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Key Performance Indicators


OUR STRATEGY

Our strategy is intended to improve our returns on capital and enhance our operational flexibility through tightly controlling leverage and reducing the proportion of our portfolio invested in land. We believe that successful execution of our strategy will not only improve returns, it will also leave us well positioned in an uncertain external environment that we expect to present both risks and opportunities.

CHANGING PLACES. CREATING BETTER FUTURES.

OVERVIEW

Our people are central to the delivery of our strategy and we must maintain a highly skilled and committed workforce to maximise our chance of success.

OBJECTIVES

  • Improve our financial returns
  • Employ highly skilled and motivated people to deliver our strategy and future growth
  • Have a positive impact on communities in which we operate

PROGRESS

  • We ended the year with 481 employees (2016: 393) testament to our ability to attract, develop and retain talented individuals
  • Alongside the strategy review, the business continued to perform well delivering trading profit of £64.6m and adjusted EPRA earnings of £29.4m
  • Profit before all tax increased 10.2% to £67.0m (2016: £60.8m)
  • We delivered 4.6% growth in NAV per share to 450.9 pence and 2.3% growth in EPRA NAV per share to 471.2 pence

NEXT STEPS

  • Continue to develop and execute on our strategy and associated business plans to improve financial returns over time and deliver more operational flexibility.

PRINCIPAL RISKS

  •  Downturn in external market and economic conditions
  • Absence of high quality contractors, consultants and third parties
  • Unforeseen exposures and rising costs and liabilities on projects
  • Reduced availability of funding and unforeseen changes to cash flow requirements
  • Inability to recruit and retain staff with the right skills and expertise

KEY PERFORMANCE INDICATOR

Trading profit, see-through LTV and total accounting return are used to set targets by which financial performance is assessed for the purposes of calculating executive directors’ annual bonuses and (in the case of the latter) awards under performance share plans.

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ACCELERATE OUR COMMERCIAL DEVELOPMENT ACTIVITY

OVERVIEW

Having identified 7.5m sq ft of potential development in the medium term, we have developed plans to accelerate our commercial development activities, subject to risk and prevailing market conditions.


OBJECTIVES

  • We will prioritise investment and focus our commercial development activity on those sites with the greatest potential, in terms of expected demand and deliverability.
  • Subject to demand and market conditions, we will target growth of up to 25%per annum.

PROGRESS

  • Across the course of 2017 we completed 1.4m sq ft of new commercial development through a combination of both ‘Design & Build’ and speculative development
  • From the 7.5m sq ft medium term A1 industrial and logistics pipeline we have established a number of development opportunities for 2018 and beyond, with our current committed pipeline standing at 1.6m sq ft at the end of November 2017

NEXT STEPS

  • Subject to market demand, we will continue to accelerate our commercial development activity through delivery of the committed pipeline in 2018 and through progressing planning on the 7.5m sq ft pipeline of potential future developments in key locations
  • Enhance our relationship with key occupiers across the UK by hiring a National Head of Leasing 

PRINCIPAL RISKS

  • Downturn in external market and economic conditions
  • Absence of high quality contractors, consultants and third parties
  • Unforeseen exposures and rising costs and liabilities on projects
  • Reduced availability of funding and unforeseen changes to cash flow requirements

KEY PERFORMANCE INDICATOR

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GROW OUR RESIDENTIAL AND HOUSEBUILDING ACTIVITY

OVERVIEW

Having identified 16,900 plots for potential development or sale in the medium term, we plan to accelerate our residential and housebuilding business while maintaining a focus on quality and onsite safety.


OBJECTIVES

  • Subject to continued positive market conditions, we plan to grow our St. Modwen Homes sales volumes by up to 25% per annum and maintain our current rate of third party land disposals. 

PROGRESS

  • We have grown our St. Modwen Homes sales volumes materially in 2017, selling 694 new homes, up from 485 in 2016.
  • Margins from St. Modwen Homes improved to 13.9% from 13.4% in 2016, resulting in an operating profit of £23.3m in the year.
  • In addition to the £190m of our share of proceeds from the sale of 10 acres of land at Nine Elms Square, proceeds from other third party sales totalled £56m versus £48m in 2016. 

NEXT STEPS

  • We will continue to grow our residential and housebuilding business in 2018 and beyond through the sale or development of the 16,900 plots identified within our land bank. We will continue to focus on quality and safety to develop a foundation upon which financial performance can be improved even further.

PRINCIPAL RISKS

  • Downturn in external market and economic conditions
  • Absence of high quality contractors, consultants and third parties
  • Unforeseen exposures and rising costs and liabilities on projects
  • Reduced availability of funding and unforeseen changes to cash flow requirements

KEY PERFORMANCE INDICATOR

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CEMENT AND GROW OUR REGENERATION REPUTATION

OVERVIEW

Large scale regeneration projects have demonstrated the impact we can have in supporting and regenerating communities over the long term. We made noteworthy progress against each of our major regeneration projects during 2017 and we were successful in securing new opportunities focused on large scale residential development.

OBJECTIVES

  • We will continue to deliver on our existing regeneration projects at Longbridge, Swansea, New Covent Garden Market and other locations.
  • We will leverage the expertise within our business to unlock the next generation of regeneration.

PROGRESS

  • At Bay Campus, Swansea we completed the most recent phase of student accommodation and started work on the next phase of both academic facilities and accommodation.
  • At Longbridge, we delivered 180 beds of medical accommodation for the MoD’s DIO, a 260 bed retirement village and 38 new homes.
  • At New Covent Garden Market we successfully sold the first 10 acres of surplus land at the Northern Site and continued to make progress on the delivery of the new market facilities.

NEXT STEPS

  • Recruit a Head of Major Projects to support the continued delivery of our existing projects as well as to identify and secure the next generation of regeneration projects.

PRINCIPAL RISKS

  • Failure to effectively manage our major projects
  • Downturn in external market and economic conditions
  • Absence of high quality contractors, consultants and third parties
  • Unforeseen exposures and rising costs and liabilities on projects
  • Reduced availability of funding and unforeseen changes to cash flow requirements

KEY PERFORMANCE INDICATOR

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PORTFOLIO FOCUS AND CAPITAL DISCIPLINE

OVERVIEW

We are going to focus on fewer, larger projects on sectors with the best structural growth prospects – this means that we will reposition our income producing portfolio towards the higher growth industrial and logistics market and reduce our exposure to other sectors, including retail and smaller assets, over time.

In conjunction with executing on our strategy, we intend to bring LTV excluding residential under 40% over the medium term to give ourselves greater flexibility and control in an uncertain macroeconomic environment.

OBJECTIVES

  • We will reposition our portfolio by reinvesting proceeds from our planned recycling activities into retaining a greater proportion of assets from our industrial and logistics development pipeline.
  • We have clear plans to bring LTV (excluding residential) under 40% over the medium term through retained proceeds from our major asset sales and a profitable cash generative business

PROGRESS

  • We have made progress on the planned disposal of retail and smaller assets with terms agreed on the disposal of approximately £40m
  • See-through net borrowings have reduced to £388m, down from £517m in 2016 and our corresponding see-through LTV reduced to 24.2% in 2017 from 30.5% in 2016.
  • See-through LTV excluding residential, which is our preferred measure, fell to 37.2% at the end of 2017 from 54.3% at the end of 2016.

NEXT STEPS

  • During 2018 we plan to continue disposing of many of our smaller assets and reducing our exposure to the retail sector. The proceeds generated from these activities will be reinvested into retaining a greater proportion of assets from our industrial and logistics development programme.

PRINCIPAL RISKS

  • Reduced availability of funding and unforeseen changes to cash flow requirements.

KEY PERFORMANCE INDICATOR

See-through LTV is used to set targets by which financial performance is assessed for the purposes of calculating executive directors’ annual bonuses.

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