## SENIOR PLC ## ANNUAL REPORT ## & ACCOUNTS 2021 ## CONTENTS FINANCIAL HIGHLIGHTS (1) ### STRATEGIC REPORT Revenue Adjusted operating margin -10% +40 bps IFC Financial Highlights 1 Our purpose ## 2 Group at a Glance £658.7m 0.9% 4 Chair’s Statement 2020 – £733.6m 2020 – 0.5% 6 Group Chief Executive Officer’s Statement 12 Sustainability (2) Adjusted loss before tax Profit/(Loss) before tax 14 Environment 18 TCFD ## 24 Social £(1.9)m £23.7m 28 Governance 2020 – £(6.2)m 2020 – £(191.8)m 30 Our Business Model 32 Investment Case Adjusted earnings/(loss) Basic earnings/(loss) 34 Strategic Priorities (3) per share per share 36 Our Technology Themes 38 Our Technology & Product Development ## 40 Stakeholder Engagement 0.17p 5.82p 44 Section 172 Statement 2020 – (0.84)p 2020 – (38.20)p 46 Key Performance Indicators 48 Risks and Uncertainties (4) Return on capital employed Dividend per share 56 Divisional Review – Aerospace 58 Divisional Review – Flexonics +50 bps nil % 60 Financial Review ## 64 Viability Statement 1.0% nil p 2020 – 0.5% 2020 – nil p ### GOVERNANCE (5) (5) Free cash flow Net debt 65 Chairman’s Governance Letter £53m reduction 68 Board of Directors 72 Executive and HSE Committee ## 73 Governance and Report of the Directors £14.0m £153.1m 76 Nominations Committee Report 2020 – £46.5m 2020 – £205.9m 80 Audit Committee Report 87 Remuneration Report: Annual Statement 90 2021 Remuneration Report at a Glance 92 Remuneration Report: Policy 98 Annual Report on Remuneration ## 108 Statement of Directors’ Responsibility NON FINANCIAL HIGHLIGHTS 109 Independent Auditor’s Report to the Members of Senior plc CDP Total Carbon Dioxide Emissions ### FINANCIAL STATEMENTS (climate disclosure project) (tonnes CO 2 equivalent emitted) 116 Consolidated Income Statement 117 Consolidated Statement of Comprehensive Income ## A- 46,540 tonnes 118 Consolidated Balance Sheet 119 Consolidated Statement of Changes in Equity Leadership rating 2020 – 46,747 tonnes 120 Consolidated Cash Flow Statement “Implementing best practices” (Scope 1, Scope 2 -market based and Scope 3) 121 Notes to the Consolidated Financial Statements 156 Company Balance Sheet Lost time injury rate Waste recylced 157 Company Statement of Changes in Equity (per 100 employees) 158 Notes to the Company Financial Statements 163 Five-year Summary ## 0.32 incidents 93% 2020 – 0.32 incidents 2020 – 93% ### ADDITIONAL INFORMATION 164 Group Undertakings Women in leadership Executive Committee 166 Additional Shareholder Information Board of Directors 167 Officers and Advisers | 50% | 38% | | --- | --- | | 2020 – 43% | 2020 – 38% | | Engagement survey | Ethics | | (percentage of employees | (percentage of employees who completed | | completing the survey) | Annual Code of Conduct Training) | | 81% | 94% | | 2020 – 64% (Global Covid employee survey) | 2020 – 94% | ## Our purpose is to provide ## safe and innovative ## products for demanding ## thermal management ## and fluid conveyance ## applications | Read more | Read more | | Read more | | Read more | Read more | Read more | | --- | --- | --- | --- | --- | --- | --- | --- | | about the | about our | | about our | | about our | about how we | about how we | | progress we | people and | investment case | | strategic priorities | | are performing | are performing | | are making on | culture on | | Page 32 | | Page 34 | in Aerospace | in Flexonics | | our purpose on | Pages 12, 24, | | | | | Page 56 | Page 58 | | Pages 4, 12, | 31, 35 & 41 | | | | | | | 34, 36 & 38 Adjusted operating profit and adjusted loss before tax are stated before £nil amortisation (3) A reconciliation of adjusted earnings/loss per share to basic earnings/loss per of intangible assets from acquisitions (2020 – £7.7m), £4.4m net restructuring income shareisshown in Note 12. (2020 – £39.0m net restructuring cost) and £nil goodwill impairment and write-o (4) See page 47 for the derivation of return on capital employed. (2020 – £134.3m). Adjusted loss before tax is stated before income associated with (5) See Notes 47 and 32c for the derivation of free cash flow and of net debt corporate undertakings of £21.2m (2020 – £4.6m cost). Adjusted earnings/loss per share respectively. is stated before exceptional non-cash tax credit of £0.6m (2020 – £nil). The US Dollar exchange rate applied in the translation of revenue, profit and cash EBITDA is defined as adjusted loss before tax, and before interest, depreciation, flowitems at average rates for 2021 was $1.38 (2020 – $1.29). The US Dollar amortisation, and profit or loss on sale of property, plant and equipment. It also excludes exchangerate applied to the balance sheet at 31 December 2021 was $1.35 EBITDA from disposed businesses and is based on frozen GAAP (pre-IFRS 16). (31December 2020 – $1.37). This measure is used for the purpose of assessing covenant compliance and is reported to the Group Executive Committee. Cautionary statement The Annual Report & Accounts 2021 contains certain forward-looking statements. (1) Adjusted operating margin is the ratio of adjusted operating profit to revenue. Suchstatements are made by the Directors in good faith based on the information Areconciliation of adjusted operating profit to operating profit/loss is shown in Note 9. available to them at the date of this Report and they should be treated with caution (2) A reconciliation of adjusted loss before tax to profit/loss before tax is shown in dueto the inherent uncertainties underlying any such forward-looking statements. Note9. 1SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 STRATEGIC REPORT ## GROUP AT A GLANCE ## Our vision is to be a trusted and collaborative high value-added ## engineering and manufacturing company delivering sustainable ## growth in operating profit, cash flow and shareholder value. ## Our purpose is to provide safe and innovative products for ## demanding thermal management and fluid conveyance applications. The Group aims to create long-term sustainable growth in shareholder value through a culture that empowers operations to work autonomously and collaboratively within an eective control framework. ### OUR BUSINESS DIVISIONS | Aerospace | | | Flexonics | | | | --- | --- | --- | --- | --- | --- | | Providing high technology products and | | | Providing high technology products | | | | systems for demanding applications in civil | 66% | | andsystems for demanding applications | 34% | | | aerospace & defence and adjacent markets. | | (1) | inlandvehicle, power & energy and | | (1) | | | (2020 – 70 | %) | | (2020 – 30 | %) | adjacent markets. The Aerospace portfolio spans a wide | | Civil Aircraft 37% | | Land vehicles 18% | | --- | --- | --- | --- | | range of fluid conveyance and thermal | Military/defence | The Flexonics portfolio spans a wide | Power and energy 16% | | management components and sub- | aerospace 18% | rangeof fluid conveyance and thermal | | Other aerospace systems, as well as complex structural management components & sub-systems, division 11% parts and assemblies, for fixed-wing and as well as complex precision machined rotary aircraft, aero-engines, spacecraft parts, for conventional and advanced land and a variety of other industrial applications. vehicle propulsion systems, petrochemical, renewable energy and a variety of other Read more about Aerospace on page 56 industrial applications. Read more about Flexonics on page 58 (1) This number excludes Senior Aerospace Connecticut Fluid conveyance systems Gas turbine engines Land vehicle emission Industrial process control Design and manufacture: • Precision-machined and control Design and manufacture: fabricated engine components • Exhaust gas recycling coolers • high-pressure and low-pressure • Engineered expansion joints, (rotating and structural) • Fuel mixing and distribution ducting systems dampers and diverters • Fluid systems ducting and systems (metal and composite) • Flexible hose assemblies and control products • Flexible couplings • control bellows, control bellows sensors and assemblies Read more on pages 36 to 39 • Fuel cells and heat exchangers • Precision-machined components Structures • Precision-machined airframe Read more on pages 36 to 39 components and assemblies 2 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 ### OUR PEOPLE WORLDWIDE North America UK and Europe ## Our Values set out the ## 43% 34% ## principles and standards ## Asia Rest of the world ofbehaviour that drive ## ourculture.” David Squires ## 20% 3% Group Chief Executive Ocer Read more about our people and culture on page 24 Worldwide operating businesses ## 26 Countries ## 12 3SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 STRATEGIC REPORT ## CHAIR’S STATEMENT ## Resilient in a challenging year • we held a Capital Markets Day (“CMD”) The Company’s strategy continues to provide ### STAKEHOLDER ENGAGEMENTS presented by key business and technical asolid foundation to support our future growth The long-term success of the Group is leadership from across the Group to aspirations. When looking forward across the enabled by mature and progressive showcase our strategies and capabilities. portfolio, our businesses manufacture highly engagement with all of our stakeholders. It was rewarding to see the support and engineered products and systems with Akey priority for the Group is ensuring engagement fromour shareholders at applications aligned to the low carbon economy. thattheir viewpoints are fully considered the session; These are pivotal technologies for emissions when assessing the impact of our • our sector-leading sustainability credentials reduction and environmental eciency. decisions and strategies. and actions of the Group have always been We have identified significant current and strong and Executive driven. Progress and future opportunities for the Group in fluid Pages 40 to 43 explains more on this drive have been sustained by the Executive conveyance, thermal management and structural throughout thisperiod; and components. These capabilities continue to be highly relevant as the world transitions towards ### SUSTAINABILITY PROGRAMME • how we execute our business and the a low carbon economy. Our products and nature of our business strategies are A commitment to sustainability underpins capabilities are relevant today and for the interlinked and synergistic. our purpose, and is a key objective of the longer term. Executive and the Board. Our programme The Board has a very strong understanding of The Board has and will continue to evaluate is well defined and being delivered. the business model and its intrinsic cash flows. andreview the portfolio within the Group. The Our progress is measured by metrics, In the first half of 2021, Senior encountered Defence document issued on 22 June 2021 targets and an annual scorecard. corporate action in the form of a conditional continues to best express the Boards position. proposal from LSF XI Investments, LLC, Read more on pages 12 to 29 on the scorecard acompany advised by Lone Star Global Our performance and progress achieved to date. | | Acquisitions, Ltd. The Board, fully aware of | In 2021, the Board and the Executive team | | --- | --- | --- | | | its fiduciary responsibilities, and together with | continued to be flexible and adaptive to the | | | its advisers, assessed the fundamental value | dynamics the Company was facing. As in 2020, | | 2021 has been a challenging year, | of theCompany in relation to the proposals. | they illustrated that they could function well | | given the external global environment | Havingcarefully considered the oers, the | during the challenging times of the pandemic. | | we have had to address | Board unanimously rejected them on the basis | | The decisive actions taken to manage costs There are a number of aspects of the year they fundamentally undervalued Senior and hasdelivered savings of £50m realised in 2021. Iwould like to draw out: its futureprospects. These actions have meant that we are now an | • the performance and behaviours of the | The Board was able to make a unanimous | even leaner and more ecient business and | | --- | --- | --- | | teamhas been exemplary during this | decision as we are confident that we have | we expect to see healthy near-term operating | | unprecedented challenging period. Our | astrategy that will maximise value for | leverage across the Group’s operating business | | people and their personal safety have been | shareholders and deliver its target return on | as sales recover. | | paramount in all we do; | capital employed of a minimum of 13.5% | | The Group generated a free cash inflow of (postIFRS 16) over the medium term. • the restructuring, announced in 2019, £14.0m. The Group balance sheet remains has been completed and was thoughtful, robust, with adequate headroom to our Continued recovery in the Group’s end markets, comprehensive and incisive. No stone was committed facilities. We have well-structured combined with our strong operating leverage left unturned but we were careful to preserve financing arrangements in place and supportive and augmented by the benefits from the organisational capability for the recovery lenders, who agreed appropriate covenant restructuring programme, are foundations of to come. We can already see the benefits relaxations to December 2021, though our ourconfidence about our prospects. Our end of the action on the flow through margins strong cash performance in 2021 meant that markets positions, capabilities, technologies and of the business as volumes increase; wedid not need to utilise those facilities. trusted relationships forged with our customers • we tested our end markets and strategies enable us to help them meet today’s challenges While Group performance in 2021 has improved forthe group against reasonable assumptions. and deliver solutions for future low carbon compared to 2020, it was still impacted by the We determined that our capabilities, market requirements. The balance sheet remains robust pandemic, and as such, the Board believes it is positions and technology are applicable and was further strengthened by the divestiture not appropriate to pay a final dividend for the tothenet zero world we are increasingly of Senior Aerospace Connecticut. We remain a year. The Board are optimistic that the recovery operating within; well-capitalised Group, with intrinsically strong currently underway in our core markets will cash flows and businesses that have capacity continue and therefore we currently expect to tobenefit from end market recoveries. resume dividend payments in 2022. We will continue to follow a progressive dividend policy reflecting earnings per share, free cash flow generation, market conditions and dividend cover over the medium term. 4 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 ## The long-term success of the Group is enabled by mature ## and progressive engagement with all of our stakeholders.” Ian King Chair | There are short- and long-term incentive | Amongst other sustainability successes, | The Corporate Governance Report (pages 65 | | --- | --- | --- | | schemes that ensure the team at all levels | in 2021, we maintained our CDP leadership | to108) examines how the Board sets the tone | | oftheGroup are focused on delivery of the | rating of A- for our climate disclosure, which | from the top of the organisation. We continue | | strategy for the benefit of our stakeholders. | is defined by CDP as “implementing current | toensure the health, well-being and safety | | Short-term incentive schemes deliver the | best practices” and at the same time Senior is | of our employees is a priority and that our | | foundation for longer-term recovery. It is | described by CDP as “a trailblazer driving the | operations conduct themselves with integrity | | fundamentally important, given the | transition towards a sustainable net-zero future”. | and in an ethical, sustainable and socially | | decentralised structure ofthe Group, that | | responsible manner. The Group is focused on | Our Board | we have an integrated and consistent set of | | aset of non-financial metrics which range from | | --- | --- | --- | | targets applying to all members of the schemes. | We have a cohesive, diverse and high | diversity, to greenhouse gas emissions, to water | | Our incentive targets are stretching, and the | performing Board. Last year’s Board | consumed and how much waste is recycled | | longer term targets reflect the Board’s view | Eectiveness review, given Celia Baxter’s | inthe businesses. The Sustainability Report | | of the medium-term prospects for the Group. | and Giles Kerr’s tenure, highlighted the need | onpages 12 to 29 looks at how Senior has | | | to properly handle transition to maintain the | achievedsignificant improvement against | | Our purpose | Board’s quality and standards. The Board felt, | | our non-financial targets in 2021. | Our purpose is to provide safe and innovative | recognising this, we should advance succession | | | --- | --- | --- | | products for demanding fluid conveyance | planning and make sure there was more than | Looking forward | | and thermal management applications. | enough time to integrate the new Board. I am | Despite the ongoing challenges in 2021 and | | Our commitment to sustainability is rooted in | delighted to say we are on plan with Mary and | notwithstanding near-term uncertainties in the | | our core Values: it is highly complementary | Barbara, having joined the Board, and both | global economy, Senior is well placed to benefit | | to, and underpins, our purpose. As an | nowembracing their personal integration plans | from the recovery underway in our end markets. | | international, high value-added engineering and | in 2022. Celia and Giles remain fully committed | The Group also has multiple opportunities to | | manufacturing company, the Board recognises | as highly valued members of the Board. | leverage its capabilities and technology as the | | the importance of adopting a market-leading | We willrecognise their contributions at the | world transitions to a low carbon economy | | sustainability programme. We firmly believe | appropriate time. | | On behalf of the Board, I would like to thank all that our leadership in this area provides a The Board has completed a comprehensive of our people for their substantial contribution distinct commercial competitive advantage as Board evaluation during 2021. The main toSenior over the last year. I would also like to the worldtransitions to a low carbon economy. recommendation centred around Board extend this to all of our stakeholders for their Sustainability is an integral part of our strategy, succession, ensuring strategy form part of every continued support. embedded within the behaviours of our people Board meeting agenda and that Directors have and the culture of our organisation. As we enter 2022, we will continue to focus good access to the Executive teams. Actions ondelivering our strategy. We remain well We provide products that operate in hard-to- are well underway to focus on these areas. To positioned to deliver improved returns for decarbonise sectors – such as aerospace, find more detail on these improvements, please our shareholders over the medium term. transport and power. As an engineering refer to page 77 in the Governance section. company with a strong heritage in relevant Thank you all for your support. The Board and I continue to focus on our domains created over almost 90 years, responsibility to all of Senior’s stakeholder innovation is in our DNA. We apply our Ian King groups – our employees, customers, suppliers, expertiseand technology across many Chair communities and shareholders. We believe dierent applications, working in close that engaging with our stakeholders is key to partnership withour customers, to develop the long-term success of the Group. Over the solutions thatsupportboth their commercial course of the year, in light of the corporate and sustainability objectives. activity, our communication and engagement It is this relevant engineering expertise that with shareholders increased. This year we hasgiven us an important role in helping invited all employees to participate in our to tackle the climate change and clean air global employee engagement survey. We had challenge, as the world transitions to a lower excellent participation and engagement, and carbon economy. feedback was very positive, valuable, and constructive. Celia Baxter, together with our In 2020 we became the first, and remain the Director of HR, Jane Johnston, participated in only, company in our sector to have its scope 1, employee engagement focused groups with our 2 and 3 greenhouse emissions reduction targets UK operating businesses. This engagement has approved and verified by the Science Based given the Board valuable insight and feedback Target Initiative (“SBTi”). which will help it implement specific continuous improvement plans across the business. Our intention is to run this global survey every 18months. 5SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 STRATEGIC REPORT ## GROUP CHIEF EXECUTIVE ## OFFICER’S STATEMENT ## It is heartening to see recovery ## underway in our core markets including ## civil aerospace and we anticipate ## that continuing in 2022 and beyond.” David Squires Group Chief Executive Ocer Overview of 2021 results In Flexonics, revenue grew 10% compared ## HIGHLIGHTS | | In 2021, Senior maintained a strong focus on | toprior year, on a constant currency basis. | | --- | --- | --- | | | operational performance and delivered improved | Theperformance in 2021 benefited from the | | Revenue | profitability, robust free cash flow generation | recovery in heavy-duty truck and o-highway | | | and further strengthened the balance sheet. | and passenger vehicle markets, partially oset | | | This was despite the continued impact of the | by a decline in oil & gas and the closure of the | | | coronavirus (COVID-19) pandemic on our | Senior Flexonics business in Malaysia. | | £658.7m | markets and customers. | | We measure Group performance on an | (2020 – £733.6m) | With markets starting to recover, we saw order | adjusted basis, which excludes items that do | | --- | --- | --- | | | intake increasing with a healthy book to bill ratio | not directly reflect the underlying in-year trading | | | of 1.16 for the Group, which underpins our | performance (see Note 9). References below | | Adjusted loss before tax | confidence in a return to growth in 2022, 2023 | therefore focus on these adjusted measures. | and beyond. We announced notable contract The decisive actions taken by the Group on extensions and new contract wins including managing costs in 2021 have delivered new orders with Boeing and Honda which significant benefits and improved profitability. ## £(1.9)m help to demonstrate Senior’s reputation as a This has helped us to generate an adjusted reliable and innovative supplier to our blue-chip (2020 – £(6.2)m) operating profit of £6.1m (2020 – £3.7m), customer base: attributes which are highly despite the reduction in Group revenue. valued during the uncertain times through which Savings of £50m were realised in 2021. The we and our customers have been navigating. Adjusted earnings/(loss) per share Group’s adjusted operating margin increased In our Post-close Trading Update on 14 January by 40 basis points, to 0.9% for the year. 2022, we reported that, for the full year, both Adjusted loss before tax reduced to £1.9m Group revenue and adjusted loss before tax (2020 – £6.2m loss). The adjusted tax credit was ## 0.17p were in line with management’s expectations. £2.6m (2020 – £2.7m). Adjusted earnings per Group revenue was 6% lower than the prior (2020 – (0.84)p) share increased to 0.17 pence (2020 – adjusted year on a constant currency basis, part of loss per share of 0.84 pence). which was pre-COVID-19 and included Senior Aerospace Connecticut (which was divested Reported profit before tax was £23.7m on 22 April 2021) for the full year. (2020 – £191.8m loss). Basic earnings per share was 5.82 pence (2020 – basic loss per share In Aerospace, revenue declined 12% year-on- of 38.20pence). year on a constant currency basis, reflecting that part of 2020 was pre-COVID and 2020 included Maintaining a strong focus on cash generation a full year contribution from Senior Aerospace throughout 2021, the Group delivered free cash Connecticut. Excluding Senior Aerospace flow of £14.0m (2020 – £46.5m). Our diligent Connecticut, revenue for the full year on an management of working capital and capital organic, constant currency basis declined by expenditure have benefited this year’s free cash 7%. The year-on-year decline reflected the flow and net debt position. Gross investment in reduction in civil aircraft production rates, capital expenditure was £21.3m (2020 – partly oset by growth from semi-conductor £26.8m) and the Group incurred £2.6m cash equipment, defence and space markets. outflows (2020 – £32.3m inflows) from working capital. Reflecting the actions taken, the Group generated net cash flow of £57.7m (2020 – £23.2m) in the year, due to free cash flow of £14.0m (2020 – £46.5m) and £43.7m cash inflows (2020 – £23.3m outflows) primarily related to corporate undertakings and (1) Adjusted loss before tax is before amortisation of restructuring activity. intangible assets from acquisitions, goodwill impairment and write-o, net restructuring income/ costs and corporate undertakings. 6 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 | The Group’s financial position remains resilient, | Delivery of Group Strategy | We have already developed novel solutions | | --- | --- | --- | | with £208.0m of headroom on our committed | Senior has a focused and compelling strategy | forlow and zero carbon applications and are | | borrowing facilities at 31 December 2021. | tomaximise value for shareholders, and is | involved in a range of research and development | | Netdebt at the end of December 2021 | confident of delivering its target return on | projects that support the drive for electrification | | was £153.1m (including capitalised leases | capitalemployed of a minimum of 13.5% | and hydrogen propulsion systems on land and | | of £73.2m), a reduction of £52.8m from | (postIFRS 16) over the medium term through | inthe air. This is discussed further in the | | December2020, after taking into account | the following: | “Technology and product design and | | favourable currency movements of £0.7m | | development” section below. | • a strategic focus on intellectual property and£5.6m increase for lease movements. (“IP”) rich fluid conveyance and thermal As well as our businesses being actively Considered and eective capital deployment is management; focused on product oerings for the transition astrategic priority for the Group and, in line with toa low carbon world we continue to be actively • organically growing our Aerostructures our strategy to review the overall portfolio of our involved in making conventional technology business fully utilising our world class businesses and evaluate their strategic fit within cleaner to bridge the gap between both worlds. globalfootprint; the Group, on 22 April 2021 we completed the In addition, Senior’s end-markets are evolving • maintaining strong focus on eciencies divestiture of our Senior Aerospace Connecticut, toreflect the global eort to achieve net zero through our Senior Operating System USA, operating business. The net proceeds for carbon emissions. Senior’s technology and as endmarkets continue to recover; this divestiture were £49.7m. As previously product roadmap is aligned to these trends • executing on its portfolio optimisation announced, in 2021, we closed our small oil witha product development strategy that is strategy to maximise value creation; and &gas operating business in Malaysia, Senior compatible with our focus on sustainability. • driving intrinsic strong cash generation. Flexonics Upeca, and also our Senior Aerospace In addition to our fluid conveyance and thermal Bosman operating business in the Netherlands Senior has maintained its focus on IP-rich management capabilities, we also have excellent following the seamless transfer of production technology and manufacturing, by developing build-to-print precision machining and structural from Rotterdam to our French Aerospace sites. expertise in fluid conveyance and thermal assembly capabilities. These businesses focus management technology and capabilities. While Group performance in 2021 has improved on a wide range of both complex airframe and These capabilities are supported by a strong compared to 2020, it was still impacted by the aeroengine applications. Examples include body of design and manufacturing process pandemic, and as such, the Board believes it is compressor fan blades for multiple engine types, intellectual property and know-how. Using these not appropriate to pay a final dividend for the wing ribs for narrow-body aircraft, complex technologies and capabilities, Senior is able 2021 financial year. We are optimistic that the structures assemblies for wing and fuselage, to develop and supply proprietary products, recovery currently underway in our core markets highly engineered engine casings and complex sub-systems and systems for our customers’ will continue and therefore, we currently expect machined products for satellites. Our Structures demanding applications across a range of to resume dividend payments in 2022. We will businesses are well capitalised with state-of-the- diverse and attractive end markets. continue to follow a progressive dividend policy art equipment and operate across North reflecting earnings per share, free cash flow America, the UK and South-East Asia. Across the portfolio, our businesses generation, market conditions and dividend manufacture highly engineered products and Our strategy for our Structures businesses cover over the medium term. systems with applications that incorporate aswe emerge from the pandemic is to focus pivotal technologies for emissions reduction anddrive: andenvironmental eciency. We have identified significant current and future opportunities • filling our existing capacity; forthe Group in fluid conveyance and thermal • pursuing some further diversification management applications and these capabilities intoSpace and Defence; and continue to be highly relevant as the world • growing market share profitably transitions towards a low carbon economy. inCivilAerospace. We remain confident that our Aerostructures core market will recover, driving performance improvement and providing the Group with strategic optionality. 7SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 STRATEGIC REPORT ## GROUP CHIEF EXECUTIVE ## OFFICER’S STATEMENT ## CONTINUED Technology and product design and Power & Energy development • We continue to develop an established wide We continue to invest in new technology range of fluid conveyance products, bellows and product development in the areas of and expansion joints for harsh environments ## We continued to make good fluid conveyance, thermal management and in carbon-free energy generation, including Additive Manufacturing in support of our key solar farms, wind power plants, hydroelectric, ## progress on our markets in Aerospace, Land Vehicles and geothermal, fuel cell and nuclear power Power & Energy, as they transition towards applications. ## sustainability goals, a low carbon economy. • Our extensive experience of providing ## fluid conveyance products for demanding maintaining our sector Aerospace environments, and, specifically, hydrogen • Our traditional fluid conveyance products are ## fuel cell cooling and conveyance, opens up leading position.” entirely compatible with sustainable aviation opportunities in hydrogen production and fuels, the increasing use of which will be the infrastructure applications. David Squires fastest route to lowering aviation emissions. Group Chief Executive Ocer • Our Additive Manufacturing capabilities Portfolio optimisation are enabling advances in complex product The Group actively reviews its overall portfolio design for improved performance and weight of operating businesses and evaluates them reduction for the benefit of our customers. in terms of their strategic fit within the Group. Restructuring • Our world-class capability in thermal Senior has continued its “Prune to Grow” The decisive actions the Group took on management and fluid conveyance provides strategy of portfolio optimisation by divesting, restructuring and cost management since 2019 opportunities to support the development closing, or combining non-core or performance- have delivered the expected benefits, with ofelectric/hybrid air vehicle applications. challenged assets. Most recently in 2021 we: savings of £50m realised in 2021. In 2021, net • We are leveraging and building upon our restructuring income of £4.4m was recognised • successfully raised £49.7m from the strategic long experience of providing hydrogen as our operating businesses maximised divestment of the Senior Aerospace fluid handling and distribution products for opportunities to realise income from assets Connecticut helicopter structures business; industrial markets to support development that had no alternative use. • realised value from the sale of the property ofboth on-aircraft and o-aircraft hydrogen Since its inception in 2019: following the closure of our oil and gas technologies as this alternative propulsion machining Senior Flexonics Malaysia facility, • the cumulative cost of the programme has system evolves. which oset some of the closure costs; and been £46.7m, (£6m lower than initially expected); | Land Vehicles | • completed the transfer of production from | | | --- | --- | --- | | • Our current exhaust gas recirculation and | the Netherlands to France and closed the | • cumulative cash outflow has been £19.0m, | | waste heat recovery products continue to | Senior Aerospace Bosman facility. | (£10m lower than expected); and | | support evolving Land Vehicle propulsion | | • savings delivered of £4m in 2019, £36m | Senior understands the importance of systems as they become more ecient in 2020 and £50m in 2021 (a year earlier considered and eective capital deployment andlower their environmental impact. than initially expected). to maximise shareholder value creation. • We focus on product oerings for the These decisive actions, taken to insulate the Expanding Senior’s high quality fluid conveyance transition to a low carbon economy and Group through the pandemic in 2020 and 2021 and thermal management businesses remains engage with our customers’ new product mean that we are now an even leaner and more an ongoing priority. Investments are supported development programmes by providing ecient business. by a business case and are assessed using design and engineering support for cooling a rigorous investment appraisal process. and fluid handling solutions for batteries and electronics on the growing number of electric/ hybrid vehicles. • We are supporting the development of commercial vehicle hydrogen fuel cell cooling and conveyance by capitalising on our experience of producing hydrogen fuel cell products in the energy sector. 8 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 ### SUSTAINABILITY | Senior is a values driven organisation: we | – Maintained our CDP leadership rating of | | – Donated £200,000 to UNICEF to support | | | --- | --- | --- | --- | --- | | believe with conviction that how you do | | A- for our climate disclosure, which is | | its Covid-19 Vaccines appeal. Our donation | | business is every bit as important as what | | defined by CDP as “implementing current | | was the equivalent of providing | | you do. We always put safety and ethics | | best practices”. | | vaccinations for every Senior employee | | first and we strongly encourage and | – Achieved the highest CDP leadership | | | and their families. | | promote diversity and inclusivity across our | | rating for the work with our supply chain. | | | • Governance international operations. For many years, Recently, Sonya Bhonsle, Global Head of – Updated the Group’s Code of Conduct therefore, we have had a strong focus on Value Chains & Regional Director with a booklet issued to all employees Environmental, Socialand Governance Corporations, CDP stated, “As a Supplier and provided training on it. (“ESG”). As sustainability themes and issues Engagement Leader, Senior plc is a – Information security was a key area of become ever more important to our trailblazer driving the transition towards focus to safeguard the Group’s assets, stakeholder groups, our strong track record asustainable net-zero future”. particularly as during the pandemic many means that we are well positioned to meet – Reduced our SBTi Scope 1 and 2 (market ofthe Group’s employees worked from and exceed their ESG expectations. based) carbon emissions by 18.9% home. During the year, all sta received compared to our 2018 base year. | Our industry leading ESG disclosures and | | | training and regular reminders about the | | --- | --- | --- | --- | | ratings are evidence of Senior’s longstanding | – 36% of our electricity was sourced from | | risks related to information security and the | | approach to sustainability. | | renewable energy, an increase from 25% | importance of awareness of matters such | | | | in 2020. | as fraud, scammers and ransomware, | In 2021, we have again made good progress – Recycled 93% of waste produced. proper use of the internet and smart with our key sustainability metrics downloading. andactivities: • Social – Training on Anti-Money Laundering and – Achieved an 81% response rate on our • Environment the Corporate Criminal Oence Act was global employee engagement survey in – In 2020, Senior became the first, also rolled out to all relevant sta. May 2021. This response rate exceeded andremains the only, company in the the benchmark for manufacturing GlobalAerospace and Defence sector companies. tohave its Scope 1, 2 and 3 greenhouse – Reduced the number of lost time injuries gas emissions targets approved and from 21 in 2020 to 18 in 2021. We remain verified through the Science-Based on track to meet our 2025 reduction target. Targets Initiative (“SBTi”) and in 2021, – The percentage of women on the Board these are now verified “Near Term increased to 50% in 2021 from 43% Net-Zero Targets” in line with the in2020. updatedclassificationsystem. 9SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 STRATEGIC REPORT ## GROUP CHIEF EXECUTIVE ## OFFICER’S STATEMENT ## CONTINUED Senior is well placed with good content on European (including the UK) passenger vehicle ### MARKET OVERVIEW mature programmes such as the C-130 production decreased by 6% in 2021 and is (2) | Civil Aerospace (37% | of Group) | | | | --- | --- | --- | --- | | | | transport aircraft, the F-35 Joint Strike Fighter | forecasted to grow by 20% in 2022. | | Production volumes for civil aerospace are | | aswell as new programmes such as the | | | expected to be higher in 2022 than 2021, driven | | | According to the International Energy Agency | USAFT-7A Red Hawk trainer. | by increasing single aisle rates. | | | (“IEA”), in 2021, electric car sales more than | | --- | --- | --- | --- | | | | (2) | doubled to 6.6 million, representing close to 9% | | | Other Aerospace (11% | of Group) | | Global air trac recovery in 2021 showed Sales from our Aerospace operating businesses of the global car market and more than tripling ongoing progress as the COVID-19 vaccine into end markets outside of the civil aerospace their market share over two years. Furthermore, delivery gathered pace and travel restrictions and defence markets are classified under all the net growth in global car sales in 2021 eased globally: in North America, US domestic “Other Aerospace” and include sales into came from electric cars. With the increasing travel recovered strongly; in the Asia Pacific the space, semi-conductor equipment and adoption of electrification for both land vehicle region we saw the start of the re-opening of medical markets. Using our world class bellows and stationary power applications continuing, international travel in the second half of the year; technology, we manufacture highly engineered this market is fast growing and represents a transatlantic travel opened up in November proprietary products to provide unique solutions major opportunity for Senior in the medium 2021; and there were signs of corporate travel for semi-conductor manufacturing equipment. and long-term, particularly for our proprietary picking up. With travel restrictions being eased, battery cooling technology. | demand for air travel is increasing, driving the | The semi-conductor equipment market | | | --- | --- | --- | | recovery in air trac and this is expected to | continued to be strong in 2021, reflecting the | Power & Energy (16% of Group) | | improve further through 2022. | increase in global demand for microchips. | Some positive momentum is expected in power | | | Robust consumer demand pushed double-digit | & energy markets now that recovery in the | The most recent IATA forecast is that world growth-rates, as a result of pandemic-related upstream oil & gas sector is underway. passenger flows will return to 2019 levels by consumer and work-from-home trends, and was theend of 2023. IATA expects domestic trac Global oil demand is forecast to exceed further strengthened by recovering industrial to reach 2019 levels by 2022 and international pre-pandemic levels before the end of 2022 and markets such as automotive. According to trac to return to 2019 levels by 2025. to further strengthen in 2023, in the absence of the World Semiconductor Trade Statistics Asdemand recovers, production of new aircraft any further COVID-related disruption. Industry (“WSTS”), the global semi-conductor market will be supported by the replacement cycle macro fundamentals, for upstream oil and gas increased by 26% in 2021 and is forecasted driven by the retirement of older, less ecient, inparticular, are looking very favourable due to to grow by 9% in 2022. | aircraft. Beyond this, the drivers supporting air | | the combination of projected steady demand | | --- | --- | --- | | trac growth over the long term of c. 4% per | Land Vehicle (18% of Group) | recovery, an increasingly tight supply market, | | annum remain in place. | | and supportive oil prices. Nevertheless, the rise | In Flexonics, Land Vehicle markets are expected to continue to grow in 2022, as supply chain in geopolitical tensions could have a potential With our diversified product portfolio in the constraints gradually ease through the year. impact on the supply side. aerospace sector, including attractive positions across the newest generation of single aisle Global refining capacity, on the other hand, Americas Commercial Transportation (“ACT”) aircraft platforms, Senior is well positioned to fellfor the first time in 30 years in 2021, as Research reported that North American benefit from the expected medium-term newcapacity was outweighed by closures. heavy-duty truck production increased by 23% marketrecovery. Weanticipate this stabilising in 2022 in 2021. ACT Research is forecasting 2022 production to grow by 13% and envisage that althoughdependent on geopolitical and (2) Defence (18% of Group) in2023, production will increase by 21%, economicconditions. Defence markets are anticipated to remain supported by the pent-up demand from the stable in 2022. In power generation, the IEA forecasts 2021/22 period and pre-buy activity ahead the electricity demand growing by 2.7% a year Senior’s sales to the Defence sector are tightening of emission standards. IHS Markit on average in 2022-2024. It also forecasts an primarily focused on the US defence market, Inc. (“IHS”) reported that European truck and acceleration in the growth of renewable capacity which in fiscal year 2022 is likely to be in the bus production grew by 14% in 2021 and is in the next five years, accounting for almost region of $770 billion following the bipartisan forecasting that it will grow by a further 7% 95% of the increase in global power capacity USSenate support for the National Defence in2022. through 2026. Authorisation Act (NDAA) in December 2021. Passenger vehicle production in 2021, especially We are ensuring we are appropriately resourced during the second half of the year, was impacted to take advantage of the market recovery led by semi-conductor shortage. IHS reported that opportunities. (2) This number is excluding Senior Aerospace Connecticut. 10 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 ### ONGOING MARKET RECOVERY ACROSS THE Outlook Overall, we are seeing recovery underway ### GROUP WITH STRONG OPERATING LEVERAGE in our core markets, including civil aerospace, and we anticipate that continuing in 2022 World passengers flows long run outlook andbeyond. While the impact of the pandemic and industry-wide supply chain constraints are still with us, we continue to manage these diligently. The Board anticipates good (3) progress in 2022 , in line with previous expectations, as we continue the multi-year recovery back to pre-COVID levels ofperformance. Over the medium-term we remain committed to delivering a strong recovery across our two Divisions, driving the Group ROCE to a minimum of 13.5% in line with our previously stated ambition. Looking ahead, our dierentiated oering in fluid conveyance and thermal management products coupled with our global footprint US defence spending continues to grow andpositioning in attractive and diverse end markets, gives the Board confidence that Senior is well positioned to build on our strongcapabilities and to capture growth opportunities. Our continued investment inlow carbon technology and advanced manufacturing combined with our commitment to the highest sustainability standards provide additional foundations forcontinued success. David Squires Group Chief Executive Ocer World vehicles production forecast World Energy Demand 800 40 6 July 2021 forecast CAGR 2025-30: 4.8% 600 November 2021 forecast 30 105 5 100 | | 400 | | 20 | 2 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | 95 | Obama presidency Trump presidency | | | | 2% | | | | 800 | | | | | 2024: 105% of 2019 level | | | El | 4 | | | | | 2023: 98% of 2019 level | | | | 90 | | | | 4% | | | | | 700 | | | Gt CO | | | | | | 200 85 | | 10 | | | | FY22 likely outcome: | | | 600 | | | | | 2022: 82% of 2019 level | | | | 80 3 | | | | | | c. USD 740-750 bn | 500 | | 75 0 | | | | | 0 | | | --- | --- | --- | --- | --- | --- | --- | --- | | | 400 | | | | | | Trump FY22 plan: | | Million units | 70 | 20202010 | 2030 | 2040 | 2050 | | USD 722 bn | 2 | 300 | | | | | 2021: 45% of 2019 level | | | --- | --- | --- | --- | --- | --- | --- | | CO 65 2 emissions (right axis) | | | | Renewables | | | | 200 | | | | | Biden FY22 request: | | | Global O-D passengers, billions Traditional use of biomass 60 | | | | Nuclear Natural gas | USD 715 bn | | | 1 | | | | | | (3) Currently assuming exchange rate for the US Dollar | | 100 | 20162015 | 2017 | 2018 | 2019 2020 2021 2022 2023 2024 | | | Oil Coal | | Nominal DoD budget, USD bn | | | | | | | | | | | to Pound Sterling of $1.34: £1 average for 2022. | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | SOURCE: IEA, “World Energy Outlook”, Oct 2021 – Describes | 0 | Light Vehicles | | | | | | | | | | | | the Announced Pledges Scenario, which assumes that all climate | 0 | 2010 2011 Medium/Heavy Commercial Vehicles | 2014 | 2015 2016 | 2017 | 2018 2019 | 2020 | 2021 2022 2024 | 20232012 2013 | 2025 | 2026 | | 11SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 commitments made by governments around the world, including 2018 2030 20282026202420222020 SOURCE: US Department of Defence, FY22 Budget Request, FY21 Green Book, Actual Nationally Determined Contributions and longer term net zero SOURCE: Data sourced from IHS Markit, Feb 2022. Biden April 2021 budget request, Federal Government Budget, Roland Berger. SOURCE: IATA, “Air Passenger Forecasts: Air passenger recovery to begin in earnest in 2022”, November 2021 (right). Extrapolation based on Biden FY22 request targets, will be met in full and on time. STRATEGIC REPORT ## SUSTAINABILITY Read more on Environment page 14 Read more on Social page 24 Read more on Governance page 28 ### ADVANCED TECHNOLOGY ## A COMMITMENT to sustainability is rooted ### COLLABORATION FORUM ## in our core Values: it is highly complementary Senior’s Advanced Technology Collaboration ## to, and underpins, our purpose. we believe Forum underpins the identification and delivery of technologies that will support our ## with conviction that how you do business Customers’ and Senior’s needs as we adapt our existing capability to deliver sustainable ## isevery bit as important as what you do. growth as clean energy solutions are increasingly adopted. Thepurpose of the Sustainability is an integral part of our strategy, embedded Forum is to identify investment opportunities within the behaviours of our people and the culture of our in new technologies, and to support the organisation. We invest in our employees to help them development of our Technology Roadmaps succeed and they are empowered within a well-defined through the delivery of targeted R&D projects aligned to our purpose to provide safe and governance framework. innovative products for demanding fluid conveyance and thermal management For many years, therefore, we have had a strong focus applications. Key themes include: onEnvironmental, Social and Governance (“ESG”). • Developing products and capabilities for Assustainability themes and issues become ever more Hydrogen applications in fuel cells, important to our stakeholder groups, our strong track record infrastructure (electrolysers), propulsion means that we are well positioned to meet and exceed their andland/sea transportation. ESG expectations. Our industry leading ESG disclosures and • Developing and implementing products ratings are evidence of Senior’s longstanding approach andcapabilities for electric propulsion tosustainability. applications in land vehicles, Urban Air Mobility (“UAM”) and civil aerospace. Our products operate in various hard-to-decarbonise sectors – • Development of new thermal management aerospace, transport and power. As an engineering company product lines for aerospace applications, witha strong heritage in relevant domains created over almost building on current automotive and 90years, innovation is in our DNA. We apply our expertise and o-highway product expertise. technology across many dierent applications, working in close • Expanding the use of Additive partnership with our customers, to develop solutions that support Manufacturing as an enabling capability both their commercial and sustainability objectives. across all product groups. Our engineering expertise has given us an important role in helping to tackle the climate change and clean air challenge, ### asthe world transitions toa lower carbon economy. WE HAVE AN INCLUSIVE CULTURE ### WITH CONTINUED INVESTMENT IN Learn more here ### OUR EMPLOYEES Attracting, developing and retaining the right people is fundamental to our long-term success. Personal and professional development of people throughout our business is a key part of ensuring we have talented, committed people with the right skills and experience. 12 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 Local management is empowered within intellectual propertydevelopments from the ### BATTERY THERMAL awell-defined governance framework that transportation sector are being applied to ### MANAGEMENT emphasises safety, high ethical standards and stationary and industrial power generation our Values, to embrace an entrepreneurial spirit applications which are playing a key part in One of the best examples of Senior’s and foster an innovative and collaborative overall decarbonisation of the economy. contributions to decarbonisation eorts approach withall our stakeholders. comes from a long-standing partnership with We adopt new, more sustainable an established industrial engine and power production methods and materials ### DELIVERING SUSTAINABLE solutions company. Building on a decades wherever possible. For example, embracing ### SOLUTIONS long business relationship; Senior designs Additive Manufacturing allows us to develop complex products quickly, with reduced waste and manufactures many key emissions Our success is built on developing long-term and often at a reduced weight when compared system components for their diesel engine partnerships with our customers, which enable | us to help them meet today’s challenges and | to traditional manufacturing methods. Even | product lines in the areas of thermal | | --- | --- | --- | | deliver solutions for future low carbon | when Additive Manufacturing is not suitable, we | management and fluid conveyance. | | requirements. As the world transitions, Senior | have a continual focus on improving production | Intellectual Property (IP) and experience | | ishelping its customers to develop ecient and | eciency, including reducing waste and the | developed for these product lines have now | | eective products that are more sustainable, | consumption of electricity and water during | been directly leveraged to develop and | | with lower environmental impact. | themanufacturing of the products. With | produce new product technologies forazero | | | operations in 12countries, we are also able to | emissions future. Most notably, Senior | We think ahead, looking at challenges be geographically close to major customers recently began volume production ofan holistically when developing solutions which can contribute to minimising the carbon advanced battery cooling module for forcustomers. The best example ofthis is footprint of our products. application in fully electric trucks and buses. ourwork to enable customer technologies on existing internal combustion technologies while simultaneously helping these same customers bring to market ecient and viable electric and hydrogen powertrains. Further to this, the same 2021 Sustainability Progress Environment Waste Health and Safety | 19% | 93% | 18 | | --- | --- | --- | | Reduction in Scope 1 (Direct) and Scope 2 (Indirect) | Recycling Rate | Lost time Injuries | | emissions from 2018 base year (2020 – 18.6%) | (2020 – 3%) | (2020 – 21) | Diversity Engagement Survey Ethics | 50% | 81% | 94% | | --- | --- | --- | | Percentage of women on Senior plc Board | Percentage of employees completing Employee | Percentage of employees who completed | | (2020 – 43%) | Engagement Survey (2020 – 64% response to | Annual Code of Conduct Training (2020 – 94% | | | global Covid employee survey) | of global workforce) | 13SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 STRATEGIC REPORT ## SUSTAINABILITY ### THE ROUTE TO NET-ZERO ## CONTINUED Launch of “20/20 Vision for Sustainability” including adopting climate targets for carbon intensity, waste recycling and water usage ## ENVIRONMENT 2010 2015 2020 ### OBJECTIVE NET ZERO: | | First submission | | “20/20 Vision for | | | --- | --- | --- | --- | --- | | Senior is committed to | | to Carbon | Sustainability” | | | | | Disclosure | climate targets | | | achieving Net Zero by 2050 | | Project | | achieved | In October 2021, the SBTi released guidance Progress towards our ona science-based approach to Net Zero certified Science Based Targets emissions. A company reaches SBTi Net Zero Scope 1 and 2 when it reduces emissions in line with keeping We continue to monitor our Scope 1 and 2 global temperature increase to 1.5°C. CDP – Carbon Disclosure Project emissions. All of our business operations haveprogrammes to increase energy eciency, Senior maintained a “Leadership” rating Senior remains the only company in the typical projects include more ecient air ofA- in 2021 from the globally recognised global Aerospace & Defence sector to compressor systems, energy ecient boilers CDP: the only UK company in our sector haveits emissions reduction targets and LED lighting. toachieve a leadership rating. The independently verified and approved by high-ranking score is a testament to the theSBTi. The targets covering GHG emissions In addition, we are actively pursuing the importance we place on the environment fromSenior’s operations are consistent with purchase of low carbon electricity to reduce and communities in which we operate and reductions required to limiting climate warming ourScope 2 (market based) carbon emissions: | is a result of the continuing dedication of | to 1.5°C. The Paris Agreement’s long-term | | | --- | --- | --- | | our teams across our businesses to | temperature goal is to keep the increase in | • in 2021, 36% of our electricity was sourced | | reducing our environmental impact. | global average temperature to well below 2°C. | from renewable energy, an increase from | | | In the SBTi’s target assessment report, Senior’s | 25% in 2020. | Scope 1 and 2 targets were considered We are on track to meet our SBTi Scope ambitious, as they track to a 1.5°C global Senior plc received A-, which is in the 1and2(market based) 2025 target with a temperature increase. SBTi have approved Leadership band and is defined as “implementing 19%reduction against our 2018 base year. thefollowing targets: current best practices”. This is higher than the Scope 1 & 2 (Market Based) Emissions European regional average of C, and higher than • Senior commits to reduce its absolute the Powered machinery sector average of C. Scope 1 and 2 GHG emissions by 30% by2025 compared to a 2018 base year • For Scope 3 GHG emissions, Senior also ## CDP Climate Disclosure Score commits that 80% of its suppliers by spend, covering purchased goods and services and capital goods, will have ## A- science-based targets by 2025. ### LEADERSHIP RATING Next Steps in our climate Journey In 2022 we plan to extend our reach, adding to our Near-Term Science Based Science Based Targets Targets by formulating Long-Term In 2020, we were successful in having our Carbon emissions Science Based Targets, the initial focus carbon emission reduction targets verified by (measured as Tonnes ofCO 2 e) will be our Scope 1 and 2 emissions, the Science Based Target Initiative (“SBTi”). Scope 2 Scope 3 will follow. TheSBTi is a partnership between CDP, the Scope 1 (market based) Total United Nations Global Compact (“UNGC”), 2018 10,414 47,0 0 4 57,418 World Resources Institute (“WRI”) and the 2019 10,378 46,614 56,992 Worldwide Fund for Nature (“WWF”). The SBTi 60,000 57,418 56,992 2020 8,731 38,016 46,747 call to action is one of the We Mean Business 2021 8,445 38,095 46,540 50,000 Coalition commitments. 46,747 46,540 40,000 30,000 20,000 10,000 0 14 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 2018 202120202019 Scope 1 & 2 Market Based Emissions Target Total tonnes CO 2 e | Scope 1, 2 and 3 | | | | Senior’s 2021 | | | --- | --- | --- | --- | --- | --- | | targets approved | | Reassessment of | | CDP score A- | | | by the Science | | climate-related | | “Implementing | Develop our | | Based Targets | | | risks and | current best | Long-Term Net | | | Initiative | opportunities | | practice” | Zero Targets | 2020 2020 2021 2021 2021 2022 JULY DECEMBER JULY SEPTEMBER DECEMBER Gap analysis undertaken to Scenario analysis Senior achieves assess the Company’s undertaken “Supplier alignment to TCFD Engagement recommendations and to Leadership” identify areas for improvement status from CDP | Scope 3 | Supplier engagement | Output from the CDP Supplier Portal estimates | | --- | --- | --- | | To make truly meaningful reductions in harm | CDP have recognised our eorts in 2021 by | that the targets set by our supply chain will give | | tothe environment, businesses must cascade | awarding us Supplier Engagement Leader | an estimated saving of 43.1 million tonnes of | | action down the entire supply chain. | status based on our Supplier Engagement | carbon per year. | Rating (“SER”) In 2021, we commenced our work to achieve our Scope 3 supplier engagement Science Next steps Based Target. In 2022, we intend to increase participation from our suppliers: to do this we will provide We calculated that around 340 suppliers more assistance and guidance principally account for 80% of our global spend. through virtual supplier group meetings. This year we contacted all of these 340 Looking forward to 2023 we will extend suppliers to inform them of our Science Based participation further by working more Targets and the approach we intend to take to closely with smaller suppliers to ensure that gather information from them. we are on target to achieve the cascade of | In order to facilitate the data capture and to | carbon reduction into our supply chain in | | --- | --- | | ensure we were following best practice we | line with our target to cover 80% of supplier | | engaged CDP, joining their Supplier Programme. | spend by 2025. | The companies with the best SER are CDP have a designated portal and we notified celebrated as Supplier Engagement suppliers asking them to provide data into Task Force on Climate Related Financial Leaders,which this year is comprised of thisportal. | | thetop8% ofcompanies who disclosed | Disclosures (“TCFD”) | | --- | --- | --- | | For many of our suppliers, Senior was the first | tothefullclimatequestionnaire. These | In addition to our operational climate disclosures | | customer to ask for detailed carbon emissions | companiesarethen included on CDP’s | Senior is active in the requirements to disclose | | data. This meant that we had to provide | SupplierEngagement Leader board, see: | in relation to the TCFD. The following section | | assistance and expertise to help these suppliers. | https://bit.ly/SupplierEngagement2021. | covers our progress and disclosure for TCFD. | | Of the 340 suppliers, 94 completed a detailed | In 2021, 94 of our key suppliers provided | | | submission through this portal, helping us | information, 51% reported having active carbon | | | tounderstand and assess how they | reduction targets with 43% reporting that they | | | wereprogressing. | engage with their own supply chain with | | respect to carbon emissions. We believe this first year has been a successful start to our programme and we continue to develop our approach. Reporting Active Targets ## 51% Suppliers Engaging ## 94 Estimated Annual with their own CO 2 savings suppliers Suppliers submitted detailed data to ## 4 3.1M ## 43% Senior 15SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 STRATEGIC REPORT ## SUSTAINABILITY CONTINUED ### ENVIRONMENT CONTINUED Waste | Our objective | Progress in 2021 | | | | --- | --- | --- | --- | | Our Objective; 95% Recycling | In 2021, Senior were | In 2021, 74% of our businesses | 50% of our operating | | Rate by 2025 | successful in recycling | achieved a recycling rate of | businesses are at | To reduce the overall quantity ofwaste generated and improve the proportion of materials reused ## 93% 90% 100% and recycled. of waste produced. or higher. recycling rate. Note: For information on hazardous waste, please see www.seniorplc.com/sustainability | Water Consumption | | | Certification | | --- | --- | --- | --- | | Our objective | Progress in 2021 | | Our objective | | To limit the environmental impact | Water Usage in 2021 | Reduction in usage of | All Senior | | of our production processes | | | businesses are | | through the ecient use of water. | | | accredited to | ISO14001 We monitor water usage by business on a ## 256megalitres 86megalitres monthly basis. Ourbusinesses conserve | water byusing ecient production methods | compared to 2019 – the last full | | --- | --- | | and by using water harvesting processes in | year before COVID-19 related | | areas ofwater scarcity. | impact to operations | Senior 2025 Sustainability Targets Metrics Target Year 2025 Direct GHG emissions | | Scope 1 and 2 | | | | | 30% | | --- | --- | --- | --- | --- | --- | --- | | | | Indirect GHG emissions | Tonnes CO | 2 e | | | | Carbon Emissions | | | | | From 2018 base year | | (Combustion of fuel and operation of facilities) 80% of suppliers by spend Supplier Scope 3 Indirect GHG emissions will have climate science engagement based targets Reduce the overall quality of waste generated % of waste Waste recycling and improve the proportion ofmaterials > 95% recycled reusedand recycled <0.3 Lost Time Injury Health and Safety Reduced Lost Time Injuries Lost Time Injuries and Illness Rate cases per 100 employees p.a. 16 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 Carbon emissions | Our objective | Progress in 2021 | | | | --- | --- | --- | --- | | To reduce Scope 1 and Scope 2 | Total gross Scope 1 and 2 | Scope 1 and 2 (market based) | Scope 1 and 2 (market | | emissions by 30% by 2025. | (market based) emissions of | emissions reduced by | based) emissions reduced by | Keytothis is the purchase of 100% renewable electricity contracts. | | 2 | | 2 | | | --- | --- | --- | --- | --- | | 46,540tCO | e | 207tCO | e | 19% | | in 2021 | | in 2021 | | against our 2018 base year | Carbon emmissions In Compliance with Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 – Streamlined Energy and Carbon Reporting (“SECR”) 1st Jan 2021 to 31st Dec 2021 1st Jan 2020 to 31st Dec 2020 Global Global UK and excluding UK UK and excluding UK Oshore and Oshore Total Oshore and Oshore Total Scope 1: Combustion of fuel and operation of facilities 1,244 7,201 8,445 1,267 7, 4 6 4 8,731 Scope 2: (location based) Electricty, heat and steam purchased for own use 2,203 36,040 38,243 2,595 36,683 39,278 Scope 2: (market based ) Electricty 875 37,220 38,095 1,800 36,216 38,016 Total gross Scope 1 and 2 (location based) emissions / tCO2e 3,447 43,241 46,688 3,862 44,147 48,009 Energy consumed in MWh to calculate above emissions 17,171 126,996 144,167 17, 279 129,273 146,552 Scope 3: Business travel, waste, water 53 1,118 1,171 73 907 980 Total Gross emissions / tCO2e (Scope 2 location based). 3,500 44,359 47,859 3,935 45,054 48,989 Intensity measure / tonnes CO2 emitted per £m of revenue 34 80 73 37 72 67 Water usage (in megalitres) 37 219 256 27 214 241 Percentage of waste recycled or recovered 100% 89% 93% 96% 90% 93% In Compliance with Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 – Streamlined Energy and Carbon Reporting (“SECR”) Energy Eciency Actions Senior has set out its year 2025 plan to reduce Methodology In the reporting year, Senior plc has implemented scope 1 and 2 emissions by 30%. Key to this is The Group’s approach to calculating and reporting our the purchase of 100% renewable electricity GHG emissions follows the Defra Guidance on how to energy eciency projects across the global measure and monitor GHG emissions. | operating businesses. In total, Senior’s | | contracts. Three of Senior’s UK operating | | | --- | --- | --- | --- | | improvements have the potential to reduce | | businesses have now contracted into the supply | Three data sources used for GHG emissions; | | GHGemissions by 1,200 tonnes of CO | e. | of100% renewable electricity supply, avoiding | | 2 1. UK Government GHG Conversion factors for company over 1,000 Tonnes of GHG emissions annually. reporting (DEFRA full set for advanced users 2021). These environmental improvements include French and German operating businesses are thecompletion of a 5 kW solar panel installation 2. US EPA (eGRID) Emission factors for greenhouse gas also supplied with 100% renewable energy. in Asia. Other improvements include the inventories for US electricity generation. Other Senior operating businesses continue to upgrading of Liquified Petroleum Gas (“LPG”) make progress to achieving renewable energy 3. IEA (International Energy Agency) Emission factors year powered fork lift trucks to electric. Heating, 2021 version. contracts and three more operating businesses Ventilation and Air Conditioning (“HVAC”) are confirmed to move to renewable energy 2021’s reporting has incorporated Scope 2 greenhouse improvements continue to be completed in contracts in 2022. gas emissions (associated with electricity consumption) several businesses reducing emissions by calculated using both the Location and Market- switching to favourable refrigerants lower in basedmethods. Global Warming Equivalent Values (emission Each Senior business reports its environmental factors). Senior’s operating businesses continue performance monthly using the Group’s financial to install electric vehicle charging points for reportingprocess. employees and visitors, encouraging the use The Scope 1 and 2 emissions are independently verified of‘zero emission’ transportation. inaccordance with the International Standard on Assurance Engagements 3410 ‘Assurance engagements on greenhouse gas statements’ (ISAE 3410). 17SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 STRATEGIC REPORT ## SUSTAINABILITY CONTINUED ## TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (“TCFD”) ## The Financial Stability Board (“FSB”) created the TCFD – a framework to help ## companiesdisclose climate-related risks and opportunities. We have made disclosures ## consistent with the TCFD framework which recommends 11 disclosure topics across (1) ## fourpillars – governance, strategy, risk management and metrics and targets. • The Group Company Secretary ensured that • The Group divisional CEOs and the Group’s ### GOVERNANCE the Board was kept informed of the regulatory Director of Business Development & Strategy Oversight of climate-related risks and developments around climate change, attended the Board Strategy meeting, opportunities providing various resources designed to highlighting the latest developments in low The Company’s Board of Directors has oversight enhance climate change competencies of the carbon technologies and the opportunities over climate-related matters. The Group Chief Board directors. these presented for Group. Executive Ocer is ultimately responsible for • The Group Director of Risk and Compliance climate-related risks and opportunities. presents the Group’s principal risks, including Throughout the year, the Board was regularly climate change, to the Board on a biannual informed about climate-related issues aecting basis. In July 2021, the Group re-assessed its the Group, as described below: climate-related risks and opportunities, and • the Group Chief Executive Ocer provided the results of this assessment were reported updates on the Group’s progress against to the Executive Committee and the Board. Scope 1 and 2 emission targets, work carried out to support Scope 3 targets, waste recycling and water use, as well as the eect Senior’s climate-related governance framework of climate change on the Group’s operating businesses. The Group Chief Executive Board of Directors Ocer reports to the Board on other climate Oversight of climate-related matters matters discussed during the Executive Committee and HSE Committee meetings. • The Group Director of HSE & Sustainability attended two Board meetings in 2021 Group Chief Executive Ocer andprovided an in-depth review on the Ultimate responsibility for management of progress in engaging with suppliers in climate-related risks and opportunities respectof theGroup’s Scope 3 targets. Inaddition, theBoard received regular progress updatesonthe implementation ofTCFD recommendations, including Executive Committee HSE Committee Scenario Analysis. Leading the Group’s eorts Monitoring progress onclimatechange onGHGemissions (1) In October 2021, the TCFD released additional guidance implementing the Recommendations of the Task Force on Climate-related Financial Disclosures (2021 TCFD Annex), which supersedes the 2017 Annex of the same name (2017 TCFD Annex). In line with the current UK Listing Rules requirements, our TCFD-aligned disclosures take into account theimplementation recommendations in the 2017 TCFD Annex. In addition, we have considered the 2021 TCFD Annex and applied it where possible. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202118 Assessing and managing climate-related risks and opportunities Management is responsible for assessing andmanaging climate-related risks andopportunities. The Group Executive Committee, led by the Group Chief Executive Ocer, ensures that material climate-related risks form part of the Group’s overall risk management framework, and that climate-related opportunities are incorporated into the Group’s strategic and financial planning. The HSE Committee, chaired by the Group Chief Executive Ocer, monitors the Group’s progress on its environmental targets, including Scope 1, 2 and 3 emissions. Focus areas for 2022 “Governance” • Continue strengthening Senior’s governance framework for the Board’s ## oversight of climate-related matters by BOARD TECHNOLOGY PRESENTATIONS including “Climate Change” as a separate In September 2021, a presentation was Senior will maintain regular technology regular agenda item in Board meetings. madeto the Board, highlighting: discussions at the Board level in 2022, • Enhance monitoring of the Group’s • the impact of technological changes, including those presenting climate-related progress towards Scope 1 and Scope 2 particularly low carbon technologies, opportunities and mitigating climate-related targets through carbon emissions onSenior’s market segments; risks for the Group. Along with improving tracking dashboard. • initiatives by Senior’s customers awareness and expertise of technology issues • Continue raising awareness of climate- demonstrating environmental awareness; at the Board level, such discussions place related matters across the Group with theDirectors in a stronger position when • technological developments in Aerospace particular focus on operating businesses incorporating technology into strategic and Senior’s engagement in various and net zero transition plans. planning and other major decisions such as projects aimed at reducing emissions acquisitions, disposals and major investments. andimproving operational eciency; • decarbonisation opportunities for the FlexonicsDivision, especially in relation toElectric Vehicle (“EV”) adoption for passenger cars and commercial vehicles; and • hydrogen infrastructure opportunities. 19SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 STRATEGIC REPORT ## SUSTAINABILITY CONTINUED ### TASK FORCE ON CLIMATE-RELATED FINANCIALDISCLOSURES (“TCFD”) CONTINUED Climate change has been reported as one of the Group’s principal ### STRATEGY risks since 2019. In 2021, we held an internal workshop to evaluate Climate-related risks and opportunities identified over the short, climate-related risks and opportunities at a higher level of detail. We medium and long term have used comprehensive data sources for this review, such as climate In considering climate-related risks and opportunities, Senior has change-specific publications; relevant sector literature outlining the selected the following time horizons to align with the current Group potential impacts of climate change, including publications from peers, internal risk management and planning time frames: investors, regulators and market stakeholders; guidance from the TCFD on potential risks and opportunities for businesses; CDP risk Rating Range S and opportunity disclosures from engineering sector companies. Short term 2021 – 2024 M Medium term 2024 – 2026 The table below highlights the Group’s opportunities and material risks L before mitigation activities. Long term 2026 – 2041 Indicative Link to Senior's Category Sub category Risk/Opportunity Description time frame Principal Risks Opportunities Products and Development of new products S Services Development or expansion of low emissions products resulting in increased demand forSenior’s products Shift in Consumer preferences S Changing customer/consumer behaviour or preferences increases demand for Senior’sproducts which support the transition to a low carbon economy Transition Market Changing customer/consumer behaviour or preferences Customer demand M Risks Customers may change demand to lower emissions products, as they adapt to a lower and price down carbon intensive economy. This might result in a reduction in demand for some of pressure Senior’sproducts. Influence of ESG on debt-rating agencies/assessment of credit risk Strategy and portfolio L Changes in investor expectation can change market valuations in a negative way management (such as attracting negative screening). Financing & liquidity Technology Substitution of existing products and services with lower emissions options M Failure to recognise and invest in changing and emerging (net-zero) technologies and demand for low emission products may result in reduced market share and reduced volume of sales. Costs to transition to lower emissions technology M Innovation and Decarbonisation of manufacturing processes and products away from fossil fuels technological change consistent with Science Based Targets may require additional investment of capital. Unsuccessful investment in new technologies M Failure to invest in low emissions technology at the right time can lock the business intofossil-fuel reliant assets over the long term, or require additional investment costs topivot away from assets before the end of their useful life. Policy & legal Increased pricing of GHG emissions/cost of carbon offset Inflation M Pricing of GHGs may continue to be introduced in the future, which would increase thecost of products/services both purchased and sold by Senior. Exposure to litigation Corporate L Failure to manage climate related issues may result in prosecution (fines and governance breach reputationaldamage). Reputation Increased stakeholder concern or negative stakeholder feedback M Mismatch between Senior’s commitments/communication on climate change and action may lead to dissatisfied customers and impeded customer loyalty, suppliers Strategy and portfolio andcommunity members attracting negative press and reputational damage. management Stigmatisation of sector M Activism and protest against aviation, land vehicles and oil and gas market sectors mightbecome a threat to the reputation of Senior. Physical Acute Increased severity of extreme weather events such as cyclones and floods S Risks Extreme weather events may cause damage to infrastructure, equipment or product stored within it and resulting in disruption to operations. Climate change Chronic Changes in precipitation patterns and extreme variability in weather patterns S Increasing global surface temperatures and changing weather patterns may lead to the increased intensity of droughts/water scarcity in some areas, impacting the supply of water to Senior’s manufacturing sites and potentially disrupting operations. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202120 Impact of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning Products and Services We recognise that climate change is one of the megatrends transforming our business environment. Senior’s purpose is to provide safe andinnovative products for demanding thermal management and fluid conveyance applications. As our customers move to a lower carbon environment, we help to develop products that are more sustainable, with lower environmental impact. Read more on pages 12, 13, 36 and 38 Operations and supply chain We are making progress against Science Based Targets set in 2020, as described on pages 14 to 17. In addition, a number of energy eciency projects implemented in 2021, and described on page 17, further improve climate resilience of our operations by reducing theirreliance on fossil fuels. We acknowledge that physical risks (such as extreme weather events) and shifts in markets and technologies have the potential to aectour operations and supply chain. Each site within the Group has a scenario-based Business Continuity Plan which is tested on anannual basis. In 2021, we worked with around 340 suppliers through Carbon Disclosure Project, asking them to align with Senior’s environmental goalsand set emissions reduction targets by 2025. Read more on page 15 Investment in research and development Senior’s Advanced Technology Collaboration Forum identifies investment opportunities in new technologies and supports with delivery oftargeted R&D projects that are aligned to the Company’s purpose. Read more on page 12 Access to capital In 2021, the Board agreed that a sustainability finance framework would be developed for Senior plc with the aim of working with the Group’s lenders to support ESG linked debt when refinancing committed facilities. Acquisitions or divestments Portfolio optimisation is a central pillar of our strategy. We look to incorporate sustainability considerations when assessing strategic acquisitions in our target areas of fluid conveyance and thermal management. Financial planning process We shall continue to develop our approach in assessing the financial impact of climate change. Actual and potential financial impacts on revenues, expenditures, assets and liabilities, and capital and financing will be considered as part of the Group’s strategic and financial planning processes. | Resilience of the organisation’s strategy | • they meet TCFD recommendation to assess | • they consider the macroeconomic impacts | | --- | --- | --- | | with reference to three climate-related | business resilience at dierent climate-related | with more granularity and within a more | | | scenarios, including a 2C or lower scenario; | applicable business context than climate | scenarios, including a 2C or lower • these scenarios are used by the Bank of scenarios based on temperature increases; scenario England to explore resilience of the UK and In 2021, we carried out scenario analysis to financial system to climate change; • multiple high transition scenarios provide understand the potential impact of climate • the scenarios are modelled to a thirty-year diversity in stress test. change on the Group’s operations. We have selected the three climate scenarios produced timespan, out to 2050 to align to the Paris by the Bank of England because: Agreement and other net zero 2050 targets; 21SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 STRATEGIC REPORT ## SUSTAINABILITY CONTINUED ### TASK FORCE ON CLIMATE-RELATED FINANCIALDISCLOSURES (“TCFD”) CONTINUED | SCENARIO 1 (<2C) | SCENARIO 2 (<2C) | SCENARIO 3 (>3C) | | --- | --- | --- | | EARLY POLICY ACTION | LATE POLICY ACTION | NO POLICY ACTION | | – SMOOTH TRANSITION | – DISRUPTIVE TRANSITION | – BUSINESS AS USUAL | | • Decisive carbon action to reduce global | • Delay in implementing the policy required | • Governments fail to introduce further | | emissions starts in 2021; | to reduce global emissions by 10 years; | policies to address climate change | | • Carbon taxes and other policies intensify | • Starting in 2031, significant and rapid | beyond those already implemented; | | gradually over the scenario horizon; | policy action causing drastic bending | • Increase in global temperatures reach | | • Global warming is limited to 1.8C by | of emissions trajectory globally; | 3.3C by 2050 compared to pre-industrial | | 2050 compared to pre-industrial levels; | • Global warming is limited to 1.8C by | levels; | | • Limited physical risks. | 2050 compared to pre-industrial levels; | • High physical risks. | • Limited physical risks. | Potential impact | Potential impact | Potential impact | | --- | --- | --- | | Policy changes start to accelerate, and | A sudden increase in the intensity of | Absence of transition policies result in a | | consumer and investor preferences evolve | climate policy in 2031, following an initial | growing concentration of greenhouse gas | | rapidly to facilitate decarbonisation. | period which is characterised by insucient | emissions in the atmosphere. | or ineective emission reducing policies. In the short and medium term, Senior Increased exposure to heatwaves, tropical needs to ensure that its investment Senior needs to ensure that it takes action cyclones, droughts may increasingly provide decisions are consistent with its science- over this time period to avoid disruption in challenge for some of Senior’s sites and based targets and deliver expected results. the long term as mature economies make supply chain. rapid strides to cut emissions. In the long term, it is important to keep With less policy action and investment pace with changing market demand for low driving forward technology development, emission products and remain consistent the costs of transitioning to the new between Senior’s public commitments and technologies may be higher, the likelihood of market expectations. successful implementation, and the relative rewards for the investment may be lower. | Opportunities | Opportunities | Opportunities | | --- | --- | --- | | The ability to maximise returns on new | Early investment can set the Group up to | The Group’s continued investments and its | | investments in the long term, once | be ready for the swift changes to the | ability to diversify business activities can | | transition has occurred and markets | disrupted economy after 2030. | help Senior be more resilient to changes | | have stabilised. | | in the markets and adapt to the impacts | Opportunities may materialise over the long of climate change. term, due to the late policy action and the abrupt transition to low carbon economy. Resilience statement Focus areas for 2022 “Strategy” The output of forward-looking scenario analysis allowed us to better understand howclimate- related risks and opportunities could impact our businesses. The assessment indicated that • Conduct further scenario analysis transitional risks could have a more significant impact in scenarios 1 and 2, whereas the impact of tounderstand the potential impact of physical risks could be higher in scenario 3. We recognise that scenario analysis will be developed climate change at a regional/operational over time, and we will continue to integrate the findings of more detailed climate-based scenario site level. analysis into Senior’s risk management framework to ensure that mitigation measures are in place • Embed the findings of the scenario for any residual risks that could impact business resilience to climate change. analysis into Senior’s strategic decision- making and risk management processes; Senior’s commitment to the ambitious Science Based targets for 1.5C future and Business continue testingthe resilience of strategy Ambition for 1.5C Campaign demonstrates that we are aligning our strategy with transition to underdierent scenarios. aglobal net-zero economy. By taking action to reduce the greenhouse gas emissions within our businesses and supply chain, we improve the eciency of our assets, encourage carbon-free technologies across the Group and our supply chain, therefore, reducing environmental impact. We are committed to working closely with all our stakeholders in taking action to combat climatechange. We believe that the Group’s dierentiators, such as its global footprint, focus oninnovation, strong relationships with customers and suppliers make it resilient in transitioning toa lowcarbon economy. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202122 Mitigating action plans are developed for all ### RISK MANAGEMENT climate-related risks where the risk scoring Focus areas for 2022 “Risk The organisation’s processes for exceeds the Group’s tolerance level for that risk. Management” identifying,assessing and managing The action plans include a detailed description of • Due to the evolving nature of climate- climate-related risks the response actions, assigned risk owners and related impacts, we aim to conduct the Climate risks are identified, assessed and time horizons for completion of the mitigating risks assessment process on a biannual managed using Senior’s risk management action plan. Action plan progress is tracked basis to track changes in materiality. process as shown on page 49. The Committee toensure timely implementation. The overall • Continue refining materiality process and of Sponsoring Organizations of the Treadway eectiveness of the risk control environment review emerging trends. Integrate this Commission (“COSO”) enterprise risk isclosely monitored through assurance and process into Senior’s annual risk management integrated framework serves as audit activities to assess if critical risks are being management framework. the foundation of the Group’s risk management mitigated within the Group’s risk tolerance. process, as tailored to reflect Senior’s culture and values. The process includes identification Integration of processes for identifying, ### of relevant risks, risk scoring, development and assessing, and managing climate-related METRICS AND TARGETS assignment of response actions, monitoring the risks into the organisation’s overall risk Metrics used to assess climate-related eectiveness of key mitigating controls and management framework risks and opportunities reporting of the risk and assurance environment Climate-related risks form part of the Group’s to the Executive Committee, the Audit Targets used to manage climate-related risk register and will be subject to an annual Committee and the Board. risks and opportunities and performance review by the Executive Committee and the against targets Board. Climate change has been reported as Three stages to identify significant one of the Group’s principal risks since 2019. climate-related risks and opportunities – Read more on page 16 methodology overview 2021 assessment During 2021, we re-assessed the climate- Scope 1, Scope 2, and, if appropriate, Identification – comprehensive list of climate- related risks and opportunities relevant to Senior related risks to understand which risks are Scope 3 greenhouse gas (“GHG”) developed using following data sources: likelyto be material across Senior’s entire value emissions chain, giving consideration to our operations, • climate change specific publications and data; suppliers,customers, as well as regulatory Read more on page 17 | • CDP disclosures from peers; | andstakeholder expectations. The assessment | | | --- | --- | --- | | • relevant sector literature; and | resulted in the development of a broad array | | | | ofresponse actions to support the Group’s | Focus areas for 2022 “Metrics and | • guidance from TCFD for Senior’s sector. climate-related initiatives. Targets” Significance assessment – material risks and • Consider appropriate metrics and targets opportunities were identified by assessing and relevant to the Company’s sustainability scoring the following factors: strategy. • likelihood; • Continue integrating the metrics into • magnitude of impact; business reporting processes. • velocity of impact, if previously identified • Develop the Company’s Net Zero asaprincipal risk by Senior; and Transition Plan. • strategic importance to the business. Selection – a final list of material risks and opportunities is selected for further climate scenario analysis. Risk assessed is inherent, without consideration for existing controls. 23SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 STRATEGIC REPORT ## SUSTAINABILITY CONTINUED ## SOCIAL | Equality, diversity and inclusion | The table below shows the Group’s Board of | In accordance with the Equality Act 2010 | | --- | --- | --- | | Our Core Values underpin our culture. | Directors, Executive Committee andoperational | (Gender Pay Gap Information) Regulations 2017, | | | senior management in 2021 bygender. | Senior publishes its Gender Pay Gap Report, | Senior promotes a culture and working asrequired on the Company’s website. environment in which everyone can make the Male Female bestuse of their skills, free from discrimination Employee engagement All employees 79% 21% | or harassment. The value of “Respect and | | | As the impact of the COVID-19 pandemic | | --- | --- | --- | --- | | Trust”defines how we treat people, and our | Operational senior | 82% 18% | continued through 2021, we maintained our | | commitment to be open and straightforward | management | | focus on newways of working, ensuring | | with colleagues, customers, suppliers and | | | eective communication and employee | Executive Committee 62% 38% other stakeholders. We recognise the benefits engagement, while remaining COVID-19 Board 50% 50% of dierent perspectives and local cultures secureand creating asafe and stable and encourage individuals to speak freely, environment for employees. as diverse contributions lead to better solutions We strive to reflect the diversity of the Building on the success of the global COVID-19 and business outcomes. communities we work in, at all levels across employee survey in 2020, we launched our ourworkforce. Senior is an equal opportunities Senior’s leaders are committed to ensuring firstglobal employee engagement survey in employer. TheBoard seeks toensure a diverse equal opportunities, fairness of treatment, May 2021. The survey was split into three main workforce that supports allemployees, work-life balance and the elimination of all forms sections, Engagement, Values, and Health irrespective of age, disability, gender of discrimination in the workplace for employees andWellbeing, and was delivered electronically, reassignment, marriage and civil partnership, and job applicants. We aim to create a working to all employees in multiple languages. race, religion or belief, sex orsexualorientation. environment in which everyone can thrive, Theresponse rate of 81% exceeded our We will not tolerate anyformof unlawful achieve their full potential and contribute to the expectations and the benchmark for discrimination against ourcolleagues, or any success of Senior, and where all decisions are manufacturing companies, with a significant third parties be theypotentialemployees, based on skills and merit. number of employees completing the survey customers, subcontractors, suppliers or who do not have ready access to company The Group’s Equality, Diversity and Inclusion members of thepublic. emails. The 81% response rate itself is a policy is contained within the Code of Conduct. positive indicator of engagement and our We expect people to treat everyone they meet employees desire to provide feedback. in the course of business with respect and dignity and in support of this, during the year, all employees undertook Preventing Harassment ### SENIOR EMPLOYEE ENGAGEMENT and Promoting Respect training as part of our ### annual, mandatory Code of Conduct training. SURVEY RESULTS Employees are required to comply with the Code of Conduct. The right behaviours are underpinned by our Values, policies and procedures that support our people processes Participation Health and wellbeing Engagement Comments for example talent acquisition, succession planning, promotions and learning and score (of a max of 10) score (of a max of 10) development opportunities. The Executive and business leaders continue tofocus on providing a diverse and inclusive ## 81% 7.6 7.1 32,507 workplace. Gender diversity remains a key area for further improvement in our operating business general management population. Values Health and Wellbeing Weare continuing our global participation in Mission Gender Equity Mentoring (previously | the 30% Club cross company mentoring | Max Score: 10 Max Score: 10 | 1 | | 1 | | | --- | --- | --- | --- | --- | --- | | | | | Safety | | Social | | scheme). Theprogramme supports and | | | | | Wellbeing | | encourages thedevelopment of talented | | 2 | Respect | | | | women. The employee Engagement Survey | | | andTrust | 2 | Physical | Wellbeing also provided us with the opportunity to | | 6 | 1 | 3 | Integrity | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | understand engagement by gender. | | | | | 5 | 1 | | | | | | | | | | | 3 | Organisational | Participation in the survey was higher for 4 Excellence Support 5 2 women than men, good levels of participation 4 2 being a measure of positive engagement. In 5 Cutsomer 4 Mental 34 addition, it was notable that women scored Focus 3 Wellbeing higher than men on their overall engagement 6 Accountability 5 Health and score, indicating that they feel that Senior is Wellbeing agreat place to work. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202124 | Overall, the feedback was positive, with a | Health and Safety | GOLDEN RULES TRAINING | | --- | --- | --- | | scoreof 7.4 for the question “Overall, how | The health, safety and wellbeing of our | | | satisfied are you working at Senior?”. | | In 2021 we initiated a major safety | employees is a core focus for Senior, the pursuit Otherhighlights included Management programme around the “Senior Golden of world class health and safety in all of our Support,Peer Relationships, Goal Setting Rules”. The 10 Senior Golden Rules for Safety undertakings is a recognised priority at all levels andMeaningful Work. As expected, there are cover key health and safety activities around of our business. areas for improvement. Across all of Senior, the the major risks we face in the business. No work-related employee or contractor These include lock-out / tag-out, working from key themes for us to work on are enhancing fatalities occurred in the Senior Group in 2021, height and similar high-risk activities. how the operating businesses communicate no major injuries (serious / life changing) injuries their business strategy and mission, so that A team of health and safety professionals to employees or contractors working on behalf people feel more inspired by what we do and from our global businesses collaborated of Senior. the value of their contribution. Reward was also totake our existing Golden Rules programme anarea for improvement, both in terms of how In 2021, the Senior Group had a reduction in andsignificantly update and refresh the individuals are rewarded but also the process thenumber of lost time injuries to 18 from 21 content, producing training materials in all fordetermining pay. in2020. applicable languages. A key component is to Feedback and high-level action plans have been align the Senior Essential Behaviours with our Senior has a Group-wide safety management shared with the Board and, in particular, Celia Golden Rules. The roll-out of this programme programme with all businesses complying to Baxter, the non-executive Director for employee is scheduled for completion in 2022. the Group standard and all subject to an annual engagement, who has spent time reviewing and audit. Seven of our business operations have analysing the feedback including engagement already transitioned from OHSAS 18001 to scores and the verbatim comments. ISO45001. Celia Baxter and Jane Johnston, Group HR Number of lost time injuries In 2020, we set a Target to reduce our Lost Director have resumed their programme of Time Injury Rate to 0.3 by 2025, we remain face-to-face Focus groups and visited four UK 51 ontrack to achieve this target. | businesses, holding 15 sessions in the autumn | | 50 | | | | --- | --- | --- | --- | --- | | of 2021. The sessions were interactive with a | Lost Time Injury Illness Rate (“LTIIR”) is defined | | 39 | | | | | 40 | | 35 | | cross section of employees, including employee | as the number of work-related lost time injury | | | | | representatives, and provided an opportunity | orillness cases (losing more than one complete | 30 | | | 21 toengage directly, asking andresponding to shift) per 100 employees. 18 20 questions. As well as holding the focus groups, The Total Recordable Injury Illness Rate is the site visits included factory tours and meeting 10 defined as the number of cases of lost the leadership teams. | | workdays, restricted work activities, job | 0 | | --- | --- | --- | | Our operations have remained vigilant in | transfers, medical care beyond first aid | | | communicating with their teams, in particular | andwork-related illnesses expressed per | | | focusing on dierent ways of engaging with | 100employees. | | Injury rate some employees working from home, and The LTIIR for 2021 was 0.32, a similar result | leaders notbeing able to hold regular all hands | | | 1.78 | | | | --- | --- | --- | --- | --- | --- | | | to2020 despite fewer injuries. This is a result | 1.8 | | | 1.69 | | meetingsdue to Covid safe working protocols. | | 1.6 | | 1.48 | | ofthe calculation being based on a reduced 1.4 | The methods for maintaining interaction and | | | | | | | | | 1 .17 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | headcount compared to 2020. | 1.2 | | | | | 1.09 | | | | providing information to employees onsite and | | 1.0 | | | | | | | | | remote workers included, video messages, | In terms of Total Recordable Injuries, we have | 0.8 | 0.66 | | | | | | | | | | 0.6 | | 0.50 | 0.44 | | | | | | utilising TV message-boards, increasing | seen an increase in the calculated rate. As | | | | | 0.32 | | 0.32 | | 0.4 newsletter frequency and using mobile activity levels increased during 2021, we have 0.2 technology. Leaders ensured they were visible experienced an increase in minor injuries; in 0.0 2017 2018 202120202019 in their businesses. In addition, we have been addition, as with LTIIR calculation, the figure encouraging employees and their families to be has been impacted by our reduced headcount. vaccinated and have continued our support for employees throughout the COVID-19 pandemic. 60 2.0 Number of Lost Time Injuries Number of Lost Time Injuries 25SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 2017 2018 2019 Total Recordable Injury Illness RateLost Time Injury Illness Rate 2020 2021 STRATEGIC REPORT ## SUSTAINABILITY CONTINUED ## I am delighted to have been able to visit some of our ## sites and meet with employees to hear their feedback ## and learn more about the culture across our businesses.” Celia Baxter ### SOCIAL CONTINUED Chair of the Remuneration Committee and designated NED for workforce engagement People and Culture Our Values set out the principles and standards of behaviour that drive our culture. As evidenced by the feedback we received from the Engagement Survey, the area we scored highest in was Safety. The safety and wellbeing of our employees is a priority in everything that we do, and our safety culture has been key tohow we have successfully managed the business during the COVID-19 pandemic, supporting employees through this dicult time. In our autonomous and collaborative business model, our operational business leaders are empowered and accountable, setting the tone for their operations. Our model has enabled leaders to react to the ever-changing environment we found ourselves in throughout 2021, taking measures to keep people safe, maintain business continuity and to plan for future recovery. Despite the challenges in 2021, manyof our businesses have continued to support our employees, their families and localcommunities, for example, with charity events, fund raising and by facilitating COVID-19 vaccinations with onsite sessions and transportation to vaccination centres. ### Communities Across Senior, we have | Across the world and in all parts of the | School Welding Series competitions, sharing | | continued to provide | | --- | --- | --- | --- | | Group,Senior’s businesses undertake a | their knowledge and helping to judge weld | | opportunities for learning and | | rangeof charitable activities to support the | tests. Flexonics Pathway also held a welding | | development, meeting both | | communities in which they operate. Our | certification event at their facility, which saw | skills and technical training across the Group. | | | colleagues contribute their time, money | 60 young people receive coaching and the | Our now well-established eLearning platform, | | | andeort in areas including educational | opportunity to try their hand at welding. | Learn has enabled us to oer a wide range of | | | mentoring, encouraging the take up of | | training to meet business needs, for example | | Elsewhere, in the UK Senior Flexonics Crumlin Science, Technology, Engineering and Operational Excellence, Management and has embedded itself in its local community Mathematics (“STEM”) subjects in schools, Leadership skills, Health and Wellbeing and through shirt sponsorship for the Whitehead helping support local sports teams and Project Management. Learn is also used to RFC Under-9 rugby team, a youth team based partnerships with local charities. deliver compliance training and, despite the in Bassaleg, South Wales. Crumlin’s challenges posed by COVID-19 pandemic, we As an advanced technology business, our contribution has ensured that the team has a have continued to deliver compliance training staare highly trained leaders in their field. kit in which they can play in with pride, with a for example our Code of Conduct, a programme Their knowledge and mentorship can squad of 20 young rugby players benefitting of Cyber Security courses and Anti Money therefore be immensely valuable, and as from the business’ support. Laundering training. A significant proportion of aGroup we encourage and support our learning is on the job and our culture of sharing At Senior India, meanwhile, the local team colleagues in sharing their expertise and in knowledge and supporting colleagues is central partnered with the charity Anadi Seva Prakalp, particular, enthusing the next generation to developing technical competencies in our an organisation focused on improving the aboutthe possibilities oered by science and operations. The feedback from the Engagement quality of life for deprived senior citizens. engineering. At Senior Flexonics Pathway, our Survey and focus groups confirms that peer With Senior India’s help, Anadi Seva Prakalp engineers volunteer across Texas schools and relationships are positive and that colleagues constructed a dining hall and kitchen at their support competitions to train young people can count on each other for support. This hospice near New Delhi, supporting the and help them start their journey into the feedback highlights our open and honest culture charity’s core mission and the 37 senior world of engineering. Qualified welders at of respect and trust, and how much people citizens living at the premises. Flexonics Pathway volunteer at the Texas High value teamwork. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202126 We have continued toembed “Perform”, ourPerformance and Development system. Perform provides a framework for managers and team members to discuss feedback, performance, behaviours linked directly to our Values, set clear objectives, both business and personal development and create development plans. In addition, we continue to undertake a robust succession planning review annually. TheExecutive Committee scrutinises the talent pipeline, identifying successors or interim cover for key roles across the Group and ensuring appropriate development plans are in place to enable individuals to fulfil their potential. In 2021, we have seen the positive outcome of this process with three senior roles, including the Director of Business Development and Strategy, being filled by talented internal candidates that were identified on the succession plans. TheBoard reviews the succession plans for in support of theExecutive Team and their direct reports onaregular basis, with a special emphasis onencouraging diversity and inclusion. Image: Wamala The feedback from our survey tells us that employees believe that people are treated ### UNICEF fairlyand that we do not tolerate misconduct. | When individuals have concerns, our culture | Senior is committed to supporting the fight | UNICEF’s role in the fight against COVID-19 | | --- | --- | --- | | isto encourage open and honest feedback | against the COVID-19 pandemic. Several of | goes further than just delivering vaccines. | | onmatters being raised with their local | our businesses have directly supported | Aswell as helping UNICEF deliver vaccines, | | management. On the rare occasion when | vaccine rollout programmes in their local | our donation is also supporting the training of | | thingscannot be resolved locally, we have our | communities and Senior plc has also donated | health workers to safely carry out vaccination | | third-party whistle-blowing service called Ethics | £200,000 to UNICEF in 2021 to support its | campaigns, as well as providing access to | | Point which along with our Code of Conduct, | COVID-19 Vaccines appeal. Our donation will | oxygen and other essential interventions to | | was relaunched in 2021. All concerns raised are | help UNICEF to achieve its overall ambition to | help treat those suering from the disease. | | investigated and learning points are actioned by | vaccinate 70% of every country in the world | UNICEF is also delivering millions of items | | local leadership teams as appropriate. | by the end of 2022. Our donation was the | ofpersonal protective equipment to keep | | | equivalent of providing vaccinations for every | frontline health workers safe whilst tackling | During the year, we Senior employee and their families. rumours and misinformation to boost vaccine haveseen an increase confidence. We are pleased to have had the inrecruitment activity COVAX is the only truly global solution to opportunity to help UNICEF in its support of asbusiness conditions thepandemic because it is the only eort the vital global COVAX programme to deliver improve. In order to meet this and future toensure that people in all corners of the vaccines to some of the most remote parts demand we are focussing on building strong world will get access to COVID-19 vaccines, ofthe world, save lives and protect entire relationships with local technical colleges, regardless of their wealth. As a global communities. | universities and education establishments, | business and employer, Senior recognises that | | --- | --- | | partnering with recruitment firms, extending | this global action is of paramount importance | | ouruse of job boards and other approaches to | which is why we were delighted to hear that | | advertising and attracting applicants. In the US, | as of February 2022, the COVAX Facility had | | Recruit, our online recruitment system, has | delivered a staggering 1.1 billion doses of | | placed us in a much better position to attract | vaccine to 144 countries around the world. | talent by enhancing the candidate experience, including the ability to use mobile devices to apply. In 2022, we are planning a further roll out of Recruit. 27SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 STRATEGIC REPORT ## SUSTAINABILITY CONTINUED ## GOVERNANCE Ethics Governance In July 2021, all employees were issued with Compliance risk assessments and audits a personal copy of the Group’s updated Code The Company conducts annual Control Self Our Core Value of ”Integrity” of Conduct booklet and provided with training Assessments at all of the Group’s operating is essential to our success on the revised Code of Conduct. In 2021, 94% businesses, which include questions related Senior remains committed to the highest of total employees completed the training. tothe Code of Conduct. The Company also standards of ethics, promoting the culture of The Code of Conduct booklet is available in all conducts Internal Audits which include testing zero tolerance towards bribery and corruption. languages applicable to the Group’s employees. on areas of governance, including the Code. Employees can give honest feedback, express concerns if there are any practices that they Any fraud issues that have come to the attention Risk assessments are conducted at operating feel uncomfortable with allowing us to take of the Head of Risk & Compliance are discussed business and Group level. Risks related to corrective actions when mistakes happen. by the Audit Committee. areascontained in the Code of Conduct are Ourethics and business conduct programme considered, with follow up actions where commits us to conducting business fairly, Gifts and hospitality residual risk is deemed too high. A more detailed impartially and in compliance with local laws The Group’s Code of Conduct contains specific fraud risk assessment is also performed. | andregulations and to acting with integrity | provisions on Gifts and Hospitality. Employees | | | --- | --- | --- | | andhonesty in our business relationships. | must declare any gift or hospitality provided or | 2021 update | | Theprogramme is underpinned by the Code | received with the individual or annual aggregate | | In 2021, Information Security training was ofConduct, which provides a clear framework value in excess of £200 (or lower amount) as delivered to all employees. Training on Money onwhich to base decisions when conducting specified in the Gifts and Hospitality Policy. Laundering and the Corporate Criminal Oence day-to-day business. It does this by: Act was rolled out to Finance sta and those Third party anti-corruption due diligence • clearly setting out the behaviour expected with external-facing roles. The Company conducts appropriate due of all employees; diligence and ongoing monitoring of third Our plans for 2022 • providing guidelines which help employees parties with which it works, including regular Additional short refresher training courses on toapply our Values; and screening, risk assessments, and compliance appropriate topics will continue to be rolled out • enabling employees to raise a concern or ask health checks; the Company also subscribes during 2022. a question if in doubt. to third-party rating organisations to support its due diligence process, particularly when Whistle-blowing Acting ethically is fundamental to our business appointing agents and distributors. The As part of our internal control procedures, success; it enables us to strengthen long-term Company has a Responsible Sourcing Policy the Group has a Whistle-blowing Policy that is relationships and protect the Group’s reputation. which includes a structured approval process for communicated across all our operations. This all key suppliers and those with additional risks. Policy provides employees with the opportunity We use various forms of communication and training materials, both in person and through to report suspected unethical or illegal corporate The Group’s Code of Conduct clearly states electronic media, to embed the ethics and conduct confidentially and anonymously. thatSenior will follow all applicable laws and integrity requirement across the Group. We regulations, including the UK Bribery Act, etc. The third-party whistle- blowing hot line, investigate any alleged violations or complaints Other Group policies, such as The Use of which is externally hosted, is available in all and take the necessary action. A register of Agents, to reinforce this. languages appropriate to our global locations. reported incidents is maintained by the Group Company Secretary and the Board receives Insider dealings The Group Company Secretary provides regular updates. The Company has a Dealing Code (the “Code”), information on any reported whistle-blowing aimed at ensuring that the Directors of the cases in monthly Secretarial reports to the The Group recognises that the use of third-party Company and employees identified as persons Board of Directors. This is a standing agenda intermediaries can increase potential bribery and discharging managerial responsibilities item at every Board meeting. In addition, corruption risks within the markets in which we (“PDMRs”) of the Company and its subsidiaries, the Group HR Director summarises the total operate. All external sales agents working on do not abuse, and do not place themselves cases and assesses if any patterns or trends behalf of Senior across the world are required under suspicion of abusing, Inside Information are emerging; this is included in every Group tooperate in compliance with the Code of and comply with their obligations under the Chief Executive Ocer’s report to the Board. Conduct. The Code requires a pre-appointment Market Abuse Regulation. The Code contains due diligence and risk assessment to be the dealing clearance procedures which must undertaken, prior to engaging or re-appointing be observed by the Company’s PDMRs and any sales agent and requires them to be issued those employees who have been told that the with the Code, ensuring that they understand, clearance procedures apply to them. The Code acknowledge and accept its requirements. also contains certain additional obligations which only apply to PDMRs. 28 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 | Board | Data Protection and Information Security | Sustainability Governance | | --- | --- | --- | | Board gender diversity | Information security risk assessments are | Internal governance of Sustainability factors | | The Board is supportive of the aim to increase | routinely conducted across the Group, an | isreviewed at both Executive Committee | | its diversity. Following Barbara Jeremiah’s | example of which includes assessing third-party | andBoard level and the factors are externally | | appointment, five of the nine Directors are | suppliers to ensure systems are secure by | verified, where applicable. Further details can | | female (55%). | design. Where a system is unable to comply | befound on page 17 of the Annual Report | | | fully with Senior’s security policy or minimum | &Accounts 2021. | Board succession & Board eectiveness standards, the risk is identified by subject matter Please see the Nominations Committee Report Product Safety Governance experts, reviewed with applicable risk owners on pages 76 and 77 in the Annual Report and steps agreed to manage any risks identified. Product quality is absolutely core in all of &Accounts 2021 for details of the Board’s Senior’s businesses and activities. All of Senior’s succession planning and the annual review In 2021, information security was a key area of businesses have ISO 9001 accreditation for of Board eectiveness. focus to safeguard the Group’s assets during the manufacturing. The operating businesses pandemic, which forced many of the Group’s have additional aerospace and automotive Independence of Directors employees to work from home in environments accreditations, dependent upon their intended Five of the Board members out of a total of eight that could not be directly controlled by the markets. Ultimate responsibility for product at the 2021 year-end were independent, these Group’s Head of Information Security. Working quality and safety lies with the senior manager were Celia Baxter, Susan Brennan, Giles Kerr, from home was facilitated by secure remote of each business unit. Rajiv Sharma and Mary Waldner. In January access to the operating businesses’ computer 2022, Barbara Jeremiah was appointed to networks. During the year, all sta received All products undergo service/safety risk the Board and is now the Company’s sixth training and regular reminders about the assessments, as required in Senior’s demanding independent Director. risks related to information security and the markets. Employees receive regular training on importance of awareness of matters such product and service safety. All businesses have Shareholder Democracy as fraud, scammers and ransomware, proper in place incident investigation and corrective Restriction on Voting Rights use of the internet and smart downloading. action policies and procedures and quality The Company has only one class of shares testing programmes. withequal voting rights. The Company does Targets and Objectives notapply any voting rights ceilings. The Group has a three-year rolling Information Product/service objectives or targets are set Security plan, which documents its mission to bythe operating businesses to meet customer Size of shareholding necessary to introduce improve security maturity and reduce business requirements and regular external product/ a new Resolution risk across the Group. As capabilities are service safety audits are conducted, where Threshold requirements to introduce a new introduced, metrics are developed and routinely standards require. Resolution at the AGM are stated in the Notes reported (including to the Executive team) which to the 2022 AGM Notice of Meeting, which Tax Transparency measure eectiveness and provide a feedback canbe found on the Company’s website. Senior’s ‘Approach to Tax’ document can be loop to the ongoing plan. found on the Company’s website. Facilitation of shareholder participation Physical and Technical Safeguards At the 2022 AGM, shareholders will be able to The three-year plan builds on existing physical vote in person, or by proxy, on resolutions by andtechnical safeguards already in place, post or electronically by visiting www.sharevote. introducing a series of minimum Security co.uk. Further details can be found in the Notes Standards and baselines applicable across to the 2022 AGM Notice of Meeting. theGroup; for example, the introduction Internal Audit ofaSecurity Operations Centre providing The Internal Audit Manager reports to the Head standardised, monitoring capability for any ## indicators of compromise for the Senior Group. ADDITIONAL of Risk & Compliance. In 2021, the Internal Audit Manager undertook nine Information Security ## Certification RESOURCES audits, 10 Risk-based audits and one Thematic The Group’s Information Security policy is based audit. Because of the COVID-19 pandemic, only upon a number of recognised, international one of these audits was able to be carried out Read more about Our Technology Themes on standards, including ISO 27001, NIST CSF and on a physical site visit, the remainder were all page 36 the CIS top 20 controls, which all the Group undertaken remotely. operating businesses are required to follow. Read more about Our Technology & Product Risk process Development on page 38 Procedures for Outsourced Data Processing Please see the Risks and Uncertainties section Where third-party data processing is utilised, Read more about Stakeholder Engagement on of the Annual Report & Accounts 2021 on the Group follows its internal data protection page 40 pages48 to 55. policies and risk assessment procedures, Learn more here including reviewing contractual provisions for both existing and new providers. 29SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 STRATEGIC REPORT ## OUR BUSINESS MODEL ## We aim to create value for all our stakeholders ## through our business model. ### OUR PURPOSE ## To provide safe and innovative products for demanding ## thermal management and fluid conveyance applications ### WHAT WE DO HOW WE DO IT Our strengths/dierentiators ## Senior designs and Organisation People and culture ## manufactures highly • A culture of autonomous collaboration • Integrity and high ethical standards ## engineered, technology rich • Active sharing of best practices • Maintaining a safe and healthy workplace • Complementary capabilities • Empowerment of local management, ## components and systems for • Leverage common customer and supplier within a well-defined control framework relationships • Ongoing investment in personal and ## principal original equipment professional development at all levels Financial ## manufacturers in the throughout the business • Financial strength supporting investment and innovation for customer benefit Read more about our people on page 24 ## worldwide aerospace and Global footprint Innovation ## defence, land vehicle and • 26 operating businesses in 12 countries • Focusing on technology product covering five market sectors andprocess innovation to better ## power & energy markets. serveourcustomers and enhance • An integrated global footprint providing ourbusinessmodel customers with market proximity and The Group has a global footprint with cost competitiveness 26operating businesses located in 12countries servicing blue-chip customers. Safety ### OUR CORE VALUES We operate safely, protecting people and the environment. ## The “Senior way“ Read more about Aerospace on page 56 Integrity We operate with integrity and in an ethical manner. Customer focus We put the customer at the heart of everything we do. Read more about Flexonics on page 58 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202130 ### OUR VISION ## Our vision is to be a trusted and collaborative ## high value-added engineering and manufacturing ## company delivering sustainable growth in ## operating profit, cash flow and shareholder value. ### HOW WE DO IT OUR LONG-TERM ### Our strategic priorities SUSTAINABLE VALUE Autonomous and collaborative Competitive cost country strategy Our employees business model Senior has a global footprint to ensure we Inspiring entrepreneurial Senior’s business model is one of staycompetitive at a capability and cost and operational leadership empowering and holding accountable level.In addition to our North American directs a highly motivated ourbusinesses, operating within a clearly andEuropean footprint we have facilities and skilledworkforce defined divisional structure, to develop and inThailand, Malaysia, China, India, Mexico, deliver business plans in line with overall South Africa and the Czech Republic which Group strategy. help to ensure we meet our customers’ Our customers costand price challenges whilst enhancing Continuously delivering Focus on growth returns on investment. competitive products and We seek to outgrow our end markets, solutions to customers whichhave structural long-term growth Considered and eective capital with outstanding quality drivers, bothorganically and through deployment and delivery performance acquisition. Senior understands the importance of considered and eective capital deployment High performance operating system inthe interest of maximising the creation of Senior has implemented a high performance Our suppliers shareholder value. operating system, drawing on the many Developing reliable, ethical excellent practices from across the Group, Talent development and sustainable supply chains through the Senior Operating System and Senior has a skilled workforce and highly ensuring we can meet our acomprehensive business review process. experienced entrepreneurial business leaders. customers’ requirements We invest continuously in technical skills and professional and leadership development. Our communities Read more about our strategic priorities on Actively participating and pages 34 and 35 helping to improve the quality of life in our local communities. Respect and trust Our culture Minimising our environmental We work together with mutual Our Values set out the principles and impact through peer leading respect and trust. standards of behaviour that drive our culture. sustainability programmes Accountability The safety and wellbeing of our employees We do what we say. isa priority in everything that we do, and our Our shareholders safety culture has been key to how we have Excellence Generating value through successfully managed the business during We continually strive to do better sustainable growth in the pandemic, supporting employees through inevery aspect of our business. operating profit, cash flow very challenging times. In our autonomous and shareholder value and collaborative business model, our operational business leaders are empowered and accountable, and set thetone for their operations. The principles of opennes and transparency are strongly encouraged and areevident across all of our businesses. 31SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 STRATEGIC REPORT ## INVESTMENT CASE: ## POSITIONED FOR GROWTH ## Senior’s clear and focused strategy continues to maximise value for all its ## stakeholders. With a strong focus on operational performance and growth in ## our end markets, Senior is confident of delivering its target return on capital ## employed of a minimum of 13.5% (post IFRS 16) over the medium term ### OUR PURPOSE ## To provide safe and innovative products for demanding ## thermal management and fluid conveyance applications. ### AEROSPACE CLEAR STRATEGY TO MAXIMISE SHAREHOLDER VALUE FLEXONICS ### A DIFFERENTIATED STRATEGIC ### BUSINESS MODEL PRIORITIES Read more about on pages 56 to 59 ### TRUSTED AND COLLABORATIVE HIGH VALUE ADDED ENGINEERING AND MANUFACTURING COMPANY ### DELIVERING MINIMUM 13.5% ROCE (RETURN ON CAPITAL EMPLOYED) OVER THE MEDIUM TERM ### STRONG CORE END MARKETS Civil Aerospace Defence Land Vehicle Power & Energy Increasing passenger demand to Defence remains a priority for the Demand driven by tightening Market leader of complex fluid fly and higher air trac drives the US. Senior has key positions on global emission control regulations systems and products need for new and replacement major funded programmes for truck, o-highway and Read more about on page 10 aircraft. Environmental pressures passenger vehicles Read more about on page 10 to focus on cleanest technology Read more about on page 10 is ideal for Senior’s product and technology portfolio Read more about on page 10 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202132 ## Senior is well positioned to build ## on our strong capabilities and to ## capture growth opportunities.” David Squires Group Chief Executive Ocer ## Focus on IP rich fluid conveyance ## & thermal management ## technology and capabilities. ### LEADING POSITION IN LONG TERM GROWTH These capabilities are supported by a strong body of design and manufacturing process intellectual ### ATTRACTIVE MARKETS AND VALUE CREATION property and know-how. ### DELIVERING SUSTAINABLE GROWTH ### OUR DIFFERENTIATORS ESG LEADERSHIP • Safety & ethics are always our highest priorities • First worldwide in A&D sector to have greenhouse gas reduction targets verified and approved by the • High performance operating system Science Based Targets initiative • Intrinsically strong cash generation • CDP leadership rating of A- on climate change • Autonomous and collaborative business and A on supplier engagement model with a robust control framework • Continuously improving Lost Time Injury Illness Rate; | • Robust balance sheet | a reduction of 69% from 2015 | | --- | --- | | • Technology, product and process innovation | • Early adopters of Hampton Alexander and Parker (2023) | | supporting transition to clean energy | Reviews on gender and ethnic diversity targets | | • Considered and eective capital deployment | Read more about on pages 12 to 29 | • Global footprint Read more about on page 30 33SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 STRATEGIC REPORT ## STRATEGIC PRIORITIES ## The following six strategic priorities are key elements of our business model, which ## drive the creation of stakeholder value. Our progress since they were established ## is noted below and they continue to receive specific attention and focus. | 1. | 2. | 3. | | --- | --- | --- | | ENHANCE SENIOR’S | FOCUS ON GROWTH | INTRODUCED A HIGH | | AUTONOMOUS AND | Senior’s end markets have structural long-term | PERFORMANCE OPERATING | growth drivers. We believe it is possible to outgrow ### COLLABORATIVE BUSINESS our end markets and we seek to do that both SYSTEM organically and through acquisition by: Senior has implemented a high-performance ### MODEL • Growing market share, particularly operating system, drawing on the many excellent Senior’s business model is one of empowering with key customers; practices from across the Group. The key and holding accountable our businesses, • Focusing on innovation; elements include: operating within a clearly defined control • Geographical expansion; • The Senior Operating System: an operational framework to develop and deliver business plans • Seeking out and exploiting adjacent opportunities toolkit incorporating best practice processes such in line with overall Group strategy. Increasing organically and through acquisition. as lean and continuous improvement techniques; collaboration amongst businesses in the Group is a priority to ensure economies of scale are supplier management; new product introduction; What we did in 2021: realised whilst maintaining the autonomous 5/6S methodology; factory visual management • Diversified into product manufacture for satellite business structure. Business leaders throughout systems; risk and financial management; structures applications; Senior are actively embracing collaboration • A comprehensive business review process • Qualifyied a sophisticated bleed air system activities with priorities set atGroup level in utilising a balanced scorecard incorporating for an upcoming flight test programme using consultation with the businesses. KPIs with focus on performance, growth, our advanced Additive Manufacturing (“AM”) operational excellence and talent development. capability; What we did in 2021: • Development of high flow hydrogen gas What we did in 2021: • Implemented engagement guidelines to compressors for clean energy applications and • Continued to implement the comprehensive help optimise the transfer of work to cost battery and electric propulsion liquid coolant restructuring plan in response to global pandemic; competitive locations and to facilitate higher volume compensators in the Urban Air Mobility • Implemented APQP gated NPI processes across level solutions to meet customer needs; (“UAM”) market sector. 75% of Aerospace operating business. Our plans for 2022 • Completed qualification of our RT2i composite • Enhance eectiveness of Group-wide Our plans for 2022 thermoplastic aerospace ducting product and Procurement, Technology and IT Councils. • Ensure the organisation is suitably aligned for the successfully transitioned into series production • Refocus our Advanced Technology Collaboration recovery that is undeway; of a Business Jet LP duct system utilizing both Forum to align our technology investment with • Multiple lean events continue with focus on cycle RT2i 3D Near Net Shape and Fusion Deposition our strategic purpose, focusing on research time reduction and cost reduction, together with Modelling (“FDM”) non-metallic AM parts and development that support growth in low continued targeted inventory improvement within critical areas of the system. carbon technologies. workshops; • Completed the industrialisation of Electric Vehicle • Complete the roll-out of APQP process standards Governance (“EV”) 70kW cooler. Secured additional Fluid across remaining Aerospace operating businesss; The Executive Committee and the Board regularly Conveyance projects for Hybrid and EVs. review the organisational design of the Group to Governance Our plans for 2022 ensure it is aligned to our strategic plan. Our Vice President of Operational Excellence chairs • Continue product development projects to the Lean Council on a monthly basis. support further diversification in space and The Executive Committee reviews operational defence that utilises available capacity in our performance and the Group Chief Executive Aerospace structures operating businesses. Ocer reports progress to the Board at every • Continue to pursue the utilisation of RT2i 3D Board meeting. Near Net Shape and Fusion Deposition Modelling (FDM) non-metallic AM parts for ducting applications in the regional jet market. • Continue to support our customers in the development of thermal management projects for passenger car and commercial vehicle applications. Governance Growth opportunities are regularly reviewed by the Executive Committee and Board. The AdvancedTechnology Forum is in place under the chairmanship of the Group Director of Business Development and Strategy and progress on strategic technology and product developments are regularly presented to, and discussed by, the Executive Committee and the Board. The long-term strategic growth plan is evaluated at the annual Board Strategy Review and monitored continuously. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202134 Read more about Risks and Uncertainties on pages 48 to 55 | 4. | 5. | 6. | | --- | --- | --- | | COMPETITIVE COST COUNTRY | CONSIDERED AND EFFECTIVE | TALENT AND DEVELOPMENT | | STRATEGY | CAPITAL DEPLOYMENT | Senior has a skilled workforce and highly | experienced entrepreneurial business leaders. Enhance Senior’s global footprint to ensure our Senior understands the importance of considered It aims to further develop and attract new talent, businesses stay competitive at a capability and and eective capital deployment in the interest of supporting employees with on-line tools cost level, with key investments made in Thailand, maximising the creation of shareholder value. All to enable personal and skills development. Malaysia, China, India, Mexico, South Africa and significant investments undertaken by Senior are The Group has a strong focus on diversity and the Czech Republic to help ensure we meet our assessed using a rigorous investment appraisal inclusion across the business including on our customers’ cost and price challenges whilst process and are supported by a business case. Board and Executive Team. We were early enhancing returns on investment. Establishing The Group has a financial objective to maintain an adopters of Hampton Alexander and Parker increasingly sophisticated capabilities in these overall return on capital employed in excess of the Review recommendations on gender and competitive cost countries and optimising Group’s cost of capital and to target a minimum ethnic diversity targets. production capacity to align with demand. pre-tax return on capital employed of 13.5% on a post IFRS 16 basis. What we did in 2021: What we did in 2021: • We launched our first Company-wide • Expanded capacity at our Mexican Aerospace What we did in 2021: Employee Engagement Survey; operation in support of increasing volumes. • Successfully raised £49.7m from the strategic • Developed and initiated action plans as a result • Successfully launched new programme for divestment of the Senior Aeropsace Connecticut of the survey and other feedback production on new EU commercial aircraft business helicopter structures business; mechanisms, eg focus groups and employee class seat structures in Thailand and secured new • Realised value from the sale of the property forums; content on several OEM engine programs for following the closure of our oil and gas machining • Participated in the 30% club Mission Gender commercial aerospace platforms. Senior Flexonics Malaysia facility, which oset Equity cross company mentoring Scheme • Completed the transfer of production equipment the closure costs; for the fourth year. from the Pacific Northwest to Thailand to support • Completed the transfer of production from Senior • Expanded our network of recruitment | wing-product series production activities in 2022. | Aerospace Bosman in the Netherlands to our | | | --- | --- | --- | | • Secured additional high-volume land vehicle | Aerospace facilities in France. | Our plans for 2022 | | contracts for fluid conveyance products, including | | • Ongoing actions as a result of the | Our plans for 2022 Hybrid and EV applications in Mexico and Czech Engagement Survey feedback; • Maintain our pricing and return on capital Republic. • Focus on attracting and developing talent. discipline when negotiating contracts and To support this we will continue to implement Our plans for 2022 assessing investments; “Recruit”, our online recruitment system, and • Continue Senior Aerospace Mexico investments • Continue to actively manage portfolio; supplement local training and development in talent and equipment to allow further production • Currently expect to reintroduce dividend in 2022. activities by launching more skills and transfers. Governance personal development eLearning, via “Learn”, • Secure further contracts to fill capacity in our cost The Board regularly reviews its portfolio to our global learning management system; competitive country locations. ensure that long-term value is being generated for • Continue to focus on diversity and inclusion • Continue to transfer cost sensitive product lines to shareholders. Where appropriate, divestments will across the business with a particular focus locations where the cost structure would deliver be considered. M&A opportunities are evaluated and on gender; a more competitive advantage. discussed at each Board meeting, as appropriate, • Undertake our second Global Employee Governance and the M&A and Prune To Grow strategies are Engagement Survey to assess culture and The Executive Committee conducts monthly reviewed at the Board’s Strategic Review. employee engagement across the Group. Business Reviews of all operations. The Group Chief Governance Executive Ocer and Group Finance Director report The Executive Committee conducts an extensive and discuss progress at each Board meeting. The review of operating businesses leadership overall progress of the competitive cost country succession plans. The review scrutinises our strategy is reviewed at the Board Strategy Review talent pipeline, identifying successors or interim on a regular basis. cover for key roles across our businesses and ensuring appropriate development plans are in place to enable individuals to fulfil their potential. The Board formally reviews the succession plans for the Executive Team and their direct reports on a bi-annual basis. 35SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 ### Complex airframe ### components & assembliest STRATEGIC REPORT ## OUR TECHNOLOGY THEMES ## Senior’s fluid conveyance and thermal management businesses have design IP (intellectual property) ## and our structures businesses have manufacturing IP. Both types of IP are underpinned by our ## investment in advanced manufacturing technology and supported by our extensive design and ## engineering expertise. Our global footprint in Aerospace & Defence, Land Vehicle, Power & Energy ## and other attractive and diverse end markets oer deliverable growth opportunities. ### FLUID CONVEYANCE AND THERMAL MANAGEMENT CASE STUDY Fluid conveyance is the flow of fluid, including both gases and liquids, ### An aerospace OEM has dedicated significant within a system. Senior has rich IP in fluid conveyance applications; for ### example, our fluid conveyance designs have been key to maintaining funding and resources to develop a ground ### aircraft cabin air supply and thermal control for the crew and passengers demonstrator with a full hydrogen powertrain during flight. ### by2025. In thermal management, as the pace of electrification picks up, our The concept is similar to land vehicle applications, and in this technology and IP can be used to develop products that can prolong particular case, the customer has chosen to run the system at the life of the battery and increase charging speed; a key dierentiator cryogenic temperatures for eciency. in electric and hybrid vehicle economics. Senior Flexonics has extensive experience with fuel cell battery Capabilities highlights technologies. One of our core capabilities is the design and • World class design capabilities • Component and system level development of cooling systems for batteries and electronics for complex fluid conveyance simulation and analysis, including that enable saafer and faster charging speeds. We also have systems incorporating zero- Finite Element, Computational cryogenic experience from our medical products that use liquid leakage flexible joints to Fluid Dynamics and vibration helium for cooling. compensate for vibration and analysis plus verification and Through existing collaboration between Senior Aerospace and the thermal displacement qualification testing customer, we have already established ourselves as a trusted • Industry leader in the design • Extensive expertise with thin-wall aerospace supplier. and fabrication of highly aluminium, copper and stainless engineered edge-welded and steel structures for demanding Benefiting from our synergies, Senior Aerospace and Senior Flexonics formed bellows devices and thermal management solutions collaborated to submit a thermal management proposal for this components from 3.2 for battery cooling, fuel cells and emerging powertrain. The learnings from this project will prepare millimetres to 5.1 metres cryogenic applications us for future opportunities that involve similar technology. diameter for various • Additive Manufacturing applications, including capabilities in both metal and frictionless servo-pneumatic polymer materials as an enabling actuators technology for complex high- pressure and low pressure ducting systems and heat exchanger designs Battery cooling plate for electrified vehicles Tubing for battery Ultra-lightweight fluid handling composite low Electronics pressure ducting cooling plate SAF-compatible aircraft ducting system SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202136 ### Complex airframe ### components & assembliest Fluid Conveyance & Thermal Management ### STRUCTURESFLUID CONVEYANCE Product and System Design ### & THERMAL & Manufacturing IP ### MANAGEMENT Structures Complex Machining and Manufacturing Know-How: Process IP ### STRUCTURES Modern airframes and turbine engines require durable lightweight components manufactured to close tolerances that operate in extreme environments. Senior is a trusted partner for high-value added engineering and manufacturing of critical structural components for the leading OEMs Complex airframe in the civil and military aviation sectors. Our capabilities and strong components & assemblies customer relationships have secured substantial content on the key aerospace platforms. Precision-machined Capabilities highlights aeroengine | • Deep expertise in | • Highly vertically integrated, with | components | | --- | --- | --- | | manufacturing, assembly and | wide-ranging process | | | qualification of a wide range of | qualifications across machining, | | | complex airframe, aeroengine | Non-Destructive Testing, special | | | and power/energy components | processes, welding and forming | | | • State-of-the-art capabilities in | • High level of collaboration | | | complex 5-axis machining and | between operations in North | | | fabrication, including toolpath | America, the UK and Southeast | | | optimization, on-machine | Asia including software model- | | | probing, and vibration | based engineering capabilities | | dampening Complex space satellite structures ### CASE STUDY ### Recently space launch and satellite applications ### have expanded rapidly, creating new aerospace ### opportunities. A new customer presented Senior with a challenge to produce complex 5-axis machined structural components for a prototype platform, in a very short lead time. Senior’s engineering team worked closely with the customer’s design engineering team to identify maximum impact features for lead-time reduction and developed a best-in-class process based on toolpath simulation, in-cycle probing and cutting tool parameters optimised for machine/spindle harmonics. Backed by our footprint across regions and collaborative business model, we strategically split the work package between two Senior sites in the US with identical equipment, to concurrently manufacture the initial production units. As a result, First Article parts were delivered in record time with 100% quality compliance, earning customer accolades and new business for follow-on production orders due in 2022/23. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 37 STRATEGIC REPORT ## Electrification and hydrogen power are poised ## OUR TECHNOLOGY AND ## toremainthe key technology themes in all our ## PRODUCT DEVELOPMENT ## end-markets in the decades to come. ## 2020 2030 | | Observation | Our response | Observation | | --- | --- | --- | --- | | | Current generation engines | We have significant content in | The US aims to supply | | AEROSPACE | bring 15 to 25% of fuel | current best-in-class engines. | ≥3 bn gallons of sustainable | | | eciency improvements. | | aviation fuels (“SAF”) per year | We are designing and by 2030. | Smaller electrified aircraft will | manufacturing components | | | --- | --- | --- | | enter into service this decade. | for electric vertical take-o | The EU plans for SAF to be | | | and landing (“eVTOL”) aircraft. | ≥5% of aviation fuels. | Additive manufactured LEAP engine oil bearing nozzle and distributor | | Observation | Our response | Observation | | --- | --- | --- | --- | | | Alternative fuels such as | Upgraded and enhanced | A COP26 declaration calls for | | LAND VEHICLES | natural gas and hydrogen are a | versions of our components | all new car sales to be zero | | | crucial engine bridge | such as the Radial Fin EGR | emission by 2035 in leading | | | technology prior to | cooler are fuel agnostic and | markets. | | | widespread electrification of | ensure compliance and | | | | commercial vehicles. | eciency for all applications. | | | | Observation | Our response | Observation | | --- | --- | --- | --- | | | Some countries recognise | We are supporting | The EU targets renewables | | POWER & ENERGY | the role of nuclear power to | engineering with active OEMs | tobe ≥40% of energy mix | | | reach net zero. | of Small Modular Reactors. | by2030. | | | At COP26, world leaders | Our flue gas diversion | The US eyes 100% carbon | | | have agreed to phase out | products are mitigating climate | pollution-free electricity | | | fossil fuel subsidies. | impact for the timebeing. | by2035. | Wye piping, reducer and crossover expansion joint conveys fluid in the form of steam powering turbines to generate electricity SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202138 ### Our fluid conveyance and thermal management ### technology, highly relevant to these market ### development themes, will help us provide ### customers with high-valued solutions in the future. ## 2040 2050 Our response Observation Our response Our current fluid conveyance Alternative-powered aircraft Our Aerospace and Flexonics technologies are compatible will increase demand divisions are teaming up to withSAF. for ourbattery thermal develop cooling and fluid management, fuel cell handling products for our We are supplying hoses andcryogenic fluid customer’s demonstrator forelectrolysers that may handling expertise. hydrogen powertrain units. generate hydrogen for SAFproduction. Stainless steel hoses for Cryogenic products in medical hydrogen production MRI liquid helium systems | Our response | Observation | Our response | | --- | --- | --- | | Our electric vehicle inverter | At COP26, fifteen countries | We have commenced | | heat sink “Omega Fin” has | have committed to 100% | production of our 70kW | ### NET ZERO been awarded a patent. zero-emission new truck and battery cooler for e-buses. bus sales by 2040. We are in active customer We have numerous discussions on our battery developments with battery and electronics cooling and manufacturers and OEMs. fluid handling products. “Omega Fin” inverter heat sink Battery cooling plate for electrified vehicles Our response Observation Our response Energy storage will be Emerging economies will We will continue to grow required on a larger scale catch up on renewables ourlow-carbon business, asrenewables grow. share. including solar and wind. Senior has solutions for Ensuring stable power We have solid experience thermal management for supply for critical instationary fuel cell backup energy storage applications. infrastructure such as data power for data centres and centres will be important. hydrogen conveyance solutions. Heat exchanger for thermal Fuel distribution anode management separator plate 39SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 STRATEGIC REPORT ### OUR STAKEHOLDERS ## STAKEHOLDER ENGAGEMENT Employees Read more on page 41 ### Senior engages with five key ## Engaging with our stakeholders ### groups– our employees, customers, Customers ## is fundamental to our business ### suppliers, communities, and Read more on page 41 ## success. Our stakeholders are ### shareholders. Byengaging and ## people, communities and collaborating with our stakeholders Suppliers ### we can ensure ourbusiness ## organisations with an interest or Read more on page 42 ### growsand delivers long-term ## concern in our purpose, strategy, ### sustainable value. Communities ## operations and actions. Read more on page 42 Shareholders Read more on page 43 ### WHY ARE THESE STAKEHOLDERS ### IMPORTANT TO OUR VALUE ### CREATION? ### EMPLOYEES The calibre and capabilities of the people within the Group drive our success and we recognise the importance of attracting the best talent into the business and retaining and developing individuals to enable them todotheir best work Skills, loyalty Career and value development ### SUPPLIERS creation opportunities CUSTOMERS Constructive engagement with Our Core Value of “Customer k e h o l d e suppliers sets fair expectations on t a r e Focus” recognises the s n Respectful s g Safe and high safety, quality, ethical behaviour u a importance of customers o g relationships u e performance and delivery performance n m in oursuccess and supply i products and t e n n chain stability o value creation t c Safe, quality and ethical Trust and long-lasting supplies and value creation relationships Corporate finance Talent for recruitment and valuable and sense of Sustainable Local feedback community growth in support operating profit, and value cash flow and creation shareholder value ### SHAREHOLDERS COMMUNITIES Senior strongly values the support We recognise our responsibility and engagement of its shareholder to the communities in which community and understands the we operate importance of this in the future success of the business SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202140 so thatpeople are inspired by what we do. ### EMPLOYEES Rewardwas also anarea for improvement, How we engage bothin terms of how individuals are rewarded The global pandemic meant developing new and the process fordetermining pay. ways of working and ensuring we maintained eective communication and employee Company actions responding to engagement, while remaining COVID secure engagement outcome and creating an environment of stability Management-level actions for employees. In our autonomous and collaborative business model, the questions and feedback were We launched our first global employee collected at an operating business level and engagement survey in May 2021. The each operating business has analysed their surveywas split into three main sections, feedback, shared the feedback with their teams Engagement, Values and Health and and developed action plans. Action plans are Wellbeing, and was delivered electronically, monitored by the Executive leadeship teams. toall employees in their preferred language. Participation in first global Board-level actions Outcome of engagement Feedback and high level action plans have been employee opinion survey The response rate of 81% exceeded our shared with the Board and in particular, Celia expectations and the benchmark for Baxter, the non-executive Director designated manufacturing companies with a significant to provide focus on employee engagement, has ## number of employees who do not have 81% spent time doing a deeper dive on the feedback. readyaccess to company emails. The 81% response rate in itself is a positive indicator Celia Baxter and Jane Johnston, Group HR Engagement Health and ofengagement and employees’ desire to Director, have resumed their programme of face-to-face focus groups and visited four UK score Wellbeing score provide feedback. businesses, holding 15 sessions in the autumn of Overall the feedback was positive, with a 2021. The sessions were interactive and provided score of 7.4 out of 10 for the question “Overall, an opportunity for Celia Baxter to engage directly how satisfied are you working at Senior?”. with a cross section of employees, including Other highlights included management employee and union representatives, asking support, peer relationships, goal setting and 7.6 andanswering questions. As well as holding 7.1 meaningful work. As expected, there are thefocus groups, the site visits included areasfor improvement. Across all of Senior factorytours and meeting the leadership teams. the key areas we should work on are: In addition, we consulted with UK employee improved communication regarding the out of a max of 10 out of a max of 10 representatives on executive pay. operating business strategy and mission for dedicated purposes with our largest ### CUSTOMERS customers to understand more clearly what How we engage thecustomer perceptions were regarding | We regularly engage with our customers at | Seniorand how we could improve. This | | --- | --- | | operational and senior levels. Division-level | resultedin Senior winning several large | | Customer Relationship Managers are in | packages of work in 2021; taking market | | placeto interact with and support our largest | share from our competitors. | customers, ensuring that we monitor and workto understand what is happening in their Company actions responding to businesses, how it aects their end-markets, engagement outcome and that we respond appropriately across Management-level actions all ofSenior. Listening to and understanding our customers and their programme issues provides valuable We actively seek feedback from our insight which helps inform future technology customers via frequent, tactical interactions and product development and innovation between our operating business customer investments and activities. account and buisness development managers, with monthly reporting of activities and We conduct periodic, formal Senior monitoring of customer scorecards for Senior Management Meetings (“SMMs”) with businesses. Whilst Senior regularly receives our largest customers. Operational metrics, ## customer awards for operational excellence, communications, growth strategies, and Actively seeking feedback from our incases where our performance falls short of market dynamics are frequently the main ## customers is vital to ensure we are expectations, we actively engage with the topicsand help both Senior and the customer customer to agree both improvement targets Executives to understand each other better. ## aligned to their needs.” and implementation schedules. Board-level actions Launie Fleming Outcome of engagement Our Board receives detailed monthly updates Chief Executive of Aerospace Division We conducted multiple Senior Management relative to customer activities. meetings with our major customers in 2021, covering both normal business activities and 41SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 STRATEGIC REPORT We identified suppliers to respond to CDP’s ### SUPPLIERS questionnaires through an online platform. How we engage Wearranged webinars and video calls with We engage with our suppliers in a variety suppliers to provide support, communicate of ways, including during tender and bid expectations and exchange best practice ideas. processes, site visits and audits, where | appropriate. In 2021, collaborative | Outcome of engagement | | --- | --- | | communication with critical suppliers was key | Our collaboration with suppliers to respond to | | to managing the eects of escalating supply | the increases in supply chain challenges during | | chain constraints impacting our operating | 2021 allowed the Group to manage lead times, | | businesses, in some cases utilising weekly, | leverage long-term supply agreements, | | or even daily, status update meetings. The | consolidate supply requirements and identify | | Executive Committee continues to closely | additional supply sources, where needed. | monitor the health and performance of critical For the CDP’s supply chain engagement Group suppliers and supports the operating programme, we identified around 340 suppliers, businesses in their engagement with suppliers accounting for 80% of the Group’s total spend. Engaged with where necessary. In 2021, we engaged with all 340 suppliers | In line with our Contract Review Policy, which | through CDP’s supply chain programme. | | | --- | --- | --- | | is mandatory for all operating businesses, we | We have analysed and verified the results. The | | | continue to communicate the requirements of | | 340 | insights from the engagement programme were the Group Responsible Sourcing Policy to key then used to set strategy and prepare for 2022. suppliers through CDP’s suppliers and provide feedback to our suppliers supply chain programme For all our eorts in 2021, CDP have awarded on their performance and, where necessary, us Supplier Engagement Leader status based will agree improvement action plans. on our Supplier Engagement Rating (“SER”). The Group also completes bi-annual reporting Company actions responding to Board-level actions pursuant to The Reporting on Payment engagement outcome The Group Director of HSE & Sustainability Practices and Performance Regulations (2017), Management-level actions attended two Board meetings in 2021 and demonstrating our commitment to remain a The Executive Committee identified supply provided an in-depth review on the progress strong financial partner with our suppliers. chain challenges as a new principal risk to in engaging with suppliers in respect of the The Board reviews the bi-annual reports for the Group in 2021. In response, supply chain Group’s Scope 3 targets. our UK subsidiaries to monitor compliance with negotiated vendor payment terms. concerns and mitigating actions have been Read more in the Risk & Uncertainties Section on a focal point during operating business page52 For Scope 3 GHG emissions, Senior reviews and Executive Committee meetings. committed that 80% of its suppliers by spend, Read more in the Sustainability Section on page 15 | covering purchased goods and services and | The Group Chief Executive is directly engaged | | --- | --- | | capital goods, will have science-based targets | with our largest suppliers on our Scope 3 | | by 2025. | greenhouse gas emission targets, and provides | regular updates to the Board on progress. ### COMMUNITIES Outcome of engagement The first group of students supported by How we engage SAThailand will graduate in March 2022. Many of the Group’s operations are major employers within their local communities The collected donation from SA Mexico was andnurture good relationships with their able to fund seven chemotherapy treatments. stakeholders, finding ways to contribute The help from Senior India enabled food to tolocal society, in addition to providing be prepared and served in the new kitchen employment opportunities. Despite the and dining hall in the home for the elderly, pandemic, where possible, community improving the quality of life of senior residents. engagement programmes were maintained. Examples of our community engagement Through engagement with local schools, programmes include: SFPathway identified talent in the local community and inspired local students • In 2021, SA Thailand provided Scholarship to pursuetheir passion. to22 students in the Diploma Degree in Aerospace Components Manufacturing Company actions responding to for two years. SA Thailand developed engagement outcome the training programme with Thai-Austrian Management-level actions technical college. Looking forward, Group operations will continue ## • SA Mexico supported women with cancer I am pleased that we have continued to support communities by contributing to this year and money was raised by selling ## charities serving their local causes, including to engage with, and support used plastic to recycling companies. fundraising for local hospitals, children’s homes, • Senior India collaborated with NGO Anadi cancer foundations, charities supporting mental local communities, successfully Seva Prakalp to construct a dining hall along health and the elderly. ## navigating the challenges posed with a kitchen for a home for the elderly Board-level actions ## and replaced the facility’s old inverter by the pandemic.” The Board continues to focus on its responsibility batteries for power back-up. to our communities and aims to identify Jane Johnston • SF Pathway provided coaching to students those Environmental, Social and Governance Group HR Director from local schools who have an interest considerations that have the potential to impact inwelding. our long-term sustainability as a business. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202142 During 2021, the Company’s Chairman also ### SHAREHOLDERS attended the full-year and interim results How we engage announcements in March and August, | In 2021, in addition to the regular engagement | respectively. The Chairman undertook a series | | | --- | --- | --- | | that we maintain with our major shareholders, | of conference calls with the Company’s major | | | we had extra contact and consultation due | shareholders to discuss any queries they | | | to the conditional proposals from LSF XI | may have regarding the corporate governance | | | Investments, LLC, a company advised by Lone | of the Company. Furthermore, Celia Baxter, | | | Star Global Acquisitions, Ltd. It was important | the Senior Independent non-executive Director, | | | for us to communicate and engage with our | was also available to attend meetings with | | | shareholders to answer all questions, queries | major shareholders upon request, so providing | | | and concerns they had on the Company and | an alternative channel of communication | | | the Board’s decision around the proposal. | between the Company and its shareholders. | | | Twice this year, the Group Chief Executive | Regular investor updates were provided to the | | | Ocer, Group Finance Director and Director | Board as part of the reporting cycle, which | | | ofInvestor Relations & Corporate | includes feedback on investor perceptions and | | | Communications undertook a series of virtual | market environment. Updates from Company- | | | meetings (by video conference or conference | level engagement with shareholders are | | | call) with our major shareholders, following the | provided to the Board as appropriate. | | | announcement of the full-year and interim | | The frequency of meetings with | In 2021, Celia Baxter (acting in accordance results, to discuss both the Board’s strategic ## major shareholders increased in withher role as the Chair of the Remuneration objectives and the detailed performance of the Committee) and our Director of HR engaged ## business as well as to understand their views 2021...these exchanges highlighted andconsulted with major shareholders, key and address any concerns they may have on ## proxy voting agencies and advisory bodies (ISS, the value of establishing and the Company. GlassLewis and the Investment Association) ## maintaining close relationships.” In addition, we issued four market updates, throughout the year on key remuneration each time oering our major shareholders topicsand to gather their views on their voting Ian King theopportunity of a follow-up call with our preferences regarding the Remuneration Policy Chair Group Chief Executive Ocer and Group and Report and potential future changes. Finance Director. Outcome of engagement Company actions responding to Furthermore, we held an in-person CMD at • Shareholders were kept fully informed of the engagement outcome the London Stock Exchange on October 12, performance, market dynamics and strategy Management-level actions where we showcased our strategy, of the Group. Engagement with shareholders during the capabilities, and arange of our business • Fully informed shareholders about the Board’s corporate activity bid process reconfirmed how leaders. We also provided investors with a decision in the corporate activity process. engaged our investors are with regard to the deeper insight into our fluid conveyance and Company’s performance and ensuring that • Followed up and engaged with major thermal management technology and how we continuing our strategy will deliver significant shareholders on the changes to the are future proofing growth of the business as shareholder value over the medium-term. Remuneration Policy and the decisions wetransition to a low carbon economy. Questions focused on end-market recovery taken by the Board regarding the outcome The Company typically makes constructive andkey areas of Senior’s strategy. In response, of the 2020 executive bonus relating to the use of the Annual General Meetings (“AGM”) we provided a clear market and strategy update attainment of free cash flow targets and to to communicate with its private shareholders at the CMD. This event focused specifically penson alignment. as we value their engagement and the on providing a deeper insight into ourfluid • Provided reassurance that the Group opportunity for the Group Chief Executive conveyance and thermal management continues to be in a strong position and Ocer to present on the Group’s business. technology and how we, as a business, remains a good investment opportunity. InApril 2021, this process had to again be plan tofuture proof as we transition to a low • Received better understanding of shareholder limited, because of the UK Government’s carboneconomy. expectations in respect to strategic decisions, restrictions due to the pandemic; however, remunerations and sustainability particularly Management are continuing to meet weensured that private shareholders would climate change risks and opportunities. withshareholders and will be returning have live audio access to the proceedings toin-person meetings as part of the full year ofthe AGM and the opportunity to submit 2021 results roadshow. questions to the Directors and listen to theirresponses. Board-level actions Feedback received from engagement with our Throughout the year we responded to shareholders has been taken into consideration requests for further information. as noted in the Remuneration Report. 43SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 STRATEGIC REPORT ## SECTION 172 STATEMENT ## In their discussions and decisions during 2021, the Directors ## of Senior plc have acted in the way they consider, in good ## faith, would most likely promote the success of the ## Company for the benefit of its members as a whole. The impact of Senior plc’s operations • The Board is accountable for the oversight ### HOW THE BOARD CONSIDERED on thecommunity and environment: ofa broad Corporate Framework which ### STAKEHOLDERS DURING 2021 establishes the unmistakable expectation • Many of the Group’s operations are major In accordance with Section 172 of the thatSenior will operate with integrity, respect employers within their local communities Companies Act 2006, the Directors are and morality in every aspect of its business. and nurture good relationships with their requiredto have regard to wider expectations Theframework includes a comprehensive stakeholders, finding ways to contribute ofresponsible business behaviour, such as: Code of Conduct, which provides clear to local society, in addition to providing guidance on behavioural expectations across employment opportunities. Despite the The likely consequences of any decision multiple facets of the business, including a pandemic, where possible, community inthe long term: zero tolerance towards bribery and corruption, engagement programmes were maintained. • The Directors recognise the decisions they adherence to all applicable trade compliance, Further details on the Group’s activities make today will aect Senior plc’s long-term competition and anti-trust regulations, a safe, are set out on page 26. success. During the year, the Board had diverse and inclusive workplace, accurate and • A commitment to sustainability underpins particular regard to the long-term success complete business records and protection of Senior’s purpose, and is a key objective of the of the Company in its decision to conduct a company data and assets. The framework Directors and the Board. Senior’s programme thorough review to assess the fundamental also provides for a whistle-blowing channel is well defined and being delivered. Its value of Senior as well as the likely value to that allows stakeholders to confidentially and progress is measured by metrics, targets and becreated by the continued delivery of its anonymously report suspected unethical an annual scorecard. Senior’s industry leading strategy when it faced corporate action or illegal corporate conduct. All reported ESG disclosures and ratings are evidence in theform of a conditional proposal from whistle-blowing incidents and any resulting of the Group’s long-standing approach to LSF XI Investments, LLC, a company advised actions are reviewed and monitored by the sustainability. Senior remains the only, by Lone Star Global Acquisitions, Ltd. Having Board and Audit Committee. The Board, via company in its sector to have its scope carefully considered this proposal, the Board the Audit Committee, also receives regular 1, 2 and 3 greenhouse emissions reduction is unanimously confident that continuing reports regarding compliance training targets approved and verified by the SBTi. thefocus on our strategy will deliver programmes, Corporate Framework updates, Further detail on Senior’s sustainability significantly more value to shareholders sanctions and trade compliance matters and progress in 2021 are set out on page 13. over the medium-term. incidents of fraud or suspected fraud. Read • Amongst other sustainability successes, in • The Directors also made the decision to divest more on pages 78 to 79 for our Corporate 2021, Senior maintained its CDP leadership Senior Aerospace Connecticut, our stand Governance Report. rating of A- for climate disclosure. CDP have alone, build-to-print helicopter structures also recognised Senior’s eorts in 2021 by Interests of the Company’s employees operating business to PCX Aerosystems, LLC. awarding us Supplier Engagement Leader and the need to foster the Company’s Upon evaluation, the Board felt that this status based on our Supplier Engagement decision made sense in the long term as business relationships with customers, Rating (SER). Senior Aerospace Connecticut was the only suppliers andothers: • We are also committed to implementing the operating business in the Group whose • The Board and its committees understand recommendations of the TCFD. See page primary focus is build-to-print parts for the thestrategic importance of stakeholders to 18to 23 for our update on TCFD. rotary sector. Therefore, it was better suited Senior’s business. When making decisions, to a larger organisation, which is primarily the Directors have regard to the interest of The desirability to maintain a reputation focused on that market. The divestiture of this colleagues, and the need to foster business for high standards of business conduct: operating business is consistent with Senior’s relationships with other key stakeholders. • The Board acknowledges its responsibility for strategy to review the overall portfolio of our Weacknowledge that not every decision setting and monitoring the culture, values and businesses and evaluate their strategic fit we make will necessarily result in a positive reputation of the Company. For Senior, our within the Group. The net proceeds from the outcome for all our stakeholders; the Board core Values underpin our culture. During the sale were used to further strengthen Senior’s therefore has to balance competing interests year, the Board considered Senior’s culture in balance sheet and provide greater flexibility in reaching its decisions. its decision-making and discussions (further for the Group to operate within its capital • While the Board engages directly on some details on this can be found on page 26). deployment framework. issues with stakeholders, there are other | • Further details can be found on the | engagements that happen below Board level. | | --- | --- | | Investment Case (page 32), Business Model | Nevertheless, the Board is well informed | | (page 30) and Strategic Priorities (page 34). | ofthese engagements and this helps it | understand how our operating businesses aect our stakeholders’ interests and views. More detail on how we engage with our key stakeholders (including our customers and suppliers) can be found on pages 40 to 43. Forfurther details on how the Board operates and makes decisions, and its activities this year, see pages 41 to 43. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202144 | • Our colleagues are vital to our success and | In addition, Celia Baxter, the non-executive | In discharging our section 172 duties, the | | --- | --- | --- | | they are always considered in the Board’s | Director designated to engage with | Directors have regard to the factors set | | discussions and decision-making process. | employees spent time reviewing the data | out above and any other factors which we | | During 2021, the wellbeing of our colleagues | in more detail and has continued withour | consider relevant to the decision being made. | | across the Group has remained a priority. | programme of focus groups, managing to | We acknowledge that every decision we make | | TheBoard continued to monitor the | engage in person while complying with Covid | will not always result in a positive outcome for | | organisation’s response to Covid, how the | guidelines. Read more on our employees | all of our stakeholders. However, by considering | | Company continued to operate eectively | on pages 24 to 25 and 41. | the Company’s Purpose, Vision and Values, | | inthe ever-changing situation and created | | together with our Strategic Priorities and having | The need to act fairly between members asafe working environment in the various a process in place for decision-making, we aim jurisdictions in which we operate. Other than of the Company (shareholders): to ensure that our decisions are considered ingeographies with government mandated • During the year, the Board, the Group Chief and proportionate. shutdowns, our operations have continued Executive Ocer and Group Finance Director, Further details on how the Board operates and tofunction throughout the pandemic and and the Director of Investor Relations and reflects stakeholder views in its decision-making wehave implemented appropriate measures Corporate Communications held various are set out in the Corporate Governance Report and protocols to keep people safe. In order to meetings with investors (see page 43 on pages 66 to 67. | ensure that the Board considers the impact | for more detail on our engagement with | | --- | --- | | oftheir decisions on employees across the | shareholders). These meetings gave | | group, the Board receives regular feedback | investors the opportunity to discuss views | | regarding people and culture. A key element | on financial and operational performance, | | of this in 2021 was the wealth of information | capital investment, capital allocation policy, | | provided by the global engagement survey. | end market fundamentals, and strategy. | TheGroup Chief Executive Ocer and Group HR Director shared the survey feedback with the Board, highlighting key themes, strengths, areas for improvement and action plans. ### NON-FINANCIAL INFORMATION STATEMENT In compliance with the Non-Financial Reporting requirement set out in sections 414CA and 414CB of the Companies Act 2006, the table below illustrates where our stakeholders can find information in respect of non-financial matters. The due diligence carried out for each policy is contained within each policy’s documentation. Reporting Where to find it Environmental Matters • Sustainability: Environmental, Social and Governance (ESG) Pages 12 to 29 and www.seniorplc.com/sustainability • Health, Safety and Environment Policy www.seniorplc.com Employees • Employee Engagement Pages 24 to 25, 35, 41, 54, 73 • Talent Management Pages 35, 42, 54, 77 • Equality, Diversity and Inclusion Pages 24, 27, 35 • Code of Conduct Pages 24, 26, 28, 55 and www.seniorplc.com • Whistle-blowing Policy Pages 28, 75, 78 and www.seniorplc.com Social Matters • Community Engagement Pages 26, 42, 67 Respect for Human Rights • Statement on Anti-Slavery and Human Tracking Page 78 • Anti-bribery and Anti-corruption Policy Pages 28, 44, 55, 78 • Modern Slavery Statement www.seniorplc.com • Responsible Supply Chain Policy Page 78 and www.seniorplc.com Business model • Business Model Pages 30 Principal risks • Risks and Uncertainties Pages 48 to 55 KPIs • KPIs Page 47 • Non-Financial KPIs Page 46 For more information please visit: www.seniorplc.com 45SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 STRATEGIC REPORT ## KEY PERFORMANCE ## The Group highlights five financial and ## INDICATORS ## two non-financial metrics to measure ## progress in implementing its strategy. ### NON-FINANCIAL METRICS | The Group’s non-financial objectives are | Carbon dioxide emissions | | | --- | --- | --- | | as follows: | Scope 1 & 2 (market based) | | | | (Total tonnes CO | 2 e) | • to reduce the Lost Time Injury Illness Rate (per 100 employees) to 0.3 by 2025; and ## 19% decrease • to reduce the absolute Scope 1 and 2 from 2018 base year Greenhouse Gas (“GHG”) emissions by 30% by 2025 (compared to 2018 base year). 56,992 The key performance indicators (“KPIs”) are 50,000 46,747 46,540 determined as follows: • CO emissions is an estimate ofthe Group’s 40,000 2 carbon dioxide emissions in tonnes 30,000 equivalent; and • lost time injury illness frequency rate is the 20,000 number of OSHA (or equivalent) recordable injury and illness cases involving days away 10,000 from work per 100 employees. 0 2018 202120202019 The Group collects its environmental data in accordance with the guidelines specified by Target Total tonnes CO 2 e the Global Reporting Initiative (“GRI”), to the In 2021, our absolute Scope 1 and 2 Greenhouse Gas (“GHG”) emissions reduced from extent that this is currently practicable, and 57,418 tCO 2 e (2018) to 46,540 tCO 2 e. We are on track to meet our SBTI 2025 target with hasapplied the greenhouse gas conversion a 18.9% reduction against our 2018 base year. factors contained within the Energy Agency and US EPA conversion factors 2021. The Group has used the financial control Lost Time Injury Illness Rate approach to define its organisational boundary (incidents per 100 employees p.a.) and reports data from its wholly-owned or majority-owned operations. Billed or metered ## sources represent the basis of the majority 0% ofour greenhouse gas emissions. 2.0 1.78 Senior is on track to meet our 2025 targets 1.69 forScope 1 & 2 GHG emissions and lost time 1.50 1.5 injury illness rate. Further details of the Group’s performance record inthis regard, including 1.17 1.09 its long-term performance trends, areshown 1.0 on pages 14 to 17. 0.67 0.50 0.44 0.5 0.32 0.32 0.0 2017 2018 202120202019 Total Recordable Injury Illness Rate Lost Time Injury Illness Rate We remain on track to reach our 2025 Target to reduce our Lost Time Injury Rate to 0.30. In 2021 we reduced our lost time injuries from 21 to 18. The end of year Lost Time Injury Rate was steady at 0.32, a similar result to 2020 as we had less employees in the Group as a consequence of the divestiture of the Connecticut business and other stang changes. 60,000 57,418 Increased Decreased Rate per 100 employees Unchanged 46 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 Scope 1 & 2 Market Based Emissions ### FINANCIAL METRICS The Group’s financial objectives are as follows: Organic revenue Net cash from operating growth (£m) activities (£m) • to achieve organic revenue growth (at constant exchange rates) in excess of the ## -5.5% -44.8% rate of inflation; • to increase the Group’s return on revenue ## -1.9% excluding margin each year; 48.9 • to increase adjusted earnings per share ## disposal on anannual basis; 27.0 • to generate sucient cash to enable the Group to fund future growth and to follow 697 Against the backdrop of the pandemic, aprogressive dividend policy; and theGroup delivered robust net cash from • to maintain an overall return on capital 659 operating activities of £27.0m and is capitalised employed in excess of the Group’s cost and prepared for growth in the Group’s key of capital and to target a pre-tax return in endmarkets. As discussed in the Group Chief Executive excess of 13.5% on a post IFRS 16 basis. Ocer’s Statement, the coronavirus pandemic Cash performance in 2020 benefited from The key performance indicators (“KPIs”) continued to impact on the Group’s end market significant reductions in working capital as are determined as follows: and customers, particularly in civil aerospace. customer demand reduced. The impact on the Divisions is set out in the • organic revenue growth is the rate of growth Divisional Reviews, on pages 56 to 59. The of Group revenue, at constant exchange overall reduction in Group revenue was a result rates, excluding the eect of acquisitions of lower revenues in Aerospace partly oset and discontinued activities; by higher revenues in Flexonics year-on-year. • return on revenue margin is the Group’s adjusted operating profit divided by revenue; • adjusted operating profit is defined in Return on revenue margin (%) Return on capital employed (%) Note9; ## • adjusted earnings per share is defined in +40bps +50bps Note12; • net cash from operating activities is available from the Consolidated Cash Flow 0.5 0.5 Statement; and 0.9 1.0 • return on capital employed is the Group’s adjusted operating profit divided by the | average of the capital employed at the start | The Group’s adjusted operating margin | Return on capital employed (“ROCE”) | | --- | --- | --- | | and end of the period, capital employed | increased by 40 basis points, to 0.9% for the | increased to 1.0%. The increase in ROCE was | | being total equity plus net debt (defined | full year. This improvement in profitability | mainly as a result of the increase in adjusted | | in Note 32c). | reflected the savings delivered from the | operating profit compared to prior year. | restructuring programme as well as our focus on cost management activities and mitigated the drop through impact of the reduction inrevenue. Adjusted earnings/(loss) per share ## n/m (0.84) 0.17 The weighted average number of shares, for the purposes of calculating undiluted earnings per share, increased to 415.7 million (2020 – 414.9 million). The increase arose principally due to vesting of shares held by the employee benefit trust during 2021. The adjusted earnings per share was 0.17 pence. The year-on-year improvement arose from improved profitability. 1,102 20 20 20 20 20 47SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 21 21 21 21 21 STRATEGIC REPORT ## RISKS AND UNCERTAINTIES ### 2021 AT A GLANCE Risk Management • The Board completed two comprehensive risk assessments, encompassing both ## The Group continues to leverage and adapt its risk principal and emerging risks ## and assurance framework to meet new challenges • Completed “deep dive” Information Technology/Information Security ## presented by the evolving COVID-19 pandemic. assessments across nine critical Group operating businesses and the Group headoce • Introduced new annual risk assessment programmes focused on climate change During the risk assessment process, all ### OUR APPROACH TO RISK and tax evasion facilitation identified risks are evaluated against our ### MANAGEMENT purpose, strategy and values to understand their Assurance Identifying and eectively managing risks is likelihood and impact of occurrence, resulting in • Completed broad scope audits with essential to the achievement of the Group’s a register of principal risks. Once the principal nine operating businesses (eight virtual, strategic priorities and supporting the Group’s risks have been identified, mitigating controls one on site) sustainability initiatives. The Group’s Business and relevant policies are documented and • Information Security assurance reviews Model is described on page 30, our Strategic additional mitigating actions are developed conducted across a cross section of the Priorities are on page 34 and Sustainability where appropriate. An owner is assigned Group businesses starts on page 12. to each action. The operating business risk • Deployed thematic audits to address registers are refreshed regularly and reviewed The Board is responsible for the Group’s specific risks related to the Group’s by Divisional Management and the Executive integrated risk and assurance framework, Controls Self Assessment process, Committee. The Executive Committee conducts ensuring that the Group risk process and contract review and Divisional its risk assessment twice a year and the systems of internal control are robust, Management approvals principal risks are discussed at each Executive continuously monitored and evolve to address Committee meeting. Every principal risk is changing business conditions and threats. Principal Risks (starts on page 50) assessed for our financial viability scenarios, TheBoard also provides direction and sets the • Pandemic: The Group continues to tosee if they could have a material financial tone on the importance of risk management. adapt its COVID-19 response, including impact, either on their own or if they Responsibility for the monitoring and review vaccination clinics for employees, flexible materialised together. ofthe eectiveness of the Group’s risk and leave policies and adaptable “return to assurance framework has been delegated by The Board performs robust, semi-annual oce” plans the Board to the Audit Committee. The risk assessments of the principal and emerging risks • Cyber/Information Security: Vulnerability process is reviewed and agreed annually with facing the Group. In addition, the Board regularly management and threat monitoring systems the Audit Committee. The Head of Risk and assesses outputs from the integrated risk and have been implemented to improve the Compliance delivers a comprehensive report assurance framework and takes comfort from Group’s resilience to threats and attacks of risk, assurance and compliance activities the “three lines of defence” risk assurance ### at each Audit Committee meeting. model. The first line represents operational LOOKING FORWARD management who own and manage risk on The Group embeds risk management within Risk Management aday-to-day basis, utilising eective internal its existing business processes across alllevels • Review our risk tolerance structure to controls. The Group Executive Committee and within the Group. Risk tolerance is reflected ensure tolerance thresholds remain Divisional Management monitor and oversee throughout our control framework by way of the appropriate as the Group continues these activities, representing governance Group’s delegation of authority, code of conduct through recovery and growth phases and compliance at the second line. | and internal controls system. A catalogue of | | for our end markets. | | --- | --- | --- | | approximately 50 identified risks encompassing | The third line is the independent assurance over | • Refine our information security and | | strategic, financial, operational, environmental | these activities provided by internal and other | data privacy risk management process | | and other external risks serves as the | external assurance. The internal assurance | | • Expansion of risk management activities foundationfor comprehensive risk assessments programme includes a combination of broad related to climate change in support completed by every operating business and scope internal audits, evaluating financial, IT, of theGroup’s eorts to comply with bythe Executive Committee as part of the annual HRand other operational controls, plus limited TCFDrequirements strategic planning process. The risk assessments scope thematic reviews designed to provide also consider emerging risks asdetected through assurance over targeted risk areas. Internal Assurance internal workshops and external sources. audits are conducted either in person or • Broad scope audits planned for 10 Emerging risks are risks whichmay develop but virtually,with all Group businesses audited on a locations with a focus on resuming on-site have a greater uncertainty attached to them in multi-year rotational schedule based on various audits where possible terms of likelihood, timing and velocity. Emerging factors, including site specific risks, prior audit • Information Security assurance reviews to risks are monitored and formally added to the results and changes within local management. be conducted with six operating businesses identified risk catalogue when the risk solidifies Thematic reviews are deployed across a cross • New thematic audits covering trade within the Group’s strategic planning horizon. section of the Group dependent on the risk compliance, supply chain challenges and being targeted. In addition, all Group businesses The Group also conducts functional risk personal data protection must complete an annual Controls Self assessments, targeting areas such as fraud, tax Assessment, allowing the Group to identify Principal Risks (starts on page 50) evasion facilitation and climate change. The risk andaddress gaps in compliance with the • Supply Chain Challenges: Close co- assessment specific to climate change follows Group’s governance policies and internal ordination with suppliers and customers the Group’s standard risk assessment process controlstandards. Divisional Management, is critical to build resilience to ongoing but considers an extended time horizon, with theExecutive Committee and the Audit supply chain disruptions some elements contemplated over a 20+ year Committee monitor the completion progress time frame, and applies Scenario Analysis to • Inflation: Mitigating rising inflationary ofimprovement actions resulting from internal the most material transition and physical risks. pressures has come into sharp focus audits, thematic reviews and the Controls Climate-related risks are also considered as part • Talent and Skills: Labour market shortages SelfAssessment. of the overall Group risk assessment completed may challenge the Group’s ability to align during the annual strategic planning process The key elements of the Senior risk stang with production requirements and rank as one ofthe Group’s principal risks. management process are shown opposite. 48 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 ### KEY RESPONSIBILITIES ## 1. ### WITHIN THE RISK Identify risks ### MANAGEMENT The risks to the achievement of theGroup’s strategic priorities are ### STRATEGY identified from a top down and | The Board | | bottom up perspective. Existing and | | | | --- | --- | --- | --- | --- | | • Has overall responsibility for | | | emerging risks areconsidered. | | | ensuring the Group risk | 6. | | | 2. | management process and systems Risk reporting and review Evaluate gross of internal controls are robust and The status of the most significant (inherent) risks continually monitored risks, top down and bottom up, The gross level of risk, considering • Formulates the Group’s strategy areregularly reviewed to ensure impact and likelihood, to the and defines the Group’s risk anychanges to the risk profile achievement of the strategic appetite and culture arecaptured and acted upon. priorities is assessed. Theconsolidated risk, assurance • Monitors the nature, extent and and control position is reported management of risk exposure for tothe Audit Committee the Group’s principal and andtheBoard. emergingrisks ### SENIOR’S RISK • Provides direction and sets the ### tone on the importance of risk MANAGEMENT management ### PROCESS ## 5. 3. Monitor and assure Identify existing controls Audit Committee The most significant risks are and processes • Supports and challenges the Board regularly reviewed. Second line The existing controls and processes in monitoring risk exposure in line assurance and internal audit activity which mitigate the risks are with its Terms of Reference is conducted to assess whether key identified and assessed for controls are eective and risks adequacy. • Reviews the eectiveness of the mitigated to an acceptable level. Group’s risk management and ## Timely implementation 4. internal control systems andreports ofresultingactions Risk response planning to the Board for consideration is monitored. Based on the controls and processes already in place the net risk from an impact and likelihood perspective is evaluated. Where the Executive Committee and net risk is considered to be higher Divisional Management than the Group’s tolerance level for • Development and implementation that risk, additional mitigating actions are identified and of strategy, operational plans, ownersassigned. policies, procedures and budgets • Monitoring of operating and financial performance including ### prioritisation and allocation RISK HEAT MAP (Residual risk after mitigations) ofresources Risk Definitions • Assessment and control of risk – including emerging risks Strategic 1 Pandemic High 2 Climate Change 3 Economic and Geopolitical Group Corporate Functions Impact 1 • Lead and co-ordinate Group risk 4 Implementation and control related processes ofStrategy 5 Innovation and • Assesses and supports the Group 11 13 10 Technological Change | in mitigating the Group’s risks | | | 3 | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | through policies and procedures, | | | | | | 2 | Operational | | | | | 9 | | | 7 | | | | | control self-assessments, specialist | 4 | | | | | 6 | 6 Supply Chain Challenges | | | support, business reviews and | | | | 8 | | | 7 Cyber/Information Security | | | other activities | | | | | | | 8 Programme Management | | | | 5 | | | | | | 9 Customer Demand and | | | | | | | 12 | | | | Price-Down Pressures | Impact of Occurrence People and Culture Operating Units 10 Talent and Skills • Operational units identify, Financial assessand mitigate their key risks 11 Inflation • Risk assessments are reviewed 12 Financing and Liquidity anddiscussed by Divisional Low Management Compliance 13 Corporate Governance Low High Breach Likelihood of Occurrence Increased Residual Risk Decreased Residual Risk Residual Risk Unchanged 49SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 STRATEGIC REPORT ## RISKS AND UNCERTAINTIES CONTINUED ### PRINCIPAL GROUP RISKS During 2021, an assessment of the principal risks and uncertainties, supply chain disruptions have developed due to labour shortages, logistical including emerging risks, that could threaten the Group’s business model delays and material availability constraints. The Group has responded or achievement of the strategic priorities has been performed. As a result quickly with mitigating actions to manage these growing risks, primarily of this assessment, Supply Chain Challenges and Inflation were added to through close communication with customers and suppliers, internal the Group’s principal risks. Inflationary pressures on labour and material eciency improvements and cost reduction initiatives. The remainder of costs are having an impact to varying degrees across the Group and the principal risks remain unchanged since our 2021 Interim Statement. Principal Risk How we manage it Focus in 2021 ### STRATEGIC | Pandemic | 2 | 3 | 6 | | A | B | C | D | E | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | A pandemic, such as the current | | | | • The Group has an Incident Response Plan and this is | | | | | | This risk continues to have a significant impact on the | | COVID-19 pandemic, could have a | | | | | being used to manage the Group’s response to the | | | | | Group, with new challenges arising as the current | | significant impact on business | | | | | current pandemic. | | | | | pandemic evolves. Response measures enacted in 2020 | | operations aecting our employees, | | | | • Emerging threats are monitored and advice provided to | | | | | | have continued in 2021, including the ongoing activities | | our supply chain and ultimately | | | | | employees as appropriate. This may include travel | | | | | of the Group’s Coronavirus Oversight Committee. | | our ability to meet customer | | | | | restrictions, temporary site closures and additional safety | | | | | The focus in2021 continued to be on: | | requirements. There is also the | | | | | measures when at work. | | | | | | • the health and safety of our employees. Various potential for a pandemic to create • Where a pandemic threat does emerge, we liaise with operating businesses have and continue to host a global slowdown in demand our suppliers and customers to manage the situation to vaccination clinics to support the rollout of global impacting our end markets. the greatest extent possible. vaccination programmes. The Group remains flexible An adverse indirect consequence and responsive to employee needs with regards to may result from our customers localised leave policies and “return to oce” strategies; having to reduce production rates • business continuity and ensuring that the business is even where our supply chain and able to meet its financial commitments and emerge production remains intact. from the pandemic strongly. Further details are provided against other principal risks as appropriate; and • ongoing communications with suppliers and customers as we adapt our business to address shifts in demand created by the evolution of the pandemic. In addition, our focus now includes careful management of the Group’s response to demand increases to ensure the cost savings measures implemented in 2020 and 2021 are not diluted. The Group remains vigilant to the potential future impacts offuture waves of the ongoing pandemic. | Climate change | 2 | 5 | | B | F | G | | | --- | --- | --- | --- | --- | --- | --- | --- | | There is a risk that climate change | | • To mitigate the impact of catastrophic events, such as | | | | | In 2021, the Group maintained a “leadership” rating of | | and/or the measures taken to address | | | an extreme weather event, each site has a scenario- | | | | A- in 2021 from the globally recognised CDP for our | | it may have an adverse impact on the | | | based Business Continuity Plan which is tested on an | | | | climate change disclosures. | | Group. Climate change may result in | | | annual basis. The Group also has insurance which helps | | | | | In support of our Science Based Targets, the Group has extreme weather events that may to protect profits in such situations. achieved an 19% reduction in combined Scope 1 and 2 impact on our ability, or that of a • The Group continues to invest in and develop solutions carbon emissions through 2021, on track to meet the 2025 supplier, to meet our customers’ relevant to changing end markets. Examples include our target deadline. requirements. battery cooling, waste heat recovery, heat sink in hybrid The Group engaged with over 300 of its leading suppliers cars technologies, and additive manufacturing solutions Our customers’ products may evolve regarding climate change, with 94 of these suppliers for aerospace. to require new technology, such as providing a full disclosure on their climate change • In 2020, the Group became the first company in the electrification. This also presents an programmes. As a result, CDP named the Group as a 2021 global Aerospace & Defence sector to have its opportunity to the Group to be Supplier Engagement Leader in recognition of our eorts emissions reduction targets independently verified involved in replacement technologies. to raise the level of climate action across our supply chain. andapproved by the Science Based Target Initiative Increasing legislation aimed at (“SBTi”). The SBTi is a partnership between CDP, A comprehensive climate change risk and opportunity accelerating decarbonisation may the United Nations Global Compact (“UNGC”), assessment exercise was conducted, addressing increase our operating costs. It may World Resources Institute (“WRI”) and the Worldwide transitional and physical risks, as well as resource also change consumer behaviours Fund for Nature(“WWF”). The targets covering GHG eciency opportunities. The assessment considered an impacting on our end markets. emissions from the Group’s operating businesses are extended time horizon, with some elements contemplated Forexample, consumers may fly consistent with reductions required to limiting climate over a 20+ year time frame. The exercise also applied lessoften. warming to 1.5°C and are aligned with Net Zero as Scenario Analysis to the most material transition and Near-Term Targets. physical risks as per TCFD. • SBTi have approved the following targets: For further details on Sustainability and TCFD, please see – The Group commits to reduce its absolute Scope 1 pages 12 to 23. and 2 GHG emissions by 30% by 2025 compared to a2018 base year; and – For Scope 3 GHG emissions, The Group also commits that 80% of its suppliers by spend, covering purchased goods and services and capital goods, willhave science-based targets by 2025. 50 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 The principal potential risks and Areas of strategic priorities Key Performance Indicators uncertainties, together with actions that 1 Enhance business model A Organic Revenue Growth are being taken to mitigate each risk, are: 2 Focus on growth B Return on Revenue Margin Increased residual risk 3 High performance operating system C Adjusted Earnings per Share Decreased residual risk 4 Competitive cost countries D Net Cash from Operating Activities Residual risk unchanged 5 Capital deployment E Return on Capital Employed New risk 6 Talent and development F Carbon Dioxide Emissions Emerging risk G Lost Time Injury Illness Rate All of the Group’s principal risks are factored into the severe but plausible downside scenario applied in the Group’s viability assessment as described on page 64. Principal Risk How we manage it Focus in 2021 | Economic and geopolitical impact | | 2 | 3 | 4 | 5 | A | B | C | D | E | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | There is a risk that there will be a | • Divisional Management and the Executive Committee | | | | | | | | | The COVID-19 pandemic continues to have a significant | | global economic downturn impacting | closely monitor economic and geopolitical trends that | | | | | | | | | impact on the global economy and sectors within which | | some or all of the sectors within which | may impact the operating businesses through regular | | | | | | | | | we operate. As a result, the Group has continued to focus | | the Group operates. | business reviews. Contingency planning is undertaken | | | | | | | | | on cash preservation, completion of restructuring projects, | | | to minimise operations disruption where necessary. | | | | | | | | | as described in the Strategy and Portfolio Management | Trade relations, for example imposing • The Group has a Brexit Committee which continues risk, and agreeing covenant relaxations with the Group’s of taris in the US, the UK leaving the to monitor the ongoing impact of the Brexit transition lenders, as described in the Financing and Liquidity risk. EU and other likely geopolitical events from regulatory, supply chain, people and financial have created uncertainty over the The Group Brexit committee continues to monitor the perspectives. future impact on international trade ongoing Brexit transition and review the appropriateness • The Board ensures that it is kept informed of US trade and the ability to retain and recruit of planning measures taken for people, regulatory and developments and Brexit so that it can assess the foreign nationals. other measures. The Group successfully implemented impact on the Group and take action as appropriate. the necessary procedural changes to ensure a Shifts in political regimes and • The Group monitors potential changes to international smooth transition, such as modified VAT and Customs government spending programmes tax regulations and taris to understand the likely impact. processes and support for employees applying to the can lead to higher taxation and have EU Settlement Scheme. an impact on earnings. These events may result in supply chain disruptions, rising energy prices and labour shortages which can escalate inflationary pressure on earnings. Additional detail regarding our inflation risk and responses can be found on page 54. | Implementation of Strategy | | 1 | 2 | 3 | 4 | 5 | B | D | E | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | An inability to implement the Group’s | • The Group regularly reviews its strategy and portfolio | | | | | | | | | The Board carried out a robust assessment of our strategic | | strategy and/or eectively manage | to ensure that long-term value is maximised for | | | | | | | | | objectives, end markets, capabilities and technologies and | | the Group’s portfolio could have a | shareholders. Where appropriate, divestments will | | | | | | | | | determined that the Group is well positioned to deliver its | | significant impact on the Group’s | be considered. | | | | | | | | | strategy and continue the transition through the evolving | | ability to generate long-term value | • M&A opportunities continue to be evaluated and | | | | | | | | | net zero world. | | for shareholders. | discussed at the Board’s strategic review. Processes are | | | | | | | | | | The Group has focused on: in place to ensure that the Group is aware of emerging Ambiguity surrounding the Group’s • continued investment in new technology and product acquisition opportunities. strategy and strategic priorities development in the areas of fluid conveyance, thermal • The Group has a well-established M&A framework that mayresult in investors failing to management and additive manufacturing which will includes proven valuation, due diligence and integration recognise the value of the Group’s help us to emerge strongly as recovery from the processes designed to be eciently executed by an investment case. pandemic occurs; experienced cross-functional team. • liquidity, eective cash management and further • Post-acquisition reviews are conducted as appropriate. strengthening of the balance sheet; and • The Group has incorporated the experiences gained from • the Group’s Prune To Grow strategy with the transfer navigating strategic challenges, such as the COVID-19 of our Netherlands Aerospace business product lines pandemic, into an adaptable response framework to to our French Aerospace businesses, the closure of ensure sucient focus remains on the Group’s core our Flexonics business in Malaysia and the strategic strategic priorities while responding to critical operational, divestment of the Senior Aerospace Connecticut strategic and financial challenges. helicopter business. We hosted a CMD in October 2021 presented by key business and technical leadership from across the Group. This provided detailed insight into our strategic objectives and capabilities. 51SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 STRATEGIC REPORT ## RISKS AND UNCERTAINTIES CONTINUED Principal Risk How we manage it Focus in 2021 | Innovation and technological change | | 1 | 2 | 5 | A | B | C | E | F | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | The Group must innovate in order to | • The Group has a Technology Collaboration forum which | | | | | | | | Despite the ongoing challenges in its business environment | | continue to win new business and | meets regularly to discuss innovation and technological | | | | | | | | in 2021, the Group has continued to invest in new and | | achieve profitable growth. There is | change. | | | | | | | | emerging technologies with progress being made on a | | a risk that the Group does not | • The Group has continued to invest in capabilities, (design | | | | | | | | number of key projects: | | continue to innovate and implement | and advanced manufacturing “AM” processes), process | | | | | | | | | • the Technology Collaboration forum’s charter has been technological change resulting in its certifications and equipment at its Advanced Additive revitalised to support the Group’s strategic focus on technology becoming uncompetitive Manufacturing Centre “AAMC”. Multiple AM parts Thermal Management and Fluid Conveyance applications or obsolete. have been qualified and delivered to customers for both for both Aerospace and Land Vehicles/Industrial markets; production platforms and ground tests. The AAMC team New technologies may have an impact • technology Roadmaps have been established for process also re-engineers existing product designs to deliver on the Group’s markets, e.g. electric and product development for both Aerospace and significant weight savings and performance vehicles and hydrogen aircraft. Flexonics divisions. These roadmaps and progress made enhancements. on current projects are reviewed on a quarterly basis; • The Group continues to develop products to support the • expanded use of non-metallic (polymer) AM for move to low carbon technologies, both in the land low-pressure applications; and vehicle and aerospace markets. • introduced several innovative products for battery and • Global Marketing Teams are engaged to ensure that fuel cell cooling, including ultra-thin patented designs customer requirements and priorities are considered. for very demanding environments. • The Group continues to invest in machining and Renewed focus on sustainability as a driver for new product fabrication technology enhancements to improve development and market expansion through leveraging process eciency and reduce cost. existing capabilities, expertise and products in Thermal • The Senior Operating System continues to deliver best Management and Fluid Conveyance into new adjacent practice tools for innovation and product development markets such as space, hydrogen etc. across the Group. ### OPERATIONAL | Supply chain challenges | | 1 | 2 | 3 | 4 | A | B | C | D | E | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Suppliers may be unable or unwilling | • The resilience of the supply chain is monitored and, | | | | | | | | | | The world is experiencing significant supply chain | | to respond to increases or decreases | where possible, over-reliance on individual suppliers | | | | | | | | | | disruption resulting from labour challenges, material | | in demand, impacting our ability to | isreduced. | | | | | | | | | | shortages and transportation delays. Focus in 2021 has | | supply our customers and/or our ability | • The Group closely monitors the resource required to | | | | | | | | | | been on: | | to optimise inventory held. | deliver customer demand. | | | | | | | | | | | • maintaining close and frequent communication with • The Group has deployed the Senior Operating System Critical materials or components may customers regarding delivery schedules, the need to provide operating businesses with a toolkit to become temporarily or permanently to qualify additional supply sources and potential optimise the use of lean and continuous improvement unavailable, leading to an inability incremental costs to mitigate supply chain disruptions; techniques, supplier management and other operational to meet production commitments. • working with suppliers to manage lead times and best practice processes. maximise the benefits from long-term supply Supply chain disruption can lead to • Operating businesses are required to maintain strong agreements, where applicable; higher volatility in delivery schedules internal controls over supplier management from new • leverage supplier relationships across the Group to as customers adjust demand to supplier selection to performance monitoring and identify alternate supply sources and opportunities to protect their production capabilities. management of existing suppliers. streamline or consolidate supply requirements; This may challenge the Group’s ability • Our core Values (see page 30) emphasise operating • utilise the Senior Operating System and our engineering to meet customer schedule, quality with integrity and respect, which allows the Group expertise to generate innovative solutions to supply and cost requirements, resulting to cultivate strong, long-term relationships with chain challenges; and in potential delays, penalties and critical suppliers. • increased focus on supply chain challenges in operating cost overruns. business reviews, as well as in Executive Committee In extreme cases some suppliers may and Group Procurement Council meetings. face financial diculties and go out of business. 52 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 The principal potential risks and Areas of strategic priorities Key Performance Indicators uncertainties, together with actions that 1 Enhance business model A Organic Revenue Growth are being taken to mitigate each risk, are: 2 Focus on growth B Return on Revenue Margin Increased residual risk 3 High performance operating system C Adjusted Earnings per Share Decreased residual risk 4 Competitive cost countries D Net Cash from Operating Activities Residual risk unchanged 5 Capital deployment E Return on Capital Employed New risk 6 Talent and development F Carbon Dioxide Emissions Emerging risk G Lost Time Injury Illness Rate All of the Group’s principal risks are factored into the severe but plausible downside scenario applied in the Group’s viability assessment as described on page 64. Principal Risk How we manage it Focus in 2021 | Cyber/information security | | 1 | 3 | B | | | --- | --- | --- | --- | --- | --- | | The risk that the Group is subjected to | • The Group has a roadmap to achieving improved | | | | Many of our employees continued to work from home | | external threats from hackers or | Information Security. | | | | during 2021 and measures were taken to ensure that | | viruses potentially causing critical or | • The Group has security controls in place including | | | | the Group IT/IS policies continue to be followed. | | sensitive data to be lost, corrupted, | policies, standards and playbooks. | | | | These measures included the introduction of an IS audit | | made inaccessible, or accessed by | • Each operating business has a security champion to | | | | programme, as well as in-depth IS reviews of key operating | | unauthorised users, resulting in | assist in raising employee awareness to this risk. | | | | businesses. In addition, the global roll out of the Group’s | | financial and/or reputational loss. | • Vulnerability metrics have been developed and are | | | | endpoint detection and response tool set has provided | | | actively reviewed by Divisional Management and the | | | | additional monitoring of the environment. | Executive Committee. Further progress was made in 2021 in implementing the • The Group has a risk management framework specific to Group’s Information Security roadmap, including: Information Technology “IT”/Information Security “IS”. • completed the implementation of a third-party Managed • Each operating business deploys a suite of protection Security Service provider and deployment of vulnerability and monitoring services, including endpoint detection management and cyber intelligence services, as well and response, vulnerability management and cyber as endpoint detection and response software; threat intelligence. • over 90% of employees completed on-line cyber/ • The Group hosts an annual IT/IS conference with information security training; participants from all operating businesses. • continuation of the cyber awareness campaign, • Employees receive annual awareness training on consisting of cyber newsletters and posters to alert cyber-related issues. employees to cyber threats; • alerting IT teams across the Group to near misses and incidents so they are aware of immediate threats; and • all Information Security policies and standards were updated. | Programme management | | 1 | 2 | 3 | 5 | 6 | A | B | C | D | E | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | The ability to introduce new products | • The Group is experienced in bidding and launching | | | | | | | | | | | The ongoing pandemic continued to impact customer | | in line with customer requirements | newproducts. Formal New Product Introduction “NPI” | | | | | | | | | | | demand in 2021, although the recovery is underway in | | and to respond appropriately to | processes, such as Advanced Product Quality Planning | | | | | | | | | | | some end markets. Focus in 2021 has been on: | | increases or decreases in demand | “APQP”, are used in some parts of the Group and | | | | | | | | | | | | • continuing to work with our customers to ensure that, thereafter is key to achieving the are being rolled out. wherever possible, orders within firm windows can Group’s strategic objectives. • There is a Group Contract Review policy which is be delivered; mandatory for all operating businesses and requires There is a risk that the Group is unable • working with our suppliers and managing inventory comprehensive financial modelling and sensitivity to respond quickly enough to changes to optimise inventory levels where there are delays in analysis of contractual terms and assumptions. in demand, potentially resulting in firm orders; • NPI programmes are subject to regular review by excess inventory and/or an inability • maintaining flexible labour resource plans to adapt to divisional and Group management to ensure that to meet schedule, quality and cost variations in demand and production schedules; and schedule, cost or quality issues are identified and dealt requirements resulting in delays, • responding to the ongoing elevated level of new requests with promptly. penalties, cost overruns or asset forquotation. • The Group monitors market and customer data so write-downs. that we can be prepared to respond to changing market dynamics. | Customer demand and price-down pressures | | 1 | 3 | 4 | 5 | A | B | C | E | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Customer pricing pressure is an | • The Group works closely with its customers to find | | | | | | Customer demand strengthened during the year, driven | | | | ongoing challenge within our | innovative ways to produce products at a lower cost, | | | | | | by the ongoing end-market recovery from the impacts of | | | | industries, driven by theexpectations | thus helping them to meet pricing challenges. | | | | | | the pandemic. | | | | of airlines, land vehicle operators and | • The Group is able to consider bundles of products | | | | | | | | | While price down pressures have continued in 2021 in governments seeking to purchase that in total help achieve customer pricing challenges. certain markets, other segments have been impacted more competitively priced products • There is a Group Contract Review policy which is by supply chain disruptions, causing a shift in customer in the future. This may put some mandatory for all operating businesses and requires focus from reducing price to meeting delivery schedules. pressure on the Group’s future comprehensive financial modelling and sensitivity Focus in 2021 has been on: operating margins. analysis of contractual terms and assumptions. • collaborating with our customers to continue to ensure • Where appropriate, the Group will actively pass work to COVID-19 continues to impact our that, wherever possible, orders within firm windows can some of its cost competitive facilities such as Mexico, end markets and there is a risk that be delivered; Thailand, the Czech Republic, South Africa, India, customers do not honour firm order • continuing to balance direct headcount with demand China and Malaysia with a view to helping satisfy schedules, or in extreme cases, whilst retaining the ability to meet increased demand in customer challenges. go out of business. the future and identifying overhead reductions through eciency improvements where possible; and • pursuing new opportunities with existing and new customers, providing some market diversification. 53SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 STRATEGIC REPORT ## RISKS AND UNCERTAINTIES CONTINUED Principal Risk How we manage it Focus in 2021 ### PEOPLE AND CULTURE Talent and Skills 2 6 A B D There is a risk that the group will have • Employee retention and recruitment challenges are The Group conducted a global employee engagement diculty in retaining and recruiting regularly discussed within the operating businesses, survey in 2021, with excellent participation and sucient skills to respond to a Divisional Management and the Executive Committee. engagement from employees. The feedback from the recovery in our markets and/or wages • The Group HR Director hosts focus groups across a survey was very positive, valuable and constructive and may have to be increased to attract cross section of the operating businesses to solicit will be used to help implement specific action plans to new employees. constructive feedback from employees and foster open improve engagement for each operating business. communication. As demand increases there may be Use of the Group’s online recruitment system, “Recruit,” • Operating businesses partner with technical colleges a disproportionate increase in the was embedded across our US operating businesses and apprenticeship schemes to create talent pipeline number of indirect heads, undoing andwill be expanded to operating businesses in the UK programmes. some of the cost savings that the in2022. • A groupwide succession planning exercise is conducted Group has achieved through its The Group responded to increasing challenges in annually to identify successors or interim cover for restructuring programme. employee retention and recruitment in 2021 by: key roles and ensure appropriate development plans Employees may leave the business are in place to support employees in meeting their • evaluating market labour rates at a local level, resulting forbetter wages/opportunities career goals. in higher wages for new employees and the execution elsewhere. • The Nominations Committee reviews management of o-cycle wage adjustments for existing employees, A notable portion of the Group’s development and succession plans twice a year, making where appropriate; workforce may reach retirement age recommendations to the Board regarding size, structure • enhancing wellbeing oerings, such as expanded at the same time, creating a gap in and composition where applicable. employee assistance programmes, to provide additional skills and labour availability. • The “Perform” performance and development system resources employees can utilise to improve their overall is utilised across the Group to facilitate objective setting, physical and mental health; The Group may have insucient talent development planning and performance and • expanding the Group’s network of reputable recruiting to respond to all strategic priorities. behaviourassessment. partners and channels, including social media • The Group HR Director regularly provides people and campaigns and job fairs, to broaden the pool of culture feedback to the Board. candidates for open positions; and • increasing the level of cross training amongst the current workforce to cover gaps in labour availability. ### FINANCIAL | Inflation | 2 | 3 | A | B | C | D | E | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | A confluence of labour constraints, | | | • The Group’s Treasury Committee actively monitors | | | | | The Group closely tracked the velocity of inflation escalation | | supply chain disruption and shifting | | | the economic forces impacting the Group and | | | | | during 2021 and responded quickly to mitigate its impact | | customer demand is increasing | | | considers a variety of viable containment strategies | | | | | on the Group’s financial performance where necessary. | | inflationary pressures on earnings | | | where necessary. | | | | | Our eorts in 2021 included: | | from existing programmes. | | | • There is a Group Contract Review policy which is | | | | | | • where inflationary pressures have increased, the Group mandatory for all operating businesses and requires Higher production costs resulting has worked closely with customers to secure price comprehensive financial modelling and sensitivity from material, energy and labour increases, delay contractual price decreases and/or pass analysis of contractual terms and assumptions. cost inflation can reduce our ability through higher production costs to mitigate the impact • A significant portion of the Group’s external debt is at to remain cost competitive and win on Group margins; fixed rates of interest, which mitigates the eect of new business. • leverage existing fixed-price supply agreements to higher benchmark interest rates that can result from secure lower pricing across as much supply as possible Inflationary pressures may result in inflationary pressures. while continuing to maintain the Group’s inventory higher interest rates, which could optimisation progress from 2020; and impact the Group’s earnings. • utilise the Senior Operating System to deploy lean and continuous improvement techniques with a focus on improving labour eciencies and cost reduction initiatives. 54 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 The principal potential risks and Areas of strategic priorities Key Performance Indicators uncertainties, together with actions that 1 Enhance business model A Organic Revenue Growth are being taken to mitigate each risk, are: 2 Focus on growth B Return on Revenue Margin Increased residual risk 3 High performance operating system C Adjusted Earnings per Share Decreased residual risk 4 Competitive cost countries D Net Cash from Operating Activities Residual risk unchanged 5 Capital deployment E Return on Capital Employed New risk 6 Talent and development F Carbon Dioxide Emissions Emerging risk G Lost Time Injury Illness Rate All of the Group’s principal risks are factored into the severe but plausible downside scenario applied in the Group’s viability assessment as described on page 64. Principal Risk How we manage it Focus in 2021 | Financing and liquidity | | 2 | 3 | 5 | D | E | | | --- | --- | --- | --- | --- | --- | --- | --- | | The Group could have insucient | • The Group’s overall treasury risk management | | | | | | The Group continued to focus on this risk during 2021 to | | financial resources to fund its growth | | programme focuses on the unpredictability of financial | | | | | mitigate the ongoing impacts of the COVID-19 pandemic. | | strategy or meet its financial | | markets, and seeks to minimise potential adverse eects | | | | | Actions taken included: | | obligations as they fall due or | | on the Group’s financial performance. | | | | | | • worked with the Group’s lenders, both banks and US insucient liquidity to meet financing • Compliance with financial policies and exposure limits private placement investors, during 2020 and through to covenants. are reviewed by the Group’s Treasury Committee on February 2021 to agree appropriate covenant relaxations a regular basis. Foreign exchange movements could in relation to the June 2020 through to December 2021 • The Group enters into forward foreign exchange have a material impact on the Group’s testing periods. The Group continues to manage leverage contracts to hedge the exchange risk arising on financial performance, both on the accordingly and will revert to original covenant limits operations’ trading activities in foreign currencies; balance sheet (translation risk) and for the June 2022 testing period; however, it does not enter into or trade financial income statement (transaction risk). • continued focus on cash preservation; no Senior plc instruments, including derivative financial instruments, dividends were paid in 2021, capital expenditure for speculative purposes. remained subdued and some delegated authorities • The Group’s Treasury policy is updated and approved remain restricted; by the Board regularly. • while inventory optimisation eorts focused on reducing • The Group’s viability assessment process considers a inventory levels where appropriate are ongoing, eorts in base case and risk case scenario, which considers the 2021 also emphasised sustaining the benefits achieved principal risks and uncertainties. in 2020 by responsibly managing growth in inventory requirements where customer demand is recovering and/or supply chain disruptions are occurring; • extensive scenario testing was undertaken in 2021 based on a variety of end market assumptions taking account of appropriate cost reduction and cash preservation mitigating actions; and • the Group’s Treasury Policy was updated and approved by the Board in September 2021. ### COMPLIANCE | Corporate governance breach | | 1 | 2 | 3 | A | B | C | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Corporate governance legislation | • The Group has well-established governance policies and | | | | | | | In 2021, the Code of Conduct was updated and relevant | | (such as the UK Bribery Act and the | procedures in all key areas, including a Group Code of | | | | | | | training was rolled out to all employees, with 94% of | | US Foreign Corrupt Practices Act), | Conduct, anti-bribery procedures, a Health & Safety | | | | | | | employees having completed the training. | | regulations and guidance (such as the | Charter, an Agent’s Policy and various policies and | | | | | | | | Additional training was conducted for appropriate employee UK Corporate Governance Code and procedures over the review and reporting of risk groups on topics including anti-money laundering, tax global health and safety regulations) management and internal control activities. evasion facilitation, trade compliance, harassment and are increasingly complex and onerous. • Governance updates are provided to the Board and protecting human rights. A serious breach of these rules and the Executive Committee at appropriate intervals, The Group implemented an enhanced denied party regulations could have a significant and to key operational management. screening tool and added export license management impact on the Group’s reputation, • All employees are required to complete annual Code capability for the US operating businesses. leadto a loss of confidence on the of Conduct training. partof investors, customers or other • All EU sites have received training on the General Data Updates have been issued to various Group policies. stakeholders and ultimately have Protection Regulations and employees in other locations The Group’s 2021 internal audit programme and Controls amaterial adverse impact on the have received training as appropriate to their roles. Self Assessment were completed, providing a level of Group’s enterprise value. • The Board receives regular updates on trade assurance that the Group’s Code of Conduct, controls, compliancematters. policies and procedures are being followed. 55SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 STRATEGIC REPORT ## DIVISIONAL REVIEW ## – Aerospace TheDivision’s operating results on a constant The civil aerospace sector was the most ## HEADLINES 2021 currency basis are summarised below: impacted by the pandemic with Senior’s sales decreasing by 15.2% compared to prior year. (3) | | 2021 | 2020 | | | --- | --- | --- | --- | | Revenue | | | This was reflective of aircraft production | | | £m | £m Change | | ratesremaining lower in 2021 compared to | Revenue 439.3 498.0 -11.8% | pre-pandemic levels including the impact of | | --- | --- | | Adjusted | lower 787 production as Boeing address the | | operating profit 7.9 5.5 +43.6% | quality issues. | ## £439.3m Adjusted (2020 – £498.0m) Excluding the divestment of Senior Aerospace operating margin 1.8% 1.1% +70 bps Connecticut, total revenue from the defence | | (1) This number is excluding Senior Aerospace | | sector increased by £1.0m, 0.9% during the | | --- | --- | --- | --- | | Adjusted operating profit | | Connecticut | year, as the F-35 production rate increase was | | | (2) This excludes Senior Aerospace Connecticut and | | partly oset by the timing gap between the | Senior Aerospace Bosman in The Netherlands. completion of deliveries on parts for F-35 Lot 14 (3) 2020 results translated using 2021 average exchange and the commencement of deliveries on Lot 15 rates – constant currency. ## £ 7.9m and lower military aftermarket sales in 2021. Divisional revenue decreased by £58.7m (11.8%) (2020 – £5.5m) Revenue derived from other markets such as to £439.3m (2020 – £498.0m) whilst adjusted space, power & energy, medical and semi- operating profit increased by £2.4m (43.6%) to conductor equipment, where the Group £7.9m (2020 – £5.5m). Adjusted operating margin manufactures products using very similar Revenue Reconciliation £m technology to that used for certain aerospace products, increased by £9.8m as a result of the 2020 revenue 498.0 increasing demand in the semi-conductor Civil aerospace (43.8) ## 1.8% equipment market and growth in the space Defence 1.0 satellite sector. (2020 – 1.1%) Other 9.8 Even though divisional revenue decreased in Disposal of business (25.7) 2021, adjusted operating profit increased by Aerospace Division 2021 revenue 439.3 43.6% to £7.9m (2020 – £5.5m). This reflected (1) The Aerospace Division represents 66% the drop through impact of the reduction in (1) (2020 – 70% of Group revenue and consists Revenue in the Aerospace Division reduced revenue, mitigated by additional savings (2) of 14 operations. These are located in North by11.8% year-on-year on a constant currency delivered from the restructuring programme. America (six), the United Kingdom (four), basis, reflecting that part of 2020 was pre- Onan organic basis (excluding Senior Aerospace continental Europe (two), Thailand and Malaysia. COVID and 2020 included a full year contribution Connecticut), the Divisional adjusted operating This Divisional review is on a constant currency from Senior Aerospace Connecticut. Excluding margin increased by 140 basis points to 1.6% basis, whereby 2020 results have been Senior Aerospace Connecticut, which was (2020 – 0.2%). translated using 2021 average exchange rates divested on 22 April 2021, revenue for the and on an adjusted basis to exclude the charge In 2022, we expect production volumes for civil fullyear on an organic, constant currency relating to amortisation of intangible assets from aerospace to be higher than 2021, driven by basisdeclined by 7.1%. The year-on-year acquisitions, goodwill impairment and write-o increasing single aisle rates. Positively, in 2021 declinereflected the reduction in civil aircraft and net restructuring income/costs. both Airbus and Boeing confirmed plans to ramp production rates, partly oset by growth up single aisle production in the near-term. fromsemi-conductor equipment, defence andspace markets. (1) 14 Global Aerospace operations (1) North America 6 United Kingdom 4 | 37% | | (1) | | | --- | --- | --- | --- | | | Continental Europe | | 2 | | Civil | Thailand 1 | | | | aircraft | Malaysia 1 | | | Aerospace sales across the Group ## 66% 11% other (1) In 2021, Senior Aerospace Connecticut was divested and 18% Senior Aerospace Bosman in The Netherlands was closed Defence SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202156 | • Airbus increased the A320 Family production | production will increase from around 2 per | • Lockheed Martin delivered 142 F-35 aircraft | | --- | --- | --- | | to 45 aircraft per month by the end of 2021. | month to almost 3 per month at the end | in 2021, which was higher than the range they | | They have stated that the ramp up is on | of2022. | set out of 133-139. At their full year results | | trajectory to achieve a monthly rate of 65 | • On the 787 platform, Boeing continues to | presentation, they reiterated their existing | | aircraft by summer 2023. For production rates | perform rework on aircraft in inventory which | production for F-35; 151-153 aircraft in 2022 | | beyond 2023, Airbus is still in the assessment | has led to production being reduced to a very | and then 156 thereafter. They further stated | | phase and working with suppliers to | low rate. This will continue until deliveries | that the annual production may increase | | potentially enable an increase above rate 65; | resume, with an expected gradual return to | beyond the planned full-rate production of | | recently, they have indicated that they expect | 5 per month over time. Boeing confirmed | 156aircraft per year given strong recent | | to have clarity on their 2024 and 2025 | on their January 26, 2022 earnings call that | international order intake. | | production targets by the middle of 2022. | they will have 110 airplanes in inventory | | Senior has a diversified product portfolio • Boeing announced at their recent earnings at the end of the first quarter of 2022. in the aerospace sector and the potential to call that the 737 programme is currently • Production of the 767 will continue at a rate add content on existing programmes as our producing at a rate of 26 per month, reiterated of 3 per month. customers recognise and appreciate Senior’s that it will continue to progress towards a • On the 777/777X combined production rate, financial resilience, stability, and global footprint. production rate of 31 per month in early 2022 Boeing announced that they will be increasing Our businesses are well capitalised with and stated that the company is evaluating the from 2 per month in H1 2021 to 3 per month equipment that can be utilised across civil, timing of further rate increases. Boeing have in 2022. They are still anticipating first delivery defence and space sectors. We have secured an order backlog of around 3,400 aircraft and of the 777X in late 2023. new multi-year contracts and contract there are currently 335 MAX aircraft in extensions on defence and civil platforms inventory with the majority of these expected Business jet flight activity was resilient in 2021, which, coupled with increasing production rates, to be delivered by the end of 2023. Boeing with strong leisure demand as travel restrictions will help to underpin our return to growth in our also stated that since the FAA’s approval to loosened. With 3.3 million flights from January Aerospace Division in 2022 and beyond. return the 737 MAX to operations in through December, business jet trac was 7% In2021, new contracts of note that were November 2020, 299 737 MAX aircraft have higher than in 2019, the previous high point for signedinclude: | been delivered and that there are 36 operators | global business jet demand, according to WingX | | | --- | --- | --- | | who have returned the 737 MAX to service. | Global Market Tracker. Activity in 2022 is also | • Senior Aerospace was awarded a multi-year | | Furthermore, the Civil Aviation Administration | continuing this upward trend, with January 2022 | contract to supply major floor beam structural | | of China (“CAAC”) has now issued the | trac increasing 35% when compared to 2021. | assemblies for the Boeing 767 platform. | | appropriate airworthiness directives (“AD’s”), | In regional jets, the entry into service of | Production of the structural assemblies | | clearing the way for the 737 MAX to return | Embraer’s E175-E2 jet has been delayed | will be undertaken from the Senior Aerospace | | to service in China in the near future. | until 2027-28 although they continue to sell | AMT facility in Arlington, WA, USA with | | | the current E175 jet. Airbus rearmed that | deliveries commencing January 2022. | • COMAC recently announced that its C919 production of the A220, which is currently at aircraft is continuing its flight certification • Senior Aerospace won a multi-year contract around rate 5 aircraft per month, will rise to programme and expect first delivery in 2022. to supply quadrant assemblies for flight around 6 per month in early 2022. Airbus is also control systems on the Boeing 737 and Recovery in long-haul routes, which typically envisaging a monthly production rate of 14 by Boeing 777 platforms. The quadrant use wide body aircraft, is expected to take the middle of the decade. assemblies for the Boeing 737 Elevator longer than short-haul routes. IATA has signalled Control and Boeing 777 Horizontal Stabilizer We expect defence revenue to be stable in that this segment will return to 98% of 2019 flight control system will commence in Q1 2022 with bipartisan support for US defence levels by 2025 and 106% of 2019 levels by2026. 2022 from the Senior Aerospace Damar spending. The strength in US military spending • Airbus continue to expect to increase the facility in Monroe, WA, USA. can be primarily attributed to heavy investment | A350 Family production rate, currently at an | in research and development and long-term | | --- | --- | | average production rate of 5 per month, to | projects such as the 5th generation F-35 Joint | | around 6 by early 2023. For the A330 Family, | Strike Fighter. | | Revenue by large commercial platforms Revenue reconciliation (£m) | A 2020 revenue | | | --- | --- | --- | | | B Civil aerospace | Sales in defence | | | C Defence | increased by | Other £m £m c. 28% E Disposal of business F 2021 revenue Boeing | | | 9.8 | | 9.8 | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 498.0 | 1.0 | 498.0 | 1.0 | | | | 9.8 | | | | | | | | 498.0 | 1.0 | | +1% | £m (25.7) (25.7) (25.7) 439.3 439.3 (43.8) (43.8) 439.3 (43.8) Adjusted operating margin increased to c. 72% Airbus ## 1.8% A B C D E F A B C D E F A B C D E F | A 2020 revenue | D | | D Other | | | --- | --- | --- | --- | --- | | B Civil aerospace | | | E Disposal of business | 57SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 | | C Defence | | | F 2021 revenue | | | | | A 2020 revenue | D Other | | | | | B Civil aerospace | E Disposal of business | | | | | C Defence | F 2021 revenue | | STRATEGIC REPORT ## DIVISIONAL REVIEW ## – Flexonics Flexonics Division Divisional revenue increased by £19.9m (9.9%) ## HEADLINES 2021 The Flexonics Division represents 34% (2020 to £219.9m (2020 – £200.0m) and adjusted (1) operating profit increased by £2.4m (22.9%) – 30%) of Group revenue and consists of 12 Revenue operations which are located in North America to £12.9m (2020 – £10.5m). (four), continental Europe (two), the United Revenue Reconciliation £m Kingdom (two), South Africa, India, and China | | (two) including the Group’s 49% equity stake | 2020 revenue 200.0 | | --- | --- | --- | | £219.9m | ina land vehicle product joint venture. This | Land vehicles 33.5 | | | Divisional review, presented before the share | Power & energy (13.6) | (2020 – £200.0m) ofthe joint venture results, is on a constant 2021 revenue 219.9 currency basis, whereby 2020 results have been translated using 2021 average exchange rates Adjusted operating profit Recovery is underway across some of our and on an adjusted basis to exclude the charge Flexonics end-markets with sales in 2021 relating to amortisation of intangible assets increasing by 9.9% compared to prior year. fromacquisitions, goodwill write-o and net Theperformance in the year benefited from the restructuring income/costs. The Division’s ## £12.9m recovery in heavy-duty truck and o-highway operating results on a constant currency basis and passenger vehicle markets, partially oset (2020 – £10.5m) are summarised below: by a decline in oil & gas and the closure of the | | | (2) | Senior Flexonics business in Malaysia. | | --- | --- | --- | --- | | 2021 | 2020 | | | | £m | £m Change | | | Adjusted operating margin Group sales to land vehicle markets increased Revenue 219.9 200.0 +9.9% by 39.3%. Senior’s sales to the North American | | Adjusted | truck and o-highway market increased by | | --- | --- | --- | | | operating profit 12.9 10.5 +22.9% | £19.6m (42.9%), as o-highway sales were | | 5.9% | Adjusted | strong and market production of heavy-duty | | (2020 – 5.3%) | operating margin 5.9% 5.3% +60 bps | diesel trucks increased by 23%. Sales to other | truck and o-highway regions, including Europe (1) This figure excludes Senior Flexonics Upeca, Malaysia and India, increased by £7.6m (41.1%). Group following its closure. (2) 2020 results translated using 2021 average exchange sales to passenger vehicle markets increased rates – constant currency. by£6.3m (29.9%) in the year, reflecting higher demand in our core European and Indian markets. (1) North America 4 12 Global Flexonics operations Land Continental Europe 2 vehicles United Kingdom 2 India 1 18% South Africa 1 (1) Malaysia 1 (2) China 2 Flexonics sales across the Group 16% Power & energy ## 34% (1) In 2021, Senior Flexonics Upeca in Malaysia was closed. (2) Including joint venture. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202158 | In the Group’s power & energy markets, | Some positive momentum is expected in | We will continue to focus our development | | --- | --- | --- | | sales decreased by £13.6m (11.9%) in the year. | power & energy markets now that recovery | eorts on dierentiated technology and | | Salesto oil and gas markets decreased by | in the upstream oil & gas sector is underway. | products, applicable across a diverse range | | £11.2m (26.7%), as a result of weaker demand, | | of attractive industrial markets. In 2021, new | • Global oil demand is forecast to exceed pre particularly for upstream activity and also the contracts of note that were signed include: pandemic levels before the end of 2022 and closure of our Senior Flexonics Upeca, Malaysia to further strengthen in 2023, in the absence • Senior Flexonics Canada was awarded an business. Downstream oil and gas activity was of any further COVID-related disruption. additional contract with Bruce Power Limited lower year-on-year because part of the prior Industry macro fundamentals, for upstream Partnership as a key supplier for their yearwas pre pandemic with higher levels of oil and gas in particular, are looking very Major Component Replacement (“MCR”) economic activity. Some maintenance projects favourable, due to the combination of Project to supply replacement bellows continue to be deferred. Sales to other power projected steady demand recovery, an expansion joints for critical equipment in the & energy markets decreased by £2.4m. | | increasingly tight supply market, and | primary and secondary circuits for Reactor | | --- | --- | --- | | Adjusted operating profit increased by £2.4m | supportive oil prices. Nevertheless, the rise | Units. The work will be performed at the | | compared to prior year and the divisional | in geopolitical tensions could have a potential | Senior Flexonics facility in Ontario, Canada | | adjusted operating margin increased by 60 basis | impact on the supply side. | and Senior Flexonics Pathway facility | | points to 5.9% (2020 – 5.3%). This reflected | • In power generation, the IEA forecasts | in Texas, USA. | | the drop through impact of growth in revenue | electricity demand growing by 2.7% a year on | • Senior Flexonics was awarded new | | coupled with additional savings delivered from | average for 2022-2024. They also forecast the | contracts to supply Honda with exhaust | | the restructuring programme which more than | growth of renewable capacity in the next five | flexible connectors for the automotive | | oset the inflationary impact of freight and | years to accelerate, accounting for almost | manufacturer’s 1.5L and 2.0L gasoline | | commodity costs. | 95% of the increase in global power capacity | engines. To meet Honda’s demanding | | | through 2026. | performance requirements, Senior Flexonics | Land vehicle markets are expected to continue • According to the IEA, nuclear power undertook a rigorous development to ensure to grow in 2022, as supply chain constraints sustained significant growth in 2021; output the flexible exhaust connectors met the gradually ease through the year. | | from nuclear was 8% above 2019 levels, with | required durability, weight and emissions | | --- | --- | --- | | • ACT Research is forecasting a 13% increase | emerging market and developing economies | standards. Manufacturing of these | | in North American heavy-duty truck | increasing their share of global nuclear output | components will be performed at Senior | | production in 2022, and further growth | to almost one-third. | Flexonics’ facilities in India and China and | | of 21% in 2023. | | deliveries have recently commenced. | | • The North American medium-duty diesel | | • Senior Flexonics Olomouc in the Czech | | truck production is forecast to increase by | | Republic has secured the Group’s first | | 11% in 2022. | | contract for a fully electric heavy-duty truck | | • IHS Markit Inc. forecasts that European truck | | application for one of our large European truck | | and bus production will grow by 7% in 2022 | | customers. We will be providing electronics | | and that passenger vehicle production will | | cooling components. | grow by 20% in 2022. • Indian passenger vehicle production is forecasted to grow by 7% in 2022. | Revenue reconciliation (£m) Global energy usage will drive | | | Sales to land vehicle markets | | --- | --- | --- | --- | | | A 2020 revenue | increased demand for many of | increased by +39% | | | B Land vehicles | the Flexonics Division’s products | | C Power & energy £m D 2021 revenue 33.5 £m 33.5 219.9 33.5 219.9 200.0 219.9 £m 200.0 200.0 (13.6) (13.6) (13.6) A B C D A B C D A B C D C Power & energy D 2021 revenue 59SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 A 2020 revenue B Land vehicles A 2020 revenue C Power & energy B Land vehicles D 2021 revenue STRATEGIC REPORT ## FINANCIAL REVIEW ## Senior delivered improved ## profitability and strengthened ## the balance sheet in 2021.” Bindi Foyle Group Finance Director Financial Summary ## HIGHLIGHTS A summary of the Group’s operating results (at reported currency) is set out in the table below. Further detail on the performance of each Division is set out in the Divisional Review. Adjusted Operating Profit Adjusted (1) | | Revenue | | | operating profit | | | Margin | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 2021 | | 2020 | 2021 | | 2020 | 2021 | 2020 | | | £m | | £m | £m | | £m | % | | % | ## £6.1m Aerospace 439.3 526.2 7.9 5.9 1.8 1.1 2020 – £3.7m (2) Flexonics 219.9 208.3 12.9 11.0 5.9 5.3 Share of results of Net Debt/EBITDA joint venture – – 0.2 0.2 – – Inter-segment sales (0.5) (0.9) – – – – Central costs – – (14.9) (13.4) – – Group total 658.7 733.6 6.1 3.7 0.9 0.5 ## 1.9x (1) See table below for reconciliation of adjusted operating profit to reported operating profit. 2020 – 2.8x (2) Flexonics results are presented before share of results of joint venture Adjusted operating profit may be reconciled to the operating profit that is shown in the | ROCE | Consolidated Income Statement as follows: | | | | --- | --- | --- | --- | | | | 2021 | 2020 | | | | £m | £m | Adjusted operating profit 6.1 3.7 ## 1.0% Amortisation of intangible assets from acquisitions – (7.7) 2020 – 0.5% Goodwill impairment and write-o – (134.3) Net Restructuring income/(costs) 4.4 (39.0) Operating profit/(loss) 10.5 (177. 3) | Financial detail | Operating profit/loss | | --- | --- | | Group revenue | Adjusted operating profit increased by £2.4m | | Group revenue was £658.7m (2020 – £733.6m). | (64.9%) to £6.1m (2020 – £3.7m). Excluding | | Excluding the adverse exchange rate impact of | theadverse exchange rate impact of £0.8m, | | £36.4m, and the year-on-year eect of the | adjusted operating profit increased by £3.2m | | disposal of £25.7m, Group revenue decreased | (110.3%) on a constant currency basis. | | by £12.8m (1.9%), with lower revenues in | Afteraccounting for £nil amortisation of | | Aerospace partly oset by higher revenues in | intangible assets from acquisitions (2020 – | | Flexonics year-on-year. In 2021, 60% of revenue | £7.7m), £nil goodwill impairment and write-o | | originated from North America, 15% from the | (2020 – £134.3m) and £4.4m net restructuring | | UK, 13% from theRest of Europe and 12% from | income (2020 – £39.0m net restructuring cost), | | the Rest of the World. | reported operating profit was £10.5m (2020 | – £177.3m loss). SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202160 Revenue (£m) Adjusted operating profit (£m) Free cash flow (£m) 733.6 3.7 46.5 658.7 6.1 14.0 | The Group’s adjusted operating margin | Flexonics Upeca and Senior Aerospace Bosman | Tax charge | | --- | --- | --- | | increased by 40 basis points, to 0.9% for the | (2020 – £10.5m cost), £0.4m cost related to | The adjusted tax rate for the year was 136.8% | | full year. This improvement in profitability | headcount reduction (2020 – £13.5m cost) and | credit (2020 – 43.5% credit), being a tax credit | | reflected the savings delivered from the | £1.0m cost related to consultancy and other | of £2.6m (2020 – £2.7m) on adjusted loss before | | restructuring programme as well as our focus | activities (2020 – £1.5m cost). For certain | tax of £1.9m (2020 – £6.2m loss). The adjusted | | on cost management activities, which more | specific programmes, and in conjunction with | tax rate benefits from prior year items as well | | than oset the drop through eect of the | the focus on restructuring, management has | as enhanced deductions for R&D expenditure | | reduction in revenue and the inflationary impact | also identified inventory impairment reversals of | in the US and capital expenditure in the UK. | | of freight and commodity costs. While the | £1.4m (2020 – £8.5m charge) where customer | | The reported tax rate was 2.1% credit, being impact of the pandemic and industry wide demand has increased, and further impairment a tax credit of £0.5m on reported profit before supply chain constraints are still with us, provisions on property, plant and equipment in tax of £23.7m. This included £2.1m net tax we continue to manage these diligently. 2021 with a charge of £0.8m (2020 – £5.0m charge against items excluded from adjusted charge) to cover the risk where there are no As set out in Note 9, adjusted operating profit loss before tax, of which £2.9m related to the alternative uses and in part due to customers and adjusted loss before tax are stated before corporate undertakings in the year and £0.6m choosing to cancel and/or significantly reduce £nil amortisation of intangible assets from credit to the revaluation of UK deferred tax future build rates. | acquisitions (2020 – £7.7m), £nil goodwill | | assets at the substantially enacted 25% | | --- | --- | --- | | impairment and write-o (2020 – £134.3m) and | Net cash outflow related to restructuring | corporation tax rate eective from 1 April 2023. | | £4.4m net restructuring income (2020 – £39.0m | activities was £0.9m (2020 – £15.2m), with | The 2020 reported tax rate was 17.4% credit, | | cost). Adjusted loss before tax is also stated | £50m of savings (2020 – £36m) delivered, | being a tax credit of £33.3m on reported loss | | before corporate undertakings income of | mainly related to lower headcount. | before tax of £191.8m. This included the tax | | £21.2m (2020 – £4.6m cost). | | credit of items excluded from adjusted profit | At 31 December 2021, a restructuring before tax of £30.6m, of which £21.7m related Restructuring provisionof £1.3m (31 December 2020 – to the reversal of deferred tax liabilities held The Group focused on taking actions to £8.9m) was recognised and is expected to against goodwill impaired in 2020. conserve cash to manage through the beutilised in 2022. pandemic, including curtailing capital Cash tax paid was £5.3m (2020 – £3.5m) and is Finance costs and investment income expenditure, tightly managing working capital stated net of refunds received of £0.9m (2020 Finance costs, net of investment income and implementing further cost cutting actions. – £0.3m) of tax paid in prior periods, including decreased to £8.0m (2020 – £9.9m) and At 31 December 2021, none of the Group’s refunds arising from the oset of tax losses comprise IFRS 16 interest charge on lease employees were on furlough (2020 – 7%). against taxable profits of prior periods. Tax liabilities of £2.6m (2020 – £3.0m), net payments during the year are £2.3m higher than The decisive actions taken on restructuring and financeincome on retirement benefits of £0.4m they would otherwise have been as a result of cost management over the last couple of years (2020 – £0.9m) and net interest charge of £5.8m coronavirus relief measures in some countries has delivered the expected benefits. In addition, (2020 – £7.8m). The decrease was mainly due which allowed the deferral of tax bills normally the Group has continued to review inventory and to lower borrowings including the repayment in due in 2020 into 2021. | asset exposures on programmes that have been | October 2020 of $20.0m (£14.6m) US Private | | | --- | --- | --- | | reduced, cancelled or where the Group will no | Placement Note carrying a high interest rate. | Tax policy | | longer participate. As part of the restructuring | | The Group acts with integrity in all tax matters, | Corporate undertakings focus, we have assessed critically any inventory in accordance with the Group’s ethics and Net income associated with corporate or asset exposures on these programmes and business conduct programme. It is the undertakings was £21.2m in 2021, of which written down the carrying values on excess Group’sobligation to pay the amount of tax £24.2m gain relates to the disposal of Senior holdings and assets where there is no alternate legally dueand to observe all applicable rules Aerospace Connecticut in April 2021, partly use. Where demand has picked up on previously and regulations in the jurisdictions in which it oset by £3.0m bid defence and costs relating reduced or cancelled programmes, inventory operates. While meeting this obligation, the to other corporate activities. In 2020, costs of impairments have been reversed to the extent Group also has a responsibility to manage £4.6m were incurred relating to employee costs that there are confirmed orders in place. Our andcontrol the costs of our business, including and external professional fees for the potential operating businesses have also worked hard to thetaxes we pay for the benefit of all our divestment of the Aerostructures business. maximise cash realised from disposal of assets stakeholders. The Group seeks to achieve SeeNote 31 to the Financial Statements for where there is no alternate use. thisby conducting business aairs in a way further details on the £24.2m gain on disposal. thatis ecient from a tax perspective, The restructuring, which involves business Profit/loss before tax includingmaintaining appropriate levels of debt closures and sale of associated assets, Adjusted loss before tax was £1.9m (2020 – in the countries we operate in and claiming headcount reductions and other benefits, has £6.2m). Reported profit before tax was available tax reliefs and incentives. The Group resulted in net income of £4.4m (2020 – £39.0m £23.7m(2020 – £191.8m loss). The reconciling iscommitted to building and maintaining net cost). Of this, £4.2m income (2020 – £nil) items between adjusted loss and reported constructive working relationships with the related to an aerospace manufacturing grant, profit/loss before tax are shown in Note 9 to taxauthorities of the countries in which it £1.0m net income for closures of Senior theFinancial Statements. operates. Further details on our approach totaxmay be found on Senior’s website at www.seniorplc.com. 20 20 20 61SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 21 21 21 STRATEGIC REPORT ## FINANCIAL REVIEW ## CONTINUED | Earnings/loss per share | Cash flow | | | Capital expenditure | | --- | --- | --- | --- | --- | | The weighted average number of shares, for the | The Group generated robust free cash flow of | | | Gross capital expenditure of £21.3m | | purposes of calculating undiluted earnings/loss | £14.0m in 2021 (2020 – £46.5m) as set out in | | | (2020–£26.8m) was 0.6 times depreciation | | per share, increased to 415.7 million (2020 – | the table below: | | | excluding the impact of IFRS 16 (2020 – 0.6 | | 414.9 million). The increase arose principally due | | 2021 | 2020 | times). The disposal of property, plant and | | to exercising of share-based payment awards | | £m | £m | equipment raised £0.2m (2020 – £0.5m). | | during 2021. The adjusted earnings per share | Operating profit/(loss) 10.5 (177. 3) | | | As previously advised, the Group’s operating | | was 0.17 pence (2020 – adjusted loss per share | | | | businesses are capitalised and prepared for | Amortisation of intangible of 0.84 pence). Basic earnings per share was growth. Therefore, we can expect future capital assets from acquisitions – 7.7 5.82 pence (2020 – basic loss per share of investment to be at more normal levels: 2022 Goodwill impairment 38.20 pence). See Note 12 for details of the capital investment is expected to be slightly andwrite-o – 134.3 basis of these calculations. below 2022 depreciation (excluding the impact Net restructuring of IFRS 16). We are prioritising new investment Return on capital employed (“ROCE”) (income)/costs (4.4) 39.0 on health and safety related items; important ROCE, a key performance indicator for the Adjusted operating profit 6.1 3.7 replacement equipment for current production; Group as defined above, increased by 50 basis and growth projects where contracts have Depreciation (including points to 1.0% (2020 – 0.5%). The increase in beensecured. amortisation of software) 47.8 53.9 ROCE was mainly a result of the increase in adjusted operating profit compared to prior year. Working capital and Working capital provisions movement, Working capital decreased by £3.0m in 2021 Research and design netof restructuring items (2.6) 32.3 to£103.0m (2020 – £106.0m), reflecting our The Group’s expenditure on research and design Pension payments above relentless and eective focus on working capital was £19.2m during 2021 (2020 – £18.7m). service cost (5.1) (5.0) management. With demand recovery underway Expenditure was incurred mainly on funded (1) in our key end markets, and some supply chain Other items 2.2 2.0 and unfunded work, which relates to designing lead times increasing, we may see an increase and engineering products in accordance Interest paid, net (8.0) (10.6) in working capital over the coming months. with individual customer specifications and Income tax paid, net (5.3) (3.5) Wewill continue to manage this diligently. investigating specific manufacturing processes Capital expenditure (21.3) (26.8) for their production. The Group also incurs The Group participates in some non-recourse Sale of property, plant costson general manufacturing improvement reverse factoring schemes which are arranged andequipment 0.2 0.5 processes which are similarly expensed. by our customers as a way of reducing Free cash flow 14.0 46.5 | Unfunded costs in the year have been | | credit risk. The trade receivables reverse | | --- | --- | --- | | expensed, consistent with the prior year, as | Corporate undertakings 46.9 (4.2) | factored under such non-recourse schemes at | | theydid not meet the strict criteria required | Net restructuring | 31December 2021 were £16.8m (31 December | | forcapitalisation. | cashpaid (0.9) (15.2) | 2020 – £17.6m). The net impact of reverse | factoring on 2021 was a cash outflow in working US Class action lawsuits (2.3) (3.9) Exchange rates capital of £0.9m (2020 – £13.3m outflow) and A proportion of the Group’s operating profit Net cash flow 57.7 23.2 the discount interest presented within other in2021 was generated outside the UK and Eect of foreign exchange finance costs is a charge of £0.2m in 2021 consequently, foreign exchange rates, principally rate changes 0.7 2.4 (2020 – £0.2m). These arrangements follow the US Dollar against Sterling, can aect the IFRS 16 non-cash standard market terms and conditions and, Group’s results. | | additions and | asnoted above, are 100% non-recourse to | | --- | --- | --- | | The 2021 average exchange rate for the US | modifications after | theGroup, thereby transfer all credit risk to | | Dollar applied in the translation of income | disposals (5.6) (1.9) | thefinancial institutions who provide the | | statement and cash flow items was $1.38 | Change in net debt 52.8 23.7 | factoring schemes. | (2020– $1.29). The exchange rate for the Opening net debt (205.9) (229.6) Dividend USDollar applied to the translation of Balance Closing net debt (153.1) (205.9) The Group had a long and stable track Sheet items at 31 December 2021 was $1.35 recordofdividend growth prior to 2020. While (31 December 2020 – $1.37). (1) Other items comprises £3.5m share-based payment Group performance in 2021 has improved charges (2020 – £3.0m), £(0.2m) profit on share of joint Using 2021 average exchange rates would compared to 2020, it was still impacted by the venture (2020 – £(0.2m)), £(1.1m) working capital and havedecreased 2020 revenue by £36.4m provision currency movements (2020 – £(0.7m) before pandemic, and as such, theBoard believes it is anddecreased 2020 adjusted operating profit £0.5m foreign exchange loss recycled to the Income not appropriate to pay a dividend for the year. Statement on restructuring activities) and £nil profit on Therefore, no cash outflow was incurred during by£0.8m. A 10 cents movement in the £:$ sale of fixed assets (2020 – £(0.1m) profit). | exchange rate is estimated to aect full-year | 2021 in respect of dividends (2020 – £nil). | | --- | --- | | revenue on average by £28m, adjusted | The Board recognises the importance of the | | operating profit by £1m and net debt by £7m. | dividend for our shareholders and is optimistic | that the recovery currently underway in our core end markets will continue. The Board therefore expects to resume dividend payments in 2022. We will continue to follow a progressive dividend policy reflecting earnings per share, free cash flow generation, market conditions and dividend cover over the mediumterm. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202162 The Group has two existing covenants Net debt/EBITDA Funding headroom (£m) (“Existing Covenants”) for committed borrowing facilities, which are tested at June and 2.8x 157 December: the Group’s net debt to EBITDA (defined in the Notes to the Financial Headlines 1.9x 208 on page 1) must not exceed 3.0x and interest cover, the ratio of EBITDA to interest must be higher than 3.5x. The Group’s lenders, both | Goodwill | Funding and Liquidity | banks and USprivate placement investors, | | --- | --- | --- | | The reduction in goodwill from £165.0m at | As at 31 December 2021, the Group’s gross | have been supportive and we agreed covenant | | 31December 2020 to £150.2m at 31 December | borrowings excluding leases and transaction | relaxations (“New Covenants”) in relation to the | | 2021 reflects the disposal of Senior Aerospace | costs directly attributable to borrowings were | June 2020, December 2020, June 2021 and | | Connecticut in April 2021 (£15.1m reduction), | £132.0m (31 December 2020 – £154.4m), | December 2021 testing periods and agreed an | | partly oset by foreign exchange dierences | with62% of the Group’s gross borrowings | additional September 2021 testing period to | | (£0.3m increase). | denominated in US Dollars (31 December 2020 | provide financial flexibility for the Group through | | | – 62%). Cash and bank balances were £51.1m | this unprecedented period. | Retirement benefit schemes (31 December 2020 – £23.6m). | The retirement benefit surplus in respect of | | | | For the testing period ended 31 December | | --- | --- | --- | --- | --- | | theGroup’s UK defined benefit pension plan | The maturity of these borrowings, together with | | | 2021, the New Covenants required the Group’s | | (“the UK Plan”) increased by £25.7m to £72.2m | the maturity of the Group’s committed facilities, | | | net debt to EBITDA must not exceed 4.5x, | | (31 December 2020 – £46.5m) due to £19.7m | can be analysed as follows: | | | interest cover must be higher than 3.5x and | | net actuarial gains, £5.4m cash contributions | | | | liquidity headroom must be higher than £40.0m. | | | | Gross | Committed | | | bythe Group, in excess of running costs, and | | | | At 31 December 2021, the Group’s net debt to | (2) | | borrowings | | facilities | | | | --- | --- | --- | --- | --- | --- | | £0.6m net interest income. Retirement benefit | | | | | EBITDA was 1.9x and interest cover was 7.3x, | | | | £m | | £m | | | deficits in respect of the US and other territories | | | | | both comfortably within the Existing (and New) | Within one year 14.8 14.8 increased by £0.1m to £11.0m (31 December Covenants limits. The Group’s liquidity In the second year – 35.9 2020 – £10.9m). headroom at £208.0m was also comfortably In years three to five 71.5 191.5 within covenant limits. The latest triennial actuarial valuation of the After five years 45.7 45.7 UKPlan as at 5 April 2019 showed a deficit of UK withdrawal from the European Union 132.0 287.9 £10.2m (5 April 2016 – deficit of £37.4m). As a The Group’s Brexit Committee undertook result, and eective from April 2019, the Group’s detailed reviews and continues to assess (2) Gross borrowings include other loans and committed | deficit reduction cash contributions to the UK | facilities, but exclude leases of £73.2m and transaction | theimpact of the UK’s decision to leave the | | --- | --- | --- | | Plan have reduced from an annual amount | costs directly attributable to borrowings of £(1.0m). | European Union including from a regulatory, | | of£8.1m to an annual amount of £5.5m. | | supply chain, people and financial perspective. | At the year-end, the Group had committed TheGroup continues to contribute £0.5m Appropriate steps were taken to prepare for the facilities of £287.9m comprising private perannum towards plan administration costs. transition, particularly to minimise any potential placement debt of £132.0m and revolving These contributions are payable over the operational disruption, with limited impact on credit facilities of £155.9m. The Group is in three-year period to March 2022 and are subject the Group’s performance in 2021. While we do a strong funding position, with headroom to review and amendment as appropriate at the not anticipate a significant direct impact from at 31 December 2021 of £208.0m in cash next funding valuation in 2022. Brexit on the Group’s activities, we remain and undrawn facilities. alertto any long-term impact of Brexit on Net debt In April 2021, the Group refinanced its US macroeconomic conditions. Our assessment Net debt which includes IFRS 16 lease revolving credit facility of $50.0m (£37.0m at remains that any direct or indirect impact liabilitiesdecreased by £52.8m to £153.1m year end exchange rate) and extended the from Brexit will be limited given the Group’s at31December 2021 (31 December 2020 – maturity to June 2023. globalpositioning. £205.9m). As noted in the cash flow above, | theGroup generated net cash flow of £57.7m | The weighted average maturity of the Group’s | Bindi Foyle | | --- | --- | --- | | (as defined in Note 32(c) of the Financial | committed facilities at 31 December 2021 was | Group Finance Director | | Statements) and benefited from £0.7m | 3.0 years. | | favourable foreign currency movements, The Group has £nil (2020 – £0.4m) of partially oset by £5.6m non-cash uncommitted borrowings which are repayable changes inlease liabilities due to additions on demand. and modifications. Net debt excluding IFRS 16 lease liabilities of£73.2m (31 December 2020 – £76.5m) decreased by £49.5m to £79.9m at 31December 2021 (31 December 2020 – £129.4m). 20 20 63SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 21 21 STRATEGIC REPORT ## VIABILITY STATEMENT ## Following a robust assessment, the Directors have concluded that ## the Group and Parent Company have sucient funds to operate for ## the foreseeable future (evaluated to 31 December 2024), even in a ## severe but plausible downside scenario. | In accordance with provisions 30 and 31 of | Flexonics land vehicle markets are expected to | Board’s conclusion | | --- | --- | --- | | the2018 UK Corporate Governance Code, | continue to grow through the medium term and | Modelling the base case and severe but | | published by the Financial Reporting Council | in the power and energy markets, recovery in | plausible downside scenarios and | | in2018, the Directors have assessed the | the oil and gas sector is now underway. | mitigationsindicate that the Group is in | | prospects of the Group over the three-year | | compliance with alldebt covenants at all | In determining a severe but plausible downside period to 31 December 2024. measurement dates outto 31 December 2024. scenario, the base case projections are flexed to The scenarios alsohighlight sucient liquidity While the impact of the pandemic and industry reflect the probability weighted and cumulative headroom throughout the period in light of wide supply chain constraints are still with us, estimated eects of the Group’s principal risks the committed facilities available. Accordingly, we continue to manage these diligently. and uncertainties, as disclosed on pages 50 to following arobust assessment the Directors Notwithstanding near-term uncertainties in the 55, including but not limited to the risks related have concluded that the Group and Parent global economy, Senior is well placed to benefit to the pandemic and the impact on end market Company have sucient funds to operate for from the recovery underway in our end markets. demand, as well as inflation and programme the foreseeable future, evenin a severe but However, the Board has maintained a higher andsupplier management. plausible downside scenario. Forthe going level of caution than years prior to 2020, in To address the impacts under the severe but concern assessment, the foreseeable future evaluating the severebut plausible downsides. plausible downside, the Board has considered covers a minimum period of 12 months from the The Board hasconsidered a three-year period, the mitigating actions within the Group’s direct date of approval of these Financial Statements, as this reflects the normal mid-term planning control. These include a continued focus on and with the viability period evaluated out to cycle ofits business operations while conserving cash through vigilant management 31December 2024. adequately covering customer lead times for of capital expenditure and working capital both new andexpansion investment. In addition, Going concern together with further restructuring actions this period provides sucient clarity to consider andlimiting non-critical discretionary spend. As a consequence of the work undertaken the business prospects and potential recovery tosupport the viability statement above, the from the pandemic under a base case, while Committed facilities and debt covenants Directors have, at the time of approving these also assessing continued impacts under a At 31 December 2021, the Group held Financial Statements, a reasonable expectation severe butplausible downside scenario. | | committed borrowing facilities of £287.9m with | that the Group and Parent Company have | | --- | --- | --- | | The base case projections of the viability | liquidity headroom of £208.0m. The weighted | adequate resources to continue in operational | | assessment are based on the Group’s Budget | average maturity of the Group’s committed | existence for the foreseeable future, being a | | for 2022 and the Group’s Strategy for 2023 and | facilities at the end of December 2021 was | period of at least 12 months from the date | | 2024. Global air trac recovery in 2021 showed | 3.0years. Net debt (defined in Note 32(c) | ofapproval of these Financial Statements. | | ongoing progress as the COVID-19 vaccine | was £153.1m, including £73.2m of capitalised | Accordingly, they continue to adopt the going | | rollout & booster gathered pace and travel | leases which do not form part of the definition | concern basis of accounting in preparing these | | restrictions eased globally. IATA reported that | of debt under the committed facilities and do | Financial Statements, having undertaken a | | overall travel demand in 2021 strengthened and | not impact the Group’s lending covenants. | rigorous assessment of the financial forecasts. | its current view is that world passenger flows The Group has two Existing Covenants for Approval will return to 2019 levels by the end of 2023. committed borrowing facilities, which are The Strategic Report from pages 1 to 64 IATA expects domestic trac to reach 2019 testedat June and December: the Group’s net wasapproved by the Board of Directors on 25 levels by 2022 and international trac to return debt to EBITDA (defined in the Notes to the February 2022 and signed on its behalf by to 2019 levels by 2025. As demand recovers, Financial Headlines on page 1) and interest cover, production of new aircraft will be supported by the ratio of EBITDA to interest. TheGroup’s David Squires the replacement cycle driven by the accelerated lenders, both banks and US privateplacement Group Chief Executive Ocer retirement of older, less ecient, aircraft investors, have been supportive and agreed duringthe pandemic. Beyond this, the drivers New Covenants in relation to the December supporting air trac growth over the long term 2020, June 2021 andDecember 2021 testing of c. 4% per annum remain in place. The lower periods, and an additional September 2021 operating cost and better sustainability of new testing period toprovide financial flexibility for aircraft, on which Senior has significant content, the Group through this unprecedented period. will continue to be a necessity for the airline However, this flexibility was not utilised as industry. In the Group’s other key markets, the Group’s performance in 2020 and 2021 defence is anticipated to remain stable, the was within the Existing Covenants. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202164 ## CHAIR’S GOVERNANCE LETTER ## A Governance Framework that has been ## tested, challenged and has stood firm ## and robust over an extended period of ## external events and circumstances.” Ian King Chair Dear Shareholders, Board governance In another year of external events that Leadership ### CONTENTS challenged the Company the Governance The Board is led by me, as the non-executive Framework proved to be invaluable and robust. Chair, together with two executive Directors Board of Directors 68 | | | The approach by LSF XI Investments, LLC, | andsix independent non-executive Directors, | | --- | --- | --- | --- | | Executive Committee and HSE | 72 | | | | | | acompany advised by Lone Star Global | following Barbara Jeremiah’s appointment on | Committee Acquisitions, Limited, came at a time when the 1January 2022. All Directors were selected for Report of the Directors 73 Group continued to face challenging trading appointment because of their wide industrial Directors’ duties 75 conditions as a result of the continued COVID-19 and commercial experience; we have an pandemic. As we emerged from the dicult excellent, well-balanced Board. In addition, Nominations Committee Report 76 conditions of last year, I look forward to leading theGroup’s Executive Committee, chaired by Audit Committee Report 80 the Board in the next phase of the Company’s the Group Chief Executive Ocer, comprises Remuneration 87 development and growth and I am confident the two executive Directors and other key wehave the right Board of Directors in place, executives. Details of the members of the 2021 Remuneration Report at a Glance 90 working with the Executive Leadership Team, Boardand of the Executive Committee can Remuneration Report: Policy 92 toimplement the Company’s strategy. The befound on pages 68 to 72. Myrole as Remuneration Report: Annual Report 98 non-executive Directors have brought strong, Chairman includes: on Remuneration broad, professional and complementary qualities (a) setting the Board’s agenda, style and tone to the Board, which proved invaluable during Independent Auditor’s Report to the 109 of Board discussions and ensuring that 2021. Despite the challenges, the Board Members of Senior plc adequate time is available for discussion of maintained its focus and progress on all agenda items, in particular strategic issues; sustainability, both in terms of environmental, social and governance (“ESG”) across the (b) supporting the Group Chief Executive operations, as well as those relevant to the Ocer in the development of strategy and, Statement of compliance with Group’s products, technologies and capabilities. more broadly, to oer guidance to the Group theCorporate Governance Code Chief Executive Ocer; Corporate governance has always been given The Company is subject to the UK prominence across the Senior plc Group; the (c) promoting a culture of openness and debate Corporate Governance Code 2018 Board sets the tone and takes the lead on by facilitating the eective contribution (theCode), which is published by the governance matters. The Governance section of non-executive Directors and ensuring Financial Reporting Council and ofthis Annual Report is intended to provide constructive relations between non- available on their website: www.frc.org. Senior’s shareholders with a clear and executive Directors and executive uk/directors/corporate-governance-and- meaningful explanation of what governance management; stewardship/uk-corporate-governance- means to the Board and how this guides its code. decision-making processes. (d) ensuring that the Directors receive accurate, timely and clear information; We have been fully compliant with The Board remains firmly committed to ensuring theCode throughout 2021, other than the long-term sustainable growth of the Group, (e) ensuring, in conjunction with the Group the executive Directors’ pension generating value for shareholders, whilst Chief Executive Ocer, eective contributions, which will be aligned considering the needs of all its stakeholders. communication with shareholders; and with the rates available to the majority | of the UK workforce by the end of 2022. | I have summarised below the Company’s | (f) ensuring that the performance of the Board, | | | --- | --- | --- | --- | | Further details of how the Company | approach to key governance matters. | | its main committees and individual Directors | | applied the Principles of the Code can | | | are formally evaluated on an annual basis. | be found on pages 75 to107. 65SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 GOVERNANCE ## CHAIR’S GOVERNANCE LETTER CONTINUED Board and Committee membership and attendance As the pace of decision-making increased in 2021 as a result of the pandemic, the Board increased its frequency of meetings. The membership and attendance record of the full Board Meetings and its full Committee Meetings during 2021 are shown in the table below: Audit Nominations Remuneration Main Board Committee Committee Committee Chair Ian King Giles Kerr Ian King Celia Baxter Total number of meetings Ian King 20/20 – 6/6 7/7 Celia Baxter 20/20 5/5 6/6 7/7 Susan Brennan 19/20 4/5 6/6 6/7 Bindi Foyle 20/20 – – – Giles Kerr 18/20 5/5 6/6 7/7 Rajiv Sharma 19/20 4/5 6/6 6/7 David Squires 20/20 – – – (1) Mary Waldner 3/3 – 1/1 2/2 (1) Mary Waldner was appointed to the Board on 1 December 2021. Barbara Jeremiah was appointed to the Board on 1 January 2022 and so has not been included in the table above. | The non-executive Directors have an | Engagement with stakeholders | because of the UK Government’s restrictions | | --- | --- | --- | | important role in reviewing and challenging | | due to the pandemic; however, we chose to | | executive management’s decisions and actions. | | oer private shareholders live audio access | | The events of 2021, including the continuing | | tothe proceedings of the AGM and the | | COVID-19 pandemic and the possible | | opportunity to submit questions to the Directors | | takeover bid by Lone Star, have highlighted the | | and listen to their responses. In April 2022, | Shareholders importance of having an eectively functioning, regulations permitting, we will be oering a Each year, the Group Chief Executive Ocer, flexible and dedicated Board, with the Directors hybrid format for the AGM; this will involve Group Finance Director and Director of Investor working together to ensure the Group was able shareholders being able to physically attend Relations & Corporate Communications to contend with the dicult and complex issues the Meeting to be held in London or gain audio undertake a series of meetings with the that arose. access to listen to the proceedings and submit Company’s major shareholders, following the questions to the Board by email. A presentation The Directors are confident that an eective announcement of the full-year and interim on the Company’s annual performance to be Board is in place, with clear division of results, to discuss both the Board’s strategic made to shareholders by the Group Chief responsibilities between the running of the objectives and the detailed performance of the Executive Ocer will be made available to all Board and the running of the Group’s business. Notwithstanding the restrictions shareholders choosing to attend either in person businesses. In 2021, adetailed Board evaluation imposed as a result of the Coronavirus or virtually; a copy of this presentation will also review was undertaken with the assistance of pandemic, regular communication continued. be uploaded to the Company’s website. We will EquityCulture Limited which confirmed that the As the Company’s non-executive Chair, I also continue to monitor the AGM structure as and Board was performing well. The review found attended the full-year 2020 and 2021 interim when circumstances change. that the Board had operated eectively and results announcements made to analysts in robustly throughout the particularly dicult year. At our AGMs, we value the engagement with March and August 2021. I also met with the A summary of the 2021 report on theBoard shareholders and the opportunity for the Group Company’s major shareholders on a regular evaluation findings and a list of recommended Chief Executive Ocer to present on the basis, with a cycle that is complementary actions are provided on page 77. Group’s business. to the executive Directors. In addition, I was independent upon appointment as Chair I led the shareholder consultation with of the Company in 2018. The Board considers respect to the Lone Star bid. allnon-executive Directors of the Company The frequency of meetings with major continue to be independent, having taken into shareholders increased in 2021, to address account a list of relationships and circumstances thechallenges faced by the Company as a Employees that may appear relevant in determining resultof the possible takeover bid by Lone Star Celia Baxter is the Director designated by the independence. As Chair, I encourage open and and the continued pandemic; these exchanges Board to engage with the Group’s workforce honest discussions between the Directors, both highlighted the value of establishing and and listen to any employee concerns. During the within and outside Board meetings, and ensure maintaining close relationships. year, she participated in 15 face-to-face Focus no Director or group of Directors exerts pressure Group meetings at four of the UK operating or dominates the Board’s decision-making. We also further consulted on the 2021 businessses with the Group HR Director, Jane Directors’ Remuneration Policy. Celia Baxter, Johnston. Feedback from the meetings was the Senior Independent non-executive Director, provided to local Management, the Executive wasalso available to attend meetings with Leadership Team and to the Company’s Board major shareholders upon request, so providing of Directors, who were given the opportunity an alternative channel of communication to ask questions on the findings and make between the Company and its shareholders. suggestions for improvement in 2022. The Company typically makes constructive use Further details on Employee Engagement of the Annual General Meetings (“AGM”) to can be found on page 41. communicate with its private shareholders. In April 2021, this process had to again be limited, SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202166 ## The Board was flexible in its approach, embraced Video ## Conferencing technology and met 20 times over the year. ## The commitment of all members has been exemplary.” Ian King Chair | Due to the nature of the materials utilised, | 2021 has been an extremely challenging year | | --- | --- | | supplies may involve long lead times, and so | forthe Board, the Company, its employees and | | communication and managing good relations | shareholders. We have shown resilience, made | | with suppliers is paramount to the Group’s | dicult decisions, been agile in our responses | | operating businesses. In 2021, we engaged | and not compromised the Group’s standards | Customers withthe top 80% of our suppliers by value, and values. The Board firmly believes it is strong Due to the nature of the business, the Group toencourage and help them to analyse their and well-positioned to take the Group into has well-established relationships with all sustainability performance and goals in relation the next phase of growth. Our Governance its key customers. These relationships are to greenhouse gas reduction- this was Framework has been strongly tested, stood firm maintained on an ongoing basis and managed recognised by CDP, who gave us a Supplier and is eective for today and for the next phase in a transparent and constructive manner; any Engagement Leadership A rating. of growth. I convey the Board’s thanks for customer concerns are addressed in a timely your support. manner, to ensure continuity of supply and Further details on Supplier Engagement customer satisfaction. In 2021, it continued can be found on page 42. Ian King tobe important for the Group’s operating Chair businesses to maintain regular contact with 25 February 2022 theircustomers, as the Group’s supply chain faced the dicult conditions created by the COVID-19 pandemic. Community and the environment The Group has dedicated account managers Many of the Group’s operations are major todeal directly with key customers on existing employers within their local communities and new customer agreements. Relationships and nurture good relationships with their with potential and new customers are also stakeholders, finding ways to contribute to local established on an open and professional basis, society, in addition to providing employment and in compliance with the Group’s Corporate opportunities. Despite the pandemic, where Framework and Code of Conduct. possible, community engagement programmes Further details on Customer Engagement were maintained. The Group’s commitment to, can be found on page 41. and focus on, the environment continued following our greenhouse gas emission reduction targets being independently verified and approved by the Science Based Targets initiative (“SBTi”) in 2021. InDecember 2021, we were delighted to have again achieved a | Suppliers | Leadership rating of A- from the globally | | --- | --- | | Maintaining a good relationship with Senior’s | recognised Carbon Disclosure Project (“CDP”). | | supply chain is fundamental to providing | All of the Group’s operating businesses take | | customers with products in a timely manner and | stakeholder engagement very seriously, | | to a high standard. In 2021, it was particularly | ensuring they adhere to the highest of standards | | important for the Group to maintain regular | for the protection of health, safety and the | | contact with its suppliers and work together | environment; in many cases, they have | | constructively to ensure the Group’s supply | established or maintained close relationships | | chain was able to maintain continuity of supply | with local schools and colleges to oer training | | during the challenging business environment | or apprenticeship programmes. | created by the pandemic. Further details on Community Engagement and the Agreements with major suppliers have, in many environment can be found pages 14 and 42. cases, been arranged to support long-term agreements with the Group’s key customers. 67SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 GOVERNANCE ## BOARD OF DIRECTORS ## The Board is responsible for ## Group decisions aecting ## governance, strategy and the ## approval of annual operating ## budgets and Financial ## Statements. Tenure – Board Ian King Celia Baxter Company Chair and Chair of the Nominations Senior Independent Non-Executive Director, Committee Chair of the Remuneration Committee and Director designated to engage with the Group’s Responsibilities employees Leadership of the Board, setting its agenda andensuring its eectiveness. Responsibilities To support the Chairman and to act as an Qualifications intermediary for other non-executive Directors, Fellow of the Chartered Institute of ifnecessary. Celia chairs the Remuneration Management Accountants. Committee and is also the Director designated Appointment to the Board to engage with the Group’s employees. Ian King joined the Board on 13 November 2017 Qualifications as a non-executive Director and became BSc – Botany/Plant Biology and PhD and a Chairman in April 2018. Member of the Chartered Institute of Personnel Over six years 4 | Over three and | Committee membership | and Development. | | --- | --- | --- | | up to six years 3 | Nominations (Chair) and Remuneration. | | | Up to three years 2 | | Appointment to the Board | | | Skills and experience | Celia Baxter joined the Board on 2 September | | | For more than 40 years Ian has held many | 2013, became Chair of the Remuneration | | | senior management and directorship roles, | Committee in December 2013 and the Senior | | | including finance, executive management, | Independent non-executive Director in April 2019. | (1) Diversity – Board customer support and strategic planning. Committee membership Career experience Remuneration (Chair), Audit and Nominations. Ian joined Marconi in 1976 and held a number Skills and experience ofroles with them. He was Chief Executive Celia is an experienced non-executive Director, ofAlenia Marconi when Marconi and British Remuneration Committee and Pension Trustee Aerospace merged in 1999 to form BAE Company Chair. Systems plc. He then became Group Strategy | and Planning Director of BAE Systems; Ian was | Career experience | | --- | --- | | its Chief Executive from 2008 until his retirement | Celia’s early HR career was with Ford Motor | | in June 2017. He was also the senior independent | Company and KPMG. She has held executive | | director of Rotork plc until June 2014. | HR positions with Hays plc, Enterprise Oil Plc | and Tate & Lyle Plc, and most recently was Current directorships/business interests Director of Group HR and responsible for all Ian is the Senior Independent Director of areas of sustainability for Bunzl plc. Celia was Female 55% Schroders plc, having been appointed to its Male 45% anon-executive director of RHI Magnesita until Board on 1 January 2017, the lead non-executive June 2021. Director of the Department for Transport, a | non-executive Director of High Speed Two | Current directorships/business interests | | --- | --- | | (HS2) Limited, and is a senior advisor to the | Celia is a non-executive Director of | | Board of Gleacher Shacklock LLP. | DS Smith plc. | | Independence | Specific contribution to the Company’s | | Ian met the UK Corporate Governance Code’s | long-term success | | independence criteria on his appointment | Celia brings extensive experience of working | | asChairman. | ininternational, decentralised businesses | andmanaging HR departments to the Board. Specific contribution to the Company’s She holds a key role in engaging with the long-term success Group’s stakeholders, particularly its employees. Ian leads the Board in defining the strategy of She advises and guides on succession the Group and driving the Company’s vision to planningmatters. Celia demonstrates valuable produce sustainable growth in operating profit, knowledge of sustainability policies and practices. cash flow and shareholder value. Ian has relevant direct experience in Aerospace, (1) Following Barbara Jeremiah’s appointment akeyelement of Senior’s strategy. to the Board on 1 January 2022 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202168 Susan Brennan Bindi Foyle Giles Kerr Independent Non-Executive Director Group Finance Director Independent Non-Executive Director and Chair of the Audit Committee Responsibilities Responsibilities To challenge the executive Directors and To manage the Group’s financial aairs and to Responsibilities monitor the delivery of the strategy within the contribute to the management of the Group’s To challenge the executive Directors and risk and control framework set by the Board. business and to the implementation of the monitor the delivery of the strategy within the strategy and policies approved by the Board. risk and control framework set by the Board. To Qualifications Chair the Audit Committee and focus its agenda BSc in Microbiology and MBA. Qualifications on its key matters: quality, financial accounting, BSc (Hons) in Economics & Accounting and Appointment to the Board corporate reporting and eective internal controls. aChartered Accountant. Susan Brennan joined the Board in January 2016. Qualifications Appointment to the Board Committee membership BA (Hons) in Economics and a Chartered Bindi Foyle joined the Board as an executive Audit, Nominations and Remuneration. Accountant. Director on 3 May 2017 and became Group Skills and experience Finance Director on 1 July 2017. Appointment to the Board Susan brings more than 25 years of Giles Kerr joined the Board on 2 September Committee membership manufacturing experience, including automotive 2013 and became Chair of the Audit Committee Bindi sits on the Group Executive Committee vehicle, powertrain and components assembly. in April 2014. and the Treasury Committee, which is not Susan has dedicated her career to improving formally appointed as a Committee of the Board. Committee membership American manufacturing and assuring that the Audit (Chair), Nominations and Remuneration. | United States maintains a vital manufacturing | Skills and experience | | | --- | --- | --- | | footprint. In her time as a manufacturing | Bindi joined Senior as Group Financial Controller | Skills and experience | | practitioner, she has always been a strong | in January 2006, a role she held until July 2014 | Giles has over 35 years’ experience in finance | | proponent of sustainability, starting in her first | when she became responsible for the Group’s | across a broad range of industrial sectors. | | role as the Environmental and Coating Manager | Investor Relations activities. Prior to her | During his tenure as Director of Finance at | | with Douglas and Lomason, leading the plant to | appointment as an executive Director, | Oxford University, he established a successful | | the State of Iowa’s first ever Waste Minimization | BindiwasDirector of Investor Relations and | investment oce and he gained considerable | | award and, more recently, launching the | CorporateCommunications for the Group. | experience of establishing and growing | | all-electric Nissan Leaf in Smyrna, USA. | | technology-based companies. | Career experience Career experience Prior to joining Senior, Bindi held senior finance Career experience Susan served as VP of Manufacturing at Nissan roles at Amersham plc and GE, having Giles is a former Director of Finance of Oxford North America, Inc. and as Director of global previously worked with BDO Stoy Hayward. University and non-executive director of BTG Plc manufacturing at Ford, where she led a global and Victrex plc, Adaptimmune Therapeutics plc Current directorships/business interests business oce for Ford’s assembly, powertrain and Arix Bioscience plc. Giles held a number of Bindi is a non-executive director of Avon and stamping plants. Until 5 August 2021, Susan positions with Amersham plc, including Group Protection plc; in January 2021 she became was the Executive Vice-President and Chief Finance Director. He was formerly a Partner the Chair of its Audit Committee. Operations Ocer of Bloom Energy Corporation. with Arthur Andersen & Co. Specific contribution to the Company’s Current directorships/business interests Current directorships/business interests long-term success In August 2021, Susan was appointed the Giles was appointed a non-executive director Bindi’s experience of financial control and President and Chief Executive Ocer of Romeo and Chairman of PayPoint plc in November 2015. investor relations and communications means Power, Inc., an energy technology company He is also a non-executive director of Abcam plc. that she is ideally placed to implement the delivering large-scale electrification solutions strategy and policies approved by the Board. Specific contribution to the Company’s for complex commercial vehicle applications Since joining the Group in 2006, she has gained long-term success based in Los Angeles, California. extensive knowledge of the running of all the Giles’ extensive experience as a chairman and Specific contribution to the Company’s Group’s operations and is instrumental in senior independent director, and as the chair long-term success managing the Group’s finances and assisting of several UK and US listed company audit Susan brings valuable manufacturing experience theGroup Chief Executive Ocer in the committees, enables him to make a strong to the Board, especially in areas of key management of the Executive team. contribution to the Board and he has ensured technological advances. Her operational and strong financial governance of the Group. executive experience, particularly in automotive It is intended Giles will step down from the and component assembly, means she is well Board following a suitable transition period placed to understand issues at both operational with Mary Waldner and the rotation of the lead and strategic levels. audit partner. 69SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 GOVERNANCE ## BOARD OF DIRECTORS CONTINUED Rajiv Sharma David Squires Mary Waldner Independent Non-Executive Director Group Chief Executive Ocer Independent Non-Executive Director Responsibilities Responsibilities Responsibilities To challenge the executive Directors and To manage the Group’s business and to To challenge the executive Directors and monitor the delivery of the strategy within the implement the strategy and policies approved monitor the delivery of the strategy within the risk and control framework set by the Board. by the Board. risk and control framework set by the Board. Qualifications Qualifications Qualifications BTech in Mechanical Engineering and MBA, BA in Business Management Studies, a Fellow MA (Hons) in Physics and a Fellow of the Marketing & Strategy. of the Chartered Institute of Purchasing and Chartered Institute of Management Accountants. Supply and Fellow of the Royal Aeronautical Appointment to the Board Appointment to the Board Society. | Rajiv Sharma was appointed to the Board on | | Mary Waldner joined the Board on 1 December | | --- | --- | --- | | 1January 2019. | Appointment to the Board | 2021. It is intended Mary will became Chair | | | David Squires was appointed to the Board on | of the Audit Committee upon Giles Kerr’s | Committee membership 1May 2015 and became Group Chief Executive retirement from the Board, following a suitable Audit, Nominations and Remuneration. Ocer on 1 June 2015. transition period. Skills and experience Committee membership Committee membership Rajiv has nearly 30 years’ experience which David chairs the Group’s Executive Committee. Audit, Nominations and Remuneration. includes commercial, operations, M&A, He is also the Chair of the Health, Safety & strategy, digital and general management. Skills and experience Environment Committee, which meets formally Rajiv joined Coats Group plc in November 2010 Mary held a number of senior roles within the three times a year to formulate the Group’s HSE as Global CEO Industrial and was responsible aerospace and automotive sectors at British strategy and objectives for approval by the Board. for developing and executing a growth strategy. Airways, General Motors and Vauxhall Motors. Hehas lived and worked in the US, Europe and Skills and experience At Ultra Electronics, Mary gained experience Asia and has multi-industry global experience. A graduate in business management, member of working within the defence, security and He has managed complex businesses with of the Chartered Institute of Purchasing and energy markets. blue-chip companies. The majority of his career Supply and Fellow of the Royal Aeronautical Career experience has been dedicated to growing or turning around Society. David has held senior posts in She was previously the Group Finance Director businesses and he has been on the board of operations and procurement, business of Ultra Electronics Holdings plc, the Director of joint ventures. development, programme management and Group Finance at QinetiQ Group plc and Group general management. Career experience Financial Controller of 3i Group plc. During his career, Rajiv has held senior roles Career experience Current directorships/business interests invarious companies including Honeywell, David started his career in the oil industry Mary is Chief Financial Ocer of Lloyd’s GEand Shell. working for Shell; however, most of his working Register, the global professional services life has been spent in the aerospace industry, Current directorships/business interests company specialising in engineering and initially with Hughes Aircraft Company (now Rajiv has been the Group Chief Executive technology for the maritime industry. She is also Raytheon), then GEC-Marconi/BAE Systems ofCoats Group plc since January 2017, a non-executive Director and Chair of the Audit and Eaton Corporation. Prior to joining Senior plc havingserved as an executive director since and Risk Committee of Oxford Instruments plc, in May 2015, David was Chief Operating Ocer March 2015. a provider of high technology products and of Cobham plc. services to the world’s leading industrial Specific contribution to the Company’s Current directorships/business interests manufacturers and scientific research institutes. long-term success David holds no other directorships. Rajiv has had a long career running and growing Specific contribution to the Company’s multinational companies across the world, Specific contribution to the Company’s long-term success particularly in South East Asia. His background long-term success Mary’s background and experience in finance in mechanical engineering means that he brings David has a long- established career in and in the engineering sector will complement operational and technical understanding to manufacturing, for the most part having the current Board membership and prove the Board’s discussions. His experience of specialised in the aerospace sector. He brings invaluable in Senior’s continued development. developing and executing growth strategy make extensive knowledge of the aerospace industry his contribution to delivering the Company’s and understanding of procurement and business long-term success an important one. development to the Board. David has been the guiding force in driving the Group’s vision and operating in a safe and ethical manner. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202170 | Barbara Jeremiah | Andrew Bodenham | | --- | --- | | Independent Non-Executive Director | Group Company Secretary | | Responsibilities | Andrew Bodenham acts as Secretary | | To challenge the executive Directors and | to the Senior plc Board and its Committees. | | monitor the delivery of the strategy within the | See biography on page 72. | risk and control framework set by the Board. Qualifications BA in Political Science and a qualified lawyer. Appointment to the Board Barbara Jeremiah was appointed to the Board on 1 January 2022. It is intended Barbara will become the Chair of the Remuneration Committee upon Celia Baxter’s retirement from the Board, following a suitable transition period. Committee membership Audit, Nominations and Remuneration. Skills and experience Barbara is a US citizen and has over 30 years’ experience with Alcoa Inc, in a number of positions, including Executive Vice President, Corporate Development and Chairman’s Counsel. She was formerly Chairwoman of Boart Longyear Limited and a non-executive Director of Premier Oil plc and Russel Metals Inc. Career experience Barbara was most recently a non-executive Director and Remuneration Committee Chair of Aggreko plc from March 2017 to August 2021. Current directorships/business interests Chair Designate and Senior Independent Director of The Weir Group PLC; Barbara was appointed Senior Independent Director on 1January 2020. She was previously a non- executive Director of The Weir Group PLC from 1 August 2017 until 31 December 2019. Specific contribution to the Company’s long-term success Barbara’s extensive experience in a number of Senior’s key markets as an executive and a non-executive Director will complement those of the existing members of the Board. 71SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 GOVERNANCE ## EXECUTIVE COMMITTEE 1. David Squires split the portfolio. The risk and compliance ## The Executive Committee See biography on page 70. duties have transferred to a newly created Head of Risk and Compliance position and Michelle’s ## oversees the running of all | | 2. Martin Barnes | other duties and responsibilities transferred to | | --- | --- | --- | | Senior Group Operations. | Martin became the Director of Business | the Director of Business Development & | | | Development & Strategy in October 2021, | Strategy. Michelle stepped down from the | | | whenhe succeeded David Beavan; Martin was | Executive Committee on 31 December 2021. | | 1 | appointed to the Executive Committee on that | | Executive Committee date. Prior to this appointment, Martin was the | CEO of Senior Flexonics Lymington and of | The purpose of the Executive Committee is | | --- | --- | | Senior Flexonics Upeca. Martin joined the | toassist the Group Chief Executive Ocer | | Senior Group in April 2016. | inthe performance of his duties, including: | • the development and implementation 3. Andrew Bodenham of strategy, operational plans, policies, Andrew was appointed Group Company procedures and budgets; Secretary in 2002. He acts as Secretary to • the monitoring of operating and financial theSenior plc Board and its Committees; he 2 performance; also sits on the Group’s Treasury Committee. Prior to joining Senior, Andrew had gained • the assessment and control of risk; experience working for businesses in • the prioritisation and allocation of resources; technology/software, manufacturing, and insuranceand aviation services sectors. • the monitoring of competitive forces in each area of operation. 4. Launie Fleming A US citizen, he has worked for the Group The Committee is also responsible for the forover 20 years. Launie joined the Executive consideration of all other matters not specifically Committee upon his appointment as Chief reserved for consideration by the Board. Areport 3 | Executive of Aerospace Fluid Systems in | on the activities of the Executive Committee | | --- | --- | | September 2008. In October 2020, Launie | isprovided to the Board by the Group Chief | | wasappointed Chief Executive of the | Executive Ocer at each Board meeting. | AerospaceDivision, formed by the consolidation The Committee is comprised of two members of the Aerospace Fluid Systems division and of the Board, David Squires and Bindi Foyle, Aerospace Structures division. Prior to these together with Launie Fleming (Chief Executive divisional roles, Launie was the Chief Executive of the Aerospace Division), Mike Sheppard of Senior Aerospace SSP. (Chief Executive of the Flexonics Division), 4 5. Bindi Foyle Martin Barnes (Director of Business Development & Strategy), Andrew Bodenham See biography on page 69. (Group Company Secretary) and Jane Johnston 6. Jane Johnston (Group HR Director). Jane joined the Group in May 2016. A Fellow Health, Safety & Environment (“HSE”) ofthe Chartered Institute of Personnel and Committee Development, Jane has considerable experience The HSE Committee is not formally appointed heading up HR functions across a range of as a Committee of the Board, butoversees all global geographies. She has worked in a health, safety and environmental matters across number of dierent sectors, including 5 the Group. ItsTerms of Reference can be found technology, drug development, construction, on the Company’s website. and professional services and, prior to joining Senior, was Group HR Director at Pace plc. There is a process in place for the Board to be kept regularly informed of all matters discussed 7. Mike Sheppard by the HSE Committee. The Group Chief A US citizen, Mike has worked for the Group for Executive Ocer provides an HSE update at over 30 years and is the Chief Executive of the every Board meeting and the Group Director Flexonics Division. A qualified engineer, Mike’s of HSE & Sustainability attends and presents previous positions within the Group included to the Board twice a year. 6 operational roles at the two largest Flexonics businesses, Pathway and Bartlett. The members of this committee are David Squires (Chairman of the Committee), Mike David Beavan Sheppard (Chief Executive of the Flexonics David was the Director of Business Division) and Launie Fleming (Chief Executive Development & Strategy from April 2014 to ofthe Aerospace Division). Mark Roden, the October 2021, he was succeeded by Martin Group Director of HSE & Sustainability, attended Barnes. David retired from the Group on all meetings held during the year. David Beavan 31 December 2021. and Michelle Yorke were also members of the 7 Executive Committee until 31 October 2021 Michelle Yorke and 31 December 2021 respectively. The Michelle was the Director of Risk and Committee met three times during the year. Compliance from September 2018, retiring from the Group on 31 December 2021. Michelle had a broad portfolio and, upon her retirement from the Executive Committee and the Group, a decision was taken to restructure this role and SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202172 ## REPORT OF THE DIRECTORS ## The Directors present their Report and supplementary reports, together with the audited Financial ## Statements for the year ended 31 December 2021. | Activities and business review | Engagement with employees | Policy on employee disability | | --- | --- | --- | | Senior plc is a holding company. The nature of | At Senior, everyone’s opinion matters and this is | Senior provides support, training and | | the Group’s operations and its principal activities | reflected in how we engage with our employees. | development opportunities to all our employees | | are set out in the Strategic Report on pages 1 to | The Group promotes the dissemination of | irrespective of any disabilities they may have. | | 64. Its Group undertakings are shown on pages | relevant information through workshops, | We give full and fair consideration to disabled | | 164 and 165. Six of the Company’s operating | newsletters and a number of other methods, | applicants, and where an existing employee | | businesses are located in the UK and 20 in the | sothat employees are kept regularly advised on | becomes disabled during their employment, | | Rest of the World. | the Group’s and local operational developments. | wewill make every eort to ensure they are | | | Where appropriate, local briefing sessions are | able to continue working for Senior in their | The Strategic Report includes details of Senior’s held concerning such matters as business original or an alternative role. business model, strategic priorities, key performance, corporate ethics, health and performance indicators, risks and uncertainties, Engagement with other stakeholders safety. In 2021, the Group’s employees were market overview, key growth drivers and a invited to complete a voluntary Employee Senior works hard to create value for all its summary of the Group’s 2021 performance. Engagement Survey. The survey had an 81% stakeholders. By engaging and collaborating completion rate and asked for employees’ with the key groups of stakeholders, Senior Acquisitions and disposals viewsand recommendations for areas of can ensure its business grows and delivers On 22 April 2021, divested Senior Aerospace improvement. The feedback from employees long-term sustainable value. During 2021, Connecticut; further details of this transaction on our response was positive. For further members of the Board and senior management can be found on Note 31. As previously information, please see Employee Engagement engaged with the Group’s customers, key announced, in 2021 we closed both our small on pages 24 to 25. suppliers, local communities and shareholders oil& gas business in Malaysia, Senior Flexonics to seek their views on a number of matters Upeca, and our Senior Aerospace Bosman At an Operating Business level, we continue that may aect them or could be of potential operating business in the Netherlands, togather feedback through locally-managed concern. Further details on this engagement following the transfer of production to our Engagement Surveys. While maintaining social process can be found on page 40. French Aerospace sites. distancing and safety protocols where possible other activities continued, for example, skip level Employee share plans Results and dividends meetings, Value workshops, CEO Breakfasts Details of employee share plans are set out in The results for the year are shown in the and All-hands meetings, sharing business Note 33. Consolidated Income Statement on page 116. information and encouraging two-way There are no specific restrictions on the size of a During 2021, no 2020 final dividend was communication through questions and discussion. holding nor on the transfer of shares, which are proposed or paid to shareholders, as part We have also employed new ways of both governed by the general provisions of the of theBoard’s cash preservation measures encouraging two-way communication with Company’s Articles of Association and prevailing taken in response to the COVID-19 pandemic. employees. As a result of our engagement with legislation. The Directors are not aware of any Similarly, no 2021 interim dividend has been employees in 2021, we were able to assess the agreements between holders of the Company’s paid to shareholders during the year (2020 – nil culture across much of the organisation, providing shares that may result in restrictions on the pence) and the Directors do not propose payment feedback to the Board; since the sessions, transfer of securities or on voting rights. No of a 2021 final dividend (2020 – nil pence). the operating businesses have been focusing person has any special rights of control over the onareas for improvement. The Board’s usual Company’s share capital, and all issued shares Share capital programme of visiting operating businesses are fully paid. The Company has one class of ordinary shares, and taking the opportunity to meet with teams which carries no right to a fixed income. With regard to the appointment and at all levels had again to be undertaken virtually Each share carries the right to vote at general replacement of Directors, the Company is in 2021. Celia Baxter was able to carry out a meetings of the Company. The Company issued governed by its Articles of Association, number of UK site visits as part of her employee no new shares in 2021; the total number of the UK Corporate Governance Code 2018, the engagement role in 2021. | shares in issue at 31 December 2021 was | | Companies Act 2006 and related legislation. The | | --- | --- | --- | | 419,418,082. Further details on the Company’s | Senior continues to invest in its workforce | Articles may be amended by special resolution | | share capital can be found in Note 25. | through training and development opportunities, | of the shareholders. The powers of Directors | | | including “Learn”, our global learning | are described in the Matters Reserved for the | Diversity policy management programme. In addition, the Senior plc Board, which may be found on the Senior has an Equality, Diversity and Inclusion ongoing roll-out of “Perform”, our performance Company’s website. Each year, shareholder policy which is contained within its Code of management system, ensures there is an approval is sought to renew the Board’s Conduct. The policy states that we treat adequate focus on developing skills, abilities and authority to allot relevant securities. everyone fairly, equally and value diversity. knowledge of our employees. Across the Group, Wewill not make employment decisions on the There are also a number of other agreements we have a range of rewards and recognition basis of anything that does not have a direct that take eect, alter or terminate upon a change initiatives to encourage employees’ involvement bearing on the ability of any individual to perform of control of the Company, such as commercial in business performance. Whilst 2021 continued a job. We value diversity and promote equal contracts, bank loan agreements, property to be a challenging year as a result of the opportunities for all employees in a workplace lease arrangements, and employee share plans. pandemic, engagement with employees was free of discrimination. We are open, honest and None of these are considered to be significant considered by management to be invaluable and courteous in our working relationships and we in terms of their likely impact on the business allowed the Group’s businesses to continue to value individual dierences and believe that of the Group as a whole. Furthermore, the operate and support their customers throughout creating an environment where everyone feels Directors are not aware of any agreements a number of locally imposed lockdown periods, included and diversity of thought are valued between the Company and its Directors or where this was permitted by governments. strengths of Senior. Further details can be employees that provide for compensation found on page 24. for loss of oce or employment that occurs because of a takeover bid. 73SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 GOVERNANCE ## REPORT OF THE DIRECTORS CONTINUED | Risk management | Directors’ indemnities | shareholders at the 2021 AGM and took eect | | --- | --- | --- | | The Board has ultimate accountability for the | Qualifying third-party indemnity provisions | from 1January 2021. Details of the Directors’ | | Group’s risk management process, which is | for the benefit of the Directors were renewed | Remuneration Policy can be found on pages | | described in detail on pages 48 to 49. | by the Company during the year and remain | 92to 97. | in force at the date of this Report. | Financial instruments | | Annual General Meeting | | --- | --- | --- | | Note 20 contains disclosures on the Company’s | Research and Design | The Notice of Annual General Meeting | | financial instruments. | In 2021, whilst cash preservation measures | describes the business to be considered | | | were key to ensuring the Group’s stability during | at the hybrid AGM to be held at 11.30 am on | | Directors | | Thursday 21April 2022 at Ironmongers’ Hall, | the pandemic, investment for future business | Details of the Directors who served throughout | activities was also viewed to be important by | O Shaftesbury Pl, Aldersgate St, Barbican, | | --- | --- | --- | | the year can be found on pages 68 to 71. The | the Board. In 2021, the Group incurred £19.2m | LondonEC2Y 8AA. The AGM can also be | | Directors’ interests in the shares of the Company | (2020 – £18.7m) on research and design. | attended virtually. Please see the Notice of | | are included in the Directors’ Remuneration | Product development and improving | Annual General Meeting 2022 for the details | | Report on page 104. NoDirector has any | manufacturing processes represent the | of the AGM; a copy may be found on the | | interest in contracts with the Company or its | primaryfocus of the Group’s research and | Company’s website. | | subsidiary undertakings. Asshown on page 69, | design activities. | | Acquisition of the Company’s own shares Susan Brennan was the former Executive Vice | President and the Chief Operations Ocer of | Political donations | The Company purchased no ordinary shares of | | --- | --- | --- | | Bloom Energy Corporation, having stepped | No political donations were made by the | 10 pence each in the capital of the Company; | | down from this role on 5 August 2021. Note 51 | Company or any of the Group’s operations | noshares (2020 – nil shares) were purchased | | provides details of the contract Bloom Energy | during the year. | bythe Senior plc Employee Benefit Trust in the | | has with a Group subsidiary. Procedures were | | year to satisfy the future vesting of executive | | | Greenhouse gas emissions | share awards and employee share plans. | adopted by Bloom Energy which meant Susan | Brennan had no involvement in this contract | Our report under the Streamlined Energy and | At theend of the year, the Directors had | | --- | --- | --- | | during her period ofemployment with them. | Carbon Reporting requirements can be found | authority, under a shareholders’ resolution | | | onpage 17. | dated 23 April 2021, to make market purchases | The provisions of the Corporate Governance of the Company’s shares up to an aggregate Code require that all Directors of FTSE 350 Major shareholdings nominal amount of £42m (2020 – £42m), which companies should be subject to annual election The Company has been notified that the represented approximately 10% of the issued by shareholders. Mary Waldner and Barbara following shareholders were interested in 3% or share capital of the Company. A resolution to Jeremiah were appointed to the Board in more of the issued share capital of the Company: renew this authority will be proposed at the December 2021 and January 2022, respectively; forthcoming AGM. they will stand for election at the AGM to be % at 9 February held in April 2022. Celia Baxter, Susan Brennan, Auditor 2022 Bindi Foyle, Giles Kerr, Ian King, Rajiv Sharma • Each of the persons who is a Director of Alantra Asset Management 18.48 | and David Squires will all stand for re-election | | theCompany at the date of approval of this | | --- | --- | --- | | at the 2022 AGM. | Aberforth Partners 8.46 | Annual Report confirms that so far as the | | | Heronbridge Investment Management 7.15 | Director is aware, there is no relevant audit | Board diversity Columbia Threadneedle Investments 4.73 information of which the Company’s Auditor Senior remains committed to all aspects of is unaware; and BlackRock 4.11 Board diversity, including gender, nationality, • the Director has taken all steps that he/she experience, background and personal attributes, Legal & General Investment ought to have taken as a Director in order and keeps under review its balance and Management 4.04 to make himself/herself aware of any composition. The earlier appointments of Vanguard Group 3.62 relevant audit information and to establish CeliaBaxter, Susan Brennan and Bindi Foyle Janus Henderson Investors 3.38 that the Company’s Auditor is aware of tothe Board, and more recently those of thatinformation. MaryWaldner in December 2021 and Barbara So far as is known, no other shareholder had a Jeremiah in January 2022, mean that Senior has This information is given and should be notifiable interest amounting to 3% or more of strong female representation on its Board. The interpreted in accordance with the provisions the issued share capital of the Company, and Board strongly believes that its composition is ofSection 418 of the Companies Act 2006. the Directors believe that the close company well-balanced in terms of diversity, including provisions of the Income and Corporation In 2016, the Group undertook a formal tender gender and ethnicity, and that this balance drives TaxesAct 1988 (as amended) do not apply process for its external audit function, which the Group’s business performance and creation to the Company. resulted in KPMG LLP being appointed the of longer-term sustainable growth. Group’s External Auditor for the financial year Compliance with the UK Corporate The Board’s Diversity and Inclusion Policy was commencing 1 January 2017. KPMG’s Governance Code | approved in February 2021. The Policy includes | | re-appointment was last approved by the | | --- | --- | --- | | the Board’s commitment to maintaining at least | The Company’s statement of compliance with | Company’s shareholders at the 2021 AGM. | | one-third female representation and at least one | the provisions of the UK Corporate Governance | Inaccordance with Section 489 of the | | Director from a Black Asian and Minority Ethnic | Code 2018 issued by the Financial Reporting | Companies Act 2006, a resolution for the | | background on the Board. Currently, 55% of | Council is set out on page 65. This Code is | re-appointment of KPMG LLP as Auditor | | the Board Directors are female and two of the | publicly available on the Financial Reporting | oftheCompany is to be proposed at the | | Directors are from minority ethnic backgrounds. | Council’s website: www.frc.org.uk. The Chair’s | forthcoming AGM. | Governance Letter on pages 65 and 67 forms The Nominations Committee annually reviews By Order of the Board part of this Report of the Directors. and approves management development and Andrew Bodenham succession plans and makes recommendations Remuneration Report and Policy Group Company Secretary to the Board on its structure, size and The 2021 Annual Report on Remuneration is 25 February 2022 composition to ensure that it is appropriate tobe put to shareholder vote at the 2022 AGM. forthe Senior Group. Following a triennial review, the Directors’ Remuneration Policy was approved by SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202174 ## DIRECTORS’ DUTIES ## Under the Companies Act 2006, each of our Directors must: act within their powers; ## promote the success of the Company; exercise independent judgment; exercise reasonable ## care, skill and diligence, and avoid conflicts of interest. Leadership and purpose The Board meets formally on a regular basis, In July 2018, The Financial Reporting 20times in 2021; in addition, there were five Company purpose, values and strategy Council published a revised Corporate meetings of the Audit Committee in 2021, The Board is responsible for Group decisions Governance Code, which was designed together with seven meetings of the aecting governance, strategy and the approval to set higher standards of corporate Remuneration Committee and six meetings of annual operating budgets and Financial governance to promote transparency ofthe Nominations Committee. A table showing Statements. Italso approves significant financial and integrity in business. Board and Committee meeting membership and contractual commitments made by the Group. The Board’s Terms of Reference were and attendance is shown on page 66. Other The 2018 Corporate Governance Code updated in 2021 and more fully describe the Committees are appointed by the Board to established five new principles: responsibilities of the Board; the Matters dealwith treasury matters, disclosure matters Reserved for the Board may be found on the and specific matters such as acquisitions Leadership and purpose anddisposals. Company’s website. ## 1 | | | The Company’s purpose is stated on page 1. | During 2021, the Chair met with the non- | | --- | --- | --- | --- | | | Division of responsibilities | Senior aims to create long-term sustainable | executive Directors to discuss matters in | | 2 | | value for all its stakeholders through its business | confidence, without the executive Directors | | | | model. Six strategic priorities have been | being present; this is in line with good practice. | Composition, succession identified as key elements of the Company’s In 2021, the minutes arising from all Committee ## 3 and evaluation business model, in order to drive the creation meetings are made available to the Board. ofshareholder value. Details of the Group’s Audit, risk and internal control Thereare procedures in place to ensure that all Business Model and Strategic Priorities can be ## 4 Directors are properly briefed, so that decisions found in the Strategic Report on pages 30 to 31, taken by the Board are based on the fullest, 34 to 35. Remuneration up-to-date, available information. The non- ## 5 executive Directors are encouraged to visit The Board recognises its role in assessing and | monitoring the Group’s culture. To that eect, | theGroup’s operations to meet the local | | --- | --- | | “Culture” has been made a regular Board | management teams and discuss any issues that | | agenda item. The Board deploys various | they may face; this process continued to be held | | initiatives to monitor culture, from participating | by virtual meetings during 2021, in accordance | | insite visits to reviewing qualitative and | with COVID-19 travel restrictions imposed by | | quantitative evidence of culture (succession | governments. Our Senior Independent Director, | | plans, Health & Safety reporting, whistle- | Celia Baxter , who is the nominated Director | | blowing notifications, payment practices reports | responsible for employee enaggement, was | | and training completion rates). During 2021, | able to visit a number of UK sites towards | | where we were not able to rely solely on | the end of the year. In 2021, at every Board | | face-to-face Board meetings, virtual meeting | meeting, there were reviews of health, | | methods wereused as an alternative and | safety and environmental performance, and | | proved to be veryeective. | operational, financial and administrative matters. | Social andethical issues, reported whistle- The Board demonstrated its strength and blowing incidents, and the agreement of adaptability when guiding the Group during the budgets and levels of insurance cover were potential oer for the Company by Lone Star, as reviewed whenever appropriate. well as its response to the continued pandemic. | At the Board’s Annual Strategic Review meeting | There is a procedure by which all Directors can | | --- | --- | | held in October 2021, the Group’s Strategy was | obtain independent professional advice at the | | tested, taking into account recent events and | Company’s expense in furtherance of their | | the impact of the pandemic on the Group’s end | duties, if required, and they have been made | | markets, and was found to be still relevant by | aware of this. | the Board. To enable the members of the Board and its Committees to discharge their duties eectively, Division of responsibilities the Chairman ensures that accurate and clear The Board delegates a certain number of its information is provided to all Directors in a timely responsibilities to the Audit, Remuneration, manner in advance of meetings. The Group Nominations, and Health, Safety & Environment Company Secretary supports the Board to Committees. The Group Chief Executive Ocer, ensure that it has in place appropriate policies, together with the Executive Committee, processes, time and resources to enable it to is responsible for the implementation of the operate eciently and eectively. decisions made by the Board and for the day-to-day conduct of the Group’s operations. 75SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 GOVERNANCE DIRECTORS' DUTIES CONTINUED I am confident that Senior has the requisite diversity of skills, people, and experience that will guide the Company in delivering value for all our stakeholders." Ian King Chair ![img-0.jpeg](img-0.jpeg) ## COMPOSITION, SUCCESSION AND EVALUATION ### NOMINATIONS COMMITTEE REPORT Dear Shareholder, #### Overview The Nominations Committee is chaired by me and comprises all non-executive Directors. The Group Company Secretary acts as Secretary to the Committee. Senior members of management and advisers are invited to attend meetings when deemed appropriate. There were six scheduled meetings of the Committee in 2021. Two members constitute a quorum for the Nominations Committee. The Committee's attendance records are shown on page 66. The Committee is tasked with administering the process for appointments, considering succession planning, regularly reviewing such processes and overseeing the composition of the Board. The Nominations Committee's Terms of Reference can be found on the Company's website. #### Appointments to the Board The Nominations Committee typically enlists an external consultancy firm to assist with the appointment of Directors to the Board. In 2021, two consultancy firms, Kam Ferry and Sam Allen Associates Limited, were engaged separately to assist with the recruitment of the Board members recently appointed. The Company provided the relevant appointed firm with a rate description, together with the required skills and personal attributes to be considered for the role. The appointed firm filtered a list of candidates down to a number of those that they felt met the skills and attributes required, then conducted preliminary interviews with the selected candidates. The candidates were then referred to Senior for interview, together with a written analysis on each candidate, with each candidate being interviewed by a number of members of the Board. The Nominations Committee also took up references on the preferred candidates. The final recruitment decisions were taken by the Board as a whole. In addition, the Nominations Committee sought confirmation that candidates under consideration would have sufficient time to carry out their duties as a Director of the Board, if appointed. The time commitment of the Directors is kept under review and the potential for over-boarding monitored and discouraged. Mary Waldner was appointed to the Board on 1 December 2021 and Barbara Jeremiah was appointed to the Board on 1 January 2022. Following the appointments of Mary and Barbara, a full and comprehensive induction programme is taking place. The induction process includes areas such as financial forecasts, Group strategy and values; ethics and training on the Code of Conduct, together with other relevant topics. Visits to the Group's operations by the newly appointed Directors will also be undertaken. The Nominations Committee and the Board have been taking due regard of Lord Davies' review into Women on Boards (February 2011), the Hampton-Alexander Review: FTSE Women Leaders (November 2018) and the Hampton-Alexander Review: Improving Gender Balance in FTSE Leadership (November 2017). I am pleased to report that the Board is supportive of the aim to increase diversity and the level of female representation in Board and senior leadership positions. Following Barbara Jeremiah's appointment, five of the nine Directors are currently female (55%). In addition, the Nominations Committee and the Board have ensured the Board's composition is diverse in terms of the Directors' ethnic backgrounds, as recommended by the Parker Review; further detail can be found on page 74. Two of the seven members of the Executive Committee are currently female (28%). A third female member, Michelle Yorke, retired from the Executive Committee at the end of December 2021, following five and a half years' service with the Company, most recently as its Director of Risk & Compliance. The Board has been proactive in further promoting diversity and equality of all kinds throughout the Group, regardless of geography or position. The Committee regularly discusses the benefits of diversity with regard to the Board and its Committees. **Extension of appointments to the Board** In 2021, no Board Directors' appointments were extended. #### Succession planning The Committee regularly considers the matter of succession planning for Board-level and the Group's senior management roles. Cognisant of terms of Celia Baxter and Giles Kerr, the Committee followed its recruitment process, described above, and appointed Mary Waldner and Barbara Jeremiah to the Board in December 2021 and January 2022, respectively, thereby allowing for a suitable transition period between them and the two departing Board members. Mary's and Barbara's skills and previous work experience make them a good fit for the Company and complement those of the existing Board members; a summary of their biographies can be found on pages 70 to 71. The Group continues to focus on maximising the potential of its employees and improving succession planning. The Executive Committee, supported by the Group HR Director, conducted an extensive review of senior executive succession plans. The review identified key employees who are considered capable of being developed into leadership roles, which is critical to the success of the Group. Appropriate plans are in place to ensure there is a mix of employees within the Group who could fill key roles in the short and longer term. In 2021, the Nominations Committee reviewed the Group and divisional succession plans and maintained its focus on further strengthening diversity in these plans particularly gender diversity in operational roles. #### Independence The Nominations Committee and the Board consider all of the non-executive Directors to be fully independent and free from conflicting interests which could cause difficulties whilst carrying out their duties. Senior considers its non-executive Directors to be proactive in contributing their respective experiences and skills gained from a range of sectors. Conflicts of interests are fully disclosed by Directors upon appointment and are reviewed on a regular basis throughout each year. I am confident that Senior has the requisite diversity of skills, people, and experience that will guide the Company in delivering shareholder value. This Report was reviewed and approved by the Nominations Committee and signed on its behalf by: Ian King Chair of the Nominations Committee 25 February 2022 76 BENGOR PLC ANNUAL REPORT AND ACCOUNTS 2021 | Nominations Committee | Board diversity and inclusion | EquityCulture Limited was very positive | | --- | --- | --- | | The Company’s Nominations Committee | The Group seeks to ensure diversity in the | about the manner in which the Board had | | leadsthe process for Board appointments | composition of its Board, including, amongst | operated and made only a limited number of | | andsupervises leadership development | other qualities, diversity of gender, social and | recommendations for the Board to consider. | | andsuccession planning. It also makes | ethnic backgrounds, cognitive and personal | TheBoard was found to have functioned well | | recommendations to the Board on all new | skills. The Company’s female representation on | during 2021, having met a total of 20 times. | | Boardappointments and re-appointments, | the Board complies with the recommendations | It had made eective use of video conferencing | | further details of which can be found on page | of the Hampton-Alexander Review, and meets | for the Board and its Committee meetings and | | 76. The Committee, which consists entirely of | the proposals on ethnic diversity outlined by | had been flexible and adaptive to the dynamics | | non-executive Directors, is chaired by Ian King; | theParker Review. Furthermore, we endeavour | the Company was facing. | | its composition is shown on page 66. | to incorporate diversity into our recruitment | | The 2021 evaluation findings showed that the process by engaging, wherever possible, with Details of the Directors’ external statutory Board had operated eectively and robustly recruitment firms that have committed to follow appointments can be found in their biographies throughout the particularly dicult year and the Voluntary Code of Conduct for Executive on pages 68 to 71. The Board believes that the made some suggestions for additional focus. Search Firms, and by widening the pool of Directors’ experience of working with other candidates from diverse backgrounds. The main recommendation centred around companies adds value to their contribution to Board succession, ensuring Mary Waldner and the Company’s Board and Committee meetings. Board induction and development Barbara Jeremiah were not rushed and given In compliance with the Corporate Governance Appointments to the Board are made following appropriate time to complete their induction in Code, all continuing Directors oered a rigorous, formal, recruitment process this challenging environment. We invested early themselves for re-election at the Company’s supported by professional consultants. All in succession planning for Celia Baxter and Giles AGM 2021. All Directors will again oer Directors receive induction upon joining the Kerr and have time to optimise the process. themselves for election or re-election at the Board and are encouraged to update their The other points raised were ensuring strategy 2022 AGM. The resolutions to be put to knowledge and skills on a frequent basis. The forms part of every Board meeting agenda and shareholders at the 2022 AGM can be found Nominations Committee has arranged for Mary ensuring the Directors have good access to the in the Notice of Annual General Meeting, Waldner and Barbara Jeremiah, our recently Executive teams, as we review performance which is available on the Company’s website. appointed non-executive Directors, to receive and strategy. The meeting structures of virtual, early and appropriate induction and all Directors hybrid and physical are also under review. The Board confirms that in 2021 all Directors already in oce continued to receive regular inoce at the time worked assiduously and We have adapted to change well through 2020 updates on statutory matters. The Group diligently, particularly in addressing the situation and 2021, and as a Board and we must not lose Company Secretary provides the Board with arising from the potential Lone Star bid, as well the momentum. The findings will add to the statutory andregulatory updates at every Board as the impact of the continued pandemic. Each Board’s development as we enter the recovery meeting and notifies them of any pressing Board member made a positive contribution phase of our end markets and strategic growth points that are relevant between meetings. to the running of the Company and the Board of the Company. confirms that they will continue to work to The Directors are cognisant of the fact that the ensure its long-term success. EquityCulture Limited has no other connection Board, and its Committees, should have the with the Company or its Directors. appropriate combination of skills, experience Remuneration and knowledge to enable them to carry out their In addition, the Chair undertakes individual The Remuneration Report on pages 87 to 107 duties eectively. Membership of the Board and reviews of each Director and provides fully describes the Board’s approach to its Committees is kept under regular review and feedback and guidance on their performance remuneration matters. refreshed when appropriate, taking into account and contribution to the Board. The Senior the Directors’ lengths of service and their ability Board eectiveness Independent Director, in consultation with the to devote sucient time to Company matters. The Board is structured under a non-executive non-executive Directors, undertakes a similar Chair and currently comprises two executive review process of the Chair. Evaluation of the Board and the Directors Directors and six independent non-executive The Board felt that it was appropriate to Succession planning Directors, who were each selected for complete an external evaluation for the The Nominations Committee met six times appointment because of their wideindustrial second year running, given the extreme during the year and considered succession plans and commercial experience. TheDirectors challenges of operating in a COVID-19 for Board-level and senior management roles. believe that the Board and its committees have environment. We again used EquityCulture the appropriate balance of skills, experience and Limited (formerly Equity Communications The Group has continued to increase its focus knowledge to enable them to fulfil their duties Limited) to maintain continuity. The evaluation on maximising the potential of its employees and responsibilities eectively. The Nominations was carried out through individual confidential and improving succession planning. The Group Committee regularly reviews the composition interviews with each Director. Chief Executive Ocer and Group HR Director of the Board. 77SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 GOVERNANCE ## DIRECTORS’ DUTIES CONTINUED | present a detailed Executive Succession Plan | advises the Board of Directors. The Audit | Because of the travel restrictions imposed as | | --- | --- | --- | | foreach Executive Committee role, to the | Committee Report on pages 80 to 86 describes | aresult of COVID-19, physical presentations | | Nominations Committee twice a year. This | the role and activities of the Audit Committee, | were not possible in 2021; however, the Code | | ensures that the Nominations Committee is able | together with the significant risks and | was reinforced by the executive Directors and | | to undertake adetailed review of the succession | judgments that it considered in relation to the | Executive Committee by regular meetings and | | plans for theExecutive Committee, the talent | 2021 Financial Statements and its relationship | the ongoing training of employees. The Board | | pipeline, and a talent profile for each member of | with the internal and External Auditors. Details | verifies compliance with the Code through | | the Executive Committee. The review includes | of the Group’s approach to risk management | its internal audit programme, ensuring that | | discussions regarding individuals’ strengths | and its Risk and Assurance Framework can be | employees have received the mandatory training | | and areas for development plans. As a result, | found on pages 48 to 49. | and that the Group’s businesses operate with | | development activities are identified, for | | integrity at all times and in compliance with | | example, supporting the Executives in pursuing | Communicating the Senior plc Code of | theCode. | | external non-executive director roles. Prior to | Conduct and operating with integrity | | Operating with integrity and in an ethical the 2021 Nominations Committee review, the In 2021, the executive Directors published an mannerbuilds trust with customers and other Executive Committee, supported by the Group updated booklet for issue to all employees and stakeholders and underpins the Board’s HR Director, conducted an extensive review relevant third parties, explaining the Group’s strategic objectives. | of the Group’s operating business leadership | Code of Conduct (the Code) and Senior’s | | | --- | --- | --- | | succession plans. By utilised skills and talent | Values; these values can be found on page 30. | Human rights | | mapping this assists both the Executive | The booklet includes a message from the Group | The Group recognises the importance of the | | Committee and, ultimately, the Nominations | Chief Executive Ocer, explaining that it is his | Universal Declaration of Human Rights and | | Committee in identifying any gaps, taking | unshakeable belief that how you do business | adheres to the core principles and values | | into account the Group’s long-term strategy | isas important as what you do in business. | defined within it. The majority of countries in | | to provide a solid foundation for Senior’s | Itcontains work-related scenarios, together | which Senior operates have their own laws | | growth aspirations. | witha selection of questions and answers, to | banning child labour and promoting human | | | help employees to understand the Code and | rights. Senior monitors the ages of its workforce | When reviewing succession plans, the relate itto their individual roles and working across the world to ensure compliance and Committee recognises the benefits of a diverse environment. Copies of the Code are issued identify any potential succession issues. workforce, diversity of thought and employing to all new employees and reissued periodically individuals from dierent backgrounds and Senior is committed to preventing slavery and to continuing employees to remind them of experience across the organisation, including human tracking in its corporate activities and the required level of conduct. Board members and senior managers. throughout its supply chain. Senior does not Senior trains its employees on the requirements restrict any of its employees in any of the In 2021, the Executive Directors undertook a of the Code upon induction, educating them countries in which it operates from joining a separate succession-planning exercise to find on what they can and cannot do, and how to trade union if they wish to do so. Senior also suitable successors for David Beavan, our Group address any ethical dilemmas they may face. works closely with its suppliers to ensure that Director of Business Development & Strategy, Acompulsory 2021 Global Code of Conduct they at least meet internationally recognised and Michelle Yorke, our Group Director of Risk & online training course was rolled out across the minimum requirements for workers’ welfare Compliance, in preparation for their retirements Group to all employees during the year. The andconditions of employment. Senior publishes in late 2021. The current composition of the 2021 course contained training modules on: a Modern Slavery Act Statement, which is kept Executive Committee can be found on page 72. Global Anti-bribery, Preventing Harassment & under review and updated as necessary; the Promoting Respect and Protecting Human current statement has been signed by the ### AUDIT, RISK AND INTERNAL | | Rights; all employees and Directors were | GroupChief Executive Ocer and was | | --- | --- | --- | | CONTROL | required to achieve a Pass grade, as a minimum. | published in March 2021, it is available | | Resources, internal controls and risk | | on the Company’s website. | Typically, all the Group’s operations are visited management by the Group Chief Executive Ocer, theGroup Reporting and investigating concerns The Board has ultimate accountability for the Finance Director or other members of the and whistle-blowing Group’s risk management process. Executive Commiittee on an annual basis and As part of its internal control procedures, the make presentations to local senior management, Company has a Whistle-blowing Policy that is The Board determines the nature and extent reinforcing the Code and the importance of communicated throughout the Group. This of the significant actions necessary to achieve maintaining an absolute commitment to the policy provides employees with the opportunity its strategic objectives and maintains a sound highest possible standards of ethics and a zero to report suspected unethical or illegal corporate system of internal control. The Company’s Audit tolerance towards bribery and corruption. conduct confidentially and anonymously. Committee reports to and, for certain matters, SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202178 | Senior plc is committed to maintaining high | Managing external sales agents and | Group information and operations business | | --- | --- | --- | | ethical standards across the Group. Employees | representatives | security policy and data protection | | and representatives of Senior have an obligation | Senior has in place a Responsible Sourcing | The Group’s confidential information is valued | | to act honestly, with integrity, and to comply | Policy which establishes the minimum | highly by the Board, and in 2019 a Group Head | | with applicable laws. Consequently, employees | standards expected of our supply chain. | of Information Security was appointed. In 2019, | | are encouraged to report any suspected | Senior plc is committed to the highest possible | an Acceptable Use Policy was issued to provide | | unethical or illegal corporate conduct in | standards of environmental, ethical and social | guidelines for the acceptable and appropriate | | accordance with this Policy. | responsibility performance in respect of all its | use of Information and Operational Technologies | | | products and services. Senior strives to be the | by all Group employees. The policy sets out | Senior will not tolerate the harassment or best for its customers and its people and looks thecontrols that are in place to help reduce victimisation (including the application of to make a positive contribution to society riskassociated with the inappropriate use of informal pressure) of a person reporting wherever it operates. Adherence to this policy Information and Operational Technologies, corporate conduct in good faith. In addition to is mandatory and all Group operations are which could lead to data loss, manufacturing the legal protection provided to such employees, required to ensure that they are aware of the disruption, virus or malware infection or other Senior will treat retaliatory conduct in violation requirements of the policy. issues that could have a negative financial of this Policy as a serious disciplinary oence. orreputational impact on the Group. In The Board recognises the potential bribery and The Group encourages its employees to discuss compliance with the Data Protection (Charges corruption risks posed by the markets in which any ethical concerns that they may have with and Information) Regulations 2018, the the Group operates and, in particular, the use of local management, or at Group level if more Company is registered with the Information third-party intermediaries it engages. All external appropriate. Where an employee feels unable Commissioner’s Oce. sales agents and representatives working on to approach local or Group management, or are behalf of Senior across the world are required In 2021, all Group employees continued to dissatisfied with the response, they can contact to operate in compliance with Senior’s Code of receive regular updates on information security, Senior’s third-party whistle-blowing service Conduct or have their own code of conduct of supported by internal newsletters and posters, provider by telephone, a web reporting tool or, in an equivalent high standard. Local management alerting them to key current issues, such as some languages, an App. The provider will pass is required to conduct a due diligence and risk cyber security. on information to an investigating ocer within assessment process prior to engaging or Senior, maintaining anonymity of the individual, To ensure compliance with the General Data re-appointing any sales agents and to issue if requested. Protection Regulations (GDPR), both in the EU them with a copy of the Code, ensuring that and the UK, the Company and all relevant Group All reports of suspected unethical or illegal they understand, acknowledge and accept operations have in place a GDPR policy and corporate conduct are independently its requirements. breach incident procedure which have been investigated and tracked from inception to International trade compliance communicated to their employees. As the resolution and, where necessary, actions are The Code of Conduct includes a section Company is not a public authority, its core taken to rectify any weakness in systems that dedicated to Complying with International activities do not require regular and systematic may have been identified. These actions, and Sanctions and Trade Compliance Requirements; monitoring of individuals on a large scale and it the overall integrity of the reporting system, it states “Senior will conduct its business in does not process special categories of personal are subject to regular scrutiny by the Audit full compliance with all global trade laws and data, criminal convictions or oences data on a Committee. This process is also available to regulations and all relevant sanctions for the large scale, it is not required to appoint a data third parties, such as suppliers and customers. import and export of goods and services in the protection ocer. However, the Company and Subject to confidentiality considerations, the countries within which it operates.” relevant Group operations each have a Data outcome of each investigation is provided, Protection Champion, whom employees insofar as it is possible, to the individual who Managing gifts and hospitality can approach for guidance if they have any reported the concern. All reported whistle- The Board recognises that gifts and hospitality queries or concerns relating to data protection. blowing incidents are reviewed by the Board have the potential to create a conflict of interest, Compliance with data protection regulations will of Directors, which the Company believes or the perception of a conflict of interest. As a continue to be monitored on an ongoing basis. to be the most appropriate forum. result, there is a Group policy restricting the receiving and giving of gifts and hospitality from, Celia Baxter is the Company’s Senior and to, third parties. This policy requires that all Independent Director, providing employees gifts and hospitality must be recorded annually and third parties with an alternative channel of through a self-declaration process. The Internal communication to resolve issues if they have a Audit Manager assesses adherence with the concern that the Chair, Group Chief Executive Group’s gifts and hospitality policy during Ocer or Group Finance Director have failed internal audit visits, which are carried out to resolve the issues, or where such contact physically or virtually. with them is not appropriate. 79SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 GOVERNANCE ## DIRECTORS’ DUTIES CONTINUED ## In 2021, the Group further strengthened ## its risk management procedures and ## these have been reviewed by the ## AuditCommittee.” Giles Kerr Chair of the Audit Committee • reviewing the Company’s statement on • ensuring the internal Auditor has direct ### AUDIT COMMITTEE REPORT the Annual Report & Accounts prior to access to the Board Chair and to the Audit Dear Shareholder, endorsement by the Board, that taken as a Committee Chair, providing independence The Audit Committee has been established by whole the Annual Report & Accounts is fair, from the Executive and accountability to the the Board and consists entirely of independent balanced and understandable and provides Audit Committee; non-executive Directors. The primary role of the information necessary to assess the • carrying out an annual assessment of the the Audit Committee is to maintain the integrity Group’s position and performance, business eectiveness of the internal audit function; of the financial reporting of the Group and to model and strategy; • reviewing the eectiveness of the Group’s ensure appropriate risk management and • discussing with the External Auditor issues internal controls systems that identify, assess, internal control procedures. To enable the and reservations, if any, arising from the manage and monitor financial risks, and AuditCommittee to fulfil this role, its main year-end audit and the half-year review, other internal control and risk responsibilities include: andany other matters the External Auditor managementsystems; • conducting the process for selecting may raise; • developing and recommending to the Board the External Auditor and making • reviewing and approving the terms of the the Group’s Policy for the Provision of recommendations to the Board, and External Auditor’s engagement, including Non-Audit Services by the External Auditor, ultimately shareholders for approval, of the management representation letter including specifying permitted non-audit the appointment of the External Auditor, addressed to the External Auditor at the services and their approval requirements; the audit fee, initiating tender processes in start of each audit; • ensuring the External Auditor’s remuneration accordance with regulatory requirements, • reviewing the longer-term viability and fee level is appropriate to enable an eective and the resignation or dismissal of the the going concern basis of accounting in and high quality audit; External Auditor; preparation of the Financial Statements • monitoring the External Auditor’s processes • if an External Auditor resigns, investigating of theGroup; for maintaining independence, its compliance the issues leading to this and deciding • approving the appointment or termination with relevant law, regulation, other whether ornot any action is required; ofappointment of the Head of Risk professional requirements and the • monitoring and assessing annually the &Compliance; EthicalStandard; independence and objectivity of the External • reviewing the eectiveness of the internal • ensuring the co-ordination of the External Auditor, its compliance with regulatory audit function (currently headed by the Auditor and the internal audit function; requirements, the eectiveness of the Group’s Head of Risk and Compliance); • agreeing with the Board a Policy on the external audit process and authorising the considering the major findings of internal Employment of Former Employees of the provision, if any, of non-audit services and auditactivities and management’s response; Group’s External Auditor, taking into account theimpact this may have on independence; ensuring co-ordination between the internal the Ethical Standard and legal requirements, • monitoring the integrity of the Company, audit function and the External Auditor; and monitoring the application of this Policy; including itsannual and the half-yearly reports, reviewing and approving the role and mandate • understanding the strategy at both Group and preliminary announcements and related of the internal audit function. Annually operational levels to ensure that business formalstatements. Reviewing and reporting approving the Internal Audit Charter, ensuring risks and other relevant issues are eectively tothe Board on significant financial reporting it is appropriate for the Group’s current needs, identified and communicated to the Board; issues and judgments which those that the function is adequately resourced and • assessing the Audit Committee’s capabilities statements contain, having regard to matters has appropriate standing within the Group; in relation to diversity, risk experience and communicated to it by the Auditor. Reviewing • ensuring the internal audit function has thefinancial expertise of its members; any other statements requiring Board unrestricted scope, the necessary resources approvalwhich contain financial information • understanding the implications of changes and access to information to enable it to where practicable and consistent with any toaccounting standards; fulfilits mandate, ensuring there is open prompt reporting requirements. Where the • ensuring the Company’s corporate ethics, communication between dierent functions Committee is not satisfied with any aspect anti-bribery and compliance procedures are and that the internal audit function evaluates ofthe proposed financial reporting by up to date in terms of addressing the potential the eectiveness of these functions as part of theCompany, it shall report its views to risks of fraud and misconduct; its internal audit plan, and ensuring that the theBoard; • reviewing the Group’s Whistle-blowing Policy, internal audit function is equipped to perform in accordance with appropriate professional to ensure that appropriate procedures are in standards for internal auditors; place for employees, contractors and external parties to raise, in confidence, any concerns that they may have relating to suspected malpractice, illegal acts, omissions or other unethical corporate conduct, regarding financial or other matters; and ensuring that arrangements are in place for investigation ofsuch matters and follow-up action; SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202180 • giving due consideration to all relevant laws The Audit Committee is composed entirely of independent non-executive Directors, and regulations, the provisions of the Code asshownbelow: and published guidance, the requirements of | the FCA’s Listing Rules, Prospectus Rules and | Member Appointment date Retirement date | | --- | --- | | Disclosure Guidance and Transparency Rules | Giles Kerr (Committee Chair) 2 September 2013 – | | sourcebook, and any other applicable rules; | Celia Baxter 2 September 2013 – | • after each Audit Committee meeting, the Susan Brennan 1 January 2016 – Audit Committee Chair formally reports Rajiv Sharma 1 January 2019 – to theBoard on its proceedings and how Mary Waldner 1 December 2021 – the Committee has discharged its duties; • working and liaising with all other Board Committees, ensuring interaction between Barbara Jeremiah was appointed to the Audit Committee on 1 January 2022. the Committees and the Board is reviewed Two members constitute a quorum for the Audit The Board expects the Audit Committee to have regularly; and Committee. The Group Company Secretary acts an understanding of: • considering any other topics specifically as Secretary to the Audit Committee. | delegated to the Audit Committee by the | | • the principles, contents and developments | | --- | --- | --- | | Board from time to time. | There was full attendance at every Audit | infinancial reporting, including the applicable | | | Committee Meeting held during 2021. | accounting standards and statements of | The Audit Committee is required to report its recommended practice; findings to the Board, identifying any matters Collectively, the members of the Audit • the key aspects of the Group’s operations, where it considers that action or improvement Committee have significant commercial and including corporate policies, its products and isneeded, and to make recommendations as financial experience at a senior management services, Group financing, and systems of tothe steps taken. level. Giles Kerr has the recent and relevant internal control; financial experience required by the UK Composition of the Audit Committee • the matters that could influence or distort Corporate Governance Code to chair the Audit the presentation of accounts and key figures; | The Terms of Reference for the Audit | Committee. For details of the qualifications of | | | --- | --- | --- | | Committee state that the Audit Committee shall | members of the Audit Committee, please refer | • the principles of, and developments in, | | be appointed by the Board from amongst the | to the Board of Directors’ biographies shown | company law, sector-specific laws and other | | independent non-executive Directors of the | on pages 68 to 71. | relevant corporate legislation; | | Company, excluding the Company Chair, atleast | | • the roles of internal and external auditing | No member of the Audit Committee has any one of whom shall have recent and relevant andrisk management; and connection with the company’s External Auditor, financial experience. The Audit Committee shall • the regulatory framework for the KPMG LLP. consist of not less than three members, of Group’sbusinesses. which all shall be independent ofany business Audit Committee’s Terms of Reference The full Terms of Reference of the connection with the Group. Appointments to Periodically, the Audit Committee’s Terms of AuditCommittee may be found on the theAudit Committee shall be for a period of up Reference are reviewed to take into account Company’s website. to three years, which may be extended by a current views on good practice and recent maximum of two additional three-year periods, updates to the UK Corporate Governance Code. subject tothe members remaining independent. The UK Corporate Governance Code 2018 was OneAudit Committee member, Susan Brennan, adopted by the Audit Committee from the was theExecutive Vice President and the Chief accounting period beginning on 1 January 2019. Operations Ocer of Bloom Energy Corporation The Audit Committee’s Terms of Reference until 5 August 2021, when she left to become were updated in December 2021. the President of Romeo Power. Note 51 provides details of the contract Bloom Energy has with a Group subsidiary. Procedures were adopted byBloom Energy which meant Susan Brennan had no involvement in this contract. 81SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 GOVERNANCE ## DIRECTORS’ DUTIES CONTINUED Activities of the Audit Committee The Audit Committee met on 23 February and 4 March 2021 to consider the 2020 year-end report and during the subsequent 12 months conducted the following business on the three standard scheduled meeting dates, as indicated below: 28 July 2021 30 September 2021 22 February 2022 | • Received and considered an Internal Audit | • Discussed and approved the External | • Reviewed the accounting presentation | | --- | --- | --- | | Report including Risk & Assurance and | Auditor’s confirmation of the 2021 audit | and judgmental issues, and the viability | | Mapping reports presented by the Group’s | scope, strategy, materiality and fee. | assessment report for the year ended | | Director of Risk & Compliance. | • Noted KPMG LLP’s Lead Partner succession | 31December 2021, which included | | • Noted the UK Government’s proposals | plan and U.S. Audit overview. | consideration of compliance with all debt | | for strengthening the UK’s internal | | covenants at all measurement dates out | • Discussed the FRC’s report on findings on controls framework. to31December 2024. key matters relevant to the audit quality at | • Noted the recommendations of UK | KPMG LLP in relation to its audits of banks | • Reviewed and approved the statements | | --- | --- | --- | | Government agencies, which related to the | and similar entities. | included in the Annual Report & Accounts | | Company’s Annual Report & Accounts 2020. | | 2021 concerning internal control, risk | • Reviewed the eectiveness of the management, including the assessment • Reviewed the accounting presentation and external audit. of principal risks and emerging risks, judgemental issues, and the funding and • Assessed the significant risks that are TCFD and the Viability Statement. liquidity reports for the half-year ended considered by the Audit Committee, 30June 2021, which included consideration • Reviewed, challenged and agreed the agreeing they would remain unchanged of compliance with all debt covenants goingconcern basis to be adopted for the from2020, with the exception of goodwill at all measurement dates out to 2021 Accounts. which was no longer considered to be a 31 December 2022. significant risk. • Reviewed the Tax Memorandum for the • Reviewed, challenged and agreed the basis yearended 31 December 2021. • Addressed Government agency | for going concern to be adopted for the 2021 | recommendations on the Company’s Annual | • Reviewed and accepted KPMG LLP’s Report | | --- | --- | --- | | Interim Results. | Report & Accounts 2020, agreeing areas that | to the Audit Committee on the audit of the | | • Reviewed the assessment of goodwill at | could be better signposted in the Annual | Financial Statements for the year ended | | 30June 2021 agreeing it was no longer | Report & Accounts 2021. | 31December 2021. | | considered to be a significant risk, in line | • Received and considered an Internal Audit | • Reviewed KPMG LLP’s confirmation of its | | with KPMG’s assessment. | Report presented by the Group’s Director | objectivity and independence. | | • Reviewed the Tax Memorandum for the | of Risk & Compliance. The Audit Committee | • Reviewed and approved the terms of the | | half-year ended 30 June 2021. | was also updated on Deloitte’s Cyber Threat | management representation letter addressed | | • Reviewed and accepted KPMG LLP’s | Intelligence System which strengthened | to the External Auditor. | | Report to the Audit Committee on the | the Group’s Cyber/Information | • Reviewed BDO LLP’s Independent Limited | | half-year review for the six months ended | Securitymeasures. | Assurance Report on the Scope 1 and 2 | | 30 June 2021. | • Received an update on the Group’s cyber | (location based) GHG emissions data included | | • Noted the OECD’s Inclusive Framework | risk communications programme and on | in the Annual Report & Accounts 2021. | | Agreement (“BEPS”) relating to a | 2021 Code of Conduct training. | • Approved the Audit Committee Report | | reformation of international tax rules, | • Reviewed the eectiveness and quality | for2021. | | which may become eective in 2023. | ofthe 2020 external audit. | • Reviewed the eectiveness of the Group’s risk | | • Reviewed and approved the terms of | • Noted the Policy for the Provision of | management and internal control systems and | | the management representation letter | Non-Audit Services by the External Auditor | disclosures made in the Annual Report & | | addressed to the External Auditor. | and the Policy on the Employment of | Accounts 2021. | | • Discussed the Group’s draft Announcement | Former Employees of the Company’s | • Reviewed the draft Annual Report & Accounts | | of the 2021 Interim Results together with the | External Auditor, which had been agreed | 2021 and reviewed the Company’s statement | | draft slides for the analysts’ presentation. | earlier in 2021 and no changes were | on the draft Annual Report & Accounts prior | | | required to bemade. | toendorsement by the Board, that, taken as a | • Discussed and approved the external audit | plan and strategy proposed by KPMG LLP | • Reviewed the draft updated Terms of | whole, the draft Annual Report & Accounts is | | --- | --- | --- | | for the 2021 audit, including scope, | Reference of the Audit Committee which | fair, balanced and understandable and provides | | significant risks and other areas of audit | contained one minor amendment. | the information necessary to assess the | | focus, the audit cycle and auditor reporting. | • Reviewed the output of the AQR review. | Group’s position and performance, business | model and strategy. • Reviewed and approved the terms of the letter of engagement addressed to the • Discussed the Group’s draft Announcement External Auditor. of the 2021 Final Results together with the draft slides for the analysts’ presentation. • Received and reviewed KPMG LLP’s | assessment on its objectivity and | • Reviewed the Notice of Meeting for the 2022 | | --- | --- | | independence. | AGM and the Proxy Form for the 2022 AGM. | | • Discussed KPMG’s Lead Partner rotation | • Received and considered a report presented by | | and confirmed agreement with the proposed | the Group’s Head of Risk & Compliance, which | | successor to the current Lead Partner on the | included the proposed 2022 internal audit plan. | | Senior account. | • Reviewed and approved the Internal | | • Held a private meeting with the External | AuditCharter. | | Auditor, without executive management | • Assessed the eectiveness of the internal | | being present. | audit function. | | • Held a private meeting with the Director | • Held a private meeting with the External | | ofRisk & Compliance, without executive | Auditor, and a separate private meeting with | | management being present. | the Group’s Head of Risk & Compliance | without executive management being present. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202182 In addition to the three standard scheduled meetings summarised above, additional meetings were held in March 2021, to review documents in relation to the disposal of Senior Aerospace Connecticut, and in April 2021, to review the draft Q1 2021 Trading Update. The Audit Committee also discussed and approved the appointment of the Head of Risk & Compliance and reviewed her remuneration. Audit Committee Attendance and Separate Discussions The Audit Committee typically invites the non-executive Chair, Group Chief Executive Ocer, Group Finance Director, Group Financial Controller, the Group’s Director of Tax & Strategic Finance, the Group’s Director of Risk & Compliance and, more recently, the Group’s Head of Risk & Compliance (who, following the retirement of the Director of Risk & Compliance, heads upthe internal audit function) and senior representatives of the external audit firm to attend its meetings, although it reserves the right to request any of these individuals to withdraw from any meeting. During 2021, the Audit Committee also held separate discussions with the External Auditor, the Director of Riskand Compliance and, more recently, with the Group’s Head of Risk & Compliance, without executive management being present. In addition, the Chair of the Audit Committee held separate meetings with each of these during the course of the year. Significant risks considered by the Audit Committee The table below summarises the significant risks considered by the Audit Committee, including significant judgments and estimates: Significant risks considered by the Audit Committee How the risk was addressed by the Audit Committee Inventory net realisable value The Audit Committee recognises the risk that the Group may not recover Inventory held covers a wide range of products in both the Aerospace the full cost of inventory via future sales and may not hold appropriate and Flexonics Divisions. The ability of the Group to sell this inventory at provisions against obsolete and slow-moving inventory. a value above its carrying value in the future can be adversely aected Management included within the continued restructuring focus an by many factors. Accordingly, there is a risk that inventory is carried at assessment of any actions required to address the exposures on amounts that exceed net realisable value. programmes where the end customer significantly reduced or cancelled The global pandemic has continued to have an adverse impact on demand. Management presented an analysis of proposed inventory and demand levels in the short term from the OEMs that the Group serves. asset impairments as well as reversals of previously impaired inventory In response, certain programmes on which the Group has content have and assets. The Audit Committee challenged impairments to ensure been cancelled or significantly reduced. This continues to heighten the there was no alternative use, or that there was sucient committed exposure to any specific inventory or assets held where there is no demand where impairments were reversed and agreed with the alternate use. proposals and accompanying disclosures. The considerations above were presented to the Audit Committee within the accounting presentation and judgmental issue paper for the related reporting period from the Group Financial Controller. These were further discussed with the External Auditor. The Audit Committee believes there are no reportable issues arising from this significant risk. Other provisions The Audit Committee considered the basis upon which management had Provisions are held where management considers there is an obligation, made its accounting judgments to determine the level of other provisions. payment is probable and the amount payable can be reliably estimated. The Audit Committee receives a separate report from the Group Head of Tax that sets out the various uncertain risk exposures and any related Provisions held by the Group include but are not limited to: provisions that are based on the best estimate of the amounts likely • those held against legal claims and contractual matters, restructuring, to be payable. The Audit Committee carefully considers the assumptions product warranties; and applied and provides appropriate challenge including an assessment of the related sensitivities. These were further discussed with the • tax provisions for uncertain risk exposures. ExternalAuditor. There is a risk that other provisions overstate or understate the The Audit Committee believes there are no further reportable issues associated liability. arising from these significant areas. Goodwill, which was a significant risk in the Annual Report & Accounts 2020, is no longer considered a significant risk by the Audit Committee given suciency of headroom in the goodwill impairment assessment and no further identified impairment assessment triggering events in 2021 (See Note13). 83SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 GOVERNANCE ## DIRECTORS’ DUTIES CONTINUED Other judgments and estimates The Audit Committee considered other areas of focus where judgments and estimates have a significant eect on the amounts recognised in the Financial Statements. These areas of focus and how they were addressed by the Audit Committee are described below: Other focus area considered by the Audit Committee How these were addressed by the Audit Committee Other key judgments and estimates The Audit Committee reviewed the accounting presentation and These include, but are not limited to, judgments and estimates in areas judgmental issues paper, including a funding and liquidity report, for the (1) not covered by significant risks such as going concern and viability , related reporting period from the Group Financial Controller. In addition, goodwill impairment assessment, retirement benefits, leases and tax the Audit Committee received a tax memorandum paper for the related (excluding provisions for uncertain tax which is a significant risk). reporting period from the Group’s Head of Tax. In its review of these presentation papers, the Audit Committee challenged management on the critical accounting judgments, and the key sources of estimation and uncertainty that were taken in the preparation of the Financial Statements, and concluded that they wereappropriate. The Audit Committee believes there are no further reportable issues arising from these other key judgments and estimates. (1) In 2020, given the impact of the pandemic on macro-economic conditions, going concern and viability was considered a key focus area regarding the challenge of management’s judgments by the Audit Committee. In 2021, although the review of going and viability will still be included within “other key judgments and estimates” forconsideration by the Audit Committee, it is no longer considered a key focus area given the level of headroom on committed facilities and covenant compliance at 31December 2021 and positive market signals for future growth. Presentation of results Resilience through the pandemic The Audit Committee’s policy in respect of The finance community across Senior have services provided by the External Auditor and The Board presents adjusted key measures of continued to demonstrate resilience throughout its Policy on the Provision of Non-Audit Services profit, in addition to reported measures, where the pandemic, and the Audit Committee has by the External Auditor are as follows: items are significant in size and either they do valued the continued focus on maintaining an not form part of the trading activities of the • The External Auditor is invited to provide eective control environment, addressing Group or their separate presentation enhances services which, in its position as auditor, the challenges presented by the globalised understanding of the underlying financial itmust or is best placed to undertake. This lockdowns and new ways of remote working. performance. The Audit Committee assessed includes formalities relating to borrowings, This supported the further strengthening of the the presentation to ensure a fair and balanced shareholder and other circulars, various other risk management framework, and delivery of the treatment of what is and is not included as an regulatory reports and certain work in respect key elements of the internal audit programme in adjusting item. of larger acquisitions and disposals; 2021. Similarly, the external audit progressed as The Audit Committee considered the • In December 2020, the Company adopted planned and to the set timescales, with no accounting policy applied to exclude adjusted anew Policy on the Provision of Non-Audit changes required to the strategy or scope items by reference to guidance issued by the Services by the External Auditor, which is approved by the Audit Committee. | FRC and the European Securities and Markets | | in line with the recommendations set out in | | --- | --- | --- | | Authority (“ESMA”), and the need to ensure | External audit | the Financial Reporting Council’s (“FRC”) | | any alternative performance measures are | Independence of the External Auditor and | Guidance on Audit Committees (2016) and | | presented with equal prominence to reported | policy on the provision of non-audit services | the requirements of the FRC’s Revised Ethical | | figures and on a consistent basis year-on-year. | To fulfil its responsibility regarding the | Standard (2019) (the “Ethical Standard”). | | | independence of the External Auditor, the Audit | Inline with these recommendations and | The Audit Committee discussed the Committee reviewed: requirements, the external audit firm is only presentation of adjusted items with the External appointed to perform a service when doing Auditor, and concurs with management’s view • a report from the External Auditor describing sowould be consistent with both the that the presentation of items excluded from the arrangements that had been made to requirements and the overarching principles adjusted results provides useful disclosure to identify, report and manage any conflicts of of the Ethical Standard, and when its skills and aidthe understanding of the performance of interest and to maintain its independence; and experience make it the most suitable supplier. theGroup. • the FRC’s Audit Inspection Unit public report In addition, the Ethical Standard requires an on KPMG LLP. assessment of whether it is probable that anobjective, reasonable and informed third party would conclude independence is not compromised. The approval of the Audit SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202184 | Committee must be obtained before the | Policy on tendering | the calibre of the external audit firm, the | | --- | --- | --- | | External Auditor is engaged to provide any | In order to maintain auditor independence | robustness of the external audit process and | | non-audit services and these services are | and comply with FRC, EU guidance and the | degree of challenge to matters of significant | | limited to activities which feature on the | provisions of the CMA Order 2014 on audit | audit risk and areas of management subjectivity, | | approved Permitted Non-Audit Services list. | tendering, the Group undertook a formal tender | the degree of professional scepticism applied by | | The total fees for non-audit services shall be | of its external audit during the first half of 2016, | the External Auditor, the quality of delivery | | limited to no more than 70% of the average | led by the Audit Committee. The appointment | of the audit and the service provided by the | | ofthe statutory audit fee for the Company, | ofKPMG LLP as the Group External Auditor for | External Auditor, the Audit Partner, the audit | | ofits controlled undertakings and of the | the financial year commencing 1 January 2017 | approach and planning, the role of management, | | consolidated Financial Statements paid to the | received approval by shareholders at the | the communication by the Auditor to the Audit | | External Auditor in the last three consecutive | AnnualGeneral Meeting held in April 2017. | Committee, the provisions of support for the | | financial years; | TheAudit Committee reviews annually whether | work of the Audit Committee by the Auditor, | | • Other services may not be provided where | it isappropriate to put the external audit out to | thesharing of insights and adding value by | | precluded by law, regulation, or Ethical | tender and concluded in 2021 that it was not | theAuditor, the audit fee, the Auditor’s | | Standards or where the Audit Committee | appropriate to do so. The Audit Committee | independence and objectivity, and the quality | | believes that it would compromise audit | fullyevaluates auditor performance and | offormal reporting by the Auditor to the Audit | | independence and objectivity; and | independence annually but does not favour | Committee. Feedback about the eectiveness | | | mandatory five-year rotation. | of the external audit process from the local | • All proposed contracts for permitted services management teams was also considered by to be provided by the External Auditor require Assessment of external audit quality theAudit Committee. The Audit Committee the Audit Committee’s approval. Approval for andeectiveness concluded that the External Auditor had permitted services below £0.050m has been The Audit Committee reviewed the challenged the thinking of the Company and of delegated by the Audit Committee to its eectiveness of the External Auditor and the the Audit Committee on a number of significant Chairand below £0.025m to the Group external audit process, including an assessment issues and had maintained its independence. Finance Director. of the quality of the audit, at itsSeptember 2021meeting. In July 2021, the Financial Reporting Council In 2021, the level of permitted services (FRC) published the 2020/2021 Audit Quality undertaken by KPMG LLP was broadly In 2021, the eectiveness of the external audit Inspection Reports (AQIR) for each of the “big unchanged, as set out in the table below. process was performed by assessing a range four” audit firms, including KPMG. The Audit TheAudit Committee considered that it was of key areas through a formal questionnaire that Committee challenged KPMG on the AQIR beneficial for the Company to retain KPMG LLP was individually distributed to all the members findings and reviewed improvement proposals for a small amount of permitted non-audit work of the Audit Committee and all other executive outlined to the Committee to ensure they and audit related services, because of the firm’s and non-executive Directors. This framework had been addressed appropriately. The Audit knowledge of the Group and our requirements required consideration of performance areas Committee Chair and the Group Finance that the Interim audit to be performed by which needed future focus by the External Director also had direct discussions with the the External Auditor. The Audit Committee Auditor, the areas where the External Auditor KPMG Head of Audit, UK, to discuss the firm’s continues to closely monitor the nature and was meeting expectations and those where quality improvement plans. Following level of such permitted non-audit work. it was considered to have a special strength. completion of the assessment process outlined Fees 2021 2020 Senior management received answers and above, the Audit Committee concluded that comments from all questionnaires and itwas satisfied with the eectiveness of the Interim review £0.05m £0.09m consolidated them into a report. The Audit External Auditor; as a consequence, the Audit Auditor assessment of tax Committee used this report to facilitate a Committee has recommended to the Board that incentives in Malaysia debate at its September 2021 meeting and to KPMG LLP be re-appointed as Auditor for 2022. andcertification of assist in assessing the level of external audit expenses in France £0.01m £nil eectiveness. The Audit Committee discussed: Total audit-related services: £0.06m £0.09m Non-audit related services: £0.1m £nil 85SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 GOVERNANCE ## DIRECTORS’ DUTIES CONTINUED | AQR review of the Senior 2020 audit | Specific areas referred to the | teams and employees and also undertake site | | --- | --- | --- | | by KPMG | ExternalAuditor | tours to review matters including production | | | In 2021, the Audit Committee asked the | methods, health and safety and the status of | During the year, the 2020 audit of Senior plc by External Auditor to look into specific areas internal audit findings. These visits are viewed KPMG was reviewed by the FRC’s Audit Quality of inventory net realisable value and other by the Audit Committee as making a positive Review team (“AQR”). | | provisions, given these areas are significant | contribution to the internal control framework. | | --- | --- | --- | | The AQR highlighted specific areas for | risks identified in this report on page 83. | In2021, due to the restrictions imposed by | | improvement related to how KPMG challenged | Further details on the work performed by the | governments in order to deal with the pandemic, | | and evidenced the audit team’s consideration of | Auditor on the provision for uncertain tax | no overseas site visits by the Chair and the | | all inputs to the Company’s impairment models | positions is disclosed on page 110. The Audit | non-executive Directors were possible; a | | and cash flow forecasts. The Audit Committee | Committee was satisfied with the results of | number of UK site visits were undertaken by | | Chair, together with the Chair of the Board and | KPMG’s results and findings. | Celia Baxter, in connection with her role as the | | the two Executive Directors, scheduled a | | Director designated to engage with the Group’s | | meeting to examine with KPMG the root cause | Internal audit | | employees. The Board iskeen to resume more | analysis and to understand the actions agreed | The Audit Committee is required to assist the | site visits, as soon aspracticable. | | --- | --- | --- | | with the AQR to address the issue raised. The | Board in fulfilling its responsibilities relating to | | | Audit Committee considered the findings and | the eectiveness, resourcing and the plans of | Conclusion | | the identified improvement observations and are | the Group internal audit function, which were | As a result of its work during the year, the Audit | | satisfied that the actions will be implemented by | headed by the Director of Risk & Compliance | Committee has concluded that it has acted in | | the External Auditor if similar circumstances | until 30 October 2021. In preparation for | accordance with its Terms of Reference. At its | | were to be encountered in future audits. The | Michelle Yorke’s retirement from the Group, her | meeting held on 22 February 2022, the Audit | | AQR raised no concerns on the audit challenge | role was restructured and some duties allocated | Committee considered each section of the | | over revenue recognition and the significant | elsewhere; a Head of Risk & Compliance was | Annual Report & Accounts 2021, and the | | risks referenced in the Audit Committee report. | appointed on 1 September 2021. The Internal | document as a whole, as proposed by the | | | Audit Manager, who formally reported to the | Company; it reached a conclusion and advised | No changes were required to the accounting Group Director of Risk & Compliance, now the Board that it considered the Annual Report applied, or the disclosures presented in the reports to the Head of Risk & Compliance. & Accounts 2021 to be fair, balanced and Annual Report & Accounts 2020. understandable and that it provided the In 2021, as set out on pages 48 to 49, the Overall, the results of the review raised no information necessary for shareholders to Group further strengthened its risk management issues about Senior’s financial reporting and assess the Group’s position and performance, procedures and these have been reviewed by there were no issues identified which cast business model and strategy. The Chair of the the Audit Committee. Risk has been assessed doubt on the fundamental quality of Senior’s Audit Committee will be available at the 2022 on a top down and bottom up basis and the external audit and the Committee remains AGM to answer any shareholders’ questions consideration of emerging risks has been satisfied with the eciency and eectiveness about the work of the Audit Committee, subject formally added to the process. A risk-based of the audit. KPMG have discussed more to any Government restrictions on the holding programme of internal audit has been conducted generally the firm’s process for enhancing audit of such meetings inApril 2022. in the year. In response to constraints imposed quality which includes internal quality reviews, by the pandemic, the internal audit programme Approval and the Audit Committee Chair and Group was delivered remotely in 2021. This Report was reviewed and approved by the Finance Director had direct discussions with the Audit Committee and signed on its behalf by: KPMG Head of Audit, UK to discuss the firm’s Under normal circumstances, the Chair and quality improvement plans. KPMG reported to non-executive Directors are actively encouraged Giles Kerr the Audit Committee as part of their September to visit the Group’s operating businesses Chair of the Audit Committee 2021 report on these matters, with the Audit unaccompanied by executive Directors. This 25 February 2022 Committee concluding that the findings were enables them to meet the local management being addressed appropriately. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202186 ## REMUNERATION: CHAIR’S ## ANNUAL STATEMENT ## Our remuneration policy and practices ## seek to incentivise during a critical stage ## in our recovery.” Celia Baxter Chair of the Remuneration Committee stage of recovery of the business, we believe it Consultation with stakeholders ### REMUNERATION REPORT: ANNUAL is more important at this stage of our rebuilding duringthe year ### STATEMENT FROM THE CHAIR OF to incentivise the executives on delivering the Consultation with employees regarding ### THE REMUNERATION COMMITTEE core financial performance of EPS and Free executive remuneration: During the year the Cash Flow. Part of our thinking is that it is clear Dear Shareholder Group HR Director and I once again consulted from past and current performance, that our I am pleased to present the Report of the with employees by holding a video/telephone sector-leading Environmental, Social and Remuneration Committee for the financial year conference with representatives from Senior’s Governance (ESG) metrics and progress has ended 31 December 2021. This statement sets six UK operating businesses. We reminded been achieved without the need to incentivise; out the work of the Committee during the year them of the structure of our Board of Directors’ rather it is something driven by our core values. and provides the context for the decisions taken. pay and explained the outcome of the AGM We have therefore decided once again not to voting on the Remuneration Policy and Remuneration is linked to our strategy introduce a strategic metric for incentives related Remuneration Report. Further we asked them and operational performance to sustainability, but we will continue to keep which of the benefits received by employees this matter under review. Senior’s vision is to be a trusted and did they most value. It was agreed that the collaborative high value-added engineering and retirement benefits were appreciated by most Senior’s performance during 2021 manufacturing company delivering sustainable employees. Finally, we asked whether they As explained in the Chairman’s Statement and growth in operating profit, free cash flow and thought that our executive Directors should have the Group Chief Executive Ocer’s Statement, shareholder value. ESG targets linked to their bonus. There were Senior delivered a robust set of results in what no strong views voiced on this topic. We will Our Remuneration Policy (“Policy”) and was another very challenging year. The Group continue to run these sessions in the coming practices support this vision, with our bonus delivered improved profitability, generated good year as we are keen to get input from our plans incentivising earnings growth and free free cash flow and maintained sector-leading employees in this area. cash flow, and our long-term plans rewarding sustainability progress while navigating through the creation of shareholder value, earnings the impact of the pandemic on our markets and This was the third year of running employee growth and return on capital. We regularly customers. Key headlines included: focus groups. Last year we undertook all of consider the alignment of our performance the meetings by video and we wanted this year • the Group’s revenue decreased by 5.5% metrics with the business strategy. Following to carry out focus groups face-to-face as the (on a constant currency basis); feedback from some of our shareholders we information we gain is richer. Unfortunately, • adjusted operating profit increased by 110.3% introduced ROCE as a third measure within our we were unable to travel to the US when (on a constant currency basis); | LTIP for awards granted from 2021 onwards. | | we had planned due to travel restrictions. We | | --- | --- | --- | | This recognises the need to build the business | • the Group’s adjusted operating margin | have therefore this year focused on the UK | | back to healthy returns and brings consideration | increased by 40 basis points, to 0.9% forthe | operations. The Group HR Director and I have | | of capital deployment into sharper focus. | full year; | undertaken 15 focus groups at four of our UK | | | • adjusted earnings per share was 0.17 pence; | locations. There were no questions raised | Sustainability is a key element of our strategy and related to executive pay. and the Board is happy with the ongoing • the Group generated robust free cash flows progress of the Group in this area. Senior was Consultation with shareholders: We of £14.0m. | the first company in its sector to set science- | | extensively consulted with major shareholders | | --- | --- | --- | | based greenhouse gas emission reduction | The restructuring of the Group to meet our | and the major governance agencies during | | targets and our health and safety performance | strategy and purpose continued in a focused | 2020on the Remuneration Policy and | | is excellent. Although our Policy allows the | manner to provide a solid foundation to support | subsequently made amendments to our policy | | Committee to include in the bonus, strategic | the Company’s future growth aspirations with | proposals relating to post employment | | measures limited to 25% of the bonus | the divestiture of Senior Aerospace Connecticut, | shareholding requirement and the alignment | | opportunity, this facility has not been used. | the closure of our small oil and gas operating | ofDirector’s pension contributions to the | | Having carefully considered shareholder | business in Malaysia, and the closure of our | workforce. We also contacted them again | | feedback, current market conditions and the | Senior Aerospace Bosman business in the | inearly 2021 to explain why, despite the | | | Netherlands following the successful | sensitivities, we wished to make a part | | | transfer ofproduct lines to our French | paymentof the 2020 executive bonus relating | | | Aerospacebusinesses. | tothe attainment of free cash flow targets. | Atthe 2021 AGM the resolutions relating to theRemuneration Report and Remuneration Policy were approved by 74.23% and 74.18%respectively. 87SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 GOVERNANCE ## REMUNERATION: CHAIR’S ANNUAL STATEMENT CONTINUED | Since then, the Committee has written again | Executive Directors’ remuneration 2021 | felt that this was appropriate as it further aligned | | --- | --- | --- | | toits largest shareholders and, also to a wider | The basic salaries of the Group Chief Executive | the executive Directors with shareholders. | | group of smaller shareholders to further | Ocer, Group Finance Director, the rest of the | We were aware that none of the inflight LTIPs | | understand and explore their views. I have | Board and the majority of senior management | are likely to vest. We saw this LTIP award as | | undertaken a number of discussions and will | across the Company were not increased from | an important part of maintaining management | | continue to do so with individual shareholders as | 1January 2021. For the wider workforce, pay | stability as we moved into the recovery stage. | | per their request. The Committee acknowledges | increases were applied to a limited extent in | The Committee retains the discretion to adjust | | the shareholders’ concerns around remuneration | some businesses to satisfy mandatory wage | the level of vesting if it considers the outcome | | decisions taken in 2020, which the Committee | increases and to address retention concerns. | to be anomalous or is not reflective of the | | believes were necessary to retain and | Inline with the Remuneration Policy, the | underlying performance of the Group over the | | incentivise a strong management team. The | executive Directors were eligible for a maximum | period, taking into account the resilience of the | | main reason why some shareholders voted | bonus equivalent to 125% of basic salary, | markets in which Senior operates and trends | | against the Remuneration Report was because | payable subject to the satisfaction of | in the underlying equity markets. | | they did not agree with the Committee’s | performance targets linked to Adjusted EPS | | Incentive scheme outcomes for 2021 decision to pay an annual bonus to the executive and Free Cash Flow targets. After the end of the financial year, the Directors. On the Remuneration Policy, there For the Annual Bonus Plan, we set Adjusted Committee reviewed the extent to which the was a divergence of views. Although we had EPS and Free Cash Flow targets in January targets under the Annual Bonus Plan had been stated that any new executive directors’ pension 2021 which were viewed as appropriately achieved. In considering the outcome, the contributions would be aligned on appointment challenging. The proportion of bonus related to Committee took into account the ongoing to that of the wider UK workforce and that the achievement of EPS targets and Free Cash performance of the management team who the incumbent executive Directors’ pension Flow targets remained unchanged from 2020 continue to strongly: contributions would be aligned by the start 60% and 40% respectively, reflecting the of 2024, some shareholders felt that the • drive the recovery continued importance of Free Cash Flow to incumbent executive Directors’ pension • reshape the structure and strategy of the the business. Following the disposal of Senior contributions should be aligned by the end business moving forward Aerospace Connecticut, which completed of2022. • maintain liquidity, on 22 April 2021, the 2021 bonus targets were | The Committee were grateful for the feedback | reviewed by the Committee; as the Group | • lead the sector in sustainability progress | | --- | --- | --- | | that they received and have discussed it at | would no longer benefit from that operation’s | and commitments; and | | length with the executive Directors and the | net Profit before Tax and net Free Cash Flow for | • invest in technology to ensure that the | | following actions have been agreed: | the remaining 8 months and 1week of 2021. | business and its customers meet carbon | | | The Committee concluded that the original 2021 | reduction targets. | • Pension Alignment: The executive Directors bonus targets should be adjusted to reflect the have oered and the Committee agreed that The Committee decided that the annual bonus reduction in Adjusted EPS and Free Cash Flow, the alignment of their pension contributions outturn was appropriate taking into as set out on page 102. The revised loss per to that available to the UK workforce, will consideration the attainment of continued cash share target had arisen due to the sale of a be brought forward to the end of 2022. In generation within the business, maintaining the profitable business which did not fit our future addition, through employee consultation we savings post-restructuring, and further progress strategy, and the disposal of which provided are aware that retirement benefits are highly in meeting sustainability targets. Therefore, additional liquidity. The Committee considered valued by our UK employee base and form an the executive Directors’ bonus awards for the that the new targets were not materially easier essential part of our employee oering for year shall be 100% of the maximum bonus or harder to achieve than the original targets. | attracting and retaining skilled sta. With the | | opportunity (representing 125% of the 2021 | | --- | --- | --- | | further recovery of the business during 2022 | The Committee retains an overriding discretion | base salary), of which one third would be | | the viability of increasing the pension | in relation to the amount of bonus it awards not | delivered in shares deferred for three years | | contribution rate available to the UK workforce | withstanding any formulaic calculations and | and two thirds would be delivered in cash. | | (currently 10%) will be considered. | targets. The targets are disclosed in the Annual | | Awards made under the LTIP in 2019 were • Bonus payments: During 2021, we are Report on Remuneration on page 102. subject to Adjusted EPS and TSR performance pleased that there has been no need for LTIP awards were granted to both executive measured over three years up to the end of any major restructuring programmes and we Directors and senior management subject to 2021. Unfortunately, the Adjusted EPS and the have commenced hiring employees as our the satisfaction of challenging three-year targets TSR performance was below threshold and orderbooks fill. Although early in 2021, we linked to Adjusted EPS growth, relative TSR therefore there was no vesting of this award. furloughed a small number of employees in and for the first time ROCE to align with our the UK, these monies were repaid to the UK The Committee is satisfied that the above business strategy and due to the importance government in Q4 2021. Although we have outcomes were a fair reflection of the of building the business back to healthy levels not reinstated the payment of dividends this performance of the Company over the relevant of returns. The LTIP awards were subject to a year, we are expecting payments to re- performance periods for the incentive schemes. two-year holding period on vested awards and commence in 2022. The Committee The Committee did not have to exercise any the enhanced malus and clawback conditions. continues to review the outcome of the discretion in agreeing the outcome of the The LTIP awards to the Group Chief Executive bonus with regard to the overall stakeholder incentive plans. Ocer and the Group Finance Director were at experience and has the ability to exercise alevel of 150% of basic salary. The Committee discretion if it feels that the formulaic outcomes do not feel appropriate taken in the round. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202188 | Implementation of the Policy for 2022 | The Company has consistently stated that its | | --- | --- | | The basic salaries of the Group Chief Executive | medium-term ROCE target is a minimum of | | Ocer and Group Finance Director were | 13.5% pre-tax, post IFRS 16 and this has not | | increased by 3.15% and 4.99% respectively | changed. The ROCE targets set for the 2022 | | with eect from 1 January 2022, broadly in line | LTIP award have been increased from those set | | with the increase applied to the widerworkforce. | in 2021 to reflect where we are on our recovery. | The targets are set at a stretching level that During the Committee’s annual consideration takes account of market conditions and the of how we implement our Policy, in light of minimum medium-term target. shareholder feedback described previously, we reconsidered the alignment of the executive The Committee will continue to review annually Directors’ pension contributions with that the targets for new awards to ensure that available to the majority of the UK workforce. they remain challenging and stretching as the It was agreed that the pension contributions of Company continues to rebuild, as its strategy the incumbent executive Directors would be is implemented in recovering markets. aligned by the end of 2022 rather than the end Further details of the targets to be set for the of 2023 as per the Remuneration Policy voted 2022 LTIP awards are set out in the Annual on in the 2021 AGM. Report on Remuneration on page 107. The Committee has an obligation to set Quantum of LTIP awards 2022: stretching targets which balance shareholder As a matter of best practice, before finalising perspectives with the need to challenge, theLTIP awards, the Committee considered engage and incentivise executive and senior themovements in the share price since the management to deliver the business recovery beginning of 2021 financial year. As the share and strategy. Withthis is mind the Committee price had increased over the period, it was felt has concluded the following: appropriate to grant the LTIPawards to the LTIP 2022: executive Directors based onthe normal Performance measures and weighting: percentage of salary of 150% ofbasic salary. Adjusted EPS, TSR and ROCE metrics will be Annual bonus plan 2022: retained as the performance measures in the Having considered the priorities for the year LTIP and have equal weighting of33.3%: wewill be maintaining the same bonus 33.3%: 33.3%. performance conditions and weightings Adjusted EPS target has been set to be as in2021: Adjusted EPS (60% weighting) stretching and challenging. In our deliberations and Free Cash Flow (40% weighting). we ensured alignment with shareholders by The Committee has set targets that are both setting Threshold and Maximum taking into stretching and challenging in the current consideration the conditional proposal that environment and retains an overriding discretion hadbeen received from LSF XI Investments, in relation to the amount of bonus it awards not LLC, acompany advised by Lone Star Global withstanding any formulaic calculations and Acquisitions, Limited. The target is expressed targets. We also have malus and clawback asan absolute number to be achieved in 2024 arrangements in place. rather than a cumulative growth percentage. At the AGM in April 2022, shareholders will TSR performance will continue to be measured beasked to vote on the Annual Remuneration against the FTSE 350 (excluding companies Report. I hope that the decisions the inthe following sectors: Banks; Financial Committeehas taken in respect of 2021 Services (other than Closed End Investments); willhave your support. Life and Non-life Insurance; Oil, Gas & Coal; Precious Metals & Mining; Industrial Support Celia Baxter Services; and Real Estate Investment Services Chair of the Remuneration Committee and Trusts). The excluded sectors remain broadly similar to those used in previous years but have been re-mapped based on current Industrial Classification Benchmark sectors. The vesting scale will remain the same as for awards granted in 2021. 89SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 GOVERNANCE # 2021 REMUNERATION REPORT AT A GLANCE Overview of our remuneration framework for 2021 | Element of remuneration | Key features | | --- | --- | | Salary and employment benefits | Market competitive to attract and retain high quality executives (including fully expensed car or car allowance, private medical insurance, life insurance, income protection, and defined contribution retirement benefits or allowances) | | Annual bonus: Adjusted EPS 60% Free Cash Flow 40% | Rewards achievement against annual performance objectives: • Maximum bonus is 125% of salary • 1/3 of any award is paid in shares, deferred for three years • Group Chief Executive Officer and Group Finance Director target: 62.5% of salary | | Long-Term Incentive Plan: Adjusted EPS (33.3%) TSR (33.3%) Return on Capital Employed (33.3%) | Supports the Company's longer-term strategic aims to create sustainable growth in shareholder value and to incentivise, motivate and retain senior talent: • Maximum award is 200% of salary and normal awards are 150% of salary • 25% vesting at "threshold" | | Shareholding requirements | Equivalent to 200% of executive Directors' salary Post-employment shareholding requirement applies for a period of two years following cessation, as set out on page 95. | | Clawback and malus provisions | Cash Bonus Awards subject to clawback Share awards (LTIP and unvested deferred shares) subject to clawback, malus and post-employment shareholding requirement | Performance highlights and incentive outcomes | Annual bonus | Target | Actual | Achieved (% of maximum) | | --- | --- | --- | --- | | Performance condition^{(1)} | | | | | Free Cash Flow – full year | £2.0/m | £14.0/m | 100% | | Adjusted EPS – full year internal target^{(2)} | (1.69)/p | 0.34/p | 100% | | Bonus award to Group Chief Executive Officer and Group Finance Director: 100% of maximum | | | | (1) The Committee set bonus targets in January 2021, but following the disposal of Senior Aerospace Connecticut, which completed on 22 April 2021, the 2021 bonus targets were reviewed by the Committee, as the Group would no longer benefit from that operation's net Profit before Tax and net Free Cash Flow for the remainder of 2021. The Committee concluded that the original 2021 bonus targets should be adjusted to reflect the reduction in Profit Before Tax and Free Cash Flow; the above table shows the revised targets. The Committee considered that the new targets were not materially easier or harder to achieve than the original targets. A summary of the original and adjusted performance measures, weightings and performance achieved is provided in the "Performance against performance targets for annual bonus" section on page 102. (2) Adjusted EPS is measured on a constant currency basis to reduce the impact of exchange rate movements on bonus outcomes | Long-Term Incentive Plan (2019 award) | Targets (threshold – maximum) | Actual | | | --- | --- | --- | --- | | Adjusted EPS (50%) | 15% – 30% growth over three-year performance period | -98.9% | (below threshold) | | Total Shareholder Return (50%) | TSR ranking: 75th percentile (maximum threshold); 50th percentile (minimum threshold) | 12th percentile | (below threshold) | Targets for the 2019 Awards were not achieved and therefore the awards shall lapse in full. 90 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 Application of Remuneration Policy The chart below shows how the composition of each of the executive Directors’ packages varies at dierent levels of performance under the Remuneration Policy. The assumptions noted for “target” performance in the graph below are provided for illustration purposes only. This chart is based on the following assumptions: Threshold Target Maximum 3,000 Fixed pay Salary is the 2022 basic salary 2,620 The value of Benefits and Pension is taken from the single total figure of remuneration for 2021 2,500 Annual Nil 62.5% of 2021 basic 125% of 2021 basic bonus salary salary 2,000 1,777 Long-term Nil 25% vesting under 100% vesting under 38% share the LTIP (i.e. 25% of the LTIP (i.e. 100% 1,500 1,367 awards (150% x 2022 basic of (150% x 2022 1,239 38% salary)) and set out at basic salary)) and 17% | | | | 31% | 49% | | | 925 | face value, assuming | set out at face value, | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 1,000 | | | | | | 841 | | | | | | | 27% | | | | | | no share price growth | assuming 50% share | | | 692 | | | | | 17% | | | | | | | | | | | | 49%30% | or dividend. | price growth and no | | | | | | | 473 | 27% | | | | dividend. 500 80% 45% 25% 41% 80% 45% 25% 41% 0 Below Target Max. Actual Below Target Max. Actual Target Target Group Chief Executive Ocer Group Finance Director Salary Long-Term Share Awards Benefits and Pension Long-Term Share Price Growth Annual Bonus Changes made in 2021 The revised Remuneration Policy was reviewed and agreed by shareholders at the 2021 AGM. The Pension section of the Remuneration Policy was changed in 2021 in line with shareholder feedback. The details of the change are outlined in the Annual Statement from the Chair of the Remuneration Committee on page 88 and in the full Remuneration Policy which for ease of reference is laid out on pages 93 to 95. About this Report The Report on Remuneration on pages 98 to 107 is produced in accordance with the 2013 Regulations and the relevant provisions of the Listing Rules of the Financial Conduct Authority. Parts of the Annual Report on Remuneration are subject to audit, as indicated within this Report. The rest of the Report covers the following key areas: • Remuneration Policy: – How shareholder views are taken into account – Discretions of the Remuneration Committee – Policy for non-executive Directors • Annual Report on Remuneration £000s 91SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 GOVERNANCE # REMUNERATION REPORT: POLICY This part of the report sets out the Remuneration Policy that was put to a binding vote of the shareholders at the AGM held on 23 April 2021. This policy applies for a maximum of three years from the date of approval and took effect from 1 January 2021. The revised policy was reviewed in the context of the business strategy and the evoking expectations of our shareholders and stakeholders, which included pension alignment and post-employment shareholding provisions. The policy was approved by shareholders at the AGM by 230,355,445 (X.18%) voting in favour and 80,193,440 (25.82%) voting against; with 22,432,322 votes withheld, being votes that are not recognised as a vote in law. That policy can be read in full in the 2020 Annual Report at https://www.seniorpic.com/investors/reports.aspx. The Remuneration Committee had consulted progressively in the months prior to the 2021 AGM with the Company's largest shareholders and the major governance agencies. Following the 2021 AGM, we consulted further with the Company's major shareholders and, as required by the UK Corporate Governance Code 2018, the Company produced an Update Statement which may be found at https://www.seniorpic.com/-/media/Files/S/Senior-PLC/documents/update_statement_2021.pdf. Of those shareholders who chose not to support the Remuneration Policy resolution, there was a divergence of views. Although we had stated that any new executive directors' pension contributions would be aligned on appointment to that of the wider UK workforce and that the incumbent executive Directors' pension contributions would be aligned by the start of 2024, some shareholders felt that the incumbent executive Directors' pension contributions should be aligned by the end of 2022. When developing policies and practices, the Remuneration Committee regularly considers the approach to remuneration and makes decisions to ensure it is aligned to the business strategy. We do this by developing an overall package that reflects the skills and experience of the individuals and appropriate short and long-term incentive plans. The key performance metrics for both the bonus plan and the long-term incentive plan are directly linked to the delivery of the strategy and the creation of shareholder value. Currently the bonus incentivises free cash flow and earnings growth; Adjusted EPS, TSR and ROCE are included in the long-term incentive plan. # Factors considered in reviewing the Policy The Committee is comfortable that the Policy and its implementation are fully consistent with the factors set out in Provision 40 of the 2018 UK Corporate Governance Code (set out below): - Clarity – The Policy and the way it is implemented is clearly disclosed in this policy section of the Directors' Remuneration Report, with full transparency of all elements of Directors' remuneration. - Simplicity – The Policy is simple and straightforward, based on a mix of fixed and variable pay. The annual bonus and LTP include performance conditions which are aligned with Senior's business strategy. - Risk – The Committee 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 and values. Potential reward is aligned with market levels of peer companies and the reputational risk from a perception of "excessive" pay-outs is limited by the maximum award levels set out in the Policy and the Committee's discretion to adjust formulaic remuneration outcomes. - Predictability – The Policy includes full details of the individual limits in place for the incentive schemes as well as "scenario charts" on page 77 which set out potential pay-outs in the event of different levels of performance, based on a number of reasonable assumptions. Any discretion exercised by the Committee in implementing the Policy will be fully disclosed. - Proportionality – The link between the delivery of strategy, long-term performance, shareholder return and the remuneration of the executive Directors is set out in the Remuneration Report. - Alignment to culture – The approach to Directors' remuneration is consistent with the Group's culture and values. # Summary of Decision-Making Process for Policy Changes In determining and implementing the Policy, the Committee follows a robust process which includes discussions on the content of the Policy at Remuneration Committee meetings. To support this process, the Committee receives advice from independent advisers. It also considers representations from other key stakeholders, including shareholders and executive management (whilst ensuring potential conflicts of interest are suitably managed), in the context of the evoking corporate governance landscape. The Committee monitors changes in corporate governance guidance and regulations to ensure the Policy remains compliant. The implementation of the Policy takes account of the remuneration of the wider workforce and is aligned with the Group's strategy by appropriately incentivising the executive Directors to deliver the strategic objectives. 92 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 Policy for executive Directors Below is the Policy which was approved by shareholders at the 2021 AGM. Following shareholder feedback after the AGM, the update to the Policy is highlighted in bold in the table. Element Purpose and link to strategy Operation Maximum Performance assessment | Salary • Reflects the | | • Will normally be reviewed | • Other than to reflect change | • Individual performance inthe | | --- | --- | --- | --- | --- | | | performance of the | annually with eect from | in the size and complexity | role and Group performance | | | executive Director, | 1January | ofthe role/Company, the | are among thefactors taken | | | hisor her skills and | • Benchmarked periodically | Committee will have | into consideration when | | | experience over time | against companies with similar | regardto the basic salary | awarding increases | | | and the responsibilities | characteristics andsector | percentage increases taking | | | | of the role | companies | place across the Company | | | | • Provides an appropriate | | moregenerally when | | • Normally positioned within a level of basic fixed pay determining salary increases range around the mid-market avoiding excessive risk for the executive Directors level taking into account the arising from over- experience and performance • No maximum salary cap reliance on variable inthe role of the individual, income complexity of the role, market competitiveness and the impact ofsalary increases ontotal remuneration | Bonus • Incentivises annual | | • Up to 83.3% of salary paid in | • Overall maximum of 125% | • The Committee determines | | --- | --- | --- | --- | --- | | | delivery of corporate | cash with up to a further 41.7% | of salary | appropriate performance | | | financial and non- | of salary paid as a conditional | | targets and weightings at | | | financial goals | award of deferred shares | | thestart of each year | | | • Delivery of a proportion | • Maximum bonus only payable | | • Details of the financial | | | of bonus in deferred | for achieving demanding | | performance targets will | | | shares provides | targets | | normally be disclosed in the | | | alignment with | • Deferred shares are released | | following Annual Report on | | | shareholders and | three years after award but | | Remuneration for reasons | | | assists with retention | aresubject to forfeiture by | | of commercial sensitivity | | | | a“badleaver” | | • The Committee may include | | | | • Executives are entitled to | | non-financial metrics up to | | | | receive the value of dividend | | 25% of the overall award | | | | payments that would have | | • Performance below threshold | | | | otherwise been paid in respect | | results in zero payment. | | | | of vested deferred shares | | Payment rises from 0% | | | | • All bonus payments are at the | | to 100% of the maximum | | | | discretion of the Committee | | opportunity for levels of | performance between the • Dierent performance threshold and maximum conditions may be set when targets recruiting an executive Director • Typically, threshold is around • The Committee may review 90% of target, and on-target the performance conditions performance delivers from time to time approximately 50% of the • The Committee has the maximum opportunity discretion in certain • Subject to clawback at the circumstances to grant and/or Committee’s discretion over settle an award in cash. In cash bonus outcomes and practice, this will only be used unvested deferred shares in in exceptional circumstances the event of material for executive Directors misstatement, gross • The Committee has the misconduct, serious discretion to adjust bonus reputational damage or targets or outcomes if deemed corporate failure and, if appropriate, where the bonus required, over any unvested outcome feels perverse. In LTIP awards practice, this will only be used in exceptional circumstances for executive Directors 93SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 GOVERNANCE ## REMUNERATION REPORT: POLICY CONTINUED Element Purpose and link to strategy Operation Maximum Performance assessment | Long-Term | • Incentivises sustained | • Annual grants of performance | • 150% of salary | • The Committee determines | | --- | --- | --- | --- | --- | | Incentive Plan | performance over the | shares which vest subject | • 200% of salary in | performance conditions and | | (LTIP) | longer term | toperformance measured | exceptional circumstances, | weightings at the start of | | | • The use of longer-term | overthree years and | such as upon recruitment | each year, providing that the | | | performance targets | continuedservice | | targets are not materially | | | and delivery of awards | • Executives are entitled to | | less challenging | | | in shares rewards the | receive the value of dividend | | • In respect of each | | | achievement of the | payments that would have | | performance element, | | | Company’s strategic | otherwise accrued during the | | performance below the | | | goals and increases in | 3-year performance period in | | threshold target results in | | | shareholder value | respect of vested LTIP awards | | zero vesting. Vesting of each | | | | • All awards are subject to the | | performance element starts | | | | discretions contained in the | | at the 25% threshold and | | | | planrules | | rises to 100% for maximum | level of performance • The Committee may review the performance conditions from • Subject to clawback at the time to time Committee’s discretion during the period of three • The Committee has the years following the date of discretion in certain vesting in the event of circumstances to grant and/or material misstatement, gross settle an award in cash. In misconduct, serious practice, this will only be used in reputational damage or exceptional circumstances for corporate failure. executive Directors • A two-year post-vesting holding period applied to LTIP awards from the March 2018 award, creating a five-year period between the grant of the awards and their final release | All- | • Employees including | • The Sharesave Plan has | • Employees can normally | • N/A | | --- | --- | --- | --- | --- | | Employee | executive Directors are | standard terms under which | electfor a three-year savings | | | Share | encouraged to become | participants can normally enter | contract under standard terms | | | Schemes | shareholders through | a savings contract in return for | and within HMRC limits | | | | the operation of the | which they are granted options | • The option price for Sharesave | | | | Sharesave Plan, the | to acquire shares at the market | awards can be set at a | | | | HMRC-approved | value of the shares at the start | discount of up to 20% of the | | | | all-employee share plan | of the performance period | market value of the shares | | | | | • The rules for this plan were | at the start of the savings | | | | | first approved by shareholders | contract, although to date no | | | | | at the 2006 AGM and the | awards granted under the | | | | | updated rules were approved | 2006 Sharesave Plan have | | | | | at the 2016 AGM | been set at a discount | | | Pension • Provides competitive | | • The executive Directors may | • 20% of basic salary either as | • N/A | | | retirement benefits for | participate in the Senior plc | a Company contribution to | | | | the Group’s employees | Group Flexible Retirement Plan | Senior GFRP or as salary in | | | | | (Senior GFRP), a contract- | lieu of pension | | | | | based, money purchase | • From the end of 2022, | | | | | pension plan and/or receive | the maximum pension | | | | | cash allowances | contribution or pension | | | | | • Bonuses are not included in | allowance for executive | | | | | calculating retirement benefits | Directors will be the | | | | | • From 2020, any new executive | maximum percentage | | | | | directors will receive a pension | pension contribution | | | | | contribution in line with that | available to the majority | | | | | available to the majority of | of the UK workforce. | | employees in the relevantjurisdiction • The pension contributions or pension allowance for executive Directors will be aligned with the majority of the UK workforce by the end of 2022 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202194 Element Purpose and link to strategy Operation Maximum Performance assessment Other • Provides a competitive • Benefits include provision of • The value of benefits is • N/A benefits package of benefits that afully expensed car or car based on the cost to the assists with recruitment allowance, private medical Company and is not and retention insurance, life insurance predetermined andincome protection, • There is no monetary taxequalisation and caponother benefits relocationbenefits • Any reasonable business- related expenses (including tax thereon) can be reimbursed | Shareholding | • Aligns executive | • Executive Directors to retain | • N/A • N/A | | --- | --- | --- | --- | | guidelines | Directors’ interests | atleast 50% of the shares | | | | withthose of other | thatvest under the LTIP and | | | | shareholders in | Deferred Bonus Award, after | | | | theCompany | allowing for tax liabilities, until | | ashareholding equivalent in value to 200% of base salary isbuilt up • Post employment shareholding requirements will apply, for all LTIP awards granted from 2021 onwards and any shares that vest from deferred bonus from the 2021 bonus scheme onwards, for a period of two years following cessation of employment at the lower of (1) 80% of the in-employment shareholding guideline in place prior to cessation and (2) the actual shareholding held at the time of cessation. Recruitment of executive Directors Rationale behind performance metrics and targets Salaries for newly appointed executive directors will be set to reflect The performance-related elements take into account the Company’s risk theirskills and experience, the Company’s intended pay positioning policies and systems and are designed to align the Directors’ interests andthe market rate for the role. with those of shareholders. Variable pay elements aim to reward executive Directors for performance at the highest levels and, as such, Where it is appropriate to oer a below median salary initially, the the Committee aims to set targets that are both stretching and achievable. Committee will have the discretion to allow phased salary increases All targets are set on a sliding scale. The Committee reviews the annual overtime for newly appointed directors, even though this may involve bonus measures set for all the Company’s senior executives (not only increases in excess of the rate for the wider workforce and inflation. theexecutive Directors) every year in order to ensure that they are Benefits will be provided in line with those oered to other employees, alignedwith the Company’s strategy and annual goals and to ensure with national or international relocation expenses/arrangements thatbonus arrangements amongst the Company’s senior executive team (e.g.schooling, tax equalisation) provided for if necessary. are consistent. The aggregate incentive oered to new recruits will be no higher than The annual bonus may include a mix of financial and non-financial thatoutlined in the Policy on pages 93 to 95. The Remuneration measures reflecting the key annual priorities of the Group. The financial Committee has flexibility to grant share awards of up to 200% of salary metrics currently include two of the Company’s KPIs: Free Cash Flow, upon recruitment. Dierent performance measures may be set initially which is a key measure of the business’s ability to fund future forthe annual bonus and LTIP, taking into account the responsibilities acquisitions; and Adjusted EPS, which will reflect the Group’s ability ofthe individual, and the point in the financial year that they joined. toexpand into new regions and product markets and increase the profitability of the existing operations. Adjusted EPS is measured on Current entitlements (benefits, bonus, share schemes) may be bought aconstant currency basis to reduce the impact of exchange rate outon terms that are no more favourable than a like-for-like basis (with movements on bonus outcomes. If non-financial measures are selected, acomparable time horizon, fair value and subject to performance these may include reference to the Group’s sustainability, safety and conditions). Existing incentive arrangements will be used to the fullest organisational goals. extent possible, although awards may also be granted outside these schemes if necessary and as permitted under the Listing Rules. In the The Free Cash Flow measure applies to 40% of the total bonus award, case of an internal hire, any outstanding variable pay awarded in relation and the Adjusted EPS measure applying to the remaining 60% of the tothe previous role will be allowed to pay out according to its terms of totalbonus, reflecting the importance of both measures to the running grant (adjusted as relevant to take into account the Board appointment). ofthe Group. 95SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 GOVERNANCE ## REMUNERATION REPORT: POLICY CONTINUED The performance measures used in the LTIP awards consist of Adjusted How employees’ pay is taken into account when setting EPS, TSR and ROCE; with ROCE being added as a third performance executive Director remuneration measure for awards granted from 2021 onwards, given its importance in The Committee also reviews the salaries of corporate, divisional and the M&A evaluation process, capital investment decisions and customer senior operational managers and therefore is fully cognisant of pay levels bid evaluations. In line with the Policy, the Committee retains the ability in the Group when determining the pay of the executive Directors. to amend performance measures to reflect changes in market conditions and business strategy. In addition, the Committee’s policy is that salary increases for the executive Directors and senior executives should not normally be greater The targets will be reviewed prior to each grant by taking account than the general level of increases awarded to other senior managers in ofinternal and external expectations. The targets for awards granted Europe and North America, other than when an executive changes role under this Remuneration Policy are set out in the Annual Report orwhen it is necessary in order to ensure levels of remuneration remain onRemuneration. market competitive. Relationship between executive Director and employee pay As laid out in the Chair’s Annual Statement, the Company consulted The Remuneration Policy for the executive Directors is designed taking with employees in 2021 regarding executive Director remuneration. into account the policy for employees across the Group as a whole. Policy on outside appointments There are some dierences in the structure of the Remuneration Policy for the executive Directors and other senior employees, which the The Remuneration Committee believes that it is beneficial both for the Remuneration Committee believes are necessary to reflect the dierent individual and the Company for an executive Director to take up one levels of responsibility of employees across the Company and reflect external non-executive appointment. Fees paid for the appointment dierent market norms for dierent roles. The key dierences in may be retained by the executive. remuneration policy between the executive Directors and employees across the Group are the increased emphasis on performance-related Executive Directors’ service agreements and loss pay and the inclusion of a share-based long-term incentive plan for ofocepayments executive Directors. The table below summarises the key provisions of each executive Director’s contract: Executive Directors are provided with a competitive package of benefits that includes (depending on role) participation in the Group’s occupational Provision Detailed terms pension arrangements, and/or receipt of pension allowance, provision Employment David Squires – 5 January 2015 of afully expensed car or car allowance, private medical insurance, contract dates Bindi Foyle – 3 May 2017 life insurance and income protection. Notice period 12 months from both the Company and the The majority of senior managers are eligible to participate in annual bonus executive Director arrangements with challenging targets tied to the performance oftheir Termination payment Contracts may be terminated without notice operating business, Division and, for the most senior executives, bythe payment of a sum equal to the sum of theGroup’s performance. salary due for the unexpired notice period, and Long-term incentives are provided to the most senior executives the value of pension contributions and other and those anticipated as having the greatest potential to influence benefits such as use of company car, lifecover, performance levels within the Company. A lower aggregate incentive income protection and private healthcare quantum operates at below executive level, with levels driven by the There are no provisions in the agreements, or impact of the role and market comparatives. otherwise, for additional termination payments Awards under the Restricted Share Award Plan, a deferred share award Payments may be made in monthly instalments plan without performance conditions, are made to selected individuals and, in these circumstances, there is a who do not benefit from other long-term incentives but are considered requirement for the Director to mitigate loss to have significant potential or are key contributors. Change of control There are no enhanced provisions in relation In order to encourage wider employee share ownership, the Company toa change of control operates a Sharesave Plan in which employees in the UK, North America and continental Europe, including executive Directors, may participate. Copies of the executive Directors’ service contracts are available from the Group Company Secretary at the Company’s Registered Oce during normal business hours. The Committee’s policy in the event of early termination of employment is set out below. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 202196 Policy on payment for departure from oce On termination of an executive Director’s service contract, the Committee will take into account the departing executive Director’s duty to mitigate his or her loss when determining the amount of compensation. The Committee’s policy in respect of the treatment of executive Directors leaving the Group is described below and is designed to support a smooth transition from the Company, taking into account the interests of shareholders: Voluntary resignation or Component of pay termination for cause Death, ill health, disability, retirement excluding redundancy Departure on agreed terms Base salary, Paid for the proportion of Paid up to the date of death or leaving, including any untaken pension and the notice period worked holidays prorated to such date. In the case of ill health, a payment benefits in lieu of notice may be made and, according to circumstances, may be subject to mitigation. In such circumstances, some benefits such as company car or medical insurance may be retained until the end of the notice period Annual bonus Cessation of employment Cessation of employment during a bonus year or after the cash during a bonus year will year-end but prior to the normal bonus payment date will result in Any agreed terms will normally result in no cash cash and deferred bonus being paid and prorated for the relevant normally fall between the bonus being paid portion of the financial year worked and performance achieved two treatments described Annual bonus Unvested deferred share In the case of the death of an executive Director, all deferred inthe previous columns, deferred shares awards will lapse shares will be transferred to the estate as soon as possible subject to the discretion of after death. In all other cases, subject to the discretion of the the Committee and the terms Committee, unvested deferred shares will be transferred to the of any termination agreement individual on a date determined by the Committee LTIP share Unvested LTIP share Subject to the discretion of the Committee, unvested LTIP share awards awards will lapse awards will remain subject to the relevant performance conditions and normally be measured at the original vesting date. Theawards will normally be prorated for the relevant proportion of the performance period worked. However, in the case of the death of an executive Director, the Committee will determine theextent ofvesting within 12 months of the date of death Options under As per HMRC regulations As per HMRC regulations Sharesave Other None Statutory payments and disbursements such as any legal costs and outplacement fees Notes a) The Committee will have the authority to settle any legal claims against the Company e.g. for unfair dismissal etc that might arise on termination. b) There are no enhanced provisions in relation to a change of control. How shareholder views are taken into account • determining the extent of LTIP vesting based on the assessment ofperformance, including the discretion to allow the override of The Remuneration Committee considers shareholder feedback received formulaic outcomes; in relation to the AGM each year and guidance from shareholder representative bodies more generally. In 2020, major shareholders • determining “good leaver” status and the extent of vesting in the case were consulted on the updating of the Remuneration Policy and its of the LTIP and deferred shares; implementation for the 2021 financial year. Prior to the 2021 AGM • determining the extent of vesting in the case of the LTIP in the event there was further interaction with major shareholders regarding the of a change of control; Remuneration Policy and Remuneration Report. Following the AGM held • making the appropriate adjustments required in certain circumstances in April 2021, major shareholders were consulted further on the AGM (e.g. rights issues, corporate restructuring events, variation of capital voting of the Remuneration Policy and Remuneration Report resolutions. and special dividends); Consultation with shareholders has always been constructive. A further • varying the performance conditions to apply to LTIP awards if an amendment to the Remuneration Policy regarding pension alignment event occurs which causes the Committee to consider that it would was made as a result of the consultation. be appropriate to amend the performance conditions, provided the Committee considers the varied conditions are fair and reasonable and Discretions of the Remuneration Committee not materially less challenging than the original conditions would have The Committee operates the Group’s various incentive plans according to been but for the event in question; their respective rules and in accordance with HMRC rules where relevant. • undertaking the annual review of weighting of performance measures, To ensure the ecient administration of these plans, the Committee and setting targets for the annual bonus plan and LTIP from year may apply certain operational discretions. These include the following: to year; • selecting the participants for the annual bonus plan and LTIP awards; • adjusting bonus and LTIP targets or outcomes if deemed appropriate, • determining the timing of grants and/or payments; for example to take account of material M&A activity or other • determining the quantum of grants and/or payments (within the limits exceptional circumstances when they arise; and set out in the policy table commencing on page 93); • adjusting bonus targets or outcomes if deemed appropriate, where • adjusting the constituents of the TSR comparator group; the bonus outcome feels perverse. 97SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 GOVERNANCE # REMUNERATION REPORT: ANNUAL REPORT ON REMUNERATION ## Policy for non-executive Directors | Element | Purpose and link to strategy | Operation | Maximum | Performance assessment | | --- | --- | --- | --- | --- | | **Non-executive Directors and Chairman fees** | - Takes account of recognised practice and set at a level that is sufficient to attract and retain high calibre non-executive Directors | - The Chair of the Board is paid a single fee for all their responsibilities as determined by the Remuneration Committee. The non-executive Directors are paid a basic fee. The Senior Independent Director and the Chairs of the Audit and Remuneration Committees receive additional fees to reflect their extra responsibilities - When reviewing fee levels, account is taken of market movements in non-executive Director fees, Board Committee responsibilities, ongoing time commitments and the general economic environment - Fee increases, if applicable, are normally effective from 1 January - The Chair of the Board and non-executive Directors do not participate in any pension, bonus, share incentive or other share option plans - The remuneration of the non-executive Directors is determined by the Board of Directors. The non-executive Directors do not participate in any discussion or decisions relating to their own remuneration - Any reasonable business-related expenses (including tax thereon) can be reimbursed | - Other than when a non-executive Director changes role or where benchmarking indicates fees require realignment, fee increases will not normally exceed the general level of increases for the Group's employees | - N/A | ## Non-executive Directors' letters of appointment The Chair of the Board and non-executive Directors do not have service agreements but the terms of their appointment, including the time commitment expected, are recorded in letters of appointment. The Chair's appointment may be terminated on providing 12 months' notice by either party. The appointments of the other non-executive Directors may be terminated by the Company or non-executive Director on providing one month's notice. Copies of the Chair's and non-executive Directors' letters of appointment are available from the Group Company Secretary at the Company's Registered Office during normal business hours. ## Non-executive Directors' terms of appointment | Name | Date original term commenced | Date current term commenced | Expected expiry date of current term | | --- | --- | --- | --- | | Ian King | Joined the Board November 2017 and became Chairman in April 2018 | – | – | | Celia Baxter | September 2013 | September 2019 | September 2022 | | Susan Brennan | January 2016 | January 2022 | December 2024^{(1)} | | Barbara Jeremiah | January 2022 | January 2022 | December 2024^{(2)} | | Giles Kerr | September 2013 | September 2019 | September 2022 | | Rajiv Sharma | January 2019 | January 2022 | December 2024^{(1)} | | Mary Waldner | December 2021 | December 2021 | November 2024 | (1) Rajiv Sharma's first three-year term of appointment and Susan Brennan's second three-year term of appointment were both due to expire in December 2021. The terms of appointment for both Directors have been extended for a further period of three years from the end of December 2021. (2) Barbara Jeremiah was appointed to the Board with effect from 1 January 2022. 16 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 Summary of the Committee’s Terms of Reference Other attendees at Remuneration Committee meetings The Terms of Reference of the Remuneration Committee, available in full The Group Chief Executive Ocer and Group HR Director attend on the Company’s website, are summarised below: meetings by invitation and the Group Company Secretary acts as secretary to the Committee but no executive Director or other employee • determine and agree with the Board the framework or broad policy is present during discussions relating to his or her own remuneration. for the remuneration of the Chair of the Board, the executive Directors and other members of the executive management as it is designated Advisers toconsider; Before recommending proposals for Board approval, the Remuneration • within the terms of the agreed Policy and in consultation with the Committee may seek advice from external remuneration consultants Chair and/or Group Chief Executive Ocer, as appropriate, determine to ensure that it is fully aware of comparative external remuneration the total individual remuneration package of the Chair, each executive practice as well as shareholder, legislative and regulatory developments. Director, and other designated senior executives including bonuses, The Committee also considers publicly available sources of information incentive payments and share options or other shareawards; relating to executive remuneration. • approve the design of, and determine targets for, any performance All advisers to the Remuneration Committee are appointed and instructed related pay plans operated by the Company and approve the total by the Committee. During the year, the Committee was advised by Korn annual payments made under such plans; Ferry in relation to remuneration advice, LTIP performance monitoring • review the design of all share incentive plans for approval by the Board and the provision of LTIP advice, and by FIT Remuneration Consultants and shareholders. For any such plans, determine each year whether in relation to the provision of LTIP advice. During 2021, the Company awards will be made and, if so, the overall amount of such awards, incurred fees of £13,400 from Korn Ferry and of £4,613 from FIT the individual awards to executive Directors, and other designated Remuneration Consultants, and these costs were based on a combination senior executives and the performance targets to be used; of hourly rates and fixed fees for specific items of work. During 2021, • determine the policy for, and scope of, pension arrangements for Korn Ferry also supported the Company with the recruitment to the Board eachexecutive Director and other designated senior executives; of Barbara Jeremiah as a non-executive Director for which it received a • ensure that contractual terms on termination, and any payments made, fee of £25,000. are fair to the individual and the Company, that failure is not rewarded The Committee does not have a formal policy of subjecting its and that the duty to mitigate loss is recognised; and remuneration consultants to a regular fixed-term rotation, although the • oversee any major changes in employee benefits structures Committee remains cognisant of the need to seek objective advice throughoutthe Group. and good value whilst also benefiting from the consultants’ knowledge Members of the Company. Other than described above, neither remuneration consultants have other connections with the Company or its Directors. The Remuneration Committee consists entirely The Committee is satisfied that the advice it has received during 2021 of non-executive Directors. has been objective and independent. Number of Number of meetings during meetings (1) Member term attended Celia Baxter – Chair 7 7 Susan Brennan 7 6 Giles Kerr 7 7 Ian King 7 7 Rajiv Sharma 7 6 (2) Mary Waldner 1 1 (1) The full Committee met 7 times in 2021. In addition, authority was delegated to two members of the Committee, Celia Baxter and Ian King, to hold 3 additional meetings to confirm the granting and vesting of share awards. (2) Mary Waldner was appointed to the Board and to the Remuneration Committee on 1December 2021. Barbara Jeremiah was appointed to the Board on 1 January 2022 and so has not been included in the table above. 99SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 GOVERNANCE # REMUNERATION REPORT: ANNUAL REPORT ON REMUNERATION CONTINUED ## Principal activities and matters addressed during 2021 The Committee has a calendar of standard items within its remit and in addition it held in-depth discussions on specific topics during the year. The Committee typically meets four times each year, although additional meetings were held in 2021 as the Committee considered issues arising from the disposal of a business and the AGM voting on the the Remuneration Policy and Remuneration Report resolutions. In addition, authority was delegated to two members of the Committee, Celia Benter and Ian King, to hold 3 additional meetings to confirm the grant and vesting of share awards. The table below shows the standard items considered at each meeting, leading up to the meetings in February and March where the key decisions regarding performance, outcomes and grants for the coming year are determined. | | Standard agenda items | Ad hoc items | | --- | --- | --- | | January | Preliminary review of performance and outcomes under the Annual Bonus and Deferred Bonus Award. Preliminary Review of performance and vesting under long-term incentives. Discuss incentive structure for the financial year including finalisation of targets. | | | February | Review of performance and outcomes under the Annual Bonus and Deferred Bonus Award. Review of performance and vesting under long-term incentives. Determine incentive structure for the next financial year including finalisation of targets. Review of draft Remuneration Report. | Approve launch of 2021 Sharesave Review gender pay gap reporting | | March (three meetings) | Approve Remuneration Report. Confirmation of grants of LTIP, Deferred Bonus Awards and Restricted Share Awards. Confirmation of vestings of Deferred Bonus Awards and Restricted Share Awards. | | | May | | Review of targets for bonus and LTIP awards following disposal of Senior Aerospace Connecticut. Review of voting on AGM Resolutions for the Directors' Remuneration Policy and the Directors' Remuneration Report. Confirm scaling back of 2021 Sharesave grant. Confirm vesting of Restricted share awards for leavers following completion of disposal of Senior Aerospace Connecticut. | | September | | Discuss shareholder feedback from consultation post-AGM Approve the AGM Update Statement. | | December (two meetings) | Review and approval of Directors' and senior managers' salary and total remuneration packages for the following financial year taking into consideration available FTSE 250 salary market data. Performance update on outstanding incentive and bonus awards. Discussion on 2022 LTIP and bonus targets; and associated shareholder consultation. Determine remuneration of Chairman. Review of Committee's Terms of Reference. | Discuss further shareholder feedback and actions arising from AGM votes on Remuneration Policy and Report. Review feedback from employee consultation. | ## Statement of voting at General Meeting At the AGM held on 23 April 2021, shareholder votes on the Directors' Remuneration Report and the Remuneration Policy were cast as follows: | | Voting | For | Against | Total | Withheld^{(1)} | Reason for vote against, if known^{(2)} | Action taken by Committee | | --- | --- | --- | --- | --- | --- | --- | --- | | Remuneration Report | Votes | 233,840,000 | 81,174,762 | 315,014,762 | 17,966,445 | See below | See below | | | % | 74.23% | 25.77% | 100% | N/A | | | | Remuneration Policy | Votes | 230,355,445 | 80,193,440 | 310,548,885 | 22,432,322 | See below | See below | | | % | 74.18% | 25.82% | 100% | N/A | | | (1) A vote withheld is not a vote in law and is not counted in the calculation of the proportion of votes cast "For" and "Against" a resolution. The Committee consulted extensively with shareholders prior to the 2021 AGM concerning executive remuneration. Following the AGM, the Committee wrote again to its larger shareholders and, also to a wider group of smaller shareholders to further understand and explore their views. A number of discussions have been and will continue to be held with individual shareholders as per their request. The Committee acknowledges the shareholders' concerns and sensitivities around remuneration decisions taken in 2020, which the Committee believes were necessary to retain and incentivise a strong management team. The main reason why shareholders voted against the Remuneration Report was because they did not agree with the Committee's decision to pay an annual bonus to the executive Directors for 2020. On the Remuneration Policy, there was a divergence of views. Although it had already been stated that any new executive directors' pension contributions would be aligned on appointment to that of the wider UK workforce and that the incumbent executive Directors' pension contributions would be aligned by the start of 2024, some shareholders felt that the incumbent executive Directors' pension contributions should be aligned by the end of 2022. Since the AGM, the Committee also agreed that the executive Directors' pension contributions or allowances would be aligned with the rates available to the majority of the UK workforce at the end of 2022. 100 SEMIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 Single total figure of remuneration (Audited information) The following table shows a single total figure of remuneration in respect of qualifying service for the 2021 financial year for each Director, together with comparative figures for 2020. Aggregate Directors’ emoluments are shown at the end of the Single Total Figure of Remuneration section. Pension benefits | Salaries and | | | Taxable benefits | | | | | Long-term | | including cash in | | | Total fixed | | Total variable | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | (1) | | | (2) | | (3) | | | (4) | | | | | | | | | | fees | | and allowances | | | Bonus | | incentives | | lieu of pension | | remuneration | | | remuneration | | Total | | | £000s | | | £000s | | £000s | | | £000s | | £000s | | | £000s | | £000s | £000s | 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2021 2021 2020 Executives David Squires 540 513 27 26 675 270 0 0 108 108 675 675 1,350 917 Bindi Foyle 361 343 22 21 451 181 0 0 72 72 455 451 906 617 Total remuneration 901 856 49 47 1,126 451 0 0 180 180 1,130 1,126 2,256 1,534 Non-executives Ian King (Chairman) 191 181 1 – – – – – – – 192 – 192 181 (6) Celia Baxter 71 67 – – – – – – – – 71 – 71 67 Susan Brennan 53 50 – – – – – – – – 53 – 53 50 Giles Kerr 62 59 – – – – – – – – 62 – 62 59 Rajiv Sharma 53 50 – – – – – – – – 53 – 53 50 (6) Mary Waldner 4 – – – – – – – – – 4 – 4 – Total remuneration 434 407 1 – – – – – – – 435 – 435 407 (1) During 2020, the executive Directors, the Chairman and the non-executive Directors voluntarily reduced their salaries and fees by 20% for a three-month period. Without the reductions, David Squires’ base salary would have been £540,000 and Bindi Foyle’s base salary would have been £361,000. The fees that the Chairman and the non-executive Directors would have received, before reductions, are as stated in the table below. (2) Taxable benefits for executive Directors include the provision of a fully expensed company car or car allowance and private medical insurance. During 2020, David Squires exchanged his company car for a car allowance. Taxable benefits for non-executive Directors are travel expenses. (3) Awards under the deferred bonus award, the Enhanced SMIS, in respect of 2021 performance will be granted following the announcement of the 2021 results. The deferred bonus element that is to be granted in the form of shares to David Squires and Bindi Foyle following the announcement of the 2021 results, is included in the Bonus figure and will be equivalent in value to one-third of the Bonus figure, namely £225,000 and £150,417 respectively. (4) The performance conditions attached to David Squires’ and Bindi Foyle’s 2019 LTIP Awards were not achieved, and this award will lapse in March 2022. Further details on the performance conditions can be found on page 90. (5) The aggregate amount of remuneration paid to or receivable by Directors in respect of qualifying services as per paragraph 9 of SI 2008/40 Schedule 5 was £2,512,008. (6) Mary Waldner was appointed to the Board on 1 December 2021 and her 2021 fee is the amount paid from that date. Celia Baxter’s 2020 salaries and fees figure includes the fee for acting as the Senior Independent non-executive Director from 24 April 2020. Barbara Jeremiah was appointed to the Board on 1 January 2022 and so has not been included in the table above. Fees received for outside appointments The Board supports executive Directors taking up appointments outside the Company to broaden their knowledge and experience. Each executive Director is permitted to accept one non-executive appointment from which they may retain any fee. Any external appointment must not conflict with a Director’s commitments to Senior plc. David Squires does not hold any outside appointments for which he is remunerated. Bindi Foyle was appointed to the Board of Avon Protection plc asa non-executive director with eect from 1 May 2020 and retained fees of £59,205 for the year ending 31 December 2021 (£29,375 for the year ended 31December 2020). Prior to her taking up this appointment, the Nominations Committee considered the time commitment required for this new role and was supportive of her taking up that appointment. Annual fees of non-executive Directors The non-executive Directors do not participate in any pension, bonus, share incentive or other share option plans. Their remuneration reflects both the time given and the contribution made by them to the Company’s aairs during the year, including membership or chairing of the Board or its Committees. The remuneration of the non-executive Directors is determined by the Board of Directors. The non-executive Directors do not participate in any discussion or decisions relating to their own remuneration. Having considered Senior’s financial performance, the then current market conditions experienced by the Group and its 2021 outlook, and the significant re-structuring of the business that was then being undertaken, the Board agreed that the salaries and fees paid to the Directors would notincrease in 2021. (1) 2021 2020 Percentage Fees £ £ change Chairman 191,000 191,000 0% Non-executive Director 53,000 53,000 0% Chair of Audit Committee 9,000 9,000 0% Chair of Remuneration Committee 9,000 9,000 0% Senior Independent Director 9,000 9,000 0% (1) During 2020, the executive Directors, the Chair of the Board and the non-executive Directors voluntarily reduced their salaries and fees by 20% for a three-month period; thetable above shows the fees that would have been paid had they not been reduced. 101SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 GOVERNANCE ## REMUNERATION REPORT: ANNUAL REPORT ON REMUNERATION CONTINUED Senior managers’ emoluments In addition to setting the remuneration of the executive Directors, the Remuneration Committee oversees the remuneration of other senior managers. The table below shows the cumulative benefits of the two Divisional CEOs, the two Divisional CFOs and the most senior corporate managers. The increase in the 2021 Short-term employee benefits compared to the prior year was partly as a result of the senior managers voluntarily reducing their salaries for a three-month period in 2020 in recognition of the disruption caused by the pandemic; and due to the stronger bonus performance in 2021. | 2021 | 2020 | | --- | --- | | Total | Total | | £000s | £000s | Short-term employee benefits 3,169 2,986 Post-employment benefits 42 89 Share-based payments 933 887 Total 4,14 4 3,962 Performance against performance targets for annual bonus (audited information) Bonuses are earned by reference to the financial year and paid in March following the end of the financial year. Consistent with recent years, the bonuses accruing to the executive Directors in respect of 2021 have been determined by Adjusted EPS and Free Cash Flow performance as set out in the table below. The Committee set bonus targets in January 2021, but following the disposal of Senior Aerospace Connecticut, which completed on 22 April 2021, the 2021 bonus targets were reviewed by the Committee in May 2021, as the Group would no longer benefit from that operation’s net Profit before Tax and net Free Cash Flow for the remaining 8 months and 1 week of 2021. The Committee concluded that the original 2021 bonus targets should be adjusted to reflect the reduction in Adjusted EPS and Free Cash Flow, as set out on page 88. The revised loss per share target had arisen due to the sale of a profitable business which did not fit our future strategy, and the disposal of which provided additional liquidity. The Committee considered that the new targets were not materially easier or harder to achieve than the original targets. A summary of the adjusted measures, weightings and performance achieved is provided in the table below: 2021 2020 | | | | | | | Bonus | | | | | | Bonus | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | Maximum | | Percentage | | payable | | Maximum | | Percentage | | payable | | | | Actual | | bonus | of maximum | (% of 2021 | | | | bonus | of maximum | (% of 2020 | | | | | | | | | | | (1) | | | | | | (1) | | Threshold Target Maximum | achieved | achievable | | achieved | | salary) | | achievable | | achieved | | salary) | | Free Cash Flow targets – full year £(5.0)m £(2.0)m £10.0m £14.0m 50.00% 100% 50% 50.00% 100.00% 50.00% (2) Adjusted EPS targets – full year internal target (2.00)p (1.69)p 0.02p 0.34p 75.00% 100% 75% 75.00% 0.00% 0.00% Totals 125.00% 100% 125% 125.00% 40.00% 50.00% (1) When bonus is payable, this is paid two-thirds in cash and one-third in deferred shares. The deferred share element of the 2020 bonus was awarded on 12 March 2021 based on ashare price of £1.128 and shall ordinarily vest on the third anniversary of the award on 12 March 2024. The deferred element of any 2021 bonus shall be awarded following the announcement of the 2021 annual results in 2022 and the details disclosed in the 2022 Remuneration Report. (2) The bonus is calculated with regard to full-year Free Cash Flow, and internal Adjusted EPS targets on a constant currency basis. (3) The performance measures originally set by the Committee in January 2021 for the 2021 bonus targets, before adjustment due to the disposal of Senior Aerospace Connecticut, are set out in the table below: Threshold Target Maximum Free Cash Flow targets – full year – £3.0m £15.0m Adjusted EPS targets(²) – full year internal target (1.66)p (1.32)p 0.39p Total pension entitlements (audited information) The 2021 single figure remuneration for pension benefits for David Squires and Bindi Foyle consisted of a cash allowance of £108,000 (2020 – £108,000) and £72,200 (2020 – £72,200) respectively, this being 20% of the respective base salaries. The Committee had previously stated that any new executive Directors’ pension contributions would be aligned on appointment to that of the wider UK workforce and that the incumbent executive Directors’ pension contributions would be aligned by the start of 2024. However, during consultations with shareholders during 2021, some felt that the incumbent executive Directors’ pension contributions should be aligned by the end of 2022. Since the 2021 AGM, the Committee agreed that the executive Directors’ pension contributions or allowances would be aligned at the end of 2022 with the maximum rate available to the majority of the UK workforce. Further detail may be found on page 88 of the Chair’s Statement and page 94 of the Renumeration Report: Policy section. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021102 # Payments for loss of office (audited information) There were no payments made in the year for loss of office. # Performance against performance conditions for LTIP vesting The performance conditions are set out below. # By reference to performance in the financial year (audited information) Set out below are the performance conditions attached to the 2019 LTIP award. Neither performance condition was achieved and therefore the 2019 LTIP awards shall lapse in full. | Performance condition | Target (25% vesting) | Maximum (100% vesting) | Actual | Percentage of total award achieved | | --- | --- | --- | --- | --- | | Total shareholder return percentile ranking (50% of Award) | 50th | 75th | 12th | 0% | | Growth in adjusted earnings per share over performance period (50% of Award) | 15% | 30% | -98.9%^{(1)} | 0% | (1) The growth in adjusted earnings per share was calculated after adjusting for the impact of IFRS 16. # Scheme interests awarded during the financial year (audited information) | Directors | Scheme | Basis of award | Face value £500s | Percentage vesting at threshold performance | Number of shares | Performance period end date | | --- | --- | --- | --- | --- | --- | --- | | David Squires^{(1)} | LTIP | Annual award | 610 | 25% | 718,085 | 31 December 2023 | | Bindi Foyle^{(1)} | LTIP | Annual award | 542 | 25% | 480,053 | 31 December 2023 | (1) The face value of the awards represented 150% of the executive Directors' respective 2021 base salaries. # Current position on outstanding LTIP awards (non-audited information) The following table shows the current position against performance targets for LTIP awards outstanding from 2020 and 2021. | Performance condition | Conditional share awards granted in 2021 | | | Conditional share awards granted in 2020 | | | | --- | --- | --- | --- | --- | --- | --- | | | Target (25% vesting) | Maximum (100% vesting) | Actual to date | Target (25% vesting) | Maximum (100% vesting) | Actual to date | | Total shareholder return ranking | 50th percentile | 75th percentile | 99th percentile | 50th percentile | 75th percentile | 17th percentile | | Adjusted EPS performance for the final Financial Year of the performance period | 5.67p | 7.56p | 0.17p^{(2)} | 13.5p | 16.5p | 0.17p^{(2)} | | Return on Capital Employed^{(3)} | 9.8% | 11.0% | 1.0% | | | | (1) Actual to date figure of 0.17p represents the Adjusted EPS during the first two years of the three-year performance period for the 2020 LTIP award. (2) Actual to date figure of 0.17p represents the Adjusted EPS during the first year of the three-year performance period for the 2021 LTIP award. (3) In 2021, the Committee amended the performance conditions for LTIP awards, so that awards are based on three evenly weighted conditions, namely: TSR ranking, Adjusted EPS performance, and Return on Capital Employed. Actual to date figure of 1.0% represents the Return on Capital Employed during the first year of the three-year performance period for the 2021 LTIP award. To ensure a suitably broad peer group, the TSR comparator group applicable to LTIP awards is the FTSE 350 index, excluding sectors with limited direct relevance to Senior and those exhibiting high volatility. TSR is averaged over three months prior to the start and end of the performance period. The Committee reviewed the potential impact of the disposal of Senior Aerospace Connecticut on the three performance targets for the 2021 LTIP awards: Total Shareholder Return; Earnings per Share; and Return on Capital Employed. The Committee concluded that the disposal should have no material impact on any of the three measures and agreed that the original targets for the 2021 LTIP awards should remain unaltered. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 103 GOVERNANCE ## REMUNERATION REPORT: ANNUAL REPORT ON REMUNERATION CONTINUED Shareholder dilution Percentage of issued shares Discretionary Shares awarded as % of issued shares schemes 2.76% 2.24% Headroom (maximum 5%) All schemes 3.79% 6. 21% (maximum 10%) The Company complies with the dilution guidelines contained within The Investment Association Principles of Executive Remuneration. At 31 December 2021, awards outstanding and shares issued in the previous 10 years under all share plans (the Senior plc 2005 Long-Term Incentive Plan (the 2005 LTIP), the Senior plc 2014 Long-Term Incentive Plan (the 2014 LTIP), the Restricted Share Award Plan and the 2006 Savings-Related Share Option Plan (the Sharesave Plan)) amounted to 3.79% of the issued ordinary share capital of the Company. At 31 December 2021, awards outstanding and shares issued in the previous 10 years under executive (discretionary) plans (the 2005 LTIP and 2014 LTIP) amounted to 2.76% of the issued ordinary share capital of the Company. During 2021, all share awards were satisfied using market-purchased shares. The Remuneration Committee monitors the flow rates of the Company’s share plans, in particular before new share awards are made, to ensure the flow rates remain within the Investment Association dilution guidelines. Statement of Directors’ shareholding and share interests (audited information) The Remuneration Committee encourages Directors to own shares in the Company and, in support of this policy, it expects executive Directors toretain at least 50% of the shares that vest under the LTIP and Enhanced SMIS deferred share awards, after allowing for tax liabilities, until a shareholding equivalent in value to 200% of base salary is built up. Included within the Directors’ holdings are 290,000 shares and 38,788 shares that David Squires and Bindi Foyle purchased respectively. The table below shows how each Director complies with this requirement. Shares are valued using the Company’s closing share price on 31December 2021 of 147.03p (31 December 2020 – 89.25p). No options under the Sharesave Plan were exercised by the executive Directors during theyear. | Number of shares | Number of shares | | | Unvested awards, subject to | | Unvested awards, not subject | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | required to be held | | held (including | | | performance conditions | | to performance conditions | | | (equivalent to 200% | unvested deferred | | | | | | | | | of basic salary at | shares net of tax) at | | Share ownership | | | | | Total deferred | (1) Executive Directors 31 December 2021) 31 December 2021 requirements met LTIP award Sharesave share award David Squires 734,544 639,708 No – 87.1% 1,554,257 4,10 3 240,723 Bindi Foyle 491,056 288,119 No – 58.7% 1,038,261 4,10 3 160,816 (1) The minimum thresholds were not reached for the two performance conditions attached to David Squires’ and Bindi Foyle’s 2019 LTIP awards over 353,340 shares, and 235,426 shares respectively (included within their respective LTIP award figures above) and therefore these awards shall lapse in full in March 2022. The interests of Directors have remained unchanged between the date of the review and the date of the signing of the Annual Report and Accounts. | Number of shares | | | | | | | | | Number of shares | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | owned outright | | | | | | | | | owned outright | | | | (including connected | | | | Shares retained | | | | (including connected | | | | | | persons) at | Shares vested | | | from 2021 | Shares purchased | | | | persons) at | | | | | | (1) | | | | | | | | (3) | | 1 January 2021 | | during 2021 | | vested shares | | | during 2021 | | 31 December 2021 | | | Executive Directors David Squires 394,377 62,748 62,748 55,000 512,125 Bindi Foyle 129,361 34,738 34,738 38,788 202,887 Non-executive Directors  Ian King 414,297 – – 100,000 514,297 Celia Baxter 31,653 – – – 31,653 Susan Brennan 5,900 – – – 5,900 Giles Kerr 10,000 – – – 10,000 Rajiv Sharma – – – – – (2) Mary Waldner – – – – – (1) In 2021, the following gains were made by David Squires and Bindi Foyle: £73,283 and £40,570 respectively upon the vesting of their Enhanced SMIS deferred awards and dividend equivalent shares. Thegains were calculated by multiplying the number of shares that vested by the average share price secured by all recipients that sold vested shares on the vesting day of 18 March 2021 of116.79p. (2) Mary Waldner was appointed to the Board on 1 December 2021. (3) Barbara Jeremiah was appointed to the Board on 1 January 2022 and so has not been included in the table above. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021104 Performance graph Share price performance The closing middle market price of the shares at 31 December 2021 was 147.03p (2020 – 89.25p). During 2021, the shares traded in the range of 89.5p to 181.1p. Senior plc total shareholder return The following TSR graph compares the total shareholder return of the Company’s shares against the FTSE All-Share, Aerospace & Defence index, andthe FTSE 250 Index over a ten-year period (where dividends are included gross of tax). This graph allows a comparison to be made against organisations facing broadly similar economic and market conditions as the Company. 300 FTSE All-Share A&DSenior FTSE250 250 200 150 100 50 0 Dec 11 Dec 21Dec 20Dec 19Dec 18 Dec 16Dec 15Dec 14Dec 13Dec 12 Dec 17 Remuneration of Group Chief Executive Ocer (1) (2) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 CEO single figure of total remuneration (£000s) 1,529 1,726 1,316 1,020 790 1,009 1,107 1,203 917 1,350 Annual variable element award rates against maximum opportunity (%) 92 65 54 14 31 79 75 58 40 100 Long-term incentive vesting rates against maximum opportunity (%) 100 100 91.8 21 0 0 0 28 0 0 (1) During 2015, Mark Rollins retired from the Board on 31 May 2015 and David Squires was appointed a Director on 1 May 2015. The CEO single figure of total remuneration includes the combined 2015 values for Mark Rollins and David Squires. (2) The annual variable maximum bonus opportunity increased from 105% to 125% in 2018. Percentage change in remuneration of Directors The table below shows how the percentage changes in Directors’ salary, benefits and bonus between 2019 and 2020 and between 2020 and 2021 compare with the percentage change in the average of each of those components of pay for Senior plc employees. During 2020, the executive Directors, the Chair and the non-executive Directors voluntarily reduced their salaries and fees by 20% for a three-month period in recognition of the disruption caused by the pandemic. The percentage change of Salary figures in the table below are calculated using the 2020 salaries before the voluntary reduction in salaries and fees for the Directors and some Senior plc employees. Employees who joined or left in either year have been excluded to prevent distortion. 2020 vs 2021 2019 vs 2020 | | | Taxable benefit | | | | | | | Taxable benefits | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Salary | and allowances Bonus Salary | | | | | | | and allowances Bonus | | | | | | | Percentage | | | Percentage | | Percentage | | Percentage | | | Percentage | | | Percentage | | | | | | | | | | | | (1) | | | (2) | | | | | change | | | change | | change | | change | | | change | | | change | Executive Directors David Squires 0% 3.4% 150.0% 2.8% -16.0% -28.6% Bindi Foyle 0% 4.8% 150.0% 3.1% - 0.1% -28.4% Non-executive Directors Ian King 0% – – 3.2% – – Celia Baxter 0% – – 6.7% – – Susan Brennan 0% – – 2.9% – – Giles Kerr 0% – – 2.5% – – Rajiv Sharma 0% – – 2.9% – – (1) Mary Waldner N/A – – N/A N/A N/A Senior plc Employees, excluding Directors 3.3% 2.0% 158.6% -2.1% 2.6% - 30.1% (1) The Salary Percentage change figure also includes any merit increases awarded to Directors and employees. (2) The decrease in David Squires’ Taxable benefits and allowances reflects the transition from using a company car in favour of taking a car allowance during 2020. Bindi Foyle’s Taxable benefits consisted solely of the receipt of private healthcare insurance. (3) Celia Baxter was appointed the Senior Independent Director on 24 April 2019 and her fee was adjusted accordingly. (4) Mary Walder was appointed to the Board on 1 December 2021. 105SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 GOVERNANCE # REMUNERATION REPORT: ANNUAL REPORT ON REMUNERATION CONTINUED # CEO Pay Ratio narrative The CEO Pay Ratio is calculated using Option B, by taking the gender pay gap data (based on Senior's largest UK employer, Senior UK Limited) and adding the data for Senior's two additional UK employing entities. For the purpose of making a valid comparison, furloughed employees and leavers were excluded. Using the same principles as the gender pay data, the best equivalents were identified, namely: the 25th, 50th and 75th percentile. The full-time equivalents pay and therefore figures for the year ending December 2021 were calculated, and then reviewed to ensure that the selected best equivalents were reasonably representative. Factors that contributed to the change in the CEO Pay Ratio from 2020 to 2021 included the Group Chief Executive Officer's temporary salary reduction during 2020, and the number of shopfloor employees who were excluded from the data due to furlough. | Year | Pay ratio | | | | | --- | --- | --- | --- | --- | | | Method^{(1)} | 25th percentile | 50th percentile | 75th percentile | | 2021 | B | 53 : 1 | 49 : 1 | 33 : 1 | | 2020^{(2)} | B | 25 : 1 | 20 : 1 | 16 : 1 | | 2019 | B | 53 : 1 | 39 : 1 | 32 : 1 | (1) Method B was selected as the most appropriate basis for selecting the 25th percentile, median and 75th percentile pay ratios because the Gender Pay Gap data was more readily available. (2) The pay ratios in 2020 had been impacted by the pandemic leading to significant numbers of employees being on furlough and/or made redundant, as well as reduced total remuneration for the CEO. | Year 2021 | 25th percentile | 50th percentile | 75th percentile | | --- | --- | --- | --- | | Base salary | £18,471 | £25,944 | £34,254 | | Total | £25,614 | £27,797 | £41,397 | # Relative importance of spend on pay The following table sets out the percentage change in profit, dividends and overall spend on pay in the financial year ended 31 December 2021 compared with the financial year ended 31 December 2020. | | 2021 £m | 2020 £m | Percentage change | | --- | --- | --- | --- | | Employee remuneration costs (excluding social security)^{(1)} | 198.9 | 225.8 | -11.8% | | Adjusted (loss)/ profit before tax^{(2)} | (1.9) | (6.2) | N/A | | Dividends paid | - | - | 0% | (3) The 2021 Employee Remuneration costs include those incurred by Senior Aerospace Connecticut during the period until its disposal in April 2021. (2) The loss before tax in 2021 reduced by 69.4% compared to the loss before tax in 2020. # 2022 Remuneration (non-audited information) Salaries and fees for 2022 | | 2022 £ | 2021 £ | Percentage change | | --- | --- | --- | --- | | Executive Directors | | | | | David Squires | 557,000 | 540,000 | 3.15% | | Bindi Foyle | 379,000 | 361,000 | 4.99% | | Non-executive Directors^{(3)} | | | | | Chairman | 197,000 | 191,000 | 3.14% | | Non-executive Directors | 54,500 | 53,000 | 2.83% | | Chair of Audit Committee | 9,000 | 9,000 | 0.0% | | Chair of Remuneration Committee | 9,000 | 9,000 | 0.0% | | Senior Independent Director | 9,000 | 9,000 | 0.0% | (1) No additional fees are payable for Committee membership. # Weighting of annual bonus KPIs for 2022 The individual weightings of the KPIs for the executive Directors for the annual bonus are set out below. The maximum bonus opportunity is 125% of basic salary, with two-thirds payable in cash and one-third in deferred shares. | | 2022 | | 2021 | | | --- | --- | --- | --- | --- | | | Maximum possible cash award | Maximum share award | Maximum possible cash award | Maximum share award | | Free Cash Flow target – full year | 33.33% | 16.67% | 33.3% | 16.67% | | Adjusted EPS target – full year internal target | 50.00% | 25.00% | 50.0% | 25.0% | | Totals | 83.3% | 41.7% | 83.3% | 41.7% | The actual targets are currently considered commercially sensitive because of the information that this provides to the Company's competitors. Full disclosure of the 2022 targets will be disclosed in the 2022 Annual Report. 106 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 # LTIP Awards for 2022 Adjusted EPS, TSR and ROCE metrics will be retained as the performance measures in the LTIP and have equal weighting of 33.3%; 33.3%; 33.3%. Adjusted EPS target has been set to be stretching and challenging. The target is expressed as an absolute number to be achieved in 2024 rather than a cumulative growth percentage. TSR performance will continue to be measured against the FTSE 350 (excluding companies in the following sectors: Banks, Financial Services (other than Closed End Investments), Life and Non-life Insurance, Oil, Gas & Coal, Precious Metals & Mining, Industrial Support Services, and Real Estate Investment Services and Trusts). The excluded sectors remain broadly similar to those used in previous years but have been re-mapped based on current Industrial Classification Benchmark sectors. The vesting scale will remain the same as for awards granted in 2020. The Company has consistently stated that its medium-term ROCE target is a minimum of 13.5% pre-tax, post IFRS 16 and this has not changed. The ROCE targets set for the 2022 LTIP award have been increased from those set in 2021 to reflect where we are on our recovery. The targets are set at a stretching level that takes account of market conditions and the minimum medium-term target. The Thresholds and Maximum for 2021 and 2022 are set out in the table below: | | 2022 | | | 2021 | | | | --- | --- | --- | --- | --- | --- | --- | | | Weighting (%) | Threshold (25% vesting) | Maximum (100% vesting) | Weighting (%) | Threshold (25% vesting) | Maximum (100% vesting) | | Return on Capital Employed | 33.33% | 10.0% | 13.5% | 33.33% | 9.8% | 11.0% | | Total Shareholder Return ranking | 33.33% | Median or higher | Upper quartile or higher | 33.33% | Median or higher | Upper quartile or higher | | Adjusted earnings per share | 33.33% | 10.05p | 12.35p | 33.33% | 5.67p | 7.56p | # Approval of the Directors' Remuneration Report The Directors' Remuneration Report was approved by the Board on 25 February 2022. Signed on behalf of the Board # Celia Baxter Chair of the Remuneration Committee 25 February 2022 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 107 GOVERNANCE ## STATEMENT OF DIRECTORS’ RESPONSIBILITIES ## IN RESPECT OF THE ANNUAL REPORT AND ## THEFINANCIAL STATEMENTS The Directors are responsible for preparing The Directors are responsible for keeping We consider the Annual Report and Accounts, the Annual Report and the Group and Parent adequate accounting records that are sucient taken as a whole, is fair, balanced and Company Financial Statements in accordance to show and explain the Parent Company’s understandable and provides the information with applicable law and regulations. transactions and disclose with reasonable necessary for shareholders to assess the accuracy at any time the financial position of Group’s position and performance, business Company law requires the Directors to the Parent Company and enable them to ensure model and strategy. prepare Group and Parent Company Financial that its Financial Statements comply with the Statements for each financial year. Under that David Squires Bindi Foyle Companies Act 2006. They are responsible law they are required to prepare the Group Group Chief Executive Ocer Group Finance Director for such internal control as they determine Financial Statements in accordance with 25 February 2022 25 February 2022 is necessary to enable the preparation of UK-adopted international accounting standards Financial Statements that are free from material and applicable law and have elected to prepare misstatement, whether due to fraud or error, the Parent Company Financial Statements in and have general responsibility for taking such accordance with UK accounting standards and steps as are reasonably open to them to applicable law, including FRS 101 Reduced safeguard the assets of the Group and to Disclosure Framework. prevent and detect fraud and other irregularities. Under Company law the Directors must not Under applicable law and regulations, the approve the Financial Statements unless they Directors are also responsible for preparing a are satisfied that they give a true and fair view Strategic Report, Directors’ Report, Directors’ of the state of aairs of the Group and Parent Remuneration Report and Corporate Company and of the Group’s profit or loss for Governance Statement that complies with that period. In preparing each of the Group that law and those regulations. and Parent Company Financial Statements, the Directors are required to: The Directors are responsible for the maintenance and integrity of the corporate and • select suitable accounting policies and then financial information included on the Company’s apply them consistently; website. Legislation in the UK governing the • make judgements and estimates that are preparation and dissemination of Financial reasonable, relevant, reliable and prudent; Statements may dier from legislation in • for the Group Financial Statements, state other jurisdictions. whether they have been prepared in accordance with UK-adopted international Responsibility statement of the Directors accounting standards; in respect of the annual financial report • for the Parent Company Financial Statements, We confirm that to the best of our knowledge: state whether applicable UK accounting • the Financial Statements, prepared in standards have been followed, subject to any accordance with the applicable set of material departures disclosed and explained accounting standards, give a true and fair in the Parent Company Financial Statements; view of the assets, liabilities, financial position • assess the Group and Parent Company’s and profit or loss of the Company and the ability to continue as a going concern, undertakings included in the consolidation disclosing, as applicable, matters related to taken as a whole; and going concern; and • the Strategic Report includes a fair review • use the going concern basis of accounting of the development and performance of the unless they either intend to liquidate the business and the position of the issuer and Group or the Parent Company or to cease the undertakings included in the consolidation operations, or have no realistic alternative but taken as a whole, together with a description to do so. of the principal risks and uncertainties that they face. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021108 ## INDEPENDENT AUDITOR’S REPORT ## TO THE MEMBERS OF SENIOR PLC 1. Our opinion is unmodified Basis for opinion We conducted our audit in accordance with Overview We have audited the Financial Statements ofSeniorplc (“the Company”) for the year International Standards on Auditing (UK) (“ISAs Materiality: £3.2m (2020: £2.2m) ended31 December 2021 which comprise (UK)”) and applicable law. Our responsibilities group financial 0.5% of Group revenue theConsolidated Income Statement, the are described below. We believe that the audit statements as (2020: 5% of normalised Consolidated Statement of Comprehensive evidence we have obtained is a sucient and awhole Group profit before tax) | Income, Consolidated and Company Balance | appropriate basis for our opinion. Our audit | | | --- | --- | --- | | Sheet, Consolidated and Company Statement | opinion is consistent with our report to the | Coverage | | ofChanges in Equity, Consolidated Cash Flow | auditcommittee. | • 89% (2020: 87%) of Total losses/profit | | Statement and the related notes, including | | before tax | We were first appointed as auditor by the theaccounting policies in Note 2. • 72% (2020: 76%) of Group revenue shareholders on 21 April 2017. The period oftotal uninterrupted engagement is for the • 82% (2020: 84%) of Group total assets In our opinion: | • the Financial Statements give a true and | fivefinancial years ended 31 December 2021. | Key audit matters vs 2020 | | | --- | --- | --- | --- | | fairview of the state of the Group’s and of the | Wehave fulfilled our ethical responsibilities | | | | | | Recurring risks • Provision for |  | | parent Company’s aairs as at 31 December | under, and we remain independent of the | | | uncertain tax 2021 and of the Group’s profit for the year Groupin accordance with, UK ethical positions then ended; requirements including the FRC Ethical • Recoverability  Standardas applied tolisted public interest • the Group Financial Statements have of the Parent entities. Nonon-audit services prohibited been properly prepared in accordance Company’s bythatstandard were provided. with UK-adopted international investment in accountingstandards; its subsidiary • the parent Company Financial Statements have been properly prepared in accordance with UK accounting standards, including FRS 101 Reduced Disclosure Framework; and • the Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006. 109SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 GOVERNANCE ## INDEPENDENT AUDITOR’S REPORT ## TO THE MEMBERS OF SENIOR PLC CONTINUED 2. Key audit matters: our assessment of risks of material misstatement Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the Financial Statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest eect on: the overall audit strategy; the allocation of resources in the audit; and directing the eorts of the engagement team. We summarise below the key audit matters, in decreasing order of audit significance, in arriving at our audit opinion above, together with our key audit procedures to address those matters and, as required for public interest entities, our results from those procedures. These matters were addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the Financial Statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on these matters. The risk Our response | Provision for uncertain tax positions | Subjective estimate | Our procedures included: | | --- | --- | --- | | The Group recorded a provision for | The Group operates in a number of dierent | • Our tax expertise: We have used our own tax | | uncertain tax position totalling £16.7m | tax jurisdictions and judgment is required to | specialists to assess the Group’s tax positions, | | as at 31 December 2021 (2020: £19.5m) | determine tax provisions across the Group, | the Company’s correspondence with the relevant | | | principally in the US. | tax authorities, and to analyse and challenge the | Refer to the Audit Committee Report in assumptions used to determine provisions for tax the Governance section on pages 80 to 86, Determination of provisions for tax uncertainties. This is based on our knowledge Note 2 (significant accounting policies) uncertainties is subject to judgment in and experiences of the application of the tax and Note 21 (tax balance sheet). assessing the probable outflow of taxes that legislation, and our understanding of the will be borne by the entity relating to matters production activities at the sites where royalty where the relevant tax authority’s final charges are applied. We challenged the Directors assessment of the tax treatment is uncertain. on the adequacy of the Group’s provision for The tax risk provisions held in connection transfer pricing risks particularly arising in the US. with transfer pricing, including inter-company • Assessing transparency: We assessed the royalty charges, is a key risk due to its size adequacy of the Group’s disclosures in respect and the subjective nature of the arm’s length of tax and uncertain tax positions. basis to which the pricing should adhere to. We performed the tests above rather than seeking The eect of these matters is that, as part of to rely on any of the Group’s controls because the our risk assessment, we determined that the nature of the balance is such that we would expect provision for uncertain tax positions has a to obtain audit evidence primarily through the high degree of estimation uncertainty, with detailed procedures described. apotential range of reasonable outcomes Our results greater than our materiality for the Financial • We found the level of provisions for Statements as a whole. The Financial taxuncertainties to be acceptable. Statements (Note 21) disclose the range (2020 result –acceptable.) estimated by the Group. | Recoverability of the Parent Company’s | Low risk, high value: | Our procedures included: | | --- | --- | --- | | investment in its subsidiary | The carrying amount of the Parent | • Tests of detail: We compared the carrying | | The parent Company recorded an | Company’s investment in its subsidiary | amount of the investment with the relevant | | investment carrying value of £259.9m as | represents 61% of its total assets. Its | subsidiary’s draft statutory balance sheet to | | at31 December 2021 (2020: £259.9m). | recoverability is not at a high risk of | identify whether its net assets, being an | | | significant misstatement or subject to | approximation of its minimum recoverable | Refer to Note 36 (accounting policies) significant judgment. However, due to its amount, was in excess of its carrying amount and Note 38 (financial disclosures) and materiality in the context of the Parent and assessed whether the subsidiary has the Parent Company Balance Sheet Company Financial Statements, this is historically been profit-making; and considered to be the area that had the We performed the tests above rather than seeking greatest eect on our overall Parent to rely on any of the Group’s controls because the Company audit nature of the balance is such that we would expect to obtain audit evidence primarily through the detailed procedures described. Our results: • We found the company’s conclusion that there isno impairment of its investment in it subsidiary to be acceptable. (2020 result –acceptable.) We continue to perform procedures over going concern and impairment of goodwill. However, the level of audit risk, and the associated audit eort required, was significantly reduced in 2021 due in part to the recovery of the Group’s end markets. We also continue to perform procedures over restructuring costs excluded from adjusted profit, however the nature and quantum has significantly reduced in 2021, reducing the audit eort required. Accordingly these matters are not assessed as the most significant risks in our current year audit. Therefore, these are not separately identified in our report this year. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021110 ### 3. Our application of materiality and an overview of the scope of our audit Materiality for the Group financial statements as a whole was set at £3.2m (2020: £2.2m), determined with reference to a benchmark of Group revenue of £658.7m, of which it represents 0.5%. Materiality for 2020 was set at £2.2m, determined with reference to a benchmark of normalised Group profit before tax (PBT) of £44.1m, of which it represents 5%. We consider total revenue to be the most appropriate benchmark in 2021 as it provides a more stable measure year on year than group profit before tax given the ongoing impact of the pandemic which has distorted the reported profits from the historical profile. In 2020 we normalised PBT by adding back adjustments that do not represent the normal, continuing operations of the Group and by averaging over 5 years. In 2020 the items we adjusted for were impairment and write-off charges against goodwill of £134.3m, disposal costs of £4.6m and restructuring of £39.0m. Materiality for the parent Company financial statements as a whole was set at £2.9m (2020: £2m), by reference to component materiality. This is lower than the materiality we would otherwise have determined by reference to total Company assets and represents 0.7% of the Company's total assets (2020: 0.5%). In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to a material amount across the financial statements as a whole. Performance materiality was set at 75% (2020: 75%) of materiality for the financial statements as a whole, which equates to £2.4m (2020: £1.65m) for the Group and £2.2m (2020: £1.5m) for the parent Company. We applied this percentage in our determination of performance materiality because we did not identify any factors indicating an elevated level of risk. We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £160,000 (2020: £110,000), in addition to other identified misstatements that warranted reporting on qualitative grounds. Of the Group's 30 (2020: 31) reporting components (excluding the Parent Company), we subjected 14 (2020: 17) to full scope audits for group purposes. The components within the scope of our work accounted for the percentages illustrated opposite. #### Group revenue £658.7m (2020: Normalised group profit before tax £44.1m) ![img-1.jpeg](img-1.jpeg) #### Group revenue ![img-2.jpeg](img-2.jpeg) #### Group total assets ![img-3.jpeg](img-3.jpeg) #### Group materiality £3.2m (2020: £2.2m) ##### £3.2m Private financial statements materiality (2020: £2.2m) ##### £2.4m Private financial statements performance materiality (2020: £1.65m) ##### £1.76m Range of materiality at 14 components (£0.09 – £1.76m) (2020: £0.1m – £0.8m) ##### £0.16m Misstatements reported to the audit committee (2020: £0.11m) #### Total profits and losses that made up Group profit before tax made up Group profit before tax ■ Full scope for group audit purposes 2021 ■ Full scope for group audit purposes 2020 ■ Residual components 2021 ■ Residual components 2020 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 111 GOVERNANCE ## INDEPENDENT AUDITOR’S REPORT ## TO THE MEMBERS OF SENIOR PLC CONTINUED | 3. Our application of materiality and an | As part of our audit we have made enquiries | We considered whether these risks could | | --- | --- | --- | | overview of the scope of our audit | of management to understand the extent of | plausibly aect the liquidity or covenant | | | the potential impact of climate change risk on | compliance in the going concern period by | continued the Group’s financial statements. We have comparing severe, but plausible downside The remaining 28% (2020: 24%) of total Group performed a risk assessment of how the impact scenarios that could arise from these risks revenue, 11% (2020: 13%) of total profits and of climate change may aect the financial individually and collectively against the level losses that made up Group profit before tax statements and our audit. We held discussions of available financial resources and covenants and 18% (2020: 16%) of total Group assets with our own climate change professionals to indicated by the Group’s financial forecasts. is represented by 16 (2020: 14) of reporting challenge our risk assessment. Our assessment components, none of which individually We considered whether the going concern is that the climate related risks to the Group’s represented more than 5% (2020: 5%) of any of disclosure in Note 2 to the financial statements business, strategy and financial planning did total Group revenue, total profits and losses that gives a full and accurate description of the not have a significant impact on our key audit made up Group profit before tax or total Group Directors’ assessment of going concern, matters based on the Group’s end markets. assets. For these components, we performed including the identified risks and dependencies. analysis at an aggregated group level to We have read the Group’s and the Parent We assessed the completeness of the going re-examine our assessment that there were Company’s disclosure of climate related concern disclosure. no significant risks of material misstatement information in the front half of the annual report Our conclusions based on this work: within these. as set out on pages 18 to 23, and considered consistency with the financial statements and • we consider that the Directors’ use of the The Group team instructed component auditors our audit knowledge. going concern basis of accounting in the as to the significant areas to be covered, preparation of the financial statements is including the relevant risks detailed above and 5. Going concern appropriate; the information to be reported back. The Group The directors have prepared the financial team approved the component materialities, • we have not identified, and concur with the statements on the going concern basis as they which ranged from £0.4m to £1.76m (2020: Directors’ assessment that there is not, a do not intend to liquidate the Group or the £0.1m to £0.8m), having regard to the mix material uncertainty related to events or Company or to cease their operations, and as of size and risk profile of the Group across conditions that, individually or collectively, they have concluded that the Group’s and the the components. The work on 9 of the 14 may cast significant doubt on the Group’s Company’s financial position means that this is components (2020: 10 of the 17 components) or Company’s ability to continue as a going realistic. They have also concluded that there are was performed by component auditors and the concern for the going concern period; no material uncertainties that could have cast rest, including the audit of the parent Company, • we have nothing material to add or draw significant doubt over their ability to continue was performed by the Group team. The Group attention to in relation to the Directors’ as a going concern for at least a year from the team performed procedures on the items statement in Note 2 to the financial date of approval of the financial statements excluded from adjusted Group profit before tax. statements on the use of the going concern (“the going concern period”). basis of accounting with no material The scope of the audit work performed was We used our knowledge of the Group, its uncertainties that may cast significant doubt fully substantive as we did not rely upon the industry, and the general economic environment over the Group and Company’s use of that Group’s internal control over financial reporting. | | to identify the inherent risks to its business | basis for the going concern period, and we | | --- | --- | --- | | Telephone conference meetings and virtual site | model and analysed how those risks might | found the going concern disclosure in Note 2 | | visits were held with component auditors | aect the Group’s and Company’s financial | to be acceptable; and | | throughout the audit. At these virtual meetings, | resources or ability to continue operations over | • the related statement under the Listing Rules | | the findings reported to the Group audit team | the going concern period. The risks that we | set out on page 64 is materially consistent | | were discussed in more detail, and any further | considered most likely to adversely aect the | with the financial statements and our | | work required by the Group audit team was | Group’s and Company’s available financial | audit knowledge. | | then performed by the component auditor. | resources and/or metrics relevant to debt | | However, as we cannot predict all future events covenants over this period were: 4. The impact of climate change or conditions and as subsequent events may • The uncertainty of the impact of COVID 19, result in outcomes that are inconsistent with on our audit with future range of possible eects such as judgements that were reasonable at the time We have considered the potential impacts of further waves of global infections currently they were made, the above conclusions are climate change on the financial statements as unknown, given the rapidly evolving nature; not a guarantee that the Group or the Company part of planning our audit. and will continue in operation. Climate change impacts the Group in a variety of • The ability of the group to respond and adapt ways including the impact of climate risk on the to structural changes in the industry as a substitution of existing products and services result of COVID-19. with lower emissions options, potential reputational risk associated with the Group’s delivery of its climate related initiatives, and greater emphasis on climate related narrative and disclosure in the annual report. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021112 6. Fraud and breaches of laws and We also performed procedures including: Secondly, the Group is subject to many other regulations – ability to detect laws and regulations where the consequences • Identifying journal entries and other of non-compliance could have a material Identifying and responding to risks of adjustments to test for all full scope eect on amounts or disclosures in the material misstatement due to fraud components based on risk criteria and financial statements, for instance through the To identify risks of material misstatement due comparing the identified entries to supporting imposition of fines or litigation or the loss of the to fraud (“fraud risks”) we assessed events documentation. These included those posted Group’s license to operate. We identified the or conditions that could indicate an incentive by senior finance management, those posted following areas as those most likely to have or pressure to commit fraud or provide an and approved by the same user and those such an eect: health and safety, environmental opportunity to commit fraud. Our risk posted to unusual accounts. laws and regulations, anti-bribery and corruption, assessment procedures included: • Assessing whether the judgements made employment law and export laws and • Enquiring of Directors, the audit committee, in making accounting estimates are indicative regulations, recognising the nature of the internal audit and inspection of policy of a potential bias. Group’s activities. Auditing standards limit documentation as to the Group’s high-level the required audit procedures to identify Identifying and responding to risks of policies and procedures to prevent and detect non-compliance with these laws and regulations material misstatement due to non- fraud, including the internal audit function, to enquiry of the Directors and inspection of compliance with laws and regulations and the Group’s channel for “whistleblowing”, regulatory and legal correspondence, if any. We identified areas of laws and regulations that as well as whether they have knowledge Therefore if a breach of operational regulations could reasonably be expected to have a material of any actual, suspected or alleged fraud. is not disclosed to us or evident from relevant eect on the financial statements from our • Reading Board and audit committee minutes. correspondence, an audit will not detect general commercial and sector experience, • Considering remuneration incentive schemes that breach. and through discussion with the Directors (as and performance targets for management required by auditing standards) and discussed Context of the ability of the audit to detect and Directors including the long-term with the Directors the policies and procedures fraud or breaches of law or regulation incentive plan for Management remuneration. regarding compliance with laws and regulations. Owing to the inherent limitations of an audit, • Using analytical procedures to identify any there is an unavoidable risk that we may not As the Group is regulated, our assessment of unusual or unexpected relationships. have detected some material misstatements risks involved gaining an understanding of the in the financial statements, even though we We communicated identified fraud risks control environment including the entity’s have properly planned and performed our audit throughout the audit team and remained alert procedures for complying with regulatory in accordance with auditing standards. For to any indications of fraud throughout the audit. requirements. example, the further removed non-compliance This included communication from the Group We communicated identified laws and with laws and regulations is from the events audit team to full scope component audit teams regulations throughout our team and remained and transactions reflected in the financial of relevant fraud risks identified at the Group alert to any indications of non-compliance statements, the less likely the inherently limited level and request to full scope component audit throughout the audit . This included procedures required by auditing standards teams to report to the Group audit team any communication from the Group audit team to would identify it. instances of fraud that could give rise to a full-scope component audit teams of relevant material misstatement at the Group level. In addition, as with any audit, there remained laws and regulations identified at the Group a higher risk of non-detection of fraud, as these As required by auditing standards, and taking level, and a request for full scope component may involve collusion, forgery, intentional into account possible pressures to meet profit auditors to report to the Group audit team any omissions, misrepresentations, or the override targets and market consensus, we perform instances of non-compliance with laws and of internal controls. Our audit procedures are procedures to address the risk of management regulations that could give rise to a material designed to detect material misstatement. override of controls and the risk of fraudulent misstatement at the Group level. We are not responsible for preventing non- revenue recognition. In particular the risk that The potential eect of these laws and compliance or fraud and cannot be expected revenue is recorded in the wrong period and the regulations on the financial statements to detect non-compliance with all laws risk that Group and component Management varies considerably. and regulations. may be in a position to make inappropriate accounting entries, and the risk of bias in Firstly, the Group is subject to laws and accounting estimates and judgements such regulations that directly aect the financial as provisions for uncertain tax provisions and statements including financial reporting pension assumptions. legislation (including related companies legislation), distributable profits legislation We did not identify any additional fraud risks. pension scheme legislation and taxation legislation, and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items. 113SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 GOVERNANCE ## INDEPENDENT AUDITOR’S REPORT ## TO THE MEMBERS OF SENIOR PLC CONTINUED 7. We have nothing to report on the Based on those procedures, we have nothing Based on those procedures, we have concluded other information in the Annual Report material to add or draw attention to in relation to: that each of the following is materially consistent with the financial statements and our audit The Directors are responsible for the other • the Directors’ confirmation within the Viability knowledge: information presented in the Annual Report Statement page 64 that they have carried out together with the financial statements. Our a robust assessment of the emerging and • the Directors’ statement that they consider opinion on the financial statements does not principal risks facing the Group, including that the annual report and financial cover the other information and, accordingly, those that would threaten its business model, statements taken as a whole is fair, balanced we do not express an audit opinion or, except as future performance, solvency and liquidity; and understandable, and provides the explicitly stated below, any form of assurance • the Risks and uncertainties disclosures information necessary for shareholders to conclusion thereon. describing these risks and how emerging assess the Group’s position and performance, risks are identified, and explaining how they business model and strategy; Our responsibility is to read the other information and, in doing so, consider whether, are being managed and mitigated; and • the section of the annual report describing the based on our financial statements audit work, • the Directors’ explanation in the Viability work of the Audit Committee, including the the information therein is materially misstated or Statementof how they have assessed the significant issues that the audit committee inconsistent with the financial statements or our prospects of the Group, over what period they considered in relation to the financial audit knowledge. Based solely on that work we have done so and why they considered that statements, and how these issues were have not identified material misstatements in period to be appropriate, and their statement addressed; and the other information. as to whether they have a reasonable • the section of the annual report that describes expectation that the Group will be able to the review of the eectiveness of the Group’s Strategic report and Directors’ report continue in operation and meet its liabilities risk management and internal control Based solely on our work on the other as they fall due over the period of their systems. information: assessment, including any related disclosures We are required to review the part of the • we have not identified material drawing attention to any necessary Corporate Governance Statement relating to the misstatements in the strategic report and the qualifications or assumptions. Group’s compliance with the provisions of the Directors’ report; We are also required to review the Viability UK Corporate Governance Code specified by • in our opinion the information given in those Statement, set out on page 64 under the the Listing Rules for our review. We have reports for the financial year is consistent Listing Rules. Based on the above procedures, nothing to report in this respect. with the financial statements; and we have concluded that the above disclosures • in our opinion those reports have been 8. We have nothing to report on the other are materially consistent with the financial prepared in accordance with the Companies statements and our audit knowledge. matters on which we are required to Act 2006. report by exception Our work is limited to assessing these matters Under the Companies Act 2006, we are Directors’ remuneration report in the context of only the knowledge acquired required to report to you if, in our opinion: | In our opinion the part of the Directors’ | during our financial statements audit. As we | | | --- | --- | --- | | Remuneration Report to be audited has been | cannot predict all future events or conditions and | • adequate accounting records have not been | | properly prepared in accordance with the | as subsequent events may result in outcomes | kept by the parent Company, or returns | | Companies Act 2006. | that are inconsistent with judgements that | adequate for our audit have not been received | | | were reasonable at the time they were made, | from branches not visited by us; or | Disclosures of emerging and principal risks the absence of anything to report on these • the parent Company financial statements and longer-term viability statements is not a guarantee as to the Group’s and the part of the Directors’ Remuneration We are required to perform procedures to and Company’s longer-term viability. Report to be audited are not in agreement identify whether there is a material with the accounting records and returns; or inconsistency between the Directors’ Corporate governance disclosures disclosures in respect of emerging and principal • certain disclosures of Directors’ remuneration We are required to perform procedures to risks and the viability statement, and the specified by law are not made; or identify whether there is a material financial statements and our audit knowledge. inconsistency between the Directors’ corporate • we have not received all the information governance disclosures and the financial and explanations we require for our audit. statements and our audit knowledge. We have nothing to report in these respects. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021114 | 9. Respective responsibilities | 10. The purpose of our audit work and to | | --- | --- | | Directors’ responsibilities | whom we owe our responsibilities | | As explained more fully in their statement set | This report is made solely to the Company’s | | out on page 108, the Directors are responsible | members, as a body, in accordance with | | for: the preparation of the financial statements | Chapter 3 of Part 16 of the Companies Act | | including being satisfied that they give a | 2006. Our audit work has been undertaken so | | true and fair view; such internal control as | that we might state to the Company’s members | | they determine is necessary to enable the | those matters we are required to state to them | | preparation of financial statements that are | in an auditor’s report and for no other purpose. | | free from material misstatement, whether | To the fullest extent permitted by law, we do not | | due to fraud or error; assessing the Group and | accept or assume responsibility to anyone other | | parent Company’s ability to continue as a going | than the Company and the Company’s | | concern, disclosing, as applicable, matters | members, as a body, for our audit work, for this | | related to going concern; and using the going | report, or for the opinions we have formed. | concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have Robert Brent no realistic alternative but to do so. (Senior Statutory Auditor) Auditor’s responsibilities for and on behalf of KPMG LLP, Our objectives are to obtain reasonable Statutory Auditor assurance about whether the financial Chartered Accountants statements as a whole are free from material 15 Canada Square, London, E14 5GL misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. 25 February 2022 Reasonable assurance is a high level of assurance, but does not 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 aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities. 115SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 FINANCIAL STATEMENTS ## CONSOLIDATED INCOME STATEMENT ## For the year ended 31 December 2021 | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | | 2021 | | 2020 | | Notes | | £m | | £m | Revenue 3 6 5 8 .7 7 33.6 Trading profit/(loss) 1 0.3 (17 7. 5) Share of joint venture profit 15 0.2 0.2 (1) Operating profit/(loss) 5 10 . 5 (17 7. 3 ) Investment income 7 0.5 1 .1 Finance costs 8 (8 . 5) (11 . 0) Corporate undertakings 31 21. 2 (4.6) (2) Profit/(loss) before tax 2 3.7 (1 91 .8) Tax credit 10 0.5 33.3 Profit/(loss) for the period 24.2 (15 8 . 5) Attributable to: Equity holders of the parent 24.2 (15 8 . 5) Earnings/(loss) per share (3) Basic 12 5.82p (38 .20)p (4) Diluted 12 5.7 3p (38 .20)p (1) Adjusted operating profit 9 6 .1 3 .7 (2) Adjusted loss before tax 9 (1. 9) (6. 2) (3) Adjusted earnings/(loss) per share 12 0 .1 7p (0 .8 4)p (4) Adjusted and diluted earnings/(loss) per share 12 0 .1 7p (0 .8 4)p SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021116 ## CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ## For the year ended 31 December 2021 | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | | 2021 | | 2020 | | Notes | | £m | | £m | Profit/(loss) for the period 24.2 (15 8 . 5) Other comprehensive income: Items that may be reclassified subsequently to profit or loss: (Losses)/gains on foreign exchange contracts – cash flow hedges during the period (2 .1) 2.0 Reclassification adjustments for (gains)/losses included in profit (1. 3) 0.6 (Losses)/gains on foreign exchange contracts – cash flow hedges 28 (3 .4) 2.6 Foreign exchange (gain)/loss recycled to the Income Statement on disposal and restructuring (business closures) 28 (2. 9) 0.5 Exchange dierences on translation of overseas operations 28 (3.8) (3.6) Tax relating to items that may be reclassified 10 0.8 (0.5) (9. 3) (1. 0) Items that will not be reclassified subsequently to profit or loss: Actuarial gains/(losses) on defined benefit pension schemes 34 19 .7 (11. 4) Tax relating to items that will not be reclassified 10 (6 . 4) 1. 6 1 3.3 (9.8) Other comprehensive income/(expense) for the period, net of tax 4.0 (1 0.8) Total comprehensive income/(expense) for the period 28.2 (16 9. 3) Attributable to: Equity holders of the parent 28.2 (16 9. 3) 117SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 FINANCIAL STATEMENTS ## CONSOLIDATED BALANCE SHEET ## As at 31 December 2021 | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | | 2021 | | 2020 | | Notes | | £m | | £m | Non-current assets Goodwill 13 150. 2 16 5 . 0 Other intangible assets 14 4.2 4.8 Investment in joint venture 15 3.9 3.6 Property, plant and equipment 16 2 94 .6 3 30.5 Deferred tax assets 21 5 .7 4 .7 Retirement benefits 34 72. 2 46.5 Trade and other receivables 18 0 .1 0 .1 Total non-current assets 530. 9 555.2 Current assets Inventories 17 14 5 . 2 1 4 7. 6 Current tax receivables 21 2.6 3.0 Trade and other receivables 18 9 8.0 85.3 Cash and bank balances 32c 5 1 .1 23.6 Total current assets 296.9 25 9.5 Total assets 8 2 7. 8 8 14 .7 Current liabilities Trade and other payables 23 14 3 . 0 1 2 6 .1 Current tax liabilities 21 14. 6 19 . 8 Lease liabilities 22 0.4 0.5 Bank overdrafts and loans 19 14 . 8 0.4 Provisions 24 13 . 8 23.5 Total current liabilities 18 6 .6 17 0 . 3 Non-current liabilities Bank and other loans 19 11 6 . 2 15 2 . 6 Retirement benefits 34 11 . 0 1 0.9 Deferred tax liabilities 21 10 . 5 5.5 Lease liabilities 22 72 .8 76.0 Provisions 24 2.2 2. 3 Others 3.4 3.8 Total non-current liabilities 2 1 6 .1 2 5 1 .1 Total liabilities 4 0 2 .7 4 2 1. 4 Net assets 425. 1 393.3 Equity Issued share capital 25 41. 9 4 1 .9 Share premium account 26 14 . 8 14 . 8 Equity reserve 27 5. 8 5 .1 Hedging and translation reserve 28 28.6 37 .9 Retained earnings 29 34 3. 2 3 0 5 .1 Own shares 30 (9. 2) (11. 5) Equity attributable to equity holders of the parent 425. 1 393.3 Total equity 425. 1 3 93.3 The Financial Statements of Senior plc (registered number 282772) were approved by the Board of Directors and authorised for issue on 25 February 2022. They were signed on its behalf by: David Squires Bindi Foyle Director Director SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021118 # CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2021 All equity is attributable to equity holders of the parent | | Notes | Issued share capital £m | Share premium account £m | Equity reserve £m | Hedging reserve £m | Translation reserve £m | Retained earnings £m | Own shares £m | Total equity £m | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | **Balance at 1 January 2020** | | 41.9 | 14.8 | 5.5 | (40.2) | 79.1 | 472.5 | (14.0) | 559.6 | | Loss for the year 2020 | | – | – | – | – | – | (158.5) | – | (158.5) | | Gains on foreign exchange contracts – cash flow hedges | 28 | – | – | – | 2.6 | – | – | – | 2.6 | | Foreign exchange loss/(gains) recycled to the Income Statement on restructuring (business closures) | 28 | – | – | – | 0.9 | (0.4) | – | – | 0.5 | | Exchange differences on translation of overseas operations | 28 | – | – | – | – | (3.6) | – | – | (3.6) | | Actuarial losses on defined benefit pension schemes | 34 | – | – | – | – | – | (11.4) | – | (11.4) | | Tax relating to components of other comprehensive income | 10 | – | – | – | (0.5) | – | 1.6 | – | 1.1 | | **Total comprehensive income/(expense) for the period** | | – | – | – | 3.0 | (4.0) | (168.3) | – | (169.3) | | Share-based payment charge | 33 | – | – | 3.0 | – | – | – | – | 3.0 | | Tax relating to share-based payments | – | – | – | – | – | – | – | – | – | | Purchase of shares held by employee benefit trust | 30 | – | – | – | – | – | – | – | – | | Use of shares held by employee benefit trust | 30 | – | – | – | – | – | (2.5) | 2.5 | – | | Transfer to retained earnings | 29 | – | – | (3.4) | – | – | 3.4 | – | – | | Dividends paid | 11 | – | – | – | – | – | – | – | – | | **Balance at 31 December 2020** | | 41.9 | 14.8 | 5.1 | (37.2) | 75.1 | 305.1 | (11.5) | 393.3 | | Profit for the year 2021 | | – | – | – | – | – | **24.2** | – | **24.2** | | Losses on foreign exchange contracts – cash flow hedges | 28 | – | – | – | **(3.4)** | – | – | – | **(3.4)** | | Foreign exchange loss/(gains) recycled to the Income Statement on disposal | 28 | – | – | – | **2.6** | **(5.5)** | – | – | **(2.9)** | | Exchange differences on translation of overseas operations | 28 | – | – | – | – | **(3.8)** | – | – | **(3.8)** | | Actuarial gains on defined benefit pension schemes | 34 | – | – | – | – | – | **19.7** | – | **19.7** | | Tax relating to components of other comprehensive income | 10 | – | – | – | **0.8** | – | **(6.4)** | – | **(5.6)** | | **Total comprehensive income/(expense) for the period** | | – | – | – | – | **(9.3)** | **37.5** | – | **28.2** | | Share-based payment charge | 33 | – | – | **3.5** | – | – | – | – | **3.5** | | Tax relating to share-based payments | – | – | – | – | – | – | **0.1** | – | **0.1** | | Purchase of shares held by employee benefit trust | 30 | – | – | – | – | – | – | – | – | | Use of shares held by employee benefit trust | 30 | – | – | – | – | – | **(2.3)** | **2.3** | – | | Transfer to retained earnings | 29 | – | – | **(2.8)** | – | – | **2.8** | – | – | | Dividends paid | 11 | – | – | – | – | – | – | – | – | | **Balance at 31 December 2021** | | **41.9** | **14.8** | **5.8** | **(37.2)** | **65.8** | **343.2** | **(9.2)** | **425.1** | SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 119 FINANCIAL STATEMENTS ## CONSOLIDATED CASH FLOW STATEMENT ## For the year ended 31 December 2021 | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | | 2021 | | 2020 | | Notes | | £m | | £m | Net cash from operating activities 32a 2 7. 0 48.9 Investing activities Interest received 0 .1 0.2 Proceeds on disposal of property, plant and equipment 0.2 0. 5 Purchases of property, plant and equipment 16 (2 0. 2) (25. 2) Purchases of intangible assets 14 (1 .1) (1. 6) Proceeds on disposal activities net of cash balances 31 51. 7 0. 4 Net cash generated/(used) in investing activities 3 0.7 (2 5 .7) Financing activities Dividends paid 11 –  – New loans 20.0 13 5 .6 Repayment of borrowings (4 1 .1) (1 42 .8) Repayment of lease liabilities (8 .4) ( 7. 9 ) Net cash used in financing activities (2 9. 5) (1 5 .1) Net increase in cash and cash equivalents 28.2 8 .1 Cash and cash equivalents at beginning of period 23. 2 15 .1 Eect of foreign exchange rate changes (0.3) – Cash and cash equivalents at end of period 32c 5 1 .1 23.2 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021120 # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ## 1. General information Senior plc is a Company incorporated in England and Wales under the Companies Act 2006. The address of the registered office is given on the inside back cover. The nature of the Group's operations and its principal activities are set out in Note 3 and on pages 1 to 64. Items included in the Financial Statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). These Financial Statements are presented in Pounds Sterling, which is the Company's functional and the Group's presentation currency. ## 2. Significant accounting policies ### Basis of accounting These Financial Statements have been prepared in accordance with UK-adopted international accounting standards. They have been prepared on the historical cost basis, except for the revaluation of certain financial instruments and retirement benefit costs measured in accordance with IAS 19. ### Going concern In determining the appropriate basis of preparation of the Financial Statements for the year ended 31 December 2021, the Directors are required to consider whether the Group and Parent Company can continue in operational existence for the foreseeable future, being a period of at least 12 months from the date of approval of these Financial Statements (the "going concern period"). The Board has applied a robust process to assess the resilience of the forecast out-turns. This assessment included applying severe but plausible downside risks as set out in the Viability Statement on page 64. To address these risks the Board has considered mitigating factors that could be employed that would address the impact and provide options to the Group and Parent Company. The Group has two existing covenants ("Existing Covenants") for committed borrowing facilities, which are tested at June and December: the Group's net debt to EBITDA (defined in the Notes to the Financial Headlines) must not exceed 3.0x and interest cover, the ratio of EBITDA to interest must be higher than 3.5x. The Group's lenders, both banks and US private placement investors, have been supportive and we agreed covenant relaxations ("New Covenants") in relation to the June 2020, December 2020, June 2021 and December 2021 testing periods and agreed an additional September 2021 testing period to provide financial flexibility for the Group through this unprecedented period. For the testing period ended 31 December 2021, the New Covenants required the Group's net debt to EBITDA must not exceed 4.5x, interest cover must be higher than 3.5x and liquidity headroom must be higher than £60.0m. At 31 December 2021, the Group's net debt to EBITDA was 1.9x and interest cover was 7.3x, both comfortably within the Existing (and New) Covenants limits. The Group's liquidity headroom at £208.0m was also comfortably within covenant limits. For all testing periods within the Going Concern Period, there is sufficient headroom to remain within the relevant covenant limits and the Group's committed borrowing facilities, even in a severe but plausible downside scenario. Based on the above assessment, the Board has concluded that the Group will continue to have adequate financial resources to realise its assets and discharge its liabilities as they fall due over the going concern period. Accordingly, the Directors have formed the judgement that it is appropriate to prepare the Financial Statements on the going concern basis. ### Changes in accounting policies At the date of authorisation of these Financial Statements, there are no relevant and material-new standards, amendments to standards or interpretations which are effective for the year ended 31 December 2021. ### Basis of consolidation The Consolidated Financial Statements incorporate the Financial Statements of Senior plc and the entities controlled by it (its subsidiaries) made up to 31 December 2021. Control is achieved when Senior plc has the power to govern the financial and operating policies of an invested entity so as to obtain benefits from its activities. Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration transferred for each acquisition is the aggregate of the fair values (at the date of exchange) of assets transferred, liabilities incurred or assumed, and equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expressed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net assets. The results of subsidiaries acquired or disposed of during the year are included in the Consolidated Income Statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. The results of joint ventures are accounted for using the equity accounting method. Where necessary, adjustments are made to the Financial Statements of subsidiaries to bring the accounting policies used in line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation. ### Goodwill Goodwill arising on consolidation, which was acquired in a business combination, is measured as the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the Group's share of the identifiable net assets acquired. Goodwill is recognised as an asset and allocated, at acquisition, to the group of cash-generating units (CGU groups) that are expected to benefit from that business combination. If the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree is less than the fair value of the net assets acquired (i.e. bargain purchase), the difference is credited to the Consolidated Income Statement in the period of acquisition. CGU groups to which goodwill has been allocated are tested for impairment at least annually and reviewed for indicators of impairment at the Balance sheet date. If impairment indicators exist, the individual assets within the CGUs, and the individual CGUs excluding goodwill, are tested for impairment before the CGU group is tested for impairment. Any impairment is recognised immediately through the Consolidated Income Statement and is not subsequently reversed. The determination of the recoverable amount of the CGU group is disclosed in the Notes to the Financial Statements (Note 13). If the recoverable amount of the CGU group is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the CGU group and then to the other assets of the CGU group pro rata on the basis of the carrying amount of each asset in the CGU group. On disposal of a subsidiary or part thereof, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. Goodwill acquired in a business combination prior to the date of transition to IFRS has been retained at the previous UK GAAP amount subject to being tested for impairment at that date. Goodwill written off to reserves under UK GAAP prior to 1996 has not been reinstated and is not included in determining any subsequent profit or loss on disposal. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 121 FINANCIAL STATEMENTS ## NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 2. Significant accounting policies continued such as rental payments, which did not form part of the original terms Revenue recognition of the contract. In this case, the lease liability is re-measured using The Group predominantly has one revenue stream relating to engineered the revised terms and a revised incremental borrowing rate at the components or systems (products), which are customer specific, modification date. Reassessment occurs where there are changes within with a secondary revenue stream of funded development revenue. the scope of the original terms of the contract, such as rental payments Both streams have identifiable customer contracts and pricing specific changes with reference to an index. For reassessment changes, the lease performance obligations. liability is re-measured in the same way as for a modification, except for the incremental borrowing rate, which is not changed from the original The transaction price is the amount of consideration to which an entity commencement date of the contract. expects to be entitled in exchange for transferring promised goods or services to a customer. Revenue is recognised net of discounts, VAT and The Group has elected not to recognise right-of-use assets and lease other sales related taxes. The determination of the transaction price is liabilities for short-term leases which have a lease term of 12 months or based upon pricing specified in the customer contract i.e. a price per unit. less and leases of low-value assets. The Group recognises the lease payments associated with these leases as an expense on a straight-line Revenue is recognised as the identified performance obligations basis over the lease term. When the Group acts as a lessor, it determines aresatisfied. at lease inception whether each lease is a finance lease or an operating lease. To classify each lease, several indicators are assessed, such as the The performance obligation for goods is a specific point in time when present value of the lease payments amounting to at least substantially the customer obtains control, which is upon delivery or when available all of the fair value of the asset. When the Group is an intermediate lessor, for collection. Allocation of transaction price to performance obligations it accounts for its interest in the head lease and the sub-lease separately. is given in the contract i.e. a unit delivered or available for collection. The Group assesses the classification of the sub-lease with reference to The performance obligation for development revenue is a specific point the right-of-use asset arising from the head lease. The Group recognises intime when the customer obtains control of the output, for example a lease payments received under operating leases as income on a straight- first article good, which is the acceptance milestone specified in the line basis over the lease term. customer contract. Foreign currencies Dividend income from investments is recognised when the shareholders’ Transactions in currencies other than the functional currency are recorded legal rights to receive payment have been established. at the rates of exchange prevailing on the date of the transaction. At each Balance Sheet date, monetary assets and liabilities that are denominated Interest in foreign currencies are retranslated at the rates prevailing on the Balance Interest receivable/payable is credited/charged to the Consolidated Sheet date. Non-monetary items carried at fair value that are denominated Income Statement using the eective interest method. in foreign currencies are translated at the rates prevailing at the date when Leasing the fair value was determined. Non-monetary items that are measured at At inception of a contract, the Group assesses whether a contract is, historical cost in a foreign currency are not retranslated. Gains and losses or contains, a lease. A contract is, or contains, a lease if the contract arising on retranslation are included in profit or loss for the period, except conveys a right to control the use of an identified asset for a period of for exchange dierences arising on non-monetary assets and liabilities time in exchange for consideration. The assessment of control includes where the changes in fair value are recognised directly in equity, subject whether the Group has a right to obtain substantially all of the economic to meeting the requirements under IAS 21. benefits from the use of the asset throughout the period of use and the In order to hedge its exposure to certain foreign exchange risks, the Group right to direct the use of the asset. enters into forward exchange contracts (see section below on derivative As a lessee, the Group recognises a right-of-use asset and lease liability financial instruments and hedging for details of the Group’s accounting atthe lease commencement date. The right-of-use asset is initially policies in respect of such derivative financial instruments). measured at cost, which comprises the initial amount of the lease On consolidation, the assets and liabilities of the Group’s overseas liabilityadjustment for any lease payments made at or before the operations are translated at exchange rates prevailing on the Balance commencement date, plus any initial direct costs incurred and an Sheet date. Income and expense items are translated at the average estimate of costs to dismantle or restore the underlying asset, less any exchange rates for the period. Exchange rate dierences arising, if any, lease incentives received. are classified as equity and transferred to the Group’s translation reserve. Lease payments comprise fixed payments and variable lease payments Such translation dierences are recognised as income or expense in based on an index or rate. The right-of-use asset is subsequently the period in which the operation is disposed. depreciated using the straight-line method from the commencement date Goodwill and fair value adjustments arising on the acquisition of a foreign to the earlier of the end of the useful life of the asset or the end of the entity are treated as assets and liabilities of the foreign entity and lease term. The lease term includes optional extensions or terminations translated at the closing rate on the relevant Balance Sheet date. which are reasonably certain to be exercised by the Group. These optional terms are reassessed periodically or when there is a significant event The exchange rates for the major currencies applied in the translation which aects the lease. The estimated useful lives of the right-of-use of results were as follows: assets are determined on the same basis as those of property, plant and equipment. Periodically the right-of-use asset is reduced for impairment, Average Average Year-end Year- end rates rates rates rates if necessary, as well as re-measurements of the lease liability. 2021 2020 2021 2020 The lease liability is measured at amortised cost using the eective US Dollar 1.38 1.29 1.35 1.37 interest method, which is initially equal to the present value of lease payments that are not paid at the commencement date, discounted using an incremental borrowing rate determined on a lease portfolio basis. Thelease liability is re-measured either as a modification or reassessment. Modification occurs where there is a change in terms, SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021122 2. Significant accounting policies continued Deferred tax assets are recognised to the extent that it is probable Government grants that future taxable profits will be available for their utilisation before Government grants received for items of a revenue nature are recognised their expiry. Amounts will be recognised first to the extent that taxable as income over the period necessary to match them with the related temporary dierences exist and it is considered probable that they will costs, which are deducted in reporting the related expense and presented reverse and give rise to future taxable profits against which losses or net of the costs to which they relate. The Group recognises a COVID-19 other assets may be utilised before their expiry. Assets will then be grant when it has reasonable assurance that it will comply with the recognised to the extent that forecasts or other evidence support relevant conditions and the grant will be received. If the conditions the availability of future profits against which assets may be realised. are met, then the Group recognises income in the profit or loss on a Deferred tax assets and liabilities are not recognised if the temporary systematic basis and in line with its recognition of the expenses that dierence arises from goodwill or from the initial recognition of goodwill the grants are intended to compensate. (other than in a business combination) of other assets and liabilities Government grants relating to investment in property, plant and in a transaction that aects neither the Group’s taxable profit nor its equipment are deducted from the initial carrying value of the related accounting profit. capital asset. The carrying value of deferred tax assets is reviewed at each Balance Retirement benefit costs Sheet date and reduced to the extent it is no longer probable that Payments to defined contribution retirement plans are charged as an sucient taxable profits will be available to allow all or part of the deferred expense as they fall due. Payments made to state-managed retirement tax asset to be recovered. Deferred tax is calculated at the tax rates benefit plans are dealt with as payments to defined contribution plans that are expected to apply in the period when the liability is settled or the where the Group’s obligations under the plans are equivalent to those asset is realised based on tax laws and rates that have been enacted arising in a defined contribution retirement plan. at the Balance Sheet date. Deferred tax is charged or credited in the Consolidated Income Statement, except when it relates to items charged For defined benefit retirement plans, the cost of providing benefits or credited to Other Comprehensive Income or directly to Equity, in which is determined using the Projected Unit Method, with full actuarial case the deferred tax is also dealt with in Other Comprehensive Income valuations being carried out on a triennial basis, and updated at each or Equity. Balance Sheet date. Actuarial gains and losses are recognised in full in the period in which they occur. They are recognised outside the Property, plant and equipment Consolidated Income Statement and are presented in the Statement Land and buildings held for use in the production or supply of goods or of Comprehensive Income. services, or for administrative purposes, are stated in the Balance Sheet at their historical cost, or at modified historical cost, being a revaluation Past service cost is recognised as an expense at the earlier of a plan undertaken in 1988 which has been taken as the eective cost on amendment, curtailment, or restructuring. transition to IFRS. Land and buildings were revalued to fair value at the date of revaluation. The Group does not intend to conduct The retirement benefit obligation recognised in the Consolidated Balance annual revaluations. Sheet represents the present value of the defined benefit obligation, and as reduced by the fair value of scheme assets. Plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is charged to write o the Taxation cost of an asset on a straight-line basis over the estimated useful life of Provisions for uncertain tax positions are included within current tax the asset, and is charged from the time an asset becomes available for liabilities on the Consolidated Balance Sheet representing Management’s its intended use. Annual rates are as follows: best estimate of the likely cash outflow related to the uncertainty. There are transactions and activities that the Group engages in where Freehold land Nil the ultimate tax determination is uncertain and a provision may be Freehold buildings 2% made against the tax benefit. For example, the Group seeks to price transactions between Group companies on an arms length basis and in Right-of-use land and on the same basis as owned assets or, compliance with OECD transfer pricing principles and the laws of the buildings where shorter, over the lease term relevant jurisdictions. The application of OECD principles and local tax laws require interpretation, and accordingly involves the application of Leasehold building on the same basis as owned assets or, judgment and is open to challenge by the relevant tax authorities. This improvements where shorter, over the lease term gives rise to a level of uncertainty. Provisions for uncertain tax positions Plant and equipment 5%–33% are established in accordance with IFRIC 23 based on an assessment Right-of-use plant and on the same basis as owned assets or, of the range of likely tax outcomes in open years and reflecting the equipment where shorter, over the lease term strength of technical arguments. Amounts are provided for individual tax uncertainties based on Management’s assessment of whether the most likely amount or an expected amount based on a probability weighted The Group primarily leases land and buildings for manufacturing use. methodology is the more appropriate predicter of amounts that the The lease term, including options to extend which are reasonably certain, company is ultimately expected to settle. When making this assessment, typically range from two to fifteen years. The Group also leases plant the Group utilises specialist in-house tax knowledge and experience and and equipment, including oce equipment, vehicles and manufacturing takes into consideration specialist tax advice from third party advisers equipment, with lease terms typically ranging from one to four years. on specific items. The gain or loss arising on the disposal or retirement of an asset is Deferred tax is the tax expected to be payable or recoverable on determined as the dierence between the sale proceeds and the carrying dierences between the carrying amounts of assets and liabilities in amount of the asset at disposal and is recognised in the Consolidated the Financial Statements and the corresponding tax bases used in the Income Statement. computation of taxable profit, and is accounted for using the Balance Sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary dierences, including for taxable temporary dierences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary dierence and it is probable that the temporary dierence will not reverse in the foreseeable future. 123SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 FINANCIAL STATEMENTS ## NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 2. Significant accounting policies continued Inventories Internally generated intangible assets – development expenditure Inventories are stated at the lower of cost and net realisable value. Costs An intangible asset arising from unfunded development work shall be comprise direct materials and, where applicable, direct labour costs and recognised if the following can be demonstrated: an appropriate allocation of production overheads. Cost is calculated using the first-in, first-out method. Net realisable value represents the estimated i. the asset can be separately identified. selling price less the estimated costs of completion and the costs to be ii. it is probable that the asset created will generate future economic benefits. incurred in marketing, selling and distribution. iii. the development cost of the asset can be measured reliably during its development. Financial instruments iv. it is technically feasible to complete the asset so that it will be available for use Financial assets and liabilities are recognised when the Group becomes or sale. a party to the contractual provisions of the relevant instrument and v. there is intention to complete the asset and use or sell it. derecognised when it ceases to be a party to such provisions. vi. the Group has ability to use or sell the asset. vii. the Group has availability of adequate technical, financial and other resources to Financial instruments are classified as cash and cash equivalents, bank complete the development work and to use or sell the asset. overdrafts and loans, lease liabilities, trade receivables, trade payables, deferred consideration receivable, other receivables and other payables, as appropriate. Internally generated intangible assets are amortised on a straight-line basis over their useful lives. Costs incurred in relation to funded Non-derivative financial assets are categorised as “Financial assets at development work are accumulated in inventory and are recognised when amortised cost” and non-derivative financial liabilities are categorised the related billings are made. Any amounts held in inventory are subject to as “Financial liabilities at amortised cost”. Derivative financial assets and normal inventory valuation principles. Expenditure on research, design and liabilities that are not designated and eective as hedging instruments are other development activities, that do not meet the capitalisation criteria categorised as “financial assets at fair value through profit or loss” and above, is recognised as an expense in the period in which it is incurred. “financial liabilities at fair value through profit or loss”, respectively. The classification depends on the nature and purpose of the financial assets Other intangible assets and liabilities and is determined at the time of initial recognition. Other intangible assets include computer software and intangible assets acquired as part of a business combination. The cost of acquiring Trade receivables computer software (including associated implementation and Trade receivables do not carry any interest and are stated at their nominal development costs where applicable) is classified as an intangible asset. value as reduced by loss allowance. The Group has elected to measure Costs associated with maintaining computer software programs are loss allowance for trade receivables at an amount equal to the lifetime recognised as an expense as incurred. Capitalised computer software expected credit losses (”ECLs”), which are based on quantitative and is amortised over its estimated useful life of between three and five qualitative credit risk assessments, using historical and forward looking years on a straight-line basis, and is stated at cost less accumulated information. Changes in the carrying amounts of the loss allowance are amortisation and impairment losses. Intangible assets acquired as part recognised in the Consolidated Income Statement. of a business combination principally comprise customer relationships, contracts and trade names. They are shown at fair value at the date of Trade receivables in default are considered uncollectible and are written acquisition less accumulated amortisation at the rates of between three o against the loss allowance. The Group considers a trade receivable and five years on a straight-line basis. to be in default when the customer is experiencing significant financial diculties, bankruptcy, financial reorganisation or is in default or Impairment of tangible and intangible assets excluding goodwill delinquent in paying its credit obligations to the Group in full. Subsequent At each Balance Sheet date, the Group reviews the carrying amounts recoveries of amounts previously written o are credited against the of its tangible and intangible assets to determine whether there is any loss allowance. indication that those assets have suered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated Trade receivables are derecognised when reverse factored, without in order to determine the extent of the impairment loss (if any). recourse, through schemes with financial institution counterparties Where the asset does not generate cash flows that are independent who assume the risk of non-payment by the customer. Derecognition from other assets, the Group estimates the recoverable amount of occurs when cash is received from the financial institution (less reverse the cash-generating unit to which the asset belongs. factoring discount). For further details, see Strategic Report and the financial instrument credit risk section in the notes to the Consolidated The recoverable amount is the higher of the fair value less the costs to sell Financial Statements. and the value in use. In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount Cash and cash equivalents rate that reflects current market assessments of the time value of money Cash and cash equivalents comprise cash at bank and other short-term and the risks specific to the asset for which the estimates of future cash highly liquid investments that are readily convertible to a known amount flows have not been adjusted. of cash and are subject to an insignificant risk of changes in value. If the recoverable amount of an asset is estimated to be less than its Non-derivative financial liabilities carrying amount, the carrying amount of the asset is reduced to its Non-derivative financial liabilities are stated at amortised cost using the recoverable amount. An impairment loss is recognised as an expense eective interest method. The eective interest method is a method of immediately, unless the relevant asset is carried at a revalued amount, calculating the amortised financial liability and of allocating interest over in which case the impairment loss is treated as a revaluation decrease. the relevant period. The eective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of Where an impairment loss subsequently reverses, the carrying amount of the financial liability, or, where appropriate, a shorter period, to the net the asset is increased to the revised estimate of its recoverable amount, carrying amount on initial recognition. For borrowings, their carrying value so that the increased carrying amount does not exceed the carrying includes accrued interest payable, as well as unamortised issue costs. amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is Equity instruments recognised as income immediately, unless the relevant asset is carried at Equity instruments issued by the Company are recorded at the value a revalued amount, in which case the reversal of the impairment loss is of the proceeds received, net of direct transaction costs. treated as a revaluation increase. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021124 2. Significant accounting policies continued Assets and disposal groups held for sale Derivative financial instruments and hedging Assets are classified as held for sale if their carrying amount will be The Group’s activities expose it primarily to the financial risks of changes recovered by sale rather than by continuing use in the business. Where a in foreign currency exchange rates and interest rates. The Group uses group of assets and their directly associated liabilities are to be disposed foreign exchange contracts and, on occasion, interest rate swap contracts of in a single transaction, such disposal groups are also classified as held to hedge these exposures. The use of financial derivatives is governed for sale. For this to be the case, the asset or disposal group must be by the Group’s Treasury Policies as approved by the Board of Directors, available for immediate sale in its present condition, and Management which provides written principles on the use of derivatives. The Group must be committed to and have initiated a plan to sell the asset or does not use derivative financial instruments for speculative purposes. disposal group which, when initiated, was expected to result in a completed sale within 12 months. Assets that are classified as held for Certain derivative instruments do not qualify for hedge accounting. These sale are not depreciated. Assets or disposal groups that are classified as are categorised as “fair value through profit or loss” and are stated at fair held for sale are measured at the lower of their carrying amount and fair value, with any resultant gain or loss recognised in the Income Statement. value less costs to sell. The Group designates certain hedging instruments in respect of foreign Provisions currency risk as cash flow hedges. At the inception of the hedge Provisions are recognised when the Group has a present obligation (legal relationship, the Group documents the relationship between the hedging or constructive) as a result of a past event, it is probable that the Group instrument and the hedged item, along with its risk management will be required to settle that obligation and a reliable estimate can be objectives and strategy for undertaking various hedging transactions. The made of the amount of the obligation. Provisions are measured at the Group also documents, both at hedge inception and on an ongoing basis, Directors’ best estimate of the expenditure required to settle the whether the hedging instrument that is used in a hedging relationship is obligation at the Balance Sheet date, taking into account the risks and highly eective in osetting changes in fair values or cash flows of the uncertainties (such as timing or amount) surrounding the obligation. hedged item. They are not discounted to present value if the eect is not material. For the Group’s cash flow hedges of highly probable forecast transactions Provisions for restructuring are recognised when the Group has a detailed in foreign currencies, the hedged risk is always considered to be 1:1. If the formal plan for the restructuring and the plan has been communicated underlying exposure changes over time, either due to commercial factors to the aected parties. Provisions for the expected cost for warranty or timing dierences, the hedging instruments will be rebalanced to obligations under local sale of goods legislation are recognised at the ensure that the hedge ratio of 1:1 is maintained. date of sale of the relevant products. Changes in the fair value of derivative financial instruments that are Share-based payments designated and are eective as a cash flow hedge are recognised directly The Group applies the requirements of IFRS 2 Share-based payments. in equity and the ineective portion is recognised immediately in the Consolidated Income Statement. If the cash flow hedge of a firm The Group issues equity-settled share-based payments to certain commitment or forecasted transaction results in the recognition of an employees. The fair value (excluding the eect of non-market-related asset or a liability, then, at the time the asset or liability is recognised, conditions), as determined at the grant date, is expensed on a straight-line the associated gains or losses on the derivative that had previously been basis over the vesting period, based on the Group’s estimate of the recognised in equity are included in the initial measurement of the asset number of shares that will eventually vest and adjusted for the eect or liability. For hedges that do not result in the recognition of an asset or a of non-market-related conditions. liability, amounts deferred in equity are recognised in the Income Statement Fair value is measured by use of a Black-Scholes model for the share in the same period in which the hedged item aects profit or loss. option plans, and a binomial model for the share awards under the 2005 For an eective hedge of an exposure to changes in fair value, the hedged Long-Term Incentive Plan. item is adjusted for changes in fair value attributable to the risk being The liability in respect of equity-settled amounts is included in Equity. hedged with the corresponding entry in the Consolidated Income Statement. Gains or losses from remeasuring the derivative are also Critical accounting judgments recognised in the Consolidated Income Statement. If the hedge is IAS 1 requires disclosure of the judgments Management makes when eective, these entries will oset in the Consolidated Income Statement. applying its significant accounting policies and that have the most significant eect on amounts that are recognised in the Group’s Financial Changes in the fair value of derivative financial instruments that do not Statements. In the course of preparing the Financial Statements, no qualify for hedge accounting are recognised in the Consolidated Income significant critical judgments have been made in the process of applying Statement as they arise. the Group’s accounting policies, other than leases and those involving Hedge accounting is discontinued when the hedging instrument estimations, which are dealt with separately below. Management makes expires or is sold, terminated, exercised, or no longer qualifies for hedge other judgments in the normal course of conducting business, such as accounting. At that time, any cumulative gain or loss on the hedging those in relation to legal claims and contractual matters (see Note 24 for instrument recognised in equity is retained in equity until the forecasted further details). transaction occurs. If a hedged transaction is no longer expected to occur, Leases the net cumulative gain or loss recognised in Equity is transferred to Where a lease includes the option for an extension to the lease term, the Consolidated Income Statement for the period. Management makes a judgment as to whether they are reasonably Gains and losses accumulated in Equity are recognised in the certain the option will be taken. This will take into account the length of Consolidated Income Statement on disposal of the overseas business. time remaining before the option is exercisable, current and forecasted plans for utilising the asset and the level and type of planned future capital investment. As at 31 December 2021, these extension options have an approximate average remaining lease term of six years. These judgments are reassessed at each reporting period, which could result in a recalculation of the lease liability and a material adjustment to the associated balances. 125SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 FINANCIAL STATEMENTS ## NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 2. Significant accounting policies continued Goodwill impairment assessment has been removed as a key estimate Key sources of estimation and uncertainty in 2021 given suciency of headroom and no identified triggering events When applying the Group’s accounting policies, Management must make at 31 December 2021 (see Note 13 for sensitivities). The Board does not assumptions and estimates concerning the future that aect the carrying consider there to be a significant risk of material adjustment arising for amounts of assets and liabilities at the Balance Sheet date and the goodwill impairment over the next financial year. amounts of revenue and expenses recognised during the period. Such The Directors have considered the impact of Climate Risk on the Financial assumptions are based upon factors including historical experience, Statements for the year ending 31 December 2021 to be immaterial, given the observance of trends in the industries in which the Group operates, the longer term view of Climate Risk compared to the short to mid-term and information available from the Group’s customers and other external planning cycle on which asset and liability values are based upon. sources. The key sources of estimation and uncertainty at the Balance Sheet date that have a significant risk of causing a material adjustment to 3. Revenue the carrying amounts of assets and liabilities within the next financial year Total revenue is disaggregated by market sectors as follows: and beyond include: | | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | --- | | Income taxes | | | 2021 | | 2020 | | In determining the Group provisions for income tax and deferred tax, | | | £m | | £m | | it is necessary to consider transactions in a small number of key tax | Civil Aerospace 244.5 304.2 | | | | | jurisdictions for which the ultimate tax determination is uncertain. To the Defence 125.0 158.5 extent that the final outcome diers from the tax that has been provided, Other 69.8 63.5 adjustments will be made to income tax and deferred tax provisions held Aerospace 439.3 526.2 in the period the determination is made. The carrying amount of net current tax liability and deferred tax liability at 31 December 2021 was £12.0m (2020 – £16.8m) and £4.8m (2020 – £0.8m), respectively. Land Vehicles 118.8 89.2 Further details on these estimates are set out in Notes 10 and 21. Power & Energy 101.1 119.1 Retirement benefits Flexonics 219.9 208.3 Management makes assumptions and estimates, for the next financial year and beyond, which aect the value of the carrying amount of the UK Eliminations (0.5) (0.9) Plan retirement benefit obligation at 31 December 2021. Management follows actuarial advice from a third party when determining estimation Total revenue 658.7 733.6 uncertainty on the valuation of the UK gross defined benefit obligation, the significant assumptions being discount rate, inflation and life expectancy (see Note 34). The carrying amount of the UK Plan’s Other Aerospace comprises space and non-military helicopters and retirement benefits at 31 December 2021 was a surplus of £72.2m other markets, principally including semiconductor, medical, and (2020 – surplus of £46.5m), being the present value of the defined benefit industrial applications. obligations of £294.9m (2020 – £317.7m) and fair value of plan assets The Group applies the practical expedient in paragraph 121 of IFRS 15 of £367.1m (2020 – £364.2m). Further details and sensitivities from and does not disclose information about remaining performance changes in estimates are set out in Note 34g. obligations that have original expected durations of one year or less. Other estimates Applying the practical expedient in paragraph 94 of IFRS 15, the Group The Board has considered the estimation applied to inventory and recognises the incremental costs of obtaining contracts as an expense concluded that there is not a significant risk of a material adjustment when incurred if the amortisation period of the assets that the Group arising over the next financial year. Management assesses the carrying otherwise would have recognised is one year or less. value of inventory to ensure that it is held at the lower of cost and net realisable value. Where necessary, Management makes an estimate to 4. Segment information write down inventory to its net realisable value. The Group held a net The Group reports its segment information as two operating Divisions inventory balance at the year-end of £145.2m (2020 – £147.6m). In according to the market segments they serve, Aerospace and Flexonics, determining an estimate of net realisable value, Management has made which is consistent with the oversight employed by the Executive assumptions in respect of the durability, quality, specificity and order Committee. The chief operating decision-maker, as defined by IFRS 8, cover, which provide some protection against adverse market conditions, is the Executive Committee. The Group is managed on the same basis, and competitor product development and pricing activity. Inventory held is as two operating Divisions. typically built on a demand basis and is customer specific. In 2021, £1.5m The accounting policies of the reportable segments are the same as the inventory impairments have been reversed (2020 – £9.3m impairment Group’s accounting policies described in Note 2 and the sales between charge) where demand has picked up on previously reduced or cancelled segments are carried out at arm’s length. Adjusted operating profit, as specific programmes, only to the extent that there are confirmed orders described in Note 9, is the key measure reported to the Group’s Executive in place. Management does not anticipate further material adjustments Committee for the purpose of resource allocation and assessment of to inventory to arise over the next financial year, subject to further segment performance. Investment income, finance costs and tax are not unforeseen changes in market conditions. allocated to segments, as this type of activity is driven by the central tax The Board previously approved a restructuring plan that covered 2019, 2020 and treasury functions. and 2021. In response to COVID-19, the Group implemented further cost Segment assets include directly attributable computer software assets, cutting actions which included asset write downs. At 31 December 2021, property, plant and equipment (including right-of-use assets), working aprovision of £1.3m (2020 – £8.9m) is recorded relating to committed capital assets, goodwill and intangible assets from acquisitions. Cash, restructuring plans that have been communicated to those eected and deferred and current tax and other financial assets (except for working where the cash outflow is anticipated to occur in 2022. The restructuring capital) are not allocated to segments for the purposes of reporting charges recorded in 2021 include asset impairments where demand on financial performance to the Executive Committee. specific programmes has ceased or significantly decreased, and where there is no alternate use. Management does not anticipate further material Segment liabilities include directly attributable working capital liabilities adjustments to the restructuring provision recorded at 31 December 2021 and lease liabilities. Debt, retirement benefits, deferred and current tax over the next financial year as the commitments are settled, subject to and other financial liabilities (except for working capital) are not allocated unforeseen changes in market conditions. to segments for the purposes of reporting financial performance to the ExecutiveCommittee. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021126 4. Segment information continued Central costs, assets and liabilities are corporate items not allocated to segments, which is consistent with the format used by the chief operating decision-maker. Segment information for revenue, operating profit/loss and a reconciliation to entity and profit/loss after tax is presented below: | | | | | | Eliminations/ | | | | | | | | | Eliminations/ | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | central | | | | | | | | | central | | | | | | Aerospace | | Flexonics | | | costs | | | Total | Aerospace | | Flexonics | | | costs | | | Total | | | Year ended | | Year ended | | Year ended | | | Year ended | | Year ended | | Year ended | | Year ended | | | Year ended | | | | | 2021 | | 2021 | | | 2021 | | 2021 | | 2020 | | 2020 | | 2020 | | | 2020 | | Notes | | £m | | £m | | | £m | | £m | | £m | | £m | | | £m | | £m | External revenue 438.9 219.8 – 658.7 525.4 208.2 – 733.6 Inter-segment revenue 0.4 0.1 (0.5) – 0.8 0.1 (0.9) – Total revenue 439.3 219.9 (0.5) 658.7 526.2 208.3 (0.9) 733.6 Adjusted trading profit 7.9 12.9 (14.9) 5.9 5.9 11.0 (13.4) 3.5 Share of joint venture profit – 0.2 – 0.2 – 0.2 – 0.2 Adjusted operating profit 7.9 13.1 (14.9) 6.1 5.9 11. 2 (13.4) 3.7 Amortisation of intangible assets from acquisitions – – – – (6.3) (1.4) – ( 7.7 ) Goodwill impairment and write-o 9 – – – – (112.1) (22.2) – (134.3) Net restructuring income/ (costs) 9 2.2 2.2 – 4.4 (32.5) (6.5) – (39.0) Operating profit/(loss) 10.1 15.3 (14.9) 10.5 (145.0) (18.9) (13.4) (17 7.3) Investment income 0.5 1.1 Finance costs (8.5) (11.0 ) Corporate undertakings 9 21.2 (4.6) Profit/(loss) before tax 23.7 (191.8) Tax 0.5 33.3 Profit/(loss) after tax 24.2 (158.5) Trading profit and adjusted trading profit is operating profit/loss and adjusted operating profit respectively before share of joint venture profit. See Note9 for the derivation of adjusted operating profit. Segment information for assets, liabilities, additions to non-current assets and depreciation and amortisation is presented below: | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | | 2021 | | 2020 | | Assets | | £m | | £m | Aerospace 506.6 563.3 Flexonics 184.9 170.4 Segment assets for reportable segments 691.5 733.7 Unallocated Central 4.6 2.9 Cash 51.1 23.6 Deferred and current tax 8.3 7.7 Retirement benefits 72.2 46.5 Others 0.1 0.3 Total assets per Consolidated Balance Sheet 827.8 814.7 | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | | 2021 | | 2020 | | Liabilities | | £m | | £m | Aerospace 148 .1 153.9 Flexonics 63.9 55.7 Segment liabilities for reportable segments 212.0 209.6 Unallocated Central 15.4 14.1 Debt 131.0 153.0 Deferred and current tax 25.1 25.3 Retirement benefits 11.0 10.9 Others 8.2 8.5 Total liabilities per Consolidated Balance Sheet 402.7 421.4 127SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 FINANCIAL STATEMENTS ## NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 4. Segment information continued | Additions to | | | Additions to | | Depreciation | | Depreciation | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | non-current | | | non-current | | | and | | and | | | assets | | | assets | amortisation | | amortisation | | | Year ended | | | Year ended | | Year ended | | Year ended | | | | | 2021 | | 2020 | | 2021 | | 2020 | | | | £m | | £m | | £m | | £m | Aerospace 12.9 20.8 35.1 45.9 Flexonics 10.3 8.7 12.2 15.1 Sub total 23.2 29.5 47.3 61.0 Central 0.1 0.2 0.5 0.6 Total 23.3 29.7 47.8 61.6 The Group’s revenues from its major products is presented below: | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Aerospace – Structures 178.9 234.4 Aerospace – Fluid Systems 260.0 291.0 Aerospace total 438.9 525.4 Land vehicles 118.8 89.2 Power & Energy 101.0 119.0 Flexonics total 219.8 208.2 Group total 658.7 733.6 No individual customer accounted for more than 10% of external revenue in 2021 or 2020 Geographical information The Groups’ operations are located principally in North America and UK. The following table provides an analysis of the Group’s sales by geographical market, irrespective of the origin of the goods. The carrying values of segment non-current assets are analysed by the geographical area in which the assets are located. | | | | | | Segment | | | Segment | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Sales | | Sales | non-current | | | | non-current | | | | revenue | | revenue | | | assets | | | assets | | Year ended | | Year ended | | Year ended | | | | Year ended | | | | 2021 | | 2020 | | | | 2021 | | 2020 | | | £m | | £m | | | | £m | | £m | USA 316.4 3 67. 4 202.5 239.7 UK 105.0 121.8 181.8 159.3 Rest of the World 237.3 244.4 140.9 151.5 Sub total 658.7 733.6 525.2 550.5 Unallocated amounts – – 5.7 4.7 Total 658.7 733.6 530.9 555.2 The unallocated amounts on non-current assets relate to deferred tax assets. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021128 5. Operating profit Operating profit/(loss) can be analysed as follows: | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Revenue 658.7 733.6 Cost of sales (555.7) (628.3) Gross profit 103.0 105.3 Distribution costs (5.4) (4.6) Administrative expenses (87.3) (278.3) Profit on sale of fixed assets – 0.1 Share of joint venture profit 0.2 0.2 Operating profit/(loss) 10.5 (177. 3) Operating profit/(loss) for the period has been arrived at after charging: | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Net foreign exchange (gains)/losses (1.7) 3.1 Research and design costs 19.2 18.7 Depreciation of property, plant and equipment 46.3 52.1 Amortisation of intangible assets included in administration expenses 1.5 9.5 Cost of inventories recognised as expense 555.7 628.3 Provision for loss allowance against receivables 0.6 0.7 Restructuring: provision for impairment of property, plant and equipment and inventories 2.3 17. 3 Restructuring: sta and other costs 2.5 21.2 COVID-19 grant (income) (0.3) (9.0) Aerospace manufacturing grant (income) (4.2) – Sta costs are disclosed in Note 6. The majority of research and design costs incurred during the year have been expensed in line with Note 2 Group’s accounting policies. In 2021, government assistance schemes in response to the COVID-19 pandemic have benefitted the Group through £0.3m grant income (2020 – £9.0m grant income), to compensate for furloughing of employees, and have £2.4m of deferral of social security tax payments, which is due for payment in 2022. The analysis of the Auditor’s remuneration is as follows: | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Fees payable to the Company’s Auditor and their associates for the audit of the Company’s annual accounts 0.3 0.2 Fees payable to the Company’s Auditor and their associates for other services to the Group – The audit of the Company’s subsidiaries 1.5 1.3 Total audit fees 1.8 1.5 Fees payable to Company’s Auditor and their associates for non-audit services to the Company are not required to be disclosed because the Consolidated Financial Statements are required to disclose such fees on a consolidated basis. The Group paid £0.06m (2020 – £0.09m) to the Company’s Auditor for audit related services and £0.1m (2020 – £nil) for non-audit related services during 2021, in line with the Company’s policy on the use of Auditors for non-audit services. Details of the Company’s policy on the use of auditors for non-audit services, the reasons why the Auditor was used rather than another supplier and how the Auditor’s independence and objectivity were safeguarded are set out in the Audit Committee Report on pages 80 to 86. No services were provided pursuant to contingent fee arrangements. 129SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 FINANCIAL STATEMENTS ## NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 6. Sta costs The average monthly number of employees (including Directors) was: | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Production 4,850 5,713 Distribution 63 72 Sales 252 285 Administration 473 564 Total 5,638 6,634 The actual number of employees at 31 December 2021 was 5,664 (2020 – 5,880). | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | | 2021 | | 2020 | | Notes | | £m | | £m | Their aggregate remuneration comprised: Wages and salaries 198.9 225.6 Social security costs 22.6 25.3 Termination benefits 1.0 19.1 Other pension costs – defined contribution 34a 8.6 9.2 Other pension costs – defined benefit 34e 0.7 0.9 Share based payments 33 3.5 3.0 Aggregate remuneration 235.3 28 3.1 The Group also incurred medical and other employee benefit expenses during the year of £20.9m (2020 – £25.0m) and received £0.3m (2020 – £9.0m) COVID-19 grant income related to government assistance schemes to compensate for furloughing of employees. 7. Investment income | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Interest on bank deposits 0.1 0.2 Net finance income of retirement benefits (Note 34e) 0.4 0.9 Total income 0.5 1.1 8. Finance costs | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Interest on bank overdrafts and loans 1.0 1.9 Interest on other loans and other finance costs 4.9 6.1 Interest on lease liabilities 2.6 3.0 Total finance costs 8.5 11.0 9. Adjusted operating profit and adjusted loss before tax The presentation of adjusted operating profit and adjusted loss before tax measures, derived in accordance with the table below, have been included to identify the performance of the Group prior to the impact of amortisation of intangible assets from acquisitions, goodwill impairment and write-o, net restructuring income/cost and the income and costs associated with corporate undertakings. The Board has adopted a policy to separately disclose those items, where significant in size, that it considers are outside the results for the particular year under review and against which the Board measures and assesses the performance of the business. COVID-19 introduced unprecedented challenges and economic disruption. This has directly impacted the business performance of both the Aerospace and Flexonics Divisions. The Board has not changed the policy for adjusted measures to present the COVID-19 financial impact, but instead, have described the impact within the narrative sections of the Strategic Report. The adjustments are made on a consistent basis and also reflect how the business is managed on a day-to-day basis. The amortisation charge relates to prior years’ acquisitions. It is charged on a straight-line basis and reflects a non-cash item for the reported year. Goodwill impairment related to the Aerostructures group of cash generating units (CGU group), reflecting the significant impact of the COVID-19 pandemic on the civil aerospace sector, where there has been a significant reduction in the short-term demand for new aircraft on existing programmes. Goodwill write-os related to operating business closures. The Group implemented a restructuring programme in 2019 which was expanded further in 2020 and 2021 in response to the impact of COVID-19 on some of the Group’s end markets. The aerospace manufacturing grant, within net restructuring income, represents incentives specific to only part of the Group for a limited time period. Corporate undertakings relate to gain on disposal of a business, bid defence and other costs relating to corporate activities and are exceptional in nature, being presented outside the normal operating results of the Group. None of these charges are reflective of in-year performance. They are therefore excluded by the Board and Executive Committee when measuring the performance of the businesses. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021130 9. Adjusted operating profit and adjusted loss before tax continued | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | | 2021 | | 2020 | | Notes | | £m | | £m | Operating profit/(loss) 10.5 (177. 3) Amortisation of intangible assets from acquisitions – 7.7 Goodwill impairment and write-o 13 – 134.3 Net restructuring (income)/cost (4.4) 39.0 Adjusted operating profit 6.1 3.7 Profit/(loss) before tax 23.7 (191.8) Adjustments to profit/loss before tax as above (4.4) 181.0 Corporate undertakings 31 (21.2) 4.6 Adjusted loss before tax (1.9) (6.2) Goodwill impairment and write-o As previously reported, during the first half of 2020, an impairment loss of £110.5m was recognised in relation to the goodwill allocated to the Aerostructures CGU group (now within Aerospace CGU group – see Note 13 for details). This reflected the significant impact of COVID-19 on the short to medium-term outlook for Aerostructures, given the end market, which is focused on the civil aerospace sector. In the second half of 2020, write-os of £1.6m and £22.2m were recognised in respect of the closures of Senior Aerospace Bosman and Senior Flexonics Upeca. Net restructuring income/cost The Group focused on taking actions to conserve cash to manage through the pandemic, including curtailing capital expenditure, tightly managing working capital and implementing further cost cutting actions. At 31 December 2021, none of the Group’s employees were on furlough (2020 – 7%). The decisive actions taken on restructuring and cost management over the last couple of years has delivered the expected benefits. In addition, the Group has continued to review inventory and asset exposures on programmes that have been reduced, cancelled or where the Group will no longer participate. As part of the restructuring focus, we have assessed critically any inventory or asset exposures on these programmes and written down the carrying values on excess holdings and assets where there is no alternate use. Where demand has picked up on previously reduced or cancelled programmes, inventory impairments have been reversed to the extent that there are confirmed orders in place. Our operating businesses have also worked hard to maximise cash realised from disposal of assets where there is no alternate use. The restructuring, which involves business closures and sale of associated assets, headcount reductions and other benefits, has resulted in net income of £4.4m (2020 – £39.0m net cost). Of this, £4.2m income (2020 – £nil) related to an aerospace manufacturing grant, £1.0m net income for closures of Senior Flexonics Upeca and Senior Aerospace Bosman (2020 – £10.5m cost), £0.4m cost related to headcount reduction (2020 – £13.5m cost) and £1.0m cost related to consultancy and other activities (2020 – £1.5m cost). For certain specific programmes, and in conjunction with the focus on restructuring, management has also identified inventory impairment reversals of £1.4m (2020 – £8.5m charge) where customer demand has increased, and further impairment provisions on property, plant and equipment in 2021 with a charge of £0.8m (2020 – £5.0m charge) to cover the risk where there are no alternative uses and in part due to customers choosing to cancel and/or significantly reduce future build rates. Net cash outflow related to restructuring activities was £0.9m (2020 – £15.2m). At 31 December 2021, a restructuring provision of £1.3m (31 December 2020 – £8.9m) was recognised and is expected to be utilised in 2022. Corporate undertakings Net income associated with corporate undertakings was £21.2m in 2021, of which £24.2m gain relates to the disposal of Senior Aerospace Connecticut in April 2021, partly oset by £3.0m bid defence and costs relating to other corporate activities. In 2020, costs of £4.6m were incurred relating to employee costs and external professional fees for the potential divestment of the Aerostructures business. See Note 31 to the Financial Statements for further details on the £24.2m gain on disposal. 10. Taxation | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Current tax: Current year 7.0 3.1 Adjustments in respect of prior periods (6.0) (6.0) 1.0 (2.9) Deferred tax (Note 21): Current year (1.7) (31.3) Adjustments in respect of prior periods 0.2 0.9 (1.5) (30.4) Total tax credit (0.5) (33.3) On 24th May 2021, a future increase in UK corporation tax rate from 19% to 25% was substantially enacted with an eective date of 1 April 2023. Deferred tax assets and liabilities are measured at the rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantially enacted at the Balance Sheet date. The impact of the tax rate change to 25% on deferred tax assets and liabilities has been reflected at the Balance Sheet date and this has resulted in net deferred tax liabilities being increased by £2.1m with a credit of £0.6m recognised through the Income Statement and a charge of £2.7m through Other Comprehensive Income. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. 131SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 FINANCIAL STATEMENTS ## NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 10. Taxation continued The total charge for the year can be reconciled to the loss/profit before tax per the Consolidated Income Statement as follows: | Year ended | | Year ended | | | Year ended | | Year ended | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 2021 | | 2021 | | | 2020 | | 2020 | | | | £m | | | % | | £m | | | % | Profit/(Loss) before tax 23.7 (191.8) Expected tax charge/(credit) at the UK standard corporation tax rate 19% 4.5 (36.4) Non-tax deductible goodwill impairments and write-os a - 12.7 Eect of dierent statutory rates in overseas jurisdictions b 0.9 (10.9) Tax incentives and credits c (1.1) – Tax losses not recognised d 0.3 3.0 Impact of share options e 0.1 0.4 Eect of dierence in treatment of financing activities between jurisdictions f (0.3) (0.3) Non-tax deductible expenses and other permanent dierences g 1.4 2.7 Eect of changes in UK tax rate on deferred tax items h (0.6) 0.4 Withholding taxes i 0.1 0.2 Adjustments in respect of prior periods – current tax items j (6.0) (6.0) Adjustments in respect of prior periods – deferred tax items k 0.2 0.9 Tax credit and eective tax rate for the year (0.5) 2.1% (33.3) (17.4%) a. Goodwill impairments and write-os on which no tax relief is available or deferred tax liability was held. b. Mainly attributable to a higher rate of tax in the US. c. Includes a £1.0m benefit from enhanced US R&D deductions and the UK capital allowance superdeduction as well as the benefit from specific projects eligible for tax incentives. In 2020 the benefit of enhanced deductions was fully oset by losses on projects subject to tax incentives which gave rise to a permanent dierence. d. Tax losses not recognised comprise £0.5m of State tax losses in the US which have restricted use, net of tax losses utilised of £0.2m. Tax losses not recognised in 2020 mainly related to Senior Aerospace Bosman and Senior Flexonics Upeca whose trades have ceased. e. Impact of non-tax deductible share based payment charges net of current tax deductions for share exercises in the year and the deferred tax asset recognition for future exercises. f. Eect of dierent rates of tax between jurisdictions on internal financing activities. g. Includes £1.5m in respect of non-tax deductible expenditure, the impact of minimum taxation rules in the US and a £2.0m charge in respect of uncertain tax positions. This is reduced by the benefit of non-taxable foreign exchange gains recycled to the Income Statement of £1.6m and other non-taxable gains on disposals. h. Relates to the Income Statement impact of the retranslation of UK deferred tax assets and liabilities following the substantial enactment of the future 25% tax rate during the year. i. Arises from irrecoverable withholding taxes. j. Includes a credit in respect of the uncertain tax positions which have been been resolved, settled or released in accordance with IFRIC 23 principles of £5.1m as well as prior year items arising from the true up of tax accruals following the submission of local tax filings which in many cases have an equal and opposite prior year item in deferred tax. k. Arises from the true up of tax positions following the submission of tax returns. In addition to the amount charged to the Consolidated Income Statement, the following amounts relating to tax have been recognised directly in other comprehensive income: 2021 2020 £m £m Deferred tax: Items that will not be reclassified subsequently to profit and loss Tax on actuarial items (3.7) 1.6 Eect of change in UK tax rate (2.7) – Items that may be reclassified subsequently to profit or loss Tax on foreign exchange contracts – cash flow hedges 0.8 (0.5) Total tax (charge)/credit recognised directly in other comprehensive income (5.6) 1.1 In addition to the amount charged to the Consolidated Income Statement and Other Comprehensive Income, the following amounts relating to tax have been recognised directly in equity: | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Deferred tax: Excess tax deductions related to share-based payments in exercised options 0.1 – Total tax credit recognised directly in equity 0.1 – Deferred tax (Note 21) (5.5) 1.1 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021132 11. Dividends | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Amounts recognised as distributions to equity holders in the period: Final dividend for the year ended 31 December 2020 of £nil (2019 – £nil) per share – – Interim dividend for the year ended 31 December 2021 of £nil (2020 – £nil) per share – – – – Proposed final dividend for the year ended 31 December 2021 of £nil (2020 – £nil) per share – – 12. Earnings/loss per share The calculation of the basic and diluted earnings/loss per share is based on the following data: | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | | 2021 | | 2020 | | Number of shares | | £m | | £m | Weighted average number of ordinary shares for the purposes of basic earnings/loss per share 415.7 414.9 Eect of dilutive potential ordinary shares: Share options 6.8 – Weighted average number of ordinary shares for the purposes of diluted earnings/loss per share 422.5 414.9 Year ended 2021 Year ended 2020 Earnings EPS Loss EPS Earnings/loss and earnings/loss per share Notes £m pence £m pence Profit/(loss) for the period 24.2 5.82 (158.5) (38.20) Adjust: Amortisation of intangible assets from acquisitions net of tax of £nil (2020 – £2.0m) – – 5.7 1.38 Goodwill Impairment and write-o net of tax of £nil (2020 – £21.7m) 9 – – 112.6 27.14 Net restructuring (income)/cost and tax credit of £0.2m (2020 – £6.5m) 9 (4.6) (1.11) 32.5 7. 8 3 Corporate undertakings net of tax of £2.9m (2020 – £0.4m) 31 (18.3) (4.40) 4.2 1.01 Non-cash tax credit 10 (0.6) (0.14) – – Adjusted earnings/(loss) after tax 0.7 0.17 (3.5) (0.84) Earnings/(loss) per share – basic 5.82p (38.20)p – diluted 5.73p (38.20)p – adjusted 0.17p (0.84)p – adjusted and diluted 0.17p (0.84)p The denominators used for all basic, diluted and adjusted earnings/loss per share are as detailed in the table above. The presentation of adjusted earnings/loss per share, derived in accordance with the table above, has been included to identify the performance of the Group prior to the impact of amortisation of intangible assets from acquisitions, goodwill impairment and write-o, net restructuring income/cost, corporate undertakings and non-cash tax credit. The Board has adopted a policy to separately disclose those items, where significant in size, that it considers are outside the earnings/loss for the particular year under review and against which the Board measures and assesses the performance of the business. See Note 9 for further details. 13. Goodwill | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Cost At 1 January 322.9 343.9 Corporate undertakings and write-o (15.1) (23.8) Exchange dierences 0.7 2.8 At 31 December 308.5 322.9 Accumulated impairment losses At 1 January 157.9 46.8 Impairment – 110.5 Exchange dierences 0.4 0.6 At 31 December 158.3 157.9 Carrying amount at 31 December 150.2 165.0 133SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 FINANCIAL STATEMENTS ## NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 13. Goodwill continued In 2021, goodwill has reduced by £14.8m, of which £15.1m relates to the disposal of Senior Aerospace Connecticut, partly oset by £0.3m foreign exchange dierences. In the first half of 2020, the COVID-19 pandemic had direct impact on the Group’s end markets which led to an impairment triggering event. Following a rigorous assessment, the Board concluded that Aerostructures CGU group (subsequently combined with Aerospace Fluid systems into the Aerospace CGU group) recoverable amount fell below the carrying value by £110.5m, and this impairment was recorded in the half year ended 30 June 2020. In the second half of 2020, write-os of £1.6m and £22.2m were recognised in respect of the closures of Senior Aerospace Bosman and Senior Flexonics Upeca. Goodwill is allocated to the group of CGUs (CGU groups) within Aerospace and Flexonics, reflecting the lowest level at which management exercises oversight and monitors the Group’s performance. The table below highlights the carrying amount of goodwill allocated to these CGU groups, all of which are considered significant in comparison with the total carrying amount of goodwill. | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Aerospace 98.0 113 .3 Flexonics 52.2 51.7 Total 150.2 165.0 The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. The timing of the annual assessment at 30 September 2021 coincided with the Board’s review of the most recent financial strategy. Management applied the value in use methodology to assess impairment. The key assumptions on which the value in use calculations were based relate to business performance over the next five years, long-term growth rates beyond 2026 and the discount rates applied. The discount rates were pre-tax measures based on the rate of 10-year government bonds issued in the relevant market and in the same currency as the cash flows, adjusted for a risk premium to reflect both the increased risk of investing in equities generally and the systematic risk of the CGU group. The key estimates were the level of revenue and operating margins anticipated and the proportion of operating profit converted into cash flow in each year. The forecast compound annual growth rate in revenue from 2021 to 2026 was 9% (2020 – 2019 to 2025 was – 1% to 4%), reflecting some market recovery post COVID-19 pandemic. Forecasts used in the cash flow were based on the most recent financial strategy, as approved by Management for the next five years to 2026. These estimates up to 2026, where appropriate, take account of the current economic environment as set out in the Strategic Report on pages 1 to 64. Cash flows after 2026 have been extrapolated based on estimated long-term growth rates into perpetuity, which has been determined by the lower of the long-term market growth rates and the historical forecast compound annual growth in revenue to 2026. For Aerospace, the long-term market growth rate is 3.0% per annum (2020 – 3.0%), which does not exceed the long-term average growth rate forecast for the aerospace market as included in market outlooks from Boeing and Airbus. For Flexonics, the long-term market growth rate is 1.4% per annum (2020 – 1.5%), which is based on the world long-term forecast GDP growth for advanced economies. The pre-tax discount rates applied to discount the pre-tax cash flows for Aerospace and Flexonics are 10.7% and 11.8% respectively (2020 – 10.5% and 12.1%; these discount rates include CGU group specific risk adjustments) which are the measurements used by Management in assessing investment appraisals specific to each CGU group. Sensitivities reflecting reasonable possible changes have also been considered for each CGU group in relation to the value in use calculations: the long-term growth rate assumption was reduced to 1 percentage point and the discount rate was increased by a 1 percentage point. This did not result in the carrying amount of the CGU groups exceeding their recoverable amount. Further to the 30 September 2021 annual impairment test, the Board considered whether there were any triggering events as at the 31 December 2021 reporting date. The Board concluded that the market factors considered as at 30 September were largely unchanged and remained relevant for the year end reporting date, with no new triggers identified for impairment. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021134 14. Other intangible assets | Intangible | | | | | | | Intangible | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | assets | | Computer | | | | | assets | | Computer | | | | | | from | | software | | | | | | from | software | | | | | acquisitions | | | and others | | | Total | acquisitions | | | and others | | | Total | | Year ended | | | Year ended | | Year ended | | Year ended | | | Year ended | | Year ended | | | | 2021 | | | 2021 | | 2021 | | 2020 | | | 2020 | | 2020 | | | | £m | | £m | | £m | | | £m | | £m | | £m | Cost At 1 January 121.0 23.0 144.0 131.0 21.8 152.8 Additions – 1.1 1.1 – 1.6 1.6 Disposals (3.5) (0.6) (4.1) – (0.1) (0.1) Restructuring impairment and disposal – (0.6) (0.6) (7. 9) – (7.9) Exchange dierences – (0.1) (0.1) (2.1) (0.3) (2.4) At 31 December 117.5 22.8 140.3 121.0 23.0 144.0 Amortisation At 1 January 121.0 18.2 139.2 123.5 16.4 139.9 Charge for the year – 1.5 1.5 7.7 1.8 9.5 Disposals (3.5) (0.6) (4.1) – (0.1) (0.1) Restructuring impairment and disposal – (0.6) (0.6) (7. 9) 0.3 (7.6 ) Exchange dierences – 0.1 0.1 (2.3) (0.2) (2.5) At 31 December 117.5 18.6 136.1 121.0 18.2 139.2 Carrying amount at 31 December – 4.2 4.2 – 4.8 4.8 15. Investment in joint venture The Group has a 49% interest in Senior Flexonics Technologies (Wuhan) Limited, a jointly controlled entity incorporated in China, which was set up in2012. Senior Flexonics Technologies (Wuhan) Limited is a precision manufacturer of automotive components. The results of the joint venture are accounted for using equity accounting. The Group’s investment of £3.9m represents the Group’s share of the joint venture’s net assets as at 31 December 2021 (2020 – £3.6m). Thefollowing amounts represent the aggregate amounts relating to the revenue and expenses and assets and liabilities of Senior Flexonics Technologies (Wuhan) Limited for the years ended 31 December 2021 and December 2020. 2021 2020 £m £m Revenue 6.6 5.7 Expenses (6.1) (5.2) Profit 0.5 0.5 Total assets 10.0 9.3 Total liabilities (2.0) (1.9) Net assets 8.0 7.4 Group's share of profit 0.2 0.2 Group's share of net assets 3.9 3.6 135SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 FINANCIAL STATEMENTS ## NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 16. Property, plant and equipment Right-of- | | | Leasehold | | | | | | | use | Right-of- | | | | | | Leasehold | | | | | Right-of- | | Right-of- | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Freehold | | | building | | | Plant | Land and | | | | use | | | Freehold | | | building | | | Plant | | use | | use | | | | land and | | improve- | | | | and | Buildings | | | Plant and | | | | land and | | improve- | | | | and | Land and | | Plant and | | | | | buildings | | | ments | | equipment | | | | Year | equipment | | | Total | buildings | | | ments | | equipment | | Buildings | | equipment | | | Total | | Year ended | | Year ended | | | Year ended | | | ended | | Year ended | | Year ended | | Year ended | | Year ended | | | Year ended | | Year ended | | Year ended | | Year ended | | | | 2021 | | | 2021 | | 2021 | | | 2021 | | 2021 | | 2021 | | 2020 | | 2020 | | | 2020 | | 2020 | | 2020 | | 2020 | | | £m | | | £m | | £m | | | £m | | £m | | £m | | £m | | | £m | | £m | | £m | | £m | | £m | Cost or valuation At 1 January 111.7 4.2 536.7 8 6.1 6.2 744.9 112.3 4.2 531.8 86.6 5.6 740.5 Additions 0.3 0.3 19.6 0.9 1.1 22.2 0.8 0.2 24.2 1.4 1.5 28.1 Lease Modifications – – – 3.7 (0.2) 3.5 – – – (0.2) (0.8) (1.0) Exchange dierences (1.1) – (5.0) (0.5) – (6.6) (1.3) (0.1) (12.6) (1.7) (0.1) (15.8) Disposed on disposal activities (3.1) – (16.6) – – (19.7) – – – – – – Disposals (0.1) – (11.0) (0.4) (0.2) (11.7) (0.1) (0.1) (5.6) – – (5.8) Restructuring impairment and disposal (3.1) – (4.9) (1.6) (0.4) (10.0) – – (1.1) – – (1.1) At 31 December 104.6 4.5 518.8 88.2 6.5 722.6 111.7 4.2 536.7 86 .1 6.2 744.9 Accumulated depreciation and impairment At 1 January 35.8 3.2 355.6 16.8 3.0 414.4 32.4 3.2 325.7 8.3 1.6 371.2 Charge for the year 2.5 0.3 34.0 8.1 1.4 46.3 3.0 0.2 38.7 8.7 1.5 52.1 Lease Modifications – – – – (0.1) (0.1) – – – – – – Exchange dierences (0.3) – (2.3) (0.1) – (2.7) (0.2) (0.1) (9.1) (0.5) (0.2) (10.1) Eliminated on disposal activities (0.9) – (11.3) – – (12.2) – – – – – – Eliminated on disposals (0.1) – (10.8) (0.4) (0.2) (11.5) (0.1) (0.1) (5.2) – – (5.4) Restructuring impairment and disposal (0.7) – (4.3) (0.8) (0.4) (6.2) 0.7 – 5.5 0.3 0.1 6.6 At 31 December 36.3 3.5 360.9 23.6 3.7 428.0 35.8 3.2 355.6 16.8 3.0 414.4 Carrying amount at 31 December 68.3 1.0 157.9 64.6 2.8 294.6 75.9 1.0 181.1 69.3 3.2 330.5 In conjunction with the focus on restructuring described in Note 9, £3.8m (2020 – £7.7m) of property, plant and equipment has been impaired in 2021, of which £1.0m relates to Aerospace and £2.8m relates to Flexonics. The recoverable amount of the assets was determined based on value-in-use for assets with confirmed orders, or fair value less costs to sell, where assets are to be disposed. At 31 December 2021, the Group had entered into contractual commitments for the acquisition of property, plant and equipment amounting to £3.4m (2020 – £1.9m) 17. Inventories | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Raw materials 56.5 51.1 Work-in-progress 6 0.1 58.6 Finished goods 28.6 37.9 Total 145.2 147.6 Inventory write-downs recognised as an expense in 2021 were £2.5m (2020 – £17.3m), after write-down reversals of £1.5m (2020 – £9.3m write-downs) relating to restructuring (see Note 9). SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021136 18. Trade and other receivables Trade and other receivables at 31 December comprise the following: | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Non-current assets Other receivables 0.1 0.1 0.1 0.1 Current assets Trade receivables 85.2 71.5 Value added tax 1.9 1.6 Foreign exchange contracts 0.8 2.9 Prepayments 10.0 8.8 Other receivables 0.1 0.5 98.0 85.3 Total trade and other receivables 98.1 85.4 Other receivables includes £nil (2020 – £0.3m) of deferred consideration, £nil (2020 – £0.3m) as a current asset and £nil (2020 – £nil) as a non-current asset. Credit risk The Group’s principal financial assets are bank balances and cash and trade receivables. The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies. The Group’s credit risk is primarily attributable to its trade receivables. The amounts presented in the Consolidated Balance Sheet are net of loss allowances. There are no other credit or impairment losses for other classes of financial assets. Further disclosures on credit risk are included in Note 20. The average credit period taken on sales of goods is 52 days (2020 – 52 days). An allowance has been made for estimated irrecoverable amounts from the sale of goods of £2.0m (2020 – £1.6m). In determining the recoverability of trade receivables, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. At 31 December 2021, the carrying amount of the receivable from the Group’s most significant customer was £6.7m (2020 – £8.3m from the same customer). The Group has no other significant concentration of credit risk, with exposure spread over a large number of counterparties and customers. Accordingly, the Directors believe that there is no further credit provision risk in excess of the loss allowance. Expected credit loss | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Movements in loss allowance: At 1 January 1.6 1.5 Provision for impairment 0.6 0.7 Disposal activities – – Amounts written o as uncollectible (0.2) (0.2) Amounts recovered – (0.3) Exchange dierences – (0.1) At 31 December 2.0 1.6 Ageing analysis of past due, net of loss allowance: Up to 30 days past due 9.3 8.9 31 to 60 days past due 3.2 1.4 61 to 90 days past due 0.9 0.7 91 to 180 days past due 1.6 0.4 Total past due, net of loss allowance 15.0 11.4 Not past due 70.2 60.1 Total current trade receivables 85.2 71.5 There are no items past due in any other class of financial assets except for trade receivables. The Directors consider that the carrying amount of trade and other receivables approximates their fair value. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable above. The Group does not hold any collateral as security. 137SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 FINANCIAL STATEMENTS ## NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 19. Bank overdrafts and loans | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Bank overdrafts – 0.4 Bank loans (0.5) 20.9 Other loans 131.5 131.7 131.0 153.0 The borrowings are repayable as follows: On demand or within one year 14.8 0.4 In the second year – 15.4 In the third to fifth years inclusive 70.7 90.6 After five years 45.5 46.6 131.0 153.0 Less: amount due for settlement within 12 months (shown under current liabilities) (14.8) (0.4) Amount due for settlement after 12 months 116.2 152.6 At 31 December 2021, bank loans are undrawn and there are £0.5m of capitalised revolving credit facility transaction costs. At 31 December 2020, bank loans of £21.7m were drawn, oset by £0.8m of capitalised transaction costs. Analysis of borrowings by currency | | | Pound | | | | US | | --- | --- | --- | --- | --- | --- | --- | | | Total | Sterling | | Euros | Dollars | | | 31 December 2021 | £m | | £m | £m | | £m | Bank overdrafts – – – – Bank loans (0.5) (0.5) – – Other loans 131.5 26.9 23.4 81.2 131.0 26.4 23.4 81.2 | | | Pound | | | US | | --- | --- | --- | --- | --- | --- | | | Total | Sterling | Euros | Dollars | | | 31 December 2020 | £m | £m | £m | | £m | Bank overdrafts 0.4 – 0.4 – Bank loans 20.9 3.7 1.8 15.4 Other loans 131.7 26.9 24.9 79.9 153.0 30.6 27.1 95.3 The weighted average interest rates paid were as follows: | Year ended | | | Year ended | | | | --- | --- | --- | --- | --- | --- | | | 2021 | | | 2020 | | | | | % | | | % | Bank loans and overdrafts 1.51 1.66 Other loans 3.10 3.08 Bank loans and overdrafts of £nil (2020 – £21.3m) are arranged at floating rates, thus exposing the Group to cash flow interest rate risk. Other borrowings are mainly arranged at fixed interest rates and expose the Group to fair value interest rate risk. No interest rate swaps were taken out in 2020 or 2021. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021138 19. Bank overdrafts and loans continued The Directors estimate the fair value of the Group’s borrowings to be as follows: | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Bank loans and overdrafts (0.5) 21.3 Other loans 133.8 131.9 133.3 153.2 The fair value of Other loans has been determined by applying a make-whole calculation using the prevailing treasury bill yields plus the applicable credit spread for the Group (level 2 of the fair value hierarchy as defined in Note 20). The other principal features of the Group’s borrowings are as follows: Bank overdrafts are repayable on demand. The eective interest rates on bank overdrafts are determined based on appropriate LIBOR and SONIA rates plus applicable margins. The Group’s main loans are unsecured guaranteed loan notes in the US private placement market and revolving credit facilities. a) Loan notes of €28m, 2021 £23.5m (2020 – £25.0m) were taken out in January 2017, carry interest at the rate of 1.51% and mature on 1 February 2027. b) Loan notes of $20m, 2021 £14.8m (2020 – £14.6m) were taken out in October 2015 and are due for repayment in October 2022. The loan notes carry interest at the rate of 3.42% per annum. c) Loan notes of $60m, 2021 £44.5m (2020 – £43.8m) were taken out in October 2015 and are due for repayment in October 2025. The loan notes carry interest at the rate of 3.75% per annum. d) Loan notes of £27m were drawn down in January 2018, carry interest at a rate of 2.35% and are due for repayment in January 2025. e) Loan notes of $30m, 2021 £22.2m (2020 – £21.9m) were taken out in September 2018, carry interest at the rate of 4.18% and are due for repayment in September 2028. Transaction costs of £0.5m, directly attributable to the GBP notes (£0.1m), the Euro notes (£0.1m) and the US Dollar notes (£0.3m), have been deducted from their carrying value. The Group also has two revolving credit facilities. A committed multi-currency revolving credit facility in the UK of £120m (2020 – £120m) which matures in February 2024. At 31 December 2020, £20.9m was outstanding under the £120m facility, comprising £4.5m, $20m (£14.6m) and €2.0m (£1.8m). At 31 December 2021, £nil was drawn under the £120m facility. A committed $50m single bank (£37.0m) loans and letter of credit facility was amended in April 2021 and matures in June 2023. There were $nil (£nil) loans drawn under the facility on 31 December 2021 and $1.1m (£0.8m) loans drawn on 31 December 2020 and there were letters of outstanding credit of $1.5m (£1.1m) (2020 – £2.3m). As at 31 December 2021, the Group had available £155.9m (2020 – £132.5m) of undrawn committed borrowing facilities in respect of which all conditions precedent had been met. The weighted average maturity of the Group’s committed facilities at 31 December is 3.0 years (2020 – 3.8 years). 20. Financial instruments Capital risk management The Group manages its capital structure to safeguard its ability to continue as a going concern whilst maximising the return to stakeholders through the optimisation of the balance between debt and equity. In considering the appropriate level of net debt, the Group pays close attention to its level as compared to the cash generation potential of the Group, measured by EBITDA (defined in the Notes to the Financial Headlines). The Group also monitors capital on the basis of a gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is derived in Note 32c. Lease liabilities are excluded from net debt in calculating the gearing ratio. Total capital is the equity shown in the Consolidated Balance Sheet. The Group’s strategy in respect of gearing is to target a long-term gearing ratio within the range of 30% to 60%. The gearing ratio for the Group at the end of 2021 was 19% (2020 – 33%). All of the Group’s external borrowing facilities at 31 December 2021 have a requirement for the ratio of net debt to EBITDA to be less than 3.0x (US Private Placements) or 3.5x (UK RCF and US RCF). The adoption of IFRS 16 does not impact the Group’s lending covenants as these are currently based on frozen GAAP, hence figures quoted below exclude the impact of IFRS 16 on net debt, interest and EBITDA. As required by the covenant definition, net debt is restated using 12-month average exchange rates (consistent with EBITDA definition). The Group has two existing covenants (“Existing Covenants”) for committed borrowing facilities, which are tested at June and December: the Group’s net debt to EBITDA (defined in the Notes to the Financial Headlines) must not exceed 3.0x and interest cover, the ratio of EBITDA to interest must be higher than 3.5x. The Group’s lenders, both banks and US private placement investors, have been supportive and we agreed covenant relaxations (“New Covenants”) in relation to the June 2020, December 2020, June 2021 and December 2021 testing periods and agreed an additional September 2021 testing period to provide financial flexibility for the Group through this unprecedented period. For the testing period ended 31 December 2021, the New Covenants required the Group’s net debt to EBITDA must not exceed 4.5x, interest cover must be higher than 3.5x and liquidity headroom must be higher than £40.0m. At 31 December 2021, the Group’s net debt to EBITDA was 1.9x (31 December 2020 – 2.8x) and interest cover was 7.3x (31 December 2020 – 6.1x), both comfortably within the Existing (and New) Covenants limits. The Group’s liquidity headroom at £208.0m (31 December 2020 – £157.1m) was also comfortably within covenant limits. 139SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED # **20. Financial instruments**continued # **Financial risk management** The Group's activities expose it to a variety of financial risks including foreign exchange risk, interest rate risk, credit risk and liquidity risk. The Group's overall treasury risk management programme focuses on the unpredictability of financial markets, and seeks to minimise potential adverse effects on the Group's financial performance. The Group uses derivative financial instruments to hedge certain risk exposures. The use of financial derivatives is governed by the Group's policies approved by the Board, which provide written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the investment of excess liquidity. Compliance with policies and exposure limits is reviewed by the Group's Treasury Committee on a regular basis. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. # **Foreign exchange risk management** The Group enters into forward foreign exchange contracts to hedge the exchange risk arising on the operations' trading activities in foreign currencies. Where commented on below, the sensitivity analysis of the Group's exposure to foreign currency risk at the reporting date has been determined based on the change taking place at the beginning of the financial year and left unchanged throughout the reporting period, with all other variables held constant (such as interest rates). The sensitivity assumptions are based on analysis reviewed by the Group's Treasury Committee. # **Translation risk** The Group derived 85% of its revenue from businesses outside the United Kingdom, with 60% relating to operations in North America. Fluctuations in the value of the US Dollar and other currencies in relation to Pound Sterling have had, and may continue to have, a significant impact on the results of the Group's operations when reported in Pound Sterling. The Group decided not to hedge this translation risk. In addition, the majority of assets are denominated in foreign currency, particularly in US Dollars. In order to provide a hedge against volatility in the value of these assets compared to the Group's bookarnings, and hence provide a natural hedge against the Group's principal lending covenant (the ratio of net debt to EBITDA), the Group aims to borrow in foreign currencies in similar proportions to its generation of foreign currency EBITDA, where practical and economic. A 10% appreciation (or depreciation) of all other currencies against the Pound Sterling would have increased (or decreased) 2021 Group adjusted operating profit by £1.8m (£1.0m of which would have been due to the US Dollar movement) and would have increased (or decreased) equity by £26.7m (£15.1m of which would have been due to the US Dollar movement). # **Transaction risk** The Group has a number of transaction-related foreign currency exposures, particularly between the US Dollar and the Pound Sterling, Thai Baht and Malaysian Ringgit. The Group seeks to layer in hedges within policy guardrails up to 100% of transaction-related exposures mainly on a rolling 15 to 18-month forward basis, but in some cases for periods of up to 60 months and applies hedge accounting where the forwards can be designated in a qualifying cash flow hedge relationship. Based on the net of the annual sales and purchase-related exposures, all transaction-related foreign currency exposures to Group profit after hedging in existence at 31 December 2021 are immaterial. The impact on equity is determined by the unrecognised portion of open forward contracts at the year-end. A 10% appreciation (or depreciation) of the US Dollar against the Pound Sterling, Thai Baht and the Malaysian Ringgit would have decreased (or increased) equity by £7.7m, £1.6m and £1.3m, respectively. # **Interest rate risk management** The Group has a policy of maintaining approximately 60% of its borrowing costs at fixed interest rates. The Group generally borrows long-term in fixed rates but at times may borrow at floating rates and swap into fixed depending on credit market conditions. Occasionally a portion of fixed debt interest is swapped into floating rates. The combination of maintaining an acceptable balance of fixed and floating rate debt, and the Group's policy of borrowing in foreign currency in proportion to its generation of foreign currency earnings, provides an effective hedge against the impact of interest rate and foreign currency volatility on total interest costs. As at year end 2021, the percentage of debt at fixed interest was 100% (2020 – 90%), excluding IFRS 16 lease liabilities from debt. The following sensitivity analysis of the Group's exposure to interest rate risk in 2021 has been retrospectively determined based on the exposure to applicable interest rates on financial assets and liabilities held throughout the financial year, with all other variables held constant (such as foreign exchange rates). The sensitivity assumptions are based on analysis reviewed by the Group's Treasury Committee. If variable interest rates had been 0.5% lower (or higher), the Group's profit before tax would have increased (or decreased) by £0.1m. Any fixed interest debt is held to maturity and not fair value adjusted through the Consolidated Income Statement. An increase (or decrease) of 0.5% in the market interest rate for the fixed rate debt held up to maturity would have decreased (or increased) the fair value of the Group's borrowings by £2.5m. The Group's sensitivity to interest rates has remained broadly consistent with prior period due to the high proportion of fixed debt. # **Credit risk management** The Group's credit risk is primarily attributable to its trade receivables. The credit quality of customers is assessed taking into account their financial position, past experience and other factors. Further details on determining the recoverability of trade receivables is provided in Note 18. The Group is guarantor under five leases in the UK, three of which arose on the disposal of a former Group-owned subsidiary. Credit risk on liquid funds and derivative financial instruments is limited because the counterparties are financial institutions with high credit ratings assigned by international credit rating agencies. The carrying amount of financial assets recorded in the Financial Statements, which is net of impairment losses, represents the Group's maximum exposure to credit risk. The Group participates in some non-recourse reverse factoring schemes which are arranged by customers. These are a form of non-recourse factoring that are common practice within the aerospace sector and with large customers in the Flexonics Division. In a reverse factoring scheme, a financial counterparty commits to pay supplier invoices ahead of due date in exchange for a discount interest charge. It is a funding solution initiated by the customer to provide the supplier with a low-cost financing arrangement. The Group participates in reverse factoring schemes as a way of reducing credit risk. The trade receivables reverse factored at 31 December 2021 were £16.8m (2020 – £17.6m). The net impact of reverse factoring on 2021 was a cash outflow in working capital of £0.9m (2020 – £13.3m outflow) and the discount interest presented within other finance costs is a charge of £9.2m in 2021 (2020 – £9.2m). 146 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 20. Financial instruments continued Liquidity risk management Liquidity risk reflects the risk that the Group will have insucient resources to meet its financial liabilities as they fall due. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and revolving credit facilities, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Cash flow forecasts are produced monthly, together with appropriate capacity planning and scenario analysis, to ensure that bank covenant and liquidity targets will be met. The Directors also regularly assess the balance of capital and debt funding of the Group, as part of a process to satisfy the Group’s long-term strategic funding requirements. As noted in the Financial Review on pages 60 to 63, the Group is currently in a well-funded position, with supportive lenders and has significant headroom under its committed borrowing facilities. Categories of financial instruments | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Carrying value of financial assets: Cash and cash equivalents 51.1 23.6 Trade receivables 85.2 71.5 Other receivables 0.2 0.6 Financial assets at amortised cost 136.5 95.7 Foreign exchange contracts – cash flow hedges 0.7 2.7 Foreign exchange contracts – held for trading 0.1 0.2 Total financial assets 137.3 98.6 Carrying value of financial liabilities: Bank overdrafts and loans 131.0 153.0 Lease liabilities 73.2 76.5 Trade payables 68.3 57.8 Other payables 54.6 49.1 Financial liabilities at amortised cost 327.1 336.4 Foreign exchange contracts – cash flow hedges 3.6 1.9 Foreign exchange contracts – held for trading – 0.5 Total financial liabilities 330.7 338.8 Undiscounted contractual maturity of financial liabilities at amortised cost: Amounts payable: On demand or within one year 152.3 121.1 In the second to fifth years inclusive 118.8 125.8 After five years 108.7 144.8 379.8 391.7 Less: future finance charges (52.7) (55.3) Financial liabilities at amortised cost 327.1 336.4 The carrying amount is a reasonable approximation of fair value for the financial assets and liabilities, excluding leases, noted above except for bank overdrafts and loans, disclosure of which are included within Note 19. An ageing analysis of trade receivables is disclosed within Note 18. 141SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 FINANCIAL STATEMENTS ## NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 20. Financial instruments continued Forward foreign exchange contracts The Group enters into forward foreign exchange contracts to hedge the exchange risk arising on the operation’s trading activities in foreign currencies in accordance with the Group’s accounting policy as set out in Note 2. At the Balance Sheet date, total notional amounts and fair values of outstanding forward foreign exchange contracts that the Group have committed are given below: | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Notional amounts: Foreign exchange contracts – cash flow hedges 128.9 118.8 Foreign exchange contracts – held for trading 4.1 9.4 Total 133.0 128.2 Less: amounts maturing within 12 months (79.1) (75.0) Amounts maturing after 12 months 53.9 53.2 Contractual maturity: Cash flow hedges balances due within one year: Outflow (76.8) (64.6) Inflow 75.2 66.2 Cash flow hedges balances due between one and two years: Outflow (22.4) (28 .1) Inflow 22.0 27.3 Cash flow hedges balances due between two and five years: Outflow (32.1) (25.7) Inflow 32.1 25.9 Held for trading balances due within one year: Outflow (4.0) (9.4) Inflow 4.1 9.1 Fair values: Foreign exchange contracts – cash flow hedges (2.9) 0.8 Foreign exchange contracts – held for trading 0.1 (0.3) Total (liability)/asset (2.8) 0.5 These fair values are based on market values of equivalent instruments at the Balance Sheet date, comprising £0.8m (2020 – £2.9m) assets included in trade and other receivables and £3.6m (2020 – £2.4m) liabilities included in trade and other payables. The fair value of currency derivatives that are designated and eective as cash flow hedges amounting to £2.6m loss (2020 – £0.8m gain) has been deferred in equity. Fair values The following table presents an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1–3 based on the degree to which the fair value is observable: Level 1 those fair values derived from quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 those fair values derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level 3 those fair values derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021142 ## 20. Financial instruments continued There has not been any transfer of assets or liabilities between levels. There are no non-recurring fair value measurements. Level 2 fair values are derived from future cash flows, of open forward contracts at 31 December, translated by the difference between contractual rates and observable forward exchange rates. | 31 December 2021 | Level 1 £m | Level 2 £m | Level 3 £m | Total £m | | --- | --- | --- | --- | --- | | **Assets** | | | | | | Foreign exchange contracts – cash flow hedges | – | 0.7 | – | 0.7 | | Foreign exchange contracts – held for trading | – | 0.1 | – | 0.1 | | Total assets | – | 0.8 | – | 0.8 | | **Liabilities** | | | | | | Foreign exchange contracts – cash flow hedges | – | 3.6 | – | 3.6 | | Foreign exchange contracts – held for trading | – | – | – | – | | Total liabilities | – | 3.6 | – | 3.6 | | 31 December 2020 | Level 1 £m | Level 2 £m | Level 3 £m | Total £m | | **Assets** | | | | | | Foreign exchange contracts – cash flow hedges | – | 2.7 | – | 2.7 | | Foreign exchange contracts – held for trading | – | 0.2 | – | 0.2 | | Total assets | – | 2.9 | – | 2.9 | | **Liabilities** | | | | | | Foreign exchange contracts – cash flow hedges | – | 1.9 | – | 1.9 | | Foreign exchange contracts – held for trading | – | 0.5 | – | 0.5 | | Total liabilities | – | 2.4 | – | 2.4 | An amount of £0.1m (2020 – £m) has been transferred to the Consolidated Income Statement, and is included within operating loss/profit. Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument. The Group enters into hedge relationships where the critical terms of the hedging instrument match exactly with the terms of the hedged item, and so a qualitative assessment of effectiveness is performed. If changes in circumstances affect the terms of the hedged item such that the critical terms no longer match exactly with the critical terms of the hedging instrument, the Group uses the hypothetical derivative method to assess effectiveness. Ineffectiveness is recognised on a cash flow hedge where the cumulative change in the designated component value of the hedging instrument exceeds on an absolute basis the change in value of the hedged item attributable to the hedged risk. In hedges of the above foreign exchange contracts this may arise if the timing of the transaction changes from what was originally estimated. The hedged forecast transactions denominated in foreign currency are expected to occur at various dates during the next 60 months. Amounts deferred in equity are recognised in the Consolidated Income Statement in the same period in which the hedged items affect profit or loss, which is generally within 12 months from the Balance Sheet date. In 2021 some cash flow hedging relationships were discontinued because forecast foreign currency transactions were no longer highly probable and no longer expected to occur. Previously accumulated gains or losses on the forward contracts were immediately reclassified to the income statement. These forward contracts, and the forward contracts entered to unwind the position, that remain at 31 December 2021 are presented in the balance sheet as held for trading assets. ## 21. Tax balance sheet ### Current tax The current tax receivable of £2.6m (2020 – £3.0m) includes excess tax paid to tax authorities that is expected to be recovered within 12 months by way of offset against future tax liabilities or refund. The majority of the Group's taxable profits arise in countries, including the US, where the estimated tax liabilities are paid in on-account instalments during the year to which they relate and are largely paid at the Balance Sheet date. The current tax liability of £14.6m (2020 – £19.8m) includes £1.3m (2020 – £1.4m) tax due on profits of the current and prior years as well as £16.7m (2020 – £19.5m) provisions for tax uncertainties that represent amounts expected to be paid but by their nature, there is uncertainty over timing and eventual settlement. Amounts receivable of £3.4m (2020 – £1.1m) that are considered to have a right of offset against provisions for tax uncertainties are also included within the current tax liability. The Group recognises provisions for tax items which are considered to have a range of possible tax outcomes and separately accounts for interest that may be due thereon. The range of reasonably possible outcomes considered by the Board could increase those tax liabilities by £8.6m (2020 – £8.0m). These uncertainties exist due to a number of factors including differing interpretations of local tax laws and the determination of appropriate arm's length pricing in accordance with OECD transfer pricing principles on internal transactions and financing arrangements. In calculating the carrying amount of provisions, Management estimates the tax which could become payable as a result of differing interpretations and decisions by tax authorities in respect of transactions and events whose treatment for tax purposes is uncertain. In accordance with IFRIC 23, individual provisions are established based on an assessment of whether it is the most likely individual outcome, or the expected outcome on a probability basis that is likely to best reflect the resolution of the uncertainty. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 143 FINANCIAL STATEMENTS ## NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 21. Tax balance sheet continued Deferred tax liabilities and assets The following are the deferred tax liabilities and assets recognised by the Group and movements thereon during the current and prior reporting period: Accelerated Unrealised Goodwill and Retirement R&D Other tax FX intangible benefits tax credits Tax temporary depreciation gains amortisation losses dierences Total £m £m £m £m £m £m £m £m At 1 January 2020 19.4 (0.4) 25.6 7.2 (1.9) (0.2) (18.6) 31.1 (Credit)/charge to Consolidated Income Statement (2.3) 0.5 (18.5) 0.5 (4.4) (3.2) (3.0) (30.4) Charge/(credit) to other comprehensive income – 0.5 – (1.6) – – – (1.1) Balances acquired/disposed – – – – – – – – Exchange dierences (0.4) 0.1 0.4 0.3 0.3 – 0.5 1.2 At 1 January 2021 16.7 0.7 7.5 6.4 (6.0) (3.4) (21.1) 0.8 (Credit)/charge to Consolidated Income Statement (3.4) (0.3) (2.0) 2.8 0.3 (1.4) 2.5 (1.5) Charge/(credit) to other comprehensive income 0.1 (0.8) – 6.4 – – (0.1) 5.6 Charge/(credit) direct to equity – – – – – – (0.1) (0.1) Exchange dierences (0.2) – 0.1 – (0.1) 0.2 – – Liability/(asset) at 31 December 2021 13.2 (0.4) 5.6 15.6 (5.8) (4.6) (18.8) 4.8 Other temporary dierences include assets in the US of £13.6m (2020 – £16.1m) in respect of inventory provisions, accruals and other expenses where tax relief is only available when items are realised or paid. Also included are assets held in respect of IFRS 16 of £1.5m (2020 – £1.1m) and share based compensation (£1.1m) (2020 – £0.3m). The deferred tax liability in respect of Retirement benefits relates primarily to the Senior plc UK defined benefit pension plan £18.0m (2020 – £8.8m), net of deferred tax assets on other schemes. UK deferred tax assets and liabilities at the Balance Sheet date have been stated at the future rate of UK corporation tax of 25% at which assets are expected to be realised or liabilities settled. This has resulted in an overall increase in the net deferred tax liability by £2.1m in the year with a £0.6m credit in the Income Statement and a £2.7m charge through Other Comprehensive Income. Certain deferred tax assets and liabilities have been oset. The following is the analysis of the deferred tax balances, after oset: | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Deferred tax liabilities 10.5 5.5 Deferred tax assets (5.7) (4.7) 4.8 0.8 Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available, including those arising from the reversal of other taxable temporary dierences, against which the assets can be utilised. At the Balance sheet date the Group has recognised deferred tax assets in respect of losses of £4.6m (2020 – £3.4m), including £3.2m (2020 – £2.4m) recognised against deferred tax liabilities and £1.4m (2020 – £1.0m) recognised based on anticipated profits in the Group’s five year forecast to 2026 as approved by the Board. Due to uncertainty as to the availability of future profits against which tax losses may be utilised, £23.6m (2020 – £25.8m) of losses have not been recognised. Included in unrecognised tax losses are losses of £13.8m (2020 – £9.6m) that will expire over a period of one to nine years. Other losses may be carried forward indefinitely. At the Balance Sheet date, a deferred tax liability of £0.2m (2020 – £0.1m) has been recognised in respect of the aggregate amount of temporary dierences associated with undistributed earnings of subsidiaries expected to reverse in the foreseeable future. No temporary dierence has been recognised in respect of £34.5m (2020 – £38.7m) of undistributed earnings, which may be subject to a withholding tax, as the Group is in a position to control the timing of the reversal of the temporary dierences and it is not probable that such dierences will reverse in the foreseeable future. At the Balance Sheet date, the Group had £5.0m (2020 – £5.0m) of surplus Advanced Corporation Tax (‘ACT’), previously written o, for which no deferred tax asset has been recognised as it is unlikely to be recovered in the foreseeable future due to the UK earnings profile. The Group also has £18.0m (2020 – £18.0m) of unused capital losses. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021144 22. Lease liabilities When measuring lease liabilities, the Group discounts lease payments using incremental borrowing rates, determined on a lease portfolio basis. | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | | 2021 | | 2020 | | Undiscounted contractual maturity of lease liabilities: | | £m | | £m | Amounts payable: On demand or within one year 10.8 10.3 In the second to fifth years inclusive 35.6 30.9 After five years 60.9 67.3 107.3 108.5 Less: future finance charges (3 4.1) (32.0) Lease liabilities 73.2 76.5 | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | | 2021 | | 2020 | | Amounts recognised in the Consolidated Income Statement: | | £m | | £m | Interest on lease liabilities 2.6 3.0 Income from sub-leasing right-of-use assets (0.1) (0.1) Expenses relating to short-term leases 0.1 0.1 Expenses relating to low value leases – – 2.6 3.0 | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | | 2021 | | 2020 | | Amounts recognised in the Consolidated Cash Flow Statement | | £m | | £m | Cash outflow for leases 11.0 10.9 23. Trade and other payables Trade and other payables at 31 December comprise the following: | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Current liabilities Trade payables 68.3 57.8 Social security and PAYE 5.7 7.9 Value added tax 1.6 2.4 Foreign exchange contracts 3.6 2.4 Accrued expenses 63.8 55.6 Total trade and other payables 143.0 126.1 The Directors consider that the carrying amount of trade payables approximates to their fair value. The average credit period taken for trade purchases is 56 days (2020 – 55 days). 24. Provisions Legal claims and contractual Warranty Restructuring matters Total £m £m £m £m At 1 January 2020 6.0 2.9 12.6 21.5 Additional provision in the year 1.9 21.2 3.1 26.2 Utilisation of provision (1.1) (15.2) (5.5) (21.8) Release of unused amounts (0.1) – – (0.1) Exchange dierences (0.1) – 0.1 – At 1 January 2021 6.6 8.9 10.3 25.8 Additional provision in the year 1.3 2.8 2.1 6.2 Utilisation of provision (1.0) (9.8) (3.2) (14.0) Release of unused amounts (0.1) (0.3) (1.3) (1.7) Exchange dierences 0.1 (0.3) (0.1) (0.3) At 31 December 2021 6.9 1.3 7.8 16.0 Included in current liabilities 4.9 1.3 7.6 13.8 145SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 FINANCIAL STATEMENTS ## NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 24. Provisions continued Warranty Provisions for warranty costs are based on an assessment of future claims with reference to past experience. £4.9m of costs are expected to settle within the next 12 months. Restructuring The Group continued to implement further restructuring in 2021, discussed in further detail in Note 9. The amount recorded is expected to be fully utilised in 2022. Legal claims and contractual matters During the year ended 31 December 2021, £2.3m settlement payments were paid relating to costs associated with class action lawsuits claiming Ametek had polluted the groundwater during its tenure as owners of the site where Senior Aerospace Ketema is currently located, comprising £2.4m provision at 1 January 2021 and £0.1m of exchange dierences. Other provisions at 31 December 2021 comprise £7.8m (2020 – £7.9m) relating to contractual matters that have arisen in the ordinary course of business, the settlement of which are subject to ongoing discussions. Management exercises judgment to determine the best estimate of the most likely outcome, having considered each provision separately and the possible range of outcomes. Amounts are recorded for known issues based on past experience of similar items and other known factors and circumstances. As with any judgment there is a high degree of inherent uncertainty, particularly with legal proceedings and claims, and the actual amounts of the settlement could dier from the amount provided. 25. Share capital | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Issued and fully paid: 419.4 million ordinary shares of 10p each 41.9 41.9 No shares were issued during 2021 and 2020. The Company has one class of ordinary shares which carry no right to fixed income. 26. Share premium account | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Balance at 1 January 14.8 14.8 Movement in year – – Balance at 31 December 14.8 14.8 27. Equity reserve | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Balance at 1 January 5.1 5.5 Transfer to retained earnings reserve (2.8) (3.4) Movement in year 3.5 3.0 Balance at 31 December 5.8 5.1 The transfer to retained earnings reserve is in respect of equity-settled share-based payments that vested during the year. The movement in the year of £3.5m (2020 – £3.0m) is in respect of the share-based payment charge for the year. 28. Hedging and translation reserves | | Hedging | | Translation | | | | | Hedging | | Translation | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | reserve | | | reserve | | | Total | reserve | | | reserve | | | Total | | Year ended | | | Year ended | | | Year ended | | Year ended | | Year ended | | | Year ended | | | | | 2021 | | | 2021 | | 2021 | | 2020 | | | 2020 | | 2020 | | | | £m | | | £m | | £m | | £m | | | £m | | £m | Balance at 1 January (37.2) 75.1 37.9 (40.2) 79.1 38.9 Exchange dierences on translation of overseas operations – (3.8) (3.8) – (3.6) (3.6) Foreign exchange losses/(gains) recycled to the Income Statement on disposal 2.6 (5.5) (2.9) 0.9 (0.4) 0.5 Change in fair value of hedging derivatives (3.4) – (3.4) 2.6 – 2.6 Tax on foreign exchange contracts- cash flow hedges 0.8 – 0.8 (0.5) – (0.5) Balance at 31 December (37. 2) 65.8 28.6 (37.2) 75.1 37.9 Hedging Reserve At 31 December 2021, the hedging reserve comprises net investment hedging losses of £35.2m (2020 – £37.8m), foreign exchange contracts – cash flow hedge losses of £2.6m (2020 – £0.8m gains) and related tax gains of £0.6m (2020 – £0.2m losses). SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021146 28. Hedging and translation reserves continued Movement in fair value of foreign exchange contracts – cash flow hedges: | Derivatives at fair | | | | Derivatives at fair | | | | | | Derivatives at fair | | | Derivatives at fair | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | value through | | | | value through | | | | | | value through | | | value through | | | | | Hedging Reserve | | | | Income Statement | | | | | Total | Hedging Reserve | | | Income Statement | | | | Total | | | | Year ended | | | | Year ended | | Year ended | | | Year ended | | | Year ended | | Year ended | | | | | | 2021 | | | | 2021 | | 2021 | | | 2020 | | | 2020 | | 2020 | | | | | £m | | | | £m | | £m | | | £m | | | £m | | £m | Balance at 1 January 0.8 (0.3) 0.5 (1.8) (0.3) (2.1) Fair value movement recognised in Hedging reserve (2 .1) – (2.1) 2.0 – 2.0 Fair value movement recognised in Income Statement – (1.2) (1.2) – 0.6 0.6 Fair value movement recognised in Hedging reserve and Income Statement (1.3) 1.3 – 0.6 (0.6) – Balance at 31 December (2.6) (0.2) (2.8) 0.8 (0.3) 0.5 The Group uses foreign currency forward contracts to manage its foreign currency risk associated with its highly probable forecast transactions. These contracts are designated as cash flow hedge relationships. To the extent these hedges are eective, the change in fair value of the hedging instrument is recognised in the hedging reserve. The sum of the fair value of foreign exchange contracts deferred in the hedging reserve and recognised in the Income Statement is presented as foreign exchange contracts – cash flow hedges. See Note 20 for further details. Costs of Hedging The group designates the forward component of foreign currency forward contracts as hedging instruments in cash flow hedge relationships. 29. Retained earnings | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Balance at 1 January 305.1 472.5 Dividends paid – – Profit/(loss) for the year 24.2 (158.5) Pension actuarial gain/(loss) 19.7 (11.4) Transfer from equity reserve 2.8 3.4 Transfer from own share reserve (2.3) (2.5) Tax on deductible temporary dierences (6.3) 1.6 Balance at 31 December 343.2 305.1 30. Own shares | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Balance at 1 January (11.5) (14.0) Transfer to retained earnings reserve 2.3 2.5 Purchase of new shares – – Balance at 31 December (9.2) (11. 5) The own shares reserve represents the cost of shares purchased in the market and held by the Senior plc Employee Benefit Trust to satisfy options under the Group’s share option schemes (see Note 33). At 31 December 2021, the number of own shares held by the Senior Plc Employee Benefit Trust is 3,463,455 (2020 – 4,336,043). 31. Disposal activities On 22nd April 2021, the Group sold its stand alone, build-to-print helicopter structures operating business, Senior Aerospace Connecticut, based in the USA. The decision to sell was based on its primary focus on build-to-print parts for the rotary sector, with proceeds from the sale strengthening the Group’s balance sheet and providing greater flexibility for the Group to operate within its capital deployment framework. For the year ended 31 December 2021, Senior Aerospace Connecticut external revenue was £8.1m (at 2021 exchange rate; 2020 – £36.2m at 2020 exchange rate) and operating profit was £0.8m (2020 – £5.1m). A gain of £24.2m arose on disposal after taking fair value of net assets disposed (£28.4m including £15.1m of goodwill, £7.5m property, plant and equipment and £5.8m of working capital), oset by net cash consideration of £49.7m after £1.8m disposal costs, and the previously recorded foreign exchange gain that has been recycled to the Income Statement of £2.9m. In 2021, the Group received £0.2m (2020 – £0.4m) deferred consideration relating to the disposal of its Aerospace business Senior Aerospace Absolute Manufacturing. 147SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 FINANCIAL STATEMENTS ## NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 32. Notes to the consolidated cash flow statement A) Reconciliation of operating profit/loss to net cash from operating activities | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Operating profit/ (loss) 10.5 (177. 3) Adjustments for: Depreciation of property, plant and equipment 46.3 52.1 Amortisation of intangible assets 1.5 9.5 Profit on sale of fixed assets – (0.1) Share-based payment charges 3.5 3.0 Pension payments in excess of service cost (5.1) (5.0) Corporate undertaking costs (4.8) (4.6) Share of joint venture (0.2) (0.2) (Increase)/decrease in inventories (7. 2) 19.6 (Increase)/decrease in receivables (16.1) 4 8.1 Increase/(decrease) in payables and provisions 11.6 (20.1) Goodwill impairment – 134.3 Restructuring impairment of property, plant and equipment and software 3.8 8.0 US class action lawsuits (2.3) (3.9) Working capital and provisions currency movements (1.1) (0.2) Cash generated by operations 40.4 63.2 Income taxes paid (5.3) (3.5) Interest paid (8.1) (10.8) Net cash from operating activities 27.0 48.9 B) Free cash flow Free cash flow, a non-statutory item, enhances the reporting of the cash-generating ability of the Group prior to corporate activity such as acquisitions, restructuring, disposal activities, financing and transactions with shareholders. It is used as a performance measure by the Board and Executive Committee and is derived as follows: | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | | 2021 | | 2020 | | Notes | | £m | | £m | Net cash from operating activities 27.0 48.9 Corporate undertaking costs 9 4.8 4.6 Net Restructuring cash paid 24 0.9 15.2 US class action lawsuits 24 2.3 3.9 Interest received 0.1 0.2 Proceeds on disposal of property, plant and equipment 0.2 0.5 Purchases of property, plant and equipment (20.2) (25.2) Purchase of intangible assets (1.1) (1.6) Free cash flow 14.0 46.5 C) Analysis of net debt | | | At | Net | | | | | Other | | At | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 1 January | | Cash | Non | Exchange | | | Lease | 31 December | | | | | 2021 | flow | Cash | movement | | Movements | | | 2021 | | Notes | | £m | £m | £m | | £m | | £m | | £m | Cash and bank balances 23.6 27.8 – (0.3) – 51.1 Overdrafts (0.4) 0.4 – – – – Cash and cash equivalents 23.2 28.2 – (0.3) – 51.1 Debt due within one year – – (14.5) (0.3) – (14.8) Debt due after one year (152.6) 21.1 14.5 0.8 – (116.2) Lease liabilities 22 (76.5) 8.4 – 0.5 (5.6) (73.2) Liabilities arising from financing activities (229.1) 29.5 – 1.0 (5.6) (204.2) Total (205.9) 57.7 – 0.7 (5.6) (15 3.1) Other lease movements include lease additions and modifications of £5.6m. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021148 32. Notes to the consolidated cash flow statement continued | | | At | Net | | | | | Other | | At | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 1 January | | Cash | Non | Exchange | | | Lease | 31 December | | | | | 2020 | flow | Cash | movement | | Movements | | | 2020 | | Notes | | £m | £m | £m | | £m | | £m | | £m | Cash and bank balances 15.8 7.9 – (0.1) – 23.6 Overdrafts (0.7) 0.2 – 0.1 – (0.4) Cash and cash equivalents 15.1 8.1 – – – 23.2 Debt due within one year (15.0) 15.7 – (0.7) – – Debt due after one year (146.0) (8.5) -- 1.9 – (152.6) Lease liabilities 22 (83.7) 7.9 – 1.2 (1.9) (76.5) Liabilities arising from financing activities (244.7) 15.1 – 2.4 (1.9) (229.1) Total (229.6) 23.2 – 2.4 (1.9) (205.9) Other lease movements include lease additions and modifications of £1.9m. | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Cash and cash equivalents comprise: Cash and bank balances 51.1 23.6 Overdrafts – (0.4) Total 51.1 23.2 Cash and cash equivalents (which are presented as a single class of assets on the face of the Consolidated Balance Sheet) comprise cash at bank and other short-term highly liquid investments with a maturity of three months or less. The Directors consider that the carrying amount of cash and cash equivalents approximates to their fair value. D) Analysis of working capital and provisions Working capital comprises the following: | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Inventories 145.2 147.6 Trade and other receivables 98.0 85.3 Trade and other payables (143.0) (126.1) Working capital, including derivatives 100.2 106.8 Items excluded: Foreign exchange contracts 2.8 (0.5) Deferred consideration relating to disposals – current – (0.3) Total 103.0 106.0 Working capital and provisions movement, net of restructuring items, a non-statutory cash flow item, is derived as follows: | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | (Increase)/decrease in inventories (7. 2) 19.6 (Increase)/decrease in receivables (16.1) 4 8.1 Increase/(decrease) in payables and provisions 11.6 (20.1) Working capital and provisions movement, excluding currency eects (11.7) 47.6 Items excluded: Decrease/(increase) in restructuring related inventory impairment 1.5 (9.3) Decrease/(increase) in net restructuring provision and other receivables 7.6 (6.0) Total (2.6) 32.3 149SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 FINANCIAL STATEMENTS ## NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 33. Share-based payments The Group recognised total expenses of £3.8m (2020 – £3.0m) related to share-based payments, of which £3.5m (2020 – £3.0m) related to equity- settled share-based payments, and £0.3m (2020 – £nil) related to social security costs on share-based payments. As at 31 December 2021, the Group had a liability of £0.3m (2020 – £0.1m) arising from share-based payments relating to social security costs. A) 2005 Long-Term Incentive Plan Equity-settled Long-Term Incentive Plans On 12 March 2021, 4,396,538 shares were awarded under the 2005 Long-Term Incentive Plan. Awards made under this plan prior to 2021 have a three-year vesting period, subject to earnings per share (EPS) and total shareholder return (TSR) performance conditions being met. Half the awards have an attaching performance target for EPS growth over the three-year performance period of at least 4% per annum above RPI. The other half of the awards begin to vest if the Group’s TSR falls in the top half of a comparator group at the end of the three-year performance period. For awards made in 2021 Adjusted EPS and TSR metrics have been retained and ROCE added as a third performance measure, with each metric having an equal weighting of one third. The EPS target is now expressed as an absolute number rather than a growth percentage. Vesting levels increase with higher performance. The awards are settled by delivering shares to the participants. The estimated fair value for the awards granted in the year, excluding for the Executive Directors, with EPS conditions is 112.80p, which is the share price at the date of grant. The estimated fair value for the awards granted in the year, excluding for the Executive Directors, with TSR conditions is 94.80p per share reflecting an adjustment of 16% to the fair value of the awards with EPS conditions due to the stringent TSR condition. The respective fair values for awards made to the Executive Directors is 92.50p and 77.70p reflecting the two year retention period. These fair values were calculated by applying a binomial option pricing model. This model incorporates a technique called “bootstrapping”, which models the impact of the TSR condition. The model inputs at the date of grant were the share price (112.80p for the main award), expected volatility of 54% per annum, and the performance conditions as noted above. Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous three years. The following share awards were outstanding as at 31 December 2021 and 2020: | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | Number of | | Number of | | | | shares | | shares | Outstanding at 1 January 7,089,567 6,370,205 Granted 4,455,281 3,576,238 Exercised (58,743) (6 63,104) Forfeited (2,051,864) (2,19 3,772) Outstanding at 31 December 9,434,241 7,0 8 9,5 67 B) Enhanced SMIS Deferred Share Award On 12 March 2021, 694,536 shares were awarded under the Enhanced SMIS Deferred Share Award. Shares earned under this award have a three- year deferral period and would be subject to forfeiture by a “bad leaver” over that deferral period. There are no performance criteria for this award. The awards are settled by delivering shares to the participants. The estimated fair value for the awards granted in the year is 112.80p per share, which is the share price at the date of grant. The following share awards were outstanding as at 31 December 2021 and 2020: | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | Number of | | Number of | | | | shares | | shares | Outstanding at 1 January 1,734,683 1,187,6 6 9 Granted 758,551 794,715 Exercised (425,422) (247,701) Forfeited (64,121) – Outstanding at 31 December 2,003,691 1,734,683 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021150 33. Share-based payments continued C) Savings-Related Share Option Plan The Company operates a Savings-Related Share Option Plan for eligible employees across the Group. There are no performance criteria for this arrangement and options are issued to all participants in accordance with the HM Revenue & Customs rules for such savings plans. Savings-Related Share Options were last issued on 26 May 2021. The following options were outstanding as at 31 December 2021 and 2020: Year ended 2021 Year ended 2020 Weighted Weighted Number of average Number of average share exercise share exercise options price options price Outstanding at 1 January 1,94 4,121 217.67p 4,390,225 215.95p Granted 3,247,159 118.40 p – – Exercised – – – – Forfeited (676,596) 204.63p (1,880,038) 212.34p Expired (261,180) 207.20p (566,066) 222.00p Outstanding at 31 December 4,253,504 144.61p 1,9 4 4,121 217.67p Exercisable at 31 December – – 261,180 207.20p No shares were exercised in 2021 and 2020. The options outstanding at 31 December 2021 had exercise prices of 118.40p and 219.30p per share, and a weighted average remaining contractual life of 2.4 years. The options outstanding at 31 December 2020 had exercise prices of 219.30p and 207.20p per share, and a weighted average remaining contractual life of 1.7 years. D) Restricted Share Awards On 12 March 2021, 110,000 shares were awarded under this plan. Shares granted under this award have a three-year deferral period and would be subject to forfeiture by a “bad leaver” over that deferral period. There are no performance criteria for this award. The awards are settled by delivering shares to the participants. The estimated fair value for the awards granted in the year is 112.80p per share, which is the share price at the date of grant. The following share awards were outstanding as at 31 December 2021 and 2020: | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | Number of | | Number of | | | | shares | | shares | Outstanding at 1 January 2,208,538 170,000 Granted 110,000 2,073,538 Exercised (388,423) (25,000) Forfeited – (10,000) Outstanding at 31 December 1,930,115 2,208,538 151SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 34. Retirement benefit schemes The Group operates a number of pension plans in the UK, North America and Europe. These include both defined contribution arrangements and defined benefit arrangements. The Senior plc Pension Plan ("the UK Plan"), which is a funded scheme in the UK and closed to future accrual at the end of 6 April 2014, has the largest pension obligation in the Group and Company. This plan provides benefits based on final pensionable emoluments for the employees of the Group and Company. The latest full actuarial valuation was carried out as at 5 April 2019 and, for the purposes of accounting under IAS19, this valuation has been rolled forward to 31 December 2021. In addition, the Group operates two defined benefit plans in the US, one of which was closed to future accrual from October 2009. The second plan was closed to future participants from September 2013, and the Executive section was also closed to future accruals from December 2013. Separate disclosure is made for the funded UK and US defined benefit arrangements. In both the UK and US, the assets of funded plans are held in separate trustee administered funds managed by independent financial institutions and have pension costs assessed by consulting actuaries using the Projected Unit Method. The Trustees are required to act in the best interests of the plans' beneficiaries. The Group also has a small number of unfunded post-retirement plans, including a closed healthcare scheme in the US. Separate disclosure is provided for these arrangements. Further details on the arrangement of the UK Plan are given below. The Trustee of the UK Plan is Senior Trustee Limited. The appointment of the Directors to the Board is determined by the Articles of Association of Senior Trustee Limited. There are seven Trustee Directors in total and in accordance with statutory requirements under the Pensions Act 2004 at least three must be a Member Nominated Director. Currently, there are three Member Nominated Directors and four Directors who have been nominated by the Company, of which the Chairman and one other Director are viewed as independent. The UK Plan exposes the Company to a number of risks. In particular: - Uncertainty in benefit payments – the value of the obligations will ultimately depend on the amount of benefits paid out. This in turn will depend on factors such as the level of inflation and how long individuals live. - Volatility in asset values – the value of the assets held to meet future benefit payments is volatile, for example due to changes in stock markets and interest rates. - Uncertainty in cash funding – movements in the value of the UK Plan's obligations or assets may result in the Company being required to provide higher levels of cash funding. The investment strategy for the UK Plan is decided by the Trustee in consultation with Senior plc. The primary investment objective is for the Plan to be able to meet benefit payments as they fall due. The UK Plan's average duration is around 15 years and benefits are expected to be paid for the next 60 to 70 years. These cash flow payments are expected to reach a peak around 2029, and gradually decline thereafter as the membership matures. In setting this strategy, the Trustee considers a wide range of asset classes, the risk and rewards of a number of possible asset allocation options, the sustainability of each asset class within each strategy, and the need for appropriate diversification between different asset classes. The primary investment objective is implemented by setting strategic asset allocations using a "linear de-risking" approach. Under this approach, the Plan's current asset strategy of 77% invested in low-risk matching assets, such as 'liability driven investments' (LDI) and bonds, and 23% in higher-risk return seeking assets, such as equities, is expected to be linearly moved into 100% matching assets over the period from April 2021 to April 2036. The LDI allocation helps to mitigate investment risk for the UK Plan by minimising the fluctuations in the UK Plan's funding levels arising from changes in the value of the liabilities. This is achieved through hedging movements in the funding liabilities caused by changes in interest rates and inflation expectations. The Trustee continues to review its investment strategy and has also implemented a switching mechanism to secure any outperformances of equities relative to bonds, by selling equities to buy bonds. While the UK Plan was in a deficit position of £10.2m as at 5 April 2019 when measured on the Trustee's funding basis, the UK Plan is in a surplus position of £72.2m as at 31 December 2021 (2020 – £46.5m surplus) when measured on an IAS 19 basis. The difference between the triennial funding and annual IAS 19 valuation relates to the assumptions used. For example, the funding discount rate is based on the UK Plan's stated investment strategy, as opposed to the yields available on corporate bonds for the IAS 19 discount rate. The IAS 19 surplus position on the UK Plan is recognised as an asset in the Consolidated and Company Balance Sheet, with no requirement to recognise an additional liability on the UK Plan, on the grounds that the Company has an unconditional right to a refund, assuming the gradual settlement of Plan liabilities over time until all members have left. In considering this, the Company has taken into account that the Trustees do not have unilateral powers to wind up the Plan or modify benefits. Cash contributions to the UK Plan are set by agreement between the Company and the Trustee of the UK Plan. These are set in accordance with legislation and take account of the intention to further reduce the risk associated with the UK Plan's investment strategy, as set out above. The contributions were last reviewed as at 5 April 2019 and were based on a forecast deficit at that time, as part of the 2019 triennial funding valuation. The Company has agreed with the Trustee of the UK Plan to make scheduled deficit reduction contributions over the three year period from April 2019 to March 2022. Annual cash funding contributions of £5.5m are expected over this period, subject to review and amendment as appropriate, at the next funding valuation in 2022. The estimated contributions expected to be paid during 2022 in the US funded plans is £2.2m. The Group is ultimately responsible for making up any shortfall in the UK Plan over a period agreed with the Trustees. To the extent that actual experience is different from that assumed, the funding position will be better or worse than anticipated. As such, the contributions required by the Group could vary in the future. 152 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 ### 34. Retirement benefit schemes continued #### a) Defined contribution schemes The Group has a number of different defined contribution and government-sponsored arrangements in place in the countries in which it operates. None of these are individually material to the Group and the aggregate cost of such schemes for the period was £8.6m (2020 – £9.2m). #### b) Defined benefit schemes The amount included in the Consolidated Balance Sheet arising from the Group's obligations in respect of its defined benefit plans is set out below. | | 31 December 2021 | | | | 31 December 2020 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | UK plans funded £m | US plans funded £m | Unfunded plans £m | Total £m | UK plans funded £m | US plans funded £m | Unfunded plans £m | Total £m | | Present value of defined benefit obligations | (294.9) | (56.2) | (5.7) | (356.8) | (317.7) | (58.8) | (6.2) | (382.7) | | Fair value of plan assets | 367.1 | 50.9 | – | 418.0 | 364.2 | 54.1 | – | 418.3 | | Plan surplus/(deficit) per Consolidated Balance Sheet | 72.2 | (5.3) | (5.7) | 61.2 | 46.5 | (4.7) | (6.2) | 35.6 | #### c) Movements in the present value of defined benefit obligations were as follows: | | 31 December 2021 | | | | 31 December 2020 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | UK plans funded £m | US plans funded £m | Unfunded plans £m | Total £m | UK plans funded £m | US plans funded £m | Unfunded plans £m | Total £m | | At 1 January | 317.7 | 58.8 | 6.2 | 382.7 | 285.8 | 54.6 | 6.9 | 347.3 | | Current service cost | – | 0.4 | 0.3 | 0.7 | – | 0.4 | 0.5 | 0.9 | | Past service cost | – | – | – | – | 0.2 | – | – | 0.2 | | Interest cost | 3.8 | 1.5 | – | 5.3 | 5.7 | 1.8 | 0.1 | 7.6 | | Experience on benefit obligations | 2.5 | – | – | 2.5 | (1.2) | 1.1 | – | (0.1) | | Actuarial (gains)/losses – financial | (15.8) | (1.8) | – | (17.6) | 35.4 | 6.0 | – | 41.4 | | Actuarial (gains)/losses- demographic | (0.3) | 0.2 | – | (0.1) | 3.8 | (0.4) | – | 3.4 | | Benefits paid | (13.0) | (3.7) | (0.4) | (17.1) | (12.0) | (2.7) | (1.6) | (16.3) | | Disposal activities | – | – | – | – | – | – | – | – | | Exchange differences | – | 0.8 | (0.4) | 0.4 | – | (2.0) | 0.3 | (1.7) | | At 31 December | 294.9 | 56.2 | 5.7 | 356.8 | 317.7 | 58.8 | 6.2 | 382.7 | #### d) Movements in the fair value of plan assets were as follows: | | 31 December 2021 | | | | 31 December 2020 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | UK plans funded £m | US plans funded £m | Unfunded plans £m | Total £m | UK plans funded £m | US plans funded £m | Unfunded plans £m | Total £m | | At 1 January | 364.2 | 54.1 | – | 418.3 | 334.7 | 52.6 | 1.1 | 388.4 | | Interest on plan assets | 4.4 | 1.3 | – | 5.7 | 6.8 | 1.7 | – | 8.5 | | Actual return on plan assets less interest | 6.1 | (1.6) | – | 4.5 | 29.6 | 3.7 | – | 33.3 | | Contributions from employer | 6.0 | – | – | 6.0 | 5.6 | 0.6 | – | 6.2 | | Benefits paid | (13.0) | (3.7) | – | (16.7) | (12.0) | (2.7) | (1.1) | (15.8) | | Running costs | (0.6) | – | – | (0.6) | (0.5) | (0.1) | – | (0.6) | | Exchange differences | – | 0.8 | – | 0.8 | – | (1.7) | – | (1.7) | | At 31 December | 367.1 | 50.9 | – | 418.0 | 364.2 | 54.1 | – | 418.3 | #### e) Amounts recognised in the Consolidated Income Statement in respect of these defined benefit schemes are as follows: | | 31 December 2021 | | | | 31 December 2020 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | UK plans funded £m | US plans funded £m | Unfunded plans £m | Total £m | UK plans funded £m | US plans funded £m | Unfunded plans £m | Total £m | | Current service cost included within operating loss/profit | – | 0.4 | 0.3 | 0.7 | – | 0.4 | 0.5 | 0.9 | | Running costs | 0.6 | – | – | 0.6 | 0.5 | 0.1 | – | 0.6 | | Past service cost | – | – | – | – | 0.2 | – | – | 0.2 | | Charge included within operating profit/loss | 0.6 | 0.4 | 0.3 | 1.3 | 0.7 | 0.5 | 0.5 | 1.7 | | Included within finance (income)/costs | (0.6) | 0.2 | – | (0.4) | (1.1) | 0.1 | 0.1 | (0.9) | | Amount recognised in the Income Statement | – | 0.6 | 0.3 | 0.9 | (0.4) | 0.6 | 0.6 | 0.8 | SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 153 FINANCIAL STATEMENTS # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ## 34. Retirement benefit schemes continued ### f) Amounts recognised in other comprehensive income are as follows: | | 31 December 2021 | | | | 31 December 2020 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | UK plans funded £m | US plans funded £m | Unfunded plans £m | Total £m | UK plans funded £m | US plans funded £m | Unfunded plans £m | Total £m | | Net actuarial gain/(losses) in the year due to: | | | | | | | | | | – Change in financial assumptions | 15.8 | 1.8 | – | 17.6 | (35.4) | (6.0) | – | (41.4) | | – Change in demographic assumptions | 0.3 | (0.2) | – | 0.1 | (3.8) | 0.4 | – | (3.4) | | – Experience adjustments on benefit obligations | (2.5) | – | – | (2.5) | 1.2 | (1.1) | – | 0.1 | | Actual return on plan assets less interest on benefit obligations | 6.1 | (1.6) | – | 4.5 | 29.6 | 3.7 | – | 33.3 | | Gains/(losses) recognised in other comprehensive income | 19.7 | – | – | 19.7 | (8.4) | (3.0) | – | (11.4) | Actuarial gains of £19.7m (2020 – losses of £11.4m) have been recognised in the Statement of Comprehensive Income. The cumulative amount of actuarial losses recognised in the Statement of Comprehensive Income as at 31 December 2021 is £23.0m (2020 – £42.7m). ### g) Assets and assumptions in funded plans | | UK plans funded | | US plans funded | | | --- | --- | --- | --- | --- | | | 2021 £m | 2020 £m | 2021 £m | 2020 £m | | Fair value of plan assets | | | | | | Equities | 28.6 | 32.9 | – | – | | Bonds | 126.6 | 127.5 | 50.9 | 54.1 | | Gifts | 157.9 | 158.7 | – | – | | Diversified growth fund | 37.7 | 41.2 | – | – | | Cash and net current assets | 16.3 | 5.9 | – | – | | Total | 367.1 | 364.2 | 50.9 | 54.1 | | Actual return on plan assets | 10.5 | 36.4 | (0.3) | 5.4 | The UK Plan's assets are invested in pooled funds, which are invested exclusively within instruments with quoted market prices in an active market, with the exception of the Plan's holdings in insurance annuity policies, valued at £4.7m (2020 – £5.5m). The value of the invested assets has been measured at bid value and the value of the scheme benefits covered by the insurance annuity policies has been set equal to the value of the corresponding obligations. The Plan's equities are split between UK and overseas companies, with a larger allocation to the overseas market. The UK equities are passively invested in line with the FTSE All-Share Index and the overseas equities are passively invested in line with the FTSE World ex-UK GBP Hedged Index. Therefore, the Plan is exposed to a typical breakdown of industries within those equity indices. The Plan's corporate bond allocation is split between an actively managed mandate and a "buy and maintain" mandate, which seeks to hold a high quality portfolio while minimising portfolio turnover. Both mandates are predominantly invested in investment grade UK corporate bonds and are exposed to a fairly typical range of UK businesses. The majority of the Plan's gifts are passively invested in a range of UK fixed-interest and index-linked government bonds, with the remainder actively invested in a range of swap instruments linked to movements in government bond prices. The risks associated with the Plan's bond and gift investments are largely offset by corresponding risks present within the pricing of the Plan's benefit obligations. The diversified growth fund is an investment in Pyrford's absolute return fund. This fund is composed of positions in a range of assets, including bonds and equities. These positions vary over time according to Pyrford's views. The fund looks to generate equity-like returns, with reduced volatility, whilst also providing diversification benefits to the Plan's other investments. The UK Plan does not invest directly in property occupied by the Company or in financial securities issued by the Company. | | UK plans funded | | US plans funded | | | --- | --- | --- | --- | --- | | | 2021 | 2020 | 2021 | 2020 | | Major assumptions (per annum %) | | | | | | Inflation | 3.50% | 3.00% | N/A | N/A | | Increase in salaries | N/A | N/A | N/A | N/A | | Increase in pensions | 3.30% | 2.90% | 0.00% | 0.00% | | Increase in deferred pensions | 3.50% | 3.00% | 0.00% | 0.00% | | Rate used to discount plan liabilities | 1.90% | 1.20% | 2.76% | 2.51% | | Life expectancy of a male aged 65 at the year-end | 20.8 | 20.8 | 19.6 | 19.5 | | Life expectancy of a male aged 65, 20 years after the year-end | 22.2 | 22.2 | 21.2 | 21.1 | 154 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 ### 34. Retirement benefit schemes continued #### g) Assets and assumptions in funded plans continued Benefits under the US funded plans are not linked to inflation. The UK Plan retirement benefit obligation is discounted at a rate set by reference to market yields at the end of the reporting period on high quality corporate bonds. Estimation is required when setting the criteria for bonds to be included in the population from which the yield curve is derived. The most significant criteria considered for the selection of bonds include the issue size of the corporate bonds, quality of the bonds and the identification of outliers which are excluded. The assumption for estimating future Retail Prices Index (RPI) inflation is based on the difference in yields on fixed-interest and index-linked gilts. Demographic assumptions are set broadly in line with the most recent actuarial valuation of the UK plan. The mortality assumption is 95% of standard mortality tables with an allowance for future improvements in line with the CM1 2020 enhanced projections, with a long-term annual rate of improvement of 1.25% for males and for females, and currently with no explicit adjustment for the potential long-term impact of Covid-19. The methodology used for determining the discount rate, in measuring the UK retirement benefit scheme, has been updated in 2021 following actuarial advice to ensure that the discount rate remains robust to changes in the bond yields, which has increased the discount rate by 0.1%. For the UK Plan, the estimated impact on the plan surplus at 31 December 2021 for changes in assumptions is as follows: | | Decrease in plan surplus £m | | --- | --- | | 0.5% decrease in the discount rate | 20.7 | | One-year increase in life expectancy | (14.0) | | 0.5% increase in inflation | (13.2) | These sensitivities have been calculated to show the movement in the surplus, including allowance for an increase to the value of insured annuity assets, but assuming no other changes in assets as at 31 December 2021. This is unlikely in practice – for example, a change in discount rate is unlikely to occur without any movement in the value of the assets held by the Plan. #### h) Other post-retirement liabilities This balance comprises an unfunded German pension plan of £3.3m (2020 – £3.7m), unfunded closed pension and post-retirement healthcare plans in the US of £0.3m (2020 – £0.3m), a provision for post-retirement payments in France of £1.4m (2020 – £1.5m) and £0.7m for post-retirement payments in Thailand (2020 – £0.7m). The closed pension and post-retirement healthcare plans in the US have been valued on a Projected Unit Method using a discount rate of 2.8% (2020 – 2.5%). No participants were eligible for medical benefits under the healthcare plan in 2021. The German plan has been subject to formal actuarial valuation on a Projected Unit Method with the following assumptions: discount rate 1.1%, salary growth 0.0% and pension increase 1.8% (2020 – 1.0%, 0.0% and 1.5%). In France, the provision arises from a legal obligation to make payments to retirees in the first two years post-retirement. Hence, it is not subject to discounting to the same extent as the other longer-term post-retirement liabilities. The Thailand plan has been subject to a formal actuarial valuation on a Projected Unit Method with the following assumptions: discount rate 2.8%, inflation rate 2.8% and salary growth 6.0% (2020 – 2.2%, 2.8% and 6.0%). ### 35. Contingent liabilities The Group is subject to various claims which arise from time to time in the course of its business including, for example, in relation to commercial matters, product quality or liability, and tax audits. Where the Board has assessed there to be a more likely than not outflow of economic benefits, provision has been made for the best estimate as at 31 December 2021 (see Note 24). For all other matters, the Board has concluded that it is not more likely than not that there will be an economic outflow of benefits. While the outcome of some of these matters cannot be predicted with any certainty, the Directors do not expect any of these arrangements, legal actions or claims, after allowing for provisions already made where appropriate, to result in significant loss to the Group. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 155 FINANCIAL STATEMENTS ## COMPANY BALANCE SHEET ## As at 31 December 2021 | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | | 2021 | | 2020 | | Notes | | £m | | £m | Non-current assets Investment in subsidiaries 38 259.9 259.9 Property, plant and equipment 39 1.3 1.5 Other intangible assets 37 0.1 0.1 Other receivables 40 25.7 27.2 Retirement benefits 50 72.2 46.5 Total non-current assets 359.2 335.2 Current assets Other receivables 40 65.4 78.6 Cash and bank balances 47 4.7 0.7 Current tax receivables 49 – – Total current assets 70.1 79.3 Total assets 429.3 414.5 Current liabilities Trade and other payables 42 70.1 91.8 Bank overdrafts and loans 41 14.8 – Total current liabilities 84.9 91.8 Non-current liabilities Bank and other loans 41 94.1 128.3 Lease liabilities 48 1.2 1.4 Deferred tax liabilities 49 14.2 6.9 Total non-current liabilities 109.5 136.6 Total liabilities 194.4 228.4 Net assets 234.9 18 6.1 Equity Issued share capital 43 41.9 41.9 Share premium account 14.8 14.8 Equity reserve 5.8 5.1 Hedging and translation reserve 44 – – Retained earnings 45 181.6 135.8 Own shares 46 (9.2) (11.5) Total equity 234.9 18 6.1 The Profit for the Company for the year ended 31 December 2021 was £31.9m (2020 – £13.7m Loss). The Financial Statements of Senior plc (registered number 282772) were approved by the Board of Directors and authorised for issue on 25 February 2022. They were signed on its behalf by: David Squires Bindi Foyle Director Director SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021156 # COMPANY STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2021 All equity is attributable to equity holders of the Company | | Notes | Issued share capital £m | Share premium account £m | Equity reserve £m | Hedging and translation reserve £m | Retained earnings £m | Own shares £m | Total equity £m | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | **Balance at 1 January 2020** | | 41.9 | 14.8 | 5.5 | (0.3) | 156.5 | (14.0) | 204.4 | | Loss for the year 2020 | | – | – | – | – | (13.7) | – | (13.7) | | Actuarial losses on defined benefit pension schemes | | – | – | – | – | (8.4) | – | (8.4) | | Exchange differences recycled to income statement | | – | – | – | 0.3 | – | – | 0.3 | | Tax relating to components of other comprehensive income | | – | – | – | – | 0.5 | – | 0.5 | | **Total comprehensive income/(expense) for the period** | | – | – | – | 0.3 | (21.6) | – | (21.3) | | Share-based payment charge | | – | – | 3.0 | – | – | – | 3.0 | | Tax relating to share-based payments | | – | – | – | – | – | – | – | | Purchase of shares held by employee benefit trust | 46 | – | – | – | – | – | – | – | | Use of shares held by employee benefit trust | 46 | – | – | – | – | (2.5) | 2.5 | – | | Transfer to retained earnings | 45 | – | – | (3.4) | – | 3.4 | – | – | | Dividends paid | 11 | – | – | – | – | – | – | – | | **Balance at 31 December 2020** | | 41.9 | 14.8 | 5.1 | – | 135.8 | (11.5) | 186.1 | | Profit for the year 2021 | | – | – | – | – | **31.9** | – | **31.9** | | Actuarial gains on defined benefit pension schemes | | – | – | – | – | **19.7** | – | **19.7** | | Exchange differences recycled to income statement | | – | – | – | – | – | – | – | | Tax relating to components of other comprehensive income | | – | – | – | – | **(6.4)** | – | **(6.4)** | | **Total comprehensive income for the period** | | – | – | – | – | **45.2** | – | **45.2** | | Share-based payment charge | | – | – | **3.5** | – | – | – | **3.5** | | Tax relating to share-based payments | | – | – | – | – | **0.1** | – | **0.1** | | Purchase of shares held by employee benefit trust | 46 | – | – | – | – | – | – | – | | Use of shares held by employee benefit trust | 46 | – | – | – | – | **(2.3)** | **2.3** | – | | Transfer to retained earnings | 45 | – | – | **(2.8)** | – | **2.8** | – | – | | Dividends paid | 11 | – | – | – | – | – | – | – | | **Balance at 31 December 2021** | | **41.9** | **14.8** | **5.8** | – | **181.6** | **(9.2)** | **234.9** | SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 157 FINANCIAL STATEMENTS ## NOTES TO THE COMPANY FINANCIAL STATEMENTS 36. Accounting policies Basis of accounting (Company only) These Financial Statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (“FRS 101”). In preparing these Financial Statements, the Company applies the recognition, measurement and disclosure requirements of UK-adopted international accounting standards (“Adopted IFRSs”), but makes amendments where necessary in order to comply with Companies Act 2006 and has taken advantage of the FRS 101 disclosure exemptions for share-based payments, financial instruments, fair value measurements, capital management, presentation of a cash flow statement and disclosure of related party transactions. The Financial Statements have been prepared on the historical cost basis. They have also been prepared on the going concern basis, as set out in the basis of preparation, Note 2 to the Consolidated Financial Statements. The principal accounting policies adopted are the same as those set out in Note2 to the Consolidated Financial Statements, except in respect of investments in subsidiaries, which are stated at cost less, where appropriate, provisions for impairment. The carrying values of investments in subsidiaries are reviewed for impairment if events or changes in circumstances indicate the carrying values may not be recoverable. The Company is incorporated in England and Wales under the Companies Act. 37. Other intangible assets | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | Computer | | Computer | | | software | | software | | | | £m | | £m | Cost At 1 January 1.0 0.9 Additions – 0.1 At 31 December 1.0 1.0 Amortisation At 1 January 0.9 0.7 Charge for the year – 0.2 At 31 December 0.9 0.9 Carrying amount at 31 December 0.1 0.1 38. Investments in subsidiaries A list of the significant investments in subsidiaries, including the name, country of incorporation, and proportion of ownership interest is given on pages 164 to 165. | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | At 1 January and 31 December 259.9 259.9 39. Property, plant and equipment | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | Plant and | | Plant and | | | equipment | | equipment | | | | £m | | £m | Cost At 1 January 2.4 2.4 Additions – – Disposals – – At 31 December 2.4 2.4 Accumulated depreciation At 1 January 0.9 0.7 Charge for the year 0.2 0.2 Eliminated on Disposals – – At 31 December 1.1 0.9 Carrying amount at 31 December 1.3 1.5 The carrying amount includes £1.1m of right-of-use assets (2020 – £1.3m) SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021158 40. Other receivables Other receivables comprise the following: | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Other receivables: amounts due more than one year Due from subsidiaries 25.7 27.2 25.7 27.2 Other receivables: amounts due within one year Value added tax 0.2 0.1 Prepayments and accrued income 1.0 0.6 Due from subsidiaries 64.2 77.9 65.4 78.6 Total other receivables 91.1 105.8 The Directors consider that the carrying amount of debtors approximates to their fair value. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable above. The Company does not hold any collateral as security. The carrying amounts due from subsidiaries approximates to their fair value. There are no past due receivable balances and expected credit losses are immaterial (2020 – immaterial). As at 31 December 2021, other receivables due in more than one year consist of £2.2m (2020 – £2.2m) due in accordance with the vesting periods of share-based payments and £23.5m (2020 – £25.0m) of loans to subsidiaries at market rates of interest. 41. Bank overdrafts and loans | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Bank overdrafts – – Bank loans (0.5) 18.3 Other loans 109.4 110.0 Total 108.9 128.3 The borrowings are repayable as follows: On demand or within one year 14.8 – In the second year – 14.6 In the third to fifth years inclusive 70.7 88.8 After five years 23.4 24.9 108.9 128.3 Less: amount due for settlement within 12 months (shown under current liabilities) (14.8) – Amount due for settlement after 12 months 94.1 128.3 At 31 December 2021, bank loans are undrawn and there are £0.5m of capitalised revolving credit facility transaction costs. At 31 December 2020, bank loans of £19.1m were drawn, oset by £0.8m of capitalised transaction costs. Analysis of borrowings by currency | | Pound | | | | | US | | | --- | --- | --- | --- | --- | --- | --- | --- | | | Sterling | | Euros | | Dollars | | Total | | 31 December 2021 | | £m | | £m | | £m | £m | Bank overdrafts – – – – Bank loans (0.5) – – (0.5) Other loans 26.9 23.4 59.1 109.4 26.4 23.4 59.1 108.9 | | Pound | | | | US | | | --- | --- | --- | --- | --- | --- | --- | | | Sterling | | Euros | Dollars | | Total | | 31 December 2020 | | £m | £m | | £m | £m | Bank overdrafts – – – – Bank loans 3.7 – 14.6 18.3 Other loans 26.9 24.9 58.2 110.0 30.6 24.9 72.8 128.3 159SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 FINANCIAL STATEMENTS ## NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED 41. Bank overdrafts and loans continued Analysis of borrowings by currency continued The weighted average interest rates paid were as follows: | Year ended | | | Year ended | | | --- | --- | --- | --- | --- | | | 2021 | | | 2020 | | | | % | | % | Bank loans and overdrafts 1.26 1.57 Other loans 2.88 2.86 Bank loans of £nil (2020 – £19.1m) are arranged at floating rates, thus exposing the Company to cash flow interest rate risk. Other borrowings are mainly arranged at fixed interest rates and expose the Company to fair value interest rate risk. No interest rate swaps were taken out in 2020 or 2021. Transaction costs of £0.5m (2020 – £0.8m) have been deducted from the bank loans carrying value. Transaction costs of £0.4m, directly attributable to the GBP notes (£0.1m), the Euro notes (£0.1m) and the US Dollar notes (£0.2m) have been deducted from the carrying value of Other loans. The Directors estimate the fair value of the Company’s borrowings to be as follows: | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Bank loans and overdrafts (0.5) 18.3 Other loans 110.4 109.4 109.9 127.7 42. Trade and other payables Trade and other payables comprise the following: | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Trade and other payables: amounts falling due within one year Trade payables 0.9 0.6 Social security and PAYE 0.2 0.2 Other payables and accruals 6.8 4.6 Due to subsidiaries 62.2 86.4 Total trade and other payables 70.1 91.8 The Directors consider that the carrying amount of trade payables approximates to their fair value. 43. Issued share capital | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Issued and fully paid: 419.4 million ordinary shares of 10p each 41.9 41.9 No shares were issued during 2020 and 2021. The Company has one class of ordinary shares, which carry no right to fixed income. 44. Hedging and translation reserves | | Hedging | | Translation | | | | | Hedging | | Translation | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | reserve | | | reserve | | | Total | reserve | | | reserve | | | Total | | Year ended | | | Year ended | | | Year ended | | Year ended | | Year ended | | | Year ended | | | | | 2021 | | | 2021 | | 2021 | | 2020 | | | 2020 | | 2020 | | | | £m | | | £m | | £m | | £m | | | £m | | £m | Balance at 1 January – – – – (0.3) (0.3) Exchange dierences recycled to Income Statement – – – – 0.3 0.3 Balance at 31 December – – – – – – SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021160 45. Retained earnings | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Balance at 1 January 135.8 156.5 Dividends paid – – Profit/(loss) for the year 31.9 (13.7) Pension actuarial gain/(loss) 19.7 (8.4) Transfer from equity reserve 2.8 3.4 Transfer from own share reserve (2.3) (2.5) Tax on deductible temporary dierences (6.3) 0.5 Balance at 31 December 181.6 135.8 £7.5m (2020 – £7.5m) of the Company’s retained earnings are considered undistributable. In accordance with Section 408 of the Companies Act 2006, the Company has not presented its own Statement of Comprehensive Income, including the Income Statement and related Notes. 46. Own shares | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Balance at 1 January (11.5) (14.0) Transfer to retained earnings 2.3 2.5 Purchase of new shares – – Balance at 31 December (9.2) (11. 5) The own shares reserve represents the cost of shares purchased in the market and held by the Senior plc Employee Benefit Trust to satisfy options under the Group’s share option schemes (see Note 33). The nominal value of each share is £0.1 (2020 – £0.1). The total number of treasury shares at 31 December 2021 is 3,463,455 (2020 – 4,336,043). 47. Cash and bank balances | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Cash and cash equivalents comprise: Cash 4.7 0.7 Cash and bank balances held by the Company (which are presented as a single class of assets on the face of the Balance Sheet) comprise cash at bank and other short-term highly liquid investments with a maturity of three months or less. The Directors consider that the carrying amount of cash and cash equivalents approximate to their face value. 48. Lease liabilities When measuring lease liabilities, the Company discounts lease payments using incremental borrowing rates, determined on a lease portfolio basis. | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | | 2021 | | 2020 | | Undiscounted contractual maturity of lease liabilities: | | £m | | £m | Amounts payable: On demand or within one year 0.2 0.2 In the second to fifth years inclusive 0.9 0.9 After five years 0.2 0.4 1.3 1.5 Less: future finance charges (0.1) (0.1) Lease liabilities 1.2 1.4 In 2021, the Company recognised income of £0.1m (2020 – £0.1m) in the Company Income Statement from sub-leasing right-of-use assets and had lease cash outflow of £0.2m (2020 – £0.2m). As at the date of approving the accounts, the Company has guaranteed £0.5m (2020 – £0.5m) of annual lease commitments of certain current and previous subsidiary entities. 161SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 FINANCIAL STATEMENTS ## NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED 49. Tax balance sheet Current tax The current tax receivable is £nil (2020 – £nil). Deferred tax liabilities The following are the major deferred tax liabilities and assets recognised by the Company and movements thereon during the current and prior reporting period: Accelerated Share tax Retirement based Tax depreciation benefits payments Losses Total £m £m £m £m £m At 1 January 2020 (0.1) 8.2 (0.1) – 8.0 Credit to income (0.1) 1.0 – (1.5) (0.6) Charge to equity – – – – – Credit to other comprehensive income – (0.5) – – (0.5) At 1 January 2021 (0.2) 8.7 ( 0.1) (1.5) 6.9 Charge to income (0.1) 2.9 (0.2) (1.6) 1.0 Charge to equity – 6.4 (0.1) – 6.3 Credit to other comprehensive income – – – – – As at 31 December 2021 (0.3) 18.0 (0.4) (3.1) 14.2 Deferred tax assets and liabilities are oset where the Company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances, after oset: | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2021 | | 2020 | | | £m | | £m | Deferred tax liabilities 14.2 6.9 At the Balance Sheet date, the Company has unused capital losses of £15.6m (2020 – £15.6m) available for oset against future capital gains. No deferred tax asset has been recognised as no such capital gains are anticipated to arise in the foreseeable future. 50. Retirement benefit scheme The Company’s defined benefit scheme is shown in Note 34 in the “UK plans funded” column. 51. Related party transactions The remuneration of the Directors and Senior Managers, who are the key management personnel of the Group, is set out in the Remuneration Report on pages 87 to 107. In 2021, the Company recognised share-based payment expense of £0.7m (2020 – £0.5m) in relation to the executive Directors. The Group has related party relationships with a number of pension schemes. Transactions between the Group and these pension schemes are disclosed in Note 34 Bloom Energy Corporation is a related party of the Group as Susan Brennan, an independent non-executive Director of the Group, was its Executive Vice-President and Chief Operations Ocer until resignation date of 5 August 2021. In 2021, the Group sold £2.7m (2020 – £2.2m) of components to Bloom Energy Corporation. The gross receivable position as at 31 December 2021 was £0.4m (2020 – £0.4m). 52. Share-based payments The Company has a number of share-based payment arrangements that existed during 2021, the details of which can be found in Note 33. For the savings-related share option plan, no shares were exercised in 2021 or 2020. The options outstanding at 31 December 2021 had exercise prices of 118.40p and 219.30p per share, and a weighted average remaining contractual life of 2.1 years. The options outstanding at 31 December 2020 had exercise prices of 219.30p and 207.20p per share, and a weighted average remaining contractual life of 1.7 years. Share-based payment costs relating to subsidiaries are recharged from the Company. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021162 # FIVE-YEAR SUMMARY | | 2021 £m | 2020 £m | 2019 £m | 2018 £m | 2017 £m | | --- | --- | --- | --- | --- | --- | | **Group income statement** | | | | | | | **Revenue** | | | | | | | Continuing operations | 658.7 | 733.6 | 1,110.7 | 1,082.1 | 1,023.4 | | **Adjusted operating profit** | | | | | | | Continuing operations | 6.1 | 3.7 | 89.4 | 91.6 | 82.6 | | Amortisation of intangible assets from acquisitions | – | (7.7) | (13.1) | (15.4) | (17.1) | | Goodwill impairment and write-off | – | (134.3) | – | – | – | | Net restructuring income/(cost) | 4.4 | (39.0) | (12.1) | – | – | | US class action lawsuits | – | – | (2.6) | (3.9) | – | | **Operating profit/(loss)** | **10.5** | **(177.3)** | **61.6** | **72.3** | **65.5** | | Investment income/finance costs, net (excluding lease liabilities) | (5.8) | (7.8) | (8.1) | (8.8) | (9.3) | | Interest on lease liabilities | (2.6) | (3.0) | (3.5) | – | – | | Net finance income/(cost) of retirement benefits | 0.4 | 0.9 | 0.7 | 0.2 | (0.2) | | Corporate undertakings | 21.2 | (4.6) | (22.0) | – | (3.8) | | **Profit/(loss) before tax** | **23.7** | **(191.8)** | **28.7** | **63.7** | **52.2** | | Tax | 0.5 | 33.3 | 0.5 | (7.8) | 8.1 | | **Profit/(loss) for the year** | **24.2** | **(158.5)** | **29.2** | **55.9** | **60.3** | | **Depreciation and amortisation of intangibles excluding right-of-use assets** | **38.3** | **51.4** | **57.5** | **56.9** | **57.9** | | **Depreciation on right-of-use assets** | **9.5** | **10.2** | **10.2** | – | – | | **Gross capital expenditure** | **21.3** | **26.8** | **64.8** | **56.3** | **54.8** | | **Basic earnings/(loss) per share** | **5.82p** | **(38.20p)** | **7.04p** | **12.81p** | **14.39p** | | **Diluted earnings/(loss) per share** | **5.73p** | **(38.20p)** | **7.01p** | **12.63p** | **14.38p** | | **Adjusted earnings/(loss) per share** | **0.17p** | **(0.84p)** | **16.17p** | **16.08p** | **14.39p** | | **Dividends in respect of years – per share** | **0.0p** | **0.0p** | **2.28p** | **7.42p** | **6.96p** | | – value | – | – | 9.5 | 30.9 | 29.0 | | **Group Balance Sheet** | | | | | | | Non-current assets excluding right-of-use assets | 463.5 | 482.7 | 651.4 | 662.0 | 624.3 | | Right-of-use assets IFRS 16 | 67.4 | 72.5 | 82.3 | – | – | | Non-current assets | 530.9 | 555.2 | 733.7 | 662.0 | 624.3 | | Net current assets | 110.3 | 89.2 | 102.5 | 131.0 | 66.0 | | Non-current liabilities | (216.1) | (251.1) | (276.6) | (221.2) | (158.7) | | Net assets | 425.1 | 393.3 | 559.6 | 571.8 | 531.6 | | Net debt pre IFRS 16 | (79.9) | (129.4) | (145.9) | (153.0) | (155.3) | | Lease liabilities IFRS16 | (73.2) | (76.5) | (83.7) | – | – | | Net debt | (153.1) | (205.9) | (229.6) | (153.0) | (155.3) | | **Group cash flow** | | | | | | | Net cash from operating activities | 27.0 | 48.9 | 115.9 | 100.7 | 110.9 | | Corporate undertaking costs | 4.8 | 4.6 | 3.4 | – | – | | Net Restructuring cash paid | 0.9 | 15.2 | 2.9 | – | – | | US class action lawsuits | 2.3 | 3.9 | – | – | – | | Interest received | 0.1 | 0.2 | 0.2 | 0.4 | 0.4 | | Proceeds from disposal of property, plant and equipment | 0.2 | 0.5 | 0.7 | 0.5 | 1.8 | | Purchase of property, plant and equipment – cash | (20.2) | (25.2) | (63.0) | (54.6) | (52.3) | | Purchase of intangible assets | (1.1) | (1.6) | (1.8) | (1.7) | (2.5) | | Free cash flow | 14.0 | 46.5 | 58.3 | 45.3 | 58.3 | | Dividends paid | – | – | (31.2) | (29.6) | (27.9) | | Disposal proceeds | 51.7 | 0.4 | 2.9 | – | 0.4 | | Corporate undertaking costs | (4.8) | (4.6) | (3.4) | – | – | | Net Restructuring cash paid | (0.9) | (15.2) | (2.9) | – | – | | US class action lawsuits | (2.3) | (3.9) | – | – | – | | Loan to joint venture | – | – | – | 0.5 | 0.3 | | Purchase of shares held by employee benefit trust | – | – | (6.3) | (7.2) | (0.1) | | Decrease in loans | (21.1) | (7.2) | (3.2) | (2.4) | (37.1) | | Decrease in lease liabilities | (8.4) | (7.9) | (7.8) | (0.3) | (0.5) | | Increase/(decrease) in cash and cash equivalents | 28.2 | 8.1 | 6.4 | 6.3 | (6.6) | SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 163 ADDITIONAL INFORMATION ## GROUP UNDERTAKINGS Operating Companies Business Units Locations Country of Incorporation Senior UK Limited Senior Aerospace Bird Congleton England & Wales 59/61 High Street, Rickmansworth, Bellows Hertordshire, WD3 1RH, UK Senior Aerospace BWT Macclesfield Senior Flexonics Crumlin Crumlin Senior Aerospace Weston Colne Senior Aerospace Thermal Royston Engineering Lymington Precision Engineers Senior Flexonics Lymington Lymington England & Wales 59/61 High Street, Rickmansworth, Co. Limited Hertordshire, WD3 1RH, UK Senior Flexonics Czech s.r.o. Senior Flexonics Czech Olomouc, Czech Republic Czech Republic Olomouc, Průmyslová 733/9, postcode 779 00, Czech Republic Senior Aerospace Ermeto SAS Senior Aerospace Ermeto Blois, France France Z.A Euro Val de Loire, 8 rue du ClosThomas, 41330 Fosse, France Senior Calorstat SAS Senior Aerospace Calorstat Dourdan, France France 11 Rue des Souets, 91410, Dourdan, France Senior Flexonics GmbH Senior Flexonics Kassel Kassel, Germany Germany Frankfurter Strasse 199, 34121 Kassel, Germany Senior India Private Limited Senior Flexonics New Delhi New Delhi, India India 4th, Floor, Rectangle No.1, Commercial Complex D-4, Saket-New Delhi-110017, India Senior Aerospace Bosman B.V. Senior Aerospace Bosman Rotterdam, Netherlands Netherlands Bergen 6, 2993 LR Barendrecht, Netherlands Senior Operations (Canada) Senior Flexonics Canada Brampton, Ontario Canada 134 Nelson Street West, Brampton, | Limited | | Ontario, L6X 1C9, Canada | | --- | --- | --- | | Senior Flexonics SA (Pty) | Senior Flexonics Cape Town Cape Town, South Africa South Africa 11 Thor Circle, Viking Place, | | | Limited | | Thornton, Cape Town, 7460, | SouthAfrica Senior Operations LLC Senior Aerospace AMT Arlington, Washington USA Corporation Trust Center, 1209 Orange Street, Wilmington, DE19801, USA Senior Aerospace Jet San Diego, California Products Senior Aerospace Ketema El Cajon, California Senior Aerospace Metal Sharon, Massachusetts Bellows Senior Aerospace Damar Monroe, Washington Senior Aerospace SSP Burbank, California Senior Flexonics Bartlett Bartlett, Illinois Senior Flexonics GA Franklin, Wisconsin Senior Flexonics Pathway New Braunfels, Texas & Maine, Delaware | Steico Industries, Inc. Senior Aerospace Steico | | Oceanside, California USA 818 West Seventh St., Ste. 930, | | | --- | --- | --- | --- | | | Industries | | LosAngeles, CA90017 | | Senior Aerospace (Thailand) | Senior Aerospace Thailand Chonburi, Thailand Thailand 78 9 /115 -116 Moo1, Pinthong | | | | Limited | | | Industrial Estate, Sainhongkor- | Lamchabang Road, Tambol Nhongkham, Amphur Sriracha, ChonBuri Province 20230, Thailand Upeca Aerotech Sdn Bhd Senior Aerospace Upeca Selangor, Malaysia Malaysia 10th Floor, Menara Hap Seng, No1&3, Jalan P. Ramlee, 50250 W.P – Kuala Lumpur, Malaysia Upeca Flowtech Sdn Bhd Senior Flexonics Upeca Selangor, Malaysia Malaysia 10th Floor, Menara Hap Seng, No1&3, Jalan P. Ramlee, 50250 W.P – Kuala Lumpur, Malaysia Upeca Engineering (Tianjin) Co LtdSenior Flexonics Upeca Tianjin, China China No. 12 QuanHe Road, Wu Qing (China) Development Area, Tianjin 301700, PR China Flexonics Limited England & Wales 59/61 High Street, Rickmansworth, Hertordshire, WD3 1RH, UK Lymington Precision Engineering England & Wales 59/61 High Street, Rickmansworth, (LPE) Limited Hertordshire, WD3 1RH, UK Senior Aerospace Limited England & Wales 59/61 High Street, Rickmansworth, Hertordshire, WD3 1RH, UK SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021164 ## GROUP UNDERTAKINGS CONTINUED Operating Companies Business Units Locations Country of Incorporation Senior Americas One Limited England & Wales 59/61 High Street, Rickmansworth, Hertordshire, WD3 1RH, UK Senior Americas Two Limited England & Wales 59/61 High Street, Rickmansworth, Hertordshire, WD3 1RH, UK Senior Automotive Limited England & Wales 59/61 High Street, Rickmansworth, Hertordshire, WD3 1RH, UK Atlas Composites Limited England & Wales 59/61 High Street, Rickmansworth, Hertordshire, WD3 1RH, UK Senior Engineering Investments England & Wales 59/61 High Street, Rickmansworth, Limited Hertordshire, WD3 1RH, UK Senior Five Limited England & Wales 59/61 High Street, Rickmansworth, Hertordshire, WD3 1RH, UK Senior Finance Four Limited England & Wales 59/61 High Street, Rickmansworth, Hertordshire, WD3 1RH, UK Senior Finance Six Limited England & Wales 59/61 High Street, Rickmansworth, Hertordshire, WD3 1RH, UK Senior Finance Seven Limited England & Wales 59/61 High Street, Rickmansworth, Hertordshire, WD3 1RH, UK Senior Flexonics Limited England & Wales 59/61 High Street, Rickmansworth, Hertordshire, WD3 1RH, UK Senior Trustee Limited England & Wales 59/61 High Street, Rickmansworth, Hertordshire, WD3 1RH, UK Senior France SAS France 11 Rue des Souets, 91410, Dourdan, France Senior Investments (Deutschland) Germany Frankfurter Strasse 199, 34121 GmbH Kassel, Germany Senior Holdings LLC USA Corporation Trust Center, 1209 Orange Street, Wilmington, DE19801, USA Senior Investments GmbH Switzerland Fronwagplatz 10, CH-8200, Schahausen, Switzerland Senior IP GmbH Switzerland Fronwagplatz 10, CH-8200, Schahausen, Switzerland Flexonics, Inc. USA Corporation Trust Center, 1209 Orange Street, Wilmington, DE19801, USA Senior US Holdings Inc USA Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801, USA Upeca Technologies Sdn Bhd Malaysia 10th Floor, Menara Hap Seng, No1&3, Jalan P. Ramlee, 50250 W.P – Kuala Lumpur, Malaysia Senior Aerospace and Flexonics Business Units in Mexico are operated by a third party under contract manufacturing agreements. The Group has a 49% interest in Senior Flexonics Technologies (Wuhan) Limited, a jointly controlled entity incorporated in China. All Group undertakings are wholly and directly owned by subsidiary undertakings of Senior plc, and in every case the principal country of operation isthe country of incorporation. Senior Aerospace Bosman ceased trading in 2021, and Senior Flexonics Upeca, Malaysia ceased manufacturing in 2021. 165SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 ADDITIONAL INFORMATION # ADDITIONAL SHAREHOLDER INFORMATION Analysis of shareholders at 31 December 2021 | | Shareholders Number | Shareholders % | Issued Shares Millions | Issued Shares % | | --- | --- | --- | --- | --- | | By category | | | | | | Corporate bodies | 556 | 24.53 | 410.70 | 97.92 | | Other shareholders | 1,711 | 75.47 | 8.72 | 2.08 | | | **2,267** | **100.00** | **419.42** | **100.00** | | By range of holdings | | | | | | 1 – 24,999 | 1,947 | 85.88 | 7.02 | 1.68 | | 25,000 – 49,999 | 83 | 3.66 | 2.80 | 0.67 | | 50,000 – 249,999 | 109 | 4.81 | 12.96 | 3.09 | | 250,000 – 499,999 | 38 | 1.68 | 13.80 | 3.29 | | 500,000 – 999,999 | 31 | 1.37 | 22.04 | 5.25 | | 1,000,000 – and over | 59 | 2.60 | 360.80 | 86.02 | | Operating (loss)/profit | **2,267** | **100.00** | **419.42** | **100.00** | Trading profit and adjusted trading profit is operating loss/profit and adjusted operating profit respectively before share of joint venture profit. See Note 9 for the derivation of adjusted operating profit. The number of shares in issue at 31 December 2021 was 419,418,082. ## Share Registrars All shareholder records are maintained by Equinti and all correspondence should be addressed to the Registrar, Senior plc at the Equinti address shown on the inside back cover, quoting the reference number starting with 0228 detailed on your dividend vouchers. The registrar should be notified regarding changes to name or address, loss of share certificate, or request for, or change to, a dividend mandate. Equinti provides a range of shareholder information on-line. Shareholders can check their holdings, update details and obtain practical help on transferring shares at: www.shareview.co.uk. Instead of payment by post to your registered address, dividends can be paid through the BACS system direct into a UK bank or building society account, with the dividend voucher still sent to your registered address. If you wish to use this facility and have not previously applied, then please apply direct to Equinti and request a dividend mandate form. Shareholders who are currently receiving duplicate sets of Company mailings, as a result of any inconsistency in name or address details, should write direct to Equinti so holdings can be combined, if appropriate. ## CREST Proxy Voting CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the Annual General Meeting to be held on 21 April 2022 and any adjournment(s) thereof by using the procedures described in the CREST manual. Further details relating to voting via CREST may be found on the 2022 AGM Notice of Meeting and Form of Proxy. 166 SEMIOR PLC ANNUAL REPORT AND ACCOUNTS 2021 ## OFFICERS AND ADVISERS | Secretary and registered oce | Solicitors | | --- | --- | | Secretary and registered oce | Slaughter and May | | Andrew Bodenham | One Bunhill Row, London EC1Y 8YY | Senior plc Principal UK clearing bankers 59/61 High Street, Rickmansworth, Hertfordshire WD3 1RH Registered in England and Wales No. 00282772 Lloyds Bank plc 25 Gresham Street, London EC2V 7HN Registrars Financial advisers Equiniti Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA Lazards & Co., Limited 50 Stratton Street, London W1J 8LL Auditor Financial Public Relations KPMG LLP 15 Canada Square, London E14 5GL Finsbury Glover Hering The Adelphi Sharegift 1-11 John Adam Street If you have only a small number of shares which would cost more for London WC2N 6HT youto sell than they are worth, you may wish to consider donating Joint corporate brokers themto the charity ShareGift (Registered Charity 1052686) which specialises in accepting such shares as donations. The ShareGift Jeeries International Limited TransferForm may be obtained from Equiniti, the Company’s Registrars, 100 Bishopsgate at www.shareview.co.uk. There are no implications for Capital Gains London EC2N 4JL Taxpurposes (no gain or loss) on gifts of shares to charity and it is also Credit Suisse International possible to obtain income tax relief. Further information about ShareGift One Cabot Square may be obtained on 020 7930 3737 or from www.ShareGift.org. London E14 4QJ Design and production Printed by Park Communications