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Key Performance Indicators


OUR STRATEGY

As the UK’s leading regeneration specialist, our expertise in remediation, planning, asset development and construction supports our strategy of securing excellent returns through a focus on long-term significant added value while protecting our assets.

SECURE EXCELLENT RETURNS

OVERVIEW

Our broad regeneration expertise and land bank of 6,000 acres provides us with the flexibility to move with market demands and pursue those opportunities that generate the greatest value at any one time.

OBJECTIVES

Invest at a point in the property lifecycle from which we can achieve maximum development returns.

Maximise individual asset values through our locally-based expertise.

Recycle assets where significant opportunities to add value are exhausted in order to generate capital for reinvestment.

PROGRESS

We have performed solidly in the year, with NAV per share growing 4.2%, in spite of an uncertain economic environment. Trading profit benefited from growth in net rental income from a larger income generating portfolio; strong residential profits as our St. Modwen Homes business continues to grow and a continued strong level of commercial development profits.

Added-value valuation gains of £28.3m were secured through our own asset management initiatives, handled in each region and including remediation, planning gains and rental growth.

Against the backdrop of some economic uncertainty, our prevalence in the regions, our strong financial position and the diverse nature of our UK-wide property portfolio enables us to avoid overexposure to a single scheme, tenant or sector and safeguards our strong financial position.

NEXT STEPS

Continue to grow commercial and residential profits and generate valuation gains through planning gain, strategic acquisitions and identifying new opportunities from our existing 6,000 acre land bank.

Continue to promote and enhance the Group’s inherent value and long-term prospects.

Develop and grow our net asset base to maximise future dividend growth. Continue to secure profitable development to generate consistent future returns.

PRINCIPAL RISKS

Changes to the planning framework at a national and regional level could impact our ability to obtain planning permissions, resulting in a failure to maximise returns from developments and a loss of competitive advantage.

Unforeseen exposures, costs an liabilities on projects could impact our ability to deliver development schemes resulting in financial loss on major projects.

The absence of high quality contractors, consultants and third parties could adversely impact the quality of work on our projects resulting in an inability to meet demand and support the growth of the business and a financial impact on the returns achieved on individual developments.

Downturn in market and economic conditions could result in reduced demand for sites and properties and declining yields and a fall in the valuation of our assets.

Financial collapse of, or dispute with, a key joint venture partner could result in financial loss and affect our ability to deliver development schemes on schedule.

KEY PERFORMANCE INDICATOR

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LINK TO REMUNERATION

Profit before all tax and growth in NAV per share were amongst the measures against which financial performance was assessed for the purposes of the executive directors’ annual bonus arrangements in the year ended 30th November 2016. Trading profit performance is one of the metrics that will be used to determine annual bonus awards for the 2016/17 financial year.

THROUGH A FOCUS ON LONG-TERM SIGNIFICANT ADDED VALUE...

OVERVIEW

We have the financial strength and vision to acquire sites opportunistically that have clear potential to benefit from our specialist value-adding skills and which can generate profits from commercial and residential development at every stage of the property lifecycle.

OBJECTIVES

Utilise our land bank to deliver future opportunities and secure planning gains, with a focus on brownfield renewal and sustainable development.

Adapt our asset strategies over the long-term to meet changing market demands.

Employ highly skilled and motivated people to deliver our asset strategies and future growth.

PROGRESS

We continue to acquire brownfield sites at low cost and prepare for development through remediation and securing planning permissions which in turn realises value.

We have completed a number of strategic acquisitions during the year, including land at Wellingborough and Chippenham Gateway and business parks in South Wales and Long Marston. In this way, we have added value to the portfolio in terms of securing immediate rental income and presenting good future development potential.

The business has continued to grow throughout the year, particularly in St. Modwen Homes, through a number of senior appointments. The Group’s management team has grown by 1.5% to 64 (2015: 63).

NEXT STEPS

Selective and capital efficient acquisitions.

Continue to adopt the latest, most sustainable, development and remediation techniques.

Continued recycling of assets with limited opportunity for further significant added value.

PRINCIPAL RISKS

Failure to manage long-term environmental issues relating to brownfield and contaminated sites could result in a major environmental issue and consequent financial and reputational damage.

Failure to recruit and retain staff with the necessary skills and expertise could result in significant disruption to the business and a loss of intellectual property, which may adversely affect our ability to grow the business.

KEY PERFORMANCE INDICATOR

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LINK TO REMUNERATION

Total accounting return is to replace absolute TSR as a measure which, together with relative TSR, will form the performance criteria for the executive directors’ long-term share-based incentive arrangements. People succession and development objectives are set annually for each executive director, with performance contributing to the personal objective element of annual bonus awards.

WHILE PROTECTING OUR ASSETS

OVERVIEW

As the UK’s leading regeneration specialist we strive to adopt only the most sustainable approaches to regeneration and development. We operate from a firm financial footing, carefully monitoring cash flow and debt, whilst our development activities are underpinned by a reliable and recurring income stream that enables us to fund our cost base and progress our longer-term regeneration projects at low risk and in a profitable manner.

OBJECTIVES

Maintain an appropriate capital structure to meet our future development and funding needs.

Generate cash-backed income streams to substantially cover the running costs of our business.

Promote positive Group-wide culture towards safety, health and environmental matters.

PROGRESS

Recurring income levels have been enhanced by increases in the income generating portfolio, strategic acquisitions and robust asset management.

No facility refinancing is now required before 2019, with the weighted average facility life increased to 3.7 years (2015: 3.6 years) and all facilities expiring either in 2019 or 2021. See-through headroom of £207m and maintenance of LTV at c.30% enables us to be agile in exploiting new opportunities while retaining a good level of prudence to support future development and funding requirements. At 30th November 2016 we had £517m see-through net borrowings against £724m see-through facilities.

Accident frequency rates for our development sites and for St. Modwen Homes significantly outperformed the industry benchmark in the year.

NEXT STEPS

Continue to enhance the income generating portfolio through asset management whilst achieving an appropriate balance between retention of income producing assets and generation of cash to fund development opportunities.

Continue to keep our debt facilities under review to ensure they remain appropriate in the light of ongoing strategic planning.

Continue to attain or exceed 2017 health and safety related CSR objectives.

PRINCIPAL RISKS

Failure to effectively manage major projects could result in financial loss and an adverse reputational impact.

A major health and safety incident or non-compliance with legislation could result in serious injury or death to an employee, client, contractor or member of the public in addition to financial penalties and reputational damage.

Reduced availability of funding and unforeseen changes to cash flow requirements from macroeconomic changes could lead to a lack of liquidity, which could adversely impact the saleability of assets, limit the business to meet its ongoing commitments and restrict the ability of the business to grow.

KEY PERFORMANCE INDICATOR

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LINK TO REMUNERATION

Debt metrics are amongst the measures against which financial performance is assessed for the purposes of the executive directors’ annual bonus arrangements.