The Group is committed to applying the highest standards of corporate governance.

John Dodds Non-executive chairman

Dear shareholder

I am pleased to introduce the Group's corporate governance report on behalf of our board of directors ('the board'). We are committed to maintaining high standards of corporate governance to enhance performance and for the protection of our shareholders. At Severfield, good governance involves establishing appropriate policies, procedures and guidelines to ensure that the Group's businesses are managed effectively resulting in the delivery of long-term shareholder value.

The corporate governance report which follows is intended to give shareholders an understanding of the Group's corporate governance arrangements and how they operated during the year ended 31 March 2014, including how the Group managed its affairs in compliance with the principles and provisions of the 2012 UK Corporate Governance Code ('the Code').

I am pleased to report that, with one exception which is explained in the corporate governance report (an enforced period of seven months where I acted as executive chairman), we have complied in full with the Code.

Leadership and effectiveness

Ian Lawson was appointed as chief executive officer during the year following a rigorous selection process which involved Korn/Ferry International, an external executive search agency. During the period from 1 April 2013 to 31 October 2013 I continued to act as executive chairman pending Ian's appointment on 1 November 2013. As explained in the 2013 annual report this was a temporary arrangement, designed to facilitate clear leadership until a chief executive officer was appointed. The board deemed such measures necessary for the successful stewardship of the Group during that period and that these extraordinary measures were justified in order to provide the Group with clear leadership in challenging circumstances. Following the successful transition of executive responsibilities to Ian, I have reverted to my previous role of non-executive chairman. This has resulted in a return to the more traditional structure of a non-executive chairman and chief executive officer to better align with the requirements of the Code.

In addition to the appointment of a new chief executive officer, two of the key areas of focus for the directors during the year have been further developing the Group's strategy and strengthening the management team to ensure that the Group is ideally positioned for the return of growth to the UK construction market. In particular, the executive committee has been strengthened with the appointment of Ian Cochrane as chief operating officer in June 2013, Mark Sanderson as Group legal director and Company secretary in September 2013, and following the year-end, Lee Mills as Group SHE director.

Following the year-end, Toby Hayward and Keith Elliott resigned as non-executive directors with effect from 18 July 2014. Alun Griffiths joined the board as a non-executive director with effect from 1 May 2014 and Kevin Whiteman and Tony Osbaldiston will join the board on 19 July 2014 with Kevin assuming the responsibilities of senior independent non-executive director, Alun becoming the chairman of the remuneration committee and Tony becoming the chairman of the audit committee. In combination, they bring to the board a wealth of experience and their appointments provide a firm foundation for continued oversight and scrutiny of the Group's activities.

Keith served as a director for 15 years, including as chairman of the remuneration committee and senior independent non-executive director and Toby served as a director for six years including periods as chairman and as chairman of the audit committee. We thank them for their valued contribution to the Group.

Audit tender

We intend to conduct a tender of the external audit contract during the course of the coming year, with the successful firm being appointed for the year ending 31 March 2016. We consider this good governance given the length of Deloitte's existing audit tenure and taking into account recent EU guidance that requires listed companies to rotate their auditors at least every ten years. This is not a mandatory requirement under the Code given the Group's current status outside the FTSE 350. However, for the reasons highlighted above, we consider a tender process to be appropriate.


During the year the changes indicated in last year's remuneration report to the Group's performance share plan and the introduction of the deferred share bonus plan were implemented.


We recognise the importance of diversity in board effectiveness and remain committed to ensuring that appointments are ultimately made on merit and against the agreed selection criteria. Further details of our diversity considerations are set out in the board committees section.

Relationships with shareholders

We remain committed to sharing information with our shareholders. The Group actively solicits feedback from investors and feedback from shareholder meetings is reported to the board, including the non-executive directors. Further details regarding this engagement with our shareholders are set out in the board effectiveness section.

As ever, I very much look forward to meeting shareholders at the annual general meeting ('AGM') on 2 September 2014 and as always, along with all of your directors, remain available to answer or respond to your questions, concerns and suggestions at any time.

Overall I think your board is effective and working well and, whilst there remains work to do, we have effective governance throughout the Group.

John Dodds
Non-executive chairman
11 July 2014

I am committed to ensuring that we have a strong board with the correct balance of skills and mix of experience."