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Genuit Group plc
Annual Report & Accounts 2022
A culture
of sustainable
innovation
STRATEGIC REPORT
01
Highlights
02
Our business at a glance
04 Chair’s Statement
06 Investment proposition
07
Chief Executive Officer’s review
11
Market review
13
Business model
14
Our Strategy
16
Strategy in action
19
Key Performance Indicators
21
Sustainability
26 TCFD
36 People
40 Health & Safety
42 Stakeholder Engagement
46 Section 172 statement
49 Non-Financial statement
50
Chief Financial Officer’s Report
55
Principal Risks and Uncertainties
GOVERNANCE
64
Governance at a glance
65
Chair’s introduction to Governance
68 Directors and Officers
70
Corporate Governance Report
81
Nomination Committee Report
86 Risk Committee Report
90 Audit Committee Report
96 Directors’ Report
99 Directors’ Responsibilities Statement
REMUNERATION
101
Letter from the Chair of the
Remuneration Committee
104 Remuneration at a glance
105 Remuneration Policy
114
Annual Report on Remuneration
FINANCIAL STATEMENTS
128 Independent Auditor’s Report
137 Group Income Statement
138
Group Statement of
Comprehensive Income
139 Group Balance Sheet
140
Group Statement of Changes
in Equity
141
Group Cash Flow Statement
142
Notes to the Group Financial
Statements
170 Directors’ Responsibilities Statement
171
Company Balance Sheet
172
Company Statement of Changes
in Equity
173 Company Cash Flow Statement
174
Notes to the Company
Financial Statements
181 Shareholder Information
Contents
07 – CEO REVIEW
Read what our CEO, Joe Vorih,
has to say about 2022
06 – INVESTMENT PROPOSITION
The fundamentals underpinning
Genuit Group’s proposition for
investors
36 – PEOPLE
Read how Genuit is continuing to
build a diverse and talented team
to deliver growth
63 – GOVERNANCE
Read more about our Board
members and Group corporate
governance structures
FORWARD-LOOKING STATEMENTS
This Annual Report contains various forward-looking
statements that reflect management’s current view
with respect to future events and financial and
operational performance. All statements reflect
knowledge and information available as at the date
of preparation of this Annual Report and there can
be no assurance that forward-looking statements
will prove to be accurate, as actual results and future
events could differ materially from those anticipated
in such statements. Therefore, nothing in this Annual
Report should be construed as a profit forecast.
14 – STRATEGY
Insights on our Sustainable Solutions
for Growth strategy
21 – SUSTAINABILITY
Read how Genuit is continuing its
journey to be the lowest carbon
supplier of choice for its customers
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
1
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Highlights
Financial highlights
Highlights
Revenue
Revenue increase of 4.7% on a strong
comparative year
Profit
Underlying operating profit increased by 3.0%
driven by strong pricing and cost controls.
Profit before tax was impacted by heightened
levels of non-underlying items and increased
borrowing costs
30.8pps
Underlying basic earnings per share
of 30.8 pence, an increase of 0.7% despite
increased borrowing costs
1.2 times
Strong operational cash management
and balance sheet, net debt 1.2 times
pro forma EBITDA
£41.1m
Continued strategic investments in the
business, capital expenditure of £41.1m
Progress
Increased investment in new product
development and organisational capability
augmented by simplification of the business
12.3p
Proposed final dividend of 8.2 pence
(2021: 8.2 pence), taking FY 2022 dividend
to 12.3 pence (2021: 12.2 pence) per share
ESG Highlights
REVENUE
£m
£622.2m
+4.7%
2022
622.2
594.3
398.6
2021
2020
UNDERLYING CASH GENERATED
FROM OPERATIONS
£m
£62.6m
+9.4%
2022
62.6
57.2
39.3
2021
2020
INCREASE IN NET DEBT
£m
£166.2m
+0.3%
2022
166.2
165.7
27.7
2021
2020
PROFIT BEFORE TAX
£m
£45.4m
-27.8%
2022
45.4
62.9
23.8
2021
2020
UNDERLYING OPERATING PROFIT
£m
£98.2m
+3.0%
2022
98.2
95.3
42.2
2021
2020
UNDERLYING BASIC
EARNINGS PER SHARE
pence per share (pps)
30.8pps
+0.7%
2022
30.8
30.6
13.5
2021
2020
Genuit Group is making progress
against its 2025 ESG targets and
senior management’s incentive
programmes are increasingly
aligned to these
Genuit Group is focused on serving the
needs created by sustainability-linked
growth drivers:
The built environment needs to adapt as
climate change continues to impact the
way we design our buildings and urban
landscapes. Increased rainfall levels,
higher temperatures, and the associated
regulatory framework provide tailwinds
for market outperformance
We continue our progress on
operating sustainably, in order to be
the lowest carbon supplier of choice
for our customers:
–
Recycled waste accounted for
48.7% of our polymer inputs
–
We further reduced our Scopes 1 and
2 carbon intensity by 3.6%. Since 2019
we have reduced this by 50.2%
–
We recognise the role of innovation
in catering for the changing
demands in our market, and in 2022
achieved a Vitality Index of 24.7%
–
3.5% of our colleagues were engaged
in accredited Earn and Learn
programmes as part of our initiatives
supporting membership of The 5% Club
Our business at a glance
Who We Are
At Genuit Group (the Group) we are focused on
creating a more sustainable built environment.
This means increasing its resilience as
it adapts to the challenges that climate
change creates, alongside reducing the
impact that the built environment has upon
climate change. For us, sustainability is at
the core of both the way we operate and our
commercial growth strategy. Our vision is to
serve the new demands placed upon the built
environment while being the lowest carbon
supplier of choice for our customers.
From January 2023, we re-organised into three Business
Units, comprising some of the UK construction industry’s
best known brands. We provide a wide range of
solutions for a sustainable built environment; from low
carbon heating and cooling, clean healthy air and
resilient surface water management through to low
carbon choices for drainage and plumbing.
We want to utilise the vast experience and capability that
exists in our businesses, close to their customers. At the
same time, we recognise that being part of the Group
can also create value through scale and unlocking
synergies, for the benefit of all of our stakeholders.
Although our businesses have strong brands and
individual identities, they are underpinned by a
Group-wide performance driven culture that
promotes accountability, empowerment and
entrepreneurial thinking.
Our three Business Units were established in January 2023, to better align with
our markets, allowing us to create customer value through solution selling.
These now form the basis of our future reporting.
Climate Management
Solutions (CMS)
Water Management
Solutions (WMS)
Sustainable Building
Solutions (SBS)
Addressing the drivers for low
carbon heating & cooling, and
clean & healthy air
Driving climate adaptation and
resilience through integrated
surface and drainage solutions
Providing a range of solutions to
reduce the carbon content of the
built environment
REVENUE
+3.6%
£158.6m
2021: £154.1m
EBIT
15.7%
2021: 19.8%
BRANDS
–
Nuaire
–
ADEY
–
Surestop
–
Domus
–
Nu-Heat
REVENUE
+3.0%
£180.0m
2021: £174.8m
EBIT
7.8%
2021: 10.8%
BRANDS
–
Polypipe
–
Plura
–
Permavoid
–
Alderburgh
–
Keytec
REVENUE
+6.5%
£283.6m
2021: £265.4m
EBIT
20.9%
2021: 17.3%
BRANDS
–
Polypipe
–
Manthorpe
–
Terrain
2
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Our business at a glance continued
UK – RMI
32%
UK – New Build
33%
RoW
5%
Europe
5%
UK – Commercial – Private
13%
UK – Commercial – Public
7%
UK – Infrastructure
5%
UK
90%
Overseas
10%
The Group has evolved from its roots
in plastic plumbing and drainage, through
ongoing product innovation alongside a
series of successful acquisitions. We now
hold market leading positions in commercial
ventilation, underfloor heating, residential
plumbing & drainage, and large diameter
water management, as well as a broad
range of specialist sub-segments.
REVENUE BY CONSTRUCTION MARKET SECTOR
COLLEAGUES
2021: 3,658
3,640
SITES
2021: 29
30
At Genuit we’re in the business of
sustainability. Our actions are underpinned
by our sustainability framework.
Advancing
the circular
economy
Developing
sustainable
solutions
Tackling
climate
change
Investing in an
engaged and
diverse workforce
1980
1990
Continued new product development
1
2
3
4
Shift to
refocusing on core businesses
within drainage where revenue is
centred, divesting from small,
unprofitable non-core businesses
Diversification through
investment in
climate
capabilities
and increased
emphasis on
sustainability
Movement towards
complete solution
offerings
Heritage business, with core
focus on
plastic pipes
but
expanding product offering
Founded as a
manufacturer
of extruded and
moulded plastic
2000
2005
2010
2015
2020
2022
GROUP DEVELOPMENT
ACQUISITIONS
Creation of
in 2021
Our business at a glance continued
3
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Chair’s Statement
Kevin Boyd, Independent Non-Executive Chair
Introduction
I am delighted to be writing my first statement
as Chair of the Company, following my
appointment on 1 November 2022. I would like,
on behalf of the Board and the Company, to
thank Ron Marsh for his chairmanship and
valuable contribution over the last eight years.
There were a number of challenges for the
Group in 2022, however, as demonstrated by
these results, our performance has been
strong and resilient despite the difficult
ongoing micro and macroeconomic
environment we faced.
Performance and results
These ongoing challenges post pandemic
have continued to impact the UK and global
economy, which has resulted in inflation
and supply chain issues, in particular in our
Adey and Nuaire businesses.
The year continued to bring difficult market
conditions in UK construction as a whole,
but our businesses have performed well in
the circumstances. This robust performance
is down to the hard work and resilience of
our colleagues around the Group who have
risen to, and overcome, the challenges we
have faced.
The Group delivered revenue 4.7% higher
than prior year at £622.2m, (2021: £594.3m).
Adjusted operating profit was 3.0% up at
£98.2m (2021: £95.3m), representing a margin
of 15.8% (2021: 16.0%). Underlying basic earnings
per share for the year was 30.8 pence
(2021: 30.6 pence).
The Group also completed the acquisition
of Keytec Geomembranes Holding Company
Limited during the first quarter of 2022,
welcoming new colleagues into the Group,
as we continue to diversify our product
portfolio and evolve towards being a
solutions-based Group.
Review and update of strategy
During the year, a review and refresh of the
Group’s strategy was carried out in order to
determine whether the strategic direction we
articulated in 2021 needed to be refreshed.
Although the Board remained convinced
about the fundamental approach of aligning
to key sustainability-linked growth drivers,
it was agreed that further work on
organisational design, and quantifying
our ambitions and key initiatives could
be achieved. We engaged a third party
consultant to assist with this review process,
and a project team of around fifty of our
leaders and subject matter experts worked
alongside them to complete this review.
The outcome of this process is our
Sustainable Solutions for Growth strategy,
which we shared publicly at the Capital
Markets Day (CMD) in November, setting out
our mid-term goals, our new organisational
and reporting structure, and further insight
into how this strategy will be achieved via
our three Business Units. The CMD was well
attended, and feedback on the day itself
and the refreshed strategy was positive.
Creating a better
built environment
Sustainability continues
to be at the heart of our
growth agenda.
4
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Sustainability
Sustainability continues to be at the heart of
our growth agenda. Expectations of the built
environment to solve the urgent challenges
facing our infrastructure, buildings,
communities, and planet have never been
greater. Across the Group we’re finding
solutions for these challenges; creating a
more resilient business, society and planet,
and we understand we have a key role to
play in making the built environment more
sustainable. We will do this by becoming a
sustainable, low-carbon business ourselves
as well as delivering sustainable solutions
at scale.
We will continue to invest in innovative
solutions to capitalise on key sustainability
drivers, as well as driving growth through
ongoing legacy material substitution
and increasing our geographic reach.
Our refreshed strategy showcased our
continuing focus on higher growth
and sustainability driven markets.
Restructuring into three Business Units:
Water Management Solutions, Climate
Management Solutions and Sustainable
Building Solutions reflects our sustainability
focus. Our growth drivers will continue to
propel performance in the years to come
and sustainability will continue to be at
the heart of how we run our businesses,
so they are fit for the future.
We continue to make progress towards
achieving our 2025 sustainability targets
and have ensured that these targets provide
alignment between management and
stakeholder expectations by incorporating
them into our long-term incentive
arrangements for the Executive Directors
and senior management. We are committed
to, and will continue to make changes to
ensure that where possible, sustainability
underpins everything we do.
Board changes
As previously outlined in the 2021 Annual
Report, Joe Vorih was appointed as Chief
Executive Officer and a member of the
Board in February 2022. Louise Hardy stepped
down from the Board in September 2022,
and on 1 November 2022 Ron Marsh retired
as Chair of the Board, following nearly nine
years in this role. Ron was appointed as a
Non-Executive Director in 2014 when the
Company listed on the LSE, and has played
a key role in leading the Board since that
date. On behalf of the Group and Board, it
has been a pleasure working alongside
Ron and we thank him for his time and
dedication and wish him all the best
with his future endeavours.
I am also pleased to welcome Shatish Dasani
to the Group, having been appointed as a
Non-Executive Director and a member of the
Board on 1 March 2023, and as Chair of the
Audit Committee on 7 March 2023 following a
thorough recruitment process. Further detail
on our Board recruitment processes are set
out in our Nomination Committee Report.
Kevin Boyd
Independent Non-Executive Chair
14 March 2023
Chair’s Statement continued
Bringing our
colleagues with us
on our sustainability
journey
‘Wash & Squash’ HDPE Recycling
In 2022 the Group launched the Wash
& Squash initiative, which encouraged
colleagues across the Group to bring their
plastic bottle waste to their respective
sites for it to be recycled at our Polymer
Processing Plant in Horncastle. The Polymer
Processing Plant recycles post-consumer
HDPE bottle waste and converts it into
engineered plastic pipe solutions that last
in excess of 100 years – this initiative adding
to the c.50,000 tonnes of plastic recycling
processed during 2022. Sites were provided
with ‘Wash & Squash’ recycling bags made
from recycled bottles, where they could
deposit clean empty HDPE bottles that were
then taken to Horncastle for recycling.
This initiative engages our colleagues to
bring them on our journey to support the
Group’s ambition to provide sustainable
solutions to the built environment and be
the lowest carbon choice for our customers.
5
Genuit Group plc
Annual Report & Accounts 2022
Governance
Remuneration
Financial Statements
Strategic Report
Long-term sustainability
Investment proposition
1
Market leadership
Genuit is a market leader with a balanced exposure
across segments, with market outperformance
underpinned by sustainability-linked tailwinds.
The Group operates in a Served Addressable Market
(SAM) valued at c.£3bn, and our market share across
that SAM is c.20%. Growth drivers such as low carbon
heating, the regulatory frameworks around
Sustainable Drainage Systems (SuDS), and the need
for increasingly resilient stormwater management
assist us in outperforming the construction market
through the cycle.
3
Innovation levels
which drive profitability
We believe that the climate challenges of today and
tomorrow will not be solved only by the products and
solutions of today. It is for that reason that we place
emphasis on innovation across the Group, and our
target of a 25.0% Vitality Index. The result of this is
extensive IP, and differentiated products capable
of sustaining higher margins.
5
Disciplined M&A
as an enabler of
accelerated growth
The Group has a proven track record of successful
M&A, having completed ten transactions since IPO.
Whilst organic growth remains core to our strategy,
we recognise that portfolio completion can
sometimes be achieved faster, and create better
value, via acquisition. We apply disciplined evaluation
criteria to our targets, including characteristics such
as strong market shares, IP, sustainability credentials,
and premium pricing, alongside financial metrics.
4
Sustainability is at the
heart of everything we
do, with medium and
long-term targets driving
our decisions and focus
Sustainability is woven into the fabric of Genuit Group.
Along with addressing sustainability-linked growth
drivers, we will be the lowest carbon supplier of
choice for our customers. As well as being the
responsible way to operate, it is key to our
commercial strategy.
6
Resilient financial
performance through
the cycle with high levels
of cash conversion
At our 2022 Capital Markets Day we stated our
objective of achieving >90% cash conversion.
Our business model is cash generative, and has
historically operated at these levels.
2
Genuit Business System,
focused on maximising
growth, lean thinking, and
leadership behaviours
We are embedding the principles and tools of lean
management across our businesses to create value
and drive out waste, improving margins and reducing
working capital. Adopting common processes will
create a flywheel to increase synergy realisation in
future M&A.
6
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Chief Executive Officer’s review
Joe Vorih, Chief Executive Officer
I am pleased to report that the Group has
delivered growth in annual underlying profit
performance, against a prior year of strong
comparatives with revenue from continuing
operations 4.7% higher than prior year at
£622.2m (2021: £594.3m), underlying operating
profit 3.0% higher than prior year at £98.2m
(2021: £95.3m) and underlying basic earnings
per share 0.7% higher than prior year at 30.8
pence (2021: 30.6 pence), despite the impact
of increased financing costs.
This was a year of considerable macroeconomic
and political uncertainty with continued levels
of high inflation in materials, energy and
labour costs, constraints in the supply of key
components (affecting us both directly, and
indirectly through the supply chains of our
customers) and with an isolated cyber
incident in April 2022. I am proud of how our
teams responded to all these challenges to
deliver these results and I would like to thank
them for their dedication and hard work.
As we committed last year, we have improved
our commercial excellence and pricing
responsiveness in the face of significant
inflation. Several robust market-leading price
increases throughout the year with shortened
implementation periods, combined with
trimming the cost base and boosting
operational efficiency to help offset inflation
and somewhat weaker demand in the second
half. We have also prioritised higher margin
business, exiting some less profitable product
lines during the year. The tougher trading
conditions in the latter part of the year
precluded any normal Autumn seasonal
uplift – especially in RMI activity – and subdued
trading continued until the end of the year.
Our underlying operating margin of 15.8%
(2021: 16.0%) was the result of improved pricing
realisation from the second quarter largely
offsetting the increase in material costs,
costs of the cyber incident and constrained
boiler supply. We have focused on a more
streamlined organisation that will realise
synergies, better positioning us for 2023 as
profit margins improved to 16.8% for the
second half.
We remain a highly cash-generative
business, and even after significant capital
investment to upgrade our manufacturing
and invest in growth, we generated £62.6m
cash (2021: £57.2m). Accordingly, the Board
has approved a final dividend of 8.2 pence
(2021: 8.2 pence).
Our Results:
Progress in the
face of challenge
REVENUE
2022
£m
2021
£m
Change
%
LFL Change
%
Residential Systems
394.3
372.9
5.7
5.0
Commercial and Infrastructure Systems
227.9
221.4
2.9
0.5
622.2
594.3
4.7
3.1
UNDERLYING OPERATING PROFIT
2022
£m
ROS
%
2021
£m
ROS
%
Change
%
Residential Systems
79.1
20.1
73.1
19.6
8.2
Commercial and Infrastructure Systems
19.1
8.4
22.2
10.0
(14.0)
98.2
15.8
95.3
16.0
3.0
7
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Chief Executive Officer’s review continued
Our customers: long term climate tailwinds,
short term market turbulence
Although we are in a period of short-term
turbulence, the Group continues to focus on
segments that benefit from secular trends
and growth drivers. The transition to low
carbon and more efficient heating and
cooling, the need to provide the built
environment with resilience to the impacts
of climate change, and the increasing
demands from our customers to help them
reduce the carbon content of their supply
chains, all provide tailwinds that will drive
above market growth in the medium term.
Even now, some of these tailwinds are
helping us to grow despite subdued markets.
Our Nu-Heat underfloor heating and heat
pump-based solutions, for example, have
grown 21.0% compared to prior year as
customers are attracted to the combination
of more sustainable products and lower
energy bills. The policy landscape also
continues to provide tailwinds, with Parts
L&F of the Building Regulations, as well as the
roll out of the Flood and Water Management
Act, all helping to increase adoption of
our products through the changes in
specification and design. Reducing the
carbon equivalent content of our products
is fundamental to how we make our business
more sustainable, and increasingly it is a
source of competitive advantage as our
customers recognise that their purchasing
decisions are a key driver of their own Scope
3 impacts.
Housing supply remains a key issue facing
the UK. Although developers have reacted to
the short-term issues around interest rates,
affordability, and the resultant dip in
reservation rates by slowing their site
opening and starts, we still see a structural
housing shortage as being a medium-term
growth driver. Despite the Government’s
declared target of 300,000 units per annum,
2022 was only the second year since 2007
that saw over 200,000 units completed
(Source: CPA), and despite the forecast of a
dip in 2023, the sector is expected to return
to growth in the latter part of the year.
Extreme weather events continue to occur
with increasing frequency, and designers and
engineers now need to cater for this in terms
of greater rainfall and its associated impact
on drainage and surface water
management. Similarly, our summers are
getting hotter, and the need for sustainable
cooling solutions has never been greater.
We continue to develop innovative solutions
across all our businesses to address climate
adaptation challenges and improve built
environment resilience.
Our strategy: Sustainable Solutions
for Growth
At our Capital Markets Day in November,
we introduced the strategic evolution of
Genuit with our Sustainable Solutions for
Growth strategy following a thorough
review and refocusing of our strategic
plans. The key elements of this new strategy
– which has been well-received by both
markets and, importantly, our own
employees – are as follows:
First, we will focus on higher growth
sustainability driven markets. While the
broader construction market is expected to
grow at low single digits through the cycle,
climate-driven investment should drive
outperformance in our strategic segments
including energy-efficient heating, green
urbanisation, and stormwater management.
Second, we will strengthen our current
position by becoming the lowest carbon
choice supplier for our customers. As our
customers implement their net zero
commitments, access to the lowest
embedded-carbon solutions – an
area we already lead – will become
increasingly important.
Third, we will simplify the business – making
it more focused, agile and profitable.
By retaining a decentralised operating model
while realising more internal synergy and
efficiency with our Business Units, we can
invest more in our future growth and improve
our profitability.
Fourth, we have committed to creating
increasing value for all our stakeholders as
we develop and embed the Genuit Business
System in all that we do. A relentless focus on
improving customer service, simplifying our
operations and engendering creative
problem-solving with all our people will
unlock the full potential of our businesses.
Fifth, we will use this stronger platform to
make disciplined and strategic M&A – when
the time is right. Our Group will continue to
add solution-enhancing, accretive
acquisitions while maintaining appropriate
levels of leverage and cash generation.
To put this strategy into action and make
progress clear, we have reorganised the
business into three Business Units – Climate
Management Solutions (CMS), Water
Management Solutions (WMS) and
Sustainable Building Solutions (SBS) – each
of good scale and with clear long-term
green revenue drivers.
CMS is focused on solving the challenges of
low-carbon heating, energy efficiency and
clean, healthy air – and includes Nuaire,
Nu-Heat, Surestop and Adey.
WMS has the most upward margin potential.
It includes some of our compelling blue-green
roof and storm water attenuation businesses
with the potential to offer more complete
solutions and move upstream in the design
and specification cycle. Polypipe Civils and
Green Urbanisation, Permavoid, Plura and
Alderburgh (with our latest Keytec services
acquisition) form part of this Business Unit.
Of course, SBS is Genuit’s strong core – including
Polypipe Building Products, Manthorpe and
Polypipe Building Services businesses.
With this strong market position, these
businesses have the potential to continue
to drive share as the lowest carbon choice
for the construction industry.
We believe that this structure will leverage
our larger scale and lower our cost base,
while providing greater strategic alignment
and clear focus on growth. Further, we will
make this our reporting structure from 2023
onward – transparency that should help our
own people and investors alike track the
results of our strategy.
Robust financial performance
achieved in a year of considerable
macroeconomic and political uncertainty
with continued levels of high inflation and
constraints in supply chain.
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Chief Executive Officer’s review continued
As we take Genuit through this transition, we
have set ambitious but achievable mid-term
targets. We will work to outperform the UK
construction market by 2 to 4% through the
cycle – organically. We intend to drive
operating margin expansion to 20% and
beyond – from self-help, continuous
improvement, and operating leverage.
We will return to, and then maintain, at least
90% operating cash conversion, and will drive
our return on capital to 15% or greater.
Of course, we will keep to our net zero and
Science-Based Targets (SBTs) commitments
and invest in our people – with a measurable
goal of achieving The 5% Club Gold
membership status.
Our path to net zero: leading the way
We submitted our SBTs for verification in
August 2022. This followed work with a leading
consultancy to conduct a thorough carbon
inventory so that we are now fully informed
on the key components of our carbon
impact. Our SBTs are initially based upon
improvements by 2027, at which point we will
re-calibrate and set targets for the following
five years. This first phase of SBTs build upon
the 2025 targets which we previously
published and put us on a trajectory for
being net zero by 2050.
Our Science-Based Targets as submitted are:
–
Reduction of the Group’s absolute Scopes
1 and 2 GHG emissions by 30% by 2027 from
a 2021 base year.
–
Commitment that 84% of the Group-wide
supplier base, covering purchased goods
and services, will have submitted SBTs
by 2027.
We are also committed to a reduction of
absolute Scope 3 GHG emissions by 13% for
our purchased goods and services by 2027
from a 2021 base year.
Our sustainability targets are already a
key component of Executive and senior
management remuneration, and we are
now also adding an annual measure of
carbon reduction into the annual bonus
arrangements for a wider cohort of our
managers to ensure reward is fully aligned
with our strategic priorities.
In 2022, we reduced our Scopes 1 and 2
carbon intensity by 3.6% versus prior year.
Given the reduction in production volumes
in 2022, it is pleasing to report that we still
managed to achieve this despite the
inherent pressure on efficiencies, and the
increased relevance of our base load energy
consumption. Since we began to measure
ourselves in this way, we have reduced our
carbon intensity by 50.2%.
Our use of recycled polymers was broadly
similar to the prior year at 48.7% of our total
tonnage (2021: 49.4%). Progress was
hampered by product mix issues, particularly
as housing starts slowed in the second half,
and in general we are more able to utilise
recyclate in below ground applications rather
than, for example, above ground plumbing
and heating pipes. We were also slightly
delayed in implementing some of the
product change projects which form the
pathway to our 62% target but expect this
to be rectified during 2023.
The proportion of our employees that
are in structured training programmes
(e.g. apprenticeships, formal graduate
programs or sponsored students) reached
3.5% (2021: 3.2%). The share of our net revenue
sales derived from products developed in
the last five years (Vitality Index) rose to
24.7% (2021: 20.2%).
Our people and culture:
purpose-driven performance
Genuit’s success is founded on our great
people. We are investing in the three key
areas of talent, engagement and culture
to unlock the full potential of the business
and secure Genuit’s position as a premium
employee brand – crucial to attracting
and retaining the best talent.
During 2022, we have strengthened our
executive team with the promotion of
Matthew Webber as Managing Director
of CMS, and by welcoming Steve Currier
as Managing Director of SBS. We have
launched the Genuit Leadership Team –
the seventy or so top leaders across the
Group and have made key additions to this
team including talent development, lean
leadership and financial management.
We have rolled out a new talent development
process and created a Group-wide talent
pipeline. This includes expanding our
commitment to graduate schemes and
apprenticeships and strengthening our
accredited learning programmes – which
have always been important at Genuit.
We are investing in technology to benefit
our people – we are implementing Workday
as our human resources platform, Peakon
as our engagement platform and have
already deployed Workplace by Meta to
communicate and connect with our people.
Building a high-performance culture takes
time, but I am encouraged by our progress
following my first ever Group-wide leadership
conference. We are focusing on the things
that matter most – transparency and
respect, encouraging a growth-mindset
and continuous improvement, and elevating
diversity and inclusion as key to our future;
something I am very passionate about.
Well positioned for key secular
trends and growth drivers.
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Chief Executive Officer’s review continued
Outlook
This year has started well and has traded in
line with expectations, although we expect
challenging and uncertain market conditions
to continue into 2023 amongst
macroeconomic uncertainty, with continued
lower volumes as seen in the second half of
2022. Our expectations for the year have
been based upon the CPA Winter Forecast.
If there are any deviations from this forecast,
the business has proven resilience and agility
to adapt in those conditions. However, the
actions taken on pricing and the other
self-help measures started last year,
including further simplification of the
business, will maintain the Group’s resilience
and enhance our capability to respond to
improvements in the market.
Through reinvesting these synergies in our
people and growth initiatives and keeping
a continual focus on margins and cash
flow, we are confident that we will start to
make measurable progress towards our
mid-term commitments. Further, our focus
on climate-driven growth, leadership in
sustainable materials and enhancing the
power of our people through the Genuit
Business System, will position us well for the
long term. Most importantly, we are building
a strong team, with a single sustainable
purpose, and look forward to the next
chapter in our Sustainable Solutions for
Growth strategy.
Joe Vorih
Chief Executive Officer
14 March 2023
Q&A
Joe Vorih
Chief Executive Officer
You launched a new strategy last year which underscores
your commitment to driving higher growth in sustainability
driven markets. Can you explain how you will differentiate
and deliver?
We will invest in higher-growth markets that benefit from
climate investment. Climate Management Solutions –
already a leading UK ventilation and heating business – is
well-positioned to deliver solutions that will be needed for
the homes and offices of the future. Water Management
Solutions already provides a range of stormwater
management products and installation services, as well as
blue-green roof technology to help adapt to increasingly
unpredictable rain and storms. We also committed to
strengthening our leadership position in recycling –
becoming the lowest embedded carbon choice for our
customers. By expanding these solutions – through
innovation and acquisition – we are committed to enabling
climate-friendly construction to deliver.
How has Genuit Group continued to adapt to the changing
conditions in the last year?
2022 was memorable, in the challenging sense – the highest
inflation we’ve seen in decades, an uncertain political stage
at home and in Europe, and unsettled financial markets.
We reacted quickly by improving our pricing agility and
leveraging Genuit purchasing scale Group-wide. We are
shifting from 20 or so independent businesses to three
strategically-focused platforms that have already begun to
drive structural cost synergies. These self-help measures will
enable us to return to and exceed historical margin
performance. Most importantly, we’ve kicked off our lean
journey and are deploying the Genuit Business System –
a source of value creation for years to come.
Climate issues are key areas of focus globally.
How is Genuit leveraging the opportunity?
Climate change definitely grabbed headlines in 2022. I believe
we’ve reached a tipping point, and that business is beginning
to lead the way to develop the solutions that will enable us to
meaningfully mitigate and adapt to climate change. We are
well-positioned, having built our climate management and
stormwater solutions businesses over the last ten years
through acquisitions to be the Genuit we are today. And we
are industry leaders in the use of recycled plastics – ready
as our customers begin to ask for lower embedded carbon
products to meet their net zero commitments.
Can you explain how you are developing Genuit’s talent,
culture, diversity and inclusion?
Great companies are built by great teams and investing
in those teams must remain our top priority. We’ve created
our own Group-wide talent development process, recruited
and promoted key leaders for the future and defined
a new Group-wide Genuit Leadership Team to drive a
high-performance culture, implement our purpose and
strategy, and role-model inclusive and diverse leadership
that will yield benefits for years to come.
What do you see as your main priorities for 2023?
Our key priorities for 2023 are to embed our Sustainable
Solutions for Growth strategy, and to get every one of us at
Genuit aligned to deliver for our customers. We will unlock
unrealised synergies and redeploy those resources to invest
in our future solutions. This is the best way to improve our
margins in the face of uncertain market conditions, while we
create the high-performance culture and embed the Genuit
Business System and lean mindset into absolutely everything
we do. I’m more positive than ever about the Group’s
purpose and growth opportunities, and looking forward
to working with our team to realise our full potential.
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In the recent Construction Products
Association (CPA) Winter Forecast, total
UK construction activity (excluding
infrastructure) is now expected to have
shown 1.0% growth in 2022 versus prior year.
At the outset of 2022 the forecast
suggested a growth level of 3.2% on a
similar basis. Broadly speaking, this
divergence began in the first half of 2022,
with the impact of Russia’s invasion of
Ukraine and its resultant inflationary
pressures. Toward the end of the year, this
was exacerbated by the interest rate
increases and the combined pressures on
disposable incomes. Similarly, in the second
half of the year, some sectors were seeing
volumes fall as inflation was impacting their
fixed budgets, whilst others, such as private
housing and commercial construction,
began to reduce activity in anticipation of
a downturn in 2023. Infrastructure showed
more resilience in 2022 due to the
long-term nature of activity, and the
relative impact of marquee projects
such as HS2.
The CPA Winter Forecast was made
during times of significant uncertainty
and short term volatility. There are
significant sensitivities to the base case
forecast, largely dependent upon the
length of any recession, and the associated
issues around consumer confidence,
unemployment rates and disposable
incomes. Against that backdrop the
total construction market, excluding
infrastructure is now forecast to decline
by 6.1% in 2023, a slight worsening
compared to the autumn forecast which
had predicted a decline of 5.0%; though
this had been formulated prior to the
obvious near term impact of the
Truss-Kwarteng government. It does, of
course, need to be seen in the context of
the scale of construction activity and the
pace of recovery post pandemic which
had led to historically high levels of
activity in both 2021 and 2022, particularly
in sub-sectors such as Housing RMI.
The estimate of 204,061 completions during
2022 is at a level second only to 2019 since
the turn of the century. The momentum post
pandemic, and the continuation of that pent
up demand was also assisted by ongoing
government stimulus packages such as Help
to Buy. The housing sector more broadly saw
a reduction in transaction volumes of c.15%,
after the extremely buoyant levels of 2021
which had also benefited from the stamp
duty reductions alongside the other
assistance packages. This reduced level of
transaction activity, albeit from a historically
high level, had been well established even
before the turmoil of the Autumn Statement.
Indeed, that created a short-term upward
tick in transaction activity as people rushed
to capitalise on mortgage offers that were
in place as can be seen in November’s level
of property transactions, being 8.7% higher
than the average of 2018/19. Nonetheless the
year ended with 15% fewer transactions than
in 2021. December 2022 also marked the
fourth consecutive month of house price falls
from their August peak, according to
Nationwide Building Society.
Against this backdrop, and the ongoing
issues of mortgage affordability as interest
rates remain higher than recent years, there
is clearly uncertainty in the short term outlook
for the housing sector, notwithstanding the
mid-term structural drivers which continue.
Housebuilders are predicted to react to this
uncertainty by slowing down their site
openings and build out rates, and therefore
the CPA forecasts a 13.1% reduction in housing
starts to 177,418 units, before a 1.6% recovery
to 180,240 in 2024.
Private Housing RMI reached historic high
levels in March 2022, and has been on a
downward trend since then. Such a huge
segment never moves homogeneously.
The post pandemic RMI boom had been
on the back of accumulated savings, and
a desire for improved outdoor spaces as
well as environments suitable for working
from home; much of which happened whilst
alternative types of expenditure such as
foreign holidays were less prevalent.
This inevitably tailed off some two years
after the start of the first lockdowns.
Nonetheless this sector is now the third
largest aspect of UK construction behind
private new housing and infrastructure.
Whilst the ‘Improvement’ element of RMI
tends to be the more volatile, it is also still the
case that R&M is largely shielded from all but
the most severe economic effects. It is also
true that certain sub-sectors have shown
some resilience, and most notably those
aspects which themselves offer mitigation
against issues such as the increasing costs
of energy; either via a move from fossil fuel
or a move to improve efficiency.
Looking forward, this relative resilience is
expected to continue with a 6.9% decline in
housing RMI, being slightly more robust than
the 10.9% decline predicted in new housing.
There is obvious downside risk given the
ongoing pressure on disposable incomes, but
similarly the upside potential is largely linked
to a recovery in housing transactions, as one
of the key triggers of a significant RMI project
is the upgrade that often takes place within
the first six months of a house move.
Residential
Market review
100
110
120
130
140
150
160
2015
2016
4.8%
2017
5.3%
2018
-0.5%
2019
1.9%
2020
-15.9%
2021
10.3%
2022
1.0%
2023
-6.1%
2024
0.2%
2.0%
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Outside of housing the picture is somewhat
mixed. Over the last two years new
commercial construction has seen a
shallowing of the decline that has beset it
since 2017. The changes in working patterns
have impacted the demand for new offices,
and the sector is often the first to react
during periods of uncertainty. Although the
office new build sub-sector grew 4.0% in 2022,
it nonetheless remains some 24% below its
2016 peak. The RMI activity in offices remains
buoyant by contrast, as existing stock is
adapted to accommodate working patterns,
or upgraded given some of the concerns
around issues such as air quality, raised
during the pandemic.
Market review continued
Commercial and infrastructure
+10.1%
164,083 private new home
starts in 2022 are forecast
to be 10.1% above the
2019 level.
Construction Market Development*
160
140
120
100
80
60
40
20
0
2017
+5.3%
2015
+2.0%
-0.5%
2018
+1.9%
2019
-15.9%
2020
+10.3%
2021
+1.0%
2022
-6.1%
2023
+0.2%
2024
*
Excluding infrastructure segment
2016
+4.8%
£bn
Private housing RMI
£bn
10
12
14
16
18
20
22
24
26
2018
2019
22.8
22.7
25.7
24.1
22.2
2021
20.2
2020
2022
2024
22.0
2023
Source: CPA/ONS
New housing
'000 units
250
200
150
100
50
0
2018
2018
Starts
Completions
2019
197
191
184
207
2019
2020
152
166
2020
2021
204
201
2021
2022
204
204
2022
2023
177
182
2023
2024
180
178
2024
Commercial construction along with sectors
such as education and health construction is
also impacted during times of high inflation,
as projects or spending programmes are
often run within fixed budgets, and so the
volume of activity lessens to accommodate
the cost increases. We see this in health and
education new build where the forecasts
are for a flat 2023 and a decline of 1.0%
respectively, in volume terms, despite
the headlines talking of significant
expenditure increases.
The infrastructure segment remains the least
significant for the Group, given that over two
thirds of the sector is accounted for in power,
road and rail expenditure. Having grown 4.9%
in 2022, the sector is forecast to grow, albeit
at a slower rate of 2.4% in 2023, partly related
to the inflation impact referred to above.
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Financial Statements
Climate Management
Solutions
Addressing the drivers for low
carbon heating & cooling, and
clean & healthy air
Water Management
Solutions
Driving climate adaptation and
resilience through integrated
surface and drainage solutions
Sustainable Building
Solutions
Providing a range of solutions to
reduce the carbon content of the
built environment
Our resources
PEOPLE
Experts knowledgeable
on our customers’
applications and
empowered to act.
IP/EXPERTISE
Innovation, continuous
improvement and
unique IP defends
our market positions.
STRONG LEADERSHIP
Clear direction and
focused resource
allocation enables our
colleagues to deliver
our strategic vision.
CAPITAL INVESTMENT
Disciplined capital
allocation to fund
sustainable profitable
growth, consistent with
our strategic objectives.
CUSTOMERS
Quality and innovative
products, engineered
solutions that enable a
sustainable built environment,
support, value, range,
bespoke solutions, market
leading brands.
SHAREHOLDERS
Dividend, capital growth
opportunity, responsible
and ethical investment.
EMPLOYEES
Training and skills development,
commitment to diversity,
direct engagement and
empowerment, providing a
chance to make a difference.
SUPPLIERS
Long-standing relationships,
fair negotiation, certainty on
payment, reputation, visibility
on revenues.
COMMUNITIES
AND THE ENVIRONMENT
Working towards a sustainable
built environment, sustainable
products and practices,
enhancing the environment,
while engaging with
communities and charities
.
How we create value
Competitive advantages
Creating sustainable value for
our stakeholders
To help our customers
Genuit Group helps professionals
create sustainable, engineered water
and climate management solutions
for the built environment.
CUSTOMERS
–
One-off installers
–
Contract installers
–
Civil engineers
and contractors
–
M&E consultants
WHO THEN DELIVER
TO THE END USER
–
Housebuilders
–
Civils and
Commercial
sector developers
–
Asset owners and
self-builders
TRUST
VALUE
CAPABILITY
SUSTAINABILITY
RANGE
SUPPORT
COMPETENCE
Our purpose:
Business model
We address the challenges caused by climate change and urbanisation by providing water and climate management
solutions. We’re helping construction build better.
O
U
R
S
U
S
T
A
I
N
A
B
I
L
I
T
Y
F
R
A
M
E
W
O
R
K
I
S
C
O
R
E
T
O
O
U
R
C
O
M
M
E
R
C
I
A
L
S
T
R
A
T
E
G
Y
L
E
A
N
S
Y
S
T
E
M
S
Advancing
the circular
economy
Tackling
climate
change
Investing in
our people
Developing
sustainable
solutions
G
R
O
W
T
H
S
Y
S
T
E
M
S
G
E
N
U
I
T
B
U
S
I
N
E
S
S
S
Y
S
T
E
M
L
E
A
D
E
R
S
H
I
P
S
Y
S
T
E
M
S
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Our Strategy
At our 2022 Capital Markets Day we outlined
the strategy that would enact the next stage in
the evolution of Genuit Group. Our Sustainable
Solutions for Growth strategy builds on our
successful history, market positions and
the deep knowledge and expertise of our
people, whilst seeking to clarify how we will
outperform the wider market and unlock value
from within the Group.
Genuit operates in a served addressable
market valued at £3bn in the UK alone.
We occupy number one or two position
in the majority of sectors we serve.
Our history of expansive M&A activity has
meant the Group is active in segments
across water management, ventilation
and cooling, heating systems and
infrastructure. Within these segments we
are providing solutions which link to key
sustainability-linked growth drivers.
Our water management ranges address
key issues around resilience and adaptation,
as engineers design for increasingly frequent
severe weather events, and combine the
design of urban green spaces with solutions
to create a resilient stormwater network.
Our climate-related products are addressing
the need for lower carbon heating and
cooling, as well as providing clean and
healthy air.
In all of these sectors there are regulatory
tail winds such as Parts L and F of the Building
Regulations, and the Flood and Water
Management Act. These regulatory, societal
and climate change-related factors combine
to yield growth opportunities in excess of the
construction market average. We will
continue to focus our capital and efforts
on ensuring our portfolio and our organic
initiatives are targeting these higher
growth segments.
The roots of our Group lie in the benefits of
converting to polymer based piping products
versus old fashioned legacy alternatives.
Over the years, in addition to benefits such
as installation speed, this transition has
accelerated due to the lower life cycle
emissions of those plastic solutions.
Now, our customers are assessing carbon
impact as part of their purchasing decisions.
We recognise that in the context of the built
environment, the choice of products
represents a significant contributor to the
Scope 3 carbon content of a project, or the
participants in its supply chain.
Our efforts to increase our use of recycled
plastics, and to reduce the carbon impact
of our operations across the Group now
mean we can offer customers a way to
improve their carbon footprint. In a context
where 45% of FTSE companies have net
zero targets, along with many of the key
developers, contractors, and merchant
groups this is now a driver of customer
preference. We will continue to improve
our position in this regard; we have set our
Science Based Targets, we have a near-term
target of 62% of our polymers being from
recycled inputs, and we are rolling out a
programme of Environmental Product
Declarations (EPDs) so that increasingly,
customers can make data driven informed
decisions based on carbon comparison.
1
Focus on higher
growth, sustainability
driven markets
2
We will strengthen
our market positions
by being the lowest
carbon choice for
our customers
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The evolution of the Group has seen
significant M&A, including ten acquisitions
completed since IPO. Whilst we remain
committed to the strengths of our brands,
the strong customer relationships that exist in
our businesses and the agility that they show,
we have also recognised that in order to
capture our future growth opportunities and
maximise returns, we have needed to simplify
the Group. Therefore, around the end of 2022
we re-organised as three Business Units,
from our previous four divisions which had
historically been largely a consolidation layer.
This makes the Group easier for investors and
colleagues to understand how we align with
our served segments, and facilitates solutions
for customers in a more cohesive way.
We are committed to continuing to exploit
revenue and cost opportunities, and this
market-aligned structure will assist in
both regards.
Although we recognise differences between
our businesses and the needs of their
customers, it is clearly also true that
implementing best practice in our processes
can be a key enabler to improve key financial
and non-financial metrics. In Q4 2022, we
began the roll out of a Lean Transformation
at our Adey business, which will continue into
2023 when we will kick off parallel
programmes at Polypipe Building Products,
and one more site.
As well as yielding benefits at those sites,
these Lighthouse Projects will also help us to
build a capability that we can then use to
deploy these techniques and processes
more widely across the Group. We will use
this programme to drive improvements in
productivity, customer service, and increase
the engagement of our colleagues in
improving our business. The embedding of
the Genuit Business System also means that
we have an ongoing flywheel, allowing us to
extract synergies from future acquisitions in
a proven manner.
A proactive approach to developing
our people and a Genuit culture, is a key
cornerstone of our strategy, and forms part
of our competitive advantage. We believe
that a high performance culture is how we
will ensure an engaged and motivated
workforce. During the first half of 2023 we are
working with groups of colleagues to
precisely articulate those core behaviours
that evidence this culture, and to which we
are all held to account.
Like the Genuit Business System, although we
recognise the different identities of our
businesses, the Genuit culture will develop
consistently across them. This is a key way to
extract the benefit of scale in terms of
capability and also to promote mobility of
talent across the Group so that colleagues
feel a wider sense of belonging to the Group,
and have ambition to grow and develop in
opportunities across it. We are also investing
in key enablers such as the Workday HRIS
system, an engagement measurement tool
called Peakon, and an employee
communication and engagement platform,
Workplace by Meta.
M&A has been key to the Group’s expanded
market footprint. For example, our Climate
Management Solutions Business Unit has
been formed via acquisition since IPO and
our activities in underfloor heating (UFH),
commercial & residential ventilation, and
heating efficiency systems now account
for c.25% of Group EBIT. We will focus our
inorganic growth on targets that allow us to
fill portfolio gaps, and build real value-added
solutions. This goes beyond simply offering
a wide range; it ensures that our systems
complement and integrate with each other
so that functionality and value increases
for the customer. That is at the heart of our
approach to solution selling. The size of our
addressable market, and the fragmented
nature of key segments provide significant
capability for future M&A. As well as being
clear of the role of inorganic versus organic
growth, we are also clear on how we evaluate
M&A opportunities, with transparent and
disciplined criteria:
1. Strong management teams
2. Above market average growth opportunity
3. Premium products
4. Sustainability at the core of the business
5. Strong market share position
6. IP, expertise and differentiation
7. Profitable and cash-generative future
3
We will simplify
the Business
Our Strategy continued
4
Create value
through the Genuit
Business System
5
Investing in our
people and culture
6
Increasing solutions
capability via growth
enabling M&A
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A Name, Position
A Name, Position
Matthew Webber,
MD, Climate Management Solutions
Since our IPO in 2014, the climate
management segment has been a key
focus of our M&A activity, to the extent
that by 2022 it represented 25.5% of
total Group revenue.
This segment benefits from secular
growth drivers, which provide tailwinds
for above construction market growth
rates. The policy environment with
recent amendments to Building
Regulations such as Part L and Part F,
as well as the broader Future Homes
Standard, are key enabling pieces
of legislation to assist the built
environment play its part in a lower
carbon economy. The move away
from fossil fuels as a sustainability
imperative is now also supplemented
by the economic issues around
energy costs; both of which drive the
demand for more efficient solutions.
Indeed, products such as our Adey
filters which improve the efficiency of
existing installations are also offering
consumers rapid paybacks as energy
costs remain at historic high levels.
Providing value across technologies
For Genuit, we see real added value in
bringing product technologies together
to provide more integrated solutions.
Historically the heating systems in our homes
have been inefficient, but with plenty of spare
capacity, so that when we were cold we
simply put in more energy for instant heat.
The future, and increasingly the present, uses
more efficient low carbon energy inputs such
as air source heat pumps as offered by
Nu-Heat. This means we need to ensure our
systems are working together so that
technologies such as underfloor heating can
be complemented by Mechanical Ventilation
& Heat Recovery (MVHR). This combination of
base load heating being supplemented by
other low carbon heat sources will be the
future of heating our homes and workplaces.
Genuit is in a unique position to offer these
complete solutions, and we will develop
interfaces to allow the technologies to
interact and to benefit the user. Additionally,
we will continue to build our product portfolio
so that we can offer genuine solutions which
meet specific customer needs rather than
being wedded to one product technology.
Alongside low carbon heating, our homes
and workplaces also need to adapt to
increasingly warm summers. Our Nuaire
business provides efficient options for
cooling, whilst also providing clean fresh
air, rather than simply recirculating air as
conventional air conditioning systems
have done. We also recognise that with the
insulation and “air tight” requirements of Part
F, there also comes a need to provide fresh
air in a managed manner to provide a
healthy environment and also to combat
the issues around damp, which are a real
concern across the existing housing stock.
Lower carbon
heating and
cooling
25.5%
In 2022 Climate
Management Solutions
represents 25.5% of total
Group revenue
Climate
Management
Solutions
Strategy in action
With our presence in both
water and air based climate
management technology,
Genuit is uniquely placed
to offer the solutions for the
future of low carbon heating
and cooling
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STRATEGY IN ACTION
The impact of climate
change on the need to
accommodate extreme
weather events is clear.
We are committed to designing
solutions which address that
need, and in doing so also provide
for higher quality urban spaces.
Our significant usage of recyclate
also means that we are minimising
our own impact upon the climate
Steve Durdant-Hollamby,
MD, Water Management Solutions
Our Water Management Solutions
Business Unit is helping adaptation
and resilience through integrated
surface and drainage solutions. The
built environment is increasingly under
stress from extreme weather events
which are happening with greater
frequency, and require solutions which
cater for increased volumes of water,
whilst also being sympathetic to the
requirements of landscape planning.
These issues lie behind the key
regulatory and policy tailwinds, such
as the Flood and Water Management
Act which is long overdue in its
implementation in England, and also
the Sustainable Drainage Systems
(SuDS) requirements which now form
the backbone of environmentally
sympathetic drainage development.
A holistic approach to design
Our Water Management Solutions Business
Unit has considerable expertise in holistic
design. For example in our Polypipe Civils &
Green Urbanisation business we provide
solutions for storing and managing the flow
of stormwater, or attenuation, whilst at the
same time using that water to sustain green
spaces on the surface. This may be in
podium decks, blue-green roofs, or rain
gardens; all ways to improve urban spaces
and the air quality within them, whilst
ensuring the resilience of the drainage
system below the surface. These are key
ways of re-introducing green surfaces into
what has become an increasingly
concretised urban landscape.
Our Horncastle site is home to the Group’s
largest investment in recycling, with our wash
plant facility that in 2022 processed c.8,000
tonnes of post consumer waste such as
plastic milk cartons, detergent bottles and
other HDPE products. The facility converts
that ‘waste’ into pipe systems which have
design lives in excess of one hundred years,
addressing real societal needs, and
underpins our position as leading the
European piping industry in terms of use
of recycled polymers.
Enabling
adaptation
and resilience
>30,000t
In 2022 our WMS Business Unit
consumed over 30,000 tonnes of
recycled post-consumer waste
Water
Management
Solutions
Strategy in action continued
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With our leading brand
positions, we are well placed
to help our customers reduce
their carbon impact. We are
committed to an innovation
programme which will build
on the progress we have
already made
Steve Currier,
MD, Sustainable Building Solutions
Our mission in our Sustainable
Building Solutions Business Unit is
to reduce the carbon impact of the
built environment. Our brands such
as Polypipe Building Products, Terrain,
and Manthorpe already lead their
respective sectors and have strong
reputations built on innovation and
high quality. Much of their history has
been to position their products against
legacy materials such as copper or
cast iron. Hitherto much of those sales
arguments had centred upon issues
such as ease and speed of installation,
and whilst those points remain valid it
is increasingly the case that customers
are choosing these ranges because of
their lower carbon impacts.
Removing carbon; for us, and our customers
We will continue to drive carbon out of our
product ranges so that we are the lowest
carbon supplier of choice for our customers.
As well as being consistent with our desire to
be a sustainable business with clear goals
such as Science Based Targets, we also see
the growth opportunities that this presents
given that for many of our customers, their
choice of products is a key driver of their
own Scope 3 emissions. Our drive for carbon
reduction is a key component of their
pathways to net zero.
We continue to explore ways to increase
our use of recycled materials in place of
virgin polymers, and in 2022 we launched a
new product in our Terrain range following
the £2.5m investment on our Aylesford site
which allows us to produce a range with 65%
recycled content. We are also rolling out a
programme of Environmental Product
Declarations (EPDs), which are third party
accredited meaning that customers are
able to make objective informed choice
based on the actual carbon content of
our products rather than industry generic
statistics. Our Advantage offering from
Polypipe Building Services provides
contractors with a way to access the benefits
of Modern Methods of Construction (MMC),
with our precision design, and fabrication
of bespoke systems in a manufacturing
environment. This reduces waste as well
as transport, and consequently the carbon
impact of the installation. With large
contractors, asset owners and developers
increasingly committing to net zero futures,
our low carbon solutions offer a source of
competitive advantage.
Strategy in action continued
Driving
out
carbon
65%
In 2022 we launched a new
product in our Terrain range
following the £2.5m investment
on our Aylesford site which
allows us to produce a range
with 65% recycled content
Sustainable
Building Solutions
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We continually review
the Group’s performance
indicators that are critical
to the measurement and
delivery of our strategic
objectives and sustainable
shareholder returns.
Key
Performance
Indicators
We have defined our Key Performance
Indicators (KPIs) to measure alignment
between our operating activity and
strategic goals.
Focus on higher growth, Sustainability
driven markets
1
Lowest carbon choice for our customers
2
Simplify the business
3
Create value through the Genuit
Business System
4
Investing in our people and culture
5
Increasing solutions capability via
growth-enabling M&A
6
NON-FINANCIAL KPIs
DEVELOPING OUR WORKFORCE
%
Link to strategic objectives
5
The proportion of our UK colleagues actively participating in
The 5% Club recognised Earn and Learn programmes such as
apprenticeships, graduate trainee and student sponsorships.
2022
3.5
3.2
3.8
2021
2020
RECYCLING
%
Link to strategic objectives
1
2
The proportion of the Group’s overall polymer consumption fulfilled
by recycled materials.
2022
48.7
49.4
45.9
2021
2020
ACCIDENT FREQUENCY
Frequency per 100,000 hours worked
Link to strategic objectives
5
The number of reported accidents as a proportion of the number of
production hours across the whole Group.
2022
3.62
5.06
2021
2020
4.26
GREENHOUSE GAS EMISSIONS
Intensity ratio
Link to strategic objectives
1
2
5
The intensity ratio is defined as the total tonnes of Scopes 1 and 2
CO
2
e produced per total tonnes of production.
2022
2021
2020
0.136
0.141
0.252
3.5%
48.7%
3.62
0.136
Importance to Genuit
Developing and investing in our
colleagues drives sales growth,
operational efficiency and
profitability, whilst facilitating
employee retention and
enhancing workforce morale.
Commentary
In 2022, we maintained Silver
Membership status of The 5%
Club. This demonstrates our
commitment to investing in our
workforce through a broad range
of Earn and Learn programmes.
At the end of 2022, we had over
110 colleagues participating
in accredited Earn and
Learn programmes.
Importance to Genuit
The Group has a commitment
to achieving the highest
standards of environmental
performance, preventing
pollution and minimising the
impact of its operations including
reducing waste to landfill.
Commentary
Our use of recycled material
in the year was broadly similar
to the prior year at 48.7% of our
total tonnage consumption.
Progress was hampered by a
slight delay in implementing
some of the product change
projects which form the pathway
to our 62% target but we expect
this to be rectified during 2023.
Importance to Genuit
Beyond mere compliance, this
is an indicator of the state of
health and safety at our various
sites and the degree to which
the workers are protected from
work-related hazards at their
workplace. Our aspiration is
to achieve zero accidents
every year.
Commentary
The Group has seen a continued
and sustained improvement in
reported accidents. Incident rates
across the Group have been
decreasing year-on-year, in line
with an increase in engagement
and positive leading indicator
performance.
Importance to Genuit
The year-on-year improvement
in this measure demonstrates
our commitment to operating in
an environmentally sustainable
manner, as the Group continues
to grow.
Commentary
Our Scopes 1 and 2 carbon
intensity has reduced by 3.6%
and we are on track towards
our goal of a 66% reduction
since the 2019 baseline data
was established. To date we
have achieved a cumulative
intensity reduction of 50.2%.
The Group continues to develop
its strategy and framework to
further reduce emissions
through energy efficiency.
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FINANCIAL KPIs
SALES GROWTH
%
Link to strategic objectives
1
3
4
6
The annual percentage growth in both Group and UK
(by destination) revenue.
2022
4.7
5.0
49.1
50.6
-10.9
-11.6
2021
2020
Group sales
UK sales
UNDERLYING OPERATING MARGIN
%
Link to strategic objectives
1
3
4
5
6
Underlying operating profit as a percentage of revenue.
2022
15.8
16.0
10.6
2021
2020
CASH CONVERSION
%
Link to strategic objectives
1
3
4
5
6
Operating cash flow excluding non-underlying items less net capital
expenditure to underlying operating profit.
2022
64
60
93
2021
2020
UNDERLYING EPS
pps
Link to strategic objectives
1
3
4
5
6
Underlying diluted earnings per share.
2022
30.5
30.2
13.3
2021
2020
RETURN ON CAPITAL EMPLOYED
%
Link to strategic objectives
1
3
4
5
6
Return on capital employed is the ratio of underlying operating profit,
adjusted for the full year benefit from acquisitions during the year,
where relevant, to average net assets excluding loans and
borrowings, cash and cash equivalents and taxation.
2022
12.1
12.0
8.0
2021
2020
4.7%
15.8%
64%
12.1%
30.5pps
Importance to Genuit
Our strategy is to ensure
that investment in our people
and operations drives sales
growth which outperforms
the construction market,
thus enhancing our market
leadership position.
Commentary
Group revenue increased 4.7%
against a strong comparative
year. UK revenue increased by
5.0% during a period of economic
uncertainty that worsened in the
second half of the year.
Importance to Genuit
Indicates that we are investing in
the right initiatives and operating
efficiently, by driving out
non-value-added costs and
delivering productivity gains.
Commentary
Underlying operating margin
percent was broadly similar
to 2021 at 15.8% (2021: 16.0%).
Without the isolated cyber
incident and more importantly
the supply chain constraints we
estimate underlying operating
margin would have been 16.4%.
Importance to Genuit
Our focus on cash conversion
demonstrates our focus on
efficiency, as well as enabling
us to fund future organic and
inorganic growth.
Commentary
Our cash conversion improved
by 4.0 percentage points.
This was achieved despite
increased capital expenditure
and investment in defining the
Solutions for Growth strategy.
Importance to Genuit
Provides the Company’s
investors, in particular, with
a consistent indication of
the Group’s underlying
financial performance.
Commentary
Underlying diluted earnings
per share increased by 1.0%
despite the impact of
increased borrowing costs.
Importance to Genuit
A key indicator of the efficient
deployment of capital on the
right initiatives and of Group’s
overall business performance.
Commentary
Return on capital employed
marginally increased in 2022,
as the Group continued to
invest in its asset base.
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Genuit Group is making
the built environment more
sustainable and helping
create a more resilient planet,
society and business.
Our Sustainable Solutions for Growth strategy
is centred around being the lowest carbon
supplier of choice for our customers,
alongside serving segments which have
growth drivers linked to climate change.
Therefore driving carbon from our business is
not only the right thing to do from a societal
perspective, but it is also commercially
fundamental to us.
Genuit Group has set a 2025 target of
reducing the intensity of its Scopes 1 and 2
carbon emissions by 66%. As you can see
from our SECR GHG report on page 24, our
2022 results show a further progress of 3.6%
against this. This means that on a like-for-like
basis we have now removed over 50%
of Scopes 1 and 2 carbon from the business
since the target was put in place in 2020.
We continue to source our electricity from
accredited renewable sources.
As we trailed last year, we have moved our
company car fleet scheme to one based
around PHEV/EV choices, and since the
scheme was activated, 140 of our colleagues
have selected these vehicles. Our bio-diesel
trials in our commercial fleet have also
provided useful learnings, and we anticipate
further progress against this in 2023.
During 2022, we submitted our Science Based
Targets (SBTs) for verification by the Science
Based Targets initiative (SBTi). These are in
line with the 1.5 degree Business Ambition
methodology. Our SBTs dovetail with our
existing targets for 2025, but extend the
timeline to 2027 for the next milestone on our
pathway toward net zero. We will then
continue to restate targets every five years
thereafter. The SBTs submitted for
the 2027 measurement period are based
from a comparator year of 2021 and broaden
our existing targets.
Making the built
environment more
sustainable
Sustainability
Strategic Report
Governance
Remuneration
Financial Statements
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Genuit Group plc
Annual Report & Accounts 2022
Our
sustainability
framework
Advancing the circular economy
We want to lead the industry in
recycling and waste management.
It is our ambition to increase
recyclability to its maximum
threshold and to become a
zero-to-waste operation.
Developing sustainable solutions
Given our focus on growth drivers
which are linked to the sustainability
agenda, we recognise that these
challenges will only be met by new
products, produced in the most
sustainable ways.
Tackling climate change
We are committed to reducing
the carbon footprint from our
operations and products by
focusing on reducing overall
emissions without resorting
to carbon offsetting.
Investing in an engaged and
diverse workforce
We recognise the contribution a
diverse group of colleagues makes to
achievement of our goals. We also
believe that providing development
pathways in the workplace is a key
enabler of social mobility.
Our 2025 targets
62%
of our polymer tonnage to be from
recycled inputs. This represents the
current available ceiling, given the
standards regimes governing the use
of recycled materials
25%
Vitality Index. One quarter of our revenue
coming from products launched within
the preceding five years
66%
reduction of CO
2
emissions intensity
(Scopes 1 and 2)
5%
of colleagues to be in accredited Earn and
Learn programmes
Our progress
in the year
During the year the mix of housing
activity moved from starts and
toward completion, resulting in more
plumbing and heating systems,
which are less conducive to the
usage of recycled inputs.
Our performance in the year was
an excellent improvement to our
trajectory. Some key product ranges
came to market, significantly
at Nu-Heat, our underfloor
heating business.
We also launched our new Terrain
branded high recycled content soil
pipe, and saw encouraging sales of
early adoption.
Our continuing focus on Scopes 1
and 2 have allowed us to make a
further 3.6% reduction in our GHG
intensity, and we are now well on
track toward our goal of a 66%
reduction, as we have achieved
a cumulative intensity reduction
of 50.2% since the 2019 baseline
data was established. As well as
our efficiency programmes in our
manufacturing processes, we
also continue to drive out carbon
across the business and have
now processed orders for 140
EV/PHEV cars.
At the year end, over a hundred
colleagues were in qualifying Earn
and Learn programmes.
Programmes such as our HGV Driver
Academy provide opportunities,
while addressing a skills shortage.
Our Earn and Learn programmes cover
a spectrum from engineering and
maintenance apprenticeships through
to digital marketing, and we will see this
number increase further.
Recycled materials:
48.7%
Vitality Index:
24.7%
Carbon intensity:
Cumulative reduction of
50.2%
People:
Percentage in Earn and Learn
3.5%
Our sustainability framework
Sustainability continued
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Sustainability continued
Sustainability continued
In parallel with this, we continue to reduce
the carbon impact of what we purchase.
Our raw materials make up the majority
of this category, and we continue to see
mechanical recycling as the key medium
term method for reducing the carbon
impact of our products. We have a target
of 62% of our polymer inputs being from
post consumer waste by 2025, and can
report that in 2022 this figure was 48.7%, or
c.50,000 tonnes. Although this is a slight
decline compared to our prior year value of
49.4%, we remain on track for achieving our
62% target in 2025. We currently have visibility
of significant projects which will allow us to
transition away from virgin polymers in key
product ranges, and remain committed to
implementing these in the short-term.
As part of our Sustainable Solutions for
Growth strategy, we have stated that we
will provide solutions which are the most
sustainable, economically viable solutions
at that point in time.
That has historically been true by offering
polymer alternatives to legacy materials
such as concrete or copper, and increasingly
this statement is made more relevant by our
move to mechanical recyclate. However,
technology is not at a standstill, and we
continue to invest Research and
Development (R&D) resource in areas
such as bio-polymers and chemical
recycling to investigate ways to raise the
bar of sustainability even higher. We are
also increasingly involved in lobbying for
standards regimes to be less prescriptive
on how products are made, without
compromising on performance. From a
technical perspective we will soon be in
a position to increase our use of recyclate
above the 62% target.
However, we will need standards regimes to
be modernised, otherwise we will leverage
the trusted status of our brands to reassure
customers of the performance of our
products, even though they fall outside the
perimeter of those historical standards.
We aim to use our leadership position as a
way of driving change, and ensuring that our
customers have access to products which will
reduce their Scope 3 carbon impacts. With this
in mind, we are also conscious that designers,
engineers and building owners need
empirical evidence to allow them to make
informed decisions regarding carbon
impact. With this in mind we are implementing
a process of accredited Environmental
Product Declarations (EPDs) which allow
quantitative carbon impact comparison.
It is because we recognise the need to
innovate to reduce carbon that we also
target our innovation rate as part of our
enablers of sustainability. We aim for 25% of
our revenue being from products launched
within the preceding five years. Our data for
2022 shows a Vitality Index of 24.7%, which
represents an improvement versus the
prior year result of 20.2%.
It is excellent progress that we are already
nearing our 2025 target. Of particular note,
some of the areas of growth include
sustainability-linked solutions such as our
underfloor heating and heat pump sales
in our Nu-Heat business, which had a very
strong year in 2022 as customers seek low
carbon solutions which also provide the
additional benefit of some shield against the
recent volatility in household energy costs.
The environment and greenhouse
gas emissions
We aim to minimise the lasting impact of
our operations on the environment, and
sustainability is a key feature of our products
and their impact on the environment.
Our modern and efficient injection moulding
and extrusion operations use significant
amounts of electricity. We monitor very
closely our electricity usage, even at a
machine level, and take a proactive
approach to improve energy efficiency.
The Group collects and analyses electricity
and natural gas usage information from
each of our sites on a monthly basis.
The following tables detail the energy
consumption and greenhouse gas (GHG)
emissions from the activities of the Group
during the period 1 January 2022 to
31 December 2022. Our GHG, reportable under
SECR during the period specified above, was
19,712 tonnes CO
2
e. This figure has been
calculated using the UK Government’s most
recent GHG Conversion Factors for Company
Reporting (2022). This is in line with standard
industry practice and allows fair comparison
with other UK businesses. This figure includes all
the material Scopes 1 and 2 emissions, required
to be disclosed by the specified legislation, plus
additional Scope 3 emissions. The Scope 3
emissions include transmission losses and
well-to-tank losses and have been included
voluntarily, in line with previous submissions.
On Scopes 1 and 2 we will target absolute
reduction rather than intensity based
reductions, and having completed an
accurate inventory of our Scope 3 emissions,
we now set targets related to Scope 3.
The targets are as follows:
30%
Scopes 1 and 2 – Genuit Group commits
to reduce absolute Scopes 1 and 2 GHG
emissions by 30% by 2027 from a 2021
base year
84%
Genuit Group commits that 84% of its
supplier base, covering purchased goods
and services will have submitted Science
Based Targets by 2027
We commit to reducing absolute Scope 3
GHG emissions by 13% for our purchased
goods and services by 2027 from a 2021
base year, and being net-zero across
Scopes 1, 2 and 3 GHG emissions by 2050
from a 2021 base year. In addition to our SBTs,
during 2023 we will be establishing our
detailed transition plan to provide a clear
pathway to net zero, which will build out from
the 2027 targets and highlight further key
building blocks and milestones.
Driving carbon from our supply chain is an
important initiative for the Group, given that
76.2% of our total 2021 carbon emissions fell
within purchased goods and services.
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Sustainability continued
It can be seen in Table 1 that the Group GHG emissions were 13.3% lower than in the 2021
reporting period. Although there was a decrease in emissions from stationary and transport-
related fuel combustion, refrigerant usage increased.
Genuit is committed to improving the scope and quality of its data collection for GHG
calculations across the Group and this has partially contributed to the increase in Scope 1
activity, as well as any acquisitions made during the financial year.
It can also be seen in Table 1 that the activity of the Group decreased by 10.3% when compared
to the previous reporting period. This resulted in the Group achieving an emissions intensity of
0.147 tonnes CO
2
e per tonne of production during 2022, a 3.3% decrease on the previous
submission year.
There has been a greater focus on data collection and data accuracy during 2022 on
electricity and gas consumption, transport usage, and production output tonnage.
The estimated values account for 2.5% of the total values recorded.
Table 1 Group greenhouse gas emissions (tonnes CO
2
e) by source and reporting period
Percentage
Share
2021
2022
Change
Source
– fuel combustion (stationary)
24.5%
5,489
4,821
-12.2%
– fuel combustion (mobile)
58.4%
13,704
11,514
-16.0%
– fugitive emissions (F-gas)
2.7%
385
536
+39.2%
– purchased electricity*
14.4%
3,147
2,841
-9.7%
Total emissions (tCO
2
e)
100%
22,725
19,712
-13.3%
Output (tonnes of production)
149,490
134,022
-10.3%
Intensity (tCO
2
e) per tonne of production
0.152
0.147
-3.3%
*
The 2022 emissions figure for purchased electricity above (and used throughout) reflects our investment in a zero-carbon
electricity tariff for the majority of the estate. In the terms of the Greenhouse Gas Protocol, this is called ‘market-based’
reporting – as opposed to ‘location-based’ reporting. Location-based reporting does not take into account the electricity
supply contracts a company has and instead
uses
a national carbon emissions factor for electricity. Following the location-
based methodology (which is required to be also reported under SECR alongside market-based figures), our 2022 emissions
from electricity were 17,057 tCO
2
e (including transmission and distribution losses), giving total emissions of 33,928 tCO
2
e and an
intensity of 0.253 tCO
2
e per tonne of production – an 0.12% decrease on 2021. The remaining electricity emissions figure above of
2,841 tCO
2
e is from electricity not covered by our zero-carbon tariff, and from transmission and distribution losses.
UK legislation requires the public reporting of Scopes 1 and 2 emissions, with Scope 3 emissions
for quoted companies being optional. As mentioned previously, Scope 3 emissions resulting
from transmission and distribution, associated with losses during the use of grid electricity
have been included in this report, as well as business travel in private vehicles (grey fleet).
The split in reported emissions by Scope is shown in Table 2 below:
Table 2 Group greenhouse gas emissions (tonnes CO
2
e) by scope and reporting period
Emissions Scope
2021
2022
% Share
Change
Scope 1
19,547
16,839
85.4%
-13.8%
Scope 2
1,487
1,412
7.2%
-5.0%
Scope 3
1,691
1,461
7.4%
-13.6%
Total emissions (tCO
2
e)
22,725
19,712
100%
-13.3%
When split by Scope, it is Scope 1 which is associated with fuel combustion in
transportation and combustion of fossil fuels at the site that make up the largest
portion of the portfolio (85.4%).
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Sustainability continued
The introduction of SECR means that companies are required to publish annual energy
consumption as well as emissions. The table below shows the total energy consumption
for the Group and the split in energy source/fuel type. It is apparent that there have
been reductions in energy consumption in both electricity and transport fuel, when
compared to 2021.
Our Group energy consumption in Megawatt Hours (MWh) by type and reporting period were
as follows:
Table 3 Energy consumption (MWh) by type and reporting period
Percentage
Share
2021
2022
Change
Energy Source (MWh)
Electricity
52.9%
81,102
80,812
-0.4%
Transport Fuel
29.8%
60,868
45,482
-25.3%
Other Fuel
17.3%
30,092
26,409
-12.2%
Total
100%
172,062
152,703
11.3%
UK and Global Consumption
A requirement of SECR reporting for applicable companies is that they provide a split of their
Scopes 1, 2 and 3 emissions between those that are emitted by UK sites and those emitted by
sites in their portfolio outside of the UK.
Table 4 Energy consumption (MWh) by type and reporting period
Territory
Scope
tCO
2
e
MWh
UK
16,800
71,659
Global
1
39
105
UK
1,045
71,776
Global
2
367
1,739
UK
1,427
7,265
Global
3
34
159
Total
19,712
152,703
Boundary, methodology and exclusions
An ‘operational control’ approach has been
used to define the GHG emissions boundary.
This approach captures emissions
associated with the operation of all
buildings such as warehouses, offices,
and manufacturing sites, plus Company-
owned transport. This covers all Group
operations. This information was collected
and reported in line with the methodology set
out in the UK Government’s Environmental
Reporting Guidelines 2019. Emissions have
been calculated using the latest conversion
factors provided by the UK Government.
There are no material omissions from the
mandatory reporting scope. The reporting
period is 1 January 2022 to 31 December 2022.
Building on the foundations laid in 2021,
during the year the Group has carried out
additional analysis and data collection
activities for Scopes 1, 2 and 3 emissions.
As stated on page 23, the Group has
submitted SBTs in 2022. Subsequently the
Group has undertaken a wider and deeper
review of its Scope 3 emissions beyond the
historic and existing criteria. The Group’s
Scope 3 emissions at 397,006t CO
2
e account
for 95% of total emissions. This proportion is
consistent with other businesses who rely
on raw material supply to support their
manufacturing processes.
Energy efficiency initiatives
SECR legislation requires us to provide some
basic information in our Directors’ Report on
the energy efficiency initiatives carried
out during the financial year. Further to
demonstrating our commitment to
sustainability through the recycling of
end-of-life material at the Horncastle
facility, we (as members of the UK’s Climate
Change Agreement (CCA) scheme) agreed
to achieve a 3.8% improvement on 2018
efficiency, by the end of 2022. Eight of the
Group’s manufacturing sites fall under
CCA. To support achieving this target we
committed to reviewing our approach to
energy management, and by the year
end, three of the manufacturing sites
across the Group had achieved ISO 50001
certification. Additional sites across the
Group are planning on certification beyond
general energy management and efficiency
improvements, and this will be reviewed
during 2023.
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Financial Disclosures
We acknowledge the scale of action required
and the role the construction industry and
building material suppliers play in increasing
the resilience of the wider economy against
the threats posed by climate change.
Our business has evolved from its heritage
in plastic pipes to being a leading player in
sustainable water and climate management;
with sustainability at the heart of what we do
and forming the basis of our strategic
choices. Our aim is to be the lowest carbon
choice for our customers, and we understand
that we need to communicate our progress
to our stakeholders in a consistent and
comprehensive way. Through collaboration
and the adoption of international frameworks
such as the Task Force on Climate-Related
Financial Disclosures (TCFD) and Science
Based Targets initiative (SBTi), we hope to
give our stakeholders more insight into the
processes and evaluations behind our
strategic decisions within the context of
climate change, providing detail on the
year-on-year progress we have made in
achieving them. We therefore recognise the
benefits of using the TCFD and will work on
improving our disclosures throughout the
next few years, further embedding the risks
that climate change poses to everyday
operations across our Group. You can read
more about our Science Based Targets (SBTs)
on page 23.
Last year we published our first TCFD
statement which provided narrative to the
impact of climate change on our Group
operations. During 2022 we prioritised
developing the process for identifying
and assessing climate-related risks and
opportunities, as well as educating senior
leaders in climate-related risk management.
Throughout the year and in early 2023 we
completed numerous climate-related risk
and opportunity training sessions and held
workshops with senior management teams
and Executive Directors. The outcome
of these sessions resulted in identification
of those risks and opportunities deemed
most significant in line with the Group risk
management framework, as well as those
appropriate for scenario analysis. We outline
further in this report the process we followed
and the risks and opportunities that were
identified, as well as further detail on the
qualitative scenario analysis conducted on
those selected risks and opportunities.
TCFD Pillar
TCFD Recommendation
More detail
Governance
a) Board oversight
b) Management’s role
Pages 27
to 29
Pages 86
to 89
Strategy
a) Climate-related risks and opportunities
b) Impact on the Company’s business, strategy,
and financial planning
c) Resilience of the Company’s strategy
Pages 29
to 35
Risk
management
a) Risk identification and assessment process
b) Risk management process
c) Integration into overall risk management
Page 28
Page 55
Metrics and
targets
a) Climate-related metrics to assess climate risks
and opportunities
b) Scope 1, Scope 2, and, if appropriate, Scope 3 GHG metrics and
the related risks
c) Climate-related targets and performance against targets
Pages 19
and 20
Page 22
Pages 24
and 25
This qualitative scenario analysis will lay
the foundation for continued, relevant and
evolving disclosures (including financial
disclosures) which we will further embed
into our operations during FY 2023. We intend
to perform quantitative scenario analysis on
these risks and opportunities during 2023,
to further our impact and mitigation
assessments, as recommended by the
TCFD framework.
The table below outlines where specific
information relevant to our disclosure can
be found in this Annual Report and Accounts.
Further signposting is detailed in the sections
that follow, where appropriate.
At Genuit Group, we
understand the serious threat
that climate change poses to
our planet and recognise our
responsibility in mitigating its
impacts through sustainable
business practices and
climate resilient products.
We comply with the FCA’s Listing
Rule 9.8.6R(8), with Strategy B pillar
as partially compliant, and make
disclosures consistent with the 2017 and
amended 2021 TCFD recommendations
and recommended disclosures across
all four of the TCFD pillars.
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1.5°C
Science Based Target consistent
with business ambition approved
by the Board
Governance
The Board oversees and
approves the Group’s strategy
and cultural framework
which includes sustainability
drivers and targets and has
responsibility for the final
disclosures included within
this report as well as our SBTs
and pathway to net zero.
The Chief Executive Officer is
ultimately responsible for the
implementation of this strategy
and climate-related risk
management. Responsibility
for identifying and monitoring
climate-related risks and
opportunities sits with our Risk
Committee, which is chaired
by our Chief Financial Officer.
We recognise the importance of effective
governance for managing climate-related
risks and opportunities. The Board has overall
responsibility for the Group’s internal control
framework and risk management systems.
This includes reviewing the effectiveness of
the Group’s risk and control processes and
ensuring the identification, assessment,
and ongoing monitoring of risk (including
environmental matters and climate-related
risks). It delegates monitoring and
management of these to the Risk Committee.
Details of the membership, activities,
responsibilities, and frequency of meetings
can be found in our Risk Committee Report
on pages 86 to 89. We are committed to
assessing climate-related risks and
opportunities throughout our businesses,
to support our customers and the wider
community with low carbon benefits
(through our low-emissions products and
services), or mitigation against physical risks
(such as flooding) through integrated surface
and drainage solutions. It is a key factor in
decision-making and considered by senior
executives when setting ambitions for Group
strategy. During 2022, we continued to
integrate the monitoring and reporting of
climate-related risks and opportunities into
our individual businesses. Climate-related
risks detailed within Business Unit risk registers
are reviewed and captured on our Group risk
register, which is reviewed by the Risk
Committee. This structure allows the Board,
management teams and Committees
to have adequate information to make
strategic and local decisions, with
consideration for climate-related risks
and opportunities. Details of the governance
reporting structure for the Group can be
found in our Governance Report on page 73,
and the risk management framework can
be found on page 87.
Climate-related risk and opportunities in
the context of TCFD is a standing agenda
item at each Risk Committee meeting and
was considered at all meetings during 2022.
The Board is updated after each meeting on
the key discussions and decisions at the Risk
Committee meetings via a written report,
as well as a verbal summary from the Risk
Committee Chair, to allow Board members
to effectively challenge and question
decisions and outcomes. In respect of
climate-related risk, the report and verbal
update includes a summary of the
discussion, as well as any other relevant
items such as climate risk training and
workshops completed during the year.
The Board also has sight of any detailed
analysis reports produced which outline
climate risks and opportunities relevant
to the Group, as part of this assessment, if
relevant or available. These discussions took
place with the Board at each Board meeting
after each scheduled Risk Committee
meeting. Further detail on the Board
meetings during the year can be found in the
Governance Report on page 74. Mechanisms,
such as the implementation of a specific pro
forma template for those Committee papers
which provide updates on climate-related
risks and opportunities, will be effected during
2023. This will continue to increase education
and awareness of climate-related risks and
opportunities across the Group.
During 2022 the Board approved the Group’s
submission of our SBTs, consistent with the
1.5 degree business ambition. These are
assessed in a regulatory and reputation-based
context, given the importance of these issues
for the Group’s stakeholders and have been
verified by the SBTi.
The Board monitors climate-related targets
through the non-financial KPIs relating to
Scopes 1 and 2 emissions, as outlined within
the Strategy section of this Report on pages
30 to 32. Most notably this includes our
commitments to carbon reduction,
and continuing to reduce our use of
virgin polymers.
Sustainability has always been at the heart
of what we do, and the Group updated its
Remuneration Policy in 2021 to include
sustainability targets in its long-term
incentive plan; carbon reduction targets
being one key element of this. This further
reflects the importance of sustainability to
the Group by incentivising senior leaders to
continue to drive the sustainability agenda.
More detail on how these incentives are
structured can be found in our Remuneration
Report on pages 115 to 116.
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Risk management
The Group understands the
importance of monitoring
climate-related risk across
its businesses and manages
changing environmental
regulations and disclosures
through impact assessments
and reviews in its risk register.
Formal review and ongoing
management of the risk
register is a responsibility
of the Risk Committee.
Initial steps toward integrating
climate-related risk into the Group risk
management framework were taken in
2021 to include climate change as a principal
risk. This was upgraded from an emerging risk,
after considering its aggregate potential
impact and likelihood over the longer term.
Further data was made available following
improvements to Group GHG data collection
processes, and scenario testing. This enabled
us to include the additional detail of the
potential impact climate change would
have on the Group, as well as implementing
mitigating actions. More detail on the structure
of the Group risk management framework
and climate risk as a principal risk can be
found in our Principal Risks and Uncertainties
on pages 55 to 62 of the Strategic Report.
Taking ownership of climate change risk at all
levels within the Group is fundamental to the
accurate identification and mitigation of
climate-related risk. Business Unit Managing
Directors and Finance Directors present to
the Risk Committee on a rotational basis
which includes any climate-related risks and
mitigating actions. Methods and mitigation
for managing these risks are communicated
by senior management to the businesses.
This ensures full integration into risk reporting
processes and consistency across the Group.
A TCFD working group was established
outside of the Risk Committee, led by the
Group Strategy and Marketing Director
(an Executive Committee member and
member of the Risk Committee), to drive the
TCFD agenda throughout the year, providing
updates to the Risk Committee as appropriate.
This working group participated in an initial
TCFD workshop to understand the Group’s
status in demonstrating compliance with
each TCFD recommendation, and a review of
climate risks and opportunities was agreed as
a priority. Following this, an initial long list of
risks and opportunities were identified and
mapped against current principal risks and
uncertainties. Based on the outputs of these
exercises, the climate risks and opportunities
were shortlisted, and categorised into those
which were of highest priority to the Group.
The priority risks were discussed in a second
climate workshop which included the TCFD
working group, plus other key members of the
Risk Committee, Business Unit Managing
Directors, and the Group Sustainability
Graduate. This workshop enabled debate and
discussion around those climate-related risks
and opportunities that had been identified
during the year, relevant to each of the
Business Units. It provided further education
on the increasing impact of climate-related
risk on the Group’s operations, confirming
the opportunities that it presented which
are inherent to the Group’s strategy.
These debates and discussions around the
impact of climate change, further embedded
climate-related risk into the Group risk
management framework. Relevant risks and
opportunities were graded, relative to each
Business Unit’s operational activities over the
short, medium, and long term. Through
heat-mapping and using the Group risk
management framework, a qualitative
assessment of the risks and opportunities
was performed to understand the potential
significance, and priorities for further action.
This resulted in an agreed shortlist of those
categorised as significant, as outlined in the
Strategy section of this Report. A set of
recommendations on how to further assess
the risks and opportunities was circulated to
the Risk Committee for review thereafter, and
the final risks and opportunities deemed
most important to the Group were selected
for disclosure in this report.
In order to ensure the Group is informed of
future regulatory direction, we participate
in industry bodies within the UK and Europe,
such as TEPPFA, and commission expert input
where required. These form key inputs into
our assessment of identified transition risks
relating to carbon tax, climate reporting
obligations and the physical risk of
material supply.
The ongoing management of these risks
and opportunities forms part of the Group
risk management framework and will be
reviewed by the Risk Committee at each
meeting in 2023. Planned quantitative
analysis during 2023 will complement this,
by providing further detail on scenarios that
present differing potential impact, allowing
the Risk Committee to determine whether the
considerations are adequately reflected in
the Group’s strategy.
The Risk Committee will continue to drive
the integration of climate-related risks into
the risk management framework across
the Group, as well as monitoring the
opportunities it presents, ensuring progress
continues to be adequately reported
to the Board.
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Strategy
Climate change continues
to pose significant challenges
to the built environment. We are
aware that transitioning into
a lower-carbon economy may
entail changes to policy, legal,
technological, or other market
changes which may cause
varying levels of financial
and reputational risks to us
as a Group.
Nonetheless, sustainability is core to our
commercial strategy. As part of our
assessment of climate-related risks and
opportunities, we have identified transition
and physical risks that climate change poses
that we wish to address and mitigate.
However, we acknowledge that with these
risks come various opportunities, given our
sustainability framework (read more
on pages 21 and 22 of the Strategic Report).
It should be noted, therefore, that whilst
climate change was assessed to have
evolved from an emerging to a principal risk,
it was through considering the potential
impact and likelihood over the longer term.
In our short-term scenarios, we do not
consider the Group to be at significant risk of
adverse impact from climate change. In the
medium-term, this risk increases, however,
we are well positioned to help mitigate
climate-related risks through supporting
our customers in providing low carbon and
climate resilient solutions. In preparing the
Group’s financial statements, we have
considered the impact of climate-related
risks on our financial position and
performance, and have not identified
any significant adverse impact on the
financial statements or judgements within;
notably around issues of economic life or
asset impairment.
As part of the input to the Company’s
Viability Statement, the Group assesses
climate change and its impact over a
three-year time horizon. During 2022 a review
of climate-related risks and opportunities was
conducted to identify those which could
impact strategy and financial planning across
our operations and Business Units. Due to the
nature of our operations, we are well placed
to support customers in tackling the impact
of climate change, particularly the increase
in severity and frequency of extreme weather
events. This provides significant opportunities
through the development of low emission
and climate resilient products and services.
The climate-related risks and opportunities
review considered the current operations
across the Group without any future strategic
changes and was based on inherent risk,
to give a clearer picture of the actual risks and
opportunities. This was then used to assess the
residual risk, following any implementation of
appropriate mitigations.
(0–3 years):
(3–10 years):
(10+ years):
This covers current year plus
our outlook for budgets and
short term financial planning,
and assessments such as viability
statements.
This period is consistent with our
view on SBTs, and the planning
horizon we have to 2032, which
is our second SBT milestone.
This time period extends beyond
our current knowledge
on legislation and regulatory
changes, but considers an
extrapolation of trends and
themes up to 2050.
Short-term
Medium-term
Long-term
Time horizons consider when the
risk could likely have an impact.
Associated impacts were considered
under current operating levels, using the
following time horizons, in accordance
with our risk management framework:
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The shortlisted risks and opportunities were evaluated further to consider the likelihood of
the risks occurring and the potential severity of the impact on the Group and those deemed
significant. Significant risks are defined as those which have potential to have considerable
impact on our operations, strategy or financial performance if they are not suitably
RISK
TCFD CATEGORY
POTENTIAL IMPACT
MITIGATING ACTIONS
TIME HORIZON/METRICS/TARGETS
Physical risk
Supply chain disruption
Potential financial impact of
disruption to supply of raw
materials and products due to
increased incidence and severity
of extreme weather events.
Acute/Chronic
Financial: Increased price of raw materials,
particularly polymers, resulting in reduced
profit margins.
Supply Chain: Disruption in supply of raw
materials could reduce stock availability and
cause delays in fulfilling customers’ orders.
The Group monitors and reviews its supply
chain and does not rely on one single
supplier for critical materials, as well as
considering geographic location of suppliers.
The Group review will be expanded to
include climate-related risks.
TIME HORIZON
Medium – long
METRICS
Non-financial KPI, Recycling
(use of recyclate reduces exposure
to internationally sourced virgin
raw materials)
TARGETS
2025 target of 62% of tonnage from
recycled plastics
Transition risk
Climate reporting obligations
Potential financial impact if
perceived by stakeholders as
failing to meet climate reporting
expectations/requirements or
reporting poor performance
against climate commitments.
Policy & Legal/
Reputation
Financial: Additional costs due to increased
reporting requirements and stakeholder
demands. Loss of investor confidence if seen
to be climate greenwashing, impacting
access to capital.
The Group has access to external resources
and has representatives on national and
international working groups. As such, we
ensure that we have good sight of changes
that impact the business.
TIME HORIZON
Short – medium
METRICS
Annual carbon inventory in line with SBTs
GHG emissions, Scopes 1, 2 and 3
TARGETS
2027 SBTs
2025 66% reduction of CO
2
emissions
intensity (Scopes 1 and 2)
controlled. Significant opportunities are those which have potential to enhance the financial
performance of the business. Five risks (two physical, and three transition) and two
opportunities were identified as having the greatest combination of probability and impact,
and consequently of significance to the business. These are as follows:
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Identified as most significant to the Group and selected for scenario analysis
RISK
TCFD CATEGORY
POTENTIAL IMPACT
MITIGATING ACTIONS
TIME HORIZON/METRICS/TARGETS
Physical risk
Business interruption and damage to assets
The potential financial impact
of damage to and closure of
Genuit’s offices, warehouses
and factories caused by
extreme weather.
Acute/Chronic
Financial: Reduced revenue due to closure
of sites; increased repair/capital costs due to
weather damage; increase in insurance
premiums; reduced revenue and higher costs.
Operations: Sites could close while repairs
take place; impacts of changing climate
on employee working conditions.
The Group internally assesses the controls
in place to deal with site level business
interruption. The Group is audited by our
insurers reviewing Group business continuity
and interruption.
TIME HORIZON
Medium – long
METRICS
Annual carbon inventory in line with SBTs
Proportion of sites deemed as at flood
risk during annual review process
TARGETS
No worsening of flood risk assessment
Transition risk
Carbon taxes
The potential financial impact
of current and future potential
carbon taxes applied to
Genuit’s own operations
and supply chain.
Policy & Legal
Financial: Increase in energy, fuel
and associated operating costs; indirect
carbon taxes passed to Genuit through
its supply chain.
Operations: Requirement for more
comprehensive datasets and assurance
of Scopes 1, 2 and 3 carbon emissions.
The Group continually monitors changes in
tax legislation through internal specialists
and guidance from our advisers.
Changes which impact the Group are
communicated to the Board and action
taken where appropriate. Our SBTs and
journey to net zero will mitigate our exposure
to carbon related tax.
TIME HORIZON
Medium
METRICS
Annual carbon inventory in line with SBTs
GHG emissions, Scopes 1, 2 and 3
Non-financial KPI, Vitality Index
TARGETS
2027 SBTs
2025 target of 25% of sales from
products launched within preceding
five years
2025 66% reduction of CO
2
emissions
(Scopes 1 and 2)
Transition risk
Increased raw material costs
The potential financial impact
of increased demand of low
carbon materials causing
reduced supply and increased
cost. This could lead to
challenges in competitive pricing
and reduced profit margins.
Market
Financial: Reduced revenues due to limited
supply of materials, reductions in profit
margins as materials required to aid the
transition to net zero increase in price.
Operations: Challenges in continuing
operations or reduction in product
offerings if materials become too costly.
The Group has established relationships
with several raw material suppliers to
ensure competition across its supplier base.
Our move to increase our use of recyclate
also mitigates against raw material volatility.
TIME HORIZON
Short – medium
METRICS
Non-financial KPI, Recycling
Margin over direct materials
TARGETS
2025 target of 62% of tonnage from
recycled plastics
Achievement of Group EBIT
margin targets
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Identified as most material to the Group and selected for scenario analysis
OPPORTUNITY
TCFD CATEGORY
POTENTIAL IMPACT
ACTIONS TO CAPITALISE
TIME HORIZON/METRICS/TARGETS
Transition
Low emission products and services
The potential revenue
generated from further
developing Genuit’s
low emissions products
and services.
Product &
Services
Financial: Overall revenue growth from
increased sales of low emission products
and services. Access to new sources
of finance.
Operations: Reduced exposure to
increasing carbon taxes due to
reduced carbon intensity of products.
Decrease in Scope 3 GHG emissions.
A key pillar in the Group strategy is to
provide low carbon products to the market.
Business Units are currently innovating
techniques to further reduce the carbon
content of our products as well as operating
efficiencies. The Group will continue the
plan to produce Environmental Product
Declarations for its products to assist
customers in making informed decisions.
Our drive to increase our Vitality Index is
also based around increasing our revenues
from low carbon products.
TIME HORIZON
Medium
METRICS
Revenues from low carbon products
Non-financial KPI, Vitality Index
Non-financial KPI, Recycling
Measuring the carbon content
of ranges as per Environmental
Product Declarations
TARGETS
2025 target of 25% of sales from
products launched within preceding
five years
2025 target of 62% of tonnage from
recycled plastics
Transition
Increased demand for flooding mitigation technology
The potential revenue
generated from further
developing Genuit’s water
management solutions.
Market
Financial: Increased revenue due to
demand for reliable drainage systems
and growing SuDS requirements in new
major developments.
Operations: Positive reputational impact
through being a part of a key climate
adaptation strategy.
The Group continues to develop water
management solutions and pursue
opportunities to expand the portfolio.
The Group recognises the demand for a
full solution and is working with customers
and partners to provide comprehensive
technology-based solutions.
TIME HORIZON
Short
METRICS
Measured via revenue from qualifying
product ranges
TARGETS
This is not disclosed due
to commercial sensitivity
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These identified risks and opportunities are
a key factor in the financial and operational
planning process, both in the long-term
strategic decision-making and short to
medium term. Our transition plan is based
upon the 1.5 degree Business Ambition, and
our SBTs for 2027, as well as the 2025 targets.
In order to achieve these goals, our key focus
is on continuing to drive out carbon across
Scopes 1, 2 and 3. During 2023, as part of our
pathway to net zero, we will expand and
evolve the projects supporting our SBTs and
form our longer-term actions to achieve net
zero. Given the significance of the carbon
impact of virgin polymers, much of our focus
is on continuing to increase our usage of
recycled materials, which we target at 62% of
our total tonnage by 2025, and are
formulating strategies to go beyond that in
the medium term. We also continue to roll out
our transition to EV/PHEV across our car fleet
and the move of our commercial fleet away
from fossil fuels. We are now implementing
an annual carbon impact assessment,
consistent with our SBT methodology and
can track this across the key sub-categories
within each Scope. Given the profile of our
revenue streams in 2022 with 90% being
derived in the UK, the primary jurisdiction for
evaluation of our net zero commitments is
the UK, and we are in line with the UK
Governments current targets. We are also
consistent with the UAE 2050 target for net
zero, which is our largest market outside of
the UK and EU. Should this profile alter, we will
seek to ensure we are in keeping with the
relevant jurisdiction targets as part of our
economic evaluation of those opportunities.
Following identification and assessment
of climate risks and opportunities relevant
to our business through workshops with key
stakeholders (see the Risk Management
section of this Report on page 28), we carried
out qualitative climate scenario analysis
on a subset of the most significant risks
and opportunities. The potential qualitative
impacts of these risks and opportunities
were assessed under a selected set of
climate scenarios. This was performed
to gain a better understanding of the
resilience of our business model and strategy
to the potential impacts of these risks and
opportunities under hypothetical climate
scenarios and outcomes. During this analysis
our climate risks and opportunities were
considered against the following reference
time horizons within the public scenarios:
short-term (2025), medium-term (2030)
and long-term (2050). 2030 and 2050 are
the typical milestones included within public
scenarios against which hypothetical climate
outcomes are described. These referenced
time horizons are broadly aligned with the
business-specific time horizons we have
identified and assessed our climate risks
and opportunities against.
WARMING TRAJECTORY
BY 2100
Transition scenarios
(IEA
1
)
Physical scenarios
(IPCC
2
)
1.5°C
Net Zero Emissions
(NZE)
<2°C
Announced Pledges Scenario (APS)
SSP1
4
-2.6
3
(low challenges to mitigation
and adaptation)
2-3°C
Stated Policies Scenario
(STEPS )
SSP2-4.5
(medium challenges to
mitigation and adaptation)
>3°C
SSP5-8.5
(high challenges to mitigation, low
challenges to adaptation)
Climate scenarios used
1
IEA – the International Energy Agency has constructed scenarios to assess different transition pathways based on varying
assumptions of how the energy system may evolve.
2
IPCC – The Intergovernmental Panel on Climate Change RCPs are the market accepted reference scenarios which outline
the possible consequences of climate change.
3
RCP – Representative Concentration Pathways are commonly used by climate scientists to assess physical climate risk.
Each pathway represents a different greenhouse gas concentration trajectory, each of which is associated with varying
levels of impact. Under RCP 2.6, Physical climate impacts are expected to be the lowest and greatest impacts under RCP 2.6
and RCF 8.5 respectively.
4
SSPs – Shared Socio-economic Pathways illustrate different socio-economic contexts or baselines (i.e. technological,
economic and demographic context), in the absence of further climate policy, (i.e. technological, economic and
demographic context).
Align with the TCFD
recommendations
to assess business
resilience under
different climate-
related scenarios,
including a <2°C
scenario.
Consider up to a
2050 timeframe,
which aligns to the
Paris Agreement and
other governmental
Net Zero 2050
targets.
Broadly align with
scenarios commonly
used in TCFD
reporting, facilitating
better comparison
between disclosures.
Include reputable
and broadly used
data and
assumptions.
These climate scenarios were selected because they:
Task Force on Climate-Related Financial Disclosures continued
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The shortlist of risks and opportunities included in this analysis are set out in the table below.
The relative magnitude of each of these risks and opportunities was assessed using our Group
risk management framework and probability impact matrix, under the context of the different
climate scenarios. This assessment excludes the impact of any current or future mitigating
actions. The results are set out in the table below. Overall, transition risks were found to have
the highest potential impact in the short to medium term, with carbon taxes representing the
greatest potential impact under all transition scenarios examined. Transition opportunities
were found to have the most potential positive impact in the medium to long term.
The opportunity arising from demand for low emissions products and services is dependent
on the transition to a low carbon economy. The opportunity arising from increased demand
for flood mitigation technology is reliant on the impact of physical risk, where flood risk is
enhanced. In contrast, physical risk is expected to have the most significant potential impact
in the longer term under the worst-case warming scenario examined. Following the risk
assessment and subsequent scenario analysis, we believe our business strategy shows
resilience to the impacts of climate change up to the medium term. Nonetheless, in line with
our periodic strategic review and risk management processes we will adjust and introduce
mitigating measures as required. Thus far we have taken a qualitative approach to assessing
the significant risks and opportunities. In 2023 we will undertake quantitative evaluation which
will better allow us to assess the business case for any counter measures or mitigations.
CLIMATE RISK/
OPPORTUNITY
Scenario Assumptions
Short
(< 5 years)
Medium
(2030)
Long
(2050)
Results
Business
interruption
and damage
to assets
SSP1-2.6 (<2°C)
The frequency and size of heavy precipitation, flood, wind and drought
events is likely to increase. An increase in the frequency of extreme coastal
flooding events due to sea level rise is very likely.
The risk of business interruption and damage to our assets increases from
SSP1-2.6 (<2°C) to SSP5-8.5 (>3°C). Financial impacts are expected to be greatest
under the SSP5-8.5 scenario and may include:
–
Increased costs in the medium to long term due to damage and disruption
from extreme weather events requiring asset restoration.
–
Revenue lost due to business disruption in the medium to long term under
all scenarios.
–
Impairment of asset values due to increased exposure to physical risk.
SSP2-4.5
(2-3°C)
Similar to trends observed in SSP1-2.6, with increased frequency and size
of extreme weather events.
SSP5-8.5 (>3°C)
Compared to SSP1-2.6, a marked increase in frequency and severity of
extreme weather events is projected. Heavy precipitation and drought
events are likely to double in frequency vs. SSP1-2.6.
Carbon Taxes
NZE (1.5°C)
Early Action
Early implementation of a carbon pricing mechanism to all economies
with a net zero commitment.
2030: £140/tCO
2
2050: £250/tCO
2
The potential impacts of the application of carbon taxes to our Scopes 1, 2
and 3 were examined. Overall, the impacts are predicted to be potentially
significant under both the NZE and APS scenarios in the medium to long term.
Carbon taxes are expected to increase in line with Government’s commitments
to decarbonise. Given our value chain predominantly operates in countries
with net zero commitments, this could result in the following potential
financial implications:
–
Increased expenditure due to the cost of carbon taxes and indirect costs
passed through our supply chain; and
–
We may have to absorb this cost, leading to reduced profit margins.
Or, alternatively, we may need to increase prices, potentially impacting
our competitiveness within the market and resulting in reduced revenue.
APS (<2°C)
Late Action
Pricing mechanisms are introduced later on and at lower rates.
2030: £135/tCO
2
2050: £200/tCO
2
STEPS (>3°C)
BAU
Only existing or announced carbon pricing schemes are applied under
lower rates.
2030: £90/tCO
2
2050: £113/tCO
2
Material Costs
NZE (1.5°C)
Early Action
A carbon price is introduced (see Impact of Carbon Taxes), increasing the
cost of carbon-intensive materials. Advanced economies increase their
demand for low carbon materials to achieve net zero.
Under each of these scenarios, the demand for low carbon materials is likely
to increase as the introduction of a carbon price shifts consumer preferences
towards low-carbon products and services. Overall, the resulting financial
impacts could potentially be significant under NZE in the medium to long term:
–
Demand-side inflationary pressure on the price of these materials as supply
adjusts to market demand. This may increase our procurement costs, thereby
impacting our profit margin.
–
In some cases our ability to procure low-carbon materials may be affected
which could impact fulfilment of customer contracts and revenues generated.
APS (<2°C)
Late Action
Similar to NZE, the introduction of a carbon tax is delayed with a lower
carbon price. Demand for low carbon materials is expected to increase
overall, but at a lower rate than NZE.
STEPS (>3°C)
BAU
A carbon tax is introduced for EU-based suppliers for highly emitting
manufacturing activities. Demand for low carbon materials is expected
to increase at the lowest rate.
Task Force on Climate-Related Financial Disclosures continued
Key
Low Risk/High Opportunity
Medium Risk/Medium Opportunity
High Risk/Low Opportunity
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Key
Low Risk/High Opportunity
Medium Risk/Medium Opportunity
High Risk/Low Opportunity
Task Force on Climate-Related Financial Disclosures continued
CLIMATE RISK/
OPPORTUNITY
Scenario Assumptions
Short
(< 5 years)
Medium
(2030)
Long
(2050)
Results
Low Emission
Products and
Services
NZE (1.5°C)
Early Action
Early implementation of climate policy (see Carbon Taxes) and consistent
signalling to the market by policy-makers is expected to increase market
demand for low emissions products and services.
The scenarios examined varying levels of regulatory pressure and the impact on
market demand for low emissions products, which could translate into financial
opportunity for Genuit.
–
In NZE and APS scenarios, an overall increase in revenue could be realised
due to increased sales of low emissions products as demand increases.
Realisation of these opportunities could support our strategic ambition
for 25% of revenue to come from sales of new products by 2025.
–
Utilising low-carbon materials could also reduce our exposure to
carbon taxes.
APS (<2°C)
Late Action
Similar to NZE, however, later implementation of climate policy and less
consistent signalling to the market by policy-makers (i.e. via more severe
and more ambitious measures, with shorter lead times) is expected.
This may result in delayed market demand for low emissions products
compared to NZE.
STEPS (>3°C)
BAU
Policy and market pressure limited due to lack of policy ambition
compared to NZE and APS. Minimal external forces driving innovation of low
emissions products and services.
Increased
Demand for
Flooding
Mitigation
Technology
SSP1-2.6 (<2°C)
Heavy precipitation and flood events are likely to increase in frequency
and severity, however to a lower extent than the other higher
emissions scenarios.
The potential size of the opportunity increases from SSP1-2.6 (<2°C) to SSP5-8.5
(>3°C). The financial opportunity may be greatest under scenario SSP5-8.5 in the
medium to long term as the market for flood mitigation technology expands in
line with the increased frequency of, severity of and exposure of new areas to
flooding events.
–
There is potential for significant increases in revenue as demand for resilient
drainage systems increases under higher emissions scenarios across all
time horizons.
SSP2-4.5
(2-3°C)
Similar to trends observed in SSP1-2.6, with increased frequency and size of
extreme weather events.
SSP5-8.5 (>3°C)
Compared to SSP1-2.6, a marked increase in frequency and severity of
extreme weather events is projected. Heavy precipitation and drought
events are likely to double in frequency vs. SSP1-2.6.
Metrics and Targets
Following the implementation of our sustainability framework in 2020, the Group identified
relevant metrics and targets to monitor progress towards achieving its sustainable goals.
These metrics and targets form part of our strategic operations and inform decision-making.
These have been mapped against our identified climate-related risks and opportunities, as
detailed in the table on page 30 to 32. This enables the risks and opportunities to be
adequately monitored and mitigated as required. Additional metrics, such as revenue from
qualifying product ranges, margin over direct materials and a specific proportion of sites
deemed as at flood risk have also been included where relevant, to enable effective and
targeted monitoring on an annual basis.
As our scenario analysis has so far consisted only of qualitative analysis, we anticipate
that further metrics and targets will be established following our planned quantitative
scenario analysis during 2023.
As outlined earlier in this report, we have committed to being net zero by 2050 which is based
upon the 1.5 degree Business Ambition, and our SBTs for 2027, as well as the 2025 targets which
have been disclosed publicly and form part of management’s incentive programmes.
Progress towards achieving these 2025/2027 targets forms part of the ongoing monitoring
and metrics identified.
Details of Scopes 1, 2 and 3 emissions are included in the emissions disclosed through SECR,
included on page 24 within the Strategic Report. Moving forward the Group will conduct
carbon measurement across Scopes 1, 2 and 3 as part of its obligations to report to SBTi.
Our non-financial KPIs in respect of recycling and greenhouse gas emissions for the 2022
financial year, including progress during 2020 and 2021 are detailed on pages 19 and 20 of the
Strategic Report. Progress towards achieving our 2025 sustainability targets is included on
page 22 of the Strategic Report, and historical data for these sustainability targets can be
found in the Strategic Report of our 2021 Annual Report and Accounts.
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Building a diverse
and talented team
People
The delivery of our Sustainable
Solutions for Growth strategy
is underpinned by the
continuous focus on people,
to create value and enable
growth through employee
capability, expertise and
contribution. We continue
to invest in developing our
workforce, through the
strengthening of our strategic
people programmes and
development opportunities
and enhancing our focus on
diversity and inclusion.
In 2022, the foundations of the HR strategy
were firmly laid. During the year, the Group
HR team was strengthened with the
appointments of a Group Talent Director,
Group Reward Director and Group Head
of Communications and Engagement.
These roles drive strategic programmes
across the Group.
Talent development
Talent management across the Group has
been a focus in 2022, to gain greater value
through sharing, attracting and retaining
great talent and ensuring the organisation
has the capability in place to deliver
its strategy.
Significant efforts have been made to
improve the standard of senior-level
recruitment, focusing on implementing a
standardised approach, rigorous selection
methods and enhanced assessments.
In addition, new partnerships with targeted
recruiters have been formed.
A consistent approach to enable more
talent moves across the Group and
promote and recruit key talent into our
most influential roles was also introduced.
With greater visibility of opportunities
across the Group and increased capability
assessment, there has been a positive
impact on the candidate experience
and outcome of talent within this
important population.
A Group-wide talent identification and
succession planning programme for the
top 120 roles was implemented to
recognise and develop employees with
potential, mitigate succession planning
risks and focus development activity on
the right capabilities. The outcome has
informed a focused action plan for 2023,
and highlighted succession gaps.
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Diversity and inclusion (D&I)
Creating an environment where all our
employees feel a sense of belonging is our
opportunity to drive increased levels of
employee engagement, attract and retain
good talent and create an organisation all
our stakeholders can be proud of.
Throughout 2022, employee insight sessions
were held across sites, that provided an
opportunity for over 400 employees to
share their views on D&I. The Board and
Executive Committee participated in externally
facilitated education and awareness sessions,
which was subsequently delivered to all senior
leaders. This programme will continue
throughout 2023.
The outputs of these awareness and
engagement sessions supported the
development of a D&I ambition and strategy,
that was launched during National Inclusion
Week 2022. Delivery of the strategy focuses
on four pillars: leadership, education, policy
and process and communication.
The renewed and focused D&I programme
is already realising the benefits of promoting
a more inclusive organisation. Across the
Group, Pride month was celebrated, and
achievements of our colleagues were
shared during Women in Construction
week. Ongoing campaigns will be shared
throughout 2023 to raise awareness and
celebrate inclusivity.
During 2023, the Group will continue to
highlight causes and campaigns that help us
demonstrate and celebrate the contributions
of all, beginning with International Women’s
Day, which was celebrated on 8 March 2023.
Our D&I ambition:
We believe a diverse team of
talented people, who truly feel
they belong, will enable us to
deliver our strategic goals.
We will create an environment
that is engaging and where
everyone is comfortable to
bring their whole self to work.
Developing Apprentice and Graduate Careers
This year, we maintained Silver
Membership status of The 5% Club that
demonstrates our proven commitment to
investing in our workforce through a broad
range of Earn and Learn programmes.
We continue to progress our plans as part
of The 5% Club, with renewed focus and
aim to reach ‘gold standard’ by 2025.
In addition, our graduates continue
to progress their careers, with
involvement in strategic programmes.
Dylan Stoppard, Sustainability Graduate,
shared his experience.
“My two years at Genuit Group have been
very rewarding, and I can say that I have
developed more than I ever thought
I would in such a short space of time.
Working in such a dynamic field means
that I often get the chance to work on
new and exciting initiatives, with the
ultimate goal of continually improving
the Group’s sustainability. So far, I have led
multiple carbon reporting projects, rolled
out a successful Environmental Product
Declaration (EPD) project for a vast
product portfolio and worked on the
implementation of the Science Based
Targets initiative (SBTi), where we set
decarbonisation targets in alignment
with climate science. Being involved in
numerous sustainability-related trade
association working groups has given
me the chance to meet new people.
With sustainability being so critical,
I look forward to leading the way in
ensuring that we continue to take
responsibility for our actions and be
the sustainable choice of products
for the construction industry.”
Developing our
upcoming talent
People continued
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People continued
I’ve always aspired to have a
challenging and interesting
career, so after studying
engineering in secondary
school I knew it was the right
direction for me.
Celebrating Women in
Construction and Engineering
We celebrated International Women in
Engineering Day by highlighting our talented
engineers across the Group.
Bethany Borley-Stow, a Senior Team Leader
and engineer at our Polypipe Civils and Green
Urbanisation site in Horncastle shared
her experience.
“I chose engineering because I’ve always
aspired to have a career that would be
challenging and interesting. Engineering is
such a broad area and I knew that there
would be so many opportunities in the
industry for future progression.
I began my career in the industry in 2017
where I started a four year Engineering
Apprenticeship at Polypipe. During my
apprenticeship I gained valuable experience
from other engineers. I completed a HND
in Electrical and Electronics and will be
continuing to study a Bachelor’s Degree
in the subject. I went on to become a
reactive breakdown engineer to open
up new challenges and increase my
engineering knowledge.”
We also celebrated with Catherine Fyfe,
Divisional Marketing Director, who was
announced as the winner of the Women
in Construction category of the National
Building & Construction Awards 2022.
Across the Group, we continue to encourage
and develop our female talent, and aim to
provide an environment where we recognise
and celebrate the skills and contribution
of all.
Celebrating
our talent
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People continued
The schedule will continue to run throughout
2023 and 2024, to cover all remaining sites
across the Group.
In addition, a new external communications
strategy was launched, to improve
engagement with our external stakeholders,
and will continue to progress through 2023.
Throughout 2022 and continuing into 2023,
significant effort has been made to improve
awareness and understanding of our key
policies, and to drive compliance with our
regulatory obligations. During the year, the
Whistleblowing policy was relaunched to
ensure all employees are aware of how they
can raise concerns, and feel confident and
supported to do so. The training completion
rate remains at 95% across both office and
operations employees. In addition, the
Group’s Data Protection policy was
relaunched, with the aim of making all
employees aware of the responsibilities of
the business and individuals in being vigilant
and compliant in data protection activities.
HR Systems
To drive HR as a strategic business partnering
function, significant investment has been
made to deploy a best-in-class HR solution,
Workday, to create efficiencies and drive
governance and compliance.
Workday will offer real-time and extensive
people data to drive decision-making and
management of people information
throughout the employee lifecycle.
The platform will be launched during 2023.
Employee communication
and engagement
It is recognised that enabling better
communication within the Group is key to
realising our goals and creating an engaging
and inclusive environment.
Improved communications and increased
employee engagement has been a key focus
in 2022 and with the appointment of a Group
Head of Communications and Engagement,
emphasis was placed on establishing an
integrated communications framework that
connects everyone and allows for more
knowledge and information sharing.
A new leadership communications
framework was implemented, bringing
all leaders together on a monthly basis,
enabling better sharing of strategic
progress and leadership visibility.
A new Group-wide communications platform,
Workplace from Meta, was launched at
the end of the year with the objective of
connecting everyone across the Group
and providing key communications, at all
levels, in one place. All employees are able to
access the platform, allowing for timely and
engaging communications, live broadcasts,
sharing of best practice and ideas and
facilitating feedback. Through 2023, the
embedding of Workplace as a central
communications space is a priority.
As part of our Corporate Governance Code
responsibilities, a programme of Board
Engagement sessions was introduced,
hosted by Louise Brooke-Smith, the
designated Non-Executive Director
responsible for employee engagement.
The sessions involve creating discussion and
feedback with employee representatives
from all functions. Four meetings were held
at our sites in Horncastle, Aylesford, Plura
and Doncaster in the last half of the year,
that provided valuable insights to inform
key strategies, like Diversity and Inclusion.
Fundraising Hike for
Construction Youth Trust &
Maddie Rose Campaign
In October 2022, a team of 100 employees
from across the Group took on the
Yorkshire Three Peaks Challenge in the UK.
In torrential rains and gale force winds,
the teams hiked over 24 miles of terrain,
across Ingleborough, Whernside and
Pen-y-ghent, raising funds for the Maddie
Rose Campaign, in association with the
Construction Youth Trust.
The total raised funds was in excess of
£16,500, that contributed towards a total
of over £108,000 raised for the Construction
Youth Trust in support of the Maddie
Rose Campaign.
The teams look forward to planning
another challenge in 2023.
Steve Durdant-Hollamby, Managing
Director of our Water Management
Solutions Business Unit commented:
“It was an absolute delight to see so many
people taking up the challenge from the
Genuit Group. The teams were in great
spirit considering the brutal conditions and
everyone just got on with the job in hand.
Thank you to everyone who has donated,
celebrated and shared the Maddie Rose
Campaign. The funds raised will enable
Construction Youth Trust to raise
awareness of the huge variety of jobs
available in the suppliers and builders’
merchant sector as well as the wider
construction industry, and support young
people to overcome barriers and enter
the world of work.”
Challenging
the Three Peaks
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Health & Safety
We are strongly committed
to providing a work
environment across the
Group where everyone feels
encouraged to speak up
and challenge each other,
to ensure that we work
safely for ourselves and
our colleagues.
The Group understands that manufacturing
is a hazardous industry and endeavours
to maintain high standards across all
businesses within the Group. This is achieved
through an ongoing programme of
improvement projects which supplement
the compliance work conducted throughout
the Group, applying a continual improvement
methodology. The Group implements,
as standard, the health and safety risk
hierarchy of controls, with focus on the early
phases such as design and planning when
implementing changes, allowing risks to
be identified and effectively eliminated.
The Group has a Health, Safety and
Environment (HSE) policy in place that sets
out the overriding principles of health
and safety for all employees, and must
be adhered to at all times. The Group’s
businesses operate to externally accredited
ISO/OHSAS standards. External audits in
addition to internal reviews continue to
provide valuable feedback and opportunities
to improve and share learnings across the
Group. We continue to set guiding principles
and minimum standards through policy and
procedures to ensure consistent delivery of
key HSE areas. Our agreed approach to
management training, guidance, incident
reporting and investigation remains
fundamental to the further development
of Group standards.
In 2022 we made further updates to our
reporting structure and review process
of HSE performance. In addition to site
and business reviews, the Group leadership
team, including the Executive Committee,
reviewed performance on a monthly basis
enabling them to identify trends and good
practice that could be shared across the
Group. The focus went beyond KPI reporting
and focused on root causation and learnings.
The Group recognises the importance
of understanding, maintaining and
continually improving its health and
safety culture. Highly engaged, informed
and trusting employees enhance health,
safety and environmental performance.
We continue to focus on individual and
collective desired behaviours, with
management and senior leadership
engagement when discussing the business
culture, its maturity, and our ambition.
Ongoing training and information on
collective and individual decision-making
continues to be well received and will
be further developed in 2023.
Safety ambassadors in addition to
established formal consultation teams,
continually monitor, advise and improve
site HSE performance in addition to
increasing the positive profile of the
cultural change plan.
Improving the quality
and safety of the
working environment
for all of our colleagues
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Health & Safety continued
The Group continues to operate a formal
system for reporting and recording hazards
and near misses. The ‘See it, Sort it, Report it’
scheme encourages individuals across the
Group at all levels to report hazards,
observations and suggest solutions, and
allows trends to be analysed. This reporting
procedure continues to be the catalyst for
multiple operational and safety related
projects. The Group leadership team have
visibility and review on a regular basis.
These are one of the Group’s leading
indicators and contribute to the Group
HSE target and object setting process.
The core function of our Occupational Health
is providing mandatory annual health checks
(health surveillance) and screening for
those colleagues across the Group who are
exposed to health hazards through work.
Occupational Health also work closely
with managers and Human Resource (HR)
colleagues supporting attendance and
providing advice and support for all
colleagues to remain in work or return to
work during periods of ill health or absence
by providing modifications or adjustments
as part of a rehabilitation plan.
Health & Safety achievements in the year
The Group has seen a continued and
sustained improvement in reported
accidents. Incident rates across the Group
have been improving year-on-year, in line
with an increase in engagement and positive
leading indicator performance.
Following nine consecutive RoSPA Gold
Awards, the Group achieved the Gold Medal
Award for exceptional performance and
dedicated support for health and safety
within the organisation.
There remains a strong focus within
Occupational Health on the health and
wellbeing of employees across the Group,
and as such, onsite health events/health fairs
are regularly hosted as part of wider Group
initiatives. An onsite counselling service was
introduced in 2021, and this provision was
expanded during 2022 to offer three clinics
per week across the Group, which provides
for 24 appointments per week with an
attendance rate of 98%. The onsite
physiotherapy service introduced in 2020 has
also been expanded to offer three clinics per
week across the Group, which provides for
30 appointments per week with a 92%
attendance rate.
The table below includes the KPIs used by the Group to monitor accident performance:
FREQUENCY PER 100,000 HOURS WORKED
2020
2021
2022
Minor accidents
3.30
4.45
3.06
Lost Time Incidents
0.97
0.61
0.56
HSE reportable accidents*
0.48
0.43
0.21
* HSE reportable accidents based on specified injuries and the current seven-day absence from work reporting requirement in
the UK and although there is no direct equivalent in Mainland Europe or the Middle East, the same definition is applied.
The Group has utilised the onsite
physiotherapy service and their
expertise in identifying risks
and improvements to general
operations.
Work carried out at Broomhouse Lane
focused on transport and despatch
departments where cross functional
teams, alongside the physiotherapist,
assessed specific tasks and added further
insight to musculoskeletal risks and
subsequent mitigations. This approach
has had a visible positive impact on our
colleagues who carry out these tasks,
and we have seen a reduction in reported
manual handling incidents and wider
reduction in musculoskeletal injuries.
Group physio keeping
colleagues safe at work
41
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Engaging with our stakeholders
Effective engagement with
stakeholders is integral to
decision-making at all levels
of management within our
Group, driven by our Board.
We recognise the benefits
that come with involving
our stakeholders in
decision-making, as
we prioritise working to
address their concerns
and feedback. By doing
this in an effective and
proactive manner, we
can build a strong and
sustainable business
which delivers value
for all stakeholders.
We continue to prioritise the development of a
culture which puts the needs of our stakeholders
at the forefront of decision-making. We believe
that doing so will help to realise and drive our
long-term strategic goals, whilst remaining
focused on the priorities of our stakeholders.
Each stakeholder has a vital role to play in
the Group’s future viability and success, as
we engage with them to help build trust,
drive innovation, reduce risk and improve
performance. Considering the viewpoints of
each respectively is imperative to ensure we
continue to provide high quality innovative
and sustainable solutions for our customers;
our employees are part of a safe, flexible,
diverse and inclusive working environment,
which considers and prioritises their needs
and development however possible; our
suppliers experience fair payment terms
and social practices, encouraging healthy
competition and reliable supply; and our
impact on the climate is minimised, which
is supported by our strategic goal of being
the lowest carbon choice for our customers,
as we continue to support the local
communities in which we operate.
We recognise the role that we must play
in meeting the requirements of climate
change adaptation and resilience, both in
our operations and the sustainable solutions
we provide to customers. Engaging with and
understanding the needs of our stakeholders
therefore forms an integral part of our
decision-making processes. The impact of
Board decisions on the Company’s
stakeholders is regularly considered by the
Board in the context of its key decisions, and
the Company Secretary acts as a key driver
in ensuring such engagement.
Communities
and the environment
The impact of our operations
on the local communities and
environments within which we
operate are of paramount
importance to the Group.
Shareholders
Creating a competitive advantage
generates long-term value for
our shareholders. Our strategy is
to allocate capital in a disciplined
way to fund sustainable
proﬁtable growth, yielding
consistent returns to
shareholders over the
long term.
Employees
We are committed to developing
the pool of talent of our employees
across the Group, helping to
develop their expertise and
knowledge in their speciﬁc ﬁelds,
fostering a culture which is diverse,
inclusive, and a great place to work.
Suppliers
We value our suppliers and
understand the benefit of
maintaining long-standing
relationships across the Group.
We encourage fair negotiation with
all suppliers, as well as certainty on
payment.
Customers
We endeavour to create quality
products with engineered solutions
that enable a sustainable built
environment for our customers,
placing our customers’ needs at the
heart of our strategic
decision-making.
42
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Strategic Report
Governance
Remuneration
Financial Statements
Engaging with our stakeholders continued
Why is it important?
Effectively engaging with our employees
helps improve engagement and increase
job satisfaction, creating an inclusive
and collaborative working environment.
This helps foster a productive,
transparent and flexible workplace,
empowering employees to share ideas
and drive innovation.
KEY TOPICS
–
Diversity and inclusion
–
Priority of physical and psychological safety
and wellbeing, through increased mental and
occupational health advisers and support
–
Effective communication
–
Learning, development and future capabilities
–
Onboarding of new employees following any
acquisition
Why is it important?
Engaging with our customers is critical to
the Group to build strong relationships,
increase loyalty and drive innovation.
Building a strong brand reputation
individually across our businesses, as well
as collectively as ‘Genuit’ and a Group, is
imperative to retain existing customers,
as well as attract new ones.
KEY TOPICS
–
Sustainable product solutions
–
Reliability, convenience and transparency
–
Being informed about and supportive of their
specific requirements
–
Understanding the impact of the changing
economic landscape and supporting their
needs where possible
Engaging with our employees
Engaging with our customers
OUTCOMES OF ENGAGEMENT
VALUE CREATED
–
Diversity & inclusion ambition and its three-year
strategy defined
–
Increased focus on safety in the workplace,
creating a safer working environment
–
Empowered employees, who are engaged and
invested in the future growth of the Group
–
Effective leadership training to create a
dynamic and inclusive working environment
–
Increased investment in employee
infrastructure including HRIS and Workplace
by Meta
–
Board and executive members setting
diversity & inclusion commitments
–
Educated employees on the importance of
diverse and inclusive working environments
–
Commitment from employees on health
and safety standards, as they are
collectively raised and challenged
–
Motivated, loyal and engaged workforce,
sharing a common sense of belonging
and pride
–
Knowledgeable and innovative workforce
with transferable skills to future-proof the
Group workforce strategy
–
Attraction and retention of high-quality
employees
OUTCOMES OF ENGAGEMENT
VALUE CREATED
–
Provides opportunities to identify areas for
improvement, allowing us to continually
improve the experience for our customers
–
Deploy energy efficient components delivering
innovative designs and sustainable, low
carbon solutions
–
Safer, higher quality and faster installation and
delivery of value engineered solutions
–
Establishment of long-term partnerships
through collaborative working, as well as
providing new opportunities for business
with customers or projects
–
Development of brand recognition for Genuit
and its businesses
–
Revenue and profit growth
–
Improved efficiencies for the customer
in terms of service, knowledge
and sustainability
–
Strategic partnering and closer
business relationships
–
Creation of value for our customers by
delivering high quality, efficient and
innovative products and solutions
–
Improved performance and reputation
for our customers with the end users
–
Awareness and benchmarking of peer
positioning
HOW WE ENGAGE
–
Employee and senior leader
diversity & inclusion insight sessions
–
Town halls, email communications and
internal and external training sessions
promoting health, safety and wellbeing
–
‘Colleague Connect’ programme providing
a forum for employees and senior
managers to discuss key priorities
and needs
–
Increased communication channels via
Workplace by Meta, Microsoft Teams and
in-person in warehouses and production
–
Collaboration through community initiatives
–
Dedicated Leadership & Development (L&D)
resource
–
Regular updates on Company performance
HOW WE ENGAGE
–
Meet regularly with customers to
understand the obstacles they face and the
solutions they require in relation to energy
efficiency, waste reduction and traditional
construction methods. This allows us to
maintain strong relationships, and ensure
customers know they are valued and heard
–
Customer satisfaction surveys distributed to
obtain feedback, to allow us to implement
and make improvements where required
–
Endeavour to offer a complete product
offering, so customers are able to find
sustainable solutions with ease
–
Host events, seminars and exhibits, as
well as engaging in the development of
technical specifications
43
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Engaging with our stakeholders continued
Why is it important?
Regular engagement with shareholders
enables the Group to build trust and
transparency, increasing investor
confidence and driving long-term
business performance. By providing
regular updates to our shareholders and
being open to feedback, we aim to build a
positive relationship to create a strong
foundation for future growth.
KEY TOPICS
–
Impact of inflation
–
Russian invasion of Ukraine, and economic
recession on shareholder returns
–
ESG and sustainability
–
Resilience of Group strategy
–
Risk management
Engaging with our shareholders
OUTCOMES OF ENGAGEMENT
VALUE CREATED
–
Continued demand for the Company’s shares
(heightening shareholder returns)
–
More access to opportunities to raise capital,
as showcased through our
Sustainability-Linked Loan
–
Support for strategy, including that pertaining
to ESG
–
Support for investment decisions including M&A
and capital expenditure
–
Confidence in management and their ambition
to achieve an operating margin in excess of
20% over the medium term
–
Stable blue chip register
–
Reduced cost of capital and access to
capital that remains in keeping with our
sustainability ambitions
–
Potential for dividend payments
–
Prevention of the worst effects of the
current market-wide challenges and
pessimism due to the macroeconomic
uncertainty
HOW WE ENGAGE
–
Regular Capital Markets Events held to
address the salient issues and articulate the
Group strategy and ambition more clearly
–
Roadshows and salesforce briefings after
each results announcement and
one-to-one meetings held on request
–
Regular attendance at broker and analyst
conferences
–
Up to date information through publications
on our website and through our various
publications
–
Engagement via our Remuneration
Committee Chair on key remuneration
matters
In November 2022 we held a
Capital Markets Day at the
Group’s Adey business in
Gloucestershire.
The event
was hosted by Joe Vorih, Chief
Executive Officer, Paul James,
Chief Financial Officer and Matt
Pullen, Chief Operating Officer,
alongside some key members
of the leadership team.
Our 2022 Capital Markets Day was a
chance for management to engage
directly with shareholders on our strategic
direction for the future, our sustainability
ambitions, and our new streamlined
structure of three Business Units:
Climate Management Solutions, Water
Management Solutions and Sustainable
Building Solutions.
This was an exciting opportunity given the
last Capital Markets Event had been held
virtually in November 2020 and thus in
the midst of the Covid-19 pandemic.
It was well attended by current and
potential investors, in addition to being
live-streamed. The day included a
presentation by senior management in
the first instance, followed by a Q&A
session, allowing in-person and virtual
attendees to raise questions and receive
direct feedback from management.
This was followed by a tour of the Adey
facilities and a demonstration of Adey’s
heating efficiency products. There was
also a trade show, showcasing a variety
of Group products in more detail.
A recording of the presentation is
available on our website at
www.genuitgroup.com.
44
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Engaging with our stakeholders continued
Why is it important?
It is imperative that engaging with our
suppliers remains high on the agenda,
building stronger relationships, improving
supply chain performance, enhancing
product quality and mitigating risk.
Effective engagement helps realise supply
chain efficiency and build collaborative
and transparent relationships.
KEY TOPICS
–
Continuity of supplies and management
of supply chain constraints, including risk
mitigation measures such as dual sourcing
–
Strategic partnering
–
Ensuring product quality meets agreed
standards and pricing
–
Accurate demand forecast
– Sustainability
Why is it important?
We recognise the benefits of engaging with
our local communities, as well as the wider
environment. We understand the value in
building trust within these local communities
and promoting sustainability, to create a
positive outcome for all stakeholders.
Through effective engagement, we can
minimise the impact of our operations on
the environment, reduce risk, and
demonstrate our commitment to
responsible business practices.
KEY TOPICS
–
Sustainable operations and minimising
environmental impact
–
Supporting local education to develop career
aspirations, as well as local charities
Engaging with our suppliers
Engaging with our communities
OUTCOMES OF ENGAGEMENT
VALUE CREATED
–
Stronger partnering relationships to minimise
disruption in supply
–
Maintain expectations for quality
–
Technical input into product development
or resolution of technical issues
–
Multiple sourcing and stable and predictable
production for suppliers
–
Service and materials that match our own
brand proposition to our customers
–
Competitive advantage in terms of margin
and cost out
–
Marketing leverage from supporting
Genuit’s sustainability aspirations
–
Reduced risk to the business through
supply relationships and partnering with
key suppliers
–
Keeping our suppliers leading in their field,
yet remaining competitive
– Innovation
–
Sustainable and ethical supply chains
–
Long-term partnerships
OUTCOMES OF ENGAGEMENT
VALUE CREATED
–
Donations made to local and national charities
and participation in Kickstart and Tempus
Novo schemes
–
A pipeline of work-ready students with
engineering and digital specialisms
–
Long-standing sponsorship of local
sports clubs, regular charitable events
and fundraising
–
Cleaner and friendlier areas for the
local communities
–
Increasing awareness of climate resilience
and adaptation
–
Development of financial and practical skills
beyond the classroom, to increase
employment opportunities for those from
low socio-economic backgrounds
–
Commitment to the delivery of effective
education to disadvantaged student
populations in local areas
–
Reducing the impact of our overall activities
on the environment and giving something
back to the local communities within which
we operate
–
Local business and Genuit brand awareness
and development of reputation
HOW WE ENGAGE
–
Develop Service Level Agreements
–
Set clear and achievable goals
–
Face-to-face and virtual meetings, digital
communications for general items and
policy updates, formal tenders for sourcing
and procurement
–
Conduct supplier audits
–
Invite suppliers for tours around the
businesses to invigorate new
product development
–
Issue forward forecasts
–
Communicate efficiently in relation
to product quality
HOW WE ENGAGE
–
Sponsorship through local initiatives and
charities, working with schools and
communities, supporting food banks
and local fundraising events across
all businesses
–
Educational initiatives and support in
heating, engineering and reduction of
carbon emissions
–
Collaboration with strategic partners to
broaden the education amongst installers
and homeowners
–
Provide funding to level-up the local areas
to our sites to enable regeneration and
reduce anti-social behaviour
–
Through Group initiatives, such as the
Maddie Rose Campaign and Yorkshire
Three Peaks challenge
45
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
This Section 172 statement for the
year ended 31 December 2022 gives
further insight into some of the
strategic decisions taken by the Board
during the 2022 financial year where
key stakeholders have influenced
those decisions, and aims to help
stakeholders better understand how
the Directors have discharged their
s172 duties.
Adequate consideration of key stakeholder
groups in Board decisions has always
been part of Board discussions and the
decision-making process at Genuit.
We recognise the long-term benefits of doing
so, whilst upholding the Directors’ duties as
outlined in s172 of the Companies Act 2006.
The Board is aware that it must promote the
success of the Company for the benefit of
its shareholders as a whole, whilst having
regard to other stakeholders.
In performing their duties during 2022, the
Directors have had regard to the matters set
out in s172 of the Companies Act 2006, as
demonstrated within this statement and
elsewhere in the Annual Report and Accounts
as follows:
Our key stakeholders
Section 172 statement
Key
s172 consideration
Page
The likely consequences of any decision
in the long term
–
Purpose and Business model
13
–
Strategic objectives
14
–
Principal risks
55 to 62
–
Sustainability
21 to 25
The interests of the Group’s employees
–
People
36
–
Health and safety
40
–
Stakeholder engagement
43
–
Employee engagement
76
The need to foster the Group’s business
relationships with suppliers, customers
and others
–
Business model
13
–
Strategy
14 to 18
–
Non-financial statement
49
–
Stakeholder engagement
45
The impact of the Group’s operations on
the community and the environment
–
Purpose
13
–
Greenhouse gas emissions
24
–
Sustainability
21 to 25
–
TCFD
26 to 35
The desirability of the Group maintaining
a reputation for high standards of
business conduct
–
Cyber
95
–
Health and safety
40
–
Whistleblowing
95
–
Internal controls
94
–
Non-financial statement
49
The need to act fairly as between members
of the Company
–
Stakeholder engagement
42 to 45
–
Dividend
53
Our key stakeholders are integral to the
Group’s long-term strategy. The Executive
Committee is responsible for ensuring
their needs form part of everyday
decision-making on behalf of the Board.
Using the feedback from senior management
on these needs, the Board considers and
then makes its strategic decisions against
the backdrop of what it considers to be in the
best interest of the long-term financial
success of the Company.
Some of the key Board decisions made
during the year and how these impact our
stakeholders, are demonstrated overleaf.
Customers
Shareholders
Employees
Suppliers
Communities
and the
environment
Board
decisions
46
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Context
The Board approved the commitment of the
Group to a series of targets under the Science
Based Targets (SBTs) framework, following its
Pledge to Net Zero in 2021.
Shareholders
The approval of SBTs enables effective
engagement with shareholders by
communicating sustainability progress and
detail in an understandable, consistent and
readable format. This gives shareholders
confidence in the Group’s commitment to net
zero and aligns to the Group’s sustainability
framework.
Community
The Board recognises the significance of
reducing the impact of climate change and
the SBTs allow the Group to accurately assess
how much and how quickly it needs to reduce
its greenhouse gas (GHG) emissions to help
prevent the impact of climate change.
Approval of Science Based Targets
s172 consideration
Stakeholders
Outcome and impact
Approval of the SBTs ensures that any
Board strategic decisions are made
with these targets in mind, demonstrating
how the Board recognises that creating
a climate-secure world is crucial for
the Group’s successful, sustainable,
business operations, and that
remuneration and incentives closely
aligned with these sustainability
goals aligns stakeholder and
management interests.
Section 172 statement continued
Context
The Board approved the refreshed Group
strategy, including the reorganisation from
four divisions into three Business Units (BU):
Climate Management Solutions, Water
Management Solutions, and Sustainable
Building Solutions.
Customers
The refreshed strategy provides focus
on delivering quality products and solutions
to the customer, notably the benefit of the
increased synergies through complete
solution offerings.
Employees
Driving the diversity and inclusion agenda
enables the Group to create a modern,
flexible and inclusive working environment
and the refreshed strategy places specific
focus on investing in our people and culture.
Shareholders
Providing sustainable solutions for growth
and identified clear pathways to shareholder
value creation through sustainable growth in
free cash flow and capital allocation.
Community
Mitigating the impacts of climate change by:
–
Addressing the drivers for low carbon
heating, cooling and clean, healthy air
through our Climate Management
Solutions BU
–
Driving climate adaptation and resilience
through integrated surface and drainage
solutions through our Water Management
Solutions BU
–
Providing a range of solutions to reduce
the carbon content of the built
environment through our Sustainable
Building Solutions BU
Approval of Group strategy
s172 consideration
Stakeholders
Outcome and impact
The approval of this refreshed strategy
has further developed the Group’s future
capabilities for growth, transitioning the
Group into a leading player in sustainable
water and climate management.
This transition is underpinned by structural
trends in the built environment, and
will bring:
–
Deep expertise and brand equity in
water and climate solutions
–
Proven leadership and partner of choice
in sustainability
–
An integrated portfolio providing
value-adding solutions
–
Extracting benefits of scale via a simpler,
better aligned operating model
–
Achieving efficiency via the Genuit
Business System focused on growth,
lean systems and leadership
–
A modern, flexible, inclusive
work environment
Context
In line with the Group’s long-term M&A
strategy, the Board gave approval to
proceed with the acquisition of Keytec
Geomembranes Holding Company Limited.
Employees
This saw the onboarding of 15 additional new
employees into the Group, further diversifying
the Group’s skills and knowledge.
Shareholders
As part of the decision-making process, the
Board considered the potential synergies
and financial benefits of the acquisition,
as well as the environmental credentials
of the target business and the benefit the
acquisition would bring to shareholders
and other stakeholders in terms of the
long-term growth of the enlarged Group
and potential returns.
Approval to proceed with the acquisition of Keytec
s172 consideration
Stakeholders
Outcome and impact
Keytec has strengthened the Group’s ability
to supply and install attenuation systems
for a broad range of applications, and
further strengthens the Group’s product
and service offering, national leverage and
knowledge in this fast-growing sector.
47
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Context
The Board approved the procurement and
implementation of a HRIS for application
across the Group, to be a single, fit for
purpose, scalable platform to enable the
effective delivery of the HR strategy, aligned
with the development of the business,
business insights and governance and
compliance requirements.
Employees
The approval of the HRIS optimises HR
scalability for development and growth by
streamlining administrative processes and
reducing waste. Other benefits include
improved efficiency, workplace mobility,
self-directed learning and self-service
features, compliance risk management,
improved data quality, insights and analysis,
and automated business processes.
Approval of Human Resources Information System (HRIS)
s172 consideration
Stakeholders
Outcome and impact
Greater access to people information
to enable more effective people
management, creating value and
enabling growth through employee
capability, expertise and contribution
particularly through effective performance
management and talent development.
Approval of this system is aligned with the
Group’s refreshed strategy to continue to
invest in our people and culture.
Section 172 statement continued
How the Board complied with its s172 duty
The Board recognises that each decision it
makes will have an impact in some form on
all stakeholders, and thus integrates this into
its culture. The duties under s172 therefore
form an integral part of the activities and
decision-making of the Board. It uses varying
methods of engagement depending on the
stakeholder to ensure it is fully informed of
their needs, and ensures it applies the most
appropriate method of engagement for the
circumstances. These include but are not
limited to; press releases, announcements,
surveys, one-to-one contact, newsletters,
forums, emails, videos and town hall
leadership sessions.
Louise Brooke-Smith is the designated
Non-Executive Director responsible for
employee engagement on the Board’s
behalf. Further steps have been taken
during the year to increase the level of
direct engagement, as detailed on page 76
of the Corporate Governance Report.
Effective engagement ensures that the
Board is fully aware of any potential issues
or likely impact, allowing it to promote those
initiatives which are expected to have a
positive outcome and minimise those which
may have a negative impact. This allows for
a detailed and thorough discussion at
meetings, enabling a considered, informed
and balanced approach to decision-making.
Non-financial information statement
The following table details the non-financial
information required by Section 414CB of the
Companies Act 2006, and highlights where
more information can be found elsewhere
within the Annual Report and Accounts.
The duties under s172
form an integral part
of the activities and
decision-making of
the Board.
Each stakeholder has a
vital role to play in the
Group’s future viability and
success, as we engage with
them to help build trust, drive
innovation, reduce risk and
improve performance.
48
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Governance
Remuneration
Financial Statements
NON-FINANCIAL INFORMATION REPORTING
REQUIREMENT
DEVELOPMENT AND ACTIONS
OUR IMPACT AND ANY RELATED PRINCIPAL RISKS
PAGE
Environmental matters
–
Advancing the circular economy
–
Tackling climate change
Providing solutions to the environmental challenges facing infrastructure, buildings and
communities is at the heart of the Group’s strategy and growth agenda, and forms part of
its refreshed strategy. In addition to the ambitious targets to achieve by 2025, the Group
has SBTs with initial targets of 2027, as well as formulating its detailed transition plan to
reduce CO
2
emissions as part of its Pledge to Net Zero, and an increase in its tonnage of
recycled plastics.
–
Our Business Model
13
–
Non-Financial KPIs
19
– TCFD
26 to 35
– Sustainability
22
–
Principal Risk 5 – Climate change
58
Employees
–
Talent development
–
Developing apprentice and
graduate careers
–
Diversity and inclusion ambition
–
Health and safety
– Culture
As part of its efforts to consolidate and promote a healthy culture, the Group places
focus on motivating and developing its employees so they feel valued and engaged in
the strategic direction of the Group, and understand their contribution to its growth.
Attracting and retaining a diverse workforce and investing in employees’ future
opportunities is of paramount importance to the Group, which can be seen from the
appointment of a dedicated Chief People Officer, as well as initiatives such as the
Graduate Scheme, our Apprentice programme and our membership of The 5% Club.
– People
36 to 39
–
Health and safety
40
–
Stakeholder Engagement
42 to 45
– Culture
75
–
Principal Risk 6 – Recruitment and retention
of key personnel
58
–
Principal Risk 8 – Health, Safety and
Environmental
60
Social matters
–
Developing sustainable solutions
The Group is committed to carrying out its business responsibly, and ensuring it promotes
sustainable operations and minimises adverse environmental and social impacts.
Employees are actively encouraged to participate in initiatives within their communities
which reduce the impact of climate change and offer support and education to their
local communities.
–
Stakeholder Engagement
42 to 45
– Culture
75
– People
36 to 39
Human rights
Whilst the Group does not have a specific human rights policy, it does have an Anti-Slavery
policy and Modern Slavery Act transparency statement which is available on the
Company’s website, within which we state our zero-tolerance approach of any modern
slavery or human trafficking rights violations. The Group is currently implementing a new
supplier onboarding process, which will include a supplier Code of Conduct, to ensure our
suppliers conform with ethical working practices.
Anti-corruption and anti-bribery
The Group seeks to prohibit all forms of bribery and corruption within its businesses and
complies with the requirements of all applicable anti-bribery and corruption laws.
The Group requires all relevant employees to confirm biannually that they remain in
compliance with the Group’s Anti-Bribery policy.
–
Audit Committee Report
95
–
Principal risk 9 – Breach of legislation
including Data Protection, Competition Law,
the Bribery Act and Sanctions Compliance
60
Non-financial and sustainability
information statement
49
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Revenue and operating margin
Group revenue for the year ended 31 December 2022 was £622.2m (2021: £594.3m), an increase
of 4.7% on a strong comparative year. UK revenue increased by 5.0% during a period of
economic uncertainty that worsened in the second half of the year. This outperformed UK
construction more broadly, which grew 1.6% (Source: CPA) versus prior year, or 1.0% when the
impact of infrastructure expenditure is excluded. New housing is expected to have grown by
2.4%, after a strong first half, where starts were some 5.0% ahead of prior year (Source: UK
Government DLUHC). Housing RMI declined from its 2021 historic peak by 3.1% as economic
uncertainty and disposable incomes worsened during the year, as well as the macro-effect
of the decline in residential property transactions of 14.8% versus prior year (Source: HMRC).
The performance in the Rest of Europe was impacted by the Group’s decision to exit the
Russian market.
Underlying operating profit was £98.2m (2021: £95.3m), an increase of 3.0% despite considerable
inflation, housing market uncertainty and supply chain disruption. The Group improved pricing
processes, began the simplification of the business to unlock synergies and lower structural
costs to enhance resilience for 2023. The Group underlying operating margin decreased
marginally by 20 basis points to 15.8% (2021: 16.0%).
This has been expedited in 2022 through a transformation project, which has involved reviews
of direct and indirect purchasing costs and also transition to the new operating structure from
2023 announced at the November 2022 Capital Markets Day.
A strong
performance despite
uncertainty
The Group continues to experience a strong performance
despite macroeconomic and political uncertainty, ongoing
high inflation and supply constraints.
REVENUE AND OPERATING MARGIN
2022
£m
2021
£m
Change
%
Revenue
622.2
594.3
4.7%
Underlying operating profit
98.2
95.3
3.0%
Underlying operating margin
15.8%
16.0%
(20bps)
REVENUE BY GEOGRAPHIC DESTINATION
2022
£m
2021
£m
Change
%
UK
560.8
534.1
5.0%
Rest of Europe
32.4
38.3
(15.4)%
Rest of World
29.0
21.9
32.4%
Group
622.2
594.3
4.7%
Chief Financial Officer’s Report
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Financial Statements
Chief Financial Officer’s Report continued
New product innovation remains strong. In Residential Systems, we launched several new
ranges in the first half of the year, including Nuaire’s DX Cooling modules designed to work
in conjunction with existing Mechanical Ventilation with Heat Recovery (MVHR) ventilation
units to tackle the challenges of overheating in apartments. Adey launched a number of
new products to expand their range of performance enhancing heating system additives,
including the new MCXS leak sealant additive.
Robust price leadership and cost saving initiatives helped Residential Systems deliver strong
underlying operating profit growth of 8.2% to £79.1m (2021: £73.1m) representing a 20.1% margin
(2021: 19.6%).
Commercial and Infrastructure Systems
The UK commercial and infrastructure markets proved to be a tougher operating environment
and the segment’s revenue was 2.9% higher at £227.9m (2021: £221.4m). On a like-for-like basis,
excluding the effects of the Plura acquisition in February 2021 and the Keytec acquisition in
March 2022, year-on-year revenue was broadly flat.
Divisional performance was impacted in Q2 by an isolated cyber incident that impacted
Group profitability by over c.£4m at the time. It was ultimately an unsuccessful attempt but
resulted in temporary disruption to manufacturing and sales in April and May.
We implemented new, stronger protection across the Group in the first half and I am pleased
to report that most of this business was recovered in the second half of the year as systems
came back on stream. However, our Nuaire commercial business was further impacted in the
second half of the year by a shortage in supply of key components such as blowers. Thanks to
the arduous work and ingenuity of our local teams, alternative sources of supply have now
been secured for 2023 and beyond, although difficulties remain.
In Commercial and Infrastructure Systems, our Polypipe Civils and Green Urbanisation
business launched SciClone X, a new stormwater treatment device for removing pollutants
from surface water runoff.
We expanded our site at Horncastle via a land purchase that allows optimisation of site layout
and flexibility for any possible future manufacturing footprint reviews. This site also
commissioned a new Polysewer line in 2022 with product due to be supplied from early 2023
that will reduce carbon emissions by reducing long-distance transportation. Material handling
capabilities have also been modernised using high efficiency vacuum pumps whilst reducing
the risk of material spillages. At our Aylesford site in Kent, we made a major investment in
multi-layer extrusion technology, allowing us to significantly increase recyclate use, propelling
us on our journey towards the medium-term ESG target that 62% of our input materials must
come from recycled sources.
Commercial and Infrastructure Systems delivered an underlying operating profit of £19.1m
(2021: £22.2m) and represents an 8.4% margin (2021: 10.0%). The key driver of reduced margin in
the year in this segment relates to operational leverage on reduced UK volumes, particularly
driven by constraints in supply of key components.
Business review
REVENUE
2022
£m
2021
£m
Change
%
LFL Change
%
Residential Systems
394.3
372.9
5.7
5.0
Commercial and Infrastructure Systems
227.9
221.4
2.9
0.5
622.2
594.3
4.7
3.1
UNDERLYING OPERATING PROFIT
2022
£m
ROS
%
2021
£m
ROS
%
Change
%
Residential Systems
79.1
20.1
73.1
19.6
8.2
Commercial and Infrastructure Systems
19.1
8.4
22.2
10.0
(14.0)
98.2
15.8
95.3
16.0
3.0
Profit before tax was £45.4m (2021: £62.9m), a decrease of 27.8%, driven by several factors
including a write down of intangibles and increased borrowing costs.
The Group continued to invest in product development and innovation throughout the year.
In 2022, underlying operating profit benefited from £1.2m of HMRC approved Research and
Development expenditure credit, relating to the year ended 31 December 2022.
Residential Systems
Revenue in our Residential Systems segment was 5.7% higher than the prior year at £394.3m
(2021: £372.9m), partially driven by the full year effect of the acquisitions of Adey and Nu-Heat
in February 2021 with like-for-like revenue excluding acquisitions 5.0% higher than 2021.
The process of integrating Adey and Nu-Heat is now complete. Both these businesses have
fitted well into the Group in a commercial, operational and a cultural sense – so much so that
Adey’s CEO at the time of acquisition has just been promoted to be Managing Director for one
of the three new Business Units. We are driving both revenue and cost synergies aggressively.
Adey has been adversely affected by the constraint in upstream boiler manufacturing caused
by the shortage in the global supply of printed circuit boards (PCBs). This shortage is ongoing.
Nu-Heat is performing well, benefiting from the positive mix effect of remaining market RMI
spend moving into funding more efficient forms of heating homes.
During 2022 at our Broomhouse Lane and Neale Road sites in Doncaster, we took delivery
of and installed 25 moulding machines for the manufacture of our mainstream products.
This underpins our commitment to sustainability as the new machines will give significant
energy savings over those that they replaced. The new machines will also allow us to become
more flexible in our approach to using recycled content in our moulding facility than
previously, which again supports our commitment to sustainability.
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Acquisitions
On 31 March 2022, the Group acquired Keytec Geomembranes Holding Company Limited
(Keytec), a supplier and installer of stormwater attenuation products, geomembranes,
and gas protection products for an initial cash consideration of £2.5m on a cash free and
debt free basis plus a deferred consideration of £0.6m due no later than 12 months from
completion. The total initial cash consideration of £2.9m included a payment for net cash
and working capital commitments on completion of £0.4m.
Non-underlying items
Profit before tax was £45.4m (2021: £62.9m), impacted by an increase in non-underlying
items. These increased to £40.0m (2021: £34.1m) after tax. These were driven by non-cash
amortisation of £15.2m (2021: £14.2m) and total impairment charges of £14.8m (2021: nil)
respectively. The impaired goodwill of £12.0m originally arose from the 2021 acquisitions, and
the £2.8m impairment of intangible assets arose from a customer relationship agreement
ending early. Of the other items, £3.3m (2021: £6.6m) of costs related to acquisitions and other
M&A costs, a product liability claim of £1.0m (2021: £2.6m), one off costs of £1.2m relating to an
isolated cyber incident at Nuaire and restructuring costs of £9.3m (2021: £1.1m).
Non-underlying items comprised:
2022
£m
2021
£m
Change
%
Amortisation of intangible assets
15.2
14.2
7.0
Impairment of goodwill
12.0
–
–
Impairment of intangible assets
2.8
–
–
Restructuring Costs
9.3
1.1
745.5
Contingent consideration on acquisitions
3.1
1.9
63.2
Product liability claim
1.0
2.6
(61.5)
Acquisition costs
0.2
4.7
(95.7)
Isolated cyber incident
1.2
–
–
Fair value adjustments on acquisitions
–
3.7
–
Unamortised deal costs
0.4
–
–
Non-underlying items before taxation
45.2
28.2
60.3
Tax effect on non-underlying items
(5.2)
(3.4)
(52.9)
Impact of change in statutory tax rate
–
9.3
–
Non-underlying items after taxation
40.0
34.1
17.3
Exchange rates
The Group trades predominantly in Sterling but has some revenue and costs in other
currencies, mainly the US Dollar and the Euro, and takes appropriate forward cover on these
cash flows using forward currency derivative contracts in accordance with its hedging policy.
Finance costs
Underlying finance costs increased to £7.6m (2021: £4.2m) due to significantly higher Standard
Overnight Index Average (SONIA) interest rates partially offset by lower level of RCF borrowings.
Interest cover was 16.0x for the year (2021: 31.3x).
Interest was payable on the RCF at SONIA (2021: LIBOR) plus an interest rate margin ranging
from 0.90% to 2.75%. The interest rate margin at 31 December 2022 was 1.60% (2021: 1.40%).
With effect from 4 January 2022, LIBOR was replaced by SONIA.
Taxation
Underlying taxation
The underlying tax charge in 2022 was £14.1m (2021: £16.0m) representing an effective
tax rate of 15.6% (2021: 17.6%). This was below the UK standard tax rate of 19.0% (2021: 19.0%).
Patent box relief contributes to a lowering of the underlying effective tax rate by some
1.8 percentage points.
Taxation on non-underlying items:
The non-underlying taxation credit of £5.2m (2021: £5.9m net charge) represents an effective
rate of 11.5% (2021: 20.9%).
EARNINGS PER SHARE
2022
£m
2021
£m
Pence per share:
Basic
14.7
16.7
Underlying basic
30.8
30.6
Diluted
14.6
16.5
Underlying diluted
30.5
30.2
The Directors consider that the underlying basic earnings per share (EPS) measure provides
a better and more consistent indication of the Group’s underlying financial performance
and more meaningful comparison with prior and future periods to assess trends in our
financial performance.
Underlying basic EPS increased by 0.7% in 2022.
+4.7%
Revenue up despite some market
softness in the latter part of the year
+3.0%
Underlying operating proﬁt driven by
strong pricing and cost controls.
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Dividend
The final dividend of 8.2 pence (2021: 8.2 pence) per share is being recommended for payment
on 24 May 2023 to shareholders on the register at the close of business on 21 April 2023. The
ex-dividend date will be 20 April 2023.
Our dividend policy is normally to pay a minimum of 40% of the Group’s annual underlying
profit after tax. The Directors intend that the Group will pay the total annual dividend in
two tranches, an interim dividend and a final dividend, announced at the time of publication
of the interim and preliminary results, respectively, with the interim dividend being
approximately one half of the prior year’s final dividend.
Balance sheet
The Group’s balance sheet is summarised below:
2022
£m
2021
£m
Property, plant and equipment
169.9
151.7
Right-of-use assets
22.3
20.6
Goodwill
455.4
467.7
Other intangible assets
159.7
175.1
Net working capital
33.9
22.0
Taxation
(47.9)
(47.4)
Other current and non-current assets and liabilities
0.1
(6.3)
Net debt (loans and borrowings, and lease liabilities,
net of cash and cash equivalents)
(166.2)
(165.7)
Net assets
627.1
617.7
The net value of property, plant and equipment has increased by £18.2m following the
acquisition of additional land at one of our sites and the Group’s continued strategic
investment in its businesses. The value of right-of-use assets has increased by £1.7m.
Pensions
The Group does not have any defined benefit pension schemes and only has defined
contribution pension arrangements in place. Pension costs for the year amounted to £6.5m
(2021: £5.4m) reflecting the inclusion of the acquisitions made in the previous year and an
overall increase in the number of scheme participants.
Cash flow and net debt
The Group’s cash flow statement is summarised below:
2022
£m
2021
£m
Operating cash flows before movement in net working capital
113.6
111.4
Add back non-underlying cash items
9.6
6.9
Underlying operating cash flows before movement in net working capital
123.2
118.3
Movement in net working capital
(19.7)
(27.0)
Capital expenditure net of proceeds from sale
(40.9)
(34.1)
Underlying cash generated from operations after
net capital expenditure
62.6
57.2
Income tax paid
(7.0)
(9.5)
Interest paid
(3.7)
(2.9)
Non-underlying cash items
(9.6)
(6.9)
Settlement of deferred and contingent consideration
(0.5)
–
Acquisition of businesses
(2.6)
(236.4)
Issue of Euro-Commercial Paper
–
–
Buyback of Euro-Commercial Paper
–
–
Net proceeds from issue of share capital
–
93.5
Debt issue costs
(3.1)
–
Dividends paid
(30.5)
(21.7)
Proceeds from exercise of share options net of purchase of own shares
0.4
2.1
Other
(4.0)
(5.7)
Movement in net debt – excluding IFRS 16
2.0
(130.3)
Movement in IFRS 16
(2.5)
(7.7)
Movement in net debt – including IFRS 16
(0.5)
(138.0)
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Chief Financial Officer’s Report continued
Delivery of good cash generation remains core to the Group’s strategy. Underlying cash
generated from operations after net capital expenditure at £62.6m (2021: £57.2m) represents
a conversion rate of 63.7% (2021: 60.0%). The Group remains committed to achieving a
conversion rate of 90.0% over the medium term.
Working capital movement in the year was driven by a rebuilding of inventory to improve
customer service performance following the recovery in demand after the pandemic, as
well as the effects of cost inflation.
Net capital expenditure investment increased to £40.9m (2021: £34.1m) as the Group continued
to focus on investing in key, strategic and innovative projects. In 2023, we anticipate that
capital expenditure will be approximately £40.0m.
Net debt of £166.2m comprised:
2022
£m
2021
£m
Change
%
Bank loans
(195.9)
(198.0)
2.1
Cash and cash equivalents
50.0
52.3
(2.3)
Net debt (excluding unamortised debt issue costs)
(145.9)
(145.7)
(0.2)
Unamortised debt issue costs
2.8
0.6
2.2
IFRS 16
(23.1)
(20.6)
(2.5)
Net debt
(166.2)
(165.7)
(0.5)
Net debt (excluding unamortised debt issue costs):
pro forma EBITDA
1.2
1.2
–
Financing
The Group has a Sustainability-Linked Loan (SLL) committed through to August 2027 with two
further uncommitted annual renewals through to August 2029 following a refinancing with the
existing bank syndicate during the year. The facility limit is £350.0m with an uncommitted
‘accordion’ facility of up to £50.0m on top. At 31 December 2022, £170.9m of the RCF was drawn
down. Additionally, the Group entered a fixed rate £25.0m seven-year private placement loan
note until August 2029 with an uncommitted shelf facility of an additional £125.0m.
The Group is subject to two financial covenants. At 31 December 2022, there was
significant headroom and facility interest cover and net debt to EBITDA covenants were
comfortably achieved:
Covenant
Covenant
requirement
Position at
31 December
2022
Interest cover
>4.0:1
16.0:1
Leverage
<3.0:1
1.2:1
Going concern
The Group continues to meet its day-to-day working capital and other funding requirements
through a combination of long-term funding and cash deposits. The Group’s bank financing
facilities consist of a £350.0m Sustainability-Linked Loan with an uncommitted ‘accordion’
facility of £50.0m and a seven-year private placement loan note of £25.0m with an
uncommitted £125.0m shelf facility. At 31 December 2022, liquidity headroom (cash and
undrawn committed banking facilities) was £229.1m (2021: £154.3m). Our focus will continue
to be on deleveraging, and our net debt to EBITDA ratio stood at 1.2x pro forma EBITDA at
31 December 2022 (2021: 1.2x), increasing to 1.4x (2021: 1.4x) pro forma EBITDA including the effects
of IFRS 16. This headroom means the Group is well-positioned with a strong balance sheet.
As a result, the Directors have satisfied themselves that the Group has adequate financial
resources to continue in operational existence for a period of at least the next 21 months.
Accordingly, they continue to adopt the going concern basis in preparing the consolidated
financial statements.
Forward-looking Statements
This report contains various forward-looking statements that reflect management’s
current views with respect to future events and financial and operational performance.
These forward-looking statements involve known and unknown risks, uncertainties,
assumptions, estimates and other factors, which may be beyond the Group’s control,
and which may cause actual results or performance to differ materially from those
expressed or implied from such forward-looking statements. All statements (including
forward-looking statements) contained herein are made and reflect knowledge and
information available as of the date of preparation of this report and the Group disclaims
any obligation to update any forward-looking statements, whether as a result of new
information, future events or results or otherwise. There can be no assurance that
forward-looking statements will prove to be accurate, as actual results and future events
could differ materially from those anticipated in such statements. Accordingly, readers
should not place undue reliance on forward-looking statements due to the inherent
uncertainty therein. Nothing in this report should be construed as a profit forecast.
Paul James
Chief Financial Officer
14 March 2023
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Financial Statements
Principal Risks and Uncertainties
Risk Management
The following heatmap sets out the impact and probability scores for our principal risks and
further detail of these risks, and emerging risks, is set out in the tables below. The analysis is
not intended to be a comprehensive list of all risks actively managed by the Group.
Low
High
Impact
Probability
1
Macroeconomic and
political conditions
2
Raw materials supply
and pricing
3
Business disruption
4
Reliance on key customers
5
Climate change
6
Recruitment and retention
of key personnel
7
Failure of information
systems or cyber breach
8
Health, Safety and
Environmental
9
Breach of legislation
including Data Protection,
Competition Law, the
Bribery Act and Sanctions
Compliance
10
Product failures
11
Liquidity and funding
12
Acquisitions do not
perform as expected
1
1
2
2
3
10
11
11
12
4
7
7
5
6
9
8
Framework for managing risk
The Board has overall responsibility for ensuring that
the Group maintains an effective risk management
system, enabling it to deliver its strategic objectives.
It determines the Group’s culture and approach to
risk management and is responsible for maintaining
appropriate processes and controls. The Board
reviews and approves the risk appetite and
determines the policies and procedures to mitigate
exposure to risk. The Board is central to the Group’s
risk review process, including the scenario planning
and detailed stress testing associated with the
Group’s Viability Statement. The Board is assisted
in this role and with its responsibilities by the Risk
Committee, a formal sub-committee of the Board.
Process
The Board continually assesses and monitors the
Group’s key risks, and the Group has developed a
risk management framework to identify, report, and
manage its principal risks and uncertainties, and
emerging risks. This process includes the recording
of all principal risks and uncertainties on a Group
Risk Register. Emerging risks are those that could
significantly impact our industry and/or our Group.
These emerging risks are evolving and often new,
and thus, their full potential impact is still uncertain.
The Risk Committee regularly reviews these
emerging risks and, where deemed appropriate,
they are added to the Group’s Risk Register.
Principal and emerging risks are analysed, allocated
owners, scored for both impact and probability to
determine the exposure for the Group, prioritised,
assessed for what mitigation is required, and
updated at least every six months.
External risks include macroeconomic conditions,
climate change, Government action, policies and
regulations, raw material supply and pricing, and
information systems disruption. Internal risks
include reliance on key customers, and recruitment
and retention of key personnel. The Board seeks
to mitigate the Group’s exposure to both external
and internal risks. The effectiveness of key mitigating
controls is continually monitored and subject
to rotational testing by the Group’s internal auditors.
Minor
Severe
The Board
The Board continually assesses and
monitors the Group’s key risks, and
the Group has developed a risk
management framework to identify,
report, and manage its principal risks
and uncertainties; and emerging risks.
This includes:
–
The recording of all principal risks
and uncertainties on a Group Risk
Register, and an emerging risks
register, which are updated at
least every six months
–
Analysing risks and allocating
owners
–
Scoring risks for impact and
probability to determine the
exposure for the Group
–
Outlining which risks should be
prioritised and what mitigation
is required
Internal audit
The effectiveness of key mitigating
controls is continually monitored and
subject to rotational testing by the
Group’s internal auditors.
Operational level
The risk management processes
are embedded into the different
operational areas within the Group.
Top down
Identifying, assessing
and mitigating risk at
Group level
Bottom up
Identifying, assessing
and mitigating risk
at business
operational level
The heat map highlights the principal risks and uncertainties that could have a material
impact on the Group’s performance and prospects, net of our mitigating activities which are
aimed at reducing the impact or likelihood of a major risk materialising. These risks have all
been considered by the Board when developing the Group’s Viability Statement. The Board
does recognise, however, that it will not always be possible to eliminate these risks entirely.
In addition, the principal and emerging risks listed below do not comprise all of the risks that
the Group may face.
Risk appetite
The Board determines the appropriate level of risk for operating the Group and delivering its
strategic objectives. A key focus of the Board is minimising exposure to operational; financial;
regulatory and compliance; health, safety and the environment; and people risks.
55
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Financial Statements
Principal Risks and Uncertainties continued
RISK
POTENTIAL IMPACT
MITIGATIONS
CHANGE IN POTENTIAL
IMPACT AND/OR
PROBABILITY
1. Macroeconomic and political conditions
The Group is dependent on the level of
activity in its end markets, especially the
construction industry, and is therefore
susceptible to any changes in its cyclical
economic conditions, Government policy,
interest rates, any political and economic
uncertainty and impacts of the Russian
invasion of Ukraine.
Over the longer term, supply chain issues
could be caused by physical or transition
risks of climate change.
The UK is currently experiencing a “cost of
living crisis” with inflation and interest rates
at levels not seen for several decades.
These current economic conditions could
have an impact on broader economic
sentiment and ultimately demand for
our products.
In addition, governments could move away
from Green deal commitments to regulate
and support energy efficient solutions, in
the short-term.
Lower levels of activity within our end
markets, especially the construction
industry, could reduce sales and
production volumes, thereby adversely
affecting the Group’s financial results.
–
The Group benefits from the diversity of its businesses and end markets;
and the proactive development of its brands, products and services.
–
The Group continues to target those end markets where profitable growth
prospects are greatest.
–
The Group closely monitors trends and lead indicators, invests
in market research and is an active member of the Construction
Products Association.
–
The Group actively manages its demand forecasts and costs through
regular operational review meetings.
–
The Group undertakes scenario planning to support business resilience.
–
Our response to climate change risks and opportunities is described in our
TCFD disclosure on pages 26 to 35, including Carbon taxes on page 31.
2. Raw materials supply and pricing
The Group is exposed to security of
supply risks in respect of raw materials,
components and haulage, including
associated cost volatility, due to
(amongst other matters) the consequence
of economic uncertainty, the Russian
invasion of Ukraine, supply interruptions
in China (potentially due to Covid-19), the
relationship between the UK and the EU
post Brexit, fluctuations in the market
price of crude oil and other petroleum
feedstocks, foreign currency exchange
rate movements, and changes to
suppliers’ capacity.
The increased friction and potential for a
trade war or other geopolitical disputes,
including between the US and China, could
destabilise supply chain activity.
Over the longer term, supply chain issues
could be caused by physical or transition
risks of climate change.
Supply chain disruption could lead to
inefficient production and/or distribution
which could adversely affect the Group’s
financial results.
Supply chain constraints could reduce
sales and organic growth, and increased
costs could reduce margins.
Our product development efforts may be
redirected to find alternative materials
and/or components.
–
During the year, the Group has appointed a Group Procurement Director,
undertaken a strategic review of its procurement activities (assisted by
PwC LLP), and generally upweighted its procurement and supplier
relationship management capabilities.
–
The Group benefits from the diversity of its businesses and end markets.
–
The Group utilises sales pricing and purchasing policies, such as dual
sourcing, to mitigate these risks.
–
The Group focuses on supplier relationships, flexible contracts and the use
of hedging instruments to mitigate supply and cost risks.
–
The Group owns and manages a significant proportion of its required
haulage capacity.
–
Significant contracts are reviewed by Group Legal to avoid unfavourable
and/or inflexible terms.
–
Our response to climate change risks and opportunities is described in our
TCFD disclosure on pages 26 to 35, including Supply chain disruption on
page 30 and Increased raw material costs on page 31.
No change
Increased
Decreased
56
Genuit Group plc
Annual Report & Accounts 2022
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Remuneration
Financial Statements
Principal Risks and Uncertainties continued
RISK
POTENTIAL IMPACT
MITIGATIONS
CHANGE IN POTENTIAL
IMPACT AND/OR
PROBABILITY
3. Business disruption
The Group’s manufacturing and distribution
operations could be subjected to disruption
due to incidents including, but not limited to,
fire, failure of equipment, power outages,
workforce strikes, pandemics, or unexpected
or prolonged periods of severe weather.
Over the longer term, business disruption
issues could be caused by physical or
transition risks of climate change.
Such incidents could result in the temporary
cessation in activity, or disruption, at one of
the Group’s production facilities impeding
the ability to deliver its products to its
customers, thereby adversely affecting
the Group’s financial results.
–
The Group has established business continuity, crisis response, and
disaster recovery plans.
–
The Group performs regular maintenance to minimise the risk of
equipment failure.
–
Finished goods holdings across the operations act as a limited buffer
in the event of an operational failure.
–
The Group continually invests in the maintenance and upgrade of IT
infrastructure and information systems which, amongst other matters,
facilitates remote working.
–
The Group maintains sufficient liquidity to meet its liabilities when due
under both normal and stressed conditions.
–
The Group maintains appropriate insurance to cover business interruption
and damage to property from such incidents.
–
Independent insurer inspections take place across all sites to identify and
assess potential hazards and business interruption risks.
–
Our response to climate change risks and opportunities is described in
our TCFD disclosure on pages 26 to 35, including Supply chain disruption
on page 30 and Business interruption and damage to assets on page 31.
4. Reliance on key customers
Some of the Group’s businesses are
dependent on key customers in highly
competitive markets. We may fail to
adequately manage relationships with
these key customers.
Any deterioration in our relationship with
a key customer could lead to a loss of
business thereby adversely affecting the
Group’s financial results.
–
The Group’s strategic objective is to broaden its customer base
wherever possible.
–
The Group focuses on delivering exceptional customer service, which is
constantly monitored, and maintains strong relationships with major
customers through direct engagement at all levels.
–
The Group continually seeks to innovate and develop its brands, products
and services to better meet the needs of its customers.
–
The Group actively manages its customer pricing, rebates and credit
terms to ensure that they remain both competitive and commercial.
These are negotiated and approved by senior management, and
governance procedures are in place to ensure that these are reviewed
by Group Legal, where required.
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Principal Risks and Uncertainties continued
RISK
POTENTIAL IMPACT
MITIGATIONS
CHANGE IN POTENTIAL
IMPACT AND/OR
PROBABILITY
5. Climate change
The increase in frequency, intensity and
impact of weather events such as flooding,
drought and coastal erosion.
The longer-term implications of climate
change give rise to the transition risk to
address the challenges expediently.
Adverse weather events could damage,
disrupt or lead to temporary closure of the
Group’s production and/or office facilities.
Prolonged periods of severe weather could
result in a slowdown in site construction
activity thus reducing demand for the
Group’s products.
Growing stakeholder focus on corporate
action to meet emissions reduction targets
may result in increased reputational risk
and reduced customer and/or employee
loyalty, investor divestment and impacts
to customer activity levels.
All of the above potential impacts could
adversely affect the Group’s financial results.
–
Climate change risk analysis has been developed and associated actions
are being undertaken where relevant.
–
A clearly defined sustainability framework has been developed. A series
of measures, action plans, metrics and targets (described in our TCFD
disclosure on page 35) were adopted to accelerate the Group’s progress.
–
Embedding its sustainability agenda across the workforce is a key focus
for the Group in achieving its objectives. The Group’s products and
services portfolio is focused on addressing the causes and results of
climate change including resilient drainage, climate management
solutions for cleaner air, green urbanisation and low/zero carbon heating.
–
In the event of flooding in the short-term, production of certain products
can be transferred to other sites. In the longer-term, climate change
impact is monitored and, where deemed appropriate, flood defence
systems will be installed.
–
Our response to climate change risks and opportunities is described in our
TCFD disclosure on pages 26 to 35.
6. Recruitment and retention of key personnel
The Group is dependent on attracting and
retaining people with the right skills,
experience and capability as well as the
continued wellbeing and mental health
of our people.
Loss of any key personnel without
adequate and timely replacement, and/or
skills shortages, could disrupt business
operations, increase salary inflation, and
adversely impact the Group’s ability to
profitably implement and deliver its
growth strategy.
–
Remuneration benchmarking of all leadership and critical roles has been
undertaken leading to improved remuneration packages for critical roles.
In addition, a focused salary review has been completed for all factory
floor employees.
–
Monthly tracking of staff turnover and key people indicators is performed.
–
Learning and development programs have continued to be rolled out
across the Group.
–
The Group has a mental health policy and associated training in place,
as well as Employee Assistance and Wellbeing Programs.
–
During the year, the Group has invested in specialist HR roles including a
Group Talent Director and a Group Reward Director; completed detailed
talent assessment and succession reviews for all leadership roles; and
launched Diversity & Inclusion training across the Group.
–
The Group has improved employee communication and engagement
with the implementation of the Workplace by Meta platform.
–
The Group has commenced the implementation of a Group-wide
human capital management system which will enable performance
management, talent management and improve employee engagement
survey capability.
–
A culture program has been launched as part of our new Sustainable
Solutions for Growth strategy.
No change
Increased
Decreased
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POTENTIAL IMPACT
MITIGATIONS
CHANGE IN POTENTIAL
IMPACT AND/OR
PROBABILITY
7. Failure of information systems or cyber breach
The Group is increasingly dependent on
the continued efficient operation of its
information systems and is therefore
vulnerable to potential failures due to
power losses, telecommunication failures,
or from a security breach including the
increasing levels and evolving tactics of
sophisticated cyber criminals targeting
businesses.
Disruption or failure of the information
systems could affect the Group’s ability to
conduct its ongoing operations and/or
result in data loss, which could adversely
affect the Group’s financial results,
reputation and compliance with data
protection regulators.
–
Best-in-class firewalls are in place to protect the perimeter of the Group’s
networks and any off-site access to the Group’s servers and applications
is through secure Virtual Private Network connections.
–
Advanced email and internet traffic filtering intelligence is in place to
protect against potential viruses or malware entering the Group’s
networks. User and server computing devices have anti-virus software
installed to protect from potential infection, together with an out-sourced
managed virus detection and response service.
–
The Group undertakes cyber security risk audits and penetration testing
performed by internal and external specialists, including the expedient
introduction of mitigation controls and other recommended
procedure updates.
–
The Group contracts with several third-party providers to supply off-site
and/or cloud-based, business continuity arrangements for wholesale or
partial recovery of the key servers and applications which are used within
the various Group businesses. These continuity arrangements are subject
to validation and testing.
–
The Group continually invests in the maintenance and upgrade of IT
infrastructure and information systems. All upgrades are carefully
planned and actively managed by senior personnel to minimise
potential business disruption.
–
Employees are subject to continuous awareness training, including that
of cyber risk which was further enhanced during the year.
–
During the year, the Group has also appointed an in-house Information
Security Manager to support the information security strategy and
deployment of new protective technologies, new processes and general
risk management.
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No change
Increased
Decreased
RISK
POTENTIAL IMPACT
MITIGATIONS
CHANGE IN POTENTIAL
IMPACT AND/OR
PROBABILITY
8. Health, Safety and Environmental
The Group is subject to the requirements of
UK and European environmental and
occupational safety and health laws and
regulations, including obligations to take
the correct measures to prevent fatalities
or serious injury, and investigate and clean
up environmental contamination on or
from properties.
Lack of management focus, poor cultural
attitude or failure of the Group to comply
with health, safety and environmental
regulations and other obligations relating
to environmental matters could result in
the Group being liable for fines, suffering
reputational damage, requiring
modification to operations, increasing
manufacturing and delivery costs, and
could result in the suspension or
termination of necessary operational
permits, thereby adversely affecting the
Group’s operations and financial results.
–
The Group has a formal Health, Safety and Environmental policy, and
procedures are in place to monitor compliance with the policy.
–
There is a Group Health, Safety and Environmental Director (with a team
throughout the Group) with clear accountability for health, safety and
environment (‘HSE’). HSE performance is regularly tracked, reported and
reviewed by all levels of management including the Board.
–
The Group performs internal HSE audits and is subject to external
HSE audits.
–
Investigations are performed to identify cause and key learnings.
If employees have failed to adhere to HSE policies, then they may be
subject to disciplinary action. Key messages are constantly reinforced
throughout the Group.
9. Breach of legislation including Data Protection, Competition Law, the Bribery Act and Sanctions Compliance
Failure to comply with elements of a
significantly increased and still evolving
governance, legislative and regulatory
business environment including, but not
limited to, Data Protection Regulation,
Competition Law, the Bribery Act and
Sanctions Compliance.
Significant increases in the penalty regime
across all areas of business could lead to
significant fines and financial penalties in
the event of a breach, alongside damage
to the Group’s reputation and potential
current and future business.
–
The Group’s in-house legal department and other specialist functions,
supported by specialist external advisers, are responsible for monitoring
changes to laws and regulations that affect the Group and ongoing
monitoring and training.
–
Specific policies are in place in respect of Data Protection, Competition
Law, a Code of Ethics (including the Bribery Act) and Sanctions
Compliance.
–
Regular declarations of compliance are undertaken in respect of Data
Protection, Competition Law, the Bribery Act and Sanctions Compliance.
–
All business in higher risk countries requires approval by Group Legal.
A third-party register is used to screen companies and/or individuals
located in, or linked to, sanctioned countries.
–
Training is provided to all relevant new employees on Competition Law,
including those changing roles. The Data Protection policy and associated
training was also further enhanced during the year.
–
The independent third-party Safecall helpline is available to employees.
–
During the year, the Group implemented a data security solution thus
giving it the ability to automatically discover, classify and label sensitive
data; and where necessary remediate potential data exposure and
misconfigurations instantly.
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RISK
POTENTIAL IMPACT
MITIGATIONS
CHANGE IN POTENTIAL
IMPACT AND/OR
PROBABILITY
10. Product failures
The Group manufactures products that are
potentially vital to the safe operation of its
customers’ products or processes.
These products are often incorporated into
the fabric of a building or dwelling or buried
in the ground as part of an infrastructure
system and in each case, it would be
difficult to access, repair, recall or replace
such products.
A product failure or recall could result in a
liability claim for personal injury or other
damage leading to substantial financial
settlements, damage to the Group’s
brands, costs and expenses and diversion
of key management’s attention from the
operation of the Group, which could
all adversely affect the Group’s
financial results.
–
The Group operates comprehensive quality assurance systems and
procedures at each site.
–
Wherever required, the Group obtains certifications over its products to
the relevant national and European standards including Kitemarks, BBAs,
WRCs and WRASs.
–
The Group maintains product liability insurance to cover third-party
claims arising from potential product failures or recalls.
11. Liquidity and funding
The risk that the Group will not be able to
meet its short-term liquidity and long-term
funding financial obligations as they
fall due.
Insufficient cash deposits and/or finance
facilities could result in the Group not being
able to fund its operations.
–
The Group’s approach to managing liquidity is to ensure that it will always
have sufficient liquidity to meet its liabilities when due, under both normal
and stressed conditions, without incurring unacceptable losses or risking
damage to the Group’s reputation.
–
This is achieved through suitable committed and uncommitted banking
facilities with significant headroom, regular communication with the
Group’s investors and relationship banks (including visits to the Group’s
businesses), regular review of its banking covenants and capital structure,
ensuring its future cash flow is sustainable through detailed budgeting
processes and reviews, robust forecasting and budgeting processes, and
ensuring that credit risk arising from cash deposits with banks is mitigated
by investments of surplus funds only being made with banks that have, as
a minimum, a single A-credit rating.
–
During the year, the Group renewed its banking facilities and entered into
a Sustainability-Linked Loan thus increasing the amount and duration of
the Group’s available liquidity.
12. Acquisitions do not perform as expected
The management of acquisitions activity
and their integration play a part in
delivering the Group’s growth strategy and
there is a risk that any acquisition may not
perform as expected.
Ineffective management of acquisitions
could lead to management distraction, a
drain on financial resources, and impact
on the Group’s ability to successfully
implement and deliver its growth strategy.
–
Formal Board level approvals are required in accordance with the Group’s
delegation of authority matrix for any acquisition activity.
–
Full due diligence is performed before any acquisition is made.
–
The Group seeks contractual assurances from the sellers to mitigate
against any identified issues or risks.
–
Where appropriate, the Group will pay deferred consideration linked to the
ongoing performance of the acquisition.
–
The progress of any integration is closely monitored at Board and senior
management team level.
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Principal Risks and Uncertainties continued
Emerging risks
Recycling
As more manufacturers seek to use recycled material and demand for it more generally increases, existing supply may become constrained.
The Group will:
–
diversify suppliers whilst maintaining good quality of supply,
–
continue to monitor price and market behaviour, along with recycling performance, to identify trends early, and
–
consider the strategic acquisition of recyclers.
Counterfeiting
Copycat and/or counterfeit products could erode the Group’s market share and/or product reputation. The Group will:
–
continue to carefully manage its trademarks, patents and licences over its products and challenge any infringements, and
–
enhance existing products with added benefits and patent protection whilst developing a new range of products.
Regulatory
The regulatory environment for construction products is expected to change significantly following the passing of the Building Safety Act and
the establishing of a National Regulator for Construction Products. The Group will:
–
continue to monitor forthcoming regulatory changes via membership of appropriate industry bodies and liaison with the Department for
Levelling Up, Housing and Communities,
–
respond to any regulatory changes in a timely manner to ensure compliance, and
–
develop, enhance and implement internal systems to demonstrate regulatory compliance.
Supply chain
The Group may be affected by changes in regulatory requirements which could potentially have an adverse impact on its supply chain.
The Group will:
–
consider and develop alternative sources of recycled PVC, and
–
consider and develop alternative material to recycled PVC.
Joe Vorih
Chief Executive Officer
14 March 2023
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Governance
64
Governance at a glance
65
Chair’s introduction to Governance
68 Directors and Officers
70
Corporate Governance Report
81
Nomination Committee Report
86 Risk Committee Report
90 Audit Committee Report
96 Directors’ Report
99 Directors’ Responsibilities Statement
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Governance at a glance
Our Board
The Board has eight directors comprising the Chair,
three Executive Directors and four independent
Non-Executive Directors.
Biographies of the Directors are available on pages 68 to 69
and on our website, www.genuitgroup.com.
Board governance framework
Good governance provides the structure to enable the
Board, acting collectively, to fulfil its responsibility to promote
the success of Genuit Group plc and create long-term value
for shareholders.
Genuit Group plc Board
Nomination
Committee
Pages 81 to 85
Risk
Committee
Pages 86 to 89
Audit
Committee
Pages 90 to 95
Remuneration
Committee
Pages 101 to 126
Independent
Non-Executive
Chair
– Kevin Boyd
Executive
Directors
– Joe Vorih (CEO)
– Paul James (CFO)
– Matt Pullen (COO)
Independent
Non-Executive
Directors (NEDs)
– Mark Hammond
– Lisa Scenna
– Louise Brooke-Smith
– Shatish Dasani
Company
Secretary
– Emma Versluys
Board appointments
Joe Vorih was appointed Chief Executive
Officer in February 2022.
Lisa Scenna was appointed Remuneration
Committee Chair in September 2022, and
Senior Independent Director in March
2023.
Kevin Boyd was appointed as Chair of the
Board in November 2022.
Shatish Dasani was appointed as
Non-Executive Director and Audit
Committee Chair in March 2023.
Further information on changes to the
Board can be found in the Nomination
Committee Report on pages 81 to 85.
Diversity and inclusion
A Board education and insight session
took place in August 2022, facilitated by
an external expert which led to individual
commitments and agreement to a
diversity and inclusion ambition, strategy
and three-year delivery plan.
Climate change
The impact of climate change, its related
risks and opportunities and relevant
mitigating actions was a key
consideration for the Board. Read more in
our TCFD Report on pages 26 to 35, and
our Risk Committee Report on page 89.
Employee engagement
The Board prioritised increasing the level
of direct employee engagement, and our
dedicated employee engagement NED
hosted employee feedback sessions
across four of our UK sites. Read more on
page 76 of our Governance Report.
Culture
Foundations were laid during 2022 to
develop an established cultural
framework in 2023, to progress the
Group’s employee value proposition and
support our strategic plans for growth.
Decision-making
The Board has made some significant
decisions this year, including approving
the Group’s refreshed strategy, which
reflects the way in which the Group has
evolved from its heritage in plastic pipes
to become a leading player in sustainable
water and climate management
solutions.
Engagement and consideration of all
material stakeholders as part of this
refresh was a key consideration for the
Board and senior management.
Read more about other key decisions and
engagement with stakeholders in our
Stakeholder Engagement section on
pages 42 to 45.
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Chair’s introduction to Governance
Kevin Boyd, Independent Non-Executive Chair
I am pleased to present my first Governance
Report as Chair of the Company for the year
ended 31 December 2022, following my
appointment as Chair on 1 November 2022.
This Governance Report, as well as the
reports of the Audit, Nomination, Risk and
Remuneration Committees give further
insight into the Board’s activities during the
year, which will enable all stakeholders to
determine the Company’s compliance with
the UK Corporate Governance Code (the
Code). This Report, as well as the Directors’
Remuneration Report, set out in greater detail
how the principles and provisions of the Code
have been applied during the year and how
the Board and its Committees have fulfilled
their responsibilities to ensure high levels of
governance are in place across the Group.
Engaging with our stakeholders is a priority,
and further detail on how we have done this
during 2022 can be found on pages 42 to 45.
The Board strongly believes that good
governance provides the infrastructure to
improve the quality of the Board’s decisions
and enables the more effective creation of
long-term value, and we are therefore
committed to maintaining high standards
of corporate governance during 2023.
In addition to the appointment of Joe Vorih
as Chief Executive Officer in February 2022,
the year has seen further changes to the
Board, with Louise Hardy stepping down from
the Board and as Chair of the Remuneration
Committee in September 2022, and Lisa
Scenna succeeding Louise as Remuneration
Committee Chair as a result. In accordance
with the Code, Ron Marsh, Chair since 2014,
stepped down as Chair of the Board on
1 November 2022, but remained a member of
the Board until 31 December 2022 in order to
effect an orderly handover of the
Chairmanship. As outlined in the Governance
Report on page 70, the Company was
non-compliant with Provision 24 of the
Corporate Governance Code with effect
from 1 November 2022 as a result of the Chair
also serving as Audit Committee Chair.
A clear explanation of the reasons for this has
been provided on page 70, and I am pleased
to confirm that on 1 March 2023, Shatish
Dasani was appointed to the Board as a
Non-Executive Director, and appointed as
Audit Committee Chair with effect from
7 March 2023. Lisa Scenna was also
appointed as Senior Independent Director on
7 March 2023, in anticipation of Mark
Hammond’s retirement in October 2023.
These changes are in line with our succession
planning and recruitment policies to ensure a
diverse Board with a combination of skills and
experience, and I believe that we have a
strong and multi-skilled Board in place with
the necessary motivation and an appropriate
balance of experience.
Enabling
long-term value
Good governance provides the infrastructure
to improve the quality of the Board’s decisions
and enables the more effective creation of
long-term value.
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The Board welcomes the changes to the
Listing Rules in respect of diversity reporting
and, in line with these recommendations, will
include a full disclosure in the 2023 Annual
Report and Accounts.
Our Nomination Committee is continuing to
further develop its succession plans for the
Board and senior management with support
from the Executive Committee and the Chief
People Officer. You can read more about the
work of our Nomination Committee on
pages 81 to 85.
Board evaluation
During the 2022 financial year we undertook
an external evaluation of the Board and
its Committees, in accordance with the
requirements of the Code. The results of this
evaluation were discussed by the Board at
its meeting in March 2023. The evaluation
comprised a detailed questionnaire and
one-to-one interviews, covering a range
of areas, including Board composition and
strengths, roles and responsibilities, vision,
goals and focus of the Board, structure
and functionality, personal effectiveness
and collective effectiveness and ability
to resolve conflicts. The results of the
evaluation concluded that whilst there
were areas where improvements could
be made, overall, the Board and its
Committees continued to operate
efficiently and effectively. Further detail
on the results of the evaluation is set out
on page 79 of this Governance Report.
Culture and purpose
Our colleagues across all our businesses
are focused on ‘Helping Construction
Build Better’ as we bring collaborative and
problem-solving mindsets to the challenges
faced by our customers in improving the
built environment.
Sustainability is at the heart of how we run
our businesses, and we want to ensure we
have the most talented, empowered and
diverse teams focusing on our key objectives
around growth, innovation and addressing
the challenges facing construction.
The Board continues to prioritise setting
the culture from the top, aligning our purpose,
behaviours, and strategy to the culture of
the Group. The Board recognises its
responsibility for shaping, monitoring and
overseeing culture, and recognises that
effective management of this is necessary
to enable the delivery of long-term success
for all stakeholders.
The strategy refresh during the year, as
well as the changes to our organisational
structure, continue to support our culture
and our desire to embed the right behaviours
across the Group. We remain of the view
that decision-making by those people who
are closest to their respective customers
and who are experts in their fields is key to
continuing to respond to our customers’
needs. As a result, the Board understands
the importance of promoting a culture
whereby employees understand the
common Group purpose and strategy, but
also feel empowered to act. We therefore
need to ensure that our governance
structures create sufficient challenge and
debate so we can be confident we continue
to make good decisions for the long-term
success of the Group. You can read more
about the culture of the Group and some
examples of the way in which the Board
encourages and engages within this
Governance Report on page 76.
Chair’s introduction to Governance continued
Board composition and diversity
The composition, size and diversity of the
Board continues to be monitored and during
2022, the Board participated in a diversity and
inclusion workshop at its meeting in August,
further details of which are set out later in
this Report. The Board supports diversity in
the widest sense and acknowledges the
advantages that come from having diverse
viewpoints across the Group’s businesses and
in the decision-making processes at Board
and senior management level. We believe
that our Board is well-balanced and diverse,
with the right mix of skills, experience,
independence and knowledge to allow it
to discharge its duties and responsibilities
effectively and to lead the Group during the
next phase of its strategic development.
I am pleased to report that as at the date
of this Report, the Company has 25% female
representation on its Board, 33% female
representation on its Executive Committee,
and 42% female representation at senior
level (compared with 26% in 2021), being the
Executive Committee and its direct reports.
We are proud of the changes we continue to
make to create a more diverse and inclusive
environment and are committed to
maintaining this diverse approach at all
levels of recruitment. Following Shatish’s
appointment as a Non-Executive Director,
and Lisa’s appointment as Senior
Independent Director, as at the date of this
Report we are compliant with two of the
Listing Rule recommendations.
Section 172 Statement
In accordance with the 2018 UK
Corporate Governance Code and the
Companies Act 2006, the Board, in its
decision-making process, considers
what is most likely to promote the
success of the Company for its
shareholders in the long term, as well as
considering the interests of the Group’s
employees and other stakeholders and
understanding the importance of taking
into account their views. The Board
also considers, and takes seriously, the
Group’s impact on the local communities
within which it operates, as well as
reviewing actions being taken to mitigate
any negative impacts our operations
have on the environment.
Considering this, the Directors have
acted in a way that they considered, in
good faith, to be most likely to promote
the success of the Company for the
benefit of its members as a whole.
The Board’s activities and considerations
in meeting this requirement are covered
in detail in our s172 Statement.
Read more on pages 46 to 48.
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Employee engagement
Following the challenges of the Covid-19
pandemic during 2020 and 2021, the Board
was keen to increase and improve direct
engagement with employees in 2022 and
seek further opportunities to hear employees’
views and consider those views in its
decision-making. You can read more about
the employee engagement programme
during 2022 and some of the actions taken
on page 76 of this Governance Report.
In addition to employee engagement more
generally, there was also regular interaction
during the year between the Board and
members of the senior management teams
across the Group through site visits,
presentations, Board and Committee
meetings and the annual strategy day.
Chair’s introduction to Governance continued
Looking at 2023 and beyond
During 2023, we will continue to address
the challenges caused by climate change
and urbanisation by developing and
producing sustainable solutions, focusing
on our sustainability framework and its
growth drivers, trends and opportunities.
We will continue to foster a culture across
our businesses that result in the right
decisions and actions to promote the
success of the Group for the long-term, and
for the benefit of our members as a whole;
whilst holding ourselves accountable against
our sustainability targets and raising the
bar for sustainability to promote the
generation of smarter and more sustainable
policies and practices across our industry.
Working together, we will make the built
environment more sustainable for
generations to come, whilst maintaining a
robust governance structure which continues
to address and understand the needs of all
our stakeholders.
As always, we welcome questions or
comments from shareholders either via our
website or in person at the Annual General
Meeting (AGM) scheduled to be held at
Genuit Group’s offices in Leeds at 4 Victoria
Place, Holbeck, LS11 5AE on 18 May 2023.
Kevin Boyd
Independent Non-Executive Chair
14 March 2023
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Directors and Officers
Committees
In addition to the Genuit
Group plc Board, there
are four Committees:
Audit Committee
A
Nomination Committee
N
Remuneration Committee
R
Risk Committee
RI
Chair of Committee
Kevin Boyd
Chair
Appointed:
22 September 2020
Experience:
Kevin Boyd has extensive
listed plc experience in the engineering
and manufacturing sectors, bringing a
strong combination of financial,
strategic and multi-organisational
expertise to the Board. He was previously
the Chief Financial Officer of global
engineering group Spirax-Sarco
Engineering plc and prior to that Chief
Financial Officer of Oxford Instruments
plc and Radstone Technology plc.
Kevin has a BEng from Queens’s
University Belfast, is a Chartered
Engineer, a Chartered Accountant and
a Fellow of the Institute of Chartered
Accountants in England and Wales
and the Institution of Engineering
and Technology. Kevin was appointed
Chair of the Board on 1 November 2022.
External appointments:
Non-Executive
Director and the Audit Committee Chair
of EMIS Group plc and a Non-Executive
Director of Bodycote plc.
Joe Vorih
Chief Executive Office
r
Appointed:
28 February 2022
Experience:
Joe joined Genuit from
Spectris plc, a FTSE 250 company, where
he was president of HBK, a standalone
division and key platform business within
the Group from January 2019, having
joined Spectris in 2016. Prior to that, he
worked for Clarcor Corporation, a NYSE
listed business delivering filtration
solutions and Danaher Corporation, also
a US listed global business in industrial,
test and medical equipment. He has a
Bachelor of Science and a Master of
Science in Mechanical Engineering
from the Massachusetts Institute
of Technology.
External appointments:
Director of
Muth Mirror Systems, LLC. and Rocky
Neck Partners, LLC.
Paul James
Chief
Financial
Officer
Appointed:
5 March 2018
Experience:
Before joining Genuit, Paul
served as Group Financial Controller of
Dixons Carphone plc, and prior to this
role held the position of Group Financial
Controller and Treasury Director of
Inchcape plc and senior financial
positions at British American Tobacco
plc in the United Kingdom, the
Netherlands and Russia. He is a Fellow of
the Institute of Chartered Accountants in
England and Wales and has a Bachelor
of Science in Civil Engineering and an
MBA from Edinburgh University.
External appointments:
None.
A
N
RI
RI
R
A
R
RI
Matt Pullen
Chief Operating Officer
Appointed:
1 November 2021
Experience:
Before joining the Group,
Matt was Managing Director of British
Gypsum, a part of the Saint-Gobain
Group, based in the UK. Prior to that, he
worked for AkzoNobel for eight years
undertaking various commercial and
leadership roles of increasing seniority in
the UK, Ireland and Northern Europe with
his last role as Managing Director, UK &
Ireland. Prior to that Matt held various
operational roles within the FMCG sector.
External appointments:
Trustee of the
Construction Industry charity CRASH
and an Industrial Cadets Ambassador.
N
Lisa Scenna
Senior Independent Director
Appointed:
24 September 2019
Experience:
Lisa Scenna has over 20
years’ business experience working at
executive director level in large private
and publicly listed multinational
corporations with a strong background
in strategic and financial business
change, with her most recent executive
role being with the Morgan Sindall Group
as Managing Director of MS Investments.
Prior to this, she held executive roles with
Laing O’Rourke, Stockland Group and
Westfield Group in Australia. Lisa has
a Bachelor of Commerce from the
University of NSW, and is a member of
the Australian Institute of Company
Directors and the Institute of Chartered
Accountants in Australia. Lisa was
appointed as Senior Independent
Director on 7 March 2023.
External appointments:
Non-Executive
Director of Cromwell Property Group,
an Australian listed company and
Non-Executive Director of Harworth
Group plc.
68
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Governance
Remuneration
Genuit Group plc
Annual Report & Accounts 2022
Financial Statements
Shatish Dasani
Non-Executive Director
Appointed:
1 March 2023
Experience:
Shatish Dasani is an
experienced former FTSE Chief Financial
Officer and current Audit Committee
Chair of UK publicly listed companies,
with a career in financial roles spanning
over 30 years. He was previously Chief
Financial Officer of TT Electronics plc, a
global manufacturer of electronic
components and Forterra plc, a
manufacturer of building products for
the UK construction industry. Shatish was
previously Non-Executive Director of
Camelot Group plc and Network Rail, and
his historic and current experience within
the construction industry, manufacturing,
and engineering sectors as well as
experience in the financial sector brings
further invaluable knowledge, experience
and skills to the Board.
External appointments:
Senior
Independent Director and Chair of the
Audit & Risk Committee of Renew
Holdings plc, and Non-Executive Director
and Audit & Risk Committee Chair of SIG
plc and Speedy Hire plc. He is also a
Trustee and Board Chair at UNICEF UK,
the children’s charity.
Mark Hammond
Non-Executive Director
Appointed:
16 April 2014
Experience:
Mark Hammond’s executive
career spanned over 25 years in banking
and private equity, most recently as
Deputy Managing Partner of Caird
Capital LLP at the time it led the IPO of
Genuit in 2014. He has been a member of
the Institute of Chartered Accountants of
Scotland since 1991 and was previously a
Director of David Lloyd Leisure Limited
and Tuffnell Parcels Express.
External appointments:
Chair of DX
(Group) plc, Chair of Governors of
Beechwood Park School and a Director
of Chaffin Holdings Limited.
A
N
R
N
A
R
R
N
A
RI
Directors and Officers continued
Louise Brooke-Smith
Non-Executive Director
Appointed:
24 September 2019
Experience:
Louise Brooke-Smith has
extensive expertise in the property,
construction and infrastructure
industries, being an experienced
property and planning adviser, past
Global President of the Royal Institution
of Chartered Surveyors and member of
the Royal Town Planning Institute.
She was formerly a partner at Arcadis
LLP. Louise holds a Bachelor of Science
from Sheffield Hallam University and an
honorary doctorate, and is a Freeman of
the City of London. Louise is our
nominated employee engagement NED.
External appointments:
Development
and Strategic Planning Adviser for
Consilio Strategic Consultancy Limited,
Governing Board member of
Birmingham City University, Chair of the
Board of All We Can (International Relief
& Development Agency), a regional
Board member of the CBI, and a Board
Trustee of The Land Trust and a Trustee
of Birmingham Museum & Art Gallery.
Emma Versluys
Group Legal Counsel and
Company Secretary
Appointed:
28 June 2017
Experience:
Emma Versluys is our Group
Legal Counsel and Company Secretary
and is Secretary to the Board and three
of its Committees. Before joining Genuit,
Emma was Deputy Company Secretary
at Provident Financial plc, and has also
held company secretarial roles at Serco
plc and Alliance UniChem plc. She is an
Associate of The Chartered Governance
Institute and is also a solicitor. Emma is a
member of the Executive Committee
and the Risk Committee.
Executive Committee
members
RI
Clare Taylor
Clare is our Chief People Officer.
She is a member of the Executive
Committee and the Risk Committee.
RI
Martin Gisbourne
Martin is our Group Strategy and
Marketing Director. He is a member
of the Executive Committee and the
Risk Committee.
69
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Strategic Report
Governance
Remuneration
Financial Statements
This statement outlines the processes the
Company has followed throughout the year
to comply with the UK Corporate Governance
Code (the Code) and demonstrates
compliance with each provision.
Maintaining the highest standards of
governance is integral to the successful
delivery of our strategy, and the Board is
committed to ensuring that these standards
are continually met.
This Corporate Governance Report (Report),
which is also available on the Company’s
website, explains key features of the
Company’s governance structure and aims
to provide a greater understanding of how
the principles of the Code, published in July
2018 by the Financial Reporting Council (FRC),
have been applied and the areas of focus
during the year. The Code can be found on
the FRC’s website at www.frc.org.uk.
The Board believes that good corporate
governance is the key to providing
confidence to stakeholders in the reliability
and future performance of the Company,
in the execution of its strategy. The Board
deems good governance as essential for the
long-term sustainable success of the
Company. During the year, the Board kept
under review the governance structures of
the Group and ensured that any decisions
taken in respect of this were done so
following adequate consideration and
discussions by the Board as a whole. It is a
priority of the Board to maintain compliance
with the Code at all times. In accordance with
the Listing Rules of the Financial Conduct
Authority, the Company has been compliant
during the year with the Principles and
Provisions set out in the Code, with the
exception of Provision 24. Kevin Boyd
(previously Audit Committee Chair) was
appointed as Chair of the Board on
1 November 2022, in anticipation of Ron
Marsh’s retirement from the Board given
his eight-year tenure.
The Board recognised the need to appoint
a successor to Kevin as Chair of the Audit
Committee following his appointment as
Chair of the Board to ensure it complied with
Provision 24 of the Code, but it was deemed
appropriate and necessary to prioritise a
smooth handover between the incumbent
and incoming Board Chairs. It was therefore
agreed that Kevin would also remain in his
post as Audit Committee Chair in the interim
whilst a suitable candidate was identified,
a process which was expedited by the
Nomination Committee during Q3 2022.
The Company confirms that it is now
compliant with Provision 24, following Shatish
Dasani’s appointment to the Board as a
Non-Executive Director on 1 March 2023, and
as Chair of the Audit Committee with effect
from 7 March 2023.
The Report also includes items required by
the FCA’s Disclosure Guidance and
Transparency Rules. The Board has ultimate
responsibility for the approval of the Annual
Report and Accounts. It has considered the
content of the Annual Report and Accounts
and confirms that, taken as a whole, it is fair,
balanced and understandable and provides
the necessary information for shareholders
to assess the Company’s position and
performance, business model and strategy.
Further detail on the process followed to
make this assessment can be found on
page 93. The following table sets out where
stakeholders are able to obtain further details
within the Annual Report to evaluate how
the Company has applied the principles
of the Code.
Corporate Governance Statement
Kevin Boyd
Chair of the Board
Good corporate governance
is the key to providing
confidence to stakeholders
in the reliability and future
performance of the Company.
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Remuneration
Financial Statements
Corporate Governance Statement continued
Compliance with the UK Corporate Governance Code (the Code)
Section 1: Board leadership and company purpose
63 to 80
A
Effective and entrepreneurial board to promote the long-term sustainable success of
the company, generating value for shareholders and contributing to wider society
B
Purpose, values and strategy with alignment to culture
C
Resources for the company to meet its objectives and measure performance.
Controls framework for management and assessment of risks
D
Effective engagement with shareholders and stakeholders
E
Consistency of workforce policies and practices to support long-term
sustainable success
Culture
75
Risk framework
55
Stakeholder engagement
42 to 45
Section 2: Division of responsibilities
72 to 73
F
Leadership of board by chair
G
Board composition and responsibilities
H
Role of non-executive directors
I
Company secretary, policies, processes, information, time and resources
Directors’ biographies
68 to 69
Roles and responsibilities
73
Section 3: Composition, succession and evaluation
77 to 85
J
Board appointments and succession plans for board and senior management and
promotion of diversity
K
Skills, experience and knowledge of board and length of service of board as a whole
L
Annual evaluation of board and directors and demonstration of whether each
director continues to contribute effectively
Board evaluation
79
Diversity
85
Succession planning
83
Section 4: Audit, risk and internal controls
90 to 95
M
Independence and effectiveness of internal and external audit functions and integrity
of financial and narrative statements
N
Fair, balanced and understandable assessment of the company’s position and
prospects
O
Risk management and internal control framework and principal risks company is
willing to take to achieve its long-term objectives
Effectiveness of external auditor
94
Fair, balanced, understandable
93
Risk management
88 to 89
Internal control framework
94
Section 5: Remuneration
100 to 126
P
Remuneration policies and practices to support strategy and promote long-term
sustainable success with executive remuneration aligned to company purpose and
values
Q
Procedure for executive remuneration, director and senior management
remuneration
R
Authorisation of remuneration outcomes
Remuneration Policy
105 to 113
Remuneration Report
114 to 126
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Genuit Group plc
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Strategic Report
Governance
Remuneration
Financial Statements
Corporate Governance Report continued
The Board
The primary role of the Board is to lead
and steer the Group in such a way that
ensures long-term sustainable success
in accordance with its strategic goals and
purpose, setting its culture and expected
behaviours from the top. It has collective
responsibility for this and is accountable to
the Company’s shareholders, as well as
representing the interests of all material
stakeholders. It takes the lead in establishing
the Company’s purpose, values, strategy,
financial policy and ensuring that a sound
system of internal control and adequate risk
management is maintained.
1
.
Strategy and management
–
Receive and approve long-term objectives
and strategic direction of the Group
–
Approve the Group’s risk management policies
and appetite
–
Have oversight of the Group’s operations
ensuring effective and prudent management,
ensuring a sound internal control framework
and risk management system is maintained
–
Approve the commencement of any major new
business activity, including acquisitions or
capital projects
–
Assess and monitor culture across the Group,
ensuring that policy, practices and behaviours
are aligned with its purpose, values and
strategy
–
Take action to identify and manage conflicts of
interest and ensure that third party influence
does not compromise or override independent
judgement
2.
Financial reporting
–
Approve annual budgets, the dividend policy,
annual and half-yearly accounts, accounting
policies and monetary limits
–
Approve the issue of shares or of securities
conferring rights of subscription for or
conversion into shares in the Company
–
Ensure formal and transparent policies and
procedures are in place to ensure the
independence and effectiveness of internal
and external audit functions
3.
Capital structure and borrowings
–
Approve the granting of security over any
Group asset
–
Review any liabilities of materiality, such as
credit notes, stock write offs or guarantees
–
Review the policy for the financing of the Group
4.
Legal, administration and pensions
–
Approve the overall levels of insurance for the
Group, including Directors and Officers
insurance
–
Review and approve the commencement
or settlement of any major litigation
6.
Board and corporate governance
arrangements
–
Review and monitor Group corporate
governance arrangements at Board level and
senior management level as appropriate
–
Approve conflicts of interest where permitted
by the Company’s Articles of Association
–
Oversee the operation of the Company’s share
option schemes as recommended by the
Remuneration Committee
5.
Communications with shareholders
–
Responsible for ensuring satisfactory dialogue
with shareholders
–
Review and approve shareholder
communications in respect of circulars and
other relevant communications concerning
matters decided by the Board
The 2018 FRC Guidance on Board
Effectiveness provides that the Board should
ensure there is a formal Schedule of Matters
reserved for the Board to assist with planning
and provide clarity over where responsibility
for decision-making lies. The Board may
appoint committees as it thinks fit to exercise
certain of its powers. Specific areas of
delegation are set out in the Terms of
Reference for the Committees, as outlined
further in this Report, as recommended by
the Code. While the Board may make use of
committees to assist with its consideration of
appointments, succession, audit, risk and
remuneration, in accordance with the Code
and the FRC Guidance, it retains responsibility
for, and endorses, final decisions in all of
these areas for the Group. The Schedule of
Matters sets out those powers reserved for
Leading
by example
the Board, in accordance with the Code.
These were reviewed during the year to
ensure they continue to reflect corporate
governance requirements and any updated
governance structures in place across the
Group. The Schedule of Matters includes, but
is not limited to, the matters set out below.
The Board delegates the responsibility for
implementing the Group’s business model and
for the day-to-day operational management
of the Group to the Chief Executive Officer
(CEO) supported by the Executive Committee
comprising the Chief Financial Officer (CFO),
the Chief Operating Officer (COO), the Group
Strategy and Marketing Director, the Chief
People Officer and the Group Legal Counsel and
Company Secretary. The Executive Committee
is supported by the senior management team.
The Board has direct access to the Company
Secretary, who is responsible to the Board for
ensuring that Board procedures are complied
with and that the Board has full and timely
access to relevant information.
The Board may take independent professional
advice in the furtherance of its duties, if
necessary, at the Company’s expense.
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Remuneration
Financial Statements
Corporate Governance Report continued
Board and Committees
To ensure it discharges its duties effectively,
the Board has delegated other specific
responsibilities to its principal committees:
the Audit, Nomination, Remuneration and
Risk Committees. Each Committee’s
responsibilities are clearly defined within their
own Terms of Reference. These Terms of
Reference are reviewed every year and
updated as necessary to reflect legislative
changes and best practice and to ensure
individual and collective Committees’
efficiency and effectiveness is maintained.
The Terms of Reference for each Committee
are available on the Company’s website.
The Committees carry out their required
duties and make recommendations to the
Board for approval. Each Committee Chair
provides an update to the Board on the key
discussions and decisions made at the
preceding Committee meeting. This allows
the Board to make reasoned decisions,
and if required, take appropriate actions.
Each Committee has reported on its
contribution to the Board’s decision-making
during the year, details of which can be
found later in this Report. Biographies of the
Chairs of each of the Board Committees,
as well as all other Directors, are set out
on pages 68 and 69.
The Board
Board Committees
Group Executive
Committee
Executive
Management Team
Chair
–
Provides overall leadership and governance
–
Sets the Board agenda
–
Promotes a culture of openness, challenge
and constructive debate
–
Ensures Directors understand the views of major
shareholders and stakeholders
Chief Executive Officer
–
Executive management of the Group’s business
–
Develops and implements Group strategy and
commercial objectives
–
Leads senior management team in effecting
decisions of the Board
–
Communicates with the Board, shareholders,
employees and other stakeholders
Executive Directors
–
The CFO implements, manages and controls the
Group’s financial-related activities, including the
development of appropriate financial strategies
and the management of investor relations
–
The COO is responsible for the effective and
efficient management of operations across
the Group
Non-Executive Directors
–
Scrutinise and constructively challenge the
performance of Executive Directors and
contribute to setting strategy, succession plans
and remuneration strategy
–
The Senior Independent Director acts as a
sounding board for the Chair, appraises their
performance, leads the other NEDs, and is a direct
contact for shareholders if necessary
Company Secretary
–
Provides advice to the Board on all governance
and legal-related matters, as well as advising
Directors on their duties
–
Assists with all Board and shareholder meetings
and related paperwork
–
Facilitates induction and training programmes
for Directors
Audit Committee
–
Overseeing financial reporting
–
Internal control systems
–
Internal and external audit functions
Nomination Committee
–
Reviewing structure, size and composition
of the Board and its Committees
–
Board succession planning
–
Determining the skills and characteristics
needed in Board candidates to ensure a
diverse skill set
–
Considering stakeholder perspectives
when deciding on recruitment processes
and selection criteria
Remuneration Committee
–
Setting remuneration policy for
Executive Directors
–
Operating the Company’s share
incentive arrangements
–
Senior management remuneration
–
Oversight of remuneration-related policies
Risk Committee
–
Setting the risk appetite, risk tolerance and
risk strategy of the Group
–
Reviewing and reporting on risk management,
principal risks and uncertainties and emerging
risks
–
Overseeing and implementing internal risk
controls and risk management systems
Responsible for:
–
Manage investor relations
(investors, analysts, media)
–
Report to and manage
communication with and escalation
to the Board
–
Manage corporate governance,
compliance and risk
Responsible for:
–
Develop and execute
Group strategy
–
Allocate resources and resolve
conflicts across the Business Units
–
Oversee Group-wide initiatives and
synergies, including transparent
understanding and agreement on
Group functions’ roles and remits
INFORMING
REPORTING
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Remuneration
Financial Statements
Corporate Governance Report continued
Board meetings
In total, there were 11 Board meetings held
during the year to discuss and review
progress on issues affecting the Group.
A number of Committee meetings were also
held during the year. Details of attendance at
Board and Committee meetings are shown
in the table below.
As the table demonstrates, every effort is
made to ensure that all Directors, where
possible, attend scheduled Board meetings.
However, in the event that a Director is
unable to attend a meeting, they are
nevertheless provided with the meeting
papers and information relating to the
meeting and are able to discuss the issues
arising with the Chair and other Directors.
Agendas are drafted in line with the Schedule
of Matters reserved for the Board, to ensure it
remains compliant with its obligations
throughout the year.
Senior management from across the Group
as well as external advisers, attend some of
the meetings for discussion of specific items
in greater depth, and to provide training
and updates.
In order to provide the Board with greater
visibility of the Group’s operations and to
provide further opportunities to meet senior
management, the Board will usually visit the
Group’s numerous businesses on a rolling
basis each year. These visits allow the Board
to engage directly with employees, as a
supplement to the structured employee
engagement forums that take place with the
dedicated Non-Executive Director (further
detail on the formal employee engagement
forums can be found later in this Report on
page 76). It allows the Board members to
have direct insight into the daily operations
across the Group at site level. Board dinners
are held ahead of the scheduled meetings
Board site visits
The Board held meetings at different
sites during the year, which included
visits to Nu-Heat, Adey, Polypipe
Building Products, Group’s Head Office
in Leeds and for the first time, Plura
Innovations; which is located in
Moreton on the Wirral. These visits
usually consist of a management
presentation and site tour followed by
an informal dinner, which provide a
more relaxed forum for the Board
members to directly engage with the
site management teams. The meeting
in September 2022 at Plura Innovations
also included a separate strategy
update session for the Non-Executive
Directors, which was hosted by Martin
Gisbourne and Joe Vorih.
BOARD AND COMMITTEE ATTENDANCE
DURING 2022
Board
Attendance
Audit
Committee
Attendance
Nomination
Committee
Attendance
Remuneration
Committee
Attendance
Risk
Committee
Attendance
Ron Marsh
1
11/11
–
4/4
4/4
–
Martin Payne
2
1/1
–
–
–
1/2
Joe Vorih
3
10/10
–
5/5
–
1/2
Mark Hammond
11/11
3/3
5/5
4/4
–
Paul James
11/11
–
–
–
4/4
Matt Pullen
10/11
–
–
–
3/4
Louise Hardy
4
7/7
2/2
2/2
2/2
–
Lisa Scenna
11/11
3/3
5/5
4/4
–
Louise Brooke-Smith
10/11
3/3
5/5
4/4
–
Kevin Boyd
11/11
3/3
3/3
4/4
–
1.
In accordance with Provision 17, Ron Marsh did not attend the Committee meeting regarding the appointment of his successor,
and Kevin Boyd did not attend the meetings which considered and approved his appointment as Chair.
2.
Stepped down from the Board on 28 February 2022.
3.
Joined the Board on 28 February 2022.
4.
Stepped down from the Board on 30 September 2022.
where possible, to provide a more relaxed
forum for the Board members to have
additional discussions amongst themselves,
as well as with the senior management team
from that location. This enables the Board to
partake in informal discussions outside of the
Board meeting itself, which in turn enables a
greater understanding of the culture across
the Group. The Board visited five different
sites during 2022, these being the Polypipe
Building Products site in Doncaster, the
Nu-Heat site in Devon, the Adey site in
Cheltenham, the Plura site in the Wirral
and Head office in Leeds.
Every year the Board holds an annual
strategy day, where it spends a full day with
senior management to discuss current
performance of the Group and the strategic
plan. The strategy day during 2022 was held
in October and was structured as an
interactive strategy session prior to the Board
meeting as a presentation and Q&A forum,
enabling engagement and opportunity for
sufficient challenge from the Board on
different elements of the strategy, and
suitable focus to be given to specific details.
It was further discussed in the Board
meeting held later that day as a
standalone agenda item.
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Financial Statements
Corporate Governance Report continued
Developing a culture which
is consistent and in line with
the Company’s purpose
is key for the Group to fulfil
its growth potential.
Investing in our
people and culture
The Board recognises that our
greatest asset for enabling the Group’s
achievement of its strategic goals is
its people. Developing a culture which
is consistent and in line with the Company’s
purpose is key for the Group to fulfil its
growth potential, and monitoring and
maintaining that culture as a consistent tool
for driving change is a priority for the Board.
Monitoring culture is essential for the Board
to ensure that across the Group, employees
are operating in an effective and ethical
manner and working together to enable it
to achieve its long-term goals. A positive
culture also helps to attract and retain
talent and the Board receives an update at
each meeting in respect of its people, which
includes both qualitative and quantitative
methods, as follows:
–
Employee turnover and current headcount
–
D&I data
–
Grievances, governance and
legal matters
–
Policy training updates
–
Recent internal communications
and engagement activity
–
Talent and development, including
talent acquisition and retention
–
Absence statistics
–
Progress towards achieving The 5% Club
–
Reasons for leaving
–
Leadership development
–
Reward, remuneration and incentives
–
Strategic projects
During 2022, foundations were laid to
develop an established cultural framework
in 2023, with the intention of progressing the
Group’s employee value proposition and
supporting our strategic plans for growth.
The cultural framework will encompass
the overall purpose of the Group, linking
it directly to its strategy, key behaviours
which enable that purpose and strategy,
and further plans to embed these
across all people processes, including
recruitment, performance management
and leadership development.
Establishing an open and transparent
culture across the Group as well as
fostering and maintaining a culture which
is responsive to stakeholder expectations
and the external environment will continue
to be a priority for the Board. As we grow,
collaborate, create solutions and innovate,
we recognise that collaboration with a
common purpose will make a difference
to achievement of our strategic goals.
This enabled the Board to take time to reflect
prior to approving the strategy in the Board
meeting, complementing the direct feedback
and questions within the strategy session
itself. An informal dinner was also held
thereafter to discuss and reflect on the
discussions during the day in a more informal
environment. The Board agreed that the
refreshed strategy was of benefit to all
material stakeholders for the long-term
sustainable success of the Group, and the
Board approved the strategy in advance of
the Capital Markets Day which was held in
November 2022. Further details on the Capital
Markets Day can be found in our Strategic
Report on page 44.
During the year, the Chair held regular
meetings with the Non-Executive Directors
without the Executive Directors present.
The Chair’s performance was assessed as
part of the external evaluation conducted by
Better Boards. Further detail on the results of
the external Board evaluation can be found
in this Report on page 79.
75
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Remuneration
Financial Statements
Corporate Governance Report continued
Direct employee engagement is one of the
key methods to ensuring a unified culture
exists across the Group. The appointment
of a dedicated employee engagement
Non-Executive Director means there is a
consistent mechanism in place for employee
views to be shared, discussed and
considered by the Board in its strategic
decision-making. During 2022, employee
feedback sessions were held across four
sites as part of the Genuit Group Employee
Engagement Programme, with Louise
Brooke-Smith, as the dedicated
Non-Executive Director for employee
engagement, hosting each session.
Each session was structured to cover five
key topics, being; strategy and vision,
communication, diversity and inclusion,
health and safety and governance.
Each session provided an overview of the
objective of the programme and invited
employees to share their views confidentially.
The views of employees within each category
were summarised collectively, as well as
being shared on a site-by-site basis with the
Board, so that gaps which existed across the
Group, could be separated from those which
required further intervention at site level.
It was clear that employees felt that
information on the capabilities and linkage
between businesses remained important to
them to help build a sense of being part of a
wider Group. All employees agreed that
understanding the wider organisation and
continuing to improve interaction with their
peers across the businesses would continue
to provide opportunities to share knowledge,
identify synergies and continue to build a
Genuit Group sense of belonging over and
above their individual business. Employees all
felt a sense of pride in their respective
businesses and acknowledged the renewed
focus on diversity and inclusion, confirming
that they felt everyone had equal opportunities
across the Group. Participants who were
part of minority groups expressed that they
had always felt included and respected by
their teams. Overall, the teams felt from a
D&I perspective, the workforce was a
representation of the area in which the
business operated.
Alongside this positive feedback, areas for
improvement were identified within each
category. These are summarised in the table
shown, with the corresponding actions taken
to mitigate and improve these over the
course of 2023:
Employee
engagement
CATEGORY
ACTION
Strategy and Vision
Some difficulties identifying
with the Genuit Group following
the rebrand from Polypipe
Group in 2021.
A refreshed strategy for the Group was launched in
November 2022 (further details in our Strategic Report on
pages 2 to 18). Strategy leadership workshops were held
in January 2023 which included leaders across all areas
of the Group to realise the pathways for working toward
achieving these strategic goals, further embedding and
communicating the strategic direction of Genuit
throughout the Group at all levels.
Communication
Ensure frequency of
communication is consistent
at all businesses across
the Group.
The Board approved the Workday HRIS system and
Workplace by Meta communications platform, to enable
consistent and wide-reaching Group communications.
Workplace is now in place across the Group and
accessible by all employees, and Workday will be
launched during 2023.
Diversity & Inclusion
Expressed that gender balance
has improved over recent
years but recognised that
more could be done.
‘Embrace equity’ campaign being rolled out across the
Group during 2023, with D&I Leadership Training sessions
and commitments having taken place during 2022 to
raise awareness of D&I in the workplace.
Health and Safety
It was noted that visibility
and focus on HSE could be
further improved.
We have refreshed and restructured agreed HSE
consultation and observational tours. The observations
have focused on key areas within operational sites, with
actions and projects to drive improvements. These are
formally and closely monitored, and learnings shared
with the local management teams and cascaded across
the Group where appropriate.
Governance
Raise awareness of other
policies and procedures that
may not be directly relevant
to an individual’s role.
A policies and procedures working group was established
to ensure policies and their relevance are effectively
communicated to all employees.
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Driving
Genuit forward
Corporate Governance Report continued
As part of the appointment process, Directors
are assessed on their skills, experience,
and independence, which is reviewed
on an annual basis in line with the skills
matrix, their roles on the Board and Provision
10 of the Code. The Board considered the
Chair and all the Non-Executive Directors
to be independent throughout the period
(or where applicable, from appointment).
In accordance with Code Provision 18, all
of the Directors are subject to annual
re-election. Shatish Dasani was appointed
on 1 March 2023 and will offer himself for
election at the 2023 AGM and for re-election
annually thereafter.
Separation of the roles of Chair and Chief
Executive Officer
The Company recognises Principle F of the
Code which outlines the responsibility of
the Chair and their accountability for
directing the Company. Objective judgement
is paramount, and thus the roles and
responsibilities of the Chair and the Chief
Executive Officer (CEO) are separate and
clearly defined, with a distinct division of
responsibilities. This distinguishes
management authority from Board authority,
which in turn empowers the Chair and CEO
to pursue their respective duties without
concern that interests in one position might
negatively influence the other.
It is the Chair’s duty to provide overall
leadership and governance of the Board and
to ensure that the Company is run in the best
interests of its shareholders. Part of this role
includes setting the Board agendas, ensuring
that adequate time is available for discussion
of all agenda items and promoting a culture
of openness, challenge and debate at Board
meetings. Along with other members of the
Board, the Chair also has a role in setting the
Company’s strategic direction, making key
decisions about mergers and acquisitions,
capital raises and other important matters.
Supported by the Company Secretary, the
Chair keeps under review; the adequacy
of the training received by all Directors,
particularly on stakeholder-related matters,
the induction received by new Directors,
especially those without previous Board
experience, and ensures the Board is
provided with accurate and timely
information – as well as determining how
best to ensure that the Board’s
decision-making processes give sufficient
consideration to material stakeholders.
The CEO is responsible for executive
management of the Group’s business,
consistent with the strategy and commercial
objectives agreed by the Board and its
overall performance. The CEO leads the
senior management team in effecting
decisions of the Board and its Committees
and is accountable to the Board, and
ultimately the shareholders. The CEO is also
responsible for the maintenance and
protection of the reputation of the Group,
ensuring that the affairs of the Group are
conducted with the highest standards of
integrity, probity and corporate governance.
They are also responsible for communicating
the Company’s vision and performance to
shareholders and other stakeholders, and for
building and managing a strong executive
management team.
Whilst the roles of the Chair and CEO are
separate, the partnership between both is
based on mutual trust and facilitated by
regular contact between them. This strong
partnership and regular communication
ensures that the Company’s strategic
direction is aligned with the expectations
of the Board and shareholders. It also helps
to ensure that there is clear communication
and coordination between the Board and
executive management, which in turn avoids
any potential conflicts or misunderstandings
that could negatively impact the
performance of the Group. It fosters a
positive and productive culture within the
Company, which contributes to retaining
top talent and maintaining good morale
amongst employees. This separation
of authority enhances the independent
oversight of the executive management
by the Board and helps to ensure that
no one individual on the Board has
unfettered authority.
Board composition, qualification
and experience
A successful Board is one which has a
combination of skills, experience and
knowledge; allowing all Directors to actively
contribute to discussions and provide
challenge where appropriate. At the year
end, the Board comprised the independent
Non-Executive Chair, three Executive Directors
and three Non-Executive Directors. Ron Marsh,
the previous Chair, retired from the Board
on 31 December 2022. The Non-Executive
Directors were appointed for the diversity
of their backgrounds as well as their
personal attributes and experience.
During 2022 a review was conducted on the
current skills of the Board and an updated
matrix of those skills was presented to the
Nomination Committee for review and
approval as part of its succession planning
considerations during the year. People and
culture, ESG and developing technological
skills were identified as emerging skills that
should be given greater focus. These skills,
along with all other required and expected
skills of Board members, will continue to be
reviewed on a regular basis and will be
considered by the Board and Nomination
Committee in all recruitment and succession
planning decisions going forward. The skills
matrix also places focus on the diversity
of the Board and is a useful tool to identify
where further training or education is
required for individual Directors as well
as the Board, collectively. The Nomination
Committee and the Board have
considered the independence of each
of the Non-Executive Directors.
Board skills and experience
The Board uses a skills matrix to identify the
balance of skills, knowledge and experience
of the Board, for its composition review and
succession planning. The matrix highlights
where the skills and experience of Directors
are particularly strong, and where there are
opportunities to further enhance the Board’s
collective knowledge. A high-level summary
of the Board skills matrix as at 31 December
2022 is included below.
BOARD SKILLS MATRIX
(NO. OF MEMBERS)
Recent and relevant
financial experience
Competence relevant to the sector
in which the Company operates
Listed Executive Director/Non-Executive
Director experience
Legal and governance
Financial governance
Managing Investor relations
M&A
International experience
ESG
Developing technological capability
People and culture
4
7
7
7
7
7
7
6
6
6
6
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Corporate Governance Report continued
Role of the Senior Independent Director
Lisa Scenna was appointed Senior
Independent Director (SID) of the Company
on 7 March 2023. She is available to
shareholders and other stakeholders if they
have concerns that cannot be addressed
through normal channels. The role of the SID
is to provide an independent perspective on
the Board’s decisions, act as a sounding
board for the Chair, and as an intermediary
for the other Directors when necessary.
The SID is also available to chair the Board in
the absence of the Chair and has authority to
add items to the agenda of any regular or
special meeting of the Board. The role of the
SID is considered an important part of the
composition of the Board, acting as
a check and balance in the Group’s
governance structure.
Appointment and tenure
The Non-Executive Directors serve on the
basis of letters of appointment, which are
available for inspection at the Company’s
registered office. The letters of appointment
set out the expected time commitment
of the Non-Executive Directors who, on
appointment, undertake that they have
sufficient time to carry out their duties.
There is no fixed expiry date. The Executive
Directors’ service contracts are also available
for inspection at the Company’s registered
office. The notice period for Executive
Directors is 12 months.
External appointments
In accordance with Principle H, the Board
takes seriously the requirement that all
Non-Executive Directors should have
sufficient time to meet their Board
responsibilities. Whilst it recognises the
benefits that greater Boardroom exposure
provides for Directors, it closely monitors the
nature and number of external directorships
held to ensure continued compliance with
Principle H. All Executive and Non-Executive
Directors’ external appointments are
reviewed at each Board meeting as
standard, including detail of all those
appointments over the previous five years.
The Board reviews the nature of each
appointment and the expected time
commitment for each Director as part of this
process, and concluded that, as at the end
of 2022 and the date of this Report, none
of these appointments compromise the
effectiveness of any individual Director to
provide constructive challenge, strategic
guidance, offer specialist advice and hold
management to account. Further details
of our Non-Executive Directors’ external
appointments can be found in their
biographies on pages 68 and 69.
Directors’ induction and training/
professional development
The Chair, with the support of the Company
Secretary, is responsible for the induction of
new Directors and the ongoing development
of all Directors. As reported in the 2021 Annual
Report and Accounts, as part of the internal
Board and Committee evaluations, a
separate evaluation was conducted which
assessed the quality and experience of the
induction process for newly appointed
Directors following Matt Pullen’s appointment
as Chief Operating Officer in 2021. Results of
this evaluation showed the induction to be
effective and the overall induction process
was rated highly. Joe Vorih joined the Board
during the year and completed his induction
throughout 2022 in line with this feedback.
The Company provided a comprehensive
and tailored induction process, which
included meeting with Executive and
Non-Executive Directors and the Chair and
having introductory meetings with senior
management and external advisers where
appropriate. Where necessary, new Directors
are provided with training to address their
role and duties as a Director of a quoted
public company. Joe’s induction also involved
visits to all operational sites, and product
briefings and training. Further detail on Joe’s
induction can be found in the Nomination
Committee Report on page 84. The Chair and
Company Secretary continue to review the
induction process and endeavour to make
improvements wherever possible to ensure
any newly onboarded Directors are
successfully integrated into the Group
and their role, as quickly as possible.
As the internal and external business
environment changes, it is important to
ensure that Directors’ skills and knowledge
are refreshed and updated regularly to allow
them to adapt to these changes and make
informed and effective decisions. The Board
was given presentations during the year by
the Company’s financial advisers, brokers
and lawyers, as well as several presentations
by senior management and diversity and
inclusion training – in addition to the strategy
day referred to earlier in this Report. The Risk
Committee also partook in training and
workshops for climate-related risk matters
and changing regulatory requirements
and disclosures, such as the Task Force on
Climate-Related Financial Disclosures (TCFD).
The Company Secretary maintains
responsibility for updating the Board on new
legislation and regulation as well as changes
to the current legislative and regulatory
regimes to which the Company is subject.
This is included in a report to the Board at
every Board meeting.
Directors’ conflicts of interest
Each Director has a duty under the
Companies Act 2006 to avoid a situation
where he or she may have a direct or indirect
interest that conflicts with the interests of
the Company. The Company has robust
procedures in place to identify, authorise
and manage such conflicts of interest, and
confirms that these procedures have
operated effectively during the year.
All potential conflicts approved by the
Board are recorded in a conflicts of interest
register which is maintained by the Company
Secretary and reviewed by the Board on a
regular basis.
Directors have a continuing duty to update
the Board with any changes to their conflicts
of interest.
Board and Director recruitment process
The recruitment process is designed to
ensure the search for new Directors is
thorough and inclusive, and ensures recruits
possess the necessary experience and skills
to support the Company’s strategic direction,
as well as showcasing an understanding of
the Group’s culture and purpose. The Chair
leads the Nomination Committee to develop
a candidate specification and brief, using the
Board skills matrix as a basis for identifying
gaps that should be addressed as part of the
selection process. This brief is then placed
with an executive search agency who must
be a signatory to the Voluntary Code of
Conduct for Executive Search Firms, in line
with our Board Diversity Policy. Any agencies
that are used as part of the recruitment
process must confirm their independence
on appointment and that they have no
other connection with the Company or any
individual Directors. The executive search
agency then provides a long list of potential
candidates from various backgrounds and
industries based on this candidate brief,
which is then shortlisted following discussions
between the Chair, Senior Independent
Director and other members of the
Committee (or appointed sub-Committee,
as appropriate). The candidates are
interviewed and assessed against
pre-determined criteria and in line with
the specific candidate brief, which often
involves meeting various Board members
on a more informal basis to determine
interpersonal dynamics. The successful
candidate is then recommended for
appointment to the Board, by the Nomination
Committee, with the Company Secretary
tasked with the formalities.
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Corporate Governance Report continued
Board evaluation and effectiveness
In accordance with Code Provision 21,
following the internal evaluation in 2021, the
Board conducted an external evaluation
during the financial year. This process was
completed by Better Boards and involved
completion of an anonymous online
questionnaire and one-to-one interviews.
These responses were then collated into an
overall feedback report for the Board, as well
as individual feedback reports for each
Director and the Company Secretary. Overall,
the results of the evaluation were positive,
with the Board and its Committees viewed
as operating effectively and in line with their
respective remits. While several areas for
further discussion and focus were also
highlighted, no major items of concern
were identified.
The Board discussed the results of the
evaluation at its meeting in March 2023,
and agreed the following actions for further
review and discussion during the course
of 2023:
1.
Detailed review of structure, remit and
composition of Board committees, in
particular the merits of a separate
sustainability committee.
2.
Review of the process for agenda setting:
to be more dynamic and inclusive, and
enable deep dives into key/topical issues,
whilst allowing sufficient time for
governance related matters.
3.
Review of board paper content to further
streamline and standardise content and
invite presentations from senior
management to further enhance
employee engagement.
4.
Separate Board session to be held to
review performance and behaviours in
detail, as well as investing time in getting
to know each other better and learning
how to work more efficiently and
effectively as a team.
5.
Consider further opportunities for
engagement with stakeholders.
A further update on progress against these
actions will be included within the 2023
Annual Report and Accounts.
Directors’ indemnity and insurance
The Company maintains Directors’ and
Officers’ liability insurance to cover legal
proceedings against Directors and Officers
acting in that capacity.
Details of the Directors’ indemnity
arrangements can be found on page 97
of the Directors’ Report.
Internal controls and risk management
The Board is responsible for determining
the nature and extent of the significant risks
it is willing to take in achieving its strategic
objectives. It is also responsible for
maintaining sound risk and internal control
systems in accordance with the Code.
The Board delegates the specific
management and monitoring of this to
the Risk Committee (as outlined in the Risk
Committee Report on page 86 to 89), who
report to the Board on all matters, including
the effectiveness of these systems, and
submit documents to the Board for approval,
as appropriate. The Board is ultimately
responsible for ensuring that:
–
there is an ongoing process for identifying,
evaluating and managing the principal
risks faced by the Group;
–
the systems have been in place for the
year under review and up to the date of
approval of the Annual Report and
Accounts;
–
the systems are regularly reviewed; and
–
the systems accord with the FRC guidance
on risk management, internal control and
related financial and business reporting.
The principal risks and uncertainties, together
with the emerging risks for the Group that the
Risk Committee and Board have focused on
this year, including their potential impact
and mitigating actions are set out on
pages 55 to 62.
The Company has a risk management
framework which adopts a top-down and
a bottom-up view of the key risks, which
involves both the downward cascade and
upward escalation of risks between the
Group and the businesses. It comprises a
risk register template, a risk profile template
and assessment guidelines to be used by
both the Group and Business Units when
considering risk. It also includes a detailed
approach to formally recording and
independently assessing Group level risks.
The Board has conducted a review of the
effectiveness of the system of internal
controls and risk management following
a detailed review undertaken by the Risk
Committee, and is satisfied that it complies
with Provision 29 of the Code.
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Financial and business reporting process
The Board recognises its duty to ensure that
the Annual Report and Accounts, taken as a
whole, is fair, balanced and understandable
and provides the information necessary for
shareholders to assess the position and
performance, strategy and business model
of the Company. In addition to the Annual
Report and Accounts, the Company
also ensures that other price-sensitive
reports and other information are
published externally.
The Group has a thorough assurance
process in place in respect of the
preparation, verification and approval of
periodic financial reports, which is set out
in the Report of the Audit Committee on
pages 93 to 94.
This process includes:
–
the involvement of qualified, professional
employees with an appropriate level of
experience (both in Group Finance and
throughout the Group’s businesses);
–
formal sign-off from appropriate business
senior executives;
–
comprehensive review and, where
appropriate, challenge from appropriate
Group senior management and Executive
Directors;
–
a transparent process to ensure full
disclosure of information to the external
auditor; and
–
oversight by the Audit Committee, involving
(amongst other duties):
–
a detailed review of key financial
reporting judgements which have been
discussed by management; and
–
review and, where appropriate,
challenge on matters including:
–
the consistency of, and any changes
to, significant accounting policies and
practices during the year;
–
significant adjustments resulting from
an external audit;
–
the Viability Statement assumptions;
and
–
the going concern assumption.
In accordance with Principle N of the Code,
the Board is required to ensure our financial
and business reporting is fair, balanced and
understandable. To ascertain whether this is
the case, it firstly establishes whether or not
the information presented within the Annual
Report and Accounts is fair; reviewing
whether the whole story is presented and
done so accurately, and if the key messages
in the narrative reflect the way in which it is
presented in the financial reporting.
It secondly assesses whether the information
presented is balanced; ensuring there is
a good level of consistency between the
narrative reporting in the front and the
financial reporting in the back, as well as
satisfying itself that the statutory and
adjusted measures are explained clearly,
with appropriate prominence. The final
element to the assessment is to determine
whether the Annual Report and Accounts
are understandable. The Board assesses
whether the Annual Report and Accounts
uses language which is accessible to a
reasonably well-informed reader, or provides
clear definitions for technical vocabulary
and acronyms where this is not possible;
it should not be disjointed or repetitive and
should tell a complete and straightforward
story. The Board also ensures that important
messages are highlighted or cross
referenced appropriately throughout the
document. Completion of this process
provides comfort to the Board that the
Annual Report and Accounts taken as a
whole, is fair, balanced and understandable,
and following its review, the Board was of the
opinion that the 2022 Annual Report and
Accounts is representative of the year and
presents a fair, balanced and
understandable overview.
Annual General Meeting
The Company’s Annual General Meeting
(AGM) is scheduled to be held on 18 May 2023.
All shareholders have the opportunity to
attend and vote, in person or by proxy, at the
AGM. A copy of the notice of AGM can be
found on the Company’s website.
The AGM is the Company’s principal forum
for communication with private shareholders.
The Chair of the Board and the Chair of each
of the Committees will be available to answer
shareholders’ questions at the AGM.
The notice of AGM will be sent out to
shareholders at least 20 working days before
the meeting. Results will be announced to the
London Stock Exchange via a Regulatory
Information Service announcement and
published on the Company’s website.
Re-election of Directors
At the AGM, all Directors will retire and
submit themselves for election or re-election.
Shatish Dasani will offer himself for election
at the 2023 AGM and for re-election annually
thereafter. As a result of the Board evaluation
exercise, as Chair, I am satisfied that each
Director continues to show the necessary
level of commitment to their role and has
sufficient time available to fulfil his or her
duties, to justify their re-election.
Approved by the Board and signed
on its behalf.
Kevin Boyd
Chair of the Board
14 March 2023
Corporate Governance Report continued
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Remuneration
Financial Statements
Dear Shareholder
I am delighted to present the Report of the
Nomination Committee (the Committee) for
2022, reporting on the work of the Committee
during the year, as well as its ongoing
objectives and responsibilities.
The role of the Committee is to establish and
maintain a process for appointing new Board
members and to support the Board in
fulfilling its overall duties. There were
numerous changes to the composition of the
Board during 2021 and into early 2022, as well
as a change of Chair in November 2022 in
light of Ron Marsh approaching completion
of a nine-year tenure, and it has therefore
been essential that the Committee has
operated an effective succession planning
programme based on clear parameters.
The Committee operated efficiently and
effectively to enable the management of
a successful recruitment and onboarding
process for a new Chief Executive Officer
and new Chair of the Board, in each case
ensuring that the appointed individual not
only has the necessary experience and skills
to support the Company’s strategic direction,
but can also show an understanding of the
Group’s culture and purpose.
With the implementation of the updated UK
Corporate Governance Code (the Code) in 2018,
the Committee’s importance and prevalence in
maintaining and promoting the culture of the
Company has continued to be one of the key
considerations of the Committee as it
implements its succession planning strategy.
D&I has been high on the agenda across the
Group, and the Board ensures that this is
considered throughout all Board recruitment
and succession planning processes.
All Board members received training as part of a
Group-wide D&I training and awareness
programme, and the lessons learned have
been core to the Committee’s approach to its
recruitment strategy throughout 2022.
Further detail on the considerations of the
Nomination Committee in respect of D&I are
showcased later in this Report.
During 2022, Joe Vorih was appointed as
Chief Executive Officer and a member of the
Board on 28 February 2022 following a
rigorous recruitment process, details of which
are set out in the 2021 Annual Report.
The Committee also oversaw the successful
recruitment of a new Chair, and I was
appointed as Chair with effect from
1 November 2022 and took up Chairmanship
of the Nomination Committee on the same
date. This was in anticipation of Ron Marsh’s
retirement from the Board following
completion of nearly nine years as a
Non-Executive Director and Chair.
Further details of the recruitment process are
set out in this Report. Louise Hardy stepped
down from the Board and as Remuneration
Committee Chair on 30 September 2022, and
Lisa Scenna was appointed as her successor.
Following the year end, Shatish Dasani was
appointed as a Non-Executive Director on
1 March 2023 and as Audit Committee Chair
on 7 March 2023.
In keeping with Corporate Governance Code
requirements, the senior management
succession plan was reviewed and updated
at the Committee meeting in February 2023,
following a robust review process involving
senior leaders, the Chief People Officer and
the Group Talent Director. The Chief People
Officer has continued to provide invaluable
support to the Committee throughout the
year, having been involved in all Board
recruitment and attended all meetings
of the Committee.
The Committee is supported by a strong
Secretariat function with access to the
Company Secretary at all times, and the
Committee is kept up to date with all
recommended guidance. This will continue
to be monitored into 2023 to take into
account any recommended changes
or new requirements. The Committee
welcomes the new diversity targets and
‘comply or explain’ approach set by the
FCA within Listing Rules LR 9.8.6R(9) and
LR 14.3.33R(1), having previously stated
its commitment to the recommendations
of the Parker Review. Full disclosure in
accordance with this will be provided
in the 2023 Annual Report and Accounts.
We can confirm, as at the date of this
Report, the Company complies with two of
the recommendations in the Listing Rules.
The Committee will continue to focus on
ensuring that individual Directors and the
Board as a whole have the necessary
experience and skills to support the
Company’s strategic direction, as well
as the Board’s ability to successfully
oversee the delivery of such strategy.
The Committee’s considerations on these
matters when making changes to the Board
during the year are set out in more detail
in this Report.
I will be available at the AGM to answer any
questions about the work of the Committee.
Kevin Boyd
Chair of the Nomination Committee
14 March 2023
Kevin Boyd
Chair of the Nomination
Committee
2022 Key Achievements
Appointment of Kevin Boyd as successor
to Ron Marsh as Chair of the Board
Approval and implementation of the diversity
and inclusion (D&I) programme within
succession planning and recruitment strategies
Successful recruitment process for Non-Executive
Director and Audit Committee Chair
Areas of focus for 2023
Further development of D&I in succession
planning for the Board and senior leaders
Recruitment of Non-Executive Director to replace
Mark Hammond when he retires from the Board
during 2023
Appointment of Senior Independent Director to
succeed Mr Hammond
Committee Chair introduction
Nomination Committee Report
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Financial Statements
Members and meetings
The Committee comprises Kevin Boyd (the
Chair) and all the Non-Executive Directors,
being, Shatish Dasani, Mark Hammond, Lisa
Scenna and Louise Brooke-Smith.
In accordance with best practice, Joe Vorih
(Chief Executive Officer) is no longer a
member of the Committee, and accordingly,
Joe Vorih and Clare Taylor (Chief People
Officer) attend the Committee meetings
by invitation only.
The Committee is chaired by the Chair of the
Board, except when considering their
own re-election.
All the Committee members are
independent, in accordance with Code
Provision 17. Further detail on the members
of the Committee and their attendance at
Committee meetings are set out on page 74.
The Company Secretary acts as Secretary
to the Committee.
Under the Committee’s Terms of Reference,
the Committee will normally meet not less
than twice a year and at such other times
as the Chair shall require. The Committee
held two scheduled formal meetings during
the year under review and an additional
three meetings to discuss and progress
the appointment of the new Chair and two
new Non-Executive Directors.
After each Committee meeting, the Chair
reports to the Board on the main items
discussed, as well as reporting on the nature
and content of its discussions,
recommendations and actions to be taken.
Governance
The Committee’s main responsibilities are to:
–
evaluate the structure, size and
composition (including the skills,
knowledge, experience and diversity)
required of the Board and the Committees;
–
give full consideration to succession
planning of Directors and other senior
executives; and
–
assist with the selection process for new
Executive and Non-Executive Directors
including the Chair of the Board.
The Committee’s Terms of Reference explain
the Committee’s role and responsibilities and
were reviewed in December 2022 to ensure
they remain appropriate and reflect any
updates in Corporate Governance guidance.
The Terms of Reference can be found on the
Company’s website and this Report explains
how the Committee has complied with these
in more detail, and the activities it has
undertaken during the 2022 financial year.
In accordance with Code Principle L, the
Board and its Committees are required
to be evaluated on an annual basis.
Following an internal evaluation in 2021,
an external evaluation of the performance
of the Board and its Committees was
conducted during 2022 by Better Boards.
This evaluation focused on the remit of the
Committee and how effectively members
work together to achieve the Committee’s
objectives. Appointments to the Board are
subject to formal, rigorous and transparent
procedures and include consideration, where
appropriate, of comments and feedback
from the annual evaluation of the Board.
The Group recruited a Group
Talent Director to enable the
Company to prioritise the
development of its succession
planning, by ensuring
talent within the Group was
recognised and developed.
2022 in review
At its meeting in March 2023, the Committee
considered the contents of the review and
concluded that the evaluation had found the
Committee to be operating effectively and
efficiently, communicating as required with
the Board in relation to matters within its
remit, thereby assisting in the Board’s
decision-making. Full results of the Board
evaluation can be found on page 79 of the
Corporate Governance Report.
The Chair confirms that the Committee has
considered the performance evaluation and
the contribution and commitment of all
Directors. The Chair has confirmed to
the Board that their performance and
commitment is such that the Company
should support their election or re-election,
as appropriate. In addition, the Board
evaluated each Director’s time
commitments, and was satisfied that, in line
with the Code, they each continued to
allocate sufficient time in order to discharge
their responsibilities effectively, including
attendance at Board and applicable
Committee meetings, as well as time
needed to prepare for meetings, and other
additional commitments that may arise
during the usual course of business.
As stated in the Corporate Governance
Report, all of the Company’s Directors will
retire and each will offer themselves for
election or re-election at the forthcoming
AGM, in accordance with Code Provision 18.
No Director is able to vote in respect
of their own election/re-election when
consideration is given to Director election/
re-election at the AGM.
Nomination Committee Report continued
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Nomination Committee Report continued
This approach ensures that the composition
of the Board and senior management team
remains appropriately balanced between
new and innovative thinking and longer-term
stability. Management training and
development plans are provided to senior
and middle management where appropriate
in order to continue to develop a diverse
pipeline of internal talent for the future.
In addition, the Committee considers
emergency succession planning and is
comfortable that a framework is in place
should key senior management roles
need to be covered on an interim basis.
Board appointment criteria are considered
automatically as part of the Committee’s
review of succession planning and
matters of Director tenure are viewed
on a case-by-case basis.
During the year, the Group recruited a Group
Talent Director to enable the Company to
prioritise the development of its succession
planning, by ensuring talent within the Group
was recognised and developed, as well as
identifying talent gaps where further
recruitment was required. More detail
about some of the steps taken across the
businesses in this regard, can be found in
the People section on page 36. The Group
Leadership Team Talent review identified
20 employees falling into Growth, High
Impact and Future Talent categories.
These are employees where investment
in development will support succession
planning and manage retention risk. 50% of
these are female which is significantly higher
than the overall review population which is
25% female. This shows a positive trend for
increasing diversity of this population.
Further details on the progress made during
the year on diversity and inclusion is detailed
later in this Report and in the People section
as outlined above.
Tenure of Non-Executive Directors
Appointments to the Board are typically
made for an initial term of three years and
are ordinarily limited to three consecutive
terms in office, subject to annual re-election
by shareholders at the AGM.
The Committee recognises the
recommendations in Principle K and Provision
19 of the Code in respect of Board tenure of
independent directors, and in accordance
with this, a nine-year tenure is the maximum
for any Non-Executive Director appointed to
the Board (with exceptions permitted only
with sufficient explanation and where agreed
by the Committee as a whole).
Mark Hammond, the outgoing Senior
Independent Director, will complete his
nine-year tenure in April 2023, and a process
is underway to recruit his replacement.
Recruitment of Executive and
Non-Executive Directors
The Committee’s role in recruiting Executive
and Non-Executive Directors includes:
–
identifying any skills or experience gaps
in the composition of the Board and its
current diversity;
–
having regard to any such gaps, identifying
and nominating candidates to fill Board
vacancies as and when they arise and
recommending them for the approval
of the Board; and
–
reviewing the time commitment required
from Non-Executive Directors.
The Committee recognises the importance
of the time commitment of each Director to
shareholders, and this will therefore continue
to be kept under review for all Directors
during 2023.
Role of the
Committee and
its activities
during the year
Appointment of the Chair
Our outgoing Chair, Ron Marsh,
confirmed he would retire at the end
of 2022, having served on the Board for
nearly nine years. As a result, a robust
recruitment process took place during
the year to appoint his successor.
The Committee appointed Odgers
Berndtson to assist in identifying
potential candidates for this role.
Specific recruitment criteria was
provided, which included diversity
considerations as well as specific
skills, experience and industry
expertise requirements.
A shortlist of two candidates
were identified. Led by the Senior
Independent Director, the Committee
met to discuss these final candidates.
It considered a variety of factors,
including each Director’s knowledge,
skills, expertise and familiarity with
the construction and manufacturing
industry. The Committee also
acknowledged the current challenging
macroeconomic climate, as well as
the changes to the Board composition
during the year, following the CEO’s
appointment in February 2022.
Following a lengthy discussion, the
Committee decided to proceed with
Kevin’s appointment, given his extensive
knowledge, expertise, skills, leadership
qualities and familiarity with the Group
and its strategic direction, and
recommended his appointment as
Chair to the Board, effective from
1 November 2022.
Succession planning and tenure
In accordance with Code Principle J, a key
activity of the Committee is to keep under
review and maintain an effective succession
plan for members of the Board and senior
executives across the Group. The Committee
acts in accordance with the Code and its
Terms of Reference and in considering
succession planning, takes into account the
challenges and opportunities facing the
Group and the future skills and expertise
needed on the Board using objective criteria,
but in the context of continuing to promote
diversity and inclusion across the Group.
In accordance with the FRC Guidance on
Board Effectiveness recommendations, the
Committee’s succession planning includes:
–
contingency planning
for sudden and unforeseen departures;
–
medium-term planning
the orderly replacement of current
Board members and senior executives
(e.g. retirement); and
–l
ong-term planning
the relationship between the delivery
of the Company strategy and objectives
to the skills needed on the Board now
and in the future.
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Nomination Committee Report continued
During the year under review, the Committee
oversaw the recruitment process for Ron
Marsh’s successor, Kevin Boyd, the newly
appointed Chair of the Board, as well as
carrying out a process to recruit a new
Non-Executive Director in light of the
completion of Mark Hammond’s nine-year
tenure in April 2023.
During the year, the Committee appointed
Odgers Berndtson to assist in identifying
potential candidates to succeed Ron Marsh
as Independent Chair, and Korn Ferry to assist
in identifying potential candidates to
succeed Mark Hammond as Non-Executive
Director, and Kevin Boyd as Audit Committee
Chair. Odgers Berndtson and Korn Ferry
confirmed their independence on
appointment and that they had no other
connection with the Company or any
individual Directors. Korn Ferry are the
appointed advisers to the Remuneration
Committee, but the work carried out
in Relation to the appointment of the
Non-Executive Directors was carried out by
a team separate to the remuneration
advisory team.
Information on the Directors’ service
agreements, shareholdings and share
options is set out in the Directors’
Remuneration Report on pages 114 to 126.
Board evaluation and composition
As part of its role in monitoring the
composition and structure of the Board, the
Nomination Committee will:
–
review the structure, size and composition
of the Board and make recommendations
to the Board, as appropriate;
–
identify the balance of skills, knowledge,
diversity and experience on the Board;
–
review and approve the Group’s diversity
policy and evaluate its effectiveness
on a regular basis;
–
review the leadership needs of the
organisation, both Executive and
Non-Executive, with a view to ensuring
the continued ability of the organisation
to compete effectively in the
marketplace; and
–
review the results of the Board
performance evaluation process that
relate to the composition of the Board
and the Committee’s own performance.
We encourage leaders,
employees and our external
partners and stakeholders
to make a positive difference
through proactively
supporting our diversity
and inclusion principles.
Following appointment, the
Company provides Directors with
a comprehensive and tailored
induction programme.
This typically includes visiting sites,
meeting with all members of the Board
and senior leaders from across the Group,
as well as external advisers and
stakeholders where appropriate.
Joe’s first two weeks at Genuit Group
prioritised the scheduling of one-to-one
briefings with individual members of the
senior leadership team, which included
travelling to the respective sites so these
could take place in person. This was
structured to ensure that information
material to the CEO role was delivered in
the early stages of the programme.
These informal briefings, which provided
an initial opportunity to meet senior
leadership, were supported by operational
site visits to provide on-the-ground
understanding of the different businesses
across the Group, which is particularly
important given its decentralised
structure and unique product offerings.
Following these individual sessions,
informal dinners were also held with
the relevant management teams at sites,
to provide a more relaxed forum for them
to interact. In total, Joe had one-to-one
meetings with over 70 members of the
leadership team. Joe’s schedule also
included numerous investor meetings with
key shareholders and stakeholders both
via video conference as well as in-person
meetings in the City.
Following the initial two-week period,
the remainder of Joe’s induction (which
consisted of visiting all sites and
businesses) took place over the
next six months.
Joe Vorih
induction
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Board skills and experience
The Committee uses a skills matrix when
identifying the balance of skills, knowledge,
experience and diversity of the Board for its
evaluation and composition review and
succession planning. The matrix highlights
where the capabilities of Directors are
particularly strong, and where there are
opportunities to further grow the Board’s
collective knowledge and level of diversity.
The skills matrix of the current Board as at
31 December 2022 is included in the
Governance Report on page 77.
Diversity
The Committee supports and encourages
diversity in line with Principle J of the Code,
acknowledging the advantages that come
from having diverse viewpoints; increasing
innovation, creativity and strategic thinking.
The Company’s recruitment and
appointment strategy is based on the merits
of the individual candidates, without bias
towards age, gender, marital or family status,
race, sexual orientation, religion or belief or
any disability and encourages leaders,
employees and our external partners and
stakeholders to make a positive difference
through proactively supporting our diversity
and inclusion principles.
Diversity was a key consideration for the
Committee throughout 2022, and during
National Inclusion Week, the Group launched
its diversity and inclusion strategy (more
information on this is included in the People
Section of the Strategic Report on page 37).
As part of this programme, a Board
education and insight session took place in
August 2022, facilitated by an external expert.
This led to individual commitments and
agreement to the diversity and inclusion
ambition, strategy and three-year delivery
plan. In addition to this, the Diversity Policy
was reviewed, updated and approved by the
Board at its meeting in March 2023.
Diversity requirements form part of the
succession planning framework as outlined
earlier in this report, as well as forming part
of non-negotiable criteria for any recruitment
partners it may engage with.
2022 saw changes to the composition of
the Board as outlined earlier in this Report.
This included changes to the Non-Executive
Directors, which saw Louise Hardy step down
from the Board on 30 September 2022,
and Ron Marsh retire from the Board on
31 December 2022 (in anticipation of the
expiration of his nine-year tenure in 2023).
On 1 March 2023, Shatish Dasani was
appointed as a Non-Executive Director, and
on 7 March, Shatish was appointed Chair of
the Audit Committee and Lisa Scenna
appointed as Senior Independent Director.
As at the date of the approval of this Report,
female representation on the Board is 25%
and the Board has one representation from
an ethnic minority background. The diagram
opposite showcases our Board’s composition
in line with the Listing Rule requirements,
including gender, ethnicity and women in
senior Board positions, as at 14 March 2023.
It also shows gender diversity at senior
management level, being the Executive
Committee and its direct reports.
Recruitment is ongoing during 2023 for an
additional Non-Executive Director, and we will
ensure we fully comply with the Listing Rules
diversity disclosure requirements in our 2023
Annual Report and Accounts, and the
reference date for this disclosure will be
31 December 2023.
By order of the Board.
Kevin Boyd
Chair of the Nomination Committee
14 March 2023
Nomination Committee Report continued
25%
Women on
the Board
1
Woman in
a senior Board
position
(SID)
1
Board member from
ethnic minority
background
42%
Women in the
Executive Committee
and its direct reports
Board and senior leadership diversity representation
(as at 14 March 2023)
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Dear Shareholder
I am pleased to present the Report of the Risk
Committee (the Committee) for the year
ended 31 December 2022, that provides detail
on the work of the Committee during the
year, as well as its ongoing objectives
and responsibilities.
This year has been challenging for the Group,
our suppliers, and the wider economy.
The establishment of the Committee in
2021 meant that the risks that these ongoing
challenges posed could be monitored and
assessed on a regular basis. Following the
isolated cyber incident we experienced at
our Nuaire business in April 2022, we
continued to invest in our security and IT
infrastructure throughout the remainder
of 2022, as well as implementing training
schemes to continue to mitigate the risk of
cyber incidents and data breaches
elsewhere in the Group. More detail on the
action taken in respect of cyber and
information security can be found in our
Audit Committee Report on page 95.
As set out in the Strategic Report, the ongoing
effects of input cost inflation was a key risk
considered by the Committee during the
year, with the Group leading the industry
in robust pricing moves and reducing
implementation time lags to mitigate this risk.
Management also increased its commercial
focus, walking away from low margin sales
and increasing the quality of the Group’s
business. Supply constraints, most noticeably
semiconductors and printed circuit boards
were also a key risk for consideration by the
Committee, with dual supply and alternative
suppliers being used to mitigate this risk.
Paul James
Chair of the Risk Committee
2022 Key Achievements
Integration of climate-related risk assessment
into the Group’s operations
Increased awareness across the Group of risk;
including adequate monitoring and mitigations
Close monitoring of key principal and emerging
risks and taking proactive preventative
measures where required
Review of risk management framework and
current scoring methodology
Areas of focus for 2023
Further embed daily risk assessments into Group
operations, with enhanced formal processes for
escalation to the Risk Committee
Further assessment of climate-related risk
and its impact following quantitative
scenario analysis
Continue to monitor principal and emerging risks
throughout the year and update where required
Recruitment and retention of key personnel
was discussed at each Committee meeting
during 2022 to ensure changes in the
recruitment environment were being
monitored and reacted to quickly when
required. Cost of living and inflationary
concerns were of key significance in relation
to this risk, and as a result, updates were
given at each Committee meeting on the
appropriate mitigating actions taken across
the Group. The Committee was satisfied that
this risk was managed effectively, given
the continued focus on talent succession,
employee wellbeing, employee remuneration
and diverse recruitment practices.
More information on our People strategy
can be found in the People section of the
Strategic Report on pages 36 to 39.
The Committee receives presentations from
the Business Units (BUs) as well as the Group
functions on a rotational basis. Each is
required to present the current and emerging
risks specific to their BU or Group function
and to detail the mitigating actions.
This approach allows the Committee to
identify risks that are common across BUs,
thereby enabling consolidated mitigation
to be put in place.
In addition to the everyday business
challenges, the Committee also considered
the Task Force on Financial Climate-Related
Disclosures (TCFD) and climate-related risk
at all meetings during the year, as well as
participating in workshops which reviewed
the measurement and monitoring of
climate-related risk, and whether adequate
processes were in place to ensure this was
embedded in Group procedures to allow
for accurate reporting in our 2022
TCFD disclosure.
At its meeting in early 2023, the Committee
reviewed, discussed and agreed the final
changes to the Group’s principal risks and
uncertainties and emerging risks prior to
submitting to the Board for approval, to
ensure that the reporting of these risks
remained current, proportionate
and appropriate.
The Committee’s work in 2022 has
strengthened the Group’s risk management
structure, allowing more dedicated time
and detailed consideration to be given to
risk management and ensuring its continued
development across the Group. As part of the
external Board evaluation carried out in 2022,
the performance and effectiveness of the
Committee was reviewed, and detail on this
is set out later in this Report.
Further detail of our considerations and the
progress which has been made during the
year on our risk management processes and
structure are explained in more detail in this
Report. Details of our principal risks and
uncertainties as well as our emerging risks,
which were reviewed at each Committee
meeting can be found on pages 55 to 62.
I will be available at the AGM to answer any
questions about the work of the Committee.
Paul James
Chair of the Risk Committee
14 March 2023
Committee Chair introduction
Risk Committee Report
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Risk Committee Report continued
Board
–
Overall responsibility for
risk management and
internal control
–
Reviews and approves the risk
appetite statement prepared
by the Risk Committee
–
Sets strategic objectives
Senior Management
–
Maintain the Group’s risk registers
and implement the bottom-up
approach review of risks
–
Manage the Group’s risk
management procedures
–
Monitor the operation and
effectiveness of key controls,
and report to the Risk Committee
on a rotational basis
–
Provide guidance and advice to
employees in identifying risk and
implementing mitigation plans
Audit Committee
–
Monitors assurance and
internal financial control
arrangements
–
Manages the external audit
process and reviews the
auditors’ reports
Risk Committee
–
Works alongside the Board to
set the risk tolerance levels
for the Group in preparing
and maintaining the risk
appetite statement
–
Monitors and reviews the
Group’s risk register
–
Identifies and evaluates
Principal Risks and
Uncertainties and emerging
risks, and presents these to
the Board for approval and
inclusion in the Annual
Report and Accounts, as
well as ensuring they are
appropriately managed
Members and meetings
The Committee comprises Paul
James, Joe Vorih, Matt Pullen, Martin
Gisbourne, Clare Taylor and Emma
Versluys. The Group Financial
Controller and the Group Internal
Audit Director are invited to attend
all meetings, and Business Unit
Managing Directors and Finance
Directors, as well as functional heads,
are invited to attend and provide an
update to the Committee on a
rotational basis. Accordingly, there
are six members.
The UK Corporate Governance Code
(the Code) Provision 25 requires risk
management systems be either
reviewed by the Audit Committee,
a risk committee composed of
independent Non-Executive Directors,
or the Board. Although the
Committee is comprised solely of
Executive Directors and senior
management, it reports on all its
activities to the Board and the Board
is required to approve any changes
to the Group’s risk appetite, principal
risks and risk management structure
across the Group. It was agreed that
the Committee composition would
enable Committee meetings to be
constructive and effective
at reviewing and discussing the
granular detail of risk across Business
Units and the Group as a whole, and
that the appropriate oversight by the
Board would be gained by the formal
reporting process in place.
Under the Committee’s Terms of
Reference, it will normally meet not
less than twice a year and at such
other times as the Chair shall require.
The Committee held four meetings
during the year under review.
Governance
In accordance with Code Principle L
and Provision 21, the Board and its
Committees are required to be
evaluated on an annual basis.
2022 was the first full reporting year
the Committee was in operation and
thus it was evaluated as part of the
external Board evaluation conducted
during the year. This review
confirmed that overall, the
Committee had the right
combination of skills, experience
and knowledge across its members,
and that the level of information
and the recommendations made
were appropriate. The review also
highlighted some areas for
consideration by the Committee,
and these will be considered
by the Committee during 2023.
The Committee is responsible for
monitoring and reviewing risk
management systems and therefore
has oversight of the Group risk profile
and risk appetite as a whole and,
unless required otherwise by
regulation, carries out the duties
below, reporting to the Board as
appropriate:
–
reviews, manages and agrees the
risk appetite, tolerance and
strategy of the Group for approval
by the Board;
–
assists the Board in fulfilling its
reporting responsibilities in the
Annual Report and Accounts for risk
reporting, including:
–
the internal risk management
and control systems in place;
–
principal risks and uncertainties;
–
emerging risks;
–
risk appetite and any respective
stress testing; and
–
overseeing and implementing
the Group’s internal controls and
risk management systems.
–
reviews the alignment of any
identified risks to Group strategy
and remuneration policy.
All proceedings of the Committee are
reported formally to the Board by the
Chair of the Committee, who reports
on the main items discussed, as well
as reporting on the nature and
content of its discussion,
recommendations and action to be
taken or approval requested.
The Assistant Company Secretary
acts as Secretary to the Committee.
The Committee’s Terms of Reference
explain the Committee’s role and
responsibilities and were reviewed
in February 2023 to ensure they
remain appropriate. The Terms
of Reference can be found
on the Company’s website.
2022 in review
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Each business and Group function is
responsible for keeping and maintaining
their own risk registers, whereby each risk
is recorded and scored for both impact
and probability, allowing the most significant
risks to be identified and prioritised. The risk
management process is prescribed and
organised by Group Finance, which ensures
that each business complies with Group
prescribed mandatory standards.
Businesses are required to formally review
their risk register and risk profile at least
twice a year.
To ensure compliance with the Code and to
operate the highest governance standards,
the Board remains responsible for reviewing
and approving risk management and
internal control and does so by reviewing
and approving any material output of the
Committee. This ensures principal and
emerging risks are adequately reviewed and
challenged by the Board and allows them
to use these when setting overall Group
strategic objectives. The Risk Committee
then works alongside the Board to set the
risk tolerance levels for the Group in drafting
and maintaining the risk appetite statement.
It monitors and reviews the Group’s risk
register, identifies and evaluates principal
and emerging risks and presents these to
the Board for approval and inclusion in the
Annual Report and Accounts. It ensures they
are appropriately managed throughout the
financial year by reviewing principal and
emerging risks at every Committee meeting,
with the Group risk register reviewed on an
annual basis.
Role of the
Committee and
its activities
during the year
Ensures adequate and effective risk
management systems and controls,
and assessing the effectiveness of the
internal control environment
In accordance with Principle O of the Code,
one of the Committee’s responsibilities is to
ensure, on behalf of the Board, that adequate
and effective risk management systems and
controls are in place across the Group.
Updates from the Group Financial Controller
outlining principal and emerging risks and
reporting timelines are presented at each
Committee meeting, and following any
decisions made on the adequacy of these,
any necessary changes will be implemented.
The Committee also provides recommendations
to the Board on the effectiveness of the
internal control environment. Part of the
Committee’s responsibilities include:
–
monitoring and reviewing the effectiveness
of the Company’s risk management and
internal control systems;
–
reviewing the Company’s procedures in
place that manage or mitigate principal
risks and identify emerging risks; and
–
reviewing and approving the statements
to be included in the Annual Report and
Accounts concerning internal risk controls
and risk management.
Risk management process
As outlined above, the Board, with the support
of the Committee, is responsible for ensuring
that an effective risk management process is
in place. Through ongoing review throughout
the year, it ensures that it is fit for purpose and
that it operates effectively. It is therefore
imperative that the Committee ensures the
Board has a clear view of the level of risk
across the Group by taking both:
–
a top-down view of the key risks: identifying,
assessing and mitigating risk at a Group
level which could hinder achievement
of the Group strategy; and
–
a bottom-up view of risks: identifying,
assessing and mitigating risk at a
business/operational level which may
have an implication at business unit
level but could also affect achievement
of the Group strategy.
Internal risk controls and
management systems
The Committee relies on the effectiveness of
Senior Management in implementing its
controls and risk management systems.
Business Unit leaders and Group function
heads report into and present to the
Committee on a rotational basis, as well as
being responsible for maintaining the
Group’s risk registers and implementing the
bottom-up approach review of risks. They are
ultimately responsible to the Committee for
managing and adequately implementing the
Group’s risk management procedures and
monitoring the operation and effectiveness
of key internal risk controls. They also provide
guidance and advice to employees in
identifying risk and implementing mitigation
plans, which is critical to the effective
operation of the Group’s risk controls and
management systems.
Risk registers must be submitted to Group
Finance at least twice a year so that the
Group risk register can be updated every six
months. The Group risk register is the
consolidation of all risks considered to be
significant at Group level. It is maintained by
the Group Financial Controller and is
reviewed and updated by the Committee.
Following the Committee’s reviews during the
year, the Committee confirms that it is
satisfied that the Group’s internal risk control
and management procedures:
–
operated effectively throughout the period;
and
–
are in accordance with the guidance
contained within the FRC’s Guidance on
Risk Management, Internal Control and
Related Financial and Business Reporting.
Risk Committee Report continued
A key priority of the
Committee during the
year was to integrate
climate-related risk
assessment into
everyday operations.
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Risk Committee Report continued
Principal risks are documented to include
comprehensive overview of the key controls
in place to mitigate the risk and the potential
impact on strategic objectives and KPIs.
Changes to those principal risks which are
disclosed annually can only be made with
approval from the Committee and the
Board. Principal risks are presented to the
Committee at every meeting to ensure
they are monitored on an ongoing basis.
More detail on those risks which have been
determined as the Group’s principal risks
and uncertainties can be found on pages 55
to 62.
As part of the above process, the Group also
identifies, collates and assesses emerging
risks, being those that could impact the
business in the medium to long term.
Emerging risks are discussed by the
Committee at each meeting and are
included in the annual submission to the
Board along with the principal risks and
uncertainties for review and approval, and
subsequent inclusion in the Annual Report
and Accounts.
Climate
A key priority of the Committee during the
year, given the TCFD disclosure requirements,
was to integrate climate-related risk
assessment into everyday operations
and gain a further understanding of
climate-related risk across the Group.
This was included as an individual agenda
item at each Committee meeting during the
year. The Committee received training
sessions during the year and engaged PwC
LLP as consultants to guide the Company
through the process for ensuring compliance
and fully embedding climate-related risk into
its operations across the Group.
Evaluate and assess principal and
emerging risks of the Group on behalf
of the Board
One of the key responsibilities of the
Committee is to assess principal and
emerging risks and monitor these on an
ongoing basis. The Committee reviews these
at every meeting as a standing agenda item
and ensures that any principal or emerging
risks which are prevalent (such as cyber or
climate-related risk) are added as individual
agenda items.
Part of the Committee’s role includes:
–
assisting in the Board’s assessment of
principal and emerging risks;
–
evaluating the Company’s principal risks,
to be considered by the Board when
assessing the Company’s prospects; and
–
advising the Board on the likelihood and
the impact of principal risks materialising,
and the management and mitigation of
principal risks to reduce the likelihood of
their incidence or their impact.
A robust assessment of the principal and
emerging risks facing the Group is performed
by Group Finance following the collation of
the Group risk registers. This process identifies
those risks that could threaten future
performance and solvency or liquidity, as well
as the Group’s strategic objectives over the
coming 12 months.
The principal and emerging risks are then
presented to the Committee and are
reviewed, discussed and approved by its
members prior to submission to the Board
for final approval and inclusion in the
Annual Report and Accounts.
PwC LLP initially performed a gap analysis to
identify those gaps in the climate-related risk
reporting process, before hosting workshops
with the Committee as well as other senior
leaders across the Group to identify the key
physical risks and opportunities. The gap
analysis was shared with the Board as part of
the Committee report to the Board, and
regular updates were given to the Board
thereafter.
Climate was identified as a principal risk in
2021 but having TCFD and climate risk as a
single agenda item has given it the additional
stature throughout 2022 and enabled a more
thorough and detailed assessment of how
climate risk affects the Group in the short,
medium, and long term. Further detail about
the findings of our assessment can be found
in our TCFD report on pages 26 to 35.
Cyber and information security
Cyber was categorised as a principal risk in
2021 and following the isolated cyber incident
at Nuaire in April 2022, it became more
pronounced on both Audit Committee and
Risk Committee agendas. The Committee
considered cyber at each principal risk
review and had a single agenda item for
cyber and information security at its July
meeting, to review and approve an
implementation plan for internal data
management and protection software.
Advises the Board on its risk appetite,
tolerance and strategy as well as ensuring
that the Group is acting in accordance with
its approved risk appetite
The Committee is responsible for:
–
advising the Board on the Company’s
overall risk appetite, tolerance and
strategy, and the principal and emerging
risks the Company is willing to take
to achieve its long-term strategic
objectives; and
–
reviewing and assessing the Company’s
risk appetite and associated stress testing.
During the year the Committee reviewed
the risk appetite statement and submitted
it to the Board for review and approval
in accordance with its annual reporting
requirements. Part of the review of the risk
appetite statement and risks it is willing to
take to achieve strategic objectives includes:
–
reviewing the defined accepted tolerance
levels for individual risks in accordance with
the risk appetite statement;
–
reviewing risks in the context of the overall
strategic direction of the Group; and
–
reviewing and monitoring updates from
senior management about their principal
and emerging risks, their approach to risk
management, monitoring and mitigation
to ensure each is aligned with the Group
risk reporting structure and current
appetite.
The Committee will continue to ensure it
reviews and mitigates Group risk on an
ongoing basis, with transparent and frequent
reporting to the Board to ensure adequate
governance structures remain in place
throughout the upcoming financial year.
By order of the Board.
Paul James
Chair of the Risk Committee
14 March 2023
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Kevin Boyd
Chair of the Audit Committee for
the year ended 31 December 2022
2022 Key Achievements
Continuing investment in cyber security
defences and controls
Review of the acquisition of Keytec
Review of the draft 2021 Annual Report and
Accounts and 2022 interim results
Group Internal Auditor appointment
Areas of focus for 2023
External audit tender
Continued focus on effectiveness of internal
controls and reporting across the Group
Continued focus on the prevention of fraud,
bribery and corruption
As notified in the 2021 Annual Report, the roles
and responsibilities of the Committee were
updated during the 2021 financial year to
reflect the new committee structure, and the
resulting transfer of responsibility for
assessment, monitoring and management of
risk to the Risk Committee, in relation to which
further detail can be found on page 87 of the
Risk Committee Report. During 2022, the Audit
Committee placed its focus on the integrity
of the Group’s financial reporting practices,
internal controls, and the quality and
performance of the internal and external
auditors, providing challenge to the decisions
and judgements made by management.
As part of the external Board evaluation, the
performance of the Risk and Audit
Committees was independently evaluated
by an external third party (more detail can be
found in the Governance Report on page 79,
Risk Committee Report on page 87 and Audit
Committee Report on page 92). The results of
this evaluation showed that this separation of
responsibilities continues to be effective and
viewed as a positive change to our
governance structure. We will continue to
keep our activities under review to ensure we
comply with all applicable regulations and
that we remain confident that the Company
continues to operate in a controlled and
managed way. The main responsibilities and
activities of the Committee are detailed
further in this Report.
Areas of focus in 2022
2022 continued to be a year of ongoing
change on both a micro and macroeconomic
front, and as a result, the Committee was
required to consider the challenges this
presented and their financial and operational
implications. This Report outlines some of
these considerations in more detail.
Areas of focus included the ongoing supply
chain constraints, in particular the supply of
semiconductors and printed circuit boards in
the upstream boiler market and the supply
of blowers which inhibited customer demand
in the latter half of the 2022 financial year,
inflationary increases across all sectors
and the isolated cyber incident in Nuaire.
The Committee considered the resulting
implications of these and other challenges
for the interim and full year financial
statements, as well as the integration of the
Keytec acquisition. Throughout the year, the
Group remained committed to identifying
these challenges quickly, and proactively
mitigating them to the greatest possible
extent. The creation of the Risk Committee has
allowed the Audit Committee to focus on the
implications of these from a financial and
operational perspective, whilst the Risk
Committee has focused on managing and
mitigating the risks themselves, enabling both
Committees to deal with the challenges over
the last twelve months efficiently and
effectively. Further information in respect of
the Risk Committee’s approach to monitoring
principal and emerging risks is set out
in the Risk Committee Report.
Dear Shareholder
On behalf of the Board, I am pleased to
present the Report of the Audit Committee
(the Committee) for 2022.
The Committee is responsible for overseeing
the financial reporting processes of the
Group and ensuring they are accurate
and transparent. The primary role of the
Committee is to provide independent
oversight of the Group’s financial reporting
process, including the review and approval
of the Group financial statements and the
selection and supervision of the independent
auditors. The Committee supports the Board
in fulfilling its governance responsibilities,
ensuring that the interests of our stakeholders
are properly protected (particularly our
shareholders and customers), specifically in
relation to financial reporting. Members of
the Committee are appointed by the Board
from its Non-Executive Directors on the
recommendation of the Nomination
Committee, in accordance with the 2018
UK Corporate Governance Code (the Code)
requirements and other FRC-related
guidance. Following my appointment as
Chair of the Board on 1 November 2022,
I continued to Chair the Audit Committee
whilst a process to appoint a successor
continued, and as the result the Company
was therefore non-compliant with Provision
24 of the Code with effect from that date
until the appointment of Shatish Dasani as a
Non-Executive Director on 1 March 2023 and
as Audit Committee Chair on 7 March 2023.
Further detail on this process can be found
on page 70 of the Governance Report.
Committee Chair introduction
Audit Committee Report
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Audit Committee Report continued
Following the containment of the cyber
incident at Nuaire, during 2022, the
Committee remained committed to ensuring
they received detailed updates on the cyber
controls across the Group; to ensure they
were fully aware of the Group’s programme
of continuous improvement in this area.
Further details about the action taken by the
Committee and the Group in this regard are
set out later in this Report.
The Committee also closely monitored
communications and Group reporting
processes, ensuring that progress of the
external and internal audits remained on
track throughout the year, that internal
controls remained effective, and that actions
required were addressed in a timely manner.
The quality of the output of these reviews
relies on transparency of management, and
effective reporting and agenda planning to
ensure sufficient time is allocated during
Committee meetings to discuss these items
in sufficient detail. The reviews conducted
during the year provided the Committee with
confidence in the robustness of the financial
reporting, audit processes and control
environment. The internal audit plan
continued to operate effectively, and
continues to evolve to reflect the changing
needs of the Group. During 2023, following
nearly ten years with the Company’s current
external auditor, Ernst & Young LLP, an audit
tender process will be carried out, as required
by the Code, and an update on the results of
that tender process will be included within
the 2023 Annual Report and Accounts.
As part of its responsibilities under its Terms
of Reference, the Committee is required, on
behalf of the Board to oversee the process
for determining whether the Annual Report
and Accounts, when taken as a whole, is fair,
balanced and understandable, and provides
the information necessary for shareholders
to assess the Group’s financial position and
performance, business model and strategy.
The judgements and factors the Committee
considered when reviewing the 2022 Annual
Report are outlined on page 93, as well as its
conclusions in this regard.
As a result of its work undertaken during the
year and taking into account the feedback
from the external Board and Committee
evaluation (further details are set out on
page 79), the Committee considers that it
has acted in accordance with its Terms of
Reference and has ensured the
independence, objectivity and effectiveness
of the external and internal auditors.
This Report outlines some of the main
activities of the Committee during the
financial year.
I would like to thank my Committee
colleagues for their work and support during
the year, and I look forward to working with
Shatish Dasani, our newly appointed Audit
Committee Chair, during 2023.
Both Shatish and I will be available at the
AGM to answer any questions about the work
of the Committee.
Kevin Boyd
Chair of the Audit Committee for the year
ended 31 December 2022
14 March 2023
The Committee placed
its focus on the integrity
of the Group’s financial
reporting practices, internal
controls, and the quality and
performance of the internal
and external auditors.
Appointment of Shatish Dasani,
Audit Committee Chair
Shatish was appointed as a
Non-Executive Director on 1 March 2023,
and Audit Committee Chair on 7 March
2023 following a handover from
Kevin Boyd.
“I am delighted to have joined the Board
of Genuit Group plc, in what is an exciting
time for the Group as it embarks on the
start of its journey to implement its
refreshed strategy. Since my start date
I have been welcomed by all Board
colleagues, met key members of the
senior management and leadership
team, and been well supported by Kevin
in providing a detailed handover of
relevant Audit Committee Chair
responsibilities. I have also met with
the internal and external auditors, the
brokers and other key stakeholders,
and look forward to completing the
remainder of my induction programme
over the coming months.
I look forward to the year ahead as your
Audit Committee Chair, and will be
available at the 2023 AGM along with
Kevin Boyd to answer any questions
about the work of the Committee.”
Shatish Dasani
Audit Committee Chair
with effect from 7 March 2023
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Audit Committee Report continued
2022 in review
Members and meetings
The Committee comprises four
Non-Executive Directors, being Shatish
Dasani, Mark Hammond, Lisa Scenna and
Louise Brooke-Smith. During the year, Louise
Hardy stepped down as a Non-Executive
Director and member of the Committee,
and Shatish Dasani was appointed as a
Non-Executive Director on 1 March 2023 and
as Chair of the Committee from 7 March
2023. All Committee members are considered
to be independent in accordance with the UK
Corporate Governance Code.
In accordance with the requirements of
Provision 24 of the Code, Shatish Dasani is
designated as the Committee member with
recent and relevant financial experience.
All other members of the Committee are
deemed to have the necessary ability
and experience to understand the
financial statements.
As demonstrated in the Board skills matrix
summary in the Governance Report,
the Audit Committee as a whole has
competence relevant to the sector in
which the Group operates. The Committee
discharges its responsibilities through a
series of scheduled formal meetings during
the year. Each meeting has a formal agenda
which is linked to the events in the financial
calendar of the Group. Attendees at each
of the meetings include the Committee
members as well as, by invitation, the Chair,
the Chief Executive Officer, the Chief Financial
Officer, the Chief Operating Officer, the Group
Financial Controller, the external auditor, Ernst
& Young LLP and Grant Thornton UK LLP who
provide internal audit services to the Group.
The Company Secretary is also Secretary to
the Committee.
ensure it adequately reports to the Board on
how it has discharged its responsibilities
under these Terms of Reference.
In accordance with best practice, the
effectiveness of the Committee was
evaluated this year as part of the external
Board and Committee evaluation.
This evaluation involved an anonymous
questionnaire to encourage open feedback,
ensuring the evaluation provided a valuable
feedback mechanism for identifying
concerns, improving effectiveness and
highlighting areas for further improvement as
well as one-to-one interviews with the
third-party evaluator.
At its meeting in March 2023, the Committee
considered the results of the internal
evaluation and concluded that it had found
the Committee to be continuing to operate
The Committee held four formal meetings
during the year. In accordance with best
practice, the Committee met regularly with
the Ernst & Young LLP lead audit partner
without executive management being
present. The Committee also met with Grant
Thornton UK LLP without executive
management being present.
Governance
The responsibilities of the Committee are set
out in its Terms of Reference. The Terms of
Reference are reviewed on an annual basis
to ensure they remain appropriate and
reflect any changing governance
requirements and recommendations, with
any relevant updates made accordingly.
The Committee Terms of Reference were
reviewed and approved in November 2022
and are available on the Company’s website.
One of the Committee’s responsibilities is to
efficiently and effectively. Responses to the
questionnaire and feedback gathered during
the interview process showed that the
Committee was unanimous in its view of the
effectiveness of all functions of the
Committee. This provides the Board with a
high level of assurance that key issues are
being dealt with appropriately.
As part of the process of working with the
Board to carry out its responsibilities and to
maximise its effectiveness, meetings of the
Committee normally take place the day prior
to the Board meetings, and which the Chair
of the Committee will then provide an update
to the Board on the Committee’s discussions
and decisions. Details of the role of the
Committee and its activities in the year are
set out in the remainder of this Report.
Audit Committee 2022 – full year agenda rotation
March 2022
–
Internal audit activities and internal controls
–
Key accounting judgements, including the
Viability Statement and going concern
–
External auditor’s report, including significant
accounting and reporting matters
–
Review of Annual Report and Accounts 2021,
including the preliminary announcement,
analyst presentation, dividend and reserves,
and fair, balanced and understandable
assessment
–
Consideration of reappointment of external
auditor, including independence and
effectiveness
–
Whistleblowing, detection of fraud and
prevention of bribery
–
Cyber security
–
Review of Committee performance
August 2022
–
Internal audit activities and internal controls
–
2022 Interim report and accounts, including
key accounting judgements and the interim
results announcement and analyst
presentation
–
External auditor’s report, including
accounting standards and audit planning
–
Whistleblowing, detection of fraud and
prevention of bribery
–
Cyber security
November 2022
–
Scope for 2022 full year audit
–
Internal audit activities and internal controls
–
Review of new accounting standards and
financial reporting
–
Review of tax strategy
–
Whistleblowing, detection of fraud and
prevention of bribery
–
Cyber security
–
Governance, including Terms of Reference,
composition and experience review and
non-audit services policy
In addition to these key agenda items, discussions
with the internal and external auditor without
management took place at each meeting.
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Audit Committee Report continued
Role of the
Committee and
its activities
during the year
Independent oversight of reporting
procedures and financial statements
The Committee’s role in overseeing
reporting procedures and financial
statements includes:
–
monitoring the integrity of the financial
statements of the Group including its
annual and half-yearly reports, trading
updates, preliminary results
announcements and any other formal
announcements relating to its financial
performance;
–
reviewing significant financial reporting
issues and judgements; and
–
reviewing the content of the Annual Report
and Accounts and advising the Board on
whether, taken as a whole, it is fair,
balanced and understandable and
provides the information necessary for
shareholders to assess the Group’s
financial position and performance,
business model and strategy.
When approving the Group’s interim and
final results announcements, Committee
meetings are scheduled prior to the Board
meetings to allow the Committee to fully
consider the financial reporting judgements
made by management, prior to submitting to
the Board for approval. These considerations
are made through a review of the accounting
papers and financial reports prepared and
presented by management and reports
prepared and presented by the Group’s
external auditor.
Viability Statement
The Viability Statement is a longer-term view
of the sustainability of the Company’s
proposed strategy and business model,
considering wider economic and market
developments as well as giving a clearer and
broader view of solvency, liquidity and risk
management. Its purpose is to provide
assurance to shareholders that the Group is
financially stable and capable of meeting its
financial obligations over a longer period of
time. The Committee considered the current
Viability Statement during the year, as well as
the current three-year period and remained
of the opinion that this continued to be
appropriate. Part of its assessment of the
Viability Statement involved considering the
risk scenarios presented, the sensitivities for
the impact of the combined risks, the reverse
stress testing, and the available headroom
after applying the sensitivities. The full
statement can be found in the Directors’
Report on page 96, which contains further
detail on the process, assumptions and
testing which underpin it.
Going concern
In determining whether the Group can
continue to adopt the going concern basis,
the Committee considers and reviews the
Group’s overall resources for the foreseeable
future covering a period of at least 21 months.
Following this review, the Committee agreed
that the forecasts presented were
reasonable, and therefore the Annual Report
and Accounts have been prepared on a
going concern basis. The going concern
statement for the Group can be found
in the Directors’ Report on page 96.
Financial reporting
The significant financial reporting risks
reviewed by the Committee in respect of the
year under review were as follows:
Fair, balanced and understandable
A key requirement of the financial statements
is that they are fair, balanced and
understandable (FBU). These principles aim
to ensure that the financial statements
accurately and fairly reflect the financial
position and performance of the Group,
and that they are presented in a clear and
concise manner. To enable the Committee
to reach a conclusion as to whether the
Annual Report and Accounts meet with
these principles, it is reviewed and assessed
by the Committee in detail, to ensure that the
information being presented to shareholders
is such that it provides a reliable and
accurate representation of the financial
position and performance of the Group.
As part of this assessment, the Committee
considers and reviews the disclosures and
the processes and controls underlying its
production. Its responsibility is to ensure that
it correctly reflects the Company’s
performance in the reporting year in a clear
and concise manner in line with the FBU
principles, as well as ensuring there is
consistent formatting and terminology
throughout. Further details on this process
can be found in the Corporate Governance
Report on page 80.
Following the Committee’s assessment of the
Annual Report and Accounts, it concluded
that in its opinion, the Annual Report and
Accounts were accurate, consistent and
presented a balanced view of the Group’s
financial performance. The Committee was
therefore able to report to the Board that
it had determined that the Annual Report
and Accounts is fair, balanced
and understandable.
–
Revenue recognition and customer
rebates – the Committee considered
the operating effectiveness of controls
surrounding revenue recognition
and management’s assessment
and recognition of customer rebate
liabilities at the half year and year end.
–
Impairment of non-financial assets – the
Committee considered a detailed report
prepared by management setting out the
assumptions used in determining whether
goodwill, other intangible assets or
property, plant and equipment required
impairment for any of the Business Units.
This included a review of the discount rate
and growth factors used to calculate the
discounted projected future cash flows,
the sensitivity analysis applied, and the
discounted projected future cash flows
used to support the carrying amount
of the goodwill.
The significant estimates reviewed by the
Committee in respect of the year under
review were as follows:
–
Contingent consideration – the Committee
considered various reports prepared by
management which assess the likelihood
that targets will be achieved which trigger
a liability to the joint owners of Plura,
quantify the possible range of that liability,
and how that liability should be calculated
and disclosed in the consolidated
financial statements.
The Committee is also responsible for
considering the impact of new financial
reporting standards and legislative
requirements on the Group, reviewing the
Group’s tax strategy and recommending
the Report of the Audit Committee for
approval by the Board. All these activities
were completed during the year and
implemented as appropriate.
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Audit Committee Report continued
Selection and supervision
of independent auditors
The Committee’s responsibility for selecting
and supervising internal and external
independent auditors includes:
–
assisting the Board with the discharge
of its responsibilities in relation to internal
and external audits;
–
overseeing the relationship with the
external auditor including their
appointment, reappointment and/or
removal; approval of the scope of the
annual audit, their remuneration and the
terms of engagement; monitoring and
reviewing their independence and
objectivity, considering the effectiveness of
the audit process and reviewing the extent
of non-audit services performed; and
–
monitoring and reviewing the effectiveness
of the Group’s internal audit function in the
overall context of the Company’s risk
management system and the work of the
compliance and finance functions and the
external auditor.
Internal control and internal audit
Internal audit performs an integral role in
the Group’s governance structure and the
Committee has reviewed and approved the
scope of the rolling internal audit programme
in relation to the Group’s internal controls
and procedures at each of the meetings
held during the year. It considers the internal
audit plan, internal audit reports and action
tracker, reviewing and challenging the results
and reports from Grant Thornton UK LLP who
carry out the internal audit work, and the
adequacy of management’s responses
and proposed resolutions.
Following a review of the three-year
internal audit programme and the Group’s
ongoing requirements, a Group Internal Audit
Director has been appointed from 2023, and a
transitional arrangement is currently underway
with Grant Thornton UK LLP in this regard.
Effectiveness of the external audit process
Ernst & Young LLP confirmed its
independence in November 2022 and March
2023 as it presented to the Committee on its
determination of independence, to enable
the Committee to fully, and appropriately,
assess its independence.
Following this review, the Committee
concluded that the external auditor
remained independent. As a result, and after
considering the above matters, the
Committee considered that the audit had
been effective and recommended to the
Board that Ernst & Young LLP be reappointed
as external auditor to the Group and a
resolution to this effect will be proposed at
the 2023 AGM.
Non-audit services
The Group’s non-audit services policy
restricts the external auditor from performing
certain non-audit services in accordance
with the Revised Ethical Standard 2016 issued
by the FRC. All non-audit services proposed
to be performed by the external auditor must
be pre-approved and sponsored by a senior
executive with a detailed written
recommendation including: the nature and
scope of the proposed service, the supplier
selection process and criteria, the chosen
supplier and selection rationale, the
relationship of the individual within the
external auditor to perform the proposed
service with those undertaking the audit work,
a fee estimate and the category of non-audit
service, if relevant. In addition, the external
auditor must provide a written statement of
independence approved by the lead audit
partner. All non-audit services proposed to
be performed by the external auditor with
a fee estimate in excess of £10,000 must
also be pre-approved by the Committee.
This policy and approach further enhances
auditor objectivity and independence, and
was reviewed by the Committee at its
meeting in November 2022. There were
no exceptions to this policy during 2022.
The Risk Committee has responsibility for risk
management on behalf of the Board, and
therefore details of how risk is assessed,
managed and controlled as well as an
outline of its purpose in the governance
structure of the Group can be found in the
Risk Committee Report on page 87. Details of
the Group’s principal risks and uncertainties
and emerging risks can be found in the
Strategic Report on pages 55 to 62.
External audit appointment
The Committee carefully considers the
reappointment of the external auditor each
year prior to making its recommendation to
the Board. As part of this process, the
Committee considers the independence of
the external auditor, the effectiveness of the
external audit process, its remuneration, and
the terms of engagement. Having reviewed
the performance of Ernst & Young LLP in 2022,
the Committee has decided to recommend
to the Board that Ernst & Young LLP should be
reappointed for the 2023 audit.
In accordance with current professional
standards, the external auditor is required
to change the lead audit partner every
five years in order to protect auditor
independence and objectivity. Ernst & Young
LLP were awarded the external audit in 2012
following a competitive tender process.
The lead audit partner was rotated in 2017
and again in 2022, and the senior audit
manager was rotated in 2019 following
completion of the 2018 full-year audit.
In accordance with the Code, the
Competition and Markets Authority (CMA)
Order and the EU Audit Directive, it is the
Company’s intention to put the audit out to
tender at least every ten years from when
the Company became subject to the rotation
requirements. Accordingly, the Company
will run a competitive tender process during
2023 and report on this in the 2023 Annual
Report and Accounts.
Fraud, compliance, whistleblowing,
and UK Bribery Act
As part of its roles and responsibilities, the
Committee monitors and reviews internal
controls in the context of ethics and
compliance, with the aim of strengthening
governance systems across the Group.
Whistleblowing
The Committee recognises the importance of
effective whistleblowing policies as being an
additional tool to strengthen governance, by
ensuring a reliable system is in place to
identify and correct any unlawful or unethical
conduct. In accordance with Principle E of the
Code, a company’s workforce should be able
to raise any matters of concern and should
be able to do so with confidence.
The Committee is responsible for ensuring
adequate reporting tools and policies are in
place. As part of this, it monitors any reported
incidents under its whistleblowing policy, and
via the third-party reporting provider.
The whistleblowing policy is included in the
Employee Handbook as well as being
accessible as a standalone policy. It sets
out the procedure employees should follow
to raise legitimate concerns about any
wrongdoing in financial reporting or
other matters such as:
–
something that could be unlawful;
–
a miscarriage of justice;
–
a danger to the health and safety
of any individual;
–
damage to the environment; and
–
improper conduct.
The anonymous hotline and online reporting
tool support the internal processes and
enable employees to feel confident to freely
report any concerns they may have. This was
implemented during 2021, and has proven to
be an effective tool for employees and a
preferred method for raising concerns.
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The Company Secretary provided regular
updates to the Committee on any reports
received via the third-party reporting line,
and the action taken, where required, to
address the concerns raised.
Fraud and the UK Bribery Act
The Committee is also responsible for
reviewing the Group’s compliance
procedures for detecting fraud and the
systems and controls in place to prevent
a breach of anti-bribery legislation.
The Committee receives an annual update
on the effectiveness of the ethics and
compliance policies in place across the
Group, as well as reviewing and approving
any updated versions. These policies must
be adhered to by all employees and are
aimed at reducing the risk of fraud
occurring. The Group is committed to
a zero-tolerance position with regard to
bribery. Those employees whom the Group
considers are more likely to be exposed
to potential breaches of the Group’s
anti-bribery policy and statutory obligations
under the UK Bribery Act have been provided
with relevant guidance on compliance with
their obligations. The Group will continue to
maintain a record of all employees who have
received this guidance and request biannual
confirmations from each relevant individual
stating that they have complied with the
Group’s policy.
Cyber and information security
The Committee is responsible for ensuring
adequate cyber and information security
protections are in place across the Group.
The Committee received regular cyber
security updates from the Group IS Director
throughout the year, in addition to those
received by the Board as a whole.
Daily updates were given to the Board
immediately following the isolated cyber
incident experienced at our Nuaire business
in April 2022, which was capably and
efficiently responded to. The Committee
remains satisfied with the ongoing
investment and commitment to robust cyber
defences, which follow the fundamentals of
the NIST Framework. For completeness and to
complement the updates and investments
within cyber security, data protection and
information security was also of particular
focus for the relevant management teams
across the Group. Additional data processing
audits were conducted, and policies and
training sessions refreshed. This reiterated the
importance of cyber and information security
across the Group, and ensured employees
adequately understood this and were aware
of the implications of non-compliance.
Further detail on the ongoing improvements
and investment in cyber defence and
controls across the Group, are shown to
the right.
By order of the Board.
Kevin Boyd
Chair of the Audit Committee for the year
ended 31 December 2022
14 March 2023
Cyber controls and defences
The Group remain vigilant of cyber threats,
and the Committee is committed to
ensuring effective cyber controls and
defences exist across the Group and its
businesses. Maintaining a sustainable
strengthened cyber security posture is
deemed a key priority by the Committee,
and continued investment and mitigations
have been put in place to strengthen
these during 2022. The Group will continue
to invest in Information Security, keeping
abreast of changing environments;
monitoring changes in the external
environment closely and continuing
to follow the fundamentals of the National
Institute of Standards and Technology
(NIST) framework.
Some of the achievements of the Group
in cyber security controls are as follows:
–
Implementation of prime antivirus
solution and outsourced managed
detection & response service (MDR).
–
Implementation and approval of a
leading data security solution, giving
the ability to automatically discover,
classify and label sensitive data,
and remediate data exposure
and misconfigurations instantly.
–
Group wide-area network (WAN), with
best-in-class firewall technology, giving
next generation firewall features
including network segmentation across
every business in the Group.
–
Enhanced email security including
advance artifical intelligence (AI) and
machine learning (ML) intelligence
to drastically reduce email and
phishing threats.
–
Appointment of an Information Security
Manager to support the strategy and
deployment of new technologies,
processes and risk management.
–
Implementation of improved back up
and disaster recovery technologies
using cloud-based datacentres and
technology, allowing our businesses to
return to operations from on-premises
to cloud-based promptly.
Cyber
Audit Committee Report continued
95
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
The Company
Genuit Group plc is a public company limited
by shares, incorporated in England and
Wales, with registered number 06059130.
Since 16 April 2014, the Company has been
listed on the premium segment of the London
Stock Exchange. While the Group operates
predominantly in the UK, it does have
operations in Ireland, Italy, the Netherlands
and the Middle East.
Strategic Report
The Companies Act 2006 requires the
Company to present a fair review of the
development and performance of the
Group’s business during the financial year
and the position of the business at the end
of that year. This review is contained within
the Strategic Report on pages 11 to 62.
The principal activities of the Group
are described in the Strategic Report
on pages 11 to 41.
Financial risk management
The Group’s financial risk management
objectives and policies, including information
on financial risks that materially impact the
Group and financial instruments used by the
Group (if any), are disclosed in Note 29 to the
Group’s consolidated financial statements on
pages 167 to 169.
Viability Statement
In accordance with Provision 31 of the Code,
the Directors have assessed the prospects of
the Group over a longer period than that
required by the ‘going concern’ provision.
The Board conducted this review for a period
of three years as the Group’s Strategic Review
covers a three-year period. During 2022, the
Board carried out a robust assessment of the
principal risks facing the Group, including
those that would threaten its business model,
future performance, solvency, or liquidity.
In performing scenario analysis, the Directors
have assumed the Group’s banking facilities
and Sustainability-Linked Loan revolving
credit facility agreement of £350.0m with
a £50.0m uncommitted accordion facility
which expires in August 2027 will continue to
be available. Further, they have assumed the
separate agreement for private placement
loan notes of £25.0m will be repaid at the end
of their full term in August 2029. Within the
base case scenario, the Directors have
assumed that the Group’s volumes will
move in line with industry forecasts.
The Directors believe that the Group is
well placed to manage its business risks
successfully, having considered the current
economic outlook. In their assessment of the
viability of the Group, the Directors have
considered 6 scenarios each considering
the impact of one of the Group’s principal
risks and uncertainties, detailed on pages 55
to 62 of the Strategic Report. In addition, the
Directors have considered a combined
scenario which reflects the impact of multiple
risks. The most severe scenario considers the
impact of both a recession, with a similar
impact to that of the 2007 to 2010 Global
Financial Crisis, and a delay in recovering
increases in raw material costs of 25% from
customers. Even under these scenarios the
Group would not be required to pursue any
of its available mitigating actions in order
to avoid a breach of covenants or exhaust
available liquidity. Notwithstanding the
Directors’ expectation that they would not
need to pursue mitigating actions, they have
identified the reduction of capital expenditure
and dividend payments as the two most
significant mitigations.
The Board included this in its assessment of
the viability of the Group. Accordingly, the
Board believes that, considering the Group’s
current position, and subject to the principal
risks faced by the business, the Group will be
able to continue in operation and to meet its
liabilities as they fall due for the period up to
31 December 2025, being the period
considered under the Group’s current
three-year strategic plan.
Statutory
and other
information
Introduction
The Directors present their Annual Report
and Accounts for the year ended
31 December 2022. In accordance with the
Companies Act 2006 as amended, and the
Listing Rules and the Disclosure Guidance
and Transparency Rules, the Reports
within the Governance section of the
Annual Report and Accounts should be
read in conjunction with one another, and
with the Strategic Report. As permitted by
legislation, some of the matters normally
included in the Directors’ Report have
instead been included in the Strategic
Report (pages 11 to 62) as the Board
considers them to be of strategic
importance.
Going concern statement
The Directors have made enquiries into the
adequacy of the Group’s financial resources,
through a review of the Group’s budget and
medium-term financial plan, including cash
flow forecasts. The Group has modelled a
range of scenarios, with the base forecast
being one in which, over the 24 months
ending 31 December 2024, sales volumes
grow in line with or moderately above
external construction industry forecasts.
In addition, the Directors have considered
several downside scenarios, including
adjustments to the base forecast, a period
of significantly lower like-for-like sales,
profitability and cash flows. Consistent with
our principal risks and uncertainties, these
downside scenarios included, but were not
limited to, loss of production, loss of a major
customer, product failure, recession,
increases in interest rates and increases in
raw material prices. Downside scenarios also
included a combination of these risks and
reverse stress testing. The Directors have
considered the impact of climate-related
matters on the going concern assessment
and they are not expected to have a
significant impact on the Group’s
going concern.
At 31 December 2022, the Group had available
£179.1m of undrawn committed borrowing
facilities in respect of which all conditions
precedent had been met. These borrowing
facilities are available until at least August 2027,
subject to covenant headroom. The Directors
are satisfied that the Group has sufficient
liquidity and covenant headroom to withstand
reasonable variances to the base forecast,
as well as the downside scenarios. In addition,
the Directors have noted the range of
possible additional liquidity options available
to the Group, should they be required.
Directors’ Report
96
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Directors’ Report continued
The general powers of the Directors are also
limited by any directions given by special
resolution of the shareholders of the Company
which are applicable on the date that
any power is exercised.
Compensation for loss of office
The Company does not have arrangements
with any Director that would provide
compensation for loss of office or employment
resulting from a takeover, except that
provisions of the Company’s share plans may
cause options and awards granted under such
plans to vest on a takeover. Further information
is provided in the Directors’ Remuneration
Report on page 112.
Directors’ indemnity arrangements
Directors and officers of the Company are
entitled to be indemnified out of the assets of
the Company in respect of any liability
incurred in relation to the Company or any
associate Company, to the extent the law
allows. In this regard, the Company is
required to disclose that, under Article 224 of
the Articles, the Directors have the benefit of
an indemnity, to the extent permitted by the
Companies Act 2006, against liabilities
incurred by them in the execution of their
duties and exercise of their powers.
This indemnity has been in place since the
Company’s listing in 2014 and remains in
place. The Company has purchased and
maintained throughout the financial period
Directors’ and Officers’ liability insurance.
Share capital
As at 31 December 2022, the share capital of
the Company was 249,170,247 ordinary shares
of £0.001 each, of which 375 ordinary shares
were held in treasury. Details of the Company’s
share capital are disclosed in Note 24 to the
Group’s consolidated financial statements on
page 162. As at 14 March 2023, the share
capital of the Company was 249,170,247
ordinary shares of £0.001 each, of which 375
ordinary shares were held in treasury.
As a result, the Directors have satisfied
themselves that the Group has adequate
financial resources to continue in operational
existence for a period of at least the next
21 months. Accordingly, they continue to
adopt the going concern basis in preparing
the consolidated financial statements.
Directors
The current Directors’ biographies are set out
on pages 68 and 69. In accordance with the
Code, each Director will retire annually and
put themselves forward for re-election at
each AGM of the Company. Shatish Dasani
joined the Board on 1 March 2023 so will offer
himself for election at the 2023 AGM, and for
re-election annually thereafter.
Appointment and replacement of Directors
The rules about the appointment and
replacement of Directors are contained in
our Articles of Association (the Articles).
They provide that Directors may be
appointed by ordinary resolution of the
members or by a resolution of the Directors.
Directors must retire and put themselves
forward for election at the first AGM
following their appointment and every
third anniversary thereafter. However, the
Directors wishing to continue to serve as
members of the Board will seek re-election
annually in accordance with the Code.
Details of the Non-Executive Directors’ letters
of appointment are given on page 78 under
‘Appointment and tenure’. The Executive
Directors have service contracts under which
12 months’ notice is required by both the
Company and the Executive Director.
Powers of Directors
The general powers of the Directors set out
in Article 104 of the Articles provide that the
business of the Company shall be managed
by the Board which may exercise all the
powers of the Company, subject to any
limitations imposed by applicable legislation
or the Articles.
Authority of the Directors to allot shares
The Company passed a resolution at the AGM
held on 19 May 2022 authorising the Directors
to allot ordinary shares up to an aggregate
nominal amount of £165,446.18 (representing
approximately two-thirds of the ordinary share
capital). On 7 April 2022, the Company allotted
1,000,000 shares pursuant to this authority in
connection with the Company’s employee
share schemes. This authority will expire at
the Company’s 2023 AGM and the Directors
will be seeking a new authority to allot shares,
to ensure that the Directors continue to have
the flexibility to act in the best interests of
shareholders, when opportunities arise, by
issuing new shares. There are no current
plans to issue new shares except in
connection with employee share schemes.
Issue of shares
A special resolution was passed at the AGM
held on 19 May 2022 granting the Directors
the authority to issue shares on a
non-pre-emptive basis up to an aggregate
nominal amount of £12,408.46 (representing
12,408,464 ordinary shares or approximately
5% of the ordinary share capital). A special
resolution was also passed granting the
Directors the authority to issue shares on a
non-pre-emptive basis in respect of an
additional 5% of the ordinary share capital
in connection with an acquisition or
specified capital investment.
These authorities will expire at the Company’s
2023 AGM. The Directors will therefore be
seeking a new authority to issue shares for
cash on a non-pre-emptive basis up to
£166,113.25, and the Directors also propose
to seek authority to issue non pre-emptively
share capital of the Company in accordance
with the recently updated Pre-Emption
Group’s Statement of Principles 2022 on
Disapplying Pre-Emption Rights, being no
more than 24% in total rather than the
previous thresholds of 10% in accordance
with the Pre-Emption Group’s Statement of
Principles published in 2015. The Directors
will also seek authority to issue
non-pre-emptively for cash shares up to
£24,916.99 (representing 24,916,987 ordinary
shares or approximately 10% of the ordinary
share capital) for use only in connection with
an acquisition or specified capital investment,
and a further authority of no more than 2%,
to be used only for the purposes of making a
‘follow on offer’, as set out in the Pre-Emption
Group guidance.
Purchase of own shares by the Company
A special resolution was passed at the AGM
held on 19 May 2022 granting the Directors
the authority to make market purchases of
up to 37,200,575 ordinary shares with a total
nominal value of £37,200.58 representing
approximately 14.99% of the Company’s
issued ordinary share capital. The authority
to make market purchases will expire at the
Company’s 2023 AGM and the Directors will
be seeking a new authority to make market
purchases up to 14.99% of the Company’s
issued ordinary share capital, which will only
be exercised if the market and financial
conditions make it advantageous to do so.
Further details are set out in the explanatory
notes of the notice convening the AGM.
Rights attaching to shares
The rights attaching to the ordinary shares
are summarised as:
–
the ordinary shares rank equally for voting
purposes;
–
on a show of hands each shareholder has
one vote and on a poll each shareholder
has one vote per ordinary share held;
–
each ordinary share ranks equally for any
dividend declared;
–
each ordinary share ranks equally for any
distributions made on a winding-up of the
Company;
97
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Substantial shareholders
As at 31 December 2022 and 14 March 2023,
the Company was aware of the interests in
voting rights representing 3% or more of the
issued ordinary share capital of the
Company set out below. This information was
correct at the date of notification. It should be
noted that these holdings may have
changed since they were notified to the
Company. However, notification of any
change is not required until the next
applicable threshold is crossed.
Auditor
A resolution to reappoint Ernst & Young LLP
as the Company’s external auditor and to
authorise the Directors to fix the auditor’s
remuneration will be proposed at the
2023 AGM.
Directors’ statement of disclosure of
information to auditor
Each of the Directors has confirmed that
as at the date of this Report:
–
So far as each Director is aware, there
is no relevant audit information of which
the Company’s auditor is unaware; and
–
The Directors have taken all reasonable
steps that they ought to have taken as
Directors in order to make themselves
aware of any relevant audit information
and to establish that the Company’s
auditor is aware of that information.
This confirmation is given and should
–
each ordinary share ranks equally in the right
to receive a relative proportion of shares in
the event of a capitalisation of reserves;
–
the ordinary shares are freely transferable;
and
–
no ordinary shares carry any special rights
with regard to control of the Company and
there are no restrictions on voting rights.
Amendment to the Company’s Articles
The Company may alter its Articles by special
resolution passed at a general meeting of
the Company. A resolution to amend the
Articles was voted on and passed by
shareholders at the 2020 AGM.
Political donations
The Group made no political donations
during the year.
Greenhouse gas emissions
Information on the Group’s greenhouse gas
emissions is set out in the Strategic Report
on pages 24 and 25, and forms part of this
Report by reference.
Future developments within the Group
The Strategic Report contains details of
likely future developments within the
Group. The Group’s research and
development costs are disclosed in Note 6 to
the Group’s consolidated financial
statements on page 152.
Overseas operations
As explained in the Strategic Report, the
Group operates in the UK, Ireland, Italy,
the Netherlands and the Middle East.
Post balance sheet events
There have been no significant post balance
sheet events to report.
Principal risks and uncertainties
The Board has carried out a robust
assessment of our current key risks and these
are summarised in the Principal Risks and
Uncertainties section of the Strategic Report
on pages 55 to 62.
Results and dividends
An interim dividend of 4.1 pence per share
was paid on 28 September 2022. The Board
recommends a final 2022 dividend of 8.2
pence per share.
Shareholders will be asked to approve the
final dividend at the AGM, for payment on
24 May 2023 to shareholders whose names
appear on the register on 21 April 2023.
Total ordinary dividends paid and proposed
for the year amount to 12.3 pence per share
or a total return to shareholders of £30.5m.
Employees
The Group is committed to employment
principles which not only follow best practice,
but are based on equal opportunities for all
colleagues, irrespective of gender, pregnancy,
race, colour, nationality, ethnic or national
origin, disability, sexual orientation, age, marital
or civil partner status, gender reassignment or
religion or belief. Full and fair consideration is
given to applications for employment from
disabled persons, having regard to their
particular aptitudes and abilities. The Group
encourages and supports the continued
employment and training, career
development and promotion of disabled
persons employed by the Group; including
making reasonable adjustments where
required. If any employee becomes disabled,
every effort is made by the Group to support
and ensure their continued employment,
either in the same or an alternative position,
with appropriate retraining given if necessary.
The Board is aware of its obligations to engage
with employees and the Group’s wider
stakeholders, as outlined under The Companies
(Miscellaneous Reporting) Regulations.
Further detail of its activities during the year
can be found in our Stakeholder Engagement
section on pages 42 to 45, our s172 statement
on pages 46 to 48, and our Board employee
engagement activities on page 76 of
the Governance Report.
be interpreted in accordance with
the provisions of Section 418 of the
Companies Act 2006.
Requirements of the Listing Rules
Apart from the details of any long-term
incentive scheme as required by Listing Rule
9.4.3.R, which is disclosed in the Directors’
Remuneration Report on pages 114 to 126,
disclosure of the information listed in Listing
Rule 9.8.4R is not applicable.
Annual General Meeting
The 2023 AGM is scheduled to be held on
18 May 2023. A full description of the business
to be conducted at the meeting is set out in
the separate notice of AGM.
By order of the Board.
Emma Versluys
Company Secretary
14 March 2023
Directors’ Report continued
As at 31 December 2022
As at 14 March 2023
NAME OF SHAREHOLDER
Ordinary
shares
%
Voting Rights
Ordinary
shares
%
Voting Rights
Impax Asset Mgt
19,896,222
7.99
19,896,222
7.99
abrdn
19,634,188
7.88
15,241,044
6.12
Liontrust Asset Mgt
13,171,979
5.29
11,028,911
4.43
Lansdowne Partners
11,949,195
4.80
11,819,001
4.74
Franklin Templeton Investments
11,129,699
4.47
11,122,000
4.46
98
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
The Directors are responsible for
preparing the Annual Report and
the Group’s consolidated financial
statements in accordance with
applicable United Kingdom law
and regulations.
Company law requires the Directors to
prepare financial statements for each
financial year. Under that law the Directors
have elected to prepare the Group’s
consolidated financial statements in
accordance with UK-Adopted International
Accounting Standards (IFRSs).
Under company law the Directors must not
approve the Group’s consolidated financial
statements unless they are satisfied that they
give a true and fair view of the state of affairs
of the Group and of the profit or loss of the
Group for that period.
In preparing the Group’s consolidated
financial statements the Directors are
required to:
–
select suitable accounting policies in
accordance with IAS 8 Accounting Policies,
Changes in Accounting Estimates and
Errors and then apply them consistently;
–
present information, including accounting
policies, in a manner that provides relevant,
reliable, comparable and understandable
information;
–
make judgements and accounting
estimates that are reasonable and
prudent;
–
provide additional disclosures when
compliance with the specific requirements
in IFRSs is insufficient to enable users to
understand the impact of particular
transactions, other events and conditions
on the Group’s financial position and
financial performance;
–
state whether IFRSs have been followed,
subject to any material departures
disclosed and explained in the Group’s
consolidated financial statements; and
–
prepare the Group’s consolidated financial
statements on the going concern basis
unless it is appropriate to presume that the
Group will not continue in business.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Group’s
transactions and disclose with reasonable
accuracy at any time the financial position
of the Group and enable them to ensure
that the Group’s consolidated financial
statements comply with the Companies
Act 2006. They are also responsible for
safeguarding the assets of the Group and
hence for taking reasonable steps for the
prevention and detection of fraud and
other irregularities.
Under applicable law and regulations, the
Directors are also responsible for preparing
a Strategic Report, Directors’ Report, Section
172 Statement, Remuneration Report and
Corporate Governance Statement that
comply with that law and those regulations.
The Directors are responsible for the
maintenance and integrity of the corporate
and financial information included on the
Company’s website.
Directors’ responsibility statement
The Directors confirm, to the best of their
knowledge:
–
the Group’s consolidated financial
statements, prepared in accordance with
UK-Adopted International Accounting
Standards give a true and fair view of the
assets, liabilities, financial position and
profit or loss of the Company and
undertakings included in the consolidation
taken as a whole
–
the Annual Report and Accounts, including
the Strategic Report, includes a fair review
of the development and performance of
the business and the position of the
Company and undertakings included in the
consolidation taken as a whole, together
with a description of the principal risks and
uncertainties that they face
–
they consider the Annual Report and
Accounts, taken as a whole, is fair,
balanced and understandable and
provides the information necessary for
shareholders to assess the Group’s
position, performance, business model
and strategy
By order of the Board.
Joe Vorih
Chief Executive Officer
Paul James
Chief Financial Officer
14 March 2023
Directors’ Responsibilities Statement
99
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Remuneration
101
Letter from the Chair of the
Remuneration Committee
104 Remuneration at a glance
105 Remuneration Policy
114
Annual Report on Remuneration
100
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
100
Genuit Group plc
Annual Report & Accounts 2022
Aligning remuneration with
Company strategy
The Policy is designed to encourage
achievement of our strategic goals and
priorities, details of which are set out on
pages 105 to 113, by rewarding in line with
underlying Company performance whilst
encouraging leadership behaviour which
carries an appropriate level of risk. This is
achieved by an annual bonus arrangement,
which is linked to achieving financial and
non-financial targets, as well as a long-term
incentive plan, which only rewards for
shareholder value creation and delivery
of long-term earnings growth.
Executive remuneration in 2022
2022 was a challenging year with tough
market conditions arising from a
combination of double digit inflation and
increases to interest rates. In this context, the
Company delivered resilient performance,
passing through rising costs where possible
at the same time as continuing to offer
competitive pricing to our valued customers.
Further details are set out in the Chief
Executive Officer (CEO) and Chief Financial
Officer (CFO) reviews on pages 7 to 10 and 50
to 54. In 2022, we achieved an underlying
operating profit of £98.2m and an underlying
basic earnings per share of 30.8 pence.
Despite the difficult market conditions
detailed above, we delivered solid
performance in partially achieving against
our EBIT margin and working capital targets.
As a result, the Committee determined that,
in respect of 2022 performance, Joe Vorih,
Paul James, and Matt Pullen each earned a
bonus of 13% of the maximum potential
annual bonus. In accordance with the Policy,
one third of this bonus will be deferred into
shares. The same approach was used to
determine the annual bonus outcome across
the Group. The Committee is comfortable
that the formulaic outcome of the bonus
reflects the wider performance of the
business, and therefore no adjustments to
the payouts are required.
With regards to performance over the longer
term, the 2020 Long-Term Incentive Plan (LTIP)
Awards were granted during the pandemic.
As a result, the decision was taken to set a sole
Total Shareholder Return (TSR) performance
target, given the challenges with setting
meaningful targets during 2020, and in light
of the fact that financial guidance was
suspended during the Covid-19 pandemic.
The Company’s TSR performance was
assessed against FTSE 250 companies that
are classified as Industrials by the Industry
Classification Benchmark. Performance was
assessed over the three financial years to
31 December 2022. As a result of below median
TSR performance compared against our FTSE
250 industrials comparator group, the award
will not vest and all options outstanding will
lapse in June 2023.
The Committee is comfortable that the Policy
operated as intended during the year.
2022 LTIP Awards
In April 2022, the Committee approved the
grant of LTIP awards to the Executive Directors
and other senior management. Award levels
were 150% of annual salary for Joe Vorih, Paul
James and Matt Pullen. These award levels
are below the maximum of 200% of annual
salary permitted under the current Policy.
Lisa Scenna
Chair of the Remuneration
Committee
2022 Key Achievements
Management of key remuneration issues in a
challenging inflationary environment
Review of remuneration structure and targets for
new CEO and for short and long-term incentives
More formalised and improved process
for wider workforce engagement in relation
to remuneration, in conjunction with the
Chief People Officer and designated NED
Areas of focus for 2023
Review the Policy ahead of the 2024 AGM
following a review of Group-wide remuneration
arrangements
Engagement with investors ahead of 2024 AGM
Performance against the targets set will be
reviewed regularly throughout the year
Engagement with the wider workforce on
Executive remuneration and consideration of
employee views during the Policy review
Dear Shareholder
I am pleased to present the Directors’
Remuneration Report (the Report) for the year
ended 31 December 2022, having taken over
as Chair of the Committee in September 2022
when Louise Hardy stepped down from
the Board and as Committee Chair. On behalf
of the Board, I wish to thank Louise for the work
she undertook while Chair of the Committee.
The Report is split into two sections in line with
legislative reporting regulations:
–
The Remuneration Policy (the Policy) contains
details of the various components of the
Policy, which was approved by shareholders
at our 2021 Annual General Meeting (AGM)
and had effect from that date.
–
The Annual Report on Remuneration
contains details of remuneration received
by Directors in 2022 and also contains full
details of how we intend to implement the
Policy during 2023. The Annual Report on
Remuneration will be subject to an advisory
vote at the 2023 AGM. Further details are
set out on pages 114 to 126.
This Directors’ Remuneration Report is
compliant with Schedule 8 of The Large
and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2013
(and subsequent amendments), the UK
Listing Authority Listing Rules and the
Companies Act 2006 and has been prepared
on a ‘comply or explain’ basis with regard
to the remuneration provisions included in
the UK Corporate Governance Code 2018
(the Code).
Committee Chair introduction
Remuneration Committee Report
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Financial Statements
Remuneration Committee Report continued
The Committee considered a number
of possible performance measures, and
concluded that it was appropriate that
a combination of stretching earnings per
share (EPS) growth targets, relative Total
Shareholder Return (TSR) targets, and
sustainability targets aligned with the key
elements of the Company’s sustainability
strategy, provided an appropriate basis for
rewarding the successful delivery of
longer-term strategic priorities, Company
growth and shareholder value.
In light of the prevailing share price at the time
of grant, the Committee agreed the inclusion
of a windfall provision in relation to the 2022
awards. The Committee will determine
whether there has been a windfall gain at the
time of vesting. In doing so, consideration will
be given to the share price performance over
the six months immediately following grant
(i.e. is there any evidence of a short-term
bounce in the share price) and any other
factors it considers appropriate.
Board changes
Martin Payne stepped down from the Board
and his role as CEO in February 2022. In the
context of his departure having been
mutually agreed, he continued to receive
his contractual entitlements through to his
cessation of employment on 20 May 2022
and was treated as a good leaver in
connection with his incentives. Mr Payne
remains subject to the Company’s
post-cessation of employment share
ownership guidelines. Page 123 provides
further details of the terms of his cessation of
employment.
Joe Vorih was appointed as CEO with effect
from 28 February 2022, and was recruited on
a base salary of £560,000, details of which
were outlined in the 2021 Directors’
Remuneration Report.
Both Joe Vorih and Matt Pullen (who was
appointed on 1 November 2021) were eligible
to receive replacement share awards for
awards which lapsed in connection with
joining Genuit. Further details are set out on
pages 122 and 123 and on page 109 in the 2021
Annual Report.
Ron Marsh retired from the Board on
31 December 2022 after completing nearly
nine years of service. After a full externally
facilitated search process, Kevin Boyd was
appointed as Ron Marsh’s successor as the
Company’s Chair with effect from 1 November
2022. Ron Marsh remained on the Board until
31 December to assist with the handover of
the Chair role.
As a part of the work undertaken in respect
of the search for a successor to Ron Marsh,
the Chair fee was reviewed. The market data
suggested that the current fees payable
were below market due to the growth in the
size and complexity of the Company.
Taking into account the market positioning
and the time commitment for the role, the
Chair fee was increased to £200,000, effective
from 1 November 2022.
Louise Hardy stepped down from the
Board and as the Committee Chair on
30 September 2022. I was appointed as Chair
of the Committee with effect from the same
date. I would like to thank Louise for her hard
work and contribution as Committee Chair,
and wish her every success for the future.
Key remuneration decisions for 2023
The implementation of the Policy for our
Executive Directors for 2023 is outlined on
pages 105 to 113. Key decisions made by the
Committee in relation to 2023 include:
–
During the year the Committee reviewed
the salary increases for the wider
workforce, taking into account high inflation
and the increase in cost of living. As a result
of the review, the Committee determined
that there should be a tiered approach to
salary increases, favouring the lowest paid.
On this basis, salary increases for the wider
workforce ranged from 3%-6%, with the
higher increases focused on employees
earning less than £35,000 per annum.
Therefore, the Remuneration Committee
were comfortable with an increase of 3% in
salary for Executive Directors.
–
Paul James’s pension provision reduced
from 15% of salary to 5% of salary with effect
from 1 January 2023 to achieve alignment
with the typical UK workforce provision.
–
The maximum bonus opportunity in FY 2023
will be 150% of salary for Joe Vorih and 125%
of salary for the other Executive Directors.
With regard to the LTIP quantum of FY 2023
awards, the Committee intends to make
awards at 150% of salary to the Executive
Directors. In recognition of current share
price volatility, the Committee intends to
include the ability to adjust the number of
shares vesting in the FY 2023 long-term
incentive award in the event there is
perceived to be a windfall gain on vesting.
–
During the year, the Committee reviewed
the performance measures for the annual
bonus and determined that the working
capital measure should be replaced by
operating cash flow conversion, to
encourage longer-term behaviours in
relation to working capital. In addition, the
total weighting on EBIT and EBIT margin was
reduced from 75% to 65%, resulting in a
corresponding increase in the weighting
of the strategic objectives from 10% to 20% to
better align the annual bonus with the
in-year objectives that have been set to
contribute towards the longer-term delivery
of sustainable shareholder value. As a result
of the review, the performance measures to
be used to assess Company performance
in 2023 will include Group underlying EBIT,
Group EBIT margin and operating cash flow
conversion targets, which determine 80%
of the annual bonus. Specific strategic
objectives, closely aligned to the Company’s
refreshed strategy outlined at the Capital
Markets Day in November 2022, will operate
for the remaining 20%. In addition, a health
and safety and a compliance override will
be operated for the first time, in relation to
which the Committee will have discretion to
reduce any annual bonus payable in the
event that certain circumstances arise.
–
In line with the weightings and measures
for the 2022 LTIP, the proportion of the LTIP
subject to underlying diluted EPS will be set at
50% of the 2023 awards, with relative TSR
determining 25% of the vesting of the awards
and the remaining 25% subject to defined and
measurable long-term sustainability targets.
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Financial Statements
–
The Committee intends to undertake a final
review of the range of targets to apply to the
2023 LTIP awards prior to grant to ensure that
any changes to the external environment
can be taken into account. The current
intention is that the underlying diluted EPS
targets will require EPS to be at least 30.1
pence for FY 2025 for threshold vesting to
take place, with maximum vesting requiring
EPS to be at least 35.6 pence. The range of
EPS targets has been set in light of both
internal planning, the market’s expectations
for our future performance and current
market conditions that include higher
interest and corporate tax rates in the UK.
Given the uncertainty around
future corporate tax rates in the UK, it is the
Committee’s intention to restate the targets
to the extent that there are material changes
to the current published statutory corporate
tax rates during the performance period, to
ensure that there will be a strong relationship
between performance and reward.
The targets are considered similarly
challenging to those set in prior years in this
context. The TSR targets will require Group
performance to be between median and
upper quartile versus our FTSE 250 Industrial
comparator companies for threshold to
maximum vesting to take place.
–
The sustainability targets are set to be
similarly challenging to the EPS and TSR
targets and include increasing the amount
of recycled plastics in our products,
reducing our emissions intensity and
achieving Gold Membership of The 5% Club,
which supports employees with acquiring
the right skills to achieve future success.
The sustainability targets directly align with
the 2025 targets first set out to the market at
our Capital Markets Event in November 2020.
–
The range of financial targets set for the
three years ending 31 December 2025 have
been set to be similarly challenging to those
set in prior years. The targets were set with
reference to both internal plans and
external market expectations for future
performance, both of which were influenced
by market conditions such as relatively high
rates of inflation and interest rates.
The Committee believes that this combination
of short-term and longer-term metrics and
targets will provide a fair and rounded
assessment of Company performance.
Context of Director pay within the Company
During the year, the Committee reviewed the
analysis of the overall gender pay gap and
equity of role-based pay within the Company.
The Board and the Committee were satisfied
appropriate actions were being taken
and will continue to monitor the situation
going forward.
As required by legislation we have included
pay ratios between the CEO and our wider
workforce using remuneration earned in
2022. As part of its discussions on this issue,
the Committee noted that the ratio was
consistent with the scope and responsibilities
of the different roles undertaken by the
individuals included in the analysis, and that
the ratios were within the range disclosed
by other FTSE 250 companies to date.
Louise Brooke-Smith is the Company’s
appointed Non-Executive Director with
responsibility for employee engagement
which includes, where appropriate,
engagement with employees on how
executive remuneration aligns with
wider Company pay policy.
Given that the remuneration structures were
not raised as a material issue during the
engagement with employees, it was not
considered necessary to make any changes
to the current remuneration structures.
Further detail on this role is set out in the
Governance Report on page 76. We have set
out our compliance with Provision 40
of the Code in more detail on page 105.
Shareholder engagement
The Committee consults with its larger
shareholders on executive pay matters,
where considered appropriate. As there are
no significant changes in the implementation
of the Policy, we have not carried out a
further formal consultation with shareholders
in relation to the Policy or its operation in
2023. However, I am always happy to make
myself available to shareholders to discuss
any concerns or feedback they may have.
We will consult with shareholders during the
Policy review process ahead of the 2024 AGM,
and I will be available to answer questions on
the Policy and the Annual Report on
Remuneration at the upcoming AGM.
I hope you will find this report to be clear and
helpful in understanding our remuneration
practices and that you will be supportive of
the resolution relating to remuneration at
the AGM.
Lisa Scenna
Chair of the Remuneration Committee
14 March 2023
Remuneration Committee Report continued
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Financial Statements
Remuneration at a glance
Incentive Performance
Snapshot 2022
Long-Term Incentive Plan Performance
Performance
Achievement
(% of max)
Below the median TSR
performance relative to
comparator group
0%
Annual bonus
Performance
Achievement
(% of max)
Underlying EBIT target
0%
EBIT margin %
9.56%
Working capital target
3.80%
Strategic targets
0%
Incentive Timelines
Annual General Meeting
The Annual Report on Remuneration will
be subject to an advisory shareholder vote at
our AGM scheduled to be held on 18 May 2023
Implementation for 2023
Fixed pay
Base salary
Increases for all Executive Directors (effective from 1 January):
Joe Vorih
Paul James
Matt Pullen
+3.0% TO
£576,800
+3.0% TO
£350,200
+3.0% TO
£350,097
Benefits
No change
Pension
5% of salary for Joe Vorih, Paul James and Matt Pullen
Share Ownership
–
200% of salary in employment share ownership guideline and a post-employment requirement to retain the
lower of the shares held at cessation of employment and 200% of salary for two years
Variable pay
Bonus
Joe Vorih
Paul James
Matt Pullen
150%
OF SALARY
125%
OF SALARY
125%
OF SALARY
–
Subject to underlying EBIT, EBIT margin, operating cash flow conversion targets and strategic objectives
–
33% deferred into shares. Half the shares vest two years from grant and half three years from grant
LTIP
Joe Vorih
Paul James
Matt Pullen
150%
OF SALARY
150%
OF SALARY
150%
OF SALARY
–
Awards subject to underlying diluted EPS, relative TSR and sustainability performance measures
–
Two year post-vesting holding period applies
Year 1
Year 2
Year 3
Year 4
Year 5
Long-
term
incentive
Annual
bonus
Key
Performance period
Deferral/holding period
Total Remuneration (£'000s)
Full details are disclosed on page 117
Joe Vorih
Paul James
Matt Pullen
0
1,000
800
600
400
200
Salary
Benefits
Pension
Annual bonus
Long-term Incentive
Other
Key
2022
2021
2022
2021
2022
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Remuneration
Financial Statements
This part of the
Report sets out
the Directors’
Remuneration
Policy (the Policy).
The Company’s current Policy was approved
by shareholders at the 2021 AGM following
consultation with shareholders and the
shareholder advisory bodies. This part of
the Report sets out the Policy. Details of
the changes to the previous policy can
be found in the 2020 Annual Report and
Accounts. This Policy applied from the
date of approval and it is intended that
it will apply for three years from approval,
therefore the next remuneration policy
will be put to shareholders for approval in
2024. The information provided in this section
of the Directors’ Remuneration Report is
not subject to audit.
Our Policy and practices are designed to
support strategy and promote long-term
sustainable success. Executive remuneration
is aligned to Company purpose and values,
especially with the increased emphasis on
sustainability in the application of Policy from
2021, and our overall Policy is clearly linked to
the successful delivery of the Company’s
long-term strategy.
Corporate
Governance
Code Requirements
In its application of the Policy in line with the
UK Corporate Governance Code (the Code),
the Policy has been tested against the six
factors listed in Provision 40 of the Code
as follows:
Remuneration Policy
Clarity
Remuneration arrangements should be
transparent and promote effective engagement
with shareholders and the workforce
Remuneration arrangements are clearly
articulated within the Annual Report and
Accounts to shareholders and other stakeholders.
The Policy is clearly disclosed on pages 105 to 113
and the implementation of the Policy is set out on
pages 114 to 126. Before updating the Policy, extensive
consultation with the Company’s major shareholders
and the leading advisory bodies took place. All
feedback was carefully reviewed and considered,
to ensure that the arrangements proposed were
clear, understandable and transparent, and
clearly aligned to stakeholder interests.
Risk
Remuneration arrangements should ensure
reputational and other risks from excessive
rewards, and behavioural risks that can arise
from target-based incentive plans, are identified
and mitigated
The Policy has been designed to discourage
inappropriate risk taking through a weighting of
incentive pay towards long-term incentives, the
balance between financial and non-financial
measures in the annual bonus and bonus
deferral, recovery provisions, and shareholding
requirements. The Committee therefore
believes that the performance targets in place
for the incentive schemes provide appropriate
rewards for stretching levels of performance
without driving behaviour which is inconsistent
with the Company’s risk profile. In addition, to
avoid conflicts of interest, Committee members
are required to disclose any conflicts or
potential conflicts ahead of Committee
meetings. No Executive Director or other
member of management is present when
their own remuneration is under discussion.
Simplicity
Remuneration structures should avoid
complexity and their rationale and operation
should be easy to understand
Our remuneration arrangements are regularly
reviewed to ensure they are as simple as
possible and in line with market practice,
whilst at the same time incorporating the
necessary structural features to ensure a strong
alignment to Group performance and strategy.
Additional steps are taken to ensure these are
effectively communicated and understood by
all participants.
Predictability
The range of possible values of rewards to
individual Directors and any other limits or
discretions should be identified and explained
at the time of approving the Policy
The Annual Report on Remuneration clearly sets
how the Policy has been applied during the
year, as well as the Committee’s intentions for
the following reporting year. This is put to a
shareholder vote at each Annual General
Meeting of the Company. Elements of the Policy
are subject to caps and dilution limits. Examples
of how remuneration varies depending on
performance is set out in the scenario charts.
Any incentive payout is ultimately at the
discretion of the Committee.
Proportionality
Remuneration arrangements should ensure
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
There is an equal balance between short-term
and long-term incentives and performance
conditions include both financial and
non-financial performance linked to strategy.
The Policy was updated in 2021 which increased
the proportion of the annual bonus payable
to Executive Directors which is required to be
deferred into shares, further aligning short-term
incentives with long-term performance.
All incentive targets are set to be stretching
and incentivising. The Committee has discretion
to override formulaic outturns to ensure that
they are appropriate and reflective of
overall performance.
Alignment to culture
Incentive schemes should drive behaviours
consistent with Company purpose, values
and strategy
Variable incentive schemes, performance
measures and underpins are designed to be
consistent with the Company’s purpose, values
and strategy. In 2020 we refined our performance
metrics to include sustainability targets in our
long-term incentive plan which reflects the
increasing importance of sustainability within
our future strategy, rewarding for supporting the
Company’s growth-focused, sustainability centric
culture. The Sharesave Plan is in place for all
eligible employees across the Group (in the UK
and overseas), to encourage them to become
shareholders and have a share in our future growth.
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Financial Statements
Remuneration Policy continued
Executive Directors
Fixed Pay
Base Salary
Purpose and link to strategy
To appropriately recognise skills, experience and responsibilities and attract and retain talent by ensuring salaries are market competitive.
Operation
Generally reviewed annually with any increase normally taking effect from 1 January, although the Committee may award increases at other times of the year if it considers it appropriate.
The review takes into consideration a number of factors, including (but not limited to):
–
The individual Director’s role, experience and performance.
–
Business performance.
–
Market data for comparable roles in appropriate pay comparators.
–
Pay and conditions elsewhere in the Group.
Maximum opportunity
No absolute maximum has been set for Executive Director base salaries. Current Executive Director salaries are set out in the Annual Report on Remuneration section of this
Remuneration Report.
Any annual increase in salaries is at the discretion of the Committee taking into account the factors stated in this table and the following principles:
–
Salaries would typically be increased at a rate consistent with the average salary increase for UK employees.
–
Larger increases may be considered appropriate in certain circumstances (including, but not limited to, a change in an individual’s responsibilities or in the scale of their role
or in the size and complexity of the Group).
–
Larger increases may also be considered appropriate if a Director has been initially appointed to their position on the Board at a lower than typical salary.
Performance conditions and provisions
for recovery of sums paid
(1)
No performance conditions.
Recovery and withholding provisions do not apply.
Benefits
Purpose and link to strategy
To provide market-competitive benefits.
Operation
Benefits currently include company car (or car allowance), income protection insurance, private family medical insurance, permanent health insurance and life assurance
of four times annual salary. The Committee has discretion to add to or remove benefits provided to Executive Directors.
Executive Directors are entitled to reimbursement of reasonable expenses. Executive Directors also have the benefit of a qualifying third-party indemnity from the Company
as well as Directors’ and Officers’ liability insurance.
Maximum opportunity
There is no overall maximum as the level of benefits depends on the annual cost of providing individual items in the relevant local market and the individual’s specific role.
Performance conditions and provisions
for recovery of sums paid
(1)
No performance conditions.
Recovery and withholding provisions do not apply.
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Remuneration Policy continued
Pension
Purpose and link to strategy
To provide market-competitive retirement benefits.
Operation
Current policy is for the Company to contribute to the Group Pension Plan, a personal pension scheme and/or provide a cash allowance in lieu of pension.
Maximum opportunity
New joiners will receive a pension-related contribution in line with the wider workforce (currently 5% of salary). Incumbent Executive Directors receive a pension-related
contribution of 5% of salary, the level of the wider workforce.
Performance conditions and provisions
for recovery of sums paid
(1)
No performance conditions.
Recovery and withholding provisions do not apply.
Variable Pay
Annual Bonus
(2)(3)
Purpose and link to strategy
To link reward to key financial and operational targets for the forthcoming year.
Additional alignment with shareholders’ interests through the operation of bonus deferral.
Operation
The Executive Directors are participants in the annual bonus plan which is reviewed annually to ensure that bonus opportunity, performance measures and targets are
appropriate and supportive of the business plan.
No more than two thirds of an Executive Director’s annual bonus is delivered in cash following the release of audited results and the remaining amount is deferred into an
award over Company shares under the Deferred Share Bonus Plan.
–
Deferred awards are usually granted in the form of conditional share awards or nil-cost options (and may also be settled in cash).
–
Deferred awards usually vest in two equal tranches two and three years after award although may vest early on leaving employment or on a change of control
(see later sections).
–
An additional payment (in the form of cash or shares) may be made in respect of shares which vest under deferred awards to reflect the value of dividends which would
have been paid on those shares during the vesting period (this payment may assume that dividends had been reinvested in Company shares on a cumulative basis).
Maximum opportunity
The maximum award that can be made to an Executive Director under the annual bonus plan is 150% of salary for the Chief Executive Officer and 125% of salary for other
Executive Directors.
Performance conditions and provisions
for recovery of sums paid
(1)
The bonus is based on performance assessed over one year using appropriate financial, operational and individual performance measures.
The majority of the bonus will be determined by measures of Group financial performance. A sliding scale of targets is set for each Group financial measure with payout at no
more than 25% for threshold financial performance increasing to 100% for maximum performance.
The remainder of the bonus will be based on financial, strategic or operational measures appropriate to the individual Executive Director.
Details of the bonus measures operating each year will be included in the relevant Annual Report on Remuneration. The Remuneration Committee has discretion, where it
believes it to be appropriate, to override the formulaic outcome arising from the annual bonus plan. Any bonus payout is ultimately at the discretion of the Committee.
The cash bonus will be subject to recovery and/or deferred shares will be subject to withholding at the Committee’s discretion in exceptional circumstances where, within
three years of the bonus determination or before the vesting of each tranche of deferred shares, a material misstatement or miscalculation comes to light which resulted
in an overpayment under the annual bonus plan or if evidence comes to light of material misconduct by an individual or a material health and safety breach or actions
that subsequently gave rise to serious reputational damage or insolvency.
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Financial Statements
Remuneration Policy continued
Long-Term Incentive Plan (LTIP)
(3)(4)
Purpose and link to strategy
To link reward to key strategic and business targets for the longer term and to align Executive Directors’ interests with shareholders’ interests.
Operation
Awards are usually granted annually under the LTIP to selected senior executives.
Individual award levels and performance conditions on which vesting will be dependent are reviewed annually by the Committee.
Awards may be granted as conditional awards of shares, nil-cost options or, if appropriate, as cash-settled equivalents.
Awards normally vest or become exercisable at the end of a period of at least three years following grant although may vest early on leaving employment or on a change
of control (see later sections). Awards to Executive Directors that vest are subject to a two-year holding period (other than in exceptional circumstances such as death).
An additional payment (in the form of cash or shares) may be made in respect of shares which vest under LTIP awards to reflect the value of dividends which would have
been paid on those shares during the vesting period (this payment may assume that dividends had been reinvested in Company shares on a cumulative basis).
Maximum opportunity
The maximum annual award permitted under the LTIP is shares with a market value (as determined by the Committee) of 200% of salary. Under the Policy, for incumbent
Directors, awards will be limited to 150% of salary.
Each year the Committee determines the actual award level for individual senior executives within this limit.
Performance conditions and provisions
for recovery of sums paid
(1)
All LTIP awards granted to Executive Directors must be subject to a performance condition. Vesting of Executive Directors’ LTIP awards would be dependent on measures which
could include Group earnings, return on capital employed, total shareholder return and sustainability, with the precise measures and weighting of the measures determined by
the Committee ahead of each award.
Performance will usually be measured over a performance period of at least three years. For achieving a ‘threshold’ level of performance against a performance measure,
no more than 25% of the portion of the LTIP award determined by that measure will vest. Vesting then increases on a sliding scale to 100% for achieving a maximum
performance target.
The Remuneration Committee has discretion, where it believes it to be appropriate, to override the formulaic outcome arising from the LTIP. LTIP awards may be subject to
withholding or recovery at the Committee’s discretion in exceptional circumstances where, before the later of the vesting of an award and the second anniversary of the end
of the performance period, a material misstatement or miscalculation comes to light, or evidence comes to light that during that performance period there was material
misconduct by an individual or a material health and safety breach or actions that subsequently gave rise to serious reputational damage or insolvency.
Sharesave Plan
(3)
Purpose and link to strategy
To create staff alignment with the Group and promote a sense of ownership.
Operation
UK tax-approved monthly savings scheme facilitating the purchase of shares through share options at a discounted exercise price by all eligible employees.
Executive Directors are eligible to participate on the same basis as other UK employees.
Maximum opportunity
Monthly savings limit of £500 (or such other limit as may be approved from time to time by HMRC) under all savings contracts held by an individual.
Performance conditions and provisions
for recovery of sums paid
The Sharesave Plan is structured in accordance with HMRC requirements so has no performance conditions but requires participants to make regular contributions into
a savings contract.
Malus and clawback provisions do not apply.
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Remuneration Policy continued
Share Ownership Guidelines
Purpose and link to strategy
To create alignment between the long-term interests of Executive Directors and shareholders.
Operation
Executive Directors have been required to build and maintain a shareholding as a percentage of salary in the form of shares in the Company since Admission.
Executive Directors are expected to achieve the shareholding requirement within five years of an individual becoming subject to the requirement.
Maximum opportunity
Any Executive Director in employment is expected to achieve a shareholding with a value of 200% of salary. Any Executive Director leaving the Company will be expected to
retain the lower of the shares held at cessation of employment and shares to the value of 200% of salary for a period of two years.
Performance conditions and provisions
for recovery of sums paid
Not applicable.
Notes to table:
1.
The Committee may amend or substitute any performance condition(s) if one or more events occur which cause it to determine that an amended or substituted performance condition would be more appropriate, provided that any such amended or
substituted performance condition would not be materially less difficult to satisfy than the original condition (in its opinion). The Committee may also adjust the calculation of performance targets and vesting outcomes (for instance for material acquisitions,
disposals or investments and events not foreseen at the time the targets were set) to ensure they remain a fair reflection of performance over the relevant period. In the event that the Committee was to make an adjustment of this sort, a full explanation would
be provided in the next Directors’ Remuneration Report.
2.
Performance measures – annual bonus. The annual bonus measures are reviewed annually and chosen to focus executive rewards on delivery of key financial targets for the forthcoming year as well as key strategic or operational goals relevant to an
individual. Specific targets for bonus measures are set at the start of each year by the Committee based on a range of relevant reference points, including, for Group financial targets, the Group’s business plan and are designed to be appropriately stretching.
3.
The Committee may: (a) in the event of a variation of the Company’s share capital, demerger, special dividend or dividend in specie or any other corporate event which it reasonably determines justifies such an adjustment, adjust; and (b) amend the terms of awards
granted under the share schemes referred to above in accordance with the rules of the relevant plans. Share awards may be settled by the issue of new shares or by the transfer of existing shares. In line with prevailing best practice at the time this Remuneration Policy
was approved, any issuance of new shares is limited to 5% of share capital over a rolling ten-year period in relation to discretionary employee share schemes and 10% of share capital over a rolling ten-year period in relation to all-employee share schemes.
4.
Performance measures – LTIP. The LTIP performance measures will be chosen to provide alignment with our longer-term strategy of growing the business in a sustainable manner that will be in the best interests of shareholders and other key stakeholders in the
Company. Use of earnings and return on capital employed measures would reward management for delivery of key financial measures of Company success that should result in sustainable value creation. Use of a total shareholder return measure would
align management’s interests with the interests of our shareholders. Use of sustainability measures will align management with the Company’s long-term commitment to building a sustainable operating business. Targets are considered ahead of each grant
of LTIP awards by the Committee, taking into account relevant external and internal reference points and are designed to be appropriately stretching.
5.
The Committee reserves the right to make any remuneration payments and/or payments for loss of office (including exercising any discretions available to it in connection with such payments) notwithstanding that they are not in line with the policy set out
above where the terms of the payment were agreed: (i) before the 2015 AGM (the date the Company’s first shareholder-approved Directors’ Remuneration Policy came into effect); (ii) before the policy set out above came into effect, provided that the terms
of the payment were consistent with the shareholder approved Remuneration Policy in force at the time they were agreed; or (iii) at a time when the relevant individual was not a Director of the Company and, in the opinion of the Committee, the payment was
not in consideration for the individual becoming a Director of the Company. For these purposes ‘payments’ includes the Committee satisfying awards of variable remuneration and, in relation to an award over shares, the terms of the payment are ‘agreed’ at
the time the award is granted.
6.
The Committee may make minor amendments to the Remuneration Policy for regulatory, exchange control, tax or administrative purposes or to take account of a change in legislation, without obtaining shareholder approval for that amendment.
Non-Executive Director (NED) fees
Purpose and link to strategy
To appropriately recognise responsibilities, skills and experience by ensuring fees are market competitive.
Operation
NED fees comprise payment of an annual basic fee and additional fees for further Board responsibilities such as:
–
Senior Independent Director
–
Chair of Audit Committee
–
Chair of Remuneration Committee
–
Employee engagement
The Chairman of the Board receives an all-inclusive fee.
No NED participates in the Group’s incentive arrangements or pension plan or receives any other benefits other than where travel to the Company’s registered office is
recognised as a taxable benefit in which case a NED may receive the grossed-up costs of travel as a benefit. NEDs are entitled to reimbursement of reasonable expenses.
Fees are reviewed annually.
NEDs also have the benefit of a qualifying third-party indemnity from the Company and Directors’ and Officers’ liability insurance.
Maximum opportunity
Fees are set at an appropriate level that is market competitive and reflective of the responsibilities and time commitment associated with specific roles.
No absolute maximum has been set for individual NED fees. Current fee levels are set out in the Annual Report on Remuneration section of this Remuneration Report.
The Company’s Articles of Association provide that the total aggregate fees paid to the Chairman and NEDs will not exceed £2,000,000 per annum.
109
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Remuneration
Financial Statements
Remuneration Policy continued
Illustrations of application of the Policy
The ‘Implementation of Remuneration Policy in 2023’ section of the Annual Report on
Remuneration details how the Committee intends to implement the Policy during 2023.
The charts to the right illustrate, in three assumed performance scenarios, the total value
of the remuneration package potentially receivable by Joe Vorih, Paul James and Matt Pullen
in relation to 2023. This comprises salary and benefits plus an annual bonus of up to a maximum
of 150% of salary for Joe Vorih, and 125% of salary for Paul James and Matt Pullen, and an LTIP
award of 150% of salary for Joe Vorih, Paul James and Matt Pullen.
The charts are for illustrative purposes only and actual outcomes may differ from that shown.
LTIP awards have been shown at face value and also allowing for a 50% increase in share price
under the maximum performance scenario. All-employee share plans have been excluded.
The totals shown in the charts relate to the potential value receivable by the current Executive
Directors in relation to 2023.
Potential remuneration outcomes for the Executive Directors
Assumed performance
Assumptions used
All performance scenarios (Fixed pay)
Consists of total fixed pay, including base salary,
benefits and pension
–
Base salary – salary effective for 2023
–
Benefits – the value of benefits received in 2022
have been included (pro-rated for Joe Vorih to
represent a full year)
–
Pension – 5% of salary
Minimum performance (Variable pay)
–
No payout under the annual bonus
–
No vesting under the LTIP
Performance in line with expectations (Variable pay)
–
50% of the maximum payout under the annual
bonus
–
50% vesting under the LTIP
Maximum performance (Variable pay)
–
100% of the maximum payout under the annual
bonus
–
100% vesting under the LTIP. The maximum
scenario includes an additional element to
represent 50% share price growth on the LTIP
award from the date of grant to vesting
0
£500,000
£1,000,000
£1,500,000
£2,000,000
£2,500,000
£3,000,000
£3,500,000
Below
target
Target
Joe Vorih
Paul James
Matt Pullen
Maximum
Below
target
Target
Maximum
Below
target
Target
Maximum
100%
£701,583
45%
27%
35%
28%
£1,566,783
36%
£2,864,583
£1,643,280
£1,606,943
29%
100%
£418,120
46%
25%
29%
£899,645
£381,604
£862,987
30%
32%
38%
£1,381,170
£1,344,371
100%
44%
25%
31%
28%
33%
39%
£2,431,983
Approach to recruitment remuneration
Principles
In determining remuneration arrangements for new appointments to the Board
(including internal promotions), the Committee will apply the following principles:
–
The Committee will take into consideration all relevant factors, including the experience
of the individual, market data and existing arrangements for other Executive Directors,
with a view that any arrangements should be in the best interests of both the Company
and our shareholders, without paying more than is necessary.
–
Typically, the new appointment will have (or be transitioned onto) the same remuneration
structure as the other Executive Directors, in line with the Policy.
–
Upon appointment, the Committee may consider it appropriate to offer additional
remuneration arrangements in order to secure the appointment. In particular, the
Committee may consider it appropriate to ‘buy out’ terms or remuneration arrangements
forfeited on leaving a previous employer (discussed below).
–
The Committee may reimburse costs and provide support if the recruitment requires
relocation of the individual.
–
Where an Executive Director is an internal promotion, the normal policy of the Company
is that any legacy arrangements would be honoured in line with the original terms and
conditions. Similarly, if an Executive Director is appointed following the Company’s
acquisition of or merger with another company, legacy terms and conditions would
be honoured.
Fixed pay
Annual Bonus
LTIP
50% share price
growth on LTIP
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Governance
Remuneration
Financial Statements
Remuneration Policy continued
Components and approach
The remuneration package offered to new appointments may include any element within
the Policy, or any other element which the Committee considers is appropriate given the
particular circumstances, with due regard to the best interests of shareholders, subject to
the limits on variable pay set out above in the Policy.
In considering which elements to include, and in determining the approach for all relevant
elements, the Committee will take into account a number of different factors, including
(but not limited to) market practice, existing arrangements for other Executive Directors
and internal relativities. If appropriate, different measures and targets may be applied
to a new appointee’s annual bonus in their year of joining.
The Committee would seek to structure buyout and variable pay awards on recruitment
to be in line with the Company’s remuneration framework so far as practical, however, if
necessary, the Committee may also grant such awards outside of that framework as
permitted under Listing Rule 9.4.2 subject to the limits on variable pay set out above. The exact
terms of any such awards (e.g. the form of the award, time frame, performance conditions
and leaver provisions) would vary depending upon the specific commercial circumstances.
Maximum level of variable pay
The maximum level of variable remuneration which may be granted to new Executive
Directors in respect of recruitment shall be limited to the maximum permitted under the Policy,
namely 350% of their annual salary.
This limit excludes any payments or awards that may be made to buy out the Executive
Director for terms, awards or other compensation forfeited from their previous employer
(discussed below).
Buyouts
To facilitate recruitment, the Committee may make a one-off award to buy out compensation
arrangements forfeited on leaving a previous employer. In doing so, the Committee will take
account of all relevant factors, including any performance conditions attached to incentive
awards, the likelihood of those conditions being met, the proportion of the vesting/performance
period remaining and the form of the award (e.g. cash or shares). The overriding principle will be
that any buyout award should be of comparable commercial value to the compensation which
has been forfeited. However, such buyout awards would only be considered where there is a
strong commercial rationale to do so.
Recruitment of Non-Executive Directors
In the event of the appointment of a new Non-Executive Director, remuneration arrangements
will normally be in line with the Policy for Non-Executive Directors. However, the Committee (or
the Board as appropriate) may include any element within the Policy, or any other element
which the Committee considers is appropriate given the particular circumstances, with due
regard to the best interests of shareholders. In particular, if the Chairman or a Non-Executive
Director takes on an executive function on a short-term basis, they would be able to receive
any of the standard elements of Executive Director pay.
Service contracts and letters of appointment
Key terms of the current Executive Directors’ service agreements and Non-Executive Directors’
letters of appointment are summarised in the table below. It is envisaged that any future
appointments would have equivalent contractual arrangements unless otherwise stated
in this Report.
Provision
Policy
Notice period
Executive Directors – 12 months’ notice by either the Company or the
Executive Director.
Non-Executive Directors – at the Company’s discretion, Non-Executive Directors
may have a notice period of up to three months.
Termination payment
Following the serving of notice by either party, the Company may terminate
employment of an Executive Director with immediate effect by paying a sum
equal to salary. Executive Directors are not contractually entitled to any bonus
for the period of service in the year in which their employment ends.
Non-Executive Directors are only entitled to receive any fee accruing in respect
of the period up to termination.
Expiry date
Executive Directors have rolling 12-month notice periods so have no fixed
expiry date.
Non-Executive Directors’ letters of appointment have no fixed expiry date.
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Financial Statements
Remuneration Policy continued
In accordance with the Code, each Director will retire annually and put themselves forward
for election or re-election at each AGM of the Company.
All Executive Directors’ service agreements and Non-Executive Directors’ letters of
appointment are available for inspection at the Company’s registered office at 4 Victoria
Place, Holbeck, Leeds LS11 5AE.
In the table below, we have set out details of the service contracts for the Executive Directors
and letters of appointment for the Non-Executive Directors.
Date of
appointment
Date of current
contract/letter
of appointment
Notice from
the Company and
individual
Unexpired period
of service contract
Executive Directors
Joe Vorih
28 February 2022
28 February 2022
12 months
Rolling
contract
Paul James
5 March 2018
5 March 2018
12 months
Rolling
contract
Matt Pullen
1 November 2021
1 November 2021
12 months
Rolling
contract
Non-Executive Directors
Kevin Boyd
22 September 2020
1 November 2022
3 months
3 months
Mark Hammond*
16 April 2014
28 March 2014
None
To 16
April 2023
Lisa Scenna
24 September 2019
10 September 2019
1 month
1 month
Louise Brooke-Smith
24 September 2019
10 September 2019
1 month
1 month
Shatish Dasani**
1 March 2023
24 February 2023
1 month
1 month
Notes
Martin Payne stepped down from the Board on 28 February 2022 and left the Company on 20 May 2022. Louise Hardy stepped
down from the Board on 30 September 2022. Ron Marsh retired from the Board on 31 December 2022.
*
Mark Hammond joined the Board at IPO and had no notice period in his letter of appointment. His term therefore ran for
a nine-year period, subject to annual re-election, as per the UK Corporate Governance Code.
**
Shatish Dasani joined the Board on 1 March 2023.
Policy on payment for loss of office
In relation to payments under non-contractual incentive schemes, the Committee would take
the following factors into account:
–
The Committee may determine that the Executive Director is eligible to receive a bonus in
respect of the financial year in which they cease employment. This bonus would usually be
time apportioned and may be settled wholly in cash. In determining the level of bonus to
be paid, the Committee may, at its discretion, take into account performance up to the
date of cessation or over the financial year as a whole based on appropriate performance
measures as determined by the Committee. The treatment of outstanding share awards is
governed by the relevant share plan rules as summarised below.
Deferred Share Bonus Plan
–
On cessation of employment, unvested shares will vest in full unless the Committee
determines otherwise.
–
On a change of control, unvested shares will vest in full.
–
If other corporate events occur, such as a demerger, delisting, special dividend, voluntary
winding-up or other event which in the opinion of the Committee may affect the current or
future value of shares, the Committee will determine whether unvested shares should vest.
LTIP
–
On cessation of employment, unvested awards will lapse unless cessation is as a result of
death, ill health, injury, disability, transfer of employing company or business to which an
individual’s employment relates out of the Group or any other scenario in which the
Committee determines at its discretion that good leaver treatment is appropriate (other
than circumstances justifying summary dismissal). In these scenarios, unvested awards will
usually continue until the normal vesting date unless the Committee determines that the
award should vest earlier and will vest to an extent that takes into account the performance
conditions assessed at the date of vesting and, unless the Committee determines
otherwise, to an extent that takes into account the period of time between grant of the
award and cessation of employment.
–
On a change of control, unvested LTIP awards will vest immediately to an extent that takes
into account the performance conditions assessed at the change of control and, unless the
Committee determines otherwise, to an extent that takes into account the period of time
between grant of the award and the change of control. If other corporate events occur,
such as a demerger, delisting, special dividend, voluntary winding-up or other event which
in the opinion of the Committee may affect the current or future value of shares,
the Committee will determine whether unvested LTIP awards should vest. If they do vest,
they will vest immediately to an extent that takes into account the performance conditions
assessed at the date of the event and, unless the Committee determines otherwise, to an
extent that takes into account the period of time between grant of the award and the date
of the event.
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Financial Statements
Sharesave Plan
–
Options become exercisable immediately on death, ceasing employment due to injury,
disability, retirement, redundancy, sale of the employing company or business to which
an individual’s employment relates out of the Group or on a change of control/voluntary
winding-up of the Company.
The Committee reserves the right to make any other payments in connection with a Director’s
cessation of office or employment where the payments are made in good faith in discharge
of an existing legal obligation (or by way of damages for breach of such an obligation) or by
way of a compromise or settlement of any claim arising in connection with the cessation
of a Director’s office or employment. Any such payments may include, but are not limited to,
paying any fees for outplacement assistance and/or the Director’s legal and/or professional
advice fees in connection with his/her cessation of office or employment.
Consideration of employment conditions elsewhere in the Group
The Committee appreciates the importance of effective engagement with the wider workforce
and so has a nominated Non-Executive Director responsible for employee engagement.
Louise Brooke-Smith has held this role since June 2020 and has engaged with employees during
the course of the year through a structured employee engagement programme across the
Group. This engagement involved various employees at different Company sites, and covered
a wide variety of topics. Louise reported regularly to the Committee and confirmed that there
were no concerns raised regarding the alignment between executive remuneration and wider
workforce pay. Further details on some of the activities Louise has undertaken during the year
can be found in the Corporate Governance Report on page 76.
The Committee reviews workforce remuneration and related policies, and is conscious of
the importance of ensuring that its pay decisions for Executive Directors and the senior
management team are regarded as fair and reasonable within the business.
As outlined in the Policy table, pay and conditions across the Group are one of the specific
considerations taken into account when the Committee is considering changes in salaries
for the Executive Directors and the senior management team.
Differences in policy from broader employee population
A greater proportion of Executive Directors’ potential wealth is ‘at risk’, either through
their existing shareholding or through LTIP awards than for our employees generally
and a greater proportion is determined by performance than for our employees generally.
However, common principles underlie the pay policy throughout the Group, including for the
Executive Directors. In particular, we place great emphasis throughout the Group on reward
being linked to performance (either Group performance or performance of an individual’s
business) and on encouraging share ownership (through participation in the LTIP or an
all-employee share scheme).
Remuneration Policy continued
Consideration of shareholders’ views
The Company is mindful of general investor views on certain aspects of remuneration,
and continues to take these views into account, where appropriate, when setting Executive
Director remuneration. The Committee Chair is available to meet with any shareholders who
wish to discuss any aspect of the Policy in more detail, and the Chairman of the Company
offered the Company’s largest shareholders the opportunity to meet with him following his
appointment on 1 November 2022.
In relation to the updated Policy that was approved by shareholders at the 2021 AGM, a formal
consultation with the Company’s top 20 shareholders and the shareholder advisory bodies
was carried out during 2020 and 2021. The Chair of the Committee and the Company
Secretary met with those shareholders who requested a meeting to discuss the proposed
Policy in more detail and to answer specific queries. The feedback received from these
meetings and the written responses was generally supportive and was discussed in detail
by the Committee before finalising the Policy proposals.
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Financial Statements
Annual Report on Remuneration
Remuneration Committee Report
The Annual Report on Remuneration describes how the Directors’ Remuneration Policy,
approved by shareholders at the Annual General Meeting in May 2021 (the Policy), has been
applied in the financial year ended 31 December 2022. This Annual Report on Remuneration
will be put to an advisory shareholder vote at the 2023 AGM on 18 May 2023.
Role of the Committee
The role of the Committee is to determine all aspects of Executive Director pay, ensuring
that the remuneration framework both attracts and retains leaders who are appropriately
incentivised to deliver the Group’s strategy, aligning with the interests of members and
promoting the long-term success of the Group for the benefit of its stakeholders as a whole.
The Committee also reviews workforce remuneration and related policies and ensures
alignment of its rewards with culture. It also monitors pay arrangements for other senior
executives and oversees the operation of all share plans.
Details about the role of the Committee are set out in its Terms of Reference which are
reviewed annually and were last updated in November 2022. These can be found on the
Company’s website.
Committee membership and meetings
The Committee comprises all of the Non-Executive Directors, all of whom are considered to
be independent, and their attendance at meetings during the year is set out in the table on
page 74. Louise Hardy stepped down from the Board and as the Remuneration Committee
Chair on 30 September 2022. Louise attended the two meetings held between 1 January 2022
and 30 September 2022. Lisa Scenna was then appointed as Committee Chair. She attended
all four meetings held during the year; two as a member and two as Committee Chair.
The remaining members of the Remuneration Committee, Mark Hammond, Louise
Brooke-Smith and Kevin Boyd attended all four meetings during the year. The CEO, Joe Vorih,
was also present at those meetings during 2022 by invitation, albeit he was not involved in any
discussions in relation to his own remuneration.
The Committee typically meets at least three times a year and thereafter as required, and in
2022, the Committee met four times.
External advisers
Korn Ferry have been advisers to the Committee on executive remuneration matters since
January 2020. During the year, the Committee received advice from Korn Ferry on market
practice and key areas of investor focus, market updates and assistance with performance
monitoring and benchmarking. Korn Ferry also provided other human capital-related services
to the Group during the year, but these services were carried out by a team separate to the
remuneration advisory team with an effective separation between the Committee advisory
team and the wider Korn Ferry teams. As a result, the Committee was satisfied that the advice
provided by Korn Ferry was objective and independent, having also noted their commitment
to the Code of Conduct. During the year, the fees (charged on a time plus expenses basis)
paid to Korn Ferry were £46,565 (2021: £71,318). Korn Ferry is a member of the Remuneration
Consultants Group and, as such, voluntarily operates under the code of conduct in relation to
executive remuneration consulting in the UK.
Unaudited information
Implementation of Remuneration Policy in 2023
This section provides an overview of how the Committee is proposing to implement the
Policy in 2023 for the Executive Directors. Other than some minor changes to the performance
measures for the annual bonus, there are no significant changes to the implementation of the
Remuneration Policy in 2023.
Base annual salary
During the year the Committee reviewed the salary increases for the wider workforce taking
into account high inflation and the increase in cost of living. As a result of the review, the
Committee determined that there should be a tiered approach to salary increases, favouring
the lowest paid. On this basis, salary increases for the wider workforce ranged from 3% to 6%
with the higher increases focused on employees earning less than £35,000 per annum.
Therefore, the Remuneration Committee were comfortable with an increase of 3% in salary for
Executive Directors.
Salary
1 January
2023
Salary
1 January
2022
% increase
Joe Vorih (CEO)*
£576,800
£560,000
3.0%
Paul James (CFO)
£350,200
£340,000
3.0%
Matt Pullen (COO)
£350,097
£339,900
3.0%
*
Joe Vorih was appointed on 28 February 2022. The 2022 salary for Joe Vorih represents his base salary on appointment.
Pension
In line with the Policy and as outlined in the 2021 Remuneration Report, the Company
contribution for Paul James has been reduced with effect from 1 January 2023, and therefore
Joe Vorih, Paul James and Matt Pullen will receive a pension contribution of 5% of annual salary
during 2023, which is in line with the wider workforce.
Other benefits
In 2023, the Executive Directors will receive a standard package of other benefits consistent
with those received in 2022.
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Financial Statements
Annual Report on Remuneration continued
Annual bonus
The annual bonus plan for 2023 will be operated in accordance with the Policy. Key features of
the plan for 2023 are:
–
There will be a maximum bonus opportunity of 150% of annual salary for Joe Vorih and 125%
of annual salary for Paul James and Matt Pullen.
–
33% of any bonus earned will be deferred into shares under the Deferred Share Bonus Plan
(DSBP). Half of these shares will vest two years from the date of grant and the remaining half
will vest three years from the date of grant.
–
In the event that a material misstatement or miscalculation subsequently comes to light
which resulted in an overpayment under the annual bonus plan or if evidence comes to
light of material misconduct by an individual, a material health and safety breach or actions
that subsequently gave rise to serious reputational damage or insolvency, then the
Committee has the flexibility to withhold the value of shares granted under the DSBP and/or
to require repayment of an appropriate portion of the annual bonus cash award in respect
of the relevant bonus year.
–
The Remuneration Committee has discretion, where it believes it to be appropriate, to
override the formulaic outcome arising from the annual bonus plan.
During the year, the Committee reviewed the performance measures for the annual bonus
and determined that the working capital measure should be replaced by operating cash flow
conversion, to encourage longer-term behaviours in relation to working capital. In addition, the
total weighting on EBIT and EBIT margin was reduced from 75% to 65% resulting in a
corresponding increase in the weighting of the strategic objectives from 10% to 20% to better
align the annual bonus with the in year objectives that have been set to contribute towards
the longer-term delivery of sustainable shareholder value. Following a review by the
Committee, Executive Director bonuses for 2023 will be subject to challenging underlying EBIT
target (40%), an underlying EBIT margin percentage target (25%), an operating cash flow
conversion target (15%) and structured strategic targets relating to strategy deployment,
talent management and climate strategy (20%). The plan will also be subject to a health and
safety and a compliance override, in relation to which the Committee shall have discretion to
reduce pay outs in certain circumstances. It is intended that these objectives will then
cascade down through the senior management team to continue to drive the right
behaviours across the Group and to ensure that the Executive Directors and senior
management teams have incentives that are aligned. These targets will be reviewed for
ongoing suitability at the end of 2023.
The targets for these performance measures in relation to FY 2023 are deemed to be
commercially sensitive. However, retrospective disclosure of the targets and performance
against them will be provided in next year’s Remuneration Report to the extent that they do
not remain commercially sensitive at that time.
Long-Term Incentive Plan (LTIP)
–
It is expected that the Executive Directors will receive awards under the LTIP during 2023.
As at the time of preparing this Remuneration Report the Committee’s intention is to grant
the awards on the basis described below. Should there be any change to the approach set
out below, this would be detailed in the Stock Exchange announcement made at the time of
granting the awards and detailed in next year’s Remuneration Report.
–
With regard to the quantum of FY 2023 awards, the Committee intends to make awards at
150% of salary to the Executive Directors. In recognition of current share price volatility, the
Committee is to include the ability to adjust the number of shares vesting in the FY 2023
long-term incentive award in the event there is perceived to be a windfall gain on vesting.
–
Subject to achievement of the performance targets, awards will become exercisable three
years after grant.
–
In the event that a material misstatement or miscalculation subsequently comes to light
which results in too high a level of vesting under the LTIP, or if evidence comes to light of
material misconduct by an individual, a material health and safety breach or actions that
subsequently gave rise to serious reputational damage or insolvency, then the Committee
has the flexibility to withhold or recover the value of shares granted under the LTIP.
–
The Remuneration Committee has discretion, where it believes it to be appropriate, to
override the formulaic outcome arising from the LTIP.
–
Awards granted to Executive Directors will be subject to a two-year post-vesting
holding requirement.
–
Awards will be subject to a combination of underlying diluted EPS, relative TSR performance
measures, and sustainability targets, assessed over a three-year period as detailed below.
Underlying diluted earnings per share target
50.00%
Relative total shareholder return target
25.00%
Sustainability target (carbon reduction)
8.33%
Sustainability target (use of recycled plastics)
8.33%
Sustainability target (The 5% Club)
8.33%
Total award
100.00%
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Financial Statements
Carbon Reduction Targets (8.33% of the total award)
The range of targets is set based on our emissions intensity which is defined as Scopes 1 and 2
tonnes of CO
2
e per tonne of output.
FY 2025 Emissions Intensity
Vesting
(% total award)
Above 0.093
0%
0.093
25%
0.086
100%
Straight-line vesting will operate between these performance points.
The 2022 baseline from which the above targets were set is 0.136 and so the above targets are
considered stretching and in line with our 2025 targeted reductions.
Use of Recycled Plastics (8.33% of the total award)
The range of targets relates to the proportion of our products that are manufactured from
recycled products.
FY 2025 % of Recycled materials used
Vesting
(% total award)
Below 57.4%
0%
57.4%
25%
62.0%
100%
Straight-line vesting will operate between these performance points.
The 2022 baseline from which the above targets were set is 48.7% and so the above targets
are considered stretching and in line with our 2025 target.
The 5% Club (8.33% of the total award)
The first two sustainability targets directly align with the Group’s focus on improvements in the
way we work, with the third target aligning with creating a sustainable business culture
through our commitment to The 5% Club. This initiative, to which we fully subscribe, focuses on
the development of greater skills and training through ‘Earn and Learn’ programmes. Our 2025
objective is to achieve 5% of our workforce in Earn and Learn positions with our 2025 target set
out below:
Progress towards The 5% Club
Vesting
(% total award)
Below 4.6%
0%
4.6%
25%
5.0%
100%
Straight-line vesting will operate between these performance points.
Annual Report on Remuneration continued
Underlying Diluted Earnings per Share (EPS) (50% of the award)
The EPS targets are a range around FY 2025 EPS. Setting the targets with reference to the
final year of the three-year performance period mirrors standard market practice and
reduces the impact on this performance condition of the near-term uncertainties caused
by external factors. The targets have been set with reference to both internal and external
expectations for the Company’s performance allowing for current market conditions and
expected changes to the Group’s corporate tax rate. Given the uncertainty around future
corporate tax rates in the UK, it is the Committee’s intention to restate the targets to the extent
that there are material changes to the current published corporate tax rates during the
performance period, to ensure that there will be a strong relationship between performance
and reward. The Committee retains discretion in line with the Policy when testing targets (e.g.
in the event of material M&A, divestments, etc.). Any use of discretion to restate targets would
ensure that the targets were no more or less challenging than when originally set but for the
relevant event. The range of targets to apply is as follows:
FY 2025 Underlying Diluted Earnings per Share
Vesting
(% total award)
Below 30.1 pence
0%
30.1 pence
25%
35.6 pence
100%
Straight-line vesting will operate between these performance points.
Relative Total Shareholder Return (TSR) (25% of the award)
The relative TSR targets remain unchanged from those operated in prior years, with our
performance compared against those companies included in the FTSE 250 Index that are
classified as ‘Industrials’ (circa 35 comparator companies). The Committee reviewed the
suitability of this group during 2022, and agreed that it remained the most appropriate
comparator group as it includes those companies that are the most similar in terms of size
and business type to the Company, and so it is likely to be management actions that drive
out-performance as opposed to external market factors. The targets to apply are as follows:
Relative TSR versus FTSE 250 Industrials
Vesting
(% total award)
Below median
0%
Median
25%
Upper quartile (or better)
100%
Straight-line vesting will operate between these performance points.
Sustainability Targets (25% of the award)
Sustainability targets align with the key elements of the Group’s sustainability strategy and
require delivery in line with the Company’s published 2025 targets. The 25% of the award
subject to sustainability targets is split into three equal components as follows:
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Financial Statements
Annual Report on Remuneration continued
The 2022 baseline from which the above targets were set is 3.5% and so the above targets are
considered stretching.
The range of targets for these awards have been set to be similarly challenging to those set
in prior years. The targets were set with reference to both internal plans and external market
expectations for future performance, both of which were influenced by market conditions
such as relatively high rates of inflation and interest rates. The Committee retains discretion
to adjust vesting outcomes (e.g. if TSR vesting is not considered aligned with the underlying
financial performance of the Company or EPS vesting outcomes are impacted by relevant
events such as material M&A or divestments, etc.). Any discretion applied by the Committee
would be used to ensure that the performance targets fulfill their original intent and were
not more or less challenging than intended when set but for the relevant events in the
performance period. Furthermore, as set out in the Policy, awards are granted subject to
malus and clawback provisions.
Sharesave Plan
Invitations to employees (including Executive Directors) to participate in the Sharesave Plan
have been issued annually over the past three years and were issued to all eligible Group
employees in 2022. The Board is proposing to continue to issue invitations to join the
Sharesave Plan on an annual basis, and all eligible employees will therefore be invited
to join the Sharesave Plan in 2023.
Non-Executive Director remuneration
After an externally facilitated search process, Kevin Boyd was appointed Company Chair
with effect from 1 November 2022. As a part of the work undertaken in respect of the search
for a successor to Ron Marsh, the Chair fee was reviewed. The market data suggested that
the current fee payable was below market due to the growth in the size and complexity of
the Group. Taking into account the market positioning and the time commitment for the role,
the Chair fee was increased to £200,000, effective from 1 November 2022. During the year,
Non-Executive Director fees were reviewed, following which it was agreed to increase the
Non-Executive Director base fee by 1.9%. There were no increases to the other fees.
The table below shows the fee structure for Non-Executive Directors with effect from 1 January
2023 with comparative figures for 2022. Non-Executive Director fees are determined by the full
Board except for the fee for the Chair of the Board, which is determined by the Committee.
2023
Fees
2022
Fees
Chair of the Board all-inclusive fee
£200,000
£158,699
Basic Non-Executive Director fee
£53,000
£52,000
Senior Independent Director additional fee
£10,000
£10,000
Chair of Audit Committee additional fee
£10,000
£10,000
Chair of Remuneration Committee additional fee
£10,000
£10,000
Employee engagement NED fee
£8,000
£8,000
Audited information
The information provided in this section of the Remuneration Report up until the ‘Unaudited
information’ heading on page 124 is subject to audit.
Single total figure of remuneration
The following tables set out the total remuneration for Executive Directors and Non-Executive
Directors for 2022 with comparative figures for 2021.
2022
All figures shown in
£’000
Salary
and fees
(1)
Benefits
(2)
Pension
(3)
Total
fixed
Annual
bonus
(4)
LTIP
(5)
Total
variable
Other
(6)
Total
remuneration
(12)
Executive Directors
Joe Vorih
(7)
469
80
23
572
94
–
94
–
666
Martin Payne
(8)
81
3
12
96
39
–
39
–
135
Paul James
340
50
51
441
57
–
57
–
498
Matt Pullen
(9)
340
14
17
371
57
–
57
231
659
Non-Executive Directors
Ron Marsh
(10)
159
–
–
–
–
–
–
–
159
Kevin Boyd
(10)
85
–
–
–
–
–
–
–
85
Mark Hammond
62
–
–
–
–
–
–
–
62
Lisa Scenna
54
–
–
–
–
–
–
–
54
Louise
Brooke-Smith
60
–
–
–
–
–
–
–
60
Louise Hardy
(11)
47
–
–
–
–
–
–
–
46
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Financial Statements
Annual Report on Remuneration continued
2021
All figures shown
in £’000
Salary
and fees
(1)
Benefits
(2)
Pension
(3)
Total
fixed
Annual
bonus
(4)
LTIP
(5)
Total
variable
Other
(6)
Total
remuneration
(10)
Executive Directors
Martin Payne
480
17
72
569
669
152
821
–
1,390
Paul James
306
13
46
365
356
78
434
40
839
Glen Sabin
(13)
301
13
45
359
350
76
426
–
785
Matt Pullen
55
2
3
60
64
–
64
–
124
Non-Executive Directors
Ron Marsh
153
–
–
–
–
–
–
–
153
Kevin Boyd
57
–
–
–
–
–
–
–
57
Mark
Hammond
59
–
–
–
–
–
–
–
59
Lisa Scenna
49
–
–
–
–
–
–
–
49
Louise
Brooke-Smith
57
–
–
–
–
–
–
–
57
Louise Hardy
57
–
–
–
–
–
–
–
57
Notes to the table – methodology
1.
Salary and fees – as disclosed in the 2021 Annual Report, Matt Pullen and Martin Payne received a 3% salary increase with
effect from 1 January 2022, in line with the wider workforce. Paul James received an increase of 10.56% from 1 January 2022,
consistent with the rate of increase detailed to institutional investors during the Policy review process. The Non-Executive
Director base fee and Chairman fee were also increase by 3%.
2.
Benefits – this represents the taxable value of all benefits. Executive Directors receive benefits including car allowance,
private family medical insurance and life assurance of four times annual salary. For 2022, the benefits value for Joe Vorih
includes £27,788 which relates to temporary accommodation and travel expenses (including reimbursement of tax) which
was agreed in connection with his recruitment for the first two years of his employment. The benefits value for Paul James
includes £36,408 which relates to his contractual entitlements to temporary accommodation and travel expenses
(including reimbursement of tax) for a transitionary period following a change in Genuit’s corporate Head Office which
relocated from Doncaster to Leeds.
3.
Pension – the pension provision in the form of a cash allowance in 2021 and 2022 for Martin Payne and Paul James, and 2021
for Mr Sabin, is 15% of salary. The pension provision in 2022 for Mr Vorih and Mr Pullen is 5% of salary. Mr James will receive a
pension provision of 5% of salary from 1 January 2023.
4.
Annual bonus – the bonus is typically paid 66.67% in cash and 33.33% deferred into shares under the DSBP.
5.
LTIP – for 2022, this relates to the estimated value of the 2020 LTIP award which was subject to a 100% relative TSR condition.
Further details can be found on page 120 and 121. As the performance condition for this award has not been met, there is no
value or share appreciation to be disclosed in relation to these awards.
LTIP – for 2021, this relates to the value of the 2019 LTIP award which was subject to an EPS and TSR performance target over
the three-year period ended on 31 December 2021. Further details can be found on page 111 of the 2021 Annual Report.
The value of the 2019 award has been calculated using the Company’s share price on the relevant vesting date of £4.52.
The amount of the 2019 award that is attributable to share price appreciation is £8,771 for Martin Payne, £4,475 for Paul James
and £4,405 for Glen Sabin. The Committee did not apply any discretion as a result of the share price appreciation.
6.
Other – for 2022, Matt Pullen was eligible to receive replacement share awards for awards that were forfeited on joining
Genuit. This comprises compensation for the 2021 bonus and replacement share awards. To compensate for forfeiting the
2021 bonus, a Deferred Share Award was granted on 22 March 2022 which vested immediately on grant. The value included in
the table is based on the value of the award vested based on a share price of £5.38. The replacement share awards are
included in this table based on the face value at grant using a share price of £5.38 (see page 123 for more details).
Other – for 2021, this column comprises £40,226, being the value of 6,040 Sharesave options granted to Paul James in 2018,
which vested on 1 November 2021. The shares have been valued at the share price when the award matured of £6.66.
7.
Joe Vorih was appointed to the Board as Chief Executive Officer on 28 February 2022.
8.
Martin Payne stepped down from the Board on 28 February 2022 and left the Company on 20 May 2022. The salary, benefits
and pension included in the table represent his pay until he stepped down from the Board on 28 February 2022. The annual
bonus included in the table represents the bonus for the period 1 January 2022 to 20 May 2022.
9.
Matt Pullen joined the Board on 1 November 2021.
10.
Kevin Boyd was appointed as Chair of the Board on 1 November 2022. Ron Marsh stepped down as Chair on 1 November 2022
and retired from the Board on 31 December 2022.
11.
Louise Hardy stepped down from the Board on 30 September 2022.
12.
Total remuneration paid to Directors in respect of 2022 was £2,424,000 (2021: £3,689,000).
13.
Glen Sabin stepped down from the Board on 1 November 2021 and retired from the Company on 31 December 2021.
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Annual bonus
The maximum annual bonus opportunity for the Executive Directors in 2022 was as follows:
–
150% of annual salary for Joe Vorih and Martin Payne. Martin Payne was entitled to receive a pro-rated bonus for the period from 1 January 2022 to 20 May 2022.
–
125% of annual salary for Paul James and Matt Pullen.
For all Executive Directors, two thirds of the bonus earned will be paid in cash and one third will be deferred into shares under the DSBP. Half of these shares will vest two years from the date of
grant and half three from the date of grant. Malus and clawback provisions apply to the bonuses of all of the aforementioned Directors. The performance measures and targets that applied to
the 2022 annual bonus are set out below. This reflects the same approach used to determine the bonus outcome for the senior management team:
Performance measure
Proportion of bonus
determined by measure
Threshold performance
Target performance
Maximum performance
Actual performance
% of maximum bonus payable
Group Underlying
EBIT
75%
EBIT
Margin
37.5%
15.75%
25% earned
16.57%
50% earned
18.23%
100% earned
15.79%
9.56%
EBIT
37.5%
£100.241m
25% earned
£108.369m
50% earned
£119.206m
100% earned
£98.2m
0%
Working capital
15%
Net working capital position assessed at the
end of each month relative to target.
Maximum performance requires the monthly
target to be met at the end of all 12 months.
Target achieved in 3 of
12 months
3.80%
Health & Safety
targets
5%
91%, calculated on a hit/miss basis
89%
0%
Customer service
targets
5%
2% improvement
5% improvement
Less than 2%
improvement
0%
The total bonus payable to each Executive Director based on the assessment of performance against the targets set out above, is shown below:
Total bonus payable
% of maximum
Total bonus payable £’000
and % of salary
Joe Vorih
13.36%
£94,409 (20.04% of salary
earned)
Paul James
13.36%
£56,790 (16.70% of salary
earned)
Matt Pullen
13.36%
£56,774 (16.70% of salary
earned)
Martin Payne
(1)
13.36%
£38,913 (20.04% of salary
earned)
1. Left the Company on 20 May 2022. The bonus outcome has therefore been pro-rated from 1 January 2022 to 20 May 2022.
The Committee has confirmed that it is comfortable with the outcome of the annual bonus scheme in light of the Company’s financial performance in the wider macroeconomic environment.
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LTIP vesting
The LTIP award granted in June 2020 is due to vest in June 2023, based 100% on relative TSR performance over the three financial years ended on 31 December 2022. Based on TSR performance
over the period, the awards will lapse.
Performance measure
Threshold (25% of award vests)
Maximum (100% of award vests)
Actual Performance
% of total award vesting
Vested shares
Value
TSR performance relative
to comparator group
Median
Upper quartile
Below median
0%
0
£0
The Committee is comfortable that the formulaic outcome of the LTIP reflects wider business performance.
Buyout awards vesting
As discussed on page 109 of the 2021 Annual Report, Matt Pullen was eligible to receive
compensation for the 2021 bonus of £82,230 that he forfeited on leaving employment with
Saint-Gobain to join Genuit. Accordingly, he was granted an award of Genuit shares that
vested immediately, further details are set out below.
Executive
Basis of the
award
(1)
Number of shares
granted
(2)
Face value of
the award at
grant date
Threshold
vesting
Grant date
Vest date
Matt Pullen
£82,230
12,347
£66,427
N/A
22 March
2022
22 March
2022
1.
The number of Genuit shares was calculated using the Genuit share price on the day Matt commenced employment with the
Company on 1 November 2021 of £6.66. The share price at the time of grant was £5.38.
2.
Shares were granted in the form of deferred shares as a nil-cost option.
Scheme interests awarded during the financial year
LTIP awards
An award was granted under the LTIP to selected senior executives, including the Executive
Directors, in April 2022. This award is subject to the performance conditions described below
and will become exercisable in April 2025.
Type of
award
Date of grant
Award as
% of
salary
Maximum
number of
shares
Face
value (£)*
Threshold
Vesting
End of
performance
period
Joe Vorih
Nil -cost
option**
22 April 2022
150%
183,139
92,659
92,632
£839,875
£424,934
£424,810
25% of
award
31
December
2024
Paul James
22 April 2022
Matt Pullen
22 April 2022
*
The maximum number of shares that could be awarded has been calculated using the share price of £4.586 (average
closing share price for 19 to 21 April 2022) and is stated before the impact of reinvestment of the dividends paid since grant.
**
In line with the 2021 awards, awards were granted as nil-cost options with an exercise date of three years from the grant date.
Therefore, there has been no change in exercise price or date.
Vesting of the awards is subject to satisfaction of the following performance
conditions measured over a three-year performance period. Vesting is calculated
on a straight-line basis.
As discussed in the Remuneration Committee Chair’s statement on page 102, in light of the
prevailing share price at the time of grant, the Committee also agreed the inclusion of a
windfall provision in relation to the 2022 awards.
Underlying Diluted Earnings per Share (EPS) (50% of the award)
The EPS targets are a range around FY 2024 EPS. Setting the targets with reference to the final
year of the three-year performance period mirrors standard market practice and reduces the
impact on the condition of the near-term uncertainties caused by external factors. The range
of targets to apply is as follows:
FY 2024 Underlying Diluted EPS
Vesting
(% of total award)
Below 31.5p
0%
31.5p
25%
37.3p
100%
Straight-line vesting will operate between performance points.
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Financial Statements
Annual Report on Remuneration continued
Relative Total Shareholder Return Targets (25% of the award)
The relative TSR targets remain unchanged from those operated in prior years with our
performance compared against those companies included in the FTSE 250 Index that are
classified as ‘Industrials’ (circa 40 comparator companies). This group remains the most
appropriate set of comparator companies as it includes those companies that are the most
similar in terms of size and business type to Genuit, and so it is likely to be management
actions that drive out-performance as opposed to external market factors. The targets that
apply are as follows:
Relative TSR versus FTSE 250 Industrials
Vesting
(% total award)
Below median
0%
Median
25%
Upper quartile (or better)
100%
Straight-line vesting will operate between performance points.
Sustainability Targets (25% of the award)
Sustainability targets align with the key elements of Genuit’s sustainability strategy and require
delivery in line with the Company’s published 2025 targets. The 25% of the award subject to
sustainability targets is split into three equal components as follows:
Carbon Reduction Targets (8.33% of the total award)
The range of targets is set based on our emissions intensity which is defined as Scopes 1 and 2
tonnes of CO
2
e per tonne of output.
FY 2024 Emissions Intensity
Vesting
(% total award)
Above 0.108
0%
0.108
25%
0.086
100%
Straight-line vesting will operate between these performance points.
The 2021 baseline from which the above targets were set is 0.141 and so the above targets are
considered stretching and in line with our 2025 targeted reductions.
Use of Recycled Plastics (8.33% of the total award)
The range of targets relates to the proportion of our products that are manufactured from
recycled products.
FY 2024 % Recycled materials used
Vesting
(% total award)
Below 54.4%
0%
54.4%
25%
62.0%
100%
Straight-line vesting will operate between these performance points.
The 2021 baseline from which the above targets were set is 49.4% and so the above targets are
considered stretching and in line with our 2025 target.
The 5% Club (8.33% of the total award)
The first two sustainability targets directly align with Genuit’s focus on improvements in
the way we work with the third target, aligning with creating a sustainable business culture
through our commitment to The 5% Club. This initiative, to which we fully subscribe, focuses
on the development of greater skills and training through Earn and Learn programmes.
Our 2025 objective is to achieve 5% of our workforce in Earn and Learn positions with our FY
2024 target set out below:
Progress towards The 5% Club
Vesting
(% total award)
Below 4.2%
0%
4.2%
25%
5%
100%
Straight-line vesting will operate between these performance points.
The 2021 baseline from which the above targets were set is 3.2% and so the above targets are
considered stretching.
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Financial Statements
Deferred Share Bonus Plan awards
On 22 April 2022, the Executive Directors received an award of shares under the Deferred Share
Bonus Plan relating to the 2021 annual bonus. The value of these shares was included in the
annual bonus figure in the 2021 single total figure of remuneration. No further performance
conditions apply to these shares.
Type of award
Maximum
number of
shares
Face value
(£)*
Vesting
date
Paul James
Deferred shares
25,852
£118,577
50% vests in each
of April 2024 and
April 2025
Matt Pullen**
Deferred shares
4,648
£21,323
Martin Payne***
Deferred shares
48,643
£223,112
*
The award was made in the form of a nil-cost option. The maximum number of shares awarded was calculated using the
average closing share price for the three dealing days prior to grant of £4.586.
**
Matt Pullen was appointed on 1 November 2021 and therefore his bonus was prorated for the period from appointment to
31 December 2021.
*** Martin Payne left the Company on 20 May 2022 and therefore his 2021 bonus was subject to the 33.67% deferral requirement.
Sharesave Plan
Details of the Executive Directors’ Sharesave options are set out below. No performance
conditions apply to these options.
Type of
award
Number of
shares under
option (year
of grant)
Face
value
of the award
at grant date
Number of
shares
exercised
Option
price
(£)
Options
exercisable from
Market
price on
date of
exercise
(£)
Notional
gain on
exercise
(£)
Joe Vorih
Share
Option
8,144
(2022)
£23,495
–
£2.21
December
2025
–
–
Paul
James
Share
Option
8,144
(2022)
£23,495
–
£2.21
December
2025
–
–
Matt
Pullen
Share
Option
8,144
(2022)
£23,495
–
£2.21
December
2025
–
–
*
The number of options included in the award was determined based on total savings during the three-year term, divided by
the option price.. The face value of the awards has been calculated using the Company’s share price on the relevant grant
date of £2.885.
The option price represents a 20% discount to the average closing price of a share on the
three dealing days prior to the relevant invitation date. The notional gain is the difference
between the option price and the market price of the shares on the date of exercise.
Annual Report on Remuneration continued
Buyout awards
As set out on page 109 of the 2021 Annual Report, both Joe Vorih and Matt Pullen were
eligible to receive replacement share awards for awards which lapsed in connection
with joining Genuit.
The buyout arrangements for Joe Vorih comprise replacement share awards for both his 2020
and 2021 Spectris Long Term Incentive Plan (LTIP) awards, which lapsed in connection with his
joining the Company, as follows:
Executive
Replace award
Number of
shares
granted
(2)
Face value of
the award
based on
share price on
28 Feb 2022
Face
value
of the
award at
grant date
Threshold
(% of max)
Grant
date
Expected
vesting date
Joe Vorih
2020 Spectris
LTIP award
175,081
£894,664
£941,936
20%
22 March
2022
25 March
2023
2021 Spectris
LTIP award
124,683
£637,130
£670,795
25%
22 March
2022
17 March
2024
1.
Calculated based on the maximum number of Spectris shares eligible to vest converted to Genuit shares using the
28 February 2022 share price (£5.11), being the day Joe Vorih commenced employment with the Company. The share price on
the date of grant was £5.38.
2.
Shares were granted in the form of deferred shares as a nil-cost option.
3.
Note – the vesting dates for each award mirror those in place at Spectris and there is an expectation that to the extent that
the above awards vest, a minimum proportion is retained towards satisfying the Company’s share ownership guidelines.
Vesting will take place at the later of the above date and the date of determining the extent to which the performance
conditions have been met.
For the 2020 Spectris LTIP replacement awards, the number of shares eligible to vest will be
determined by the proportion of the 2020 Spectris LTIP that vests. The award is subject to EPS,
Return on Gross Capital Employed and TSR targets measured from 1 January 2020 to
31 December 2022. The targets are set out on page 90 of the Spectris 2020 Annual Report,
available on their Company website. The structure of this award mirrors what was forfeited on
leaving Spectris, albeit the conversion into Genuit shares on joining provides alignment with
Genuit shareholders.
Whilst the performance period is complete, at the point of writing, Spectris has not published
their Annual Report and so the vesting level is not known. Therefore, the vesting level for this
award will be included in our 2023 Annual Report.
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For the 2021 Spectris LTIP replacement award, the award will vest based on the performance
condition applicable to the 2021 Genuit LTIP award. The award is subject to EPS, Relative TSR vs
FTSE 250 Industrials and sustainability targets measured from 1 January 2021 to 31 December
2023. The targets are set out on pages 112 to 113 of the Genuit Group plc 2021 Annual Report,
available on our Company website. This approach recognised that only a relatively short
proportion of the performance period had run its course at the time the award was granted
and so Genuit performance targets were set, as opposed to Spectris performance targets.
The buyout arrangements for Matt Pullen comprise replacement share awards in
compensation for the 2021 bonus (details are set out on page 120) and the share awards he
had earned that were forfeited on joining the Company, as follows:
Executive
Replace award
Number of
shares
granted
Face value of
the award
based on
share price on
1 November
2021
Face
value
of the
award at
grant date
Threshold
vesting
Grant
date
Expected
vesting date
Matt Pullen
Saint Gobain
share awards
forfeited
30,640
£204,062
£164,843
n/a
22 March
2022
22 March
2023
1.
Calculated based on the maximum number of Saint-Gobain shares converted to Genuit shares using the 1 November 2021
share price (£6.66). The share price on the date of grant was £5.38.
2.
Shares were granted in the form of deferred shares as a nil-cost option.
The quantum of this award was structured to replicate the Saint-Gobain awards forfeited
and can be adjusted by the Committee to ensure that in the event there would be any
performance related clawback, then this can be replicated in what ultimately vests.
Payments for loss of office and to past Directors
As outlined in the 2021 Annual Report and Accounts, Martin Payne stepped down from the
Board on 28 February 2022, and ceased employment on 20 May 2022. Mr Payne therefore
received salary, pension and benefits during the period until 20 May 2022 (totalling £230,000
over the period from 1 January 2022 to 20 May 2022). In addition, he received an annual bonus
for the period to 20 May 2022, as set out in the table on page 117. As outlined in the
Remuneration Committee Chair’s statement, as a result of leaving employment by mutual
agreement, and in accordance with the discretions included in the relevant plan rules, he was
treated as a good leaver for incentive plan purposes. Mr Payne remained entitled to receive a
pro rata annual bonus in respect of the period 1 January 2022 to 20 May 2022 which was
subject to the achievement of the performance conditions detailed on page 119. His bonus
was payable on the normal payment date in 2023 and is subject to malus and clawback
provisions. As a good leaver, Mr Payne remained eligible to receive Deferred Share Bonus Plan
(DSBP) awards earned in relation to prior years’ bonuses. With regards to outstanding share
awards granted under the Long-Term Incentive Plan (LTIP), he was granted options over 134,421
ordinary shares on 30 April 2019, 132,660 ordinary shares on 22 June 2020 and 127,996 ordinary
shares on 20 May 2021. The LTIP award granted in 2019, of which 33,605 vested in 2022 (as
disclosed on page 111 of the 2021 Annual Report) was exercised on 9 May 2022. The awards will
remain eligible to vest in line with their normal vesting dates subject to a pro-rata reduction
for the period of time in employment and subject to the achievement of the relevant
performance criteria. His awards granted under the DSBP on 22 June 2020 and 22 April 2022
over 7,996 and 48,643 shares, respectively, vest in two tranches on 22 June 2022 and 22 June
2023, and 22 April 2024 and 22 April 2025, respectively. In accordance with the DSBP rules, he
will also receive the value of dividends paid in respect of the vested shares between grant
and vesting. Martin Payne did not receive any payment in lieu of notice.
All payments that have or will be received will be made within the terms of the termination
policy as set out in the Policy.
Under the Company’s post-cessation of employment shareholding policy, Martin Payne is
required to retain shares to the value of 200% of salary for two years post-employment.
Louise Hardy stepped down from the Board on 30 September 2022 and received fees to that
date (£46,500). There were no additional payments.
Statement of Directors’ shareholdings and share interests
Executive Directors are expected to achieve the shareholding requirement of 200% of salary
within five years of an individual becoming subject to the requirement. The Committee reviews
ongoing individual performance against the shareholding requirement at the end of each
financial year. Joe Vorih commenced employment with the Company during 2022 and will
build up his shareholding in line with the aforementioned five-year timescale. Martin Payne
met this requirement at the date of cessation of his employment and is expected to retain
shares to the value of 200% of salary for two years’ post-employment in line with the
Company’s policy.
123
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Unaudited information
The information provided in this section of the Directors’ Remuneration Report is not subject
to audit.
Performance graph and CEO remuneration table
The chart below compares the Total Shareholder Return performance of the Company over the
period from Admission to 31 December 2022 to the performance of the FTSE 250 Index. This index has
been chosen because it is a recognised equity market index of which the Company is a member.
The base point in the chart for the Company equates to the Offer Price of £2.45 per share. The table
below summarises the CEO single figure for total remuneration, annual bonus payouts and
long-term incentive vesting levels as a percentage of maximum opportunity over this period.
0
50
100
150
200
250
300
Genuit
FTSE 250
£
£
£
£
£
£
£
Value of £100 invested at the Offer Price
on the date of
Admission (FTSE 250 Index)
16 April 2014
(admission)
31 December
2014
31 December
2015
31 December
2016
31 December
2017
31 December
2018
31 December
2019
31 December
2020
31 December
2021
31 December
2022
The table below summarises the CEO single figure total remuneration, annual bonus payouts and
long-term incentive vesting levels as a percentage of maximum opportunity over this period.
2014
2015
2016
2017
(1)
2017
(2)
2018
(3)
2019
(3)
2020
(3)
2021
(3)
2022
(4) (6)
2022
(5)
CEO single figure of
remuneration £’000
955
919
948
717
218
1,014
944
717
1,390
666
135
Annual bonus payout
(as a % of maximum
opportunity)
88.7%
68.2%
69.4%
66.8%
66.8%
48.9%
24.8%
n/a
93%
13.36%
13.36%
LTIP vesting out-turn
(as a % of maximum
opportunity)
n/a
n/a
n/a
n/a
n/a
87.8%
54.5%
25%
25%
0%
0%
1.
This reflects the remuneration received by David Hall, CEO for the period from 1 January 2017 to 1 October 2017.
2.
This reflects the remuneration received by Martin Payne who was appointed as CEO on 2 October 2017 following the
retirement of David Hall.
3.
The first LTIP award was granted in 2014 and so no LTIPs were due to vest between 2014 and 2017.
4.
The LTIP vesting out-turn percentages show the payout as a percentage of maximum of the LTIP award for which the three
financial years over which performance is measured ends on 31 December of the year being reported on. Therefore, the 2022
figure shows the payout for the 2020 LTIP award.
5.
This reflects the remuneration received by Martin Payne, CEO from 1 January 2022 to 28 February 2022.
6.
This reflects the remuneration received by Joe Vorih, CEO from 28 February 2022.
Annual Report on Remuneration continued
The number of shares held by Directors is set out in the table below:
Number of shares at 31 December 2022
Shares owned
outright
(12)
Interests in share
incentive schemes,
subject to
performance
conditions
Interests in share incentive
schemes, awarded without
performance conditions
Vested but
unexercised
options
Director
LTIP
(1)
DSBP
(2)
Sharesave
(3)
Joe Vorih
(4)(5)
27,500 (14 % of salary)
183,139
–
8,144
–
Paul James
(5)(7)
42,059 (35% of salary)
263,163
37,415
8,144
44,336
Matt Pullen
(5)(6)
6,236 (5% of salary)
92,632
4,648
8,144
–
Kevin Boyd
54,325
–
–
–
–
Mark Hammond
17,247
–
–
–
–
Lisa Scenna
14,966
–
–
–
–
Louise Brooke-Smith
–
–
–
–
–
Martin Payne
(5)(8)
265,481 (273% of salary)
294,261
64,945
–
–
Louise Hardy
(9)
–
–
–
–
–
Ron Marsh
(10)
333,980
–
–
–
–
Notes to the table
1.
This relates to shares awarded under the LTIP.
2.
This relates to shares awarded under the DSBP.
3.
This relates to share options granted under the Sharesave Plan.
4.
Joe Vorih joined the Board on 28 February 2022.
5.
For the purposes of determining the value of Executive Director shareholdings for Joe Vorih, Paul James and Matt Pullen, the
annual salary for 2022 and the share price as at 30 December 2022 has been used (£2.81 per share).
6.
Matt Pullen joined the Board on 1 November 2021.
7.
Paul James exercised 6,040 options granted under the Sharesave scheme on 3 May 2022 and these shares are included in
the ‘Shares owned outright’ column. The aggregate gain for Paul James in the year from the exercise of these options was
£8,154, based on the market price on the date of exercise of £4.33.
8.
The shareholding for Martin Payne is only considered until 28 February 2022, when he stepped down from the Board, and the
shareholding is calculated using the share price on that date. During the year, Martin Payne had: (a) 33,605 LTIP shares vest,
retained net of shares sold to pay personal tax liability; (b) 8,197 DSBP shares (inclusive of 327 dividend shares) vest, retained
net of shares sold to pay personal tax liability; and (c) 4,125 DSBP shares (inclusive of 127 dividend shares) vest, retained net of
shares sold to pay personal tax liability. These were exercised post 28 February 2022 and are therefore included in the LTIP/
DSBP columns above respectively. The aggregate gain for Martin Payne in the year from the exercise of awards granted
under the LTIP was £136,100, based on the share price on the date of exercise of £4.05.
9.
The shareholding for Louise Hardy is only considered until 30 September 2022, when she stepped down from the Board.
10.
Ron Marsh retired from the Board on 31 December 2022.
11.
Note – all outstanding scheme interests are in the form of nil cost options.
12.
All shares within the ‘Shares owned outright’ column include those held by connected persons.
124
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Average percentage change in the remuneration of the Directors (audited)
The table below sets out the percentage change in base salary, value of taxable benefits and
bonus for all the Directors compared with the average percentage change for employees.
Average percentage change
2021/22
Average percentage change
2020/21
Average percentage change
2019/20
Salary/
fees
Taxable
benefits
Annual
bonus
(2)
Salary/
fees
Taxable
benefits
Annual
bonus
(2)
Salary/
fees
Taxable
benefits
Annual
bonus
(2)
Executive Directors
Joe Vorih
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Martin Payne
n/a
n/a
n/a
+2.2%
(1)
0%
+100%
+3.0%
(1)
0%
-100%
Paul James
+11.1%
285%
(4)
-84%
+2.2%
(1)
0%
+100%
+3.0%
(1)
0%
-100%
Matt Pullen
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Non-Executive Directors
Ron Marsh
+3.9%
n/a
n/a
+2.2%
(1)
n/a
n/a
+3.0%
(1)
n/a
n/a
Kevin Boyd
+49.1%
(6)
n/a
n/a
+2.2%
(1)
n/a
n/a
n/a
n/a
n/a
Mark Hammond
+5.1%
n/a
n/a
+2.2%
(1)
n/a
n/a
+3.0%
(1)
n/a
n/a
Louise Hardy
n/a
n/a
n/a
+2.2%
(1)
n/a
n/a
+3.0%
(1)
n/a
n/a
Lisa Scenna
+10.2%
(5)
n/a
n/a
+2.2%
(1)
n/a
n/a
+3.0%
(1)
n/a
n/a
Louise Brooke-Smith
+5.3%
n/a
n/a
+2.2%
(1)
n/a
n/a
+3.0%
(1)
n/a
n/a
Employee average
+3.0%
0%
-4.4%
+2.2%
0%
+100%
+3.0%
0%
+2.4%
(1)
Notes:
1.
The 2.2% increase in 2020/2021 reflects the salary increase following the decrease after the response to the Covid-19
pandemic. The 3.0% figure in 2019/2020 excludes the impact of the voluntary salary reduction during the year.
2.
The Annual Bonus Plan for Executive Directors was not operated during 2020.
3.
Where an incumbent has not served a full year in 2022 or 2021, the change has not been included as it would not
be representative.
4.
As disclosed in the 2021 Annual Report, Paul James received an increase of 10.56% in salary from 1 January 2022, consistent with
the rate of increase detailed to institutional investors during the Policy review process. In addition, Paul James received
benefits for his contractual entitlements to temporary accommodation and travel expenses (including reimbursement of tax)
for a transitionary period following a change in Genuit’s corporate Head Office which relocated from Doncaster to Leeds.
5.
Lisa Scenna became Remuneration Committee Chair on 30 September 2022, resulting in an increase in fees received.
6.
During the year Kevin Boyd was appointed as Chairman resulting in an increase in fees received.
CEO pay ratio
The table below illustrates the ratio between CEO pay for 2022 (as shown in the single figure
table on page 117) and the indicative full-time equivalent total remuneration for employees
ranked at the lower quartile, median and upper quartile.
CEO pay ratio
2019
2020
2021
2022
Method
A
B
B
B
Upper quartile
28:1
19:1
40:1
21:1
Median
37:1
24:1
54:1
29:1
Lower quartile
44:1
29:1
65:1
36:1
For 2022, in line with the relevant legislation, the analysis has been completed using Option B,
given the availability of data and in order that a direct comparison can be shown against last
year. Gender Pay for 2022 has been calculated in line with the guidance, and details can be
found in the Gender Pay Gap Report published on our website.
In determining the quartile figures, the hourly rates were annualised using the same number of
contracted hours as the CEO. One UK employee with the relevant annual salary was then
chosen for each quartile and the single total remuneration figure was calculated to compare to
the CEO. Using gender pay data ensures that these individuals are reasonably representative of
pay levels at the 25th, 50th and 75th percentile as the single total remuneration figure for these
individuals is similar to other employees with a similar annual salary.
In FY 2020, the CEO voluntarily waived 20% of salary between the months of April and August
due to the impact of the Covid-19 pandemic. In addition, the Committee made the decision
not to operate the annual bonus plan for the Executive Directors in 2020. This resulted in a drop
in the CEO pay ratio. As the CEO received his full salary in FY 2021, the bonus was reinstated and
the LTIP vested, this resulted in a subsequent increase in the CEO pay ratio. In FY 2022, no LTIP
vested and the bonuses were lower than the prior year, resulting in a decrease in the ratio.
For FY 2022 the ratio includes the remuneration for Joe Vorih and Martin Payne during the
periods that these individuals undertook the role of CEO.
The ratio is considered within the expected range for the Company and is consistent with the
pay and reward policies for our UK employees overall.
The salary and total pay for the individuals identified at the Lower quartile, Median and Upper
quartile positions in 2022 are set out below:
Salary
Total Pay
CEO single figure
£549,515
£801,676
Upper quartile
£38,897
£38,897
Median
£26,677
£27,906
Lower quartile
£22,237
£22,237
Note:
The CEO single figure used in this analysis is based on the total remuneration for Martin Payne and Joe Vorih.
Annual Report on Remuneration continued
125
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Relative importance of the spend on pay
The charts below illustrate the total expenditure on pay for all of the Company’s employees
compared to dividends payable to shareholders.
EMPLOYEE REMUNERATION COSTS
£
DIVIDENDS
£
2022
148.2m
145.6m
2021
2022
30.5m
30.2m
2021
Shareholder voting on remuneration resolutions
Details of the votes cast in relation to our remuneration resolutions in 2021 and 2022 are
summarised below:
Votes for
Votes against
Votes
withheld
Approval of the Remuneration Policy
– 2021 AGM
198,146,521 (96.32%)
7,576,774 (3.68%)
5,526
Approval of the Annual Report on
Remuneration – 2022 AGM
196,818,094 (93.77%)
12,897,960 (6.14%)
3,699
External board appointments
Executive Directors are not normally entitled to accept a Non-Executive Director appointment
outside the Company without the prior approval of the Board. Joe Vorih is a Non-Executive
Director of Muth Mirrors, LLC, and retains the fees from that appointment.
Annual General Meeting
This Annual Report on Remuneration will be subject to an advisory shareholder vote at our
AGM scheduled to be held on 18 May 2023.
By order of the Board.
Lisa Scenna
Chair of the Remuneration Committee
14 March 2023
Annual Report on Remuneration continued
126
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
127
Genuit Group plc
Annual Report & Accounts 2022
Financial
statements
128 Independent Auditor’s Report
137 Group Income Statement
138
Group Statement of
Comprehensive Income
139 Group Balance Sheet
140
Group Statement of Changes
in Equity
141 Group Cash Flow Statement
142
Notes to the Group Financial
Statements
170 Directors’ Responsibilities Statement
171 Company Balance Sheet
172
Company Statement of Changes
in Equity
173 Company Cash Flow Statement
174
Notes to the Company
Financial Statements
181 Shareholder Information
127
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Independent Auditor’s Report
Independent Auditor’s Report to the
members of Genuit Group plc
Opinion
In our opinion:
–
Genuit Group plc’s Group financial statements and Parent Company financial statements
(the ‘financial statements’) give a true and fair view of the state of the Group’s and of the
Parent Company’s affairs as at 31 December 2022 and of the Group’s profit for the year
then ended;
–
the Group financial statements have been properly prepared in accordance with UK
Adopted International Accounting Standards;
–
the Parent Company financial statements have been properly prepared in accordance with
UK Adopted International Accounting Standards as applied in accordance with Section 408
of the Companies Act 2006; and
–
the financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.
We have audited the financial statements of Genuit Group plc (the ‘Parent Company’)
and its subsidiaries (the ‘Group’) for the year ended 31 December 2022 which comprise:
Group
Parent Company
Group Income Statement for the year ended
31 December 2022
Company Balance Sheet as at
31 December 2022
Group Statement of Comprehensive Income
for the year ended 31 December 2022
Company Statement of Changes in Equity
for the year ended 31 December 2022
Group Balance Sheet as at 31 December 2022
Company Cash Flow Statement for the year
ended 31 December 2022
Group Statement of Changes in Equity for the
year ended 31 December 2022
Related notes 1 to 9 to the Company financial
statements including a summary
of significant accounting policies
Group Cash Flow Statement for the year ended
31 December 2022
Related notes 1 to 29 to the Group financial
statements, including a summary
of significant accounting policies
The financial reporting framework that has been applied in their preparation is applicable
law and UK Adopted International Accounting Standards and as regards the Parent Company
financial statements, as applied in accordance with Section 408 of the Companies Act 2006.
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 financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient 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 financial statements in the UK, including the FRC’s Ethical
Standard as applied to listed public interest entities, and we have fulfilled 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 to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going
concern basis of accounting in the preparation of the financial 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:
–
Performing a walkthrough of the Group’s financial close process to confirm
our understanding of management’s going concern assessment process and
engaging with management to ensure all key risk factors we identified were
considered in their assessment.
–
Obtaining management’s going concern assessment including the cash flow forecasts
and covenant calculations for the going concern period which covers the 21 month
period to 31 December 2024 then performing procedures to confirm the clerical
accuracy and appropriateness of the underlying model.
–
Obtaining the Group’s revolving credit facility and agreeing the level of facilities
available, the applicable covenants, and the renewal date of August 2027 to
management’s assessment.
–
Assessing the Group’s base case scenario for consistency with budgets and cash flow
forecasts approved by the Board of Directors and those used by the Group in other
accounting estimates such as the goodwill impairment assessment.
–
Challenging the appropriateness of the base case assumptions relating to future levels
of demand, raw material availability and cost, and future energy prices. Our procedures
included analysis of external market data to consider any contradictory sector forecasts,
considerations of the current macroeconomic climate and the disclosed climate change
commitments of the Group.
128
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Independent Auditor’s Report continued
–
Critically assessing and reperforming management’s stress test of their cash flow
forecasts and covenant calculations in order to quantify and then consider the plausibility
of the downside scenarios required to exhaust the Group’s forecast liquidity and breach
the Group’s covenant ratios. We specifically considered the quantum of revenue reduction
and unrecovered cost inflation required to exhaust liquidity and breach the Group’s
covenant ratios.
–
Considering the impact and feasibility of potential mitigating activities that are within
control of management, such as reducing capital expenditure and dividend payments.
–
Reviewing the Group’s going concern disclosures included in the Annual Report and
Accounts in order to assess their completeness and conformity with the reporting
standards.
Our key observations:
–
The Directors’ assessment forecasts that the Group will maintain sufficient liquidity
throughout the going concern assessment period in the base case scenario.
–
The Directors have modelled several downside scenarios including a loss of production, loss
of a major customer, product failure, recession, increases in interest rates and increases in
raw material prices. In all scenarios, the going concern basis remains appropriate, with no
breach of covenant or shortfall of liquidity in the going concern period.
–
The Group has a significant undrawn committed borrowing facility (£179.1m) at the balance
sheet date, which is available until August 2027.
Based on the work we have performed, we have not identified any material uncertainties
relating to events or conditions that, individually or collectively, may cast significant doubt on
the Group and Parent Company’s ability to continue as a going concern for the period to
31 December 2024.
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 financial 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.
Overview of our audit approach
Audit scope
–
We performed an audit of the complete financial information of 8
components and audit procedures on specific balances for a further 4
components. We performed review scope procedures for the
remaining 38 components.
–
The components where we performed full or specific audit procedures
accounted for 95% of adjusted Profit Before Tax measure used to
calculate materiality, 90% of Revenue and 95% of Total Assets.
Key audit matters
–
Inappropriate revenue recognition arising from manual adjustments.
–
Inappropriate revenue recognition arising through inaccurate
accounting for customer rebates within Building Products.
–
Risk of an unrecognised impairment of goodwill within the Adey and
Climate & Ventilation CGUs.
Materiality
–
Overall Group materiality of £3.7m (2021: £3.9m) which represents 5%
of Profit Before Tax adjusted for non-recurring items.
An overview of the scope of the Parent Company and Group audits
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance
materiality determine our audit scope for each company within the Group. Taken together,
this enables us to form an opinion on the Group financial statements. We take into account
size, risk profile, the organisation of the Group and effectiveness of Group-wide controls,
changes in the business environment, the potential impact of climate change and other
factors such as recent Internal Audit results when assessing the level of work to be performed
at each company.
In assessing the risk of material misstatement to the Group financial statements, and to
ensure we had adequate quantitative coverage of significant accounts in the financial
statements, of the 50 reporting components of the Group, we selected 12 components
covering entities within the UK, which represent the principal business units within the Group.
Of the 12 components selected, we performed an audit of the complete financial information
of 8 components (‘full scope components’) which were selected based on their size or risk
characteristics. For the remaining 4 components (‘specific scope components’), we performed
audit procedures on specific accounts within that component that we considered had the
potential for the greatest impact on the significant accounts in the financial statements either
because of the size of these accounts or their risk profile.
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Genuit Group plc
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Strategic Report
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Remuneration
Financial Statements
The reporting components where we performed audit procedures accounted for 95%
(2021: 86%) of the Group’s adjusted Profit Before Tax measure used to calculate materiality,
90% (2021: 89%) of the Group’s Revenue and 95% (2021: 89%) of the Group’s Total Assets. For the
current year, the full scope components contributed 86% (2021: 86%) of the Group’s adjusted
Profit Before Tax measure used to calculate materiality, 80% (2021: 85%) of the Group’s Revenue
and 92% (2021: 89%) of the Group’s Total Assets. The specific scope component contributed 9%
of the Group’s adjusted Profit Before Tax measure used to calculate materiality, 10% of the
Group’s Revenue and 3% of the Group’s Total Assets (2021: no specific scope components).
The audit scope of these components may not have included testing of all significant
accounts of the component but will have contributed to the coverage of significant
accounts tested for the Group.
Of the remaining 38 components that together represent 5% of the Group’s adjusted Profit
Before Tax, none are individually greater than 1% of the Group’s adjusted Profit Before Tax.
For these components, we performed review scope procedures which primarily consist
of analytical review. For certain locations with statutory audit requirements, we also
performed incremental procedures. This included performing data analytics in respect
of revenue transactions and manual accounting entries to identify unusual transactions,
testing a sample of significant transactions including fixed asset expenditure where
significant, attendance at stock counts where inventory balances were significant and
obtaining external confirmation of cash balances to respond to any potential risks
of material misstatement to the Group financial statements.
Changes from the prior year
The approach to scoping the Group remains in line with prior year. Our approach is in line with
EY’s audit methodology and International Standards on Auditing (UK).
Involvement with component teams
All audit work performed for the purposes of the audit was undertaken by the Group audit team.
Climate change
Stakeholders are increasingly interested in how climate change will impact Genuit Group plc.
The Group has determined that the most significant future impacts from climate change on
their operations relate to the reputational risk in not meeting climate-related targets and
potential disruption to the supply chain but also the market opportunities it presents through
the development of low emission and climate resilient products and services. These are
explained on pages 29 to 32 in the required Task Force on Climate-Related Financial
Disclosures. They have also explained their climate commitments on pages 21 to 23. All of
these disclosures form part of the “Other information,” rather than the audited financial
statements. Our procedures on these unaudited disclosures therefore consisted solely of
considering whether they are materially inconsistent with the financial statements or our
knowledge obtained in the course of the audit or otherwise appear to be materially misstated,
in line with our responsibilities on “Other information”.
In planning and performing our audit we assessed the potential impacts of climate change
on the Group’s business and any consequential material impact on its financial statements.
The Group has explained how climate change has been reflected in the financial statements
in note 2.2 and note 17. These considerations did not give rise to a material impact on the
financial reporting estimates, consistent with the assessment that climate change is not
expected to have a significant impact on the Group’s going concern assessment to
31 December 2024, nor the viability of the Group over the next three years. These disclosures
also explain where governmental and societal responses to climate change risks are still
developing, and where the degree of certainty of these changes means that they cannot be
taken into account when determining asset and liability valuations under the requirements
of UK Adopted International Accounting Standards.
Our audit effort in considering the impact of climate change on the financial statements was
focused on evaluating management’s assessment of the impact of climate risk, physical and
transition, their climate commitments, the effects of material climate risks disclosed on pages
29 to 32 and whether these have been appropriately reflected in asset values where these are
impacted by future cash flows and associated sensitivity disclosures being the impairment
testing of goodwill following the requirements of UK Adopted International Accounting
Standards. As part of this evaluation, we performed our own risk assessment, supported by our
climate change internal specialists and determined the risks of material misstatement in the
financial statements from climate change which needed to be considered in our audit.
We also challenged the Directors’ considerations of climate change risks in their assessment
of going concern and viability and associated disclosures. Where considerations of climate
change were relevant to our assessment of going concern, these are described above.
Based on our work we have considered the impact of climate change on the financial
statements to impact one key audit matter. Details of our procedures and findings are
included in our explanation of key audit matters below.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most
significance in our audit of the financial statements of the current period and include the
most significant assessed risks of material misstatement (whether or not due to fraud) that
we identified. These matters included those which had the greatest effect on: the overall
audit strategy, the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our audit of the
financial statements as a whole, and in our opinion thereon, and we do not provide
a separate opinion on these matters.
Independent Auditor’s Report continued
130
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Risk
Our response to the risk
Key observations communicated to the Audit Committee
Inappropriate revenue recognition arising from
manual adjustments.
Refer to the Audit Committee Report (page 90); Summary
of Significant Accounting Policies (page 142); and Note 3.3
of the consolidated financial statements (page 150)
The Group has reported revenue of £622.2m
(2021: £594.3m). Revenue is stated net of rebates payable
which are considered in the subsequent key audit matter.
The timing of revenue recognition is relevant to the
reported performance of the Group as a whole and also
to the completeness of the rebate expense and related
year-end liabilities. Through manual adjustments, there
is the opportunity to misstate revenue between periods
in order to influence reported results.
We consider the significant risk to be primarily associated
with those components contributing more than 5% of the
Group’s revenue as any potential error could result in a
material misstatement of the Group financial statements.
For the remaining components whilst we consider there
to be a risk of management override of controls
to misstate revenue, we do not consider any individual
component to represent a significant risk of material
misstatement.
There has been no change in our assessment of this risk
when compared to the prior year.
We obtained an understanding of the process and controls in place over the
recognition of revenue including approval of manual adjustments recorded
as part of the financial statement close process.
We obtained an understanding of the IT systems and the role of IT in initiating,
recording and reporting revenue transactions within the Group’s accounting systems.
Of the 8 full scope components, 7 components recorded revenue that was
material to the Group and are specifically impacted by the identified fraud risk.
For 6 of the 7 full scope components with significant revenue, representing 86%
of the Group’s revenues, we used data analytics to analyse the full populations
of revenue transactions by correlating sales postings with receivables and cash
throughout the year to identify any unusual transactions.
Through this, we identified revenue recognised through manual adjustments
or manual journals for targeted testing.
We performed analysis by month to identify unusual trends in revenue and gross
margin that could indicate inappropriate revenue recognition.
For the remaining full scope component covering 3% of revenue, we performed
tests of detail over revenue recognised in the year by agreeing a representative
sample of sales to supporting documentation including proof of delivery and
testing related cash receipts throughout the year. We also performed
procedures to identify and assess the appropriateness of manual adjustments.
For all full scope components, we inspected a sample of pre and post year-end
sales invoices to assess whether they relate to completed deliveries and have
been recognised in the correct period.
We analysed sales credit notes raised in January 2023 and tested a sample to
supporting information.
For those reporting components reporting revenue but not identified as full or
specific scope, we performed data analytics procedures to identify unusual
trends in revenue recognition and any significant unusual transaction flows.
We have reviewed Genuit Group’s revenue recognition policy against the
requirements of IFRS 15 with a focus on ensuring the performance obligations
are appropriately reflected in the Group’s approach to recognising revenue.
We assessed the adequacy of the disclosure of revenue within the Annual
Report and Accounts.
Through our procedures performed we have
not identified any unsupported manual
adjustments to revenue, or any unexplained
anomalies from our revenue analytics.
No significant manual adjustments or
unusual accounting entries were identified
through our testing.
No material errors in the timing of revenue
recognition were identified.
We concluded that revenue recognised
in the year is appropriate and found
no evidence of management bias.
Independent Auditor’s Report continued
131
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Risk
Our response to the risk
Key observations communicated to the Audit Committee
Inappropriate revenue recognition arising through
inaccurate accounting for customer rebates within
Building Products.
Refer to the Audit Committee Report (page 90); Summary
of Significant Accounting Policies (page 142); and Note 3.3
of the consolidated financial statements (page 150)
The total value of customer rebates recognised in the year
and accrued for at the balance sheet date is material.
The Group’s pricing structure includes rebate arrangements
with customers. Many of these arrangements are relatively
straightforward, being based on agreed percentages of
sales made to direct customers during the period.
A proportion of the Group’s rebate agreements are with
indirect customers and estimation is required when
determining the rebate accrual at the balance sheet date.
This is particularly the case for indirect rebates within the
Residential Systems operating segment (Building Products
business unit) where the rebate is driven by claims which
may not have been received or verified at the time when
the liabilities are recognised. These claims are made on the
basis of installations in line with specification rather than
purchases from the Group.
There has been no change in our assessment of this risk
when compared to the prior year.
We obtained an understanding of management’s process and controls in place
over recognition and recording of rebates, including key assumptions such as
volumes and related targets and claim compliance rates for developers.
We obtained an understanding of the IT systems and the role of IT
in initiating, recording and reporting rebate transactions within the
Group’s accounting systems.
We reviewed significant, new and existing rebate agreements and tested a
sample of payments made during the year in order to validate the charges
incurred and settled during the year.
We utilised data analytics to identify unusual transactions recorded in rebate
accounts that could indicate management override of controls.
For developer rebates, we reviewed external information to develop our own
point estimate of the year-end rebate. We tested the accuracy of quarterly
estimates made by management against actual claim amounts. We tested the
compliance rates of actual claims received to understand the value of claims
received that were subsequently paid out during the year.
For merchant rebates, we developed an independent expectation of the annual
rebate charge and year-end liability, including any charge associated with
targeted rebate clauses, and compared this to management’s annual charge
and year-end liability.
We performed completeness procedures on the year-end rebate held by
comparing a sample of customers who claimed during the year to the rebate
charge and closing balance.
We reviewed material post year-end bank payments and claims received and
compared these to management’s year-end estimates.
For merchant rebates, we compared the 2022 charge from the December 2022
schedule to the 2022 charge from the January 2023 schedule to understand
changes to the rebate charge that were made subsequent to the year end.
We compared the prior year accrual to the actual claims verified and paid in the
year to understand the historical accuracy of management’s estimation.
We found no material difference between the
prior year rebate accrual and the actual
rebate claims verified and paid in the year.
This provides assurance over management’s
historical ability to accurately estimate the
rebate liability.
We concluded that management’s
judgments were materially consistent with
our expectations and recalculations based
on external sources, post year-end claim
activity and historic settlement rates.
We concluded that the rebate expense
recognised during the year and the liability
at the period end is appropriate.
Independent Auditor’s Report continued
132
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Risk
Our response to the risk
Key observations communicated to the Audit Committee
Risk of an unrecognised impairment of goodwill within the
Adey and Climate & Ventilation CGUs.
Refer to the Audit Committee Report (page 90); Summary
of Significant Accounting Policies (page 142); and Note 3.4
of the consolidated financial statements (page 150)
There is a risk that there is an unrecognised impairment
against goodwill within the Adey and the Climate &
Ventilation CGUs. The forecasts in these CGUs are likely
to be highly sensitive to key assumptions including the
revenue growth rates and discount rates.
The risk has increased compared to the prior year, due to
performance of these specific CGUs in comparison to
budget in H1 of 2022.
We assessed the appropriateness of the individual CGUs identified in line
with IAS 36.
We walked through and understood management’s approach to the goodwill
impairment assessment and walked through the Groups budgeting process to
understand the key assumptions made in the budget. This included confirming
the underlying cash flows are consistent with the Board approved business plan
and appropriately consider the effects of material climate risks as disclosed
on pages 29 to 32.
We obtained an understanding of the role of IT in the goodwill impairment
assessment process, including the source of underlying data.
We utilised out valuation specialists to support in our assessment of the
appropriateness of management’s discount rate.
We challenged the long-term growth rate within the discounted cash
flow calculations.
We understood and challenged management’s forecast future cash flows,
to assess key inputs and to compare these against industry expectations.
We challenged the assumptions underpinning the growth rates, including the
expected recovery following supply chain constraints, considerations over
economic uncertainty in the short-term and how the medium to longer-term
risks and opportunities were factored in to future cash flows, including the
impact of climate change.
We audited the disclosures in accordance with IAS 36 and IAS 1.
We consider management’s assessment
appropriately reflects the requirements of IAS
36 and captures the risks to future cash flows.
Further to initial review, management has
recorded an impairment of £12m of goodwill
associated with the Adey CGU. We concluded
that the remaining goodwill balance
recognised in the Adey CGU is appropriate.
We concluded that the goodwill recognised
in the Climate & Ventilation CGU was
appropriate.
In the prior year, our auditor’s report included a key audit matter in relation to the risk of inaccurate accounting for acquisitions which was specific to material acquisitions made during 2021.
In the current year, there were no material acquisitions and therefore this risk is not identified as a key audit matter.
Independent Auditor’s Report continued
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Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating
the effect of identified misstatements on the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate,
could reasonably be expected to influence the economic decisions of the users of the
financial statements. Materiality provides a basis for determining the nature and extent
of our audit procedures.
We determined materiality for the Group to be £3.7m (2021: £3.9m), which is 5% (2021: 5%) of
Group Profit Before Tax adjusted for non-recurring items. We believe that materiality basis
provides us with a consistent basis for calculating materiality as it excludes the impact of
one-off items that are not related to the underlying operations of the Group.
We determined materiality for the Parent Company to be £3.4m (2021: £3.9m), which is 1%
(2021: 1%) of total equity.
Starting basis
–
Group Profit Before Tax – £45.4m
Adjustments
–
Adjusted for non-underlying items excluding amortisation on acquired
intangible assets of £15.2m and staff costs £0.9m
Materiality
–
Totals £74.5m Group adjusted Profit Before Tax
–
Materiality of £3.7m (5% of Group Profit Before Tax adjusted for
non-recurring items)
During the course of our audit, we reassessed initial materiality with the only change in the
final materiality from our original assessment, being to reflect the actual reported
performance of the Group in the year.
Performance materiality
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 75% (2021: 75%) of
our planning materiality, namely £2.8m (2021: £2.9m). We have set performance materiality at
this percentage due to our assessment of the control environment and assessment that there
is a lower likelihood of misstatements.
Audit work at component locations for the purpose of obtaining audit coverage over
significant financial 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 £0.5m to £2.2m (2021: £0.6m to £1.8m).
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit
differences in excess of £0.2m (2021: £0.2m), which is set at 5% of planning materiality,
as well as differences 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.
Other information
The other information comprises the information included in the Annual Report and Accounts
set out on pages 1 to 127, other than the financial statements and our auditor’s report thereon.
The Directors are responsible for the other information contained within the Annual Report
and Accounts.
Our opinion on the financial 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 financial 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 financial 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.
Independent Auditor’s Report continued
134
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Opinions on other matters prescribed by the Companies Act 2006
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 financial year
for which the financial statements are prepared is consistent with the financial statements
and those reports have been prepared in accordance with applicable legal requirements;
–
the information about internal control and risk management systems in relation to financial
reporting processes and about share capital structures, given in compliance with rules 7.2.5
and 7.2.6 in the Disclosure Rules and Transparency Rules sourcebook made by the Financial
Conduct Authority (the FCA Rules), is consistent with the financial statements and has been
prepared in accordance with applicable legal requirements; and
–
information about the Company’s corporate governance statement and practices and
about its administrative, management and supervisory bodies and their committees
complies with rules 7.2.2, 7.2.3 and 7.2.7 of the FCA Rules.
Matters on which we are required to report 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 identified material
misstatements in:
–
the Strategic Report or the Directors’ Report; or
–
the information about internal control and risk management systems in relation to
financial reporting processes and about share capital structures, given in compliance
with rules 7.2.5 and 7.2.6 of the FCA Rules
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 financial 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 specified by law are not made; or
–
we have not received all the information and explanations we require for our audit; or
–
a Corporate Governance Statement has not been prepared by the Company.
Corporate Governance Statement
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 specified 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
financial 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 identified set out on page 96;
–
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 page 96;
–
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 96;
–
Directors’ statement on fair, balanced and understandable set out on page 99;
–
Board’s confirmation that it has carried out a robust assessment of the emerging and
principal risks set out on pages 55 to 62;
–
The section of the Annual Report and Accounts that describes the review of effectiveness
of risk management and internal control systems set out on page 79; and;
–
The section describing the work of the Audit Committee set out on pages 90 to 94.
Responsibilities of Directors
As explained more fully in the Group Directors’ Responsibilities Statement set out on page 99
and the Parent Company Directors’ Responsibilities Statement set out on page 170, the
Directors are responsible for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such internal control as the Directors
determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial 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.
Independent Auditor’s Report continued
135
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial 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 influence the economic decisions of users taken on the basis
of these financial statements.
Explanation as to what extent the audit was considered capable of detecting irregularities,
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.
However, the primary responsibility for the prevention and detection of fraud rests with both
those charged with governance of the Group and management.
–
We obtained an understanding of the legal and regulatory frameworks that are applicable
to the Group and determined that the most significant are frameworks which are directly
relevant to specific assertions in the financial statements are those that relate to the
reporting framework (UK Adopted International Accounting Standards, the Companies Act
2006 and UK Corporate Governance Code). In addition, we concluded that there are certain
significant laws and regulations which may have an effect on the determination of the
amounts and disclosures in the financial statements including the relevant tax compliance
regulations in the UK and those laws and regulations relating to health and safety and
employee matters.
–
We understood how Genuit Group plc is complying with those frameworks by making
enquiries of Group and Component management, as well as those charged with governance.
We corroborated our enquiries through our review of board minutes and papers provided to
the Audit Committee. Further, through our detailed audit procedures we have considered
whether any evidence has been identified that indicates non-compliance with the relevant
laws and regulations has occurred.
–
We assessed the susceptibility of the Group’s financial statements to material
misstatement, including how fraud might occur by understanding the Group’s performance
against market expectations; understanding the Group’s performance against internal key
performance indicators used when calculating management’s variable remuneration;
identifying key judgments and estimates including rebate accounting that can materially
impact the financial statements; and understanding the controls and processes in place
for the prevention and detection of fraudulent activity and financial reporting.
–
Based on this understanding we designed our audit procedures to identify non-compliance
with such laws and regulations. Our procedures involved those outlined in the revenue and
rebate key audit matters above, as well as testing manual journals recorded at the
component and consolidation level, understanding unusual and one-off transactions, and
where relevant corroborating the basis of accounting judgements and estimates with
employees and specialists outside of the finance functions such as the Company Secretary,
the Group IT function, the Group Health and Safety team and commercial management.
A further description of our responsibilities for the audit of the financial statements is located
on the Financial Reporting Council’s website at https://www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
Other matters we are required to address
–
Following the recommendation from the Audit Committee, we were appointed by the
company in 2012 to audit the Group’s financial statements for the year ending 31 December
2012 and subsequent financial periods. In 2014, upon the Group’s listing on the London Stock
Exchange the Group became subject to the rotation requirements under the UK Corporate
Governance Code, Competition and Markets Authority and the EU Audit Directive.
–
The period of total uninterrupted engagement since the Group was subject to these
rotation requirements is nine years. In total the period of uninterrupted engagement
including previous renewals and reappointments is eleven years, covering the years ending
31 December 2012 to 31 December 2022.
–
The audit opinion is consistent with the additional report to the Audit Committee.
Use of our report
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.
Mark Morritt (Senior Statutory Auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Leeds
14 March 2023
Notes:
1.
The maintenance and integrity of the Genuit Group plc website is the responsibility of the Directors; the work carried out by
the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any
changes that may have occurred to the financial statements since they were initially presented on the website.
2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Independent Auditor’s Report continued
136
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Group Income Statement
For the year ended 31 December 2022
2022
2021
Notes
Underlying
£m
Non-
underlying
†
£m
Total
£m
Underlying
£m
Non-
underlying
†
£m
Total
£m
Revenue
5
622.2
–
622.2
594.3
–
594.3
Cost of sales
6, 8
(372.1)
(2.5)
(374.6)
(348.8)
(6.5)
(355.3)
Gross profit
250.1
(2.5)
247.6
245.5
(6.5)
239.0
Selling and distribution costs
(81.5)
–
(81.5)
(81.8)
–
(81.8)
Administration expenses
8
(70.2)
(12.3)
(82.5)
(68.3)
(7.5)
(75.8)
Trading profit
98.4
(14.8)
83.6
95.4
(14.0)
81.4
Amortisation of intangible assets
8
(0.2)
(15.2)
(15.4)
(0.1)
(14.2)
(14.3)
Impairment of intangible assets
8
–
(2.8)
(2.8)
–
–
–
Impairment of goodwill
8
–
(12.0)
(12.0)
–
–
–
Operating profit
5, 6
98.2
(44.8)
53.4
95.3
(28.2)
67.1
Finance costs
8, 11
(7.6)
(0.4)
(8.0)
(4.2)
–
(4.2)
Profit before tax
5
90.6
(45.2)
45.4
91.1
(28.2)
62.9
Income tax
8, 12
(14.1)
5.2
(8.9)
(16.0)
(5.9)
(21.9)
Profit for the year attributable to the owners of the parent company
76.5
(40.0)
36.5
75.1
(34.1)
41.0
Basic earnings per share (pence)
13
14.7
16.7
Diluted earnings per share (pence)
13
14.6
16.5
Dividend per share (pence) – interim
14
4.1
4.0
Dividend per share (pence) – final
14
8.2
8.2
14
12.3
12.2
†
Non-underlying items are presented separately. The definition of non-underlying items is included in the Group Accounting Policies on page 148. Non-underlying items are detailed in Note 8 to the consolidated financial statements.
137
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Group Statement of Comprehensive Income
For the year ended 31 December 2022
2022
£m
2021
£m
Profit for the year attributable to the owners of the parent company
36.5
41.0
Other comprehensive income:
Items which may be reclassified subsequently to the income statement:
Exchange differences on translation of foreign operations
–
(0.4)
Effective portion of changes in fair value of forward foreign currency derivatives
0.1
(0.1)
Other comprehensive income for the year net of tax
0.1
(0.5)
Total comprehensive income for the year attributable to the owners of the parent company
36.6
40.5
138
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Group Balance Sheet
At 31 December 2022
Notes
2022
£m
2021
£m
Non-current assets
Property, plant and equipment
15
169.9
151.7
Right-of-use assets
16
22.3
20.6
Intangible assets
17
615.1
642.8
Total non-current assets
5
807.3
815.1
Current assets
Inventories
21
89.9
80.8
Trade and other receivables
22
68.1
76.7
Income tax receivable
2.2
1.1
Cash and cash equivalents
23
50.0
52.3
Assets held-for-sale
19
10.7
–
Total current assets
220.9
210.9
Total assets
5
1,028.2
1,026.0
Current liabilities
Trade and other payables
26
(124.2)
(135.5)
Lease liabilities
16, 27
(5.8)
(4.5)
Deferred and contingent consideration
18
–
(0.5)
Derivative financial instruments
27
–
(0.1)
Liabilities held-for-sale
19
(2.6)
–
Total current liabilities
(132.6)
(140.6)
Notes
2022
£m
2021
£m
Non-current liabilities
Loans and borrowings
27
(193.1)
(197.4)
Lease liabilities
16, 27
(17.3)
(16.1)
Deferred and contingent consideration
18
(8.0)
(4.3)
Other liabilities
27
–
(1.4)
Deferred income tax liabilities
12
(50.1)
(48.5)
Total non-current liabilities
(268.5)
(267.7)
Total liabilities
5
(401.1)
(408.3)
Net assets
5
627.1
617.7
Capital and reserves
Equity share capital
24
0.2
0.2
Share premium
24
93.6
93.6
Capital redemption reserve
24
1.1
1.1
Hedging reserve
24
–
(0.1)
Foreign currency retranslation reserve
24
–
–
Other reserves
24
116.5
116.5
Retained earnings
415.7
406.4
Total equity
627.1
617.7
The consolidated financial statements were approved for issue by the Board of Directors and
signed on its behalf by:
Joe Vorih
Paul James
Director
Director
14 March 2023
14 March 2023
Company Registration No. 06059130
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Remuneration
Financial Statements
Group Statement of Changes in Equity
For the year ended 31 December 2022
Equity
share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Own
shares
£m
Hedging
reserve
£m
Foreign
currency
retranslation
reserve
£m
Other
reserves
£m
Retained
earnings
£m
Total
equity
£m
At 31 December 2020
0.2
–
1.1
–
–
0.4
116.5
382.7
500.9
Profit for the year
–
–
–
–
–
–
–
41.0
41.0
Other comprehensive income
–
–
–
–
(0.1)
(0.4)
–
–
(0.5)
Total comprehensive income for the year
–
–
–
–
(0.1)
(0.4)
–
41.0
40.5
Dividends paid
–
–
–
–
–
–
–
(21.7)
(21.7)
Issue of share capital (See Note 24)
–
96.3
–
–
–
–
–
–
96.3
Transaction costs on issue of share capital
–
(2.7)
–
–
–
–
–
–
(2.7)
Share-based payments charge
–
–
–
–
–
–
–
2.2
2.2
Share-based payments settled
–
–
–
–
–
–
–
2.1
2.1
Share-based payments excess tax benefit
–
–
–
–
–
–
–
0.1
0.1
At 31 December 2021
0.2
93.6
1.1
–
(0.1)
–
116.5
406.4
617.7
Profit for the year
–
–
–
–
–
–
–
36.5
36.5
Other comprehensive income
–
–
–
–
0.1
–
–
–
0.1
Total comprehensive income for the year
–
–
–
–
0.1
–
–
36.5
36.6
Dividends paid
–
–
–
–
–
–
–
(30.5)
(30.5)
Share-based payments charge
–
–
–
–
–
–
–
2.9
2.9
Share-based payments settled
–
–
–
–
–
–
–
0.4
0.4
Share-based payments excess tax benefit
–
–
–
–
–
–
–
–
–
At 31 December 2022
0.2
93.6
1.1
–
–
–
116.5
415.7
627.1
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Remuneration
Financial Statements
Group Cash Flow Statement
For the year ended 31 December 2022
Notes
2022
£m
2021
£m
Operating activities
Profit before tax
45.4
62.9
Finance costs
11
8.0
4.2
Operating profit
53.4
67.1
Non-cash items:
Profit on disposal of property, plant and equipment
6
(0.7)
(0.2)
Transaction costs on issue of share capital
–
0.1
Research and development expenditure credit
6
(1.2)
(2.0)
Warranty provision release
(1.0)
–
Non-underlying items:
–
impairment of goodwill arising on business combinations
8, 17
12.0
–
–
impairment of intangible assets arising on business combinations
8, 17
2.8
–
–
amortisation of intangible assets arising on business combinations
8, 17
15.2
14.2
–
provision for acquisition costs
8
3.3
6.6
–
unwind of inventory fair value adjustment
8
–
3.7
–
provision for restructuring costs
8
9.3
1.1
–
provision for product liability claim
8
1.0
2.6
–
isolated cyber incident
8
1.2
–
Depreciation of property, plant and equipment
5, 15
19.4
18.4
Depreciation of right-of-use assets
5, 16
5.4
4.4
Amortisation of internally generated intangible assets
17
0.2
0.1
Share-based payments
25
2.9
2.2
Cash items:
– Settlement of acquisition costs
18
(0.2)
(6.9)
– Settlement of restructuring costs
(8.2)
–
– Settlement of isolated cyber incident costs
(1.2)
–
Operating cash flows before movement in working capital
113.6
111.4
Movement in working capital:
Receivables
7.8
(0.9)
Payables
(10.4)
(6.2)
Notes
2022
£m
2021
£m
Inventories
(17.1)
(19.9)
Cash generated from operations
93.9
84.4
Income tax paid
(7.0)
(9.5)
Net cash flows from operating activities
86.9
74.9
Investing activities
Acquisition of businesses net of cash at acquisition
18
(2.6)
(236.4)
Settlement of deferred and contingent consideration
(0.5)
–
Proceeds from disposal of property, plant and equipment
2.9
0.5
Purchase of property, plant and equipment
(41.1)
(33.1)
Development expenditure
(2.7)
(1.5)
Net cash flows from investing activities
(44.0)
(270.5)
Financing activities
Issue of share capital
24
–
96.3
Transaction costs on issue of share capital
24
–
(2.8)
Debt issue costs
(3.1)
–
Drawdown of bank loan
266.2
148.0
Repayment of bank loan
(268.3)
(10.0)
Interest paid
(3.7)
(2.9)
Dividends paid
14
(30.5)
(21.7)
Proceeds from exercise of share options
0.4
2.1
Settlement of lease liabilities
16
(6.2)
(5.1)
Net cash flows from financing activities
(45.2)
203.9
Net change in cash and cash equivalents
(2.3)
8.3
Cash and cash equivalents at 1 January
23
52.3
44.1
Net foreign exchange difference
–
(0.1)
Cash and cash equivalents at 31 December
23
50.0
52.3
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Strategic Report
Governance
Remuneration
Financial Statements
Notes to the Group Financial Statements
For the year ended 31 December 2022
1. Authorisation of financial statements
The consolidated financial statements of the Group for the year ended 31 December 2022
were authorised for issue by the Board of Directors on 14 March 2023 and the balance sheet
was signed on the Board’s behalf by Joe Vorih and Paul James.
Genuit Group plc (previously known as Polypipe Group plc) is a public limited company
incorporated and domiciled in England and Wales. The principal activity of the Group is the
provision of sustainable water and climate management solutions for the built environment.
2. Summary of significant accounting policies
The basis of preparation and accounting policies used in preparing the consolidated
historical financial information for the year ended 31 December 2022 are set out below.
These accounting policies have been consistently applied in all material respects
to all the periods presented.
2.1 Basis of preparation and statement of compliance with IFRSs
The Group’s consolidated financial statements have been prepared in accordance with
UK-adopted International Accounting Standards (UK-adopted-IAS).
The accounting policies which follow set out those policies which apply in preparing
the consolidated financial statements for the year ended 31 December 2022.
The Group’s consolidated financial statements have been prepared on a historical cost basis
except for derivative financial instruments and deferred and contingent consideration that
have been measured at fair value. The consolidated financial statements are presented in
Pounds Sterling and all values are rounded to one decimal place of a million (£m) unless
otherwise indicated.
2.2 Going concern
The Directors have made enquiries into the adequacy of the Group’s financial resources,
through a review of the Group’s budget and medium-term financial plan, including cash flow
forecasts. The Group has modelled a range of scenarios, with the base forecast being one in
which, over the 24 months ending 31 December 2024, sales volumes grow in line with or
moderately above external construction industry forecasts.
In addition, the Directors have considered several downside scenarios, including adjustments
to the base forecast, a period of significantly lower like-for-like sales, profitability and cash
flows. Consistent with our Principal Risks and Uncertainties these downside scenarios included,
but were not limited to, loss of production, loss of a major customer, product failure, recession,
increases in interest rates and increases in raw material prices. Downside scenarios also
included a combination of these risks, and reverse stress testing.
The financial impact of the climate-related risks disclosed within the Task Force on
Climate-Related Financial Disclosures Report on pages 26 to 35 of the Strategic Report
continue to be assessed. Through the detailed qualitative scenario analysis undertaken, the
Directors conclude that there is no material adverse impact of climate change in the short to
medium term, and hence have not included any impacts in either the base case or downside
scenarios of the going concern assessment. The Group has not experienced material adverse
disruption during periods of adverse or extreme weather in recent years and do not expect
this to occur to a material level over the period of the going concern assessment.
At 31 December 2022, the Group had available £179.1m of undrawn committed borrowing
facilities in respect of which all conditions precedent had been met. These borrowing facilities
are available until at least August 2027, subject to covenant headroom. The Directors are
satisfied that the Group has sufficient liquidity and covenant headroom to withstand
reasonable variances to the base forecast, as well as the downside scenarios. In addition, the
Directors have noted the range of possible additional liquidity options available to the Group,
should they be required.
As a result, the Directors have satisfied themselves that the Group has adequate financial
resources to continue in operational existence for a period of at least the next 21 months.
Accordingly, they continue to adopt the going concern basis in preparing the consolidated
financial statements.
2.3 Basis of consolidation
The consolidated financial statements comprise the financial statements of the Group and its
subsidiaries at 31 December 2022. Control is achieved when the Group is exposed, or has
rights, to variable returns from its involvement with the investee and has the ability to affect
those returns through its power over the investee.
Specifically, the Group controls an investee if, and only if, the Group has:
–
power over the investee (i.e. existing rights that give it the current ability to direct the
relevant activities of the investee);
–
exposure, or rights, to variable returns from its involvement with the investee; and
–
the ability to use its power over the investee to affect its returns.
The Group 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. Consolidation of a
subsidiary begins when the Group obtains control over the subsidiary and ceases when the
Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary
acquired or disposed of during the year are included in the consolidated financial statements
from the date the Group gains control until the date the Group ceases to control the subsidiary.
The Group holds 100% of the equity and controls 100% of the voting rights in all subsidiaries, with
the exception of Plura Composites Limited, Polydeck Limited, Equaflow Ltd, Sustainable Water
and Drainage Systems BV, Sustainable Water and Drainage Systems Limited and Water
Management Solutions LLC (which has not traded since incorporation in Qatar in 2015).
In relation to the acquisition of Plura Composites Limited and related entities, there exists an
option to acquire the remaining 49% which has not been exercised in the year. Under the
contractual arrangements, the Group’s approval is required for all major operational
decisions. Based on this, the Group has accounted for Plura Composites Limited as a wholly
owned subsidiary because there is a call option over the remaining shares which gives the
Group present access to returns over all the shares held by non-controlling shareholders.
The treatment of non-controlling interests or any other non-voting right factors in respect of
control is not material to the consolidated financial statements.
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Remuneration
Financial Statements
Notes to the Group Financial Statements continued
2.4 Business combinations
Business combinations are accounted for using the acquisition method. The cost of an
acquisition is the total of the consideration transferred, measured at acquisition fair value.
Acquisition costs incurred are expensed and included in administration expenses in the
income statement.
Identifiable intangible assets, meeting either the contractual-legal or separability criterion are
recognised separately from goodwill.
2.5 Goodwill
Goodwill is initially measured at cost being the excess of the aggregate of the acquisition
date fair value of the consideration transferred over the net identifiable amounts of the assets
acquired and the liabilities assumed in exchange for the business combination.
After initial recognition, goodwill is stated at cost less any accumulated impairment losses
(see Note 2.13).
The carrying amount of goodwill allocated to a cash-generating unit is taken into account
when determining the profit or loss on disposal of the unit, or of an operation within it.
2.6 Foreign currency translation
The Group’s consolidated financial statements are presented in Pounds Sterling, which is
also the parent company’s functional currency. Each entity in the Group determines its own
functional currency and items included in the financial statements of each entity are
measured in that functional currency.
Transactions in foreign currencies are initially recognised by the Group entities at their
respective functional currency rates prevailing at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are retranslated at the
functional currency spot rate of exchange at the balance sheet date. All differences arising
on settlement or translation are taken to the income statement.
Non-monetary items that are measured in terms of historical cost in a foreign currency are
translated using the exchange rates at the dates of the initial transactions.
The assets and liabilities of foreign operations are translated into Pounds Sterling at the rate of
exchange ruling at the balance sheet date. Income and expenses are translated at average
exchange rates prevailing. The resulting exchange differences are recognised in other
comprehensive income.
2.7 Revenue from contracts with customers and interest income
Revenue from contracts with customers is recognised when control of the goods is
transferred to the customer at an amount that reflects the consideration to which the Group
expects to be entitled to in exchange for those goods. The disclosure of significant accounting
judgements and estimates relating to revenue from contracts with customers is provided in
Note 3.
2.7.1 Sale of goods
Revenue from sale of goods is recognised at the point in time when control of the goods is
transferred to the customer, generally on delivery of the goods. Our most commonly used
standard payment terms are 30 days net end of month.
i) Performance obligations
Revenue from sale of goods is recognised at the point in time when control of the goods is
transferred to the customer, generally on delivery of the goods. Our most commonly used
standard payment terms are 30 days net end of month.
The Group considers whether there are other undertakings in the sales contract that are
separate performance obligations to which a portion of the transaction price needs to be
allocated. The main source of variable consideration in our contracts with customers relates
to volume rebates. More information is on the accounting for rebates is provided at (ii) and (iii)
below. The Group’s contracts do not typically include a significant financing component.
Non-cash consideration is not a feature of the Group’s contractual arrangements.
ii) Variable consideration
If the consideration in a sales contract includes a variable amount, the Group estimates the
amount of consideration to which it will be entitled in exchange for transferring the goods to
the customer. The variable consideration is estimated at contract inception and constrained
until it is highly probable that a significant revenue reversal in the amount of cumulative
revenue recognised will not occur when the associated uncertainty with the variable
consideration is subsequently resolved. Some sales contracts provide customers with sales
volume rebates. The sales volume rebates give rise to variable consideration.
iii) Sales volume rebates
The Group provides retrospective sales volume rebates to certain customers once, amongst
other matters, the quantity of goods purchased during a predetermined period exceeds
thresholds specified in the sales contract. To estimate the variable consideration for these
expected future rebates, the Group applies the most likely amount method for sales contracts
with a single-volume threshold and the expected value method for sales contracts with more
than one volume threshold. The selected method that best predicts the amount of variable
consideration is primarily driven by the number of volume thresholds contained in the sales
contract. The Group then applies the requirements on constraining estimates of variable
consideration and recognises a refund liability for the expected future rebates. Sales volume
rebate liabilities, both estimated and actual, are netted off against the associated trade
receivables to the extent of the individual customer trade receivable balance and where they
are net settled. Any remaining credit balances are included in trade and other payables.
Developer rebate liabilities are presented in trade and other payables.
2.7.2 Interest income
Interest income is recognised as interest accrues on cash balances using the effective
interest method. The effective interest rate is the rate that exactly discounts estimated future
cash receipts through the expected life of the financial instrument to its net carrying amount.
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Financial Statements
Notes to the Group Financial Statements continued
2.8 Income taxes
Current income tax
Current income tax assets and liabilities for the current and prior years are measured at the
amount expected to be recovered from or paid to the tax authorities, based on income tax
rates and laws enacted or substantively enacted at the balance sheet date.
Deferred income tax
Deferred income tax is recognised on all temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the consolidated financial statements,
with the following exceptions:
–
where the deferred income tax asset relating to the deductible temporary difference arises
from the initial recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit nor
taxable profit or loss;
–
in respect of taxable temporary differences associated with investments in subsidiaries,
where the timing of the reversal of the temporary differences can be controlled and it is
probable that the temporary differences will not reverse in the foreseeable future; and
–
deferred income tax assets are recognised only to the extent that it is probable that taxable
profit will be available against which the deductible temporary differences, carried forward
tax credits or tax losses can be utilised.
For deductible temporary differences associated with investments in subsidiaries it must
additionally be probable that the temporary differences will reverse in the foreseeable future.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date.
Deferred income tax assets and liabilities are offset only if a legally enforceable right exists
to set off current income tax assets against current income tax liabilities and the deferred
income taxes relate to the same tax authority and that authority permits the Group to make
a single net payment.
Deferred income tax assets and liabilities are measured on an undiscounted basis at the
income tax rates that are expected to apply when the asset is realised or the liability is
settled, based on income tax rates and laws enacted or substantively enacted at the
balance sheet date.
Income tax is charged or credited to other comprehensive income if it relates to items that
are charged or credited to other comprehensive income. Similarly, income tax is charged or
credited directly to equity if it relates to items that are charged or credited directly to equity.
Otherwise, income tax is recognised in the income statement.
2.9 Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and
accumulated impairment losses, if any. Cost comprises the aggregate amount paid and the
fair value of any other consideration given to acquire the asset and includes costs directly
attributable to making the asset capable of operating as intended.
Depreciation is provided on the cost less residual value of property, plant and equipment, and
is on a straight-line basis over its expected useful life as follows:
Freehold land
Nil
Freehold buildings
Over expected useful life not exceeding 50 years
Plant and other equipment
4 to 10 years
The carrying amounts of property, plant and equipment are reviewed for impairment if events
or changes in circumstances indicate the carrying amount may not be recoverable, and are
written down immediately to their recoverable amount. Useful lives, residual values and
depreciation methods are reviewed at each financial year end, and where adjustments are
required, these are made prospectively.
An item of property, plant and equipment and any significant part initially recognised is
derecognised upon disposal or where no future economic benefits are expected to arise from
the continued use of the asset. Any profit or loss arising on the derecognition of the asset
(calculated as the difference between the net disposal proceeds and the carrying amount of
the asset) is included in the income statement when the asset is derecognised.
2.10 Intangible assets
Intangible assets acquired separately are initially measured at cost. Intangible assets arising
on business combinations are initially measured at fair value. Following initial recognition,
intangible assets are carried at cost or fair value less accumulated amortisation and
accumulated impairment losses, if any. Internally generated intangible assets, excluding
capitalised development costs, are not capitalised and expenditure is reflected in the income
statement in the year in which the expenditure is incurred.
The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets
with finite lives are amortised on a straight-line basis over their expected useful life and are
assessed for impairment whenever there is an indication that the intangible asset may be
impaired.
Amortisation of intangible assets is provided over the following expected useful lives:
Patents and brand names
10 to 20 years
Customer relationships and customer order book
5 to 20 years
Licences
10 years
Development costs
4 to 10 years
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Financial Statements
Notes to the Group Financial Statements continued
Research and development costs
Research costs are expensed as incurred. Development expenditures on individual projects
are recognised as an intangible asset when the Group can demonstrate:
–
the technical feasibility of completing the intangible asset so that it will be available
for use or sale;
–
its intention to complete and its ability to use or sell the asset;
–
how the asset will generate future economic benefits;
–
the availability of resources to complete the asset; and
–
the ability to measure reliably the expenditure during development.
2.11 Government grants
Government grants are recognised where there is reasonable assurance that the grant will be
received, and all attached conditions will be complied with. When the grant relates to an
expense item, it is recognised as income on a systematic basis over the periods that the related
costs, for which it is intended to compensate, are expensed. When the grant relates to an asset,
it is recognised as income in equal amounts over the expected useful life of the related asset.
When the Group receives grants of non-monetary assets, the asset and the grant are
recorded at nominal amounts and released to the income statement over the expected
useful life of the asset, based on the pattern of consumption of the benefits of the underlying
asset by equal annual instalments.
2.12 Assets classified as held-for-sale
Assets classified as held-for-sale are measured at the lower of carrying amount and fair
value, less costs to sell. Assets are classified as held-for-sale if their carrying amount will be
recovered through a sale transaction rather than through continuing use. This condition is
regarded as met only when the sale is highly probable, expected to be completed within one
year from the date of classification and accordingly included in current assets with the
associated liabilities being included in current liabilities, and the asset is available for
immediate sale in its present condition.
2.13 Impairment of non-financial assets
The Group assesses at each balance sheet date whether there are any indicators that an
asset may be impaired.
If any such indication exists, or when annual impairment testing for an asset is required, the
Group makes an estimate of the asset’s recoverable amount in order to determine the extent of
the impairment loss. The recoverable amount of an asset or cash-generating unit (CGU) is the
higher of its fair value less costs to sell and its value-in-use and it is determined for an individual
asset, unless the asset does not generate cash flows that are largely independent of those from
other assets or groups of assets. Where the carrying amount of an asset exceeds its
recoverable amount, the asset is considered impaired and is written down to its recoverable
amount. In assessing value-in-use, the estimated future pre-tax cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset. In determining fair value less costs
to sell, recent market transactions are taken into account. If no such transactions can be
identified, an appropriate valuation model is used. These calculations are corroborated by
valuation multiples or other available fair value indicators.
The Group bases its impairment calculations on detailed budgets and industry forecast
calculations which are prepared separately for each of the Group’s CGUs to which the
individual assets are allocated. These budgets and industry forecast calculations are
generally covering a period of five years. For longer periods, a long-term growth rate is
calculated and applied to project future cash flows after the fifth year.
Impairment losses are recognised in the income statement in those expense categories
consistent with the function of the impaired asset.
Goodwill
Goodwill has specific characteristics for impairment and is tested annually (at 31 December)
or when circumstances indicate that the carrying amount may be impaired.
Impairment is determined for goodwill by assessing the recoverable amount of each CGU to
which the goodwill relates. For the purpose of impairment testing, goodwill is allocated to the
related CGUs. Each CGU or group of CGUs to which goodwill is allocated represents the lowest
level within the entity at which the goodwill is monitored for internal management purposes
and is not larger than an operating segment before aggregation. Where the recoverable
amount of the CGU is less than its carrying amount, including goodwill, an impairment loss is
recognised in the income statement.
Impairment losses related to goodwill are not reversed in future periods.
2.14 Leasing
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e. the date
the underlying asset is available for use). Right-of-use assets are measured at cost, less any
accumulated depreciation and impairment losses, and adjusted for any remeasurement of
lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised,
initial direct costs incurred, and lease payments made at or before the commencement date
less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of
the leased asset at the end of the lease term, the recognised right-of-use assets are
depreciated on a straight-line basis over the shorter of its expected useful life and the lease
term. Right-of-use assets are subject to impairment.
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the
present value of lease payments to be made over the lease term. The lease payments include
fixed payments (including in-substance fixed payments) less any lease incentives receivable,
variable lease payments that depend on an index or a rate, and amounts expected to be paid
under residual value guarantees. The lease payments also include the exercise price of a
purchase option reasonably certain to be exercised by the Group and payments of penalties for
terminating a lease, if the lease term reflects the Group exercising the option to terminate. The
variable lease payments that do not depend on an index or a rate are recognised as an
expense in the period in which the event or condition that triggers the payment occurs.
145
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Remuneration
Financial Statements
Notes to the Group Financial Statements continued
2.14 Leasing continued
In calculating the present value of lease payments, the Group uses the incremental borrowing
rate at the lease commencement date if the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease liabilities is increased to
reflect the accretion of interest and reduced for the lease payments made. In addition, the
carrying amount of lease liabilities is remeasured if there is a modification, a change in the
lease term, a change in the in-substance fixed lease payments or a change in the
assessment to purchase the underlying asset.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of
machinery and equipment (i.e. those leases that have a lease term of 12 months or less from
the commencement date and do not contain a purchase option). It also applies the lease of
low-value assets recognition exemption to leases that are considered of low value. Lease
payments on short-term leases and leases of low-value assets are recognised as an expense
on a straight-line basis over the lease term.
Determining the lease term of contracts with renewal options
The Group determines the lease term as the non-cancellable term of the lease, together with
any periods covered by an option to extend the lease if it is reasonably certain to be
exercised, or any periods covered by an option to terminate the lease, if it is reasonably
certain not to be exercised.
The Group has the option, under some of its leases, to lease the assets for additional terms.
The Group applies judgement in evaluating whether it is reasonably certain to exercise the
option to renew. That is, it considers all relevant factors that create an economic incentive
for it to exercise the renewal. After the commencement date, the Group reassesses
the lease term if there is a significant event or change in circumstances that is within
its control and affects its ability to exercise (or not to exercise) the option to renew
(e.g. a change in business strategy).
2.15 Financial instruments – initial recognition and subsequent measurement
A financial instrument is any contract that gives rise to a financial asset of one entity and
a financial liability or equity instrument of another entity.
i) Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised
cost, fair value through other comprehensive income, or fair value through profit or loss (FVTPL).
The classification of financial assets at initial recognition depends on the financial asset’s
contractual cash flow characteristics and the Group’s business model for managing them. With
the exception of trade receivables that do not contain a significant financing component, the
Group initially measures a financial asset at its fair value plus, in the case of a financial asset not
recognised at FVTPL, transaction costs. Trade receivables that do not contain a significant
financing component are measured at the transaction price determined under IFRS 15.
In order for a financial asset to be classified and measured at amortised cost or fair value
through other comprehensive income, it needs to give rise to cash flows that are ‘solely
payments of principal and interest (SPPI)’ on the principal amount outstanding. This
assessment is referred to as the SPPI test and is performed at an instrument level.
The Group’s business model for managing financial assets refers to how it manages its
financial assets in order to generate cash flows. The business model determines whether cash
flows will result from collecting contractual cash flows, selling the financial assets, or both.
The Group’s financial assets include cash and cash equivalents and trade and other
receivables.
Subsequent measurement
The subsequent measurement of financial assets depends on their classification. The Group
does not currently hold any fair value through other comprehensive income financial assets.
Financial assets at amortised cost
The Group measures financial assets at amortised cost if both of the following conditions
are met:
–
the financial asset is held within a business model with the objective to hold financial assets
in order to collect contractual cash flows; and
–
the contractual terms of the financial asset give rise on specified dates to cash flows that
are solely payments of principal and interest on the principal amount outstanding.
Financial assets at amortised cost are subsequently measured using the effective interest
method and are subject to impairment. Gains and losses are recognised in profit or loss when
the asset is derecognised, modified or impaired.
The Group’s financial assets at amortised cost includes cash and cash equivalents and trade
receivables.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar
financial assets) is primarily derecognised when:
–
the rights to receive cash flows from the asset have expired; or
–
the Group has transferred its rights to receive cash flows from the asset or has assumed an
obligation to pay the received cash flows in full without material delay to a third party under
a ‘pass-through’ arrangement; and either (a) the Group has transferred substantially all the
risks and rewards of the asset, or (b) the Group has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered
into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks
and rewards of ownership. When it has neither transferred nor retained substantially all of the
risks and rewards of the asset, nor transferred control of the asset, the Group continues to
recognise the transferred asset to the extent of its continuing involvement. In that case, the
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Group also recognises an associated liability. The transferred asset and the associated liability
are measured on a basis that reflects the rights and obligations that the Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is
measured at the lower of the original carrying amount of the asset and the maximum amount
of consideration that the Group could be required to repay.
Impairment
The Group recognises an allowance for expected credit losses (ECLs) for all financial assets
not held at FVTPL. ECLs are based on the difference between the contractual cash flows due in
accordance with the contract and all the cash flows that the Group expects to receive,
discounted at an approximation of the original effective interest rate.
For trade receivables, the Group applies a simplified approach in calculating ECLs. Therefore,
the Group does not track changes in credit risk, but instead recognises a loss allowance
based on lifetime ECLs at each balance sheet date. The Group has established a provision
matrix that is based on its historical credit loss experience, adjusted for forward-looking
factors specific to the receivables and the economic environment.
ii) Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at FVTPL, loans and
borrowings, payables, lease liabilities or as derivatives designated as hedging instruments in
an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and
borrowings and payables, net of directly attributable transaction costs.
The Group’s financial liabilities include trade and other payables, lease liabilities, deferred and
contingent consideration, loans and borrowings including bank overdrafts, and derivative
financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss
Derivative financial instruments are classified as FVTPL unless they are designated as effective
hedging instruments. Gains and losses on such derivatives are recognised in the income
statement. However, in the current and prior period all derivatives have been designated as
hedging instruments in effective hedging relationships. Further information on their
accounting is provided at 2.16 below. As such, the only financial liability at FVTPL is the deferred
and contingent consideration (see Note 18).
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured
at amortised cost using the effective interest method. Profits and losses arising on the
repurchase, settlement or otherwise cancellation of liabilities are recognised in finance
revenues and finance costs, respectively.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or
cancelled or expires. When an existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an existing liability are substantially
modified, such an exchange or modification is treated as a derecognition of the original
liability and the recognition of a new liability. The difference in the respective carrying
amounts, together with any costs or fees incurred, is recognised in the income statement.
iii) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount reported in the balance
sheet if there is a currently enforceable legal right to offset the recognised amounts and there
is an intention to settle on a net basis, to realise the assets and settle the liabilities
simultaneously.
2.16 Derivative financial instruments and hedge accounting
Initial recognition and subsequent measurement
The Group uses derivative financial instruments, such as forward foreign currency exchange
contracts and interest rate swaps, to hedge its foreign currency risks and interest rate risks,
respectively. The Group does not use derivative financial instruments for speculative purposes.
Derivative financial instruments are initially recognised at fair value on the date on which a
derivative contract is entered into and are subsequently remeasured at fair value. Derivatives
are carried as financial assets when the fair value is positive and as financial liabilities when
the fair value is negative. A derivative is presented as a non-current asset or a non-current
liability if the remaining maturity of the instrument is more than 12 months and it is not
expected to be realised or settled within 12 months.
For the purpose of hedge accounting, hedges are classified as:
–
Fair value hedges when hedging the exposure to changes in the fair value of a recognised
asset or liability or an unrecognised firm commitment.
–
Cash flow hedges when hedging the exposure to variability in cash flows that is either
attributable to a particular risk associated with a recognised asset or liability or a highly
probable forecast transaction or the foreign currency risk in an unrecognised firm
commitment.
–
Hedges of a net investment in a foreign operation.
At the inception of a hedge relationship, the Group formally designates and documents the
hedge relationship to which it wishes to apply hedge accounting and the risk management
objective and strategy for undertaking the hedge.
The documentation includes identification of the hedging instrument, the hedged item, the
nature of the risk being hedged and how the Group will assess whether the hedging
relationship meets the hedge effectiveness requirements (including the analysis of sources of
hedge ineffectiveness and how the hedge ratio is determined). A hedging relationship
qualifies for hedge accounting if it meets all of the following effectiveness requirements:
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2.16 Derivative financial instruments and hedge accounting continued
–
There is an economic relationship between the hedged item and the hedging instrument.
–
The effect of credit risk does not dominate the value changes that result from that
economic relationship.
–
The hedge ratio of the hedging relationship is the same as that resulting from the quantity
of the hedged item that the Group actually hedges and the quantity of the hedging
instrument that the Group actually uses to hedge that quantity of hedged item.
Hedges that meet all the qualifying criteria for hedge accounting are accounted for as
described below:
Cash flow hedge
Cash flow hedging matches the cash flows of hedged items against the corresponding cash
flows of the derivative. The effective part of any profit or loss on the derivative is recognised
directly in other comprehensive income and the hedged item is accounted for in accordance
with the policy for that financial instrument. Any ineffective part of any profit or loss is
recognised immediately in the income statement. Amounts taken to other comprehensive
income are transferred to the income statement when the hedged transaction affects profit
or loss, such as when a forecast sale or purchase occurs.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated,
or exercised, or no longer qualifies for hedge accounting. At that time, any cumulative profit
or loss on the hedging instrument recognised in equity is retained in equity until the forecast
transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative
profit or loss recognised in equity is transferred to the income statement for the period.
The Group does not currently have any designated fair value hedges or net
investment hedges.
Note 29 sets out the details of the fair values of the derivative financial instruments used for
hedging purposes.
2.17 Fair values
The Group measures financial instruments, such as derivatives, at fair value at each balance
sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between the market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction to sell the asset or transfer
the liability takes place either:
–
in the principal market for the asset or liability; or
–
in the absence of a principal market, in the most advantageous market for the asset
or liability.
The principal or the most advantageous market must be accessible by the Group. The fair
value of financial instruments that are traded in active markets at the balance sheet date is
determined by reference to quoted market prices or dealer price quotations, without any
deduction for transaction costs.
For financial instruments not traded in an active market, the fair value is determined using
appropriate valuation techniques. Such techniques may include using recent arm’s length
market transactions; reference to the current fair value of another instrument that is
substantially the same; discounted cash flow analysis; or other valuation models.
An analysis of fair values of financial instruments and further details as to how they are
measured are provided in Note 29.
2.18 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost includes all costs
incurred in bringing each product to its present location and condition, as follows:
–
Raw materials – purchase cost on a first in, first out basis.
–
Work in progress and finished goods – cost of direct materials and labour plus attributable
overheads based on a normal level of activity.
Net realisable value is based on estimated selling price less any further costs expected to be
incurred to completion and disposal.
2.19 Cash and short-term deposits
Cash and short-term deposits consist of cash at bank and in hand.
2.20 Pensions
The Group operates defined contribution pension plans. Contributions payable in the year
are charged to the income statement. The assets are held separately from those of the Group
in an independently administered fund. Differences between contributions payable in the
year and contributions actually paid are shown as either accruals or prepayments in the
balance sheet.
2.21 Non-underlying items
The Group presents amortisation and impairment of intangible assets arising on business
combinations, the unwind of inventory fair value adjustments resulting from acquisitions,
significant profit on disposal of property, plant and equipment, restructuring costs, non-recurring
operating costs, finance costs and tax in respect of acquisitions, as non-underlying items on the
face of the income statement. These are items of income and expense which, because of the
nature and expected infrequency of the events giving rise to them, the Directors consider merit
separate presentation to provide a better and more consistent indication of the Group’s
underlying financial performance and a more meaningful comparison with prior and future
periods to assess trends in financial performance. The tax effect of the above is also included.
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2.22 Share-based payments
In the case of equity-settled schemes, the fair value of options granted is recognised as an
employee expense with a corresponding increase in equity. The fair value is measured at the
date of grant and spread over the period during which the employees become unconditionally
entitled to the options. The value of the options is measured using the Black–Scholes and Monte
Carlo models, taking into account the terms and conditions (including market and non-vesting
conditions) upon which the options were granted. Non-market vesting conditions are taken into
account by adjusting the number of equity instruments expected to vest at each balance sheet
date so that, ultimately, the cumulative amount recognised over the vesting period is based on
the number of options that eventually vest. No expense is recognised for awards that do not
ultimately vest, except for equity-settled transactions where vesting is conditional upon a
market or non-vesting condition, which are treated as vesting irrespective of whether or not the
market or non-vesting condition is satisfied, provided that all other performance and/or service
conditions are satisfied.
The dilutive effect of outstanding options is reflected as additional share dilution in the
computation of diluted earnings per share.
2.23 Cash dividend
The Group recognises a liability to pay a dividend when the distribution is authorised and the
distribution is no longer at the discretion of the Group. Under UK company law a distribution is
authorised when it is approved by the shareholders. A corresponding amount is then
recognised directly in equity.
2.24 Own shares
The Group operates an Employee Benefit Trust (EBT). The Group and/or the EBT, holds Genuit
Group plc shares for the granting of Genuit Group plc shares to employees and Directors.
These shares are recognised at cost and presented in the balance sheet as a deduction from
equity. No profit or loss is recognised in the income statement on the purchase, sale, issue or
cancellation of these shares. No dividends are earned on these shares, and they are ignored
for the purposes of calculating the Group’s earnings per share.
2.25 Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as
a result of a past event, it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable estimate can be made of the
amount of the obligation.
Restructuring provisions are recognised only when the Group has a constructive obligation,
which is when a detailed formal plan identifies the business or part of the business concerned,
the location and number of employees affected, a detailed estimate of the associated costs,
and an appropriate timeline, and the employees affected have been notified of the plan’s
main features.
3. Judgements and key sources of estimation uncertainty
The preparation of the Group’s consolidated financial statements requires management to
make judgements, estimates and assumptions that affect the reported amounts of revenue,
expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of
contingent liabilities. Uncertainty about these assumptions and estimates could result in
outcomes that require a material adjustment to the carrying amount of assets or liabilities
affected in future periods.
In the process of applying the Group’s accounting policies, management has made the
following judgement(s), in the consolidated financial statements in the years ended
31 December 2022 and 2021:
3.1 Business combinations
The measurement of fair values on a business combination requires the recognition and
measurement of the identifiable assets, liabilities and contingent liabilities. The key
judgements involved are the identification of which intangible assets meet the recognition
criteria as set out in IAS 38, the fair values attributable to those intangible assets, and the
useful lives of individual intangible assets. The Group has applied judgement in determining
whether amounts contingently payable to previous owners of the businesses we have
acquired should be recognised as a remuneration cost in the income statement, or within
total consideration that is allocated to the fair value of assets and liabilities included in the
balance sheet.
3.2 Determination of cash generating units
Under IAS 36, Impairment of Assets, the Group is required to determine its Cash Generating
Units (CGUs) by identifying the lowest aggregation of assets that generate largely
independent cash inflows; and perform impairment assessments at a chosen annual date
(the Group has historically chosen 31 December) or when an event occurs that indicates the
carrying amount maybe impaired. When the Group first adopted IFRS (effective 1 January 2013)
it determined its CGUs and then allocated the consolidated goodwill at that time to each of
those CGUs. Subsequently, separately identifiable goodwill arose on the acquisitions of
Surestop (January 2015), Nuaire (August 2015), Permavoid (August 2018), Manthorpe (October
2018), Alderburgh (October 2019), Adey, Nu-Heat and Plura (February 2021) and the acquisition
of Keytec Geomembranes (March 2022).
During 2021, following the acquisition of Adey, Nu-Heat and Plura, the Group revised its CGU
structure to more accurately reflect the lowest aggregation of assets that generate largely
independent cash inflows. This revision resulted in the number of CGUs consolidating to 7, from
17 previously, but did not necessitate goodwill to be reallocated between the revised CGUs.
Accordingly, the Group did not need to perform an impairment review immediately prior to
the revision of the CGU structure. There have been no further revisions to the CGU structure in
2022. Keytec Geomembranes was acquired during the year and forms part of the Commercial
and Infrastructure Systems segment. The goodwill arising on its acquisition has been allocated
to the ‘Infrastructure and Landscape’ CGU grouping. See Note 17 for further details.
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3.2 Determination of cash generating units continued
The key assumptions concerning the future and other key sources of estimation uncertainty at the
balance sheet date, that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year, are described below. The Group
based its assumptions and estimates on parameters available when the consolidated financial
statements were prepared. Existing circumstances and assumptions about future developments,
however, may change due to market changes or circumstances arising that are beyond the
control of the Group. Such changes are reflected in the assumptions when they occur.
3.3 Revenue recognition and customer rebates
The Group’s pricing structure involves rebate arrangements with several of its direct and indirect
customers. These can be complex in nature and involve estimation in determining the required
level of provision for rebate liabilities, particularly where the Group is reliant on information from
customers which may not be available at the time the liabilities are assessed.
3.4 Impairment of non-financial assets
Non-financial assets include goodwill, other intangible assets and property, plant and
equipment. In accordance with IFRS, the Group considers whether there are any indicators of
impairment of these assets. Where indicators of impairment are identified, the Group tests the
asset for impairment. Goodwill is tested for impairment annually (at 31 December) or more
frequently when circumstances indicate that the carrying amount may be impaired.
The Group’s impairment test for goodwill is based on a value-in-use calculation, using a
discounted cash flow model. The aim of the test is to ensure that goodwill is not carried at a
value greater than the recoverable amount. The cash flows are derived from the budgets and
forecasts for the next five years and do not include restructuring activities that the Group is not
yet committed to or significant future investments that will enhance the performance of the
asset or the cash-generating unit (CGU) being tested. The recoverable amount is most sensitive
to the discount rate used for the discounted cash flow model as well as the expected future
cash flows and the growth rate used for extrapolation purposes. The key assumptions used to
determine the recoverable amount for the different CGUs are further explained in Note 17.
3.5 Contingent consideration
The Directors assess the likelihood that financial targets will be achieved in order to trigger
the contingent consideration to the previous owners of the businesses we have acquired, to
quantify the possible range of that contingent consideration, and to how that contingent
consideration should be calculated and disclosed in the consolidated financial statements.
Due to the inherent uncertainty in this process, actual liabilities may be different from those
originally estimated.
4. New and amended accounting standards and interpretations
Accounting standards or interpretations which have been adopted in the year
There were no accounting standards or interpretations that have become effective in the
year which had an impact on disclosures, financial position or performance.
Accounting standards or interpretations issued but not yet effective
There were no accounting standards or interpretations issued which have an effective date
after the date of these consolidated financial statements that the Group reasonably expects
to have an impact on disclosures, financial position or performance.
5. Segment information
IFRS 8, Operating Segments, requires operating segments to be identified on the basis of the
internal financial information reported to the Chief Operating Decision Maker (CODM). The
Group’s CODM is deemed to be the Board of Directors, which is primarily responsible for the
allocation of resources to segments and the assessment of performance of the segments.
The Group has two reporting segments – Residential Systems and Commercial and
Infrastructure Systems. The reporting segments are organised based on the nature of the end
markets served. Inter-segment sales are on an arm’s length basis in a manner similar to
transactions with third parties. During the period one acquired business was added to the
Commercial and Infrastructure Systems segment (see Note 18).
2022
2021
Residential
Systems
£m
Commercial &
Infrastructure
Systems
£m
Total
£m
Residential
Systems
£m
Commercial &
Infrastructure
Systems
£m
Total
£m
Segmental revenue
400.4
238.6
639.0
378.0
231.8
609.8
Inter-segment revenue
(6.1)
(10.7)
(16.8)
(5.1)
(10.4)
(15.5)
Revenue
394.3
227.9
622.2
372.9
221.4
594.3
Underlying operating
profit*
79.1
19.1
98.2
73.1
22.2
95.3
Non-underlying items –
segmental
(31.2)
(9.3)
(40.5)
(18.5)
(8.8)
(27.3)
Segmental operating profit
47.9
9.8
57.7
54.6
13.4
68.0
Non-underlying items –
Group
(4.3)
(0.9)
Operating profit
53.4
67.1
Non-underlying items –
finance costs
(0.4)
–
Finance costs
(7.6)
(4.2)
Profit before tax
45.4
62.9
*
Underlying operating profit is stated before non-underlying items as defined in the Group Accounting Policies on page 148
and is the measure of segment profit used by the Group’s CODM. Details of the non-underlying items of £45.2m (2021: £28.2m)
are set out below at non-underlying items before tax.
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Balance sheet
31 December 2022
31 December 2021
Total
assets
£m
Total
liabilities
£m
Total
assets
£m
Total
liabilities
£m
Residential Systems
727.3
(99.0)
665.0
(101.9)
Commercial and Infrastructure Systems
248.7
(58.9)
307.6
(60.5)
Total segment assets/(liabilities)
976.0
(157.9)
972.6
(162.4)
Current and deferred income taxes
2.2
(50.1)
1.1
(48.5)
Net debt excluding lease liabilities
50.0
(193.1)
52.3
(197.4)
Total – Group
1,028.2
(401.1)
1,026.0
(408.3)
Net assets
627.1
617.7
Property, plant and equipment additions
2022
£m
2021
£m
Residential Systems
25.3
20.2
Commercial and Infrastructure Systems
15.8
12.6
Total – Group
41.1
32.8
Right-of-use asset additions
2022
£m
2021
£m
Residential Systems
4.5
2.7
Commercial and Infrastructure Systems
3.6
2.7
Total – Group
8.1
5.4
Depreciation of property, plant and equipment
2022
£m
2021
£m
Residential Systems
10.9
9.9
Commercial and Infrastructure Systems
8.5
8.5
Total – Group
19.4
18.4
Depreciation of right-of-use assets
2022
£m
2021
£m
Residential Systems
3.1
2.2
Commercial and Infrastructure Systems
2.3
2.2
Total – Group
5.4
4.4
Non-underlying items before tax
2022
£m
2021
£m
Residential Systems – impairment of goodwill
12.0
–
Residential Systems – impairment of intangible assets
2.8
–
Residential Systems – amortisation of intangible assets
12.1
10.4
Residential Systems – restructuring costs
3.7
1.1
Residential Systems – Isolated cyber incident costs
0.6
–
Residential Systems – acquisition costs
–
3.3
Residential Systems – unwind of inventory fair value adjustment
–
3.7
Commercial and Infrastructure Systems – amortisation
of intangible assets
3.1
3.8
Commercial and Infrastructure Systems – acquisition costs
3.3
2.4
Commercial and Infrastructure Systems – restructuring costs
1.3
–
Commercial and Infrastructure Systems – product liability claim
1.0
2.6
Commercial and Infrastructure Systems – isolated cyber incident
costs
0.6
–
UK operations
40.5
27.3
Group – restructuring costs
4.3
0.9
Group – unamortised deal fees
0.4
–
Total – Group
45.2
28.2
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Notes to the Group Financial Statements continued
5. Segment information continued
Geographical analysis
Revenue by destination
2022
£m
2021
£m
UK
560.8
534.1
Rest of Europe
32.4
38.3
Rest of World
29.0
21.9
Total – Group
622.2
594.3
Non-current assets
31 December
2022
£m
31 December
2021
£m
UK
800.2
809.4
Rest of Europe
7.1
5.7
Total – Group
807.3
815.1
Non-current assets for this purpose consist of property, plant and equipment, right-of-use
assets, goodwill and other intangible assets.
The Group has two customers (2021: two) which individually accounted for more than 10%
of the Group’s total revenue during 2022. These customers accounted for 11.9% and 10. 8%,
respectively (2021: 13.0% and 10.4%, respectively) and are included in both reporting segments.
6. Operating profit
2022
£m
2021
£m
Income statement charges
Depreciation of property, plant and equipment (owned)
19.4
18.4
Depreciation of right-of-use assets
5.4
4.4
Cost of inventories recognised as an expense
318.3
290.4
Research and development costs expensed
8.8
8.8
Income statement credits
Research and development expenditure credit
1.2
2.0
Profit on disposal of property, plant and equipment
0.7
0.2
7. Auditor’s remuneration
The Group paid the following amounts to the Company’s auditor in respect of the audit of the
consolidated financial statements and for other services provided to the Group.
Auditor’s remuneration for audit services:
2022
£m
2021
£m
Audit of the Company’s annual financial statements
–
–
Audit of the Company’s subsidiaries
0.9
0.7
Total audit fees
0.9
0.7
The Group paid the Company’s auditor £0.2m for audit related assurance services
(2021: £0.1m).
8. Non-underlying items
Non-underlying items comprised:
2022
2021
Gross
£m
Tax
£m
Net
£m
Gross
£m
Tax
£m
Net
£m
Cost of sales:
Restructuring costs –
inventory write down
1.5
(0.3)
1.2
–
–
–
Cost of sales:
Unwind of inventory
fair value adjustment
–
–
–
3.7
–
3.7
Cost of sales:
Restructuring costs
–
–
–
0.2
–
0.2
Cost of sales:
Product liability claim
1.0
–
1.0
2.6
(0.5)
2.1
Administration expenses:
Isolated
cyber incident costs
1.2
(0.2)
1.0
–
–
–
Administration expenses:
Restructuring costs
7.8
(1.5)
6.3
0.9
(0.2)
0.7
Administration expenses:
Acquisition costs – acquisition
and other M&A activity
3.3
–
3.3
6.6
–
6.6
Amortisation of intangible assets
15.2
(2.6)
12.6
14.2
6.6
20.8
Impairment of intangible assets
2.8
(0.5)
2.3
–
–
–
Impairment of goodwill
12.0
–
12.0
–
–
–
Finance costs:
Unamortised deal fees
0.4
(0.1)
0.3
–
–
–
Total non-underlying items
45.2
(5.2)
40.0
28.2
5.9
34.1
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Financial Statements
Notes to the Group Financial Statements continued
Restructuring costs incurred in relation to the reorganisation of the Group. This included an
inventory write down for items immediately taken off the market that do not sit within the new
Genuit product strategy and on this basis the inventory holding was deemed obsolete, a
closure of a business and the reorganisation of the segmental units and consultancy fees for
advisory support and reorganisation design.
The product liability claim is associated with a historic acquisition. Including the prior year
charge of £2.6m, recognised in non-underlying costs, the total amount recognised as a liability
on the balance sheet at 31 December 2022 is £3.3m.
During 2022, there was an isolated cyber incident at one of the Group’s businesses, which
resulted in temporary disruption to manufacturing and consequently sales in April and
May 2022.
Acquisition costs in 2022 relate predominantly to a £3.1m charge arising in connection with
contingent consideration treated as remuneration in respect of the acquisition of Plura.
Acquisition costs in 2021 related to the acquisition of Nu-Heat, Plura and Adey (see Note 18).
Impairment of intangible assets (£2.8m) is in respect of a customer relationship agreement
ending early and impairment of goodwill relates to a 2021 acquisition, (see Note 18).
Amortisation charged relates to intangible assets arising on business combinations. In 2021
the non-underlying tax charge relating to amortisation included a £9.3m charge in respect of
restating the deferred income tax liability on the intangible assets as a result of the change in
the main UK corporation tax rate (see Note 12).
9. Staff costs
Staff costs (including Directors) comprised:
2022
£m
2021
£m
Wages and salaries
128.5
125.9
Social security costs
13.2
14.3
Other pension costs
6.5
5.4
148.2
145.6
The average monthly number of persons employed by the Group by segment was as follows:
2022
2021
Residential Systems
2,215
2,204
Commercial and Infrastructure Systems
1,425
1,454
Total – Group
3,640
3,658
10. Directors’ remuneration
Details of the Directors’ remuneration are set out below:
2022
£m
2021
£m
Fees
0.5
0.4
Emoluments
3.1
3.3
3.6
3.7
Further details of Directors’ remuneration are provided in the Annual Report on Remuneration.
The aggregate amount of gains made by the Directors on the exercise of share options during
the year was £0.2m (2021: £0.4m).
11. Finance costs
2022
£m
2021
£m
Interest on bank loan
6.2
2.5
Debt issue cost amortisation
0.5
0.5
Unwind of discount on lease liabilities
0.8
0.7
Other finance costs
0.1
0.5
7.6
4.2
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Financial Statements
Notes to the Group Financial Statements continued
12. Income tax
(a) Tax expense reported in the income statement
2022
£m
2021
£m
Current income tax:
UK income tax
7.7
9.5
Overseas income tax
0.1
0.5
Current income tax
7.8
10.0
Adjustment in respect of prior years
(0.5)
0.4
Total current income tax
7.3
10.4
Deferred income tax:
Origination and reversal of temporary differences
0.4
(1.3)
Effects of changes in income tax rates
1.3
11.7
Deferred income tax
1.7
10.4
Adjustment in respect of prior years
(0.1)
1.1
Total deferred income tax
1.6
11.5
Total tax expense reported in the income statement
8.9
21.9
Details of the non-underlying tax credit of £5.2m (2021: £5.9m net charge) are set out in Note 8.
(b) Reconciliation of the total tax expense
A reconciliation between the tax expense and the product of accounting profit multiplied
by the UK standard rate of income tax for the years ended 31 December 2022 and 2021
is as follows:
2022
£m
2021
£m
Accounting profit before tax
45.4
62.9
Accounting profit multiplied by the UK standard rate of income tax
of 19.0% (2021: 19.0%)
8.6
12.0
Expenses not deductible for income tax
3.4
1.8
Non-taxable income
(0.4)
(1.0)
Adjustment in respect of prior years
(0.6)
1.5
Effects of patent box
(1.6)
(1.6)
Effects of changes in income tax rates
1.3
11.4
Effects of tax losses
–
(1.1)
Effects of super deduction
(1.8)
(0.6)
Effects of other tax rates/credits
–
(0.5)
Total tax expense reported in the income statement
8.9
21.9
The effective rate for the full year was 19.6% (2021: 34.8%). If the impact of non-underlying items
is excluded, the underlying income tax rate would be 15.6% (2021: 17.6%).
(c) Deferred income tax
The deferred income tax included in the Group balance sheet is as follows:
2022
£m
2021
£m
Deferred income tax liabilities/(assets)
Short-term timing differences
37.8
41.3
Capital allowances in excess of depreciation
16.9
11.1
Share-based payments
(2.1)
(2.3)
Tax losses
(2.5)
(1.6)
50.1
48.5
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Financial Statements
Notes to the Group Financial Statements continued
The Group offsets tax assets and liabilities if, and only if, it has a legally enforceable right to
set off current income tax assets and current income tax liabilities and the deferred income
tax assets and deferred income tax liabilities relate to income taxes levied by the same
tax authority.
A reconciliation of deferred income taxes for the years ended 31 December 2022 and 2021
is as follows:
2022
£m
2021
£m
Deferred income tax reported in the income statement
1.6
11.5
Share-based payments excess tax benefit
–
(0.1)
Deferred income tax acquired
–
26.3
1.6
37.7
(d) Change in corporation tax rate
The Finance (No.2) Act 2015 reduced the main UK corporation tax rate to 19%, effective from
1 April 2017. A further reduction in the main UK corporation tax rate to 17% was expected to come
into effect from 1 April 2020 (as enacted by the Finance Act 2016 on 15 September 2016).
However, legislation introduced in the Finance Act 2020 (enacted on 22 July 2020) repealed
the reduction of the rate, thereby maintaining the current rate of 19%.
On 24 May 2021, legislation was passed which substantively enacted an increase in UK
corporation tax rate from 19% to 25% from April 2023. Deferred income tax on the balance
sheet at 31 December 2022 was therefore measured at 19% or 25% depending on when the
deferred income tax asset or liability is expected to reverse.
(e) Unrecognised tax losses
No deferred income tax has been recognised on non-trading losses and other timing
differences of £1.3m (2021: £1.4m) as the Directors do not consider that they will be utilised
in the foreseeable future.
13. Earnings per share
Basic earnings per share amounts are calculated by dividing profit for the year attributable
to the owners of the parent company by the weighted average number of ordinary shares
outstanding during the year. The diluted earnings per share amounts are calculated by
dividing profit for the year attributable to the owners of the parent company by the weighted
average number of ordinary shares outstanding during the year plus the weighted average
number of potential ordinary shares that would be issued on the conversion of all the dilutive
share options into ordinary shares.
The calculation of basic and diluted earnings per share is based on the following:
2022
2021
Weighted average number of ordinary shares for the purpose
of basic earnings per share
248,001,063
245,097,578
Effect of dilutive potential ordinary shares
2,414,364
3,168,838
Weighted average number of ordinary shares for the purpose
of diluted earnings per share
250,415,427
248,266,416
Underlying earnings per share is based on the result for the year after tax excluding the
impact of non-underlying items of £40.0m (2021: £34.1m). The Directors consider that this
measure provides a better and more consistent indication of the Group’s underlying financial
performance and more meaningful comparison with prior and future periods to assess trends
in our financial performance. The underlying earnings per share is calculated as follows:
2022
2021
Underlying profit for the year attributable to the owners of the
parent company (£m)
76.5
75.1
Underlying basic earnings per share (pence)
30.8
30.6
Underlying diluted earnings per share (pence)
30.5
30.2
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Remuneration
Financial Statements
Notes to the Group Financial Statements continued
14. Dividend per share
2022
£m
2021
£m
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 December 2021 of 8.2p
per share (2020: 4.8p)
20.3
11.8
Interim dividend for the year ended 31 December 2022 of 4.1p
per share (2021: 4.0p)
10.2
9.9
30.5
21.7
Proposed final dividend for the year ended 31 December 2022 of 8.2p
per share (2021: 8.2p)
20.3
20.3
The proposed final dividend is subject to approval by shareholders at the Annual General
Meeting and has not been included as a liability in these consolidated financial statements.
15. Property, plant and equipment
Freehold
land and
buildings
£m
Plant
and other
equipment
£m
Total
£m
Cost
At 1 January 2021
54.3
160.4
214.7
Additions
3.9
28.9
32.8
Disposals
(1.0)
(7.7)
(8.7)
Transfer to intangible assets
–
(0.8)
(0.8)
Acquisition of businesses
1.2
3.0
4.2
Exchange adjustment
–
(0.3)
(0.3)
At 31 December 2021
58.4
183.5
241.9
Additions
4.9
36.1
41.0
Disposals
(0.1)
(10.6)
(10.7)
Acquisition of businesses
–
0.4
0.4
Exchange adjustment
–
0.4
0.4
Transfer to assets held-for-sale
–
(6.4)
(6.4)
At 31 December 2022
63.2
203.4
266.6
Depreciation and impairment losses
At 1 January 2021
8.5
72.0
80.5
Provided during the year
1.6
16.8
18.4
Disposals
(1.0)
(7.4)
(8.4)
Transfer to intangible assets
–
(0.1)
(0.1)
Exchange adjustment
–
(0.2)
(0.2)
At 31 December 2021
9.1
81.1
90.2
Provided during the year
1.7
17.7
19.4
Disposals
–
(8.7)
(8.7)
Exchange adjustment
–
(0.2)
(0.2)
Transfer to assets held-for-sale
–
(4.0)
(4.0)
At 31 December 2022
10.8
85.9
96.7
Net book value
At 31 December 2022
52.4
117.5
169.9
At 31 December 2021
49.3
102.4
151.7
Included in freehold land and buildings is non-depreciable land of £18.2m (2021: £17.7m).
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Financial Statements
Notes to the Group Financial Statements continued
Capital commitments
At 31 December 2022, the Group had commitments of £2.8m (2021: £5.4m) relating to plant and
equipment purchases.
16. Right-of-use assets and lease liabilities
Right-of-use assets
Lease
liabilities
Freehold
land and
buildings
£m
Plant and
other
equipment
£m
Motor
vehicles
£m
Total
£m
£m
At 1 January 2021
5.9
6.9
0.1
12.9
(12.9)
Additions
2.9
2.5
–
5.4
(5.4)
Acquisition of businesses
6.0
0.8
–
6.8
(6.8)
Depreciation of right-of-use assets
(2.1)
(2.3)
–
(4.4)
–
Unwind of discount on lease liabilities
–
–
–
–
(0.7)
Settlement of lease liabilities
–
–
–
–
5.1
Exchange adjustment
–
(0.1)
–
(0.1)
0.1
At 31 December 2021
12.7
7.8
0.1
20.6
(20.6)
Additions
3.2
3.8
1.1
8.1
(8.2)
Disposals
(0.5)
(0.6)
–
(1.1)
–
Depreciation of right-of-use assets
(2.2)
(2.7)
(0.5)
(5.4)
–
Depreciation on disposal of right-of-use asset
0.1
0.4
–
0.5
–
Transfer to assets held-for-sale
(0.4)
–
–
(0.4)
0.3
Unwind of discount on lease liabilities
–
–
–
–
(0.8)
Settlement of lease liabilities
–
–
–
–
6.2
At 31 December 2022
12.9
8.7
0.7
22.3
(23.1)
17. Intangible assets
Goodwill
£m
Patents
£m
Brand
names
£m
Customer
relationships
£m
Licences
£m
Customer
order book
£m
Development
costs
£m
Total
£m
Cost
At 1 January 2021
345.4
34.4
30.3
17.4
0.8
–
–
428.3
Additions
–
0.3
–
–
–
–
1.2
1.5
Transfer from tangible
assets
–
–
–
–
–
–
0.8
0.8
Acquisition of
businesses
122.3
4.8
36.2
96.9
–
0.9
–
261.1
At 31 December 2021
467.7
39.5
66.5
114.3
0.8
0.9
2.0
691.7
Additions
–
0.5
–
–
–
–
2.3
2.8
Acquisition of
businesses
2.9
–
–
–
–
–
–
2.9
Transfer to assets
held-for-sale
(3.2)
–
–
–
–
–
–
(3.2)
At 31 December 2022
467.4
40.0
66.5
114.3
0.8
0.9
4.3
694.2
Amortisation and impairment losses
At 1 January 2021
–
12.1
14.3
7.9
0.2
–
–
34.5
Charge for the year
–
3.3
4.9
5.5
0.1
0.4
0.1
14.3
Transfer from tangible
assets
–
–
–
–
–
–
0.1
0.1
At 31 December 2021
–
15.4
19.2
13.4
0.3
0.4
0.2
48.9
Charge for the year
–
3.4
5.1
6.1
0.1
0.5
0.2
15.4
Impairment losses
12.0
–
–
2.8
–
–
–
14.8
At 31 December 2022
12.0
18.8
24.3
22.3
0.4
0.9
0.4
79.1
Net book value
At 31 December 2022
455.4
21.2
42.2
92.0
0.4
–
3.9
615.1
At 31 December 2021
467.7
24.1
47.3
100.9
0.5
0.5
1.8
642.8
Goodwill arising on the acquisition of businesses was increased by £2.9m (2021: £122.3m)
following the acquisition of Keytec Geomembranes Holding Company Limited as detailed in
Note 18.
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Financial Statements
Notes to the Group Financial Statements continued
17. Intangible assets continued
Impairment testing of goodwill
Goodwill is not amortised but is subject to annual impairment testing. Goodwill has been
allocated for impairment testing purposes to a number of cash-generating units (CGUs)
which represent the lowest level in the Group at which goodwill is monitored for internal
management purposes. The carrying amount of goodwill allocated to each of the CGUs
is as follows:
CGU
31 December
2022
£m
31 December
2021
£m
Building Services & International
30.4
33.6
Infrastructure & Landscape
43.6
40.7
Residential Systems
169.6
169.6
Climate & Ventilation
93.7
93.7
Nu-Heat
17.3
17.3
Adey
92.8
104.8
Others (comprising Surestop and Ulster)
8.0
8.0
455.4
467.7
At 31 December 2022, £3.2m of goodwill has been allocated to assets held-for-sale from the
Building Services & International CGU, in relation to Polypipe Italia SRL as detailed in Note 19.
Impairment tests on the carrying amounts of goodwill are performed by analysing the carrying
amount allocated to each CGU against its value-in-use. Value-in-use is calculated for each CGU
as the net present value of that CGU’s discounted future pre-tax cash flows covering a 5-year
period. These pre-tax cash flows are based on budgeted cash flows information for a period of
one year, construction industry forecasts of growth for the following year and management’s
forecast of growth between 2.0% to 5.0% for years 3 to 5 (2021: 2.74% to 2.80%). Terminal growth rates
of 2% (2021: 2%) have been applied beyond this, based on historical macroeconomic performance
and projections of the sector served by the CGUs.
When assessing for impairment of goodwill, management have considered the impact of
climate change, particularly in the context of the risks and opportunities identified within the
Task Force on Climate-Related Financial Disclosures Report on pages 29 to 32 of the Strategic
Report and have not identified any material short-term impacts from climate change that
would impact the carrying value of goodwill. Over the longer term, the risks and opportunities
are more uncertain, and management will continue to assess the quantitative impact of risks
at each balance sheet date.
A pre-tax discount rate of 12.9% (2021: 10.4%) has been applied in determining the recoverable
amounts of CGUs. The pre-tax discount rate is estimated based on the Group’s risk adjusted
cost of capital.
The Group has applied sensitivities to assess whether any reasonably possible changes in
assumptions could cause an impairment that would be material to these consolidated financial
statements. Due to a removal of longer term overseas strategic growth opportunities and
increasing cash flow risks, ongoing headwinds from the upstream boiler manufacturing shortages
driven by a global lack of printed circuit boards and the significantly increased pre-tax discount
rate there has been a reduction in the value in use of the Adey CGU. This has resulted in an
impairment charge of £12.0m in the year to reflect that the discounted present value of future
pre-tax cash flows did not support the full carrying value of the asset. As an impairment loss has
been recognised in respect of Adey in the current year, the recoverable amount is equal to its
carrying value at the year end and therefore any negative changes in key assumptions would
result in the recognition of an additional impairment loss.
18. Acquisitions
Acquisition-related deferred and contingent consideration comprised:
31 December
2022
£m
31 December
2021
£m
Deferred consideration on Keytec acquisition
0.6
–
Deferred and contingent consideration on Plura acquisition
7.4
4.3
Contingent consideration on Permavoid acquisition
–
0.5
8.0
4.8
Acquisition-related cash flows comprised:
2022
£m
2021
£m
Operating cash flows – settlement of acquisition costs
Keytec
0.1
–
Nu-Heat
–
0.6
Plura
0.1
0.7
Adey
–
3.1
Permavoid
–
2.5
0.2
6.9
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Financial Statements
Notes to the Group Financial Statements continued
2022
£m
2021
£m
Investing cash flows – Settlement of deferred
and contingent consideration
Permavoid
0.5
–
0.5
–
2022
£m
2021
£m
Investing cash flows – acquisition of businesses net
of cash at acquisition
Keytec
2.6
–
Nu-Heat
–
25.8
Plura
–
1.8
Adey
–
208.6
Tree Ground Solutions
–
0.2
2.6
236.4
Keytec
On 31 March 2022, the Group acquired 100% of the voting rights and shares of Keytec
Geomembranes Holding Company Limited (Keytec), for an initial cash consideration of £2.5m
on a cash-free and debt-free basis plus a deferred consideration of £0.6m due no later than
12 months from completion. The total cash consideration of £2.9m included a payment for net
cash and working capital commitments on completion of £0.4m. Keytec is a supplier and
installer of stormwater attenuation products, geomembranes and gas protection products.
Details of the acquisition, including fair value adjustments, were as follows:
Fair
value
£m
Property, plant and equipment
0.1
Inventories
0.1
Trade and other receivables
0.7
Cash and cash equivalents
0.3
Trade and other payables
(0.5)
Income tax payable
(0.1)
Net identifiable assets
0.6
Goodwill on acquisition
2.9
Total cash consideration
3.5
Less: Deferred consideration
(0.6)
Initial cash consideration
2.9
No material intangible assets have been identified. The goodwill arising on the acquisition
primarily represented the assembled workforce, technical expertise and market share. The
goodwill is allocated entirely to the Commercial and Infrastructure Systems segment.
The fair value of trade and other receivables was £0.7m. The gross amount of trade and other
receivables was £0.7m and it is expected that the full contractual amounts will be collected.
Post-acquisition Keytec contributed £5.3m revenue and £0.6m underlying operating profit
which were included in the Group Income Statement. If Keytec had been acquired on
1 January 2022, the Group’s results for the twelve months ended 31 December 2022 would have
shown revenue of £624.0m and underlying operating profit of £98.4m.
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Financial Statements
Notes to the Group Financial Statements continued
18. Acquisitions continued
Nu-Heat
On 2 February 2021, the Group acquired 100% of the voting rights and shares of Nu-Heat
(Holdings) Limited (Nu-Heat), the leading supplier of sustainable underfloor heating solutions,
air and ground source heat pumps, and other renewable heating systems, for a consideration
of £27.0m on a cash-free, debt-free basis. The total cash consideration of £24.8m included a
payment of £5.7m for net cash on completion and was net of loans and borrowings at
acquisition of £6.7m. Additional debt and debt like items amounted to £1.2m.
The ‘Nu-Heat’ brand, order book and customer relationships have been recognised as specific
intangible assets as a result of this acquisition. Fair value adjustments principally related to
the recognition of intangible assets and deferred income tax arising on these adjustments.
The goodwill arising on the acquisition primarily represented the assembled workforce,
technical expertise and market share. The goodwill is allocated entirely to the Residential
Systems segment.
Plura
On 5 February 2021, the Group acquired 51% of the voting rights and shares of Plura Composites
Ltd (Plura) for an initial cash consideration of £1.25m, and further payment in respect of the
remaining 49% of between £6.0m and £16.4m depending on the EBITDA performance of Plura
in the 12-month period ending no earlier than 5 February 2024 and no later than 31 July 2024
as well as the continued employment of key personnel.
Customer relationships is the only material intangible asset that has been recognised as a
result of this acquisition. Fair value adjustments principally related to the recognition of
intangible assets and deferred income tax arising on these adjustments. The goodwill arising
on the acquisition is immaterial.
An amount of £3.1m has been recognised as a non-underlying expense in the Group
Income Statement in the year ended 31 December 2022 in respect of the Plura contingent
consideration arrangement. This takes the total amount recognised as a liability on the
Group Balance Sheet at 31 December 2022 to £7.4m. Accordingly, the aggregate final
consideration is expected to be approximately £11.9m. Contingent consideration was
determined using the Directors’ assessment of the likelihood that financial targets will be
achieved. There is no material difference between the estimated cash consideration and
the fair value. The estimated cash consideration is derived from the budgets and forecasts
for Plura.
Adey
On 10 February 2021, the Group acquired 100% of the voting rights and shares of London Topco
Limited (Adey) for a consideration of £210.0m on a cash-free, debt-free basis. Adey is the UK’s
leading provider of magnetic filters, chemicals and related products, which protect against
magnetite and other performance constraints in water-based heating systems and improve
energy efficiency, operating in predominantly residential end markets. The cash consideration
of £86.6m included a payment of £7.3m for net cash on completion and was net of loans and
borrowings at acquisition of £129.3m. Additional debt and debt-like items amounted to £1.4m.
Customer relationships, the ‘Adey’ brand and patents have been recognised as specific intangible
assets as a result of this acquisition. Fair value adjustments principally related to the recognition of
intangible assets and deferred income tax arising on these adjustments. The goodwill arising on
the acquisition primarily represented the assembled workforce, technical expertise and market
share. The goodwill is allocated entirely to the Residential Systems segment.
19. Assets held-for-sale
During the year the Group announced its intention to dispose of Polypipe Italia SRL following a
strategic review and began marketing the company for sale. The Group determined a sale was
highly probable and expected to be sold within 12 months from the Balance Sheet date and
negotiations with several interested parties have subsequently taken place. The proceeds of
disposal are expected to exceed the carrying amount of the related net assets and accordingly
no impairment losses have been recognised on the classification of Polypipe Italia SRL as
held-for-sale.
The following major class of assets and liabilities relating to Polypipe Italia SRL that have been
classified as held-for-sale are as follows:
Fair
value
£m
Property, plant and equipment
2.4
Right-of-use assets
0.3
Goodwill
3.2
Trade receivables
1.7
Inventories
3.1
Assets held-for-sale
10.7
Trade and other payables
2.3
Finance lease liabilities
0.3
Liabilities held-for-sale
2.6
160
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Notes to the Group Financial Statements continued
20. Investments
Details of Group undertakings
Details of the investments in which the Group holds 20% or more of the nominal value of any
class of share capital at 31 December 2022 are set out in Note 4 to the Parent Company
financial statements.
21. Inventories
31 December
2022
£m
31 December
2021
£m
Raw materials
25.3
23.9
Work in progress
9.2
10.3
Finished goods
55.4
46.6
89.9
80.8
All inventories are carried at cost less a provision to take account of slow-moving and
obsolete items. The provision at 31 December 2022 was £14.9m (2021: £12.0m).
22. Trade and other receivables
31 December
2022
£m
31 December
2021
£m
Trade receivables
60.5
69.7
Prepayments
6.1
7.0
Other receivables
1.5
–
68.1
76.7
Trade receivables are non-interest bearing and are generally settled on 30 days’ credit.
Expected credit losses
The Group maintains a substantial level of credit insurance covering a significant proportion
of its trade receivables which mitigates against expected credit losses. Therefore, such credit
losses are not significant.
The ageing of trade receivables at the balance sheet date was as follows:
31 December 2022
31 December 2021
Gross
£m
Allowance
for expected
credit losses
£m
Net
£m
Gross
£m
Allowance
for expected
credit losses
£m
Net
£m
Not past due
22.3
–
22.3
41.7
(0.2)
41.5
Past due 1 to 30 days
35.3
–
35.3
22.8
(0.2)
22.6
Past due 31 to 90 days
2.0
(0.2)
1.8
5.5
(0.2)
5.3
Past due more than 90 days
1.5
(0.4)
1.1
1.1
(0.8)
0.3
61.1
(0.6)
60.5
71.1
(1.4)
69.7
The movements in the allowance for expected credit losses of trade receivables comprised:
£m
At 31 December 2020
1.1
Acquisition of businesses
0.4
Credited to the income statement during the year
(0.1)
At 31 December 2021
1.4
Charged to the income statement during the year
0.2
Utilised during the year
(1.0)
At 31 December 2022
0.6
161
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Notes to the Group Financial Statements continued
23. Cash and cash equivalents
Cash and cash equivalents comprised:
31 December
2022
£m
31 December
2021
£m
Cash at bank and in hand
50.0
52.3
Cash at bank earns interest at variable rates based on daily bank deposit rates. The Group
only deposits cash surpluses with banks that have as a minimum a single A credit rating.
24. Share capital and reserves
Share capital
31 December 2022
31 December 2021
Number*
£
Number*
£
Authorised, allotted, called up and fully paid share capital:
Ordinary shares of £0.001 each
249
249,170
248
248,170
*
Millions of shares.
The ordinary shares are voting non-redeemable shares and rank equally as to dividends,
voting rights and any return of capital on winding up.
Share premium
On 11 February 2021, the Group conducted a non-pre-emptive placing of 18,704,085 new
ordinary shares at £5.15 per share generating gross proceeds of £96.3m with issue costs of
£2.7m. Net proceeds in excess of the nominal value of £93.6m have been credited to the share
premium account. A further £0.1m of listing fees have been incurred and charged to the
income statement in 2021.
Capital redemption reserve
Following the consolidation and subdivision of shares in 2014 the Company’s deferred shares
were cancelled. In order to maintain the Company’s capital, a transfer was made from
retained earnings to a capital redemption reserve at that time.
Own shares
Own shares represent the cost of Genuit Group plc shares purchased in the market and held by
the Company, and/or the Employee Benefit Trust (EBT), to satisfy the future exercise of options
under the Group’s share option schemes.
During the year the Group issued 1,000,000 shares (2021: 1,000,000 shares) to the EBT at the
nominal value of £0.001.
At 31 December 2022, the Group held 375 (2021: 965) of its own shares at an average cost of £4.20
(2021: £4.20) per share. The market value of these shares at 31 December 2022 was less than
£0.1m (2021: less than £0.1m). The nominal value of each share is £0.001.
The EBT held 1,071,188 shares at 31 December 2022 (2021: 353,385) at an average cost of 0.1p
(2021: 0.1p) per share. The market value of these shares at 31 December 2022 was £3.0m
(2021: £2.1m). The nominal value of each share is £0.001.
Hedging reserve
The hedging reserve contains the effective portion of the cash flow hedge relationships
entered into by the Group in respect of interest rate swaps and forward foreign currency
derivatives as discussed in Note 29.
Foreign currency retranslation reserve
The foreign currency retranslation reserve is used to record exchange differences arising from
the translation of the financial statements of foreign subsidiaries.
Other reserves
On 7 May 2020, the Group conducted a non-pre-emptive placing of 26,966,300 new ordinary
shares at £4.45 per share generating gross proceeds of £120.0m. The placing was undertaken
using a cashbox structure. As a result, the Group was able to take relief under Section 612 of the
Companies Act 2006 from crediting share premium and instead transfer the net proceeds in
excess of the nominal value to other reserves. Advisers’ fees of £3.5m have been netted off
against the gross proceeds.
Capital management
The primary objective of the Group’s capital management is to ensure that it maintains an
appropriate capital structure to support its business objectives and maximise shareholder value.
The Group regards shareholders’ equity and net debt as its capital. The Group’s net debt is defined
as cash and cash equivalents, loans and borrowings, and lease liabilities. At 31 December 2022, the
Group had bank debt of £170.9m (2021: £198.0m), an undrawn committed revolving credit facility of
£179.1m (2021: £102.0m), cash of £50.0m (2021: £52.3m), an uncommitted accordion facility of £50.0m
(2021: £50.0m), private placement loan notes of £25.0m (2021: £nil) with a maturity date of August
2029 and lease liabilities of £23.1m (2021: £20.6m). A key objective of the Group is to maintain
sufficient liquidity (cash and committed bank facilities) in order to meet its cash commitments
including interest payments due on that debt. No changes were made to the objectives, policies
or processes during the years ended 31 December 2022 and 31 December 2021.
162
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Notes to the Group Financial Statements continued
25. Share-based payments
Share options were granted by the Company under its various share option schemes as detailed in the table below:
Exercise
price
£
31 December
2021
Number
Granted
Number
Dividend
Accrual
Exercised
Number
Lapsed/
forfeited
Number
31 December
2022
Number
Date
first
exercisable
Expiry
date
2014 Sharesave (granted 2018)
2.98
116,943
–
–
(115,087)
1
(1,856)
–
1 Nov 2021
30 April 2022
2014 Sharesave (granted 2019)
3.05
1,034,024
–
–
(27,269)
2
(323,127)
683,628
1 Nov 2022
30 April 2023
2014 Sharesave (granted 2020)
3.45
1,462,435
–
–
(5,999)
3
(813,709)
642,727
1 Dec 2023
31 May 2024
2014 Sharesave (granted 2021)
5.78
998,276
–
–
–
(752,299)
245,977
1 Dec 2024
31 May 2025
2014 Sharesave (granted 2022)
2.21
–
4,521,667
–
–
–
4,521,667
1 Dec 2025
31 May 2026
2014 LTIP (granted 10 May 2016)
Nil
104,165
–
–
(17,960)
4
–
86,205
10 May 2019
10 May 2026
2014 LTIP (granted 2 May 2017)
Nil
29,289
–
–
(16,715)
5
–
12,574
2 May 2020
2 May 2027
2014 LTIP (granted 22 May 2017)
Nil
5,973
–
–
–
–
5,973
22 May 2021
22 May 2028
2014 LTIP (granted 2 May 2018)
Nil
32,647
–
–
(6,197)
6
(5,308)
21,142
2 May 2021
2 May 2028
2014 LTIP (granted 30 April 2019)
Nil
526,151
–
–
(76,656)
7
(399,499)
49,996
30 April 2022
30 April 2029
2014 LTIP (granted 22 Nov 2019)
Nil
23,531
–
–
–
(17,649)
5,882
22 Nov 2022
22 Nov 2029
2014 LTIP (granted 22 June 2020)
Nil
633,899
–
–
–
(159,661)
474,238
22 June 2023
22 June 2030
2014 LTIP (granted 20 May 2021)
Nil
676,916
–
–
–
(130,001)
546,915
20 May 2024
20 May 2031
2014 LTIP (granted 22 April 2022)
Nil
–
809,192
–
–
(65,334)
743,858
22 April 2025
22 April 2032
2014 LTIP (granted 13 July 2022)
Nil
–
11,973
–
–
–
11,973
13 July 2025
13 July 2032
Deferred share awards (granted 22 March 2022)
Nil
–
175,081
3,296
–
–
178,377
22 March 2023
22 March 2032
Deferred share awards (granted 22 March 2022)
Nil
–
124,683
2,347
–
–
127,030
22 March 2024
22 March 2032
Deferred share awards (granted 22 March 2022)
Nil
–
12,347
–
–
–
12,347
22 March 2022
22 March 2032
Deferred share awards (granted 22 March 2022)
Nil
–
30,640
576
–
–
31,216
22 March 2023
22 March 2032
DSBP (granted 30 April 2019)
Nil
19,437
–
–
(12,434)
8
–
7,003
30 April 2021
30 April 2029
DSBP (granted 22 June 2020)
Nil
17,120
–
320
(4,125)
9
–
13,315
22 June 2022
22 June 2030
DSBP (granted 22 April 2022)
Nil
–
79,144
1,486
–
–
80,630
22 April 2024
22 April 2031
5,680,806
5,764,727
8,025
(282,442)
(2,668,443)
8,502,673
1.
The weighted average share price at the date of exercise of these options was £4.78.
2.
The weighted average share price at the date of exercise of these options was £3.55.
3.
The weighted average share price at the date of exercise of these options was £4.25.
4.
The weighted average share price at the date of exercise of these options was £5.27.
5.
The weighted average share price at the date of exercise of these options was £5.16.
6.
The weighted average share price at the date of exercise of these options was £5.28.
7.
The weighted average share price at the date of exercise of these options was £4.14.
8.
The weighted average share price at the date of exercise of these options was £4.06.
9.
The weighted average share price at the date of exercise of these options was £3.78.
163
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Notes to the Group Financial Statements continued
25. Share-based payments continued
At 31 December 2022, 889,345 (2021: 292,541) share options were exercisable at a weighted
average exercise price of £2.34 (2021: £1.19) per share.
Sharesave Plan
Sharesave Plan options were granted to eligible employees on 9 November 2022 at an
exercise price of £2.21 per share, a 20% discount to the average share price over the three
business days preceding the offer. Participating employees can exercise their options to
purchase the shares acquired through their savings plans at the option price after three
years. These options have an exercise date of 2025 to 2026.
Long-Term Incentive Plan (LTIP)
LTIP options were awarded to a number of senior managers on 22 April 2022. These options
have an exercise date of 2025 to 2032. The vesting of each award is subject to the satisfaction
of certain performance criteria, of which 25% is based on total shareholder return (the TSR
element), 25% is based on sustainability performance (the sustainability element) and 50% is
based on earnings per share (the EPS element). Further details of the scheme are provided in
the Annual Report on Remuneration.
Deferred Share Bonus Plan (DSBP)
On 22 April 2022, the Executive Directors received an award of shares under the DSBP relating
to the 2021 annual bonus.
Deferred share awards
On 22 March 2022, other share awards in the form of nil-cost options were made relating to
the buyout arrangements to partially compensate Joe Vorih and Matt Pullen for bonus and
long-term incentive awards which were forfeited when they left their previous employers.
Further details are provided in the Annual Report on Remuneration on pages 120-123.
All these equity-settled, share-based payments are measured at fair value at the date of grant.
The fair value determined at the date of grant of the equity-settled, share-based payments is
expensed to the income statement on a straight-line basis over the vesting period, based on
the Group’s estimates of shares that will eventually vest, with a corresponding adjustment to
equity. Fair value for the Sharesave Plan options is measured by use of a Black–Scholes model.
Fair value of the LTIP options is measured by use of a Monte Carlo model. The expected life used
in the models has been adjusted, based on management’s best estimate for the effects of
non-transferability, exercise restrictions and behavioural considerations.
The assumptions used for each share-based payment were as follows:
2014 LTIP
options
granted
22 April
2022
2014 LTIP
options
granted
13 July
2022
2014
Sharesave
options
granted
2022
Share price at the date of grant
£4.57
£3.82
£2.70
Exercise price
Nil
Nil
£2.21
Shares under option
809,192
11,973
4,521,667
Vesting period (years)
3.00
3.00
3.25
Expected volatility
37.3%
37.3%
41.3%
Median volatility of the comparator group
38.2%
38.2%
n/a
Expected life (years)
3.00
3.00
3.25
Risk free rate
1.82%
1.70%
3.64%
Dividend yield
2.69%
3.20%
4.26%
TSR performance of the Company at the date of grant
(21.2)%
(21.2)%
n/a
Median TSR performance of the comparator group
at the date of grant
(24.4)%
(24.4)%
n/a
Correlation (median)
33.3%
33.3%
n/a
Fair value per option
£3.65
£3.11
£0.84
164
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Notes to the Group Financial Statements continued
2014 LTIP
options
granted
20 May
2021
2014
Sharesave
options
granted
2021
Share price at the date of grant
£6.03
£6.96
Exercise price
Nil
£5.78
Shares under option
676,916
1,005,123
Vesting period (years)
3.00
3.25
Expected volatility
35.4%
37.8%
Median volatility of the comparator group
38.2%
n/a
Expected life (years)
3.00
3.25
Risk free rate
0.14%
0.69%
Dividend yield
2.5%
2.5%
TSR performance of the Company at the date of grant
1.9%
n/a
Median TSR performance of the comparator group at the date of grant
38.2%
n/a
Correlation (median)
33.3%
n/a
Fair value per option
£4.91
£2.02
The expected volatility is based on historical share price movements. The Directors anticipate
it is possible the performance criteria in relation to the LTIP options may not be met.
2022
£m
2021
£m
Share-based payments charge for the year
2.9
2.2
26. Trade and other payables
31 December
2022
£m
31 December
2021
£m
Trade payables
85.1
94.1
Other taxes and social security costs
7.9
11.2
Accruals
31.2
30.2
124.2
135.5
Trade payables are non-interest bearing and generally settled on 30 to 60 day terms.
27. Financial liabilities
31 December
2022
£m
31 December
2021
£m
Non-current loans and borrowings:
Bank loan
– principal
170.9
198.0
–
unamortised debt issue costs
(2.8)
(0.6)
Private Placement Loan Notes
25.0
–
Total non-current loans and borrowings
193.1
197.4
Cash at bank and in hand
(50.0)
(52.3)
Net debt excluding lease liabilities
143.1
145.1
31 December
2022
£m
31 December
2021
£m
Other financial liabilities:
Trade and other payables
124.2
135.5
Lease liabilities
23.1
20.6
Other liabilities
–
1.4
Deferred and contingent consideration
8.0
4.8
Derivative financial instruments
–
0.1
155.3
162.4
165
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Notes to the Group Financial Statements continued
27. Financial liabilities continued
Bank loan
On 19 November 2018, the Group entered into an Amendment and Restatement Agreement
with various lenders in respect of the Group’s previous revolving credit facility agreement
dated 4 August 2015. The bank loan, which comprised a £300.0m revolving credit facility and
£50.0m uncommitted accordion facility, was secured and would have matured in November
2023 (with two further uncommitted annual renewals through to November 2025 possible).
The Group incurred £1.7m of debt issue costs in respect of entering into the Amendment and
Restatement Agreement dated 19 November 2018 which were capitalised and were being
amortised to the income statement over the term of the facility. Upon renewal of the facility in
August 2022, the remaining unamortised amount was written off to non-underlying items.
On 10 August 2022, the Group renewed its banking facilities and entered a Sustainability-Linked
Loan revolving credit facility agreement for £350.0m with a £50.0m uncommitted accordion
facility expiring in August 2027 and a separate agreement for private placement loan notes of
£25.0m with an uncommitted £125.0m shelf facility repayable in August 2029. The Group
incurred debt issue costs of £3.1m, in respect of entering into both agreements, which have
been capitalised and are being amortised to the income statement over the whole term of
each facility, respectively.
Interest is payable on the bank loan at SONIA plus an interest margin ranging from 0.90% to
2.75% which is dependent on the Group’s ESG targets and the Group’s leverage (net debt
excluding lease liabilities as a multiple of pro forma EBITDA) and reduces as the Group’s
leverage reduces. The interest margin at 31 December 2022 was 1.60% (2021: 1.40%). Pro forma
EBITDA for the year was £120.3m (2021: £117.9m) and is defined as pre-IFRS 16 underlying
operating profit before depreciation, amortisation and share-based payment charges, for the
12 months preceding the Balance Sheet date adjusted where relevant to include a full year of
EBITDA from acquisitions made during those 12 months.
Interest is payable semi-annually on the loan notes and is fixed at 4.44% per annum for the
period of the loan term.
2022
£m
2021
£m
Pro forma EBITDA
(12 months preceding the Balance Sheet)
Underlying operating profit
98.2
95.3
Depreciation of property, plant and equipment
19.4
18.4
Amortisation of intangible assets arising on business combinations
0.2
0.1
Unwind of discount on lease liabilities
(0.8)
(0.7)
Share-based payments charge
3.1
2.5
120.1
115.6
EBITDA from acquisitions
0.2
2.3
120.3
117.9
At 31 December 2022, the Group had available, subject to covenant headroom, £179.1m
(2021: £102.0m) of undrawn committed borrowing facilities in respect of which all conditions
precedent had been met.
The Group is subject to a number of covenants in relation to its bank loan which, if breached,
would result in the bank loan becoming immediately repayable. These covenants specify
certain maximum limits in terms of net debt, excluding lease liabilities, as a multiple of pro
forma EBITDA and interest cover. At 31 December 2022, the Group was not in breach of any
bank covenants. The covenant position was as follows:
Covenant
Covenant
Requirement
Position at
31 December
2022
Interest cover
(Underlying operating profit: finance costs excluding
debt issue cost amortisation)
>4.0:1
16.0:1
Leverage
(Net debt excluding lease liabilities: pro forma EBITDA)
<3.0:1
1.2:1
The interest cover and leverage covenants remain at 4.0:1 and 3.0:1 respectively, throughout
the remaining term of the revolving credit facility to August 2027, though there exists the
option to apply to extend the leverage covenant to 3.5:1 for a limited period of time if the
Group makes an acquisition.
28. Related party transactions
Compensation of key management personnel (including Directors):
2022
£m
2021
£m
Short-term employee benefits
3.3
4.8
Share-based payments
1.7
0.7
5.0
5.5
Key management personnel comprise the Executive Directors and other key managers
in the Group.
166
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Notes to the Group Financial Statements continued
29. Financial risk management objectives and policies
The Group’s principal financial liabilities comprise loans and borrowings, deferred and
contingent consideration, lease liabilities, derivative financial instruments and trade and other
payables. The main purpose of these financial liabilities is to finance the Group’s operations.
The Group has trade and other receivables and cash that are derived directly from its
operations.
The Group is exposed to interest rate cash flow, foreign currency exchange, credit and
liquidity risk.
The Group’s senior management oversees the mitigation of these risks which are summarised
as follows:
Interest rate risk
The interest rate on the Group’s £350.0m Sustainability-Linked Loan is variable, being payable
at SONIA plus a margin. The Group manages its long-term borrowings policy centrally and
operates weekly cash flow forecasting to manage its net debt position to ensure exposure to
changes in interest rates are minimised where possible.
Interest rate sensitivity
The table below demonstrates the sensitivity to a change in 100 basis point in interest rates on
the Group’s borrowings which at the relevant reporting dates are not hedged. The analysis
assumes all other variables remain constant and the change in rates takes place at the
beginning of the financial year and held constant throughout the reporting period, the Group’s
profit after tax is affected through the impact on interest rate borrowings as follows:
Change in interest rate
Effect on profit
after tax
£m
2022
Increase of 100 basis points
(1.6)
Decrease of 100 basis points
0.6
2021
Increase of 100 basis points
(0.1)
Decrease of 100 basis points
0.1
Foreign currency exchange risk
Foreign currency exchange risk is the risk that the fair value of a financial instrument or future
cash flows will fluctuate because of changes in foreign currency exchange rates. The Group’s
exposure to the risk of changes in foreign currency exchange rates relates primarily to the
Group’s operating activities where the revenue or expense is denominated in a currency other
than the functional currency of the entity undertaking the transaction.
The Group enters into forward foreign currency exchange contracts for the purchase and sale
of foreign currencies in order to manage its exposure to fluctuations in currency rates,
primarily in respect of US Dollar and Euro receipts and payments.
Foreign currency exchange sensitivity
The table below demonstrates the sensitivity to a 10% change in the Euro exchange rate versus
Pounds Sterling, the presentational currency of the Group used for translation purposes, on the
net assets and profit after tax of the Group. The Group’s exposure to foreign currency
exchange rate changes for all other currencies is not material.
Change in exchange rate
Effect on
net assets
£m
Effect on profit
after tax
£m
2022
10% strengthening of Pounds Sterling: against Euro
(1.0)
–
10% weakening of Pounds Sterling: against Euro
1.3
–
2021
10% strengthening of Pounds Sterling: against Euro
(0.8)
(0.1)
10% weakening of Pounds Sterling: against Euro
1.0
0.1
167
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Notes to the Group Financial Statements continued
29. Financial risk management objectives and policies continued
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial
instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk
from its operating activities (primarily for trade receivables) and from its financing activities,
including cash deposits with banks.
Trade receivables
Customer credit risk is managed by each subsidiary subject to the Group’s established policy,
procedures and controls relating to customer credit risk management. Credit quality of the
customer is assessed based on an extensive credit rating scorecard and individual credit
limits are defined in accordance with this assessment. Outstanding customer receivables
are regularly monitored and any shipments to major export customers are generally
covered by letters of credit or other forms of credit insurance.
The requirement for impairment is analysed at each balance sheet date on an individual
basis for major clients. Additionally, a large number of minor receivables are grouped into
homogeneous groups and assessed for impairment collectively. The calculation is based on
actually incurred historical data. The maximum exposure to credit risk at the Balance Sheet
date is the carrying amount of each class of financial assets as disclosed in Note 22 which is
adjusted for forward-looking information.
The Group does not hold collateral as security. The Group evaluates the concentration
of risk with respect to trade receivables as low. At 31 December 2022, 53% (2021: 39%) of
net trade receivables were covered by credit insurance which is subject to the normal
policy deductibles.
Financial instruments and cash deposits
The Group maintains strong liquidity through cash balances and deposits (£50.0m at
31 December 2022) and its undrawn committed revolving credit facility £179.1m at 31 December
2022 which matures in August 2027 (with two further uncommitted annual renewals through
to November 2029 possible).
Credit risk arising from cash deposits with banks is managed in accordance with the Group’s
established treasury policy, procedures and controls. Deposits of surplus funds are made only
with banks that have as a minimum a single A credit rating. The Group’s maximum exposure
to credit risk for the components of the Balance Sheet at 31 December 2022 and 31 December
2021 is the carrying amounts as illustrated in Note 23.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they
fall due. The Group’s approach to managing liquidity is to ensure that it will always have
sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses or risking damage to the Group’s reputation. The Group
had cash and cash equivalents of £50.0m and undrawn and committed credit facilities of
£179.1m at 31 December 2022, and no debt maturities within 12 months.
The table below summarises the maturity profile of the Group’s financial liabilities based on
contractual undiscounted payments:
31 December 2022
< 3 months
£m
3 to 12
months
£m
1 to 5
years
£m
> 5 years
£m
Total
£m
Bank loan – principal
2.4
5.7
214.7
–
222.8
Private placement loan notes
–
1.1
4.4
27.2
32.7
Other financial liabilities:
Trade and other payables
124.2
–
–
–
124.2
Deferred and contingent
consideration
–
–
8.0
–
8.0
Forward foreign currency
derivatives
0.9
–
–
–
0.9
Lease liabilities
1.3
3.7
14.9
10.4
30.3
128.8
10.5
242.0
37.6
418.9
The interest payments on the Sustainability-Linked Loan would be £10.9m per year if the
interest rate plus margin remained at 5.6% and the level of debt did not change from the
balance sheet date.
31 December 2021
< 3 months
£m
3 to 12
months
£m
1 to 5
years
£m
> 5 years
£m
Total
£m
Bank loan – principal
–
–
198.0
–
198.0
Other financial liabilities:
Trade and other payables
135.5
–
–
–
135.5
Deferred and contingent
consideration
0.5
–
4.3
–
4.8
Forward foreign currency
derivatives
6.0
–
–
–
6.0
Lease liabilities
0.9
3.6
11.1
8.3
23.9
Other liabilities
–
0.5
–
0.9
1.4
142.9
4.1
213.4
9.2
369.6
168
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Notes to the Group Financial Statements continued
Fair values of financial assets and financial liabilities
The book value of trade and other receivables, trade and other payables, cash balances, bank
loan and other liabilities equates to fair value.
The table below sets out the Group’s accounting classification of its other financial liabilities
and their carrying amounts and fair values:
Carrying
value
£m
Fair
value
£m
Forward foreign currency derivatives
(designated as hedging instruments)
–
–
Interest-bearing loans and borrowings due after more than
one year (designated as financial liabilities measured
at amortised cost)
193.1
193.1
Deferred and contingent consideration
(designated as financial liabilities at FVTPL)
8.0
8.0
Lease liabilities (designated as financial liabilities
measured at amortised cost)
23.1
23.1
Total at 31 December 2022
224.2
224.2
Carrying
value
£m
Fair
value
£m
Forward foreign currency derivatives
(designated as hedging instruments)
0.1
0.1
Interest-bearing loans and borrowings due after more than
one year (designated as financial liabilities measured
at amortised cost)
197.4
197.4
Deferred and contingent consideration
(designated as financial liabilities at FVTPL)
4.8
4.8
Lease liabilities (designated as financial liabilities
measured at amortised cost)
20.6
20.6
Total at 31 December 2021
222.9
222.9
The fair values were determined as follows by reference to:
–
Forward foreign currency derivatives: quoted exchange rates.
–
Deferred and contingent consideration: Directors’ assessment of the likelihood that financial
targets will be achieved (see Note 18).
–
Lease liabilities: present value of lease payments to be made over the lease terms.
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of
financial instruments by valuation technique:
Level 1:
quoted (unadjusted) prices in active markets for identical assets or liabilities;
Level 2:
other techniques for which all inputs which have a significant effect on the
recognised fair value are observable, either directly or indirectly; and
Level 3:
techniques which use inputs which have a significant effect on the recognised fair
value that are not based on observable market data.
The fair values disclosed above, with the exception of deferred and contingent consideration
which is categorised as Level 3, all relate to items categorised as Level 2.
There have been no transfers in any direction between Levels 1, 2 or 3 in the years ended
31 December 2022 and 2021.
169
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Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
The Directors are responsible for preparing the Annual Report and the financial statements in
accordance with applicable UK law and regulations.
UK Company law requires the Directors to prepare financial statements for each financial
year. Under that law the Directors have elected to prepare the financial statements in
accordance with UK-Adopted International Accounting Standards (IFRSs).
Under company law the Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of the Company and of the
profit or loss of the Company for that period.
In preparing these financial statements the Directors are required to:
–
select suitable accounting policies in accordance with IAS 8, Accounting Policies, Changes
in Accounting Estimates and Errors, and then apply them consistently
–
make judgements and accounting estimates that are reasonable and prudent
–
present information, including accounting policies, in a manner that provides relevant,
reliable, comparable and understandable information
–
provide additional disclosures when compliance with the specific requirements in IFRSs
is insufficient to enable users to understand the impact of particular transactions, other
events and conditions on the Company’s financial position and financial performance
–
state whether IASs in conformity with the requirements of the Companies Act 2006
have been followed, subject to any material departures disclosed and explained
in the financial statements
–
prepare the financial statements on the going concern basis unless it is appropriate
to presume that the Company will not continue in business
The Directors are responsible for keeping adequate accounting records that are sufficient to
show and explain the Company’s transactions and disclose with reasonable accuracy at any
time the financial position of the Company and enable them to ensure that the financial
statements comply with the Companies Act 2006. They are also responsible for safeguarding
the assets of the Company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
Directors’ Responsibilities Statement
In relation to the parent company financial statements
170
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Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Notes
31 December
2022
£m
31 December
2021
£m
Non-current assets
Investments
4
246.9
245.5
Current assets
Amounts owed by subsidiary undertakings
and other receivables
5
190.6
190.9
Total assets
437.5
436.4
Current liabilities
Amounts owed to subsidiary undertakings
and other payables
6
(86.3)
(51.4)
Net assets
351.2
385.0
Capital and reserves
Equity share capital
7
0.2
0.2
Share premium
7
93.6
93.6
Capital redemption reserve
7
1.1
1.1
Own shares
7
–
–
Other reserves
7
116.5
116.5
Retained earnings
139.8
173.6
Total equity
351.2
385.0
Included in retained earnings is a loss for the year of £6.6m (2021: £5.5m loss).
The financial statements were approved for issue by the Board of Directors and signed
on its behalf by:
Joe Vorih
Paul James
Director
Director
14 March 2023
14 March 2023
Company Registration No. 06059130
Company Balance Sheet
At 31 December 2022
171
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Remuneration
Financial Statements
Equity
share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Own
shares
£m
Other
reserves
£m
Retained
earnings
£m
Total
equity
£m
At 31 December 2020
0.2
–
1.1
–
116.5
196.6
314.4
Loss for the year
–
–
–
–
–
(5.5)
(5.5)
Total comprehensive
income for the year
–
–
–
–
–
(5.5)
(5.5)
Dividends paid
–
–
–
–
–
(21.7)
(21.7)
Issue of share capital
–
96.3
–
–
–
–
96.3
Transaction costs on issue
of share capital
–
(2.7)
–
–
–
–
(2.7)
Share-based payments
charge
–
–
–
–
–
2.2
2.2
Share-based payments
settled
–
–
–
–
–
2.1
2.1
Share-based payments
excess tax benefit
–
–
–
–
–
(0.1)
(0.1)
At 31 December 2021
0.2
93.6
1.1
–
116.5
173.6
385.0
Loss for the year
–
–
–
–
–
(6.6)
(6.6)
Total comprehensive
income for the year
–
–
–
–
–
(6.6)
(6.6)
Dividends paid
–
–
–
–
–
(30.5)
(30.5)
Issue of share capital
–
–
–
–
–
–
–
Transaction costs on issue
of share capital
–
–
–
–
–
–
–
Share-based payments
charge
–
–
–
–
–
2.9
2.9
Share-based payments
settled
–
–
–
–
–
0.4
0.4
Share-based payments
excess tax benefit
–
–
–
–
–
–
–
At 31 December 2022
0.2
93.6
1.1
–
116.5
139.8
351.2
Company Statement of Changes in Equity
For the year ended 31 December 2022
172
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Remuneration
Financial Statements
31 December
2022
£m
31 December
2021
£m
Operating activities
(Loss)/profit before tax
(6.6)
(5.7)
Net finance cost/(income)
–
–
Operating loss
(6.6)
(5.7)
Transaction costs on issue of share capital
–
0.1
Non-cash items: Share-based payments
1.5
0.5
Operating cash flows before movement in working capital
(5.1)
(5.1)
Movement in working capital:
Receivables
0.3
(0.2)
Payables
0.1
0.4
Inter-group balances
34.8
(69.0)
Net cash flows from operating activities
30.1
(73.9)
Financing activities
Issue of share capital
–
96.3
Transaction costs on issue of share capital
–
(2.8)
Dividends paid
(30.5)
(21.7)
Proceeds from exercise of share options
0.4
2.1
Net cash flows from financing activities
(30.1)
73.9
Net change in cash and cash equivalents
–
–
Cash and cash equivalents at 1 January
–
–
Cash and cash equivalents at 31 December
–
–
Company Cash Flow Statement
For the year ended 31 December 2022
173
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Remuneration
Financial Statements
1. Authorisation of financial statements
The parent company financial statements of Genuit Group plc (formerly Polypipe Group plc)
(the ‘Company’) for the year ended 31 December 2022 were authorised for issue by the Board
of Directors on 14 March 2023 and the balance sheet was signed on the Board’s behalf by
Joe Vorih and Paul James.
Genuit Group plc is a public limited company incorporated and domiciled in England and
Wales. The principal activity of the Company is that of a holding company.
2. Summary of significant accounting policies
The basis of preparation and accounting policies used in preparing the historical financial
information for the year ended 31 December 2022 are set out below. These accounting policies
have been consistently applied in all material respects to all the periods presented.
2.1 Basis of preparation and statement of compliance with IFRSs
The Company’s financial statements have been prepared in accordance with International
Accounting Standards in conformity with the requirements of the Companies Act 2006.
The accounting policies which follow set out those policies which apply in preparing the
financial statements for the year ended 31 December 2022.
The Company’s financial statements have been prepared on a historical cost basis.
The financial statements are presented in Pounds Sterling and all values are rounded to
one decimal place of a million (£m) unless otherwise indicated. No income statement or
statement of comprehensive income is presented by the Company as permitted by Section
408 of the Companies Act 2006. The results of Genuit Group plc are included in the
consolidated financial statements of Genuit Group plc.
2.2 Going concern
The Directors have made enquiries into the adequacy of the Company’s financial resources,
through a review of the Group’s budget and medium-term financial plan, including cash flow
forecasts. The Group has modelled a range of scenarios, with the base forecast being one
in which, over the 24 months ending 31 December 2024, sales volumes grow in line with
or moderately above external construction industry forecasts.
In addition, the Directors have considered several downside scenarios, including adjustments
to the base forecast, a period of significantly lower like-for-like sales, profitability and cash
flows. Consistent with the Group’s Principal Risks and Uncertainties these downside scenarios
included, but were not limited to, loss of production, loss of a major customer, product failure,
recession, increases in interest rates and increases in raw material prices. Downside scenarios
also included a combination of these risks, and reverse stress testing.
The financial impact of the climate-related risks disclosed within the Task Force on Climate-Related
Financial Disclosures Report on pages 26 to 35 of the Strategic Report continue to be assessed.
Through the detailed qualitative scenario analysis undertaken, the Directors conclude that
there is no material adverse impact of climate change in the short to medium-term, and
hence have not included any impacts in either the base case or downside scenarios of the
going concern assessment. The Group has not experienced material adverse disruption
during periods of adverse or extreme weather in recent years and do not expect this to occur
to a material level over the period of the going concern assessment.
At 31 December 2022, the Group had available £179.1m of undrawn committed borrowing
facilities in respect of which all conditions precedent had been met. These borrowing facilities
are available until at least August 2027, subject to covenant headroom. The Directors are
satisfied that the Group has sufficient liquidity and covenant headroom to withstand
reasonable variances to the base forecast, as well as the downside scenarios. In addition,
the Directors have noted the range of possible additional liquidity options available to the
Group, should they be required.
As a result, the Directors have satisfied themselves that the Company has adequate
financial resources to continue in operational existence for a period of at least the next
21 months. Accordingly, they continue to adopt the going concern basis in preparing the
financial statements.
2.3 Investments
Investments in subsidiary undertakings are held at historical cost less any applicable provision
for impairment.
2.4 Share-based payments
In the case of equity-settled schemes, the fair value of options granted is recognised as
an employee expense with a corresponding increase in equity. The fair value is measured
at the date of grant and spread over the period during which the employees become
unconditionally entitled to the options. The value of the options is measured using the Black–
Scholes and Monte Carlo models, taking into account the terms and conditions (including
market and non-vesting conditions) upon which the options were granted. Non-market
vesting conditions are taken into account by adjusting the number of equity instruments
expected to vest at each balance sheet date so that, ultimately, the cumulative amount
recognised over the vesting period is based on the number of options that eventually vest.
No expense is recognised for awards that do not ultimately vest, except for equity-settled
transactions where vesting is conditional upon a market or non-vesting condition, which are
treated as vesting irrespective of whether or not the market or non-vesting condition is
satisfied, provided that all other performance and/or service conditions are satisfied.
The financial effect of awards by the Company of options over its equity shares to employees
of subsidiary undertakings are recognised by the Company in its individual financial statements.
In particular, the Company records an increase in its investment in subsidiaries with a
corresponding adjustment to equity equivalent to the IFRS 2 cost in subsidiary undertakings.
Notes to the Company Financial Statements
For the year ended 31 December 2022
174
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Notes to the Company Financial Statements continued
2.5 Cash dividend
The Company recognises a liability to pay a dividend when the distribution is authorised
and the distribution is no longer at the discretion of the Company. Under UK company law a
distribution is authorised when it is approved by the shareholders. A corresponding amount
is then recognised directly in equity.
2.6 Own shares
The Company operates an Employee Benefit Trust (EBT). The Company and/or the EBT, holds
Genuit Group plc shares for the granting of Genuit Group plc shares to employees and
Directors. These shares are recognised at cost and presented in the balance sheet as a
deduction from equity. No profit or loss is recognised in the income statement on the
purchase, sale, issue or cancellation of these shares. No dividends are earned on these shares.
2.7 Financial instruments
The Company policy for accounting for financial instruments is consistent with the Group
policy detailed in Note 2.15 of the Group’s consolidated financial statements. A financial
instrument is any contract that gives rise to a financial asset of one entity and a financial
liability or equity instrument of another entity. The Company’s only financial assets are
amounts owed by subsidiary undertakings (see Note 5).
3. Dividend per share
2022
£m
2021
£m
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 December 2021 of 8.2p per share
(2020: 4.8p)
20.3
11.8
Interim dividend for the year ended 31 December 2022 of 4.1p per
share (2021: 4.0p)
10.2
9.9
30.5
21.7
Proposed final dividend for the year ended 31 December 2022 of 8.2p
per share (2021: 8.2p)
20.3
20.3
The proposed final dividend is subject to approval by shareholders at the Annual General
Meeting and has not been included as a liability in these financial statements.
4. Investments
Shares in
subsidiary
undertakings
£m
Cost
At 1 January 2021
243.8
Additions – share-based payments
1.7
At 31 December 2021
245.5
Additions – share-based payments
1.4
At 31 December 2022
246.9
Net book value
At 31 December 2022
246.9
At 31 December 2021
245.5
At 1 January 2021
243.8
In 2022, an adjustment in respect of share-based payments of £1.4m (2021: £1.7m) was made
to shares in subsidiary undertakings, representing the financial effects of awards by the
Company of options over its equity shares to employees of subsidiary undertakings.
The total contribution to date was £7.7m (2021: £6.3m).
175
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Notes to the Company Financial Statements continued
4. Investments continued
The companies in which the Company had an interest at 31 December 2022 are shown below:
Name of company
Country of incorporation
Holding
Proportion of voting
rights and shares held
AAA Holdings Limited
1
England & Wales
Ordinary £1
100%*
Adey Commercial Limited
2
England & Wales
Ordinary £1
100%*
Adey Holdings (2008) Limited
2
England & Wales
Ordinary £1
100%*
Adey Innovation Limited
2
England & Wales
Ordinary £1
100%*
Adey Innovation LLC
3
United States of America
n/a
100%*
Adey Innovation SAS
4
France
Ordinary €1
100%*
Adey Innovation (Shanghai) Water Treatment Technology Co. Ltd
5
China
Ordinary £1
100%*
Alderburgh Limited
1
England & Wales
Ordinary £1
100%*
Alderburgh Ireland Limited
6
Republic of Ireland
Ordinary €1
100%*
Alpha Scientific Ltd
2
England & Wales
Ordinary £0.01
100%*
Drain Products Europe BV
7
The Netherlands
Ordinary €100
100%*
Environmental Sustainable Solutions Ltd
1
England & Wales
Ordinary £1
100%*
Equaflow Ltd
1
England & Wales
Ordinary £1
50%*
Ferrob Ventilation Ltd
1
England & Wales
Ordinary £1
100%*
Genuit Limited
1
England & Wales
Ordinary £1
100%*
Hayes Pipes (Ulster) Limited
8
Northern Ireland
Ordinary £1
100%*
Home Ventilation (Ireland) Limited
9
Northern Ireland
Ordinary £1
100%*
Infra Green Limited
1
England & Wales
Ordinary £1
100%*
Insulated Damp-Proof Course Limited
1
England & Wales
Ordinary £1
100%*
Keytec Geomembranes Holding Company Limited
1
England & Wales
Ordinary £1
100%*
Keytec Geomembranes Limited
1
England & Wales
Ordinary £1
100%*
London Bidco Limited
2
England & Wales
Ordinary £1
100%*
London Finco Limited
2
England & Wales
Ordinary £1
100%*
London Topco Limited
2
England & Wales
Ordinary £0.01 – £1
100%*
Manthorpe Building Products Limited
1
England & Wales
Ordinary £1
100%*
Manthorpe Building Products Holdings Limited
1
England & Wales
Ordinary £1
100%*
Mason Pinder (Toolmakers) Limited
1
England & Wales
Ordinary £1
100%*
Nuaire Limited
1
England & Wales
Ordinary £1
100%*
176
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Notes to the Company Financial Statements continued
Name of company
Country of incorporation
Holding
Proportion of voting
rights and shares held
Nu-Heat (Holdings) Limited
1
England & Wales
Ordinary £0.01
100%*
Nu-Heat UK Limited
1
England & Wales
Ordinary £1
100%*
Nuhold Limited
1
England & Wales
Ordinary £0.1
100%*
Nu-Oval Acquisitions 1 Limited
1
England & Wales
Ordinary £0.94 – £1
100%*
Nu-Oval Acquisitions 2 Limited
1
England & Wales
Ordinary £1
100%*
Nu-Oval Acquisitions 3 Limited
1
England & Wales
Ordinary £1
100%*
Oracstar Limited
1
England & Wales
Ordinary £1
100%*
Permavoid Limited
1
England & Wales
Ordinary £1
100%*
Permavoid Technologies Limited
1
England & Wales
Ordinary £1
100%*
Permavoid Technologies (USA) Limited
1
England & Wales
Ordinary £1
100%*
Permavoid Technologies (USA) LLC
10
United States of America
Ordinary $1
100%*
Pipe Holdings plc
1
England & Wales
Ordinary £1
100%*
Pipe Holdings 1 plc
1
England & Wales
Ordinary £1
100%*
Pipe Holdings 2 Limited
1
England & Wales
Ordinary £1
100%*
Pipe Luxembourg Sarl
11
Luxembourg
Ordinary £1
100%
Plumbexpress Limited
1
England & Wales
Ordinary £1
100%*
Plura Composites Ltd
12
England & Wales
Ordinary £1
51%*
Polydeck Limited
13
England & Wales
Ordinary £1
51%*
Polypipe Limited
1
England & Wales
Ordinary £0.1
100%*
Polypipe Building Products Limited
1
England & Wales
Ordinary £1
100%*
Polypipe Civils Limited
1
England & Wales
Ordinary £1
100%*
Polypipe Commercial Building Systems Limited
1
England & Wales
Ordinary £1
100%*
Polypipe Group 1 Limited (formerly Genuit Group Limited)
1
England & Wales
Ordinary £0.01
100%*
Polypipe (Ireland) Ltd
8
Northern Ireland
Ordinary £1
100%*
Polypipe Italia SRL
14
Italy
Ordinary €0.52
100%*
Polypipe Middle East FZE
15
United Arab Emirates
Ordinary 1m UAE Dirhams
100%*
Polypipe Middle East Water Technology LLC
16
United Arab Emirates
Ordinary 1,000 UAE Dirhams
100%*
Polypipe T.D.I. Limited
1
England & Wales
Ordinary £1
100%*
Polypipe Terrain Limited
1
England & Wales
Ordinary £1
100%*
177
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Remuneration
Financial Statements
Notes to the Company Financial Statements continued
Name of company
Country of incorporation
Holding
Proportion of voting
rights and shares held
Polypipe Terrain Holdings Limited
1
England & Wales
Ordinary £1
100%*
Polypipe Trading Limited
1
England & Wales
Ordinary £0.1
100%*
Polypipe (Ulster) Limited
8
Northern Ireland
Ordinary £1
100%*
Polypipe Ventilation Limited
1
England & Wales
Ordinary £1
100%*
Robimatic Limited
1
England & Wales
Ordinary £1
100%*
Solutek Environmental Limited
1
England & Wales
Ordinary £1
100%*
Surestop Limited
1
England & Wales
Ordinary £1
100%*
Sustainable Water and Drainage Systems BV
7
The Netherlands
Ordinary €1
50%*
Sustainable Water and Drainage Systems Limited
1
England & Wales
Ordinary £1
50%*
Tree Ground Solutions BV
7
The Netherlands
Ordinary €10
100%*
Water Management Solutions LLC
17
Qatar
Ordinary 1,000 Qatari Riyals
49%*
All the companies operate principally in their country of registration and in the same class of business as the Group. The shares in the undertakings marked with an asterisk are held by
subsidiary undertakings.
Registered offices of subsidiaries:
1.
4 Victoria Place, Holbeck, Leeds, LS11 5AE.
2.
Unit 2 St Modwen Park, Haresfield, Stonehouse, Gloucestershire, GL10 3EZ.
3.
c/o CT Corporation, 1209 Orange Street, Wilmington, Newcastle 19801, Delaware, United States of America.
4.
119B Rue de Colombes, 92600 Asnieres Sur Seine, France.
5.
Room 308-18, No. 998, South Shen Bin Road, Min Hang District, Shanghai, China.
6.
Ballybrack, Kilmacthomas, Co. Waterford.
7.
Kattenburgerstraat 5, 1018, JA, Amsterdam, The Netherlands.
8.
Dromore Road, Lurgan, Co. Armagh, BT66 7HL.
9.
19 Bedford Street, Belfast, BT2 7EJ.
10.
251 Little Falls Drive, Wilmington, Delaware, 19808-1674, United States of America.
11.
15 Boulevard F.W. Raiffeisen, L-2411 Luxembourg.
12.
Unit 5 Johnsons Estate, Tarran Way South, Tarran Industrial Estate, Moreton, Wirral, Merseyside, CH46 4TP.
13.
Unit 14 Burnett Industrial Estate, Cox’s Green, Wrington, Bristol, Somerset, BS40 5QP.
14.
Localita Pianmercato 5C-D-H, 16044 Cicagna, Genova, Italy.
15.
PO Box 18679, Showroom A2 SR 07, First Al Khail Street, Jebel Ali Free Zone, Dubai, United Arab Emirates.
16.
Arenco Tower – Office 908, Dubai Media City, Dubai, United Arab Emirates.
17.
Level 15, Commercial Bank Plaza, West Bay, Doha, Qatar.
4. Investments continued
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Strategic Report
Governance
Remuneration
Financial Statements
Notes to the Company Financial Statements continued
5. Amounts owed by subsidiary undertakings and other receivables
31 December
2022
£m
31 December
2021
£m
Amounts owed by subsidiary undertakings
189.9
189.9
Deferred income tax assets
0.7
0.7
Prepayments
–
0.3
190.6
190.9
No material allowance for expected credit losses is deemed necessary in respect of amounts
owed by subsidiary undertakings.
6. Amounts owed to subsidiary undertakings and other payables
31 December
2022
£m
31 December
2021
£m
Amounts owed to subsidiary undertakings
85.0
50.2
Other payables
1.3
1.2
86.3
51.4
7. Share capital and reserves
Share capital
31 December 2022
31 December 2021
Number*
£
Number*
£
Authorised, allotted, called up and fully paid share capital:
Ordinary shares of £0.001 each
249
249,170
248
248,170
*
Millions of shares.
The ordinary shares are voting non-redeemable shares and rank equally as to dividends,
voting rights and any return of capital on winding up.
Details of share options in issue on the Company’s share capital and share-based payments
are set out in Note 25 to the Group’s consolidated financial statements.
Share premium
On 11 February 2021, the Company conducted a non-pre-emptive placing of 18,704,085 new
ordinary shares at £5.15 per share generating gross proceeds of £96.3m with issue costs of
£2.7m. Net proceeds in excess of the nominal value of £93.6m have been credited to the share
premium account. A further £0.1m of listing fees have been incurred and charged to the
income statement in 2021.
Capital redemption reserve
Following the consolidation and subdivision of shares in 2014 the Company’s deferred shares
were cancelled. In order to maintain the Company’s capital a transfer was made from
retained earnings to a capital redemption reserve at that time.
Own shares
Own shares represent the cost of Genuit Group plc shares purchased in the market and held
by the Company and/or the Employee Benefit Trust (EBT), to satisfy the future exercise of
options under the Group’s share option schemes. These shares are recognised at cost and
presented in the balance sheet as a deduction from equity. No profit or loss is recognised in
the income statement on the purchase, sale, issue or cancellation of these shares.
No dividends are earned on these shares.
During the year the Group issued 1,000,000 shares (2021: 1,000,000 shares) to the EBT at the
nominal value of £0.001.
Other reserves
On 7 May 2020, the Company conducted a non-pre-emptive placing of 26,966,300 new
ordinary shares at £4.45 per share generating gross proceeds of £120.0m. The placing was
undertaken using a cashbox structure. As a result, the Company was able to take relief under
section 612 of the Companies Act 2006 from crediting share premium and instead transfer the
net proceeds in excess of the nominal value to other reserves. Advisers’ fees of £3.5m were
netted off against the gross proceeds.
8. Profit for the financial year
Genuit Group plc has not presented its own Income Statement as permitted by Section 408 of
the Companies Act 2006. The loss for the year dealt with in the financial statements of the
Company was £6.6m (2021: £5.5m loss for the year).
The only employees remunerated by the Company were the Directors of the Company.
Remuneration paid to the Directors is disclosed in Note 10 to the Group’s consolidated financial
statements.
Amounts paid to the Company’s auditor in respect of the audit of the financial statements of
the Company are disclosed in Note 7 to the Group’s consolidated financial statements.
Fees paid to the auditor for non-audit services to the Company itself are not disclosed in the
individual financial statements of the Company because the Group’s consolidated financial
statements are prepared which are required to disclose such fees on a consolidated basis.
These are disclosed in Note 7 to the Group’s consolidated financial statements.
179
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Notes to the Company Financial Statements continued
9. Related party transactions
The following table provides the analysis of transactions that have been entered into with
related parties:
31 December 2022
31 December 2021
Recharges
from related
parties
£m
Amounts
owed to
related
parties
£m
Recharges
to
related
parties
£m
Amounts
owed to
related
parties
£m
Polypipe Limited
34.8
(85.0)
(69.0)
50.2
Loan
advanced
£m
Amounts
owed by
related
parties
£m
Loan
advanced
£m
Amounts
owed by
related
parties
£m
Pipe Holdings 1 plc:
Eurobonds
–
64.9
–
64.9
Preference shares
–
18.3
–
18.3
Other
–
0.9
–
0.9
Pipe Holdings 2 Limited
–
6.4
–
6.4
Pipe Holdings plc
–
99.4
–
99.4
–
189.9
–
189.9
Other related party transactions are disclosed in Note 28 to the Group’s consolidated
financial statements.
180
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Financial calendar
Preliminary Announcement of Results for the year ended 31 December 2022
14 March 2023
Annual General Meeting
18 May 2023
Final dividend for the year ended 31 December 2022:
– Ex-dividend date
20 April 2023
– Record date
21 April 2023
– Payment date
24 May 2023
Half yearly results for the six months ending 30 June 2023
15 August 2023
Half yearly dividend for the six months ending 30 June 2023:
– Ex-dividend date
31 August 2023
– Record date
1 September 2023
– Payment date
27 September 2023
Registrar services
Our shareholder register is managed and
administered by Link Group.
Link Group should be able to help you with
most questions you have in relation to
your holding in Genuit Group plc shares.
Link Group can be contacted at:
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
www.linkgroup.eu
Shareholder helpline for information
relating to your shares call:
+44 (0)371 664 0300
Website helpline for information on
using this website call:
+44 (0)371 664 0391
Calls to 0371 are charged at the standard
geographic rate and will vary by provider.
Calls outside the United Kingdom are
charged at the applicable international rate.
We are open between 09:00–17:30, Monday to
Friday excluding public holidays in England
and Wales.
e-mail: enquiries@linkgroup.co.uk
In addition, Link offers a range of other
services to shareholders including a share
dealing service and a share portal to
manage your holdings.
Share dealing service
A share dealing service is available to existing
shareholders to buy or sell the Company’s
shares via Link Market Services.
Online and telephone dealing facilities
provide an easy to access and simple
to use service.
For further information on this service,
or to buy or sell shares, please contact:
www.linksharedeal.com – online dealing
0371 664 0445 – telephone dealing
email: info@linksharedeal.com
Please note that the Directors of the
Company are not seeking to encourage
shareholders to either buy or sell their shares.
Shareholders in any doubt as to what action
to take are recommended to seek financial
advice from an independent financial adviser
authorised by the Financial Services and
Markets Act 2000.
Shareholder Information
181
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Principal Group businesses
UK
Polypipe Building Products
Broomhouse Lane
Edlington
Doncaster
South Yorkshire
DN12 1ES
Neale Road
Doncaster
South Yorkshire
DN2 4PG
Sandall Stores Road
Kirk Sandall Industrial estate
Doncaster
DN3 1QR
Edlington Lane
Warmsworth
Doncaster
South Yorkshire
DN4 9LS
Polypipe Ulster
Dromore Road
Lurgan
Co. Armagh
BT66 7HL
Polypipe Civils and
Green Urbanisation
Charnwood Business Park
North Road
Loughborough
LE11 1LE
Holmes Way
Horncastle
LN9 6JW
Polypipe Building Services
New Hythe Business Park
College Road
Aylesford
Kent
ME20 7PJ
Nuaire
Western Industrial Estate
Caerphilly
CF83 1NA
Domus Ventilation
Cambria House
Caerphilly Business Park
Van Road
Caerphilly
CF83 3ED
Manthorpe Building Products
Brittain Drive
Codnor Gate Business Park
Ripley
DE5 3ND
Alderburgh
Solutions House
Dane Street
Rochdale
OL11 4EZ
Nu-Heat
Heathpark House
Devonshire Road
Heathpark Industrial Estate
Honiton
Devon
EX14 1SD
Adey Innovation
Unit 2
St Modwen Park
Haresfield
Stonehouse
Gloucestershire
GL10 3EZ
Plura Composites
Unit 5 Johnsons Estate
Tarran Way South
Tarran Way Industrial Estate
Moreton
Wirral
CH46 4TP
Polydeck
Unit 14
Burnett Industrial Estate
Cox’s Green
Wrington
Bristol
BS40 5QP
Keytec Geomembranes
Unit 6
Plover Close
Interchange Park
Newport Pagnell
Milton Keynes
MK16 9PS
Mainland Europe
Polypipe Italia
Localita Pianmercato 5C-D-H
16044 Cicagna, Genova
Italy
Permavoid
Kattenburgerstraat 5
1018, JA
Amsterdam
The Netherlands
Middle East
Polypipe Middle East Water
Technology LLC
Arenco Tower
Office 908
Dubai Media City
Dubai
United Arab Emirates
Shareholder Information continued
182
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Contact details and advisers
Company registration number
and registered office
06059130
4 Victoria Place
Holbeck
Leeds
LS11 5AE
Independent auditor
Ernst & Young LLP
1 Bridgewater Place
Water Lane
Leeds
LS11 5QR
Principal bankers
Lloyds
Sheffield
RBS
Leeds
NatWest
Leeds
Santander
Leeds
Citibank
London
Danske Bank
Belfast
Bank of Ireland
Manchester
Registrar and transfer office
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Stockbrokers
Deutsche Bank AG
Numis Securities Limited
Shareholder Information continued
183
Genuit Group plc
Annual Report & Accounts 2022
Strategic Report
Governance
Remuneration
Financial Statements
Consultancy, design and production
www.luminous.co.uk
Genuit Group plc
4 Victoria Place
Holbeck
Leeds
LS11 5AE
+44 (0) 1138 315315
www.genuitgroup.com