## ANNUAL ## REPORT & ## ACCOUNTS ## 2022 ## 6 ### Group at a Glance ## WE ARE ## SENIOR ## 8 ### Chair’s Statement ## 10 ### Group Chief Executive ### Officer’s Statement We are an international, market-leading, engineering solutions provider with 26 operating businesses in 12 countries. OUR PURPOSE We help engineer the transition to a sustainable world for the benefit of all our stakeholders. We do this by: • Using our technology expertise in fluid conveyance and thermal management to provide safe and innovative products for demanding applications in some of the most hostile environments. • Enabling our customers, who operate in some of the hardest-to-decarbonise sectors, to transition to low carbon and clean energy solutions. • Staying at the forefront of climate disclosure and actionby ensun by ensuring our own operations achieve our NetZero comNet Zero commitments. 16 Sustainability ![img-0.jpeg](img-0.jpeg) ![img-1.jpeg](img-1.jpeg) 72 Divisional Review: Aerospace 76 Divisional Review: Flexonics ![img-2.jpeg](img-2.jpeg) 84 Governance ![img-3.jpeg](img-3.jpeg) STRATEGIC REPORT IFC Our Purpose 2 Financial Highlights 3 Non-Financial Highlights 6 Group at a Glance 8 Chair's Statement 10 Group Chief Executive Officer's Statement 14 Market Overview 16 Sustainability 20 Our Technology and Product Development on the Road to Net Zero 22 Environment 26 TCFD 32 Social 36 Governance 38 Our Business Model 40 Investment Case 42 Strategic Priorities 44 Technology 46 Our Technology Themes 48 Our Enabling Technology 50 Stakeholder Engagement 56 Section 172 Statement 58 Key Performance Indicators 60 Risks and Uncertainties 72 Divisional Review – Aerospace 76 Divisional Review – Flexonics 78 Financial Review 82 Viability Statement GOVERNANCE 86 Chair's Governance Letter 89 Board at a Glance 90 Board of Directors 94 Executive and HSE Committees 95 Report of the Directors 97 Nominations Committee Report 100 Audit, Risk and Internal Control 102 Audit Committee Report 108 Remuneration Committee Report 111 2022 Remuneration Report at a Glance 113 Remuneration Report: Policy 119 Annual Report on Remuneration 129 Statement of Directors' Responsibilities 130 Independent Auditor's Report to the Members of Senior plc FINANCIAL STATEMENTS 140 Consolidated Income Statement 141 Consolidated Statement of Comprehensive Income 142 Consolidated Balance Sheet 143 Consolidated Statement of Changes in Equity 144 Consolidated Cash Flow Statement 145 Notes to the Consolidated Financial Statements 184 Company Balance Sheet 185 Company Statement of Changes in Equity 186 Notes to the Company Financial Statements 192 Five-year Summary ADDITIONAL INFORMATION 194 Group Undertakings 196 Additional Shareholder Information 197 Officers and Advisers ![img-4.jpeg](img-4.jpeg) ![img-5.jpeg](img-5.jpeg) SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 1 STRATEGIC REPORT / FINANCIAL HIGHLIGHTS ## HIGHLIGHTS ## FINANCIAL ## HIGHLIGHTS (1) Revenue Adjusted operating margin +29% +250 bps ## £848.4m 3.4% 2021 – £658.7m 2021 – 0.9% (2) Adjusted profit before tax Profit before tax ## £20.1m £22.4m 2021 – £(1.9)m loss 2021 – £23.7m (3) Adjusted earnings per share Basic earnings per share ## 4.36p 4.86p 2021 – 0.17p 2021 – 5.82p (4) Return on capital employed Dividend per share +370 bps | 4.7% | | 1.30p | | | --- | --- | --- | --- | | 2021 – 1.0% | | 2021 – nil p | | | | (5) | | (5) | | Free cash flow | | Net debt | | £26m increase ## £ 27.7m ## £178.9m 2021 – £14.0m 2021 – £153.1m Adjusted operating profit and adjusted profit/loss (pre-IFRS 16). This measure is used for the purpose of The US Dollar exchange rate applied in the translation of before tax are stated before £4.2m net restructuring assessing covenant compliance and is reported to the revenue, profit and cash flow items at average rates for income (2021 – £4.4m) and £0.2m amortisation of Group Executive Committee. 2022 was $1.24 (2021 – $1.38). The US Dollar exchange intangible assets from acquisitions (2021 – £nil). (1) Adjusted operating margin is the ratio of adjusted rate applied to the balance sheet at 31 December 2022 Adjusted profit/loss before tax is also stated before operating profit to revenue. A reconciliation of adjusted was $1.21 (31 December 2021 – $1.35). costs associated with corporate undertakings of £1.7m operating profit to operating profit is shown in Note 9. (2021 – £21.2m income). In 2021, Adjusted earnings (2) A reconciliation of adjusted profit/loss before tax to Cautionary statement per share is also stated before exceptional non-cash tax profit before tax is shown in Note 9. The Annual Report & Accounts 2022 contains certain credit of £0.6m. (3) A reconciliation of adjusted earnings per share to basic forward-looking statements. Such statements are made earnings per share is shown in Note 12. by the Directors in good faith based on the information EBITDA is defined as adjusted profit/loss before tax, (4) See page 59 for the derivation of return on capital available to them at the date of this Report and they and before interest, depreciation, amortisation, and employed. should be treated with caution due to the inherent profit or loss on sale of property, plant and equipment. (5) See Notes 32b and 32c for the derivation of free cash uncertainties underlying any such forward-looking It also excludes EBITDA from businesses which have flow and of net debt respectively. statements. been disposed and includes 12 months EBITDA for businesses acquired and it is based on frozen GAAP 2 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 ## NON-FINANCIAL ## HIGHLIGHTS CDP Total Scope 1 and 2 Carbon Dioxide Emissions (climate disclosure project) (tonnes CO 2 equivalent emitted) | A | 44,878 tonnes | | --- | --- | | (2021 A-) | 2021 – 46,540 tonnes | | Leadership rating “Implementing best practices” | (Scope 1, Scope 2 – market based) | | Lost time injury rate | Waste recycled | (per 100 employees) | 0.38 | 94.8% | | --- | --- | | 2021 – 0.32 | 2021 – 93.1% | | Women in leadership – Board of Directors | Women in leadership – Executive Committee | | 55% | 29% | | --- | --- | | 2021 – 50% | 2021 – 38% | | Global Employee Opinion Survey | Ethics | | (percentage of employees completing the survey) | (percentage of employees who completed Annual Code | of Conduct Training) ## 81% 94% 2021 – 81% 2021 – 94% Read more about the progress we are making on our purpose on pages 8, 11, 12, 16, 18, 20 & 42 Read more about our people and culture on pages 18, 34, 39, 42 & 51 Read more about our investment case on page 40 Read more about our strategic priorities on page 42 Read more about how we are performing in Aerospace on page 72 Read more about how we are performing in Flexonics on page 76 3SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / ## STRATEGIC ## REPORT IN THIS SECTION ## “Senior has continued to make good strategic, ## operational and financial progress, with Intermediate Case (IMC) for ## strong delivery across the Group, in2022.” Aerospace Turbine Engine A modern turbofan engine is David Squires ahighly complex assembly Group Chief Executive Officer ofstationary and rotating components. Various casings | 6 Group at a Glance | | arefundamental structural | | --- | --- | --- | | 8 Chair’s Statement | | components of the engine core, | | 10 Group Chief Executive Officer’s Statement | | and as such, have complicated | | 14 Market Overview | | geometries with thousands of | | 16 Sustainability | | veryclose-tolerance features. | | 20 Our Technology & Product Development | | Veryfew suppliers have the | | | on the road to Net Zero | technical competence to be | | 22 Environment | | strategic suppliers of casings | | 26 TCFD | | tomajor engine OEMs. | 32 Social 36 Governance 38 Our Business Model 40 Investment Case 42 Strategic Priorities 44 Technology 46 Our Technology Themes 48 Our Enabling Technology 50 Stakeholder Engagement 56 Section 172 Statement 58 Key Performance Indicators 60 Risks and Uncertainties 72 Divisional Review – Aerospace 76 Divisional Review – Flexonics 78 Financial Review 82 Viability Statement Ducting 4 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / Business Class Seat Frames Every long-haul airline regards itsbusiness class seats as its Bellows premium offering. As airlines Every aircraft has hundreds, if realised that passengers were notthousands of bellows used requiring seats that easily extensively in expansion joints, convertinto lie-flat beds, the seat actuators, mechanical seals, manufacturers updated their old exhaust systems, manifolds, designs with both minor and major fluidmanagement devices Ducting changes. The exact specifications (i.e.accumulators, volume change not only from one airline In order for people to be able compensators and reservoirs). toanother, but also from one towithstand the extreme These critical components absorb aircraft type to another. In addition, temperatures and pressures vibration, compensate for both some airlines will have one type encountered in flight, aerospace lineal and radial movements, ofseat on one aircraft variant, ducting facilitates the distribution absorb thermal expansion and andacompletely different type ofcritical fluids and air throughout contraction and precisely onanother. the aircraft, thus ensuring proper measuremovement. temperature regulation, ventilation, Flexibility in manufacturing humidity, and/or containment These bellows come in all multipledesigns is paramount control, anti-icing and varietyofshapes including tocompetitiveness. noiseattenuation. circular,rectangular and even ovalshapedbellows in a single Modern flight would not be ormulti-plyconfiguration. possible without high- and low-pressure ducting throughout theaircraft. Ducting 5SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / GROUP AT A GLANCE ## GROUP AT A GLANCE ### WE DO THIS BY: ## OUR PURPOSE ### • Using our technology expertise influid conveyance and thermal ## We help engineer the transition ### management to provide safe and innovative products for demanding ## to a sustainable world for the ### applications in some of the most hostile environments. ## benefit of all our stakeholders ### • Enabling our customers, whooperate in the hardest-to-decarbonise ### sectors, to transition tolow carbon and clean energysolutions. ### • Staying at the forefront of climate disclosure and action by ensuring ### ourown operations achieve our Net Zero commitments. ## AEROSPACE ### Providing high technology products ### and systems for demanding ### applications in civil aerospace & ### defence and adjacent markets. ### The Aerospace portfolio spans ### awide range of fluid conveyance ### and thermal management ### components and sub-systems, ### aswell as complex structural parts ### and assemblies, for fixed-wing ### androtary aircraft, aero-engines, ### spacecraft and a variety of other ### industrial applications. Read more about Aerospace on page 72 | | Fluid conveyance systems | Gas turbine engines | | | --- | --- | --- | --- | | | Design and manufacture: | • Precision-machined and fabricated engine | | | 65% | | | components (rotating and structural) | • high-pressure and low-pressure ducting • Fluid systems ducting and control products (2021 – 66%) systems (metal and composite) Civil Aircraft 40% • control bellows, sensors and assemblies Read more on pages 44 to 49 Military/defence aerospace 14% Other aerospace division 11% Structures • Precision-machined airframe components and assemblies 6 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / GROUP AT A GLANCE ### OUR PEOPLE WORLDWIDE North America UK and Europe Asia Rest of the world ## 42% 34% 21% 3% ## OUR VALUES ## “Our Core Values Worldwide ## underpin our culture.” operating businesses David Squires Group Chief Executive Officer ## 26 Countries ## 12 Read more about our values on page 38 Read more about our people and culture on page 34 ## FLEXONICS ### Providing high technology products ### and systems for demanding ### applications in land vehicle, power ### & energy and adjacent markets. ### The Flexonics portfolio spans a ### wide range of fluid conveyance ### and thermal management ### components & sub-systems, ### aswell as complex precision- ### machined parts, for conventional ### and advanced land vehicle ### propulsion systems, ### petrochemical, renewable ### energyand a variety of other ### industrial applications. Read more about Flexonics on page 76 | | Land vehicle emission control | Industrial process control | | --- | --- | --- | | | • Exhaust gas recycling coolers | Design and manufacture: | | 35% | • Fuel mixing and distribution systems | | • Engineered expansion joints, dampers | (2021 – 34%) | • Flexible couplings | | anddiverters | | --- | --- | --- | --- | | Land vehicles 19% | | • Flexible hose assemblies and | | | Power and energy 16% | | | controlbellows | • Fuel cells and heat exchangers • Precision-machined components Read more on pages 44 to 49 7SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / CHAIR’S STATEMENT ## CHAIR’S STATEMENT ## CONTINUED RECOVERY ## AND GROWTH DURING ## A CHALLENGING YEAR Overview • Staying at the forefront of climate disclosure Our consistent resolute approach to managing and action by ensuring our own operations the effects of significant external factors achieve out Net Zero commitments. continued through 2022 and enabled us to What Senior offers is pivotal technologies deliver a strong operational and financial foremissions reduction and environmental performance in the year. We continued to efficiency; capabilities that continue to be highly contend with the effects of the pandemic and relevant as the world transitions towards a low the disruption and deglobalisation of the supply carbon economy. Our continued investment in chain was also exacerbated by the conflict in the right technologies ensures that we not only Ukraine and the consequent energy crisis. provide solutions for today’s challenges but Theresulting major inflationary pressures across equally for future requirements. our cost base continue to be managed diligently and proactively by the business, whilst also Our strategy and our positioning in attractive recognising the impact that the pressures andstructurally resilient core markets, combined haveon the cost of living for our employees. with sector-leading sustainability credentials ## “We remain confident in delivery andhighly relevant technical capabilities, Once again, the operating businesses under ## ofour strategy and that it will deliversa strong financial recovery across David and Bindi’s leadership have risen to the bothAerospace and Flexonics Divisions. ## maximise value for shareholders, occasion and delivered significantly improved Withmarkets recovering, we will continue profitability during the period, exceeding market tosee improving profitability through volume ## asour markets recover, over the expectations. Attractive and structurally resilient related operating leverage, while managing core markets, evidenced by increasing ## medium term.” inflationary impacts through our focus on production volumes in both Aerospace and costand pricing management. | Ian King | Flexonics, underpinned a Group revenue growth | | | --- | --- | --- | | Chair | of 29% and a healthy order intake. The book to | We are a well-capitalised Group, with | | | bill ratio of 1.24 is strong. | intrinsically strong cash flows and operating | businesses that have capacity to benefit from The Group’s strategy continues to be compelling end marketrecoveries. The Group maintains a and along with our well-capitalised businesses strong financial position and the balance sheet provides a solid foundation to support our future remains robust, further enhanced by the growth aspirations. The acquisition of Spencer renewal of the UK revolving credit facility and Aerospace is a very considered step in this the well-funded nature of the UK pension plan. direction. Spencer’s capabilities in highly engineered, high-pressure hydraulic fluid fittings The Board continues to review the portfolio for use in commercial and military aerospace within the Group, understanding the importance applications have strong synergies with Senior’s of considered and effective capital deployment existing fluid conveyance business; the to maximise shareholder value creation. opportunities for further growth in this sector Expanding Senior’s high-quality fluid areexciting. conveyance and thermal management businesses remains an ongoing priority. The Board revisited Senior’s Purpose this year Investments are supported by a business case and aligned it further with our ongoing strategy. and are assessed using a rigorous investment Ourrenewed Purpose is "we help engineer the appraisal process. transition to a sustainable world for the benefit of all our stakeholders". We do this by: The Board is confident in our strategy and that it will deliver enhanced value for all stakeholders. • Using our technology expertise in fluid conveyance and thermal management to provide safe and innovative products for demanding applications in some of the mosthostile environments. • Enabling our customers, who operate in the hardest-to-decarbonise sectors, totransition to low carbon and clean energy solutions. 8 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / CHAIR’S STATEMENT Our sector leading The Corporate Governance Report pages 86 sustainabilitycredentials to129 explains how the Board sets the tone ## STAKEHOLDER andtakes the lead on governance matters. Our Purpose underpins our commitment to Wecontinue to ensure the health, well-being ## ENGAGEMENT sustainability. The Board continues to recognise and safety of our employees is a priority and the importance of adopting a bold and The success of the Group is enabled by mature thatour operations conduct themselves with comprehensive sustainability programme. andprogressive engagement with all of our integrity and in an ethical, sustainable and Wefirmly believe that our leadership in this stakeholders. A key priority for the Group is socially responsible manner. areaprovides a distinct commercial competitive ensuringthat their viewpoints are fully considered advantage as the world transitions to a low Stakeholder Engagement when assessing the impact of our decisions carbon economy. Sustainability remains an The Board continues to focus on our andstrategies. integral part of our strategy, embedded within responsibility to all of Senior’s stakeholder the behaviours of our people and the culture Pages 50 to 57 explain more on this groups – our employees, customers, suppliers, ofour organisation. communities and shareholders. We believe that In 2022, we have again made good progress engaging with our stakeholders is key to the ## SUSTAINABILITY with our key sustainability metrics and activities. long-term success of the Group. We were awarded the top ‘A’ score by CDP ## REPORT In 2022, the Group increased its engagements inits global annual ranking for transparency with shareholders, both by the Executive team, onclimate change, putting us in the top 2% A commitment to sustainability underpins our the Group Chair and the Chair of the ofdisclosing companies. We were the only purpose, and is a key objective of the Executive and Remunerations Committee, through a diverse Aerospace and Defence company to achieve an the Board. Our programme is well defined and being and tailored range of channels. A rating in 2022. In addition, we have submitted delivered. Our progress is measured by metrics, our Long Tern Net Zero Targets to the Science This year we launched our second Global targets and an annual scorecard. | | Based Targets Initiative for validation. The | Employee Opinion Survey. We had excellent | | --- | --- | --- | | To find out more on our sector leading | targets, to be achieved by 2040, are aligned to | participation and engagement, and feedback | | sustainability programme read pages 16 to 37. | keep global warming to 1.5 degrees centigrade, | was positive, valuable, and constructive. Celia | | | the most ambitious goal of the Paris Agreement. | Baxter, together with our Group HR Director, | Jane Johnston, participated in 19 employee The Sustainability Report on pages 16 to 37 Our performance engagement focused groups with four of our US explains how Senior has achieved significant In 2022, the Board and the Executive team operating businesses and our German business. improvement against our non-financial targets continued to make good strategic, operational, Feedback from the meetings was provided to in2022. and financial progress. With strong delivery local Management, the Executive Leadership across the Group, we significantly improved Team and to the Company’s Board of Directors, Our Board profitability, generated excellent free cash who were given the opportunity to ask I remain confident we have a cohesive, diverse flow and further strengthened of our questions on the findings. and high performing Board in place to work with balancesheet. the Executive Leadership Team to implement Looking forward Group revenue increased 29% to £848.4m, the Company’s strategy. The non-executive Our compelling strategy and positioning in withgrowth in both divisions. Our adjusted Directors continued to bring very strong, broad, attractive and structurally resilient core markets, operating profit increased to £28.5m which professional and complementary qualities to the combined with our sector leading sustainability resulted in the Group’s adjusted operating Board in 2022, and I look forward to continue credentials and highly relevant technical margin increasing by 250 basis points, working with the Board in 2023 to deliver capabilities, underpins our commitment to to3.4%. long-term sustainable growth. continuing to deliver a strong recovery across | We generated an excellent free cash inflow | As previously highlighted, this year we thank | our Aerospace and Flexonics Divisions, which | | --- | --- | --- | | of£27.7m. The Group’s financial position | Celia Baxter and Giles Kerr for their tenure as | inturn will deliver enhanced value for | | remains robust, with a healthy balance sheet | highly valued members of the Board; having | ourstakeholders. | | and period end net debt to EBITDA of 1.47x, | reached their nine-year anniversaries on the | | As we enter 2023, we will continue to focus after taking into account the consideration Board in 2022, in order to ensure a suitable ondelivering good strategic, operational, and forthe acquisition of Spencer Aerospace. transition period with their successors, it was financial progress. We remain on track to drive agreed they remain in office until the conclusion In line with the Board’s decision from earlier in the Group ROCE to a minimum of 13.5% in line of the 2023 AGM. Mary Waldner and Barbara the year to reinstate dividends, and reflecting with our previously stated ambition. Jeremiah, having joined the Board at the end of confidence in the Group’s performance, 2021 and the beginning of 2022 respectively, On behalf of the Board, I would like to thank all financial position and future prospects, the have been given a full and comprehensive of our people for their substantial contribution Board is proposing a final dividend of 1.00 induction programme and are now fully toSenior over the last year. I would also like to pence per share (2021 – nil pence). This would established members of the Board. extend this to all of our stakeholders for their bring total dividends, paid and proposed for continued support. 2022 to 1.30 pence per share. The Board will The Board has completed a comprehensive continue to follow a progressive dividend externally conducted Board evaluation during Ian King policy reflecting earnings per share, free cash 2022. The Board was found to be functional, Chair flow generation, market conditions and effective, engaged and motivated and with dividend cover over the medium term. clearprogress being made against prior actions. Non-Executive Director (NED) succession hadbeen handled smoothly and it was agreed that the process should be extended to hire anadditional NED with relevant industrial and business experience aligned to our strategy. TheBoard is to also review the structure of the Board meetings schedule and agenda to ensure more time is allocated on the agenda to achieve debate and engagement. To find more detail on these improvements, please refer to page 99 in the Governance section. 9SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / CHIEF EXECUTIVE OFFICER’S STATEMENT ## GROUP CHIEF EXECUTIVE ## OFFICER’S STATEMENT ## STRONG RESULTS AS ## RECOVERY CONTINUES | Overview of 2022 results | In Aerospace, revenue increased 18% year-on- | | --- | --- | | Senior has continued to make good strategic, | year on a constant currency basis. Excluding | | operational, and financial progress, with strong | Senior Aerospace Connecticut, which was | | delivery across the Group reflected in | divested in April 2021, revenue for the full year | | significantly improved profitability, excellent free | on a constant currency basis increased by 20%. | | cash flow generation and further strengthening | The year-on-year increase reflected the ramp | | of our balance sheet. | upin civil aircraft production rates, growth from | semi-conductor equipment markets and higher With commercial aerospace markets recovering volumes for space programmes. This more than and other important end markets remaining offset the decline in defence, which was buoyant, we saw order intake increase and affected by the delay in spending as a abook to bill ratio of 1.24 for the Group, consequence of the Continuing Resolution whichunderpins our confidence in continued being in place in the USA during the first half growth in2023 and beyond. Both divisions ofthe year. recorded good order intake demonstrating ## “We have delivered a strong In Flexonics, revenue grew 26% compared thebroad, diversified, and high-quality nature ofourbusiness. toprior year, on a constant currency basis. ## setofresults for 2022. Theperformance in 2022 was driven by strong Senior’s Purpose is "we help engineer the customer demand in the land vehicle and ## Wesignificantly improved transition to a sustainable world for the benefit power& energy markets. In land vehicles, ## profitability, generated excellent of all our stakeholders." Our strategic focus and Senior outgrew end market demand due to industry-leading expertise in fluid conveyance recent contract wins entering series production. ## free cash flow, strengthened and thermal management technology was Inpower & energy markets, activity increased enhanced by the acquisition of Spencer inupstream oil and gas and levels of ## ourbalance sheet and continued Aerospace in November 2022. Additionally, maintenance and overhaul activity improved. ## to make very good progress on wemade good progress on our technology roadmap with many new products in We measure Group performance on an adjusted ## oursustainabilitygoals.” development and significant technology and basis, which excludes items that do not directly engineering milestones achieved: for example, reflect the underlying in-year trading David Squires the development of the bleed air system for the performance (see Note 9). References below Group Chief Executive Officer supersonic X-59 flight demonstrator utilising therefore focus on these adjusted measures. ouradvanced additive manufacturing capability. The Group generated an adjusted operating (This is discussed further in the Technology profit of £28.5m (2021 – £6.1m), an increase of section on page 48.) 367% over the prior year. This resulted in the Revenue In our Post-close Trading Update on 24 January Group’s adjusted operating margin increasing by | | 2023, we reported a strong end to the year with | 250 basis points, to 3.4% in 2022 (2021 – 0.9%). | | --- | --- | --- | | | outperformance in the Flexonics Division and | Overall, in 2022, price increases of £28.6m | | £848.4m | the Aerospace Division performing in line with | offset material and other inflationary cost | | | expectations. During 2022, Group revenue | increases of £26.0m. The improved profitability | (2021 – 658.7m) | | increased 20% on a constant currency basis | principally reflected the volume-related | | --- | --- | --- | | | to£848.4m, with growth in both divisions. | operating leverage across our businesses. | | Adjusted profit before tax | Theyear-on-year increase reflected the ongoing | Supply chain constraints and inflationary | | | recovery in our core markets as well as recent | pressures persisted throughout 2022: our | | | programme wins entering series production. | operating businesses worked diligently and | | | The Group benefited from the increase in civil | proactively to navigate these challenges, | ## £20.1m aircraft production rates, growth in land vehicle, mitigate their impact on the business and power & energy, semi-conductor equipment ensure service levels for customers were (2021 – £(1.9)m loss) | | and space markets, as well as price increases | maintained to the best extent possible. As we | | --- | --- | --- | | | of£28.6m to offset inflationary costs. | enter 2023, supply chain constraints have eased | | Adjusted earnings per share | | somewhat in our Flexonics Division but continue | Additionally, favourable exchange rates added£46.3m (9%) to total sales. to require relentless management in a number ## 4.36p (2021 – 0.17p) 10 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / CHIEF EXECUTIVE OFFICER’S STATEMENT | of our Aerospace businesses. We see that | In line with the Board’s decision from earlier in | delivering emissions reduction and | | --- | --- | --- | | continuing to be the situation for some time | the year to reinstate dividends, and reflecting | environmental efficiency and are highly relevant | | given the welcome increase in civil aircraft | confidence in the Group’s performance, financial | as the world transitions towards a low-carbon | | production rates required by the industry to | position and future prospects, the Board is | economy. Senior has developed novel solutions | | satisfy the strong demand from airlines and | proposing a final dividend of 1.00 pence per | for low and zero carbon applications and we are | | aircraft lessors. We continue to work closely | share (2021 – nil pence) and this will be paid on | involved in a range of research and development | | with our suppliers and customers to minimise | 26 May 2023 to shareholders on the register at | projects that support the drive for electrification | | any potential disruption. Very recently, the | close of business on 28 April 2023. This would | and hydrogen propulsion systems on land and | | situation has been compounded by a fire at | bring total dividends, paid andproposed for | inthe air. This is discussed further on pages 18 | | one of our key suppliers in Thailand. We are | 2022 to 1.30 pence per share. Wewill continue | to 21 and 44 to 49. | | working closely with the supplier and our | to follow a progressive dividend policy reflecting | | As well as our businesses being actively customers to assess and mitigate the specific earnings per share, free cash flow generation, focused on new product offerings for the impact of the fire. market conditions and dividend cover over the transition to a low carbon world, we continue medium term. | Adjusted profit before tax increased to | | tobe actively involved in making conventional | | --- | --- | --- | | £20.1m (2021 – £(1.9)m loss). The adjusted | Delivery of Group Strategy | technology cleaner to bridge the gap between | | tax charge was £2.0m (2021 – £2.6m credit). | | both worlds. In addition, Senior's end-markets | Senior has a compelling strategy to maximise Adjusted earnings per share increased to are evolving to reflect the global effort to value for shareholders. 4.36pence (2021 – 0.17 pence). achieve net zero carbon emissions. Senior's Our renewed Purpose is "we help engineer the technology and product roadmap is aligned Reported profit before tax was £22.4m. The transition to a sustainable world for the benefit tothese trends with a product development 2021 reported profit before tax was £23.7m, of all our stakeholders". We do this by: strategy that is compatible with our focus having benefited from the profit on the sale of onsustainability. • Using our technology expertise in fluid our Senior Aerospace Connecticut business conveyance and thermal management to This well-defined strategy, along with during that period. Basic earnings per share provide safe and innovative products for ourwell-capitalised businesses, provides was 4.86 pence (2021 – 5.82 pence). demanding applications in some of the asolidfoundation to support our future The Group delivered an excellent cash mosthostile environments. growthaspirations. performance in 2022 generating free cash • Enabling our customers, who operate in the inflow of £27.7m (2021 – £14.0m), an In June 2022, we announced the strategic hardest-to-decarbonise sectors, to transition increaseof 98% over the prior year, driven acquisition of substantially all of the assets to low carbon and clean energy solutions. bythe significant increase in profits. ofSpencer Aerospace Manufacturing, LLC • Staying at the forefront of climate Grossinvestment in capital expenditure (“Spencer Aerospace”), which completed disclosureand action by ensuring was£30.5m (2021 – £21.3m), which was inNovember. The acquisition marks a further ourownoperations achieve our 0.8times depreciation excluding the impact step in our well-defined strategy and is part of NetZerocommitments. | ofIFRS 16 (2021 – 0.6 times). Cash outflows | | our wider objective of optimising our portfolio | | --- | --- | --- | | from working capital were £12.1m (2021 – | Complementing this, our vision is to be a trusted | and maximising value for shareholders. | | £2.6m) reflecting increased activity levels and | and collaborative high value-added engineering | Theacquisition enhances Senior's industry- | | the need to hold some tactical buffer stocks. | and manufacturing company producing | leading fluid conveyance capabilities, expanding | | However, our effective management of | sustainable growth in operating profit, cash flow | our capability to produce higher level assemblies | | working capital helped to deliver a small | and shareholder value. | and sub-systems and with the potential to | | decrease as a percentage of sales to 15.5% | | penetrate new markets such as hydrogen | To achieve our strategy, we will: (2021 – 15.6%). The Group had net cash fittings for power and infrastructure applications. outflow of £2.6m (2021 – £57.7m inflow) While Senior has existing hydraulic fluid fittings • strengthen our strategic focus on IP-rich in2022, due to free cash inflow of £27.7m expertise, our customers have been strongly fluidconveyance and thermal (2021 – £14.0m), offset by £30.3m cash encouraging us to increase our presence and, managementproducts; outflows related to corporate undertakings following the acquisition, our combined • organically grow the Aerostructures and restructuring activity, interim dividend expertise and market reach will allow us to businessby fully utilising our world class payments and purchase of own shares respond decisively and accelerate growth as globalfootprint; (2021– £43.7m inflows). weleverage Senior’s strong relationships with • maintain a strong focus on lean OEMs, Tier 1 integrators, and aftermarket Net debt at the end of December 2022 manufacturingand operational efficiency customers around the world to open new was£178.9m (including capitalised leases through our Senior Operating System; opportunities for Spencer Aerospace. | of£78.4m), an increase of £25.8m from | • execute on our portfolio optimisation | | | | --- | --- | --- | --- | | December 2021, after taking into account | | strategyto maximise value creation; | The strategy for Aerostructures asits core | | £25.3m consideration for the acquisition of | | | markets continue to recover is to focus | • maintain our sector leading Spencer Aerospace, adverse currency anddrive: sustainabilityperformance; movements of £14.2m and a £9.0m increase • drive intrinsic strong cash generation • filling our existing capacity; for lease movements. The Group’s financial anddeliver a minimum of 13.5% ROCE • pursuing some further diversification position remains robust, with a healthy overthe medium term. intoSpace and Defence; and balance sheet and period end net debt to EBITDA of 1.47x (December 2021 – 1.87x). Our strategic focus and expertise in fluid • growing market share profitably conveyance and thermal management inCivilAerospace. Return on capital employed (ROCE) increased technology and capabilities is supported by by 370 basis points to 4.7% (2021 – 1.0%). We saw good progress in our Aerostructures extensive design and manufacturing process The increase in ROCE reflected the significant businesses in 2022 and remain confident of intellectual property and know-how. We develop increase in profitability, while managing the further performance improvement as production and supply proprietary products, sub-systems increase in capital employed which was volumes continue to ramp. and systems for our customers’ demanding mainly due to the acquisition of Spencer applications across a range of diverse and Aerospace. This improvement in ROCE is an attractive end markets. Our products are key important step to delivering our Group ROCE enablers of pivotal technologies which are target of 13.5% over the medium term. 11SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / CHIEF EXECUTIVE OFFICER’S STATEMENT CONTINUED ## SUSTAINABILITY | A commitment to sustainability is rooted in | We were also highly commended by the UK | • We have submitted our Long-Term Net Zero | | | --- | --- | --- | --- | | ourcore values and underpins our Purpose. | Investor Relations Society in their annual best | | Targets to SBTi for validation. The targets, | | Sustainability is an integral part of our strategy, | practice awards for how we communicate our | | tobe achieved by 2040, are aligned to keep | | embedded within the behaviours of our people | sustainability programmes and commitments | | global warming to 1.5 degrees centigrade, the | | and the culture of Senior. We believe with | toour stakeholders. | | most ambitious goal of the Paris Agreement. | | conviction that how you do business is every bit | | • 41% of our electricity was sourced from | | Our engineering expertise is key in helping to as important as what you do. Across the Group renewable energy, an increase from 36% tackle the climate change and clean air challenge we always put safety and ethics first, and we in2021. as the world transitions to a lower carbon strongly encourage and promote diversity and • Recycled 94.8% of waste produced. economy. We achieve this by applying our inclusivity across our international operations. expertise and technology across many different Social We continuously aim to deliver our products applications, in hard-to-decarbonise sectors • Recognising the impact of high rates of inamanner that is both environmentally ranging from aviation through to land vehicle inflation, Senior has taken steps to help sustainable and supports economic growth andpower & energy markets. We work in close thebroader workforce including salary andlong-term value creation for shareholders partnership with our customers' developing settlements that reflected regional cost of through sustainable methods. In implementing solutions which support both their commercial living pressures, a more flexible approach our strategy, we are committed to using and sustainability objectives as we all strive to toworking hours and promoting employee naturalresources responsibly, investing for the achieve our individual Net Zero goals. assistance and wellbeing initiatives. long-term wellbeing of the planet and ensuring In 2022, we have again made good progress • Building on the success of our first Global that all people involved in our business process’ with our key sustainability metrics and activities: Employee Opinion Survey in 2021 and the are treated fairly. Our Environmental, Social and actions taken as a result of the feedback, Governance (“ESG”) programmes continue Environment weundertook our second Global Employee toevolve; this year we have been awarded a • Awarded the top ‘A’ score by CDP in its global Opinion Survey in September 2022. class leading “A” rating by CDP for our work annual ranking for transparency on climate onclimate disclosure and action, having already • We remain on track to achieve our 2025 change – Senior is one of only 283 companies previously achieved the highest leadership LostTime Injury Rate reduction target. which achieved an A out of nearly 15,000 ratingfor our Supplier Engagement programme. • In 2022, we introduced additional safety scored, putting us in the top 2% of disclosing initiatives involving ergonomics and hand companies. We were the only Aerospace and protection to support our 2025 Lost Time Defence company to achieve an A rating in Injury Rate reduction goal. 2022. In February 2022, we were informed • Currently, 55% of the Board Directors are ## “We continued to make byCDP that Senior was awarded the highest female and two of the Directors are from leadership status in its annual supplier ethnic minority backgrounds. ## good progress on our engagement ratings, putting us in the top 8% of companies on this metric. Governance ## sustainability goals, • We remain on track to achieve our Scope 1, 2 • In 2022, employees received refresher and 3 Science Based Target Initiative (“SBTi”) training on Senior’s Code of Conduct. ## maintaining our sector verified Near Term Targets. • Employees continue to receive training and regular reminders about the risks related to ## leading position.” information/cyber security. David Squires • In 2022, we developed our Climate Change Group Chief Executive Officer training to improve awareness of climate related matters across the Group. 12 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / CHIEF EXECUTIVE OFFICER’S STATEMENT CONTINUED Aerospace Considered and effective Outlook • Our traditional fluid conveyance products are capitaldeployment As we start 2023, our order book is healthy, entirely compatible with sustainable aviation We understand the importance of reflecting favourable market dynamics, fuels, the increasing adoption of which considered and effective capital withcommercial aerospace recovery in appears to be the fastest route to lowering deployment towards maximising fullswing with other important markets aviation emissions. shareholder value creation. The Group has remaining buoyant. Demand is currently • Our Additive Manufacturing capabilities are afinancial objective to maintain an overall holding up well, though we remain mindful enabling advances in complex product design ROCE in excess of the Group’s cost of of the potential impact of the ongoing for improved performance and weight capital and to target a minimum pre-tax supply chain pressures in aerospace, reduction for the benefit of our customers return on capital employed of 13.5% on aswell as the broader macro-economic across a number of product applications. apost IFRS 16 basis. Our strategy of situation and geopolitical uncertainty. • Our world-class capability in thermal expanding Senior’s high-quality fluid management and fluid conveyance Withaircraft build rates increasing through conveyance and thermal management providesopportunities to support the the year, and the continuing supply chain businesses remains a priority. All significant furtherdevelopment of electric/hybrid challenges in aerospace, including the investments are supported by a business airvehicleapplications. recent fire at one of our key suppliers, we case and are assessed using a rigorous • We are building upon our longexperience anticipate trading inour Aerospace Division investment appraisal process. | | ofproviding hydrogen fluid handling and | to be more weighted to the second half | | --- | --- | --- | | To maximise the Group’s operating | distribution products for industrial markets | ofthe year. Overall, the Board anticipates | | efficiency and overall effectiveness we | tosupport development ofboth on-aircraft | strong growth for the Group in2023 in line | | actively review our overall portfolio of | and off-aircraft hydrogen technologies as this | with itsexpectations. | | operating businesses and evaluate them in | alternative propulsion ecosystem evolves. | | We remain on track to drive the Group terms of their strategic fit within the Group. Land Vehicles ROCE to a minimum of 13.5% in line with In December 2019, Senior confirmed that • Our current exhaust gas recirculation and our previously stated ambition. itwas reviewing strategic options for its waste heat recovery products continue to Aerostructures business, which included a Our strategy and positioning in attractive support evolving Land Vehicle propulsion potential divestment. Although we received and structurally resilient core markets, systems as they become more efficient strong interest for the business, the Group combined with our sector-leading andlower their environmental impact. determined that, with the onset of the sustainability credentials and highly • We are focusing on new product offerings pandemic, it was in the best interests of relevanttechnical capabilities, is delivering forthe transition to a low carbon economy Senior and its stakeholders for the astrong recovery across our Aerospace and engage with our customers’ new product Aerostructures business to remain within andFlexonics Divisions and enhanced development programmes by providing the Group at that time. We are considering valuefor our stakeholders. design and engineering support for cooling the best time to relaunch the process to and fluid-handling solutions for batteries and ensure we optimise value for shareholders, power electronics on the growing number taking into account financing markets and David Squires ofelectric/hybrid vehicles. end market conditions. Group Chief Executive Officer • We are supporting the development of fuel cell cooling and associated fluid conveyance Technology and product design and for commercial vehicle applications by development on the road to Net Zero capitalising on our experience of producing Senior’s fluid conveyance and thermal hydrogen fuel cell products in the management businesses have design IP energysector. (intellectual property) and our structures businesses have manufacturing IP and know- Power & Energy how. Both are underpinned by our investment • We continue to develop our well-established inadvanced manufacturing technology and wide range of fluid conveyance products, supported by our extensive design and bellows and expansion joints for harsh engineering expertise, and collaboration environments in carbon-free energy throughour Technology Council. generation including solar farms, wind power plants, hydroelectric, geothermal, fuel cell In support of our core technology themes, andnuclear power applications. Senior has identified two key enabling • Our extensive experience of providing fluid technologies that underpin innovation conveyance products for demanding throughout our product development and environments, and specifically hydrogen manufacturing lifecycle: Additive Manufacturing fuelcell cooling and conveyance, opens up and Digitisation. Our Technology Council opportunities in hydrogen production and ensures that these technologies are infrastructure applications. collaboratively developed for the benefit ofallbusiness in the Group. Electrification and hydrogen power are poised toremain the key technology themes in many ofour end markets in the decades to come. Ourfluid conveyance and thermal management technology, highly relevant to these themes, willcontinue to help us support our customers with high-valued solutions in the medium- and long-term to bridge the transition to sustainable technologies for the future in a low carboneconomy. 13SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / CHIEF EXECUTIVE OFFICER’S STATEMENT CONTINUED ## MARKET OVERVIEW ## Our core markets across the Group proved resilient in 2022 andare ## buoyant as we commence 2023 despite ongoing macro-economic ## challenges and geopolitical uncertainty. ### ONGOING MARKET RECOVERY ## ACROSS THE GROUP WITH STRONG CIVIL DEFENCE ### OPERATING LEVERAGE Senior’s sales to the Defence sector are primarily focused on the US defence market. ## AEROSPACE The approved budget for US defence in Fiscal | World passengers flows long run outlook | | The rebound in flight departure levels in 2022 | Year 2022 was $778bn. However, the 2022 | | --- | --- | --- | --- | | | 9 | was testament to the resilience of global air | Appropriations Bill was not passed until March | | | | travel demand, with the subsequent recovery | 2022 which meant that up to that point, | 8 across commercial aerospace now in full spending was restricted to 2021’s levels under 7 | | swing. The strong growth in passenger | aContinuing Resolution which led to a delay in | | --- | --- | --- | | 6 | numbers seen in most domestic markets | some ordering activity. For Fiscal Year 2023, | | | andother short-haul routes was sustained | theNational Defense Authorisation Act has | 5 throughout 2022 and is expected to continue. approved $858bn of spend, 10% higher than 4 International, long-haul traffic has been the budget in 2022. 3 accelerating, particularly between North Senior is well placed with good content on the America and Europe and the recent easing 2 F-35 Joint Strike Fighter, mature programmes oftravel restrictions in China has immediately 1 such as the C-130 transport aircraft, and newer provided added momentum. IATA continues programmes such as the T-7A Red Hawk trainer. to expect domestic passenger numbers to 0 reach 2019 levels by 2024 and international 2019 2040 2034 20372031202820252022 passenger numbers to return to 2019 levels ## by 2025. OTHER Production volumes for civil aerospace World vehicles production forecast accelerated in 2022 driven by increased ## AEROSPACE singleaisle build rates. Both Boeing and 100 Airbus announced production rate increases Sales from our Aerospace operating businesses 95 for wide-bodies starting from the end of into end markets outside of the civil aerospace 90 2022and further increases on single-aisle and defence markets are classified under 85 rates in 2023 and beyond. “Other Aerospace” and include sales into 80 thespace, semi-conductor equipment and 75 In the medium and longer term, structural medical markets. Using our world class bellows 70 growth in air travel of c. 4% per annum is technology, we manufacture highly engineered 65 expected to be driven by growing air traffic 60 proprietary products to provide unique solutions demand in Asia and supported by the 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 for semi-conductor manufacturing equipment. replacement of older aircraft with latest Light Vehicles generation, more fuel-efficient models. The semi-conductor equipment market reached Medium/Heavy Commercial Vehicles | IATAanticipates that Asia Pacific will be the | a new sales record in 2022, growing by an | | --- | --- | | fastest growing region over the next two | estimated 4%, reflecting the increase in global | | decades, buoyed by favourable income | demand for microchips. While wafer fab, | | growth and demographic factors. | foundry and logic equipment sales increased, | World Energy Demand memory and storage demand weakened as With our diversified product portfolio in post-pandemic related consumer and work- theaerospace sector, including attractive from-home trends normalise and inflation rises. positions across the newest generation of 600 30 According to the World Semiconductor Trade single aisle aircraft platforms, Senior is well Statistics (“WSTS”), the global semi-conductor positioned to benefit from the ongoing market 400 20 market is forecast to contract by 4% in 2023 recovery, and increased aircraft build rates. 800 40 asa result of challenging macroeconomic Gt CO 200 10 conditions, leading to weaker end marketdemand. 105 CAGR 2025-30: 4.8% The galactic low earth orbit satellites market 2021 STEPS APS NZE STEPS APS NZE 2 2030 2050 revenue is expected to accelerate at a El CO 2 emissions (right axis) Renewables compound annual growth rate of 15% | Traditional use of biomass | Nuclear Natural gas | | | | --- | --- | --- | --- | | | | 2024: 105% of 2019 level | between2022 and 2030. Rising demand for | | Oil Coal | | 2023: 98% of 2019 level | | high-speed and low-cost broadband, growing 2022: 82% of 2019 level advancements in satellite network and Million units potentialuses for laser-based space optical communications are key factors driving 2021: 45% of 2019 level revenuegrowth of the market. Global O-D passengers, billions SOURCE: IEA, “World Energy Outlook”, Oct 2022 – Describes the total energy supply by fuel and CO2 emissions by each scenario – 14 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 Stated Policies Scenario, Announced Pledges Scenario and Net Zero Emissions Scenario by 2050. Illustrates that renewable energy increases more than any other energy source in each scenario. SOURCE: Data sourced from IHS Markit, Feb 2022. SOURCE: IATA, “Air Passenger Forecasts: Air passenger recovery to begin in earnest in 2022”, November 2021 (right). STRATEGIC REPORT / CHIEF EXECUTIVE OFFICER’S STATEMENT CONTINUED ### CIVIL AEROSPACE ## LAND POWER 40% of Group | VEHICLE | & ENERGY | | --- | --- | | The land vehicle market experienced good | Power & energy markets grew in 2022, and | | momentum in 2022. All segments grew | inparticular, activity in upstream oil and gas | | in2022, as markets in North America and | increased and the levels of maintenance | | Europe were buoyant, aided by signs of | andoverhaul improved. | supply chain constraints easing compared The Ukraine crisis brought pressure to energy toprior year. supply in key markets, adding political impetus According to Americas Commercial to build energy security and to accelerate the Transportation (“ACT”) research, the heavy energy transition to renewables. duty truck market grew by 19% in 2022 Electricity demand is forecast to continue compared to 2021. The market is expected ### growing steadily and the IEA predicts an even DEFENCE todecline by 3% in 2023 as pent-up demand stronger push for renewables in the power 14% of for more fuel efficient engines and modest Group sector and faster electrification of industrial pre-buy activity ahead of tighter emission processes and heating. In 2022, 30% of global standards coming to be introduced in 2024 electricity generation came from renewable are expected to be offset by slowing sources and the IEA predicts this rising to macroeconomic indicators in the US. about50% by 2030 and 80% by 2050. According to IHS Markit Inc. (“IHS”), | European truck and bus market production | According to the IEA, in 2022, world oil demand | | --- | --- | | declined by 1% and is forecast to decline | grew 2% and is expected to surpass pre- | | byafurther 1% in 2023. | pandemic levels in 2023 and subsequently | grow1% per year until 2030. Global refining Light vehicle production in 2022 continued capacity expanded slightly in 2022 with similar tobe impacted by semi-conductor shortages, growth anticipated in 2023, although shortages although this is showing signs of in individual products may well persist due to improvement. Production rates were further uneven rates of demand growth and limits in ### impacted by interruptions in the supply of OTHER AEROSPACE therefining system. This tight supply, coupled wireharnesses due to the Ukraine crisis. 11% of with a limited appetite for new US refining According to IHS, European light vehicle Group capacity due to the US federal government’s production grew by 5% in 2022 compared policies onenergy, has led businesses to focus to2021, despite being forecasted to decline. on upgrading and expanding existing facilities, Itis forecast to grow by 6% in 2023 as thereby increasing maintenance and semiconductor availabilityimproves. overhaulwork. According to the International Energy Amid soaring fuel prices and growing energy Agency(“IEA”), global electric car sales security concerns, momentum is building havecontinued their strong growth in 2022. fornuclear power in many countries. TheBloomberg NEF Electric Vehicle Outlook Accordingto the IEA, nuclear power generation 2022 report predicts that by 2025, plug-in has the potential to play a significant role in vehicles will represent 23% of new passenger helping countries to securely transition to vehicle sales globally and electric vehicles will energysystems dominated by renewables. represent 6% of the fleet. With the increasing ### Intheir global pathway to reach Net Zero LAND VEHICLE adoption of electrification for both land vehicle Emissions by 2050, the IEA predicts that 19% of and stationary power applications continuing, Group nuclearpower generation will double between this market is fast growing and represents 2020 and 2050, with construction of new amajor opportunity for Senior in the plantsneeded in all countries that are open mediumand long term, particularly for our tothe technology. Whilst extending lifetimes proprietary battery cooling technology ofnuclearplants will be an indispensable part ofacost-effective path to Net Zero by 2050, itisfeasible that half of the emission reductions by 2050 may come from small modular reactors (SMRs) due to their lower cost, smaller size, andreduced projectrisks. ## We are ensuring we are appropriately resourced to POWER & ENERGY 16% of ## take advantage of the market-led opportunities across Group ## our Flexonics and Aerospace Divisions. 15SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / SUSTAINABILIT Y ## SUSTAINABILITY IN THIS SECTION ## “A commitment to sustainability is rooted in ## our core values and underpins our purpose. ## We believe with conviction that how you do ## business is every bit as important as what ## you do. Across the Group we always put ## safety and ethics first, and we strongly ## encourage and promote diversity and ## inclusivity in all of our operations.” David Squires Group Chief Executive Officer 20 Our Technology and Product Development on the Road to Net Zero 22 Environment 26 TCFD 32 Social 36 Governance ### Sustainability remains an indispensable part ### ofour overall strategy. We always aim to ### deliver our products in a manner that is both ### environmentally sustainable and supports ### economic growth through sustainable ### methods as opposed to focusing solely on ### short-term financial gains. In implementing ### ourstrategy, we are committed to using ### natural resources responsibly, investing for ### thelong-term wellbeing of the planet and ### ensuring that all people involved in and with ### our business process are treated fairly. We continue to enhance our long-term focus on Environmental, Social and Governance (“ESG”). This year, for example, we have achieved a class leading “A” rating inour CDP climate disclosure. We apply our expertise and technology across different applications, working in close partnership with our customers, to develop solutions that support both theircommercial and sustainability objectives. We remain ever responsive to the climate change and clean air challenge, as the world and our customers transition to a lower carbon economy. 16 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / SUSTAINABILIT Y Rotation Flex Rotation Flexes are deployed in Concentrated Solar Powerplants globally. They create a leak tight joint while enabling the trough tofollow the rotation of the sun. Solar Bellows Solar Bellows are deployed in Concentrated Solar Powerplants globally. They act as a seal and compensate for the different thermal expansion of glass andmetal. 17SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / SUSTAINABILIT Y CONTINUED ## SUSTAINABILITY Our sustainability framework Our sustainability framework emphasises ## OUR SUSTAINABILITY safety, high ethical standards, care for theenvironment and our overall businessvalues. ## FRAMEWORK We believe this framework and the high standards we set, helps us to attract, develop and retain the right people, and thatthis is fundamental to our long-term ### ENVIRONMENT SOCIAL GOVERNANCE success. We have talented, committed people with the right skills and experience across our businesses, and we continue SUSTAINABLE PRODUCTS HEALTH & SAFETY UPHOLD HIGH tosupport the personal and professional | Support our customers in | Reduce Lost Time Injury Rate | STANDARDS OF | development of our staff. | | --- | --- | --- | --- | | developing products that help | to 0.3 by 2025 | ETHICALINTEGRITY | | | reduce the impact on the | | | Delivering sustainable solutions | Bribery & Corruption environment. As the world transitions to a low carbon DIVERSITY & INCLUSION Ensure our policies and economy, Senior is helping its customers practices deliver the highest Develop greater diversity and todevelop efficient and effective products ENVIRONMENTAL standards of integrity, avoiding inclusion within the Group that are more sustainable and have the possibility of bribery FOOTPRINT lowerenvironmental impact during the andcorruption Carbon PEOPLE & CULTURE manufacture process and in use. • Reduce Scope 1 and Scope Human Rights Create a working environment 2 emissions by 30% by 2025 Our success is built on developing Uphold international standards that enables our employees to from 2018 base year long-term partnerships with our customers, on human rights achieve their full potential which enable us to help them meet today’s • 80% of the Group’s suppliers Modern Slavery challenges and deliver solutions for future by spend, covering EMPLOYEE WELLBEING Prevent slavery and human low carbon requirements. An example of purchased goods and Support physical and mental trafficking in the Group’s this is our work to provide customers with services and capital goods, health of employees. Create activities and its supply chain more energy efficient solutions on existing to have science based | | the environment that leads to | | internal combustion technologies while | | --- | --- | --- | --- | | targets by 2025 | | Responsible Sourcing | | | | ahighly engaged workforce | | simultaneously helping these same | Promote the use of responsible Waste customers bring to market efficient and practices with a supply chain • Achieve 95% recycling rate viable electric and hydrogen power trains. COMMUNITY INITIATIVES by 2025 Responsible Taxation Bring positive change to We have continued to reduce our carbon Fully comply with the tax laws, Water the communities in which emissions (market based Scope 2) regulations and disclosure • Limit the environmental weoperate usingmore renewable energy and more requirements in the countries impact of our production sustainable production methods and we operate in processes through the materials wherever possible. Our advances efficient use of water Whistle-blowing in additive manufacturing are a good Encourage the reporting of example of this, as we are now able to wrongdoing in the organisation design and manufacture complex products quickly, with reduced waste and often at areduced weight when compared to CYBER SECURITY & traditional manufacturing methods. DATA PROTECTION Reducing waste and the consumption Reduce the risk of cyber ofelectricity and water during the attacks and ensure protection manufacturing of the products remains of all confidential data akey focus. In 2022 we achieved a waste recycling rate of 94.8%. With operations | PRODUCT SAFETY | in12 countries, we are also able to be | | --- | --- | | Ensure that Senior products are | geographically close to major customers | | certified to the required | which helps to minimise the carbon | | International Standards | footprint of our products. | 18 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 ![img-6.jpeg](img-6.jpeg) "Sustainability remains a core focus in Senior. We continuously improve our programmes, following global best practice standards. Inclusion in the CDP "A" list for Climate Disclosure is a highlight for 2022, placing us at the forefront of companies taking action. We remain committed to building on this success in 2023." **Mark Roden** Group Director of HSE & Sustainability STRATEGIC REPORT / SUSTAINABILITY CONTINUED Environment 22% Reduction in Scope 1 (Direct) and Scope 2 (Indirect) emissions (market based) from 2018 base year (2021 – 18.9%) Waste 94.8% Recycling rate (2021 – 93.1%) Diversity 55% Percentage of women on Senior plc Board (2021 – 50%) Employee Opinion Survey 81% Percentage of employees completing Employee Opinion Survey (2021 – 81% of Senior employees completed survey) ![img-7.jpeg](img-7.jpeg) CDP – CARBON DISCLOSURE PROJECT Senior has been awarded an 'A' by CDP for its 2022 Climate Change disclosure. CDP is a global environmental non-profit charity that provides a global disclosure system for investors, companies, cities, states and regions. Based on CDP's thorough assessment of comprehensive climate change data, Senior is the only Company in the Aerospace & Defence Sector to achieve the highest 'A' rating. A total of nearly 15,000 companies were scored, putting us in the top 2% of disclosing companies. Phoebe Duke-Wallace (The Group Sustainability Co-ordinator) and Mark Roden (The Group Director of HSE & Sustainability) accept the award from CDP. CLIMATE SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 19 STRATEGIC REPORT / SUSTAINABILIT Y CONTINUED Electrification and hydrogen power Our fluid conveyance and thermal ## OUR TECHNOLOGY AND are likely to remain the key management technology, highly technology themes in all our relevant to these applications, end-markets in the decades willallow us to support our ## PRODUCT DEVELOPMENT tocome. customers with high-value solutions in the medium and ## ON THE ROAD TO NET ZERO longterm as they transition to sustainable technologies. ## 2020 2030 Observation Our response Observation Current generation engine We have significant content The US aims to supply ≥3 bn ## AEROSPACE | technology enhancements | incurrent best-in-class | gallons of sustainable aviation | | --- | --- | --- | | expected to deliver maximum | engines, and work closely | fuels (SAF) per year by 2030. | | 5 – 25% fuel efficiency | with customers to further | | The EU plans for SAF to be improvements, with the latest enhanceourproducts. ≥5% of aviation fuels, and proposed designs. Urban Air We are working with multiple plans to end free CO 2 credits Mobility (UAM) operators UAM providers on prototype for airlines by 2026. planning to start operations solutions for thermal from 2024, but widespread management solutions. acceptance unlikely before2030. LEAP-1B engineoil bearingnozzle and distributor Observation Our response Observation Semiconductor content in We have become a key The US EPA will tighten ## LAND | | carsis increasing, especially | supplier to microchip | emissions rules countrywide | | --- | --- | --- | --- | | | inEVs. The US passed the | equipment makers, a market | from 2027. | | | CHIPS act to secure supply, | with high barriers to entry. | | | VEHICLES | | | Major car markets are | EU/India considering Our emission control implementing a COP26 similarplans. products help vehicles meet agreement to ban new California Air Resources transitionary regulations. fossilfuel cars by 2035. Boardrequires – 75% NOx reductions by 2024. Euro VII and Bharat V (India) standardsareplanned. The Inflation Reduction Act Bellow will extend incentives for EVs. actuatorfor semiconductor equipment application Observation Our response Observation Nuclear is increasingly We are supporting The EU increased its ## POWER & | | seenas vital for a low carbon | engineering and/or fabrication | renewables target to ≥45% | | --- | --- | --- | --- | | | future. The European | with all active OEMs of Small | ofenergy mix by 2030. | | | Parliament voted to | Modular Reactors (SMR). | | | ENERGY | | | The US eyes 100% carbon | classifynuclear as Our flue gas diversion pollution-free electricity agreeninvestment. | | products are mitigating | by2035. | | --- | --- | --- | | World leaders have agreed | climate impact of | | | to phase out fossil fuel | conventionalenergy. | | subsidies at COP26. Wye piping, reducer and crossover expansion joint for small modular reactor (SMR) 20 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / SUSTAINABILIT Y CONTINUED ## 2040 2050 Our response Observation Our response Our current fluid conveyance and Alternative-powered aircraft Our Aerospace and Flexonics structural components solutions will increase demand for divisions are working are fully compatible with SAFs. ourbattery thermal together to develop various management, fuel cell demonstrator hydrogen We are collaborating with andcryogenic expertise. powertrain components multiplecustomers on developing AirbusZEROe H₂ aircraft forOEM customers. components for carbon capture, planned for service in 2035. energy storage and electrolyzersystems for greenhydrogenproduction. Stainless | steelhoses | Cryogenic | | --- | --- | | forhydrogen | productsfor | | production | LH2systems | | Our response | Observation | Our response | | --- | --- | --- | | Our electric vehicle inverter | 16 countries have committed | We are in series production | | heat sink “Omega Fin” | to 100% zero-emission new | of our 70kW battery cooler | | hasbeen patented. | truck and bus sales by 2040. | for e-buses. | | We are in active customer | | We won our first contract | | discussions on our battery | | tosupply a cooling pipe | | and electronics cooling and | | assembly for an electric | | fluid handling products. | | motor on a heavy-duty | Battery Electric Vehicle and are working on H₂ fuel cells for HDVs. Cooling pipe assembly for anelectric Battery cooling motor on a plate for “Omega Fin” fullyelectric electrified inverter heat sink (BEV)truck vehicles Our response Observation Our response Energy storage will be IEA forecasts global wind We will continue to grow required on a larger scale and solar photo-voltaic ourlow carbon business asrenewables grow. energy demand to grow including solar and wind. nearly 700% on 2021 Senior offers multiple We have extensive in2050 in its Stated solutions for thermal experience in land based Policiesscenario. management within various SOFC fuel cell components energy storage applications. Ensuring stable power used in backup power supply for critical unitsfor data centres infrastructure such as data andhydrogen centres will be important. conveyancesolutions. Heat exchanger Fuel distribution forthermal anode separator management plate 21SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / SUSTAINABILIT Y CONTINUED ## ENVIRONMENT ## SENIOR HAS COMMITTED ## TO ACHIEVE NET ZERO BY 2040 ### THE ROUTE TO NET ZERO 2010 2015 2020 2020 2020 2021 2021 2021 2022 2022 2022 2023 JULY DECEMBER JULY SEPTEMBER DECEMBER JULY DECEMBER | First submission to the | Launch of “20/20 Vision | “20/20 Vision for | Scope 1, 2 and 3 targets | Gap analysis undertaken | Re-assessment of | Scenario analysis | Senior’s 2021 CDP score | Develop our Long-Term | Submit application to | Senior Achieve “A” | Anticipated SBTi | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Carbon Disclosure | for Sustainability” | Sustainability” climate | approved by the Science | to assess the Company’s | climate-related risks | undertaken | A- “Implementing | Net Zero Targets | SBTi for verification of | rating for Climate | approval for our | | Project | including adopting | targets achieved | Based Targets Initiative | alignment to TCFD | andopportunities | | current best practice” | | our Long-Term Net Zero | Disclosure | Long-Term Net Zero | | | climate targets for | | | recommendations and to | | | | | Targets | | Targets | Senior achieves carbon intensity, waste identify areas for “Supplier Engagement recycling and water improvement Leadership Status” usage from CDP The target, to be achieved by 2040 is aligned Scope 3 Emissions ### SENIOR HAS COMMITTED TO to 1.5 degrees centigrade for all scopes. Scope 3 emissions are the result of activities ### ACHIEVE NET ZERO BY 2040 from assets not owned or controlled by Senior, In Senior we follow the Net Zero guidance as We have followed the cross-sector pathway emissions of carbon outside of Scope 1 and 2 defined by SBTi*. Put simply this means cutting using modelling from the Intergovernmental which Senior indirectly affects in the value chain. | greenhouse gas emissions to as close to zero | Panel on Climate Change (IPCC) and the | | | --- | --- | --- | | aspossible, with a removal strategy for any | International Energy Authority (IEA). | In order to reduce Scope 3 emissions, we know | | remaining emissions. | | that it is vital to engage with our supply chain as | We expect to achieve Net Zero approval in 2023. purchased goods and capital goods are our The SBTi Net-Zero Standard is consistent with ### PROGRESS TOWARDS OUR major sources of Scope 3 emissions. societal climate and sustainability goals and ### CERTIFIED SCIENCE BASED within the biophysical limits of the planet. In 2021, we commenced our work to achieve ### TARGETS our Scope 3 (supplier engagement) SBTi Target. The SBTi Net-Zero Standard defines corporate Scope 1 and 2 carbon emissions In order to facilitate the data capture and to net-zero as: Scope 1 emissions are greenhouse gas ensure we were following best practice we emissions released directly from a business partnered with CDP becoming a member of • Reducing scope 1, 2, and 3 emissions to zero – this includes natural gas combustion, theCDP Supplier Programme. or to a residual level that is consistent with ownedtransport and refrigerant use. reaching net-zero emissions at the global or | | sector level in eligible 1.5°C-aligned pathways. | Scope 2 emissions are indirect GHG | | --- | --- | --- | | • Neutralising any residual emissions at the | | emissions released from energy purchased | | | net-zero target year and any GHG emissions | byan organisation, principally electricity. | In 2022 released into the atmosphere thereafter. Business activity continued to recover in Senior was the first company in the global 2022, as a result we experienced an increase Aerospace & Defence sector to have its in electricity usage of around 12%. To mitigate ## 41% emissions reduction targets independently the potential increase in Scope 2 emissions, of our electricity was sourced from verified and approved by the SBTi. In 2020 SBTi we increased our sourcing of low carbon/ renewable energy, an increase from approved our Near-Term Net Zero Targets. renewable electricity, in combination with our 36% in 2021 These are: existing on-site solar generation (Thailand, Malaysia, India businesses) we achieved: Senior energy hierarchy • Senior commits to reduce its absolute Scope 1 and 2 GHG emissions by 30% by 2025 • 3.6% reduction in total Scope 1 and 2 compared to a 2018 base year. emissions (market based) in 2022 REDUCE ENERGY compared to 2021. CONSUMPTION • For Scope 3 GHG emissions, Senior also commits that 80% of its suppliers by spend, • 4.9% reduction in Scope 2 emissions in covering purchased goods and services and 2022 (market based) compared to 2021. ON-SITE RENEWABLE capital goods, will have science based targets • 41% of our electricity sourced from ENERGY by 2025. renewable supply (36% in 2021). In July 2022 Senior applied to the Science *The Science Based Targets initiative (SBTi) is a RENEWABLE/LOW globalbody enabling businesses to set ambitious Based Target Initiative (SBTi) for approval of our CARBON ENERGY emissions reductions targets in line with the latest Net Zero Targets for Scope 1, 2 and 3 emissions. PROCUREMENT climatescience. The SBTi Net Zero criteria requires a near-term and long-term science based target. TRANSITION FROM GAS TO RENEWABLE 22 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / SUSTAINABILIT Y CONTINUED 2010 2015 2020 2020 2020 2021 2021 2021 2022 2022 2022 2023 JULY DECEMBER JULY SEPTEMBER DECEMBER JULY DECEMBER | First submission to the | Launch of “20/20 Vision | “20/20 Vision for | Scope 1, 2 and 3 targets | Gap analysis undertaken | Re-assessment of | Scenario analysis | Senior’s 2021 CDP score | Develop our Long-Term | Submit application to | Senior Achieve “A” | Anticipated SBTi | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Carbon Disclosure | for Sustainability” | Sustainability” climate | approved by the Science | to assess the Company’s | climate-related risks | undertaken | A- “Implementing | Net Zero Targets | SBTi for verification of | rating for Climate | approval for our | | Project | including adopting | targets achieved | Based Targets Initiative | alignment to TCFD | andopportunities | | current best practice” | | our Long-Term Net Zero | Disclosure | Long-Term Net Zero | | | climate targets for | | | recommendations and to | | | | | Targets | | Targets | Senior achieves carbon intensity, waste identify areas for “Supplier Engagement recycling and water improvement Leadership Status” usage from CDP ### SUPPLIER ### ENGAGEMENT CDP recognised our efforts by awarding us Supplier Engagement Leader status based on our Supplier Engagement Rating (“SER”). The 2022 score will be released in March2023. In 2022 we engaged with around 340 of oursuppliers. In 2021, 94 of our suppliers provided data to us; in 2022, we were successful in increasing this response to 160suppliers, a considerable increase. Weachieved this through an Scope 1 & 2 Market Based Emissions Carbon emissions extended engagement programme including (measured as Tonnes ofCO e) a series of Supplier Webex meetings as well 2 as assisting suppliers with calculations. Scope 2 Data from the CDP portal shows that on Electricity | | | + District | average 20% of a participating company’ | | --- | --- | --- | --- | | | | Heating | suppliers are first time disclosers. For Senior | | Scope 1 | (market based) Total | | | in 2022 this percentage was much higher at 2018 10,414 47,0 0 4 5 7,418 49%, a strong indication of the success of our 2019 10,378 46,614 56,992 engagement activities, support andapproach. 2020 8,731 38,016 46,747 2021 8,445 38,095 46,540 2022 8,629 36,249 44,878 ## 70% | | Of the 160 Suppliers who responded: | | | increase in supplier responses in 2022 | | --- | --- | --- | --- | --- | | | Emission | | | compared to 2021 | | | | 64% | Suppliers reporting operational emissions | | | Supplier Engagement | reporting | | | | We remain 2022 key statistics on track to | 60,000 | 56,99257,418 | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | 22% | | | | 45% | Suppliers reporting active targets | | | | | | Targets | | achieve our | | | | | | | | | 14% | Suppliers with validated near-term SBTi targets | | | 50,000 | reduction in total | 46,747 | | 46,540 | | | 49% | 44,878 Supplier Scope 1 and 2 Emission 65 MMT Estimated annual CO2 savings Note: The Scope 1 and 2 emissions Location Based of suppliers were first time responders 40,000 ## Response Rate emissions from our reduction 30% 53% Suppliers reporting emission reduction projects andMarket Based (FY22) are independently verified in compared with a CDP programme 160 Suppliers | 30,000 | 2018 baseline | | | | accordance with the International Standard on Assurance | | | --- | --- | --- | --- | --- | --- | --- | | | | | SBTi reduction | | | average of 20% | | | | Renewable | | | Engagements ISAE3410 (limited assurance). | | | | | | target by 2025 37% | Suppliers reporting renewable energy usage | | | | 20,000 | | energy | | | | | Data taken from CDP 2022 supplier portal extract 10,000 Engagement 41% Suppliers engaging their own suppliers 0 23SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 2018 2019 202220212020 Scope 1 & 2 Market Based Emissions Target Total tonnes CO 2 e STRATEGIC REPORT / SUSTAINABILITY CONTINUED # WATER Objective: limit the environmental impact of our production processes through the efficient use of water, particularly in places of high-water scarcity. With the increased importance of freshwater reserves being more strained we are looking into areas of water scarcity and assessing how we can limit the use of freshwater from these areas. We have used the World Wildlife Fund (WWF) water filter tool to identify the businesses in areas of water scarcity. The plan is to target these businesses in 2023. For information on water, please see www.seniorplc.com/sustainability Water usage in 2022 266 megaltres Reduction in usage of 76 megaltres compared to 2019 (342 ML), the last full year before COVID-19 related impact to operations # WASTE Objective: 95% recycling rate by 2025. To increase the amount of waste that is recycled on site and provide efficient ways to recycle the waste that is produced. With continued progression with business level actions to increase our overall recycling rate, we have achieved a recycling rate of 94.8% in 2022, an increase from 93.1% in 2021. For information on hazardous waste, please see www.seniorplc.com/sustainability In 2022, Senior was successful in recycling 94.8% of waste produced In 2022, 74% of our businesses achieved a recycling rate of 90% or higher # CERTIFICATION Our objective: all Senior businesses are accredited to ISO 14001. ![img-8.jpeg](img-8.jpeg) # Energy Efficiency Actions In the reporting year Senior plc has implemented energy efficiency projects across the global operating businesses. In total, Senior's environmental improvements have the potential to reduce GHG emissions by 2,284 tonnes of CO₂e. These environmental improvements include improving the energy efficiency in buildings, including heating, ventilation and air conditioning improvements, as well as further installation of LED lighting. Senior has also looked carefully at energy efficiency in production processes, including machine/equipment replacement and compressed air efficiency. Senior has set out its year 2025 plan and is on target to reduce Scope 1 and 2 emissions by 30%. Key to this is the purchase of 100% renewable electricity contracts. Six of Senior's UK operating businesses have now contracted into the supply of 100% renewable electricity, avoiding over 2,000 Tonnes of GHG emissions annually. Also, one US business has entered into a 100% renewable energy contract. Other Senior operating businesses continue to make progress to achieving renewable energy contracts. One USA business has entered into a 25% renewable energy contract with their supplier. 24 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / SUSTAINABILITY CONTINUED ## CARBON EMISSIONS ### In Compliance with Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 – Streamlined Energy and Carbon Reporting (“SECR”) | | 1st Jan 2022 to 31st Dec 2022 | | | 1st Jan 2021 to 31st Dec 2021 | | | | --- | --- | --- | --- | --- | --- | --- | | | UK and Offshore | Global excluding UK and Offshore | Total | UK and Offshore | Global excluding UK and Offshore | Total | | Scope 1: Combustion of fuel and operation of facilities | 1,224 | 7,405 | 8,629 | 1,244 | 7,201 | 8,445 | | Scope 2: location based Electricity, heat and steam purchased for own use | 2,159 | 39,550 | 41,709 | 2,203 | 36,040 | 38,243 | | Scope 2: market based Electricity + District Heating | 1,085 | 35,107 | 36,249 | 875 | 37,220 | 38,095 | | Total gross Scope 1 and 2 (location based) emissions/CO_{2}e | 3,383 | 46,955 | 50,338 | 3,447 | 43,241 | 46,688 | | Energy consumed in MWh to calculate above emissions | 17,198 | 138,029 | 155,227 | 17,171 | 126,996 | 144,167 | | Scope 3: Business travel, waste, water | 103 | 1,995 | 2,098 | 53 | 1,118 | 1,171 | | Total Gross emissions/CO_{2}e (Scope 1, Scope 2 location based, Scope 3, Business travel, waste, water) | 3,486 | 48,950 | 52,436 | 3,500 | 44,359 | 47,859 | | Intensity measure/tonnes CO_{2} emitted per £m of revenue | 25 | 69 | 62 | 34 | 80 | 73 | | Water usage (in megalitres) | 32 | 235 | 266 | 37 | 219 | 256 | | Percentage of waste recycled or recovered | 100% | 94% | 95% | 100% | 89% | 93% | ### Methodology The Group’s approach to calculating and reporting our GHG emissions follows the GHG Protocol on how to measure and monitor GHG emissions. Three data sources used for GHG emissions. 1. UK Government GHG Conversion factors for company reporting (DEFRA full set for advanced users 2022). 2. US EPA (eGRID) Emission factors for greenhouse gas inventories for US electricity generation (2022 Version). 3. IEA (International Energy Agency) Emission factors year 2022 version. 2022’s reporting has incorporated Scope 2 greenhouse gas emissions (associated with electricity consumption) calculated using both the Location and Market-based methods. Data for the market-based, utility emission rates has been collated during the period December 2022 – January 2023, as best available information to represent the emissions during the year. It should be noted that these vary and are periodically updated, so are representative of our best endeavour to determine market-based emissions at the time of collating data for this report. In 2022, there was one acquisition. Spencer Aerospace, located in California was acquired on 25 November 2022. As there were only 5 weeks of GHG emissions until the end of year 2022, it was decided that GHG emissions will be reported from January 2023. Therefore, Spencer Aerospace is omitted from our 2022 reporting. Each Senior business reports its environmental performance monthly using the Group’s financial reporting process. The Scope 1 and 2 emissions Location Based and Market Based (FY22) are independently verified in accordance with the International Standard on Assurance Engagements ISAE 3410 limited assurance. In calculating GHG emissions, the Group has used the control approach and more specifically the financial control approach under which a company accounts for 100% of the GHG emissions from operations over which it has control. This covers all wholly owned operations and subsidiaries of the Group for financial reporting purposes. Limited Scope 3 emissions are reported in the table above, they are not externally verified at the time of publication of this Annual Report. A full disclosure of the 2022 Scope 3 emissions, externally verified, will be made publicly available within our CDP Climate Change later in 2023. Total waste includes the reported production and non-production related hazardous and non-hazardous solid, sludge and liquid materials (including wastewater since 2018) that is sent off site for disposal, treatment, reprocessing, recycling or reuse by others. Waste materials do not include by-products or scrap from a Senior business process which are re-used in a production process. Similarly, wastes that arise from construction and other maintenance / remediation works performed by third party contractors are not included in the scope of reporting where the contractor is responsible for the disposal of the waste. DEFRA conversion factors are used worldwide for waste data as means to determine a reasonable carbon conversion factor. Water volumes are obtained from meter readings and from supplier invoices. All water consumption is converted to megalitres, carbon is derived using recognised and appropriate DEFRA conversion factors. Senior uses DEFRA conversion factors to calculate carbon based on distance and class of travel. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 25 STRATEGIC REPORT / SUSTAINABILIT Y / TCFD ## TASK FORCE ON CLIMATE-RELATED ## FINANCIALDISCLOSURES (‘TCFD’) to a long-term target to reach Net Zero GHG ## This section summarises ## GOVERNANCE emissions across the value chain by 2040. • Recognising that climate considerations are ## theGroup’s climate-related Oversight of climate-related risks an important factor in capital expenditure andopportunities ## financial disclosures decisions, we have started work on The Company’s Board of Directors has oversight enhancing the Group’s Capital Expenditure ## consistent with the TCFD over climate-related matters. The Group Chief Request process by incorporating calculations Executive Officer is ultimately responsible for and accounting of carbon which would result ## framework recommending climate-related risks and opportunities. from the purchase and operations of the Reporting to the Group Chief Executive Officer, newequipment. This is an important step ## 11disclosure topics across the Group Director of HSE & Sustainability is towards developing the Group’s internal responsible for Senior’s sustainability and carbon price mechanism. ## four pillars – governance, climate-related strategies. During 2022, the • The Audit Committee considered the TCFD ## strategy, risk management Board discussed climate-related matters as part disclosures included in the Annual Report & of the regular scheduled Board meetings as Accounts 2021 during its meeting in February ## and metrics and targets. outlined below: 2022. The Committee will also be responsible for reviewing the TCFD disclosures proposed • During every Board meeting, the Group Chief for the Annual Report &Accounts 2022. Executive Officer provided updates to the Board on a wide range of sustainability • Following the Group’s annual identification matters, including climate-related issues. Our and assessment of climate-related risks and TCFD compliance statement newly developed carbon emissions tracking opportunities, the Executive Committee In accordance with the Listing Rule 9.8.6 R(8), dashboard has been incorporated into the andthe Board received and reviewed the we confirm that the Company has made Chief Executive Officer’s report to the Board summary of findings during their respective climate-related financial disclosures for the and enabled improved visibility, monitoring meetings in October and December 2022. year ending 31 December 2022 which are and oversight over the Group’s performance • The Group continued its focus on Board consistent with the TCFD Recommendations in meeting its climate-related sustainability technology presentations made by the and Recommended Disclosures. | | targets by the Board. The Group Chief | Group’s members of the Technology Council | | --- | --- | --- | | | Executive Officer also regularly reports to the | in September and October 2022, highlighting, | | | Board on other climate matters discussed | among other matters, climate-related | | | during the Executive Committee and HSE | megatrends likely to affect the Group in | | | Committee meetings. | thenext 5-10 years, regulatory government | | • The Group Director of HSE & Sustainability | | commitments impacting the Company’s | | | attended two Board meetings in 2022 to | endmarkets and development of new | | | update on the progress of meeting Senior's | technologies by the customers. | Near-Term Scope 1 and 2 targets, report on We recognise the importance of ensuring that the initiatives taken tomeet the existing the Board of Directors has the necessary Scope 3 targets and to present the business knowledge and skills to understand and address case for Long-Term Net Zero climate targets. the impact of climate change on the Group. In June 2022, the Board approved the Wemaintained the Board’s climate competence submission of Senior's Long-Term Net Zero through regulatory and legal updates as part of targets for Scope 1, 2 and 3 to the SBTi for regular secretarial reports to the Board. In verification and approval, committing Senior Senior’s climate-related governance framework Board of Directors Oversight of climate-related matters Group Chief Executive Officer Ultimate responsibility for management of climate-related risks and opportunities Executive Committee HSE Committee Leading the Group’s efforts Monitoring progress onclimatechange onGHGemissions 26 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / SUSTAINABILIT Y / TCFD | addition, all Board directors will be offered | Assessing and managing climate-related | Chief Executives of the Aerospace and the | | --- | --- | --- | | toundertake climate-related training in 2023, | risks and opportunities | Flexonics divisions have direct responsibility for | | covering the range of topics shown in the | | ensuring that their divisions meet the Group's | Senior's management is responsible for graph below. carbon reduction targets and supplier assessing and managing climate-related risks engagement responsibilities. They constantly and opportunities. The Board’s strategic discussions always monitor customer demands and are best placed consider global megatrends expected to The Group Director of HSE & Sustainability has to ensure that these requrements are reflected shape the Company’s future operating direct oversight over Senior's operations on the in future programmes as customers transition environment. During the Board Strategy matters of climate change, ensuring that data, tolow carbon products. meeting in October 2022, matters such as the such as Scope 1, 2 and 3 emissions, waste impact of global warming, increased pressure The Group Executive Committee, led by the recycling and water consumption, is collated, on scarce mineral resources and Group Chief Executive Officer, ensures that monitored, presented and reported to the decarbonisation trends informed the Board’s material climate-related risks form part of the Executive Committee and the Board on a strategic conversations around Senior’s ability Group’s overall risk management framework, regular basis. Responsibility for carbon emisison to take advantage of such macro and end and that climate-related opportunities are management and the development of the market trends. incorporated into the Group’s strategic and Energy Efficiency programme also resides with financial planning. The HSE Committee, chaired this position. by the Group Chief Executive Officer, monitors the Group’s progress on its environmental targets, including Scope 1, 2 and 3 emissions. | | Recognising the importance of raising | We acknowledge that achieving Net Zero | | --- | --- | --- | | CLIMATE | awareness of climate-related matters across the | GHG emissions across all of our value chain | | | Group, we developed our Climate Change | requires meaningful understanding of | | | training course in 2022, which focused on the | strategic risks and opportunities arising due to | ## CHANGE following key areas: climate change, as well as practical skills to implement the change needed to transition to • interrelation between climate change and ## TRAINING low carbon future and to meet the Group’s financial stability; sustainability objectives. • differentiating between transition and physical climate risks; The training will be rolled out in 2023. • introduction to TCFD and the recommended disclosures; • climate-related scenario analyses; and • Scope 1, 2 and 3 emissions and Science- Based Targets. 27SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / SUSTAINABILIT Y / TCFD CONTINUED | | Climate change has been reported as one of | business in India, South Africa, California | | --- | --- | --- | | STRATEGY | the Group’s principal risks since 2019. In 2022, | (Senior Aerospace SSP, Senior Aerospace | | | we performed our annual assessment of | JetProducts, Senior Aerospace Ketema, | Climate-related risks and opportunities climate-related risks and opportunities taking Senior Aerospace Steico Industries), as well identified over the short, medium and into consideration legislative frameworks on asour Flexonics and Aerospace businesses longterm climate change, expectations from regulators inMexico. Our businesses use water in the In considering climate-related risks and and market stakeholders, changes in weather production process to dilute coolant used in opportunities, Senior has selected the patterns as well as the latest technological machining as well as cleaning and chemical following time horizons to align with the trends related to climate change. treatment processes; in addition, water is current Group internal risk management required for staff hydration and hygiene. To andplanning time frames: The results of the assessment, presented date, Senior has not been subject to conditions inthe table below, indicate that the Group’s where water scarcity had led to interruptions Rating Range material risks remain unchanged from the inoperations, however we are aware of the S Short term 2022 – 2025 2021 assessment, with one risk moving from possibility of operational interruption and the long-term into medium-term horizon, reflecting M Medium term 2025 – 2027 potential of interrupted supply of products to the increasing focus of credit rating agencies our customers in the case of a severe localised L on ESG. The assessment also identified one Long term 2027 – 2042 water shortage. We are targeting these new opportunity related to reduced reliance businesses on an individual basis to onfossil fuels for energysources. understand where we can reduce overall | Furthermore, in 2022 we analysed each of | water consumption. Senior Aerospace | | --- | --- | | ourbusinesses using the Worldwide Fund for | Spencer, located in California, the acquisition | | Nature (WWF) Water Risk Filter. This indicated | of which was completed in November 2022, | | that 8 of the 26 operating businesses were in | will be assessed using the WWF Water Risk | | areas of potential water scarcity. These are our | Filter in 2023. | Indicative Link to Senior's Category Sub category Risk/Opportunity Description time frame Principal Risks Opportunities Products and Development of new products Services Development or expansion of low emissions products resulting in increased demand for S Senior’s products. Shift in Consumer preferences Changing customer/consumer behaviour or preferences increases demand for Senior’s S products which support the transition to a low carbon economy. Resilience Resource substitutes/diversification M Reduced reliance on fossil fuel for energy sources resulting in reduced costs and a more resilient energy supply programme. Transition Market Changing customer/consumer behaviour or preferences Climate change M Risks Customers may change demand to lower emissions products, as they adapt to a lower carbon intensive economy. This might result in a reduction in demand for some of Senior’sproducts. Influence of ESG on debt-rating agencies/assessment of credit risk Implementation M Changes in investor expectation can change market valuations in a negative way (such as ofstrategy attracting negative screening). Financing and 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 Decarbonisation of manufacturing processes and products away from fossil fuels consistent Innovation and with Science Based Targets may require additional investment of capital. technological change Unsuccessful investment in new technologies M Failure to invest in low emissions technology at the right time can lock the business into 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 reputational governance breach 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 and community Implementation members attracting negative press and reputational damage. ofstrategy Stigmatisation of sector M Activism and protests 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. 28 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / SUSTAINABILIT Y / TCFD CONTINUED ## 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 – “we help engineer the transition to a sustainable world for the benefit of all our stakeholders" – is aligned with the Group’s environmental sustainability objectives to support our customers moving to a lower carbon environment in developing products that are more sustainable and have lower environmental impact. Climate change regulation and understanding are driving changes in consumer preferences and increasing demand for energy efficient transportation. This will mean the extended use of hybrid, fully electric and hydrogen powered vehicles. Senior is currently active in this area with products including innovative thermal management solutions for large battery packs (initially for public transport vehicles). Examples of the products include battery cooling, electronics cooling, electric vehicle fluid handling and flex for vehicle range extenders. A dedicated team of Senior Flexonics businesses are collaborating with their customers on Exhaust Gas Recirculation (EGR) systems to ensure these meet European EU7 standards expected in 2022/2023. Our investment in specialised additive manufacturing equipment in some of our aerospace businesses is aimed at developing and manufacturing lighter metallic components that reduce weight and, ultimately, save fuel and reduce carbon emissions during flight. Read more on pages 20 to 21 and 46 to 49 Operations and supply chain We are committed to continuously reducing our environmental footprint. In 2022, we revised our Group Energy Policy with an Energy Hierarchy model including internal reduction targets. In addition, numerous energy conservation projects were implemented in the Group’s operating businesses across the world, including improving building insulation, upgrading energy efficient lighting, installing heat recovery systems. The Group’s progress on reducing its carbon emissions, increasing waste recycling and its initiatives in promoting the efficient use ofwater, are described on pages 22 to 25. Each site within the Group has a scenario-based Business Continuity Plan which is tested on an annual basis. In 2022, we continued working with around 340 suppliers through the Carbon Disclosure Project, asking them to align with Senior’s environmental goals and set emissions reduction targets by 2025. Read more on page 23 Investment in research and development Senior’s Advanced Technology Collaboration Forum identifies investment opportunities in new technologies and supports the delivery of targeted R&D projects that are aligned to the Company’s purpose. When we look to R&D spend and investment, we assess sustainability of products in terms of supporting the customers’ aims to reduce energy consumption and carbon. Read more on page 42 Access to capital In November 2022, the Group successfully refinanced its main UK Revolving Credit facility (“RCF”). In support of the strong ESG commitments made by the Group, Senior and its lenders jointly agreed appropriate sustainability KPIs linked to the RCF. 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 It is important that the potential of climate-related risks and opportunities is considered in the Group's financial planning, so that adequate strategies are developed to manage such risks and seize opportunities. We recognise that climate-related risks and opportunities can influence financial planning in a number of ways. One of them is that climate change can alter demand for certain products and services. Although we are seeing some negative effects from the decreasing market trend for diesel passenger vehicles in Europe and a consequent reduction in demand for some products, the overall impact on the Group is not significant, with other product lines filling the demand. Changes in climate-related regulations and policies can also impact the financial planning, for example through the introduction of carbon pricing. In support of our SBTi targets, our operating businesses have initiated energy conservation projects (as described on page 24). Climate-related risks such as extreme weather events and water shortages could potentially disrupt operations. The investment of around £30,000 in a water filtration project in Cape Town was initiated in response to the extreme water shortages in the region. Thewater filtration system was installed to reduce the amount of main water needed by recycling some wastewater sources. Thishas resulted in a greater than 30% reduction in metered water usage and enabled the business to continue operating as usual. OurMexico businesses also operate in a region of water scarcity. We invested around £10,000 in water harvesting and saw around 10%reduction inwater usage with potential benefits to business continuity as the harvested water acts as a buffer supply. 29SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / SUSTAINABILIT Y / TCFD CONTINUED | 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 different climate-related | | with more granularity and within a more | | | | scenarios, including a 2ºC or lower scenario; | | applicable business context than climate | scenarios, including a 2ºC or lower scenario • these scenarios are used by the Bank of scenarios based on temperature increases; In 2021, we carried out scenario analysis to England to explore resilience of the UK and understand the potential impact of climate financial system to climate change; • multiple high transition scenarios provide change on the Group’s operations. We selected • the scenarios are modelled to a thirty-year diversity in stress test. the three climate scenarios produced by the Bank of England because: timespan, out to 2050 to align to the Paris Further information on the assumptions and Agreement and other net zero 2050 targets; parameters used in the scenarios can be found on the Company's website. ## SCENARIO 1 SCENARIO 2 SCENARIO 3 ## (<2ºC) (<2ºC) (>3ºC) | 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 of | • Increase in global temperatures reach | | | • Global warming is limited to 1.8ºC by | | | emissions trajectory globally; | | 3.3ºC by 2050 compared to pre-industrial | | | 2050 compared to pre-industrial levels; | • Global warming is limited to 1.8ºC 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 climate | Absence of transition policies result in a | | consumer and investor preferences evolve | policy in 2031, following an initial period which | growing concentration of greenhouse gas | | rapidly to facilitate decarbonisation. | is characterised by insufficient or ineffective | emissions in the atmosphere. | emission reducing policies. In the short and medium term, Senior needs Increased exposure to heatwaves, tropical to ensure that its investment decisions are Senior needs to ensure that it takes action cyclones and droughts may increasingly consistent with its Science Based Targets and over this time period to avoid disruption in the provide challenge for some of Senior’s sites deliver expected results. long term as mature economies make rapid and supply chains. strides to cut emissions. In the long term, it is important to keep pace With less policy action and investment driving with changing market demand for low forward technology development, the costs emission products and remain consistent of transitioning to the new technologies may between Senior’s public commitments and be higher, the likelihood of successful market expectations. 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 have | disrupted economy after 2030. | help Senior be more resilient to changes in | | stabilised. | | the markets and adapt to the impacts of | Opportunities may materialise over the long climate change. term, due to the late policy action and the abrupt transition to low carbon economy. | Resilience statement | Group’s focus on innovation and strong | robust business continuity plans, tailored to the | | --- | --- | --- | | The output of forward-looking scenario analysis | relationships with customers means we are well | specific risks and vulnerabilities of a given area, | | indicated that transition risks could have more | positioned to maximise opportunities offered by | help us become more resilient against the | | significant impacts in scenarios 1 and 2. The | smooth and disruptive transition scenarios. We | potential physical impacts of climate change. | | Group’s application to the SBTi for the approval | are proactively assessing the way climate | We recognise that scenario analysis will be | | of Long-Term Net Zero Targets, aligned to 1.5ºC | change affects market demand for our products | developed over time,and we shall continue to | | for all scopes, can help build resilience to the | as part of our annual strategic meetings. Under | ingrate the findings into Senior's risk | | effects of policy, legal, reputation and taxation | scenario 3, the physical impacts of climate | management framework. | | risks expected under scenarios 1 and 2. The | change could be more significant. The Group’s | | 30 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / SUSTAINABILIT Y / TCFD CONTINUED Integration of processes for identifying, assessing, and managing climate-related ## RISK risks into the organisation’s overall risk management framework Climate-related risks form part of the Group’s risk register and will be subject to the annual ## MANAGEMENT review by the Executive Committee and the Board. Climate change has been reported as one of the Group’s principal risks since 2019. The organisation’s processes for identifying, assessing and managing climate-related risks Climate risks are identified, assessed and managed using Senior’s risk management process as shown on page 62 on an annual basis. The Committee of Sponsoring Organizations of the Treadway Commission ## (“COSO”) enterprise risk management METRICS AND TARGETS integrated framework serves as the Metrics used to assess climate-related risks and opportunities foundation of the Group’s risk management process, tailored to reflect Senior’s culture Targets used to manage climate-related risks and opportunities and performance and values. The process includes against targets identification of relevant risks, risk scoring, The below table illustrates the metrics we have selected to measure our climate-related risks development and assignment of response andopportunities. We selected these metrics because we consider that they are relevant to actions, monitoring the effectiveness of key theclimate-related risks and opportunities facing Senior, as well as regulatory and stakeholder mitigating controls and reporting of the risk expectations; in addition, these metrics are measurable, transparent, comparable and actionable. and assurance environment to the Executive Our Near-Term Scope 1, 2 and 3 targets were verified by SBTi in 2021. In July 2022, Senior Committee, the Audit Committee and applied to the SBTi for verification and approval of its Long-Term Net Zero climate targets for theBoard. Scope 1, 2 and 3 emissions. The targets, to be achieved by 2040, are aligned to 1.5ºC for allscopes. During 2022, the multi-disciplinary team including the Group Director of Risk and Although the Company's Remuneration Policy allows the Remuneration Committee to include in Assurance, the Group Director of HSE & the bonus, strategic measures limited to 25% of the bonus opportunity, this facility has not been Sustainability, the Divisional CFOs, the used nor have we included an ESG target within the long term incentive plan. Part of our thinking Director of Investor Relations and Corporate is that it is clear from past and current performance, that our sector-leading ESG metrics and Communications, the Director of Business progress has been achieved without the need to incentivise, due to our corevalues. Development & Strategy, the Head of Treasury and the members of the Secretarial Target Base Climate-related target year Year Progress in Metric Link to material climate risk team, re-assessed the climate-related risks, taking into account the evolving landscape Reduce absolute 2025 2018 22% decrease Tonnes CO 2 e Increased pricing of GHG Scope 1and 2 GHG (2021 – 19% emissions/cost of carbon offset associated with climate change in the areas of emissions by 30% decrease) Increased stakeholder concern or existing and expected legislation, supplier and negative stakeholder feedback/ consumer preferences, government policies Stigmatisation of sector and commitments, as well as changes in For Scope 3 GHG 2025 160 Supplier Increased pricing of GHG weather patterns. The results of the emissions, 80% of (2021 – 94) Engagement emissions/cost of carbon offset assessment were reviewed by the Executive suppliers by spend to Increased stakeholder concern or Committee and the Board. (response rate) have climate Science negative stakeholder feedback/ Based Targets Stigmatisation of sector Climate-related risks and opportunities are Achieve a recycling 2025 94.8% % of waste Increased stakeholder concern or identified using a wide range of data sources, rateof 95% (2021 – 93.1%) recycled negative stakeholder feedback/ such as climate change specific publications Stigmatisation of sector and data, CDP disclosures from peers, relevant sector literature and guidance from TCFD for Senior’s sector. Materiality of Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (“GHG”) emissions climate-related risks is assessed by The details of our Scope 1, 2 and 3 emissions, in compliance with SECR, can be found on page 25. considering such factors as likelihood, | magnitude of impact and the strategic | Focus areas for 2023 | | | --- | --- | --- | | importance to the business. For our 2022 | Governance Develop, review and approve the actions required to implement Senior's | | | assessment, risks were assessed as residual, | | Long-Term Net Zero targets | | having considered existing controls | Strategy Incorporate the risks and opportunities presented by Senior’s Long-Term | | | andmitigations. | | Net Zero Targets into the 2023 annual risk assessment | Perform annual assessment of climate-related risks and opportunities at the Mitigating action plans are developed for all operational level climate-related risks where the risk scoring Review the impact of Senior’s Long-Term Net Zero targets on its strategy exceeds the Group’s tolerance level for that and businessmodel risk. The action plans include a detailed Risk Management Continue to enhance the Group’s risk management process in respect of description of the response actions (assigned climate-related risks to the members of the Executive Committee Metrics and Targets Develop interim milestones to achieve Senior’ Long-Term Net Zero targets and other senior members of staff) as well as and consider additional metrics and targets to assess climate-related risks time horizons for completion of the mitigating andopportunities action plans. Action plan progress is tracked to ensure timely implementation. The overall effectiveness of the risk control environment is closely monitored through assurance and audit activities to assess if critical risks are being mitigated within the Group’s risktolerance. 31SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / SUSTAINABILIT Y / SOCIAL ## SOCIAL ### HEALTH & SAFETY | The health and safety of our employees | Employees at our operating businesses are | These initiatives are: | | | --- | --- | --- | --- | | remains a core focus for Senior. The pursuit | required to take regular environment, health | 1) Senior Golden Rules for Safety | | | of world class health and safety in all of our | and safety training determined by their | | – refresh and roll out. | | undertakings is a recognised priority at all | specific roles, areas where they work, | | Work commenced on this | | levels in our business. | jobfunctions and responsibilities. | | programme in 2021, our Golden | Rules have been enhanced by We ask all our employees to be proactive No work-related employee or contractor incorporating elements of our inidentifying and reporting unsafe work fatalities occurred in the Senior Group in behavioural safety programme and practices or potentially hazardous situations, 2022 with no major (serious / life changing) updated best practices. Multi-lingual in 2022 we received 12,615 such “near injuries to employees or contractors working training material has been produced miss” reports, an improvement from 11,556 on behalf of Senior. and all of our businesses have in 2021 (which help to prevent recordable We experienced a reduction in the Total completed the programme this year. safety incidents). We actively share Recordable Injury and Illness Rate of around goodpractices and learnings across our 2) “Hand Injury” reduction 21% compared to 2021 underpinning the operations with regional meetings and Cuts and injuries to hands have positive, downward trajectory of safety onour intranet. beena common source of injury incidents. However, there was a small inSenior for many years. The parts Senior has a Group-wide Environment, increase in the Lost Time Injury and Illness we produce often have sharp edges Health & Safety (EHS) Management Rate emphasising the need for continuous and hand finishing of the high-quality Framework encompassing risk evaluation improvement. With this in mind, in 2022 we components remains a part of and operational controls for all our facilities. initiated three major global safety initiatives ourprocess in many businesses. This is subject to an annual audit by ISO- in addition to the routine auditing and In2022, we took a fresh look at trained staff. Seven of our operating support activities. Twoof these – hand these risks and rolled out a global businesses have already transitioned from safety and ergonomics – are aimed at the programme to address the main OHSAS 18001 to ISO 45001. most frequent causes of lost time injuries causes after an exhaustive across Senior whilst the Golden Rules evaluation of the detailed causes update is designed to prevent major injuries. ofinjury over the last five years. Itistoo early to report on the success ofthe programme as yet, Senior Group Injury cases Senior Group Injury rates an update will follow in 2023. | | | | | 1.78 | | | 3) A New Ergonomic assessment | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 136 | | 136 | 1.8 | | | 1.69 | | | | | 119 | | 1.6 | | 1.48 | | | programme | 120 1.4 Ergonomic injuries are the second 1.17 | | | | | | | 1.2 | | | | 1.09 | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | 0.93 | most common type of injury in | | 80 | | | 69 | 66 | | 1.0 | | | | | | | | | | | | | 57 | | 0.66 | | | | | Senior (just behind hand injuries). | | 60 | 51 | | | | | | | | | | | | | | | 39 | | | | | | 0.50 | 0.44 | | | | 35 | 40 | | | | | | 0.38 | Tocounter this, we have engaged | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | 23 | 0.32 | 0.32 | | | | | 21 | 18 | | | | | | | 20 | | | | | | | aleading global consultancy and | 0 started to roll out a programme, 2017 2018 20222020 20212019 2017 2018 20222020 20212019 Total Recordable Injury Illness RateLost Time Injury Illness Rate initially in North America – see the case study. Lost Time Injury and Illness Rate (“LTIIR”), defined as the number of work-related lost time injury or illness cases (losing more than one complete shift) per 100 employees. The Total Recordable Injury Illness Rate is defined as the number of cases of lost workdays, restricted work activities, job transfers, medical care beyond first aid and work-related illnesses expressed per 100 employees. ### SENIOR AEROSPACE MEXICO ### CELEBRATES HEALTH & SAFETY ### ACHIEVEMENT Senior Aerospace Mexico recognises fiveyears with no lost time injuries. Over 200 senior employees joined local officials from the health & safety secretary office and civil protection office, together withgeneral managers of other companies from the local industrial park for a celebratory lunch andpresentation. 2.0 160 140 100 0.8 0.6 0.4 Number of Lost Time Injuries Number of Lost Time Injuries 0.2 32 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 0.0 Total Recordable Injury Illness CasesLost Time Injury Illness Cases STRATEGIC REPORT / SUSTAINABILIT Y / SOCIAL ### EQUALITY, DIVERSITY AND INCLUSION asdiverse contributions lead to better was higher for women than men, levels of solutions and business outcomes. participation being a measure of positive TheGroup’s Equality, Diversity and engagement. Inaddition, it was notable Inclusionpolicy is contained within the thatwomen again scored higher than men Codeof Conduct, and every employee on their overall engagement score and receives a personal copy ofthe booklet. organisational fit, indicating that they feel that Senior is a great place to work. Senior promotes a culture and working | environment in which everyone can make | The table below shows the Group’s Board | | --- | --- | | the best use of their skills, free from | ofDirectors, Executive Committee and | | discrimination or harassment. In 2022, | operational senior management in 2022 | | allemployees undertook Preventing | bygender. | Harassment and Promoting Respect training as part of our annual, mandatory Code of Male Female ## “Senior promotes an inclusive Conduct training. Our Values define how we All employees 78% 22% ## culture and working treat people, and reinforce our commitment Operational senior 82% 18% to be open and straightforward with ## environment where management colleagues, customers, suppliers and ## individuals can thrive, otherstakeholders. Executive 71% 29% Committee ## anddiversity isvalued.“ We expect people to treat everyone they Board 45% 55% meet in the course of business with Jane Johnston respectand dignity. The right behaviours Group HR Director areunderpinned by our Values, policies We strive to reflect the diversity of the andprocedures that support our people communities we work in at all levels processes, for example talent acquisition, acrossour workforce. Senior is an equal succession planning, promotions and opportunities employer. The Board seeks learning and development opportunities. toensure a diverse workforce that supports all employees, irrespective of age, disability, The Executive Committee and business Our Core Values underpin our culture. gender reassignment, marriage and civil leaders continue to focus on providing a partnership, race, religion or belief, sex or Senior’s leaders are committed to ensuring diverse andinclusive workplace. Gender sexual orientation. We will not tolerate any equal opportunities, fairness of treatment, diversity receives much attention in Senior, form of unlawful discrimination against work-life balance, and the elimination of all however we believe that it remains an ourcolleagues, or any third parties be forms of discrimination in the workplace for opportunity for further improvement, theypotential employees, customers, employees and job applicants. We aim to particularly in our operating businesses subcontractors, suppliers or members create a working environment in which general management. We are continuing our ofthepublic. everyone can thrive, achieve their full global participation inMission Gender Equity potential, and contribute to the success of Mentoring. Theprogramme supports and In accordance with the Equality Act 2010 Senior, and where all decisions are based on encourages the development of talented (Gender Pay Gap Information) Regulations skills and merit. We recognise the benefits women. In2022, we analysed the 2022 2017, Senior publishes its Gender Pay of different perspectives and local cultures Global Employee Opinion Survey feedback GapReport, as required on the and encourage individuals to speak freely, by gender. The participation in the survey Company’swebsite. ### SENIOR PARTNERS WITH LEADING CONSULTANCY TO REDUCE ### ERGONOMIC RISKS | Ergonomic injuries account for around 40% of | the application generates a colour-coded image | | --- | --- | | our safety-related incidents in Senior. To reduce | of the human body, indicating low-risk (green), | | these incidents, we have engaged a leading | medium-risk (yellow), and high-risk (red) on | | global expert consultancy and have piloted | affected body segments. An overall risk score | | “Industrial Ergonomics”, an online ergonomics | for the job is also calculated. These dashboards | | training, assessment, and management | act as our status report and are reviewed at our | | solution in 10 of our manufacturing operations | monthly leadership meeting. They allow us to | | in the US and Mexico. | see the issues we have at each site, and | proactively calculate where we want to be in “One thing that differentiates Industrial the future. The ability to filter the data by site, Ergonomics from other software solutions is state, or country is especially helpful to the the e-learning made available to the teams” team. The data will help our businesses says Nick De Bruyne, Senior’s Group Safety, establish local action plans to eliminate risk. Health and Environmental Manager. Ona global level, we can track the businesses Nick conducted a roll-out programme in our performance and establish areas of common Bartlett facility, training around 20 Senior risk and best practice. staffhow to use the bespoke software. Whileassessing a job, workshop attendees enter the data into the bespoke portal. When data entry for all body segments is complete, 33SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / SUSTAINABILIT Y / SOCIAL CONTINUED ### PEOPLE AND CULTURE | Thisyear we have seen an increase in | updated leadership indicators and the use of | | --- | --- | | face-to-face and on the job training and | high-performance indicator tool for our top | | workshops as COVID-19 restrictions have | talent. The Executive Committee scrutinises | | eased. This includes Toolbox talks, | the succession plans and talent pipeline, | | supervisor and leadership skills training, | identifying successors or interim cover for | | “lunch and learns” as well as technical | key roles across the Group. During these | | training. We continue to sponsor individuals | discussions we focused on functional | | undertaking external and more academically | capability, for example engineering, as | | orientated courses and training, for example | wellas operational leadership. Personal | | engineering degree courses. Across Senior, | development plans are recorded and | | we have continued to provide opportunities | monitored in Perform to enable individuals | | for learning and development, meeting both | tofulfil their potential. The Board reviews | | skills and technical training across the Group. | thesuccession plans for the Executive Team | | In 2022 we enhanced our skills training | and their direct reports on a regular basis, | | content in Learn, our best in class eLearning | with a special emphasis on encouraging | | platform, expanding the catalogue and | diversity and inclusion. | providing the training in all our languages. In our autonomous and collaborative As outlined in our Values and Code of Individuals can select courses and manage business model, our operational business Conduct, we work together with mutual their own learning, covering areas such as leaders are empowered and accountable, trust and respect and operate with integrity ITskills, Leadership and Management, setting the tone for their operations guided and in an ethical manner. The feedback from Project Management, Health & Wellbeing by our Values. As we emerge from the our survey is consistent with this and and Communication skills. Learn also pandemic, we have seen a change in confirms that employees believe that people enables usto deliver our Code of Conduct emphasis during 2022 as the business are treated fairly and that we do not tolerate training and other compliance training such recovers. In a challenging employment misconduct. Our culture is to encourage as Cybersecurity. A significant proportion market, we have been focusing on retaining open and honest feedback with potential oflearning is on the job and our culture and recruiting talent to meet business issues or concerns being raised with local ofsharing knowledge and supporting growth requirements. We have done this management. However, on the rare colleagues is central to developing bybenchmarking pay rates in local markets, occasion when things cannot be resolved technicalcompetencies in our operations. making adjustments if appropriate, and locally, employees are encouraged to As evidenced in the Global Employee ensuring we are paying people fairly for the raisetheir concerns through our third-party Opinion Survey, peer relationships remain work they do. We have seen operations whistle-blowing service, Ethics Point. astrength and colleagues help and support providing one off payments or allowances Allconcerns raised are investigated and each other. We have an open and honest tosupport employees with the increased learning points are actioned by local culture of respect and trust and people value cost of living. We have remained vigilant leadership teams as appropriate. teamwork and the teams they work in and regarding changing pay expectations and with. This has been particularly important In order to meet the increased demand supporting employees through these when we welcomed new employees to our fromcustomers, we have seen an increase challenging times. Examples include, operations and support them to become in recruitment activity. In order to meet promoting our employee assistance valued teammembers. demand, we are continuing to focus on programmes which cover areas such building strong relationships with local asdebt management, legal advice and “Perform”, our Performance and technical colleges, universities and counselling services, promoting saving for Development system, provides a framework education establishments, partnering with retirement and flexible working. We have for managers and team members to discuss recruitment firm. We are extending our also strengthened our links with technical feedback, performance, behaviours linked useof job boards and other approaches to colleges and universities close to our directly to our Values, set clear objectives, advertising and attracting applicants, and are operations, providing opportunities for both business and personal development continuing the roll out of Recruit, our talent students to visit Senior, apprenticeships, and create development plans. These acquisition system, to our UK businesses andfor Senior to build a longer-term discussions are designed to be constructive, aswell as focusing on our employer brand. talentpipeline. open two-way dialogues. This year we have changed our succession planning cycle to We continue to view the provision of align with year-end Perform reviews and development opportunities and training have improved the process, introducing across the group as vital to our success. ### EMPLOYEE WELLBEING | The health and wellbeing of our colleagues | to their local needs and have promoted | thereby improving individual work life | | --- | --- | --- | | remains a priority. Included in our Global | specific health drives, for example, breast | balance. Other examples of how we support | | Employee Opinion Survey is a specific | cancer awareness and fund raising, prostate | employees include offering subscriptions to | | Health and Wellbeing section and the score | cancer testing, menopause awareness, | wellbeing apps, sports activities and team | | across all ofSenior was 7.5 out of 10. The | health checks, providing vitamin pack to | building events. | | wellbeing section of the survey looks at four | employees and flu vaccinations. We have | | During the year we have enhanced our key drivers of health and wellbeing and in anumber of individuals specially trained eLearning content to now include a number addition to the question scores, we have tosupport colleagues with mental health of focused wellbeing modules such as received over 3,000 comments which are issues and employee assistance Mindfulness at Work and Positive Mental analysed by leadership teams, and provide programmes in many of our businesses. Health delivered in multiple languages. further insights into how we can support Incommon with many businesses, where Weremain vigilant regarding occupational ouremployees. possible, we are offering employees more health, for example ergonomics, supported flexibility with working patterns by offering Our operating businesses provide support by our Health and Safety frameworks. hybrid working and changing shift patterns, and education to employees as appropriate 34 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / SUSTAINABILIT Y / SOCIAL CONTINUED ### PEOPLE AND CULTURE COMMUNITIES | Thisyear we have seen an increase in | updated leadership indicators and the use of | Senior’s businesses actively supported | All our operations support their local | Many of our businesses have also been | | --- | --- | --- | --- | --- | | face-to-face and on the job training and | high-performance indicator tool for our top | theircommunities in which they operate by | communities and to name some examples: | supporting food banks, donating to local | | workshops as COVID-19 restrictions have | talent. The Executive Committee scrutinises | undertaking a range of charitable activities. | Senior Metal Bellows is a long-standing | andnational charities and have a regular | | eased. This includes Toolbox talks, | the succession plans and talent pipeline, | | sponsor of HESSCO’s (Health and Social | programme of supporting local | In the UK four operations sponsored local supervisor and leadership skills training, identifying successors or interim cover for Services Consortium) St Patrick’s Day 5K communityefforts. community sports teams with Senior | “lunch and learns” as well as technical | key roles across the Group. During these | | race. HESSCO’s mission is to help older | | | --- | --- | --- | --- | --- | | | | Aerospace Thermal Engineering in Royston | | Our colleagues contribute their time, | | training. We continue to sponsor individuals | discussions we focused on functional | | adults and individuals living with a disability | | | | | providing uniforms to a girls football team. | | moneyand effort in areas including | | undertaking external and more academically | capability, for example engineering, as | | remain safe and independent at home for | | | | | InJune, a small team of dedicated cyclists | | educational mentoring and encouraging | | orientated courses and training, for example | wellas operational leadership. Personal | | aslong as possible. The team was placed | | | | | rode the 260 miles from Senior Aerospace | | thetake-up of Science, Technology, | | engineering degree courses. Across Senior, | development plans are recorded and | | 1st inthe Race with additional accolades to | | | | | Weston in Earby, Lancashire to our | | Engineering and Mathematics (“STEM”) | | we have continued to provide opportunities | monitored in Perform to enable individuals | | one Team Member who finished 1st overall. | | | | | Rickmansworth head office, visiting | | subjects in schools. Across the Group | | for learning and development, meeting both | tofulfil their potential. The Board reviews | | | | | | | colleagues at Senior Aerospace BWT, | Senior Flexonics Lymington and Senior | weencourage and support our colleagues | | skills and technical training across the Group. | thesuccession plans for the Executive Team | | | | | | | SeniorAerospace Bird Bellows and | Aerospace Metal Bellows supported the | insharing their expertise and in particular, | | In 2022 we enhanced our skills training | and their direct reports on a regular basis, | | | | | | | SeniorAerospace Thermal Engineering | Empty Bowls campaign that encourages | enthusing the next generation about | | content in Learn, our best in class eLearning | with a special emphasis on encouraging | | | | | | | onroute– “Tour de Senior”. The trip was | members of the local community to support | thepossibilities offered by science and | | platform, expanding the catalogue and | diversity and inclusion. | | | | | | | completed over four days raising money | their local food bank or any initiative that | engineering. Forexample, by working | providing the training in all our languages. In our autonomous and collaborative As outlined in our Values and Code of tosupport youth programmes in the provides food to those in need and educates withtechnical colleges and education Individuals can select courses and manage business model, our operational business Conduct, we work together with mutual community local to Weston. people about the issue of hunger. Senior establishments localto ouroperations. their own learning, covering areas such as | leaders are empowered and accountable, | | trust and respect and operate with integrity | | Flexonics Upeca (China) held a parent-child | | --- | --- | --- | --- | --- | | | ITskills, Leadership and Management, | | At Senior Flexonics India, we have again | | | setting the tone for their operations guided | | and in an ethical manner. The feedback from | | outward bound training for employees. | | | Project Management, Health & Wellbeing | | collaborated with a non-government | | | by our Values. As we emerge from the | | our survey is consistent with this and | | Aswell as having fun, the event developed | | | and Communication skills. Learn also | | organisation, "PRAKASH DEEP" to help | | | pandemic, we have seen a change in | | confirms that employees believe that people | | communication and cooperation skills, | | | enables usto deliver our Code of Conduct | | support the provision of quality education | | | emphasis during 2022 as the business | | are treated fairly and that we do not tolerate | | andwas a great team building event. | | | training and other compliance training such | | tounderprivileged children. | | | recovers. In a challenging employment | | misconduct. Our culture is to encourage | | | as Cybersecurity. A significant proportion market, we have been focusing on retaining open and honest feedback with potential oflearning is on the job and our culture and recruiting talent to meet business issues or concerns being raised with local ofsharing knowledge and supporting growth requirements. We have done this management. However, on the rare colleagues is central to developing bybenchmarking pay rates in local markets, occasion when things cannot be resolved ### technicalcompetencies in our operations. SENIOR FLEXONICS CRUMLIN making adjustments if appropriate, and locally, employees are encouraged to As evidenced in the Global Employee ### ensuring we are paying people fairly for the raisetheir concerns through our third-party ENVIRONMENTAL IMPROVEMENT Opinion Survey, peer relationships remain work they do. We have seen operations whistle-blowing service, Ethics Point. ### astrength and colleagues help and support PROJECT providing one off payments or allowances Allconcerns raised are investigated and each other. We have an open and honest tosupport employees with the increased The team at Senior Flexonics Crumlin learning points are actioned by local culture of respect and trust and people value cost of living. We have remained vigilant participated in a Community based project at leadership teams as appropriate. teamwork and the teams they work in and regarding changing pay expectations and a Primary School local to their site to renovate with. This has been particularly important In order to meet the increased demand supporting employees through these an area for the children to utilise for learning. when we welcomed new employees to our fromcustomers, we have seen an increase challenging times. Examples include, The team invested their time, resources and operations and support them to become in recruitment activity. In order to meet promoting our employee assistance funds into this community project, and valued teammembers. demand, we are continuing to focus on programmes which cover areas such managed to source materials for the building strong relationships with local improvements for free or at discounted rates. asdebt management, legal advice and “Perform”, our Performance and technical colleges, universities and The forest school area was in a poor state, counselling services, promoting saving for Development system, provides a framework education establishments, partnering with with limited areas for the children to use due retirement and flexible working. We have for managers and team members to discuss recruitment firm. We are extending our to overgrown brambles, broken rocks, trip also strengthened our links with technical feedback, performance, behaviours linked useof job boards and other approaches to hazards and rubbish thrown into the area off colleges and universities close to our directly to our Values, set clear objectives, advertising and attracting applicants, and are the street. The Senior Flexonics Crumlin team operations, providing opportunities for both business and personal development continuing the roll out of Recruit, our talent cleared the area and rebuilt it to make it an students to visit Senior, apprenticeships, and create development plans. These acquisition system, to our UK businesses amazing place for the children to enjoy for andfor Senior to build a longer-term discussions are designed to be constructive, aswell as focusing on our employer brand. many years to come. The team-built mud talentpipeline. open two-way dialogues. This year we have kitchens, rope climbs, a new path, a water changed our succession planning cycle to We continue to view the provision of feature, imagination area and even a fire pit. align with year-end Perform reviews and development opportunities and training The project was a great success, both in have improved the process, introducing across the group as vital to our success. terms of enhancing the area for the benefit ofthe school and team building for the teamatCrumlin. 35SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / SUSTAINABILITY / GOVERNANCE # GOVERNANCE ## Ethics Governance ### Our Core Value of “Integrity” is essential to our success Senior remains committed to the highest standards of ethics, promoting the culture of zero tolerance towards bribery and corruption. Employees can give honest feedback, express concerns if there are any practices that they feel uncomfortable with allowing us to take corrective actions when mistakes happen. Our ethics and business conduct programme commits us to conducting business fairly, impartially and in compliance with local laws and regulations and to acting with integrity and honesty in our business relationships. The programme is underpinned by the Code of Conduct, which provides a clear framework on which to base decisions when conducting day-to-day business. It does this by: - clearly setting out the behaviour expected of all employees; - providing guidelines which help employees to apply our Values; and - enabling employees to raise a concern or ask a question if in doubt. Acting ethically is fundamental to our business success; it enables us to strengthen long-term relationships and protect the Group’s reputation. We use various forms of communication and training materials, both in person and through electronic media, to embed the ethics and integrity requirement across the Group. We investigate any alleged violations or complaints and take the necessary action. A register of reported whistle-blowing incidents is maintained by the Group Company Secretary and the Board receives regular updates. In July 2021, all employees were issued with a personal copy of the Group’s updated Code of Conduct booklet and provided with training on the revised Code of Conduct. All new joiners are issued with a copy of the booklet and provided with training on the Code. In 2022, all employees received refresher training on Senior’s Code of Conduct. The completion rates typically run at around 94% allowing for new starters who have not completed their training immediately on joining. The Code of Conduct booklet is available in all languages applicable to the Group’s employees. Any fraud issues that have come to the attention of the Director of Risk and Assurance (formerly the Head of Risk & Compliance) are discussed by the Audit Committee, noting the cause, the action taken and any improvements to internal controls implemented as a result. ## Gifts and hospitality The Group’s Code of Conduct contains specific provisions on Gifts and Hospitality. Employees must declare any gift or hospitality provided or received with the individual or annual aggregate value in excess of £200 (or lower amount) as specified in the Group Gifts and Hospitality Policy. ## Anti-bribery & Corruption The Group recognises that the use of third-party intermediaries can increase potential bribery and corruption risks within the markets in which we operate. The Company conducts appropriate due diligence and ongoing monitoring of third parties with which it works, including regular screening, risk assessments, and compliance health checks. The Company also subscribes to third-party rating organisations to support its due diligence process, particularly when appointing agents and distributors. The Company has a Responsible Sourcing Policy which includes a structured approval process for all key suppliers and those with additional risks. The Group’s Code of Conduct clearly states that Senior will follow all applicable laws and regulations, including the UK Bribery Act, etc. Other Group policies, such as The Use of Agents, reinforce this. ## Insider dealings The Company has a Dealing Code (the “Code”), aimed at ensuring that the Directors of the Company, and employees identified as persons discharging managerial responsibilities (“PDMRs”) of the Company and its subsidiaries, do not abuse, and do not place themselves under suspicion of abusing, Inside Information and comply with their obligations under the Market Abuse Regulation. The Code contains the dealing clearance procedures which must be observed by the Company’s PDMRs and those employees who have been told that the clearance procedures apply to them. This means that there will be certain times when these employees cannot deal in the Company’s securities. The Code also contains certain additional obligations which only apply to PDMRs. Failure to observe and comply with the requirements of the Code may result in disciplinary action. ## Compliance risk assessments and audits The Company conducts annual Control Self Assessments at all of the Group’s operating businesses, which include questions related to the Code of Conduct. The Company also conducts Internal Audits which include testing on areas of governance, including the Code and the prominent display of the Group’s whistle-blowing procedures at all of the Group’s sites. Risk assessments are conducted at operating business and Group level. Risks related to areas contained in the Code of Conduct are considered, with follow up actions where residual risk is deemed high. A more detailed fraud risk assessment is also performed. ## Whistle-blowing As part of our internal control procedures, the Group has a Whistle-blowing Policy that is communicated across all our operations. This Policy provides employees with the opportunity to report suspected unethical or illegal corporate conduct confidentially and anonymously. The third-party whistle-blowing free, secure reporting service, which is externally hosted, is available in all languages appropriate to our global locations. The Group Company Secretary provides information on any reported whistle-blowing cases in monthly Secretarial reports to the Board of Directors. This is a standing agenda item at every Board meeting. In addition, the Group HR Director summarises the total cases and assesses if any patterns or trends are emerging. This is included in every Group Chief Executive Officer’s report to the Board. ## Information Security update and our plans for 2023 In 2022, Information Security training continued to be delivered to all employees. Further details of the training courses provided during 2022 can be found on page 37. Training courses planned to be rolled out in 2023 include: Secure Use of Email and Instant Messaging, Using Mobile Computing Securely; and Working Securely in Public Places. ## Board ### Board gender diversity The Board is supportive of the aim to improve diversity in public companies. In 2022, five of the nine Directors were female (55%). ### Board succession & Board effectiveness Please see the Nominations Committee Report on pages 97 to 99 in the Annual Report & Accounts 2022 for details of the Board’s succession planning and the annual review of Board effectiveness. ### Independence of Directors Six of the Board members out of a total of nine at the 2022 year-end were independent. These were Celia Baxter, Susan Brennan, Barbara Jeremiah, Giles Kerr, Raju Sharma and Mary Waldner. 38 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / SUSTAINABILIT Y / GOVERNANCE Shareholder Democracy Targets and Objectives In 2019, the Group implemented a three-year ADDITIONAL RESOURCES Restriction on Voting Rights | The Company has only one class of shares; | rolling Information Security plan, which | Read more about Technology | | --- | --- | --- | | these are ordinary shares which carry no right | documented its mission to improve security | on pages 44 to 49 | | to fixed income and have equal voting rights. | maturity and reduce business risk across | | Read more about Our Technology and Product The Company does not apply any voting theGroup. As capabilities were introduced, Development on the Road to Net Zero on rightsceilings. metrics were developed and routinely reported pages20and 21 (including to the Executive Committee) which Size of shareholding necessary to measured effectiveness and provided a Read more about Stakeholder Engagement introduce a new Resolution feedback loop to the ongoing plan. In July 2022, on page 50 to 55 Threshold requirements to introduce a new the Executive Committee approved a new Resolution at the forthcoming AGM are Information Security strategy, with the objective stated in the Notes to the 2023 AGM Notice of further maturing the Group’s cyber defences of Meeting, which can be found on the for the next three years. Company’s website. Physical and Technical Safeguards Facilitation of shareholder participation The new three-year Information Security At the 2023 AGM, shareholders will be strategy builds on existing physical and technical ableto vote in person, or by proxy, on safeguards already in place by creating a more resolutions by post or electronically by visiting mature security infrastructure with growing www.sharevote.co.uk. Further details can be capability, using a risk-based approach. found in the Notes to the 2023 AGM Notice ofMeeting. Certification The Group’s Information Security policy is based | Internal Audit | upon a number of recognised, international | | --- | --- | | The Internal Audit Manager reports to the | standards, including ISO 27001, NIST CSF and | | Director of Risk and Assurance (formerly | the CIS top 20 controls, which all the Group | | theHead of Risk and Compliance). In 2022, | operating businesses are required to follow. | the Internal Audit Manager undertook four Procedures for Outsourced Data Processing Information Security audits, 10 Internal Where third-party data processing is utilised, the Control audits, one Trade Compliance Group follows its internal data protection policies auditand three Thematic audits. and risk assessment procedures, including Risk process reviewing contractual provisions for both existing and new providers. Please see the Risks and Uncertainties section of the Annual Report & Accounts Sustainability Governance 2022 on pages 60 to 71. Internal governance of the Group’s Sustainability Data Protection and Information factors is reviewed at both Executive Security Committee and Board level and the factors are externally verified, where applicable. Further Information security risk assessments are details can be found on page 25 of the Annual routinely conducted across the Group, an Report & Accounts 2022. example of which includes assessing third-party suppliers to ensure systems are Product Safety secure by design. Where a system is unable Product quality is absolutely core in all of to comply fully with Senior’s security policy Senior’s businesses and activities. All of Senior’s orminimum standards, the risk is identified businesses have ISO 9001 accreditation for bysubject matter experts, reviewed with manufacturing. The operating businesses applicable risk owners and steps agreed haveadditional aerospace and automotive tomanage any risks identified. accreditations, dependent upon their intended | In 2022, information security continued to be | markets. Ultimate responsibility for product | | --- | --- | | a key area of focus to safeguard the Group’s | quality and safety lies with the senior manager | | assets, with some of the Group’s employees | of each business unit. | continuing to work from home in All products undergo service/safety risk environments that could not be directly assessments, as required in Senior’s demanding controlled by the Group’s Head of Information markets. Employees receive regular training Security. Working from home was facilitated onproduct and service safety. All the Group’s by secure remote access to the operating operating businesses have in place incident businesses’ computer networks. During the investigation and corrective action policies and year, all staff received training and regular procedures and quality testing programmes. reminders about the risks related to information security and the importance Product/service objectives or targets are ofawareness of matters such as fraud, setbythe operating businesses to meet scammers and ransomware, proper use customer requirements and regular external ofthe internet and smart downloading. product/service safety audits are conducted, where standards require. The Group’s Head of Information Security provides regular updates to the Board and Tax Transparency attended the September 2022 Board meeting Senior’s ‘Approach to Tax’ document can to formally present a report on information befound on the Company’s website. security issues identified during the year, theimprovements to security made and theplans for the future. 37SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / OUR BUSINESS MODEL ## OUR BUSINESS MODEL demanding applications in some of the most ## We aim to create OUR PURPOSE hostile environments. We help engineer the transition to a sustainable • Enabling our customers, who operate in the ## value for all our world for the benefit of all our stakeholders. hardest-to-decarbonise sectors, to transition ## stakeholders through to low carbon and clean energy solutions. We do this by: • Staying at the forefront of climate disclosure • Using our technology expertise in fluid ## our business model. and action by ensuring our own operations conveyance and thermal management to achieve our Net Zero commitments. provide safe and innovative products for ## WHAT HOW WE DO IT ## WE DO OUR STRENGTHS/DIFFERENTIATORS Organisation People and culture • A culture of autonomous collaboration • Integrity and high ethical standards ## Senior designs and • Active sharing of best practices • Maintaining a safe and healthy workplace ## manufactures highly • Complementary capabilities • Empowerment of local management, • Leverage common customer and withinawell-defined control framework ## engineered, technology rich supplierrelationships • Ongoing investment in personal and • Strong Divisions provide additional focus professional development at all levels ## components and systems for ongrowth, performance and governance throughout the business ## principal original equipment Financial Read more about our people on page 34 • Financial strength supporting investment ## manufacturers in the Innovation andinnovation for customer benefit • Focusing on technology, product andprocess ## worldwide aerospace and Global footprint innovation to better serveourcustomers and • 26 operating businesses in 12 countries enhance ourbusinessmodel ## defence, land vehicle and covering five market sectors ## power & energy markets. • An integrated global footprint providing customers with market proximity and cost competitiveness The Group has a global footprint with Located in ## 26 12 operating countries businesses ## AEROSPACE ## OUR CORE VALUES ## “THE SENIOR WAY” Safety Respect and trust We operate safely, protecting people We work together with mutual respect Read more about Aerospace on page 72 andtheenvironment. andtrust. Integrity Accountability ## FLEXONICS We operate with integrity and in an We do what we say. ethicalmanner. Excellence Customer focus We continually strive to do better inevery We put the customer at the heart aspect of our business. of everything we do. Read more about Flexonics on page 76 38 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / OUR BUSINESS MODEL ## 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. ## OUR LONG- ## OUR STRATEGIC PRIORITIES TERM Focus on growth Competitive cost country strategy We seek to outgrow our end markets, which Senior has a global footprint to ensure we ## SUSTAINABLE havestructural long-term growth drivers, staycompetitive at a capability and cost level. bothorganically and through acquisition. Inaddition to our North American andEuropean footprint, we have facilities ## Considered and effective VALUE inThailand, Malaysia, China, India, Mexico, capitaldeployment South Africa and the Czech Republic which Senior understands the importance of help to ensure we meet our customers’ ### OUR EMPLOYEES considered and effective capital deployment costand price challenges whilst enhancing inthe interest of maximising the creation of Inspiring entrepreneurial returns on investment. shareholder value. and operational leadership High performance operating system directs a highly motivated Talent development Senior has implemented a high performance and skilledworkforce Senior has a skilled workforce and highly operating system, drawing on the many experienced entrepreneurial business leaders. excellent practices from across the Group, ### Weinvest continuously in technical skills and OUR CUSTOMERS through the Senior Operating System and professional and leadership development. acomprehensive business review process. Continuously delivering competitiveproducts and solutions Autonomous and collaborative Sustainability to customers with outstanding businessmodel We continuously aim to deliver our products quality and delivery performance Senior’s business model is one of empowering in a manner that is both environmentally and holding accountable ourbusinesses, sustainable and supports economic growth ### operatingwithin a clearly defined divisional OUR SUPPLIERS and long-term value creation for shareholders structure, to develop and deliver business plans through sustainable methods. We help tackle Developing reliable, ethical inline with overall Group strategy. climate change by applying our expertise and andsustainable supply chains technology across many different applications ensuring we can meet our customers’ requirements in hard to decarbonise sectors. Read more about our strategic priorities on ### OUR COMMUNITIES pages 42 and 43 Actively participating and helping toimprove the quality of life in our local communities. Minimising our environmental impact through peer leading sustainability programmes ### OUR SHAREHOLDERS Generating value through sustainable growth in operatingprofit, cash flow andshareholder value ## OUR CULTURE Our Values set out the principles and In our autonomous andcollaborative business ### PLANET standards of behaviour that drive model, our operational business leaders are ourculture. empowered and accountable, and set Caring for our planet by reducing The safety and wellbeing of our employees thetone for their operations. The principles greenhouse gas emissions, isapriority in everything that we do, and our ofopenness and transparency are strongly beneficially using our water andrecycling our waste safety culture has been key to how we have encouraged andareevident across all of successfully managed the business during ourbusinesses. thepandemic, supporting employees through very challenging times. 39SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / INVESTMENT CASE ## INVESTMENT CASE ## POSITIONED ## FOR GROWTH ## OUR PURPOSE ## We help engineer the transition to ## asustainable world for the benefit ## ofall our stakeholders ## AEROSPACE CLEAR STRATEGY TO MAXIMISE SHAREHOLDER VALUE ## FLEXONICS ### DIFFERENTIATED FOCUSED STRATEGIC ### BUSINESS MODEL PRIORITIES Read more on pages 72 to 77 ### 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 Demand driven by tightening Market leader of complex fly and higher air traffic drives the the US and has increased in global emission control fluidsystems and products need for new and replacement importance for other countries regulations for truck, off-highway Read more on page 15 aircraft. Environmental pressures given the current geopolitical and passenger vehicles to focus on clean technology situation. Senior has key Read more on page 15 | is ideal for Senior’s product and | positions on major funded | | --- | --- | | technology portfolio | programmes | | Read more on page 14 | Read more on page 14 | 40 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / INVESTMENT CASE ## “Senior's Purpose and compelling ## strategy provides a solid foundation to ## support our future growth aspirations.” David Squires Group Chief Executive Officer We do this by: • Using our technology expertise influid conveyance and thermal management to provide safe and innovative products for demanding applications in some of the most hostile environments. • Enabling our customers, who operate in the hardest-to-decarbonise sectors, to transition tolow carbon and clean energy solutions. • Staying at the forefront of climate disclosure and action by ensuring our own operations achieve our Net Zero commitments. ## Focus on IP-rich fluid ## conveyance & thermal ## management technology ## and capabilities. These capabilities are supported ### LEADING POSITION IN LONG-TERM GROWTH by a strong body of design and manufacturing process intellectual ### ATTRACTIVE MARKETS AND VALUE CREATION property and know-how. ### DELIVERING SUSTAINABLE GROWTH ## OUR DIFFERENTIATORS SUSTAINABILITY 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 Supplier Engagement Leader status on supplier engagement model with a robust control framework • Lost Time Injury Illness Rate improved by 62% and Total Recordable | • Strong balance sheet | | | Injury Rate improved by 67% from 2015 to 2022 | | --- | --- | --- | --- | | • Technology, product and process innovation | | • Early adopters of Hampton Alexander and Parker | | | | supporting transition to clean energy | | Reviews on gender and ethnic diversity targets | | • Considered and effective capital deployment | | | Read more about on pages 16 to 37 | • Global footprint Read more about on page 38 41SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / STRATEGIC PRIORITIES ## FOCUS ON CONSIDERED AND TALENT AND ## STRATEGIC ## GROWTH EFFECTIVE CAPITAL DEVELOPMENT Senior’s end markets have structural Senior has a skilled workforce and ## PRIORITIES DEPLOYMENT long-term growth drivers. We believe highly experienced entrepreneurial Senior understands the importance it is possible to outgrow our end business leaders. It aims to further of considered and effective capital markets and we seek to do that develop and attract new talent, ## The following seven deployment in the interest of bothorganically and through supporting employees with online maximising the creation of acquisitionby: tools to enable personal and skills ## strategic priorities shareholder value. All significant development. The Group has • Growing market share, particularly investments undertaken by Senior astrong focus on diversity and ## arekey elements with key customers; are assessed using a rigorous inclusion across the business • Focusing on technology and investment appraisal process and including on our Board and Executive ## ofour business product innovation; aresupported by a business case. Team. We were early adopters of • Geographical expansion; The Group has a financial objective Hampton Alexander and Parker ## modelwhich drive • Seeking out and exploiting tomaintain an overall return on Review recommendations on adjacent opportunities organically capitalemployed in excess of the genderand ethnic diversity targets. ## thecreation of and through acquisition. Group’s cost of capital and to target aminimum pre-tax return on capital What we did in 2022: What we did in 2022: ## stakeholder value. employed of 13.5% on a post IFRS • Ongoing actions as a result of • Succeeded in expanding our 16 basis. theGlobal Employee Opinion Space business for both low orbit Survey feedback; ### We have added satellites and launch vehicles; What we did in 2022: • Focused on attracting and • Secured higher share of dual ### sustainability as the 7th • Increased ROCE by 370 bps developing talent. To support sourced content as a result of through significantly improved ### priority reflecting the this,we continued to implement strong operational performance; profitability; “Recruit”, our online recruitment • Senior Flexonics Bartlett launched ### increasing importance • Maintained our pricing and system, and supplemented local EGR cooler production for heavy returnon capital discipline ### which our stakeholders training and development activities duty truck engine replacing whennegotiating contracts by launching more skills and anincumbent; ### attribute to our work in andassessing investments; personal development eLearning, • Completed the acquisition • Acquired Spencer Aerospace a ### this area. via “Learn”, our global learning ofSpencer Aerospace Fluid Systems fittings business, management system; Manufacturing; acompany specialising in highly ### Our progress since these • Continued to focus on diversity • Continued to pursue the utilisation engineered, high-pressure and inclusion across the business of Additive Manufacturing ("AM"), ### priorities were established hydraulic fittings for fluid with a particular focus on gender; both non-metallic and metallic, in conveyance applications; ### is shown and they • Undertook our second Global our product offerings. Senior now • Continued to actively manage Employee Opinion Survey to has AM products on both civil and ### continue to receive theportfolio by reviewing our assess culture and employee military programmes; operating businesses and ### specific attention engagement across the Group. • Developed new material evaluating them in terms of ### andfocus. technologies in support of our Our plans for 2023 strategic fit within the Group; customers’ requirements for • Developing and implementing • Reinstated dividend in 2022. thermal management applications action plans following the Global Our plans for 2023 for passenger car and commercial Employee Opinion Survey run • Continue to increase the vehicles. inOctober 2022; Group'sROCE; • Relaunching our Group Leadership Our plans for 2023 • Integrate and grow Spencer Development Programme; • Develop capability for the Aerospace in line with the • Continue to focus on diversity manufacture of highly engineered business plan; andinclusion across the business standard parts, which will include • Continue to drive working capital with a particular focus on gender; hydraulic fittings, metallic flanges efficiencies at all operations; • Focus on talent acquisition and and clamps to vertically integrate • Continue to actively retention plans, and future skills. and support our customers’ high manageportfolio. rate production requirements; Governance Governance • Establish and develop capability The Executive Committee conducts The Board regularly reviews its forthe design, qualification, an extensive review of operating portfolio to ensure that long-term manufacture and supply of businesses leadership succession value is being generated for hydraulic fittings in Europe to plans. The review scrutinises our shareholders. Where appropriate, support European OEMs; talent pipeline, identifying successors divestments will be considered. • Develop products for battery or interim cover for key roles across M&A opportunities are evaluated and cooling, thermal management our businesses. Appropriate discussed at each Board meeting, as ofinverters, hydrogen gas development plans are in place and appropriate, and the M&A and Prune compression and fuel cells; recorded in "Perform", our To Grow strategies are reviewed at • Develop fluid distribution systems performance management system, the Board’s Strategic Review. for hydrogen powered fuel cells to enable individuals to fulfil their &electrolysers. potential. The Board formally reviews the succession plans for the Governance Executive Team and their direct Growth opportunities are reports on a bi-annual basis. regularlyreviewed by the ExecutiveCommittee and Board. TheTechnology Council is in place under the chairmanship of the GroupDirector of Business Development &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 Read more about Risks BoardStrategy Review and and Uncertainties on monitored continuously. pages 60 to 71 42 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / STRATEGIC PRIORITIES ## ENHANCE SENIOR’S COMPETITIVE COST INTRODUCED A HIGH SUSTAINABILITY Sustainability is an integral part of our ## AUTONOMOUS AND COUNTRY STRATEGY PERFORMANCE strategy. We continuously aim to Enhance Senior’s global footprint to ## COLLABORATIVE OPERATING SYSTEM deliver our products in a manner that ensure our operating businesses stay is both environmentally sustainable Senior has implemented a high ## BUSINESS MODEL competitive at both a capability and and supports economic growth and performance operating system, cost level, with key investments Senior’s business model is one long-term value creation for drawing on the many excellent made in Thailand, Malaysia, China, ofempowering and holding shareholders through sustainable practices from across the Group. India, Mexico, South Africa, and the accountable our operating methods. Our engineering expertise Thekey elements include: Czech Republic to help ensure we businesses to operate within a is key in helping to tackle the climate meet our customers’ cost and price clearly defined control framework • The Senior Operating System: an change and clean air challenge as the challenges whilst enhancing returns todevelop and deliver business operational toolkit incorporating world transitions to a lower carbon on investment. Establishing plans in line with overall Group best practice processes such as economy. We achieve this by increasingly sophisticated capabilities strategy. Increasing collaboration lean and continuous improvement applying our expertise and in these competitive cost countries amongst operating businesses in techniques, supplier management, technology across many different and optimising production capacity the Group isa priority to ensure new product introduction, 5/6S applications in hard to decarbonise toalign with growing demand. profitable, risk-reduced solutions are methodology, factory visual sectors. created toaddress our customers’ management systems, risk and What we did in 2022: What we did in 2022: needs whilst maintaining the financial management; • Doubled the production volume • Awarded the top ‘A’ score by autonomous business structure. • A comprehensive business review ofSenior Aerospace Mexico by CDPin its global annual ranking Business leaders throughout Senior process utilising a balanced transferring key EBU assemblies fordisclosure and actions on are actively embracing collaboration scorecard incorporating KPIs with from our US businesses; climate change. activities with priorities set at both focus on performance, growth, • Continued to invest and enhance • In February 2022, Senior was divisional and Group level in operational excellence and talent the capability of Senior Aerospace awarded the highest leadership consultation toaddress and development. Mexico to support production of status in CDP’s annual supplier expandin our evolvingmarkets. Fluid Systems products including What we did in 2022: engagement ratings. | | | machining, welding and assembly; | • Our Aerospace Division Lean | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | What we did in 2022: | | | | | • CO | | 2 emissions were reduced | | | • Secured contracts to fill capacity | | | Council met monthly to collaborate | | | | | • In line with customer | | | | | | further in our operations, keeping | | | | | inour cost competitive country | | and share best practices, while our | | | | | expectations, we established an | | | | | | us on track to deliver our Scope 1, | | | | | locations; | | Flexonics Division lean champions | | | | | AS 13100 Council to share best | | | | | | 2 and 3 Science Based Target | | | | • Continued to transfer product lines | | | continued to leverage the Senior | | | | | practice and co-ordinate efforts | | | | | | Initiative (“SBTi”) verified Near | | | | | to locations where our customers | | Operating System tools; | | | | | toensure on time completion of | | | | | | Term (2025) Targets. | | | | | operate reducing supply chain risk | • Added continuous improvement | | | | | | the certification; | | | | | • We have submitted our long-term | | | | | | and supporting customer cost | | champions to key Aerospace | | | | | • Refocused our Technology | | | | | | Scope 1,2 and 3 Net Zero Targets | | | | | expectations. | | businesses to drive faster | | | | | Council to align our technology | | | | | | to SBTi for validation. | | improvements; investment with our purpose, Our plans for 2023 • 41% of our electricity was • Both divisions conducted multiple focusing on research and • Continue investing and transferring sourcedfrom renewable energy, lean events with continuing focus development that supports Fluid Systems product to Senior an increase from 36% in 2021. on cycle time reduction and cost growth in low carbon Aerospace Mexico; • We secured multiple reduction, together with continued technologies, completing projects • Invest in more machining capacity developmentcontracts for targeted inventory improvement aligned to renewables; to support the production ramp cleanenergy projects. workshops; | • Participated on R&D projects | | inMalaysia; | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | | • Completed the roll-out of APQP | | Our plans for 2023 | | | withour customers, focusing on | • Investing in machining to support | | | | | | | | | | | process standards across our | • Continue to deliver our Scope 1, | | | new technologies that will be | | recently awarded A320 contracts | | | | | | | | | | Aerospace operating businesses. | | 2and 3 Science Based Target | | employed on future programmes. | | as rates increase in Malaysia | | | | | | | | | • Mitigated freight, materials, | | | Initiative (“SBTi”) verified Near | andThailand; Our plans for 2023 Term (2025) Targets. labour,and energy inflation with • Continue to transfer cost sensitive • Form a new Global Market Team • Maintain our CDP leadership appropriate pricing actions. product lines to competitive cost | (GMT) for Hydrogen with both | | | | | | status. | | --- | --- | --- | --- | --- | --- | --- | | | | locations to support customer rate | Our plans for 2023 | | | | | Flexonics and Aerospace | | | | | • Achieve verification from SBTi of | | | | | increase where appropriate; | • Continue to diligently manage | | | | | participants. | | | | | | our long-term Scope 1,2 and 3 | | | • Launch production of products | | | supply chain and inflationary | | | | • Launch inaugural Group-wide | | | | | | NetZero targets. | | | | being relocated from a Western | | pressures by having active | | | | Innovation Competition | | | | | • Secure additional development | | | | | European truck customer’s facility | | dialogue with our customers | | | | sponsored by the Technology | | | | | | and production clean energy | | | | to our plant in the Czech Republic; | | andsuppliers and mitigating for | | | | Council aimed at inspiring | | | | | | contracts. | | | • Relocate industrial products from | | | inflation where possible as part of | | | innovation and encouraging our operation in France to Czech negotiations in contract renewals; Governance greater collaboration and Republic, driven by customer’s • Continue events focused on The Executive Committee and the participation with our wider assembly being in the Czech improving efficiencies and output Board reviews progress against our Technology Councilactivities; Republic. This will allow for as demand increases; sustainability targets at the regular • Further enhance effectiveness of planned growth of aerospace • Work to improve capacity and Board meetings, through the CEO’s the IT Council through quarterly fittings in France. throughput in our Aerospace monthly report and during the annual conferences to share best operating businesses; strategy review. The Board also practice and collaborate on Governance • Establish a supplier council initiatives that support our InfoSec The Executive Committee conducts receives presentations from key focused on improving supplier Strategy for 2023 to 2025. quarterly Business Reviews of all engineering and technology leaders on-time delivery, risk of supply operations. The Group Chief explaining progress with product Governance reduction, cost reduction and Executive Officer and Group Finance development aligned to our The Executive Committee and insourcing opportunities; Director report and discuss progress customers decarbonisation goals. theBoard regularly review the • Continue to work to improve the at each Board meeting. The overall organisational design of the Group SOS Lean skill set of new progress of the competitive cost toensure it is aligned to our Continuous Improvement leaders country strategy is reviewed at the strategicplan. and Manufacturing Engineers Board Strategy Review on a across the business; regularbasis. • Continue to focus on improving working capital efficiencies. Governance Our Vice President of Operational Excellence chairs the Aerospace Lean Council on a monthly basis. TheExecutive Committee reviews operational performance and the Group CEO reports progress to the Board at every Board meeting. 43SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / TECHNOLOGY ## TECHNOLOGY IN THIS SECTION ## “We continue to work collaboratively across ## Senior to progress the key technology ## themes that future-proof our product ## portfolio and enable sustainable growth ## across our endmarkets.” Martin Barnes Director of Business Development & Strategy 46 Our Technology Themes 48 Our Enabling Technology Refractory Lined LouverDamper Dampers are flow control devices that are used in Thermal Oxidizers, which convert hazardous volatile organic compounds (VOCs) and other pollutants into CO 2 and H₂O before emission into the atmosphere. 44 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / TECHNOLOGY Universal Expansion Joint Expansion Joint assemblies act as a thermal compensator for fluid and gas conveyance ducts. These are used in Petrochemical processing plants, such as Catofin® applications. Pressure Balance ExpansionJoint Expansion Joint assemblies compensate for mechanical or thermal expansion & movement in fluid and gas ducts. These are used in Boiler Feed pump exhaust system in Power Generation plants. 45SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / OUR TECHNOLOGY THEMES ## OUR TECHNOLOGY THEMES ### Senior’s fluid conveyance and thermal Both are underpinned by our ### management businesses have design investment in advanced ### IP (intellectual property) and our manufacturing technology and ### structures businesses have supported by our extensive design ### manufacturing IP and know-how. and engineering expertise, and ### collaboration through our Technology ### Council. Our core technologies ### support deliverable growth ### opportunities in all our end markets. ## FLUID CONVEYANCE AND ## THERMAL MANAGEMENT Fluid conveyance is the flow of fluid, In thermal management, as the pace of ### PROOF OF CONCEPT DEVELOPMENT FOR including both gases and liquids, within electrification picks up, our technology ### AEROSPACE HEAT EXCHANGERS a system. Senior has extensive and IP can be used to develop products background IP in fluid conveyance that can prolong the life of the battery Senior’s extensive experience in the design and applications. For example, Senior is a and increase charging speed. Senior has manufacture of fluid conveyance applications provides market leading design and manufacturer already developed custom solutions for significant insight into the system requirements for various of bleed-air systems on modern both passenger car and heavy duty aerospace applications. Our fluid conveyance products turbofan engines for commercial Battery Electric Vehicles. As the market frequently connect to heat exchangers within airframe and aerospace applications. For land vehicle moves towards zero-carbon solutions engine applications and, in response to customer requests and industrial applications, we have for propulsion and energy generation, for a single-source system provider, we are investing in applied our extensive expertise in we are leveraging our core thermal thedesign and manufacture of a proof of concept high fluidconveyance systems on multiple management expertise for fuel cell temperature heat exchanger for aerospace applications, exhaust gas ducting applications, applications, such as recuperators (for building on our extensive experience gained in producing ranging from half-inch diameter polymer membrane or PEM fuel cell high performance heat exchangers for land vehicles and passenger car systems to large size systems), and dielectric compensators battery thermal management. power plant applications which are (for solid oxide fuel cell systems). We have been able to demonstrate significant uptotwo metres (80 inch) diameter. performance and weight advantages by leveraging our Additive Manufacturing (AM) expertise to outperform “conventional“, commonly available, heat exchanger designs. Developing this new product capability will open Capability highlights significant new markets for Senior and complements our | • World class design capability | | • Extensive expertise with thin-wall | | existing expertise and knowledge in fluid conveyance | | --- | --- | --- | --- | --- | | | forcomplex fluid conveyance | | aluminium, copper and stainless steel | system and component design, demonstrating how we | | | systemsincorporating zero-leakage | | structures for demanding thermal | can leverage AM techniques and apply our land vehicles | | | flexible joints and couplings to | | management solutions for battery | expertise to new aerospace applications. | | | compensate for vibration and | | cooling, fuel cells and cryogenic | | | | thermaldisplacement. | | applications. | | | • Industry leader in the design and | | • Additive Manufacturing (AM) | | | | | fabrication of highly engineered | | capabilities in both metal and polymer | | | | edge-welded and formed bellows | | materials as an enabling technology | | | | devices and components from | | for complex high-pressure and | | | | 3.2millimetres to 5.1 metres | | low-pressure ducting systems | | | | diameterfor various applications, | | andheat exchanger designs. | | including frictionless servo- pneumaticactuators. • Component and system level simulation and analysis, including Finite Element Analysis (FEA), Computational Fluid Dynamics (CFD) and vibration analysis, plus verification and qualification testing. Senior is developing a new heat exchanger product linefocused on aerospace applications, combining our traditional experience from land vehicle applications anddesign freedom enabled by our Additive Manufacturingcapability. 46 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / OUR TECHNOLOGY THEMES ### GROUP REVENUE BY TECHNOLOGY THEME Fluid Conveyance & Thermal Management Product and System Design ## 68% & Manufacturing IP Structures Complex Machining and Manufacturing Know-How: ## 32% Process IP ## STRUCTURES Modern airframes and turbine engines Our capabilities and strong customer ### ON-MACHINE PROBING FOR COST AND require durable lightweight components relationships have secured substantial ### QUALITY IMPROVEMENTS manufactured to extremely tight content on the key aerospace platforms. tolerances that operate in extreme Senior manufactures some of the most complex environments. Senior is a trusted machinedparts for various airframe and engine platforms. partner for high value-added engineering A good example is an extremely complex engine casing and manufacturing of critical structural manufactured from the heaviest single piece titanium components for the leading OEMs in investment casting in the world. This part has over three the civil and military aviation sectors. thousand machined features, many of which have very tight tolerances. Senior uses the most advanced mill-turn machine technology available to manufacture the part, however, tolerances on the component are at the edge of the machine’s capabilities. Maximum use is made of in- process probing to precisely measure feature dimensions Capability highlights automatically and adjust the depth of finishing cuts to • Extensive expertise in manufacturing, • Highly vertically integrated, with account for part-to-part variation as well as any process assembly and qualification of a wide-ranging process qualifications drift without operator intervention. This allows us to widerange of complex airframe, across machining, Non-Destructive maintain high levels of conformance, minimise errors, aeroengine and power/ Testing (NDT), special processes, deliver customer efficiencies and improve operator safety. energycomponents welding and forming. Over the last 18 months, Senior has applied on-machine • State-of-the-art capabilities in • High level of collaboration between probing routines across multiple complex machined complex 5-axis machining and operations in North America, components, resulting in cycle time savings and fabrication, including toolpath theUKand Southeast Asia significantly improved quality and process capability. optimisation, robotics, on-machine includingsoftware model-based probing, and vibration dampening. engineeringcapabilities. By using on-machine probing extensively, Senior has significantly improved quality and process capability onhighly complex machined components. 47SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / OUR ENABLING TECHNOLOGY ## OUR ENABLING TECHNOLOGY ### In support of our core technology Our Technology Council ensures ### themes, Senior has identified two that these technologies are ### key enabling technologies that collaboratively developed to ensure ### underpin innovation throughout that we continue to provide safe ### our product development and andinnovative products that meet ### manufacturing lifecycle: Additive customer needs. ### Manufacturing and Digitisation. ## ADDITIVE MANUFACTURING Additive Manufacturing (AM), sometimes Our team has skillfully optimised the AM ### ADDITIVE COMPONENTS referred to as 3D printing, is a key enabling machine and process parameters, based on ### FORSUPERSONIC FLIGHT technology for Senior that underpins the real-world aerospace production applications. ### development of novel product designs across We have built an unparalleled, proprietary DEMONSTRATOR our product portfolio. AM offers boundless dataset of AM process parameters that allows Senior Aerospace SSP (SSP) is working on possibilities for designers to develop unique our customers to have complete confidence NASA's Quiet SuperSonic Technology andinnovative product designs unconstrained in our ability to produce AM parts that are fully (QueSST) programme. The research aircraft by traditional manufacturing process limitations, qualified for series aerospace production. In will be used to collect data of a quiet sonic enabling the design to be optimised for a conjunction with our robust quality system, boom generated by the unique design of the multitude of different characteristics such as Senior obtained Nadcap certification for AM aircraft aimed at lifting the ban on commercial weight, performance parameters and processes in 2022, which only a handful of supersonic travel over land; a breakthrough physicalenvelope. other companies have achieved worldwide. that would open the door to an entirely new global market for aircraft manufacturers. SSP Senior has made significant investments in AM, We are currently working with a number of has successfully designed and manufactured both from a hardware and infrastructure Aerospace OEMs and Tier 1 suppliers on the bleed air duct system for the research perspective as well as a capability and expertise qualifying various AM components for aircraft using both conventional manufacturing perspective. In 2017 Senior established our production applications. These range from methods as well as advanced Additive Advanced Additive Manufacturing centre at our fuel and oil flow components for high volume Manufactured (AM) for critical portions of the Senior Aerospace SSP facility in Burbank, CA. single-aisle aerospace applications, to critical system. The bleed air duct system comprises Since then, we have established a highly structural components for next generation several hundred individual part numbers, of integrated AM process capability covering every defence platforms. In all these cases, our which over 40 were made via AM. aspect of AM design, build, post-processing, customers have chosen to work with and material characterisation – including a fully Seniordue to our proven pedigree on The use of AM in combination with equipped and accredited materials laboratory. AMproduction capability, as well as our conventional machining and welding Inaddition, we have made significant widerdesign expertise. processes allowed the SSP design team investments in building AM design expertise, tocreate an innovative, complex system. We consider our AM capability to be an which is vital to take full advantage of the AMbuilds components layer-by-layer without integral part of our product design and freedom that AM processes can offer. These the need for either special forming tools or manufacturing technology toolkit. We are include AM process simulation tools and an dedicated fixturing, creating design prioritising investment to enable the in-depth knowledge of what features can be opportunities to enable multiple components development of process parameters to produced reliably withAM. to be consolidated into single assemblies perfect the build process, as well as thusreducing part count, creating shorter developing design expertise to take full leadtimes and lighter weight components, advantage of AM’s ability to enhance whilst improving the system's operating productperformance. performance compared to a conventional bleed air duct system. Manufacturing such a large number of Capability highlights • Internal design simulation and analysis components with very complex features, capabilities have helped us fully • Nadcap certification for metal AM process thinwalls, and previously "unprintable" demonstrate the benefits AM can offer, capability – significant achievement characteristics required significant such as part consolidation, performance highlighting the robustness of our AM collaboration between SSP and the AM improvement and weight reduction in production system. machine builder and raw material (i.e., metal avariety of demanding aerospace powder) providers, and showcases Senior's • Full vertical integration of the AM design and applications. Additive Manufacturing design and build manufacturing process, including all post- • Additive Manufacturing capabilities in both expertise for complex aerospace processing and finishing steps. Achieved metal and polymer materials as an enabling productionapplications. significant experience integrating AM-derived technology for complex high-pressure and subcomponents into subsystems and low-pressure ducting systems and heat modules with traditional fabricated i.e. exchanger designs. welding and brazing methods. • AM process simulation and extensive process parameter dataset allows us to predict and subsequently optimise various design candidates for predictable build performance inproduction. 48 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / OUR ENABLING TECHNOLOGY Additive Manufacturing Digitisation Our internal expertise in We are actively pursuing Additive Manufacturing allows Digitisation as an enabling us to overcome constraints technology across all our oftraditional manufacturing product and process technology processes in developing development processes to innovative, high-performance improve efficiencies and solutions for demanding promote collaboration at applications. alllevels. ## DIGITISATION Digitisation, or the fourth industrial revolution, 2. Project management & Engineering ### DIGITAL PLATFORM isa broad field with multiple definitions Data management, covering PLM ### FORENGINEERING coveringthe adoption of digital technologies (Product Lifecycle Management) and ### inmanufacturing. Multiple OEMs are already MBD (Model Based Design). Adoption PROJECT MANAGEMENT focusing on operational data collection for and implementation of PLM is essential One of Senior’s Aerospace businesses has valuegeneration throughout the entire product to streamline our product development successfully implemented a cloud-based lifecycle. To this end, we have seen increased cycles by encouraging reuse of common software solution for engineering project efforts by OEMs to ensure a minimum level engineering data and eliminating portfolio management. The key driver was the ofdigital capabilities throughout their supply inefficiencies and lost time due to design need to update and modernise the existing chainsthrough supplier focus groups, and data change/version control issues. Our processes for managing engineering resource regular scorecards grading suppliers’ capabilities MBD efforts are focused on using “rich“ allocation, project portfolio management and in terms of digital readiness, automated data models with embedded manufacturing task prioritisation across multiple projects exchange and native product data formats. andquality control information and operating under significant resource requirements, removing the need for constraints. Historically, Senior has used Accordingly, Senior’s focus on Digitisation additional documents and drawings. various standalone project management relates to three specific focus areas: toolssuch as MS Project and bespoke 3. Operational Technology and Process 1. Design and Engineering development spreadsheets to manage these tasks. Management. Our operating businesses toolsets to standardise the design and are working on monitoring real-time As part of our Technology focus on simulation/analysis tools used within a process data with the use of IIOT Digitisation as an Enabling Technology, number of Senior’s Operating Businesses (Industrial Internet of Things) and Seniorimplemented a cloud-based work toachieve manufacturing cost synergies machine monitoring to optimise management platform focused primarily on andaccelerated adoption across our resource usage andproduction planning. engineering project management. Automated business units. Multiple sites areconnecting the resource management, workflows and task machine/resource monitoring data notifications have significantly improved directly into their ERP systems, moving engineering resource efficiency and allowed towards a true Manufacturing Execution significantly higher throughput even in the System approachto resource planning. face of challenging personnel constraints. Thecloud based software gives users an easy-to-use visual interface to interact with collaborators across multiple locations. A key advantage with the new work management platform is the ability to develop customised workflows to automate typical engineering processes such as review and approval cycles, status rollups and summary data forpresentations and dashboards. This has Capability highlights • Standard database of engineering significantly improved the level of simulation and analysis tools with cross- collaboration between various project teams, • PLM solutions in use across multiple functional team looking to optimise usage as well as enabling automated email operating businesses, especially in the of these tools across Senior as part of the notifications and reminders to allow scarce build-to-spec environment | | | Digitisation technology focus. | technical resources to focus on value-added | | --- | --- | --- | --- | | • Standardised capability to use rich model data | | | tasks rather than reporting and status | | | (e.g. ISO 10303-242 STEP AP 242 standard) | | reporting to management. | natively for all aspects of downstream Future uses of the platform include the ability engineering dataprocessing. to conduct brainstorming and visualisation sessions during the initial discovery phases ofthe project to help tighten project scopes and improve on-time delivery of new productdevelopment. 49SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / STAKEHOLDER ENGAGEMENT ## STAKEHOLDER ENGAGEMENT ## Senior’s engagement with stakeholders is a continual ## process which embeds the highest standards to ensure ## the business's success. Our stakeholders are people, ## communities and organisations with an interest or ## concern in our purpose, strategy, operations and actions. ## Senior engages with five key groups – our employees, ## customers, suppliers, communities and shareholders. ## Byengaging and collaborating with our stakeholders ## wecan ensure our business delivers long-term ## sustainable value. ## OUR STAKEHOLDERS ### EMPLOYEE ENGAGEMENT Career development opportunities 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 and value creation Read more on page 51 ### CUSTOMERS Safe and high performance products and value creation Our Core Value of “Customer Focus” firmly establishes thatwe put our customer at the heart of everything we do. Read more on page 52 Trust and long-lasting relationships ### SUPPLIERS Respectful relationships and supply chain stability Constructive engagement with suppliers sets fair expectations on safety, quality, ethical behaviour, ### CONTINUOUS commercial terms and delivery performance. ### STAKEHOLDER Safe, high quality, ethical and cost effective Read more on page 53 suppliers ### ENGAGEMENT ### SHAREHOLDERS Sustainable growth in operating profit, cash flow and shareholder value Senior engages regularly with our investors to ensure ourpriorities are aligned on strategy, capital deployment, sustainability goals and value creation. Investment and valuable feedback Read more on page 54 ### COMMUNITIES Local support and value creation We recognise our responsibility to the communities inwhich we operate. Read more on page 55 Talent for recruitment and sense of community 50 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / STAKEHOLDER ENGAGEMENT ### EMPLOYEE ENGAGEMENT | How we engage | business, was identified as an area for | unexpected that Reward is still an area | | --- | --- | --- | | During 2022, we placed great emphasis | improvement, and an area that our | forimprovement, when considered in | | onemployee engagement which was | operations worked on following the 2021 | thecontext of the current economic | | particularly important as we emerged from | survey. Business leaders will continue to | environment. Similarly, there was an | | the impact of the COVID-19 pandemic. | focus on communicating their strategy | improvement in our score for “Mission”, | | Gradually we were able to return to more | andmission to their teams. | although it remains an area of focus. | normal working conditions, with business For much of the year, and depending on Company actions responding leaders able to hold all-hands meetings to geographical location, our operations had toengagement outcome communicate business objectives and toremain vigilant regarding COVID-19 Management-level actions answer questions from employees. We also outbreaks and supported employees by Action plans developed following the 2021 reintroduced smaller group meetings, continuing COVID-19 safe working protocols Global Employee Opinion Survey, were question and answer sessions, skip level andby encouraging them tobe vaccinated. monitored and updates provided by the meetings and employee focus groups. We operating businesses throughout the year continued to utilise some of the new ways Outcome of engagement via business reviews. Operating business of engaging and communicating with At the end of September 2022, we leadership teams and the Executive employees that we had developed during launchedour second Global Employee Committee are analysing their 2022 Global the pandemic, for example employee apps, Opinion Survey. We once again asked our Employee Opinion Survey feedback and TV information screens, video messages, employees for their opinions and we saw action planning is underway across the and tried and tested methods like asmall improvement in the overall Group. There is a framework in place for newsletters and employee representative engagement score compared to May 2021, thebusinesses to provide regular updates bodies such as works councils. when we ran our first global survey. Using tothe Executive Committee and the Board the same questions enabled us to review A key area of focus during the year was throughout 2022. The next global survey the feedback in comparison to the first implementing the action plans following the willbe in 2024. survey. As in 2021, the response rate was successful 2021 Global Employee Opinion 81%, which for manufacturing companies, Board-level actions Survey. 2021 was the first time wehad with a significant number of employees Celia Baxter, the Non-executive Director runaglobal survey and the output provided completing the survey, who do not have with responsibility for employee a rich source of employee feedback, ready access to company emails, is a high engagement, and Jane Johnston, Group HR suggestions for improvement and participation rate, and in itself is a positive Director have continued their programme affirmation of what we do well. Thesurvey indicator of engagement and our employees offace-to-face focus groups. As well as provided feedback on three keyareas; desire toprovide feedback. holding the focus groups, site visits included Engagement, Values, and Healthand factory tours and meeting leadership teams. Wellbeing. Each operating business Our overall engagement score improved They visited four US operations and our developed their own action plans and slightly from 7.1 to 7.2 out of a possible German business, holding 19 sessions in communicated them to their teams. maximum of 10. The main engagement 2022. The sessions afford an opportunity Actionsincluded skills training for managers question, “Overall, how satisfied are you toengage directly with a cross section of and supervisors to improve personal working at Senior?”, score increased from employees, allowing them to ask questions development, an increase in focused 7.4 to 7.5. Goal setting, peer relationships, and provide feedback. As always, the technical training, enhanced wellbeing organisational fit and meaningful work, discussions were positive, enthusiastic offerings such as wellness apps, employee remain our best scoring areas. Compared andinteractive. recognition and social activities, and tothe previous survey the score for Reward reviewing pay, benefits and resourcing improved, however it was still highlighted The Board reviewed progress against the levelspost pandemic. inthe 2022 survey as an area for further 2021 Global Employee Opinion Survey improvement both in terms of how action plans and were provided with high In the 2021 survey “Mission”, which is individuals are rewarded but also the level feedback from the 2022 survey during linked to strategy and indicates whether process for determining pay. It was not the Board meeting inDecember. people are inspired by the purpose of the ### SENIOR GLOBAL EMPLOYEE OPINION SURVEY RESULTS Overall engagement score Health and Wellbeing score All comments (of a max of 10) (of a max of 10) ## 39,020 ## 7.2 7.5 Employee participation Health and Wellbeing Values Max Score: 10 1 Social Max Score: 10 1 Safety Wellbeing 2 Respect ## 81% 2 Physical &Trust Wellbeing | | 5 | 1 | | | | 6 | 1 | | 3 | Integrity | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | 3 | Organisational | | | | | | | | | | | | Support | | | | | 4 | Excellence | | | | | | | 5 | | | 2 | | | | 4 | | 2 | | | | | | | | | | | | | 4 | Mental | | | | | 5 | Customer | 34 3 Wellbeing Focus 5 Overall Health 6 Accountability & Wellbeing 51SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / STAKEHOLDER ENGAGEMENT CONTINUED ### CUSTOMERS How we engage aswell as forming a vital part of our ongoing We maintain an ongoing dialogue with our relationship management, helped to clarify customers across Senior, including at the andfocus our mutual activities towards driving operating business, Division and Group senior both our success. Remaining close to our management levels. Division-level Customer customers helped us to support them through Relationship Managers and Global Marketing achallenging supply chain and operational Teams are in place in Europe, the UK, and the environment, which has helped to position USA to interact with and support all levels of our Senior as a valued andtrusted supply partner. largest customers, ensuring that we monitor and Outcome of engagement understand as much as possible the fundamental The close partnerships we have nurtured with dynamics impacting their businesses and the our customers allowed us to mitigate operational potential knock-on effects on their end-markets. challenges, which stemmed from industry-wide This regular and cross-functional insight gives us supply chain and labour shortages. Together, the ability to respond appropriately when issues wehave worked to solve these challenges, ## arise and to quickly capitalise on opportunities "Actively seeking supporting our customers production and across the wholeGroup. These interactions also ## development programmes to the maximum feedback from our provide the information necessary for Senior to extent possible. develop strategies that link up with our ## customers is vital customers' forward-focused efforts, such as As the opportunity for face to face meetings ## their sustainability goals, including the transition toensuring we are improved post pandemic, we were able to have to a zero carbon economy, their new competitive much stronger engagement with customers ## aligned to their needs, offerings to the market place, and mutual particularly in relation to clean energy product investments in research and technology. and technology development. ## and that we work We actively seek feedback from our customers Company actions responding to ## closely with them via frequent interactions between our operating engagement outcome business's customer account and business ## toprovide solutions, Management-level actions development managers, with monthly reporting Listening to and understanding our customers, ## of activities and monitoring of customer resulting in long-term, their programme/market issues and performance scorecards across the Senior ## opportunities provides valuable insight to Senior, positive relationships.” businesses. Whilst Senior regularly receives which helps to inform our future technology, customer awards for operational excellence, in Launie Fleming product development, and innovation those caseswhere our performance falls short Chief Executive of Aerospace Division investments and activities towards ensuring ofexpectations, we actively engage with the Senior remains a healthy, vibrant, and reliable customer to agree improvement targets, supplier in all the industries we operate in. implementation schedules, resource dedication, and executive involvement. Board-level actions Our Board receives detailed monthly updates Furthermore, we continued to conduct regular relative to customer activities. Senior Management Meetings, including at CEOlevel, with our major customers in 2022 aswell as frequent interactions regarding supply chain andlabour issues, operational metrics, communications, growth strategies, and market dynamics. These executive-level meetings, ### SENIOR AEROSPACE THAILAND AWARDED MEMBERSHIP ### OF ROLLS-ROYCE’S “HIGH PERFORMING SUPPLIER GROUP” | The growth of Senior Aerospace Thailand | The relationship with Rolls-Royce started in | strong and trusting working relationship, | | --- | --- | --- | | (SAT) in recent years is due in no small part | 2013, when SAT began supplying aerofoils | addressing challenges as they arose. In 2019, | | tothe level of engagement SAT has built | forRolls-Royce’s (Trent XWB, Trent 1000 | SAT’s performance was recognised by being | | withstakeholders, particularly suppliers and | andV2500 ) engines, building on the existing | awarded the “Most Improved Supplier” | | customers. This was exemplified by the award | aerofoil supply relationship between SAT’s | awardby the customer. | | of a place in Rolls-Royce’s “High Performing | sister company, Senior Aerospace Weston, | | SAT has a strong engineering capability Supplier Group” in 2022. Membership is and the customer. andisan active and recognised member gained by the attainment of “class leading” Using best in class processes for aerofoil oftheRolls-Royce “Supply Chain Digital scorecard status. SAT achieved this machining, from 2014 to 2018, the SAT Transformation Focus Group”. Through recognition through sustained improvement teamrapidly increased its production output. collaboration in this group, SAT has inperformance and customer collaboration Collaborative management of the forging developedareas of innovation including using formal engagement plans, and now supply, machining capacity and engineering automating the creation of programmes benefits from additional executive contact and approvals between SAT and the Rolls-Royce forinspection equipment directly from prioritisation for new sourcing opportunities. teams in the UK and Singapore created a thecustomer’s digitalmodel. 52 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / STAKEHOLDER ENGAGEMENT CONTINUED ### SUPPLIERS | How we engage | Outcome of engagement | | --- | --- | | We engage with our suppliers in a variety of | During 2022, our collaboration with suppliers | | ways, including during tender and bid processes, | enabled the operating businesses to mitigate | | as well as on-site visits and audits where | ongoing supply chain volatility through lead time | | appropriate. As supply chain constraints | management, order flexibility and other | | persisted through 2022, the Group continued to | cooperative solutions. | employ two-way communication channels with As part of CDP’s supply chain engagement its supplier base to help mitigate the impacts of programme, we identified and engaged material availability and inflationary pressures witharound 340 suppliers, accounting for across operating businesses. Our efforts approximately 80% of the Group’s total spend. included supplier surveys and close co-ordination We increased the number of companies with suppliers regarding lead times, demand responding from 94 in 2021 to 160 in 2022. changes, transportation options and other Asignificant number of our suppliers were Engaged with around sources of volatility. The Executive Committee responding to CDPfor the first time, a positive continues to closely monitor the health and reflection of ourincreased engagement activity. performance of critical Group suppliers and The insights from the engagement programme ## supports the operating businesses in their 340 are being used to set strategy and prepare for engagement with suppliers where necessary. the 2023 supplier climate programme. suppliers through CDP’s In line with our Contract Review Policy, which supply chain programme In February 2022, we were informed by CDP ismandatory for all operating businesses, we that Senior was awarded the highest leadership continue to communicate the requirements of status in its annual engagement ratings based ## the Group Responsible Sourcing Policy to key "Our collaboration with onour Supplier Engagement Rating (“SER”). suppliers, and provide feedback to our suppliers This put us in the top 8% of companies on ## on their performance and, where necessary, suppliers enabled the thismetric. willagree improvement action plans. ## operating businesses Company actions responding to The Group also completes bi-annual reporting ## engagement outcome to mitigate ongoing pursuant to The Reporting on Payment Practicesand Performance Regulations (2017), Management-level actions ## supply chain volatility." | demonstrating our commitment to remain a | Supply chain challenges and inflation remained | | | --- | --- | --- | | strong financial partner with our suppliers. | principal risks to the Group in 2022. As a result, | Mike Sheppard | | TheBoard reviews the bi-annual reports for | supply chain and inflationary concerns, as well as | Flexonics Division Chief Executive | | ourUK subsidiaries to monitor compliance | related mitigating actions, continued to be focal | Officer | | withnegotiated vendor payment terms. | points during operating business reviews and | | Executive Committee meetings throughout For Scope 3 Greenhouse Gas emissions, Senior theyear. committed that 80% of its suppliers by spend, | 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. We identified suppliers to respond to | greenhouse gas emission targets and provides | | CDP’s questionnaires through an online platform. | regular updates to the Board on progress. | We arranged webinars and video calls with Board-level actions suppliers to provide support, communicate The Group Director of HSE & Sustainability expectations and exchange best practice ideas. attended two Board meetings in 2022 and In 2022, we increased the number of webinars provided an in-depth review on the progress in and video calls and were successful in engaging engaging with suppliers in respect of the Group’s with significantly more of our supply base as Scope 3 targets. When necessary the Group aresult. CEO has actively intervened at executive level with critical under-performing suppliers. Read more in the Risk & Uncertainties Section on page60 Read more in the Sustainability Section on page 16 53SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / STAKEHOLDER ENGAGEMENT CONTINUED ### SHAREHOLDERS | How we engage | • In our efforts to return to in-person | | | --- | --- | --- | | In 2022, the Group increased its engagement | | engagements, the Group ran three investor | | with shareholders, both by the Executive team | | site visits during the year to showcase our | | and the Group Chair. | | fluidsystem businesses: two in the UK to our | Senior Aerospace Bird Bellows and Senior The Group’s Chair attended the full-year and Aerospace BWT facilities and one in the US interim results announcements inFebruary and toour Senior Aerospace Metal Bellows facility. August 2022, respectively. Additionally, the Chair In attendance were the management teams undertook a series of solo meetings with the ofthe operating businesses and members of largest shareholders to receive feedback on the wider Executive team (Chief Executive strategy, capital allocation andmanagement. ofthe Aerospace Division and Group Director of Business Development & Strategy). As the Group resumed its normal active Investor Thesevisits were well-received by the Relations programme, we kept an ongoing shareholders who had the opportunity to dialogue and engaged with shareholders further understand the fluid conveyance throughout the year using adiverseand tailored andthermal management capabilities of the range of channels: Groupand see practical applications of our • Twice in the year, the Group Chief Executive products and services. Officer, Group Finance Director and Director • The Group Chief Executive Officer hosted ofInvestor Relations & Corporate theGroup’s inaugural virtual fireside chat. Communications undertook a series of mostly Investors were able to hear strategic insights face-to-face as well as some virtual meetings on Senior and to pose questions to the Group (by video conference or conference call) with Chief Executive Officer. The event allowed our major shareholders, following the attendees togain a better understanding of announcement of the full-year and interim the Group’s evolution, near-term risks and results. These meetings centred around the opportunities, and the longer-term vision and detailed performance of the business, the strategy of helping customers operating in Group’s strategic objectives and how Senior’s sectors that are hard tode-carbonise, as they fluid conveyance and thermal management transition to a low carbon economy. capabilities are key enablers as we transition • The Group has also leveraged digital platforms toa low carbon economy. We used these to keep our investors up to date. Tools such as meetings to understand our shareholders’ our newly upgraded website homepage and views and address any concerns they may more widespread use of LinkedIn, provided have about the Company. investors with updates on the Group covering • In addition, we issued three market updates, a range of topics (from performance to on each occasion offering major shareholders sustainability, community case studies and the opportunity of a follow-up call ourcapabilities). withmanagement. Throughout the year we responded to requests • The Group resumed its overseas roadshows, for further information and addressed any with trips to the US in April (New York) and questions or concerns. September (Chicago). The Group Chief Executive Officer, Group Finance Director and The Group typically makes constructive use Director of Investor Relations & Corporate ofthe Annual General Meetings (“AGM”) to Communication met with current shareholders communicate with its private shareholders as as well as potential shareholders to update on wevalue their engagement and provide them Senior’s investment case, performance and with the opportunity to hear directly from the strategy. These roadshows were well Group Chief Executive Officer about the attended and greatly appreciated, with performance of the business. In April 2022, we attendees positively noting that Senior was were once again able to host an in-person event one of the first companies to resume for those who wanted to attend as well as a live face-to-face meetings. audio access to the proceedings of the AGM. Private shareholders had the opportunity to submit questions to the Directors and listen totheir responses. 54 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / STAKEHOLDER ENGAGEMENT CONTINUED ### SHAREHOLDERS CONTINUED | Following on from the relationships built during | • Focused engagement with selected ESG | | | | --- | --- | --- | --- | | the Remuneration consultation process last year, | | ratings providers to ensure shareholders | | | in 2022, Celia Baxter (our Senior Independent | | viewing this information have accurate | "In 2022, the Group | | non-executive Director and Chair of the | | andup-to-date insight | | ## increased its Remuneration Committee) made herself • Provided reassurance that the Group continues ## available throughout the year for discussions to be in a strong position and remains a good engagements with onkey remuneration topics, and continues to investment opportunity. ## have regular interaction as appropriate with shareholders, both by • Received better understanding of shareholder majorshareholders. Regular investor updates expectations in respect to strategic decisions ## the Executive team were provided to the Board as part of the and sustainability, including climate change reporting cycle, which includes feedback on ## risks and opportunities. andthe Group Chair.” investor perceptions and market environment. | The feedback was provided either directly | Company actions responding to | Ian King | | --- | --- | --- | | fromshareholders, from the Group’s Investor | engagement outcome | Chair | | Relations function or from our corporate broker. | Management-level actions | | | Updates from Company-level engagement | Engagement with shareholders during 2022 | | | withshareholders are also provided to the | emphasised how focused they are on the | | | Boardas appropriate (i.e investor site visits, | Group’s performance, strategy, end-market | | | fireside chats, etc.). | recovery, and fluid conveyance and thermal | | management capabilities. In response, we Outcome of engagement resumed our normal active Investor Relations • Increased engagement via the Investor engagement programme with in-person Relations function & Management with meetings, investor site visits, fireside chats current and potential shareholders both andsocial platforms. The investors were able through regular reporting and off-cycle togain an appreciation for the wider Senior • Shareholders were kept fully informed of the leadership team and a practical understanding market dynamics and strategy and progress ofthe fluid conveyance and thermal ofthe Group through various channels management applications. including in-person meetings, investor site visits, a fireside chat and via social platforms Board-level actions (i.e. website/LinkedIn). Feedback received from engagement withourshareholders has been taken into • Maintained open channel of communications consideration when making decisions on with our shareholders on key topics such as Executive remuneration. remuneration and targets. ### COMMUNITIES | How we engage | • Senior Aerospace Thailand has helped | | | --- | --- | --- | | Our Group’s operations continue to support their | | 30students to study for their High Diploma | | local communities and nurture good relationships | | degree and two students to study for a | | with their stakeholders, finding ways to | | bachelor degree in Aerospace Component | | contribute to local society, in addition to providing | | Manufacturing. | | employment opportunities. Examples of our | • By sponsoring a student award Senior | | | community engagement programmes include: | | Aerospace Bird Bellows is supporting | vocational and lifeskills programmes. • At the end of 2021, our Malaysian operation • Through their donation Senior Flexonics India provided support to employees and local helped underprivileged children develop to communities that had been impacted by succeed in mainstream education. flooding. Our employees donated their time to help with clean-up operations and we provided Company actions responding to food, bottled water, cleaning equipment, engagement outcome clothes, bedding and power banks to staff ## Management-level actions "We encourage our andtheir families, helping them get back on Group operations continue to support ## their feet. operating businesses communities by contributing to charities serving • Senior Aerospace Bird Bellows sponsored their local causes, including fundraising for local ## to engage with their alocal college’s Student Award. hospitals, children’s homes, education • Senior Aerospace Thailand supports education programmes, cancer foundations and charities ## local communities to through its “Senior Aerospace Academy" supporting mental health and the elderly. ## • Continuing our work with Prakash Deep a make apositive impact” Board-level actions non-governmental, not for profit organisation The Board is cognisant of its responsibility to Jane Johnston set up with the objective of providing free thecommunities in which we operate and the Group HR Director quality education, Senior Flexonics India need to have a positive impact and strong donated laptops for their computer lab, employer brand. 23bicycles and school bags to top performingstudents. Read more in the Social Section on page 32 Outcome of engagement • With our support we helped employees, andtheir families recover from the floods inMalaysia. 55SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / SECTION 172 STATEMENT # SECTION 172 STATEMENT This section describes how the Directors have had regard to the matters set out in section 172 (1)(a) to (f) when performing their duties under section 172 of the Companies Act 2006. In their discussions and decisions during 2022, 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 likely consequences of any decision in the long term: - The Directors recognise the decisions they make today will affect Senior's long-term success. During the year, the Board had particular regard to the long-term success of the Company in its discussion on the evolution of the Group's purpose. Our Company Purpose is highly relevant for all of our stakeholders and guides the Board's decisions towards investments, both short and longer term. - In 2022, the Directors decided to acquire Spencer Aerospace. The Board believed that Spencer's capabilities in highly engineered, high-pressure hydraulic fluid fittings for use in commercial and military aerospace applications have strong synergies with Senior's existing fluid conveyance business and recognised the opportunity presented by Senior's global reach beyond Spencer's current North American customer base. This decision was a considered step in the Group's overall strategy. - Further details can be found on the Investment Case (page 40), Business Model (page 38) and Strategic Priorities (page 42). The impact of Senior's operations on the community and environment: - Many of the Group's operations are major employers within their local communities and nurture good relationships with their stakeholders, finding ways to contribute to local society, in addition to providing employment opportunities. In 2022, the operating businesses continued their focus on community engagement programmes and further details on the Group's activities are set out on page 55. - Senior's sector-leading performance and accreditations on sustainability are testament to the great importance the Board and Executive Committee places on ESG matters. Senior's programme is well defined and being delivered. Its progress is measured by metrics, targets and a monthly scorecard. Sustainability is a standing agenda item in the CEOs report at every Board meeting. The HSE Committee monitors and updates on the progress being made on the strategy set forth by the Group in terms of health, safety and environment. - Senior was the first company in its sector to have its scope 1, 2 and 3 greenhouse emissions reduction targets approved and verified by the SBTi. In 2022, we were recognised by CDP for our work on climate disclosure and action and awarded an 'A' putting us in the top 2% of disclosing companies. Further detail on Senior's sustainability progress in 2022 are set out on page 19. - We have also continued our commitment to implementing the recommendations of the TCFD. See page 26 to 31 for our update on TCFD. The desirability to maintain a reputation for high standards of business conduct: - The Board acknowledges its responsibility for setting and monitoring the culture, values and reputation of the Company. For Senior, our core Values underpin our culture. During the year, the Board considered Senior's culture in its decision-making and discussions (further details on this can be found on page 34). - The Board is accountable for the oversight of a robust Corporate Framework which establishes the unequivocal expectation that Senior will operate with integrity and respect in every aspect of its business. The framework includes a comprehensive Code of Conduct, which provides clear guidance on behavioural expectations across multiple facets of the business, including a zero tolerance towards bribery and corruption, adherence to all applicable trade compliance, competition and anti-trust regulations, a safe, diverse and inclusive workplace, accurate and complete business records and protection of company data and assets. The framework also provides for a whistle-blowing channel that allows stakeholders to confidentially and anonymously report suspected unethical or illegal corporate conduct. All reported whistle-blowing incidents and any resulting actions are reviewed and monitored by the Board and Audit Committee. The Board, via the Audit Committee, also receives regular reports regarding compliance training programmes, Corporate Framework updates, sanctions and trade compliance matters and incidents of fraud or suspected fraud. Read more on pages 100 and 101 for our Corporate Governance Report. Interests of the Company's employees and the need to foster the Company's business relationships with customers, suppliers and others: - The Board and its committees understand the strategic importance of stakeholders to Senior's business. When making decisions, the Directors have regard to the interest of colleagues, and the need to foster business relationships with other key stakeholders. - While the Board engages directly on some issues with stakeholders, there are other engagements that happen below Board level. Nevertheless, the Board is well informed of these engagements and this helps it understand how our operating businesses affect 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 50 to 55. For further details on how the Board operates and makes decisions, and its activities this year, see page 93. - Our colleagues are vital to our success and they are always considered in the Board's discussions and decision-making process. During 2022, the wellbeing of our colleagues across the Group continued to be a priority, especially in light of the cost of living crisis. As inflation continued to rise over the course of 2022, the Board were cognisant of the potential impact on our employees and their families, and ensured that wage settlements were fair, taking into account the cost of living challenges and prevailing regional conditions. The Board continued to monitor the organisation's response to COVID-19 and how the Company maintained operational delivery in the ever-changing situation. Operational leadership continued to maintain appropriate measures and protocols to keep people safe. - In order to ensure that the Board considers the impact of their decisions on employees across the Group, the Board receives regular feedback regarding people and culture. In 2021, the Board received a wealth of information provided by the Senior's first global employee engagement survey. Operating business actions plans and progress against them were reviewed regularly throughout 2022 by the Executive Committee. In addition, a summary of the 56 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / SECTION 172 STATEMENT ### 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 16 to 37 and www.seniorplc.com/sustainability • Health, Safety and Environment Policy www.seniorplc.com Employees • Employee Engagement Pages 51, 56 and 88 • Talent Management Pages 33 to 34, 42, 69 • Equality, Diversity and Inclusion Page 33 • Code of Conduct Pages 33 to 34, 36, 56, 71, 100 to 101 and www.seniorplc.com • Whistle-blowing Policy Pages 34, 36, 56, 100 and www.seniorplc.com Social Matters • Community Engagement Pages 35, 55 to 56, 88 Respect for Human Rights • Statement on Anti-Slavery and Human Trafficking Page 100 • Anti-bribery and Anti-corruption Policy Pages 36 and 71 • Modern Slavery Statement www.seniorplc.com • Responsible Supply Chain Policy Pages 53, 100 and 101 and www.seniorplc.com Business model • Business Model Page 38 Principal risks • Risks and Uncertainties Pages 60 to 71 KPIs • Financial and Non-Financial KPIs Pages 58 to 59 For more information please visit: www.seniorplc.com | actions was reviewed by the Board | investors the opportunity to discuss views | | --- | --- | | throughout 2022. The survey was repeated | onthe Group’s financial and operational | | towards the end of 2022 and the Group | performance, strategy, end-market recovery, | | Chief Executive Officer and Group HR | fluid conveyance and thermal management | | Director shared initial feedback from the | capabilities and capital deployment. | 2022 Survey with the Board in December In discharging our section 172 duties, the 2022 highlighting key themes, strengths, Directors have regard to the factors set out areas recommended for improvement. In above and any other factors which we consider addition, Celia Baxter, the non-executive relevant to the decision being made. We Director designated to engage with acknowledge that every decision we make will employees has continued with our not always result in a positive outcome for all of programme of focus groups and with our stakeholders. However, by considering the COVID-19travel restrictions lifting, the Company’s Purpose, Vision and Values, together Board has visited operating businesses, with our Strategic Priorities and having a process andmet with management teams and in place for decision-making, we aim to ensure employees. Readmore on our employees that our decisions are considered, proportionate on pages 32 to 34and 51. and balanced. The need to act fairly between Further details on how the Board operates and members of the Company reflects stakeholder views in its decision-making (shareholders): are set out in the Corporate Governance Report • During the year, the Group Chair, Senior on pages 87 and 88. Independent Director, Group Chief Executive Officer, Group Finance Director, and the Director of Investor Relations and Corporate Communications held various meetings with investors (see page 54 for more detail on our engagement with shareholders). These meetings gave 57SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / KEY PERFORMANCE INDICATORS # KEY PERFORMANCE INDICATORS The Group highlights five financial and two non-financial metrics to measure progress in implementing its strategy. ## NON-FINANCIAL METRICS The Group's non-financial objectives are as follows: - To reduce the Lost Time Injury Illness Rate (per 100 employees) to 0.3 by 2025; - To reduce the absolute Scope 1 and 2 Greenhouse Gas ("GHG") emissions by 30% by 2025 (compared to 2018 base year). The key performance indicators ("KPIs") are determined as follows: - CO₂ emissions is an estimate of the Group's carbon dioxide emissions in tonnes equivalent; and - Lost time injury illness frequency rate is the number of OSHA (or equivalent) recordable injury and illness cases involving days away from work per 100 employees. The Group's approach to calculating and reporting our GHG emissions follows the GHG Protocol. 2022's reporting has incorporated Scope 2 greenhouse gas emissions (associated with electricity consumption) calculated using both the Location and Market-based methods. The Scope 1 and 2 emissions Location Based and Market Based (FY22) are independently verified in accordance with the International Standard on Assurance Engagements ISAE 3410 (limited assurance). In calculating GHG emissions, the Group has used the financial control approach under which a company accounts for 100% of the GHG emissions from operations over which it has control. This covers all wholly owned operations and subsidiaries of the Group for financial reporting purposes. Senior is on track to meet our 2025 targets for Scope 1 & 2 GHG emissions and lost time injury illness rate. Further details of the Group's performance, including its long-term performance trends, are shown on pages 22 to 23. More detail on the Methodology can be found on page 25. Carbon dioxide emissions Scope 1 & 2 (market based) (Total tonnes CO₂e) 22% decrease from 2018 base year ![img-9.jpeg](img-9.jpeg) In 2022, our absolute Scope 1 and 2 Greenhouse Gas ("GHG") emissions reduced from 57,418 tCO₂e (2018) to 44,878 tCO₂e. We are on track to meet our SBTi 2025 target with a 22% reduction against our 2018 base year. Lost Time Injury Illness Rate (incidents per 100 employees p.a.) 0.38 ![img-10.jpeg](img-10.jpeg) We experienced an increase in the Lost Time Injury and Illness Rate from 0.32 in 2021 to 0.38 in 2022. The total number of injuries has fallen as indicated by the Total Recordable Injury and Illness Rate reduction from 1.17 in 2021 to 0.93 in 2022, a reduction of around 21%. The small increase in the Lost Time Injury and Illness Rate emphasises the need for continuous improvement. With this in mind, in 2022 we initiated three major global safety initiatives in addition to the routine auditing and support activities. More details can be found on page 32. 58 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / KEY PERFORMANCE INDICATORS Revenue growth Net cash from operating ## FINANCIAL (£m) activities (£m) ## METRICS ## +20.3% +113.7% The Group’s financial objectives are asfollows: • to achieve revenue growth (at constant 21 27.0 exchange rates) in excess of the rate ## ofinflation; +21.9% 57.7 • to increase the Group’s return on revenue margin each year; The Group delivered an excellent cash performance in 2022 driven by the significant • to increase adjusted earnings per share ## excluding increase in profits. Net cash from operating on anannual basis; activities of £57.7m funded gross capital • to generate sufficient cash to enable the expenditure of £30.5m in 2022. Group to fund future growth and to follow ## disposal aprogressive dividend policy; and • to maintain an overall return on capital employed in excess of the Group’s cost 705 of capital and to target a pre-tax return in excess of 13.5% on a post IFRS 16 basis. 848 The key performance indicators (“KPIs”) As discussed in the Group Chief Executive are determined as follows: Officer’s Statement, the year-on-year | • revenue growth is the rate of growth of | | increase reflected the ongoing recovery in our | | --- | --- | --- | | | Group revenue, at constant exchange rates; | core markets as well as recent programme | | • return on revenue margin is the Group’s | | wins entering series production. The impact | | | adjusted operating profit divided by | on the Divisions is set out in the Divisional | | | revenue; | Reviews, on pages 72 to 77. The overall | increase in Group revenue was a result of • adjusted operating profit is defined in higher revenues in both Aerospace and Note9; Flexonics year-on-year. • adjusted earnings per share is defined in Note12; • net cash from operating activities is available from the Consolidated Cash Flow Return on revenue margin Return on capital employed Statement; and (%) (%) • return on capital employed is the Group’s adjusted operating profit divided by the average of the capital employed at the start and end of the period, capital employed ## +250bps +370bps being total equity plus net debt (defined in Note 32c). | | 0.9 | | | 1.0 | | | --- | --- | --- | --- | --- | --- | | | | 3.4 | | | 4.7 | | The Group’s adjusted operating margin | | | Return on capital employed (“ROCE”) | | | | increased by 250 basis points, to 3.4% for | | | increased to 4.7%. The increase in ROCE | | | | thefull year. This improvement in profitability | | | reflected the significant increase in | | | | principally reflected volume related operating | | | profitability, while managing the increase | | | | leverage across our businesses. Inflationary | | | incapital employed which was mainly due | | | | pressures were successfully mitigated by | | | totheacquisition of Spencer Aerospace. | | | diligently managing costs and by increasing prices and surcharges where possible. Adjusted earnings per share ## 2,464.7% 0.17 4.36 The year-on-year improvement arose from improved profitability. 1,10 2 21 21 21 21 59SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 22 22 22 22 22 STRATEGIC REPORT / RISKS AND UNCERTAINTIES ## RISKS AND UNCERTAINTIES ## 2022 KEY LOOKING ## FOCUS FORWARD Risk Management Risk Management • The Board, Executive Committee and • Conduct a focused risk assessment and operating businesses completed two scoping exercise to guide the Group’s comprehensive risk assessments, response to the BEIS consultation encompassing both principal and Restoring Trust in Audit and emergingrisks CorporateGovernance • Refined the climate change risk • Review and enhance our Information assessment process to establish a Technology/Information Security risk multi-disciplinary participant team and management process throughout the further clarify the Group’s strategy to Group and complete the deployment of embed climate change risk consideration expanded threat and security monitoring throughout the organisation tools across all operating businesses andcorporate offices. Assurance • Implement a climate change risk • Completed ten broad scope internal audits ## “Our risk management process has assessment process at the operating and four Information Security assurance business level to further embed climate ## proved vital in helping effectively reviews across various operating change risk into the Group’s risk businesses and corporate offices management structure ## identify and manage ongoing • Piloted a new Trade Compliance “deepdive” assessment Assurance ## supply chain challenges, • Deployed thematic audits to address • Reassess the Group’s assurance ## inflationary pressures and framework in consideration of the proposed specific risks related to supply chain disruption,inflation challenges and the requirements in response to the BEIS ## challenging labour markets. The impacts from the crisis in Ukraine, talent consultation Restoring Trust in Audit and and skills management and software Corporate Governance ## complex geopolitical environment compliance • Broad scope internal audits and Information ## has introduced further uncertainty Security assurance reviews planned across Principal Risks (starts on page 64) 14 locations ## and intensified the risk profile • Supply Chain Challenges: The Group • Trade Compliance “deep dive” successfully implemented a variety of ## across the Group. These key assessments to be conducted with three mitigating actions to counteract supply operating businesses and a thematic ## principal risk areas are expected chain disruptions, including increased safety assurance review completed for the stock of critical materials and components, remaining locations ## topersist through the yearahead.” expanding our supply base to provide • New thematic audits covering payment alternate material sources and enhancing Amy Legenza fraud controls, Information Security patch/ communication with customers and Group Director of Risk and Assurance vulnerability management and personal suppliers regarding changes in demand, data protection lead times and other production factors | • Inflation: A variety of measures were | | Principal Risks (starts on page 64) | | | --- | --- | --- | --- | | | deployed to mitigate escalating inflationary | • Economic and Geopolitical Impact: | | | | pressures, including negotiating selling | | Remainvigilant to the potential impacts | | | price escalations with customers, efficiency | | onthe Group from fluctuating global | | | improvements to contain labour and energy | | economicconditions | cost escalations and utilising alternate • Customer Disruption: Strengthen our supply arrangements adaptable response to customer • Talent and Skills: The Group responded demandvariability toregional labour market challenges • Pandemic: Conduct a post incident review withenhanced retention and to assess the Group’s response to the recruitmentstrategies COVID-19 pandemic 60 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / RISKS AND UNCERTAINTIES ## OUR APPROACH TO ## RISK MANAGEMENT | Identifying and effectively managing risks is | elements contemplated over a 20+ year time | Information Security, HR and other operational | | --- | --- | --- | | essential to the achievement of the Group’s | frame, and applies Scenario Analysis to the | controls, plus limited scope thematic reviews | | strategic priorities and supporting the Group’s | most material transition and physical risks. | designed to provide assurance over targeted | | sustainability initiatives. The Group’s Business | Climate-related risks are also considered as part | riskareas. Internal audits are conducted either | | Model is described on page 38, our Strategic | of the overall Group risk assessment completed | inperson or virtually, with all Group businesses | | Priorities are on page 42 and Sustainability | during the annual strategic planning process | audited on a multi-year rotational schedule | | startson page 16. | andrank as one of the Group’s principal risks. | based on a variety of factors, including site | specific risks, prior audit results and changes The Board is responsible for the Group’s During the risk assessment process, all within local management. Thematic reviews are integrated risk and assurance framework, identified risks are evaluated against our deployed across the entirety or a cross section ensuring that the Group risk process and purpose, strategy and values to understand their of the Group dependent on the risk being systems of internal control are robust, likelihood and impact of occurrence, resulting in targeted. In addition, all Group businesses must continuously monitored and evolve to address a register of principal risks. Once the principal complete an annual Controls Self Assessment, changing business conditions and threats. risks have been identified, mitigating controls allowing the Group to identify and address gaps TheBoard also provides direction and sets the and relevant policies are documented and in compliance with the Group’s governance tone on the importance of risk management. additional mitigating actions are developed policies and internal control standards. Divisional Responsibility for the monitoring and review where appropriate. An owner and due date are Management, the Executive Committee and ofthe effectiveness of the Group’s risk and assigned to each action and progress toward theAudit Committee monitor the completion assurance framework has been delegated by completion is closely monitored. The operating progress of improvement actions resulting the Board to the Audit Committee. The risk business risk registers are refreshed regularly frominternal audits, thematic reviews and process is reviewed and agreed annually with and reviewed by Divisional Management and theControls Self Assessment. the Audit Committee. The Director of Risk and the Executive Committee. The Executive Assurance delivers a comprehensive report Committee conducts its risk assessment The key elements of the Senior risk ofrisk, assurance and compliance activities twicea year and the principal risks are management process are shown on ateach Audit Committee meeting. discussedat each Executive Committee thefollowing page. meeting. Every principal risk is assessed for The Group embeds risk management within ourfinancial viabilityscenarios to see if they itsexisting business processes across all levels could have a material financial impact within the Group. Risk tolerance is reflected individuallyor if they materialised together. throughout our control framework by way | oftheGroup’s delegation of authority, code | The Board performs robust, semi-annual | | --- | --- | | ofconduct and internal controls system. | assessments of the principal and emerging risks | | Acatalogue of approximately 50 identified risks | facing the Group. In addition, the Board regularly | | encompassing strategic, financial, operational, | assesses outputs from the integrated risk and | | environmental and other external risks serves | assurance framework and takes comfort from | | asthe foundation for comprehensive risk | the “three lines of defence” risk assurance | | assessments completed by every operating | model. The first line represents operational | | business and by the Executive Committee as | management who own and manage risk on | | part of the annual strategic planning process. | aday-to-day basis through effective internal | | The risk assessments also consider emerging | controls. The Group Executive Committee and | | risks as detected through internal workshops | Divisional Management monitor and oversee | | and external sources. Emerging risks are risks | these activities, representing governance and | | which may develop but have a greater | compliance at the second line. | uncertainty attached to them in terms of The third line is the independent assurance over likelihood, timing and velocity. Emerging risks these activities provided by internal and other are monitored and formally added to the external assurance. The internal assurance identified risk catalogue when the risk solidifies programme includes a combination of broad within the Group’s strategic planning horizon. scope internal audits, evaluating financial, The Group also conducts functional risk assessments, targeting areas such as fraud, tax evasion facilitation and climate change. The risk assessment specific to climate change follows the Group’s standard risk assessment process but considers multiple time horizons, with some 61SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / RISKS AND UNCERTAINTIES CONTINUED ## KEY RESPONSIBILITIES ## WITHIN THE RISK ## MANAGEMENT SENIOR’S RISK ## STRATEGY MANAGEMENT PROCESS The Board • Has overall responsibility for ensuring Identify risks ## the Group risk management process 1 The risks to the achievement of theGroup’s strategic and systems of internal controls are priorities are identified from a top down and bottom up robust and continually monitored perspective. Existing and emerging risks areconsidered. • Formulates the Group’s strategy and defines the Group’s risk tolerance andculture • Monitors the nature, extent and Evaluate gross (inherent) risks management of risk exposure for the ## 2 The gross level of risk, considering impact and likelihood, Group’s principal and emerging risks tothe achievement of the strategic priorities is assessed. • Provides direction and sets the tone onthe importance of risk management Identify existing controls and processes ## 3 • Supports and challenges the Board in The existing controls and processes which mitigate the risks Audit monitoring risk exposure in line with are identified and assessed for adequacy. Committee itsTerms of Reference • Reviews the effectiveness of the Group’s risk management and internal control systems and reports to the Risk response planning ## Board for consideration 4 Based on the controls and processes already in place, thenet risk from an impact and likelihood perspective is evaluated. Where the net risk is considered to be higher than the Group’s tolerance level for that risk, additional Executive • Development and implementation of mitigating actions are identified and ownersassigned. strategy, operational plans, policies, Committee procedures and budgets and • Monitoring of operating and financial Divisional performance including prioritisation Monitor and assure Management and allocation of resources ## 5 The most significant risks are regularly reviewed. Second • Assessment and control of risk – line assurance and internal audit activity is conducted to including emerging risks assess whether key controls are effective and risks mitigated to an acceptable level. Timely implementation ofresultingactions is monitored. Group • Lead and co-ordinate Group risk andcontrol related processes Corporate • Assesses and supports the Group in Functions Risk reporting and review ## mitigating the Group’s risks through 6 The status of the most significant risks, top down and policies and procedures, control bottom up, areregularly reviewed to ensure any changes self-assessments, specialist support, tothe risk profile arecaptured and acted upon. business reviews and other activities Theconsolidated risk, assurance and control position isreported tothe Audit Committee andtheBoard. Operating • Operational units identify, assess andmitigate their key risks Units • Risk assessments are reviewed and discussed by Divisional Management 62 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / RISKS AND UNCERTAINTIES CONTINUED ## RISK HEAT MAP (Residual risk after mitigations) High 1 12 14 2 6 8 7 5 11 3 4 10 9 13 Impact of Occurrence Low Low High Likelihood of Occurrence Increased Residual Risk Decreased Residual Risk Residual Risk Unchanged RISK DEFINITIONS | Strategic | Operational | People and Culture | | --- | --- | --- | | 1 Economic and Geopolitical Impact | 6 Supply Chain Challenges | 11 Talent and Skills | | 2 Climate Change | 7 Customer Disruption | | Financial 3 Implementation of Strategy 8 Cyber/Information Security 12 Inflation 4 Innovation and Technological 9 Programme Management 13 Financing and Liquidity Change 10 Price-down Pressures Compliance 5 Pandemic 14 Corporate Governance Breach 63SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / RISKS AND UNCERTAINTIES CONTINUED As a result of the most recent assessment, the ### PRINCIPAL GROUP RISKS name of the Customer Demand principal risk During 2022, assessments of the principal was updated to Customer Disruption to better risks and uncertainties, including emerging reflect the nature of the risk. The remainder of risks, that could threaten the Group’s business the principal risks remain unchanged since our model or achievement of the strategic 2022 Interim Statement. priorities were performed. | The principal potential risks | Areas of strategic priorities | | Key Performance Indicators | | All of the Group’s principal risks | | --- | --- | --- | --- | --- | --- | | and uncertainties, together | | | | | are factored into the severe but | | | 1 | Enhance business model | A | Organic Revenue Growth | | | with actions that are being | | | | | plausible downside scenario | | taken to mitigate each risk, are: | 2 | Focus on growth | B | Return on Revenue Margin | applied in the Group’s viability | assessment as described on Increased residual risk 3 High performance operating C Adjusted Earnings per Share page82. system Decreased residual risk D Net Cash from Operating 4 Competitive cost countries 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 Principal Risk How we manage it Focus in 2022 ## STRATEGIC | 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 impact the global | | | | | | | | | | | global economic downturn impacting | closely monitor economic and geopolitical trends that may | economy and certain sectors within which we operate. | | | | | | | | | | | some or all of the sectors within which | impact the operating businesses through regular business | Ongoing supply chain constraints and inflationary | | | | | | | | | | | the Group operates. | reviews. Contingency planning is undertaken to minimise | pressures added to the economic uncertainty during 2022. | | | | | | | | | | | | operations disruption where necessary. | As a result, the Group remained focused on delivering | | | | | | | | | | Changes in critical trade relations profitable growth and generating free cash flow, as factors, such as tariffs, sanctions and The Group employs tax, treasury and trade compliance described in the Financing and Liquidity risk, and exchange rates, resulting from specialists who maintain the Group’s trade-related completion of restructuring projects, as described in the geo-political events have created compliance programmes and continually monitor the Implementation of Strategy risk. uncertainty over the future impacts on impacts of evolving trade relations fromregulatory, supply international trade, including export chain, people and financialperspectives. In response to heightened trade tensions resulting from revenues, material availability and cost the crisis in Ukraine, the Group conducted a targeted The Board ensures that it is kept informed ofsignificant and the ability to employ foreign assurance review across the operating businesses which trade developments in order to assessthe impact on the nationals. Shifts in political regimes confirmed the Group has identified and is continuing to Group and take action asappropriate. and government spending monitor and mitigate the impacts of the crisis on our programmes can lead to higher operating businesses. The assurance review also The Group monitors potential changes to international tax taxation and have an impact confirmed that our relevant trade compliance controls regulations and tariffs to understand the likely impact. onearnings. areoperating effectively. 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 70. 64 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / RISKS AND UNCERTAINTIES CONTINUED Principal Risk How we manage it Focus in 2022 | CLIMATE CHANGE | | | 2 | 5 | B | F | G | | --- | --- | --- | --- | --- | --- | --- | --- | | There is a risk that climate change | To mitigate the impact of catastrophic events, suchas an | In 2022, the Group was awarded the highest possible | | | | | | | and/or the measures taken to address | extreme weather event, each site has ascenario-based | “leadership” rating of A from the globally recognised CDP | | | | | | | it may have an adverse impact on the | Business Continuity Plan which istested on an annual | for our climate change disclosures. | | | | | | | Group. Climate change may result in | basis. The Group also has insurance which helps to protect | | | | | | | In support of our Science Based Targets, the Group has extreme weather events that may profits in suchsituations. achieved a 22% reduction in combined Scope 1 and 2 impact our ability, or that of a supplier, The Group continues to invest in and develop solutions carbon emissions through 2022 compared with the 2018 to meet our customers’ requirements. relevant to changing end markets. Examples include our base year, on track to meet the 2025 target deadline. Our customers’ products may evolve battery cooling, waste heat recovery, heat sink in hybrid During 2022, the Group engaged with over 350 of its to require new technology, such as cars technologies, and additive manufacturing solutions leading suppliers regarding climate change, accounting for electrification. This also presents an foraerospace. approximately 80% of the Group’s total spending. 160 of opportunity to the Group to be A comprehensive climate change risk and opportunity these suppliers provided a full disclosure on their climate involved in replacement technologies. assessment exercise is conducted annually by a multi- change programmes, representing a significant increase Increasing legislation aimed at disciplinary team to evaluate transitional and physical from the level of response in 2021. As a result, CDP once accelerating decarbonisation may risks,as well as resource efficiency opportunities. The again awarded the Group with the status of Supplier increase our operating costs. It may assessment considers mulitple time horizons, with some Engagement Leader in 2022 in recognition of our also change consumer behaviours elements contemplated over a 20+ year time frame. increased efforts to raise the level of climate action impacting on our end markets. Theexercise also applies Scenario Analysis to the most acrossour supply chain. Forexample, consumers may fly material transition and physical risks as per TCFD. The The Group submitted our 2040 Net Zero targets to SBTi lessoften. Group's SBTi approved emissions reductions targets in2022 with validation expected in the first half of 2023. covering GHG emissions from the Group’s operating businesses are consistent with reductions required to For further details on TCFD and Sustainability, including limiting climate warming to 1.5°C and are aligned with how the Group is leveraging our technology and product NetZero as Near-Term Targets. SBTi has approved the development to drive progress towards net zero, please following targets: see pages 16 to 31. • The Group commits to reduce its absolute Scope 1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. | 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 to | The Board carried out its annual assessment of our | | | | | | | | | | strategy and/or effectively manage | ensure that long-term value is maximised for shareholders. | strategic objectives, end markets, capabilities and | | | | | | | | | | the Group’s portfolio could have a | Where appropriate, divestments will be considered. | technologies and determined that the Group is well | | | | | | | | | | significant impact on the Group’s | | positioned to deliver its strategy and continue the transition | | | | | | | | | M&A opportunities continue to be evaluated and discussed ability to generate long-term value through the evolving net zero world. at the Board’s strategic review. Processes are in place to forshareholders. ensure that the Group is aware of emerging acquisition The Group continues to focus on: Ambiguity surrounding the Group’s opportunities. • investment in new technology and product development strategy and strategic priorities may The Group has a well-established M&A framework that in our core markets, including fluid conveyance and result in investors failing to recognise includes proven valuation, due diligence and integration thermal management, and expand our additive the value of the Group’s processes designed to be efficiently executed by an manufacturing capabilities; investmentcase. experienced cross-functional team. • targeting new markets with structural growth potential, such as space and semiconductor, through leveraging Post-acquisition reviews are conducted asappropriate. the expertise we have developed in our traditional core The Group has incorporated the experiences gained from markets; and navigating strategic challenges, such as the COVID-19 • liquidity, effective cash management and a healthy pandemic, into an adaptable response framework to ensure balance sheet. sufficient focus remains on the Group’s core strategic The Group acquired substantially all of the assets of priorities while responding to critical operational, strategic Spencer Aerospace Manufacturing, LLC, a leading and financial challenges. manufacturer of highly engineered, high-pressure hydraulicfluid fittings for commercial and military aerospace applications. The acquisition supports the Group’s strategic priorities through expansion our fluid conveyance capabilities. 65SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / RISKS AND UNCERTAINTIES CONTINUED Principal Risk How we manage it Focus in 2022 | 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 | In 2022, we identified five specific Technology Focus | | | | | | | | | | continue to win new business and | meets regularly to discuss innovation and technological | areas – Hydrogen, Electrification, Aerospace Heat | | | | | | | | | | achieve profitable growth. There is a | changes across our various businesses and markets. | Exchanger development, Additive Manufacturing and | | | | | | | | | | risk that the Group does not continue | | Digitisation. The Group has continued to invest in new | | | | | | | | | The Group has continued to invest in additive to innovate and implement product development and emerging technologies within manufacturing “AM” capabilities as an enabling technological change resulting in its these focus areas, with significant progress being made technology, design and simulation capabilities, AM process technology becoming uncompetitive ona number of key projects: certifications and equipment at its Advanced Additive or obsolete. Manufacturing Centre “AAMC”. Multiple AM parts have • development of high-pressure flexible hoses for New technologies may have an impact been qualified and delivered to customers for both industrial hydrogen applications; on the Group’s markets, e.g. electric production platforms and technology demonstrators, • introduction of several innovative products for battery vehicles and hydrogen aircraft. suchas the NASA sponsored supersonic X59 platform. and fuel cell cooling, including ultra-thin patented The AAMC team has also developed significant design designs for very demanding environments; capability to re-engineer existing product designs to • development of an extensive process parameter deliversignificant weight savings and datasetfor complex metallic AM component design performanceenhancements. andmanufacture, including full vertical integration of the complete AM process chain. Senior’s process quality The Group continues to develop products to support and expertise was recognised in 2022 as one of the themove to low carbon technologies and sustainability, fewcompanies in the world to have achieved Nadcap both inthe land vehicle and aerospace markets. certification for AM; and Global Marketing Teams are engaged to ensure that • significantly expanded the use of non-metallic (polymer) customer requirements and priorities are considered. AM for low-pressure ducting applications, including development of innovative knitting technology for The Group continues to invest in machining and fabrication thermoplastic composite components. technology enhancements to improve process efficiency and reduce cost. The Group remains focused on sustainability as a driver for new product development and market expansion through The Senior Operating System continues to deliver best leveraging existing capabilities, expertise and products in practice tools for innovation and product development Thermal Management and Fluid Conveyance into new across the Group. adjacent markets such as space, hydrogen etc. Additional The Technology section, starting on page 44, details the detail on how the Group is leveraging our technology and Group's technology themes and product development product development to drive progress towards net zero case studies. can be found on pages 20 and 21. | PANDEMIC | | | 2 | 3 | 6 | A | B | C | D | E | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | A pandemic, such as the current | The Group has an Incident Response Plan and it is | The pandemic continues to impact the Group, though to | | | | | | | | | | COVID-19 pandemic, could have | beingused to manage the Group’s response to the | alesser degree in many locations and markets. Response | | | | | | | | | | asignificant impact on business | currentpandemic. | measures enacted throughout the COVID-19 pandemic | | | | | | | | | | operations affecting our employees, | | remain in effect, with many of the actions now embedded | | | | | | | | | Emerging threats are monitored and advice provided our supply chain and ultimately our into the Group’s standard policies and procedures. toemployees as appropriate. This may include travel ability to meet customer Theseinclude: restrictions, temporary site closures and additional requirements. There is also the safetymeasures when at work. • the ongoing activities of the Group’s Coronavirus potential for a pandemic to create Oversight Committee; aglobal slowdown in demand Where a pandemic threat does emerge, we liaise with impacting our end markets. • flexible and responsive localised leave policies and oursuppliers and customers to manage the situation “return to office” strategies to ensure the health and tothegreatest extent possible. An adverse indirect consequence safety needs of our employees continue to be met; may result from our customers • business continuity and ensuring that the business is having to reduce production rates able to meet its financial commitments while continuing even where our supply chain and to navigate the impacts of the ongoing pandemic. production remains intact. Further details are provided against other principal risks as appropriate; • close communication with suppliers and customers as we continue to adapt our business to address shifts in demand, supply chain capabilities and labour availability created by the evolution of the pandemic; and • careful management of the Group’s response to demand recovery to ensure the cost savings measures implemented in recent years are not diluted. The Group remains vigilant to the potential impacts offuture waves of the COVID-19 pandemic. 66 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / RISKS AND UNCERTAINTIES CONTINUED Principal Risk How we manage it Focus in 2022 ## 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, where | Significant supply chain disruption driven by ongoing | | | | | | | | | | | to respond to increases or decreases | possible, over-reliance on individual suppliers is reduced. | labourchallenges, material shortages and transportation | | | | | | | | | | | in demand, impacting our ability to | | delays persisted throughout 2022, with the crisis in | | | | | | | | | | The Group closely monitors the resource required to deliver supply our customers and/or our Ukraine adding further complexity in the year. In response, customer demand. ability to optimise inventory held. the Group has maintained the initiatives previously deployed,including: The Group has deployed the Senior Operating System to Critical materials or components may provide operating businesses with a toolkit to optimise the become temporarily or permanently • maintaining close and frequent communication with use of lean and continuous improvement techniques, unavailable, leading to an inability to customers regarding delivery schedules, the need to supplier management and other operational best practice meet production commitments. qualify additional supply sources and potential processes. incremental costs to mitigate supply chain disruptions; Supply chain disruption can lead to Operating businesses are required to maintain strong • working with suppliers to manage lead times and higher volatility in delivery schedules internal controls over supplier management from new maximise the benefits from long-term supply as customers adjust demand to supplier selection to performance monitoring and agreements, where applicable; protect their production capabilities. management of existing suppliers. • leveraging supplier relationships across the Group to This may challenge the Group’s ability identify alternate supply sources and opportunities to meet customer schedule, quality Our core Values (see page 38) emphasise operating with tostreamline or consolidate supply requirements; and cost requirements, resulting integrity and respect, which allows the Group to cultivate inpotential delays, penalties and • applying the Senior Operating System and our strong, long-term relationships with critical suppliers. costoverruns. engineering expertise to generate innovative solutions to supply chain challenges; and In extreme cases some suppliers • highlighting supply chain challenges in operating may face financial difficulties and business reviews and Executive Committee meetings. goout of business. To gain additional comfort over our management of the intensifying supply chain challenges in 2022, the Group conducted a supply chain assurance review across the operating businesses to assess the scope and severity ofsupply chain constraints, as well as the effectiveness ofmitigating actions employed to navigate the current operating environment. | CUSTOMER DISRUPTION | | | 1 | 2 | 5 | A | B | C | E | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Supply chain constraints, staffing | The Group has fostered long-lasting and cooperative | Customer demand continued to strengthen during the year | | | | | | | | | shortages and other labour | relationships across its customer base. | driven by the resilience of the Group’s end-markets in the | | | | | | | | | disruptions may leave customers | | post-pandemic recovery. However, supply chain and labour | | | | | | | | In furtherance to its strategic priorities, the Group actively unable to meet current sales issues have challenged some customers’ ability to meet seeks to grow the business through diversification of its commitments and/or respond to market demand increases, suppressing demand down customer base and new product innovation. increases in market demands. As a through their supply base. result, there is a risk that customers The Group closely monitors market trends and Focus in 2022 has been on: do not honour firm order schedules, developments through in-house market research analysis. delay programme ramp-up, postpone • collaborating with our customers to understand their new programmes. There is a Group Contract Review policy which is demand variability and potential schedule changes; mandatory for all operating businesses and requires • diligently managing supply chain challenges to meet comprehensive financial modelling and sensitivity analysis ourproduct delivery objectives in support of customer of contractual terms and assumptions. operations; and • continuing to balance direct headcount with demand whilst retaining the ability to meet increased demand in the future and identifying overhead reductions through efficiency improvements where possible. 67SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / RISKS AND UNCERTAINTIES CONTINUED Principal Risk How we manage it Focus in 2022 | CYBER/INFORMATION SECURITY | | | 1 | 3 | B | | --- | --- | --- | --- | --- | --- | | The risk that the Group is subjected to | The Group has a strategic roadmap to continually improve | Remote, hybrid and other flexible work arrangements | | | | | external threats from hackers or | Information Security. | arenow common in many locations across the Group. | | | | | viruses potentially causing critical or | | These types of alternate work arrangements can | | | | The Group has dedicated and robust Information Security sensitive data to be lost, corrupted, increaseInformation Security risks so the Group remains capability in place with a wide range of proactive and made inaccessible, or accessed by committed to full compliance to our IT/IS policies and reactive security controls, including up-to-date antivirus unauthorised users, resulting in diligent monitoring of the IS environment. 2022 capability across our operating businesses and network financial and/or reputational loss. actionsincluded: and system monitoring to identify vulnerabilities and potential threats. • approval of a new three-year IS strategy and roadmap toaccount for the dynamic nature of the cyber A multi-year rotational Information Security (IS) assurance threatlandscape; review programme is in place to assess and enhance • selected and transitioned to a new Managed Security compliance with established IS controls, policies Service provider offering enhanced visibility and security andprocedures. monitoring across the entire organisation; Vulnerability metrics have been developed and are • introduced new, market-leading security systems and activelyreviewed by Divisional Management and the software to provide real-time security event monitoring ExecutiveCommittee. via a single portal. This includes increased protection against the latest cyber threats, such as ransomware The Group has a risk management framework specific to and other destructive attacks; Information Technology “IT”/Information Security “IS”. • deployed proactive threat hunting capabilities and Each operating business deploys a suite of protection userbehavioural scanning capabilities to enable andmonitoring services, including endpoint detection defenceagainst the latest methods of attacks andresponse, vulnerability management and cyber usedbycybercriminals; threatintelligence. These are fully monitored by our • implemented a new external scanning capability centralised Group Information Security team to ensure allowing the Group to see the security posture of the consistency, continuity and rapid remediation organisation through the eyes of a cybercriminal; and • completion of comprehensive IS assurance reviews Technology-led security controls are further supported across multiple operating businesses. byaclear and documented series of policies, standards andplaybooks. Employees receive annual awareness training on cyber-related issues and the Group maintains a cyber awareness campaign to alert employees to cyber threats. A near miss and incident reporting process is deployed across the Group to alert IT/IS teams of immediate cyberthreats. | 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 new | The ongoing pandemic continued to impact customer | | | | | | | | | | | | in line with customer requirements | products. Formal New Product Introduction “NPI” | demand in 2022 to some degree but supply chain | | | | | | | | | | | | and to respond appropriately to | processes, such as Advanced Product Quality Planning | constraints and labour availability created substantial | | | | | | | | | | | | increases or decreases in demand | “APQP”, are in use across many operating businesses | programme management challenges during the year. | | | | | | | | | | | | thereafter is key to achieving the | with full adoption in process across the Group. | Inresponse, the Group has maintained its focus on: | | | | | | | | | | | Group’s strategic objectives. There is a Group Contract Review policy which is • continuing to work with our customers to ensure that, There is a risk that the Group is unable mandatory for all operating businesses and requires wherever possible, orders within firm windows can to respond quickly enough to changes comprehensive financial modelling and sensitivity analysis bedelivered; in demand, potentially resulting in of contractual terms and assumptions. • working with our suppliers and managing inventory to excess inventory and/or an inability to balance inventory levels where there are delays in firm NPI programmes are subject to regular review by divisional meet schedule and cost requirements orders and/or ensure adequate supply to meet and Group management to ensure that schedule, cost or resulting in delays, penalties, cost production demands; quality issues are identified and dealt with promptly. overruns or asset write-downs. • maintaining flexible labour resource plans to adapt to The Group monitors market and customer data so that we variations in demand and production schedules; and Changes across a variety of production can be prepared to respond to changing market dynamics. • responding to the ongoing elevated level of new requirements, such as fluctuations in material supplies, volatility in customer requests for quotation. A variety of tools are deployed throughout the Group to ordering and employee retention and prevent, detect and manage quality issues, including training, may challenge the Group’s supplier audits, comprehensive quality management ability to maintain programme quality systems, internal quality audits, Gemba walks and specifications, leading to the potential documented root cause analysis. for higher costs of quality or greater risk of product defects. 68 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / RISKS AND UNCERTAINTIES CONTINUED Principal Risk How we manage it Focus in 2022 | 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 | Disruptive supply chain challenges and escalating | | | | | | | | | | ongoing challenge within our | innovative ways to produce products at a lower cost, | inflationary pressures converged during 2022 to force | | | | | | | | | | industries, driven by the expectations | thushelping them to meet pricing challenges. | many customers to strike a balance between prioritising | | | | | | | | | | of airlines, land vehicle operators and | | delivery schedules, which may require higher freight, | | | | | | | | | The Group is able to consider bundles of products that governments seeking to purchase material and other costs, and managing programme intotal help achieve customer pricing challenges. more competitively priced products coststo mitigate inflation impacts. In 2022, the Group inthe future. This may put some focusedon: Where appropriate, the Group will actively pass work pressure on the Group’s future tosome of its cost competitive facilities such as • formalising a pragmatic and adaptable pricing response operating margins. Mexico,Thailand, the Czech Republic, South Africa, framework across the Group; India,ChinaandMalaysia with a view to helping satisfy • working in partnership with customers to support customerchallenges. theirpriorities within the contractual terms of There is a Group Contract Review policy which is existingagreements; mandatory for all operating businesses and requires • facilitating alignment between supplier and customer comprehensive financial modelling and sensitivity agreements to stabilise material costs; and analysisof contractual terms and assumptions • identifying labour and overhead cost reductions through efficiency improvements where possible. ## PEOPLE AND CULTURE | TALENT AND SKILLS | | | 2 | 6 | A | B | D | | --- | --- | --- | --- | --- | --- | --- | --- | | There is a risk that the Group, | Employee retention and recruitment challenges are | 2022 presented a uniquely challenging labour market as | | | | | | | particularly in the US and UK, is | regularly discussed within the operating businesses, | wage inflation and a post-pandemic increase in hiring | | | | | | | unable to attract sufficient skills and | Divisional Management and the Executive Committee. | demand converged with subdued labour availability | | | | | | | talent and/or is unable to retain the | | creating fierce competition amongst employers to attract | | | | | | The Group HR Director hosts focus groups across a cross skills and talent it has in order to meet and retain employees. The Group responded to the section of the operating businesses to solicit constructive demand. Margins may be impacted escalating challenges in employee retention and feedback from employees and foster open communication. by higher wage rates necessary to recruitment in 2022 by: retain current employees and/or Operating businesses partner with technical colleges • softening the effects of inflation on our workforce attract new employees. andapprenticeship schemes to create talent through off-cycle wage increases or lump sum inflation pipelineprogrammes. As demand increases there may be payments to support employees with the impact of adisproportionate increase in the increased costs of living; A groupwide succession planning exercise is conducted number of indirect heads, undoing • offering new incentive opportunities such as sign-on annually to identify successors or interim cover for key roles some of the cost savings that the bonuses to attract new employees and enhancing and ensure appropriate development plans are in place to Group has achieved through its recruiting bonuses to existing employees for support employees in meeting their career goals. restructuring programme. candidatereferrals; The Nominations Committee reviews management • promoting opportunities for remote, hybrid and flexible A notable portion of the Group’s development and succession plans twice a year, making work arrangements; workforce may reach retirement age recommendations to the Board regarding size, structure • implementing additional employee engagement actions, at the same time, creating a gap in and composition where applicable. such as employee activities, newsletters, employee skills and labour availability. suggestion/feedback channels and management The “Perform” performance and development system meetings; and The Group may have insufficient isutilised across the Group to facilitate objective setting, • expanding in-house training programmes. talent to respond to all development planning and performance and strategicpriorities. The Group conducted its second Global Employee Opinion behaviourassessment. Survey in 2022. Additional detail regarding the2022 The Group HR Director regularly provides people employee engagement survey can be found on page51. andculture feedback to the Board. An expansion of the Group’s online recruitment system, “Recruit,” commenced in 2022 for operating businesses inthe UK A talent and skills assurance review was completed across the Group to assess the scope and severity of employee recruitment and retention concerns, as well as the effectiveness of mitigating actions implemented to counteract the effects of the challenging labour market. 69SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / RISKS AND UNCERTAINTIES CONTINUED Principal Risk How we manage it Focus in 2022 ## FINANCIAL | INFLATION | | | 2 | 3 | A | B | C | D | E | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Inflationary pressures stemming from | The Group’s Treasury Committee actively monitors the | Inflationary pressures continued to escalate in 2022 | | | | | | | | | a confluence of labour constraints, | economic forces impacting the Group and consider a variety | asongoing supply chain issues, wage inflation, labour | | | | | | | | | supply chain disruption and shifting | of viable containment strategies where necessary. | disruptions and the crisis in Ukraine combined to fuel | | | | | | | | | customer demand could result in a | | ahistoric surge in labour, energy, transportation and | | | | | | | | There is a Group Contract Review policy which is reduction of earnings from existing material costs. The Group expanded efforts to monitor mandatory for all operating businesses and requires programmes if the Group is unable to andmitigate inflation impacts during 2022 through the comprehensive financial modelling and sensitivity analysis secure mitigating price adjustments followingactions: of contractual terms and assumptions. from customers. • spotlight inflationary impacts and evaluate potential A significant portion of the Group’s external debt is at Higher production costs resulting mitigating actions in operating business reviews and fixedrates of interest, which mitigates the effect of from material, energy and labour Executive Committee meetings; higherbenchmark interest rates that can result from costinflation can reduce our ability • where inflationary pressures have increased, the Group inflationarypressures. toremain cost competitive and win has worked closely with customers to secure price newbusiness. increases, delay contractual price decreases and/or pass The Group utilises the Senior Operating System to deploylean and continuous improvement techniques through higher production costs to mitigate the impact Inflationary pressures may result in withafocuson improving labour efficiencies and cost on Group margins; higher interest rates, which could reductioninitiatives. • leverage existing fixed-price supply agreements to impact the Group’s earnings. secure lower pricing across as much supply as possible while maintaining a focus on inventory optimisation; • seek out alternate sources of energy supply to reduce the possibility of energy supply disruption and slow escalating costs; and • assess the impacts of inflation and effectiveness of actions deployed to mitigate those impacts across the Group through a targeted assurance review. | FINANCING AND LIQUIDITY | | | 2 | 3 | 5 | D | E | | --- | --- | --- | --- | --- | --- | --- | --- | | The Group could have insufficient | The Group’s overall treasury risk management programme | Financing and liquidity initiatives continued to play a critical | | | | | | | financial resources to fund its growth | focuses on the unpredictability of financial markets, and | role during 2022 to mitigate the ongoing impacts of the | | | | | | | strategy or meet its financial | seeks to minimise potential adverse effects on the Group’s | COVID-19 pandemic, supply chain challenges and inflation. | | | | | | | obligations as they fall due or | financial performance. | Actions taken included: | | | | | | insufficient liquidity to meet The Group enters forward foreign exchange contracts to • after a period of covenant relaxation through 2020 and financingcovenants. hedge the transactional exchange risk arising on operations’ 2021 in agreement with the Group’s lenders, the Group Foreign exchange movements could trading activities in foreign currencies; however, it does not reverted to original covenant limits in 2022. A strong have a material impact on the Group’s enter or trade financial instruments, including derivative focus on free cash flow generation has continued financial performance, both on the financial instruments, for speculative purposes. into2022; balance sheet (translation risk) and • both main committed revolving credit facilities (in UK The Group monitors liquidity risks monthly and ensures income statement (transaction risk). and US) were refinanced during 2022 and the tenors sufficient headroom in its committed borrowing facilities to extended to 2026 and 2025, respectively; meet financial obligations across the Group as they fall due. • a global notional cash pooling solution was implemented in 2022 to enable the Group to make better use of cash The Group’s Treasury policy is updated and approved by the in the operations for working capital needs to minimise Board regularly. central borrowings; Compliance with financial policies, exposure limits and • responsibly managing growth in inventory requirements headroom/liquidity limits are reviewed by the Group’s where customer demand is recovering and/or supply Treasury Committee on a regular basis. chain disruptions are occurring; • continued compliance with transactional foreign The Group’s viability assessment process considers a base exchange hedging policy to mitigate income statement case and risk case scenario, which considers the principal volatility from currency movements; and risks and uncertainties. • the Group’s Treasury Policy was updated and approved by the Board in December 2022. 70 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / RISKS AND UNCERTAINTIES CONTINUED Principal Risk How we manage it Focus in 2022 ## COMPLIANCE | CORPORATE GOVERNANCE BREACH | | | 1 | 2 | 3 | A | B | C | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Corporate governance legislation | The Group has well-established governance policies and | Employees received annual refresher training on our | | | | | | | | (such as the UK Bribery Act and the | procedures in all key areas, including a Group Code of | Codeof Conduct during 2022. The completion rates | | | | | | | | US Foreign Corrupt Practices Act), | Conduct, anti-bribery procedures, a Health & Safety | typically hover around 94%, allowing for new starters | | | | | | | | regulations and guidance (such as the | Charter, an Agent’s Policy and various policies and | whohave notyet completed their training immediately | | | | | | | | UK Corporate Governance Code and | procedures over the review and reporting of risk | onjoining. The course included content related to | | | | | | | | global health and safety regulations) | management and internal control activities. | conflictsof interest, anti-bribery, general business | | | | | | | | are increasingly complex and | | ethicsand preventingharassment. | | | | | | | Governance and regulatory compliance updates are onerous. A serious breach of these provided to the Board and the Executive Committee at Additional training was conducted for appropriate rules and regulations could have a appropriate intervals, and to key operational management. employee groups on topics including prevention of significant impact on the Group’s payment fraud and information security related topics. reputation, lead to a loss of All employees are required to complete annual Code confidence on the part of investors, ofConduct training. The Group expanded its trade compliance capabilities customers or other stakeholders through the addition of an internal classification specialist andultimately have a material All EU sites have received training on the General Data and enhanced legal entity due diligence procedures. adverse impact on the Group’s Protection Regulations and employees in other locations enterprisevalue. have received training as appropriate to their roles. Updates have been issued to various Group policies. The Group’s 2022 internal audit programme and Controls Self Assessment were completed as planned, providing alevel of assurance that the Group’s Code of Conduct, controls, policies and procedures are being followed. 71SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / DIVISIONAL REVIEW # DIVISIONAL REVIEW # AEROSPACE DIVISION Revenue +18% £553.6m (2021 – £471.3m) Adjusted operating profit +142% £20.3m (2021 – £8.4m) Adjusted operating margin +190 bps 3.7% (2021 – 1.8%) Aerospace sales across the group ![img-11.jpeg](img-11.jpeg) Revenue by large commercial platforms ![img-12.jpeg](img-12.jpeg) ![img-13.jpeg](img-13.jpeg) "Revenue in the Aerospace Division increased by 17.5% year-on-year, reflecting the recovery now well underway in commercial aviation." Laurie Fleming Aerospace Division Chief Executive ![img-14.jpeg](img-14.jpeg) The Aerospace Division represents 65% (2021 – 66%) of Group revenue and consists of 14 operating businesses. These are located in North America (six), the United Kingdom (four), continental Europe (two), Thailand and Malaysia. This Divisional review is on a constant currency basis, whereby 2021 results have been translated using 2022 average exchange rates and on an adjusted basis to exclude the charge relating to amortisation of intangible assets from acquisitions and net restructuring income. The Division's operating results on a constant currency basis are summarised below: | | 2022 £m | 2021^{(1)} £m | Change | | --- | --- | --- | --- | | Revenue | 553.6 | 471.0 | +18% | | Adjusted operating profit | 20.3 | 8.4 | +142% | | Adjusted operating margin | 3.7% | 1.8% | +190bps | (1) 2021 results translated using 2022 average exchange rates – constant currency. STRATEGIC REPORT / DIVISIONAL REVIEW | Divisional revenue increased by £82.6m (17.5%) | During the period, adjusted operating profit | | | --- | --- | --- | | to £553.6m (2021 – £471.0m) whilst adjusted | increased by 141.7% to £20.3m (2021 - £8.4m) | 14 Global Aerospace operations | | operating profit increased by £11.9m (141.7%) | and the adjusted operating margin increased | | | to£20.3m (2021 – £8.4m). | by190 basis points to 3.7% (2021 – 1.8%). | North America 6 | United Kingdom 4 Theimproved profitability reflected the Revenue Reconciliation £m Continental Europe 2 volumerelated operating leverage across our Thailand 1 2021 revenue 471.0 businesses, while price increases helped offset Malaysia 1 Civil aerospace 81.4 the impact of material and other inflationary cost increases. Our operating businesses worked Defence (6.6) hard to address the persistent supply chain Other 16.8 challenges and mitigate their impact, ensuring Disposal of business (9.0) service levels for customers were maintained 2022 revenue 553.6 tothe best extent possible. These supply chain constraints are likely to be evident throughout 2023 and continue to require relentless Revenue in the Aerospace Division increased management in a number of our operations. by17.5% year-on-year on a constant currency These challenges are a function of the welcome basis, reflecting the overall recovery in demand. increase in civil aircraft production rates required Excluding the prior year £9.0m revenue by the industry to satisfy the strong demand fromSenior Aerospace Connecticut, which from airlines and aircraft lessors. We will wasdivested in April 2021, revenue on a Revenue reconciliation (£m) continue to work closely with our suppliers and constant currency basis increased by 19.8%. customers to minimisedisruption. Very recently, The year-on-year increase reflected the ramp A 2021 revenue the situation has been compounded by a fire at B Civil aerospace upin civil aircraft production rates, growth from one of our key suppliers in Thailand. We are C Defence semi-conductor equipment markets and ramp working closely with the supplier and our D Other up inspace programmes reflecting end market customers to assess and mitigate the specific E Disposal of business growth. This more than offset the decline in F 2022 revenue impact of the fire. defence, which was affected by the delay in spending as a consequence of the Continuing £m Both Airbus and Boeing are planning further 81.4 16.8 553.6 Resolution being in place in the USA during increases in aircraft production programmes in (9.0) (6.6) thefirst half of the year. 471.0 2023 and beyond which gives confidence that civil aerospace revenue will continue to grow The civil aerospace sector had the strongest in2023. With aircraft build rates increasing growth during the period with Senior’s sales through the year, and the continuing supply increasing by 31.6% compared to prior year. chain challenges in aerospace, including the Thiswas reflective of the significant ramp up recent fire at one of our key suppliers, we inaircraft production rates from the OEMs anticipate Aerospace Division trading to be resulting in rates being higher in 2022 compared moreweighted to the second half of the year. to 2021, driven particularly by single aisle aircraft including regional and large business jets, with The most fuel-efficient single aisle aircraft widebody production rate increases announced areinhigh demand which underpins planned towards the end of the year. In 2022, 21% of rateincreases: A FB C D E civil aerospace sales were from widebody | aircraft, with the other 79% sales being from | • Airbus announced at their FY 2022 results | | | | --- | --- | --- | --- | | single aisle, regional and business jets. | | that on the A320 Family programme, they | | | | | arenow progressing towards a monthly | Sales in civil aerospace | Excluding the divestment of Senior Aerospace production rate of 65 aircraft by the end of increased by Connecticut, total revenue from the defence 2024 and 75 in 2026. For the entry-into- sector decreased by £6.6m (5.1%) as purchase service of the A321XLR, Airbus announced orders were delayed due to the late approval of that they expect this to take place in Q2 2024. ## the Appropriations Bill which resulted in the 32% Airbus ended 2022 with a backlog of 6,093 Continuing Resolution coming into force as well A320 Family (2021: 5,839). (2021 – 15% decrease) as our sales to F-35 programme being impacted • Boeing announced at their full year results by customer inventory levels of some of the that the 737 programme is stabilising parts we supply. production rate at 31 per month, which is on Revenue derived from other markets such as steady course to being achieved, with plans ## "The ramp up in large | space, power & energy, medical and semi- | toramp production to approximately 50 per | | | --- | --- | --- | | conductor equipment, where the Group | month in the 2025/2026 timeframe. At their | commercialaircraft | | manufactures products using very similar | Investor Day in November 2022, they | | ## productionrates reflected technology to that used for certain aerospace announced a target of 400-450 737 MAX products, increased by £16.8m as a result of deliveries in 2023, rising from the low 30s ## therecovery in domestic | increased demand in the semi-conductor | deliveries per month in the beginning of | | | --- | --- | --- | | equipment market and the ramp up in space | theyear and reaching near 40 deliveries per | andinternational flights.” | | satellite programmes reflecting end | month in H2 2023. As at the end of 2022, | | | marketgrowth. | Boeing had a 737 firm order backlog of | | around 3,653 units (2021: 3,414) and 250 737 MAX aircraft ininventory. 73SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / DIVISIONAL REVIEW CONTINUED | | • During 2022, the first customer delivery of the | | We expect defence revenue to be stable in | | --- | --- | --- | --- | | | | COMAC C919 was completed. COMAC | 2023 compared to prior year. | | "Improved profitability reflected | | announced that they have received orders for | | • Lockheed Martin delivered 141 F-35 aircraft more than 1200 units and expect to reach ## volume related operating in2022, below its stated target of 147-153, annual production capacity of 150 aircraft in asthey experienced supplier performance five years. ## leverage across our businesses, challenges and a delivery pause & suspension Recovery in long-haul routes, which typically of the Government Furnished Equipment ## while price increases helped use widebody aircraft, has been accelerating (GFE) engine. At their full year results, they offset the impact of inflationary in2022. With the easing of travel restrictions announced an intention of producing 147-153 inAsia, especially recently in China, this is aircraft in 2023 and 2024, although deliveries ## cost increases.“ expected to provide added momentum over in 2023 will be determined pending the thecoming year. IATA has signalled that this resumption of engine deliveries and other Launie Fleming segment will return to 92% of 2019 levels by factors. They continue to anticipate annual Aerospace Division Chief Executive | | 2025 and 104% of 2019 levels by 2026. As a | deliveries of 156 aircraft in 2025 and for the | | --- | --- | --- | | | result, both Boeing and Airbus have announced | foreseeable future. In Q4 2022, they finalised | | | production rate increases for wide bodies | the F-35 Low-Rate Initial Production (LRIP) | | Adjusted operating | starting from the end of 2022. | Lots 15-17 production contract with the U.S. | | margin increased to | | Government for up to 398 aircraft. | • On widebody aircraft, Airbus announced at | their FY 2022 results that the A330 monthly | In November 2022, Senior completed its | | --- | --- | | production rate increased to around 3 at the | acquisition of Spencer Aerospace, expanding | | end of 2022 as planned and they are now | Senior’s presence in hydraulic fluid fittings and | ## 3.7% | | targeting to reach a monthly production rate | allowing Senior to meet customer demand in | | --- | --- | --- | | (2021 – 1.8%) | of4 in 2024. On the A350 platform, Airbus | anarea that closely complements existing fluid | | | confirmed the monthly rate is now around 6 | conveyance products. Initial integration activities | | | aircraft. In order to meet growing demand for | are proceeding well. | widebody aircraft as international air travel ## "Both Airbus and Boeing are Senior Aerospace has a diversified product recovers, and following a feasibility study with portfolio of innovative offerings with many the supply chain, it is now targeting a monthly ## planning further increases in growth opportunities as our customers value production rate of 9 A350s at the end of 2025 Senior’s financial resilience, stability, design and ## aircraft production programmes The company’s total widebody backlog was manufacturing expertise and global footprint. 619 at the end of 2022 (2021: 766). We continue to secure new contracts and ## in 2023 and beyond which gives • Boeing resumed 787 programme deliveries contract extensions on civil platforms and other inAugust 2022, after receiving approval from ## confidence that civil aerospace aerospace markets that will drive our growth. the FAA for their plan on inspections and In2022, new contracts of note that were ## revenue will continue to grow retrofit work. The 787 programme continues signedinclude: at alow production rate with plans to ramp up ## in2023.” | | tofive per month in late 2023 and to 10 per | • Senior Aerospace Ketema was awarded | | | --- | --- | --- | --- | | | month in the 2025/2026 timeframe. At their | | multi-year contracts worth in excess of | | | Investor Day in November 2022, they | | $30mto supply cryogenic valves for space | | | announced a target of 70-80 787 deliveries | | launch vehicles | | | for2023. Boeing confirmed at the full year | • Senior Aerospace AMT was awarded repeat | | | | earnings call that they had 100 787 aircraft | | production contracts worth c.$10m to supply | | | ininventory at the end of 2022, which they | | floor beam assemblies and frames for large | | | stated will be delivered by the end of 2024. | | commercial aircraft. | | • Boeing reaffirmed on their full year earnings | | • Senior Aerospace Jet Products increased | | | | call that the 777X programme timeline is | | market share for v-blade production for large | | | holding for delivery of the first plane in 2025. | | commercial aircraft. | • Senior Metal Bellows won a development Global business jet activity in 2022 was resilient, andcertification contract for implantable continuing the pandemic bounce. According to medication delivery pumps. This included WingX Advance, 2022 was a record year as aproof-of-design bellow for an intra-aortic sales were up 10% year-on-year and 14% above balloon pump assembly. pre-pandemic 2019 levels. In 2023, demand is forecast to normalise to 2019 levels in Europe, with North America sustaining higher than pre-pandemic activity. Airbus continues to ramp-up A220 production, having increased to 6per month during 2022. They announced at their FY 2022 results that they are still on track for rate 14 which they envisaged by the middle of the decade. 74 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / DIVISIONAL REVIEW CONTINUED Senior Aerospace Metal Bellows provides custom engineered bellows-based mechanical and electromechanical component and assembly solutions, by applying its technologies to applications requiring hydraulic system pressure and flow control, dynamic sealing, precision sensing and actuation (pressure and thermal), and flexible coupling. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 75 STRATEGIC REPORT / DIVISIONAL REVIEW CONTINUED # DIVISIONAL REVIEW # FLEXONICS DIVISION Revenue +26% £295.6m (2021 – £234.6m) Adjusted operating profit +83% £25.4m (2021 – £13.9m) Adjusted operating margin +270 bps 8.6% (2021 – 5.9%) Flexonics sales across the group 35% 19% Land vehicles 16% Power & Energy ![img-15.jpeg](img-15.jpeg) "In Flexonics, strong customer demand in the land vehicle and power & energy markets in 2022 drove an increase in sales of 26.0% compared to prior year." Mike Sheppard Flexonics Division Chief Executive ![img-16.jpeg](img-16.jpeg) The Flexonics Division represents 35% (2021 – 34%) of Group revenue comprising 12 operations which are located in North America (four), continental Europe (two), the United Kingdom (two), South Africa, India, and China (two) including the Group's 49% equity stake in a land vehicle product joint venture. This Divisional review is on a constant currency basis(1), whereby 2021 results have been translated using 2022 average exchange rates and on an adjusted basis to exclude net restructuring income/costs. The Division's operating results on a constant currency basis are summarised below: | | 2022 £m | 2021(2) £m | Change | | --- | --- | --- | --- | | Revenue | 295.6 | 234.6 | +26% | | Adjusted operating profit | 25.4 | 13.9 | +83% | | Adjusted operating margin | 8.6% | 5.9% | +270bps | (1) The divisional review is presented before the share of the joint venture results. (2) 2021 results translated using 2022 average exchange rates - constant currency. STRATEGIC REPORT / DIVISIONAL REVIEW CONTINUED | Divisional revenue increased by £61.0m (26.0%) | • The North American medium-duty diesel | | | | --- | --- | --- | --- | | to £295.6m (2021 – £234.6m) and adjusted | | truck production is forecast to be stable | 12 Global Flexonics operations | | operating profit increased by £11.5m (82.7%) | | in2023 as backlogs remain elevated, | | | to£25.4m (2021 – £13.9m). | | indicating solid pent-up demand. | North America 4 | Continental Europe 2 • IHS Markit Inc. forecasts that European truck Revenue Reconciliation £m United Kingdom 2 and bus production will fall by 1% in 2023 India 1 2021 revenue 234.6 inline with the slowing macroeconomic South Africa 1 | Land vehicles 37.1 | indicators, while light vehicle production | | (1) | | --- | --- | --- | --- | | | | China | 2 | | Power & energy 23.9 | isforecast to grow by 6% in 2023 with | | | semiconductor availability improving. 2022 revenue 295.6 • Indian light vehicle production is forecasted togrow by 8% in 2023. In Flexonics, strong customer demand in the | land vehicle and power & energy markets in | Positive momentum is expected in power | | | | --- | --- | --- | --- | | 2022 drove an increase in sales of 26.0% | &energy markets given higher activity levels | | | | compared to prior year. | inthe upstream oil & gas and nuclear sectors: | | | | Group sales to land vehicle markets increased | • The IEA expects world oil demand in 2023 | | | | by 29.2% as Senior outgrew end market | | tosurpass pre-pandemic levels. | | | demand due to higher market share. Senior’s | • According to the IEA, global refining capacity | | | | sales to the North American truck and off- | | | (1) Including joint venture. | is anticipated to expand slightly in 2023. Tight | highway market increased by £18.7m (25.8%), | supply, coupled with a limited appetite for | | | --- | --- | --- | | with strong demand for on-highway vehicles | new refining capacity due to the US federal | | | asproduction of heavy-duty trucks increased | | Revenue reconciliation (£m) | government’s policies on energy, has led by19%. Sales to other truck and off-highway businesses to focus on upgrading and regions, including Europe and India, increased A 2021 revenue expanding existing facilities, thereby B Land vehicles by£12.0m (45.6%), helped by recent contract increasing maintenance and overhaul work. C Power & energy wins entering series production, and end market • In power generation, the IEA forecasts global D 2022 revenue production growth as supply chain constraints electricity demand growth in 2023 to be eased through the year. Group sales to similar as 2022, albeit with some uncertainty 23.9 295.6 passenger vehicle markets increased by £6.4m 37.1 around how macroeconomic growth rates (22.8%) in the year, benefiting from recent willimpact demand. 234.6 contract wins entering series production in • In the nuclear sector, 2023 will see nations North America and Europe. £m focus on energy security through ensuring In the Group’s power & energy markets, sales thesmooth operating of existing powerplant increased by £23.9m (22.2%) in the year. Sales and look to further develop SMRs. to power generation and nuclear markets Our innovative technology is a key point of increased by £9.3m (26.7%) as efforts to extend differentiation for the Group, and we continue powerplant life and maintenance grew. Sales to tofocus our development efforts, with our oil and gas markets increased by £8.8m (27.1%), products applicable across a diverse range of as a result of higher production volumes for attractive industrial markets. In 2022, we made upstream. Sales to other power & energy good progress with new product development: markets increased by £5.8m. A B C D • Senior Flexonics Crumlin supplied prototype Adjusted operating profit increased by £11.5m Battery Cooling Plates to several European compared to prior period and the divisional carcompanies. Increasing global energy adjusted operating margin increased by 270 • Senior supplied Prototype Heat Sinks to basis points to 8.6% (2021 – 5.9%). This consumption will drive several tier one electric vehicle inverter significant improvement in profitability reflected higher demand for suppliers. the volume related operating leverage across manyof the Flexonics • Senior Flexonics Crumlin secured a production our operating businesses and agreed price Division’s products. order for Battery Cooling Plates for a premium increases to offset the impact of inflationary sports car manufacturer. cost increases. • Senior Flexonics Kassel was named as In 2023, Senior’s overall sales to land vehicle Sales to power & energy apartner for the development of a marine markets are expected to outperform end hydrogen powered fuel cell fluid markets increased by markets due to the launch and ramp up of new managementsystem. programmes. In terms of the end markets: • Senior Flexonics Bartlett was nominated | • ACT Research is forecasting a 3% decline in | | tosupply assemblies for a Solid Oxide Fuel | | | --- | --- | --- | --- | | | North American heavy-duty truck production | Cell being developed to replace diesel | +22% | | | in 2023. Pent-up demand for more fuel | poweredgenerators. | | (2021 – 12% decrease) efficient engines and modest pre-buy activity ahead of tighter emission standards coming to be introduced in 2024 are expected to be offset by slowing macroeconomic indicators in the US. 77SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / FINANCIAL REVIEW ## FINANCIAL REVIEW ## GOOD FINANCIAL ## PROGRESS Financial Summary 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 (1) | | Revenue | | | operating profit | | | | Margin | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 2022 | | 2021 | 2022 | | 2021 | 2022 | | 2021 | | | £m | | £m | £m | | £m | | % | | % | Aerospace 553.6 439.3 20.3 7.9 3.7 1.8 (2) Flexonics 295.6 219.9 25.4 12.9 8.6 5.9 Share of results of joint venture – – 0.4 0.2 – – Inter-segment sales (0.8) (0.5) – – – – Central costs – – (17.6) (14.9) – – ## "Senior delivered significantly Group total 848.4 658.7 28.5 6.1 3.4 0.9 ## improved profitability, generated (1) See table below for reconciliation of adjusted operating profit to reported operating profit. (2) Flexonics results are presented before share of results of joint venture. ## excellent free cash flow and Adjusted operating profit may be reconciled to the operating profit that is shown in the ## further strengthened the Consolidated Income Statement as follows: ## balancesheet.” | | | 2022 | 2021 | | --- | --- | --- | --- | | Bindi Foyle | | £m | £m | | Group Finance Director | Adjusted operating profit 28.5 6 .1 | | | Amortisation of intangible assets from acquisitions (0.2) – Net restructuring income 4.2 4.4 Operating profit 32.5 10.5 | Adjusted Operating Profit | Financial detail | Operating profit | | --- | --- | --- | | +367% | Group revenue | Adjusted operating profit increased by £22.4m | | | Group revenue was £848.4m (2021 – £658.7m). | (367.2%) to £28.5m (2021 – £6.1m). Excluding | | | Excluding the favourable exchange rate impact | the favourable exchange rate impact of £1.3m, | | | of £46.3m, Group revenue increased by | adjusted operating profit increased by £21.1m | | £28.5m | | (285.1%) on a constant currency basis. After | £143.4m (20.3%), of which £28.6m related to pricing. Revenue grew in both Aerospace and accounting for £0.2m amortisation of intangible 2021 – £6.1m | | Flexonics year-on-year. In 2022, 59% of revenue | assets from acquisitions (2021 – £nil) and £4.2m | | --- | --- | --- | | | originated from North America, 17% from the | net restructuring income (2021 – £4.4m), | | Free Cash Flow | UK, 12% from the Rest of Europe and 12% from | reported operating profit was £32.5m (2021 – | | | the Rest of the World. | £10.5m). | +98% The Group’s adjusted operating margin increased by 250 basis points, to 3.4% for the full year. This improved profitability principally ## £ 27.7m reflected volume related operating leverage 2021 – £14.0m across our businesses. Inflationary pressures were successfully mitigated by diligently managing costs and by increasing prices ROCE andsurcharges where possible. Overall price +370 bps increases of £28.6m offset material and otherinflationary cost increases of £26.0m. ## 4.7% 2021 – 1.0% 78 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / FINANCIAL REVIEW Revenue (£m) Adjusted operating profit (£m) Free cash flow (£m) +29% +367% +98% 658.7 6.1 14.0 22 848.4 28.5 22 27.7 | As set out in Note 9, adjusted operating profit | Finance costs and investment income | The reported tax rate was 9.8% charge, being | | --- | --- | --- | | and adjusted profit/loss before tax are stated | Finance costs, net of investment income and | atax charge of £2.2m on reported profit before | | before £0.2m amortisation of intangible | before interest unwind of deferred and | tax of £22.4m. This included £0.2m net tax | | assets from acquisitions (2021 – £nil) and | contingent consideration increased to £8.4m | charge against items excluded from adjusted | | £4.2m net restructuring income (2021 – | (2021 – £8.0m) and comprise IFRS 16 interest | profit before tax, of which £0.7m charge related | | £4.4m). Adjusted profit/loss before tax is also | charge on lease liabilities of £2.5m (2021 – | to net restructuring income and a £0.5m credit | | stated before costs associated with corporate | £2.6m), net finance income on retirement | related to corporate undertakings in the year. | | undertakings of £1.7m (2021 – £21.2 income). | benefits of £1.2m (2021 – £0.4m) and net | The 2021 reported tax rate was 2.1% credit, | | | interest charge of £7.1m (2021 – £5.8m). This | being a tax credit of £0.5m on reported profit | Restructuring increase was mainly due to higher underlying before tax of £23.7m. This included £2.1m net In 2020 the Group had focused on taking interest rates on variable rate debt and foreign tax charge against items excluded from adjusted actions to conserve cash to manage through exchange movements on fixed rate USD Private loss before tax, of which £2.9m related to the the pandemic, including curtailing capital Placement Notes denominated in US Dollars. corporate undertakings in the year and £0.6m expenditure, tightly managing working capital credit to the revaluation of UK deferred tax and implementing further cost cutting actions. Gross finance costs, including interest unwind assets at the substantially enacted 25% In 2022 there were still some residual ofdeferred and contingent consideration were corporation tax rate effective from 1 April 2023. activities associated with that. £10.6m (2021 – £8.5m) and investment income was £1.9m (2021 – £0.5m). Cash tax paid was £3.5m (2021 – £5.3m) The decisive actions which we took on andisstated net of refunds received of £1.1m restructuring and cost management delivered Corporate undertakings (2021– £0.9m) of tax paid in prior periods, the expected benefits. In addition, the Group Costs associated with corporate undertakings including refunds arising from the offset of tax has continued to reviewinventory and asset were £1.7m in 2022, of which £1.2m of losses against taxable profits of prior periods. exposures on programmes that have been acquisition costs and £0.3m interest unwind Tax payments in 2021 were £2.3m higher than reduced, cancelled or where the Group will no ofdeferred and contingent consideration they would otherwise have been as a result of longer participate. As part of the restructuring relatestothe acquisition of Spencer Aerospace coronavirus relief measures in some countries focus, we have assessed critically any in November 2022 and £0.2m costs relate to which allowed the deferral of tax bills normally inventory or asset exposures on these othercorporate activities. In 2021, net income due in 2020 into 2021. | programmes and written down the carrying | of£21.2m was recognised, of which £24.2m | | | --- | --- | --- | | values on excess holdings and assets where | gain relates to the disposal of Senior Aerospace | Tax policy | | there is no alternate use. Where demand has | Connecticut in April 2021, partly offset by | The Group acts with integrity in all tax matters, | | picked up on previously reduced or cancelled | £3.0mbid defence and costs relating to other | in accordance with the Group’s ethics and | | programmes, inventory impairments have | corporate activities. See Note 31 to the Financial | business conduct programme. It is the Group’s | | been reversed to the extent that there are | Statements for further details on the £24.2m | obligation to pay the amount of tax legally | | confirmed orders in place. | gain on disposal. | dueand to observe all applicable rules and | regulations in the jurisdictions in which it The restructuring resulted in net income of Net cash outflow related to corporate operates. While meeting this obligation, the £4.2m (2021 – £4.4m). Of this, £4.0m income undertakings in 2022 was £26.7m, Group also has a responsibility to manage and (2021 – £4.2m) related to an aerospace comprising£25.3m for the acquisition of control the costs of our business, including manufacturing grant and £1.2m net charge Spencer Aerospace and £1.4m of acquisition thetaxes we pay for the benefit of all our related to consultancy and other costs related costs and other corporate activities. stakeholders. The Group seeks to achieve this (2021– £0.4m net charge). For certain In2021, netcash inflow related to corporate by conducting business affairs in a way that specific programmes, and in conjunction undertakings was £46.9m, comprising isefficient from a tax perspective, including withthe focus on restructuring, management £51.7mproceeds from disposal activities, maintaining appropriate levels of debt in the has also identified inventory impairment offsetby £1.8m disposal costs and £3.0m countries we operate in and claiming available reversals of £2.7m (2021 – £1.4m) where biddefence and other costs. tax reliefs and incentives. The Group is customer demand has increased, and further Profit/loss before tax committed to building and maintaining impairment provisions on property, plant and Adjusted profit before tax was £20.1m (2021 – constructive working relationships with the equipment in 2022 with a charge of £1.3m £1.9m loss). Reported profit before tax was taxauthorities of the countries in which it (2021 – £0.8m) to cover the risk where there £22.4m (2021 – £23.7m). The reconciling items operates. Further details on our approach are no alternative uses. Net cash inflow between adjusted profit/loss and reported totaxmay be found on Senior’s website related to restructuring activities was profitbefore tax are shown in Note 9 to the atwww.seniorplc.com. £2.1m(2021 – £0.9m net cash outflow). FinancialStatements. | At31December 2022, a restructuring | | Earnings per share | | --- | --- | --- | | provision of £0.2m (31 December 2021: | Tax charge | The weighted average number of shares, for | | £1.3m) was recognised and is expected | The adjusted tax rate for the year was 10.0% | thepurposes of calculating undiluted earnings | | tobeutilised in2023. | (2021 – 136.8% credit), being a tax charge of | per share, decreased to 415.3 million (2021– | | | £2.0m (2021 – £2.6m credit) on adjusted profit | 415.7million). The decrease arose principally | | | before tax of £20.1m (2021 – £1.9m loss). | due to the purchase of shares held by the | | | Theadjusted tax rate benefitted from enhanced | employee benefit trust during 2022. The | | | deductions for R&D expenditure in the US, | adjusted earnings per share was 4.36 pence | | | thesuper-deduction for capital expenditure | (2021 – 0.17 pence). Basic earnings per share | | | inthe UK, as well as prior year items. | was 4.86 pence (2021– 5.82 pence). See Note | 12 for details of the basis of these calculations. 21 21 21 79SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 22 STRATEGIC REPORT / FINANCIAL REVIEW CONTINUED | Return on capital employed (“ROCE”) | Cash flow | | | Capital expenditure | | --- | --- | --- | --- | --- | | ROCE, a key performance indicator for the | The Group generated excellent free cash flow | | | Gross capital expenditure of £30.5m (2021 – | | Group as defined above, increased by 370 basis | of£27.7m in 2022 (2021 – £14.0m) as set out | | | £21.3m) was 0.8 times depreciation excluding | | points to 4.7% (2021 – 1.0%). The increase in | inthe table below: | | | the impact of IFRS 16 (2021 – 0.6 times). The | | ROCE was mainly a result of the significant | | | | disposal of property, plant and equipment raised | | | | 2022 | 2021 | | | increase in adjusted operating profit compared | | | | £0.5m (2021 – £0.2m). 2023 capital investment | | | | £m | £m | | | to prior year. | | | | is expected to be in line with depreciation | Operating profit 32.5 10.5 (excluding the impact of IFRS 16). We are Research and design Amortisation of intangible prioritising new investment on sustainability The Group’s expenditure on research and design assets from acquisitions 0.2 – related items; important replacement equipment was £19.8m during 2022 (2021 – £19.2m). Net restructuring income (4.2) (4.4) for current production; and growth projects Expenditure was incurred mainly on funded where contracts have been secured. Adjusted operating profit 28.5 6.1 andunfunded work, which primarily relates | todesigning and engineering products in | Depreciation (including | Working capital | | --- | --- | --- | | accordance with individual customer | amortisation of software) 49.6 47.8 | Working capital increased by £28.3m in 2022 | | specifications and investigating specific | Working capital and | to£131.3m (2021 – £103.0m), of which £9.3m | | manufacturing processes for their production. | provisions movement, net | related to foreign currency movements. | | The Group also incurs costson general | of restructuring items (12.1) (2.6) | Asexpected, the underlying increase was | | manufacturing improvement processes | | reflective of increased activity in our key end | Pension payments above whichare similarly expensed. Unfunded costs markets along with some supply chain lead service cost (1.4) (5.1) | inthe year have been expensed, consistent | | (1) | | times increasing. In 2022, our effective | | --- | --- | --- | --- | --- | | | Other items | | 5.6 2.2 | | | withtheprior year, as theydid not meet the | | | | management of working capital reduced it as a | Interest paid, net (9.0) (8.0) strict criteria required forcapitalisation. percentage ofsales by 10 basis points to 15.5% Income tax paid, net (3.5) (5.3) (2021 – 15.6%). Although we may continue to Exchange rates Capital expenditure (30.5) (21.3) see an increase in working capital over the A proportion of the Group’s operating profit Sale of property, plant and coming year, we will continue our relentless and in2022 was generated outside the UK and equipment 0.5 0.2 effective focus on working capital management. consequently, foreign exchange rates, Free cash flow 27.7 14.0 | principallythe US Dollar against Sterling, | | The Group participates in some non-recourse | | --- | --- | --- | | canaffect the Group’s results. | Corporate undertakings (26.7) 46.9 | reverse factoring schemes which are arranged | | | Net restructuring | by our customers as a way of reducing credit | The 2022 average exchange rate for the US proceeds/(cash paid) 2.1 (0.9) risk. The trade receivables reverse factored Dollar applied in the translation of income under such non-recourse schemes at US Class action lawsuits – (2.3) statement and cash flow items was $1.24 31December 2022 were £24.9m (31 December (2021– $1.38). The exchange rate for the Dividends paid (1.2) – 2021 – £16.8m). The net impact of reverse USDollar applied to the translation of Purchase of shares held factoring on 2022 was a cash inflow in working BalanceSheet itemsat 31 December 2022 by employee benefit trust (4.5) – capital of £6.2m (2021 – £0.9m outflow) and the was$1.21 (31December 2021 – $1.35). | | Net cash flow (2.6) 57.7 | discount interest presented within other finance | | --- | --- | --- | | Using 2022 average exchange rates would | Effect of foreign exchange | costs is a charge of £0.6m in 2022 (2021 – | | haveincreased 2021 revenue by £46.3m | rate changes (14.2) 0.7 | £0.2m). These arrangements follow standard | | andincreased 2021 adjusted operating profit | | market terms and conditions and, as noted | IFRS 16 non-cash by£1.3m. A 10 cents movement in the £:$ above, are 100% non-recourse to the Group, additions and exchange rate is estimated to affect forecast thereby transfer all credit risk to the financial modifications including full-year revenue on average by £44m, adjusted institutions who provide the factoring schemes. acquisition (9.0) (5.6) operating profit by £2m and net debt by £11m. | Change in net debt (25.8) 52.8 | Dividend | | --- | --- | | Opening net debt (15 3.1) (205.9) | The Group had a long and stable track record | | Closing net debt (178.9) (153.1) | ofdividend growth prior to 2020. Reflecting | confidence in the Group’s performance, (1) Other items comprises £4.3m share-based payment financialposition and future prospects, the charges (2021 – £3.5m), £(0.4m) profit on share of joint Board reinstated dividend payments in 2022 and venture (2021 – £(0.2m)), £1.8m working capital and is proposing a final dividend of 1.00 pence per provision currency movements (2021 – £(1.1m)) and £(0.1m) profit on sale of fixed assets (2021 – £nil). share (2021 – nil pence). If approved, it would bepaid on 26 May 2023 to shareholders on theregister at the close of business on 28 April 2023 and payment would total £4.1m. This would deliver total dividends paid and proposed in respect of 2022 of 1.30 pence per share (2021 – nil pence). At the level recommended, the full year dividend would be covered 3.4 times by adjusted earnings per share. The cash outflow incurred during 2022 in respect of dividends was £1.2m (2021 – £nil) relating to theinterim dividend for 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. 80 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / FINANCIAL REVIEW CONTINUED Net debt/EBITDA Funding headroom (£m) Return on capital employed (%) 1.87x 21 208 1.0 22 1.47x 22 179 4.7 | Goodwill | Funding and Liquidity | The Group has £0.5m (2021 – £nil) of | | --- | --- | --- | | The increase in goodwill from £150.2m | As at 31 December 2022, the Group’s gross | uncommitted borrowings which are repayable | | at31December 2021 to £199.7m at | borrowings excluding leases and transaction | on demand. | | 31December 2022 reflects the acquisition | costs directly attributable to borrowings were | | The Group has two covenants for committed ofSpencer Aerospace in November 2022 £145.3m (31 December 2021 – £132.0m), borrowing facilities, which are tested at June (£42m increase) and foreign exchange with64% of the Group’s gross borrowings and December: the Group’s net debt to EBITDA differences (£7.5m increase). denominated in US Dollars (31 December (defined in the Notes to the Financial Headlines 2021– 62%). Cash and bank balances were Retirement benefit schemes on page 2) must not exceed 3.0x and interest £43.2m (31 December 2021 – £51.1m). | The retirement benefit surplus in respect of | | | | cover, the ratio of EBITDA to interest must | | --- | --- | --- | --- | --- | | the Group’s UK defined benefit pension plan | The maturity of these borrowings, together with | | | behigher than 3.5x. At 31 December 2022, | | (“the UK Plan”) decreased by £20.4m to | the maturity of the Group’s committed facilities, | | | theGroup’s net debt to EBITDA was 1.47x | | £51.8m (31 December 2021 – £72.2m) due | can be analysed as follows: | | | andinterest cover was 9.4x, both comfortably | | to£23.2m net actuarial losses, partly offset | | | | within covenant limits. | | | | Gross | Committed | | by£1.4m cash contributions by the Group, (2) borrowings facilities During the year the Group implemented a global inexcess of running costs, and £1.4m net £m £m cash pooling structure which has enhanced interest income. Retirement benefit deficits Within one year 0.5 – liquidity and cash management, reduced gross inrespect of the US and other territories In the second year – – debt levels and will help mitigate rising interest increased by £1.1m to £12.1m (31 December costs moving forward. 2021 – £11.0m). In years three to five 120.0 255.1 After five years 24.8 24.8 Bindi Foyle The latest triennial actuarial valuation of the 145.3 279.9 Group Finance Director UK Plan as at 5 April 2022 showed a surplus of £24.5m (5 April 2019 – deficit of £10.2m). (2) Gross borrowings include other loans and committed As a result, and effective from April 2022, the facilities, but exclude leases of £78.4m and transaction Group’s deficit reduction cash contributions, costs directly attributable to borrowings of £(1.6)m. including administration costs, to the UK Plan At the year-end, the Group had committed ceased on 30 June 2022. facilities of £279.9m comprising private | The estimated cash contributions expected | placement debt of £126.2m and revolving | | --- | --- | | tobe paid during 2023 in the US funded | creditfacilities of £153.7m. The Group is in | | plansis£2.3m (£0.4m was paid in 2022). | astrong funding position, with headroom | at31December 2022 of £179.4m in cash Net debt andundrawn facilities. Net debt which includes IFRS 16 lease | liabilities increased by £25.8m to £178.9m | During the first half of 2022, the Group | | --- | --- | | at31 December 2022 (31 December | refinanced its US revolving credit facility of | | 2021– £153.1m). As noted in the cash flow | $50.0m (£41.3m at year end exchange rate) and | | above, the Group generated net cash outflow | extended the maturity to June 2025. In October | | of £2.6m (as defined in Note 32(c) of the | 2022, the US private placement debt of $20m | | Financial Statements), after £14.2m adverse | (£16.5m at year end exchange rate) was repaid. | | foreign currency movements and £9.0m | In November 2022 the Group refinanced its | | non-cash changes in lease liabilities due to | UKrevolving credit facility and extended the | | additions and modifications of which £4.7m | maturity to November 2026 with a commitment | | relates to acquisition leases. | of £115m and in support of the strong ESG | commitments made by Senior and its lenders, Net debt excluding IFRS 16 lease liabilities we have jointly agreed appropriate sustainability of£78.4m (31 December 2021 – £73.2m) linked key performance indicators. increased by £20.6m to £100.5m at 31 | December 2022 (31 December 2021 – | The weighted average maturity of the Group’s | | --- | --- | | £79.9m), due to free cash inflow of £27.7m | committed facilities at 31 December 2022 | | being more than offset by £26.7m cash | was3.5 years. | outflow in respect of corporate undertakings, £9.1m capital repayment of leases, £3.6m net cash outflows for dividends and purchase of shares net of restructuring income and £8.9m adverse foreign currency movements. 21 21 81SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 22 STRATEGIC REPORT / VIABILITY STATEMENT ## VIABILITY STATEMENT ## Following a robust assessment, the Directors have concluded ## that the Group and Parent Company have sufficient funds to ## operate for the foreseeable future (evaluated to 31 December ## 2025), even in a severe but plausible downside scenario. | In accordance with provisions 30 and 31 of | has significant content, will continue to be a | The Group has two covenants for committed | | --- | --- | --- | | the2018 UK Corporate Governance Code, | necessity for the airline industry. In the Group’s | borrowing facilities, which are tested at June | | published by the Financial Reporting Council | other key markets, defence is anticipated to | and December: the Group’s net debt to EBITDA | | in2018, the Directors have assessed the | remain stable over themedium term, the | (defined in the Notes to the Financial Headlines | | prospects of the Group over the three-year | Flexonics land vehicle markets are expected to | on page 2) must not exceed 3.0x and interest | | period to 31 December 2025. | continue to grow through the medium term and | cover, the ratio of EBITDA to interest must be | | | in the power andenergy markets, recovery in | higher than 3.5x. At 31 December 2022, the | As we start 2023, markets remain favourable, the oil and gassector is underway and demand Group’s net debt to EBITDA was 1.47x and with commercial aerospace recovery in full for power generation is expected to grow interest cover was 9.4x, both comfortably swing and other important markets remaining through the medium term. withincovenant limits. buoyant. Demand is currently holding up well, though we remain mindful of the potential In determining a severe but plausible downside Board’s conclusion impact of the broader macro-economic situation scenario, the base case projections are flexed to Modelling the base case and severe but and geopolitical uncertainty. Notwithstanding reflect the weighted probability and cumulative plausible downside scenario and mitigations near-term uncertainties in the global economy, estimated effects of all the Group’s principal indicate that the Group is in compliance with Senior is well placed to benefit from the risks and uncertainties, as disclosed on pages alldebt covenants at all measurement dates recovery underway in our end markets. The 60 to 71. This scenario reflects the combined outto 31 December 2025. The scenarios Board hasconsidered a three-year period, as probabilistic effect of all principal risks, rather alsohighlight sufficient liquidity headroom this reflects the normal mid-term planning cycle than individual scenarios for each risk, according throughout the period in light of the committed ofits business operations while adequately to impact and likelihood of occurrence and facilities available. Accordingly, following a covering customer lead times for both new include mitigations where appropriate to robust assessment the Directors have andexpansion investment. In addition, this maintain liquidity. These effects drive key concluded that the Group and Parent Company period provides sufficient clarity to consider the metrics in revenue growth, operating profit have sufficient funds to operate for the business prospects and continued recovery margin and borrowing rates. The top 3 principal foreseeable future, even in a severe but from the pandemic under a base case, while risks with the highest estimated effect on key plausible downside scenario. For the going also assessing impacts under a severe metrics include Economic and Geopolitical concern assessment, the foreseeable future butplausible downside scenario. impact, Inflation, and Supply chain challenges. covers a minimum period of 12 months from the The remaining risks, such as Pandemic and date of approval of these Financial Statements, The base case projections of the viability Climate Change, have relatively equal weighting and with the viability period evaluated out to assessment are based on the Group’s Budget in the scenario, with Corporate Governance 31December2025. for 2023 and the Group’s Strategy for 2024 and Breach and Innovation & Technological Change 2025. The rebound in flight departure levels in having the lowest estimated effect. Going concern 2022 was testament to the resilience of global As a consequence of the work undertaken air travel demand, with the recovery across To address the impacts under the severe but tosupport the viability statement above, the commercial aerospace underway. The strong plausible downside, the Board has considered Directors have, at the time of approving these growth in passenger numbers seen in most the mitigating actions within the Group’s direct Financial Statements, a reasonable expectation domestic markets and other short-haul routes control. These include a continued focus on that the Group and Parent Company have was sustained throughout 2022 and is expected conserving cash through vigilant management adequate resources to continue in operational to continue. International, long-haul traffic has of capital expenditure and working capital existence for the foreseeable future, being been accelerating, particularly between North together with further restructuring actions aperiod of at least 12 months from the date America and Europe and the recent easing of andlimiting non-critical discretionary spend. ofapproval of these Financial Statements. travel restrictions in China has immediately Committed facilities and debt covenants Accordingly, they continue to adopt the going provided added momentum. IATA continues to concern basis of accounting in preparing these expect domestic passenger numbers to reach At 31 December 2022, the Group held Financial Statements, having undertaken a 2019 levels by 2024 and international passenger committed borrowing facilities of £279.9m with rigorous assessment of the financial forecasts. numbers to return to 2019 levels by 2025. As liquidity headroom of £179.4m. The weighted demand recovers, production of new aircraft will average maturity of the Group’s committed Approval be supported by the replacement cycle driven facilities at the end of December 2022 was The Strategic Report from pages 1 to 83 by the accelerated retirement of older, less 3.5years. Net debt (defined in Note 32c) was wasapproved by the Board of Directors on efficient, aircraft duringthe pandemic. Beyond £178.9m, including £78.4m of capitalised leases 24February2023 and signed on its behalf by this, the drivers supporting air traffic growth which do not form part of the definition of debt over the long term of c. 4% per annum remain under the committed facilities and do not impact David Squires inplace. The lower operating cost and better the Group’s lending covenants. Group Chief Executive Officer sustainability of new aircraft, on which Senior 82 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 STRATEGIC REPORT / VIABILITY STATEMENT ## The rebound in flight ## departure levels in 2022 ## was testament to the ## resilience of global air ## travel demand, with ## therecovery across ## commercial aerospace ## underway. Defence is ## anticipated to remain ## stable over the ## mediumterm. ## Land vehicle markets are ## expected to continue to ## grow through the medium ## term. In the power and ## energy markets, recovery ## in the oil and gas sector ## isunderway and demand ## for power generation is ## expected to grow through ## the medium term. 83SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / ## GOVERNANCE IN THIS SECTION 86 Chair's Governance Letter ## “In 2022, the Group's Corporate ## GovernanceFramework has supported ## alldecisions made by the Board and ## theExecutiveCommittee.” 90 Board of Directors 94 Executive and HSE Committees 95 Governance and Report of the Directors 97 Nominations Committee Report ## “The Group seeks to ensure diversity in the ## composition of its Board, including gender, ## ethnicity and personal and cognitive skills.” Ian King Chair Bellows for Land Vehicles Bellows are used in fluid conveyance to hermetically sealpiping systems that 102 Audit Committee Report connectdifferent propulsion components moving in different ## “Collectively, the members of the motions. Acritical component neededtomeet leak tight ## AuditCommittee have significant emissionsstandards. ## commercial andfinancial experience ## atasenior management level.” Giles Kerr Chair of the Audit Committee 108 Remuneration Committee Report ## “The implementation of our ## RemunerationPolicy seeks to motivate ## andsupport outperformance.” Celia Baxter Chair of the Remuneration Committee 111 2022 Remuneration Report at a Glance 113 Remuneration Report: Policy 119 Annual Report on Remuneration 129 Statement of Directors’ Responsibilities 130 Independent Auditor’s Report to the Members of Senior plc 84 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / GOVERNANCE / EV Fluid Conveyance Electronic Thermal Engineered fluid conveyance | | | tubesand assemblies are critical | Management | | --- | --- | --- | --- | | EGR Cooler | | for both EVs and ICE vehicles. | Thermal management of critical | | Aids in reducing combustion | | Optimized coolant management | electronic components is required | | temperatures, thereby reducing | | and delivery enhances the | for all new land vehicles. Newer | | NOx (which creates smog) and | | performance and durability of | more efficient vehicles require | | improving fuel economy (which | | theentire propulsion system. | more electronic systems for engine | | results in lower CO | 2 ). In order to | | management and therefore need | | meet tightening emissions | | | advanced thermal management | | standards, EGR Coolers will be | | | forelectronic durability. | required for diesel, natural gas and synthetic fuel combustion engines. Battery cooling plates Battery cooling plates 8585SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / CHAIR’S GOVERNANCE LETTER ## CHAIR’S GOVERNANCE LETTER ## AN INVALUABLE AND ## ROBUST FRAMEWORK Application of the five principles Dear Shareholders, of the Code In another year of external events that challenged the Company, the Governance Leadership, Company purpose, Framework once again proved to be invaluable values and strategy and robust. Throughout 2022, it has been my The role of the Board Page 93 privilege to lead the Board in the next phase Division of responsibilities: Page 93 ofthe Company’s development and growth theChair, the non-executive andwe have delivered a year of strong progress. Directors and the Iremain confident we have the right Board of CompanySecretary Directors in place, working with the Executive Purpose Page 6 Leadership Team, to implement the Company’s | Core Values Page 38 | | strategy. The non-executive Directors continued | | --- | --- | --- | | Strategic Priorities Pages 42 | | to bring strong, broad, professional and | | | to43 | complementary qualities to the Board in 2022. | Ilook forward to working with the Board in 2023 ## “In 2022, the Group's Corporate to continue to deliver long-term sustainable Effectiveness: Board composition, ## Governance Framework growth. The acquisition of Spencer Aerospace evaluation and succession and the opportunities it will bring to our Fluid ## hassupported alldecisions Composition of the Board Page 89 Conveyance business have heightened my Nominations Committee Report, Pages 97 confidence and outlook for the Group. ## madebytheBoard and the including appointments to the to99 In 2022, the Board has maintained its focus on ## ExecutiveCommittee.” Board and succession planning sustainability, both in terms of environmental, | | Skills, experience and | Pages 90 | | | --- | --- | --- | --- | | Ian King | | | social and governance (“ESG”) across the | | | knowledge of the | to92 | | | Chair | | | operations, as well as those relevant to the | Board of Directors Group’s products, technologies and capabilities. Board evaluation Page 99 Corporate governance continues to have prominence across the Senior Group; the Board Accountability: Audit, risk and internal sets the tone and takes the lead on governance control matters. The Governance section of this Audit, risk and Internal Control Pages 100 AnnualReport is intended to provide Senior’s to 101 shareholders with a clear and meaningful | | Audit Committee Report Pages 102 | | explanation of what governance means to | | --- | --- | --- | --- | | Statement of compliance with | | to 107 | theBoard and how this guides its decision- | | theCorporate Governance Code | Risks and Uncertainties Pages 60 | | making processes. | | The Company is subject to the UK Corporate | | and 61 | | The Board remains firmly committed to Governance Code 2018 (theCode), which is ensuring the long-term sustainable growth published by the Financial Reporting Council Remuneration ofthe Group, generating value for and available on their website: www.frc.org. Remuneration Committee Pages 108 shareholders,whilst considering the uk/directors/corporate-governance-and- Report to 128 needsofallitsstakeholders. stewardship/uk-corporate-governance-code. On the following pages, I have summarised We have been fully compliant with theCode Relations with Shareholders theCompany’s approach to key throughout 2022 apart from the executive Shareholder engagement Pages 54 governancematters. Directors’ pension contributions, which Other stakeholder engagement Pages 50 to werealigned with the rates available to the 53 and 55 majority of the UK workforce in December 2022. Further details of how the Company applied the Principles of the Code can be found on pages 86 to 107. 86 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / CHAIR’S GOVERNANCE LETTER Board governance (d) ensuring that the Directors receive accurate, are procedures in place to ensure that all timely and clear information; Directors are properly briefed, so that decisions Directors’ duties taken by the Board are based on the fullest, (e) ensuring, in conjunction with the Group Chief Under the Companies Act 2006, each up-to-date, available information. The non- Executive Officer, effective communication ofour Directors must: act within their executive Directors are encouraged to visit with shareholders; and | powers, promote the success of the | | | theGroup’s operations to meet the local | | --- | --- | --- | --- | | Company, exercise independent | (f) ensuring that the performance of the Board, | | management teams and discuss any issues | | judgment, exercise reasonable care, | | its main committees and individual Directors | thatthey may face. In 2022, as COVID-19 travel | | skilland diligence, and avoid conflicts | | are formally evaluated on an annual basis. | restrictions were lifted, the Directors were able | | ofinterest. | | | to recommence some site visits. Our Senior | The non-executive Directors have an important Independent Director, Celia Baxter, who is the role in reviewing and challenging executive nominated Director responsible for employee Role of the Board management’s decisions and actions. Global engagement, visited a number of sites during The Board is responsible for Group events over the last couple of years, including the year to meet employees. In 2022, at every decisionsaffecting governance, strategy the COVID-19 pandemic, supply chain issues Board meeting, there were reviews of health, andthe approval of annual operating budgets and the war in Ukraine have highlighted the safety and environmental performance, and Financial Statements. It also approves importance of having an effectively functioning, operational, financial and administrative matters, significant financial and contractual flexible and dedicated Board, with the Directors social and ethical issues, and reported whistle- commitments made by the Group. The working together to ensure the Group was blowing incidents. The agreement of budgets Board’s Terms of Reference were updated ableto contend with the difficult and complex and levels of insurance cover were also in2022 and more fully describe the issues that arose. reviewed whenever appropriate. responsibilities of the Board; the Matters Reserved for the Senior plc Board may be The Directors are confident that an effective There is a procedure by which all Directors can found on the Company’s website. Board is in place, with a clear division of obtain independent professional advice at the responsibilities between the running of the Company’s expense in furtherance of their The Board recognises its role in assessing Board and the running of the Group’s duties, if required, and they have been made andmonitoring the Group’s culture. To that businesses. In 2022, Clare Chalmers Limited aware of this. effect, “Culture” has been made a regular was engaged to undertake a detailed Board Board agenda item. The Board deploys evaluation review which found the Board to To enable the members of the Board and its various initiatives to monitor culture, from befunctional and effective. A summary of the Committees to discharge their duties effectively, participating in site visits to reviewing 2022 report on the Board evaluation findings the Chair ensures that accurate and clear qualitative and quantitative evidence of culture areprovided in the Nominations Committee information is provided to all Directors in a timely (succession plans, Health & Safety reporting, Report on page 99. manner in advance of meetings. The Group whistle-blowing notifications, payment Company Secretary supports the Board to practices reports and training completion I was independent upon appointment as Chair ensure that it has in place appropriate policies, rates). In 2022, a Global Employee Opinion of the Company in 2018. The Board considers processes, time and resources to enable it to Survey was undertaken. The results were allnon-executive Directors of the Company operate efficiently and effectively. positive and shared with employees; continue to be independent, having taken into furtherdetails can be found on page 51. account a list of relationships and circumstances Engagement with stakeholders that may appear relevant in determining At the Board’s Annual Strategic Review independence; the Group Company Secretary meeting held in October 2022, the Group’s maintains a register of the Directors’ potential Strategy was tested, taking into account conflicts of interest. As Chair, I encourage open recent events on the Group’s end markets, and honest discussions between the Directors, and was found to be still relevant by Shareholders both within and outside Board meetings, and theBoard. Each year, the Group Chief Executive Officer, Iensure no Director or group of Directors Group Finance Director and Director of Investor exertspressure or dominates the Board’s Leadership Relations & Corporate Communications decision-making. The Board is led by me, as the non-executive undertake a series of meetings with the Chair, together with two executive Directors Division of responsibilities Company’s major shareholders following the and six independent non-executive Directors. announcement of the full-year and interim The Board delegates a certain number of its All Directors were selected for appointment results, to discuss both the Board’s strategic responsibilities to the Audit, Remuneration, because of their wide industrial and objectives and the detailed performance of Nominations, and Health, Safety & Environment commercial experience; we have an excellent, thebusiness. Committees. The Group Chief Executive well-balanced Board. In addition, the Group’s Officer, together with the Executive Committee, Executive Committee, chaired by the Group As the Company’s non-executive Chair, I also is responsible for the implementation of the Chief Executive Officer, comprises the two attended the 2021 full year and 2022 interim decisions made by the Board and for the executive Directors and other key executives. results announcements made to analysts in day-to-day conduct of the Group’s operations. Details of the members of the Board and March 2022 and August 2022 respectively. ofthe Executive Committee can be found Ialso met with the Company’s major The Board meets formally on a regular basis, onpages 90 to 92 and 94. My role as shareholders on a regular basis, with a cycle that 12times in 2022; in addition, there were four Chairincludes: is complementary to the executive Directors. meetings of the Audit Committee in 2022, together with five meetings of the (a) setting the Board’s agenda, the style Meetings with major shareholders in 2022 Remuneration Committee and four meetings andtone of Board discussions and continued to address the challenges faced ofthe Nominations Committee. A table ensuring that adequate time is available bythe Company, but also conveyed positive showingBoard and Committee meeting fordiscussion of all agenda items, messages around improved margins and membership and attendance is shown on inparticular strategic issues; profitability, robust end markets and a healthy page89. Other Committees are appointed order book. (b) supporting the Group Chief Executive bythe Board to deal with treasury matters, Officer in the development of strategy disclosure matters and specific matters such The Company typically makes constructive and,more broadly, to offer guidance to asacquisitions and disposals. useof the Annual General Meetings (“AGM”) theGroup Chief Executive Officer; tocommunicate with its private shareholders. During 2022, the Chair met with the non- InApril 2022, following the lifting of the UK (c) promoting a culture of openness and executive Directors to discuss matters in Government’s restrictions imposed during the debate by facilitating the effective confidence, without the executive Directors pandemic, we were able to offer shareholders contribution of non-executive Directors, being present; this is in line with good practice. the opportunity to attend the AGM in person in and ensuring constructive relations London, or to listen to the AGM proceedings, In 2022, the minutes arising from all Committee between non-executive Directors submit questions and view David Squires' meetings are made available to the Board. There andexecutive management; 87SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / CHAIR’S GOVERNANCE LETTER CONTINUED presentation on the Company’s 2021 performance. In April 2023, our forthcoming AGM will be held as a face-to-face meeting and I look forward to meeting shareholders inperson again. A presentation on the Customers Community and the environment Company’s annual performance will be made Due to the nature of the business, the Group Many of the Group’s operations are major to shareholders by the Group Chief Executive has well-established relationships with all its employers within their local communities and Officer. A copy of this presentation will also keycustomers. These relationships are nurture good relationships with their be uploaded to the Company’s website. maintained on an ongoing basis and managed stakeholders, finding ways to contribute to local ina transparent and constructive manner; society, in addition to providing employment At our AGMs, we value the engagement anycustomer concerns are addressed in a opportunities. The Group’s commitment to, and withshareholders and the opportunity for the timely manner, to ensure customer satisfaction. focus on, the environment continued following Group Chief Executive Officer to present on In 2022, it remained important for the Group’s our greenhouse gas emission reduction targets the Group’s business and answer questions operating businesses to maintain regular contact being independently verified and approved by on the Group's 2022 performance. | | with their customers, as the Group’s supply | the Science Based Targets initiative (“SBTi”) | | --- | --- | --- | | | chain continued to face difficult conditions | in2022. In December 2022, we were delighted | | | created by, for example, global events such as | to have again achieved a Leadership rating of | | | the conflict in Ukraine. Our operating businesses | Afrom CDP. All of the Group’s operating | | | are supported by their Divisional Vice Presidents | businesses take stakeholder engagement very | | Employees | of Business Development to ensure good | seriously, ensuring they adhere to the highest | | Celia Baxter is the Director designated by the | relations are maintained with their customers | ofstandards for the protection of health, safety | | Board to engage with the Group’s people and | and address any concerns that may arise | and the environment. In many cases, they have | | listen to any concerns. During the year, as in | beforethey escalate. | established or maintained close relationships | | 2021, she participated in 15 face-to-face focus | | with local schools and colleges to offer training | The Group has dedicated account managers group meetings at four of the US operating or apprenticeship programmes. todeal directly with key customers on existing businesses, together with four focus group and new customer agreements. Relationships Further details on Community Engagement and the meetings in Germany, with the Group HR with existing and potential new customers environment can be found pages 55 and 22 to 25. Director, Jane Johnston. Feedback from the areestablished and maintained on an open meetings was provided to local Management, 2022 has been an improving year for the andprofessional basis, and in compliance with the Executive Leadership Team and to the Company, its employees and shareholders. the Group’s Corporate Framework and Code Company’s Board of Directors, who were Whilst we have had to face the challenges ofConduct. | given the opportunity to ask questions on | | ofthe macroeconomic and geopolitical | | --- | --- | --- | | thefindings. As announced, Celia is to retire | Further details on Customer Engagement | environment, supply chain issues and rising | | from the Board and her role in employee | can be found on page 52. | inflation, we have risen to the challenges and | | engagement at the conclusion of the 2023 | | shown resilience and resourcefulness, without | | AGM having completed her nine-year term | | compromising the Group’s high standards and | | ofoffice. Barbara Jeremiah will succeed Celia | | values. The Group’s Corporate Governance | | as Chair of the Remuneration Committee and | | Framework has supported all decisions made | | Mary Waldner will be appointed the Director | | bythe Board and the Executive Committee, | | designated to engage with the Group's | Suppliers | andwill continue to guide us as we go about | | employees upon Celia's retirement. Employee | Maintaining a good relationship with Senior’s | ourday-to-day business in 2023. I convey | | engagement will continue to be given high | supply chain is fundamental to providing | theBoard’s thanks for your support. | | importance by the Board and the structure | customers with products in a timely manner | | | | andto a high standard. In 2022, it was | Ian King | ofthe engagement will be developed under particularly important for the Group to maintain Chair Mary's leadership. regular contact with its suppliers, and for us 24 February 2023 Further details on Employee Engagement towork together constructively to ensure can be found on page 51. theGroup’s supply chain was able to maintain continuity of supply during the challenging business environment. Agreements with major suppliers have, in many cases, been arranged to support long-term agreements with the Group’s key customers. Due to the nature of the materials used, suppliesmay involve long lead times, and so communication and managing good relations with suppliers is paramount to the Group’s operating businesses. In 2022, we engaged with the top 80% of our suppliers by value, toencourage and help them to analyse their sustainability performance and goals in relation to greenhouse gas reduction. This was recognised by the globally recognised CDP (formally known as the Carbon Disclosure Project) who gave us an 'A' rating for transparency on climate change. In 2022, Seniorwas also recognised by CDP as asupplierengagement leader, ranked in thetop8% of companies worldwide and awarded the highest level in the rankings. Further details on Supplier Engagement can be found on page 53. 88 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / CHAIR’S GOVERNANCE LETTER CONTINUED ## BOARD AT A GLANCE ## The Board is responsible for Group decisions affecting governance, strategy ## and the approval of annual operating budgets and Financial Statements. Board and Committee membership as at 31 December 2022 and meeting attendance in 2022 The membership and attendance record of the full Board Meetings and its full Committee Meetings during 2022 are shown in the table below: Main Board Audit Committee Nominations Committee Remuneration Committee Chair Ian King Giles Kerr Ian King Celia Baxter Ian King 12/12 - 4/4 5/5 Celia Baxter 12/12 4/4 4/4 5/5 Susan Brennan 11/12 4/4 3/4 5/5 Bindi Foyle 12/12 - - - Barbara Jeremiah 10/12* 4/4 4/4 5/5 Giles Kerr 12/12 4/4 4/4 5/5 Rajiv Sharma 12/12 4/4 4/4 5/5 David Squires 12/12 - - - Mary Waldner 12/12 4/4 4/4 5/5 Total number of meetings 12 4 4 5 * In advance of her appointment in January 2022, Barbara Jeremiah notified the Board she would be unable to attend two of the 2022 Board meetings due to priorcommitments. Board composition as at 31 December 2022 Gender Number of senior positions on the Board Number of Percentage of (Group CEO, Group FD, Board members the Board SID,Chair) Men 4 45% 2. Women 5 55% 2 Not specified - - Ethnicity Number of senior positions on the Board Number of Percentage of (Group CEO, Group FD, Board members the Board SID,Chair) White British or other White (including minority-white groups) 7 78% 3 Mixed/Multiple Ethnic groups - - - Asian/Asian British 2 22% 1 Black/African/Caribbean/Black British - - - Other ethnic group, including Arab - - - Not specified - - - Tenure Number of Percentage of Board members the Board Over six years 4 45% Over three and up to six years 3 33% Up to three years 2 22% 89SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / BOARD OF DIRECTORS ## BOARD OF DIRECTORS ## The Board is responsible for Group decisions affecting ## governance, strategy and the approval of annual operating ## budgets and Financial Statements. ## IAN CELIA SUSAN ## KING BAXTER BRENNAN Company Chair Senior Independent Independent Non- andChairof the Non-Executive Director, Executive Director NominationsCommittee Chair of the Remuneration Committee membership: Committee and Director Committee membership: Audit, Nominations designated to engage with the Nominations and Remuneration. and Remuneration. Group’s employees Independence Qualifications Celia is to retire from the Board following Ian met the UK Corporate Governance Code’s BSc in Microbiology and MBA. theconclusion of the 2023 AGM. independence criteria on his appointment as Skills and experience Company Chair. Committee membership: Susan Brennan joined the Board in January Remuneration, Audit and Nominations. | Qualifications | | 2016. Susan has more than 30 years of | | --- | --- | --- | | Fellow of the Chartered Institute of | Qualifications | manufacturing experience, including commercial | | Management Accountants. | BSc – Botany/Plant Biology and PhD and | vehicle electric battery, fuel cell, automotive | | | aMember of the Chartered Institute of | vehicle, powertrain, and component assembly. | Skills and experience Personnel and Development. Susan has dedicated her career to improving Ian King joined the Board in November 2017 American manufacturing. In her time as a asa non-executive Director and became Chair Skills and experience manufacturing practitioner, she has always inApril 2018. For more than 40 years Ian has Celia Baxter joined the Board in September beena strong proponent of sustainability. | held many senior management and directorship | 2013, became Chair of the Remuneration | | | --- | --- | --- | | roles, including finance, executive management, | Committee in December 2013 and the Senior | Today, Susan is the President of her own | | customer support and strategic planning. | Independent non-executive Director in April | consulting company, Susan Brennan | | Ianjoined Marconi in 1976 and held a number | 2019. Celia is an experienced non-executive | Leadership, which advises companies on | | ofroles with them. He was Chief Executive | Director, Remuneration Committee and Pension | energy, emerging technology scale and | | ofAlenia Marconi when Marconi and British | Trustee Company Chair. Celia’s early HR career | automotive-based technologies. From August | | Aerospace merged in 1999 to form BAE | was with Ford Motor Company and KPMG. | 2021 to October 2022, she was the President | | Systems plc. He then became Group Strategy | Shehas held executive HR positions with | and Chief Executive Officer of Romeo Power, | | and Planning Director of BAE Systems; | Haysplc, Enterprise Oil Plc and Tate & Lyle Plc, | Inc., leading Romeo’s mission of advancing | | Ianwasits Chief Executive from 2008 until | and most recently was Director of Group HR | andcommercialising high-density battery | | hisretirement in June 2017. He was also the | and responsible for all areas of sustainability for | technology for heavy-duty commercial vehicles. | | seniorindependent director of Rotork plc | Bunzl plc. Celia was a non-executive director | In the past, she has served as Chief Operations | | untilJune 2014. | ofRHI Magnesita until June 2021. | Officer of Bloom Energy and in a variety of | leadership roles for major automakers, External appointments External appointments includingNissan and Ford. | Ian is the Senior Independent Director of | Celia is a non-executive Director | | | --- | --- | --- | | Schroders plc, having been appointed to | ofDSSmithplc. | Susan led Nissan’s launch of the all-electric | | itsBoard on 1 January 2017, the lead non- | | Nissan Leaf in Smyrna, Tennessee and led the | Specific contribution to the Company’s executive director of the Department for transformation of the facility to a sustainable long-term success Transport, a non-executive director of future. She has created and supported Celia brings extensive experience of working HighSpeed Two (HS2) Limited, and is a organisations that encourage young women ininternational, decentralised businesses senioradviser at Gleacher Shacklock LLP. topursue careers in STEM as a pathway for andmanaging HR departments to the future generations of technological research, Specific contribution to the Company’s Board.She holds a key role in engaging development and manufacturing in the United long-term success withtheGroup’s stakeholders, particularly States and the globe. She is the founder and Ian leads the Board in defining the strategy of itsemployees.She advises and guides aboard member of the Southern Automotive the Group and driving the Company’s vision to onsuccession planning matters. Celia Women’s Forum and is an advisor to many produce sustainable growth in operating profit, demonstrates valuable knowledge of other women’s empowerment groups. cash flow and shareholder value. Ian has sustainability policies and practices. relevant direct experience in Aerospace, Specific contribution to the Company’s akeyelement of Senior’s strategy. long-term success Susan brings valuable manufacturing experience to the Board, especially in areas of key technological advances. Her operational and executive experience, particularly in automotive and component assembly, means she is well placed to understand issues at both operational and strategic levels. 90 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / BOARD OF DIRECTORS | Gender diversity – Board | | Tenure – BoardEthnic diversity – Board | | | --- | --- | --- | --- | | Female 55% | White British or 7 | | Over six years 4 | | Male 45% | other White (including | | Over three and 3 | | | minority-white groups) | | up to six years | | | Asian/Asian British 2 | | Up to three years 2 | ## BINDI BARBARA GILES ## FOYLE JEREMIAH KERR Group Finance Director Independent Non- Independent non- Executive Director Executive Director and Committee Chair of the Audit membership: Committee membership: Committee | Group’s Executive Committee | Audit, Nominations | | | --- | --- | --- | | and the Treasury Committee, which is | and Remuneration. | Giles is to retire from the Board following | | notformally appointed as a Committee | | theconclusion of the 2023 AGM. | Upon the retirement of Celia Baxter following oftheBoard. | | the conclusion of the 2023 AGM, Barbara will | Committee membership: | | --- | --- | --- | | Qualifications | be appointed the Chair of the Remuneration | Audit, Nominations and Remuneration. | | BSc (Hons) in Economics & Accounting | Committee and the Senior Independent | | Qualifications andaChartered Accountant. Non-Executive Director. BA (Hons) in Economics and a Chartered Skills and experience Qualifications Accountant. Bindi Foyle joined the Board as an executive BA in Political Science and a qualified lawyer. Skills and experience Director in May 2017 and became Group Skills and experience Giles Kerr joined the Board in September 2013 Finance Director in July 2017. Bindi joined Senior Barbara Jeremiah was appointed to the Board and became Chair of the Audit Committee in as Group Financial Controller in January 2006, on 1 January 2022. Barbara is a US citizen and April 2014. Giles has over 35 years’ experience arole she held until July 2014 when she has over 30 years’ experience with Alcoa Inc, in finance across a broad range of industrial became responsible for the Group’s Investor ina number of positions, including Executive sectors. During his tenure as Director of Relations activities. Prior to her appointment Vice President, Corporate Development Financeat Oxford University, he established asan executive Director, Bindi was Director andChairman’s Counsel. She was formerly asuccessful investment office and he gained ofInvestor Relations and Corporate Chairwoman of Boart Longyear Limited and considerable experience of establishing Communications for the Group. Prior to anon-executive director of Premier Oil plc and andgrowing technology-based companies. joiningSenior, Bindi held senior finance roles Russel Metals Inc. Barbara was most recently Giles is aformer Director of Finance of Oxford atAmersham plc and GE, having previously anon-executive director and Remuneration University and non-executive director of BTG Plc worked with BDO Stoy Hayward. | | Committee Chair of Aggreko plc from March | and Victrex plc, Adaptimmune Therapeutics plc | | --- | --- | --- | | External appointments | 2017 to August 2021. | and Arix Bioscience plc. Giles held a number of | | Bindi is a non-executive director of | | positions with Amersham plc, including Group | External appointments AvonProtection plc and is the Chair Finance Director. He was formerly a Partner Chair of The Weir Group PLC since April 2022, ofitsAuditCommittee. with Arthur Andersen & Co. having been appointed a non-executive director Specific contribution to the Company’s of that company in August 2017. External appointments long-term success Giles was appointed a non-executive director Specific contribution to the Company’s Bindi’s experience of financial control and ofPayPoint plc in November 2015. He is also long-term success investor relations and communications means anon-executive director of Abcam plc. Barbara’s extensive experience in a number that she is ideally placed to implement the ofSenior’s key markets as an executive and Specific contribution to the Company’s strategy and policies approved by the Board. anon-executive director will complement long-term success Since joining the Group in 2006, she has gained thoseof the existing members of the Board. Giles’ extensive experience as a chair and senior extensive knowledge of the running of all the independent director, and as the chair of several Group’s operations and is instrumental in UK and US listed company audit committees, managing the Group’s finances and assisting enables him to make a strong contribution to the Group Chief Executive Officer in the theBoard and he has ensured strong financial management of the Executive team. governance of the Group. 91SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / BOARD OF DIRECTORS CONTINUED ## RAJIV DAVID MARY ## SHARMA SQUIRES WALDNER Independent non- Group Chief Executive Independent Non- Executive Director Officer Executive Director Committee membership: Committee membership: Committee membership: Audit, Nominations David chairs the Group’s Audit, Nominations and and Remuneration. Executive Committee. He is also the Chair of Remuneration. the Health, Safety & Environment Committee, Qualifications Upon the retirement of Giles Kerr and Celia which meets formally three times a year to BTech in Mechanical Engineering and MBA, Baxter following the conclusion of the 2023 formulate the Group’s HSE strategy and Marketing & Strategy. AGM, Mary will be appointed the Chair of the objectives for approval by the Board. Audit Committee and the Director designated Skills and experience Qualifications toengage with the Group's employees. Rajiv Sharma was appointed to the Board BA in Business Management Studies, inJanuary 2019. Rajiv has nearly 30 years’ Qualifications aFellowof the Chartered Institute of experience which includes commercial, MA (Hons) in Physics and a Fellow of the Purchasingand Supply and Fellow operations, M&A, strategy, digital and general Chartered Institute of Management oftheRoyalAeronauticalSociety. management. Rajiv joined Coats Group plc in Accountants. November 2010 as Global CEO Industrial and Skills and experience Skills and experience was responsible for developing and executing David Squires was appointed to the Board in Mary Waldner joined the Board in December agrowth strategy. He has lived and worked in May 2015 and became Group Chief Executive 2021. Mary held a number of senior roles within the US, Europe and Asia and has multi-industry Officer in June 2015. A graduate in business the aerospace and automotive sectors at British global experience. He has managed complex management, a Fellow of the Chartered Airways, General Motors and Vauxhall Motors. businesses with blue-chip companies. The Institute of Purchasing and Supply and Fellow of At Ultra Electronics, Mary gained experience of majority of his career has been dedicated to the Royal Aeronautical Society. David has held working within the defence, security and energy growing or turning around businesses and he senior posts in operations and procurement, markets. She was previously the Group Finance has been on the board of joint ventures. During business development, programme Director of Ultra Electronics Holdings plc, the his career, Rajiv has held senior roles in various management and general management. Director of Group Finance at QinetiQ Group plc companies including Honeywell, GE and Shell. Davidstarted his career in the oil industry and Group Financial Controller of 3i Group plc. working for Shell; however, most of his working External appointments life has been spent in the aerospace industry, External appointments Rajiv has been the Group Chief Executive initially with Hughes Aircraft Company (now Mary is Chief Financial Officer of Lloyd’s ofCoats Group plc since January 2017, Raytheon), then GEC-Marconi/BAE Systems Register, the global professional services havingserved as an executive director and EatonCorporation. Prior to joining Senior company specialising in engineering and sinceMarch 2015. | | plcinMay 2015, David was Chief Operating | technology for the maritime industry. She is also | | --- | --- | --- | | Specific contribution to the Company’s | Officerof Cobham plc. | a non-executive director and Chair of the Audit | | long-term success | | and Risk Committee of Oxford Instruments plc, | External appointments Rajiv has had a long career running and growing a provider of high technology products and David holds no other directorships. multinational companies across the world, services to the world’s leading industrial particularly in South East Asia. His background Specific contribution to the Company’s manufacturers and scientific research institutes. in mechanical engineering means that he long-term success Specific contribution to the Company’s bringsoperational and technical understanding David has a long- established career in long-term success to the Board’s discussions. His experience manufacturing, for the most part having Mary’s background and experience in finance ofdeveloping and executing growth specialised in the aerospace sector. He brings and in the engineering sector will complement strategymakes his contribution to delivering extensive knowledge of the aerospace industry the current Board membership and prove theCompany’s long-term success an and understanding of procurement and business invaluable in Senior’s continued development. 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. Andrew was appointed Group Company ## ANDREW Secretary in 2002. He acts as Secretary to the Senior plc Board and its Committees; ## BODENHAM heisalso a member of the Group’s Executive Group Company Committee and of the Treasury Committee. Secretary Prior to joining Senior, Andrew had gained experience working for businesses in technology/software, manufacturing, insurance and aviation services sectors. 92 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / BOARD OF DIRECTORS CONTINUED Board activities Governance structure Board meetings and site visits Role Director Key responsibilities In mid 2022, the Directors were able to restart visits to some of the Group’s operating Company Chair Ian King Leadership of the Board, setting its agenda businesses and held Board meetings at Senior and Chair of the and ensuring its effectiveness. Ian chairs the Flexonics Kassel and Senior Aerospace SSP; Nominations Nominations Committee. these visits included site tours and discussions Committee with local management. Board meetings Group Chief Executive David Squires To manage the Group’s business and to throughout the rest of the year were held as Officer implement the strategy and policies approved face-to-face or hybrid meetings. The Group bythe Board. Director of HSE & Sustainability, the Group HR Group Finance Director Bindi Foyle To manage the Group’s financial affairs and to Director, the Director of Business Development contribute to the management of the Group’s & Strategy, the Director of Risk and Assurance business, and the implementation of the strategy (formerly the Head of Risk & Compliance), and policies approved by the Board. theDirector of Trade Compliance and the Senior Independent Celia Baxter To support the Chair and to act as an intermediary Headof Treasury were invited to separately Non-Executive for other non executive Directors, if necessary. attend certain Board meetings during the year, Director, Chair of Celia chairs the Remuneration Committee and to provide updates to the Directors and the Remuneration isalso the Director designated to engage with answertheir questions. Committee and theGroup’s employees. Strategy Director designated At every Board meeting held in 2022, the to engage with the Directors discussed the Board’s Strategy. This Group’s employees included topics such as the Group’s markets and Independent Non- Giles Kerr To challenge the executive Directors and monitor technologies, the divisional strategies, the key Executive Director and the delivery of the strategy within the risk and risks that could impact on the Board’s strategy, Chair of the Audit control framework set by the Board. To Chair the people planning, divestments and acquisitions Committee Audit Committee and focus its agenda on its key and forecasting and scenario planning. matters: quality, financial accounting, corporate | | | reporting and effective internal controls. | Financial and contractual matters | | --- | --- | --- | --- | | Independent Non- | Susan Brennan, | To challenge the executive Directors and monitor | During the year, the Board meeting agendas | | Executive Directors | Barbara | the delivery of the strategy within the risk and | included financial and contractual matters such | | | Jeremiah, Rajiv | control framework set by the Board. | as the Group’s trading and performance, the | | | Sharma and | | refinancing of the Group's Revolving Credit | | | Mary Waldner | | Facilities, the 2022 full-year and interim results, | Going Concern and Viability, the 2021 and draft Group Company Andrew To provide advice to the Directors on all corporate 2022 Annual Report & Accounts, including the Secretary Bodenham governance matters and ensure the Company TCFD disclosures made, the reinstatement of complies with legal and regulatory matters and dividends to shareholders, and the approval of good practice. Andrew acts as Secretary to the major capital expenditure for projects over £2m. Senior plc Board and its committees. Operational management Board evaluation In December 2021, the Board approved the The 2022 external Board evaluation process was undertaken by Clare Chalmers Limited. Group’s 2022 annual operating budget. It was Asummary of the 2021 Board evaluation findings and the progress made in 2022 are kept informed of operational management’s providedbelow. activities through receipt of the Group Chief 2021 actions 2022 progress Executive Officer’s Board report at every meeting; his reports include updates on: the To ensure Mary Mary and Barbara were appointed to the Board in December 2021 market backdrop, HSE and sustainability, people, Waldner and Barbara and January 2022, respectively. Both were recruited at an early investor relations, the Company’s share price Jeremiah were given stage, to allow a suitable induction period and handover prior to performance and analysts’ expectations on appropriate time theretirements of Celia Baxter and Giles Kerr from the Board. theCompany’s performance. At every Board to complete their Maryand Barbara also received support from the Nominations meeting, the Directors were given the induction Committee and guidance from Celia Baxter and the Group opportunity to put questions on these reports HRDirector, Jane Johnston. toDavid Squires and Bindi Foyle. In December To ensure strategy Strategy was discussed at every Board meeting in 2022 and this 2022, the Board approved the Group’s 2023 forms part of every willcontinue in 2023. annual operating budget. Board meeting agenda | To ensure the Directors | The Directors had good access to the Group’s Executive Committee | Governance | | --- | --- | --- | | have good access to | throughout 2022. They also met local management teams when | The Group Company Secretary advises the | | the Executive teams, | Board meetings were able to be resumed at some of the Group’s | Directors on all corporate governance matters | | as performance and | operating businesses in 2022. In addition, Martin Barnes, Launie | and updates them on statutory and regulatory | | strategy are reviewed | Fleming, Jane Johnson and Mike Sheppard separately attended | developments at every Board meeting. Strong | | | anumber of 2022 Board meetings. | corporate governance is of key importance to | the Board. This includes Board effectiveness, To review Board For 2022, Board meetings were largely held as physical meetings, adherence to the Group’s policies and meeting structures following the lifting of COVID-19 restrictions. However, on occasion, procedures and stakeholder engagement. (virtual, hybrid and Directors who were not able to physically attend, were able to physical) participate by videoconference and so some meetings were held Risk and compliance as hybrid participation. Whilst the Directors appreciate the benefits Amy Legenza, the Director of Risk and of holding physical Board meetings, they have found the flexibility Assurance (formerly the Head of Risk & to participate by videoconference, if necessary, useful and it has Compliance), advises the Board on all risk and enabled our Directors to attend the majority of meetings. The compliance matters across the Group. Amy also Directors will continue to keep the Board and Committee meeting attends all Audit Committee meetings held in structures under review. ayear. In 2022, the Board reviewed the Group’s approach to risk management and monitored A summary of the findings of the 2022 external Board evaluation can be found in the allprincipal risks. Nominations Committee Report on page 99. 93SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / EXECUTIVE COMMITTEE ## EXECUTIVE COMMITTEE ## DAVID ## The Executive Committee oversees the running ## SQUIRES ## of all Senior Group Operations. Executive Committee meeting Bindi Foyle attendance See biography on page 91. The Executive Committee met nine times ## MARTIN Jane Johnston during 2022. Jane joined Senior as Group HR Director ## BARNES David Squires inMay2016. A Fellow of the Chartered See biography on page 92. InstituteofPersonnel and Development, Janehas considerable experience heading Martin Barnes upHR functions across a range of global | | Martin became the Director of Business | geographies. She has worked in a number | | --- | --- | --- | | | Development & Strategy in October 2021 and | ofdifferent sectors, including technology, | | | was appointed to the Executive Committee on | drugdevelopment, construction, professional | | ANDREW | that date. Prior to this appointment, Martin was | | services and, prior to joining Senior, was the CEO of Senior Flexonics Lymington and of GroupHR Director at Pace plc. ## BODENHAM Senior Flexonics Upeca. Martin joined the Mike Sheppard Senior Group in April 2016. A US citizen, Mike has worked for the Group Andrew Bodenham forover 30 years and is the Chief Executive See biography on page 92. ofthe Flexonics Division. A qualified engineer, Mike’s previous positions within the Group Launie Fleming included operational roles at the two largest ## LAUNIE A US citizen, he has worked for the Flexonics businesses, Pathway and Bartlett. Group for over 20 years. Launie joined the | FLEMING | Executive Committee upon his appointment | Amy Legenza | | --- | --- | --- | | | as Chief Executive of Aerospace Fluid Systems | A US citizen, Amy became the Director of Risk | | | in September 2008. In October 2020, | and Assurance on 1 January 2023 and was | | | Launiewas appointed Chief Executive of | appointed to the Executive Committee on that | | | theAerospace Division, formed by the | date, having previously served as the Group's | | | consolidation of the Aerospace Fluid Systems | Head of Risk & Compliance. A Certified Public | | | division and Aerospace Structures division. | Accountant, Amy joined the Group in 2008 and | | BINDI | Prior to these divisional roles, Launie was the | has broad experience in senior finance and | | | Chief Executive of Senior Aerospace SSP. | accounting roles. | ## FOYLE ## JANE Executive Committee composition as at 31 December 2022 Gender ## JOHNSTON Percentage of Number of Executive Executive management management members members Men 5 71% Women 2 29% Not specified - - ## MIKE Ethnicity ## SHEPPARD Percentage of Number of Executive Executive management management members members White British or other White (including minority-white groups) 6 86% Mixed/Multiple Ethnic groups - - Asian/ Asian British 1 14% ## AMY Black/African/Caribbean/Black British - - ## LEGENZA Other ethnic group, including Arab - - Not specified - - 94 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / REPORT OF THE DIRECTORS ## REPORT OF THE DIRECTORS Executive Committee Activities ## The Directors present their Report and supplementary reports, The purpose of the Executive Committee is ## toassist the Group Chief Executive Officer together with the audited Financial Statements for the year inthe performance of his duties, including: ## ended 31 December 2022. • the development and implementation ofstrategy, operational plans, policies, procedures and budgets; • the monitoring of operating and financial Disclosures located elsewhere in the Policy on employee disability performance; Annual Report & Accounts 2022 Senior provides support, training and • the assessment and control of risk; development opportunities to all our employees The Strategic Report on pages 2 to 81 includes | • the prioritisation and allocation of resources; | | details of Senior’s business model, strategic | irrespective of any disabilities they may have. | | --- | --- | --- | --- | | | and | priorities, financial and non-financial key | We give full and fair consideration to disabled | | • the monitoring of competitive forces in | | performance indicators, risks and uncertainties, | applicants, and where an existing employee | | | each area of operation. | market overview, key growth drivers and a | becomes disabled during their employment, | | | | summary of the Group’s 2022 performance. | wewill make every effort to ensure they are | The Committee is also responsible for able to continue working for Senior in their theconsideration of all other matters not original or an alternative role. | specifically reserved for consideration by | Page | | | --- | --- | --- | | theBoard. A report on the activities of the | Acquisitions and disposals 174 | Employee share plans | | Executive Committee is provided to the | Corporate governance statement | Details of employee share plans are set out | | Boardby the Group Chief Executive Officer | ofcompliance 86 | inNote 33. | | ateach Board meeting. | Directors 90 | | There are no specific restrictions on the size of Directors’ share interests 125 The Committee is comprised of two aholding nor on the transfer of shares, which Employee engagement 51 members of the Board, David Squires and are both governed by the general provisions Future developments 20 Bindi Foyle, together with Launie Fleming ofthe Company’s Articles of Association and Greenhouse gas emissions 25 (Chief Executive of the Aerospace Division), prevailing legislation. The Directors are not Anti-bribery 36 Mike Sheppard (Chief Executive of the aware of any agreements between holders Modern slavery 100 Flexonics Division), Martin Barnes (Director ofthe Company’s shares that may result in Related-party transactions 191 ofBusiness Development & Strategy), restrictions on the transfer of securities or on Risk management 61 Andrew Bodenham (Group Company voting rights. No person has any special rights Section 172 statement 56 Secretary) and Jane Johnston (Group ofcontrol over the Company’s share capital, Share capital 172 HRDirector). andall issued shares are fully paid. Use of Financial Instruments 165 Health, Safety & Environment (“HSE”) Whistle-blowing 36 With regard to the appointment and Committee replacement of Directors, the Company is governed by its Articles of Association, the The HSE Committee is appointed by the UKCorporate Governance Code 2018, the Executive Committee; it oversees all health, Companies Act 2006 and related legislation. safety and environmental matters across Activities and business review TheArticles may be amended by special theGroup. Its Terms of Reference can be Senior plc is a holding company. The nature of resolution of the shareholders. The powers of found on the Company’s website. the Group’s operations and its principal activities Directors are described in the Matters Reserved There is a process in place for the Board to for the Senior plc Board, which may be found are set out in the Strategic Report on pages 2 to bekept regularly informed of all matters onthe Company’s website. Each year, 81. Its Group undertakings are shown on pages discussed by the HSE Committee. The Group shareholder approval is sought to renew the 194 and 195. Six of the Company’s operating Chief Executive Officer provides an HSE Board’s authority to allot relevant securities. businesses are located in the UK and 20 in the update at every Board meeting. Rest of the World. There are also a number of other agreements The members of this committee are David that take effect, alter or terminate upon a Dividends Squires (Chair of the Committee), Mike change of control of the Company, such as An interim dividend of 0.30 pence per share Sheppard (Chief Executive of the Flexonics commercial contracts, bank loan agreements, (2021 – nil pence) has already been paid and the Division) and Launie Fleming (Chief Executive property leasearrangements, and employee Directors recommend a 2022 final dividend of of the Aerospace Division). The Committee share plans. None of these are considered to be 1.00 pence per share (2021 – nil pence). The met three times during the year and there significant interms of their likely impact on the final dividend, if approved, will be payable on 26 was full attendance at every Committee business ofthe Group as a whole. Furthermore, May 2023 to shareholders on the Register of meeting. Mark Roden, the Group HSE & the Directors are not aware of any agreements Members at the close of business on 28 April Sustainability Director, attended all of the between the Company and its Directors or 2023. This would bring the total dividend for the meetings held during the 2022. employees that provide for compensation for year to 1.30 pence per share (2021 – nil pence). loss of office or employment that occurs because of a takeover bid. Conflicts of Interest The Board has a procedure for identifying andmanaging Directors’ potential conflicts ofinterest. The Group Company Secretary maintains the Register of Directors’ Potential 95SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / REPORT OF THE DIRECTORS CONTINUED Conflicts of Interest. Directors are required to declare their own potential conflicts, together with those of their close family members, their partners, any trust to which they are a beneficiary, a corporate body in which they have a 20% interest or above, or a firm in which they are a partner. The Directors review and confirm their Register entries at least annually. At every Board meeting, the Directors are required to declare if they have any potential conflicts of interest in the business to be discussed at the meeting. In 2022, the Directors confirmed there were no potential or actual conflicts of interest. # Directors' indemnities Qualifying third-party indemnity provisions for the benefit of the Directors were renewed by the Company during the year and remain in force at the date of this Report. # Research and Design In 2022, the Group incurred £19.8m (2021 – £19.2m) on research and design. Product development and improving manufacturing processes represent the primary focus of the Group's research and design activities. # Political donations No political donations were made by the Company or any of the Group's operations during the year. # Major shareholdings The Company has been notified that the following shareholders were interested in 3% or more of the issued share capital of the Company: | | % at 8 February 2023 | | --- | --- | | Alantra Asset Management | 17.38 | | Aberforth Partners | 8.71 | | Heronbridge Investment Management | 5.97 | | Columbia Threadneedle Investments | 4.91 | | Vanguard Group | 4.63 | | BlackRock | 4.48 | | Janus Henderson Investors | 3.30 | | Legal & General Investment Management | 3.25 | So far as is known, no other shareholder had a notifiable interest amounting to 3% or more of the issued share capital of the Company, and the Directors believe that the close company provisions of the Income and Corporation Taxes Act 1988 (as amended) do not apply to the Company. # Annual General Meeting The Notice of Annual General Meeting describes the business to be considered at the AGM to be held at 11.30 am on Friday 21 April 2023 at Ironmongers' Hall, Off Shaftesbury Pl, Aldersgate St, Barbican, London EC2Y 8AA. Please see the Notice of Annual General Meeting 2023 for the details of the AGM; a copy of the Notice can be found on the Company's website. # Authority to purchase the Company's own shares The Company purchased no ordinary shares of 10 pence each in the capital of the Company; 2,992,477 shares in the Company (2021- nil shares) were purchased by the Senior plc Employee Benefit Trust in the year to satisfy the future vesting of executive share awards and employee share plans. At the end of the year, the Directors had authority, under a shareholders' resolution dated 21 April 2022, to make market purchases of the Company's shares up to an aggregate nominal amount of £42m (2021 – £42m), which represented approximately 10% of the issued share capital of the Company. A resolution to renew this authority will be proposed at the forthcoming AGM. # Auditor - Each of the persons who is a Director of the Company at the date of approval of this Annual Report & Accounts confirms that so far as the Director is aware, there is no relevant audit information of which the Company's Auditor is unaware; and - the Director has taken all steps that he/she ought to have taken as a Director in order to make himself/herself aware of any relevant audit information and to establish that the Company's Auditor is aware of that information. This information is given and should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006. In 2016, the Group undertook a formal tender process for its external audit function, which resulted in KPMG LLP being appointed the Group's External Auditor for the financial year commencing 1 January 2017. KPMG's re-appointment was last approved by the Company's shareholders at the 2022 AGM. In accordance with Section 489 of the Companies Act 2006, a resolution for the re-appointment of KPMG LLP as Auditor of the Company is to be proposed at the forthcoming AGM. By Order of the Board Andrew Bodenham Group Company Secretary 24 February 2023 96 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / NOMINATIONS COMMITTEE REPORT Extension of appointments to the Board ## NOMINATIONS ## COMPOSITION, In 2022, Celia Baxter and Giles Kerr reached ## COMMITTEE REPORT their nine year anniversary with Senior; theirappointments were extended until the ## SUCCESSION conclusion of the 2023 AGM to support Dear Shareholder, theinduction of Mary Waldner and Barbara ## ANDEVALUATION Overview Jeremiah, when it has been announced they The Nominations Committee is chaired by willretire from the Board. meand comprises all non-executive Directors. | The Group Company Secretary acts as | Succession planning | | --- | --- | | Secretary to the Committee. Senior members | The Committee regularly considers succession | | of management and advisers are invited to | planning for Board-level and the Group’s senior | | attend meetings, as appropriate. There were | management roles. Cognisant of the length of | | four scheduled meetings of the Committee | the terms of Celia Baxter and Giles Kerr, the | | in2022. Two members constitute a | Committee followed its recruitment process, | | quorumfor the Nominations Committee. | described above, and appointed Mary Waldner | | TheCommittee’s attendance records are | and Barbara Jeremiah to the Board in December | | shown on page 89. | 2021 and January 2022 respectively, thereby | allowing for a suitable transition period between The Committee is tasked with administering them and the two departing Board members. the process for appointments, considering Mary’s and Barbara’s skills and previous work succession planning, regularly reviewing such experience make them a good fit for the processes and overseeing the composition Company and complement those of the existing ofthe Board. The Nominations Committee’s Board members; a summary of their biographies Terms of Reference can be found on the can be found on pages 90 to 92. ## "The Group seeks to ensure Company’s website. The Group continues to focus on maximising ## diversity in the composition Appointments to the Board thepotential of its employees and improving In 2021, two consultancy firms were ## ofthe Board, including gender, succession planning. The Group's Executive engagedto assist with the recruitment of Committee, supported by the Group HR ## ethnicity, personal and cognitive twonew Board members, as part of the Director, conducted an extensive review of Board’s succession planning process. The senior executive succession plans. The review ## skills.” Nominations Committee sought confirmation identified key employees who are considered that candidates under consideration would Ian King capable of being developed into leadership have sufficient time to perform their duties as Chair roles, which is critical to the success of the a Director of the Board, if appointed. The time Group. Appropriate plans are in place to commitment of the Directors is kept under ensurethere is a mix of employees within review and the potential for over-boarding theGroup who could fill key roles in the short monitored and discouraged. Following a and longerterm. diligent interview process, Mary Waldner was | appointed to the Board on 1 December 2021 | In 2022, the Nominations Committee also | | --- | --- | | and Barbara Jeremiah was appointed to the | reviewed the Group, divisional and operating | | Board on 1 January 2022. | business level succession plans, and maintained | its focus on further strengthening diversity in A full and comprehensive induction these plans, particularly gender diversity in programme was provided to Mary and operational roles. Barbara. The induction process covered areas such as financial forecasts, Group strategy Independence and values, corporate ethics and training on The Nominations Committee and the Board the Group’s Code of Conduct, together with consider all of the non-executive Directors to other relevant topics. Visits to some of the befully independent and free from conflicting Group’s operations by the newly appointed interests which could cause difficulties whilst Directors were also undertaken. performing their duties. Senior considers its non-executive Directors to be proactive in The Nominations Committee and the Board contributing their respective experiences and are supportive of the aim to increase diversity skills gained from a range of sectors. Conflicts and the level of female representation in ofinterest are fully disclosed by Directors upon Board and senior leadership positions. Five of appointment and are reviewed on a regular the nine Directors are female (55%). basisthroughout each year. In addition, the Nominations Committee I am confident that Senior has the requisite andthe Board have ensured the Board’s diversity of skills, people, and experience that composition is diverse in terms of the will guide the Company in delivering shareholder Directors’ ethnic backgrounds, as value. This Report was reviewed and approved recommended by the Parker Review; by the Nominations Committee and signed on furtherdetail can be found on page 89. its behalf by: At 31 December 2022, there were seven Ian King members of the Group's Executive Chair of the Nominations Committee Committee, of which two are female (29%). 24 February 2023 On 1 January 2023, Amy Legenza joined the Executive Committee and therefore at the time of signing this report 38% of that committee are female. The Nominations Committee regularly discusses the benefits of diversity with regardto the Board and its Committees. 97SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / NOMINATIONS COMMITTEE REPORT CONTINUED | Nominations Committee | Nominations Committee Activities | Remuneration | | --- | --- | --- | | The Company’s Nominations Committee | In February 2022, the Nominations | The Remuneration Committee Report on pages | | leads the process for Board appointments | Committee discussed the composition of the | 108 to 128 fully describes the Board’s approach | | andsupervises leadership development | Board and the performance of the Directors | to remuneration matters. | | andsuccession planning. It also makes | and recommended to the Board that all | | Board effectiveness | recommendations to the Board on all new | Directors currently in office stand for election | | | --- | --- | --- | | Board appointments and re-appointments. | or re-election at the 2022 AGM. At this | The Board is structured under a non-executive | | The Committee, which consists entirely of | meeting, the Nominations Committee also | Chair and currently comprises two executive | | non-executive Directors, is chaired by Ian | reviewed and discussed the draft 2021 | Directors and six independent non-executive | | King; its composition is shown on page 89. | Nominations Committee Report contained | Directors, who were each selected for | | | within the Annual Report & Accounts 2021 | appointment because of their wide industrial | Details of the Directors’ external statutory and the draft Board Diversity and Inclusion and commercial experience. The Directors appointments can be found in their Policy and recommended to the Board that believe that the Board and its committees have biographies on pages 90 to 92. The Board they both be approved. In June 2022, the the appropriate balance of skills, experience and believes that the Directors’ experience of Nominations Committee met and discussed knowledge to enable them tofulfil their duties working with other companies adds value to the succession plans at Group, Divisional and and responsibilities effectively. The Nominations their contribution to the Company’s Board Operating Business levels. In July 2022, the Committee reviews the composition of the andCommittee meetings. In compliance with Nominations Committee held a meeting to Board at leastannually. the Corporate Governance Code, all Directors discuss possible updates to the Board offered themselves for re-election at the Board diversity and inclusion Diversity and Inclusion Policy, to bring it in Company’s 2022 AGM. All continuing The Group seeks to ensure diversity in the linewith an amendment made to the FCA’s Directors will again offer themselves for composition of the Board, including, amongst Listing Rules and the Disclosure and re-election at the 2023 AGM. The resolutions other qualities, diversity of gender, ethnicity, Transparency Rules; the Nominations to be put to shareholders at the 2023 AGM personal and cognitive skills. The Company’s Committee recommended to the Board that can be found in the Notice of Annual General female representation on the Board complies itapproved the updates. The Nominations Meeting, which is available on the with the recommendations of the Hampton- Committee convened to review the Company’swebsite. Alexander Review, and meets the proposals on ExecutiveCommittee’s succession plans ethnic diversity outlined by the Parker Review. The Board confirms that in 2022 all Directors inDecember2022. Furthermore, we endeavour to incorporate in office at the time worked assiduously and Following the 2022 year end, the Nominations diversity into our recruitment process by diligently. Each Board member made a very Committee held a meeting to discuss and engaging, wherever possible, with recruitment positive contribution to the running of the make recommendations to the Board firms that have committed to follow the Company and the Board confirms that they concerning the Directors to stand for election Voluntary Code of Conduct for Executive Search will all continue to work to ensure its at the AGM 2023 and the draft 2022 Firms, and by widening the pool of candidates long-term success. Nominations Committee Report, as contained from diverse backgrounds. within the Annual Report & Accounts 2022. We confirm that the Company has met the targets stipulated in the Listing Rule 9.8.6R(9) asat 31 December 2022. The numerical data onthe ethnic background and the gender identity of the individuals on the Board of the Company and in its Executive Committee as at 31 December 2022 is set out on pages 89 to 94. There have been no changes to the Board since 31December 2022. Data used for the purpose of making the disclosures was collected through the Company’s diversity monitoring forms completed by the individuals on the Board of theCompany and in its Executive Committee. 98 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / NOMINATIONS COMMITTEE REPORT CONTINUED Board induction and development Directors' succession had been handled Succession planning Appointments to the Board are made following a smoothly and it was agreed that process The Nominations Committee met four times rigorous, formal, recruitment process supported should be extended to hire an additional during the year and considered succession plans by professional consultants. All Directors non-executive Director with relevant industrial for Board-level and senior management roles. receiveinduction upon joining the Board and and business experience aligned to our The Group has continued to increase its focus areencouraged to update their knowledge strategy. The Board is to also review the on maximising the potential of its employees andskills on a frequent basis. The Nominations structure of the Board meetings schedule and improving succession planning. The Group Committee arranged for Mary Waldner and andagendas to ensure adequate time is Chief Executive Officer and Group HR Director Barbara Jeremiah, our most recently appointed givento debate and engagement. present a detailed Executive Succession non-executive Directors, to receive early and The Board continued its momentum during Planforeach Executive Committee role, to appropriate induction. The Group Company 2022, building on further strengthening the theNominations Committee twice a year. This Secretary provides the Board with statutory business as it emerged from the difficult ensures that the Nominations Committee is able andregulatory updates at every Board meeting conditions encountered during the COVID-19 to undertake a detailed review of the succession and notifies them of any pressing points that pandemic. The findings of the 2022 evaluation plans for the Executive Committee, the talent arerelevant between meetings. will add to the Board’s development as the pipeline, and a talent profile for each member of The Directors are cognisant of the fact that the recovery phase of our end markets and the the Executive Committee. The review includes Board, and its Committees, should have the strategic growth of the Company continue discussions regarding individuals’ strengths appropriate combination of skills, experience tomake timely progress. andareas for development plans. As a result, and knowledge to enable them to perform their development activities are identified, for Clare Chalmers Limited has no other duties effectively. Membership of the Board and example, supporting the Executives in pursuing connection with the Company or its Directors. | its Committees is kept under regular review and | | external non-executive director roles. Prior to | | --- | --- | --- | | refreshed when appropriate, taking into account | In addition, the Chair undertakes individual | the2022 Nominations Committee review, the | | the Directors’ lengths of service and their ability | reviews of each Director and provides | Executive Committee, supported by the Group | | to devote sufficient time to Company matters. | feedback and guidance on their performance | HR Director, conducted an extensive review | | | and contribution to the Board. The Senior | ofthe Group’s operating business leadership | Evaluation of the Board and the Directors | | Independent Director, in consultation with the | succession plans. Utilising skills and talent | | --- | --- | --- | | In 2022, the Directors felt that it was again | non-executive Directors, undertakes a similar | mapping, assists both the Executive | | appropriate to undergo an external Board | review process of the Chair. | Committee and, ultimately, the Nominations | | evaluation process and chose to engage a | | Committee in identifying any gaps, taking | | different firm to bring a new perspective when | | intoaccount the Group’s long-term strategy | | undertaking the evaluation. Clare Chalmers | | toprovide a solid foundation for Senior’s | | Limited undertook the evaluation which included | | growthaspirations. | attending a full Board meeting and conducting When reviewing succession plans, the individual confidential interviews with each Committee recognises the benefits of a diverse Board Director, the Group Company Secretary, workforce, diversity of thought and employing the Group HR Director and the ChiefExecutives individuals from diverse backgrounds and of the Aerospace and FlexonicsDivisions. experience across the organisation, including The Board had operated and made only a Board members and senior managers. limitednumber of recommendations for the Board to consider. The Board was found to be functional, effective, engaged and motivated and with clear progress being made against prior actions. Non-executive 99SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / NOMINATIONS COMMITTEE REPORT CONTINUED Ethics and Avoiding Conflicts of Interest. published in February 2023, it can be found ## AUDIT, RISK AND Allemployees and Directors were required onthe Company’s website. ## INTERNAL CONTROL toachieve a Pass grade, as a minimum. Reporting and investigating concerns Typically, all the Group’s operations are visited andwhistle-blowing Resources, internal controls by the Group Chief Executive Officer, the As part of its internal control procedures, the andriskmanagement GroupFinance Director or other members of Company has a Whistle-blowing Policy that is The Board has ultimate accountability for the Executive Committee on an annual basis communicated throughout the Group. This theGroup’s risk management process. and make presentations to local senior policy provides employees with the opportunity The Board determines the nature and extent management, reinforcing the Code and the to report suspected unethical or illegal corporate of the significant actions necessary to achieve importance of maintaining an absolute conduct confidentially and anonymously. its strategic objectives and maintains a sound commitment to the highest possible standards Senior is committed to maintaining high ethical system of internal control. The Company’s of ethics and a zero tolerance towards bribery standards across the Group. Employees and Audit Committee reports to and, for certain and corruption. Until travel restrictions imposed representatives of Senior have an obligation to matters, advises the Board of Directors. The as a result of COVID-19 were lifted, site visits act honestly, with integrity, and to comply with Audit Committee Report on pages 102 to 107 by the Executive Directors and members of applicable laws. Consequently, employees are describes the role and activities of the Audit theExecutive Committee were not possible; encouraged to report any suspected unethical Committee, together with the significant risks however, they reinforced the Code at meetings orillegal corporate conduct in accordance with and judgments that it considered in relation held at Divisional and local levels and monitored this policy. | tothe 2022 Financial Statements and its | the progress of the training programme across | | | --- | --- | --- | | relationship with the internal and External | the Group. The Board verifies compliance with | Senior will not tolerate the harassment or | | Auditors. Details of the Group’s approach to | the Code through its internal audit programme, | victimisation (including the application of | | risk management and its Risk and Assurance | ensuring that employees have received the | informal pressure) of a person reporting | | Framework can be found on pages 60 to 62. | mandatory training and that the Group’s | corporate conduct in good faith. In addition to | | | businesses operate with integrity at all times | the legal protection provided to such employees, | Communicating the Senior plc Code of and in compliance with the Code. Senior will treat retaliatory conduct in violation Conduct and operating with integrity ofthis policy as a serious disciplinary offence. Operating with integrity and in an ethical In 2021, the executive Directors published mannerbuilds trust with customers and other The Group encourages its employees to discuss anupdated booklet for issue to all employees stakeholders and underpins the Board’s any ethical concerns that they may have with and relevant third parties, explaining the strategic objectives. local management, or at Group level if more Group’s Code of Conduct (the Code) and appropriate. Where an employee feels unable Senior’s Values; these values can be found Human rights toapproach local or Group management, or are onpage 38. The booklet includes a message The Group recognises the importance of the dissatisfied with the response, they can contact from the Group Chief Executive Officer, Universal Declaration of Human Rights and Senior’s third-party whistle-blowing service explaining that it is his unshakeable belief that adheres to the core principles and values provider by telephone, a web reporting tool or, in how you do business is as important as what defined within it. The majority of countries in some languages, an app. The provider will pass you do in business. It contains work-related which Senior operates have their own laws on information to an investigating officer within scenarios, together with a selection of banning child labour and promoting human Senior, maintaining anonymity of the individual, questions and answers, to help employees rights. Senior monitors the ages of its workforce if requested. tounderstand the Code and relate it to their across the world to ensure compliance and individual roles and working environment. identify any potential succession issues. All reports of suspected unethical or illegal Copies of the Code are issued to all new corporate conduct are independently Senior is committed to preventing slavery employees and reissued periodically to investigated and tracked from inception to andhuman trafficking in its corporate activities continuing employees to remind them resolution and, where necessary, actions are and throughout its supply chain. Senior does oftherequired level of conduct. taken to rectify any weakness in systems that notrestrict any of its employees in any of the may have been identified. These actions, and Senior trains its employees on the countries in which it operates from joining a the overall integrity of the reporting system, requirements of the Code upon induction, trade union if they wish to do so. Senior also aresubject to regular scrutiny by the Audit educating them on what they can and cannot works closely with its suppliers to ensure that Committee. This process is also available to do, and how to address any ethical dilemmas they at least meet internationally recognised third parties, such as suppliers and customers. they may face. A compulsory 2022 Global minimum requirements for workers’ welfare Subject to confidentiality considerations, the Code of Conduct online training course was andconditions of employment. Senior publishes outcome of each investigation is provided, rolled out across the Group to all employees a Modern Slavery Act Statement, which is insofar as it is possible, to the individual who during the year. The 2022 course contained keptunder review and updated as necessary. reported the concern. All reported whistle- training modules on: Anti-bribery, Preventing The current statement has been signed by blowing incidents are reviewed by the Board Harassment & Promoting Respect, Business theGroup Chief Executive Officer and was 100 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / NOMINATIONS COMMITTEE REPORT CONTINUED ofDirectors, which the Company believes Managing gifts and hospitality thatare in place to help reduce risk associated tobethe most appropriate forum. The Board recognises that gifts and hospitality with the inappropriate use of the Group's have the potential to create a conflict of interest, information technology and operational Celia Baxter is the Company’s Senior or the perception of a conflict of interest. As a technology assets, which could lead to data Independent Director, providing employees result, there is a Group policy restricting the loss, manufacturing disruption, virus or malware andthird parties with an alternative channel of receiving and giving of gifts and hospitality from, infection or other issues that could have a communication to resolve issues if they have and to, third parties. This policy requires that all negative financial or reputational impact on the aconcern that the Chair, Group Chief Executive gifts and hospitality must be recorded annually Group. In compliance with the Data Protection Officer or Group Finance Director have failed through a self-declaration process. The Internal (Charges and Information) Regulations 2018, toresolve the issues, or where such contact Audit Manager assesses adherence with the theCompany is registered with the Information with them is not appropriate. Group’s gifts and hospitality policy during Commissioner’s Office. Managing external sales agents and internal audit visits, which are carried out To ensure compliance with the General Data representatives physically or virtually. Protection Regulations (GDPR), both in the Senior has in place a Responsible Sourcing Group information and operations business EUand the UK, the Company and all relevant Policy which establishes the minimum security policy and data protection Group operations have in place a GDPR policy standards expected of our supply chain. The Group’s confidential information is valued and breach incident procedure which have been Senioris committed to the highest possible highly by the Board. In early 2022, the Group communicated to their employees. As the standards of environmental, ethical and social Head of Information Security departed the Company is not a public authority, its core responsibility performance in respect of all its Group and his successor appointed, with a activities do not require regular and systematic products and services. Senior strives to be the suitable handover period arranged to ensure monitoring of individuals on a large scale and it best for its customers and its people and looks continuity. In 2019, a three-year roadmap does not process special categories of personal to make a positive contribution to society wasdeveloped, which contained a prioritised, data, criminal convictions or offences data on wherever it operates. Adherence to this policy risk-based, improvement plan. Linked to the alarge scale, it is not required to appoint a data ismandatory and all Group operations are three-year roadmap, a tactical execution plan protection officer. However, the Company and required to ensure that they are aware of the was created annually, building on the activity relevant Group operations each have a Data requirements of the policy. | | todate; the incoming Group Head of Information | Protection Champion, whom employees | | --- | --- | --- | | The Board recognises the potential bribery and | Security continued this work. In September | canapproach for guidance if they have any | | corruption risks posed by the markets in which | 2022, the Group Head of Information Security | queries or concerns relating to data protection. | | the Group operates and, in particular, the use of | was invited to present to the Board meeting, | Compliance with data protection regulations will | | third-party intermediaries it engages. All external | providing an update on the 2019 to 2022 | continue to be monitored on an ongoing basis. | | sales agents and representatives working on | maturity journey. The key focus areas on the | | | behalf of Senior across the world are required to | journey included the external security posture, | | | operate in compliance with Senior’s Code of | the risk management framework, patch and | | | Conduct or have their own code of conduct of | vulnerability management, security event | | | an equivalent high standard. Local management | monitoring and incident response and | | | is required to conduct a due diligence and risk | networksecurity. | | assessment process prior to engaging or In 2022, all Group employees continued to re-appointing any sales agents and to issue receive regular updates on information security, them with a copy of the Code, ensuring that supported by circulation of weekly tips of the they understand, acknowledge and accept week. The aim of these weekly communications itsrequirements. was to provide small, bitesize recommendations International trade compliance and guidance on all matters information security The Code of Conduct includes a section related. These included informing employees dedicated to Complying with International how to protect themselves both in their personal Sanctions and Trade Compliance Requirements. lives as well as when at work. It states “Senior will conduct its business in An Acceptable Use Policy is in place to provide fullcompliance with all global trade laws and guidelines for the acceptable and appropriate regulations and all relevant sanctions for the use of the Group's information technology import and export of goods and services in andoperational technology assets by all Group thecountries within which it operates.” employees. The policy sets out the controls 101SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / DIRECTORS’ DUTIES / AUDIT COMMITTEE REPORT • approving the appointment or termination ## AUDIT COMMITTEE ofappointment of the Director of Risk and ## REPORT Assurance (formerly the Head of Risk &Compliance); Dear Shareholder, • reviewing the effectiveness of the internal The Audit Committee has been established audit function (currently headed by the by the Board and consists entirely of Director of Risk and Assurance, formerly the independent non-executive Directors. The Head of Risk and Compliance); considering primary role of the Audit Committee is to the major findings of internal audit activities maintain the integrity of the financial reporting and management’s response; ensuring of the Group and to ensure appropriate risk co-ordination between the internal audit management and internal control procedures. function and the External Auditor; reviewing To enable the Audit Committee to fulfil this and approving the role and mandate of the role, its main responsibilities include: internal audit function. Annually approving • conducting the process for selecting theInternal Audit Charter, ensuring it is ## "Collectively, the members of the theExternal Auditor and making appropriate for the Group’s current needs, ## Audit Committee have recommendations to the Board, and that the function is adequately resourced and ultimately shareholders for approval, of the has appropriate standing within the Group; ## significant commercial and appointment of the External Auditor, the • ensuring the internal audit function has audit fee, initiating tender processes in unrestricted scope, the necessary resources ## financial experience at a senior accordance with regulatory requirements, and access to information to enable it to ## management level.” and the resignation or dismissal of the fulfilits mandate, ensuring there is open External Auditor; communication between different functions Giles Kerr • if an External Auditor resigns, investigating and that the internal audit function evaluates Chair of the Audit Committee the issues leading to this and deciding the effectiveness of these functions as part whether or not any action is required; ofits internal audit plan, and ensuring that the internal audit function is equipped to perform • monitoring and assessing annually the in accordance with appropriate professional independence and objectivity of the standards for internal auditors; External Auditor, its compliance with regulatory requirements, the effectiveness • ensuring the internal Auditor has direct of the external audit process and accessto the Board Chair and to the Audit authorising the provision, if any, of Committee Chair, providing independence non-audit services and the impact this from the Executive and accountability to mayhave on independence; theAudit Committee; • monitoring the integrity of the Company, • carrying out an annual assessment of the including its annual and the half-yearly effectiveness of the internal audit function; reports, preliminary announcements and • reviewing the effectiveness of the Group’s related formal statements. Reviewing internal controls systems that identify, andreporting to the Board on significant assess,manage and monitor financial risks, financial reporting issues and judgments and other internal control and risk which those statements contain, having managementsystems; regard to matters communicated to it • developing and recommending to the Board bythe Auditor. Reviewing any other the Group’s Policy for the Provision of statements requiring Board approval Non-Audit Services by the External Auditor, whichcontain financial information where including specifying permitted non-audit practicable and consistent with any prompt services and their approval requirements; reporting requirements. Where the • ensuring the External Auditor’s remuneration Committee is not satisfied with any aspect fee level is appropriate to enable an effective of the proposed financial reporting by the and high quality audit; Company, it shall report its views to • monitoring the External Auditor’s theBoard; processesfor maintaining independence, • reviewing the Company’s statement on itscompliancewith relevant law, regulation, theAnnual Report & Accounts prior to other professional requirements and the endorsement by the Board, that taken as a EthicalStandard; whole the Annual Report & Accounts is fair, • ensuring the co-ordination of the External balanced and understandable and provides Auditor and the internal audit function; the information necessary to assess the • agreeing with the Board a Policy on the Group’s position and performance, Employment of Former Employees of the business model and strategy; Group’s External Auditor, taking into account • discussing with the External Auditor issues the Ethical Standard and legal requirements, and reservations, if any, arising from the and monitoring the application of this Policy; year-end audit and the half-year review, • understanding the strategy at both Group andany other matters the External Auditor andoperational levels to ensure that business may raise; risks and other relevant issues are effectively • reviewing and approving the terms of the identified and communicated to the Board; External Auditor’s engagement, including • assessing the Audit Committee’s capabilities the management representation letter in relation to diversity, risk experience and addressed to the External Auditor at the thefinancial expertise of its members; start of each audit; • reviewing the longer-term viability and thegoing concern basis of accounting in preparation of the Financial Statements ofthe Group; 102 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / DIRECTORS’ DUTIES / AUDIT COMMITTEE REPORT • understanding the implications of changes Member Appointment date Retirement date toaccounting standards; Giles Kerr (Committee Chair) 2 September 2013 – • ensuring the Company’s corporate ethics, Celia Baxter 2 September 2013 – anti-bribery and compliance procedures are Susan Brennan 1 January 2016 – up to date in terms of addressing the potential | | risks of fraud and misconduct; | Barbara Jeremiah 1 January 2022 – | | --- | --- | --- | | • reviewing the Group’s Whistle-blowing Policy, | | Rajiv Sharma 1 January 2019 – | | | to ensure that appropriate procedures are in | Mary Waldner 1 December 2021 – | place for employees, contractors and external parties to raise, in confidence, any concerns Two members constitute a quorum for the Audit The Board expects the Audit Committee that they may have relating to suspected Committee. The Group Company Secretary acts tohavean understanding of: malpractice, illegal acts, omissions or other as Secretary to the Audit Committee. | unethical corporate conduct, regarding | | • the principles, contents and developments | | | --- | --- | --- | --- | | financial or other matters; and ensuring that | There was full attendance at every Audit | | infinancial reporting, including the applicable | | arrangements are in place for investigation | Committee Meeting held during 2022. | | accounting standards and statements of | | ofsuch matters and follow-up action; | | | recommended practice; | Collectively, the members of the Audit • giving due consideration to all relevant laws • the key aspects of the Group’s operations, Committee have significant commercial and and regulations, the provisions of the Code including corporate policies, its products and financial experience at a senior management and published guidance, the requirements of services, Group financing, and systems of level. I have the recent and relevant financial the FCA’s Listing Rules, Prospectus Rules and internal control; experience required by the UK Corporate Disclosure Guidance and Transparency Rules • the matters that could influence or distort Governance Code to chair the Audit Committee. sourcebook, and any other applicable rules; thepresentation of accounts and key figures; Mary Waldner will succeed me as Chair of the • after each Audit Committee meeting, the • the principles of, and developments in, Audit Committee, upon my retirement following Audit Committee Chair formally reports company law, sector-specific laws and the conclusion of the 2023 AGM; Mary too has totheBoard on its proceedings and how otherrelevant corporate legislation; the recent and relevant financial experience theCommittee has discharged its duties; required by the Code. • the roles of internal and external auditing • working and liaising with all other Board andrisk management; and For details of the qualifications of members Committees, ensuring interaction between • the regulatory framework for the ofthe Audit Committee, please refer to the the Committees and the Board is reviewed Group’sbusinesses. Board of Directors’ biographies shown on regularly; and pages90 to 92. The full Terms of Reference of the • considering any other topics specifically Audit Committee may be found on delegated to the Audit Committee by the No member of the Audit Committee has any theCompany’s website. Board from time to time. connection with the company’s External Auditor, KPMG LLP. The Audit Committee is required to report its findings to the Board, identifying any matters Audit Committee’s Terms of Reference where it considers that action or improvement Periodically, the Audit Committee’s Terms of isneeded, and to make recommendations as Reference are reviewed to take into account tothe steps taken. current views on good practice and recent updates to the UK Corporate Governance Code. Composition of the Audit Committee The UK Corporate Governance Code 2018 was The Terms of Reference for the Audit adopted by the Audit Committee from the Committee state that the Audit Committee accounting period beginning on 1 January 2019. shallbe appointed by the Board from amongst The Audit Committee’s Terms of Reference the independent non-executive Directors of the were updated in December 2022. Company, excluding the Company Chair, at least one of whom shall have recent and relevant financial experience. The Audit Committee shall consist of not less than three members, of which all shall be independent of any business connection with the Group. Appointments to theAudit Committee shall be for a period of upto three years, which may be extended by a maximum of two additional three-year periods, subject to the members remaining independent. The Audit Committee is composed entirely of independent non-executive Directors, asshown in the table above. 103SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / DIRECTORS' DUTIES / AUDIT COMMITTEE REPORT CONTINUED # **Activities of the Audit Committee** The Audit Committee met on 22 February 2022 to consider the 2021 year-end report and during the subsequent 12 months conducted the following business on the four standard scheduled meeting dates, as indicated below: # **26 May 2022** - Discussed and approved the external audit plan and strategy proposed by KPMG LLP for the 2022 audit, including materiality, scope, significant risks and other areas of audit focus, the audit cycle and auditor reporting. - Reviewed KPMG LLP's 2022 Audit Fee Estimate. - Reviewed and approved the terms of the proposed letter of engagement addressed to the External Auditor. - Received and reviewed KPMG LLP's assessment on its objectivity and independence # **27 July 2022** - Received and considered an Internal Audit Report including Risk & Assurance and Mapping reports presented by the Head of Risk & Compliance (now the Director of Risk and Assurance). - Received and reviewed KPMG LLP's assessment on its objectivity and independence. - Reviewed the accounting presentation and judgmental issues, and the funding and liquidity reports for the half-year ended 30 June 2022. - Reviewed, challenged and agreed the basis for going concern to be adopted for the 2022 Interim Results. - Reviewed the Tax Memorandum for the half-year ended 30 June 2022. - Reviewed and accepted KPMG LLP's Report to the Audit Committee on the half-year review for the six months ended 30 June 2022. - Reviewed and approved the terms of the management representation letter addressed to the External Auditor. - Discussed the Group's draft Announcement of the 2022 Interim Results together with the draft slides for the analysts' presentation. - Approved KPMG LLP's proposed fees for the 2022 Audit. - Noted the FRC's Audit Quality Review of KPMG LLP's audit work in 2021/22. # **29 September 2022** - Reviewed the effectiveness of the external audit process. - Assessed the significant risks that are considered by the Audit Committee, agreeing they would broadly unchanged from 2021, subject to review at the next meeting. - Addressed Government agency recommendations on the Company's Annual Report & Accounts 2021, agreeing areas that could be better signposted in the Annual Report & Accounts 2022. - Received and considered an Internal Audit Report presented by the Head of Risk & Compliance (now the Director of Risk and Assurance). - Received an update on the Group's cyber risk communications programme and on 2022 Code of Conduct training. - Reviewed the effectiveness and quality of the 2021 external audit. - Approved the existing Policy for the Provision of Non-Audit Services by the External Auditor and the Policy on the Employment of Former Employees of the Company's External Auditor, with no changes required. - Reviewed the draft updated Terms of Reference of the Audit Committee with one small update agreed. - Approved the Group's existing Whistle-blowing Policy, with no changes required. # **21 February 2023** - Reviewed the accounting presentation and judgmental issues, and the viability assessment report for the year ended 31 December 2022, which included consideration of compliance with all debt covenants at all measurement dates out to 31 December 2025. - Reviewed and approved the addition of acquisition accounting as a significant risk and a risk assessment change of inventory net realisable value risk from significant risk to other focus area. - Reviewed and approved the statements included in the Annual Report & Accounts 2022 concerning internal control, risk management, including the assessment of principal risks and emerging risks, TCFD and the Viability Statement. - Reviewed, challenged and agreed the going concern basis to be adopted for the 2022 Accounts. - Reviewed the Tax Memorandum for the year ended 31 December 2022. - Reviewed and accepted KPMG LLP's Report to the Audit Committee on the audit of the Financial Statements for the year ended 31 December 2022. - Reviewed KPMG LLP's confirmation of its objectivity and independence, including identification of a prohibited non-audit service which was provided to a residual component from 2018 to 2022. The Audit Committee was satisfied with the conclusions and actions taken by the Auditor. - Reviewed and approved the terms of the management representation letter addressed to the External Auditor. - Approved the Audit Committee Report for 2022. - Reviewed the effectiveness of the Group's risk management and internal control systems and disclosures made in the Annual Report & Accounts 2022. - Reviewed the draft Annual Report & Accounts 2022 and reviewed the Company's statement on the draft Annual Report & Accounts prior to endorsement by the Board, that, taken as a whole, the draft Annual Report & Accounts is fair, balanced and understandable and provides the information necessary to assess the Group's position and performance, business model and strategy. - Discussed the Group's draft Announcement of the 2022 Final Results together with the draft slides for the analysts' presentation. - Reviewed the Notice of Meeting for the 2023 AGM and the Proxy Form for the 2023 AGM. - Received and considered a report presented by the Director of Risk & Assurance, which included the proposed 2023 internal audit plan. - Reviewed and approved the Internal Audit Charter. - Assessed the effectiveness of the internal audit function. The Audit Committee held a private meeting with the External Auditor and a private meeting with the Group's Director of Risk and Assurance (formerly the Group's Head of Risk & Compliance) on 27 July 2022 and 21 February 2023, without executive management being present. In addition to the four scheduled meetings summarised above, meetings were held in January 2022 to approve the Full-year 2021 Post Close Trading Update and in November 2022, to approve the draft Trading Update for the 10-month period ended October 2022, subject to final confirmation by the Disclosure Committee. 104 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / DIRECTORS’ DUTIES / AUDIT COMMITTEE REPORT CONTINUED Audit Committee Attendance and Separate Discussions The Audit Committee typically invites the non-executive Chair, Group Chief Executive Officer, Group Finance Director, Group Financial Controller, theGroup’s Director of Tax & Strategic Finance, the Group’s Director of Risk and Assurance (formerly the Head of Risk & Compliance) 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 2022, the Audit Committee also held separate discussions withthe External Auditor and the Group’s Director of Risk and Assurance, 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 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 to • those held against legal claims and contractual matters, product bepayable. The Audit Committee carefully considers the assumptions warranties; and applied and provides appropriate challenge including an assessment of • tax provisions for uncertain risk exposures. the related sensitivities. These were further discussed with the ExternalAuditor. There is a risk that other provisions overstate or understate the associated liability. The Audit Committee believes there are no further reportable issues arising from these significant areas. Acquisition accounting The Group recognised goodwill of £42.0m and intangible assets of On 25 November 2022, the Group acquired substantially all of the £31.0m on the acquisition date. The Audit Committee held discussions assets of Spencer Aerospace Manufacturing, LLC, for total with executive management regarding the procedures performed to fair consideration of $100m split between initial, deferred and contingent value the assets and liabilities acquired. The Committee noted the use payments (See Note 31 for further details). There is judgment in ofexternal valuation experts in order to form the necessary judgments. determining the valuation of the intangible assets and associated Theexternal auditor provided the Audit Committee with details of the goodwill with the acquisition. audit work performed to assess that the assets and liabilities are held at fair value. The Audit Committee was satisfied that the assumptions used were appropriate and that the assets and liabilities are valued at fair value. Inventory net realisable value, which was a significant risk in the Annual Report & Accounts 2021, is no longer considered a significant risk bytheAudit Committee given strengthening demand and subsequent impact on expected utilisation of inventory. It is now a focus area asoutlinedbelow. Other judgments and estimates The Audit Committee considered other areas of focus where judgments and estimates have a significant effect on the amounts recognised in the 2022 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 not covered by significant risks such as inventory net realisable value, related reporting period from the Group Financial Controller. In addition, going concern and viability, goodwill impairment assessment, the Audit Committee received a tax memorandum paper for the related retirement benefits, leases and tax (excluding provisions for uncertain reporting period from the Group’s Head of Tax. tax which is a significant risk). 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. 105SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / DIRECTORS’ DUTIES / AUDIT COMMITTEE REPORT CONTINUED Presentation of results The approval of the Audit Committee must reasonable and informed third party would The Board presents adjusted key measures of beobtained before the External Auditor is conclude that the provision of this service would profit, in addition to reported measures, where engaged to provide any non-audit services not impair KPMG's integrity or objectivity for items are significant in size and either they do and these services are limited to activities anyof the impacted financial years. not form part of the trading activities of the which feature on the approved Permitted Policy on tendering Group or their separate presentation enhances Non-Audit Services list. The total fees for In order to maintain auditor independence understanding of the underlying financial non-audit services shall be limited to no more andcomply with FRC, EU guidance and the performance. The Audit Committee assessed than 70% of the average of the statutory provisions of the CMA Order 2014 on audit the presentation to ensure a fair and balanced auditfee for the Company, of its controlled tendering, the Group undertook a formal tender treatment of what is and is not included as undertakings and of the consolidated Financial of its external audit during the first half of 2016, anadjusting item. Statements paid to the External Auditor in led by the Audit Committee. The appointment thelast three consecutive financial years; The Audit Committee considered the accounting ofKPMG LLP as the Group External Auditor for • Other services may not be provided where policy applied to exclude adjusted items by the financial year commencing 1 January 2017 precluded by law, regulation, or Ethical reference to guidance issued by the FRC and received approval by shareholders at the Annual Standards or where the Audit Committee the European Securities and Markets Authority General Meeting held in April 2017. The Audit believes that it would compromise audit (“ESMA”), and the need to ensure Committee reviews annually whether it is independence and objectivity; and anyalternative performance measures are appropriate to put the external audit out to • All proposed contracts for permitted services presented with equal prominence to reported tender and concluded in 2022 that it was not to be provided by the External Auditor require figures and on a consistent basis year-on-year. appropriate to do so. In 2022, the Group's the Audit Committee’s approval. Approval AuditPartner was rotated off the Senior account The Audit Committee discussed the forpermitted services below £0.050m has and anew Audit Partner appointed, in line with presentation of adjusted items with the External been delegated by the Audit Committee to regulatory rotation requirements. The Audit Auditor, and concurs with management’s view itsChairand below £0.025m to the Group Committee fully evaluates auditor performance that the presentation of items excluded from Finance Director. and independence annually but does not favour adjusted results provides useful disclosure to mandatory five-year rotation. In 2022, the level of permitted services aidthe understanding of the performance of undertaken by KPMG LLP was broadly theGroup. Assessment of external audit quality unchanged, as set out in the table below. andeffectiveness External audit TheAudit Committee considered that it was The Audit Committee reviewed the beneficial for the Company to retain KPMG LLP Independence of the External Auditor and effectiveness of the External Auditor and the for a small amount of permitted non-audit work policy on the provision of non‑audit services external audit process, including an assessment and audit related services, because of the firm’s To fulfil its responsibility regarding the of the quality of the audit, at its September knowledge of the Group and our requirements independence of the External Auditor, the Audit 2022meeting. that the Interim audit to be performed by the Committee reviewed: | | | External Auditor. The Audit Committee | In 2022, the effectiveness of the external audit | | --- | --- | --- | --- | | • a report from the External Auditor describing | | continues to closely monitor the nature and | process was again performed by assessing | | | the arrangements that had been made to | levelof such permitted non-audit work. | arange of key areas through a formal | | | identify, report and manage any conflicts of | | questionnaire that was individually distributed | | | interest and to maintain its independence; and | | toall the members of the Audit Committee and | Fees 2022 2021 • the FRC’s Audit Inspection Unit public report all other executive and non-executive Directors. Interim review £0.06m £0.05m on KPMG LLP. This framework required consideration of Auditor assessment of tax performance areas which needed future focus The Audit Committee’s policy in respect of incentives in Malaysia by the External Auditor, the areas where the services provided by the External Auditor and andcertification of External Auditor was meeting expectations itsPolicy on the Provision of Non-Audit Services expenses in France £0.01m £0.01m andthose where it was considered to have by the External Auditor are as follows: Total audit-related services: £0.07m £0.06m aspecialstrength. • The External Auditor is invited to provide Senior management received answers and services which, in its position as auditor, Non-audit related services: £nil £0.1m comments from all questionnaires and itmust or is best placed to undertake. This consolidated them into a report. The Audit includes formalities relating to borrowings, Apart from the matter noted below, KPMG have Committee used this report to facilitate a shareholder and other circulars, various other not performed any non-audit services during the debateat its September 2022 meeting and to regulatory reports and certain work in year ended 31 December 2022 or subsequently assist in assessing the level of external audit respectof larger acquisitions and disposals; | | | which are prohibited by the FRC Ethical | effectiveness. The Audit Committee discussed: | | --- | --- | --- | --- | | • The Company has a Policy on the Provision | | Standard. In early 2023, KPMG identified that a | the calibre of the external audit firm, the | | | ofNon-Audit Services by the External Auditor, | KPMG member firm had provided preparation | robustness of the external audit process and | | | which is in line with the recommendations | oflocal GAAP financial statement services over | degree of challenge to matters of significant | | | setout in the Financial Reporting Council’s | the period 2018 to 2022 to an entity which was | audit risk and areas of management subjectivity, | | | (“FRC”) Guidance on Audit Committees | a residual component and therefore not in scope | the degree of professional scepticism applied | | | (2016) and the requirements of the | for the Group audit. The services, which have | bythe External Auditor, the quality of delivery | | | FRC’sRevised Ethical Standard (2019) | been terminated, were administrative in nature | ofthe audit and the service provided by the | | | (the“Ethical Standard”). In line with these | and did not involve any management decision- | External Auditor, the Audit Partner, the audit | | | recommendations and requirements, the | making or bookkeeping. The work had no direct | approach and planning, the role of management, | | | external audit firm is only appointed to | or indirect effect on Senior plc's Consolidated | the communication by the Auditor to the Audit | | | perform a service when doing so would be | Financial Statements. KPMG sent a letter to the | Committee, the provisions of support for the | | | consistent with both the requirements and | Audit Committee explaining the cause, analysis | work of the Audit Committee by the Auditor, | | | the overarching principles of the Ethical | of implications and actions taken. The Audit | thesharing of insights and adding value by | | | Standard, and when its skills and experience | Committee reviewed the letter and following | theAuditor, the audit fee, the Auditor’s | | | make it the most suitable supplier. In addition, | discussions, have concurred with KPMG's | independence and objectivity, and the quality | | | the Ethical Standard requires an assessment | professional judgment, that based on the | offormal reporting by the Auditor to the Audit | | | of whether it is probable that an objective, | assessment of the breach, KPMG's integrity | Committee. Feedback about the effectiveness | | | reasonable and informed third party would | andobjectivity as Auditor has not been | of the external audit process from the local | | | conclude independence is not compromised. | compromised and believe that an objective, | management teams was also considered by | 106 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / DIRECTORS’ DUTIES / AUDIT COMMITTEE REPORT CONTINUED | theAudit Committee. The Audit Committee | Conclusion | | --- | --- | | concluded that the External Auditor had | As a result of its work during the year, the | | challenged the thinking of the Company and of | AuditCommittee has concluded that it has | | the Audit Committee on a number of significant | acted fully in accordance with its Terms of | | issues and had maintained its independence, | Reference. At its meeting held on 21 February | | notwithstanding the provision of an insignificant | 2023, the Audit Committee considered each | | non-audit service to a residual component of | section of the Annual Report & Accounts 2022, | | theGroup as discussed in the previous section. | and the document as a whole, as proposed by | the Company; it reached a conclusion and In July 2022, the Financial Reporting Council advised the Board that it considered the Annual (FRC) published its 2021/2022 Audit Quality Report & Accounts 2022 to be fair, balanced Inspection Reports (AQIR) for each of the andunderstandable and that it provided the largest audit firms, including KPMG. Five of the information necessary for shareholders to largest firms had no audits requiring significant assess the Group’s position and performance, improvements and the FRC had found KPMG’s business model and strategy. As the Chair of the individual audit inspections to have improved Audit Committee, I will be available at the 2023 significantly. The Audit Committee noted the AGM to answer any shareholders’ questions FRC was to continue to closely monitor KPMG about the work of the Audit Committee. LLP’s banking audits. Following completion of Aspreviously announced, I shall be retiring from the assessment process outlined above, the the Board of Directors following the conclusion Audit Committee concluded that it was satisfied of the 2023 AGM and Mary Waldner will with the effectiveness of the External Auditor; succeed me as Chair of the Audit Committee; as a consequence, the Audit Committee has Mary too will be attending the 2023 AGM. recommended to the Board that KPMG LLP bere-appointed as Auditor for 2023. Change of Audit Committee Chair | Specific areas referred to the | During 2022, I have been working with Mary | | --- | --- | | ExternalAuditor | Waldner who will be taking over from me as | | In 2022, the Audit Committee has not asked | Audit Committee Chair after the AGM in April | | theAuditor to explicitly review any specific areas | 2023. I wish her every success in the role and | | because the significant risks and other focus | thank everyone for their support over the | | areas considered by the Auditor where aligned | previous nine years. | with the significant risks considered by the Approval AuditCommittee. The Audit Committee was This Report was reviewed and approved by the satisfied with the results of the Auditor's Audit Committee and signed on its behalf by: resultsand findings. Giles Kerr Internal audit Chair of the Audit Committee The Audit Committee is required to assist 24 February 2023 theBoard in fulfilling its responsibilities relating to the effectiveness, resourcing and the plans ofthe Group internal audit function, which wereheaded by the Group Head of Risk &Compliance (now the Director of Risk and Assurance) throughout 2022. The Internal AuditManager reports to the Director ofRiskand Assurance. In 2022, as set out on pages 60 to 62, the Groupfurther strengthened its risk management procedures and these have been reviewed by the Audit Committee. Risk has been assessed on a top down and bottom up basis and the consideration of emerging risks has been formally added to the process. A risk-based programme of internal audit has been conductedin the year. In 2022, the internal auditprogramme was delivered through acombination of face-to-face and remote workingmethods. The Chair and non-executive Directors are actively encouraged to visit the Group’s operating businesses unaccompanied by executive Directors and such visits were able torecommence in 2022, following the lifting oftravel restrictions imposed by governments during the pandemic. Such visits enable the Directors to meet the local management teams and employees and also undertake site tours to review matters including production methods, health and safety and the status of internal audit findings. These visits are viewed by the Audit Committee as making a positive contribution tothe internal control framework. 107SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / REMUNERATION: CHAIR’S ANNUAL STATEMENT ## REMUNERATION ## CHAIR’S ANNUAL ## STATEMENT term incentive plan. Having carefully considered ## REMUNERATION REPORT: shareholder feedback, current market conditions ## ANNUAL STATEMENT and the stage of recovery of the business, we continue to believe that it is more important at ## FROM THE CHAIR OF THE this stage of our rebuilding to incentivise the executive Directors on delivering the core ## REMUNERATION financial performance of EPS, ROCE, Free Cash ## COMMITTEE Flow and TSR. Part of our thinking is that it is clear from past and current performance, that our sector-leading Environmental, Social and Dear Shareholder Governance (ESG) metrics and progress has I am pleased to present the Report of the been achieved without the need to incentivise, Remuneration Committee for the financial year due to our core values. We have therefore ended 31 December 2022. This statement sets decided once again not to introduce a out the work of the Committee during the year sustainability metric for incentives, but we ## “The implementation of our and provides the context for the decisions taken. willcontinue to keep this matter underreview. ## Remuneration Policy seeks Remuneration is linked to our strategy Senior’s performance during 2022 and operational performance ## to motivate and support As explained in the Chair’s Statement and the Senior’s vision is to be a trusted and Group Chief Executive Officer’s Statement, ## outperformance.” collaborative high value-added engineering and Senior has continued to make good strategic, manufacturing company producing sustainable operational and financial progress, with strong Celia Baxter growth in operating profit, free cash flow and delivery across the Group. This is reflected in Chair of the Remuneration Committee shareholder value. significantly improved profitability, excellent free Our Remuneration Policy (“Policy”) and cash flow generation, further strengthening of practices support this vision, with our bonus the balance sheet and improved its sector- plans incentivising earnings growth and free leading sustainability progress. This has been cash flow, and our long-term plans rewarding achieved while navigating through the impact of the creation of shareholder value, earnings the pandemic, the disruption and deglobalisation growth and return on capital. We regularly of the supply chain, exacerbated by the conflict consider the alignment of our performance in Ukraine and the consequent energy crisis. metrics with the business strategy. Following Keyheadlines include: feedback from some of our shareholders we • the Group’s revenue increased by 20% continue to include ROCE as a third measure (on a constant currency basis); within our LTIP for awards granted from 2021 • adjusted operating profit increased by 285% onwards. This recognises the need to build the (on a constant currency basis); business back to healthy returns and brings • the Group’s adjusted operating margin consideration of capital deployment into increased by 250 basis points, to 3.4% for sharperfocus. thefull year; Sustainability is a key element of our strategy, • adjusted earnings per share increases by and the Board continues to be satisfied with 2,465%, to 4.36 pence; and theongoing progress of the Group in this area. • the Group generated excellent free cash flows Senior was the first company in its sector to of £27.7m, double that of the prior year. setscience-based greenhouse gas emission | reduction targets, committing to net zero | The restructuring of the Group to meet our | | --- | --- | | targetsand our health and safety performance | strategy and purpose continued in a focused | | isexcellent. Although our Policy allows the | manner with the acquisition of Spencer | | Committee to include in the bonus, strategic | Aerospace, as well as an ongoing review of | | measures limited to 25% of the bonus | theportfolio within the Group, and continued | | opportunity, this facility has not been used nor | investment in technologies for emissions | | have we included an ESG target within the long | reduction and environmental efficiency. | 108 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / REMUNERATION: CHAIR’S ANNUAL STATEMENT | Consultation with stakeholders | For the Annual Bonus Plan, we set Adjusted | Awards made under the LTIP in 2020 were | | --- | --- | --- | | duringthe year | EPS and Free Cash Flow targets in January | subject to Adjusted EPS and TSR performance | | | 2022 which were viewed as appropriately | measured over three years up to the end of | Consultation with employees regarding challenging. The proportion of bonus related to 2022. Unfortunately, the Adjusted EPS and the executive remuneration the achievement of EPS targets and Free Cash TSR performance was below threshold as a During 2022, Ionce again consulted with Flow targets remained unchanged from 2021 result of the impact of the COVID pandemic employees by holding a video conference with 60% and 40% respectively, reflecting the onSenior's markets and customers, and representatives from Senior’s six UK operating continued importance of earnings growth therefore there was no vesting of this award. businesses. Wereminded them of the andFree Cash Flow to thebusiness. structureof our Board of Directors’ pay and The Committee is satisfied that the above explained the outcome of the AGM voting on The Committee retains an overriding discretion outcomes were a fair reflection of the the Remuneration Policy and Remuneration in relation to the amount of bonus it awards performance of the Company over the relevant Report. We asked them if they thought that notwithstanding any formulaic calculations performance periods for the incentive schemes. ourexecutive Directors should have ESG andtargets. The targets are disclosed in the The Committee did not have to exercise any targetslinked to their bonus, any suggestions Annual Report on Remuneration on page 123. discretion in agreeing the outcome of the they hadfor changes to the remuneration policy incentive plans and no adjustments were made which would be subject to shareholder vote LTIP awards were granted to both executive relating to the acquisition of Spencer Aerospace in2024 and their views on the clarity of the Directors and senior management and are nor as a consequence of the impact of the Remuneration Report within the Annual Report. subject to the satisfaction of challenging pandemic on the Group's ability to meet its The consensus view was that they would be three-year targets linked to Adjusted EPS LTIPtargets. supportive of introducing an ESG element within growth, relative TSR and ROCE to align with the remuneration of the executives. There were ourbusiness strategy and due to the importance The current economic environment and no suggestions for remuneration policy change, of building the business back to healthy levels the wider workforce’s remuneration and it was commented that the Remuneration ofreturns. The executive Directors' LTIP awards Recognising the impact of high rates of inflation, Report was clear and well laid out. We will were subject to a two-year holding period on Senior has taken steps to help the broader continue to run these sessions in the coming vested awards and the enhanced malus and workforce including salary settlements that year as we are keen to get input from our clawback conditions. The LTIP awards to the reflected regional costs of living pressures. employees in thisarea. Group Chief Executive Officer and the Group Theimpact of this has been particularly felt Finance Director were at a level of 150% of byour more junior employees and therefore This was the fourth year of running employee basic salary. As a matter of best practice, before although approaches vary between businesses, focus groups. In 2021, we were unable to travel finalising the LTIP awards, the Committee these employees have been targeted for higher to the US when we had planned due to travel considered the movements in the share price salary increases or other initiatives such as: restrictions and therefore, we focused on the UK since the beginning of 2021 financial year. As operations only. In 2022, the Group HR Director the share price had increased over the period, • Introducing or extending bonus plans; and I have undertaken a further 15 focus groups itwas felt appropriate to grant the LTIP awards • One-off special ‘cost of living’ payments; and at four of our West Coast US locations, together to the executive Directors based on the normal • Support with travel costs. with four focus groups in Germany, thereby percentage of salary of 150% of basicsalary. meeting and talking to over 200 people from In addition, there were changes made for the across section of each business. There were Incentive scheme outcomes for 2022 benefit of the wider workforce, such as: noquestions raised related to executive pay. After the end of the financial year, the • Offering an increased level of pension Committee reviewed the extent to which Consultation with shareholders contributions to the majority of the thetargets under the Annual Bonus Plan had As previously reported, following extensive UKworkforce; been achieved. In considering the outcome, consultation with major shareholders and the • Introducing a more flexible approach to theCommittee took into account the ongoing major governance agencies during 2021, the working hours; and performance of the management team who executive Directors offered and the Committee continue to: • Promoting employee assistance programmes agreed that the alignment of their pension and wellbeing initiatives. | contributions to that available to the UK | • lead the Group's recovery of profitability | | | | --- | --- | --- | --- | | workforce, would be brought forward to the | | andhealthy revenue growth; | Implementation of the Policy for 2023 | | endof 2022. This has now been implemented. | • manage efficiently and diligently the | | The basic salaries of the Group Chief Executive | | | | pressuresacross the business due to supply | Officer and Group Finance Director were | During 2022, I have undertaken a number chain disruptions and the energy crisis; increased by 5.4% and 5.5% respectively ofdiscussions regarding executive • reshape the structure and strategy of the witheffect from 1 January 2023. Typically, remunerationand will continue to do so with Group moving forward; payof employees at our UK operations individual shareholders as per their request. • maintain liquidity; increased by 6% or higher, depending upon Further in early 2023 I have consulted our skills and geographic location. majorshareholders and the major governance • lead the sector in sustainability progress agencies with regard to the implementation andcommitments; and As previously reported, the pension | ofour 2023 Long Term Incentive which I detail | • invest in technology to ensure that the | | contributions of the executive Directors were | | --- | --- | --- | --- | | in the relevant section below. We listened to | | business and its customers meet carbon | reduced from 1 January 2023 to 15% which | | theviews of shareholders and have made | | reduction targets. | aligns with the pension contribution available | | changes to our proposals to take account | | | tothe majority of the UK workforce. | The Committee decided that the annual bonus oftheirfeedback. outturn was appropriate taking into Executive Directors’ remuneration 2022 consideration the attainment of continued cash generation within the business, maintaining the The basic salaries of the Group Chief Executive savings post-restructuring, and further progress Officer and Group Finance Director were in meeting sustainability targets. Therefore, the increased by 3.15% and 4.99% respectively executive Directors’ bonus awards for the year with effect from 1 January 2022, broadly shall be 100 % of the maximum bonus inlinewith the increase applied to the wider opportunity (representing 125% of the 2022 workforce. In line with the Remuneration Policy, base salary), of which one third will be the executive Directors were eligible for a deliveredin shares deferred for three years maximum bonus equivalent to 125% of basic andtwo thirds will be delivered in cash. salary, payable subject to the satisfaction of performance targets linked to Adjusted EPS andFree Cash Flow targets. 109SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / REMUNERATION: CHAIR'S ANNUAL STATEMENT CONTINUED # **LTIP 2023** Senior's markets have been impacted by a number of external events since the grounding of the Boeing 737 Max, the effects on profitability have been huge. We remain confident in the resilience and recovery of these markets and in our ability to recover profitability from our products and technology over the medium term. This rationale was the reason behind why the Board rejected the Lone Star bid as it was not good value for our shareholders. In order to deliver on this commitment we need to retain and motivate the leaders through this key period of recovery. Senior has a decentralised business model, comprised of discrete business units run by senior managers each with their own profit and loss account. These senior managers are key to our success and to meet our aspirations we will require a stable and highly motivated leadership team. The LTIP is an important tool to achieve this, ensuring the ongoing recovery is built on and outperformance delivered. For the reasons set out above, the Committee intends to provide a special long-term incentive to drive material outperformance through the next stage of the recovery, by enhancing the LTIP for 2023 by granting awards at higher than normal levels to all participants in the LTIP (approximately 50 senior leaders), with awards granted at a value that will typically be one-third higher than granted in 2022. For the executive Directors, this means they will receive LTIP awards at a level of 200% of basic salary, up from the normal level of 150%. The Committee appreciates that an LTIP award at a level higher than normal must be accompanied by particularly challenging and stretching performance targets. For the 2023 award, we have decided to retain the same overall construct in our plan design, i.e. using three equally-weighted performance metrics: ROCE, relative TSR and adjusted EPS. Targets for each metric will be measured based on performance up to the end of the financial year ending 31 December 2025, with a range of targets from threshold to maximum. For the amount of each award above the normal grant level, we have incorporated additional "super-stretch" targets. Participants will therefore only receive the full benefit of their enhanced award if performance is delivered above and beyond what would be required in normal circumstances, as follows: - ROCE – The maximum of the enhanced award will vest only in the event of ROCE in 2025 being at a level materially higher than our stated target of 13.5% over the medium term. Threshold for vesting will require achieving 12.5% ROCE and maximum will require achieving 17.0% ROCE. - Relative TSR – Our approach to measuring TSR against a broad group of FTSE 350 companies will remain unchanged. Threshold for vesting will continue to require median performance against the peer group. For maximum vesting of the enhanced award, we will require upper quintile (rather than upper quartile) performance against the peer group. - Adjusted EPS – We will assess this based on the absolute level of adjusted EPS reported in 2025. Threshold for vesting will be adjusted EPS of 11.77p and maximum vesting will be at 18.50p, more than quadrupling adjusted EPS, compared to 2022. The Committee remains confident that a mix of ROCE, relative TSR and adjusted EPS provides a balanced approach to measuring performance over the next three-year period which aligns with Senior's strategy for recovery and growth. We have again reflected on the potential use of a specific sustainability measure, recognising the expectations of some investors in this space. Sustainability is central to the strategy of the business and taken very seriously by the executive Directors and other senior leaders, and we remain of the view that Senior's sector-leading ESG performance demonstrates that we do not need to include an explicit ESG target within the incentive schemes to ensure appropriate focus on these matters. As a result, we are not changing our approach for 2023 but we will consider this again later in the year as we review the Remuneration Policy ahead of its renewal at the AGM in 2024. We have also considered the LTIP proposal, and executive Directors' remuneration more broadly, very carefully in the context of the remuneration of the wider workforce. As noted above, a key feature of the proposal is its application to all LTIP participants, ensuring consistency across the senior executive population. Given Senior's decentralised nature, it is important that we align all leaders with a consistent award structure and set of targets which focuses them on the performance of the overall Group. More broadly, the Committee has reflected on the specific challenges facing the wider workforce in an environment when inflation has returned and many are experiencing cost-of-living pressures, as outlined above. The Remuneration Committee believes that the enhanced award is in the best interests of the Group and its shareholders. The Committee retains the discretion to adjust the level of vesting if it considers the outcome to be anomalous or is not reflective of the underlying performance of the Group over the period, taking into account the resilience of the markets in which Senior operates and trends in the underlying equity markets. # **Annual bonus plan 2023** Having considered the priorities for the year we will be maintaining the same bonus performance conditions and weightings as in 2022: Adjusted EPS (60% weighting) and Free Cash Flow (40% weighting). The Committee has set targets that are both stretching and challenging in the current environment and retains an overriding discretion in relation to the amount of bonus it awards not withstanding any formulaic calculations and targets. We also have malus and clawback arrangements in place. At the AGM in April 2023, shareholders will be asked to vote on the Annual Remuneration Report. I hope that the decisions the Committee has taken in respect of 2022 will have your support. # **Change of Remuneration Committee Chair** During 2022, I have been working with Barbara Jeremiah who will be taking over from me as Remuneration Committee Chair after the AGM in April 2023. I wish her every success in the role and wish to thank everyone for their support over the previous nine years. # **Celia Baxter** Chair of the Remuneration Committee 110 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / 2022 REMUNERATION REPORT AT A GLANCE ## 2022 REMUNERATION REPORT ## AT A GLANCE Overview of our remuneration framework for 2022 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: | Rewards achievement against annual performance objectives: | | --- | --- | | Adjusted EPS 60% | • Maximum bonus is 125% of salary | | Free Cash Flow 40% | • 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: Supports the Company’s longer-term strategic aims to create sustainable growth in shareholder value andtoincentivise, motivate and retain senior talent: Adjusted EPS (33.3%) TSR (33.3%) • Maximum award is 200% of salary and normal awards are 150% of salary Return on Capital Employed (33.3%) • 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 116 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 Achieved (% of Annual bonus Target Actual maximum) Performance condition Free Cash Flow – full year £6.0m £27.7m 100% (1) Adjusted EPS – full year internal target 2.91p 3.88p 100% Bonus award to Group Chief Executive Officer and Group Finance Director: 100% of maximum (1) Adjusted EPS is measured on a constant currency basis to reduce the impact of exchange rate movements on bonus outcomes Long-Term Incentive Plan (2020 award) Targets (threshold – maximum) Actual Adjusted EPS (50%) 13.5p (minimum threshold) to 16.5p (maximum 4.36p (below threshold) threshold) for the final Financial Year of the three-year performance period Total Shareholder Return (50%) TSR ranking: 50th percentile (minimum threshold) 24th percentile (below threshold) to75th percentile (maximum threshold) Targets for the 2020 Awards were not achieved and therefore the awards shall lapse in full. 111SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / 2022 REMUNERATION REPORT AT A GLANCE CONTINUED Application of Remuneration Policy The chart below shows how the composition of each of the executive Directors’ packages varies at different 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 3,500 3,18 0 Fixed pay Salary is the 2023 basic salary 3,000 The value of Benefits and Pension is taken from the single total figure of remuneration for 2022 2,500 Annual Nil 62.5% of 2022 125% of 2022 2,162 bonus basicsalary basicsalary 45% 2,000 Long-term Nil 25% vesting under 100% vesting under share the LTIP (i.e. 25% the LTIP (i.e. 100% 1,419 1,500 1,364 awards of(200% x 2023 of (200% x 2023 45% | 22% | | | | | basicsalary)) and | basic salary)) and | | --- | --- | --- | --- | --- | --- | --- | | | 27% | 49% | | 962 | | | | | | | 925 | | set out at face value, | set out at face value, | 1,000 26% 722 22% assuming no share assuming 50% share 49%27% 488 26% price growth or price growth and no 500 81% 43% 23% 41% dividend. dividend. 82% 43% 23% 42% 0 Below Target Max. Actual Below Target Max. Actual Target Target Group Chief Executive Officer Group Finance Director Salary Long-Term Share Awards Benefits and Pension Long-Term Share Price Growth Annual Bonus Changes made in 2022 There were no changes to the Remuneration Policy in 2022. The Pension section of the Remuneration Policy was changed in 2021 in line with shareholder feedback. In accordance with the changes made in 2021 to the Pension section of the Remuneration Policy, the pension contributions orpension allowance for executive Directors were reduced from the end of 2022 to 15% which aligns with the pension contribution available to the majority of the UK workforce. The details of the full Remuneration Policy are for ease of reference is laid out on pages 114 to 116. About this Report The Report on Remuneration on pages 119 to 128 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 112 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 # 2022 REMUNERATION REPORT: POLICY GOVERNANCE / 2022 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 evolving expectations of our shareholders and stakeholders, which included pension alignment and post-employment shareholding provisions. 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. We continue to believe that it is more important at this stage of our rebuilding to incentivise the executive Directors and senior managers on delivering the core financial performance of EPS, ROCE, Free Cash Flow and TSR. We have therefore decided once again not to introduce a sustainability metric for incentives, as it is clear from past and current performance, that our sector-leading Environmental, Social and Governance (ESG) metrics and progress has been achieved without the need to incentivise; rather it is something driven by our core values, but we will continue to keep this matter under review. ## 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 LTIP 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 formulae 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 112 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, executive management and employees (whilst ensuring potential conflicts of interest are suitably managed), in the context of the evolving 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. ## Policy for executive Directors The Policy which was approved by shareholders at the 2021 AGM can be found on page 114. Following shareholder feedback after the 2021 AGM, the Pension section of the Policy was updated to bring forward the alignment of the pension contributions or pension allowance for executive Directors with the majority of the UK workforce to the end of 2022. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 113 GOVERNANCE / 2022 REMUNERATION REPORT: POLICY CONTINUED Purpose and link | Element | 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 effect 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 | regardto the basic salary | awarding increases | | | | and the responsibilities | | similarcharacteristics and | percentage increases taking | | | | | of the role | | sector 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 | | | • Details of the financial | | | | of bonus in deferred | | payablefor achieving | | performance targets will | | | | shares provides | | demanding 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 of | | | | assists with retention | | aresubject to forfeiture by | | 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 • Different performance thethreshold and conditions may be set when maximum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 exceptional circumstances inthe event of material for executive Directors misstatement, gross • The Committee has the misconduct, serious discretion to adjust bonus reputational damage targets or outcomes if deemed orcorporate failure and, appropriate, where the bonus ifrequired, over any outcome feels perverse. In unvestedLTIP awards practice, this will only be used in exceptional circumstances for executive Directors 114 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / 2022 REMUNERATION REPORT: POLICY CONTINUED Purpose and link | Element | 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 | | three-year performance period | | | | threshold target results in | | | | inshareholder value | | in 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 discretion in certain ofvesting in the event of circumstances to grant and/or material misstatement, settle an award in cash. In grossmisconduct, serious practice, this will only be used reputational damage or inexceptional circumstances corporate failure for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 | | | | | | | at the 2006 AGM and the | | no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 | | • From the end of 2022, the | | • N/A | | | | retirement benefits for | | participate in the Senior plc | | pension contributions or | | | | | the Group’s employees | | Group Flexible Retirement Plan | | allowances for executive | | | | | | | (Senior GFRP), a contract- | | Directors reduced to 15% | | | | | | | based, money purchase | | which aligns with the | | | | | | | pension plan and/or receive | | pension contribution | | | | | | | cash allowances | | available to the majority | | | | | | • Bonuses are not included in | | | of the UK workforce | | calculating retirement benefits • From 2020, any new executive directors will receive a pension contribution in line with that available to the majority of 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 115SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / 2022 REMUNERATION REPORT: POLICY CONTINUED Purpose and link Element 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 cap taxequalisation and 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 All targets are set on a sliding scale. The Committee reviews the annual Salaries for newly appointed executive directors will be set to reflect their bonus measures set for all the Company’s senior executives (not only skills and experience, the Company’s intended pay positioning and the theexecutive Directors) every year in order to ensure that they are market rate for the role. alignedwith the Company’s strategy and annual goals and to ensure thatbonus arrangements amongst the Company’s senior executive Where it is appropriate to offer a below median salary initially, the teamare consistent. Committee will have the discretion to allow phased salary increases overtime for newly appointed directors, even though this may involve The annual bonus may include a mix of financial and non-financial increases in excess of the rate for the wider workforce and inflation. measures reflecting the key annual priorities of the Group. The financial metrics currently include two of the Company’s KPIs: Free Cash Flow, Benefits will be provided in line with those offered to other employees, which is a key measure of the business’s ability to fund future with national or international relocation expenses/arrangements (e.g. acquisitions; and Adjusted EPS, which will reflect the Group’s ability schooling, tax equalisation) provided for if necessary. toexpand into new regions and product markets and increase the profitability of the existing operations. Adjusted EPS is measured on The aggregate incentive offered to new recruits will be no higher than aconstant currency basis to reduce the impact of exchange rate thatoutlined in the Policy on pages 114 to 116. The Remuneration movements on bonus outcomes. If non-financial measures are selected, Committee has flexibility to grant share awards of up to 200% of salary these may include reference to the Group’s sustainability, safety and upon recruitment. Different performance measures may be set initially organisational goals. forthe annual bonus and LTIP, taking into account the responsibilities ofthe individual, and the point in the financial year that they joined. The Free Cash Flow measure applies to 40% of the total bonus award, and the Adjusted EPS measure applying to the remaining 60% of the Current entitlements (benefits, bonus, share schemes) may be bought totalbonus, reflecting the importance of both measures to the running out on terms that are no more favourable than a like-for-like basis ofthe Group. (withacomparable time horizon, fair value and subject to performance conditions). Existing incentive arrangements will be used to the fullest The performance measures used in the LTIP awards consist of Adjusted extent possible, although awards may also be granted outside these EPS, TSR and ROCE; with ROCE being added as a third performance schemes if necessary and as permitted under the Listing Rules. In the measure for awards granted from 2021 onwards, given its importance in case of an internal hire, any outstanding variable pay awarded in relation the M&A evaluation process, capital investment decisions and customer tothe previous role will be allowed to pay out according to its terms of bid evaluations. In line with the Policy, the Committee retains the ability grant (adjusted as relevant to take into account the Board appointment). toamend performance measures to reflect changes in market conditions and business strategy. Rationale behind performance metrics and targets The performance-related elements take into account the Company’s risk The targets will be reviewed prior to each grant by taking account policies and systems and are designed to align the Directors’ interests ofinternal and external expectations. The targets for awards granted with those of shareholders. Variable pay elements aim to reward under this Remuneration Policy are set out in the Annual Report on executive Directors for performance at the highest levels and, as such, Remuneration. the Committee aims to set targets that are both stretching and achievable. 116 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / 2022 REMUNERATION REPORT: POLICY CONTINUED Relationship between executive Director and employee pay Policy on outside appointments The Remuneration Policy for the executive Directors is designed taking The Remuneration Committee believes that it is beneficial both for the into account the policy for employees across the Group as a whole. There individual and the Company for an executive Director to take up one are some differences in the structure of the Remuneration Policy for the external non-executive appointment. Fees paid for the appointment executive Directors and other senior employees, which the Remuneration maybe retained by the executive. Committee believes are necessary to reflect the different levels of Executive Directors’ service agreements and loss responsibility of employees across the Company and reflect different ofofficepayments market norms for different roles. The key differences in remuneration policy between the executive Directors and employees across the Group The table below summarises the key provisions of each executive are the increased emphasis on performance-related pay and the inclusion Director’s contract: of a share-based long-term incentive plan for executive Directors. Provision Detailed terms Executive Directors are provided with a competitive package of benefits Employment David Squires – 5 January 2015 that includes (depending on role) participation in the Group’s occupational contract dates Bindi Foyle – 3 May 2017 pension arrangements, and/or receipt of pension allowance, provision of Notice period 12 months from both the Company and the afully expensed car or car allowance, private medical insurance, life executive Director insurance and income protection. Termination payment Contracts may be terminated without notice The majority of senior managers are eligible to participate in annual bonus bythe payment of a sum equal to the sum of arrangements with challenging targets tied to the performance of their salary due for the unexpired notice period, and operating business, Division and, for the most senior executives, the the value of pension contributions and other Group’s performance. benefits such as use of company car, lifecover, income protection and private healthcare Long-term incentives are provided to the most senior executives and those anticipated as having the greatest potential to influence There are no provisions in the agreements, or performance levels within the Company. A lower aggregate incentive otherwise, for additional termination payments quantum operates below the senior executive level, with levels driven Payments may be made in monthly instalments bythe impact of the role and market comparatives. and, in these circumstances, there is a Awards under the Restricted Share Award Plan, a deferred share award requirement for the Director to mitigate loss plan without performance conditions, are a retention tool and are made Change of control There are no enhanced provisions in relation toselected individuals who do not benefit from other long-term incentives toa change of control but are considered to have significant potential or are key contributors. In order to encourage wider employee share ownership, the Company Copies of the executive Directors’ service contracts are available from operates a Sharesave Plan in which employees in the UK, North America theGroup Company Secretary at the Company’s Registered Office during and continental Europe, including executive Directors, may participate. normal business hours. The Committee’s policy in the event of early termination of employment is set out below. How employees’ pay is taken into account when setting executive Director remuneration The Committee also reviews the salaries of corporate, divisional and senior operational managers and therefore is fully cognisant of pay levels in the Group when determining the pay of the executive Directors. In addition, the Committee’s policy is that salary increases for the executive Directors and senior executives should not normally be greater than the general level of increases awarded to other senior managers in Europe and North America, other than when an executive changes role orwhen it is necessary in order to ensure levels of remuneration remain market competitive. Recognising the impact of high rates of inflation, Senior has taken steps tohelp the broader workforce including salary settlements that reflected regional costs of living pressures. The impact of this has been particularly felt by our more junior employees and therefore although approaches vary between businesses, these employees have been targeted for higher salary increases. effect from 1 January 2023. Typically, pay of employees at our UK operations increased by 6% or higher, depending upon skills and geographic location. As previously reported, the pension contributions of the executive Directors were reduced from 1 January 2023 to 15% which aligns with the pension contribution available to the majority of the UK workforce. As laid out in the Remuneration Committee Chair’s Annual Statement, theCompany consulted with employees in 2022 regarding executive Directorremuneration. 117SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / 2022 REMUNERATION REPORT: POLICY CONTINUED Policy on payment for departure from office 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: Component Voluntary resignation Death, ill health, disability, retirement Departure on of pay or termination for cause excluding redundancy 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 of any termination agreement theindividual on a date determined by the Committee LTIP share Unvested LTIP share Subject to the discretion of the Committee, unvested LTIP awards awards will lapse share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 formulaic The Remuneration Committee considers shareholder feedback outcomes; receivedin relation to the AGM each year and guidance from shareholderrepresentative bodies more generally. In 2020, major • determining “good leaver” status and the extent of vesting in the case shareholders were consulted on the updating of the Remuneration of the LTIP and deferred shares; Policyand its implementation for the 2021 financial year. Prior to the • determining the extent of vesting in the case of the LTIP in the event 2021AGMthere was further interaction with major shareholders ofa change of control; regarding theRemuneration Policy and Remuneration Report. Following • making the appropriate adjustments required in certain circumstances the AGM held in April 2021, major shareholders were consulted on the (e.g. rights issues, corporate restructuring events, variation of capital AGM voting of the Remuneration Policy and Remuneration Report and special dividends); resolutions. As a result of the consultation, an amendment was made • varying the performance conditions to apply to LTIP awards if an tothe Remuneration Policy regarding pension alignment. Consultation eventoccurs which causes the Committee to consider that it would with shareholders has always been constructive. beappropriate to amend the performance conditions, provided the Committee considers the varied conditions are fair and reasonable During 2022, I have undertaken a number of discussions regarding andnot materially less challenging than the original conditions would executive remuneration and will continue to do so with individual have been but for the event in question; shareholders as per their request. Further in early 2023 I have consulted our major shareholders and the major governance agencies with regard • undertaking the annual review of weighting of performance tothe implementation of our 2023 Long Term Incentive which I detail in measures,and setting targets for the annual bonus plan and LTIP the relevant section below. We listened to the views of shareholders and fromyear to year; have made changes to our proposals to take account of their feedback. • adjusting bonus and LTIP targets or outcomes if deemed appropriate, for example to take account of material M&A activity or other Discretions of the Remuneration Committee exceptional circumstances when they arise; and The Committee operates the Group’s various incentive plans according to • adjusting bonus targets or outcomes if deemed appropriate, where their respective rules and in accordance with HMRC rules where relevant. thebonus outcome feels perverse. To ensure the efficient administration of these plans, the Committee mayapply certain operational discretions. These include the following: • selecting the participants for the annual bonus plan and LTIP awards; • determining the timing of grants and/or payments; • determining the quantum of grants and/or payments (within the limits set out in the policy table commencing on page 114); • adjusting the constituents of the TSR comparator group; 118 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 # 2022 REMUNERATION REPORT: ANNUAL REPORT ON REMUNERATION GOVERNANCE / 2022 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 | April 2023^{(1)} | | Susan Brennan | January 2016 | January 2022 | December 2024 | | Barbara Jeremiah | January 2022 | January 2022 | December 2024 | | Giles Kerr | September 2013 | September 2019 | April 2023^{(1)} | | Rajiv Sharma | January 2019 | January 2022 | December 2024 | | Mary Waldner | December 2021 | December 2021 | November 2024 | (1) In September 2022, Celia Baxter and Giles Kerr reached the ninth anniversary of their respective appointments to the Board. Both Directors are to retire from the Board at the conclusion of the ASM in April 2023, at which time Barbara Jeremiah will become Senior Independent Director and Chair of the Remuneration Committee, and Mary Waldner will become Chair of the Audit Committee and the Director nominated for Employee Engagement. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 119 GOVERNANCE / 2022 REMUNERATION REPORT: ANNUAL REPORT ON REMUNERATION CONTINUED 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 Officer 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 Chair Committee may seek advice from external remuneration consultants of the Remuneration Committee and/or Group Chief Executive Officer, toensure that it is fully aware of comparative external remuneration as appropriate, determine the total individual remuneration package of practice as well as shareholder, legislative and regulatory developments. the Chair of the Board, each executive Director, and other designated The Committee also considers publicly available sources of information senior executives including bonuses, incentive payments and share relating to executive remuneration. options or other share awards; All advisers to the Remuneration Committee are appointed and instructed • approve the design of, and determine targets for, any performance by the Committee. During the year, the Committee was advised by related pay plans operated by the Company and approve the total KornFerry in relation to remuneration advice, LTIP performance annual payments made under such plans; monitoring and the provision of LTIP advice, and by FIT Remuneration • review the design of all share incentive plans for approval by the Board Consultants in relation to the provision of LTIP advice. During 2022, the and shareholders. For any such plans, determine each year whether Company incurred fees of £6,408 from Korn Ferry and of £8,784 from awards will be made and, if so, the overall amount of such awards, the FITRemuneration Consultants, and these costs were based on a individual awards to executive Directors, and other designated senior combination of hourly rates and fixed fees for specific items of work. executives and the performance targets to be used; and • oversee any major changes in employee benefits structures throughout The Committee does not have a formal policy of subjecting its the Group. remuneration consultants to a regular fixed-term rotation, although theCommittee remains cognisant of the need to seek objective advice Members and good value whilst also benefiting from the consultants’ knowledge The Remuneration Committee consists entirely ofthe Company. Other than described above, neither remuneration of non-executiveDirectors. consultants have other connections with the Company or its Directors. TheCommittee is satisfied that the advice it has received during 2022 Number of Number of hasbeen objective and independent. meetings during meetings (1) Member term attended Celia Baxter – Chair 5 5 Susan Brennan 5 5 Barbara Jeremiah 5 5 Giles Kerr 5 5 Ian King 5 5 Rajiv Sharma 5 5 Mary Waldner 5 5 (1) The full Committee met five times in 2022. In addition, authority was delegated to two members of the Committee, Celia Baxter and Ian King, to hold one additional meeting to confirm the granting and vesting of share awards. 120 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 ## Principal activities and matters addressed during 2022 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. In addition, authority was delegated to two members of the Committee, Celia Baxter and Ian King, to hold one additional meeting to confirm the grant and vesting of share awards. The table below shows the 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 and targets for the 2022 financial year. | | | 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 2022 financial year including finalisation of targets. Review and approve draft Remuneration Report. | Review gender pay gap reporting and CEO Pay Ratio. | | March | Confirmation of grants of LTIP, Deferred Bonus Awards and Restricted Share Awards. Confirmation of vestings of Deferred Bonus Awards and Restricted Share Awards. | | | September | | Discuss options relating to the existing share-based executive award plans, and current shareholder thinking and topical matters, including the use of ESG targets. | | 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 salary market data. Performance update on outstanding incentive and bonus awards. Discussion on 2023 LTIP and bonus targets; and associated shareholder consultation. Determine remuneration of Chairman. Review of Committee's Terms of Reference. | Review feedback from UK employee consultation. | ## Statement of voting at General Meeting At the AGM held on 21 April 2022, shareholder votes on the Directors' Remuneration Report were cast as follows: | | Voting | For | Against | Total | Withheld^{(1)} | Reason for vote against, (if known) | Action taken by Committee | | --- | --- | --- | --- | --- | --- | --- | --- | | Remuneration Report | Votes | 308,019,668 | 30,221,012 | 338,240,680 | 6,954,222 | See below | N/A | | | % | 91.07% | 6.93% | 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 2022 AGM concerning executive remuneration. A large proportion of the votes cast against the Remuneration Report related to a single large shareholder's objection to a Total Shareholder Return performance condition being included in the executive Directors' LTIP awards. A TSR performance condition has been used in executive Directors' LTIP awards for many years, in conjunction with the EPS and (since the 2021 awards) Return of Capital Employed performance conditions. The Remuneration Committee considers these performance metrics provide an appropriate balance of targets to properly incentivise the executives to deliver long-term value for shareholders. The Committee will continue to review the suitability of these and other potential performance conditions in advance of the granting of each year's LTIP awards. GOVERNANCE / 2022 REMUNERATION REPORT: ANNUAL REPORT ON REMUNERATION CONTINUED SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 121 GOVERNANCE / 2022 REMUNERATION REPORT: ANNUAL REPORT ON REMUNERATION CONTINUED Single total figure of remuneration (Audited information) The following table shows a single total figure of remuneration in respect of qualifying service for the 2022 financial year for each Director, together with comparative figures for 2021. 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) | | | | | | | | | | fees | and allowances | | | Bonus | | incentives | | lieu of pension | | remuneration | | | remuneration | | Total | | | £000s | | £000s | | £000s | | | £000s | | £000s | | | £000s | | £000s | £000s | 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2022 2022 2021 Executives David Squires 557 540 24 27 696 675 0 0 111 108 692 696 1,388 1,350 Bindi Foyle 379 361 12 22 474 451 0 0 76 72 467 474 941 906 Total remuneration 936 901 36 49 1,170 1,126 0 0 187 180 1,159 1,170 2,329 2,256 Non-executives Ian King (Chairman) 197 191 2 1 – – – – – – 199 – 199 192 Celia Baxter 73 71 – – – – – – – – 73 – 73 71 Susan Brennan 55 53 – – – – – – – – 55 – 55 53 (5) Barbara Jeremiah 55 – – – – – – – – – 55 – 55 – Giles Kerr 64 62 – – – – – – – – 64 – 64 62 Rajiv Sharma 55 53 – – – – – – – – 55 – 55 53 (5) Mary Waldner 55 4 – – – – – – – – 55 – 55 4 Total remuneration 554 434 2 1 – – – – – – 556 – 556 435 (1) Taxable benefits for executive Directors include the provision of a fully expensed company car or car allowance and private medical insurance. Taxable benefits for non-executive Directors are travel expenses. (2) Awards for the deferred share element of the Bonus in respect of 2022 performance will be granted following the announcement of the 2022 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 2022 results, is included in the Bonus figure and will beequivalent in value to one-third of the Bonus figure, namely £232,083 and £157,917 respectively. (3) The performance conditions attached to David Squires’ and Bindi Foyle’s 2020 LTIP Awards were not achieved, and this award will lapse in March 2023. Further details on theperformance conditions can be found on page 111. (4) 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 £2,696,061. (5) Mary Waldner was appointed to the Board on 1 December 2021 and her 2021 fee is the amount paid from that date. Barbara Jeremiah was appointed to the Board on 1January2022. 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 effect from 1 May 2020 and retained fees of £60,000 for the year ending 31 December 2022 (£59,205 for the year ended 31 December 2021). 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 affairs 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 2022 outlook, the Board agreed that the salaries and fees paid to the Directors would increase in 2022 as follows: 2022 2021 Percentage Fees £ £ change Chairman 197,000 191,000 3.14% Non-executive Director 54,500 53,000 2.83% 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% 122 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / 2022 REMUNERATION REPORT: ANNUAL REPORT ON REMUNERATION CONTINUED GOVERNANCE / 2022 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. For the purpose of valid comparison, the benefits and payments that had been made to one of the senior corporate managers who had retired in December 2021 and was not replaced in 2022, have been excluded from the prior year comparator. | 2022 | 2021 | | --- | --- | | Total | Total | | £000s | £000s | Short-term employee benefits 3,325 2,926 Post-employment benefits 55 42 Share-based payments 1,356 881 Total 4,736 3,849 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 2022 have been determined by Adjusted EPS and Free Cash Flow performance as set out inthe table below. The acquisition of Spencer Aerospace completed on 25 November 2022; the Committee determined that this acquisition had no material impact on the achievement of the maximum thresholds of the Free Cash Flow and Adjusted EPS targets and that no adjustment to the 2022 bonus payments was required. A summary of the measures, weightings and performance achieved is provided in the table below: 2022 2021 | | | | | | | Bonus | | | | | | Bonus | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | Maximum | | Percentage | | payable | | Maximum | | Percentage | | payable | | | | Actual | | bonus | of maximum | (% of 2022 | | | | bonus | of maximum | (% of 2020 | | | | | | | | | | | (1) | | | | | | (1) | | Threshold Target Maximum | achieved | achievable | | achieved | | salary) | | achievable | | achieved | | salary) | | Free Cash Flow targets – full year £4.0m £6.0m £15.0m £27.7m 50.00% 100% 50% 50.00% 100.00% 50% (2) Adjusted EPS targets – full year internal target 2.63p 2.91p 3.56p 3.88p 75.00% 100% 75% 75.00% 100.00% 75% Totals 125.00% 100% 125% 125.00% 100.00% 125% (1) When bonus is payable, this is paid two-thirds in cash and one-third in deferred shares. The deferred share element of the 2021 bonus was awarded on 8 March 2022 based on ashare price of £1.21 and shall ordinarily vest on the third anniversary of the award on 8 March 2024. The deferred element of any 2022 bonus shall be awarded following the announcement of the 2022 annual results in 2023 and the details disclosed in the 2023 Remuneration Report. (2) The internal Adjusted EPS target is calculated on a constant currency basis. Total pension entitlements (audited information) The 2022 single figure remuneration for pension benefits for David Squires and Bindi Foyle consisted of a cash allowance of £111,400 (2021 – £108,000) and £75,800 (2021 – £72,200) respectively, this being 20% of the respective base salaries. The pension contributions or pension allowance for executive Directors were reduced to 15% from the end of 2022 which aligns with the pension contribution available to the majority of the UK workforce. Further detail may be found on page 115 of the Remuneration Report: Policy section. 123SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / 2022 REMUNERATION REPORT: ANNUAL REPORT ON REMUNERATION CONTINUED 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 2020 LTIP award. Neither performance condition was achieved and therefore the 2020 LTIP awards shall lapse in full. Percentage Target Maximum of total award Performance condition (25%vesting) (100% vesting) Actual achieved Total shareholder return percentile ranking (50% of Award) 50th 75th 24th 0% Adjusted earnings per share for the final Financial Year of the Performance Period (50% of Award) 13.5p 16.5p 4.36p 0% Scheme interests awarded during the financial year (audited information) Percentage vesting Face value at threshold Number of Performance period Directors Scheme Basis of award £000s performance shares end date (1) David Squires LTIP Annual award 836 25% 690,495 31 December 2024 (1) Bindi Foyle LTIP Annual award 569 25% 469,834 31 December 2024 (1) The face value of the awards represented 150% of the executive Directors’ respective 2022 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 2021 and 2022. Conditional share awards granted in 2022 Conditional share awards granted in 2021 Threshold Maximum Threshold Maximum Performance condition (25% vesting) (100% vesting) Actual to date (25% vesting) (100% vesting) Actual to date Total shareholder return ranking 50th percentile 75th percentile 52nd percentile 50th percentile 75th percentile 98th percentile Adjusted EPS performance for the final Financial Year of the | | (2) | | (1) | | --- | --- | --- | --- | | performance period 10.05p 12.35p 4.36p | | 5.67p 7.5 6 p 4.36p | | | | (4) | | (3) | | Return on Capital Employed 10.0% 13.5% 4.7% | | 9.8% 11.0% 4.7% | | (1) Actual to date figure of 4.36p represents the Adjusted EPS during the first two years of the three-year performance period for the 2021 LTIP award. (2) Actual to date figure of 4.36p represents the Adjusted EPS during the first year of the three-year performance period for the 2022 LTIP award. (3) Actual to date figure of 4.7% represents the Return on Capital Employed during the first two years of the three-year performance period for the 2021 LTIP award. (4) Actual to date figure of 4.7% represents the Return on Capital Employed during the first year of the three-year performance period for the 2022 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 acquisition of Spencer Aerospace completed on 25 November 2022; the Committee reviewed the potential impact of the acquisition on the three performance targets for the outstanding LTIP awards: Total Shareholder Return; Earnings per Share; and, for the awards granted in 2021 and 2022, Return on Capital Employed, and agreed that the original targets for the outstanding LTIP awards should remain unaltered. 124 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / 2022 REMUNERATION REPORT: ANNUAL REPORT ON REMUNERATION CONTINUED GOVERNANCE / 2022 REMUNERATION REPORT: ANNUAL REPORT ON REMUNERATION CONTINUED Shareholder dilution Percentage of issued shares Discretionary Shares awarded as % of issued shares schemes 2.15%2.85% Headroom (maximum 5%) All schemes 3.57% 6.43% (maximum 10%) The Company complies with the dilution guidelines contained within The Investment Association Principles of Executive Remuneration. At 31 December 2022, awards outstanding and shares issued in the previous 10 years under the Senior plc 2005 Long-Term Incentive Plan (the 2005 LTIP), the Senior plc 2014 Long-Term Incentive Plan (the 2014 LTIP), and the 2006 Savings-Related Share Option Plan (the Sharesave Plan)) amounted to 3.57% of the issued ordinary share capital of the Company. At 31 December 2022, awards outstanding and shares issued in the previous 10 years under executive (discretionary) plans (the 2005 LTIP and 2014 LTIP) amounted to 2.85% of the issued ordinary share capital of the Company. During 2022, 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 awards and the deferred share element of the Bonus, 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 325,000 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 2022 of 125.2p (31 December 2021 – 147.03p). 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 31 | shares net of tax) at | | Share ownership | | | | | Total deferred | (1) Executive Directors December 2022) 31 December 2022 requirements met LTIP award Sharesave share award David Squires 889,776 809,003 No – 90.9% 1,891,412 0 355,940 Bindi Foyle 605,431 354,843 No – 58.6% 1,272,669 0 237,78 5 (1) The minimum thresholds were not reached for the two performance conditions attached to David Squires’ and Bindi Foyle’s 2020 LTIP awards over 482,832 shares, and322,782 shares respectively (included within their respective LTIP award figures above) and therefore these awards shall lapse in full in March 2023. 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 2022 | Shares purchased | | | persons) at | (1) 1 January 2022 during 2022 vested shares during 2022 31 December 2022 Executive Directors David Squires 512,125 73,230 73,230 35,000 620,355 Bindi Foyle 202,887 49,013 25,930 – 228,817 Non-executive Directors  Ian King 514,297 – – 300,000 814,297 Celia Baxter 31,653 – – – 31,653 Susan Brennan 5,900 – – – 5,900 (2) Barbara Jeremiah – – – 25,000 25,000 Giles Kerr 10,000 – – – 10,000 Rajiv Sharma – – – – – Mary Waldner – – – 10,000 10,000 (1) In 2022, the following gains were made by David Squires and Bindi Foyle: £90,122 and £60,319 respectively upon the vesting of the deferred share element of the Bonus 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 8 March 2022 of 123.07p. (2) Barbara Jeremiah was appointed to the Board on 1 January 2022. 125SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / 2022 REMUNERATION REPORT: ANNUAL REPORT ON REMUNERATION CONTINUED Performance graph Share price performance The closing middle market price of the shares at 31 December 2022 was 125.2p (2021 – 147.03p). During 2022, the shares traded in the range of111.0p to 152.1p. 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 16Dec 15Dec 14Dec 13Dec 12 Dec 17 Dec 21 Dec 22Dec 20Dec 19Dec 18 Remuneration of Group Chief Executive Officer (1) (2) 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 CEO single figure of total remuneration (£000s) 1,726 1,316 1,020 790 1,009 1,107 1,203 917 1,350 1,388 Annual variable element award rates against maximum opportunity (%) 65 54 14 31 79 75 58 40 100 100 Long-term incentive vesting rates against maximum opportunity (%) 100 91.8 21 0 0 0 28 0 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 2020 and 2021 and between 2021 and 2022 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. 2021 vs 2022 2020 vs 2021 Taxable | | | | benefits and | | | | | | | Taxable benefits | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Salary | | allowances Bonus Salary | | | | | | | and allowances Bonus | | | | | | Percentage | | | Percentage | | | Percentage | | Percentage | | | Percentage | | Percentage | | | | | (1) | | | (2) | | | | | (1) | | | | | | | change | | | change | | | change | | change | | | change | | change | Executive Directors David Squires 3.2% -12.3% 3.2% 0% 3.4% 150.0% Bindi Foyle 5.0% -44.3% 5.0% 0% 4.8% 150.0% Non-executive Directors Ian King 3.1% – – 0% – – Celia Baxter 2.1% – – 0% – – Susan Brennan 2.8% – – 0% – – (3) Barbara Jeremiah N/A – – N/A – – Giles Kerr 2.4% – – 0% – – Rajiv Sharma 2.8% – – 0% – – (3) Mary Waldner N/A – – N/A – – Senior plc Employees, excluding Directors 6.7% 7.0% 6.7% 3.3% 2.0% 158.6% (1) The Salary Percentage change figure also includes any merit increases awarded to Directors and employees. (2) Bindi Foyle’s Taxable benefits and allowances reflects the transition from having a car allowance to having a company car during 2022. (3) Mary Waldner was appointed to the Board on 1 December 2021 and Barbara Jeremiah was appointed to the Board on 1 January 2022. 126 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 Source: Refinitiv Eikon Datastream # 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, 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 benefits figures for the year ending December 2022 were calculated, and then reviewed to ensure that the selected best equivalents were reasonably representative. The modest change compared to prior year was mainly due to the increase in the number of employees receiving a bonus during 2022. | Year | Pay ratio | | | | | --- | --- | --- | --- | --- | | | Method^{(1)} | 25th percentile | 50th percentile | 75th percentile | | 2022 | B | 51 : 1 | 44 : 1 | 36 : 1 | | 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. | Year 2022 | 25th percentile | 50th percentile | 75th percentile | | --- | --- | --- | --- | | Base salary | £21,286 | £24,801 | £33,910 | | Total | £27,392 | £31,464 | £38,692 | # 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 2022 compared with the financial year ended 31 December 2021. | | 2022 £m | 2021 £m | Percentage change | | --- | --- | --- | --- | | Employee remuneration costs (excluding social security)^{(1)} | 234.7 | 198.9 | 18.0% | | Adjusted profit/ (loss) before tax | 20.1 | (1.9) | 1,158% | | Dividends paid | 1.2 | - | N/A | (1) The 2021 Employee Remuneration costs include those incurred by Senior Aerospace Connecticut during the period until its disposal in April 2021. # 2023 Remuneration (non-audited information) # Salaries and fees for 2023 Recognising the impact of high rates of inflation, Senior has taken steps to help the broader workforce including salary settlements that reflected regional costs of living pressures. The impact of this has been particularly felt by our more junior employees and therefore although approaches vary between businesses, these employees have been targeted for higher salary increases or other initiatives, more broadly described in the Chair's Annual Statement on page 108. When determining the 2023 basic salaries of the Group Chief Executive Officer and Group Finance Director, which were increased by 5.4% and 5.5% respectively, the Committee was cognisant of the increases applied to the wider UK workforce, which were typically 6% or higher, depending upon skills and geographic location. Although determined by the Board, rather than the Remuneration Committee, the 2023 fees for the Non-executive Directors were increased by 5.5% and had been determined after considering the increasing time commitment of the non-executive Directors, and the increases applied to the wider UK workforce, and to those for the executive Directors. The fees for the roles of the Chairs of the Audit and Remuneration Committees and for the Senior Independent Director were last increased in 2016. | | 2023 £ | 2022 £ | Percentage change | | --- | --- | --- | --- | | Executive Directors | | | | | David Squires | 587,000 | 557,000 | 5.39% | | Bindi Foyle | 400,000 | 379,000 | 5.54% | | Non-executive Directors^{(3)} | | | | | Chairman | 208,000 | 197,000 | 5.58% | | Non-executive Directors | 57,500 | 54,500 | 5.50% | | Chair of Audit Committee | 10,000 | 9,000 | 11.11% | | Chair of Remuneration Committee | 10,000 | 9,000 | 11.11% | | Senior Independent Director | 10,000 | 9,000 | 11.11% | | Director with responsibility for employee engagement^{(3)} | 6,000 | - | N/A | (1) No additional fees are payable for Committee membership. (2) The Committee considered the significant time commitment required of the non-executive Director with designated responsibility for employee engagement and determined that it would be appropriate for a fee of £6,000 p.a. be paid for this role with effect from 1 January 2023. GOVERNANCE / 2022 REMUNERATION REPORT: ANNUAL REPORT ON REMUNERATION CONTINUED SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 127 GOVERNANCE / 2022 REMUNERATION REPORT: ANNUAL REPORT ON REMUNERATION CONTINUED # **Annual bonus for 2023** The maximum bonus opportunity remains unchanged for the 2023 annual bonus and is 125% of basic salary, with two-thirds payable in cash and one-third in deferred shares. The individual weightings of the KPIs for the executive Directors for the annual bonus are set out below. | | 2023 | | 2022 | | | --- | --- | --- | --- | --- | | | Maximum possible cash award | Maximum share award | Maximum possible cash award | Maximum share award | | Free Cash Flow target – full year | 33.33% | 16.67% | 33.33% | 16.67% | | Adjusted EPS target – full year internal target | 50.00% | 25.00% | 50.00% | 25.00% | | **Totals** | **83.33%** | **41.67%** | **83.33%** | **41.67%** | The actual targets are currently considered commercially sensitive because of the information that this provides to the Company's competitors. Full disclosure of the 2023 targets will be in the 2023 Annual Report. # **LTIP Awards for 2023** Senior's markets have been impacted by a number of external events since the grounding of the Boeing 737 Max, the effects on profitability have been huge. We remain confident on the resilience and recovery of these markets and our ability to recover profitability from our products and technology over the medium term. This rationale was the reason behind why the Board rejected the Lone Star bid as it was not good value for our shareholders. In order to deliver on this commitment we need to retain and motivate the leaders through this key period of recovery. Senior has a decentralised business model, comprised of discrete business units run by senior managers each with their own profit and loss account. These senior managers are key to our success and to meet our aspirations we will require a stable and highly motivated leadership team. The LTIP is an important tool to achieve this, ensuring the ongoing recovery is built on and outperformance delivered. The Remuneration Committee intends to provide a special long-term incentive to drive material outperformance through the next stage of the recovery, by enhancing the LTIP for 2023 by granting awards at higher than normal levels to all participants in the LTIP (approximately 50 senior leaders), with awards granted at a value that will typically be one-third higher than granted in 2022. For the executive Directors, this means they will receive LTIP awards at a level of 200% of basic salary, up from the normal level of 150%. We have also considered the LTIP proposal, and executive Directors' remuneration more broadly, very carefully in the context of the remuneration of the wider workforce. As noted above, a key feature of the proposal is its application to all LTIP participants, ensuring consistency across the senior executive population. Given Senior's decentralised nature, it is important that we align all leaders with a consistent award structure and set of targets which focuses them on the performance of the overall Group. More broadly, the Committee has reflected on the specific challenges facing the wider workforce in an environment when inflation has returned and many are experiencing cost-of-living pressures, as outlined above. 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%. The Adjusted EPS target has been set to be stretching and challenging. The target is expressed as absolute growth achieved in 2025 compared to 2022. 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 the same to those used in previous years. 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 2023 LTIP award have been increased from those set in 2022 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 2022 and 2023 are set out in the table below: | | 2023 | | | 2022 | | | | --- | --- | --- | --- | --- | --- | --- | | | Weighting (%) | Threshold (25% vesting) | Maximum (100% vesting) | Weighting (%) | Threshold (25% vesting) | Maximum (100% vesting) | | Return on Capital Employed | 33.33% | 12.5% | 17.0% | 33.33% | 10.0% | 13.5% | | 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% | 11.77p | 18.5p | 33.33% | 10.05p | 12.35p | # **Approval of the Directors' Remuneration Report** The Directors' Remuneration Report was approved by the Board on 24 February 2023. Signed on behalf of the Board **Celia Baxter** Chair of the Remuneration Committee 24 February 2023 128 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS ## 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 Responsibility statement of the Directors theAnnual Report and the Group and Parent adequate accounting records that are sufficient in respect of the annual financial report Company Financial Statements in accordance to show and explain the Parent Company’s We confirm that to the best of our knowledge: with applicable law and regulations. transactions and disclose with reasonable accuracy at any time the financial position of • the Financial Statements, prepared in Company law requires the Directors to prepare theParent Company and enable them to ensure accordance with the applicable set of Group and Parent Company Financial that its Financial Statements comply with the accounting standards, give a true and fair Statements for each financial year. Under that Companies Act 2006. They are responsible viewof the assets, liabilities, financial position law they arerequired to prepare the Group forsuch internal control as they determine is and profit or loss of the Company and the Financial Statements in accordance with necessary to enable the preparation of Financial undertakings included in the consolidation UK-adopted international accounting standards Statements that are free from material taken as a whole; and and applicable law and have elected to prepare misstatement, whether due to fraud or error, • the Strategic Report includes a fair review of theParent Company Financial Statements in and have general responsibility for taking such the development and performance of the accordance with UK accounting standards steps as are reasonably open to them to business and the position of the issuer and andapplicable law, including FRS 101 safeguard the assets of the Group and to the undertakings included in the consolidation ReducedDisclosure Framework. prevent and detect fraud and other irregularities. taken as a whole, together with a description Under company law the Directors must not of the principal risks and uncertainties that Under applicable law and regulations, the approve the Financial Statements unless they they face. Directors are also responsible for preparing a aresatisfied that they give a true and fair view Strategic Report, Directors’ Report, Directors’ We consider the Annual Report and Accounts, ofthe state of affairs of the Group and Parent Remuneration Report and Corporate taken as a whole, is fair, balanced and Company and of the Group’s profit or loss for Governance Statement that complies with understandable and provides the information that period. In preparing each of the Group thatlaw and those regulations. necessary for shareholders to assess the andParent Company Financial Statements, Group’s position and performance, business theDirectors are required to: The Directors are responsible for the model and strategy. maintenance and integrity of the corporate and • select suitable accounting policies and financial information included on the Company’s David Squires Bindi Foyle thenapply them consistently; website. Legislation in the UK governing the Group Chief Executive Officer Group Finance Director • make judgements and estimates that are preparation and dissemination of Financial 24 February 2023 24 February 2023 reasonable, relevant, reliable and prudent; Statements may differ from legislation in • for the Group Financial Statements, state otherjurisdictions. whether they have been prepared in accordance with UK-adopted international accounting standards; • for the Parent Company Financial Statements, state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained inthe Parent Company Financial Statements; • assess the Group and Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related togoing concern; and • use the going concern basis of accounting unless they either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative butto do so. 129SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / INDEPENDENT AUDITOR’S REPORT ## INDEPENDENT AUDITOR’S REPORT ## TO THE MEMBERS OF SENIOR PLC 1. Our opinion is unmodified We were first appointed as auditor by the shareholders on 21 April 2017. The period of Overview We have audited the financial statements of Senior plc (“the Company”) for the year ended total uninterrupted engagement is for the Materiality: £3.2m (2021: £3.2m) 31 December 2022 which comprise the 6financial years ended 31 December 2022. Group financial 0.4% (2021: 0.5%) of Consolidated Income Statement, the Wehave fulfilled our ethical responsibilities statements as Group revenue Consolidated Statement of Comprehensive under, and we remain independent of the Group awhole Income, Consolidated and Company Balance in accordance with, UK ethical requirements Coverage Sheet, Consolidated and Company Statement including the FRC Ethical Standard as applied • 75%(2021: 72%) of Group revenue ofChanges in Equity, Consolidated Cash Flow tolisted public interest entities. • 80%(2021: 89%) of Total losses/profit Statement and the related notes, including Apart from the matter noted below, we have before tax theaccounting policies in note 2. notperformed any non-audit services during • 84%(2021: 82%) of Group total assets In our opinion: theyear ended 31 December 2022 or Key audit matters vs 2021 • the financial statements give a true and fair subsequently which are prohibited by the FRCEthical Standard. Event driven • New: view of the state of the Group’s and of the Business parent Company’s affairs as at 31 December In early 2023, we identified that a KPMG combination 2022 and of the Group’s profit for the year member firm had provided preparation of local accounting then ended; GAAP financial statement services over the • the Group financial statements have Recurring risks • Provision for  period 2018 to 2022 to an entity which was beenproperly prepared in accordance uncertain tax aresidual component and therefore not in withUK-adopted international positions scopefor the group audit. The services, which | | accountingstandards; | | • Recoverability | | | | --- | --- | --- | --- | --- | --- | | | | have been terminated, were administrative in | | |  | | • the parent Company financial statements | | nature and did not involve any management | | of the Parent | | | | have been properly prepared in accordance | decision-making or bookkeeping. The work | | Company’s | | | | with UK accounting standards, including FRS | ineach case had no direct or indirect effect on | | investment in | | | | 101 Reduced Disclosure Framework; and | Senior plc’s consolidated financial statements. | | its subsidiary | | • the financial statements have been prepared In our professional judgment, we confirm that in accordance with the requirements of the based on our assessment of the breach, our Companies Act 2006. integrity and objectivity as auditor has not been Basis for opinion compromised and we believe that an objective, We conducted our audit in accordance with reasonable and informed third party would International Standards on Auditing (UK) (“ISAs conclude that the provision of this service (UK)”) and applicable law. Our responsibilities wouldnot impair our integrity or objectivity for are described below. We believe that the audit any of the impacted financial years. The audit evidence we have obtained is a sufficient and committee have concurred with this view. appropriate basis for our opinion. Our audit opinion is consistent with our report to the auditcommittee. 130 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / INDEPENDENT AUDITOR’S REPORT 2. Key audit matters: our assessment audit significance, in arriving at our audit opinion ofrisks of material misstatement above, together with our key audit procedures to address those matters and, as required for Key audit matters are those matters that, public interest entities, our results from those inourprofessional judgement, were of procedures. These matters were addressed, mostsignificance in the audit of the financial and our results are based on procedures statements and include the most significant undertaken, in the context of, and solely for the assessed risks of material misstatement purpose of, our audit of the financial statements (whether or not due to fraud) identified by us, as a whole, and in forming our opinion thereon, including those which had the greatest effect and consequently are incidental to that opinion, on: the overall audit strategy; the allocation of and we do not provide a separate opinion on resources in the audit; and directing the efforts these matters. of the engagement team. We summarise below the key audit matters, in decreasing order of The risk Our response | Business combination accounting | Subjective estimate | Our procedures included: | | | --- | --- | --- | --- | | Valuation of intangible assets acquired of | The acquisition of Spencer Aerospace on | • Assessing the valuer’s credentials: We evaluated | | | £31m and contingent consideration of | 25November 2022 required the net assets | | the competence and independence of the expert | | £28.7m in respect of Spencer Aerospace | acquired to be recorded at fair value and for | | engaged by the Directors and whether they had | | Manufacturing LLC (“Spencer Aerospace”) | intangible assets to be separately identified | | been appropriately instructed and were provided | | (2021: £nil). | from goodwill. | | with complete, accurate data on which to base | their valuations. Refer to the Audit Committee Report in Estimation was required to value the part of • Our corporate finance expertise and our sector theGovernance section on pages 105, the consideration paid that was contingent knowledge: We evaluated the basis upon Note 2 (significant accounting policies) and on the future revenue of Spencer Aerospace. whichthe Directors identified the intangible Note31 (acquisition and disposal activities). This estimation is dependent on significant assets acquired. We assessed whether the estimates and assumptions management measurement basis used to estimate the fair makes related to the sales forecasts of values of the intangible assets were reasonable, Spencer Aerospace. taking account of our experience of similar The fair value of intangible assets acquired assetsin other comparable situations and our are determined through complex valuation assessment of the work performed by the methods including by forecasting and thirdparty expert. discounting future cash flows (based on • Benchmarking assumptions: We challenged the assumptions such as growth rates, and appropriateness of discount rates, growth rates, expected revenue opportunities), which and expected revenue opportunities which have areinherently highly judgemental. been used to value acquired intangible assets and contingent consideration with reference The effect of these matters is that, as part toassumptions developed by our own ofour risk assessment, we determined valuationspecialists, post acquisition trading, thatthe valuation of intangible assets andmarket data. acquired on acquisition and determination • Assessing transparency: We assessed whether ofthe contingent consideration of Spencer the appropriate disclosures have been provided Aerospace contain a high degree of on the judgements and estimates applied in estimation uncertainty, with a potential range arriving at the fair values. of reasonably possible outcomes greater than our materiality as a whole, and possibly We performed the tests above rather than seeking many times that amount. to rely on any of the Group’s controls because the 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 fair values adopted for the intangible assets acquired and contingent consideration to be acceptable. 131SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / INDEPENDENT AUDITOR’S REPORT CONTINUED ## INDEPENDENT AUDITOR’S REPORT ## TO THE MEMBERS OF SENIOR PLC CONTINUED 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 different | • Our tax expertise: We have used our own tax | | | uncertain tax position totalling £16.2m | tax jurisdictions and judgment is required to | | specialists to assess the Group’s tax positions, | | asat31 December 2022 (2021: £16.7m) | 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 105, 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 of and the subjective nature of the arm’s length tax and uncertain tax positions and the range of basis to which the pricing should adhere to. possible outcomes. The effect of these matters is that, as part of We performed the tests above rather than seeking our risk assessment, we determined that the to rely on any of the Group’s controls because the provision for uncertain tax positions has a nature of the balance is such that we would expect high degree of estimation uncertainty, with a to obtain audit evidence primarily through the potential range of reasonable outcomes detailed procedures described. greater than our materiality for the Financial Our results Statements as a whole. The Financial • We found the level of provisions for tax Statements (Note 21) disclose the range uncertainties to be acceptable. (2021 estimated by the Group. result –acceptable.) | 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 59% of its total assets. Its | | subsidiary’s draft statutory balance sheet to | | at31December 2022 (2021: £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 Parent Company Balance Sheet. Company Financial Statements, this is historically been profit-making. considered to be the area that had the We performed the tests above rather than seeking greatest effect 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’s subsidiary to be acceptable. (2021 result –acceptable.) | 3. Our application of materiality and | Materiality for the parent Company financial | toreduce to an acceptable level the risk that | | --- | --- | --- | | anoverview of the scope of our audit | statements as a whole was set at £2.9m | individually immaterial misstatements in | | | (2021:£2.9m), which is the component | individual account balances add up to a material | Materiality for the Group financial statements materiality for the parent company determined amount across the financial statements asa whole was set at £3.2m (2021: £3.2m), by the group audit engagement team. This is as awhole. determined with reference to a benchmark of lower than the materiality we would otherwise Group revenue of which it represents 0.4% Performance materiality was set at 75% (2021: have determined by reference to parent (2021: 0.5%). 75%) of materiality for the financial statements Company total assets of which it represents as a whole, which equates to £2.4m (2021: We consider total revenue to be the most 0.7% (2021:0.7%). £2.4m) for the Group and £2.2m (2021: £2.2m) appropriate benchmark in 2022 as it provides In line with our audit methodology, our for the parent Company. We applied this amore stable measure year on year than procedures on individual account balances percentage in our determination of performance Groupprofit before tax. anddisclosures were performed to a lower materiality because we did not identify any threshold, performance materiality, so as factors indicating an elevated level of risk. 132 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / INDEPENDENT AUDITOR'S REPORT CONTINUED We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £160,000 (2021: £160,000), in addition to other identified misstatements that warranted reporting on qualitative grounds. Of the Group's 31 (2021: 30) reporting components (excluding the Parent Company), we subjected 10 to full scope audits for group purposes and 4 to specified risk-focused audit procedures (2021: 14 combined). The latter were not individually financially significant enough to require a full scope audit for group purposes, but we performed specified procedures across all material accounts in line with those components subject to full scope audit. The components within the scope of our work accounted for the percentages illustrated opposite. The remaining 25% (2021: 28%) of total Group revenue, 20% (2021: 11%) of total profits and losses that made up Group profit before tax and 16% (2021: 18%) of total Group assets is represented by 17 (2021: 16) reporting components, none of which individually represented more than 5% (2021: 5%) of any of total Group revenue, total profits and losses that made up Group profit before tax or total Group assets. For these components, we performed analysis at an aggregated group level to re-examine our assessment that there were no significant risks of material misstatement within these. The Group team instructed component auditors as to the significant areas to be covered, including the relevant risks detailed above and the information to be reported back. The Group team approved the component materialities, which ranged from £0.4m to £1.76m (2021: £0.4m to £1.76m), having regard to the mix of size and risk profile of the Group across the components. The work on 10 of the 14 components (2021: 9 of the 14 components) was performed by component auditors and the rest, including the audit of the parent Company, was performed by the Group team. The scope of the audit work performed was fully substantive as we did not rely upon the Group's internal control over financial reporting. The Group team visited 5 component locations in the US and UK to assess the audit risk and strategy. Video and telephone conference meetings were also held with these component auditors and all others that were not physically visited. At these visits and meetings, the findings reported to the Group team were discussed in more detail, and any further work required by the Group team was then performed by the component auditor. **Group revenue** £848.4m (2021: £858.7m) ![img-17.jpeg](img-17.jpeg) **Group revenue** ![img-18.jpeg](img-18.jpeg) **Group total assets** ![img-19.jpeg](img-19.jpeg) **Group materiality** £3.2m (2021: £3.2m) **£3.2m** Whilst financial statements materiality (2021: £3.2m) **£2.4m** Whilst financial statements performance materiality (2021: £2.4m) **£1.76m** Range of materiality at 14 components (£0.4m-£1.76m) (2021: £0.4m-£1.76m) **£0.16m** Misstatements reported to the audit committee (2021: £0.16m) **Total profits and losses that made up Group profit before tax** - ■ Full scope for group audit purposes 2022 - ■ Specified risk-focused audit purposes 2022 - ■ Full scope for group audit purposes 2021 - ■ Residual components SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 133 GOVERNANCE / INDEPENDENT AUDITOR’S REPORT CONTINUED ## INDEPENDENT AUDITOR’S REPORT ## TO THE MEMBERS OF SENIOR PLC CONTINUED | 4. The impact of climate change on | 5. Going concern | We considered whether the going concern | | --- | --- | --- | | ouraudit | The directors have prepared the financial | disclosure in Note 2 to the financial statements | | | statements on the going concern basis as | gives a full and accurate description of the | We have considered the potential impacts of theydo not intend to liquidate the Group or the Directors’ assessment of going concern, climate change on the financial statements as Company or to cease their operations, and as including the identified risks and dependencies. part of planning our audit. they have concluded that the Group’s and the We assessed the completeness of the going Climate change impacts the Group in a variety of concern disclosure. Company’s financial position means that this ways including the impact of climate risk on the isrealistic. They have also concluded that there Our conclusions based on this work: substitution of existing products and services are no material uncertainties that could have with lower emissions options, increased costs cast significant doubt over their ability to • we consider that the directors’ use of to transition to lower emissions technology continue as a going concern for at least a year thegoing concern basis of accounting in andthe impact on useful lives of assets from from the date of approval of the financial thepreparation of the financial statements physical and obsolescence risks. There is also statements (“the going concern period”). isappropriate; potential reputational risk associated with the • we have not identified, and concur with Group’s delivery of its climate related initiatives, We used our knowledge of the Group, its thedirectors’ assessment that there is not, and greater emphasis on climate related industry, and the general economic environment amaterial uncertainty related to events or narrative and disclosure in the annual report. to identify the inherent risks to its business conditions that, individually or collectively, model and analysed how those risks might As part of our audit we have made enquiries may cast significant doubt on the Group’s affect the Group’s and Company’s financial ofmanagement to understand the extent of orCompany’s ability to continue as a going resources or ability to continue operations over thepotential impact of climate change risk concern for the going concern period; the going concern period. The risks that we onthe Group’s financial statements. We have • we have nothing material to add or draw considered most likely to adversely affect the performed a risk assessment of how the impact attention to in relation to the directors’ Group’s and Company’s available financial of climate change may affect the financial statement in Note 2 to the financial resources and/or metrics relevant to debt statements and our audit. We held discussions statements on the use of the going concern covenants over this period were: | with our own climate change professionals to | | | | basis of accounting with no material | | --- | --- | --- | --- | --- | | challenge our risk assessment, including the | • The impact of a global economic downturn | | | uncertainties that may cast significant | | goodwill impairment assessment, the estimates | | onthe Group’s key end markets, including | | doubtover the Group and Company’s use | | made regarding useful economic lives of | | increasing inflationary pressures; | | ofthat basis for the going concern period, | | property, plant and equipment, and the valuation | • The volatility of and disruption to supply chain | | | andwefound the going concern disclosure | | of inventory, recoverability of trade receivables | | affecting critical materials or components; and | | inNote 2 to be acceptable; and | | and going concern. Taking into account the | • The uncertainty of the recovery following the | | • the related statement under the Listing | | | extent of headroom on goodwill, the expected | | impact of COVID-19. | | Rulesset out on page 82 is materially | | remaining useful lives of property, plant and | | | | consistent with the financial statements | We considered whether these risks could equipment, the nature of customers and andour audit knowledge. plausibly affect the liquidity or covenant products, our assessment is that the climate compliance in the going concern period by However, as we cannot predict all future events related risks to the Group’s business, strategy comparing severe, but plausible downside or conditions and as subsequent events may and financial planning did nothave a significant scenarios that could arise from these risks result in outcomes that are inconsistent with impact on our key audit matters given the nature individually and collectively against the level judgements that were reasonable at the time of the Group’s operations and knowledge gained ofavailable financial resources and covenants they were made, the above conclusions are of its impact on critical accounting estimates indicated by the Group’s financial forecasts. nota guarantee that the Group or the Company during our riskassessment procedures will continue in operation. andtesting. We have read the Group’s and the Parent Company’s disclosure of climate related information in the front half of the annual report as set out on pages 30 to 31, and considered consistency with the financial statements and our audit knowledge. 134 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / INDEPENDENT AUDITOR’S REPORT CONTINUED 6. Fraud and breaches of laws and We also performed procedures including: Firstly, the Group is subject to laws and regulations – ability to detect regulations that directly affect the financial • Identifying journal entries and other statements including financial reporting adjustments to test for all full scope legislation (including related companies Identifying and responding to risks of components based on risk criteria and legislation), distributable profits legislation, material misstatement due to fraud comparing the identified entries to supporting pension scheme legislation and taxation To identify risks of material misstatement due documentation. These included those posted legislation, and we assessed the extent of tofraud (“fraud risks”) we assessed events by senior finance management, those posted compliance with these laws and regulations orconditions that could indicate an incentive and approved by the same user and those aspart of our procedures on the related orpressure to commit fraud or provide an posted to unusual accounts. financialstatement items. opportunity to commit fraud. Our risk • Assessing whether the judgements made assessment procedures included : inmaking accounting estimates are indicative Secondly , the Group is subject to many other of a potential bias. laws and regulations where the consequences • Enquiring of Directors, the audit committee, of non-compliance could have a material effect internal audit and inspection of policy Identifying and responding to risks of on amounts or disclosures in the financial documentation as to the Group’s high-level material misstatement due to non- statements, for instance through the imposition policies and procedures to prevent and detect compliance with laws and regulations of fines or litigation or the loss of the Group’s fraud, including the internal audit function, We identified areas of laws and regulations that license to operate. We identified the following andthe Group’s channel for “whistleblowing”, could reasonably be expected to have a material areas as those most likely to have such an as well as whether they have knowledge of effect on the financial statements from our effect: health and safety, environmental laws any actual, suspected or alleged fraud. general commercial and sector experience and and regulations, anti-bribery and corruption, • Reading Board and audit committee minutes. through discussion with the Directors (as employment law and export laws and • Considering remuneration incentive schemes required by auditing standards), and discussed regulations, recognising the financial and and performance targets for management with the Directors the policies and procedures regulated nature of the Group’s activities. and Directors including the long-term regarding compliance with laws and regulations. Auditing standards limit the required audit incentive plan for Management remuneration. procedures to identify non-compliance with As the Group is regulated, our assessment • Using analytical procedures to identify any these laws and regulations to enquiry of the ofrisks involved gaining an understanding unusual or unexpected relationships. directors and inspection of regulatory and legal ofthecontrol environment including the correspondence, if any. Therefore if a breach We communicated identified fraud risks entity’sprocedures for complying with ofoperational regulations is not disclosed to throughout the audit team and remained alert regulatory requirements. usor evident from relevant correspondence, toany indications of fraud throughout the audit. We communicated identified laws and anaudit will not detect that breach. This included communication from the Group regulations throughout our team and remained audit team to full scope component audit teams Context of the ability of the audit to detect alert to any indications of non-compliance of relevant fraud risks identified at the Group fraud or breaches of law or regulation throughout the audit . This included level and request to full scope component audit Owing to the inherent limitations of an audit, communication from the Group audit team to teams to report to the Group audit team any there is an unavoidable risk that we may not full-scope component audit teams of relevant instances of fraud that could give rise to a have detected some material misstatements laws and regulations identified at the Group material misstatement at the Group level. inthe financial statements, even though we level, and a request for full scope component have properly planned and performed our As required by auditing standards, and taking auditors to report to the Group audit team any auditin accordance with auditing standards. into account possible pressures to meet profit instances of non-compliance with laws and Forexample, the further removed non- targets and market consensus, we perform regulations that could give rise to a material compliance with laws and regulations is from procedures to address the risk of management misstatement at the Group level. the events and transactions reflected in the override of controls and the risk of fraudulent The potential effect of these laws and financial statements, the less likely the revenue recognition. In particular the risk that regulations on the financial statements inherently limited procedures required by revenue is overstated through recording variesconsiderably. auditing standards would identify it. revenues in the wrong period and the risk that Group and component Management may be In addition, as with any audit, there remained ina position to make inappropriate accounting ahigher risk of non-detection of fraud, as these entries, and the risk of bias in accounting may involve collusion, forgery, intentional estimates and judgements such as the omissions, misrepresentations, or the override valuationof acquired intangibles, contingent of internal controls. Our audit procedures are consideration, provisions for uncertain tax designed to detect material misstatement. provisions and pension assumptions. Weare not responsible for preventing non- compliance or fraud and cannot be expected We did not identify any additional fraud risks. todetect non-compliance with all laws andregulations. 135SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / INDEPENDENT AUDITOR’S REPORT CONTINUED ## INDEPENDENT AUDITOR’S REPORT ## TO THE MEMBERS OF SENIOR PLC CONTINUED | 7. We have nothing to report on the | Disclosures of emerging and principal risks | Corporate governance disclosures | | --- | --- | --- | | otherinformation in the Annual Report | and longer-term viability | We are required to perform procedures | | | We are required to perform procedures | toidentify whether there is a material | The directors are responsible for the other toidentify whether there is a material inconsistency between the directors’ corporate information presented in the Annual Report inconsistency between the directors’ governance disclosures and the financial together with the financial statements. Our disclosures in respect of emerging and principal statements and our audit knowledge. opinion on the financial statements does not risks and the viability statement, and the cover the other information and, accordingly, Based on those procedures, we have concluded financial statements and our audit knowledge. wedo not express an audit opinion or, except that each of the following is materially asexplicitly stated below, any form of Based on those procedures, we have nothing consistent with the financial statements and assuranceconclusion thereon. material to add or draw attention to in relation to: our audit knowledge: Our responsibility is to read the other • the directors’ confirmation within the Viability • the directors’ statement that they consider information and, in doing so, consider whether, Statement page 82 that they have carried out that the annual report and financial based on our financial statements audit work, a robust assessment of the emerging and statements taken as a whole is fair, balanced the information therein is materially misstated principal risks facing the Group, including and understandable, and provides the orinconsistent with the financial statements or those that would threaten its business model, information necessary for shareholders to our audit knowledge. Based solely on that work future performance, solvency and liquidity; assess the Group’s position and performance, we have not identified material misstatements • the Risks and uncertainties disclosures business model and strategy; in the other information. describing these risks and how emerging • the section of the annual report describing the Strategic report and directors’ report risksare identified, and explaining how they work of the Audit Committee, including the Based solely on our work on the are being managed and mitigated; and significant issues that the audit committee other information: • the directors’ explanation in the Viability considered in relation to the financial Statement of how they have assessed the statements, and how these issues were • we have not identified material prospects of the Group, over what period addressed; and misstatements in the strategic report theyhave done so and why they considered • the section of the annual report that andthedirectors’ report; that period to be appropriate, and their describesthe review of the effectiveness • in our opinion the information given in those statement as to whether they have a ofthe Group’s risk management and internal reports for the financial year is consistent reasonable expectation that the Group will control systems. withthe financial statements; and beable to continue in operation and meet We are required to review the part of the • in our opinion those reports have been itsliabilities asthey fall due over the period Corporate Governance Statement relating to prepared in accordance with the Companies oftheir assessment, including any related theGroup’s compliance with the provisions of Act 2006. disclosuresdrawing attention to any the UK Corporate Governance Code specified necessary qualifications or assumptions. | Directors’ remuneration report | | by the Listing Rules for our review. We have | | --- | --- | --- | | In our opinion the part of the Directors’ | We are also required to review the Viability | nothing to report in this respect. | | Remuneration Report to be audited has been | Statement, set out on page 82 under the | | | properly prepared in accordance with the | ListingRules. Based on the above procedures, | | | Companies Act 2006. | we have concluded that the above disclosures | | are materially consistent with the financial statements and our audit knowledge. Our work is limited to assessing these matters in the context of only the knowledge acquired during our financial statements audit. As we cannot predict all future events or conditions andas subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the absence of anything to report on these statements is not a guarantee as to the Group’s and Company’s longer-term viability. 136 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 GOVERNANCE / INDEPENDENT AUDITOR’S REPORT CONTINUED | 8. We have nothing to report on the other | 9. Respective responsibilities | 10. The purpose of our audit work and | | --- | --- | --- | | matters on which we are required to | | towhom we owe our responsibilities | | report by exception | Directors’ responsibilities | This report is made solely to the Company’s | | | As explained more fully in their statement set | members, as a body, in accordance with | Under the Companies Act 2006, we are out on page 129, the directors are responsible Chapter 3 of Part 16 of the Companies Act required to report to you if, in our opinion: for: the preparation of the financial statements 2006. Our audit work has been undertaken so • adequate accounting records have not been including being satisfied that they give a true that we might state to the Company’s members kept by the parent Company, or returns and fair view; such internal control as they those matters we are required to state to them adequate for our audit have not been received determine is necessary to enable the in an auditor’s report and for no other purpose. from branches not visited by us; or preparation of financial statements that are free To the fullest extent permitted by law, we do • the parent Company financial statements from material misstatement, whether due to notaccept or assume responsibility to anyone andthe part of the Directors’ Remuneration fraud or error; assessing the Group and parent other than the Company and the Company’s Report to be audited are not in agreement Company’s ability to continue as a going members, as a body, for our audit work, for this with the accounting records and returns; or concern, disclosing, as applicable, matters report, or for the opinions we have formed. • certain disclosures of directors’ remuneration related to going concern; and using the going specified by law are not made; or concern basis of accounting unless they either • we have not received all the information intend to liquidate the Group or the parent Mike Barradell andexplanations we require for our audit. Company or to cease operations, or have (Senior Statutory Auditor) norealistic alternative but to do so. for and on behalf of KPMG LLP, We have nothing to report in these respects. | Auditor’s responsibilities | Statutory Auditor | | --- | --- | | Our objectives are to obtain reasonable | Chartered Accountants | | assurance about whether the financial | 15 Canada Square, London, E14 5GL | statements as a whole are free from material 24 February 2023 misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. 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. The Company is required to include these financial statements in an annual financial report prepared using the single electronic reporting format specified in the TD ESEF Regulation. This auditor’s report provides no assurance over whether the annual financial report has been prepared in accordance with that format. 137SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 FINANCIAL STATEMENTS / # FINANCIAL STATEMENTS IN THIS SECTION ![img-20.jpeg](img-20.jpeg) "Senior delivered a strong set of results in 2022." **Bindi Foyle** Group Finance Director - 140 Consolidated Income Statement - 141 Consolidated Statement of Comprehensive Income - 142 Consolidated Balance Sheet - 143 Consolidated Statement of Changes in Equity - 144 Consolidated Cash Flow Statement - 145 Notes to the Consolidated Financial Statements - 184 Company Balance Sheet - 185 Company Statement of Changes in Equity - 186 Notes to the Company Financial Statements - 192 Five-year Summary Accumulators and Reservoirs Accumulators and reservoirs manage operating pressures in fluid systems to account for fluctuating working fluid volumes throughout the aircraft. Senior is a leading designer and manufacturer of maintenance free accumulators and reservoirs for demanding applications like those found on all three variants of the F-35 Lightning. ![img-21.jpeg](img-21.jpeg) 138 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 FINANCIAL STATEMENTS / Accumulators and Reservoirs Tube and Duct Assemblies A modern 5th-generation fighter jet like the F-35 has extremely challenging thermal management requirements, satisfied by thousands of complex tubes and ducts carrying fuel, hydraulic fluid, oxygen, and various coolants throughout the aircraft. These components range from 0.25 inches up to 3 inches in diameter and are manufactured from multiple materials and must conform to precise geometry to take up as little space in the aircraft as possible. 139SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 139 FINANCIAL STATEMENTS / ## CONSOLIDATED INCOME STATEMENT ## FOR THE YEAR ENDED 31 DECEMBER 2022 | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | | 2022 | | 2021 | | Notes | | £m | | £m | Revenue 3 84 8.4 6 5 8 .7 Trading profit 3 2 .1 10 . 3 Share of joint venture profit 15 0. 4 0. 2 (1) Operating profit 5 32.5 10 . 5 Investment income 7 1. 9 0. 5 Finance costs 8 (1 0 . 6) (8 .5) Corporate undertakings 9 (1. 4) 21. 2 (2) Profit before tax 22.4 2 3 .7 Tax (charge)/credit 10 (2 . 2) 0.5 Profit for the period 20. 2 24. 2 Attributable to: Equity holders of the parent 20. 2 24. 2 Earnings per share (3) Basic 12 4.86p 5 .8 2p (4) Diluted 12 4 .7 3p 5.73p (1) Adjusted operating profit 9 28.5 6 .1 (2) Adjusted profit/(loss) before tax 9 2 0 .1 (1. 9) (3) Adjusted earnings per share 12 4.36p 0 .1 7p (4) Adjusted and diluted earnings per share 12 4.24p 0 .1 7p 140 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 FINANCIAL STATEMENTS / ## CONSOLIDATED STATEMENT OF ## COMPREHENSIVE INCOME ## FOR THE YEAR ENDED 31 DECEMBER 2022 | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | | 2022 | | 2021 | | Notes | | £m | | £m | Profit for the period 20. 2 24. 2 Other comprehensive income: Items that may be reclassified subsequently to profit or loss: Losses on foreign exchange contracts – cash flow hedges during the period (4. 5) (2 .1) Reclassification adjustments for losses/(gains) included in profit 2.2 (1. 3) Losses on foreign exchange contracts – cash flow hedges 28 (2 . 3) (3. 4) Foreign exchange (gain) recycled to the Income Statement on disposal and restructuring (business closures) 28 – (2. 9) Exchange differences on translation of overseas operations 28 24.5 (3.8) Tax relating to items that may be reclassified 10 0 .7 0.8 22.9 (9.3) Items that will not be reclassified subsequently to profit or loss: Actuarial (losses)/gains on defined benefit pension schemes 34 (2 3 .1) 19 .7 Tax relating to items that will not be reclassified 10 5.7 (6.4) (1 7. 4) 13 . 3 Other comprehensive income for the period, net of tax 5.5 4.0 Total comprehensive income for the period 25. 7 28. 2 Attributable to: Equity holders of the parent 25. 7 28. 2 141SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 FINANCIAL STATEMENTS / ## CONSOLIDATED BALANCE SHEET ## AS AT 31 DECEMBER 2022 | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | | 2022 | | 2021 | | Notes | | £m | | £m | Non-current assets Goodwill 13 19 9.7 15 0 . 2 Other intangible assets 14 36.2 4.2 Investment in joint venture 15 4.4 3.9 Property, plant and equipment 16 3 0 7. 2 2 9 4.6 Deferred tax assets 21 10. 9 5 .7 Retirement benefits 34 51. 8 72.2 Trade and other receivables 18 0.4 0 .1 Total non-current assets 610. 6 53 0.9 Current assets Inventories 17 1 94.3 14 5 . 2 Current tax receivables 21 2 .1 2.6 Trade and other receivables 18 12 6 .7 9 8.0 Cash and bank balances 32c 43. 2 5 1 .1 Total current assets 366.3 296.9 Total assets 976. 9 827 .8 Current liabilities Trade and other payables 23 191. 2 14 3 . 0 Current tax liabilities 21 1 7. 7 14 . 6 Lease liabilities 22, 32c 12 .7 0.4 Bank overdrafts and loans 19 0.5 1 4.8 Provisions 24 16 .7 13 .8 Deferred consideration 31 2 3.4 – Total current liabilities 262. 2 18 6 . 6 Non-current liabilities Bank and other loans 19 14 3 . 2 11 6 . 2 Retirement benefits 34 1 2 .1 11 . 0 Deferred tax liabilities 21 4 .7 10 . 5 Lease liabilities 22 6 5 .7 7 2.8 Provisions 24 2.9 2.2 Contingent consideration 31 28.9 – Others 23 7. 8 3.4 Total non-current liabilities 265.3 2 1 6 .1 Total liabilities 5 2 7. 5 402. 7 Net assets 44 9.4 4 2 5 .1 Equity Issued share capital 25 41 . 9 4 1 .9 Share premium account 26 14 . 8 1 4.8 Equity reserve 27 6.4 5.8 Hedging and translation reserve 28 51. 5 2 8.6 Retained earnings 29 34 6.5 34 3.2 Own shares 30 (11 . 7) (9. 2) Equity attributable to equity holders of the parent 4 49. 4 4 2 5 .1 Total equity 4 49. 4 4 2 5 .1 The Financial Statements of Senior plc (registered number 282772) were approved by the Board of Directors and authorised for issue on 24 February 2023. They were signed on its behalf by: David Squires Bindi Foyle Director Director 142 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 # CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2022 FINANCIAL STATEMENTS / | | Notes | All equity is attributable to equity holders of the parent | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | 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 2021** | | 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/(gain) 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 | | 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 | | Profit for the year 2022 | | – | – | – | – | – | **20.2** | – | **20.2** | | Losses on foreign exchange contracts – cash flow hedges | 28 | – | – | – | **(2.3)** | – | – | – | **(2.3)** | | Foreign exchange loss/(gain) recycled to the Income Statement on disposal | 28 | – | – | – | – | – | – | – | – | | Exchange differences on translation of overseas operations | 28 | – | – | – | – | **24.5** | – | – | **24.5** | | Actuarial losses on defined benefit pension schemes | 34 | – | – | – | – | – | **(23.1)** | – | **(23.1)** | | Tax relating to components of other comprehensive income | 10 | – | – | – | **0.7** | – | **5.7** | – | **6.4** | | **Total comprehensive income/(expense) for the period** | | – | – | – | **(1.6)** | **24.5** | **2.8** | – | **25.7** | | Share-based payment charge | 33 | – | – | **4.3** | – | – | – | – | **4.3** | | Purchase of shares held by employee benefit trust | 30 | – | – | – | – | – | – | **(4.5)** | **(4.5)** | | Use of shares held by employee benefit trust | 30 | – | – | – | – | – | **(2.0)** | **2.0** | – | | Transfer to retained earnings | 29 | – | – | **(3.7)** | – | – | **3.7** | – | – | | Dividends paid | 11 | – | – | – | – | – | **(1.2)** | – | **(1.2)** | | **Balance at 31 December 2022** | | **41.9** | **14.8** | **6.4** | **(38.8)** | **90.3** | **346.5** | **(11.7)** | **449.4** | SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 143 FINANCIAL STATEMENTS / ## CONSOLIDATED CASH FLOW STATEMENT ## FOR THE YEAR ENDED 31 DECEMBER 2022 | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | | 2022 | | 2021 | | Notes | | £m | | £m | Net cash from operating activities 32a 5 7. 7 2 7. 0 Investing activities Interest received 0.7 0 .1 Proceeds on disposal of property, plant and equipment 0.5 0.2 Purchases of property, plant and equipment 16 (2 8 .7) (20. 2) Purchases of intangible assets 14 (1 . 8) (1.1) Acquistion of Spencer 31 (25.3) – Proceeds on disposal activities net of cash balances 31 – 51. 7 Net cash (used)/generated in investing activities (5 4.6) 3 0 .7 Financing activities Dividends paid 11 (1 . 2) – New loans 90. 8 20.0 Repayment of borrowings (9 0. 4) (41.1) Purchase of shares held by employee benefit trust (4 . 5) – Repayment of lease liabilities (9 .1) (8. 4) Net cash used in financing activities (14 . 4) (2 9.5) Net (decrease)/increase in cash and cash equivalents (11 . 3) 28. 2 Cash and cash equivalents at beginning of period 5 1 .1 23. 2 Effect of foreign exchange rate changes 2.9 (0.3) Cash and cash equivalents at end of period 32c 4 2 .7 5 1 .1 144 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 83. 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 2022, 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 outturns. This assessment included applying severe but plausible downside risks as set out in the Viability Statement on page 82. 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 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 on page 2) must not exceed 3.0x and interest cover, the ratio of EBITDA to interest must be higher than 3.5x. At 31 December 2022, the Group's net debt to EBITDA was 1.47x and interest cover was 9.4x, both comfortably within covenant limits. 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 these Consolidated 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 2022. ### 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 2022. 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 expensed 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 1998 has not been reinstated and is not included in determining any subsequent profit or loss on disposal. ### Revenue recognition The Group predominantly has one revenue stream relating to engineered components or systems (products), which are customer specific, with a secondary revenue stream of funded development revenue. Both streams have identifiable customer contracts and pricing specific performance obligations. The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. Revenue is recognised net of discounts, VAT and other sales related taxes. The determination of the transaction price is based upon pricing specified in the customer contract i.e. a price per unit. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 145 FINANCIAL STATEMENTS # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ## 2. Significant accounting policies continued Revenue is recognised as the identified performance obligations are satisfied. The performance obligation for goods is a specific point in time when the customer obtains control, which is upon delivery or when available for collection. Allocation of transaction price to performance obligations is given in the contract i.e. a unit delivered or available for collection. The performance obligation for development revenue is a specific point in time when the customer obtains control of the output, for example a first article good, which is the acceptance milestone specified in the customer contract. Dividend income from investments is recognised when the shareholders' legal rights to receive payment have been established. ### Interest Interest receivable/payable is credited/charged to the Consolidated Income Statement using the effective interest method. ### Leasing At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration. The assessment of control includes whether the Group has a right to obtain substantially all of the economic benefits from the use of the asset throughout the period of use and the right to direct the use of the asset. As a lessee, the Group recognises a right-of-use asset and lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjustment for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle or restore the underlying asset, less any lease incentives received. Lease payments comprise fixed payments and variable lease payments based on an index or rate. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the asset or the end of the lease term. The lease term includes optional extensions or terminations which are reasonably certain to be exercised by the Group. These optional terms are reassessed periodically or when there is a significant event which affects the lease. The estimated useful lives of the right-of-use assets are determined on the same basis as those of property, plant and equipment. Periodically the right-of-use asset is reduced for impairment, if necessary, as well as re-measurements of the lease liability. The lease liability is measured at amortised cost using the effective 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, such as rental payments, which did not form part of the original terms of the contract. In this case, the lease liability is re-measured using the revised terms and a revised incremental borrowing rate at the modification date. Reassessment occurs where there are changes within the scope of the original terms of the contract, such as rental payments changes with reference to an index. For reassessment changes, the lease 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 commencement date of the contract. The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases which have a lease term of 12 months or less and leases of low-value assets. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. When the Group acts as a lessor, it determines 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 present value of the lease payments amounting to at least substantially all of the fair value of the asset. When the Group is an intermediate lessor, it accounts for its interest in the head lease and the sub-lease separately. The Group assesses the classification of the sub-lease with reference to the right-of-use asset arising from the head lease. The Group recognises lease payments received under operating leases as income on a straight-line basis over the lease term. ### Foreign currencies Transactions in currencies other than the functional currency are recorded at the rates of exchange prevailing on the date of the transaction. At each Balance Sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the Balance Sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured at historical cost in a foreign currency are not retranslated. Gains and losses arising on retranslation are included in profit or loss for the period, except for exchange differences arising on non-monetary assets and liabilities where the changes in fair value are recognised directly in equity, subject to meeting the requirements under IAS 21. In order to hedge its exposure to certain foreign exchange risks, the Group enters into forward exchange contracts (see section below on derivative financial instruments and hedging for details of the Group's accounting policies in respect of such derivative financial instruments). On consolidation, the assets and liabilities of the Group's overseas operations are translated at exchange rates prevailing on the Balance Sheet date. Income and expense items are translated at the average exchange rates for the period. Exchange rate differences arising, if any, are classified as equity and transferred to the Group's translation reserve. Such translation differences are recognised as income or expense in the period in which the operation is disposed. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate on the relevant Balance Sheet date. The exchange rates for the major currencies applied in the translation of results were as follows: | | Average rates 2022 | Average rates 2021 | Year-end rates 2022 | Year-end rates 2021 | | --- | --- | --- | --- | --- | | US Dollar | 1.24 | 1.38 | 1.21 | 1.35 | ### Government grants Government grants received for items of a revenue nature are recognised as income over the period necessary to match them with the related costs, which are deducted in reporting the related expense and presented net of the costs to which they relate. The Group recognises a COVID-19 grant when it has reasonable assurance that it will comply with the relevant conditions and the grant will be received. If the conditions are met, then the Group recognises income in the profit or loss on a systematic basis and in line with its recognition of the expenses that the grants are intended to compensate. Government grants relating to investment in property, plant and equipment are deducted from the initial carrying value of the related capital asset. 146 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 FINANCIAL STATEMENTS / 2. Significant accounting policies continued 147SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 Retirement benefit costs Payments to defined contribution retirement plans are charged as an expense as they fall due. Payments made to state-managed retirement benefit plans are dealt with as payments to defined contribution plans where the Group’s obligations under the plans are equivalent to those arising in a defined contribution retirement plan. For defined benefit retirement plans, the cost of providing benefits is determined using the Projected Unit Method, with full actuarial valuations being carried out on a triennial basis, and updated at each Balance Sheet date. Actuarial gains and losses are recognised in full in the period in which they occur. They are recognised outside the Consolidated Income Statement and are presented in the Statement of Comprehensive Income. Past service cost is recognised as an expense at the earlier of a plan amendment, curtailment, or restructuring. The retirement benefit obligation recognised in the Consolidated Balance Sheet represents the present value of the defined benefit obligation, and as reduced by the fair value of scheme assets. Taxation Provisions for uncertain tax positions are included within current tax liabilities on the Consolidated Balance Sheet representing Management’s best estimate of the likely cash outflow related to the uncertainty. There are transactions and activities that the Group engages in where the ultimate tax determination is uncertain and a provision may be made against the tax benefit. For example, the Group seeks to price transactions between Group companies on an arms length basis and in compliance with OECD transfer pricing principles and the laws of the relevant jurisdictions. The application of OECD principles and local tax laws require interpretation, and accordingly involves the application of judgment and is open to challenge by the relevant tax authorities. This gives rise to a level of uncertainty. Provisions for uncertain tax positions are established in accordance with IFRIC 23 based on an assessment of the range of likely tax outcomes in open years and reflecting the 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 methodology is the more appropriate predicter of amounts that the company is ultimately expected to settle. When making this assessment, the Group utilises specialist in-house tax knowledge and experience and takes into consideration specialist tax advice from third party advisers on specific items. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the Financial Statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the Balance Sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, including for taxable temporary differences 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 difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available for their utilisation before their expiry. Amounts will be recognised first to the extent that taxable temporary differences exist and it is considered probable that they will reverse and give rise to future taxable profits against which losses or other assets may be utilised before their expiry. Assets will then be recognised to the extent that forecasts or other evidence support the availability of future profits against which assets may be realised. Deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition of goodwill (other than in a business combination) of other assets and liabilities in a transaction that affects neither the Group’s taxable profit nor its accounting profit. The carrying value of deferred tax assets is reviewed at each Balance Sheet date and reduced to the extent it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on tax laws and rates that have been enacted at the Balance Sheet date. Deferred tax is charged or credited in the Consolidated Income Statement, except when it relates to items charged or credited to Other Comprehensive Income or directly to Equity, in which case the deferred tax is also dealt with in Other Comprehensive Income or Equity. Property, plant and equipment Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the Balance Sheet at their historical cost, or at modified historical cost, being a revaluation undertaken in 1988 which has been taken as the effective cost on transition to IFRS. Land and buildings were revalued to fair value at the date of revaluation. The Group does not intend to conduct annual revaluations. Plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is charged to write off the cost of an asset on a straight-line basis over the estimated useful life of the asset, and is charged from the time an asset becomes available for its intended use. Annual rates are as follows: Freehold land Nil Freehold buildings 2% Right-of-use land and buildings on the same basis as owned assets or, where shorter, over the lease term Leasehold building improvements on the same basis as owned assets or, where shorter, over the lease term Plant and equipment 5%–33% Right-of-use plant and equipment on the same basis as owned assets or, where shorter, over the lease term The Group primarily leases land and buildings for manufacturing use. The lease term, including options to extend which are reasonably certain, typically range from two to fifteen years. The Group also leases plant and equipment, including office equipment, vehicles and manufacturing equipment, with lease terms typically ranging from one to four years. The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sale proceeds and the carrying amount of the asset at disposal and is recognised in the Consolidated Income Statement. FINANCIAL STATEMENTS / FINANCIAL STATEMENTS ## NOTES TO THE CONSOLIDATED ## FINANCIAL STATEMENTS CONTINUED 148 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 148 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 Internally generated intangible assets – development expenditure An intangible asset arising from unfunded development work shall be recognised if the following can be demonstrated: i. the asset can be separately identified. ii. it is probable that the asset created will generate future economic benefits. iii. the development cost of the asset can be measured reliably during its development. iv. it is technically feasible to complete the asset so that it will be available for use or sale. v. there is intention to complete the asset and use or sell it. vi. the Group has ability to use or sell the asset. vii. the Group has availability of adequate technical, financial and other resources to complete the development work and to use or sell the asset. Internally generated intangible assets are amortised on a straight-line basis over their useful lives. Costs incurred in relation to funded development work are accumulated in inventory and are recognised when the related billings are made. Any amounts held in inventory are subject to normal inventory valuation principles. Expenditure on research, design and other development activities, that do not meet the capitalisation criteria above, is recognised as an expense in the period in which it is incurred. Other intangible assets Other intangible assets include computer software and intangible assets acquired as part of a business combination. The cost of acquiring computer software (including associated implementation and development costs where applicable) is classified as an intangible asset. Costs associated with maintaining computer software programs are recognised as an expense as incurred. Capitalised computer software is amortised over its estimated useful life of between three and five years on a straight-line basis, and is stated at cost less accumulated amortisation and impairment losses. Intangible assets acquired as part of a business combination principally comprise qualified parts list, customer relationships, contracts and trade names. They are shown at fair value at the date of acquisition less accumulated amortisation at the rates of between one and eighteen years on a straight-line basis. Impairment of tangible and intangible assets excluding goodwill At each Balance Sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash- generating unit to which the asset belongs. The recoverable amount is the higher of the fair value less the costs to sell 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 rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, so that the increased carrying amount does not exceed the carrying 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 recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. Inventories Inventories are stated at the lower of cost and net realisable value. Costs comprise direct materials and, where applicable, direct labour costs and an appropriate allocation of production overheads. Cost is calculated using the first-in, first-out method. Net realisable value represents the estimated selling price less the estimated costs of completion and the costs to be incurred in marketing, selling and distribution. Financial instruments Financial assets and liabilities are recognised when the Group becomes a party to the contractual provisions of the relevant instrument and derecognised when it ceases to be a party to such provisions. Financial instruments are classified as cash and cash equivalents, bank overdrafts and loans, lease liabilities, trade receivables, trade payables, deferred consideration payable, contingent consideration payable, other receivables and other payables, as appropriate. Non-derivative financial assets are categorised as “Financial assets at amortised cost” and non-derivative financial liabilities are categorised as “Financial liabilities at amortised cost”. Derivative financial assets and liabilities that are not designated and effective as hedging instruments are categorised as “financial assets at fair value through profit or loss” and “financial liabilities at fair value through profit or loss”, respectively. The classification depends on the nature and purpose of the financial assets and liabilities and is determined at the time of initial recognition. Trade receivables Trade receivables do not carry any interest and are stated at their nominal value as reduced by loss allowance. The Group has elected to measure loss allowance for trade receivables at an amount equal to the lifetime expected credit losses (”ECLs”), which are based on quantitative and qualitative credit risk assessments, using historical and forward looking information. Changes in the carrying amounts of the loss allowance are recognised in the Consolidated Income Statement. Trade receivables in default are considered uncollectible and are written off against the loss allowance. The Group considers a trade receivable to be in default when the customer is experiencing significant financial difficulties, bankruptcy, financial reorganisation or is in default or delinquent in paying its credit obligations to the Group in full. Subsequent recoveries of amounts previously written off are credited against the loss allowance. Trade receivables are derecognised when reverse factored, without recourse, through schemes with financial institution counterparties who assume the risk of non-payment by the customer. Derecognition occurs when cash is received from the financial institution (less reverse factoring discount). For further details, see Strategic Report and the financial instrument credit risk section in the notes to the Consolidated Financial Statements. Cash and cash equivalents Cash and cash equivalents comprise cash at bank and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Non-derivative financial liabilities Non-derivative financial liabilities are stated at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised financial liability and of allocating interest over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of 2. Significant accounting policies continued FINANCIAL STATEMENTS / FINANCIAL STATEMENTS 2. Significant accounting policies continued the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. For borrowings, their carrying value includes accrued interest payable, as well as unamortised issue costs. Contingent consideration payable is measured at fair value through profit or loss. Share-based payments The Group applies the requirements of IFRS 2 Share-based payments. The Group issues equity-settled share-based payments to certain employees. The fair value (excluding the effect of non-market-related conditions), as determined at the grant date, is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of the number of shares that will eventually vest and adjusted for the effect of non-market-related conditions. Fair value is measured by use of a Black-Scholes model for the share option plans, and a binomial model for the share awards under the 2005 Long-Term Incentive Plan. The liability in respect of equity-settled amounts is included in Equity . 149SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 149SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 Equity instruments Equity instruments issued by the Company are recorded at the value of the proceeds received, net of direct transaction costs. Derivative financial instruments and hedging The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. The Group uses foreign exchange contracts and, on occasion, interest rate swap contracts to hedge these exposures. The use of financial derivatives is governed by the Group’s Treasury Policies as approved by the Board of Directors, which provides written principles on the use of derivatives. The Group does not use derivative financial instruments for speculative purposes. Certain derivative instruments do not qualify for hedge accounting. These are categorised as “fair value through profit or loss” and are stated at fair value, with any resultant gain or loss recognised in the Income Statement. The Group designates certain hedging instruments in respect of foreign currency risk as cash flow hedges. At the inception of the hedge relationship, the Group documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents, both at hedge inception and on an ongoing basis, whether the hedging instrument that is used in a hedging relationship is highly effective in offsetting changes in fair values or cash flows of the hedged item. For the Group’s cash flow hedges of highly probable forecast transactions in foreign currencies, the hedged risk is always considered to be 1:1. If the underlying exposure changes over time, either due to commercial factors or timing differences, the hedging instruments will be rebalanced to ensure that the hedge ratio of 1:1 is maintained. Changes in the fair value of derivative financial instruments that are designated and are effective as a cash flow hedge are recognised directly in equity and the ineffective portion is recognised immediately in the Consolidated Income Statement. If the cash flow hedge of a firm commitment or forecasted transaction results in the recognition of an asset or a liability, then, at the time the asset or liability is recognised, the associated gains or losses on the derivative that had previously been recognised in equity are included in the initial measurement of the asset or liability. For hedges that do not result in the recognition of an asset or a liability, amounts deferred in equity are recognised in the Income Statement in the same period in which the hedged item affects profit or loss. For an effective hedge of an exposure to changes in fair value, the hedged item is adjusted for changes in fair value attributable to the risk being hedged with the corresponding entry in the Consolidated Income Statement. Gains or losses from remeasuring the derivative are also recognised in the Consolidated Income Statement. If the hedge is effective, these entries will offset in the Consolidated Income Statement. Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the Consolidated Income Statement as they arise. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, exercised, or no longer qualifies for hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in Equity is transferred to the Consolidated Income Statement for the period. Gains and losses accumulated in Equity are recognised in the Consolidated Income Statement on disposal of the overseas business. Assets and disposal groups held for sale Assets are classified as held for sale if their carrying amount will be recovered by sale rather than by continuing use in the business. Where a group of assets and their directly associated liabilities are to be disposed of in a single transaction, such disposal groups are also classified as held for sale. For this to be the case, the asset or disposal group must be available for immediate sale in its present condition, and Management must be committed to and have initiated a plan to sell the asset or disposal group which, when initiated, was expected to result in a completed sale within 12 months. Assets that are classified as held for sale are not depreciated. Assets or disposal groups that are classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the Directors’ best estimate of the expenditure required to settle the obligation at the Balance Sheet date, taking into account the risks and uncertainties (such as timing or amount) surrounding the obligation. They are not discounted to present value if the effect is not material. Provisions for restructuring are recognised when the Group has a detailed formal plan for the restructuring and the plan has been communicated to the affected parties. Provisions for the expected cost for warranty obligations under local sale of goods legislation are recognised at the date of sale of the relevant products. Critical accounting judgments IAS 1 requires disclosure of the judgments Management makes when applying its significant accounting policies and that have the most significant effect on amounts that are recognised in the Group’s Financial Statements. In the course of preparing the Financial Statements, no significant critical judgments have been made in the process of applying the Group’s accounting policies, other than leases and those involving estimations, which are dealt with separately below. Management makes other judgments in the normal course of conducting business, such as those in relation to legal claims and contractual matters (see Note 24 for further details). Leases Where a lease includes the option for an extension to the lease term, Management makes a judgment as to whether they are reasonably certain the option will be taken. This will take into account the length of FINANCIAL STATEMENTS # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ## 2. Significant accounting policies continued 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 2022, these extension options have an approximate average remaining lease term of seven years. These judgments are reassessed at each reporting period or when there is a significant event affecting the lease, which could result in a recalculation of the lease liability and a material adjustment to the associated balances. ### Key sources of estimation and uncertainty When applying the Group's accounting policies, Management must make assumptions and estimates concerning the future that affect the carrying amounts of assets and liabilities at the Balance Sheet date and the amounts of revenue and expenses recognised during the period. Such assumptions are based upon factors including historical experience, the observance of trends in the industries in which the Group operates, and information available from the Group's customers and other external sources. The key sources of estimation and uncertainty at the Balance Sheet date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year and beyond include: #### Income taxes In determining the Group provisions for income tax and deferred tax, it is necessary to consider transactions in a small number of key tax jurisdictions for which the ultimate tax determination is uncertain. To the extent that the final outcome differs from the tax that has been provided, adjustments will be made to income tax and deferred tax provisions held in the period the determination is made. The carrying amount of net current tax liability and deferred tax asset/liability at 31 December 2022 was £15.6m (2021 – £12.0m) and £6.2m asset (2021 – £4.8m liability), respectively. Further details on these estimates are set out in Notes 10 and 21. #### Retirement benefits Management makes assumptions and estimates, for the next financial year and beyond, which affect the value of the carrying amount of the UK Plan retirement benefit obligation at 31 December 2022. Management follows actuarial advice from a third party when determining estimation 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 retirement benefits at 31 December 2022 was a surplus of £51.8m (2021 – surplus of £72.2m), being the present value of the defined benefit obligations of £198.4m (2021 – £294.9m) and fair value of plan assets of £250.2m (2021 – £367.1m). Further details and sensitivities from changes in estimates are set out in Note 34g. #### Acquisition accounting On 25 November 2022, the Group acquired substantially all of the assets of Spencer Aerospace Manufacturing, LLC, for total consideration of $100m split between initial, deferred and contingent payments (See Note 31 for further details). There is judgment in applying assumptions and estimates which determine the valuation of the intangible assets and associated goodwill. The fair value of contingent consideration is based on the expected present value technique, using risk-adjusted discount rate to discount probability weighted cashflows. Intangible valuation is based on a hybrid cost/income approach, which is predominantly based on future income streams of the acquiree. The contingent consideration is subject to fair valuation reviews each reporting period. #### Consideration of climate change In preparing the Financial Statements, the Directors have considered the impact of climate change, particularly in the context of the risks identified in the TCFD disclosure on pages 26 to 31. There has been no material impact identified on the financial reporting judgements and estimates. In particular, the Directors considered the impact of climate change in respect of the following areas: - • Useful lives of assets – The useful lives of assets could be reduced by climate-related matters, for example as a result of physical risks, obsolescence or legal restrictions. The change in useful lives would have a direct impact on the amount of depreciation or amortisation recognised each year from the date of reassessment. The Directors' review of useful lives has taken into consideration the impacts of the Group's net zero commitments and has not had a material impact on the results for the year. - • Inventory valuation – Climate-related matters may affect the value of inventories as they could become obsolete as a result of a decline in selling prices or a reduction in demand. After consideration of the typical inventory days compared to the rate of change in the market the Directors consider that inventory is appropriately valued. - • Going concern and viability – risks identified in the TCFD disclosures in pages 26 to 31 have been factored into the going concern and viability assessment. See page 82 further details. - • Goodwill Impairment assessment – cash flow forecasts used in the impairment assessment of goodwill have considered potential changes in demand over the next 5 years as a result of changing customer preferences on Senior's products. This is not expected to have a material impact on the cashflows, with longer term growth rates based on forecasted market demand. Aerospace market rates were used for the Aerospace CGU and long-term GDP rates for advanced economies were used for the Flexonics CGU. Sensitivity analysis (See Note 13) shows that a 1 percent decrease in growth rate would not result in the carrying amount of CGU groups exceeding their recoverable amount. - • Recoverability of trade receivables – After consideration of the typical receivable days compared to the rate of change in the market, the Directors consider that receivables at 31 December 2022 are not adversely affected by climate change. - • Valuation of the UK Plan retirement gross benefit obligation - there is no material impact on key financial assumptions which are set according to market yields. Mortality assumptions take account of current views of possible climate pathways that may develop. Asset values are set according to market valuations which incorporate market expectations of climate impacts. The Directors are aware of the ever-changing risks attached to climate change and will regularly assess these risks against judgements and estimates made in preparation of the Group's financial statements. ## 3. Revenue Total revenue is disaggregated by market sectors as follows: | | Year ended 2022 £m | Year ended 2021 £m | | --- | --- | --- | | Civil Aerospace | 339.4 | 244.5 | | Defence | 122.1 | 125.0 | | Other | 92.1 | 69.8 | | Aerospace | 553.6 | 439.3 | | Land Vehicles | 164.1 | 118.8 | | Power & Energy | 131.5 | 101.1 | | Flexonics | 295.6 | 219.9 | | Eliminations | (0.8) | (0.5) | | Total revenue | 848.4 | 658.7 | 150 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 FINANCIAL STATEMENTS # **3. Revenue continued** Other Aerospace comprises space and non-military helicopters and other markets, principally including semiconductor, medical, and industrial applications. The Group applies the practical expedient in paragraph 121 of IFRS 15 and does not disclose information about remaining performance obligations that have original expected durations of one year or less. Applying the practical expedient in paragraph 94 of IFRS 15, the Group recognises the incremental costs of obtaining contracts as an expense when incurred if the amortisation period of the assets that the Group otherwise would have recognised is one year or less. # **4. Segment Information** The Group reports its segment information as two operating Divisions according to the market segments they serve, Aerospace and Flexonics, which is consistent with the oversight employed by the Executive Committee. The chief operating decision-maker, as defined by IFRS 8, is the Executive Committee. The Group is managed on the same basis, as two operating Divisions. The accounting policies of the reportable segments are the same as the Group's accounting policies described in Note 2 and the sales between segments are carried out at arm's length. Adjusted operating profit, as described in Note 9, is the key measure reported to the Group's Executive Committee for the purpose of resource allocation and assessment of segment performance. Investment income, finance costs and tax are not allocated to segments, as this type of activity is driven by the central tax and treasury functions. Segment assets include directly attributable computer software assets, property, plant and equipment (including right-of-use assets), working capital assets, goodwill and intangible assets from acquisitions. Cash, deferred and current tax and other financial assets (except for working capital) are not allocated to segments for the purposes of reporting financial performance to the Executive Committee. Segment liabilities include directly attributable working capital liabilities and lease liabilities. Debt, retirement benefits, deferred and current tax and other financial liabilities (except for working capital) are not allocated to segments for the purposes of reporting financial performance to the Executive Committee. 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: | Notes | Aerospace Year ended 2022 £m | Flexonics Year ended 2022 £m | Eliminations/ central costs | | Total Year ended 2022 £m | Aerospace Year ended 2021 £m | Flexonics Year ended 2021 £m | Eliminations/ central costs | | Total Year ended 2021 £m | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | Year ended 2022 £m | Year ended 2022 £m | | | | Year ended 2021 £m | Year ended 2021 £m | | | External revenue | 553.0 | 295.4 | – | – | 848.4 | 438.9 | 219.8 | – | – | 658.7 | | Inter-segment revenue | 0.6 | 0.2 | (0.8) | – | – | 0.4 | 0.1 | (0.5) | – | – | | Total revenue | 553.6 | 295.6 | (0.8) | – | 848.4 | 439.3 | 219.9 | (0.5) | – | 658.7 | | Adjusted trading profit | 20.3 | 25.4 | (17.6) | 28.1 | 28.1 | 7.9 | 12.9 | (14.9) | 5.9 | 5.9 | | Share of joint venture profit | – | 0.4 | – | 0.4 | 0.4 | – | 0.2 | – | 0.2 | 0.2 | | Adjusted operating profit | 20.3 | 25.8 | (17.6) | 28.5 | 28.5 | 7.9 | 13.1 | (14.9) | 6.1 | 6.1 | | Amortisation of intangible assets from acquisitions | 9 (0.2) | – | – | (0.2) | (0.2) | – | – | – | – | – | | Net restructuring income | 9 4.2 | – | – | 4.2 | 4.2 | 2.2 | 2.2 | – | – | 4.4 | | Operating profit | 24.3 | 25.8 | (17.6) | 32.5 | 32.5 | 10.1 | 15.3 | (14.9) | 10.5 | 10.5 | | Investment income | | | | 1.9 | 1.9 | | | | | 0.5 | | Finance costs | | | | (10.6) | (10.6) | | | | | (8.5) | | Corporate undertakings | 9 | | | (1.4) | (1.4) | | | | | 21.2 | | Profit before tax | | | | 22.4 | 22.4 | | | | | 23.7 | | Tax (charge)/credit | | | | (2.2) | (2.2) | | | | | 0.5 | | Profit after tax | | | | 20.2 | 20.2 | | | | | 24.2 | Trading profit and adjusted trading profit is operating profit and adjusted operating profit respectively before share of joint venture profit. See Note 9 for the derivation of adjusted operating profit. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 151 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED # 4. Segment Information continued Segment information for assets, liabilities, additions to non-current assets and depreciation and amortisation is presented below: | Assets | Year ended 2022 £m | Year ended 2021 £m | | --- | --- | --- | | Aerospace | 647.8 | 506.6 | | Flexonics | 217.3 | 184.9 | | Segment assets for reportable segments | 865.1 | 691.5 | | Unallocated | | | | Central | 3.6 | 4.6 | | Cash | 43.2 | 51.1 | | Deferred and current tax | 13.0 | 8.3 | | Retirement benefits | 51.8 | 72.2 | | Others | 0.2 | 0.1 | | Total assets per Consolidated Balance Sheet | 976.9 | 827.8 | | Liabilities | Year ended 2022 £m | Year ended 2021 £m | | --- | --- | --- | | Aerospace | 189.5 | 148.1 | | Flexonics | 79.7 | 63.9 | | Segment liabilities for reportable segments | 269.2 | 212.0 | | Unallocated | | | | Central | 19.2 | 15.4 | | Loans and Overdrafts | 143.7 | 131.0 | | Deferred and current tax | 22.4 | 25.1 | | Retirement benefits | 12.1 | 11.0 | | Deferred and Contingent consideration | 52.3 | - | | Others | 8.6 | 8.2 | | Total liabilities per Consolidated Balance Sheet | 527.5 | 402.7 | | | Additions to non-current assets Year ended 2022 £m | Additions to non-current assets Year ended 2021 £m | Depreciation and amortisation Year ended 2022 £m | Depreciation and amortisation Year ended 2021 £m | | --- | --- | --- | --- | --- | | Aerospace | 18.6 | 12.9 | 35.9 | 35.1 | | Flexonics | 13.5 | 10.3 | 13.4 | 12.2 | | Sub total | 32.1 | 23.2 | 49.3 | 47.3 | | Central | 0.4 | 0.1 | 0.5 | 0.5 | | Total | 32.5 | 23.3 | 49.8 | 47.8 | The Group's revenues from its major products is presented below: | | Year ended 2022 £m | Year ended 2021 £m | | --- | --- | --- | | Aerospace – Structures | 242.6 | 178.9 | | Aerospace – Fluid Systems | 310.4 | 260.0 | | Aerospace total | 553.0 | 438.9 | | Land vehicles | 164.1 | 118.8 | | Power & Energy | 131.3 | 101.0 | | Flexonics total | 295.4 | 219.8 | | Group total | 848.4 | 658.7 | No individual customer accounted for more than 10% of external revenue in 2022 or 2021. 152 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 FINANCIAL STATEMENTS / FINANCIAL STATEMENTS 4. Segment Information continued 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 | | | | | 2022 | | | 2021 | | | | 2022 | | 2021 | | | | | £m | | £m | | | | £m | | | £m | USA 417.1 316.4 296.5 202.5 UK 140.6 105.0 158.8 181.8 Rest of the World 290.7 237.3 144.4 140.9 Sub total 848.4 658.7 599.7 525.2 Unallocated amounts – – 10.9 5.7 Total 848.4 658.7 610.6 530.9 The unallocated amounts on non-current assets relate to deferred tax assets. 153SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 153SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 5. Operating profit Operating profit can be analysed as follows: Year ended 2022 £m Year ended 2021 £m Revenue 848.4 658.7 Cost of sales (698.7) (555.7) Gross profit 149.7 103.0 Distribution costs (6.3) (5.4) Administrative expenses (111.4) (87.3) Profit on sale of fixed assets 0.1 – Share of joint venture profit 0.4 0.2 Operating profit 32.5 10.5 Operating profit for the period has been arrived at after charging: Year ended 2022 £m Year ended 2021 £m Net foreign exchange losses/(gains) 4.6 (1.7) Research and design costs 19.8 19.2 Depreciation of property, plant and equipment 48.1 46.3 Amortisation of intangible assets included in administration expenses 1.7 1.5 Cost of inventories recognised as expense 698.7 555.7 Provision for loss allowance against receivables 1.5 0.6 Restructuring: provision (release)/charge for impairment of property, plant and equipment and inventories (1.4) 2.3 Restructuring: staff and other costs 1.2 2.5 COVID-19 grant (income) – (0.3) Aerospace manufacturing grant (income) (4.0) (4.2) Staff 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. FINANCIAL STATEMENTS / FINANCIAL STATEMENTS ## NOTES TO THE CONSOLIDATED ## FINANCIAL STATEMENTS CONTINUED 5. Operating profit continued The analysis of the Auditor’s remuneration is as follows: | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2022 | | 2021 | | | £m | | £m | Fees payable to the Company’s Auditor and their associates for the audit of the Company’s annual accounts 0.5 0.3 Fees payable to the Company’s Auditor and their associates for other services to the Group – The audit of the Company’s subsidiaries 1.7 1.5 Total audit fees 2.2 1.8 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 (2021 – £0.06m) to the Company’s Auditor for audit related services and £nil (2021 – £0.1m) for non-audit related services during 2022, 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 102 to 107. No services were provided pursuant to contingent fee arrangements. 154 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 154 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 6. Staff costs The average monthly number of employees (including Directors) was: Year ended 2022 Number Year ended 2021 Number Production 5,297 4,850 Distribution 64 63 Sales 249 252 Administration 495 473 Total 6,105 5,638 The actual number of employees at 31 December 2022 was 6,361 (2021 – 5,664). Notes Year ended 2022 £m Year ended 2021 £m Their aggregate remuneration comprised: Wages and salaries 234.7 198.9 Social security costs 26.9 22.6 Termination benefits – 1.0 Other pension costs – defined contribution 34a 8.9 8.6 Other pension costs – defined benefit 34e 0.8 0.7 Share based payments 33 4.3 3.5 Aggregate remuneration 275.6 235.3 The Group also incurred medical and other employee benefit expenses during the year of £24.6m (2021 – £20.9m) and received £nil (2021 – £0.3m) COVID-19 grant income related to government assistance schemes to compensate for furloughing of employees. 7. Investment income Year ended 2022 £m Year ended 2021 £m Interest on bank deposits 0.7 0.1 Net finance income of retirement benefits (Note 34e) 1.2 0.4 Total income 1.9 0.5 FINANCIAL STATEMENTS # **8. Finance costs** | | Notes | Year ended 2022 £m | Year ended 2021 £m | | --- | --- | --- | --- | | Interest on bank overdrafts and loans | | 2.0 | 1.0 | | Interest on other loans and other finance costs | | 5.8 | 4.9 | | Interest on lease liabilities | | 2.5 | 2.6 | | Interest unwind on acquisition consideration | 9, 31 | 0.3 | – | | Total finance costs | | 10.6 | 8.5 | # **9. Adjusted operating profit and adjusted profit/(loss) before tax** The presentation of adjusted operating profit and adjusted profit 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, net restructuring income and the costs and income 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. 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 acquisition of Spencer Aerospace. It is charged on a straight-line basis and reflects a non-cash item for the reported year. The Group implemented a restructuring programme in 2019, which continued through 2020 and 2021 in response to the impact of the COVID-19 pandemic on some of the Group's end markets. Some residual restructuring activity has continued in 2022. 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 business acquisition activities, gain on disposal of a business, bid defence and other costs relating to corporate activities. None of these charges are reflective of in year performance. Therefore, they are excluded by the Board and Executive Committee when measuring the operating performance of the businesses. | | Notes | Year ended 2022 £m | Year ended 2021 £m | | --- | --- | --- | --- | | Operating profit | | 32.5 | 10.5 | | Amortisation of intangible assets from acquisitions | | 0.2 | – | | Net restructuring income | | (4.2) | (4.4) | | Adjusted operating profit | | 28.5 | 6.1 | | Profit before tax | | 22.4 | 23.7 | | Adjustments to profit/loss before tax as above | | (4.0) | (4.4) | | Corporate undertakings | 31 | 1.4 | (21.2) | | Corporate undertakings – interest | | 0.3 | – | | Total Corporate undertakings | | 1.7 | (21.2) | | Adjusted profit/(loss) before tax | | 20.1 | (1.9) | # **Net restructuring income** In 2020 the Group had 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. In 2022 there were still some residual activities associated with that. The decisive actions which we took on restructuring and cost management 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. The restructuring resulted in net income of £4.2m (2021 - £4.4m). Of this, £4.0m income (2021 - £4.2m) related to an aerospace manufacturing grant and £1.2m net charge related to consultancy and other costs (2021 - £0.4m net charge). For certain specific programmes, and in conjunction with the focus on restructuring, management has also identified inventory impairment reversals of £2.7m (2021 - £1.4m) where customer demand has increased, and further impairment provisions on property, plant and equipment in 2022 with a charge of £1.3m (2021 - £0.8m) to cover the risk where there are no alternative uses. Net cash inflow related to restructuring activities was £2.1m (2021 - £0.9m net cash outflow). At 31 December 2022, a restructuring provision of £0.2m (31 December 2021: £1.3m) was recognised and is expected to be utilised in 2023. # **Corporate undertakings** Costs associated with corporate undertakings were £1.7m in 2022, of which £1.2m of acquisition costs and £0.3m interest unwind of deferred and contingent consideration relates to the acquisition of Spencer Aerospace in November 2022 and £0.2m costs relate to other corporate activities. In 2021, net income of £21.2m was recognised, of which £24.2m gain relates to the disposal of Senior Aerospace Connecticut in April 2021, partly offset by £3.0m bid defence and costs relating to other corporate activities. See Note 31 to the Financial Statements for further details. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 155 FINANCIAL STATEMENTS # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ## 10. Taxation | | Year ended 2022 £m | Year ended 2021 £m | | --- | --- | --- | | Current tax: | | | | Current year | 8.2 | 7.0 | | Adjustments in respect of prior periods | (1.9) | (6.0) | | | 6.3 | 1.0 | | Deferred tax (Note 21): | | | | Current year | (3.5) | (1.7) | | Adjustments in respect of prior periods | (0.6) | 0.2 | | | (4.1) | (1.5) | | Total tax charge/(credit) | 2.2 | (0.5) | On 24th May 2021, a future increase in UK corporation tax rate from 19% to 25% was substantially enacted with an effective 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 a current year charge of £0.2m recognised in the Income Statement and a credit of £1.4m through Other Comprehensive Income. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. The total charge for the year can be reconciled to the profit before tax per the Consolidated Income Statement as follows: | | Year ended 2022 £m | Year ended 2022 % | Year ended 2021 £m | Year ended 2021 % | | --- | --- | --- | --- | --- | | Profit before tax | 22.4 | | 23.7 | | | Expected tax charge/(credit) at the UK standard corporation tax rate 19% | 4.3 | | 4.5 | | | Effect of different statutory rates in overseas jurisdictions | a 0.3 | | 0.9 | | | Tax incentives and credits | b (1.2) | | (1.1) | | | Tax losses not recognised | c (0.4) | | 0.3 | | | Impact of share options | d 0.2 | | 0.1 | | | Effect of difference in treatment of financing activities between jurisdictions | e (0.4) | | (0.3) | | | Non-deductible expenses and other permanent differences | f 1.5 | | 1.4 | | | Effect of changes in UK tax rate on deferred tax items | g 0.2 | | (0.6) | | | Withholding taxes | h 0.2 | | 0.1 | | | Adjustments in respect of prior periods – current tax items | i (1.9) | | (6.0) | | | Adjustments in respect of prior periods – deferred tax items | j (0.6) | | 0.2 | | | Tax charge / (credit) and effective tax rate for the year | 2.2 | 9.8% | (0.5) | (2.1%) | a. Mainly attributable to a higher rate of tax in the US. b. Includes a £1.2m benefit from enhanced US R&D deductions and the UK capital allowance super-deduction. c. Tax losses utilised in the year includes £0.3m of UK tax losses whose use is uncertain and therefore unrecognised for deferred tax. Unrecognised amounts in 2021 included £0.5m of State tax losses in the US which have restricted use, net of tax losses utilised of £0.2m. d. 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. e. Effect of different rates of tax between jurisdictions on internal financing activities. f. Non-deductible expenses and other permanent differences, includes a £1.7m charge in respect of uncertain tax positions in accordance with IFRIC 23 principles. g. 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 effective from 1 April 2023. h. Arises from irrecoverable withholding taxes. i. 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 £3.8m as well as prior year items arising from the true up of tax accruals in line with local tax filings which in many cases have an equal and opposite prior year item in deferred tax. j. Arises from the true up of deferred tax estimates following the finalisation of entity statutory accounts and local tax returns. 158 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 FINANCIAL STATEMENTS # **10. Taxation continued** 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: | | 2022 £m | 2021 £m | | --- | --- | --- | | Deferred tax: | | | | Items that will not be reclassified subsequently to profit and loss | | | | Tax on actuarial items | 4.3 | (3.7) | | Effect of change in UK tax rate | 1.4 | (2.7) | | Items that may be reclassified subsequently to profit or loss | | | | Tax on foreign exchange contracts – cash flow hedges | 0.7 | 0.8 | | Total tax credit/charge recognised directly in other comprehensive income | 6.4 | (5.6) | 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 2022 £m | Year ended 2021 £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) | 6.4 | (5.5) | # **11. Dividends** | | Year ended 2022 £m | Year ended 2021 £m | | --- | --- | --- | | Amounts recognised as distributions to equity holders in the period: | | | | Final dividend for the year ended 31 December 2021 of £nil per share (2020 – £nil) | – | – | | Interim dividend for the year ended 31 December 2022 of 0.30p per share (2021 – £nil) | 1.2 | – | | | 1.2 | – | | Proposed final dividend for the year ended 31 December 2022 of 1.00p per share (2021 – £nil) | 4.1 | – | # **12. Earnings per share** The calculation of the basic and diluted earnings per share is based on the following data: | Number of shares | Year ended 2022 Million | Year ended 2021 Million | | --- | --- | --- | | Weighted average number of ordinary shares for the purposes of basic earnings per share | 415.3 | 415.7 | | Effect of dilutive potential ordinary shares: | | | | Share options | 11.6 | 6.8 | | Weighted average number of ordinary shares for the purposes of diluted earnings per share | 426.9 | 422.5 | SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 157 FINANCIAL STATEMENTS # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ## 12. Earnings per share continued | Earnings and earnings per share | Notes | Year ended 2022 | | Year ended 2021 | | | --- | --- | --- | --- | --- | --- | | | | Earnings £m | EPS pence | Earnings £m | EPS pence | | Profit for the period | | **20.2** | **4.86** | 24.2 | 5.82 | | Adjust: | | | | | | | Amortisation of intangible assets from acquisitions net of tax of £nil (2021 – £nil) | | **0.2** | **0.05** | – | – | | Net restructuring income net of tax of £0.7m (2021 – £0.2m tax credit) | 9 | **(3.5)** | **(0.84)** | (4.6) | (1.11) | | Corporate undertakings net of tax of £0.5m (2021 – £2.9m) | 31 | **1.2** | **0.29** | (18.3) | (4.40) | | Non-cash tax credit | 10 | – | – | (0.6) | (0.14) | | Adjusted earnings after tax | | **18.1** | **4.36** | 0.7 | 0.17 | | Earnings per share | | | | | | | – basic | | | **4.86p** | | 5.82p | | – diluted | | | **4.73p** | | 5.73p | | – adjusted | | | **4.36p** | | 0.17p | | – adjusted and diluted | | | **4.24p** | | 0.17p | The denominators used for all basic, diluted and adjusted earnings per share are as detailed in the table above. The presentation of adjusted earnings 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, net restructuring income, the costs and income associated with 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 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 | | Notes | Year ended 2022 £m | Year ended 2021 £m | | --- | --- | --- | --- | | **Cost** | | | | | At 1 January | | **308.5** | 322.9 | | Corporate undertakings | 31 | **42.0** | (15.1) | | Exchange differences | | **9.9** | 0.7 | | At 31 December | | **360.4** | 308.5 | | **Accumulated impairment losses** | | | | | At 1 January | | **158.3** | 157.9 | | Exchange differences | | **2.4** | 0.4 | | At 31 December | | **160.7** | 158.3 | | **Carrying amount at 31 December** | | **199.7** | 150.2 | In 2022, goodwill has increased by £49.5m, of which £42.0m relates to the acquisition of Spencer Aerospace (see Note 31), with £7.5m net foreign exchange differences. Goodwill is allocated to the group of CGUs (CGU groups), namely 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 2022 £m | Year ended 2021 £m | | --- | --- | --- | | Aerospace | **143.6** | 98.0 | | Flexonics | **56.1** | 52.2 | | Total | **199.7** | 150.2 | 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 2022 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 2027 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 158 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 FINANCIAL STATEMENTS # **13. Goodwill continued** margins anticipated, the proportion of operating profit converted into cash flow in each year, long-term growth rates and discount rates applied. The forecast compound annual growth rate in revenue from 2022 to 2027 was 8% (2021 – 2021 to 2026 was 9%), reflecting continued 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 2027. These estimates up to 2027, where appropriate, take account of the current economic environment as set out in the Strategic Report on pages 1 to 83. Cash flows after 2027 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 2027. For Aerospace, the long-term market growth rate is 3.7% per annum (2021 – 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 1.5% per annum (2021 – 1.4%), 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 10.9% and 13.7% respectively (2021 – 10.7% and 11.8%); 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. The increase in discount rates is mainly driven by changes in 10-year UK and US government bond yields. 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. Neither these sensitivities or a reasonable possible change in the cash flows results in the carrying amount of the CGU groups exceeding their recoverable amount. Further to the 30 September 2022 annual impairment test, the Board considered whether there were any triggering events as at the 31 December 2022 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. # **14. Other intangible assets** | | Intangible assets from acquisitions Year ended 2022 £m | Computer software and others Year ended 2022 £m | Total Year ended 2022 £m | Intangible assets from acquisitions Year ended 2021 £m | Computer software and others Year ended 2021 £m | Total Year ended 2021 £m | | --- | --- | --- | --- | --- | --- | --- | | **Cost** | | | | | | | | At 1 January | 117.5 | 22.8 | 140.3 | 121.0 | 23.0 | 144.0 | | Additions | – | 1.8 | 1.8 | – | 1.1 | 1.1 | | Acquired on acquisition | 31.0 | – | 31.0 | – | – | – | | Disposals | – | (1.2) | (1.2) | (3.5) | (0.6) | (4.1) | | Restructuring impairment and disposal | – | (0.4) | (0.4) | – | (0.6) | (0.6) | | Reclassification | – | 0.6 | 0.6 | – | – | – | | Exchange differences | 8.8 | 1.7 | 10.5 | – | (0.1) | (0.1) | | At 31 December | 157.3 | 25.3 | 182.6 | 117.5 | 22.8 | 140.3 | | **Amortisation** | | | | | | | | At 1 January | 117.5 | 18.6 | 136.1 | 121.0 | 18.2 | 139.2 | | Charge for the year | 0.2 | 1.5 | 1.7 | – | 1.5 | 1.5 | | Disposals | – | (1.2) | (1.2) | (3.5) | (0.6) | (4.1) | | Restructuring impairment and disposal | – | (0.4) | (0.4) | – | (0.6) | (0.6) | | Exchange differences | 8.8 | 1.4 | 10.2 | – | 0.1 | 0.1 | | At 31 December | 126.5 | 19.9 | 146.4 | 117.5 | 18.6 | 136.1 | | **Carrying amount at 31 December** | **30.8** | **5.4** | **36.2** | – | **4.2** | **4.2** | The carrying amount of intangible assets from acquisitions as at 31 December 2022 relates to the acquisition of Spencer Aerospace and consists of £23.8m relating to Qualified parts list, £6.5m relating to Customer relationships and £0.5m relating to Order backlog. These are being amortised over periods of 18 years and 1 month, 16 years and 1 month and 1 year and 1 month respectively. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 159 FINANCIAL STATEMENTS # **NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED** # **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 £4.4m represents the Group's share of the joint venture's net assets as at 31 December 2022 (2021 – £3.9m). 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 2022 and December 2021. | | 2022 £m | 2021 £m | | --- | --- | --- | | Revenue | 7.0 | 6.6 | | Expenses | (6.2) | (6.1) | | Profit | 0.8 | 0.5 | | Total assets | 11.5 | 10.0 | | Total liabilities | (2.6) | (2.0) | | Net assets | 8.9 | 8.0 | | Group's share of profit | 0.4 | 0.2 | | Group's share of net assets | 4.4 | 3.9 | 160 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 FINANCIAL STATEMENTS # 16. Property, plant and equipment | | Freehold land and buildings Year ended 2022 £m | Leasehold building improve- ments Year ended 2022 £m | Plant and equipment Year ended 2022 £m | Right-of- use Land and Buildings Year ended 2022 £m | Right-of- use Plant and equipment Year ended 2022 £m | Total Year ended 2022 £m | Freehold land and buildings Year ended 2021 £m | Leasehold building improve- ments Year ended 2021 £m | Plant and equipment Year ended 2021 £m | Right-of- use Land and Buildings Year ended 2021 £m | Right-of- use Plant and equipment Year ended 2021 £m | Total Year ended 2021 £m | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | **Cost or valuation** | | | | | | | | | | | | | | At 1 January | 104.6 | 4.5 | 518.8 | 88.2 | 6.5 | 722.6 | 111.7 | 4.2 | 536.7 | 86.1 | 6.2 | 744.9 | | Additions | 1.2 | 0.3 | 27.2 | 0.8 | 1.2 | 30.7 | 0.3 | 0.3 | 19.6 | 0.9 | 1.1 | 22.2 | | Acquired on acquisition | – | – | 1.1 | 2.6 | 2.1 | 5.8 | – | – | – | – | – | – | | Lease Modifications | – | – | – | 2.7 | (0.5) | 2.2 | – | – | – | 3.7 | (0.2) | 3.5 | | Exchange differences | 9.4 | 0.5 | 46.2 | 6.3 | 0.5 | 62.9 | (1.1) | – | (5.0) | (0.5) | – | (6.6) | | Disposed on disposal activities | – | – | – | – | – | – | (3.1) | – | (16.6) | – | – | (19.7) | | Disposals | (0.3) | – | (11.2) | (1.5) | (0.5) | (13.5) | (0.1) | – | (11.0) | (0.4) | (0.2) | (11.7) | | Reclassification | – | 3.0 | (6.7) | – | – | (3.7) | – | – | – | – | – | – | | Restructuring impairment and disposal | (1.9) | – | (5.2) | – | – | (7.1) | (3.1) | – | (4.9) | (1.6) | (0.4) | (10.0) | | At 31 December | 113.0 | 8.3 | 570.2 | 99.1 | 9.3 | 799.9 | 104.6 | 4.5 | 518.8 | 88.2 | 6.5 | 722.6 | | **Accumulated depreciation and impairment** | | | | | | | | | | | | | | At 1 January | 36.3 | 3.5 | 360.9 | 23.6 | 3.7 | 428.0 | 35.8 | 3.2 | 355.6 | 16.8 | 3.0 | 414.4 | | Charge for the year | 2.6 | 0.3 | 34.9 | 8.7 | 1.6 | 48.1 | 2.5 | 0.3 | 34.0 | 8.1 | 1.4 | 46.3 | | Lease Modifications | – | – | – | 0.3 | (0.4) | (0.1) | – | – | – | – | (0.1) | (0.1) | | Exchange differences | 3.9 | 0.5 | 32.2 | 1.8 | 0.3 | 38.7 | (0.3) | – | (2.3) | (0.1) | – | (2.7) | | Eliminated on disposal activities | – | – | – | – | – | – | (0.9) | – | (11.3) | – | – | (12.2) | | Eliminated on disposals | (0.3) | – | (10.8) | (1.5) | (0.5) | (13.1) | (0.1) | – | (10.8) | (0.4) | (0.2) | (11.5) | | Reclassification | – | 1.1 | (4.2) | – | – | (3.1) | – | – | – | – | – | – | | Restructuring impairment and disposal | (1.9) | – | (3.9) | – | – | (5.8) | (0.7) | – | (4.3) | (0.8) | (0.4) | (6.2) | | At 31 December | 40.6 | 5.4 | 409.1 | 32.9 | 4.7 | 492.7 | 36.3 | 3.5 | 360.9 | 23.6 | 3.7 | 428.0 | | **Carrying amount at 31 December** | **72.4** | **2.9** | **161.1** | **66.2** | **4.6** | **307.2** | **68.3** | **1.0** | **157.9** | **64.6** | **2.8** | **294.6** | As part of the restructuring programme (see Note 9), £1.3m (2021 – £3.8m) of property, plant and equipment has been impaired in 2022, of which £1.3m relates to Aerospace and Enil 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 2022, the Group had entered into contractual commitments for the acquisition of property, plant and equipment amounting to £1.9m (2021 – £3.4m). SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 181 FINANCIAL STATEMENTS # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ## 17. Inventories | | Year ended 2022 £m | Year ended 2021 £m | | --- | --- | --- | | Raw materials | 77.5 | 56.5 | | Work-in-progress | 80.6 | 60.1 | | Finished goods | 36.2 | 28.6 | | Total | 194.3 | 145.2 | Inventory releases in 2022 were £1.9m (2021 – write-down of £2.5m), after releases of £2.7m (2021 – £1.5m) relating to restructuring (see Note 9). ## 18. Trade and other receivables Trade and other receivables at 31 December comprise the following: | | Year ended 2022 £m | Year ended 2021 £m | | --- | --- | --- | | Non-current assets | | | | Foreign exchange contracts | 0.3 | – | | Other receivables | 0.1 | 0.1 | | | 0.4 | 0.1 | | Current assets | | | | Trade receivables | 110.6 | 85.2 | | Value added tax | 2.9 | 1.9 | | Foreign exchange contracts | 2.4 | 0.8 | | Prepayments | 10.7 | 10.0 | | Other receivables | 0.1 | 0.1 | | | 126.7 | 98.0 | | Total trade and other receivables | 127.1 | 98.1 | ### 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 55 days (2021 – 52 days). An allowance has been made for estimated irrecoverable amounts from the sale of goods of £3.3m (2021 – £2.0m). 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 2022, the carrying amount of the receivable from the Group's most significant customer was £8.3m (2021 – £6.7m 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. 162 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 FINANCIAL STATEMENTS / FINANCIAL STATEMENTS 18. Trade and other receivables continued Expected credit loss | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2022 | | 2021 | | | £m | | £m | Movements in loss allowance: At 1 January 2.0 1.6 Provision for impairment 1.5 0.6 Amounts written off as uncollectible (0.2) (0.2) Amounts recovered (0.2) – Exchange differences 0.2 – At 31 December 3.3 2.0 Ageing analysis of past due, net of loss allowance: Up to 30 days past due 10.4 9.3 31 to 60 days past due 3.0 3.2 61 to 90 days past due 1.5 0.9 91 to 180 days past due 1.9 1.6 Total past due, net of loss allowance 16.8 15.0 Not past due 93.8 70.2 Total current trade receivables 110.6 85.2 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. 163SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 163SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 19. Bank overdrafts and loans Year ended 2022 £m Year ended 2021 £m Bank overdrafts 0.5 – Bank loans 17.4 (0.5) Other loans 125.8 131.5 143.7 131.0 The borrowings are repayable as follows: On demand or within one year 0.5 14.8 In the second year – – In the third to fifth years inclusive 118.5 70.7 After five years 24.7 45.5 143.7 131.0 Less: amount due for settlement within 12 months (shown under current liabilities) (0.5) (14.8) Amount due for settlement after 12 months 143.2 116 . 2 At 31 December 2022, bank loans of £18.6m are drawn and there are £1.2m of capitalised revolving credit facility transaction costs. At 31 December 2021, bank loans were undrawn, and there were £0.5m of capitalised revolving credit facility transaction costs. FINANCIAL STATEMENTS # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ## 19. Bank overdrafts and loans continued Analysis of borrowings by currency | | Total £m | Pound Sterling £m | Euros £m | US Dollars £m | | --- | --- | --- | --- | --- | | **31 December 2022** | | | | | | Bank overdrafts | 0.5 | – | 0.5 | – | | Bank loans | 17.4 | (1.2) | – | 18.6 | | Other loans | 125.8 | 26.9 | 24.7 | 74.2 | | | **143.7** | **25.7** | **25.2** | **92.8** | | **31 December 2021** | | | | | | 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** | The weighted average interest rates paid were as follows: | | Year ended 2022 % | Year ended 2021 % | | --- | --- | --- | | Bank loans and overdrafts | **3.64** | 1.51 | | Other loans | **3.07** | 3.10 | Bank loans and overdrafts of £19.1m (2021 – £nil) 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 2021 or 2022. The Directors estimate the fair value of the Group's borrowings to be as follows: | | Year ended 2022 £m | Year ended 2021 £m | | --- | --- | --- | | Bank loans and overdrafts | **17.9** | (0.5) | | Other loans | **116.3** | 133.8 | | | **134.2** | 133.3 | 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 effective interest rates on bank overdrafts and loans are determined based on SONIA, SOFR and appropriate LIBOR 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, 2022 £24.8m (2021 – £23.5m) 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, 2022 £nil (2021 – £14.8m) were taken out in October 2015 and were repaid in October 2022. The loan notes carried interest at the rate of 3.42% per annum. - c) Loan notes of $60m, 2022 £49.6m (2021 – £44.5m) 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, 2022 £24.8m (2021 – £22.2m) 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 £0.4m, directly attributable to the GBP notes (£0.1m), the Euro notes (£0.1m) and the US Dollar notes (£0.2m), have been deducted from their carrying value. The Group also has two revolving credit facilities. 164 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 FINANCIAL STATEMENTS ### 19. Bank overdrafts and loans continued A committed multi-currency revolving credit facility in the UK of £115m (2021 – £120m) was amended and extended in November 2022 and matures in November 2026. At 31 December 2022, a loan of $20m (£16.5m) with reference to USD LIBOR was outstanding under the £115m facility. At 31 December 2021, £nil was drawn under the £120m facility. The refinancing of the Group's main UK revolving credit facility demonstrates the strong ESG commitments made by Senior and its lenders in agreeing appropriate sustainability linked Key Performance Indicators ("KPIs"). The first testing period on these KPIs is not until the year ended 31 December 2023, which could have a small impact on the UK RCF interest margin. A committed $50m single bank (£41.3m) loans and letter of credit facility was extended in June 2022 and matures in June 2025. There were $2.6m (£2.1m) loans with reference to Term SOFR which are drawn under the facility on 31 December 2022 and $nil (£nil) loans drawn on 31 December 2021 and there were letters of outstanding credit of $3.1m (£2.6m) (2021 – £1.1m). As at 31 December 2022, the Group had available £135.1m (2021 – £155.9m) 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 3.5 years (2021 – 3.0 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 2022 was 22% (2021 – 19%). All of the Group's external borrowing facilities at 31 December 2022 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). 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 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. At 31 December 2022, the Group's net debt to EBITDA was 1.47x (31 December 2021 – 1.87x) and interest cover was 9.4x (31 December 2021 – 7.3x), both comfortably within the covenants limits. #### 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 83% of its revenue from businesses outside the United Kingdom, with 59% 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 earnings, 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) 2022 Group adjusted operating profit by £4.3m (£2.6m of which would have been due to the US Dollar movement) and would have increased (or decreased) equity by £31.1m (£18.9m 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 hedge between 0% 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 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 105 FINANCIAL STATEMENTS # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ## 20. Financial instruments continued after hedging in existence at 31 December 2022 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 £5.3m, £2.0m 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 2022, the percentage of debt at fixed interest was 87% (2021 – 100%), excluding IFRS 16 lease liabilities from debt. The following sensitivity analysis of the Group's exposure to interest rate risk in 2022 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 £1.8m. 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 one lease of a current subsidiary entity in the UK. 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 Flexomics 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 an alternative financing arrangement. The Group participates in reverse factoring schemes as a way of reducing credit risk. The trade receivables reverse factored at 31 December 2022 were £24.9m (2021 – £16.8m). The net impact of reverse factoring on 2022 was a cash inflow in working capital of £6.2m (2021 – £0.9m outflow) and the discount interest presented within other finance costs is a charge of £0.6m in 2022 (2021 – £0.2m). ### Liquidity risk management Liquidity risk reflects the risk that the Group will have insufficient 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 78 to 81, the Group is currently in a well-funded position, with significant headroom under its committed borrowing facilities. It is considered unlikely that the Group will face any significant funding issues in the foreseeable future. 166 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 FINANCIAL STATEMENTS # **20. Financial instruments**continued Categories of financial instruments | | Year ended 2022 £m | Year ended 2021 £m | | --- | --- | --- | | Carrying value of financial assets: | | | | Cash and cash equivalents | 43.2 | 51.1 | | Trade receivables | 110.6 | 95.2 | | Other receivables | 0.2 | 0.2 | | Financial assets at amortised cost | 154.0 | 136.5 | | Foreign exchange contracts – cash flow hedges | 2.5 | 0.7 | | Foreign exchange contracts – held for trading | 0.2 | 0.1 | | Total financial assets | 156.7 | 137.3 | | Carrying value of financial liabilities: | | | | Bank overdrafts and loans | 143.7 | 131.0 | | Lease liabilities | 78.4 | 73.2 | | Trade payables | 103.4 | 68.3 | | Deferred consideration | 23.4 | – | | Other payables | 65.1 | 54.6 | | Financial liabilities at amortised cost | 414.0 | 327.1 | | Contingent Consideration - fair value through profit or loss | 28.9 | – | | Foreign exchange contracts – cash flow hedges | 8.5 | 3.6 | | Foreign exchange contracts – held for trading | 0.1 | – | | Total financial liabilities | 451.5 | 330.7 | | Undiscounted contractual maturity of financial liabilities at amortised cost: | | | | Amounts payable: | | | | On demand or within one year | 228.9 | 152.3 | | In the second to fifth years inclusive | 149.1 | 118.8 | | After five years | 81.5 | 108.7 | | | 459.5 | 379.8 | | Less: future finance charges | (45.5) | (52.7) | | Financial liabilities at amortised cost | 414.0 | 327.1 | The contingent consideration which is potentially payable in more than one year but less than five years has a gross value at 31 December 2022 of $40m (£33.1m) and a discounted value of $35m (£28.9m). There was no contingent consideration payable as at 31 December 2021. 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. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 187 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 2022 £m | Year ended 2021 £m | | --- | --- | --- | | Notional amounts: | | | | Foreign exchange contracts – cash flow hedges | 159.4 | 128.9 | | Foreign exchange contracts – held for trading | 0.5 | 4.1 | | Total | 159.9 | 133.0 | | Less: amounts maturing within 12 months | (99.4) | (79.1) | | Amounts maturing after 12 months | 60.5 | 53.9 | | Contractual maturity: | | | | Cash flow hedges balances due within one year: | | | | Outflow | (101.5) | (76.8) | | Inflow | 99.9 | 75.2 | | Cash flow hedges balances due between one and two years: | | | | Outflow | (22.9) | (22.4) | | Inflow | 22.0 | 22.0 | | Cash flow hedges balances due between two and five years: | | | | Outflow | (42.5) | (32.1) | | Inflow | 38.6 | 32.1 | | Held for trading balances due within one year: | | | | Outflow | (0.5) | (4.0) | | Inflow | 0.5 | 4.1 | | Fair values: | | | | Foreign exchange contracts – cash flow hedges | (6.0) | (2.9) | | Foreign exchange contracts – held for trading | 0.1 | 0.1 | | Total liability | (5.9) | (2.8) | These fair values are based on market values of equivalent instruments at the Balance Sheet date, comprising £2.7m (2021 – £0.8m) assets included in trade and other receivables and £8.6m (2021 – £3.6m) liabilities included in trade and other payables. The fair value of currency derivatives that are designated and effective as cash flow hedges amounting to £4.9m loss (2021 – £2.6m loss) 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). 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. 168 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 FINANCIAL STATEMENTS # **20. Financial instruments**continued | | Level 1 £m | Level 2 £m | Level 3 £m | Total £m | | --- | --- | --- | --- | --- | | **31 December 2022** | | | | | | **Assets** | | | | | | Foreign exchange contracts – cash flow hedges | – | 2.5 | – | 2.5 | | Foreign exchange contracts – held for trading | – | 0.2 | – | 0.2 | | Total assets | – | 2.7 | – | 2.7 | | **Liabilities** | | | | | | Contingent Consideration – fair value through profit or loss | – | – | 28.9 | 28.9 | | Foreign exchange contracts – cash flow hedges | – | 8.5 | – | 8.5 | | Foreign exchange contracts – held for trading | – | 0.1 | – | 0.1 | | Total liabilities | – | 8.6 | 28.9 | 37.5 | | **31 December 2021** | | | | | | **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** | | | | | | Contingent Consideration – fair value through profit or loss | – | – | – | – | | Foreign exchange contracts – cash flow hedges | – | 3.6 | – | 3.6 | | Foreign exchange contracts – held for trading | – | – | – | – | | Total liabilities | – | 3.6 | – | 3.6 | An amount of £0.8m loss (2021 – £0.1m gain) has been transferred to the Consolidated Income Statement, and is included within operating 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 and 2022 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 remained at 31 December 2021 and 31 December 2022 were presented in the balance sheet as held for trading assets. The fair value of contingent consideration is based on the expected present value technique, using risk-adjusted discount rate to discount probability weighted cashflows. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 189 FINANCIAL STATEMENTS / # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ## 21. Tax balance sheet ### Current tax The current tax receivable of £2.1m (2021 – £2.6m) 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 £17.7m (2021 – £14.6m) includes £1.5m (2021 – £1.3m) tax due on profits of the current and prior years as well as £16.2m (2021 – £16.7m) 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 £2.8m (2021 – £3.4m) 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 £10.4m (2021 – £8.6m). 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. ### 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 tax depreciation £m | Unrealised FX gains £m | Goodwill and intangible amortisation £m | Retirement benefits £m | R&D tax credits £m | Tax losses £m | Other temporary differences £m | Total £m | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | At 1 January 2021 | (16.7) | (0.7) | (7.5) | (6.4) | 6.0 | 3.4 | 21.1 | (0.8) | | (Charge)/credit 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 differences | 0.2 | – | (0.1) | – | 0.1 | (0.2) | – | – | | At 1 January 2022 | **(13.2)** | **0.4** | **(5.6)** | **(15.6)** | **5.8** | **4.6** | **18.8** | **(4.8)** | | (Charge)/credit to Consolidated Income Statement | **(2.6)** | – | **(1.4)** | **(0.6)** | **(3.1)** | **0.3** | **11.5** | **4.1** | | (Charge)/credit to other comprehensive income | – | **0.7** | – | **5.7** | – | – | – | **6.4** | | (Charge)/credit direct to equity | – | – | – | – | – | – | – | – | | Exchange differences | **(1.7)** | – | **(0.7)** | **0.3** | – | **(0.7)** | **3.3** | **0.5** | | **Asset/(liability) at 31 December 2022** | **(17.5)** | **1.1** | **(7.7)** | **(10.2)** | **2.7** | **4.2** | **33.6** | **6.2** | Other temporary differences include assets in the US of £15.6m (2021 – £13.6m) in respect of inventory provisions, accruals and other expenses where tax relief is only available when items are realised or paid as well other timing differences for interest costs of £2.3m (2021 – £nil) and R&D expenditure expected to be deductible in future periods of £4.8m (2021 – £nil). Also included are assets held in respect of IFRS16 of £1.9m (2021 – £1.5m) and share based compensation of £1.9m (2021 – £1.1m). The deferred tax liability in respect of Retirement benefits relates primarily to the Senior plc UK defined benefit pension plan £12.9m (2021 – £18.0m), 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 at 31 December 2022 of £0.9m with a current year charge of £0.2m in the Income Statement, £1.4m credit through Other Comprehensive Income and a £2.1m charge recognised in the opening balance at 1 January 2022. Certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances, after offset: | | Year ended 2022 £m | Year ended 2021 £m | | --- | --- | --- | | Deferred tax assets | **10.9** | 5.7 | | Deferred tax liabilities | **(4.7)** | (10.5) | | | **6.2** | (4.8) | 170 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 FINANCIAL STATEMENTS # **21. Tax balance sheet continued** 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 differences, against which the assets can be utilised. At the Balance sheet date the Group has recognised deferred tax assets in respect of losses of £4.2m (2021 – £4.6m), including £3.1m (2021 – £3.2m) recognised against deferred tax liabilities and £1.1m (2021 – £1.4m) recognised based on anticipated profits in the Group's five year forecast to 2027 as approved by the Board. Due to uncertainty as to the availability of future profits against which tax losses may be utilised, £24.0m (2021 – £23.6m) of losses have not been recognised. Included in unrecognised tax losses are losses of £12.2m (2021 – £13.8m) that will expire over a period of one to nine years. Other losses may be carried forward indefinitely. Also, at the Balance Sheet date, a deferred tax liability of £0.2m (2021 – £0.2m) has been recognised in respect of the aggregate amount of temporary differences associated with undistributed earnings of subsidiaries expected to reverse in the foreseeable future. No temporary difference has been recognised in respect of £35.1m (2021 – £34.5m) 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 differences and it is not probable that such differences will reverse in the foreseeable future. At the Balance Sheet date, the Group had £5.0m (2021 – £5.0m) of surplus Advanced Corporation Tax ('ACT'), previously written off, 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 (2021 – £18.0m) of unused capital losses. # **22. Lease liabilities** When measuring lease liabilities, the Group discounts lease payments using incremental borrowing rates, determined on a lease portfolio basis. | Undiscounted contractual maturity of lease liabilities: | Year ended 2022 £m | Year ended 2021 £m | | --- | --- | --- | | Amounts payable: | | | | On demand or within one year | 12.9 | 10.8 | | In the second to fifth years inclusive | 38.1 | 35.6 | | After five years | 55.7 | 60.9 | | | 106.7 | 107.3 | | Less: future finance charges | (28.3) | (34.1) | | Lease liabilities | 78.4 | 73.2 | | Amounts recognised in the Consolidated Income Statement: | Year ended 2022 £m | Year ended 2021 £m | | --- | --- | --- | | Interest on lease liabilities | 2.5 | 2.6 | | 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 | – | – | | | 2.5 | 2.6 | | Amounts recognised in the Consolidated Cash Flow Statement | Year ended 2022 £m | Year ended 2021 £m | | --- | --- | --- | | Cash outflow for Leases (including interest) | 11.6 | 11.0 | # **23. Trade and other payables** Trade and other payables at 31 December comprise the following: | | Year ended 2022 £m | Year ended 2021 £m | | --- | --- | --- | | Current liabilities | | | | Trade payables | 103.4 | 68.3 | | Social security and PAYE | 4.8 | 5.7 | | Value added tax | 1.6 | 1.6 | | Foreign exchange contracts | 3.9 | 3.6 | | Accrued expenses | 77.5 | 63.8 | | Total trade and other payables | 191.2 | 143.0 | Foreign exchange contracts of £4.7m (2021 – £nil) is included in Others, under Non-current liabilities on the Consolidated Balance Sheet. The Directors consider that the carrying amount of trade payables approximates to their fair value. The average credit period taken for trade purchases is 63 days (2021 – 56 days). SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 171 FINANCIAL STATEMENTS / ## NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ### 24. Provisions | | Warranty £m | Restructuring £m | Legal claims and contractual matters £m | Total £m | | --- | --- | --- | --- | --- | | 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 differences | 0.1 | (0.3) | (0.1) | (0.3) | | At 1 January 2022 | **6.9** | **1.3** | **7.8** | **16.0** | | Additional provision in the year | **3.7** | **1.2** | **6.2** | **11.1** | | Utilisation of provision | **(0.1)** | **(2.3)** | **(2.5)** | **(4.9)** | | Release of unused amounts | **(0.3)** | – | **(3.3)** | **(3.6)** | | Exchange differences | **0.6** | – | **0.4** | **1.0** | | **At 31 December 2022** | **10.8** | **0.2** | **8.6** | **19.6** | | Included in current liabilities | **8.1** | **0.2** | **8.4** | **16.7** | #### Warranty Provisions for warranty costs are based on an assessment of future claims with reference to past experience. £8.1m of costs are expected to settle within the next 12 months. #### Restructuring The Group continued to implement further restructuring in 2022, discussed in further detail in Note 9. The amount recorded is expected to be fully utilised in 2023. #### Legal claims and contractual matters Provisions at 31 December 2022 comprise £8.6m (2021- £7.8m) 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 differ from the amount provided. ### 25. Share capital | | Year ended 2022 £m | Year ended 2021 £m | | --- | --- | --- | | Issued and fully paid: | | | | 419.4 million ordinary shares of 10p each | **41.9** | 41.9 | No shares were issued during 2022 and 2021. The Company has one class of ordinary shares which carry no right to fixed income. ### 26. Share premium account | | Year ended 2022 £m | Year ended 2021 £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 2022 £m | Year ended 2021 £m | | --- | --- | --- | | Balance at 1 January | **5.8** | 5.1 | | Transfer to retained earnings reserve | **(3.7)** | (2.8) | | Movement in year | **4.3** | 3.5 | | Balance at 31 December | **6.4** | 5.8 | 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 £4.3m (2021 – £3.5m) is in respect of the share-based payment charge for the year. 172 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 FINANCIAL STATEMENTS / FINANCIAL STATEMENTS 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 | | | | | 2022 | | | 2022 | | 2022 | | | 2021 | | | 2021 | | 2021 | | | | £m | | | £m | | £m | | | £m | | | £m | | £m | Balance at 1 January (37. 2) 65.8 28.6 (37.2) 75.1 37.9 Exchange differences on translation of overseas operations – 24.5 24.5 – (3.8) (3.8) Foreign exchange losses/(gains) recycled to the Income Statement on disposal – – – 2.6 (5.5) (2.9) Change in fair value of hedging derivatives (2.3) – (2.3) (3.4) – (3.4) Tax on foreign exchange contracts – cash flow hedges 0.7 – 0.7 0.8 – 0.8 Balance at 31 December (38.8) 90.3 51.5 (37.2) 65.8 28.6 Hedging Reserve At 31 December 2022, the hedging reserve comprises net investment hedging losses of £35.2m (2021 – £35.2m), foreign exchange contracts – cash flow hedge losses of £4.9m (2021 – £2.6m) and related tax gains of £1.3m (2021 – £0.6m). Movement in fair value of foreign exchange contracts – cash flow hedges: | Derivatives at | | | Derivatives at | | | | | Derivatives at | | | Derivatives at | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | fair value | | | fair value | | | | | fair value | | | fair value | | | | | | through | | | through | | | | | through | | | through | | | | | | Hedging | | | Income | | | | | Hedging | | | Income | | | | | | Reserve | | | Statement | | | Total | | Reserve | | | Statement | | | Total | | | Year ended | | | Year ended | | Year ended | | | Year ended | | Year ended | | | Year ended | | | | | 2022 | | | 2022 | | 2022 | | | 2021 | | | 2021 | | 2021 | | | | £m | | | £m | | £m | | | £m | | | £m | | £m | Balance at 1 January (2.6) (0.2) (2.8) 0.8 (0.3) 0.5 Fair value movement recognised in Hedging reserve (4.5) – (4.5) (2.1) – (2.1) Fair value movement recognised in Income Statement – 1.4 1.4 – (1.2) (1.2) Fair value movement recognised in Hedging reserve and Income Statement 2.2 (2.2) – (1.3) 1.3 – Balance at 31 December (4.9) (1.0) (5.9) (2.6) (0.2) (2.8) 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 effective, 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 . 173SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 173SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 29. Retained earnings Year ended 2022 £m Year ended 2021 £m Balance at 1 January 343.2 305.1 Dividends paid (1.2) – Profit for the year 20.2 24.2 Pension actuarial (loss)/gain (23.1) 19.7 Transfer from equity reserve 3.7 2.8 Transfer from own share reserve (2.0) (2.3) Tax on deductible temporary differences 5.7 (6.3) Balance at 31 December 346.5 343.2 FINANCIAL STATEMENTS / # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ## 30. Own shares | | Year ended 2022 £m | Year ended 2021 £m | | --- | --- | --- | | Balance at 1 January | (9.2) | (11.5) | | Transfer to retained earnings reserve | 2.0 | 2.3 | | Purchase of new shares | (4.5) | – | | Balance at 31 December | (11.7) | (9.2) | 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 2022, the number of own shares held by the Senior Plc Employee Benefit Trust is 5,716,834 (2021 – 3,463,455). ## 31. Acquisition and disposal activities ### Acquisition of Spencer Aerospace Manufacturing, LLC On 25 November 2022, the Group acquired substantially all of the assets of Spencer Aerospace Manufacturing, LLC, a leading manufacturer of highly engineered, high-pressure hydraulic fluid fittings for use in commercial and military aerospace applications, located in Valencia, California, USA. This acquisition enhances Senior's industry leading fluid conveyance capabilities and is an important step in our strategy to optimise our portfolio and maximise value for shareholders. The initial consideration was $30m (£24.8m) paid in cash at completion, with a net working capital adjustment of $0.2m (£0.2m), of which $0.6m (£0.5m) was paid in cash initially and $0.4m (£0.3m) cash adjustment was received in January 2023. A further $30m (£24.8m) is to be paid 12 months after completion. Additionally, there is contingent consideration of $40m (£33.1m) potentially payable, in milestone amounts, dependent on the financial performance of Spencer Aerospace during the period between completion and 31 December 2026. The most likely range of this contingent element is estimated between $30m and $40m. The amortised cost of deferred consideration is £23.2m and the fair value of contingent consideration is £28.7m at the acquisition date. The fair value of contingent consideration assumes expanding the relationship with Spencer's established customers and leveraging Senior's strong relationships with OEMs, Tier 1 integrators, and aftermarket customers around the world to exploit opportunities for Spencer Aerospace. The acquisition was funded using the Group's existing borrowing facilities. Set out below is a summary of the fair value of identified assets acquired and liabilities assumed: | | £m | | --- | --- | | Identifiable intangible assets | 31.0 | | Property, plant and equipment | 5.8 | | Inventories | 2.2 | | Financial assets, excluding cash and cash equivalents | 1.7 | | Cash and cash equivalents | – | | Lease liabilities | (4.7) | | Other Financial liabilities | (1.1) | | **Net Assets Acquired** | **34.9** | | Goodwill | 42.0 | | **Total Consideration** | **76.9** | | Consideration satisfied by: | | | Cash paid | 25.3 | | Working capital adjustment receivable | (0.3) | | Deferred and Contingent consideration payable | 51.9 | | **Total Consideration** | **76.9** | | Net cash outflow arising on acquisition: | | | Cash consideration | 25.3 | | Less: Cash and cash equivalents acquired | – | | **Net cash outflow arising on acquisition** | **25.3** | The goodwill of £42.0m represents the premium paid in anticipation of future profitability from assets that are not capable of being separately identified and separately recognised such as the assembled workforce as well as the expectation that the Group will be able to leverage its wider market access and strong financial position to generate sustainable financial growth beyond what Spencer would have potentially achieved as a stand-alone company. The strong customer relationships that the Group has with OEMs, Tier 1 integrators, and aftermarket customers around the world, will open new opportunities for Spencer Aerospace. The combined capabilities will provide greater access to developing market opportunities such as hydrogen infrastructure and fluid handling. There are strong synergies with Senior's existing fluid conveyance businesses, and the combination of expertise will accelerate growth in aerospace and adjacent markets. Goodwill is expected to be fully tax deductible in accordance with US tax rules. The intangible assets acquired as part of the acquisition relate mainly to qualified parts lists and customer relationships, the fair value of which is dependent on estimates of attributable future revenues, profitability and cash flows, and are being amortised over 18 and 16 years (see Note 14). The 174 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 FINANCIAL STATEMENTS # **31. Acquisition and disposal activities continued** fair value has also been assigned to the order backlog which are being amortised over 1 year. The financial assets acquired include trade receivables with a fair value of £1.6m and a gross contractual value of £1.6m, all of which is currently expected to be collectible. Acquisition-related costs of £1.2m are included within corporate undertakings in the Group's Consolidated Income Statement for the 12 months ended 31 December 2022 (See Note 9). From the date of acquisition to 31 December 2022, Spencer contributed £0.7m of external revenue and £0.1m to the Group's operating profit before amortisation of intangible assets from the acquisition of £0.2m. If the acquisition had been completed on 1 January 2022, Group revenue for the 12 months ended 31 December 2022 would have been £855.9m and Group operating profit would have been £31.2m. # **Disposal activities** On 22nd April 2021, the Group sold its stand alone, build-to-print helicopter structures operating company, 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 and operating profit was £0.8m. 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), offset by net cash consideration of £49.7m after £1.8m disposal costs, and the previously recorded foreign exchange gain that had been recycled to the Income Statement of £2.9m. In 2021, the Group received £0.2m deferred consideration relating to the disposal of its Aerospace business Senior Aerospace Absolute Manufacturing. # **32. Notes to the consolidated cash flow statement** # **A) Reconciliation of operating profit to net cash from operating activities** | | Year ended 2022 £m | Year ended 2021 £m | | --- | --- | --- | | Operating profit | 32.5 | 10.5 | | Adjustments for: | | | | Depreciation of property, plant and equipment | 48.1 | 46.3 | | Amortisation of intangible assets | 1.7 | 1.5 | | Profit on sale of fixed assets | (0.1) | – | | Share-based payment charges | 4.3 | 3.5 | | Pension payments in excess of service cost | (1.4) | (5.1) | | Corporate undertaking costs | (1.4) | (4.8) | | Share of joint venture | (0.4) | (0.2) | | Increase in inventories | (34.2) | (7.2) | | Increase in receivables | (18.8) | (16.1) | | Increase in payables and provisions | 37.5 | 11.6 | | Restructuring impairment of property, plant and equipment and software | 1.3 | 3.8 | | US class action lawsuits | – | (2.3) | | Working capital and provisions currency movements | 1.8 | (1.1) | | Cash generated by operations | 70.9 | 40.4 | | Income taxes paid | (3.5) | (5.3) | | Interest paid | (9.7) | (8.1) | | Net cash from operating activities | 57.7 | 27.0 | SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 175 FINANCIAL STATEMENTS / ## NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ### 32. Notes to the consolidated cash flow statement continued #### 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: | | Notes | Year ended 2022 £m | Year ended 2021 £m | | --- | --- | --- | --- | | Net cash from operating activities | | **57.7** | 27.0 | | Corporate undertaking costs | 9 | **1.4** | 4.8 | | Net Restructuring cash received/paid | | **(2.1)** | 0.9 | | US class action lawsuits | 24 | – | 2.3 | | Interest received | | **0.7** | 0.1 | | Proceeds on disposal of property, plant and equipment | | **0.5** | 0.2 | | Purchases of property, plant and equipment | | **(28.7)** | (20.2) | | Purchase of intangible assets | | **(1.8)** | (1.1) | | Free cash flow | | **27.7** | 14.0 | #### C) Analysis of net debt | | Notes | At 1 January 2022 £m | Net Cash flow £m | Non Cash £m | Exchange movement £m | Other Lease Movements £m | At 31 December 2022 £m | | --- | --- | --- | --- | --- | --- | --- | --- | | Cash and bank balances | | **51.1** | **(10.8)** | – | **2.9** | – | **43.2** | | Overdrafts | | – | **(0.5)** | – | – | – | **(0.5)** | | Cash and cash equivalents | | **51.1** | **(11.3)** | – | **2.9** | – | **42.7** | | Debt due within one year | | **(14.8)** | **17.2** | – | **(2.4)** | – | – | | Debt due after one year | | **(116.2)** | **(17.6)** | – | **(9.4)** | – | **(143.2)** | | Lease liabilities^{(1)} | 22 | **(73.2)** | **9.1** | – | **(5.3)** | **(9.0)** | **(78.4)** | | Liabilities arising from financing activities | | **(204.2)** | **8.7** | – | **(17.1)** | **(9.0)** | **(221.6)** | | Total | | **(153.1)** | **(2.6)** | – | **(14.2)** | **(9.0)** | **(178.9)** | (1) The change in lease liabilities in the year ended 31 December 2022 includes lease rental payments of £11.8m (£2.5m of these payments relates to lease interest), £5.3m exchange movement and £9.0m other movements, which comprise £4.3m related to lease additions and modifications and £4.7m related to lease acquired on acquisition. Following a review of the lease liability disclosures in 2022, the presentation of current and non-current liabilities within the Consolidated Balance Sheet for 31 December 2022 now reflects the timing of the underlying lease payments. Comparative information has not been restated as the adjustment is not deemed material. | | Notes | At 1 January 2021 £m | Net Cash flow £m | Non Cash £m | Exchange movement £m | Other Lease Movements £m | At 31 December 2021 £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)** | **(153.1)** | Other lease movements include lease additions and modifications of £5.6m. 176 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 FINANCIAL STATEMENTS / FINANCIAL STATEMENTS 32. Notes to the consolidated cash flow statement continued | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2022 | | 2021 | | | £m | | £m | Cash and cash equivalents comprise: Cash and bank balances 43.2 51.1 Overdrafts (0.5) – Total 42.7 51.1 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 | | | --- | --- | --- | --- | | | 2022 | | 2021 | | | £m | | £m | Inventories 194.3 145.2 Trade and other receivables 126.7 98.0 Trade and other payables (191.2) (143.0) Working capital, including derivatives 129.8 100.2 Items excluded: Foreign exchange contracts 1.5 2.8 Total 131.3 103.0 Working capital and provisions movement, net of restructuring items, a non-statutory cash flow item, is derived as follows: | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2022 | | 2021 | | | £m | | £m | Increase in inventories (34.2) ( 7. 2) Increase in receivables (18.8) (16.1) Increase in payables and provisions 37.5 11.6 Working capital and provisions movement, excluding currency effects (15.5) (11.7) Items excluded: Decrease in restructuring related inventory impairment 2.7 1.5 Decrease in net restructuring provision and other receivables 0.7 7.6 Total (12.1) (2.6) 177SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 177SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 33. Share-based payments The Group recognised total expenses of £4.6m (2021 – £3.8m) related to share-based payments, of which £4.3m (2021 – £3.5m) related to equity- settled share-based payments, and £0.3m (2021 – £0.3m) related to social security costs on share-based payments. As at 31 December 2022, the Group had a liability of £0.6m (2021 – £0.3m) arising from share-based payments relating to social security costs. A) 2014 Long-Term Incentive Plan Equity-settled Long-Term Incentive Plans On 8 March 2022, 4,307,035 shares were awarded under the 2014 Long-Term Incentive Plan. Awards made under this plan have a three-year vesting period, and are subject to the following equally weighted performance conditions: adjusted earnings per share (EPS), total shareholder return (TSR), and for awards granted from 2021, there is also a return on capital employed (ROCE) performance condition. The adjusted EPS and ROCE performance conditions’ targets are expressed as absolute numbers for the final financial year of the three-year performance period. The threshold ofthe Tof the TSR performance condition requires the Company’s TSR performance to fall within the top half of a comparator group at the end of the three-year performance period. 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 and ROCE conditions is 121.00p, which isthe shais 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 81.30p per share reflecting an adjustment of 33% 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 96.80p and 65.00p reflecting the two year retention period. FINANCIAL STATEMENTS / ## NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ### 33. Share-based payments continued 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 (121.00p for the main award), expected volatility of 59% 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 2022 and 2021: | | Year ended 2022 Number of shares | Year ended 2021 Number of shares | | --- | --- | --- | | Outstanding at 1 January | 9,434,241 | 7,089,567 | | Granted | 4,307,035 | 4,455,281 | | Exercised | – | (58,743) | | Forfeited | (2,703,064) | (2,051,864) | | Outstanding at 31 December | 11,038,212 | 9,434,241 | ### B) Enhanced SMIS Deferred Share Award On 8 March 2022, 1,333,546 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 121.00p per share, which is the share price at the date of grant. The following share awards were outstanding as at 31 December 2022 and 2021: | | Year ended 2022 Number of shares | Year ended 2021 Number of shares | | --- | --- | --- | | Outstanding at 1 January | 2,003,691 | 1,734,683 | | Granted | 1,353,612 | 758,551 | | Exercised | (677,193) | (425,422) | | Forfeited | (137,747) | (64,121) | | Outstanding at 31 December | 2,542,363 | 2,003,691 | ### 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 2022 and 2021: | | Year ended 2022 | | Year ended 2021 | | | --- | --- | --- | --- | --- | | | Number of share options | Weighted average exercise price | Number of share options | Weighted average exercise price | | Outstanding at 1 January | 4,253,504 | 144.61p | 1,944,121 | 217.67p | | Granted | – | – | 3,247,159 | 118.40p | | Exercised | (1,905) | 118.40p | – | – | | Forfeited | (545,138) | 148.81p | (676,596) | 204.63p | | Expired | (749,847) | 219.30p | (261,180) | 207.20p | | Outstanding at 31 December | 2,956,614 | 124.90p | 4,253,504 | 144.61p | | Exercisable at 31 December | 190,580 | 219.30p | – | – | 1,905 shares were exercised in 2022. No shares were exercised in 2021. The options outstanding at 31 December 2022 had exercise prices of 118.40p and 219.30p per share, and a weighted average remaining contractual life of 1.8 years. 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. 178 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 FINANCIAL STATEMENTS / FINANCIAL STATEMENTS 33. Share-based payments continued D) Restricted Share Awards On 8 March 2022, 205,000 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 121.00p per share, which is the share price at the date of grant. The following share awards were outstanding as at 31 December 2022 and 2021: | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2022 | | 2021 | | Number of | | Number of | | | | shares | | shares | Outstanding at 1 January 1,930,115 2,208,538 Granted 205,000 110,000 Exercised (60,000) (388,423) Forfeited (251,165) – Outstanding at 31 December 1,823,950 1, 9 3 0,115 179SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 179SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 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 2022 and, for the purposes of accounting under IAS19, this valuation has been rolled forward to 31 December 2022. 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 one-third of trustees 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 12 years and benefits are expected to be paid for the next 60 years. These cash flow payments are expected to reach a peak around 2031, 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 Trustee’s current investment strategy is to invest 100% in lower risk assets, consisting of corporate bonds, liability driven investments (‘LDI’), gilts and cash. 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 adjust it in response to changes in the Plan’s funding position and/or market conditions. The UK Plan was in a surplus position of £24.5m as at 5 April 2022 when measured on the Trustee’s funding basis and is in a surplus position of £51.8m as at 31 December 2022 (2021 – £72.2m 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. FINANCIAL STATEMENTS / ## NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ### 34. Retirement benefit schemes continued 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 2022 and were based on a forecast surplus at that time, as part of the 2022 triennial funding valuation. The Company agreed with the Trustee of the UK Plan to make scheduled contributions in respect of administrative expenses and PPF levies from 5 April 2022 until 30 June 2022, with no further contributions after this date. The estimated contributions expected to be paid during 2023 in the US funded plans is £2.3m. 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. #### 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 £8.9m (2021 – £8.6m). #### 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 2022 | | | | 31 December 2021 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 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 | (198.4) | (49.4) | (5.4) | (253.2) | (294.9) | (56.2) | (5.7) | (356.8) | | Fair value of plan assets | 250.2 | 42.7 | – | 292.9 | 367.1 | 50.9 | – | 418.0 | | Plan surplus/(deficit) per Consolidated Balance Sheet | 51.8 | (6.7) | (5.4) | 39.7 | 72.2 | (5.3) | (5.7) | 61.2 | #### c) Movements in the present value of defined benefit obligations were as follows: | | 31 December 2022 | | | | 31 December 2021 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 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 | 294.9 | 56.2 | 5.7 | 356.8 | 317.7 | 58.8 | 6.2 | 382.7 | | Current service cost | – | 0.5 | 0.3 | 0.8 | – | 0.4 | 0.3 | 0.7 | | Past service cost | – | – | – | – | – | – | – | – | | Interest cost | 5.5 | 1.7 | – | 7.2 | 3.8 | 1.5 | – | 5.3 | | Experience on benefit obligations | 0.8 | 1.2 | – | 2.0 | 2.5 | – | – | 2.5 | | Actuarial (gains)/losses – financial | (89.6) | (12.1) | (0.5) | (102.2) | (15.8) | (1.8) | – | (17.6) | | Actuarial (gains)/losses – demographic | (1.4) | – | – | (1.4) | (0.3) | 0.2 | – | (0.1) | | Benefits paid | (11.8) | (4.3) | (0.4) | (16.5) | (13.0) | (3.7) | (0.4) | (17.1) | | Disposal activities | – | – | – | – | – | – | – | – | | Exchange differences | – | 6.2 | 0.3 | 6.5 | – | 0.8 | (0.4) | 0.4 | | At 31 December | 198.4 | 49.4 | 5.4 | 253.2 | 294.9 | 56.2 | 5.7 | 356.8 | 180 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 FINANCIAL STATEMENTS # **34. Retirement benefit schemes**continued # **d) Movements in the fair value of plan assets were as follows:** | | 31 December 2022 | | | | 31 December 2021 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 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 | 367.1 | 50.9 | – | 418.0 | 364.2 | 54.1 | – | 418.3 | | Interest on plan assets | 6.9 | 1.5 | – | 8.4 | 4.4 | 1.3 | – | 5.7 | | Actual return on plan assets less interest | (113.4) | (11.3) | – | (124.7) | 6.1 | (1.6) | – | 4.5 | | Contributions from employer | 2.1 | 0.4 | – | 2.5 | 6.0 | – | – | 6.0 | | Benefits paid | (11.8) | (4.3) | – | (16.1) | (13.0) | (3.7) | – | (16.7) | | Running costs | (0.7) | – | – | (0.7) | (0.6) | – | – | (0.6) | | Exchange differences | – | 5.5 | – | 5.5 | – | 0.8 | – | 0.8 | | At 31 December | 250.2 | 42.7 | – | 292.9 | 367.1 | 50.9 | – | 418.0 | # **e) Amounts recognised in the Consolidated Income Statement in respect of these defined benefit schemes are as follows:** | | 31 December 2022 | | | | 31 December 2021 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 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 profit | – | 0.5 | 0.3 | 0.8 | – | 0.4 | 0.3 | 0.7 | | Running costs | 0.7 | – | – | 0.7 | 0.6 | – | – | 0.6 | | Past service cost | – | – | – | – | – | – | – | – | | Charge included within operating profit | 0.7 | 0.5 | 0.3 | 1.5 | 0.6 | 0.4 | 0.3 | 1.3 | | Included within finance income | (1.4) | 0.2 | – | (1.2) | (0.6) | 0.2 | – | (0.4) | | Amount recognised in the Income Statement | (0.7) | 0.7 | 0.3 | 0.3 | – | 0.6 | 0.3 | 0.9 | # **f) Amounts recognised in other comprehensive income are as follows:** | | 31 December 2022 | | | | 31 December 2021 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 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 (losses)/gain in the year due to: | | | | | | | | | | – Change in financial assumptions | 89.6 | 12.1 | 0.5 | 102.2 | 15.8 | 1.8 | – | 17.6 | | – Change in demographic assumptions | 1.4 | – | – | 1.4 | 0.3 | (0.2) | – | 0.1 | | – Experience adjustments on benefit obligations | (0.8) | (1.2) | – | (2.0) | (2.5) | – | – | (2.5) | | Actual return on plan assets less interest on benefit obligations | (113.4) | (11.3) | – | (124.7) | 6.1 | (1.6) | – | 4.5 | | (Losses)/gains recognised in other comprehensive income | (23.2) | (0.4) | 0.5 | (23.1) | 19.7 | – | – | 19.7 | Actuarial losses of £23.1m (2021 – gains of £19.7m) 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 2022 is £46.1m (2021 – £23.0m). # **g) Assets and assumptions in funded plans** | | UK plans funded | | US plans funded | | | --- | --- | --- | --- | --- | | | 2022 £m | 2021 £m | 2022 £m | 2021 £m | | Fair value of plan assets | | | | | | Equities | – | 28.6 | – | – | | Bonds | 102.4 | 126.6 | 42.7 | 50.9 | | Gifts | 139.3 | 157.9 | – | – | | Diversified growth fund | – | 37.7 | – | – | | Cash and other assets | 8.5 | 16.3 | – | – | | Total | 250.2 | 367.1 | 42.7 | 50.9 | | Actual return on plan assets | (106.5) | 10.5 | (9.8) | (0.3) | SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 181 FINANCIAL STATEMENTS / ## NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ### 34. Retirement benefit schemes continued 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 £4.0m (2021 – £4.7m). 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 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 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 | | | --- | --- | --- | --- | --- | | | 2022 | 2021 | 2022 | 2021 | | Major assumptions (per annum %) | | | | | | Inflation | **3.40%** | 3.50% | **N/A** | N/A | | Increase in salaries | **N/A** | N/A | **N/A** | N/A | | Increase in pensions | **3.20%** | 3.30% | **0.00%** | 0.00% | | Increase in deferred pensions | **3.40%** | 3.50% | **0.00%** | 0.00% | | Rate used to discount plan liabilities | **4.80%** | 1.90% | **4.78%** | 2.76% | | Life expectancy of a male aged 65 at the year-end | **20.6** | 20.8 | **19.7** | 19.6 | | Life expectancy of a male aged 65, 20 years after the year-end | **22.0** | 22.2 | **21.2** | 21.2 | 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 gifts. Demographic assumptions are set broadly in line with the most recent actuarial valuation of the UK plan. The mortality assumption is 95% of the standard mortality tables with an allowance for future improvements in line with the CMI 2021 enhanced projections, with a long-term annual rate of improvement of 1.25% for males and for females, with no weighting on 2020 mortality data and a 10% weighting on 2021 mortality data to make an allowance for the impact of Covid-19. For the UK Plan, the estimated impact on the plan surplus at 31 December 2022 for changes in assumptions is as follows: | | Increase/ (decrease) in plan surplus £m | | --- | --- | | 0.5% decrease in the discount rate | (11.7) | | One-year increase in life expectancy | (7.7) | | 0.5% increase in inflation | (7.2) | 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 2022. 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 £2.7m (2021 – £3.3m), unfunded closed pension and post-retirement healthcare plans in the US of £0.3m (2021 – £0.3m), a provision for post-retirement payments in France of £1.5m (2021 – £1.4m) and £0.9m for post-retirement payments in Thailand (2021 – £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 4.8% (2021 – 2.8%). No participants were eligible for medical benefits under the healthcare plan in 2022. The German plan has been subject to formal actuarial valuation on a Projected Unit Method with the following assumptions: discount rate 3.5%, salary growth nil% and pension increase 2.2% (2021 – 1.1%, nil% and 1.8%). 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 long-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% (2021 – 2.8%, 2.8% and 6.0%). 182 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 FINANCIAL STATEMENTS / FINANCIAL STATEMENTS 183SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 183SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 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 2022 (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. FINANCIAL STATEMENTS / ## COMPANY BALANCE SHEET ## AS AT 31 DECEMBER 2022 | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | | 2022 | | 2021 | | Notes | | £m | | £m | Non-current assets Investment in subsidiaries 38 259.9 259.9 Property, plant and equipment 39 1.1 1.3 Other intangible assets 37 0.1 0.1 Other receivables 40 3.3 25.7 Retirement benefits 49 51.8 72.2 Total non-current assets 316.2 359.2 Current assets Other receivables 40 121.1 65.4 Cash and bank balances 46 1.6 4.7 Total current assets 122.7 70.1 Total assets 438.9 429.3 Current liabilities Trade and other payables 42 61.8 70.1 Lease liabilities 47 0.2 – Bank overdrafts and loans 41 – 14.8 Total current liabilities 62.0 84.9 Non-current liabilities Bank and other loans 41 116.4 94.1 Lease liabilities 47 0.9 1.2 Deferred tax liabilities 48 8.8 14.2 Total non-current liabilities 126.1 109.5 Total liabilities 188.1 194.4 Net assets 250.8 234.9 Equity Issued share capital 43 41.9 41.9 Share premium account 14.8 14.8 Equity reserve 6.4 5.8 Retained earnings 44 199.4 181.6 Own shares 45 (11.7) (9.2) Total equity 250.8 234.9 The Profit for the Company for the year ended 31 December 2022 was £34.8m (2021 – £31.9m). The Financial Statements of Senior plc (registered number 282772) were approved by the Board of Directors and authorised for issue on 24 February 2023. They were signed on its behalf by: David Squires Bindi Foyle Director Director 184 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 # COMPANY STATEMENT OF CHANGES IN EQUITY ## FOR THE YEAR ENDED 31 DECEMBER 2022 FINANCIAL STATEMENTS / | | Notes | All equity is attributable to equity holders of the Company | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | Issued share capital £m | Share premium account £m | Equity reserve £m | Retained earnings £m | Own shares £m | Total equity £m | | **Balance at 1 January 2021** | | 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 | | 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 | | Use of shares held by employee benefit trust | 45 | – | – | – | (2.3) | 2.3 | – | | Transfer to retained earnings | 44 | – | – | (2.8) | 2.8 | – | – | | Dividends paid | 11 | – | – | – | – | – | – | | **Balance at 31 December 2021** | | 41.9 | 14.8 | 5.8 | 181.6 | (9.2) | 234.9 | | Profit for the year 2022 | | – | – | – | **34.8** | – | **34.8** | | Actuarial losses on defined benefit pension schemes | | – | – | – | **(23.2)** | – | **(23.2)** | | Tax relating to components of other comprehensive income | | – | – | – | **5.7** | – | **5.7** | | **Total comprehensive income for the period** | | – | – | – | **17.3** | – | **17.3** | | Share-based payment charge | | – | – | **4.3** | – | – | **4.3** | | Purchase of shares held by employee benefit trust | 45 | – | – | – | – | **(4.5)** | **(4.5)** | | Use of shares held by employee benefit trust | 45 | – | – | – | **(2.0)** | **2.0** | – | | Transfer to retained earnings | 44 | – | – | **(3.7)** | **3.7** | – | – | | Dividends paid | 11 | – | – | – | **(1.2)** | – | **(1.2)** | | **Balance at 31 December 2022** | | **41.9** | **14.8** | **6.4** | **199.4** | **(11.7)** | **250.8** | SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 185 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 | | | --- | --- | --- | --- | | | 2022 | | 2021 | | Computer | | Computer | | | software | | software | | | | £m | | £m | Cost At 1 January 1.0 1.0 Additions – – Disposal (0.2) – At 31 December 0.8 1.0 Amortisation At 1 January 0.9 0.9 Charge for the year – – Disposals (0.2) – At 31 December 0.7 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 194 to 195. | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2022 | | 2021 | | | £m | | £m | At 1 January and 31 December 259.9 259.9 186 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 FINANCIAL STATEMENTS / 39. Property, plant and equipment | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2022 | | 2021 | | Plant and | | Plant and | | | equipment | | equipment | | | | £m | | £m | Cost At 1 January 2.4 2.4 Additions 0.1 – Disposals (0.2) – At 31 December 2.3 2.4 Accumulated depreciation At 1 January 1.1 0.9 Charge for the year 0.3 0.2 Eliminated on Disposals (0.2) – At 31 December 1.2 1.1 Carrying amount at 31 December 1.1 1.3 The carrying amount includes £1.0m of right-of-use assets (2021– £1.1m) 40.Other receivables Other receivables comprise the following: | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2022 | | 2021 | | | £m | | £m | Other receivables: amounts due more than one year Due from subsidiaries 3.3 25.7 3.3 25.7 Other receivables: amounts due within one year Value added tax 0.3 0.2 Prepayments and accrued income 1.1 1.0 Due from subsidiaries 119.7 64.2 121.1 65.4 Total other receivables 124.4 91.1 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 (2021 – immaterial). As at 31 December 2022, other receivables due in more than one year consist of £3.3m (2021 – £2.2m) due in accordance with the vesting periods of share-based payments and £nil (2021 – £23.5m) of loans to subsidiaries at market rates of interest. 187SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 FINANCIAL STATEMENTS / FINANCIAL STATEMENTS ## NOTES TO THE COMPANY ## FINANCIAL STATEMENTS CONTINUED 41. Bank overdrafts and loans | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2022 | | 2021 | | | £m | | £m | Bank overdrafts – – Bank loans 15.3 (0.5) Other loans 101.1 109.4 Total 116.4 108.9 The borrowings are repayable as follows: On demand or within one year – 14.8 In the second year – – In the third to fifth years inclusive 116.4 70.7 After five years – 23.4 116.4 108.9 Less: amount due for settlement within 12 months (shown under current liabilities) – (14.8) Amount due for settlement after 12 months 116.4 94.1 At 31 December 2022, bank loans are £16.5m and there are £1.2m of capitalised revolving credit facility transaction costs. At 31 December 2021, bank loans were undrawn, and there were £0.5m of capitalised revolving credit facility transaction costs. Analysis of borrowings by currency | | Pound | | | | | US | | | --- | --- | --- | --- | --- | --- | --- | --- | | | Sterling | | Euros | | Dollars | | Total | | 31 December 2022 | | £m | | £m | | £m | £m | Bank overdrafts – – – – Bank loans (1.2) – 16.5 15.3 Other loans 26.9 24.7 49.5 101.1 25.7 24.7 66.0 116.4 | | 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 5 9.1 109.4 26.4 23.4 5 9.1 108.9 The weighted average interest rates paid were as follows: | Year ended | | | Year ended | | | --- | --- | --- | --- | --- | | | 2022 | | | 2021 | | | | % | | % | Bank loans and overdrafts 3.93 1.26 Other loans 2.83 2.88 Bank loans of £16.5m (2021 – £nil) 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 2021 or 2022. Transaction costs of £1.2m (2021- £0.5m) have been deducted from the bank loans carrying value. Transaction costs of £0.3m (2021- £0.4m), directly attributable to the GBP notes (£0.1m), the Euro notes (£0.1m) and the US Dollar notes (£0.1m) 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 | | | --- | --- | --- | --- | | | 2022 | | 2021 | | | £m | | £m | Bank loans and overdrafts 15.3 (0.5) Other loans 93.4 110.4 108.7 109.9 188 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 188 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 FINANCIAL STATEMENTS / FINANCIAL STATEMENTS 42. Trade and other payables Trade and other payables comprise the following: | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2022 | | 2021 | | | £m | | £m | Trade and other payables: amounts falling due within one year Trade payables 1.6 0.9 Social security and PAYE 0.2 0.2 Other payables and accruals 7.1 6.8 Due to subsidiaries 52.9 62.2 Total trade and other payables 61.8 70.1 The Directors consider that the carrying amount of trade payables approximates to their fair value. 43. Issued share capital | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2022 | | 2021 | | | £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 2022. The Company has one class of ordinary shares, which carry no right to fixed income. 44. Retained earnings | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2022 | | 2021 | | | £m | | £m | Balance at 1 January 181.6 135.8 Dividends paid (1.2) – Profit for the year 34.8 31.9 Pension actuarial (loss)/gain (23.2) 19.7 Transfer from equity reserve 3.7 2.8 Transfer from own share reserve (2.0) (2.3) Tax on deductible temporary differences 5.7 (6.3) Balance at 31 December 199.4 181.6 £7.5m (2021 – £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. 45. Own shares | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2022 | | 2021 | | | £m | | £m | Balance at 1 January (9.2) (11.5) Transfer to retained earnings 2.0 2.3 Purchase of new shares (4.5) – Balance at 31 December (11.7) (9.2) 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 (2021 – £0.1). The total number of treasury shares at 31 December 2022 is 5,716,834 (2021 – 3,463,455). 189SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 189SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 FINANCIAL STATEMENTS / FINANCIAL STATEMENTS ## NOTES TO THE COMPANY ## FINANCIAL STATEMENTS CONTINUED 46. Cash and bank balances | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2022 | | 2021 | | | £m | | £m | Cash and cash equivalents comprise: Cash 1.6 4.7 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. 47. 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 | | | --- | --- | --- | --- | --- | | | | 2022 | | 2021 | | 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 1.1 1.3 Less: future finance charges – (0.1) Lease liabilities 1.1 1.2 In 2022, the Company recognised income of £0.1m (2021 – £0.1m) in the Company Income Statement from sub-leasing right-of-use assets and had lease cash outflow of £0.2m (2021 – £0.2m). As at the date of approving the accounts, the Company has guaranteed £0.4m (2021 – £0.5m) of annual lease commitments of a current subsidiary entity. 48. Tax balance sheet Current tax The current tax receivable is £nil (2021 – £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 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 – – – – – At 1 January 2022 (0.3) 18.0 (0.4) (3.1) 14.2 Charge to income – 0.7 (0.4) – 0.3 Charge to equity – (5.7) – – (5.7) Credit to other comprehensive income – – – – – As at 31 December 2022 (0.3) 13.0 (0.8) (3.1) 8.8 Deferred tax assets and liabilities are offset where the Company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances, after offset: | Year ended | | Year ended | | | --- | --- | --- | --- | | | 2022 | | 2021 | | | £m | | £m | Deferred tax liabilities 8.8 14.2 At the Balance Sheet date, the Company has unused capital losses of £15.6m (2021 – £15.6m) available for offset against future capital gains. No deferred tax asset has been recognised as no such capital gains are anticipated to arise in the foreseeable future. 190 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 190 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 FINANCIAL STATEMENTS # **49. Retirement benefit scheme** The Company's defined benefit scheme is shown in Note 34 in the "UK plans funded" column. # **50. 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 108 to 128. In 2022, the Company recognised share-based payment expense of £1.1m (2021 – £0.7m) 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. # **51. Share-based payments** The Company has a number of share-based payment arrangements that existed during 2022, the details of which can be found in Note 33. For the savings-related share option plan, 1,905 shares were exercised in 2022 and no shares were exercised in 2021. The options outstanding at 31 December 2022 had exercise prices of 118.40p per share, and a weighted average remaining contractual life of 2.0 years. 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. Share-based payment costs relating to subsidiaries are recharged from the Company. SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 191 FINANCIAL STATEMENTS / # FIVE-YEAR SUMMARY | | 2022 £m | 2021 £m | 2020 £m | 2019 £m | 2018 £m | | --- | --- | --- | --- | --- | --- | | **Group income statement** | | | | | | | **Revenue** | | | | | | | Continuing operations | **848.4** | 658.7 | 733.6 | 1,110.70 | 1,082.10 | | **Adjusted operating profit** | | | | | | | Continuing operations | **28.5** | 6.1 | 3.7 | 89.4 | 91.6 | | Amortisation of intangible assets from acquisitions | **(0.2)** | – | (7.7) | (13.1) | (15.4) | | Goodwill impairment and write-off | – | – | (134.3) | – | – | | Net restructuring income/(cost) | **4.2** | 4.4 | (39.0) | (12.1) | – | | US class action lawsuits | – | – | – | (2.6) | (3.9) | | **Operating profit/(loss)** | **32.5** | 10.5 | (177.3) | 61.6 | 72.3 | | Investment income/finance costs, net (excluding lease liabilities) | **(7.4)** | (5.8) | (7.8) | (8.1) | (8.8) | | Interest on lease liabilities | **(2.5)** | (2.6) | (3.0) | (3.5) | – | | Net finance income of retirement benefits | **1.2** | 0.4 | 0.9 | 0.7 | 0.2 | | Corporate undertakings | **(1.4)** | 21.2 | (4.6) | (22.0) | – | | **Profit/(loss) before tax** | **22.4** | 23.7 | (191.8) | 28.7 | 63.7 | | Tax | **(2.2)** | 0.5 | 33.3 | 0.5 | (7.8) | | **Profit/(loss) for the year** | **20.2** | 24.2 | (158.5) | 29.2 | 55.9 | | **Depreciation and amortisation of intangibles excluding right-of-use assets** | **39.5** | 38.3 | 51.4 | 57.5 | 56.9 | | **Depreciation on right-of-use assets** | **10.3** | 9.5 | 10.2 | 10.2 | – | | **Gross capital expenditure** | **30.5** | 21.3 | 26.8 | 64.8 | 56.3 | | **Basic earnings/(loss) per share** | **4.86p** | 5.82p | (38.20)p | 7.04p | 12.81p | | **Diluted earnings/(loss) per share** | **4.73p** | 5.73p | (38.20)p | 7.01p | 12.63p | | **Adjusted earnings/(loss) per share** | **4.36p** | 0.17p | (0.84)p | 16.17p | 16.08p | | **Dividends in respect of years – per share** | **1.30p** | 0.0p | 0.0p | 2.28p | 7.42p | | – value | **5.3** | – | – | 9.5 | 30.9 | | **Group Balance Sheet** | | | | | | | Non-current assets excluding right-of-use assets | **539.8** | 463.5 | 482.7 | 651.4 | 662.0 | | Right-of-use assets IFRS 16 | **70.8** | 67.4 | 72.5 | 82.3 | – | | Non-current assets | **610.6** | 530.9 | 555.2 | 733.7 | 662.0 | | Net current assets | **104.1** | 110.3 | 89.2 | 102.5 | 131.0 | | Non-current liabilities | **(265.3)** | (216.1) | (251.1) | (276.6) | (221.2) | | Net assets | **449.4** | 425.1 | 393.3 | 559.6 | 571.8 | | Net debt pre IFRS 16 | **(100.5)** | (79.9) | (129.4) | (145.9) | (153.0) | | Lease liabilities IFRS 16 | **(78.4)** | (73.2) | (76.5) | (83.7) | – | | Net debt | **(178.9)** | (153.1) | (205.9) | (229.6) | (153.0) | | **Group cash flow** | | | | | | | Net cash from operating activities | **57.7** | 27.0 | 48.9 | 115.9 | 100.7 | | Corporate undertaking costs | **1.4** | 4.8 | 4.6 | 3.4 | – | | Net Restructuring cash (received)/paid | **(2.1)** | 0.9 | 15.2 | 2.9 | – | | US class action lawsuits | – | 2.3 | 3.9 | – | – | | Interest received | **0.7** | 0.1 | 0.2 | 0.2 | 0.4 | | Proceeds from disposal of property, plant and equipment | **0.5** | 0.2 | 0.5 | 0.7 | 0.5 | | Purchase of property, plant and equipment – cash | **(28.7)** | (20.2) | (25.2) | (63.0) | (54.6) | | Purchase of intangible assets | **(1.8)** | (1.1) | (1.6) | (1.8) | (1.7) | | Free cash flow | **27.7** | 14.0 | 46.5 | 58.3 | 45.3 | | Dividends paid | **(1.2)** | – | – | (31.2) | (29.6) | | Acquisition costs/Disposal proceeds | **(25.3)** | 51.7 | 0.4 | 2.9 | – | | Corporate undertaking costs | **(1.4)** | (4.8) | (4.6) | (3.4) | – | | Net Restructuring cash received/(paid) | **2.1** | (0.9) | (15.2) | (2.9) | – | | US class action lawsuits | – | (2.3) | (3.9) | – | – | | Loan to joint venture | – | – | – | – | 0.5 | | Purchase of shares held by employee benefit trust | **(4.5)** | – | – | (6.3) | (7.2) | | Increase/(decrease) in loans | **0.4** | (21.1) | (7.2) | (3.2) | (2.4) | | Decrease in lease liabilities | **(9.1)** | (8.4) | (7.9) | (7.8) | (0.3) | | (Decrease)/Increase in cash and cash equivalents | **(11.3)** | 28.2 | 8.1 | 6.4 | 6.3 | 192 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 ADDITIONAL INFORMATION / ## ADDITIONAL ## INFORMATION IN THIS SECTION 194 Group Undertakings 196 Additional Shareholder Information 197 Officers and Advisers 193SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 ADDITIONAL INFORMATION / GROUP UNDERTAKINGS ## 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 Hertfordshire, 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 Hertfordshire, 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 Soufflets, 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 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 & Lewiston, Maine Senior Aerospace Spencer Valencia, California | Steico Industries, Inc. Senior Aerospace Steico | | Oceanside, California USA 818 West Seventh St., Ste. 930, | | | --- | --- | --- | --- | | | Industries | | LosAngeles, CA90017, USA | | 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 Ltd Senior Flexonics Upeca Tianjin, China China No. 12 QuanHe Road, Wu Qing (China) Development Area, Tianjin 301700, PR China 194 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 ADDITIONAL INFORMATION / GROUP UNDERTAKINGS Operating Companies Business Units Locations Country of Incorporation Atlas Composites Limited England & Wales 59/61 High Street, Rickmansworth, Hertfordshire, WD3 1RH, UK Flexonics Limited England & Wales 59/61 High Street, Rickmansworth, Hertfordshire, WD3 1RH, UK Lymington Precision Engineering England & Wales 59/61 High Street, Rickmansworth, (LPE) Limited Hertfordshire, WD3 1RH, UK Senior Aerospace Limited England & Wales 59/61 High Street, Rickmansworth, Hertfordshire, WD3 1RH, UK Senior Americas One Limited England & Wales 59/61 High Street, Rickmansworth, Hertfordshire, WD3 1RH, UK Senior Americas Two Limited England & Wales 59/61 High Street, Rickmansworth, Hertfordshire, WD3 1RH, UK Senior Automotive Limited England & Wales 59/61 High Street, Rickmansworth, Hertfordshire, WD3 1RH, UK Senior Engineering Investments England & Wales 59/61 High Street, Rickmansworth, Limited Hertfordshire, WD3 1RH, UK Senior Finance Four Limited England & Wales 59/61 High Street, Rickmansworth, Hertfordshire, WD3 1RH, UK Senior Finance Seven Limited England & Wales 59/61 High Street, Rickmansworth, Hertfordshire, WD3 1RH, UK Senior Finance Six Limited England & Wales 59/61 High Street, Rickmansworth, Hertfordshire, WD3 1RH, UK Senior Five Limited England & Wales 59/61 High Street, Rickmansworth, Hertfordshire, WD3 1RH, UK Senior Flexonics Limited England & Wales 59/61 High Street, Rickmansworth, Hertfordshire, WD3 1RH, UK Senior Trustee Limited England & Wales 59/61 High Street, Rickmansworth, Hertfordshire, WD3 1RH, UK Senior France SAS France 11 Rue des Soufflets, 91410, Dourdan, France Senior Investments (Deutschland) Germany Frankfurter Strasse 199, 34121 GmbH Kassel, Germany Upeca Technologies Sdn Bhd Malaysia 10th Floor, Menara Hap Seng, No1&3, Jalan P. Ramlee, 50250 W.P – Kuala Lumpur, Malaysia Senior Aerospace Bosman B.V. Netherlands Bergen 6, 2993 LR Barendrecht, Netherlands Senior Investments GmbH Switzerland Fronwagplatz 10, CH-8200, Schaffhausen, Switzerland Senior IP GmbH Switzerland Fronwagplatz 10, CH-8200, Schaffhausen, Switzerland Flexonics, Inc. USA Corporation Trust Center, 1209Orange Street, Wilmington, DE19801, USA Senior Holdings LLC 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 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. 195SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 ADDITIONAL INFORMATION / ADDITIONAL SHAREHOLDER INFORMATION # ADDITIONAL SHAREHOLDER INFORMATION Analysis of shareholders at 31 December 2022 | | Shareholders Number | Shareholders % | Issued Shares Millions | Issued Shares % | | --- | --- | --- | --- | --- | | By category | | | | | | Corporate bodies | 402 | 19.51 | 411.05 | 98.00 | | Other shareholders | 1,659 | 80.49 | 8.37 | 2.00 | | | **2,061** | **100.00** | **419.42** | **100.00** | | By range of holdings | | | | | | 1 – 24,999 | 1,758 | 85.30 | 6.15 | 1.46 | | 25,000 – 49,999 | 71 | 3.45 | 2.48 | 0.59 | | 50,000 – 249,999 | 106 | 5.14 | 12.23 | 2.92 | | 250,000 – 499,999 | 34 | 1.65 | 12.61 | 3.01 | | 500,000 – 999,999 | 34 | 1.65 | 23.93 | 5.71 | | 1,000,000 – and over | 58 | 2.81 | 362.02 | 86.31 | | Operating (loss)/profit | **2,061** | **100.00** | **419.42** | **100.00** | The number of shares in issue at 31 December 2022 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 2023 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 2023 AGM Notice of Meeting and Form of Proxy. 196 SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 ## OFFICERS AND ADVISERS | Secretary and registered office | Solicitors | | --- | --- | | Secretary and registered office | Slaughter and May | | Andrew Bodenham | One Bunhill Row, London EC1Y 8YY | Senior plc Bankers 59/61 High Street, Rickmansworth, Hertfordshire WD3 1RH Registered in England and Wales No. 00282772 HSBC UK Bank plc 71 Queen Victoria Street, London EC4V 4AY Registrars KBC Bank NV, London Branch Equiniti Ltd 111 Old Broad Street, London EC2N 1BR Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA Financial advisers Auditor Lazards & Co., Limited KPMG LLP 50 Stratton Street, London W1J 8LL 15 Canada Square, London E14 5GL Financial Public Relations Sharegift FGS Global If you have only a small number of shares which would cost more for The Adelphi youto sell than they are worth, you may wish to consider donating 1-11 John Adam Street themto the charity ShareGift (Registered Charity 1052686) which London WC2N 6HT specialises in accepting such shares as donations. The ShareGift TransferForm may be obtained from Equiniti, the Company’s Registrars, Corporate Brokers at www.shareview.co.uk. There are no implications for Capital Gains Jefferies International Limited Taxpurposes (no gain or loss) on gifts of shares to charity and it is also 100 Bishopsgate possible to obtain income tax relief. Further information about ShareGift London EC2N 4JL may be obtained on 020 7930 3737 or from www.ShareGift.org. Design and production Printed by Park Communications 197SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2022 ### SENIOR PLC 59/61 High Street, Rickmansworth, Hertfordshire WD3 1RH United Kingdom www.seniorplc.com T +44 (0) 1923 775547