36.6
16.2
52.8
41.0
10.0
51.0
Note
s
to
the consolid
ated nancial st
atem
ent
s
c
ontinued
20
0
_
Mo
rg
an S
in
da
ll G
r
ou
p pl
c
Annual Repor
t 202
1
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
21 Contingent liabilities
Group banking facilities and surety bond facilities are supported by cross guarantees given by the
Company and participating companies in the Group. There are contingent liabilities in respect of
surety bond facilities, guarantees and claims under contracting and other arrangements, including
joint arrangements and joint ventures entered into in the normal course of business. As at 31
December 2021, contract bonds in issue under uncommitted facilities covered £137.2m (2020:
£124.6m) of contract commitments of the Group.
Contingent liabilities may also arise in respect of subcontractor and other third-party claims made
against
the
Group, in
the normal
course
of
trading.
These
claims can
include those
relating
to
cladding/
legacy
re safety
matters, and
defects.
A provision
for such
claims
is only
recognised to
the
extent
that the directors believe that the Group has a legal or constructive obligation as a result of a past
event
and it
is probable
that
an outow
of economic
benet
will be
required to
settle
the
obligation.
However,
such claims
are predominantly
covered
by the
Group’s insurance
arrangements.
Cladding
and re
safety review
The
Group has
considered the
public
letter to
Residential Property
Developer
industry from
the
Department
for Levelling
Up, Housing
&
Communities dated
10 January
2022,
as well
as the
letter
dated
22 January
2022 to
the
Construction Products
Association and
all
other related
government
press releases, communications and publications.
The Group fully agrees that the costs of remediation should not be borne by leaseholders and is
supportive of working with the government, industry and other key stakeholders to determine a
solution
to the
issue of
historic
cladding and
re safety
defects
in buildings.
The Group has considered the scope of relevant cases across its business in line with the criteria set
out in the 10 January 2022 letter and this review is ongoing. It is possible that a small number of cases
will
be identied
where the
Group
has a
liability leading
to
remediation. In
accordance with
the
Group’s
past
practice, the
Group is
committed
to meeting
its liabilities
as
they are
identied. While
any
such
costs incurred are not expected to be material and will likely span a number of years, the industry-wide
solution to the issues set out in the 10 January 2022 letter is still being determined and therefore any
liability arising therefrom cannot be reliably estimated.
In
common with
the rest
of
the industry,
the Group
will
begin paying
the Residential
Property
Developer Tax in 2022.
22 S
hare capit
al
2021
2020
Number
£m
Number
£m
Issued and fully paid ordinary shares of
5p each:
1 January
46,353,338
2.3
45,489,985
2.3
Exercise of share options
21,535
–
863,353
–
31 December
46,374,873
2.3
46,353,338
2.3
All issued ordinary shares are fully paid. Ordinary shares are entitled to dividends when declared and
each share carries the right to one vote at a meeting of the Company.
During 2021, 21,535 shares were issued in respect of options exercised under the Group’s Savings-
Related
Share Option
Plan for
a
total consideration
of £0.3m
(2020:
863,353 shares
were issued
for
a
total consideration of £7.0m).
23 S
hare
-
bas
ed pay
ment
s
The Group recognised a share option expense of £12.1m (2020: £0.1m share option credit) related
to equity-settled share-based payment transactions. The Group has three share option schemes with
unvested options or awards at 31 December 2021:
Share
option plan
(‘2014 SOP’)
for
eligible employees
across the
Group.
Options can
be exercised
if
the EPS
performance conditions
are
met over
a three-year
maturity
period. If
the options
remain
unexercised after a period of 10 years from the date of grant the options lapse. If employees are not
deemed
to be
good leavers
under
the rules
of the
2014
SOP, their
options will
be
forfeited
if they
leave the Group before the end of the option maturity period.
Savings-Related
Share Option
Plan (‘SAYE’)
for
all employees
that are
employed
by the
Group at
the
relevant
invitation date.
There are
no
performance criteria
for the
SAYE
and options
are issued
to
participants
in accordance
with HMRC
rules.
Long-
Term Incentive
Plan (‘2014
LTIP’).
Details of
the performance
conditions
and other
information
in
respect of
the 2014
LTIP
are set
out in
the
directors’ remuneration
report on
pages
152
and 153.
The Group also has options which are outstanding at 31 December 2021 under the Employee Share
Option
Plan 2007
(‘ESOP 2007’)
that
have vested
but the
employees
have not
elected to
exercise
their
options.
The outstanding
options under
the
ESOP 2007
must be
exercised
by 27
November 2024.
Note
s
to
the consolid
ated nancial st
atem
ent
s
c
ontinued
20
1
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ate
gi
c rep
or
t
Governance
Financial st
atement
s
23 S
hare
-
bas
ed pay
ment
s continued
As described on pages 126 to 128 in the 2021 directors' renumeration report, the Group’s
remuneration
committee made
amendments to
the
LTIP and
Share Option
Plan
EPS targets.
The
impact of these amendments was considered in calculating the 2021 share option expense for the
period.
Details of the share awards and options granted during the year and the valuation methodology are as
follows:
Share awards under 2014 LTIP
Share options
under 2014 SOP
Awards with
TSR condition
Awards with
EPS condition
Number
of awards
or options
granted
85,159
170,318
868,136
Weighted
average fair
value at
date
of
grant (per share)
£12.07
£15.41
£3.66
Weighted
average share
price at
date
of grant
£18.00
£18.00
£18.00
Weighted
average exercise
price
n/a
n/a
£17.17
Valuation model
Monte–Carlo
Black–
Scholes
Black–
Scholes
Expected term (from date of grant)
2.8 years
2.8 years
7.5 years
Expected volatility
(a)
42.1%
n/a
34.1%
Expected dividend yield
(b)
n/a
n/a
3.7%
Risk free rate
0.1%
n/a
0.6%
(a) Volatility has been calculated over the period of time commensurate with the expected award term
immediately prior to the date of grant.
(b)
Under the
2014 LTIP,
award
holders may
receive the
value
of any
dividends paid
during
the
vesting
period in respect of their vested shares at the end of the vesting period. Consequently, the fair value is
not discounted for value lost in respect of dividends.
The following table provides a summary of the options granted under the Company’s employee share
option schemes during the current and comparative year:
2021
2020
Number of
share options
Weighted
average
exercise price
(£)
Number of
share options
Weighted
average
exercise price
(£)
Outstanding at 1 January
4,481,179
12.43
5,360,455
10.47
Granted during the year
1,780,274
16.08
795,146
18.57
Lapsed
during the
year
(790,781)
12.75
(346,866)
12.09
Exercised during the year
(872,510)
10.28
(1,327,556)
8.28
Outstanding at 31 December
4,598,162
14.19
4,481,179
12.43
Exercisable at 31 December
284,443
9.75
820,894
9.26
Weighted
average
remaining
contractual
life
5.4 years
6.2 years
The weighted average share price at the date of exercise for share options exercised during the year
was £20.15 (2020: £13.49).
The options outstanding at 31 December 2021 had exercise prices ranging from £6.40 to £18.57.
Note
s
to
the consolid
ated nancial st
atem
ent
s
c
ontinued
20
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Str
ate
gi
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Governance
Financial st
atement
s
24 Relate
d par
t
y trans
ac
tions
Transactions between the Company and its subsidiaries, which are related parties, have been
eliminated on consolidation and are not disclosed in this note. During the year, Group companies
entered into transactions to provide construction and property development services with related
parties, all of which were joint ventures, not members of the Group, amounting to £124.0m (2020:
£50.7m). At 31 December 2021, amounts owed to the Group by joint ventures was £13.5m (2020:
£0.9m) and amounts owed by the Group to joint ventures was £0.2m (2020: £0.2m).
Remuneration of key management personnel
The Group considers key management personnel to be the members of the Group management
team,
and sets
out below
in
aggregate, remuneration
for each
of
the categories
specied in
IAS
24
‘Related
Party Disclosures’.
2021
£m
2020
£m
Short-term
employee benets
9.8
7.3
Post-employment
benets
0.1
0.1
Termination
benets
–
0.2
Share
option expense/(credit)
4.9
(0.4)
14.8
7.2
Details of directors’ remuneration are set out in the directors’ remuneration report on pages 143 to
147.
Directors’ transactions
There have been no related party transactions with any director in the year or in the subsequent
period to 24 February 2022.
Directors’ material interests in contracts with the Company
No
director held
any material
interest
in any
contract with
the
Company or
any Group
company
in
the
year or in the subsequent period to 24 February 2022.
25 Financial ins
tr
ument
s
Net cash
Net
cash is
dened as
cash
and cash
equivalents less
borrowings
and non-recourse
project nancing
as shown below:
2021
£m
2020
£m
Cash and cash equivalents
468.6
400.5
Bank overdrafts presented as borrowings due within one year
(110.2)
(67.3)
Cash and cash equivalents reported in the consolidated cash
ow statement
358.4
333.2
Borrowings
due between
two and
ve
years
(0.4)
(0.4)
Net cash
358.0
332.8
Included within cash and cash equivalents is £55.7m (2020: £53.8m) which is the Group's share
of cash held within jointly-controlled operations. There is £6.4m included within cash and cash
equivalents that is held for future payment to designated suppliers (2020: £7.5m).
The Group has £180m of committed loan facilities maturing more than one year from the balance
sheet date, of which £15m matures in March 2024 and £165m in October 2024. These facilities are
undrawn at 31 December 2021. The Group has a further facility of £0.4m that was drawn down in full
during 2020 and matures in July 2025.
Average
daily net
cash during
2021
was £291.4m
(2020: £180.7m).
Average
daily net
cash is
dened
as
the average
of the
365
end-of-day balances
of the
net
cash (as
dened above)
over
the
course of
a
reporting period. Management use this as a key metric in monitoring the performance of the business.
Financial risks and management
The
Group has
exposure to
a
variety of
nancial risks
through
the conduct
of its
operations.
Risk
management is governed by the Group’s operational policies, which are subject to periodic review by
the Group’s internal audit team and twice-yearly review by management. The policies include written
principles
for the
Group’s risk
management
as well
as specic
policies,
guidelines and
authorisation
procedures
in respect
of specic
risk
mitigation techniques
such as
the
use of
derivative nancial
instruments.
The Group
does not
enter
into derivative
nancial instruments
for
speculative purposes.
Note
s
to
the consolid
ated nancial st
atem
ent
s
c
ontinued
20
3
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Financial st
atement
s
25 Financial ins
tr
ument
s continued
The
following represent
the key
nancial
risks resulting
from the
Group’s
use of
nancial instruments:
credit risk
liquidity risk
market risk.
(a) Credit risk
Credit
risk is
the risk
of
nancial loss
to the
Group
if a
client or
counterparty
to
a nancial
instrument
fails to meet its contractual obligations and arises primarily in respect of the Group’s trade receivables
and contract assets.
The degree to which the Group is exposed to this credit risk depends on the individual characteristics
of
the contract
counterparty and
the
nature of
the project.
The
Group’s credit
risk is
also
inuenced
by
general macroeconomic
conditions. The
Group
does not
have any
signicant
concentration risk
in
respect of contract assets or trade receivable balances at the reporting date with receivables spread
across a wide range of clients. Due to the nature of the Group’s operations, it is normal practice for
clients to hold retentions in respect of contracts completed. Retentions held by clients at 31 December
2021 were £91.0m (2020: £79.9m). These will be collected in the normal operating cycle of the Group.
The Group manages its exposure to credit risk through the application of its credit risk management
policies which specify the minimum requirements in respect of the creditworthiness of potential
customers, assessed through reports from credit agencies, and the timing and extent of progress
payments in respect of contracts.
The risk management policies of the Group also specify procedures in respect of obtaining parent
company guarantees or, in certain circumstances, use of escrow accounts which, in the event of
default, mean that the Group may have a secure claim. The Group does not require collateral in
respect of contract assets or trade receivables.
The Group manages the collection of retentions through its post completion project monitoring
procedures and ongoing contract with clients to ensure that potential issues that could lead to the
non-payment
of retentions
are identied
and
addressed promptly.
The directors
always
estimate
the loss allowance on contract assets and trade receivables at the end of the reporting period at an
amount equal to lifetime expected credit losses.
None
of the
contract assets
at
the end
of the
reporting
period are
past due,
and,
taking
into account
the historical default experience and the future prospects in the industry, the directors consider that
no contract assets are impaired.
The expected credit losses on trade receivables are estimated using a provision matrix by reference
to
past default
experience of
the
debtor and
an analysis
of
the debtor’s
current nancial
position,
adjusted
for factors
that are
specic
to the
debtors, general
economic
conditions of
the industry
in
which the debtors operate and an assessment of both the current as well as the forecast direction of
conditions at the reporting date.
The ageing of trade receivables at the reporting date was as follows:
2021
2020
Gross trade
receivables
£m
Provision
for expected
credit losses
£m
Gross trade
receivables
£m
Provision
for expected
credit losses
£m
Not
past due
219.5
–
174.4
–
Past
due 1
to 30
days
10.9
–
9.0
–
Past
due 31
to 120
days
9.3
–
3.6
–
Past
due 121
to 365
days
7.0
0.4
5.7
0.3
Past
due greater
than one
year
4.7
0.8
11.4
0.9
251.4
1.2
204.1
1.2
The following table shows the movement in lifetime expected credit losses that has been recognised
for
trade and
other receivables
in
accordance with
the simplied
approach
set out
in IFRS
9:
2021
£m
2020
£m
Balance at 1 January
1.2
0.6
Net
increase in
loss allowance
arising
from new
amounts recognised
in
current year, net of those derecognised upon billing
–
0.6
31 December
1.2
1.2
There
has not
been any
signicant
change in
the gross
amounts
of contract
assets that
has
aected
the estimation of the loss allowance.
The
average credit
period on
revenue
is 28
days (2020:
24
days). No
interest is
charged
on
the trade
receivables outstanding balance. Trade receivables overdue are provided for based on estimated
irrecoverable amounts.
Note
s
to
the consolid
ated nancial st
atem
ent
s
c
ontinued
20
4
_
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1
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ate
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c rep
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Governance
Financial st
atement
s
25 Financial ins
tr
ument
s continued
Included in the Group’s trade receivable balance are debtors with a carrying amount of £30.7m (2020:
£28.5m) which are past due at the reporting date, for which the Group has not provided as there
has
not been
a signicant
change
in credit
quality and
the
Group considers
that the
amounts
are
still
recoverable. The average age of these receivables is 108 days (2020: 177 days).
In determining the recoverability of trade receivables, the Group considers any change in the credit
quality of the trade receivable from the date credit was initially granted up to the reporting date. The
concentration of credit risk is limited due to the customer base being large and spread across the
Group’s operating segments. Accordingly, the directors believe that there is no further credit provision
required in excess of the provision for impairment losses.
At the reporting date, there were no trade and other receivables which have had renegotiated terms
that would otherwise have been past due.
(b) Liquidity risk
Liquidity
risk is
the risk
that
the Group
will not
be
able to
meet its
nancial
obligations
as and
when
they fall due. The ultimate responsibility for liquidity risk rests with the Board.
The
Group aims
to manage
liquidity
by ensuring
that it
will
always have
sucient liquidity
to
meet
its
liabilities when due, under both normal and stress conditions.
Liquidity
is provided
through cash
balances
and committed
bank loan
facilities.
Additional project
nance
borrowings maybe
used to
fund
specic projects.
These project
nance
borrowings are
without recourse to the remainder of the Group’s assets.
The Group reports cash balances daily and invests surplus cash to maximise income whilst preserving
liquidity and credit quality. The Group prepares weekly short-term and monthly medium-term cash
forecasts, which are used to assess the Group’s expected cash performance and compare with the
facilities available to the Group and the Group’s covenants.
Key risks to liquidity and cash balances are a downturn in contracting volumes, a reduction in the
protability
of work,
delayed receipt
of
cash from
customers and
the
risk that
major clients
or
suppliers
suer
nancial distress
leading to
non-payment
of debts
or costly
and
time-consuming reallocation
and rescheduling of work. Certain measures and key performance indicators are continually
monitored throughout the Group and used to quickly identify issues as they arise, enabling the Group
to address them promptly.
Key among these are: continual monitoring of the secured order book, including the status of orders
and likely timescales for realisation so that contracting volumes are well understood; monitoring of
overhead levels to ensure they remain appropriate to contracting volumes; continual monitoring of
working
capital exceptions
(overdue debts
and
conversion of
work performed
into
certicates and
invoices);
continual review
of levels
of
current and
forecast protability
on
contracts; review
of client
and supplier credit references; and approval of credit terms with clients and suppliers to ensure they
are appropriate.
The
Group does
not have
any
material derivative
or non-derivative
nancial
liabilities with
the
exception of trade and other payables, borrowings and lease liabilities. Trade and other payables are
generally
non-interest-bearing and,
therefore, have
no
weighted average
eective interest
rates.
Lease
liabilities are carried at the present value of the minimum lease payments. Trade and other payables
are due to be settled in the Group’s normal operating cycle.
(c) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates
or
equity prices,
will aect
the
Group’s income
or the
carrying
amount of
its holdings
of
nancial
instruments. The objective of market risk management is to achieve a level of market risk that is within
acceptable parameters as set out in the Group risk management framework.
Interest rate risk
The
Group is
not exposed
to
signicant interest
rate risk
as
it does
not have
signicant
interest-bearing
liabilities and its only interest-bearing asset is cash invested on a short-term basis.
Certain of the Group’s equity accounted joint ventures have entered into interest rate swaps to
manage
their exposure
to interest
rate
risk arising
on oating
rate
bank borrowings.
The Group’s share of joint ventures’ interest rate swap contracts have a nominal value of £12.2m
(2020:
£12.8m) and
xed interest
payments
at an
average rate
of
5.1% (2020:
5.1%) for
periods
up
until 2033.
Currency risk
The
majority of
the Group’s
operations
are carried
out in
the
UK and
the Group
has
a
low level
of
exposure to currency risk on sales and purchases. The Group’s policy is to hedge foreign currency
transactions
where they
are material,
at
which point
derivative nancial
instruments
are entered
into
so as to hedge forecast or actual foreign currency exposures.
Note
s
to
the consolid
ated nancial st
atem
ent
s
c
ontinued
20
5
_
Mor
g
an S
in
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ro
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Annual Repor
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21
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
25 Financial ins
tr
ument
s continued
Capital management
The Board aims to maintain a strong capital base so as to maintain investor, creditor and market
condence
and to
sustain the
future
development of
the business,
and
its approach
to capital
management
is explained
fully in
the
nancial review
on pages
39
and 40.
The capital structure of the Group consists of cash and cash equivalents and equity attributable to
equity holders of the Company, comprising issued capital, reserves and retained earnings as disclosed
in the consolidated statement of changes in equity. The cash and cash equivalents are supplemented
by £180m of committed bank facilities, of which £15m expires in March 2024 and £165m expires in
October 2024. In order to manage its capital structure the Group may adjust the amounts of dividends
paid to shareholders, return capital to shareholders, issue new shares or sell assets.
There were no changes in the Group’s approach to capital management during the year and the
Group is not subject to any capital requirements imposed by regulatory authorities.
26 Subse
quent event
s
There
were no
subsequent events
that
aected the
nancial statements
of
the Group.
Note
s
to
the consolid
ated nancial st
atem
ent
s
c
ontinued
20
6
_
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ou
p pl
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Annual Repor
t 20
21
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
Notes
2021
£m
2020
£m
Assets
Property,
plant and
equipment
3.5
3.7
Investments
2
459.6
440.9
Amounts owed by subsidiary undertakings
15.4
–
Non-current assets
478.5
444.6
Trade receivables
0.7
0.4
Amounts owed by subsidiary undertakings
117.2
70.6
Current tax asset
5.0
–
Deferred tax asset
9.8
3.7
Prepayments
5.1
4.9
Other receivables
3.5
2.5
Cash and cash equivalents
160.1
105.1
Current assets
301.4
187.2
Total assets
779.9
631.8
Liabilities
Bank overdrafts
(94.6)
(26.2)
Lease
liabilities
(0.5)
(0.7)
Trade payables
(1.1)
(1.5)
Amounts owed to subsidiary undertakings
(520.5)
(485.8)
Current tax liabilities
–
(0.6)
Other tax and social security
(0.7)
(0.9)
Retirement
benet obligation
(0.2)
(0.2)
Accrued expenses
(8.5)
(6.3)
Other payables
(1.3)
(0.8)
Provisions
3
–
(4.9)
Current liabilities
(627.4)
(527.9)
Net current liabilities
(326.0)
(340.7)
Total assets less current liabilities
152.5
103.9
Notes
2021
£m
2020
£m
Lease
liabilities
(1.5)
(1.8)
Provisions
3
(10.7)
(11.7)
Non-current liabilities
(12.2)
(13.5)
Net assets
140.3
90.4
Equity
Share capital
2.3
2.3
Share premium account
45.8
45.5
Capital redemption reserve
0.6
0.6
Special reserve
13.7
13.7
Retained earnings
77.9
28.3
Total equity
140.3
90.4
The
Company reported
a prot
for
the nancial
year ended
31
December 2021
of £93.5m
(2020:
loss
of £12.3m).
The
nancial statements
of the
Company
(company number
00521970) were
approved
by the
Board
and authorised for issue on 24 February 2022 and signed on its behalf by:
Jo
hn M
or
ga
n
Ste
ve Cr
um
me
t
t
Chief Executive
Finance Director
C
o
m
p
a
n
y
s
t
a
t
e
m
e
n
t
o
f 
n
a
n
c
i
a
l
po
s
i
t
i
o
n
at 31 December 2021
20
7
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1
Str
ate
gi
c rep
or
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Governance
Financial st
atement
s
Share
capital
£m
Share
premium
account
£m
Capital
redemption
reserve
£m
Special
reserve
£m
Prot
and loss
account
£m
Shareholders'
funds
£m
1 January 2020
2.3
38.5
0.6
13.7
59.8
114.9
Loss
for the
year
–
–
–
–
(12.3)
(12.3)
Other comprehensive income
–
–
–
–
–
–
Total comprehensive expense
–
–
–
–
(12.3)
(12.3)
Share option credit
–
–
–
–
(0.1)
(0.1)
Issue of shares at a premium
–
7.0
–
–
–
7.0
Tax relating to share options
–
–
–
–
(0.8)
(0.8)
Purchase
of shares
in the
Company by the Trust
–
–
–
–
(9.6)
(9.6)
Exercise of share options
–
–
–
–
0.9
0.9
Dividends paid
–
–
–
–
(9.6)
(9.6)
1 January 2021
2.3
45.5
0.6
13.7
28.3
90.4
Prot
for the
year
–
–
–
–
93.5
93.5
Other comprehensive income
–
–
–
–
–
–
Total comprehensive income
–
–
–
–
93.5
93.5
Share option expense
–
–
–
–
12.1
12.1
Tax relating to share options
–
–
–
–
8.2
8.2
Issue of shares at a premium
–
0.3
–
–
–
0.3
Purchase
of shares
in the
Company by the Trust
–
–
–
–
(33.6)
(33.6)
Exercise of share options
–
–
–
–
1.7
1.7
Dividends paid
–
–
–
–
(32.3)
(32.3)
31 December 2021
2.3
45.8
0.6
13.7
77.9
140.3
C
o
m
p
a
n
y s
t
a
t
e
m
e
n
t o
f c
h
a
n
g
e
s i
n e
q
u
i
t
y
for the year ended 31 December 2021
20
8
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c
Annual Repor
t 20
21
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
Basi
s of accounting
The
separate nancial
statements of
the
Company are
presented as
required
by the
Companies
Act
2006 (‘the
Act’). The
Company
meets the
denition of
a
qualifying entity
under FRS
100
(Financial
Reporting Standard 100) issued by the Financial Reporting Council. Accordingly, the Company has
prepared
its nancial
statements in
accordance
with FRS
101 (Financial
Reporting
Standard 101)
‘Reduced Disclosure Framework’ as issued by the Financial Reporting Council.
The Company’s accounting policies are consistent with those described in the consolidated accounts
of Morgan Sindall Group plc, except that, as permitted by FRS 101, the Company has taken advantage
of the disclosure exemptions available under that standard in relation to share-based payments,
nancial
instruments, capital
management, presentation
of
a cash
ow statement
and
related party
transactions.
Where required,
equivalent disclosures
are
given in
the consolidated
accounts.
In
addition,
disclosures in
relation to
retirement
benet schemes
(note 18),
share
capital (note
22) and
dividends
(note 7)
have not
been
repeated here
as there
are
no dierences
to those
provided
in
the
consolidated accounts. There are no critical judgements the directors have made within the Company
nancial
statements.
These
nancial statements
have been
prepared
on the
going concern
basis
as set
out in
the
basis
of
preparation to
the consolidated
nancial
statements on
page 174,
where
the Company
receives
income in the form of dividends from other Group subsidiaries, and under the historical cost
convention.
The nancial
statements are
presented
in pounds
sterling, which
is
the Company’s
functional currency, and unless otherwise stated have been rounded to the nearest £0.1m.
The Company has taken advantage of section 408 of the Act and consequently the statement of
comprehensive
income (including
the prot
and
loss account)
of the
Parent
Company is
not presented
as part of these accounts.
S
i
g
n
i
c
a
n
t
ac
c
ou
n
t
i
n
g
p
ol
i
ci
e
s
for the year ended 31 December 2021
20
9
_
Mor
g
an S
in
da
ll G
ro
up p
l
c
Annual Repor
t 20
21
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
1
Sta
cost
s
2021
£m
2020
£m
Wages
and salaries
12.0
17.9
Social security costs
2.4
–
Other pension costs
0.3
0.4
14.7
18.3
The average number of employees
103
95
The
2020 wages
and salaries
costs
include £7.7m
repaid to
HMRC
under the
UK government's
CJRS
furlough
scheme. See
note 4
of
the consolidated
nancial statements.
Social
security costs
in include
an
expense of
£0.9m (2020:
benet
of £1.2m)
related to
the
Group
share option scheme.
2 Investm
ents
Subsidiary
undertakings
£m
Cost
1 January 2021
440.9
Additions
20.0
Disposals
(1.3)
31 December 2021
459.6
Net book value at 31 December 2021
459.6
Net
book value
at 31
December
2020
440.9
Investment additions relate to a share subscription of £20m the Company made into its wholly-owned
subsidiary,
Morgan Sindall
Property Services
Limited,
for the
allotment of
20,000,000
ordinary shares
of £1.00 each.
Investment disposals relate to the sale of the entire issued share capital of the Company’s wholly-
owned
subsidiary, Newman
Insurance Company
Limited,
to another
wholly-owned subsidiary,
MS
(Mest)
Limited, for
consideration of
£1.3m.
A
list of
all subsidiary,
associated
undertakings and
signicant holdings
owned
by the
Group at
31
December 2021 is shown below:
Construction & Infrastructure
Name of undertaking
Direct or
indirect
holding
Group interest
in allotted
capital (%)
Morgan
Sindall Construction
& Infrastructure
Ltd
Indirect
100
Bluestone
Limited
Indirect
100
Magnor
Plant Hire
Limited
Direct
100
Morgan Sindall All Together Cumbria CIC (6)
Indirect
100
Morgan
Sindall Engineering
Solutions Limited
Indirect
100
Morgan
Sindall Holdings
Limited
Direct
100
Morgan
Utilities Limited
Indirect
100
MS
(MEST) Limited
Indirect
100
Newman
Insurance Company
Limited *
(l)
Indirect
100
Baker
Hicks Limited
Direct
100
Morgan
Sindall Professional
Services (Switzerland)
Ltd
Indirect
100
BakerHicks
AG *
(e)
Indirect
100
BakerHicks
GmbH *
(f) (g)
Indirect
100
Fit Out
Name of undertaking
Direct or
indirect
holding
Group interest
in allotted
capital (%)
Overbury plc
Direct
100
Morgan
Lovell plc
Direct
100
N
o
t
e
s
t
o t
h
e
C
o
m
p
a
n
y
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
210
_
Mor
g
an S
in
da
ll G
ro
up p
l
c
Annual Repor
t 20
21
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
2 Investm
ents continu
ed
Property Services
Name of undertaking
Direct or
indirect
holding
Group interest
in allotted
capital (%)
Morgan
Sindall Property
Services Limited
Direct
100
Golden
i Limited
Indirect
100
Lovell
Powerminster Limited
Indirect
100
Manchester
Energy Company
Limited
Indirect
100
Partnership Housing
Name of undertaking
Direct or
indirect
holding
Group interest
in allotted
capital (%)
Lovell
Partnerships Limited
Direct
100
Abbey
Walk Management
Company Limited
(a)
(2)
Indirect
100
AH
Burnholme Limited
Indirect
100
Anthem
Lovell LLP
(1)
Indirect
50
Blossomeld
(Thorp Arch)
Management Company
Limited
(a) (2)
Indirect
100
Caldon
Quay Residents
Management Company
Limited
(a) (2)
Indirect
100
Chalkdene
Developments LLP
(1)
Indirect
50
Cherry
Pie Meadow
Residents Management
Company
Limited (a)
(2)
Indirect
100
Claymore
Roads (Holdings)
Limited (c)
Indirect
50
Community
Solutions for
Education Limited
Indirect
100
Community
Solutions for
Regeneration Limited
Indirect
100
Community
Solutions for
Regeneration (Hertfordshire)
Limited
Indirect
100
Community
Solutions Living
Limited
Indirect
100
Community
Solutions Management
Services Limited
Indirect
100
Community
Solutions Management
Services (Hub)
Limited
Indirect
100
Community
Solutions Partnership
Services Limited
Indirect
100
Crosse
Courts (Basildon)
Management Company
Limited
(a) (2)
Indirect
100
Crown
Meadows Residents
Management Company
Limited
(a) (2)
Indirect
100
Name of undertaking
Direct or
indirect
holding
Group interest
in allotted
capital (%)
Drummond
Park (Ludgershall)
Residents Management
Company
Limited
(a) (2)
(**)
Indirect
100
Eden
Valley Management
Company Limited
(a)
(2)
Indirect
100
Electric
Quarter Residents
Management Company
Limited
(a) (2)
Indirect
100
Exford
Drive Management
Company Limited
(a)
(2)
Indirect
100
Fairelds
Management Company
Limited (a)
(2)
Indirect
100
Firs
Park Residents
Management Company
Limited
(a) (2)
Indirect
100
Fountain
Court Residents
Company Limited
(a)
(2)
Indirect
100
Foxglove
Meadows Residents
Management Company
Limited
(a)(2)
Indirect
100
Gallus
Fields Residents
Management Company
Limited
(a) (2)
Indirect
100
Golwg
Y Bryn
Residents Management
Company
Limited (a)
(2)
Indirect
100
HB
Villages Developments
(Crewe) Ltd
Indirect
100
HB
Villages Developments
(Stoke) Ltd
Indirect
100
Hamsard
3134 Limited
Indirect
100
Hamsard
3135 Limited
Indirect
100
Health
Innovation Partners
Limited
Indirect
50
Heath
Farm Residents
Management Company
Limited
(a) (2)
Indirect
100
hub
West Scotland
Limited (d)
Indirect
54
Ingleby
View Management
Company Limited
(a)
(2)
Indirect
100
Keepers
Gate (WSM)
Residents Management
Company
Limited (a)
(2)
Indirect
100
Kensington
Gardens Management
Limited (a)
(2)
Indirect
100
Laurus
Lovell Whalley
LLP (1)
Indirect
50
Laxton
Close Management
Company Limited
(a)
(2)
Indirect
100
Lockside
Residents Management
Company Limited
(a)
(2)
Indirect
100
Lovell
Bow Limited
Indirect
100
Lovell
Director Limited
(a)
Indirect
100
Lovell
Flagship LLP
(1)
Indirect
50
Lovell
Guf Limited
(a)
Indirect
100
Note
s
to
the Company
nancial st
ate
ment
s
c
ontinued
2
11
_
Mo
r
ga
n Si
nd
al
l Gr
ou
p p
lc
A
nnual Report 202
1
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
Name of undertaking
Direct or
indirect
holding
Group interest
in allotted
capital (%)
Lovell
Later Living
LLP (1)
Indirect
100
Lovell
Latimer LLP
(1)
Indirect
50
Lovell
Plus Limited
Indirect
100
Lovell
Property Rental
Limited
Indirect
100
Lovell
Together (Pendleton)
LLP (1)
Indirect
50
Lovell
Together LLP
(1)
Indirect
50
Lovell/Abri
Weymouth LLP
(1)
Indirect
50
Lymington
Mews Management
Company Limited
(a)
(2)
Indirect
100
Meggeson
Management Company
Limited (a)
(2)
Indirect
100
Minshull
Way Residents
Management Company
Limited
(a) (2)
Indirect
100
Morgan
Sindall Consortium
LLP (1)
Indirect
100
Morgan
Sindall Investments
(Newport SDR)
Limited
Indirect
100
Morgan-Vinci
Limited
Indirect
50
Mount
View (Melton
Mowbray) Residents
Company
Limited (a)
(2)
Indirect
100
Oakeld
Grange (Llantarnam)
Residents Management
Company
Ltd (a)
(2)
Indirect
100
Oaktree
Grange Residents
Management Company
Limited
(a) (2)
Indirect
100
Oriel
View Residents
Management Company
Limited
(a) (2)
Indirect
100
Pich
Management Company
Limited (a)
(2)
Indirect
100
Principal
Point Residents
Management Company
Limited
(a) (2)
Indirect
100
Queensbury
Park Management
Company Limited
(a)
(2)
Indirect
100
RMC
The Meadows,
Clifton-upon-Teme Limited
(a)
(2)
Indirect
100
Romsey
Extra Care
Limited
Indirect
100
Ruby
Brook Estate
Management Company
Limited
(a) (2)
Indirect
100
Ruby
Brook Management
Company Limited
(a)
(2)
Indirect
100
Saddlers
Grange (Howden)
Management Company
Limited
(a) (2)
Indirect
100
Name of undertaking
Direct or
indirect
holding
Group interest
in allotted
capital (%)
Saints
Quarter (Steelhouse
Lane) Residents
Management
Company
Limited
(a) (2)
Indirect
100
Saredon
Gardens Residents
Management Company
Limited
(a) (2)
Indirect
100
Shawbrook
Manor (Residents)
Management Company
Limited
(a) (2)
Indirect
100
Somerford
Park Residents
Management Company
Limited
(a) (2)
Indirect
100
St
Mary’s View
(Residents) Management
Company
Limited (a)
(2)
Indirect
100
Station
Fields Residents
Management Company
Limited
(a) (2)
Indirect
100
Station
House (Stourbridge)
Management Company
Limited
(a) (2)
Indirect
100
Tennyson
Fields Management
Company Limited
(a)
(2)
Indirect
100
The
Acorns (Walsham
Le Willows)
Residents
Management Company
Limited
(a) (2)
Indirect
100
The
Compendium Group
Limited
Indirect
50
The
East Avenue
2 Residents
Management
Company Limited
(a) (2)
Indirect
100
The
East Avenue
Residents Management
Company
Limited (a)
(2)
Indirect
100
The
Laureates Residents
Management Company
Limited
(a) (2)
Indirect
100
The
Mill (Site
1) Residents
Management
Company Limited
(a) (2)
Indirect
100
The
Mill (Site
2) Residents
Management
Company Limited
(a) (2)
Indirect
100
The
Spires Residents
Management Company
Limited
(a) (2)
Indirect
100
The
Sycamores (Kirk
Ella) Management
Company
Limited (a)
(2)
Indirect
100
The
Way Beswick
(Zone 1)
Management
Limited (a)
(2)
Indirect
100
The
Way Beswick
(Zone 2)
Management
Limited (a)
(2)
Indirect
100
The
Way Beswick
(Zone 3)
Management
Limited (a)
(2)
Indirect
100
The
Way Beswick
(Zone 4)
Management
Limited (a)
(2)
Indirect
100
The
Way Beswick
(Zone 5)
Management
Limited (a)
(2)
Indirect
100
The
Way Beswick
(Zone 6)
Management
Limited (a)
(2)
Indirect
100
The
Way Beswick
(Zone 7)
Management
Limited (a)
(2)
Indirect
100
Tixall
View Residents
Management Company
Limited
(a) (2)
Indirect
100
Towcester
Regeneration Limited
Indirect
100
Note
s
to
the Company
nancial st
ate
ment
s
c
ontinued
2 Investm
ents continu
ed
212
_
Mor
ga
n Si
nd
al
l G
ro
up p
lc
A
nnual Report 202
1
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
Name of undertaking
Direct or
indirect
holding
Group interest
in allotted
capital (%)
Trinity
Walk Residents
Management Company
Limited
(a) (2)
Indirect
100
Victoria
Court (Newport
No 1)
Residents
Management Company
Limited
(p) (2)
Indirect
50
Waterside
Quay Residents
Management Company
Limited
(a) (2)
Indirect
100
Wellspring
Finance Company
Limited
Indirect
49.5
Wellspring
Partnership Limited
(b)
Indirect
90
Wensum
Grange Management
Company Limited
(a)
(2)
Indirect
100
West
Sussex Property
Development LLP
(1)
Indirect
50
Westcroft
12 Management
Company Limited
(a)
(2)
Indirect
100
Weston
Woods Residents
Management Company
Limited
(a) (2)
Indirect
100
Weymouth
Community Sports
LLP (1)
Indirect
100
William's
Park Residents
Management Company
Limited
(a) (2)
Indirect
100
Willow
Grange (Lakeside)
Residents Management
Company
Limited (a)
(2)
Indirect
100
Woodlark
Chase (Warren
Drive) Residents
Management
Company
Limited
(a) (2)
Indirect
100
YMYL
YR Afon
Residents Management
Company
Limited (a)
(2)
Indirect
100
Urban Regeneration
Name of undertaking
Direct or
indirect
holding
Group interest
in allotted
capital (%)
Muse
Developments Limited
Direct
100
Alexandria
Business Park
Management Company
Limited
(5)
Indirect
100
Ashton
Moss Developments
Limited
Indirect
50
Brentwood
Development Partnership
LLP (1)
Indirect
50
Bromley
Park (Holdings)
Limited
Indirect
50
Brook
House (Brixton)
Management Company
Limited
(n) (2)
(7)
Indirect
100
Chatham
Place (Building
1) Limited
Indirect
100
Name of undertaking
Direct or
indirect
holding
Group interest
in allotted
capital (%)
Chatham
Place Building
1 (Commercial)
Limited
Indirect
100
Chatham
Square Limited
Indirect
100
Cheadle
Royal Management
Company Limited
(h)
(3)
Indirect
27.9
Community
Solutions for
Regeneration (Bournemouth)
Limited
Indirect
100
Community
Solutions for
Regeneration (Brentwood)
Limited
Indirect
100
Community
Solutions for
Regeneration (Slough)
Limited
Indirect
100
ECF
(General Partner)
Limited (i)
Indirect
33.3
English Cities Fund (i) (4)
Indirect
22.9
Eurocentral
Partnership Limited
Indirect
99
EPL
Contractor (Plot
B West)
Limited
Indirect
99
EPL
Contractor (Plot
F East)
Limited
Indirect
99
EPL
Contractor (Plot
F West)
Limited
Indirect
99
EPL
Developer (Plot
B West)
Limited
Indirect
99
EPL
Developer (Plot
F East)
Limited
Indirect
99
EPL
Developer (Plot
F West)
Limited
Indirect
99
Harrier
Park Management
Company Limited
(2)
Indirect
100
ICIAN
Developments Limited
Indirect
100
Intercity
Developments Limited
Indirect
50
Ivor
House (Brixton)
Management Company
Limited
(n) (2)
Indirect
100
Lewisham
Gateway Developments
(Holdings) Limited
Indirect
100
Lewisham
Gateway Developments
Limited
Indirect
100
Lingley
Mere Business
Park Development
Company
Limited (j)
Indirect
50
Logic
Leeds Management
Company Limited
(2)
Indirect
50
Muse
Aberdeen Limited
Indirect
100
Muse
(Brixton) Limited
Indirect
100
Muse
(ECF) Partner
Limited
Indirect
100
Muse
(Warp 4)
Partner Limited
Indirect
100
Note
s
to
the Company
nancial st
ate
ment
s
c
ontinued
2 Investm
ents continu
ed
213
_
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r
ga
n Si
nd
al
l Gr
ou
p p
lc
A
nnual Report 202
1
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
Name of undertaking
Direct or
indirect
holding
Group interest
in allotted
capital (%)
Muse
Brixton (Phase
2) Limited
Indirect
100
Muse
Chester Limited
Indirect
100
Muse
Developments (Northwich)
Limited
Indirect
100
Muse
Properties Limited
Indirect
100
North
Shore Development
Partnership Limited
Indirect
100
Northshore
Management Company
Limited (2)
Indirect
50
Olive
Morris House
(Brixton) Management
Company
Limited (o)
(2)
Indirect
100
Rail
Link Europe
Limited
Indirect
100
Slough
Urban Renewal
LLP (1)
Indirect
50
Sovereign
Leeds Limited
Indirect
100
St
Andrews Brae
Developments Limited
Indirect
50
The
Bournemouth Development
Company LLP
(1)
Indirect
50
Wapping
Wharf (Alpha)
LLP (1)
Indirect
50
Wapping
Wharf (Beta)
LLP (1)
Indirect
40
Warp
4 General
Partner Limited
Indirect
100
Warp
4 General
Partner Nominees
Limited
Indirect
100
Warp
4 Limited
Partnership (4)
Indirect
100
Waterside
Places (General
Partner) Limited
(k)
Indirect
50
Waterside
Places Limited
Partnership (k)
(4)
Indirect
50
Wirral
Growth Company
LLP (m)
(1)
Indirect
50
Morgan Sindall Group
Name of undertaking
Direct or
indirect
holding
Group interest
in allotted
capital (%)
Barnes
& Elliott
Limited
Direct
100
Bluebell
Printing Limited
Direct
100
Hinkins
& Frewin
Limited
Direct
100
Lovell
Partnerships (Northern)
Limited
Direct
100
Lovell
Partnerships (Southern)
Limited
Direct
100
Morgan
Est (Scotland)
Limited (b)
Direct
100
Morgan
Beton And
Monierbau Limited
(b)
Indirect
50
Morgan
Lovell London
Limited
Direct
100
Morgan
Sindall Investments
Limited
Direct
100
Morgan
Sindall Trustee
Company Limited
Direct
100
Morgan
Utilities Group
Limited
Direct
100
Roberts
Construction Limited
Direct
100
Sindall
Eastern Limited
Indirect
100
Snape
Design &
Build Limited
Indirect
100
Stansell
Limited
Direct
100
T
J Braybon
& Son
Limited
Direct
100
The
Snape Group
Limited
Direct
100
Underground
Professional Services
Limited
Direct
100
Wheatley
Construction Limited
Direct
100
*
With the exception
of
Newman Insurance
Company
Limited,
registered and
operating
in Guernsey,
BakerHicks
AG,
registered
and operating
in
Switzerland,
and BakerHicks
GmbH,
registered and
operating
in
Austria and
Germany,
all undertakings
are
registered in
England
and
Wales or
Scotland
and the
principal
place
of business
is
the UK.
** Incorporated
13
January
2022.
Note
s
to
the Company
nancial st
ate
ment
s
c
ontinued
2 Investm
ents continu
ed
214
_
Mo
rg
an S
in
da
ll G
r
ou
p pl
c
Annual Repor
t 202
1
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
2 Investm
ents continu
ed
Unless otherwise
stated
the
registered oce
address
for each
of
the
above is
Kent
House, 14-17
Market
Place,
London
W1W8AJ.
Registered oce
classication
key:
(a)
One
Eleven,
Edmund Street,
Birmingham,
West Midlands
B3
2HJ
(b)
1 Rutland
Court,
Edinburgh EH3
8EY
(c)
Cannon Place, 78
Cannon
Street, London
EC4N
6AF
(d)
6th Floor
Merchant
Exchange, 20
Bell
Street, Glasgow
G1
1LG
(e)
Badenstrasse 3,
4057, Basel,
Switzerland
(f)
Albert-Nestler-Strasse 26,
76131
Karlsruhe,
Germany
(g)
Am
Euro Platz
3,
1120
Wien, Austria
(h)
2 New
Bailey, 6
Stanley
Street,
Salford, Greater
Manchester
M3 5GS
(i)
One Coleman
Street,
London EC2R
5AA
(j)
Haweswater House,
Lingley
Mere Business
Park,
Lingley
Green Avenue,
Great
Sankey, Warrington
WA5
3LP
(k)
National Waterways
Museum, Ellesmere
Port,
South Pier
Road,
Ellesmere
Port, Cheshire
CH65
4FW
(l)
Willis Management
(Guernsey)
Limited, Suite
1
North,
First Floor,
Albert
House, South
Esplanade,
St
Peter Port,
Guernsey,
GY1 1AJ
(m)
C/o Head
of
Legal
Wirral Borough
Council,
Town Hall,
Brighton
Street,
Walllasey, Wirral,
CH44
8ED
(n)
C/o Prism
Cosec Ltd,
Highdown
House,
Yeoman Way,
Worthing,
West Sussex,
BN99
3HH
(o)
Riverside House,
Irwell Street,
Salford,
M3 5EN
(p)
7 Neptune
Court,
Vanguard Way,
Cardi
CF24 5PJ
Unless otherwise
stated,
the
Group's interest
is
in the
ordinary
shares
issued (or
the
equivalent of
ordinary
shares
issued in
the
relevant country of issue).
Classication key:
(1)
Limited Liability
Partnership.
(2)
Limited by
guarantee.
(3)
Holding of
ordinary
and
special shares.
(4)
Limited Partnership.
(5)
Holding of
special
shares.
(6)
Community Interest Company.
(7)
Holding of
voting
rights.
The proportion of ownership interest is the same as the proportion of voting power held except English Cities Fund and hub
West Scotland,
details
of
which are
shown
in note
12
of
the consolidated
nancial
statements.
3 Provisions
Self-Insurance
£m
Other
£m
Total
£m
1 January 2020
9.7
7.4
17.1
Utilised
(0.7)
(2.7)
(3.4)
Additions
2.5
0.7
3.2
Released
(0.1)
(0.2)
(0.3)
1 January 2021
11.4
5.2
16.6
Utilised
(0.5)
(4.9)
(5.4)
Additions
1.5
–
1.5
Released
(2.0)
–
(2.0)
31 December 2021
10.4
0.3
10.7
Non-current
10.4
0.3
10.7
31 December 2021
10.4
0.3
10.7
Self-insurance provisions
Self-insurance provisions comprise the Group’s self-insurance of certain risks. The Group makes
provisions
in respect
of specic
types
of claims
incurred but
not
reported (IBNR).
The valuation
of
IBNR
considers
past claims
experience and
the
risk prole
of the
Group.
These are
reviewed periodically
and are intended to provide a best estimate of the most likely or expected outcome.
Other provisions
Other provisions include property dilapidations and other personnel related provisions.
The majority of the provisions are expected to be utilised within 10 years.
Note
s
to
the Company
nancial st
ate
ment
s
c
ontinued
215
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Annual Repor
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1
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
Anal
ysi
s of sharehol
dings at 31 De
cember 2
021
Holding of shares
Number of accounts
Percentage of
total accounts
Number of shares
Percentage of
total shares
Up
to 1,000
1,045
58.54
443,089
0.95
1,001 to 5,000
454
25.43
895,468
1.93
5,001 to 100,000
214
11.99
5,606,268
12.09
100,001 to
1,000,000
64
3.59
19,652,101
42.38
Over 1,000,000
8
0.45
19,777,947
42.65
Usef
ul contac
ts
Morgan Sindall Group plc
Registered
oce
Kent
House, 14–17
Market Place,
London
W1W 8AJ
Registered
in England
and Wales
Company number: 00521970
General queries
Email: cosec@morgansindall.com
Telephone: 020 7307 9200
Registrar
All
administrative enquiries
relating to
shareholdings,
such as
lost certicates,
changes
of address,
change of ownership or dividend payments and requests to receive corporate documents by email
should,
in the
rst instance,
be
directed to
the Company’s
registrar
and clearly
state the
shareholder’s
registered address and, if available, the full shareholder reference number:
By post:
Computershare
Investor Services
PLC, The
Pavilions,
Bridgwater Road,
Bristol BS99
6ZZ
By phone:
+44
(0) 370
707 1695.
Lines
open 8.30am
to 5.30pm
(UK
time), Monday
to Friday
By email:
webcorres@computershare.co.uk
Online:
investorcentre.co.uk
Shareholders who receive duplicate communications from the Company may have more than one
account in their name on the register of members. Any shareholder wishing to amalgamate such
holdings should write to the Registrar giving details of the accounts concerned and instructions on
how they should be amalgamated.
Shareholders
who do
not currently
have
their dividends
paid directly
to
a UK
bank or
building
society
account and wish to do so should complete a mandate instruction available from the registrar on
request or at investorcentre.co.uk in the ‘Downloadable Forms’ section.
Financial ca
lendar 2
02
2
Ex-dividend
date –
nal dividend
28 April 2022
Record
date to
be eligible
for
nal dividend
29 April 2022
AGM and trading update
5 May 2022
Payment
date for
nal dividend
18 May 2022
Half-year
results announcement
August 2022
Interim dividend payable
October 2022
Trading update
November 2022
Group web
site and ele
c
tronic communicat
ions
A wide range of Company information is available on our website including:
nancial
information –
annual reports
and
half-year results;
nancial
news and
events;
share price information;
shareholder services information; and
press releases – both current and historical.
Shareholder documents are made available via our website, unless a shareholder has requested hard
copies from the registrar.
Shareholder
information
216
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Financial st
atement
s
For
ward
-
looking s
tatement
s
This document and written information released, or oral statements made, to the public in the future
by or on behalf of the Group, may include certain forward-looking statements, beliefs or opinions
that are based on current expectations or beliefs, as well as assumptions about future events. These
forward-looking statements give the Group’s current expectations or forecasts of future events.
Forward-looking
statements can
be identied
by
the fact
that they
do
not relate
strictly to
historical
or
current facts.
Without limitation,
forward-looking
statements often
use words
such
as anticipate,
target, expect, estimate, intend, plan, goal, believe, will, may, should, would, could or other words
of
similar meaning.
No assurance
can
be given
that any
particular
expectation will
be met
and
shareholders are cautioned not to place undue reliance on any such statements because, by their
very
nature, they
are subject
to
risks and
uncertainties and
can
be aected
by other
factors
that
could
cause
actual results,
and the
Group’s
plans and
objectives, to
dier
materially from
those expressed
or
implied in the forward-looking statements.
All
forward-looking statements
contained in
this
document are
expressly qualied
in
their entirety
by
the cautionary statements contained or referred to in this section.
There
are several
factors that
could
cause actual
results to
dier
materially from
those expressed
or
implied in
forward-looking statements.
Among
the factors
that could
cause
actual results
to dier
materially from those described in forward-looking statements are changes in the global, political,
economic,
business, competitive,
market and
regulatory
forces, uctuations
in exchange
and
interest
rates, changes in tax rates and future business combinations or dispositions.
Forward-looking statements speak only as of the date they are made. Other than in accordance
with
its legal
or regulatory
obligations
(including under
the UK
Listing
Rules and
the Disclosure
and
Transparency
Rules of
the Financial
Conduct
Authority), the
Group, its
directors,
ocers, employees,
advisers and associates disclaim any intention or obligation to revise or update any forward-looking
or other statements contained within this document, regardless of whether those statements are
aected
as a
result of
new
information, future
events or
otherwise,
except as
required by
applicable
law.
Shareholder information
continued
217
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Mor
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lc
A
nnual Report 202
1
Str
ate
gi
c rep
or
t
Governance
Financial st
atement
s
Science-
based targets
Following the global agreement on climate
change
action (CoP
21, Paris,
December
2015), companies were encouraged to set
greenhouse gas emission reduction targets
based on science. Targets are calculated
according to the reduction required to keep
global warming within an agreed level of
temperature
rise. Originally,
the Paris
Agreement
was written around a 2
o
C warming model
above
preindustrial levels
and pursuing
eorts
to limit the temperature increase to 1.5
o
C
above preindustrial levels. The calculation of
targets varies according to industry sector and
the contribution the sector makes to global
emissions.
Science-based targets are calculated to
eliminate all emissions to the atmosphere by
2050. The Science Based Targets Initiative is a
collaboration
between CDP,
the United
Nations
Global
Compact, World
Resources Institute
(WRI)
and
World-Wide Fund
for Nature
(WWF).
The
initiative uses the latest available climate science
to
dene best
practice in
science-based
target-
setting,
oers resources
and guidance
to
reduce
barriers to adoption and independently assess
company’s assets against validation criteria.
T
y
pes of e
missio
ns
The
Greenhouse Gas
Protocol is
a
globally
recognised framework for measuring and
managing greenhouse gas emissions. The
Protocol
denes three
types –
scopes
– of
emissions.
Scope 1
(direct emissions) covers the direct
emissions to air under an organisation’s control.
These mainly include gas boilers and fuel used in
vehicle
eets.
Scope 2
(indirect emissions) covers the
emissions produced during the generation
of electricity purchased and consumed by
an
organisation. Published
emission factors
are used as multipliers to calculate Scope
2 emissions based on consumption. As the
generation of electricity shifts away from fossil
fuels, these emission factors change.
Scope 3
covers all other indirect emissions,
upstream and downstream of the business.
There are 15 categories for Scope 3 emissions.
Some are relatively simple to measure and
report (e.g. air travel and commuting), while
others
are more
dicult (e.g.
purchased
goods
and materials and products in use). The more
straightforward ones are generally reported
as part of an organisation’s emissions (often
referred to as ‘limited disclosure’); we refer to
these as our ‘operational Scope 3 emissions’. If a
company’s Scope 3 emissions are 40% or more
of its total emissions, reduction targets for Scope
3 need to be included as part of agreed science-
based targets. (This includes all 15 categories,
where
they are
relevant or
signicant).
Our emis
sions
Our emissions are broken down as follows:
Scope 1
Other fuels – emissions via air conditioning (kg
of gas recharge and gas type), generation of
electricity
(fuel consumption/litres
of gas
oil)
Company cars – petrol purchased on Arval
fuel
cards (Litres)
Transport fuels
Natural
gas (kWh)
Scope 2
Electricity
purchased (kWh)
Steam
and heat
purchased from
osite
(kWh)
Electricity consumed in landlord-controlled
oces
(metres cubed
of lease
oor
area)
Operational Scope 3
Electricity upstream generation, transmission
and distribution losses
Employees with travel allowances - petrol
purchased via expense claims and mileage
claims (miles)
Transport – other – public transport including
air travel, train or tube (passenger miles),
supplier freight (miles)
Waste
– tonnes
of waste
produced
Water
and waste
water –
metres
cubed of
potable water consumption and waste water
generation
Wider Scope 3
Carbon embodied in the materials (emitted
during raw extraction, manufacture, transport
to site, and disposal or recycling)
Carbon emitted during construction (via
energy use and waste)
Estimated carbon emitted from operating
the buildings for 60 years following handover
to the client, based on how our clients tell us
they will use the buildings
We
are working
with our
supply
chain and
clients
to gather this data.
O
set
s
Osets
are a
mechanism whereby
companies
can
eectively buy
“credits” to
reduce
the
balance
of their
carbon emissions.
An
oset
is generally an investment in a recognised
emission reduction activity or process that
reduces or removes carbon dioxide, and other
greenhouse gases such as methane, from the
atmosphere.
Osetting is
a relatively
complex
subject
and not
all osets
are
recognised by
the
UN,
which publishes
a list
of
recognised projects.
Osets
are not
currently accepted
as
part of
an
organisation’s
science-based targets.
However,
according to the Science Based Targets Initiative,
the body responsible for approving and assuring
science-based
targets, osetting
can play
two
roles
in science-based
net zero
strategies:
1.
In the
transition to
net
zero: companies
may opt to compensate or to neutralise
emissions that are still being released into the
atmosphere while they transition towards a
state
of net
zero emissions.
2.
At net
zero: companies
with
residual
emissions within their value chain are
expected to neutralise those emissions with
an equivalent amount of carbon dioxide
removals.
Appendix – carbon emissions bac
k
groun
d and term
inolo
g
y
218
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Financial st
atement
s
Net zer
o
The ambition of many countries and
organisations
is to
become net
zero,
eectively
having
a zero
account on
their
carbon balance
sheet.
True net
zero emissions
are
represented
by the Science Based Targets Initiative’s 2050
goal.
However, not
all industries
will
be able
to
meet this target no matter what measures are
implemented to reduce emissions. For example,
current technology will not enable the aviation
sector
to become
true net
zero.
The
current terminology
for net
zero
is not
the
same as
achieving zero
emissions
by 2050
(science-based targets). In the past, some
companies have claimed to be carbon neutral
(net
zero) simply
by purchasing
a
large amount
of
osets (often
forestry). It
is
still possible
for
a company
to become
'net
zero' almost
immediately
by osetting.
However, this
does
not ultimately achieve the goal of eliminating all
emissions.
Responsible businesses are now approaching
net
zero by
examining their
carbon
emissions
trajectory (often one that has been approved
by the Science Based Targets Initiative) at two
levels: reductions made possible by behavioural
change and reductions through development
and implementation of new technologies. It
is only then that any remaining emissions are
oset.
The type
of osetting
implemented
to
achieve
net zero
is currently
up
to the
individual
organisation,
but there
are many
osets
provided on the market which do not meet
accepted
quality criteria.
Quality carbon
oset
credits must be associated with greenhouse gas
reductions or removals that are:
additional (i.e. that the mitigation activity
would not have taken place in the absence
of the added incentive created by the carbon
credits);
not overestimated;
permanent;
not claimed by another entity; and
not
associated with
signicant social
or
environmental harms.
Source:
Securing Climate
Benet –
A
Guide to
Using
Carbon Osets.
Stockholm Environment
Institute
& Greenhouse
Gas Management
Institute.
Ap
pen
dix – c
arb
on emi
ssi
ons b
ack
gr
ound an
d term
inolo
g
y
continued
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Morgan Sindall Group plc
Annual Report 2021
Morgan Sindall G
roup plc
Kent House
1
4
–
1
7 Ma
rket Place
London W1
W 8A
J
Company number: 0
0521
970
@mor
gansindall
morga
nsindall.com