nortHern HoMe CoUntieS
First Floor, Unit E1
The Courtyard
Alban Park
Hatfield Road
St Albans
Hertfordshire
AL4 0LA
01727 732690
St. Modwen
ProPertieS PLC
Company Number 349201
HeAd oFFiCe & MidLAndS
reGionAL oFFiCe
Sir Stanley Clarke House
7 Ridgeway
Quinton Business Park
Birmingham
B32 1AF
0121 222 9400
www.stmodwen.co.uk
info@stmodwen.co.uk
reGionAL oFFiCeS:
London & SoUtH eASt
180 Great Portland Street
London
W1W 5QZ
020 7788 3700
SoUtH weSt & SoUtH wALeS
Green Court
King’s Weston Lane
Avonmouth
Bristol
BS11 8AZ
0117 316 7780
YorKSHire & nortH eASt
Ground Floor, Unit 2
Landmark Court
Elland Road
Leeds
LS11 8JT
0113 272 7070
nortH StAFFordSHire
The Trentham Estate
Management Suite
Stone Road
Trentham
Stoke-on-Trent
ST4 8AX
01782 281844
nortH weSt
Chepstow House
Trident Business Park
Daten Avenue
Risley
Warrington
WA3 6BX
01925 825950
S
t
M
o
d
w
e
n
P
r
o
P
e
r
t
i
e
S
P
L
C
A
n
n
u
A
l
R
e
p
o
R
t
f
o
R
t
h
e
y
e
A
R
e
n
d
e
d
3
0
n
o
V
e
M
B
e
R
2
0
1
0
the uK’s leading
Regeneration Specialist
St. Modwen ProPertieS PLC
www.stmodwen.co.uk
StoCK Code: SMP
St Modwen ProPertieS PLC
AnnuAl RepoRt foR the yeAR ended 30 noVeMBeR 2010
18573-04
16/02/2011
Proof 7
18573-04
16/02/2011
Proof 7
St. Modwen Properties PLC Annual Report 2010
welcome to St. Modwen
Contents
www.stmodwen.co.uk
resource Centre
St. Modwen is the uK’s leading regeneration
specialist. over the last 30 years we have built
up a land bank of over 5,700 developable acres
and have transformed the uK landscape via
thoughtfully planned sustainable communities,
mixed-use and town centre schemes, district
centres and business and employment
developments.
our schemes act as the catalyst for wide scale
comprehensive regeneration in the areas that need
it the most. With each development we seek to
leave a legacy by providing the right physical and
economic infrastructure where businesses and
communities can evolve and develop.
We have a strong presence across the uK and our
diverse property portfolio of over 180 sites means
we are not over exposed to a single scheme, tenant
or sector. this portfolio is largely divided into
three specific areas of focus: income producing,
residential land and commercial land.
Business review
Page 07
Operational and financial
performance in 2010 and
prospects for 2011.
08 Chairman’s Statement
10 Chief Executive’s Review
12 Operating and Financial Review
Corporate Governance
Page 21
Information regarding the
Board and how they have run
the business for the benefit
of the shareholders.
22 Corporate Social Responsibility
28 Board Members and
Senior Management
31 Corporate Governance Report
38 Directors’ Remuneration Report
Financial Statements
Page 45
Detailed analysis of
financial performance.
46 Directors’ Responsibilities
Statement
47
Independent Group
Auditors’ Report
48 Group and Company
Accounts
88
Independent
Auditors’ Report
89 Five Year Record
90 Notice of Annual
General Meeting
94 Glossary of Terms
95
Information for Shareholders
96 Development Projects
Reports and Publications
St. Modwen’s reports and publications are
available to view online or download from
www.stmodwen.co.uk
You can order St. Modwen’s printed
publications, free of charge from:
UK and Rest of World
Sir Stanley Clarke House
7 Ridgeway
Quinton Business Park
Birmingham
B32 1AF
Industrial
St. Modwen’s reports and publications are available to view online or
download from www.stmodwen.co.uk
Retail
Registered office
Sir Stanley Clarke House
7 Ridgeway
Quinton Business Park
Birmingham
B32 1AF
Company number
349201
Website
www.stmodwen.co.uk
Joint Stockbrokers
JP Morgan Cazenove
Numis Securities
18573-04
16/02/2011
Proof 7
18573-04
16/02/2011
Proof 7
www.stmodwen.co.uk
Highlights of 2010
01
Profit before tax
£37.5m
(2009: loss of £119.4m)
Our return to profit was driven by significant
progress in property profits and a recovery in
valuation gains.
Net assets per share
218p
(2009: 200p)
Net asset value has increased by 9%.
(£73.1m)
£37.5m
251p*
200p
218p
2008
(£119.4m)
2009
2010
2008
2009
2010
Trading profit**
£17.4m
(2009: £8.4m)
Our core rental and other income covers the
running costs of the company and provides
a stable base from which the Group can
maximise its development activities.
Gearing
72%
(2009: 80%)
Our cash flow management has enabled us to
reduce our gearing to 72%.
£19.5m
£17.4m
105%
80%
72%
£8.4m
2008
2009
2010
2008
2009
2010
* Adjusted for equity issue in 2009
** See note 2 of the financial statements
The statutory report of the directors comprises the business review and corporate
governance sections of the annual report and has been drawn up and presented in
accordance with English Company Law
Read more online at
www.stmodwen.co.uk
18573 16/02/2011 PROOF 7
02 St. Modwen Properties PLC Annual Report 2010
Business review our Strategy
Our strategy is to add value to all land and property assets we
hold by marshalling an extensive bank of development opportunities
and by delivering development schemes across all sectors of the
property market.
THe HoPPer
Our hopper of future development opportunities comprises over 5,700
developable acres and 16 Town Centre projects. We acquire these
opportunities in their rawest state, ensuring that we can add maximum
value as we work through the planning process towards delivery and
ultimately disposal. We aim to replace the land used every year to
enable the Company’s long-term growth.
STaGe 1
• We now have a land bank of
5,736 developable acres of
which 375 acres were acquired
in 2010
MarSHaLLiNG
Our development and construction teams, supplemented with skilled
external professionals, have a proven track record of marshalling a
wide range of projects through the planning process. We have particular
expertise in site assembly, remediation, master planning and public
consultation.
STaGe 2
• We continued to secure many
important planning consents
in 2010, including over 1,400
residential units and over 1
million sq. ft. of commercial
space
DeLivery
With planning permissions secured, schemes are built-out or the land
sold in response to market conditions. Assets are disposed of once no
further significant value can be added and the capital is then recycled
into new schemes, enabling the entire process to begin again.
STaGe 3
• We achieved over 50 disposals
in the year, realising over
£125m with a profit of £21.9m
18573 16/02/2011 PROOF 7
www.stmodwen.co.uk
03
We also recycle the capital raised from the disposal of those assets
to which we can no longer add value into the acquisition of new
opportunities. This is all underpinned by £525m of income producing
property assets and managed estates.
Branston
East Staffordshire
BP Portfolio
South Wales
openshawe
East Manchester
raF Uxbridge
Greater London
Long Marston estate
Warwickshire
South ockendon
Essex
Connah’s Quay
Flintshire
Warwickshire College
Warwickshire
edmonton Green
London
18573 16/02/2011 PROOF 7
04 St. Modwen Properties PLC Annual Report 2010
our Strategy continued
Share of Portfolio
There are three main areas of
focus for our business, each supported
by our proven strategy.
InCOME pROduCInG pROpERTIES
Income Producing Properties 50%
Residential Land 38%
Commercial Land 12%
Our active land bank is underpinned by over
£500m of retained assets and managed estates
that provide us with a regular and secure income
stream whilst we marshal our schemes through the
planning and construction process.
Key FaCTS:
• Book value — £525m
• Diversified rent roll (1,650 tenants) providing annual
rent of £45.7m
See case study on page 13
RESIdEnTIAL LAnd
COMMERCIAL LAnd
A key strand to our business has always been to
Our ability to marshal land through the planning
acquire and develop land with potential for residential
process and offer ‘oven ready’ sites for development
development. Value is realised through land sales,
means that we are well placed to take advantage
development with joint venture partners and via our
of a growing demand for pre-let / design and build
own in-house development team.
opportunities arising from a decreasing supply of
Key FaCTS:
• Book value — £400m; 1,550 acres
• 24,805 units; 20,724 with a recognised planning
consent of which 3,700 are in London and South
East
See case study on page 14
stock.
Key FaCTS:
• Book value — £130m; 2,794 acres
• Many large pre-sold construction projects underway
or completing in 2011
See case study on page 19
18573 16/02/2011 PROOF 7
www.stmodwen.co.uk
05
Our business activities and our hopper are controlled through a network of seven
regional teams of highly skilled professionals. Our regional presence provides
us with national and local knowledge and expertise that keep us in tune with
the needs of the local community and ensures that we remain politically and
economically sensitive to each individual area.
At a time of pressure on public finances, we believe our regional presence and
extensive regeneration expertise will prove crucial in building on our established
relationships with Local Authorities across the country who can continue to look to
us to reliably deliver regeneration.
Regional presence
yorKSHire & NorTH eaST
NorTH WeST
NorTH STaFForDSHire
MiDLaNDS
NorTHerN HoMe CoUNTieS
SoUTH WeST
& SoUTH WaLeS
LoNDoN & SoUTH eaST
For a list of development projects see page 96
18573 16/02/2011 PROOF 7
06 St. Modwen Properties PLC Annual Report 2010
18573 16/02/2011 PROOF 7
www.stmodwen.co.uk
07
Chairman’s Statement
Chief Executive’s Review
Operating and Financial Review
08
10
12
18573 16/02/2011 PROOF 7
08 St. Modwen Properties PLC Annual Report 2010
Business review Chairman’s Statement
“In my final statement to you as Chairman, I am
pleased to report on a strong recovery by your
Company with a return to profit and NAV growth.”
Anthony Glossop
Chairman
The Trentham Estate and Gardens, where visitor
levels increased by almost 50% to 315,000
in 2010.
18573 16/02/2011 PROOF 7
09
Directors and Employees
At the forthcoming Annual General Meeting Ian Menzies-Gow will
retire after nine years service, the last two as Senior Independent
Director. His robust and incisive contribution to Board debate was
always of the greatest assistance and I would like to thank him for his
considerable help.
It is intended that Ian will be replaced as Senior Independent Director by
David Garman who joined us in April 2010 as a non-executive director.
David has a broad range of industrial experience both in an executive
and non-executive capacity, which I expect to be of great assistance to
the Company.
I will also step down as Chairman at the same time and I would like
to welcome Bill Shannon who joined us in November 2010 as my
designated successor. He had a long and successful executive career
with Whitbread PLC before establishing himself as a respected
non-executive.
We also welcome Michael Dunn as Group Finance Director. He joined
in December 2010 to replace Tim Haywood who left us last year after
almost eight years’ service with the Company. Michael, who joined us
from May Gurney, has extensive experience of working for publicly listed
companies in the construction and outsourcing sectors and will be a
great asset to the Company.
The fact that the Company has emerged from the undoubted challenges
of the past three years in such good shape is largely due to the expertise
and drive of the Company’s employees at all levels in the organisation.
Their dedication and skill has been of the highest order. They have been
a pleasure to work with.
Prospects
Although the property market and broader economic prospects remain
uncertain, and the impact of spending cuts has yet to be fully felt, we
are nevertheless confident of the prospects for the Company. We have
a long track record of generating value from our traditional activities
of regeneration and the proactive management of ‘secondary’ assets,
and the results for the year to 30th November 2010 demonstrate that
we have been able to manage our business and assets through the
global crisis while continuing to progress our portfolio of development
projects to ensure the company is well positioned to deliver value for our
shareholders.
As we look forward, our financial position is sound; our business
model will increasingly create value; our valuations are prudent, and
our recurring income is robust. We are also in a good position to seize
attractive opportunities to add further to the hopper, our regional teams
continue to find opportunities to generate value and we are seeing a
gradual recovery of liquidity in our key markets.
I am confident that I leave the Company in capable hands and that 2011
will be a year of further progress.
anthony Glossop
Chairman
4th February 2011
*including our share of joint ventures and associates as detailed in note 2.
www.stmodwen.co.uk
Dear Shareholder,
In my final statement to you as Chairman and as predicted in our half
year and interim management statements, I am pleased to be able to
report on a strong recovery by your Company with a return to profit and
NAV growth.
Profit before tax was £37.5m (2009: loss of £119.4m) with net asset
value per share growing by 9% to 218p (2009: 200p).
These results were driven by significant progress in property profits* to
£21.9m (2009: £7.6m) and a recovery in valuation gains* of £23.0m
(2009: (£122.3m)), of which £17.6m were attributable to asset
management initiatives, progressing our projects through the planning
and development stages (“marshalling”) and other added value activities.
These achievements resulted in a 7% increase in our diluted EPRA net
asset value, which now stands at 234p per share (2009: 219p), and
helped generate a positive operational cashflow and enabled us to reduce
our gearing to 72% (2009: 80%).
Our active approach to asset management has led to an increase in
recurring income and our rent roll, and vacancy levels within our portfolio
have reduced to 12% (2009: 17%). Our financial position has been
further improved by active management of our funding requirements,
through adding to and extending our existing banking facilities.
Dividends
On the back of this recovery, dividend payments were resumed at the
half year and your Board is now recommending a final dividend of 2p
(2009: nil) per ordinary share, making a total distribution for the year
of 3p (2009: nil). This final dividend will be paid on 4th April 2011 to
shareholders on the register on 11th March 2011.
Strategy
Our strategy is a long-standing and consistent one: to add value to
the properties we control through remediation, marshalling, asset
management, development and delivery by our first rate regional
teams, focusing on areas where our regeneration and brownfield
expertise enables us to generate profits in commercial and residential
development.
Our business model has evolved over many years to ensure that our
longer-term development activities are underpinned by a reliable
recurring income stream (and capital appreciation) generated by our
portfolio of rent-producing properties. These assets are now valued at
over £500m, representing 50% by value of our total portfolio, and ensure
we can progress our developments in a controlled and profitable manner.
In addition, we own an extensive landbank (our “hopper”) of over
5,700 developable acres, 38% of which comprises land earmarked for
residential development.
During the course of this year, many commentators have focused
their attention on the prospects for ‘prime’ assets. It is therefore
pleasing that we have been able demonstrably to deliver against our
strategy and business model and record healthy year on year growth
in profits, property valuations and net asset values. Our development
and remediation activity levels have improved; we have continued to
progress our schemes successfully through the planning process to
ensure a pipeline of future activity and added value, and the hopper
of development opportunities has increased to record levels through a
programme of selective acquisitions.
We are always looking to challenge and improve this strategy.
Our groundbreaking joint venture with Persimmon, which covers
2,000 plots on seven sites, is a clear example of how we are able
to extract value (and cash) from the longer-term residential assets in
the hopper, accelerating the use of our residential land stock and
improving profitability.
18573 16/02/2011 PROOF 7
10 St. Modwen Properties PLC Annual Report 2010
Business review Chief executive’s review
“Looking ahead we are confident that St. Modwen’s
long-established strategy will once again give us the
opportunity to provide sector leading returns
to shareholders.”
Bill Oliver
Chief Executive
Progress at Longbridge — the 250,000 sq. ft.
Bournville College, on target for completion
in 2011.
18573 16/02/2011 PROOF 7
www.stmodwen.co.uk
11
We are proud to be recognised as the UK’s leading regeneration
specialist. Our regeneration activities and the complex schemes we
deliver make a real and lasting difference and provide an economic boost
to many deprived areas across the country.
Our return to profit is testament to the strength of our business, the
hard work and skill of our employees and our proven strategy of adding
value to the portfolio of properties we own and manage. The performance
is also a result of our regional presence which differentiates us from
many of our competitors and has kept us in tune with the needs of local
communities and businesses. It has also enabled us to continue to
access sites that offer us the potential to apply our expertise to create
value for our shareholders, partners and stakeholders.
Our balanced business model ensures that our development activities
are underpinned by a reliable recurring income stream from our £525m
portfolio of rent-producing properties. This enables us to fund our cost
base and progress our longer-term regeneration projects in a risk-averse
and profitable manner.
Our extensive and very diverse hopper of over 5,700 developable acres
is controlled and managed through a network of seven teams across
the UK, comprising highly skilled and experienced professionals. This
enables us to adopt a detailed and hands-on approach to all aspects of
our schemes, enabling us to deliver sector-leading results. Our long-
standing emphasis on value creation enables us to deliver more than
market valuation movements for our portfolio, as we marshal assets from
our hopper through the planning process to higher value uses.
There are three main areas of focus for our business, each supported by
our proven business strategy:
1. Income producing investments – representing 50% by value of our
portfolio. Our recurring income, generated from an extensive and
diversified rent roll, enables us to continue to operate profitably,
meeting the running and financing costs of the business.
2. Residential land – 38% by value of our portfolio. We acquire and
develop land with the potential for residential development. Our asset
management skills enable us to add value throughout the development
process, realising value through land sales or by development either
in joint ventures or solely through our in-house development teams.
Our skills in driving our landholdings through the planning process,
brownfield land remediation and other aspects of regeneration and
development make us an attractive partner to landowners, local
authorities and central government agencies.
3. Commercial land – 12% by value of our portfolio. Our ability to
marshal land through the planning process and offer ‘oven ready’ sites
for development means that we are able to meet occupiers’ demands
swiftly and take advantage of a growing demand for pre-let and design
and build opportunities arising from a decreasing supply of stock
across the UK.
Our Market
We have witnessed some improvement in market conditions over the last
12 months. Our broad range and our regional spread of development and
regeneration activities has enabled us to continue to secure business
across a wide variety of sectors, achieving property sales, including our
share of JVs, of £125m.
Our levels of development activity are still lower than we are used to
historically but we do compare well to the rest of the marketplace, with a
good programme of activity in place for 2011 and beyond.
As we forecast last year, our valuations at 30th November 2010 were
reflective of more stable market conditions after a long period of
uncertainty, with an average positive yield shift of 0.5%. The value of
our commercial land has stabilised, while the valuation of our residential
land has encouragingly recovered a small element of the values
previously written off. We believe this may reflect the start of a recovery
in the market for residential land, as evidenced by the transactions we
have completed during the year and since the year-end.
Competitive and Regulatory Environment
The lack of readily available finance and the continuing drive to de-gear
and de-risk their businesses has restricted many developers’ appetite and
ability to compete for new development schemes. Speculative development
remains almost non-existent and there are still very few developers who are
both willing to bid for, and able to finance, new schemes.
By contrast, in this new competitive landscape, we are operating in
our chosen regional and secondary markets from a position of strength.
We are identifying an increasing stream of opportunities, both for
acquisitions and for developments which offer clear potential to create
and enhance value for our shareholders. As a result, we are able to report
on yet another very successful year for our hopper, which at over 5,700
acres, once again stands at record levels.
Despite some of the gloomier forecasts to the contrary, we have also
continued to benefit from the relative resilience of our occupier markets,
underpinned by our own focus on specific active asset management
initiatives.
This year we have been highly successful in both reducing void levels
and increasing the rent roll. Our secondary retail centres in particular
are continuing to perform strongly, with high occupancy and robust
rental levels. We are also seeing an increased level of enquiries for new
development space, with a number of sizeable opportunities now coming
to fruition; for example we are in advanced discussions with Siemens in
Lincoln to develop a new 127,000 sq. ft. manufacturing facility.
On face value, the regulatory environment remains cumbersome and
complex. However, we remain optimistic that the latest planning process
reforms will not have an adverse impact while local authorities seek to
make sense of their new-found powers and responsibilities including the
proposed abolition of regional spatial strategies, the replacement of Regional
Development Agencies with Local Enterprise Partnerships and the merger of
the Housing and Communities Agency with English Partnerships.
One of the Company’s key skills is being able to work our schemes
through the planning system in a responsive and time-efficient manner.
For this reason, the more restrictive a system becomes, the more our
skills are needed, and potentially, the greater the value that is created
by our marshalling activities. Furthermore, sites with a secured planning
consent (of which we have many, including 20,724 residential plots with
a recognised planning status) should command an increasing premium
while the system adjusts to operate in the more efficient way intended.
Outlook
Looking ahead, we are confident that St. Modwen’s long-established
strategy will once again give us the opportunity to provide sector-leading
returns to shareholders.
We continue to adopt a cautious, but opportunistic, stance to changing
conditions. The expertise and knowledge that we have built up over many
years in diverse markets across the UK will ensure that we are strongly
placed to continue to identify and secure opportunities in the markets
that are most active and offer the best potential to create value.
We have a strong balance sheet and a landbank that is full of latent
value. Our development pipeline for 2011 and beyond is strengthening
and a number of significant schemes are being marshalled for delivery in
future years.
Our asset management capability is proving invaluable in maintaining
occupancy and rent levels, and we are confident that we will be
able to continue with the positive progress in this area that we have
demonstrated in the past two years.
As a result, we believe that we are well positioned to deliver profit and
net asset value growth in 2011, despite the ongoing uncertain market
conditions.
Bill oliver
Chief Executive
4th February 2011
18573 16/02/2011 PROOF 7
12 St. Modwen Properties PLC Annual Report 2010
Business review operating and Financial review
OPERATINg REVIEW
Business Model and Strategy
Our established business strategy is to add maximum value to the land
and property assets we own through remediation, marshalling, asset
management and development and subsequently to recycle the capital
released on sale into the acquisition of new opportunities.
We operate predominantly in locations where we are able to offer
value for money to occupiers and undertake substantial planning or
remediation activities to transform asset values. It is in these locations,
via our regeneration activities, where we can make a positive and lasting
difference by providing the right physical and economic infrastructure for
businesses and communities to evolve and develop. Regardless of recent
generic market commentary, we continue to experience improving market
conditions for the type of secondary properties in our portfolio which are
proving remarkably robust in terms of rental and occupation levels.
Obtaining control of opportunities through self-financing transactions
has always been part of our hopper strategy. This year, our total
expenditure on new acquisitions was only £31m which added 375 acres
of developable land to our portfolio, of which 318 acres were via options
and development agreements. As a result, our hopper now stands at the
record level of 5,736 developable acres. This landholding is very broadly
based, comprising over 180 separate schemes, across all sectors of the
property market.
During the past year, we have not undertaken any speculative
development, but have continued to advance sites for development on
the back of pre-let or pre-sold opportunities.
Our strategy of constantly seeking to add value to the properties we
own (whether through asset management, remediation or driving them
through the planning process) has also continued to deliver tangible
progress. During the year, we achieved a number of important planning
consents and advanced the status of several of our key schemes,
generating added value gains of £18m (2009: £27m).
We have also continued to dispose of mature assets and those developed
specifically for sale. We have completed over 50 disposals in the year
realising £125m which includes our share of JVs and £22m of disposal
profits, enabling us to reinvest in new long-term opportunities.
Employees
St. Modwen’s business model is based on a hands-on approach in all
areas: asset management; marshalling; remediation; construction and
development. As a result, the skill of our people is fundamental to our
success. Therefore, as we emerge from financially-constrained times,
we will continue to retain and incentivise and to grow the abilities of
the talented people who will be the drivers of the Company’s future
expansion.
Hopper analysis (acres)
Developable
Retail and leisure
Employment
Residential
Unspecified
2010
2009
368
2,927
1,550
891
5,736
433
2,735
1,564
872
5,604
The 300,000
sq. ft. waste treatment and
recycling facility for New
Earth Solutions at Access
18, Avonmouth.
18573 16/02/2011 PROOF 7
www.stmodwen.co.uk
13
Case Study
Income Producing —
ETP Portfolio
We have purchased an eleven-site portfolio of industrial estates
for £21.4m from Citi Property Investors. With a rental income of
£2.2m, this represents a net initial yield of 10.3%.
The portfolio comprises 610,000 sq. ft. of multi-let industrial
assets located throughout the Midlands and North of England,
including Birmingham, Sheffield and Stoke-on-Trent. It includes
75 occupational leases, let to 60 tenants, with a void level of 3%.
In line with our business strategy, it is our intention to retain these
sites for income until we maximise their value. Income raised from
their disposal will be invested into other development projects,
land acquisition or the purchase of other income producing assets.
Financial Objectives
St. Modwen’s financial objectives over the past year have been to
deliver positive NAV growth and resume dividend payments; to grow the
recurring income; to optimise the Company’s cashflow and financing
position; and to be in the best possible shape to capture new acquisition
or development opportunities.
With the stabilisation of property valuations, we are pleased to have
returned to profitability, reporting a profit before tax of £37.5m (2009:
£119.4m loss). Our NAV per share has grown 9% to 218p per share and
the EPRA equivalent 7% to 234p (2009: 219p). Our recurring gross rent
roll has grown to £45.7m (2009: £43.0m) with voids reduced to 12%
(2009: 17%).
This, and our confidence in the robustness of our net asset value and
our prospects for the coming year, enabled us to resume the payment of
dividends during the year. An interim dividend of 1p per share was paid
in September, and the Board is recommending a final dividend of 2p.
In the current more cautious market, our business model is - perhaps
counter-intuitively - particularly appropriate. Our prudent approach to
financing, excellent relationships with our key banks and strengthened
balance sheet following the Placing and Placing and Open Offer in 2009
has given us a stable financial footing and ensured we have significant
capacity for growth as market conditions improve.
The Company is trading within all its banking covenants and our forward
projections show a continuation of that position.
A further key objective for the year was to renew and extend the maturity
of our banking facilities to ensure that sufficient funding remained in
place for the Company’s medium-term requirements. We have realised
this aim and renewal dates for the majority of our existing facilities have
been extended to 2014/15 with no changes to the existing terms and
conditions. The earliest significant maturity date is now September 2012
and the weighted average maturity of the Group’s facilities at the date of
this report is now 3.7 years (November 2009: 3.0 years).
Income Producing Investments
Hands-on asset management is a very significant part of our business
model. Our regional teams have been very active during the period,
working closely with tenants to mitigate the impact on our rent roll of the
current difficult market conditions. The effect of asset disposals, tenant
failures and vacations was more than offset by our successes in letting
void space and newly-completed developments giving us an overall
increase in net rental income.
The benefit of this pragmatic and hands-on approach is shown by
the fact that our like-for-like gross rent roll has increased by £1.9m
to £45.7m since 30th November 2009. This reflects our success in
achieving £7.8m of new lettings to offset rent lost of £5.7m due to
vacations and £0.2m due to tenant failures in the period. This activity
has enabled us to reduce our overall portfolio void to 11.8% and reduce
the level of unsold stock to £66.3m.
Rental income by sector
Industrial 55%
(2009: 52%)
Offices 10%
(2009: 9%)
Retail 35%
(2009: 39%)
While we may see continued pressure on our net rents in 2011, as
the macro-economic conditions continue to give rise to increased
unemployment and a reduction in consumer spending, our rents are
at the affordable end of the scale. We believe this will provide some
insulation from the effect of further tenant failures.
18573 16/02/2011 PROOF 7
14 St. Modwen Properties PLC Annual Report 2010
Business review operating and Financial review continued
Case Study
Residential Land —
Persimmon JV
1.4m sq. ft. Innovation
Centre
Income producing investments — key highlights during the year:
• During the year we acquired the ETP portfolio, an eleven-site portfolio of
industrial estates (see page 13 for case study).
• Testament to the fact that well located and well managed secondary
retail property can prove to be a reliable investment is the Elephant
and Castle Shopping Centre in London. The Centre now comprises 82
tenants and occupancy has increased from 93% to 98% during 2010.
As a result of 15 new lettings and lease renewals, the net rent receivable
has increased by 3.2% during the year to £3.8m per annum.
Outlook
We continue to seek opportunities to add to our income producing
portfolio. Our regional presence, flexible funding and appetite for assets
that generate income but have the potential for future development is
enabling us to move quickly which provides us with an advantage in the
current marketplace. We anticipate acquiring further income producing
assets at attractive yields, and believe that our active asset management
will continue to add value.
Residential Land
The gradual recovery of the residential market, and the consequent
erosion of housebuilders’ landbanks and housing stock levels has seen a
re-emergence of demand for residential land, particularly for our type of
‘oven-ready’ consented sites that can be brought quickly into production.
This is demonstrated by our disposal of 40 acres during the year and the
signing of the strategic joint venture with Persimmon to develop an initial
seven sites. This JV will unlock considerable value and cash from our
residential land bank as well as delivering development profit from house
sales.
As an example of our acquisition activity in the year, we have concluded
an agreement with Branston Properties Ltd to acquire, subject to
planning, a 280 acre site near Burton-upon-Trent. We anticipate the site
being brought forward for a mixed use development of 500 new homes
and 650,000 sq. ft. of employment space.
Marshalling
The planning position on our residential land bank is now:
In August 2010, we entered into a joint venture with Persimmon
PLC initially to develop 2,000 homes on seven of our sites across
Planning status
Allocated in local plan
or similar
Resolution to grant
permission
Outline permission granted
Detailed permission granted
Sub-total
No planning recognition
TOTAL
Nov 10
Nov 09
Acres
Units
Acres
Units
309
6,550
231
6,134
39
794
68
1,210
340
1,550
806
12,239
1,129
20,724
4,081
24,805
323
517
32
1,103
440
1,543
5,230
7,887
833
20,084
4,956
25,040
the country:
— goodyear, Wolverhampton
— glan Llyn, Newport, South Wales (pictured)
— Pallion New Road, Sunderland
— Whessoe Road, Darlington
— Longbridge East, Birmingham
— Long Marston, Warwickshire
— Coed Darcy, Neath, South Wales
It is expected that the development across 120 acres of land will
take up to five years to complete and will have an end value of
over £300m. Further schemes may be added to the joint venture as
planning permission is obtained by St. Modwen.
We are already making good progress with the joint venture
and have recently submitted detailed planning applications at
the former goodyear site in Wolverhampton and at glan Llyn in
Newport, South Wales. We will shortly submit applications at
Darlington, Sunderland and Longbridge East.
18573 16/02/2011 PROOF 7
www.stmodwen.co.uk
15
Planning progress — key highlights during the year:
• Two sites at Longbridge and Weston-Super-Mare have received detailed
planning consent for residential development totalling 215 new
homes. With the benefit of HCA funding, demonstrating our ability
to actively manage development without major use of our own funds,
these sites are being developed directly by the Company under its
house-building brand, St. Modwen Homes.
• South Ockendon, Essex — we received outline planning permission for
650 homes on a 31 acre former car factory which we acquired from
Ford in 2006. This scheme will form a key part of the delivery of new
housing in the Thames Gateway region.
In addition, the following major planning applications are being
progressed in 2011:
• Mill Hill — as part of a consortium with neighbouring landowners,
we have submitted plans for a comprehensive development of our
83 acre former MoD site comprising 2,174 new homes, 11,800 sq. ft.
of new retail, 37,000 sq. ft. of commercial space, a GP surgery, an
energy centre and two primary schools.
• Uxbridge — plans for the extensive development of this 108 acre
former MoD site includes 1,373 new homes, 31,000 sq. ft. of new
retail and 145,000 sq. ft. of new office space, together with a 77 bed
retirement home, a 1,200 seat theatre, a 6,300 sq. ft. community /
museum use, an energy centre, a GP surgery, a 90 bed hotel and three
primary schools, for which outline planning was granted in January
2011.
Delivery and disposal — key examples:
• One of the key transactions during the year was the signing of a joint
venture agreement with Persimmon PLC to develop 2,000 homes on
seven of our sites. The structure of the JV accelerates the realisation of
value from our hopper, and also enables us to share in the future value
of the houses built. We anticipate that the transaction will be cash
positive for us in 2011, and will remain so throughout the duration of
the JV (see page 14 for case study).
• We have sold 29 acres of residential land for a total consideration of
£40.5m at values equal to, or ahead of book value: 20 acres at the
former MoD site at Bentley Priory, Stanmore to Barratt Developments;
four acres at Haywards Heath to Crest Nicholson and five acres at
Newton le Willows to Jones Homes.
Outlook
Our ability to be flexible and innovative gives us confidence that we will
continue to unlock the value from our substantial and diverse landbank.
Our developments in progress should generate increases in NAV over the
coming years while our landbank should prove a valuable long-term asset
as the housing market recovery accelerates.
Commercial Land Development
In line with the rest of the market, we are not currently undertaking any
speculative development. However, our regional structure enables us to
continue to drive our land holdings through the planning process and
offer occupiers ‘oven ready’ sites for development means that we are well
placed to take advantage of the resulting and growing demand for pre-let
and design and build opportunities.
Our brownfield remediation expertise makes us an attractive proposition
to landowners who trust us implicitly to remove the risk from their sites.
The first phase of
housing at Coed Darcy,
South Wales where
planning is shortly to be
submitted for a further
300 houses as part of our
Persimmon JV.
18573 16/02/2011 PROOF 7
16 St. Modwen Properties PLC Annual Report 2010
Business review operating and Financial review continued
Acquisitions — key examples during the year:
• Hednesford — a vehicle component factory from ATP Industries Group, in
a deal which unlocks the development potential of the £50m Hednesford
Gateway scheme in Cannock Chase, Staffordshire (see page 19 for case
study).
• The 300,000 sq. ft. waste treatment and recycling facility at Avonmouth
for New Earth Solutions is on target for completion in Spring 2011.
• Works have also commenced on the construction of the pre-sold 48,000
sq. ft. office complex for Manchester City Council in Wythenshawe.
• Crawley - an option to acquire, subject to planning, a 100 acre site at
Copthorn adjacent to the M23 near Crawley and Gatwick for employment-
led development.
Planning progress — key highlights:
• Exeter — outline planning consent has been obtained for our £120m
Skypark development near Exeter Airport, together with detailed
consent for the first phase. Funded by the Low Carbon Infrastructure
Fund of HCA, the innovative first phase is set to comprise a £20m
Energy Centre — the first of its kind on this scale in the UK - which
will be run by E.ON, and which will provide sustainable energy for the
entire scheme and the neighbouring community of Cranbrook.
• Longbridge Town Centre — Proposals have been submitted for the
£70m next phase of the town centre which include 80,000 sq. ft. of
retail space, a major 85,000 sq. ft. foodstore, an hotel and 40 two-
bedroom apartments, together with community space access roads and
continued local road improvements to join the town centre with the
newly-built £66m Bournville College.
Delivery and disposal — key examples:
Some of the principal disposals, which were all made at or above book
value, in the period were:
• Catford Shopping Centre and parade of shops - sold to Lewisham
Borough Council for £11.5m.
• The Malls, Basingstoke — our joint venture, KPI, sold its 65% share in
this 300,000 sq. ft. shopping centre to Basingstoke & Deane Borough
Council (who owned the remaining 35%) for £15.3m.
Key employment schemes include:
We have also made significant progress on a number of important town
centre, retail and public sector schemes:
• Wembley — Our Wembley Central scheme will provide 135,000 sq. ft.
of retail and leisure space, together with 117 private apartments and
85 affordable homes already completed on site. During 2010, 23,000
sq. ft. of office space in Ramsey House was refurbished; the fitting out
of the first phase of 117 apartments was completed, of which 50 have
been sold or let; Co-Op have completed a lease on 10,000 sq. ft. and
will commence trading in March 2011; and terms have been agreed
with Travelodge for a new 86 bed hotel.
• We have completed the 72,000 sq. ft. retail scheme at Connah’s Quay,
Flintshire including a new 52,000 sq. ft. Morrisons food store which
commenced trading in November 2010. Over 300 new jobs have been
created at the Ffordd Llanarth site, which has attracted lettings from a
wide range of national retailers including Greggs, Bargain Booze, Just
Go Travel, and Home Bargains.
• We completed and handed over the 150,000 sq. ft. Warwickshire
College at our Rugby site in time for the first intake of students in
September 2010. Work is also progressing on schedule and budget
towards completion of the flagship six storey 250,000 sq. ft. £66m
Bournville College at Longbridge to be opened to over 10,000 students
in September 2012.
Outlook
Our developments in progress should continue to generate value. While we
do not foresee returning to speculative development in the near future, our
regional presence is enabling us to find development opportunities that
can be satisfied by our existing landbank. We are currently in negotiations
to secure a number of opportunities that should enable us to continue to
create value and generate good profits over the next few years.
The completed
52,000 sq. ft. Morrison’s
foodstore at Connah’s Quay,
Flintshire. This is part of
our Quay Shopping Centre
development.
18573 16/02/2011 PROOF 7
www.stmodwen.co.uk
17
FINANCIAL REVIEW
Income statement
Our business model is based on core rental and other income covering
the running costs of the Company (property outgoings, overheads and
interest), which provides a stable base from which the Group can
maximise its development activities.
Trading profit (£m)
Net rental income
Property profits
Other income
Administrative expenses
Bank interest
Trading Profit
(see Note 2 of the financial statements)
2010
33.7
21.9
3.1
(17.1)
(24.2)
17.4
2009
33.5
7.6
1.8
(14.1)
(20.4)
8.4
Net rental income
During the course of the year we have focused on our asset management
activity in order to safeguard our future rental returns.
At 30th November 2010 the like-for-like gross rent roll, including
our share of rent from joint ventures, had increased from £43.0m to
£45.7m. At the year-end our overall voids had been reduced considerably
to 12% (2009: 17%). Furthermore we have increased our weighted
average lease length to 5.1 years (2009: 4.3 years).
Property profits
Property profits, including our share of joint ventures, were £21.9m
(2009: £7.6m), with significant contributions from our remediation
contracts with BP at Coed Darcy and Baglan Bay, a number of pre-let and
pre-sold developments (including for Manchester City Council, New Earth
Solutions, Morrisons and Bournville and Rugby Colleges), as well as the
disposal of residential land.
Property valuations
All of our investment properties (including land) are valued every six
months by King Sturge LLP at market value, and our work in progress
is also independently assessed, where appropriate, for any impairment
issues.
Property portfolio (£m)
Residential land
Commercial land
Income producing
Retail
Offices
Industrial
Total
2010
400
130
194
60
271
2009
339
155
197
63
253
1,055
1,007
•
including the Group’s share of joint ventures and associates (excluding minimum lease
payments).
• valuation numbers include investment properties and legally owned properties held in
inventory (except for those inventory properties already contracted for transfer under the
Project MoDEL agreements).
The valuation of our investment properties reflects both market
movements and the value added by our own activities, including the
achievement of marshalling milestones in the planning process. The
calculation of this added value reflects the present value of future cash
flows, based on existing land prices and the current best estimate of
costs to be incurred.
2010 was another year of uncertainty in the real estate investment
market, but one in which values recovered some of the losses of the
previous two years. Our valuations at 30th November 2010 reflect a
stabilised secondary property market, with our investment property
valuations having increased overall by £29m (3%) during the year.
In the first half of the year, we saw the gradual return of some real
estate investor appetite and an increasing level of housebuilding
activity, resulting in an overall uplift of £24m. In the second half,
these trends had stabilised and both investment yields and underlying
land values were more stable with a movement of £5m. Throughout
the year, we produced significant gains through our marshalling and
asset management efforts which added value to the underlying market
movements, the beneficial impact of this can be seen in the table below:
investment property valuation movements (£m)*
Market value movement
Marshalling and asset
management
Total
H1
9
15
24
2010
H2
2
3
5
Total
11
18
29
2009
Total
(134)
27
(107)
*including the Group’s share of joint ventures and associates
The valuation of our residential land portfolio was thoroughly market-
tested during the year by the sale of land and the formation of the joint
venture with Persimmon over a further seven sites: in all cases, our
carrying values were proven by these market transactions. Furthermore,
our ability via this Persimmon JV to participate in the future
housebuilding profits implies that there is a further stream of value to
come from this portfolio which has not yet been fully recognised.
Of the overall investment property valuation movements of £29m, our
valuers consider that over 60%, or £18m, is due to value added by
our own management of the assets. This is an achievement consistent
with our expectations and one that gives us confidence in our future
valuations.
Administrative expenses
We continue to maintain close control over underlying costs. Underlying
recurring costs have remained stable. We have, however, incurred £2.2m
of restructuring costs in the year as we rationalised our properties and
reorganised our internal legal structure in line with approved tax planning
activities. Due to the successful outcome to the year we have also re-
introduced the staff bonus scheme.
As a consequence of the factors above, administrative expenses
(including our share of joint ventures) have moved during the year to
£17.1m (2009: £14.1m).
Joint ventures and associates
Our share of the post tax results of joint ventures and associates is
shown on the income statement as one net figure. A full analysis of the
underlying details is disclosed in Note 10. The principal joint venture
in which the Group is involved is Key Property Investments Limited,
which recorded a profit of £16.6m of which our share was £8.3m
(2009: £22.1m loss).
Finance costs and income
Net finance charges (including our share of joint ventures) have reduced
to £26.4m (2009: £26.7m). The level of charges was due to the
following principal factors: lower borrowing levels; reduced mark-to-
market costs; partly offset by increased borrowing costs.
18573 16/02/2011 PROOF 7
18 St. Modwen Properties PLC Annual Report 2010
Business review operating and Financial review continued
As a result of low and stable interest rates and the renegotiating of some
of our hedging contracts (at zero cost) with our banks, the revaluation
of our interest rate swap contracts (which have a weighted average cost
before margin of 4.6%) to market value at year-end resulted in a net
credit to the Income Statement of £0.1m (2009: charge £5.9m).
The impact of the renegotiation of our banking covenants mid way
through 2009 was to increase the weighted average margin on our
facilities by 113 basis points to 199 basis points.
Net finance charges also include a charge of £1.6m (2009: £0.2m) for
the amortisation of the discounted deferred consideration payable to the
MoD in respect of Project MoDEL.
operational cashflow (£m)
Net rent
Property disposals
Property acquisitions
Capital expenditure
Working capital and other movements
Overheads, interest and tax
Net cash inflow/(outflow)
(see Note 2 of the financial statements)
2010
26.4
92.9
(30.5)
(80.1)
33.9
(36.5)
6.1
2009
26.1
100.9
(12.9)
(79.7)
(6.3)
(27.0)
1.1
During 2010, the Group continued to expense all interest as it has
arisen, and has not capitalised any interest on its developments or its
investments.
Profit before tax
With the stabilisation of property valuations, we are pleased to have
returned to profitability, reporting a profit before tax of £37.5m
(2009: £119.4m loss).
Taxation and profits after tax
The effective tax credit for the year, including our share of joint ventures,
is £0.8m (2009: £17.7m).
This rate is substantially lower than the standard rate of UK Corporation
Tax due to the utilisation of previous years’ tax losses and allowances.
It is anticipated that, with the continued utilisation of these losses and
of other tax allowances, and the benefit in future years of approved tax
planning activities, the effective rate of tax on future profits will be lower
than the standard rate of UK Corporation Tax.
We now have total Group facilities of £539m (2009: £519m). Year-end net
debt is £315m (2009: £319m), giving us gearing of 72% (2009: 80%)
and headroom of over £200m to meet future commitments. Including joint
ventures, total banking facilities are £784m (2009: £764m), net debt is
£504m (2009: £527m) and gearing is 94% (2009: 106%).
The maturity of both hedges and facilities is aligned with individual
schemes where applicable. Following the repayment of £101.6m of
borrowings after the equity issue during 2009, the amount of our debt at
fixed rates rose to 99% and is currently 98%. This will gradually reduce
during 2011 as a number of the hedging contracts mature. We are
keeping our hedging positions under review.
Covenants
We are operating well within the covenants that apply to our banking
facilities. These are:
• net assets must be greater than £250m (actual £437m);
• gearing must not exceed 175% (actual 72%); and
Benefit from tax planning activities is only recognised when the outcome
is reasonably certain.
• interest cover ratio (which excludes non-cash items, such as
revaluation movements) must be greater than 1.25x (actual 1.8x).
Taking into account these tax rates, profit after tax has risen to £38.3m
(2009: loss of £101.7m).
Financial Structure
Financing
Following the refinancing of the business in 2009, we continue
to operate well within our banking covenants and have substantial
headroom within our existing facilities to cover all of our current and
proposed development and acquisition programmes.
We have also taken a number of steps during the year to renew and
extend our banking facilities. During the financial year we renewed
facilities with Barclays, Royal Bank of Scotland and Bank of Ireland.
Following the year-end, but before the date of this report, we have
also renewed facilities with HSBC and put in place a new facility with
Santander, further increasing the weighted average expiry to 3.7 years at
the date of this report (November 2009: 3.0 years). This has been done
with no material impact on borrowing costs.
The Company’s cash flow was again an area of significant focus during
the year as we realised £93m from our ongoing programme of asset
disposals. This, together with our recurring net rental income and
close management of our working capital, enabled us to meet our
administrative expenses, interest, and a £111m development and capital
expenditure programme, whilst delivering a net reduction in borrowings
from trading cash flows.
The following table shows an additional analysis of the operational cash
flow of the business.
Although current economic conditions still have an element of
uncertainty, we have considered available market information, consulted
with our advisers and applied our own knowledge and experience to the
Group’s property portfolio. As a result of this, we believe covenant levels
are more than adequate for our worst-case scenarios.
Financial statistics and key performance indicators
2010
Net Borrowings
Gearing
Gearing, incl share of JV debt
Average debt maturity
Interest cover
£315m
72%
94%
3.7 years
1.8x
2009
£319m
80%
106%
3.0 years
1.7x
Balance Sheet
Net assets
At the year end, net asset value per share was 218p, an increase of 18p
(9%). In common with other property companies, we also use the diluted
EPRA NAV measure of net assets which analysts also use in comparing
the relative performance of such companies. The adjustments required
to arrive at our adjusted net assets measure are shown in the following
table.
EPRA adjusted net assets per share were 234p at 30th November 2010,
an increase of 15p (7%) in the year.
18573 16/02/2011 PROOF 7
www.stmodwen.co.uk
19
Net assets (£m)
Net assets, beginning of year
Issue of new shares
Profit/(loss) after tax
Dividends paid
Other
Net assets, end of year
Deferred tax on capital allowances
and revaluations
Mark-to-market of interest rate swaps
Fair value of inventories
Diluted EPRA NAV — total
— per share
2010
401.0
—
38.3
(2.0)
(0.5)
436.8
9.4
16.7
5.3
468.2
234p
2009
402.2
101.6
(101.7)
—
(1.1)
401.0
18.0
19.3
438.3
219p
Investment properties
The total value of investment properties under our control, including
100% of joint ventures, increased by £66m during the year to £1,101m
(2009: £1,035m).
The independent valuations during the year-ended 30th November 2010
resulted in net revaluation gains, including our share of joint ventures,
of 3% (£29m), compared with the previous year-end. Our properties are
currently valued at the following weighted average yields:
Weighted average yields
Equivalent
Net initial
Retail
Office
Industrial
Total
2010
8.6%
9.0%
9.2%
9.0%
2009
9.9%
8.7%
9.4%
9.5%
2010
7.4%
7.1%
7.4%
7.4%
2009
8.4%
5.7%
8.4%
8.0%
Inventories
Inventories have reduced in the year from £193m to £173m, reflecting
the completion of the development programme started in previous years
(including £88m relating to Project MoDEL) and the effect of disposals
or transfers into investment properties of completed schemes. Assets
held in inventories principally comprise development projects that are on
site and under construction and have not been pre-sold, and other assets
that are held for resale at the period end.
Assets held in inventories are not included in the annual valuation,
but are assessed for impairment and net realisable value issues using
independent external advice where appropriate. As a result, we have
written down certain of our assets for resale and work in progress balances
to reflect their net realisable value in current market conditions. The total
provided in the year amounted to £6.1m in the Group and £0.3m in joint
ventures.
Pension scheme
Our defined benefit pension scheme continues to be fully funded on
an IAS19 basis. The next triennial valuation is due in 2011 but as the
scheme is closed to new entrants and closed to future accrual we do not
anticipate any significant increase in scheme contributions.
Financial Outlook
Our business is in a robust financial position. Active management of our
portfolio is enabling us to generate profits, our valuations are prudent
and our financial structure is solid. We are continuing to recycle our
portfolio and generate cash and this, together with the headroom in our
financial structure, enables us to continue to invest in opportunities that
offer the potential to create and enhance shareholder value.
Given the opportunities in the current markets this gives us a sound
platform for future growth.
Case Study
Commercial Land —
Hednesford, Cannock
In 2004 we were selected as preferred developer by Cannock
Chase District Council to redevelop two Town Centre sites in
Hednesford, totalling 13 acres.
The £50m retail-led scheme, known as Hednesford gateway, is set
to be one of the most significant projects in the town’s history and
comprises two phases known as Rugeley Road and Victoria Street.
Rugeley Road — an 8.8 acre site will be anchored by an 80,000
sq. ft. foodstore, with associated car parking alongside 38,000 sq.
ft. of non-food retail units and community facilities.
Victoria Street — a 4.6 acre site will be anchored by a 16,900
sq. ft. discount foodstore, with 7,500 sq. ft. of retail units and
an additional 5,650 sq. ft. of additional retail space within the
town centre. The town’s existing Bingo Club and Drill Hall will be
relocated to this site.
Progress to date includes securing planning permission for
Rugeley Road and we have already started to unlock the
development potential of this part of the site, having purchased
a factory from ATP Industries group which will be demolished in
2011. Construction works to the new 80,000 sq. ft. foodstore are
due to start in 2011.
Regarding Victoria Street, planning permission has already been
secured and we have commenced ground investigation works.
18573 16/02/2011 PROOF 7
20 St Modwen Properties PLC Annual Report 2010
18573 16/02/2011 PROOF 7
www.stmodwen.co.uk
Corporate Governance
21
Corporate Social Responsibility
Board Members and Senior Management
Corporate Governance Report
Directors’ Remuneration Report
22
28
31
38
18573 16/02/2011 PROOF 7
22 St. Modwen Properties PLC Annual Report 2010
Corporate Governance Corporate Social responsibility
INTRODUCTION
Regeneration goes beyond bricks and mortar; it is about breathing new
life into areas that need it the most and bringing about positive and
genuine changes to communities, the environment and the economy
alike. Therefore, we take Corporate Social Responsibility (“CSR”) very
seriously and ensure it forms an integral part of what we do.
Our CSR activities are grouped into three specific areas:
Waste management
Our principal aim when dealing with waste is to reduce our reliance on
landfill sites and ensure that we introduce effective waste management
systems across all sites built directly by us. For those projects delivered
by contractors and subcontractors on our behalf, we only employ
companies who comply with our strict criteria for dealing with waste
management.
WarWiCKSHire CoLLeGe
— Sustainability and the Environment
— Community and Economy
— Charities and Awards
SUSTAINABILITY AND THE ENVIRONMENT
Environmental initiatives
We are always looking at ways in which we can support or instigate
local initiatives that bring benefit to our sites and the surrounding
environment. Where possible, we seek to involve the local community in
these initiatives which not only helps to build understanding and trust in
our work but makes development more accessible.
CryMLyN BUrroWS, SoUTH WaLeS
The development of the new Warwickshire College and the access
road to this 82 acre site is a typical example of our approach to
waste management. Here, we instigated a rigorous process that led
to only 4% of the waste produced being sent to landfill.
To facilitate the process, we appointed one company who would
control the waste management for the entire site. All contractors
and subcontractors were instructed to use this company only.
Waste was segregated into six channels; inert matter, wood waste,
cardboard/paper, scrap metal, plastic and general waste and a total
of 10,000 m3 was produced, of which 96% was retained on-site and
re-used within the site for structural fill.
Sustainable buildings
We look for the most environmentally effective solutions for our occupiers
in terms of the whole life cost of a building and take several factors
into consideration. These range from the use of renewable materials,
employment of specific design standards and employing a highly skilled
team of sustainability advisors who ensure that we are always using the
most technically advanced and efficient sustainability techniques.
We welcome the introduction of the code for sustainable homes and
understand that beyond reducing carbon dioxide emissions, we need
to deliver buildings in a way that minimises their other environmental
impacts such as the water they use, the waste they generate and the
materials they are built from.
We also encourage innovative energy saving measures across all of
our sites which have broader positive implications for the surrounding
communities and regions as a whole.
At Crymlyn Burrows in South Wales, a Site of Special Scientific
Interest, and part of the 2,500 acre former BP Portfolio we acquired
in 2009, we joined marine biologists, Oakley International, local
school children and other community volunteers in a search for
shark, skate and ray egg cases along this important strip of Welsh
coastline. This work is crucial to the Shark Trust, facilitating vital
research into these elusive breeds of fish.
As part of the same initiative, a special beach clean-up to remove
litter from the beach and surrounding areas was carried out. This
followed publication of a Marine Conservation Society Beachwatch
Report claiming that rubbish found on 73 Welsh shorelines was up
by 21% on the previous year.
18573 16/02/2011 PROOF 7
www.stmodwen.co.uk
23
So far, the remediation efforts have restricted landfill consumption
significantly and almost 100% of all material generated during the pre-
development and remediation works has been retained on site for reuse.
With another 50 acres of site to prepare for development, this
sustainable remediation approach is being continued with the support of
both Wolverhampton City Council and the Environment Agency.
Remediation and reclamation
Remediation, or the preparation of land for development, is perhaps the
most important part of the regeneration cycle; allowing for disused sites
to be brought back to life and minimising development on greenfield
land.
Almost 100% of our building activity takes place on brownfield sites and
we adopt a thorough and ruthless approach to remediation which ensures
that the land is cleaned up extensively before any development occurs.
Similarly, across our entire portfolio, over 95% of all waste and materials
either reclaimed on-site or created due to demolition works are retained
and re-used as part of the development. This approach ensures we avoid
any unnecessary off-site disposal, reduce our reliance on landfill and
minimise the need for mining for new materials.
GooDyear SiTe, WoLverHaMPToN
Our regeneration of the 90 acre former Goodyear site in
Wolverhampton into an £80m mixed-use community is a classic
example of how we deal with remediation and reclamation on-site:
Prior to commencing any redevelopment works, we carried out
extensive environmental and geotechnical assessments of the site
which revealed the historic tyre manufacturing processes had resulted
in localised contamination to the ground and to the groundwater
beneath the site. A three acre on-site tip was also uncovered which
had been used to dispose of industrial waste.
Upon discovery of these elements, we immediately developed
a detailed remediation strategy and validation plan that was
subsequently agreed with Wolverhampton City Council and the
Environment Agency.
Phase 1 of the remediation works covered an initial 16 acres and
comprised slab/foundation removal, re-profiling earthworks, treatment
of hydrocarbon impacted soils and groundwater, processing and
treatment of asbestos contaminated soils and processing of buried
industrial waste materials for re-use within the site.
65,500 sqm of former factory slabs, yard areas and foundations were Approximately 30,000 tonnes of concrete was generated by
grubbed up and removed to enable the redevelopment of the
Phase 1 area to be initiated.
these works, this material was crushed to 6f1 and 6f2
specifications for roadway construction and reuse within the
build platform.
Relic sub-surface infrastructure comprising structures extending Approximately 35,000 tonnes of concrete was generated by
these works; this material was crushed to a 6f2 specification
to depths in excess of 6m below ground level were excavated
for reuse within the redevelopment.
and removed.
Oil contaminated soils resulting from historical site operations were Approximately 4,000 tonnes of soils treated by bio-remediation
delineated, excavated and treated on-site under license.
methods, this material was validated and integrated beneath
the build platform.
Re-profiling works across Phase 1 of the site comprised
the excavation, validation, laying and compaction of ‘site won’ soils.
Approximately 16,000 tonnes of soils was excavated,
environmentally and geotechnically classified and reused
to form the redevelopment profile.
1,259 tonnes of asbestos impacted soils were identified, excavated 760 tonnes of soils were recovered following processing and
and processed under strict environmental licensed control conditions.
integrated beneath the redevelopment footprint.
Former site tip contents were segregated, processed and validated Approximately 25,000 tonnes of material was recovered for
for reuse within the redevelopment.
reuse to achieve required formation levels within the
development.
Oil impacted perched water was removed from excavations and
relic sub-surface infrastructure.
1.2m litres of water was recovered during the works
and pre-treated prior to discharge to foul sewer.
Environmental monitoring and control measures were implemented In excess of 500 environmental samples were obtained during
throughout the works comprising the sampling of air, soils, recycled
materials and water.
the successful completion of the works.
18573 16/02/2011 PROOF 7
24 St. Modwen Properties PLC Annual Report 2010
Corporate Governance Corporate Social responsibility continued
Sustainability targets
We remain committed to reducing our carbon footprint. Until the Government has produced clear guidance on the future of the Carbon Reduction
Commitment Energy Scheme, we will continue to monitor and measure our Co2 emissions and investigate appropriate mitigation measures right
across our portfolio.
To ensure our commitment to sustainability is both real and evidenced, we have in place a series of sustainability targets and continue to demonstrate
improvement across the board every year.
Sustainability
2010 target
2010 achieved
Remediated materials re-used or recycled
Demolition products retained for retention on-site or recycling
Construction project waste re-used or recycled
Energy consumption better than required by building regulations*
Building projects with at least 10% of power from a renewable energy source
Schemes with water usage reduction technologies
Schemes with water recycling technology
91
91
60
n/a
8%
100
30
96
95
75
n/a**
17%
100
33
2009
99
94
75
100
33%
100
36
*
on speculative projects in excess of 50,000 sq. ft. for industrial buildings and 25,000 sq. ft. for offices
** no speculative projects have been constructed during 2010
Re-using and preserving buildings
Recycling buildings reduces the environmental impact of development and
therefore we only demolish those that no longer add any value to a specific
site.
In particular, it is our duty to retain any buildings with historical
significance or that play an important part in a site or area’s heritage.
Similarly, with our larger sites, we try to use land that is not currently
under development for other uses such as car parking, car storage and
hosting any community events.
BeNTLey Priory
St. Modwen, as part of its VSM Estates joint venture, has sup-
ported the preservation of Bentley Priory, famous for its pivotal role
as Fighter Command Headquarters during the Battle of Britain in
World War Two.
VSM Estates was granted detailed planning and listed building
consent by Harrow Council in 2008 for its sensitive redevelopment.
The site has now been sold to Barratt Homes, who will build the
majority of new homes at the site, together with City & Country who
will develop the new homes and museum within the Priory building.
As part of this development, St. Modwen agreed that circa £9.5m
would be made available to create, maintain and run the Battle of
Britain Museum in the Grade II* listed mansion house. The museum
will educate future generations about the unique heritage and
significance of Bentley Priory to the nation and allow its historic
rooms to be open to the public for the first time in 80 years. The
museum will also pay respect to the bravery and sacrifice of RAF
pilots and ground staff who helped turn the tide against Nazi
Germany during World War Two.
18573 16/02/2011 PROOF 7
www.stmodwen.co.uk
25
COMMUNITY AND ECONOMY
Initiatives
Whether it is supporting a crime awareness day at a London shopping
centre or donating money to a local nature reserve in Yorkshire, we make
sure that all of the initiatives in which we get involved create real value
for the community and make development more accessible.
WarWiCKSHire CoLLeGe, rUGBy
Public realm
We know from experience that a little extra attention to detail can make
all the difference to a new development. Placing special focus on public
realm goes a long way in making the communities we build a more
pleasant place to live, work and relax. Whether supporting a specially
commissioned work of art in Manchester, sponsoring a tree planting
exercise in South Wales or sponsoring a photography competition in
Edmonton Green, through public realm we seek to instill a special sense
of pride in the area.
CoNNaH’S QUay, FLiNTSHire
We recently completed the development of a 52,000 sq. ft.
Morrison’s supermarket at our £15m Quay Shopping Centre scheme
in Connah’s Quay, Flintshire. To celebrate the new face of Connah’s
Quay, we donated £20,000 towards the creation of a piece of public
art.
Local councillors and school children sat on an art panel that
eventually commissioned a sculpture made of old shopping trolleys.
Known as ‘Spirit of the Quay’, the sculpture acknowledges the
town’s long association with its steel works whilst also pointing
towards the development of the new shopping centre.
To make way for the new £30m Warwickshire College at our site
in Rugby, we were required to move an existing War Memorial to
another part of the site. Acutely aware of the sensitive nature of this
work, we ensured the Ex-Servicemen’s Association was involved in
this process from the very start.
To symbolise the relocation of the memorial, it was agreed that on
Remembrance Day a ceremony would be held and a time capsule,
created by local school children, would be buried beneath the
memorial alongside an existing time capsule dating back to just
after World War One. In doing so, young and old were united in
celebrating the lives of ex-servicemen on this very important day.
18573 16/02/2011 PROOF 7
26 St. Modwen Properties PLC Annual Report 2010
Corporate Governance Corporate Social responsibility continued
Social Inclusion and job creation
Our regeneration projects and development activities breathe new life
into neglected communities and transform disused brownfield sites into
green and pleasant places to live and work. This makes us a key driver
of regional economic growth and means that we play a major role in
creating thousands of job opportunities for people across the UK.
CHARITY AND AWARDS
Across the UK, our network of regional offices support a broad range
of local and national charities and this year we have raised tens of
thousands of pounds towards many worthy causes.
Lands end to John o’Groats sponsored cycle ride
HrH The Prince of Wales at Coed Darcy in 2010
We seek to employ local contractors to carry out works across
our projects and use sustainable building techniques wherever
possible to ensure that our sites are at the forefront of sustainable
development. For example, at Coed Darcy in South Wales, we
are working closely with The Prince’s Foundation for the Built
Environment to ensure that local skills and local materials are being
used when developing the site. In June 2010 HRH The Prince of
Wales visited Coed Darcy and met with many local tradesmen who
were showcasing their skills at a specially organised event. The
Prince was then taken on a tour of the developed areas of the site to
see sustainable development in practice.
We also seek to promote the growth of new businesses through the
development of our innovation centres which are designed to encourage
SMEs, growing businesses and specific sectors, in various areas across
the UK. Each centre provides an environment where these businesses
can evolve and develop. They provide flexible leases and a full range of
ready made business services.
We are rolling out a series of these centres as part of our national
regeneration programme and work closely with Local Authorities in each
area to ensure that they are in line with local demand. We have already
built three — in Cranfield, Longbridge and Blackburn — where over 200
businesses are now working and flourishing. Further centres are planned
in Exeter and Weston-super-Mare.
Community consultation
With the Localism Bill featuring high on the Government’s agenda,
it is our responsibility to ensure that we seek to engage with local
communities on as many levels as possible so that they have a real
stake in our developments. Community consultation will therefore grow
in importance as a means for us to hear the views of local residents,
businesses and politicians.
Perhaps the most high profile charity event was a sponsored cycle
ride from Lands End to John O’Groats. The team, comprising
Regional Director Mike Herbert, Senior Development Surveyor Mike
Murray and development surveyors Jonathan Green and Andrew Cox,
completed the task in just ten days and raised, with the help of St.
Modwen, over £25,000 for the challenge’s four nominated charities
— The Donna Louise Children’s Hospice Trust; Breast Cancer
Campaign; The British Heart Foundation and the James Whale Fund
for Kidney Cancer.
St. Modwen Environmental Trust
Our other charity work includes the St. Modwen Environmental Trust.
Now in its fourth year, the Trust continues to provide valuable support to
community and environmental projects across the UK.
Affiliated to the Government’s Landfill Tax Credit Scheme and regulated
by ENTRUST, the Environmental Trust seeks to support projects where
alternative funding is unlikely to be available, targeting not-for-profit
organisations such as community groups and charities.
In 2010 we have committed £200,000 to 15 projects across the UK and
an example of these projects is situated in close proximity to our £100m
Town Centre regeneration project in Wythenshawe, Manchester where we
donated £10,000 to the clean up of Park Wood. This is a cause which
was also sponsored by Greening Greater Manchester and Manchester
City Council’s Working Neighbourhood Fund. Our grant helped to pay for
the restoration of the pathways which criss-crossed the wood, signage,
clearing of litter and safety improvements around the wood’s panels.
The proceeds also included regular litter picking events which attracted
around 70 local residents each time and the creation of two carved
wooden sculptures.
Councillor Richard Cowell, Executive Member of the Environment at
Manchester City Council said: ‘This project is part of the Council’s
regeneration work at Wythenshawe and means that an area of natural
beauty is litter-free and has been preserved so that it can be enjoyed
long-term by residents and visitors’.
18573 16/02/2011 PROOF 7
www.stmodwen.co.uk
27
Awards
Our track record as the UK’s leading regeneration specialist, continues to
be recognised by the number of awards we have secured in 2010:
The 2010 Chartered Institute of Architectural Technologists’ National
Awards – Highly Commended
The £30m Vodafone Contact Centre in Stoke-on-Trent which St.
Modwen’s North Staffordshire team completed in early 2010 was
recognised for technical excellence in these national awards.
Midlands Insider Awards 2010 – Developer of the Year
Having completed another very active year, the judges felt that this
prestigious title should be awarded to St. Modwen’s Midlands team.
Specifically, progress at the £1 billion Longbridge regeneration scheme
and the completion of the £30m Warwickshire College in Rugby were
acknowledged.
South West Insider Awards 2010 – Commercial Developer of the Year
St. Modwen’s South West team was shortlisted for this important award
in recognition of its development activities across the region, amongst
which includes the £150m Access 18 scheme in Avonmouth, the
£120m regeneration of Skypark in Exeter and the £210m regeneration of
Firepool in Taunton.
ISO14001
This international standard was awarded to The Meads Shopping
Centre in Farnborough and demonstrates St. Modwen’s commitment to
environmental best practice in recycling, energy, waste and water use.
The accreditation requires a monthly check on all environmental aspects
of shopping centre operations and states that all suppliers must source
goods ethically.
RHS Tatton Park Show 2010 — Silver Award
The ‘Sound Garden’ from The Trentham Estate and Gardens was
awarded a silver medal at this year’s Tatton Show, organised by the
Royal Horticultural Society. This interactive, sensory garden, designed by
Clive Mollart, was one of the few show gardens to receive one of the top
awards.
The European Garden Heritage Network 2010 — European Award for
Garden Restoration
In recognition of its transformation into one of the finest gardens in the
British Isles, The Trentham Estate achieved this prestigious award in the
category of ‘exceptional achievements in garden culture’. The European
Garden Heritage Network is led by The Centre for Garden Art and
Landscape Design in Germany, and is supported by a number of local,
regional and national organisations.
North West Property awards 2010 — inaugural Strategic alliance award
The Strategic Alliance Award was established in 2010 to recognise
the importance of partnership working at a time when finance is hard
to come by.
The judges presented St. Modwen and its partner Halton Borough
Council with this award in recognition of over a decade’s worth of
regeneration to Widnes Town Centre.
Organisers of the event referred to the project as a shining example
of the value of partnership working, delivering employment, leisure
and laying foundations for further growth.
The award coincided with our announcement that in 2011, we
would be commencing the development of Venture Fields; the £10m
leisure scheme on the edge of Widnes and the final piece of the
jigsaw for the Town Centre’s regeneration. The scheme is already
over 95% pre-let.
In the last ten years, Widnes Regeneration Ltd has completely
transformed and revitalised the Town Centre, leading to substantial
new investment in adjoining areas:
— 40,000 sq. ft. of local shopping;
— 80,000 sq. ft. foodstore;
— 50,000 sq. ft. retail and leisure development;
— 76 social housing units;
— 150 private homes;
— 150,000 sq. ft. of employment space;
— The creation of over 900 jobs.
18573 16/02/2011 PROOF 7
28 St. Modwen Properties PLC Annual Report 2010
Corporate Governance Board Members
01
04
02
05
03
06
01 aNTHoNy GLoSSoP MA†
NON-ExECUtivE ChAiRMAN
A director since 1976 and Chief Executive from 1982 to 2004.
Executive Chairman from 2004 to 2008, and non-executive Chairman
since February 2008. He is also a non-executive director of Robinson
PLC., and a member of the Regeneration and Development Committee
of the British Property Federation.
02 BiLL SHaNNoN
NON-ExECUtivE ChAiRMAN (designate)
Appointed as a non-executive director and Chairman Designate in
October 2010 and will become Chairman following the company’s AGM
in March 2011. He is Chairman of AEGON plc and a non-executive
director of Johnson Service Group plc and Rank Group plc. Previously
he was non-executive director of Barratt Developments plc, Matalan plc
and an executive director of Whitbread plc.
03 BiLL oLiver BSc, FCA
ChiEF ExECUtivE
Joined the Company as Finance Director in 2000. Appointed Managing
Director in 2003 and Chief Executive in 2004. He has over 30 years’
experience within the housebuilding and property sectors.
04 iaN MeNZieS-GoW MA*†
A non-executive director appointed in 2002. Senior Independent
Director since February 2009. Formerly Chairman of Geest PLC and
Derbyshire Building Society and prior to that held senior executive
positions within the Hanson Group.
05 DaviD GarMaN BA FCiLt*†
A non-executive director appointed in April 2010. Formerly Chief
Executive of TDG plc and the Allied Bakeries subsidiary of Associated
British Foods plc. Currently Senior Independent Director of Carillion plc
and a non-executive director of Phoenix IT Group plc.
06 MiCHaeL DUNN BSc, FCA
GROUP FiNANCE DiRECtOR
Joined the Company in December 2010. Michael joined St. Modwen
from May Gurney Integrated Services plc, the AIM listed infrastructure
support services business, where he spent five years as Group Finance
Director. A chartered accountant, Michael was Finance Director of
Carillion Building and Carillion Private Finance prior to joining May
Gurney.
18573 16/02/2011 PROOF 7
www.stmodwen.co.uk
29
07
10
08
11
09
12
07 STeve BUrKe
CONStRUCtiON DiRECtOR
Joined the Company as Construction Director in 1995 and appointed
to the main Board as a director in November 2006. Previously
contracts director and construction manager with a number of
national contracting companies (including Balfour Beatty and
Clarke Construction).
10 LeSLey JaMeS CBE, MA, CCiPD *†
A non-executive director appointed in October 2009. Chairman of the
Remuneration Committee. Formerly HR Director of Tesco PLC and
a non-executive director of Queens Moat Houses plc; Care UK plc;
Alpha Airports Group plc; Inspicio plc; Liberty International plc; and
Selfridges plc. Currently a non-executive director of Anchor Trust and
the West Bromwich Building Society.
08 SiMoN CLarKe *†
A non-executive director appointed in 2004. Chairman of private
company, Dunstall Holdings Ltd. Previously Deputy Chairman of
Northern Racing PLC and a director and the Vice-Chairman of the
Racecourse Association.
11 JoHN SaLMoN FCA*†
A non-executive director appointed in 2005. Chairman of the Audit
Committee. Formerly a partner of PricewaterhouseCoopers LLP, and
a member and former Deputy Chairman of their supervisory board.
Currently a trustee and council member of the British Heart Foundation.
09 LaDy KaTHeriNe iNNeS Ker MA, DPhil*†
A non-executive director appointed in October 2009. Formerly a
non-executive director of The Television Corporation PLC, Fibernet
Group plc, Williams Lea PLC, Gyrus Group PLC, Shed Media PLC,
Bryant Group plc, Ordnance Survey, ITVDigital plc, Oakley Capital
Limited, Marine Farms ASA and Taylor Wimpey PLC. Currently Senior
Independent Director of Tribal Group plc and a non-executive director of
Go-Ahead Group plc.
12 reeTa SToKeS ACiS
COMPANy SECREtARy
Joined the Company in November 2009. Previously a senior manager
in the secretariat of Alliance & Leicester plc, and ran her own practice
providing company secretarial services to public and private companies.
Prior to that, was Deputy Company Secretary of McKechnie plc.
* member of Audit and Remuneration Committees
† member of the Nomination Committee
18573 16/02/2011 PROOF 7
30 St. Modwen Properties PLC Annual Report 2010
Corporate Governance regional Directors
03
06
02
01
05
04
07 08
01 JoHN DoDDS BSc, FRiCS
REGiONAL DiRECtOR — MiDLANDS
02 GUy GUSTerSoN BSc, MBA
RESiDENtiAL DiRECtOR
06 TiM SeDDoN BSc, MRiCS
REGiONAL DiRECtOR — LONDON & SOUth EASt
07 MiCHeLLe TayLor BSc, MRiCS
REGiONAL DiRECtOR — NORth WESt
03 MiKe HerBerT
REGiONAL DiRECtOR — NORth StAFFORDShiRE
08 rUPerT WooD BSc, MRiCS
REGiONAL DiRECtOR — NORthERN hOME COUNtiES
04 rUPerT JoSeLaND BSc, MRiCS
REGiONAL DiRECtOR — SOUth WESt & SOUth WALES
05 STePHeN ProSSer BSc, MRiCS
REGiONAL DiRECtOR — yORKShiRE & NORth EASt
18573 16/02/2011 PROOF 7
www.stmodwen.co.uk
Corporate Governance Corporate Governance report
31
The Board is committed to maintaining high standards of corporate
governance within the Company. Throughout the year ended
30th November 2010, the Company has complied with Section 1
of the Combined Code on Corporate Governance issued in 2008
(the ‘Code’) except in relation to the following matters:
• The Code asks the Board to identify each non-executive director it
considers to be independent. Of the eight non-executive directors at
the end of 2010, the Board considers Bill Shannon, Ian Menzies-
Gow, David Garman, Lesley James, Katherine Innes Ker, and John
Salmon to be fully independent. The Board recognises that Simon
Clarke does not meet the criteria for a fully independent director
under the Code, although his position as a representative of the
Clarke and Leavesley families who together hold 49.1m shares
(24.52%) in the Company’s issued share capital, gives him a very
strong interest in challenging and scrutinising management to secure
excellent performance from the Company.
• The Code recommends that all members of the Audit and
Remuneration Committees are independent non-executive directors.
Each of these Committees comprises all of the non-executive
members of the Board. As explained above, Simon Clarke is not a
fully independent director under the Code, but the Board considers
that its discussions benefit from his involvement in the preparatory
detailed scrutiny which takes place in these Committees. As also
noted above, Simon Clarke has a strong interest in challenging and
monitoring management’s performance.
• The Code recommends that a chief executive should not go on to be
the Chairman of the same company. As explained in previous years’
annual reports, the Board recommended the appointment of former
Chief Executive, Anthony Glossop, as Chairman of the Board in 2004
which was endorsed by shareholders at the Annual General Meeting
that same year. As of 11th February 2008 Anthony Glossop became
non-executive Chairman. He will be retiring after the Company’s
Annual General Meeting on 22nd March 2011. Bill Shannon, who
was deemed to be independent on appointment, will take over
as Chairman. The roles of the Chairman and Chief Executive are
carefully differentiated.
BOARD OF DIRECTORS AND COMMITTEES
The Board operates within the terms of its written authorities, which
include a schedule of matters reserved for the approval of the Board.
The Board currently consists of the non-executive Chairman, three
executive directors and seven non-executive directors. The composition
of the Board provides an appropriate blend of experience and
qualifications, and the number of non-executives provides a strong base
for ensuring appropriate corporate governance of the Company. The
Board’s decisions are implemented by the executive directors.
The Board met 11 times during the year and the Chairman and the
non-executive directors also met without the executive directors being
present. The programme of Board meetings is tailored to enable some
meetings to be held at the Company’s properties. In advance of each
meeting, each director receives a Board pack containing comprehensive
briefing papers. Presentations on business and operational issues are
made regularly to the Board by senior management. The non-executive
directors are encouraged to communicate directly with the executive
directors between formal Board meetings and in addition to these
regular Board meetings, the Board holds an annual strategy meeting at
which it discusses the future direction of the Company as part of the
business planning process.
Ian Menzies-Gow is the Senior Independent Director. He is available for
consultation by shareholders, whenever appropriate. He will be retiring
after the Company’s Annual General Meeting on 22nd March 2011. David
Garman will be appointed the Senior Independent Director on that date.
The Company’s Articles of Association provide that all directors are
subject to re-election at least every three years. In addition, all directors
are subject to re-election by shareholders after their initial appointment.
The reappointment of non-executive directors is not automatic. It is
intended that appointments will be for an initial term of three years,
which may be extended by mutual agreement. Prior to each non-
executive director offering himself to the members for re-election his
reappointment must be confirmed by the Chairman (or the Senior
Independent Director in relation to the Chairman) in consultation with
the remainder of the Board.
The Board is supplied with timely and relevant information regarding
the business, through regular monthly and ad hoc reports, site visits
and presentations from members of the management team and
by meetings with key partners. Where appropriate, the Company
provides the resources to enable directors to update and upgrade their
knowledge. Through the Company Secretary, the Board is informed of
corporate governance issues and all Board members have access via the
Company Secretary to independent advice if required.
The criteria used for evaluating individual executive directors’
performance are included in the Directors’ Remuneration Report.
Individual non-executive directors’ performance is reviewed by the
Chairman and Chief Executive. The performance of the Board as a
whole is assessed in the context of the Company’s achievement of its
strategic objectives and total shareholder return targets. Feedback on
the Company is sought through external surveys from shareholders,
analysts and other professionals within the investment community
following regular briefings, presentations and site visits undertaken by
the Company. This feedback is made available to the whole Board.
In support of the principles of good corporate governance, the Board
has appointed the following Committees, all of which have formal terms
of reference which are available for inspection by shareholders and are
posted on the Company’s website, www.stmodwen.co.uk:
a) Audit Committee
The Audit Committee currently comprises all of the non-executive
directors. The Committee is chaired by John Salmon, who as a former
partner of PricewaterhouseCoopers LLP, is considered by the Board to
have the required recent and relevant experience.
The Company’s Finance Director, Financial Controller and Internal
Auditor attend Audit Committee meetings but the Committee also
meets without management being present and has private sessions
with the auditors. The Committee has direct access to the internal and
external auditors.
The Audit Committee’s functions include:
• Ensuring that appropriate accounting systems and financial controls
are in operation and that the Group’s financial statements comply
with statutory and other requirements.
• Receiving reports from, and consulting with, the internal and external
auditors.
• Reviewing the interim and annual results and reports to shareholders,
and considering any matters raised by the internal and external auditors.
• Considering the appropriateness of the accounting policies of the
Group used in preparing its financial statements.
• Monitoring the integrity of the financial statements of the Group and
formal announcements relating to the Group’s financial performance,
and reviewing significant financial reporting judgements contained
therein.
18573 16/02/2011 PROOF 7
32 St. Modwen Properties PLC Annual Report 2010
Corporate Governance Corporate Governance report continued
• Reviewing the effectiveness of the Group’s internal audit function.
• Reviewing and monitoring the independence and objectivity of the
Group’s external auditors.
• Monitoring the scope, cost effectiveness and objectivity of the audit.
• Monitoring the Group’s policy on non-audit services provided by the
b) Nomination Committee
The Nomination Committee comprises Anthony Glossop (as chairman
of the Committee), Ian Menzies-Gow, John Salmon, Lesley James and
Katherine Innes Ker together with David Garman and Bill Shannon who
joined on 19th April and 1st November 2010 respectively. Paul Rigg
resigned on 26th March 2010.
external auditors.
The Committee is responsible for:
• Making an annual assessment of the external auditors and
recommending, or not, their reappointment.
• Reviewing “whistle-blowing”arrangements within the Company.
• Reviewing its own performance, constitution and terms of reference to
ensure it is operating at maximum effectiveness and recommending
any changes it considers necessary to the Board for approval.
During the year, the Committee was assisted in the performance of
these duties by the Company’s internal auditor, tasked with auditing the
documented internal control procedures and ensuring compliance.
The Committee’s policy on the provision of non-audit services by the
external auditors is that, whilst it is appropriate and cost effective for the
external auditors to provide tax compliance and tax planning services to the
Group, other services should only be provided where alternative providers
do not exist or where it is cost effective or in the Group’s interest for the
external auditors to provide such services. In all cases the provision of non-
audit services is carefully monitored by, and subject to the prior approval
of, the Committee. The external auditors would not be invited to provide
any non-audit services where it was felt that this could conflict with their
independence or objectivity. Such services would include the provision of
internal audit and management consulting services.
• Evaluating the balance of skills, knowledge and experience on the
Board and the structure, size and composition of the Board and its
Committees.
• Annually reviewing the performance of non-executive directors and
Board Committees.
• Recommending and reviewing new appointments to the Board as they
become due.
• Reviewing and approving Board and Committee succession.
During the year external consultants Zygos Partnerships were engaged
to assist in a search for two new non-executive directors to replace
the Chairman and Senior Independent Director. Following a rigorous
assessment process, the Committee recommended the appointments
of Bill Shannon and David Garman to the Board and they were duly
appointed. The Committee also endorsed the appointment during the
year of Michael Dunn as Group Finance Director and he was appointed
on 1st December 2010.
c) Remuneration Committee
The composition and functions of the Remuneration Committee are set
out in the Directors’ Remuneration Report on page 38.
BOARD AND COMMITTEE ATTENDANCE
The attendance at Board or Committee meetings during the year to 30th November 2010, was as follows:
Audit Remuneration Nominations
Committee
Committee
Committee
—
—
3*
—
3
3
3
3
1
3
2
1
3
4*
—
—
4*
4
4
4
4
1
4
2
—
4
2
—
—
1*
2
2
2
2
1
2
1
—
2
C.C.A. Glossop
S.J. Burke
T.P. Haywood (resigned 26.11.10)
W.A. Oliver
S.W. Clarke
L. James
K. Innes Ker
R.I. Menzies-Gow
D.P. Rigg (resigned 26.3.10)
J.H. Salmon
D. Garman (appointed 19.4.10)
W.M.F.C. Shannon (appointed 1.11.10)
No. of meetings during the year
* In attendance, but not a member of the committee.
Board
11
10
11
11
11
10
10
11
4
10
7
1
11
18573 16/02/2011 PROOF 7
www.stmodwen.co.uk
33
BOARD EFFECTIVENESS
The Code recommends that the Board undertake a formal and rigorous
annual evaluation of its own performance. A formal evaluation,
facilitated by an external assessor, Dr Tracy Long of Boardroom Review,
was undertaken during 2008-09. The principal findings of the review
were that although there had been a significant improvement in risk
management, communication with shareholders and stakeholders
and a shared sense of vision, areas that required further review were
succession planning and clarity of Board agenda and papers.
During 2009-10 a number of changes were made to the composition
of the Board, including the appointment of Chairman Designate and
Senior Independent Director Designate and the Group Finance Director
was replaced on 1st December 2010.
Evaluations of the Board process continue to be carried out by the
Chairman Designate and Company Secretary and it is intended that the
next Board evaluation which is due later in 2011, will be undertaken
externally.
RISK MANAgEMENT AND INTERNAL CONTROL
The Board recognises that it has overall responsibility for the
identification and mitigation of risks and the development and
maintenance of an appropriate system of internal control.
During the period under review the directors have reviewed:
• the effectiveness of the system of internal control in accordance with
the Turnbull guidance, through the production of a detailed report
which covered the Group’s control environment;
• the manner in which key business risks are identified;
The Group’s key internal controls are centred on comprehensive monthly
reporting from all activities which includes a detailed portfolio analysis,
development progress reviews, management accounts and a comparison
of committed expenditure against available facilities. These matters are
reported to the Board monthly, with reasons for any significant variances
from budget. Detailed annual budgets are reviewed by the Board and
revised forecasts for the year are prepared on a regular basis.
The Group has put in place its own internal audit function. Internal
audit work is focused on the controls that mitigate the principal risks
faced by the Group. The internal audit reports are prepared for the
executive management and the findings are reported to the Group’s
Audit Committee.
There are clearly defined procedures for the authorisation of capital
expenditure, purchases and sales of development and investment
properties, contracts and commitments and a formal schedule of
matters, including major investment and development decisions and
strategic matters, that are reserved for Board approval. Formal policies
and procedures are in place covering all elements of employment, the
construction process, health and safety and IT.
Internal control, by its nature, provides only reasonable and not absolute
assurance against material misstatement or loss. The directors continue,
however, to strive to ensure that internal control and risk management
are further embedded into the operations of the business by dealing with
areas for improvement as they are identified. In the year under review, no
material loss was suffered by a failure of internal control.
The analysis of the business’s key risks was also reviewed and redefined
in the light of current experience.
• the adequacy of information systems and control procedures; and
The Company’s policies with respect to its:
• the manner in which any required corrective action is to be taken.
a) financial risk management objectives and policies, including the
policy for hedging each major type of forecasted transaction for which
hedge accounting is used; and
b) exposure to price risk, credit risk, liquidity risk and cashflow risk,
are contained in Note 16 to the accounts.
18573 16/02/2011 PROOF 7
34 St. Modwen Properties PLC Annual Report 2010
Corporate Governance Corporate Governance report continued
Risks and Uncertainties
St. Modwen recognises that the identification, assessment, monitoring and response to business risks is essential to the delivery of the Group’s
objectives. St. Modwen has policies and procedures in place that are designed to enable the business to manage and mitigate its corporate,
operational and financial risks. This is reinforced by a management structure that seeks to reduce risks in the business.
Risk Area
Description of Risk
Risk Mitigation
Assessment
Economic and Property
Lack of demand for space from
occupiers or land from housebuilders
restricts business development.
Regional spread and portfolio
diversity mitigates sector or location
specific risks.
Financial
Declining rental yields reduce
profitability and cash flow.
Reduced availability of well funded
property purchasers reduces profits
and restricts cash flow.
Market investment yield movements
reduce profitability and affect
property portfolio valuations.
Active portfolio management
achieves a better than market
utilisation of assets.
Professionally conducted and
conservative property valuations.
Funding constraints restrict growth
and development of the business.
Unforeseen significant changes to
cash flow requirements limit the
ability of the business to meet its
ongoing commitments.
Interest rate changes cause
unforeseen financial loss.
Recurring income from rental
provides funding for ongoing
overhead and interest costs.
Regular and detailed cash flow
forecasting enables monitoring of
performance and management of
future cash flows. Headroom is
maintained in high quality banking
facilities.
Business Organisation
and People
Shortage of skilled and experienced
people.
Poor succession planning.
IT failure prevents business
operation.
Failure to Secure
Appropriate Schemes
Poor market intelligence on
schemes or competitors prevents
successful bids or causes the
selection of inappropriate
schemes.
Lack of availability of finance
limits potential scheme
development.
Inaccurate reputation with
clients reduces ability to secure
schemes.
Performance against budget is
assessed monthly.
Hedging policy contains interest
rate risk.
Targeted recruitment with
competitive, performance driven
remuneration packages.
Succession planning reviewed at
Board level.
Dedicated IT team monitor
performance of all information
systems.
Regional offices in touch with
their local market.
Dedicated central resource to
support regional teams.
Flexible and innovative approach
to acquisitions and schemes
in order to adapt as market
conditions change.
Financial headroom maintained to
provide flexibility.
Projects, acquisitions and
disposals are reviewed (and
financially appraised) within
clearly defined authority limits.
Business wide PR programme in
place.
We have chosen to operate only
in one geographical area, the UK,
which is subject to relatively low-
risk, low-returns from a stable and
mature, albeit cyclical economy and
property market. By involvement
with all sectors of that economy
and that property market, we are
as diversified as possible, without
venturing overseas.
Our cautious approach to forward
commitments, speculative
development and asset disposals
has enabled us to optimise
operational cash flows, and to
offset the impact of fluctuating
market conditions. Furthermore,
we have once again recorded
a trading profit in the year,
demonstrating our ability to
succeed in varying markets.
Our banking facilities have been
extended, our gearing reduced and
interest rate risk hedged.
Vacancies are few, and are
generally filled promptly, indicating
the attractiveness of the Company
and remuneration packages. To
support the long-term financial
objectives, we will need to continue
to improve the skills of our
employees.
With improving economic
conditions, pension contributions,
payment of bonuses and modest
salary increases have been
reintroduced.
The excellent reputation and
restored financial capacity of
the Company have enabled us to
win a number of schemes and
to grow the hopper to record
levels, even in the current
financially-constrained climate.
We anticipate that the number
of opportunities will increase
as vendor expectations become
more realistic and lenders begin
to address the issues in their
loan books. In this environment,
with a reduced number of active
competitors, we expect to be able
to continue to source attractive
acquisitions.
18573 16/02/2011 PROOF 7
www.stmodwen.co.uk
Risk Area
Construction
Reputational
Regulatory
Social, Ethical and
Environmental
Description of Risk
Risk Mitigation
Assessment
35
Financial or reputational damage
from inappropriate quality or
timeliness.
Inaccurate initial project
assessments of contamination,
development cost or contractor
status prevent effective delivery
causing financial loss.
Strong internal construction
management team.
Use and close supervision of
a preferred supply chain of
high quality trusted suppliers
and professionals, including
assessment of their financial
viability.
Lack of trusted contractor and
sub-contractor resources available
for increased post-recession
activity.
Clearly defined formal tender
process that evaluates qualitative
and quantitative factors in bid
assessment.
Proven experience of completing
schemes successfully despite
contractor failure.
Difficulty in securing appropriate
partnerships and schemes if
reputation with influential third
parties negatively affected.
Investor perception damaged.
Monthly review of performance
to identify if senior management
intervention is required.
Regular feedback obtained from
clients, advisers and investors.
Recruitment and retention of key
staff impacted.
Planning regime changes
limit ability to secure viable
permissions.
Lack of compliance with complex
tax regulations causes financial
loss.
Use of high quality professional
advisers.
Compliance training programmes
in place.
Programme of regular high level
meetings with influential public
bodies.
Serious injury or death of an
employee, a client or a member of
the public.
Environmental pollution leading
to financial penalties or loss of
reputation.
Inappropriate ethical or business
behaviour causing legal risks or
loss of reputation.
Performance indicators are
reviewed monthly.
Defined business processes
and authority levels to manage
transactions.
Any issues dealt with openly and
promptly.
The Company is willing to accept
a degree of environmental/
contamination risk, enabling
higher returns to be made for the
perceived higher risks undertaken.
These risks are passed on or
minimised where possible, but
cannot be eliminated. In our
recent experience, the residual
risks have been acceptably low.
In current markets there is an
increased risk of contractor
failure. Our panel of contractors
is assessed for stability and
suitability but is not immune
to wider economic risks. Using
a sufficiently broad mix of
contractors, for whom our work is
important, mitigates the impact of
a single failure.
The Company enjoys an excellent
reputation with its stakeholders
(including investors, business
partners and employees). This
is based on, and reinforced by,
a strong set of principles and
consistent delivery of promises.
The very nature of our business,
however, means that there will
always be an element of local
controversy, thus exposing us to
reputational damage.
Our daily exposure to all aspects
of the planning process, and
internal procedures for spreading
best practice ensure we remain
abreast of most developments.
We have become more active
in attempting to influence
public policy debate, although
meaningful and beneficial changes
are very difficult to bring about,
notwithstanding the formalities of
extensive public consultation.
We continue to remain vigilant on
health and safety issues. The initial
assessment of environmental costs
(and the subsequent optimising
of remediation solutions) is an
integral part of our acquisition
and post-acquisition procedures.
We seek to minimise or pass on
any such environmental risks,
and believe that the residual risk
in this respect is acceptably low.
In other social and ethical areas,
the Company has benefited from
the underpinning of a simple
but rigorous set of operating
commitments.
18573 16/02/2011 PROOF 7
36 St. Modwen Properties PLC Annual Report 2010
Corporate Governance Corporate Governance report continued
PRINCIPAL ACTIVITIES
The Company acts as the holding company of a group of property
investment and development companies. A list of the subsidiary and
associated undertakings affecting the profit or net assets of the Group
are included in Note F to the Company Financial Statements.
BUSINESS REVIEW
The Company is required by the Companies Act 2006 to include a
business review in this report. This information can be found on pages
08 to 19, which is incorporated in this report by reference.
DIVIDENDS
The directors recommend a final dividend of 2p per ordinary share to be
paid on 4th April 2011 to ordinary shareholders on the register on 11th
March 2011 which, together with the interim dividend of 1p paid on
6th September 2010, makes a total of 3p for the year (2009: nil).
DIRECTORS’ INTERESTS IN ORDINARY SHARES
The interests of the directors in the issued share capital of the
Company, are shown below:
30th November 30th November
2009
2010
Beneficial
S.J. Burke
S.W. Clarke
C.C.A. Glossop
T.P. Haywood (resigned on 26.11.10)
L. James
R.I. Menzies-Gow
W.A. Oliver
D.P. Rigg (retired on 26.3.10)
J.H. Salmon
D. Garman (appointed 19.4.10)
W.M.F.C. Shannon (appointed on 1.11.10)
Non-beneficial
C.C.A. Glossop
174,643
6,112,657
1,708,792
—
10,000
14,814
391,093
—
25,000
10,000
40,000
112,123
7,122,657
1,757,292
155,324
10,000
14,814
314,157
2,812
18,000
—
—
180,000
180,000
Mr. M. E. Dunn who was appointed as Group Finance Director on
1st December 2010, held 30,000 shares on 30th November 2010.
The above interests do not include shares held under the share option
schemes described in the Directors’ Remuneration Report on pages
39 to 41.
There has been no change in these beneficial interests between
30th November 2010 and the date of this report.
SUBSTANTIAL INTERESTS
As at 4th February 2011 the Company had been notified of the
following interests in more than 3% of its issued share capital:
Shareholder
Number of Percentage of
Ordinary
Share Capital
Ordinary
Shares Held
18,543,382
J.D. Leavesley and connected parties
Lady Clarke and family holdings
24,462,539
(excluding S.W. Clarke)
14,429,368
Aberforth Partners
Co-operative Asset Management
9,640,359
Morgan Stanley Investment Management 9,533,648
9,515,186
Kempen Capital Management
7,520,923
BlackRock
7,269,244
CBRE Global Real Estate Securities
AXA Investment Managers
7,182,457
Legal & General Investment Management 6,488,153
9.25%
12.21%
7.20%
4.81%
4.76%
4.75%
3.75%
3.63%
3.58%
3.24%
REAPPOINTMENT OF DIRECTORS
The directors listed on pages 28 to 29 constituted the Board during
the year. David Garman and Bill Shannon, having been appointed since
the last Annual General Meeting (‘AGM’), offer themselves for election.
Anthony Glossop and Ian Menzies-Gow will retire from the Board
and are not seeking re-election. Michael Dunn, who was appointed
Director on 1st December 2010, will also offer himself for election. In
accordance with a new provision included in the Governance Code, all
other directors will seek re-election at the next Annual General Meeting.
Although this provision of the Governance Code would not apply to the
Company until the financial year ending 30th November 2011, the
Board has decided to comply this year.
DIRECTORS’ INTERESTS IN CONTRACTS
No contract existed during the year in relation to the Company’s
business in which any director was materially interested, with the
exception of those detailed in Note 21.
QUALIFYINg THIRD PARTY INDEMNITY PROVISIONS
As at the date of this report, there are qualifying third party indemnity
provisions governed by the Companies Act 2006 in place, under which
the Company has agreed to indemnify the directors, former directors
and the Company Secretary of the Company, directors and former
directors of any member of the Group or of an associated company or
affiliate company and members of the Executive Committee, to the
extent permitted by law and the Articles against all liability arising in
respect of any act or omission in their duties. In addition the Company
has in place Directors’ and Officers’ liability insurance for each officer
of the Company and its associated companies.
CREDITOR PAYMENT POLICY
It is the Group’s policy to agree specific payment terms for its business
transactions with its suppliers and to abide by those terms whenever
it is satisfied that the supplier has provided the goods and services in
accordance with the agreed terms and conditions.
During the year ended 30th November 2010 trade creditors represented
an average of 32 days’ purchases (2009: 31 days). This has been
calculated by expressing year end creditors as a fraction of purchases
made in the year, and multiplying the resulting fraction by 365 days.
KEY PERFORMANCE INDICATORS
Details of the Group’s Key Performance Indicators can be found on page
18.
gOINg CONCERN
In consideration of the basis of going concern, the directors have
considered the factors described in the Business Review and reviewed
the Group’s future cash forecasts and valuation projections, which the
directors believe are based on realistic assumptions.
On these grounds the Board has continued to adopt the going concern
basis for the preparation of the financial statements.
EMPLOYEES
The Group encourages employee involvement and places emphasis
on keeping its employees informed of the Group’s activities and
performance. The Company’s executive runs quarterly management
meetings at which staff are informed about information affecting them
as employees, where their feedback is sought on decisions likely to
affect their interests, and where a common awareness is achieved of the
financial and economic factors affecting the Company’s performance.
This information is then cascaded to staff at the Company’s head office
and regional offices. A performance related annual bonus scheme
and share option arrangements are designed to encourage employee
involvement in the success of the Group.
18573 16/02/2011 PROOF 7
www.stmodwen.co.uk
37
ELECTRONIC COMMUNICATIONS
Each year the Company produces and posts annual reports to all of its
shareholders, at considerable cost to the Company and the environment.
In an effort to reduce the cost and the environmental burden and
provide instant access, the Board has agreed to make more use
of electronic and website communication. All shareholder
documentation will continue to be published directly on our website
(www.stmodwen.co.uk). Shareholders will be notified by email or post
each time a document is published on the website and how to find it.
The interim management statements will continue to be available via
the website.
Shareholders who prefer to receive a printed copy will be able to elect
to do so (those who have elected to receive a printed copy already will
continue to do so). Shareholders who have elected to receive electronic
communications can at any time change their election and require the
Company to send them a paper copy of any document or information
which has been posted on the Company website.
Although electronic communications will become the default option,
the Company reserves the right to send printed documents by post,
should the information be more suited to that format. If the Company
is required to restrict the sending of any documents or information to
any shareholder due to the local laws of the jurisdiction in which the
shareholder is resident or located and as a result, the Company is not
permitted to use electronic means to communicate with shareholders, it
will send hard copies of the documents or information.
BUSINESS STANDARDS
The Company does not condone any form of corrupt behaviour in
business dealings and has disciplinary procedures in place to deal with
any illegal or inappropriate activities by employees.
The Group operates a non-discriminatory employment policy under
which full and fair consideration is given to disabled applicants, to
the continued employment of staff who become disabled, and to
their continued career development and promotion. It is the policy
of the Group that the training, career development and promotion of
disabled persons should, as far as possible, be identical to that of other
employees.
The Group operates a pension scheme which is open to all employees
— see Note 18 of the financial statements.
POLITICAL DONATIONS AND CHARITABLE DONATIONS
The Company did not make any political donations in the year. Details
of the Company’s charitable activities are included in the CSR review.
Direct charitable donations during the year, excluding donations made
by the St. Modwen Environmental Trust, totalled £12,000
(2009: £14,000).
SHAREHOLDER RELATIONS
The executive directors have a programme of meetings with institutional
shareholders and analysts at which the Company’s strategy and
most recently reported performance are explained and questions
and comments made are relayed to the whole Board. Visits are also
arranged to sites of particular interest or significance to assist investors’
understanding of the Company’s business. The Company’s Annual
General Meeting is also used as an opportunity to communicate with
private investors. In addition to the usual period for questions which is
made available for shareholders at the Annual General Meeting, John
Salmon, the Chairman of the Audit Committee, and Lesley James, the
Chairman of the Remuneration Committee, will be available to answer
appropriate questions. Any matters of concern regarding the Company
are discussed by the Senior Independent Director with shareholders or
appropriate corporate governance bodies and comments are fed back by
him to the whole Board.
Copies of all press releases, investor presentations and Annual Reports
are posted on the Company’s website (www.stmodwen.co.uk), together
with additional details of major projects, key financial information and
company background. The number of proxy votes cast in resolutions
is announced at the Annual General Meeting and published on the
Company’s website.
To simplify and encourage participation in voting on resolutions at our
Annual General Meeting, the Company provides the opportunity to vote
electronically through CREST (for further details see pages 92 and
93). In addition, shareholders will also be able to appoint a proxy
electronically via the Company Share Registrar’s website, www.
shareview.co.uk.
18573 16/02/2011 PROOF 7
38 St. Modwen Properties PLC Annual Report 2010
Corporate Governance Directors’ remuneration report
This remuneration report has been prepared in accordance with
Schedule 8 of the Large and Medium sized Companies and Groups
(Accounts and Reports) Regulations 2008 (S.I.2008/410) (the
‘Regulations’), the Listing and Disclosure Rules and the principles
relating to directors’ remuneration of the UK Corporate Governance
Code and will be subject to an advisory vote at the AGM.
The information, the headings of which have been noted with an
asterisk (*), are subject to audit in accordance with the Regulations.
COMPOSITION AND FUNCTION OF THE REMUNERATION COMMITTEE
The Remuneration Committee (the ‘Committee’) comprises Lesley
James (Chairman), Simon Clarke, Ian Menzies-Gow, Katherine Innes
Ker, John Salmon, David Garman and Bill Shannon. David Garman and
Bill Shannon joined in April and November 2010 respectively. Paul
Rigg was a member until his resignation in March 2010.
The Committee is responsible for all aspects of the executive directors’
remuneration and administers the Company’s share schemes. This
includes an annual review of the incentive plan to ensure that it
remains appropriate to the Company’s current circumstances and
prospects and that, in particular, the policy adopted is aligned with and
based on the creation of value for shareholders and provides appropriate
incentives for management to achieve this objective.
The remuneration of the non-executive directors is considered by
the Board following recommendations by the executive directors. No
directors participate in setting their own remuneration. The Committee
also reviews and notes annually the remuneration trends across the
Company and any major changes in employee benefit structures. The
Committee’s terms of reference are available for inspection on the
Company’s website at www.stmodwen.co.uk.
During the year, Hewitt New Bridge Street (‘HNBS’) replaced Towers
Watson as the Committee’s independent remuneration advisers. HNBS
do no other work for the Company. The Committee was also assisted
in its deliberations by the Chairman, the Chief Executive and the
Company Secretary, who were not present when their own remuneration
arrangements were under discussion.
REMUNERATION POLICY
The objective of St. Modwen’s remuneration policy is to attract, retain
and motivate high calibre senior executives through competitive pay
arrangements which are also in the best interests of shareholders. These
include performance-related elements with demanding targets, in order
to align the interests of directors and shareholders and to appropriately
reward financial success.
The overall aim is that executive directors’ remuneration should be
market competitive relative to comparable companies with a significant
element being performance-related and, therefore, only payable if
stretching short-term and long-term performance targets are achieved.
The main elements of executive directors’ remuneration comprise:
• Base salary: reviewed annually in the light of information on the
external market and other relevant factors such as internal relativities
and individual performance.
• Annual bonus: a clear and direct incentive linked to annual
performance targets. Bonus targets require performance based
on financial, operational and strategic measures at company and
personal levels.
• Performance share plan: an annual award of shares which vest, subject
to achievement of performance targets, in whole or in part after three
years. The plan was agreed by shareholders in 2007 and provides the
main incentive to sustained, longer term performance. The plan rules
require challenging performance targets to be set for each award to
vest.
• Pensions and benefits: executive directors’ on-going pension benefits
comprise a cash allowance or a Company contribution to
the defined contribution scheme. Executive directors also receive
private medical insurance, life insurance and participate in the
company car plan
• Shareholdings: it has been the Company’s policy since 1st December
2006 that executive directors are expected to build up their
shareholdings in the Company over a five year period to be shares,
at a minimum, worth one times base salary.
EXECUTIVE DIRECTORS’ REMUNERATION
The Committee, with the assistance of its independent advisers,
undertook its annual review of executive directors’ remuneration. This
review assessed existing pay arrangements in light of the Committee’s
policy objectives, operational and strategic priorities, corporate
governance best practice, relevant market developments and pay
practice throughout the Company. Following this review, the Committee
has agreed the following changes for 2010-11:
Executive directors’ base salaries have been increased by 2% from
1st December 2010. This is consistent with the average 2% increase
awarded to other staff.
Pension provision for all employees was reduced in 2009-10 (the
reduction for executive directors was from 15% to 5% of salary).
Following the resumption of NAV growth, pension provision has been
restored in 2010-11 for all employees to their previous level.
A claw-back facility has been introduced to the annual bonus plan for
2010-11 to reflect current best practice.
In recent years, awards granted under the performance share plan
have been subject to a mixture of total shareholder return (‘TSR’) and
NAV performance measures. To avoid potential overlap with the annual
bonus plan, the Committee has decided that performance share plan
awards in 2010-11 will be measured against absolute and relative
TSR performance.
Full details of these changes are set out below:
Base salaries
No increases to base salaries were given for the year beginning
1st December 2009, in line with the policy adopted for the majority
of employees.
Base salaries for the year beginning 1st December 2010 were reviewed
having regard to market conditions and the salary review being
implemented for other staff which was as a 2% increase. Salaries were
set at the following levels: Bill Oliver (Chief Executive) — £432,847
(2% increase); Stephen Burke (Construction Director) — £285,600
(2% increase). Michael Dunn (the new Group Finance Director) was
appointed on 1st December 2010 with a salary of £260,000.
Pension
Employer contributions to the defined contribution scheme
were reduced for all employees from 1st September 2009 until
30th November 2010. For executive directors, this resulted in a
reduction from 15% of salary to 5% of salary.
The Board has approved the reinstatement of pension contributions
across the Company with effect from December 2010 at the same rates
applicable prior to their suspension in September 2009. Executive
directors will, therefore, receive contributions of 15% of salary in
2010–11 either as a cash supplement or as a contribution to the
defined contribution scheme.
18573 16/02/2011 PROOF 7
www.stmodwen.co.uk
39
Annual Bonus Plan
2009-10
In 2009-10, the executive directors had the opportunity to earn a
bonus of up to 125% of base salary, with performance measured
against a range of criteria including NAV growth at the year end,
covenant compliance, gearing levels, land and property acquisitions
and disposals, marshalling activity and personal targets including cost
management.
Payment of bonus was not dependent on achievement of any single
target in isolation, since the targets were all of key importance to the
short and longer-term health of the Company and the Committee did not
wish to distort behaviour by focusing on a single element.
The executive directors’ performance was assessed individually by the
Committee against the targets, relying on audited information where
appropriate, and having regard to the value which has been created for
shareholders.
On the basis of the Committee’s assessment of corporate and individual
performance, bonus payments made to each of the executive directors
were: Bill Oliver 80% of maximum bonus (100% of salary); Steve Burke
80% of maximum bonus (100% of salary). Tim Haywood resigned on
26th November 2010 and did not receive any bonus.
Payment of the bonus is conditional upon the executive directors
undertaking to invest at least one third of the bonus received, after
payment of income tax and national insurance, in Company shares and
to retain those shares for a minimum period of three years.
2010-11
Following its review of remuneration arrangements, the Remuneration
Committee has broadly maintained the structure of the existing bonus
plan for 2010-11:
• A mixture of corporate measures and personal targets will continue
to determine bonus payments.
• The corporate measures selected will be consistent with and
complement the budget and strategic plan for the year. NAV
performance will have the largest weighting amongst the corporate
measures in 2010-11. Other measures will include dividend growth,
gearing levels, marshalling activity and return on capital.
• Notwithstanding performance against individual measures, the
Committee will retain an overriding discretion to ensure that overall
bonus payouts reflect its view of corporate performance during
the year.
• The maximum bonus potential will remain at 125% of salary with
executive directors being required to invest at least one third of any
bonus received in Company shares.
• A new feature for the bonus plan in 2010-11 is that all bonuses
paid will be subject to potential claw-back at the Committee’s
discretion for a period of four years following the end of the bonus
year in the event that a later restatement of accounts occurs or there
is other discovered misconduct which, if known at the time, would
have meant that a lower or nil bonus would have been paid.
Performance Share Plan (“PSP”)
Prior year awards
Awards granted to executive directors in 2008 over shares worth 150%
of salary were subject to a NAV growth target and a TSR multiplier. As
the minimum NAV growth target has not been met, the Remuneration
Committee has determined that these awards will lapse.
Awards granted to executive directors in 2009 and 2010 over shares
worth 125% of salary, half were subject to a NAV condition and half to
a TSR condition both measured over a period of three financial years.
• NAV condition — based on cumulative growth in NAV per share
(“NAV growth”). NAV growth of 5% (2009 award)/7.5% (2010
award) will earn 12.5% of the shares awarded and growth of 20%
(2009 award)/30% (2010 award) will earn 50% of the shares
awarded.
• TSR condition — based on TSR relative to the FTSE350 Real Estate
Index. TSR equal to the Index over the three year performance
period will earn 12.5% of the shares awarded and TSR of 120% of
the Index will earn 50% of the shares awarded, with a straight-line
correlation between these points.
Tim Haywood resigned as Finance Director on 26th November 2010
and his share options have lapsed.
2010-11 awards
In 2010-11, PSP awards to Bill Oliver and Steve Burke will be over
shares worth 125% of salary. To reflect his recent recruitment, the
Remuneration Committee has agreed a slightly larger award over shares
worth 150% of salary to Michael Dunn.
Noting the concern of some investors and the potential overlap with the
annual bonus plan, PSP awards in 2010-11 will not be subject to a
NAV related performance measure. Instead they will be subject wholly
to TSR related measures measured over three financial years — half
based on relative performance as in previous years and half based on
absolute growth. The Committee believes that this combination provides
alignment with the interests of shareholders and complements the focus
on operational performance measures in the annual bonus plan.
• Absolute TSR performance. TSR growth of 20% will earn 12.5% of
the shares awarded and growth of 50% will earn 50% of the shares
awarded.
• Relative TSR performance. TSR equal to the FTSE 350 Real Estate
Investment & Services Index over the three year performance period
will earn 12.5% of the shares awarded and TSR of 120% of the
Index will earn 50% of the shares awarded.
In calculating TSR, a three month average will be used at both ends of
the performance period to ensure that the calculation is not impacted
by potential volatility arising from day-to-day share price fluctuations.
Notwithstanding TSR performance the Committee also has to be
satisfied that two new underpin conditions have been met before
permitting 2010-11 PSP awards to vest, namely:
• The Committee needs to be satisfied that the extent of vesting
under the TSR conditions is appropriate given the general financial
performance of the Company over the performance period; and
• If no dividend has been paid on the last normal dividend date prior
to the vesting date or if the Committee believes that no dividend will
be paid in respect of the year in which the award vests, the award
will not vest at that time and vesting will be delayed (subject to
continued employment) until dividend payments are resumed.
The Committee will review these performance conditions when deciding
PSP grants in future years, in order to reflect changes in the outlook
for the sector and the Company, and to ensure that awards remain
challenging.
Executive directors may also participate in the Company’s savings-
related share schemes on the same terms as all other employees.
18573 16/02/2011 PROOF 7
40 St. Modwen Properties PLC Annual Report 2010
Corporate Governance Directors’ remuneration report continued
PERFORMANCE gRAPH
The Company’s total shareholder return is shown in the graph below against a broad equity market index. Since the Company was a constituent of the
FTSE 250 and FTSE Real Estate indices during the year, these are considered to be appropriate benchmarks for the graph.
180
160
140
120
100
80
60
40
20
0
St. Modwen
FTSE 250
FTSE 350RE
2005
2006
2007
2008
2009
2010
Audited information*
EXECUTIVE SHARE OPTION SCHEMES(i)
Date of Grant
August 2004*
August 2005*
W.A. Oliver
S.J. Burke T.P. Haywood
Exercise
Price
Exercise
Period
105,610
46,315
—
236p
102,955
39,825
46,610
375p
Aug 2007
–Aug 2014
Aug 2008
– Aug 2015
As at 30th November 2010
208,565
86,140
— (ii)
(i) All share options have vested in full, having met the performance conditions.
(ii)T.P. Haywood resigned on 26th November 2010 and as a result his share options have lapsed.
* The exercise prices and numbers of shares under option have been adjusted to reflect the equity issue in June 2009.
18573 16/02/2011 PROOF 7
www.stmodwen.co.uk
41
PERFORMANCE SHARE PLAN
Directors’ maximum entitlements, subject to the satisfaction of performance conditions, are as follows:
Date of Grant
12th February 2008*(i)
24th July 2009
22nd February 2010
Total
W.A. Oliver
S.J. Burke T.P. Haywood
152,305
85,025
89,091
294,694
194,444
172,381
282,154
186,170
165,046
729,153
465,639
— (ii)
Exercise
Period
Feb 2011
–Feb 2018
July 2012
–July 2019
Feb 2013
–Feb 2020
*
The numbers of shares have been adjusted to reflect the equity issue in June 2009.
(i) PSP awards granted in 2008 have lapsed, performance conditions not having been met.
(ii) T.P. Haywood resigned on 26th November 2010 and as a result his entitlement under the Performance Share Plan has lapsed.
The share price on 22nd February 2010, the date of the latest grant, was 188p.
SAVINgS RELATED SCHEMES
Balance at
30th Nov 2009*
Exercised
Granted
Balance at
30th Nov 2009
Exercise
Price*
Exercise
Period
C.C.A. Glossop
W.A. Oliver
T.P. Haywood
S.J. Burke
876
6,941
7,025
6,941
—
—
—
—
—
—
—
—
876
6,941
367p
224p
7,025** 224p–228p
6,941
224p
Mar 2012
Oct 2014
–Mar 2015
Mar 2013
–Mar 2014
Oct 2014
–Mar 2015
* The exercise prices and numbers of shares under option have been adjusted to reflect the equity issue in the year.
** T.P. Haywood resigned on 26th November 2010 and as a result his option to purchase shares has lapsed.
The share price as at 30th November 2010 was 135.4p. The highest price during the year was 218.7p and the lowest price was 135.4p.
18573 16/02/2011 PROOF 7
42 St. Modwen Properties PLC Annual Report 2010
Corporate Governance Directors’ remuneration report continued
SERVICE CONTRACTS
All of the executive directors have service contracts of no fixed term, with notice periods of 12 months.
The non-executive directors have Letters of Appointment with notice periods of three months.
No director has any rights to compensation on loss of office (apart from payment in lieu of notice, where appropriate).
Unless specifically approved by the Board, executive directors are not permitted to hold external non-executive directorships.
The dates of the executive directors’ service contracts are as follows:
W.A. Oliver
S.J. Burke
24th January 2000
1st January 2006
DIRECTORS’ REMUNERATION
The remuneration of the directors for the year ended 30th November 2010 was as follows:
Executive
S.J. Burke
T.P. Haywood (to 26.11.10)
W.A. Oliver
Non-Executive
C.C.A. Glossop
S.W. Clarke
M.E. Francis (to 30.9.09)
R.I. Menzies-Gow
D.P. Rigg (to 26.3.10)
C.E. Roshier (to 3.4.09)
J.H. Salmon
L. James
K. Innes Ker
D. Garman (from 19.4.10)
W.M.F.C. Shannon (from 1.11.10)
Salary/fees
£’000
280
248
424
125
37
—
43
12
—
46
46
37
23
11
Annual
bonus
£’000
280
—
424
—
—
—
—
—
—
—
—
—
—
—
1,332
704
Total emoluments
excluding pensions
and pension
contributions
2010
£’000
2009
£’000
Benefits
£’000
25
21
33
13
—
—
—
—
—
—
—
—
—
—
92
585
269
881
138
37
—
43
12
—
46
46
37
23
11
510
419
823
144
37
38
41
37
15
46
6
5
—
—
2,128
2,121
All benefits for the executive directors (comprising mainly the provision of company car, fuel and health insurance) arise from employment with the
Company, and do not form part of directors’ final pensionable pay.
The figures above represent emoluments earned during the relevant financial year. Such emoluments are paid in the same financial year with the
exception of performance related bonuses, which are paid in the year following that in which they are earned.
Tim Haywood, who was appointed a Director in 2003, resigned on 26th November 2010. According to the terms of his contract of employment, he
was obliged to give the Company twelve months’ notice, but by mutual consent, he received a payment of £248,230 which comprised one year’s
basic salary. There were no other payments in relation to the loss of his benefits and his entitlements under the Executive Share Options Scheme and
Performance Share Plan and the option to purchase the shares under the SAYE ShareSave Scheme have also lapsed. The amount paid has not been
included in the table above.
18573 16/02/2011 PROOF 7
www.stmodwen.co.uk
43
PENSIONS
The Company operates a pension scheme with both defined benefit and defined contribution sections, covering the majority of employees, including
executive directors. In relation to the defined benefit section, benefits are based on years of credited service and final pensionable pay. The maximum
pension generally payable under the scheme is two-thirds of final pensionable pay. The defined benefit section of the scheme was closed to new
members in 1999, and to future accrual in 2009.
Membership of the defined contribution section is available to all permanent employees including executive directors joining the Company after
6th April 1999. Contributions are invested by an independent investment manager.
S.J. Burke became a deferred member of the Defined Benefit Section on 1st September 2009.
Contributions made on behalf of the directors amounted to:
W.A. Oliver
S.J. Burke
T.P. Haywood
2010
£’000
21
14
12
2009
£’000
53
3
31
With effect from 1st September 2009, Company contributions into the defined contribution section of the plan were reduced. The Company
contributions resumed at the full rate on 1st December 2010.
Further information on the Company’s pension scheme is shown in Note 18 of the financial statements.
Approved by the Board and signed on its behalf by
L. James
Chairman, Remuneration Committee
4th February 2011
18573 16/02/2011 PROOF 7
44 St Modwen Properties PLC Annual Report 2010
www.stmodwen.co.uk
45
Directors’ Responsibilities Statement
Independent Group Auditors’ Report
Group Income Statement
Group Balance Sheet
Group Cash Flow Statement
Group Statement of Comprehensive Income
Group Statement of Changes in Equity
Accounting Policies
Notes to the Accounts
Company Balance Sheet
Notes to the Company Accounts
Independent Company Auditors’ Report
Five Year Record
Notice of Annual General Meeting
Glossary of Terms
Information for Shareholders
Development Projects
46
47
48
49
50
51
51
52
58
79
80
88
89
90
94
95
96
46 St Modwen Properties PLC Annual Report 2010
Financial Statements
Directors’ Responsibilities Statement
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors are required to prepare the
Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4
of the IAS Regulation and have elected to prepare the parent company financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the accounts
unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that
period.
In preparing the parent company financial statements, the directors are required to:
• Select suitable accounting policies and then apply them consistently;
• Make judgements and accounting estimates that are reasonable and prudent;
• State whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial
statements; and
• Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
In preparing the Group financial statements, International Accounting Standard 1 requires that directors:
• Properly select and apply accounting policies;
• Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
• Provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact
of particular transactions, other events and conditions on the entity’s financial position and financial performance; and
• Make an assessment of the Company’s ability to continue as a going concern.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and
disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply
with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other
jurisdictions.
Each of the persons who is a director at the date of approval of this annual report confirms that:
• So far as the director is aware, there is no relevant audit information of which the Company’s auditors are unaware; and
• The director has taken all the 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 auditors are aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006.
Deloitte LLP have expressed their willingness to continue in office as auditors and a resolution to reappoint them will be proposed at the Annual
General Meeting.
Responsibility statement
We confirm that to the best of our knowledge:
• The financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and
• the management report, which is incorporated into the directors’ report, includes a fair review of the development and performance of the business
and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal
risks and uncertainties that they face.
By order of the Board
Bill Oliver
Chief Executive
4th February 2011
Michael Dunn
Group Finance Director
www.stmodwen.co.uk
47
Independent Group Auditors’ Report
to the Members of St. Modwen Properties PLC
We have audited the Group financial statements of St. Modwen Properties PLC for the year ended 30th November 2010 which comprise the Group
Income Statement, the Group Balance Sheet, the Group Cash Flow Statement, the Group Statement of Comprehensive Income, the Group Statement
of Changes in Equity and the related Notes 1 to 21. The financial reporting framework that has been applied in their preparation is applicable law
and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the
Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the Group financial
statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the Group financial
statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with
the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the
financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting
policies are appropriate to the Group’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant
accounting estimates made by the directors; and the overall presentation of the financial statements.
Opinion on financial statements
In our opinion the Group financial statements:
• give a true and fair view of the state of the Group’s affairs as at 30th November 2010 and of its profit for the year then ended;
• have been properly prepared in accordance with IFRSs as adopted by the European Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the IAS Regulation.
Separate opinion in relation to IFRSs as issued by the IASB
As explained in Note 1 to the Group financial statements, the Group in addition to complying with its legal obligation to apply IFRSs as adopted by
the European Union, has also applied IFRSs as issued by the International Accounting Standards Board (IASB).
In our opinion the Group financial statements comply with IFRSs as issued by the IASB.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which the Group financial statements are prepared is consistent
with the Group financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• the Group financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records
and returns;
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Under the Listing Rules we are required to review:
• the directors’ statement, contained within the Corporate Governance Statement, in relation to going concern; and
• the part of the Corporate Governance Statement relating to the Company’s compliance with the nine provisions of the June 2008 Combined Code
specified for our review.
Other matter
We have reported separately on the parent company financial statements of St. Modwen Properties PLC for the year ended 30th November 2010 and
the information in the Directors’ Remuneration Report that is described as being audited.
Stephen Griggs FCA (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
Birmingham, United Kingdom
4th February 2011
48 St Modwen Properties PLC Annual Report 2010
Financial Statements
Group Income Statement
for the year ended 30th November 2010
Revenue
Net rental income
Development profit/(loss)
Gains on disposal of investments/investment properties
Investment property revaluation gains/(losses)
Other net income
Profits/(losses) of joint ventures and associates (post-tax)
Administrative expenses
Profit/(loss) before interest and tax
Finance cost
Finance income
Profit/(loss) before tax
Tax credit
Profit/(loss) for the year
Attributable to:
Equity shareholders of the Company
Non-controlling interests
Basic and diluted profit/(loss) per share
Notes
1
1
1
8
1
10
3
4
4
5
Notes
6
2010
£m
2009
£m
121.4
113.7
26.4
12.5
2.5
23.2
3.1
7.4
(16.8)
58.3
(24.0)
3.2
37.5
0.8
38.3
37.2
1.1
38.3
2010
pence
18.6
26.1
(9.3)
2.2
(81.7)
1.8
(22.9)
(13.9)
(97.7)
(26.0)
4.3
(119.4)
17.7
(101.7)
(101.1)
(0.6)
(101.7)
2009
pence
(59.7)
www.stmodwen.co.uk
Group Balance Sheet
as at 30th November 2010
Non-current assets
Investment property
Operating property, plant and equipment
Investments in joint ventures and associates
Trade and other receivables
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Current liabilities
Trade and other payables
Borrowings
Tax payables
Non-current liabilities
Trade and other payables
Borrowings
Deferred tax
Net assets
Capital and reserves
Share capital
Share premium account
Capital redemption reserve
Retained earnings
Own shares
Shareholders’ equity
Non-controlling interests
Total equity
49
2009
£m
762.9
7.9
41.3
5.2
817.3
192.7
47.0
4.8
244.5
(139.2)
(0.4)
(7.7)
(147.3)
(188.9)
(323.2)
(1.4)
(513.5)
401.0
20.0
102.8
0.3
269.6
(0.4)
392.3
8.7
401.0
Notes
8
9
10
11
12
11
13
14
5
13
14
5
17
2010
£m
828.0
7.4
49.4
8.2
893.0
171.6
45.3
11.3
228.2
(133.1)
—
(9.3)
(142.4)
(215.1)
(326.2)
(0.7)
(542.0)
436.8
20.0
102.8
0.3
304.7
(0.6)
427.2
9.6
436.8
These financial statements were approved by the Board of directors on 4th February 2011 and were signed on its behalf by Bill Oliver and
Michael Dunn.
Bill Oliver
Chief Executive
Michael Dunn
Group Finance Director
50 St Modwen Properties PLC Annual Report 2010
Financial Statements
Group Cash Flow Statement
for the year ended 30th November 2010
Operating activities
Profit/(loss) before interest and tax
Gains on investment property disposals
Share of (profits)/losses of joint ventures and associates (post-tax)
Investment property revaluation (gains)/losses
Depreciation
Impairment losses on inventories
(Increase)/decrease in inventories
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Share options and share awards
Pension funding
Tax received
Net cash inflow from operating activities
Investing activities
Investment property disposals
Investment property additions
Property, plant and equipment additions
Cash and cash equivalents acquired with subsidiary
Interest received
Net cash (outflow)/inflow from investing activities
Financing activities
Dividends paid
Dividends paid to non-controlling interests
Interest paid
Net proceeds on issue of share capital
New borrowings drawn
Repayment of borrowings
Net cash outflow from financing activities
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
Notes
10
8
9
12
5 (c)
7
2010
£m
58.3
(2.5)
(7.4)
(23.2)
0.7
6.1
(1.6)
(12.5)
29.0
(0.2)
—
1.7
48.4
27.5
(49.0)
(0.3)
—
0.6
(21.2)
(2.0)
(0.2)
(21.1)
—
33.1
(30.5)
(20.7)
6.5
4.8
11.3
2009
£m
(97.7)
(2.2)
22.9
81.7
1.0
14.2
6.5
0.6
(13.5)
(0.3)
(0.8)
3.2
15.6
31.3
(28.0)
(1.5)
0.4
1.4
3.6
—
(0.2)
(17.9)
101.6
44.2
(154.8)
(27.1)
(7.9)
12.7
4.8
www.stmodwen.co.uk
Group Statement of Comprehensive Income
for the year ended 30th November 2010
Profit/(loss) for the year
Pension fund:
— actuarial losses
— deferred tax thereon
Total comprehensive income for the year
Attributable to:
— Equity shareholders of the Company
— Non-controlling interests
Total comprehensive income for the year
Group Statement of Changes in Equity
for the two years ended 30th November 2010
51
2009
£m
(101.7)
(0.8)
0.2
(102.3)
(101.7)
(0.6)
(102.3)
Notes
18
18
2010
£m
38.3
(0.1)
—
38.2
37.1
1.1
38.2
Share
capital
£m
Share
premium
account
£m
Capital
redemption
reserve
£m
Retained
earnings
£m
Own Shareholders’
equity
£m
shares
£m
controlling
interest
£m
Total
equity
£m
Non-
9.1
0.3
371.3
(0.1)
392.7
9.5
402.2
At 30th November 2008
Loss for the year attributable
to shareholders
—
Pension fund actuarial losses (Note 18) —
12.1
Total comprehensive income
Net shares acquired
Dividends paid
Issue of share capital
—
—
—
7.9
At 30th November 2009
Profit for the year
attributable to shareholders
Pension fund actuarial losses (Note 18)
20.0
Total comprehensive income
Net shares acquired
Dividends paid
—
—
—
—
—
—
—
—
—
—
93.7
102.8
—
—
—
—
—
—
—
—
—
—
—
(101.1)
(0.6)
(101.7)
—
—
—
0.3
269.6
—
—
—
—
—
37.2
(0.1)
37.1
—
(2.0)
At 30th November 2010
20.0
102.8
0.3
304.7
—
—
—
(0.3)
—
—
(0.4)
—
—
—
(0.2)
—
(0.6)
(101.1)
(0.6)
(101.7)
(0.3)
—
101.6
392.3
37.2
(0.1)
37.1
(0.2)
(2.0)
427.2
(0.6)
—
(0.6)
—
(0.2)
—
8.7
1.1
—
1.1
—
(0.2)
9.6
(101.7)
(0.6)
(102.3)
(0.3)
(0.2)
101.6
401.0
38.3
(0.1)
38.2
(0.2)
(2.2)
436.8
Own shares represent the cost of 259,414 (2009: 273,330) shares held by the Employee Benefit Trust. The open market value of the shares held at
30th November 2010 was £351,246 (2009: £580,280).
52 St Modwen Properties PLC Annual Report 2010
Financial Statements
Accounting Policies
for the year ended 30th November 2010
Basis of preparation
The Group’s financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU as
they apply to the Group for the year ended 30th November 2010, applied in accordance with the provisions of the Companies Act 2006.
The financial statements have been prepared on the historical cost basis except for the revaluation of certain properties, derivative financial
instruments and the defined benefit section of the Group’s pension scheme.
The Group’s functional currency is pounds sterling and its IFRS accounting policies are set out below.
Basis of consolidation
The Group financial statements consolidate the financial statements of St. Modwen Properties PLC and the entities it controls. Control comprises
the power to govern the financial and operating policies of the investee and is achieved through direct or indirect ownership of voting rights or by
contractual agreement. A list of the principal entities controlled is given in Note (F) of the Company’s financial statements.
VSM Estates (Holdings) Limited is 50% owned by St. Modwen Properties PLC; however, under the funding agreement the Group obtains the majority
of the benefits of the entity and also retains the majority of the residual risks. This entity is therefore consolidated in accordance with SIC 12
“Consolidation — Special Purpose Entities”.
All entities are consolidated from the date on which the Group obtains control, and continue to be consolidated until the date that such control
ceases. All intra-Group transactions, balances, income and expense are eliminated on consolidation.
Non-controlling interests represent the portion of profit or loss and net assets that are not held by the Group and are presented separately within
equity in the Group balance sheet.
Interests in joint ventures
The Group recognises its interest in joint ventures using the equity method of accounting. Under the equity method, the interest in the joint venture
is carried in the balance sheet at cost plus post-acquisition changes in the Group’s share of its net assets, less distributions received, less any
impairment in value of individual investments. The income statement reflects the Group’s share of the jointly controlled entities’ results after interest
and tax.
Financial statements of jointly controlled entities are prepared for the same reporting period as the Group. Where necessary, adjustments are made to
bring the accounting policies used into line with those of the Group.
The Group statement of comprehensive income reflects the Group’s share of any income and expense recognised by the jointly controlled entities
outside the income statement.
Interests in associates
The Group’s interests in its associates, being those entities over which it has significant influence and which are neither subsidiaries nor joint
ventures, are accounted for using the equity method of accounting, as described above.
Properties
Investment properties
Investment properties, being freehold and leasehold properties held to earn rental income, for capital appreciation and/or for undetermined future
use, are carried at fair value following initial recognition at the present value of the consideration payable. To establish fair value, investment
properties are independently valued on the basis of market value. Any surplus or deficit arising is recognised in the income statement for the period.
Once classified as an investment property, a property remains in this category until development with a view to sale commences, at which point the
asset is transferred to inventories at current valuation.
Where an investment property is being redeveloped for continued use as an investment property, the property remains within investment property and
any movement in valuation is recognised in the income statement.
Investment property disposals are recognised on completion. Profits and losses arising are recognised through the income statement and the profit on
disposal is determined as the difference between the sales proceeds and the carrying amount of the asset.
Investment properties are not depreciated.
Inventories
Inventories principally comprise properties held for sale, properties under construction and land under option. All inventories are carried at the lower
of cost and net realisable value.
Cost comprises land, direct materials and, where applicable, direct labour costs that have been incurred in bringing the inventories to their present
location and condition. When inventory includes a transfer from investment properties, cost is recorded as the book value at the date of transfer. Net
realisable value represents the estimated selling price less any further costs expected to be incurred to completion and disposal.
www.stmodwen.co.uk
53
Operating property, plant and equipment
Operating property, plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses. Such cost includes
costs directly attributable to making the asset capable of operating as intended.
Depreciation is provided on all operating property, plant and equipment at rates calculated to write off the cost less estimated residual value of each
asset evenly over its expected useful life as follows:
Leasehold operating properties
Plant, machinery and equipment
— over the shorter of the lease term and 25 years
— over 2 to 5 years
Leases
The Group as lessee
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All
other leases are classified as operating leases.
Non-property assets held under finance leases are capitalised at the inception of the lease with a corresponding liability being recognised for the fair
value of the leased asset or, if lower, the present value of the minimum lease payments. Lease payments are apportioned between the reduction of the
lease liability and finance charges in the income statement so as to achieve a constant rate of interest on the remaining balance of the liability. Non-
property assets held under finance leases are depreciated over the shorter of the estimated useful life of the asset and the lease term.
Freehold interests in leasehold investment properties are accounted for as finance leases with the present value of guaranteed minimum ground rents
included within the carrying value of the property and within long-term liabilities. On payment of a guaranteed ground rent, virtually all of the cost is
charged to the income statement, as interest payable, and the balance reduces the liability.
Rentals payable under operating leases are charged in the income statement on a straight-line basis over the lease term.
The Group as lessor
Rental income from operating leases is recognised in the income statement on a straight-line basis over the lease term.
Income taxes
Current tax assets and liabilities are measured at the amount expected to be recovered from, or paid to, the taxation authorities, based on tax rates
and laws that are enacted or substantively enacted by the balance sheet date.
The tax currently payable is based on the taxable result for the year. The taxable result differs from the result as reported in the income statement
because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or
deductible.
Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in
the financial statements, using the rates of tax expected to apply based on legislation enacted or substantively enacted at the balance sheet date,
with the following exceptions:
— in respect of taxable temporary differences associated with investments in subsidiaries, joint ventures and associates, where the timing of the
reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future;
and
— deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the deductible
temporary differences, carried forward tax credits or tax losses can be utilised.
Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related asset is
realised or liability is settled, based on tax rates and laws substantively enacted at the balance sheet date. Deferred tax assets and liabilities are offset
when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the
same authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity. Otherwise, income tax is recognised in
the income statement.
Pensions
The Group operates a pension scheme with both defined benefit and defined contribution sections. The defined benefit section is closed to new
members and, from 1st September 2009, to future accrual.
54 St Modwen Properties PLC Annual Report 2010
Financial Statements
Accounting Policies continued
for the year ended 30th November 2010
The cost of providing benefits under the defined benefit section is determined using the projected unit credit method, which attributes entitlement
to benefits to the current period (to determine current service cost) and to the current and prior periods (to determine the present value of defined
benefit obligation) and is based on actuarial advice. Past service costs are recognised in the income statement immediately if the benefits have
vested.
The interest element of the defined benefit cost represents the change in present value of scheme obligations resulting from the passage of time
and is determined by applying the discount rate to the opening present value of the benefit obligation, taking into account material changes in the
obligation during the year. The expected return on plan assets is based on an assessment made at the beginning of the year of long-term market
returns on scheme assets, adjusted for the effect on the fair value of plan assets of contributions received and benefits paid during the year. The
difference between the expected return on plan assets and the interest cost is recognised in the income statement as other finance income or
expense.
Actuarial gains and losses are recognised in full in the statement of comprehensive income in the year in which they occur. The defined benefit
pension asset or liability in the balance sheet comprises the present value of the defined benefit obligation, less any past service cost not yet
recognised and less the fair value of plan assets out of which the obligations are to be settled directly.
When a pension asset (net surplus) arises and the directors consider it is controlled by the Company such that future economic benefits will be
available to the Company, it is carried forward in accordance with the requirements of IFRIC14.
Contributions to defined contribution schemes are recognised in the income statement in the year in which they become payable.
Own shares
St. Modwen Properties PLC shares held by the Group are classified in shareholders’ equity and are recognised at cost.
Dividends
Dividends declared after the balance sheet date are not recognised as liabilities at the balance sheet date.
Revenue recognition
Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can be reliably measured.
Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, VAT and other sales taxes or duty. The following
criteria must also be met before revenue is recognised:
Sale of property
Revenue arising from the sale of property is recognised on legal completion of the sale. Where revenue is earned for development of property assets
not owned, this is recognised when the Group has substantially fulfilled its obligations in respect of the transaction.
Construction contracts
Revenue arising from construction contracts is recognised in accordance with the Group’s accounting policy on construction contracts (see below).
Rental income
Rental income arising from investment properties is accounted for on a straight-line basis over the lease term.
Interest income
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts over the expected life of the financial asset to that asset’s net carrying amount.
Dividend income
Dividend income from joint ventures is recognised when the shareholders’ rights to receive payment have been established.
Construction contracts
Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion
of the contract activity at the balance sheet date. The extent to which the contract is complete is determined by the total costs incurred to date as a
percentage of the total anticipated costs for the entire contract. Variations in contract work, claims and incentive payments are included only to the
extent they have been agreed with the purchaser.
Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs
incurred where it is probable they will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred.
When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
Government grants
Government grants relating to property are treated as deferred income and released to profit or loss over the expected useful life of the assets
concerned.
www.stmodwen.co.uk
55
Share-based payments
When employee share options are exercised the employee has the choice whether to have the liability settled by way of cash or the retention of
shares. As it has been the Company’s experience to satisfy the majority of share options in cash, and new shares are not issued to satisfy employee
share option plans, the Group accounts for its share option schemes as cash-settled. The cost of cash-settled transactions is measured at fair value
using an appropriate option pricing model and amortised through the income statement over the vesting period. The liability is remeasured at each
balance sheet date. Revisions to the fair value of the accrued liability after the end of the vesting period are recorded in the income statement of the
year in which they occur.
Financial instruments
Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual provisions
of the instrument. The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it
transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor
retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest
in the asset and an associated liability for any amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership
of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds
received. The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled, or they expire.
Trade and other receivables
Trade receivables are recognised and carried at the lower of their original invoiced value and recoverable amount. Provision is made when there is
evidence that the Group will not be able to recover balances in full. Balances are written off when the probability of recovery is assessed as being
remote.
Cash and cash equivalents
Cash and cash equivalents comprises cash balances and short-term deposits with banks.
Trade and other payables
Trade and other payables on deferred payment terms are initially recorded by discounting the nominal amount payable to net present value. The
discount to nominal value is amortised over the period of the deferred arrangement and charged to finance costs.
Interest bearing loans and borrowings
All loans and borrowings are initially recognised at fair value less directly attributable transaction costs. After initial recognition, loans and borrowings
are measured at amortised cost.
Gains and losses arising on the repurchase, settlement or otherwise cancellation of liabilities are recognised in finance income or finance expense as
appropriate.
The effective interest rate method is used to charge interest to the income statement.
Derivative financial instruments and hedging
The Group uses derivative financial instruments such as interest rate swaps to hedge its risks associated with interest rate fluctuations. Such
instruments are initially recognised at fair value on the date on which a contract is entered into and are subsequently remeasured at fair value. The
Group has determined that the derivative financial instruments in use do not qualify for hedge accounting and, consequently, any gains or losses
arising from changes in the fair value of derivatives are taken to the income statement.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all its liabilities. Equity instruments
issued by the Group are recorded at the proceeds received less direct issue costs.
Use of estimates and judgements
To be able to prepare accounts according to generally accepted accounting principles, management must make estimates and assumptions that
affect the asset and liability items and revenue and expense amounts recorded in the financial accounts. These estimates are based on the Group’s
systems of internal control, historical experience and the advice of external experts (including qualified professional valuers and actuaries) together
with various other assumptions that management and the Board of directors believe are reasonable under the circumstances. The results of these
considerations form the basis for making judgements about the carrying value of assets and liabilities that are not readily available from other
sources.
The areas requiring the use of estimates and critical judgements that may significantly impact the Group’s earnings and financial position are:
Going concern The financial statements have been prepared on a going concern basis. This is discussed in the Business Review, under the heading
‘Financial Structure’ and adoption of the going concern assumption is confirmed on page 36.
Valuation of investment properties Management has used the valuation performed by its independent valuers as the fair value of its investment
properties. The valuation is performed according to RICS rules, using appropriate levels of professional judgement for the prevailing market
conditions.
56 St Modwen Properties PLC Annual Report 2010
Financial Statements
Accounting Policies continued
for the year ended 30th November 2010
Use of estimates and judgements continued
Net realisable value of inventories The Group has ongoing procedures for assessing the carrying value of inventories and identifying where this is in
excess of net realisable value. Management’s assessment of any resulting provision requirement, is where applicable, supported by independent
information supplied by the external valuers. The estimates and judgements used were based on information available at, and pertaining to,
30th November 2010. Any subsequent adverse changes in market conditions may result in additional provisions being required.
Estimation of remediation and other costs to complete for both development and investment properties. In making an assessment of these costs there
is inherent uncertainty and the Group has developed systems of internal control to assess and review carrying values and the appropriateness of
estimates made. Any changes to these estimates may impact the carrying values of investment properties and/or inventories.
The calculation of deferred tax assets and liabilities together with assessment of the recoverability of future tax losses. The recoverability of tax
losses has been assessed and the accounts reflect the extent to which management believe recovery is likely against latent gains and future profits
anticipated to be realised on the Group’s property portfolio.
Calculation of the net present value of pension scheme liabilities In calculating this liability it is necessary for actuarial assumptions to be made,
including discount and mortality rates and the long-term rate of return upon scheme assets. The Group engages a qualified actuary to assist with
determining the assumptions to be made and evaluating these liabilities.
Adoption of New and Revised Standards
Standards affecting the financial statements
In the current year the following new and revised standards and interpretations have been adopted and have affected the amounts reported on the
disclosures in these financial statements.
IAS1 (revised) Presentation of Financial Statements
IAS1 (revised) requires the production of a statement of comprehensive income setting out all items of income and expense relating to non-owner
changes in equity. There is a choice between presenting comprehensive income in one statement or in two statements comprising an income
statement and a separate statement of comprehensive income. The Group has elected to present comprehensive income in two statements. In
addition, IAS1 (revised) requires the statement of changes in shareholders’ equity to be presented as a primary statement. The other revisions to IAS1
have not had a significant impact on the presentation of the Group’s financial information.
IFRS8 Operating Segments
IFRS8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the
chief operating decision maker, which in the case of the Group is the Board, to allocate resources to the segments and to assess their performance
and is effective in the EU for accounting periods beginning on or after 1st January 2009. In contrast, the predecessor Standard (IAS14 ‘Segment
Reporting’) required the Group to identify two sets of segments (business and geographical), using a risk and rewards approach, with the Group’s
system of internal financial reporting to key management personnel serving only as the starting point for the identification of such segments. The
Group’s operating segments, whilst unchanged, are reported in accordance with IFRS8.
IAS23 (revised) Borrowing Costs
IAS23 (revised) requires the capitalisation of borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset
(one that takes a substantial period of time to get ready for use) as part of the cost of the asset. The amendment removes the option of immediately
expensing borrowing costs subject to an exemption for inventories manufactured in large numbers on a repetitive basis.
The Group has evaluated its business processes and where developments are considered to fall under the requirements of IAS23 (revised) costs are
capitalised. No interest was capitalised in the year ended 30th November 2010.
IFRS2 (revised) Share-based payments
The amendment to IFRS2 requires non-vesting conditions to be taken into account in the estimate of the fair value of the equity instruments. The
adoption of the amendment has no impact on the Group’s financial statements.
IFRS7 (amended) Improving disclosures about financial instruments
IFRS7 (amended) requires disclosure of fair value measurement by level of a fair value measurement hierarchy. The required disclosures are in
Note 16 to the financial statements.
www.stmodwen.co.uk
57
Standards adopted not affecting the financial statements
In addition the following standards and interpretations have been adopted but have had no impact on the amounts reported or the disclosures in the
financial statements:
IAS27 (revised 2008) Consolidated and Separate financial statements
IAS32 (amended)/IAS1 (amended) Puttable Financial Instruments and Obligations Arising on Liquidation
IAS39 Eligible Hedged Items
IFRS1 (amended)/IAS27 (amended) Cost of a Subsidiary, Jointly Controlled Entity or Associate Payment Transactions
IFRS3 (revised) Business Combinations
IFRIC9 (amended)/IAS39 Embedded Derivatives
IFRIC15 Agreements for the Construction of Real Estate
IFRIC17 Distributions of Non-Cash Assets to Owners
IFRIC18 Transfer of Assets from Customers
Impact of standards and interpretations in issue but not yet effective
At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial
statements were in issue and endorsed by the EU but not yet effective:
IAS24 (revised 2009) Related Party Disclosures
IAS32 (amended 2009) Classification of Rights Issues
IFRS1 (amended 2009) Additional Exemptions for First-time Adopters
IFRS1 (amended 2010) Limited Exemption from Comparative IFRS7 Disclosures for First-time Adopters
IFRS2 (amended 2009) Group Cash-settled Share-based Payment Transactions
IFRIC14 (amended 2009) Prepayments of a Minimum Funding Requirement
IFRIC19 Extinguishing Financial Liabilities with Equity Instruments
In addition, Improvements to IFRSs, issued in April 2009, is the most recent tranche of the Improvements to IFRS project endorsed by the EU and
has a number of minor amendments to existing IAS and IFRS which have not yet been implemented.
The directors anticipate that the adoption of these standards and interpretations in future periods will have no material impact on the financial
statements of the Group.
58 St Modwen Properties PLC Annual Report 2010
Financial Statements
Notes to the Accounts
for the year ended 30th November 2010
1. ReveNUe AND GROSS PROFIT
Revenue
Cost of sales
Gross profit
Revenue
Cost of sales
Gross profit /(loss)
Rental
£m
Development
£m
35.1
(8.7)
26.4
79.9
(67.4)
12.5
Rental Development
£m
£m
34.3
(8.2)
26.1
74.5
(83.8)
(9.3)
2010
2009
Other
£m
6.4
(3.3)
3.1
Other
£m
4.9
(3.1)
1.8
Total
£m
121.4
(79.4)
42.0
Total
£m
113.7
(95.1)
18.6
The Group operates exclusively in the UK and all of its revenues derive from its portfolio of properties which the Group manages as one business.
Therefore, the financial statements and related notes represent the results and financial position of the Group’s sole business segment.
The Group’s total revenue for 2010 was £129.1m (2009: £122.7m) and in addition to the amounts above included service charge income of £6.9m
(2009: £6.1m), for which there was an equivalent expense, and interest income of £0.8m (2009: £2.9m).
Cost of sales in respect of rental income as disclosed above comprise direct operating expenses (including repairs and maintenance) related to the
investment property portfolio and include £0.2m (2009: £0.2m) in respect of properties that did not generate any rental income.
During the year the following amounts were recognised (as part of development revenue and cost of sales) in respect of construction contracts:
Revenue
Cost of sales
Gross profit
2010
£m
63.8
(50.8)
13.0
2009
£m
27.7
(25.3)
2.4
Amounts recoverable on contracts as disclosed in Note 11 comprise £11.6m (2009: £0.9m) of contract revenue recognised and £1.2m (2009:
£1.4m) of retentions.
Amounts due to customers of £nil (2009: £nil) were included in trade and other payables in respect of contracts in progress at the balance sheet date.
2. NON-STATUTORy INFORMATION
a. Trading profit
The non-statutory measure of trading profit, which includes the Group’s share of joint ventures and associates, has been calculated as set out below:
Net rental income
Development profit
Gains/(losses) on disposal of
investments/investment properties
Other income
Administrative expenses
Finance costs
Finance income
Trading profit
2010
Joint ventures
Group and associates
£m
£m
26.4
18.6
2.5
3.1
(16.8)
(20.0)
0.6
14.4
7.3
0.3
0.5
—
(0.3)
(4.8)
—
3.0
2009
Joint ventures
Group and associates
£m
£m
26.1
4.9
2.2
1.8
(13.9)
(17.5)
0.3
3.9
7.4
0.6
(0.1)
—
(0.2)
(3.4)
0.2
4.5
Total
£m
33.7
18.9
3.0
3.1
(17.1)
(24.8)
0.6
17.4
Total
£m
33.5
5.5
2.1
1.8
(14.1)
(20.9)
0.5
8.4
Notes
(1)
(2)
(3)
(1) Stated before the deduction of net realisable value provisions of: Group £6.1m (2009: £14.2m); Joint ventures and associates £0.3m
(2009: £1.6m).
(2) Stated before mark-to-market of derivatives and other non-cash items of: Group £4.0m (2009: £8.5m); Joint ventures and associates £0.8m
(2009: £1.8m).
(3) Stated before mark-to-market of derivatives and other non-cash items of: Group £2.6m (2009: £4.0m); Joint ventures and associates £nil
(2009: £nil).
www.stmodwen.co.uk
59
2. NON-STATUTORy INFORMATION CONTINUED
b. Property valuation gains/(losses)
Property valuations, including the Group’s share of joint ventures and associates, have been calculated as set out below:
Investment property revaluation gains/(losses)
Net realisable value provisions
Property valuation gains/(losses)
c. Movement in net debt
Movement in cash and cash equivalents
Borrowings drawn
Repayment of borrowings
Movement in net debt
2010
Joint ventures
Group and Associates
£m
£m
23.2
(6.1)
17.1
6.2
(0.3)
5.9
Total
£m
29.4
(6.4)
23.0
2009
Joint Ventures
Group and Associates
£m
£m
(81.7)
(14.2)
(95.9)
(24.8)
(1.6)
(26.4)
2010
£m
6.5
(33.1)
30.5
3.9
d. Trading cash flow
Trading cash flows are derived from the Group cash flow statement as set out below:
Total
£m
(106.5)
(15.8)
(122.3)
2009
£m
(7.9)
(44.2)
154.8
102.7
Total
£m
26.4
92.9
(30.5)
(80.1)
33.9
(36.5)
6.1
0.4
6.5
Total
£m
26.1
100.9
(12.9)
(79.7)
(6.3)
(27.0)
1.1
(9.0)
(7.9)
2010
Operating
activities
£m
Investing
activities
£m
Financing
activities
£m
26.4
65.4
(6.4)
(54.9)
33.9
(16.0)
48.4
—
48.4
—
27.5
(24.1)
(25.2)
—
0.6
(21.2)
—
(21.2)
—
—
—
—
—
(21.1)
(21.1)
0.4
(20.7)
2009
Operating
activities
£m
Investing
activities
£m
Financing
activities
£m
26.1
69.6
—
(63.1)
(6.5)
(10.5)
15.6
—
15.6
—
31.3
(12.9)
(16.6)
0.2
1.4
3.4
0.2
3.6
—
—
—
—
—
(17.9)
(17.9)
(9.2)
(27.1)
Total equity
2010
2009
Shareholders’ Equity
2009
2010
436.8
401.0
200,360,931 200,360,931
427.2
392.3
200,360,931 200,360,931
218.0
8.9%
200.1
213.2
195.8
8.9%
Net rent
Property disposals
Property acquisitions
Property expenditure
Working capital and other movements
Overheads, interest and tax
Trading cash flow
Non-trading cash flows
Movement in cash and cash equivalents
Net rent
Property disposals
Property acquisitions
Property expenditure
Working capital and other movements
Overheads, interest and tax
Trading cash flow
Non-trading cash flows
Movement in cash and cash equivalents
e. Net assets per share
Net assets (£m)
Shares in issue (number)
Net assets per share (pence)
Percentage increase
60 St Modwen Properties PLC Annual Report 2010
Financial Statements
Notes to the Accounts continued
for the year ended 30th November 2010
3. OTheR INCOMe STATeMeNT DISCLOSUReS
a. Administrative expenses
Administrative expenses have been arrived at after charging:
Depreciation
Operating lease costs
b. Auditors’ remuneration
The analysis of auditors’ remuneration is as follows:
Fees payable for the audit of the Company’s annual accounts
The audit of subsidiary companies and joint ventures pursuant to legislation
Total audit fees
Other services pursuant to legislation
Tax services
Total non-audit fees
Total fees
2010
£m
0.7
1.0
2009
£m
1.0
1.1
2010
£’000
2009
£’000
112
112
224
51
460
511
735
107
112
219
309
284
593
812
The above amounts include all amounts charged in respect of joint venture undertakings. Other services pursuant to legislation for 2009 included
£259,000 in relation to the Firm Placing and Placing and Open Offer.
c. employees
The average number of full-time employees (including executive directors) employed by the Group during the year was as follows:
Property
Leisure and other activities
Administration
The total payroll costs of these employees were:
Wages and salaries
Social security costs
Pension costs
Details of the directors’ remuneration is given in the directors’ remuneration report.
2010
Number
2009
Number
125
64
39
228
2010
£m
9.9
1.2
0.3
11.4
127
61
40
228
2009
£m
9.1
1.1
0.7
10.9
www.stmodwen.co.uk
61
3. OTheR INCOMe STATeMeNT DISCLOSUReS CONTINUED
d. Share-based payments
The Group has a save as you earn share option scheme open to all employees. Employees must remain in service for a period of five years from
the date of grant before exercising their options. The option period ends six months following the end of the vesting period. The Group also has an
executive share option scheme and performance share plan (PSP), full details of which are given in the directors’ remuneration report.
The following table illustrates the movements in share options during the year. As the PSP includes the grant of options at £nil exercise price, the
weighted average prices below are calculated including and excluding the options under this plan.
2010
Weighted average price
2009
Weighted average price
Number of
options
All options
£
excluding
PSP £
Number of
options
All options
£
Excluding
PSP £
Outstanding at start of year
Re-basing of options following issue of share capital
Granted
Forfeited
Lapsed
Exercised
Outstanding at end of year
Exercisable at year end
6,459,991
—
2,603,001
(29,143)
(2,548,328)
(25,960)
6,459,561
1,068,363
2.00
—
1.46
(2.99)
(2.30)
(1.25)
1.66
2.77
2.46
—
1.78
(2.99)
(2.92)
(1.25)
4,920,691
716,635
2,815,046
(535,265)
(513,700)
(943,416)
2.01
6,459,991
2.77
1,144,467
2.88
(0.39)
1.42
(3.28)
(4.78)
(1.08)
2.00
2.70
Share options are priced using a Black–Scholes valuation model. The fair values calculated and the assumptions used are as follows:
As at 30th November 2010
As at 30th November 2009
* Based on 90 day moving average.
(Credit)/charge
to income
statement
£m
Risk-free
interest rate
%
Expected
volatility
%
(0.2)
0.6
0.7–2.4
54.4–67.5
0.1–2.2
0.1–80.2
Dividend
yield
%
1.8
—
3.17
(0.44)
1.86
(3.28)
(4.78)
(1.08)
2.46
2.70
Share
price
£*
1.65
2.28
The fair value of the balance sheet liability in respect of share options outstanding at the year end was £1.8m (2009: £1.8m) and included £1.1m
(2009: £0.9m) in respect of options that had vested at the year end.
In arriving at fair value it has been assumed that, when vested, shares options are exercised in accordance with historical trends. Expected volatility
was determined by reference to the historical volatility of the Group’s share price over a period consistent with the expected life of the options.
The weighted average share price at the date of exercise was £1.94 (2009: £2.25). The executive share options outstanding at the year end had a
range of exercise prices between 97p and 410p (2009: 97p and 456p) with PSP options exercisable at £nil (2009: £nil). Outstanding options had a
weighted average maximum remaining contractual life of 8.1 years (2009: 6.5 years).
62 St Modwen Properties PLC Annual Report 2010
Financial Statements
Notes to the Accounts continued
for the year ended 30th November 2010
4. FINANCe COST AND FINANCe INCOMe
Interest payable on borrowings
Amortisation of loan arrangement fees
Amortisation of discount on deferred payment arrangements
Head rents treated as finance leases
Movement in fair value of interest rate derivatives
Interest on pension scheme liabilities (Note 18)
Total finance cost
2010
£m
(19.8)
(1.0)
(1.6)
(0.2)
—
(1.4)
(24.0)
2009
£m
(17.3)
(0.7)
(1.7)
(0.2)
(4.7)
(1.4)
(26.0)
The finance cost on interest rate derivatives derives from financial liabilities held at fair value through profit or loss. All other finance costs derive from
financial liabilities measured at amortised cost.
Interest receivable on cash deposits
Credit in respect of discount on deferred receivables
Movement in fair value of interest rate derivatives
Expected return on pension scheme assets (Note 18)
Total finance income
5. TAxATION
a. Tax on profit/(loss) on ordinary activities
Tax (credit)/charge in the income statement
Corporation tax
Current year tax
Adjustments in respect of previous years
Deferred tax
Reversal of temporary differences
Impact of current year revaluations and indexation
Impact of tax losses
Adjustments in respect of previous years
Total tax credit in the income statement
Tax relating to items charged to equity
Deferred tax
Actuarial losses on pension schemes
Tax credit in the statement of comprehensive income
2010
£m
0.6
0.2
0.9
1.5
3.2
2009
£m
1.4
1.5
—
1.4
4.3
2010
£m
2009
£m
—
(0.1)
(0.1)
(1.0)
(1.9)
1.7
0.5
(0.7)
(0.8)
—
—
—
(1.2)
(1.2)
4.1
(17.9)
(2.1)
(0.6)
(16.5)
(17.7)
(0.2)
(0.2)
www.stmodwen.co.uk
5. TAxATION CONTINUED
b. Reconciliation of effective tax rate
Profit/(loss) before tax
Less: Joint ventures and associates
Pre-tax profit/(loss) attributable to the Group
Corporation tax at 28% (2009: 28%)
Permanent differences
Short-term timing differences
Impact of current year revaluations and indexation
Difference between chargeable gains and accounting profit
Utilisation of tax losses not previously recognised
Deferred tax asset not recognised
Current year credit
Adjustments in respect of previous years
Effective rate of tax
63
2009
£m
(119.4)
22.9
(96.5)
(27.0)
(0.3)
—
5.0
(1.2)
—
7.6
(15.9)
(1.8)
(17.7)
18%
2010
£m
37.5
(7.4)
30.1
8.4
(0.6)
(0.9)
(9.1)
6.9
(5.9)
—
(1.2)
0.4
(0.8)
(3%)
The post-tax results of joint ventures and associates are stated after a tax charge of £0.7m (2009: £0.8m credit). The effective tax rate for the Group
including joint ventures and associates is a credit of 0.5% (2009: 15.4%).
The Finance (No 2) Act 2010 was enacted on 21st July 2010 which reduced the main rate of corporation tax to 27% from 1st April 2011. Further
reductions to the main rate are proposed to reduce the rate by 1% per annum to 24% by 1st April 2014. This has not been enacted at the balance
sheet date and, therefore, is not included in these financial statements.
The proposed reductions of the main rate of corporation tax by 1% per year to 24% by 1st April 2014 are expected to be enacted separately each year.
If the deferred tax assets and liabilities of the Group were all to reverse after 2014, the effect of the changes from 27% to 24% would be to reduce the
net deferred tax liability by £0.1m.
c. Balance sheet
Balance at start of the year
Credit to the income statement
Credit directly to equity
Net refund
Balance at end of the year
An analysis of the deferred tax provided by the Group is given below:
Property revaluations
Capital allowances
Appropriations to trading stock
Unutilised tax losses
Other temporary differences
Asset
£m
—
—
—
(5.3)
(3.4)
(8.7)
2010
Liability
£m
4.1
4.7
0.6
—
—
9.4
2010
2009
Corporation
tax
£m
Deferred
tax
£m
Corporation
tax
£m
Deferred
tax
£m
7.7
(0.1)
—
1.7
9.3
Net
£m
4.1
4.7
0.6
(5.3)
(3.4)
0.7
1.4
(0.7)
—
—
0.7
Asset
£m
—
—
—
(13.2)
(4.2)
(17.4)
5.7
(1.2)
—
3.2
7.7
2009
Liability
£m
13.3
4.7
0.8
—
—
18.8
18.1
(16.5)
(0.2)
—
1.4
Net
£m
13.3
4.7
0.8
(13.2)
(4.2)
1.4
64 St Modwen Properties PLC Annual Report 2010
Financial Statements
Notes to the Accounts continued
for the year ended 30th November 2010
5. TAxATION CONTINUED
At the balance sheet date, the Group has:
— unused tax losses in relation to 2010 and prior years of £6.6m (2009: £17.5m), of which £5.3m (2009: £9.9m) has been recognised as a
deferred tax asset; and
— deductions of £nil (2009: £3.3m) that will be available in subsidiary companies in future periods and have been recognised in full as a deferred
tax asset.
A deferred tax asset has been recognised on the basis that the losses or deductions will shelter the latent gains anticipated to be realised on the
Group’s property portfolio including those reflected in the deferred tax liability for property revaluations and future trading losses.
A deferred tax asset of £1.3m (2009: £7.6m) has not been recognised in respect of current and prior year tax losses as it is not considered certain
that there will be taxable profits available in the short-term against which these can be offset.
d. Factors that may affect future tax charges
Based on current capital investment plans, the Group expects to be able to continue to claim capital allowances in excess of depreciation in
future years.
The benefits of any tax planning are not recognised by the Group until the outcome is reasonably certain.
6. eARNINGS PeR ShARe
The calculation of basic and diluted earnings per share is set out below:
Weighted number of shares in issue
Weighted number of dilutive shares
Profit/(loss) attributable to equity shareholders (basic and diluted)
Basic and diluted profit/(loss) per share
Shares held by the Employee Benefit Trust are excluded from the above calculations.
2010
Number of
shares
2009
Number of
shares*
200,098,045 169,276,058
—
346,115
200,444,160 169,276,058
2010
£m
37.2
2010
pence
18.6
2009
£m
(101.1)
2009
pence
(59.7)
The Group’s share options are accounted for as cash-settled share-based payments. In calculating diluted earnings per share, earnings have been
adjusted for changes which would have resulted from share options being classified as equity-settled. Where applicable, the number of shares
included in the calculation has also been adjusted accordingly.
* In 2009 the Group undertook a Firm Placing and Placing and Open Offer resulting in the issue of 79,586,977 shares on 8th June 2009. The number of shares in issue used in the above calculation for 2009 reflects the lower number of shares in issue
through to the date of the Firm Placing and Placing and Open Offer.
7. DIvIDeNDS
Dividends paid during the year were in respect of the interim dividend for 2010. The proposed final dividend is subject to approval at the Annual
General Meeting and has not been included as a liability in these financial statements.
Paid
Final dividend in respect of previous year
Interim dividend in respect of current year
Total
Proposed
Current year final dividend
The Employee Benefit Trust waives its entitlement to dividends.
2010
2009
p per share
£m
p per share
—
1.0
1.0
2.0
—
2.0
2.0
4.0
—
—
—
—
£m
—
—
—
—
www.stmodwen.co.uk
65
8. INveSTMeNT PROPeRTy
Fair value
At 30th November 2008
Additions — new properties
Other additions
Net transfers from/(to) inventories (Note 12)
Disposals
Deficit on revaluation
At 30th November 2009
Additions — new properties
Other additions
Net transfers from inventories (Note 12)
Transfer on acquisition of residual freehold
Disposals
Gain on revaluation
At 30th November 2010
Freehold
investment
properties
£m
Leasehold
investment
properties
£m
467.1
15.2
13.8
15.4
(10.0)
(45.6)
455.9
23.8
9.8
13.0
3.3
(8.9)
10.4
507.3
347.2
—
6.0
(0.7)
(9.4)
(36.1)
307.0
—
15.4
0.8
(3.3)
(12.0)
12.8
320.7
Total
£m
814.3
15.2
19.8
14.7
(19.4)
(81.7)
762.9
23.8
25.2
13.8
—
(20.9)
23.2
828.0
Investment properties were valued at 30th November 2010 and 2009 by King Sturge LLP, Chartered Surveyors, in accordance with the Appraisal
and Valuation Manual of the Royal Institution of Chartered Surveyors, on the basis of market value. King Sturge LLP are professionally qualified
independent external valuers and have recent experience in the relevant location and category of the properties being valued.
The historical cost of investment properties at 30th November 2010 was £754.9m (2009: £717.7m).
As at 30th November 2010, £709.4m (2009: £669.2m) of investment property was pledged as security for the Group’s loan facilities.
Included within leasehold investment properties are £3.9m (2009: £3.9m) of assets held under finance leases.
9. OPeRATING PROPeRTy, PLANT AND eqUIPMeNT
Cost
At 30th November 2008
Additions
Disposals
At 30th November 2009
Additions
Disposals
At 30th November 2010
Depreciation
At 30th November 2008
Charge for the year
Disposals
At 30th November 2009
Charge for the year
Disposals
At 30th November 2010
Net book value
At 30th November 2008
At 30th November 2009
At 30th November 2010
Operating
plant
and
equipment
£m
Operating
properties
£m
2.6
4.4
(0.1)
6.9
—
—
6.9
0.4
0.1
—
0.5
0.1
—
0.6
2.2
6.4
6.3
5.0
0.4
(0.6)
4.8
0.3
(0.3)
4.8
2.9
0.9
(0.5)
3.3
0.6
(0.2)
3.7
2.1
1.5
1.1
Total
£m
7.6
4.8
(0.7)
11.7
0.3
(0.3)
11.7
3.3
1.0
(0.5)
3.8
0.7
(0.2)
4.3
4.3
7.9
7.4
66 St Modwen Properties PLC Annual Report 2010
Financial Statements
Notes to the Accounts continued
for the year ended 30th November 2010
9. OPeRATING PROPeRTy, PLANT AND eqUIPMeNT CONTINUED
Tenure of operating properties:
Freehold
Leasehold
2010
£m
3.6
2.7
6.3
2009
£m
3.6
2.8
6.4
10. JOINT veNTUReS AND ASSOCIATeS
The Group’s share of the trading results for the year of its joint ventures and associates is:
Key Property
Investments
Limited
£m
2010
Other joint
ventures and
associates
£m
2009
Key Property
Investments
Limited
£m
Total
£m
Other joint
ventures and
associates
£m
Income statements
Revenue
Net rental income
Development profit/(loss)
Gains/(losses) on disposals of investment properties
Investment property revaluation gains/(losses)
Administrative expenses
Profit/(loss) before interest and tax
Finance cost
Finance income
Profit/(loss) before tax
Taxation
Profit/(loss) for the year
14.4
6.6
—
0.4
6.2
(0.2)
13.0
(4.4)
—
8.6
(0.3)
8.3
4.4
0.7
—
0.1
—
(0.1)
0.7
(1.2)
—
(0.5)
(0.4)
(0.9)
18.8
7.3
—
0.5
6.2
(0.3)
13.7
(5.6)
—
8.1
(0.7)
7.4
25.9
7.2
(1.0)
(0.1)
(24.4)
(0.1)
(18.4)
(4.5)
0.2
(22.7)
0.6
(22.1)
1.2
0.2
—
—
(0.4)
(0.1)
(0.3)
(0.7)
—
(1.0)
0.2
(0.8)
Included in other joint ventures and associates above are profits from associated companies of £0.3m (2009: £0.2m losses).
The Group’s share of the balance sheet of its joint ventures and associates is:
Balance Sheets
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets
Equity at start of year
Transfer from joint venture to subsidiary undertaking
Profit/(loss) for the year
Equity at end of year
Key Property
Investments
Limited
£m
2010
Other joint
ventures and
associates
£m
2009
Key Property
Investments
Limited
£m
Total
£m
Other joint
ventures and
associates
£m
119.5
11.7
(11.9)
(74.9)
44.4
36.1
—
8.3
44.4
20.8
14.5
(10.1)
(20.2)
5.0
5.2
0.7
(0.9)
5.0
140.3
26.2
(22.0)
(95.1)
49.4
41.3
0.7
7.4
49.4
116.7
13.6
(12.0)
(82.2)
36.1
58.2
—
(22.1)
36.1
15.9
18.9
(6.4)
(23.2)
5.2
6.0
—
(0.8)
5.2
Total
£m
27.1
7.4
(1.0)
(0.1)
(24.8)
(0.2)
(18.7)
(5.2)
0.2
(23.7)
0.8
(22.9)
Total
£m
132.6
32.5
(18.4)
(105.4)
41.3
64.2
—
(22.9)
41.3
Included in other joint ventures and associates above are net assets of £2.7m (2009: £2.4m) in relation to associated companies. These net assets
comprise total assets of £3.9m (2009: £3.6m) and total liabilities of £1.2m (2009: £1.2m).
www.stmodwen.co.uk
67
10. JOINT veNTUReS AND ASSOCIATeS CONTINUED
Joint venture companies and associates comprise:
Name
Key Property Investments Limited
Barton Business Park Limited
Sowcrest Limited
Holaw (462) Limited
Skypark Development Partnership LLP
Chertsey Road Properties Limited
St. Modwen Hungerford Limited
Coed Darcy Limited
Baglan Bay Company Limited
Status
Interest
Activity
Joint venture
Joint venture
Joint venture
Joint venture
Joint venture
Joint venture
Joint venture
Associate
Associate
50%
50%
50%
50%
50%
50%
50%
49%
25%
Property investment and development
Property development
Property investment and development
Property investment
Property development
Property investment
Property development
Property investment and development
Property management
Many of the joint ventures and associates contain change of control provisions, as is common for such arrangements.
On 1st June 2010 the Group increased its shareholding in Shaw Park Developments Limited to 100%. No goodwill arose on increasing the stake of the
Group in the entity, which is now accounted for as a subsidiary.
11. TRADe AND OTheR ReCeIvABLeS
Non-current
Other debtors
Current
Trade receivables
Prepayments and accrued income
Other debtors
Amounts recoverable on contracts
Amounts due from joint ventures
IFRS7 disclosures in respect of financial assets included above are provided in Note 16.
12. INveNTORIeS
Properties held for sale
Properties under construction
Land under option
The movement in inventories during the two years ended 30th November 2010 is as follows:
At 30th November 2008
Additions
Net transfers to investment property (Note 8)
Disposals (transferred to development cost of sales) (Note 1)
At 30th November 2009
Additions
Net transfers to investment property (Note 8)
Disposals (transferred to development cost of sales) (Note 1)
At 30th November 2010
2010
£m
8.2
2.3
7.3
10.2
12.8
12.7
45.3
2010
£m
37.6
112.6
21.4
171.6
2009
£m
5.2
6.7
7.9
24.4
2.3
5.7
47.0
2009
£m
55.2
115.3
22.2
192.7
£m
228.1
63.1
(14.7)
(83.8)
192.7
60.1
(13.8)
(67.4)
171.6
The directors consider all inventories to be current in nature. The operational cycle is such that a proportion of inventories will not be realised
within 12 months. It is not possible to determine with accuracy when specific inventory will be realised as this will be subject to a number of issues
including the strength of the property market.
Included within disposals of inventories are net realisable value provisions made during the year of £6.1m (2009: £14.2m).
As at 30th November 2010, £48.3m (2009: £67.8m) of inventory was pledged as security for the Group’s loan facilities.
68 St Modwen Properties PLC Annual Report 2010
Financial Statements
Notes to the Accounts continued
for the year ended 30th November 2010
13. TRADe AND OTheR PAyABLeS
Current
Trade payables
Amounts due to joint ventures
Other payables and accrued expenses
Provision for share options
Other payables on deferred terms
Derivative financial instruments
Non-current
Other payables and accrued expenses
Provision for share options
Other payables on deferred terms
Finance lease liabilities (head rents)
2010
£m
15.7
4.1
76.4
0.2
18.4
18.3
2009
£m
15.0
3.5
70.1
0.9
30.4
19.3
133.1
139.2
46.4
1.6
163.2
3.9
215.1
21.5
0.9
162.6
3.9
188.9
IFRS7 disclosures in respect of financial liabilities included above are provided in Note 16.
The payment terms of the other payables on deferred terms are subject to contractual commitments. In the normal course of events the payments will
be made in line with either the disposal of investment properties held on the balance sheet, or the commencement of development. Net cash outflows
on the settlement of the deferred consideration will therefore be limited.
14. BORROWINGS
Current
Floating rate unsecured loan notes
Non-current
Bank loans repayable between one and two years
Bank loans repayable between two and five years
2010
£m
—
—
107.9
218.3
326.2
2009
£m
0.4
0.4
55.9
267.3
323.2
Each bank has their borrowings secured by a fixed charge over a discrete portfolio of certain of the Group’s property assets.
www.stmodwen.co.uk
69
14. BORROWINGS CONTINUED
Maturity profile of committed bank facilities
The majority of the Group’s bank debt is provided by bilateral revolving credit facilities, providing the flexibility to draw and repay loans as required.
The maturity profile of the Group’s committed facilities is set out below:
Less than one year†
One to two years
Two to three years
Three to four years
Four to five years
More than five years
Total
Less than one year†
One to two years
Two to three years
Three to four years
Four to five years
More than five years
Total
Floating rate borrowings
Interest rate swaps
2010
Drawn
£m
—
107.9
30.0
89.7
98.6
—
326.2
Drawn
£m
0.4
55.9
162.4
28.0
76.9
—
323.6
Undrawn
£m
5.0
56.1
40.0
35.3
56.4
—
192.8
Total
£m
5.0
164.0
70.0
125.0
155.0
—
519.0
earliest termination
£m
%*
Latest termination
£m
%*
4.79
5.43
4.81
4.80
2.69
4.32
4.63
60.0
80.0
20.0
—
40.0
60.0
260.0
4.83
5.54
4.65
—
2.69
4.51
4.63
80.0
90.0
10.0
10.0
40.0
30.0
260.0
2009
Floating rate borrowings
Interest rate swaps
Undrawn
£m
5.0
34.1
91.6
42.0
23.1
—
195.8
Total
£m
5.4
90.0
254.0
70.0
100.0
—
519.4
Earliest termination
£m
%*
Latest termination
£m
%*
110.0
130.0
—
—
—
—
240.0
5.36
4.67
—
—
—
—
4.99
—
80.0
80.0
40.0
—
40.0
240.0
—
4.70
5.54
4.56
—
4.87
4.99
* Weighted average interest rate.
† In addition to the principal amounts included above, £3.7m (2009: £3.7m) of interest payable was committed at the year end. These amounts all fall due within three months of the year end.
Certain of the interest rate swaps are extendable at the bank’s option; therefore, the tables above show the dates of normal termination and extended
termination.
£22.6m (2009: £23.1m) of the undrawn committed bank facilities are ring fenced for VSM Estates (Holdings) Limited.
The average rate of interest payable, before taking into account the effects of hedging, on borrowings outstanding during the year was 2.8% (2009:
2.9%). At 30th November 2010 the weighted average facility maturity of the bank debt was 3 years (2009: 3 years).
Interest rate profile
The interest rate profile of the Group’s borrowings after taking into account the effects of hedging is:
Total
£m
326.2
323.6
Floating
Rate debt
£m
66.2
83.6
Fixed
Rate debt
£m
260.0
240.0
Weighted
average
fixed
interest
rate
(%)
4.63
4.99
Weighted
maturity of
derivatives
(years)*
3.37
1.09
At 30th November 2010
At 30th November 2009
* Based on earliest termination dates.
The Group’s derivative financial instruments, which are classified as fair value through profit or loss, consist of sterling denominated interest swaps
from floating rate to fixed rate and range from 2.46% to 5.97% (2009: 4.32% to 5.97%). In addition the Group has a cap at 7.5% on a further
£11m (2009: £55m) of floating rate debt. Details of the change in fair value of derivatives charged to the income statement are disclosed in Note 4.
70 St Modwen Properties PLC Annual Report 2010
Financial Statements
Notes to the Accounts continued
for the year ended 30th November 2010
15. LeASING
Operating lease commitments where the Group is the lessee
The Group leases certain of its premises, motor vehicles and office equipment under operating leases. Future aggregate minimum lease rentals
payable under non-cancellable operating leases are as follows:
In one year or less
Between one and five years
In five years or more
2010
£m
0.7
2.9
1.0
4.6
2009
£m
1.3
2.6
1.5
5.4
Operating leases where the Group is the lessor
The Group leases out its investment properties under operating leases. The future aggregate minimum rentals receivable under non-cancellable
operating leases are as follows:
In one year or less
Between one and five years
In five years or more
2010
£m
27.5
71.1
193.7
292.3
2009
£m
27.2
71.1
178.6
276.9
Contingent rents, calculated as a percentage of turnover for a limited number of tenants, of £0.4m (2009: £0.3m) were recognised during the year.
Obligations under finance leases
Finance lease liabilities payable in respect of certain leasehold investment properties are as follows:
Less than one year
Between one and five years
More than five years
Less than one year
Between one and five years
More than five years
Minimum
lease
payments
£m
0.2
0.9
67.5
68.6
Minimum
lease
payments
£m
0.2
0.9
67.7
68.8
2010
Interest
£m
Principal
£m
0.2
0.9
63.6
64.7
2009
—
—
3.9
3.9
Interest
£m
Principal
£m
0.2
0.9
63.8
64.9
—
—
3.9
3.9
Finance leases are for periods of up to 999 years from inception and a discount rate of 6.0% (2009: 6.0%) has been used to derive the fair value of
the principal amount outstanding. All lease obligations are denominated in sterling.
www.stmodwen.co.uk
16. FINANCIAL INSTRUMeNTS
Categories and classes of financial assets and liabilities
Financial assets
Loans and receivables:
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Derivative financial instruments held at fair value through profit or loss
Amortised cost:
Bank loans and overdrafts
Trade and other payables
Other payables on deferred terms
Finance lease liabilities (head rents)
71
2009
£m
4.8
36.4
41.2
2009
£m
19.3
323.6
62.2
193.0
3.9
602.0
2010
£m
11.3
25.8
37.1
2010
£m
18.3
326.2
90.3
181.6
3.9
620.3
a
a
b
a
a
a
a
Trade and other receivables above comprise other debtors, trade receivables and amounts due from joint ventures as disclosed in Note 11, for current
and non-current amounts, after deduction of £7.6m (2009: £7.9m) of non-financial assets.
Trade and other payables above comprise trade payables, amounts due to joint ventures and other payables and accrued expenses as disclosed in
Note 13, for current and non-current amounts, after deduction of £52.3m (2009: £47.9m) of non-financial liabilities.
a) The directors consider that the carrying amount recorded in the financial statements approximates their fair value.
b) Derivative financial instruments are carried at fair value. The fair value is calculated using quoted market prices relevant for the term and
instrument.
Fair value hierarchy of financial assets and liabilities
Financial assets and financial liabilities that are measured subsequent to initial recognition at fair value, are required to be grouped into Levels 1 to 3
based on the degree to which the fair value is observable:
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets;
• Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset,
either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset that are not based on observable
market data (unobservable inputs).
Derivative financial instruments held at fair value through profit or loss are the only financial instruments held by the Group at fair value. The net
liability of £18.3m recognised as at 30th November 2010 (2009: £19.3m) is categorised as a Level 2 fair value measurement.
Capital risk
The Group manages its capital to ensure that the entities in the Group will be able to continue as a going concern whilst maximising the return to
shareholders through the optimisation of the debt and equity balance. The capital structure of the Company consists of debt (as disclosed in
Note 14), cash and cash equivalents and equity, comprising issued capital, reserves and retained earnings as disclosed in the Group statement of
changes in equity.
72 St Modwen Properties PLC Annual Report 2010
Financial Statements
Notes to the Accounts continued
for the year ended 30th November 2010
16. FINANCIAL INSTRUMeNTS CONTINUED
Market risk
Market risk is the potential adverse change in Group income or the Group net worth arising from movements in interest rates or other market prices.
Interest rate risk is the Group’s principal market risk and is considered below.
Interest rate risk management: The Group is exposed to interest rate risk as it borrows funds at variable interest rates. The Group uses a combination
of variable rate borrowings and interest rate swaps to manage the risk.
Interest rate sensitivity: The following table details the Group’s sensitivity, after tax, to a 1% change in interest rates based on year end levels of debt.
1% increase in interest rates
Interest on borrowings
Effect of interest rate swaps
1% decrease in interest rates
Interest on borrowings
Effect of interest rate swaps
2010
£m
(2.3)
1.9
(0.4)
2010
£m
2.3
(1.9)
0.4
2009
£m
(2.3)
1.7
(0.6)
2009
£m
2.3
(1.7)
0.6
Credit risk
Credit risk is the risk of financial loss where counterparties are not able to meet their obligations as they fall due.
The credit risk on the Group’s liquid funds and derivative financial instruments is limited because the counterparties are banks with high (generally
AA) credit ratings. Bank deposits are only placed with banks in accordance with Group policy that specifies minimum credit rating and maximum
exposure. Credit risk on derivatives is closely monitored.
Trade and other receivables consist of amounts due from a large number of parties spread across geographical areas. The Group does not have any
significant concentrations of credit risk as the tenant base is large and diverse with the largest individual tenant accounting for £1.5m (2009:
£2.2m) of gross rental income.
The carrying amount of financial assets, as detailed above, represents the Group’s maximum exposure to credit risk at the reporting date.
Included within trade and other receivables is £0.7m (2009: £1.0m) which is provided against as it represents estimated irrecoverable amounts.
This allowance has been determined by a review of all significant balances that are past due considering the reason for non-payment and the
creditworthiness of the counterparty. A reconciliation of the changes in this account during the year is provided below.
Movement in the allowance for doubtful debts
At start of year
Impairment losses recognised
Amounts written off as irrecoverable
Impairment losses reversed
At end of year
2010
£m
1.0
0.6
(0.5)
(0.4)
0.7
2009
£m
0.7
0.7
(0.2)
(0.2)
1.0
Trade and other receivables include £0.6m (2009: £2.4m) which are past due as at 30th November 2010 for which no provision has been made
because the amounts are considered recoverable. The following table provides an ageing analysis of these balances.
Number of days past due but not impaired
1–30 days
31–60 days
60 days +
2010
£m
0.3
—
0.3
0.6
2009
£m
1.1
0.2
1.1
2.4
www.stmodwen.co.uk
73
16. FINANCIAL INSTRUMeNTS CONTINUED
Liquidity risk
Liquidity risk is the risk that the Group does not have sufficient financial resources available to meet its obligations as they fall due. The Group
manages liquidity risk by continuously monitoring forecast and actual cash flows, matching the maturity profiles of financial assets and liabilities and
through the use of bilateral facilities, overdrafts and cash with a range of maturity dates to ensure continuity of funding.
The economic climate, although improved, continues to provide a difficult backdrop to the Group’s operations. As such, the focus continues to be on
managing cash flows and forward commitments, whilst continuing to marshal sites through the planning and remediation process and undertaking
development on largely pre-let or pre-sold opportunities.
The maturity profile of the anticipated future cash flows for bank loans and overdrafts is shown in Note 14. The maturity profile for the Group’s other
non-derivative financial liabilities, on an undiscounted basis is as follows:
2010
Trade and other payables
Other payables on deferred terms
2009
Trade and other payables
Other payables on deferred terms
Less than
one month
£m
18.3
—
18.3
Less than
one month
£m
16.5
—
16.5
1–3
months
£m
8.8
10.0
18.8
1–3
months
£m
11.6
11.9
23.5
3 months
to 1 year
£m
13.3
8.4
21.7
3 months
to 1 year
£m
12.6
19.0
31.6
1–5
years
£m
47.3
162.6
209.9
1–5
years
£m
22.4
164.9
187.3
More than
5 years
£m
67.7
5.0
72.7
More than
5 years
£m
67.7
7.7
75.4
Total
£m
155.4
186.0
341.4
Total
£m
130.8
203.5
334.3
The Group’s approach to cash flow, financing and bank covenants is discussed further in the financial review section of the business review on
page 18.
17. ShARe CAPITAL
Authorised:
Equity share capital
At start and end of year
Allotted and fully paid:
Equity share capital
At start and end of year
See Note 3d for details of outstanding options to acquire ordinary shares.
Ordinary
10p shares
No.
£m
250,000,000
25.0
200,360,931
20.0
74 St Modwen Properties PLC Annual Report 2010
Financial Statements
Notes to the Accounts continued
for the year ended 30th November 2010
18. PeNSIONS
The Group operates a pension scheme with both defined benefit and defined contribution sections. The defined benefit section is closed to new
members and, from 1st September 2009, is also closed to future accrual. The income statement includes:
— a charge of £0.1m (2009: £0.5m credit) for the defined benefit section, incorporating a curtailment gain of £nil (2009: £0.7m); and
— a charge of £0.1m (2009: £0.4m) for the defined contribution section.
The last formal actuarial valuation of the scheme was at 5th April 2008, when the market value of the net assets of the scheme was £32.9m, a
funding level of 104%. The valuation was performed using the ‘Projected Unit Credit Method’ under IAS19. The main actuarial assumptions were:
Investment rate of return:
pre-retirement
post-retirement
Increase in earnings*
Increase in pensions
6.3% p.a.
4.8% p.a.
6.6% p.a.
3.6% p.a.
* Capped to 5.6% for certain members.
The actuarial valuation of the defined benefit section, a final salary scheme, was updated to 30th November 2010 on an IAS basis by a qualified
independent actuary. The major assumptions used by the actuary were:
Rate of increase in salaries *
Rate of increase in deferred pensions
Rate of increase in pensions in payment
Pre 6th April 1997 benefits
Post 5th April 1997 benefits
Discount rate
Inflation assumption
2010
—
2.8%
3.0%
3.5%
5.5%
2.8%
2009
—
3.6%
3.0%
3.6%
5.5%
3.6%
2008
4.8%
2.8%
2.8%
2.8%
6.2%
2.8%
*
Following the closure of the defined benefit section to future accrual, the assumption regarding the rate of increase in salaries is no longer applicable as retirement benefits will be based on salaries at 31st August 2009. Benefits earned up to
the point of the scheme closure will be protected and will be increased in line with inflation, subject to a maximum of 5% per annum. From 2010 the basis of the inflation assumption has been amended, in line with market practice, from the
Retail Price Index to the Consumer Price Index.
The mortality rates adopted are from the PA92 year of birth and medium cohort tables (which assume that, for example, male members who are
currently retired are expected to draw their pensions for 26.8 years and non retired members for 27.7 years, based on the normal retirement age
of 60).
The Group expects to make contributions of £0.2m to the defined benefit section of the scheme in 2011 and in future years.
The fair values of assets in the defined benefit section of the scheme and the expected rates of return, based on market expectations, were:
Equities
Bonds
Property
Cash and other assets
Actuarial value of liabilities
Unrecognised surplus
Surplus in the scheme
Related deferred tax liability
Fair value of pension asset net of deferred tax
2010
2009
2008
%
5.7
5.5
5.7
4.2
£m
10.3
7.6
8.5
0.8
27.2
(24.7)
(2.5)
—
—
—
%
5.6
5.4
5.6
4.1
£m
17.0
1.4
8.4
0.3
27.1
(26.9)
(0.2)
—
—
—
%
5.9
7.2
5.9
4.4
£m
13.3
0.5
9.9
1.2
24.9
(23.6)
(1.3)
—
—
—
The cumulative amount of actuarial gains and losses (before unrecognised surplus of £2.5m) recorded in the Group statement of recognised income
and expense is a gain of £0.2m (2009: £2.0m loss).
www.stmodwen.co.uk
18. PeNSIONS CONTINUED
Analysis of the amount (charged)/credited to operating profit
Current service cost
Curtailment gain
Total operating (charge)/credit
Analysis of the amount credited/(charged) to finance costs and income
Expected return on pension scheme assets
Interest on pension scheme liabilities
75
2008
£m
(0.4)
—
(0.4)
2008
£m
2.0
(1.6)
0.4
2010
£m
(0.2)
—
(0.2)
2010
£m
1.5
(1.4)
0.1
2009
£m
(0.2)
0.7
0.5
2009
£m
1.4
(1.4)
—
The actual return on pension scheme assets was a gain of £2.4m (2009: £3.2m). The expected return on pension scheme assets was calculated
assuming cash and gilts will make returns in line with the yield on the 20 year gilt index and that equities and properties will return 1.5% above this.
Corporate bonds have been assumed to return in line with the yield on the iboxx over 15 year corporate bond index.
Analysis of the amount recognised in the Group statement of comprehensive income
Difference between expected and actual return on assets
Experience gains and losses arising on fair value of scheme liabilities
Effects of changes in the demographic and financial assumptions underlying
the fair value of the scheme liabilities
Change in unrecognised surplus
Total actuarial loss
Analysis of the movement in the fair value of the scheme liabilities
Beginning of year
Movement in year:
Current service cost
Employee contributions
Interest cost
Actuarial gains and losses
Benefits paid
Curtailment gain
End of year
2010
£m
26.9
0.2
—
1.4
(1.3)
(2.5)
—
24.7
2010
£m
0.9
(0.7)
2.0
(2.3)
(0.1)
2008
£m
29.0
0.4
0.1
1.6
(3.9)
(3.6)
—
2009
£m
1.8
3.7
(7.4)
1.1
(0.8)
2007
£m
31.1
0.5
0.1
1.5
(3.0)
(1.2)
—
2008
£m
(8.9)
(3.8)
7.6
4.7
(0.4)
2006
£m
29.8
0.5
0.1
1.5
—
(0.8)
—
2009
£m
23.6
0.2
0.1
1.4
3.7
(1.4)
(0.7)
26.9
23.6
29.0
31.1
76 St Modwen Properties PLC Annual Report 2010
Financial Statements
Notes to the Accounts continued
for the year ended 30th November 2010
18. PeNSIONS CONTINUED
Analysis of the movement in the fair value of the scheme assets
Beginning of year
Movement in year:
Expected return on scheme assets
Contributions by employer
Employee contributions
Actuarial gains and losses
Benefits paid
End of year
Surplus in scheme at the year end
Unrecognised surplus
Net surplus
history of experience gains and losses
Difference between expected and actual return on scheme assets
Amount
Percentage of scheme assets
Experience gains and losses on scheme liabilities
Amount
Percentage of fair value of scheme liabilities
Changes in assumptions underlying the fair value of scheme liabilities
Amount
Percentage of fair value of scheme liabilities
Change in unrecognised surplus
Total actuarial (loss)/gain recognised in the statement of
recognised income and expense
Amount
Percentage of present value of scheme liabilities
Deferred taxation attributable to pension movements (Note 5)
Pension scheme movement for the year net of deferred tax
2010
£m
27.1
1.5
0.2
—
0.9
(2.5)
27.2
2.5
(2.5)
—
2010
£m
0.9
3.3%
(0.7)
2.8%
2.0
(8.1%)
(2.3)
(0.1)
(0.4%)
—
(0.1)
2009
£m
24.9
1.4
0.3
0.1
1.8
(1.4)
27.1
0.2
(0.2)
—
2008
£m
35.0
2.0
0.4
0.1
(9.0)
(3.6)
24.9
1.3
(1.3)
—
2007
£m
33.9
1.8
0.6
0.1
(0.2)
(1.2)
35.0
6.0
(6.0)
—
2009
£m
2008
£m
2007
£m
1.8
6.6%
(9.0)
(35.7%)
3.7
(13.8%)
(7.4)
27.5%
1.1
(0.8)
(3.0%)
0.2
(0.6)
(3.8)
16.1%
7.6
(32.2%)
4.7
(0.4)
(1.7%)
0.1
(0.3)
(0.2)
(0.3%)
(3.0)
10.3%
5.8
(20.0%)
(6.0)
(3.3)
(11.4%)
0.9
(2.4)
2006
£m
29.3
1.6
1.1
0.1
2.6
(0.8)
33.9
2.8
—
2.8
2006
£m
2.6
8.0%
(1.1)
3.5%
0.9
(2.9%)
—
2.5
8.0%
(0.7)
1.8
19. CAPITAL COMMITMeNTS
At 30th November 2010 the Group had contracted capital expenditure of £18,159,000 (2009: £796,000). In addition the Group’s share of the
contracted capital expenditure of its joint venture undertakings was £596,000 (2009: £1,593,000). All capital commitments relate to investment
properties.
20. CONTINGeNT LIABILITIeS
The Group has a joint and several unlimited liability with Vinci PLC and the Ministry of Defence under guarantees in respect of the financial
performance of VSM Estates (Holdings) Limited (“VSM”). This is a guarantee in the ordinary course of business and would require the guarantors to
step into VSM’s place in the event of a default on Project MoDEL. Completion of the project is not considered onerous as the forecast revenues exceed
the anticipated costs and it is not expected that there would be any net outflow in this regard.
The Group is also party to a joint and several guarantee to Fortis Bank in respect of the performance of Sowcrest Limited which is limited to £16.0m
(2009: £18.4m).
www.stmodwen.co.uk
77
21. ReLATeD PARTy TRANSACTIONS
Transactions between the Group and its non wholly owned subsidiaries, joint ventures and associates are all undertaken on an arms length basis and
are detailed as follows:
Key Property Investments Limited (‘KPI’)
During the year the Group provided management and construction services to KPI for which it received fees totalling £10.9m (2009: £6.5m). The
balance due to the Group at year end was £0.6m (2009: £0.3m). No interest is charged on this balance.
holaw (462) Limited (‘holaw’)
During the year Holaw repaid £nil of its loan (2009: £0.2m). The balance due to the Group at the year end was £0.3m (2009: £0.3m). No interest is
charged on this balance.
Barton Business Park Limited (‘Barton’)
During the year the Group borrowed an additional £0.5m from Barton (2009: £nil). The balance due to Barton at the year end was £3.9m (2009:
£3.4m). No interest is charged on this balance.
Sowcrest Limited (‘Sowcrest’)
During the year the Group provided management services to Sowcrest for which it received fees totalling £nil (2009: £0.2m).
In addition, during the year £7.3m was paid to Sowcrest (2009: £3.6m) leaving an amount due from Sowcrest at the year end of £11.3m (2009:
£4.0m). Interest is chargeable on £8.5m (2009: £1.4m) of the amount outstanding at a fixed rate of 10% (2009: 10%).
Skypark Development Partnership (‘Skypark’)
The balance due to the Group from Skypark at the year end was £0.6m (2009: £0.3m), of which £0.2m (2009: £0.2m) relates to loan notes issued to
the Group in the year. The remaining £0.4m (2009: £0.1m) relates to purchase ledger funding provided by the Group. No interest is charged on these
balances.
Chertsey Road Properties Limited (‘CRP’)
During the year CRP repaid £0.2m of its loan (2009: borrowed £0.3m). The balance due to the Group at the year end was £0.1m (2009: £0.3m). No
interest is charged on this balance.
St. Modwen hungerford Limited (‘hungerford’)
During the year the Group loaned £nil to Hungerford (2009: £0.6m). The balance due to the Group at the year end was £0.6m (2009: £0.6m). No
interest is charged on this balance.
Coed Darcy Limited (‘CDL’)
During the year CDL repaid £0.2m of its loan. The balance due to the Group at the year end was £nil (2009: £0.2m). No interest is charged on this
balance.
Branston Properties Limited (‘Branston’)
During the year the Group entered into an option to acquire the entire issued share capital of Branston, a company in which the family of Simon Clarke
has a financial interest, at market value. The price paid for the option was £0.1m and exercise of this is contingent on certain planning milestones
being achieved.
St. Modwen Pension Scheme
The Group occupies offices owned by the pension scheme with a value of £0.5m (2009: £0.5m) with an annual rental payable of £0.1m (2009:
£0.1m). The balance due to the Group at the year end was £nil (2009: £0.5m).
78 St Modwen Properties PLC Annual Report 2010
Financial Statements
Notes to the Accounts continued
for the year ended 30th November 2010
21. ReLATeD PARTy TRANSACTIONS CONTINUED
Non-wholly owned subsidiaries
The Company provides administrative and management services and provides a central purchase ledger system to subsidiary companies. In addition,
the Company also operates a central treasury function which lends to and borrows from subsidiary undertakings as appropriate. Management fees
and interest charged/(credited) during the year and net balances due (to)/from subsidiaries in which the Company has a less than 90% interest were
as follows:
Stoke-on-Trent Regeneration Limited
Stoke-on-Trent Regeneration (Investments) Limited
Uttoxeter Estates Limited
Widnes Regeneration Limited
Trentham Leisure Limited
Norton & Proffitt Developments Limited
VSM Estates (Holdings) Limited
Management fees
Interest
Balance
2010
£m
—
—
—
—
—
—
0.2
0.2
2009
£m
—
—
—
—
0.2
—
0.2
0.4
2010
£m
(0.1)
—
—
—
1.9
—
—
1.8
2009
£m
(0.1)
—
—
0.1
1.2
—
—
1.2
2010
£m
(3.9)
(0.5)
(0.6)
2.3
23.8
(0.2)
(9.9)
11.0
2009
£m
(7.4)
(0.3)
(0.2)
3.0
22.4
(0.3)
(8.5)
8.7
All amounts due to the Group are unsecured and will be settled in cash. All amounts above are stated before provisions for doubtful debts of £nil
(2009: £0.7m). No guarantees have been given or received from related parties.
Key management personnel
The directors are considered to be the Group’s key management personnel and their remuneration is disclosed in the directors’ remuneration report.
www.stmodwen.co.uk
Company Balance Sheet
as at 30th November 2010
Fixed assets
Tangible fixed assets
Investments held as fixed assets
Current asset
Debtors
Cash at bank and in hand
Current liabilities
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Creditors: amounts falling due after more than one year
Net assets
Capital and reserves
Called up share capital
Share premium account
Capital redemption reserve
Revaluation reserve
Profit and loss account
Own shares
equity shareholders’ funds
79
2009
£m
0.7
239.3
240.0
475.0
0.2
(149.2)
326.0
566.0
(192.2)
373.8
20.0
102.8
0.3
164.7
86.4
(0.4)
373.8
Notes
(E)
(F)
(G)
(H)
(H)
(K)
(L)
(L)
(L)
(L)
(L)
2010
£m
0.6
328.5
329.1
473.6
1.9
(149.4)
326.1
655.2
(216.1)
439.1
20.0
102.8
0.3
254.6
62.0
(0.6)
439.1
These financial statements were approved by the Board of directors on 4th February 2011 and were signed on its behalf by Bill Oliver and
Michael Dunn.
Bill Oliver
Chief Executive
Michael Dunn
Group Finance Director
80 St Modwen Properties PLC Annual Report 2010
Financial Statements
Notes to the Company Accounts
for the year ended 30th November 2010
(A). ACCOUNTING POLICIeS
Basis of preparation
The accounts and notes have been prepared in accordance with applicable UK GAAP on a going concern basis.
Compliance with SSAP19 “Accounting for Investment Properties” requires departure from the Companies Act 2006 relating to depreciation and an
explanation of the departure is given below.
Accounting convention
The financial statements have been prepared under the historical cost convention except for the revaluation of certain properties, derivative financial
instruments and the defined benefit section of the Company’s pension scheme.
Revenue recognition
Revenue is recognised to the extent that the Company obtains the right to consideration in exchange for its performance. Revenue is measured at the
fair value of the consideration received, excluding discounts and VAT.
Rental income
Rental income arising from investment properties is accounted for on a straight-line basis over the lease term.
Interest receivable
Interest receivable is recognised on an accruals basis.
Tangible fixed assets
Tangible fixed assets, other than investment properties, are stated at cost less accumulated depreciation and accumulated impairment losses. Such
cost includes costs directly attributable to making the asset capable of operating as intended.
Depreciation is provided on all plant, machinery and equipment at rates calculated to write off the cost less estimated residual value, based on prices
prevailing at the balance sheet date, of each asset evenly over its expected useful life as follows:
Plant, machinery and equipment
— over 2 to 5 years
Depreciation is not provided on investment properties which are subject to annual revaluations.
Long leasehold investment properties
In accordance with SSAP19, investment properties are revalued annually and the aggregate surplus or temporary deficit is transferred to the
revaluation reserve. Permanent diminutions are recognised through the profit and loss account. No depreciation is provided in respect of
investment properties.
The Companies Act 2006 requires all properties to be depreciated. However, this requirement conflicts with the generally accepted accounting
principle set out in SSAP19. The directors consider that, because these properties are not held for consumption but for their investment potential,
to depreciate them would not give a true and fair view and that it is necessary to adopt SSAP19 in order to give a true and fair view. If this departure
from the Act had not been made, the profit for the financial year would have been reduced by depreciation. However, the amount of depreciation
cannot reasonably be quantified because depreciation is only one of many factors reflected in the annual valuation and the amount which might
otherwise have been shown cannot be separately identified or quantified.
Investment in subsidiary, joint venture and associated companies
The investments in subsidiary, joint venture and associated companies are included in the Company’s balance sheet at the Company’s share of net
asset value. The valuation recognises the cost of acquisition and changes in the book values of the underlying net assets. The surplus or deficit
arising on revaluation is reflected in the Company’s reserves.
Deferred taxation
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or
events have occurred at that date that will result in an obligation to pay less or to receive more tax, with the following exceptions:
— provision is made for tax on gains arising from the revaluation (and similar fair value adjustments) of fixed assets and gains on disposal of fixed
assets that have been rolled over into replacement assets only to the extent that, at the balance sheet date, there is a binding agreement to
dispose of the assets concerned. However, no provision is made where, on the basis of all available evidence at the balance sheet date, it is more
likely than not that the taxable gain will be rolled over into replacement assets and charged to tax only where the replacement assets are sold; and
— deferred tax assets are recognised only to the extent that the directors consider that it is more likely than not that there will be suitable taxable
profits from which the future reversal of the underlying timing differences can be deducted.
Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse,
based on tax rates and laws enacted or substantively enacted at the balance sheet date.
www.stmodwen.co.uk
81
(A). ACCOUNTING POLICIeS CONTINUED
Interest
Interest paid is charged to the profit and loss account on an accruals basis.
Finance costs of debt are allocated over the term of the debt at a constant rate on the carrying amount.
Share-based payment
When employee share options are exercised the employee has the choice of whether to have the liability to them settled by way of cash or the
retention of shares. As it has been the Company’s practice to satisfy the majority of share options in cash and new shares are not issued to satisfy
employee share option plans the Company accounts for its share option schemes as cash-settled. The cost of cash-settled transactions is measured at
fair value using an appropriate option pricing model and amortised through the income statement over the vesting period. The liability is remeasured
at each balance sheet date. Revisions to the fair value of the accrued liability after the end of the vesting period are recorded in the income statement
of the year in which they occur.
Pensions
The Company operates a pension scheme with both defined benefit and defined contribution sections. The defined benefit section is closed to
new members and, from 1st September 2009, to future accrual.
The cost of providing benefits under the defined benefit section is determined using the projected unit credit method, which attributes entitlement to
benefits to the current period (to determine current service cost) and to the current and prior periods (to determine the present value of the defined
benefit obligation) and is based on actuarial advice. Past service costs are recognised in the profit and loss account immediately if the benefits
have vested.
The interest element of the defined benefit cost represents the change in present value of scheme obligations. The expected return on plan assets is
based on an assessment made at the beginning of the year of long-term market returns on scheme assets, adjusted for the effect on the fair value of
plan assets of contributions received and benefits paid during the year. The difference between the expected return on plan assets and the interest
cost is recognised in the profit and loss account as other finance income or expense.
Actuarial gains and losses are recognised in full in the statement of total recognised gains and losses in the year in which they occur. The defined
benefit pension asset or liability in the balance sheet comprises the present value of the defined benefit obligation, less any past service cost not yet
recognised and less the fair value of plan assets out of which the obligations are to be settled directly.
Contributions to defined contribution schemes are recognised in the profit and loss account in the period in which they become payable.
Derivative financial instruments and hedging
The Company uses derivative financial instruments such as interest rate swaps to hedge its risks associated with interest rate fluctuations. Such
instruments are initially recognised at fair value on the date on which a contract is entered into and are subsequently remeasured at fair value. The
Company has determined that the derivative financial instruments in use do not qualify for hedge accounting and, consequently, any gains or losses
arising from changes in the fair value of derivatives are taken to the profit and loss account.
Full details of the Company’s derivative financial instruments are given in Note 16 to the Group financial statements.
Own shares
St. Modwen Properties PLC shares held by the Company are classified in shareholders’ equity and are recognised at cost.
Interest bearing loans and borrowings
All loans and borrowings are initially recognised at fair value less directly attributable transaction costs. After initial recognition, loans and borrowings
are measured at amortised cost.
Gains and losses arising on the repurchase, settlement or otherwise cancellation of liabilities are recognised respectively in finance income
and expense.
Operating leases
Rentals payable under operating leases are charged in the profit and loss account on a straight-line basis over the lease term.
Cash flow statement
The Company has taken advantage of the exemption permitted by FRS1 not to present a cash flow statement.
82 St Modwen Properties PLC Annual Report 2010
Financial Statements
Notes to the Company Accounts continued
for the year ended 30th November 2010
(B). PROFIT FOR The FINANCIAL yeAR
The Company has taken advantage of Section 408 of the Companies Act 2006 and has not included its own profit and loss account in these financial
statements. The Company’s loss for the year ended 30 November 2010 was £22.3m (2009: £17.8m loss).
(C). OPeRATING exPeNSeS
(i) Audit fees
The analysis of auditors’ remuneration is as follows:
Fees paid to Deloitte LLP in respect of:
Fees payable for the audit of the Company’s annual accounts
Total audit fees
Other services pursuant to legislation
Tax services
Total non-audit fees
Total fees
2010
£’000
2009
£’000
112
112
51
210
261
373
107
107
305
109
414
521
(ii) employees
The average number of full-time employees (including executive directors) employed by the Company during the year were as follows:
Property
Leisure and other activities
Administration
Wages and salaries
Social security costs
Pension costs
2010
Number
2009
Number
125
41
39
205
2010
£m
9.4
1.2
0.3
10.9
127
38
40
205
2009
£m
8.1
1.0
0.7
9.8
(D). DIvIDeNDS
Dividends paid during the year were in respect of the interim dividend for 2010. The proposed final dividend is subject to approval at the Annual
General Meeting and has not been included as a liability in these financial statements.
Paid
Final dividend in respect of previous year
Interim dividend in respect of current year
Total
Proposed
Current year final dividend
The Employee Benefit Trust waives its entitlement to dividends.
2010
2009
p per share
£m
p per share
£m
—
1.0
1.0
2.0
—
2.0
2.0
4.0
—
—
—
—
—
—
—
—
www.stmodwen.co.uk
(e). TANGIBLe FIxeD ASSeTS
Cost or valuation
At 30th November 2009
Additions
At 30th November 2010
Depreciation
At 30th November 2009
Charge for the year
Disposals
At 30th November 2010
Net book value
At 30th November 2010
At 30th November 2009
83
Total
£m
2.5
0.2
2.7
1.8
0.3
—
2.1
0.6
0.7
Long
leasehold
investment
properties
£m
Plant,
machinery
and
equipment
£m
0.3
—
0.3
—
—
—
—
0.3
0.3
2.2
0.2
2.4
1.8
0.3
—
2.1
0.3
0.4
Investment properties were valued at 30th November 2010 and 2009 by King Sturge LLP, Chartered Surveyors, in accordance with the Appraisal
and Valuation Manual of the Royal Institution of Chartered Surveyors, on the basis of market value. King Sturge LLP are professionally qualified
independent external valuers and have recent experience in the relevant location and category of the properties being valued.
Long leasehold investment properties are currently let under operating leases for the purpose of generating rental income.
(F). INveSTMeNTS heLD AS FIxeD ASSeTS
valuation
At 30th November 2009
Increase in entity holding from joint venture to subsidiary
Revaluation of investments
At 30th November 2010
Cost
At 30th November 2010 and 30th November 2009
Investment
in subsidiary
companies
£m
Investment
in joint
ventures
£m
192.4
(1.4)
83.5
274.5
46.9
0.7
6.4
54.0
Total
£m
239.3
(0.7)
89.9
328.5
76.2
26.5
102.7
84 St Modwen Properties PLC Annual Report 2010
Financial Statements
Notes to the Company Accounts continued
for the year ended 30th November 2010
(F). INveSTMeNTS heLD AS FIxeD ASSeTS CONTINUED
Subsidiary companies:
At 30th November 2010 the principal subsidiaries, all of which were held directly by the Company, were as follows:
Proportion of ordinary shares held
Nature of principal business
Boughton Holdings
Chaucer Estates Limited
Leisure Living Limited
Redman Heenan Properties Limited
St. Modwen Developments Limited
St. Modwen Investments Limited
St. Modwen Securities Limited
St. Modwen Ventures Limited
St. Modwen Properties Sarl
Stoke-on-Trent Regeneration Limited
Uttoxeter Estates Limited
Widnes Regeneration Limited
Trentham Leisure Limited
Norton & Proffitt Developments Limited
VSM Estates (Holdings) Limited
100%
100%
100%
100%
100%
100%
100%
100%
100%
81%
81%
81%
80%
75%
50%
Investment company
Property investors
Leisure operator
Property investors
Property developers
Property investors
Property developers
Property investors
Property investors
Property developers
Property developers
Property developers
Leisure operator
Property developers
Property developers
All principal subsidiaries are registered and operated in England and Wales.
Joint ventures
At 30th November 2010 the principal joint ventures were:
Key Property Investments Limited
Barton Business Park Limited
Sowcrest Limited
Holaw (462) Limited
Skypark Development Partnership LLP
Chertsey Road Properties Limited
St. Modwen Developments Hungerford Limited
Percentage shareholding
Nature of principal business
50%
50%
50%
50%
50%
50%
50%
Property investment and development
Property development
Property development
Property investment
Property development
Property investment
Property development
Many of the joint ventures contain change of control provisions, as is common for such arrangements.
(G). DeBTORS
Trade debtors
Amounts due from subsidiaries
Amounts due from joint venture and associated companies
Other debtors
Prepayments and accrued income
Corporation tax
Deferred tax asset (see Note (J))
2010
£m
0.1
437.4
12.6
6.8
3.1
7.9
5.7
473.6
2009
£m
0.1
446.9
5.0
7.8
2.6
6.5
6.1
475.0
www.stmodwen.co.uk
85
(h). CReDITORS
Amounts falling due within one year:
Trade creditors
Amounts due to subsidiaries
Amounts due to joint venture and associated companies
Other tax and social security
Other creditors
Accruals and deferred income
Derivative financial instruments
Amounts falling due after more than one year:
Bank loans
Other creditors
Accruals and deferred income
All bank borrowings are secured by a fixed charge over the property assets of the Company and its subsidiaries.
(I). BORROWINGS
The maturity profile of the bank borrowings, all of which are wholly repayable within five years, is as follows:
One to two years
Two to five years
Total
(J). DeFeRReD TAxATION
The amounts of deferred taxation provided and unprovided in the accounts are :
2010
£m
1.4
112.3
4.1
0.1
1.1
12.1
18.3
149.4
2010
£m
214.5
—
1.6
216.1
2010
£m
40.0
174.5
214.5
2009
£m
1.1
117.0
3.5
1.1
2.5
4.7
19.3
149.2
2009
£m
190.1
1.2
0.9
192.2
2009
£m
62.5
127.6
190.1
Provided Unprovided
2009
£m
2010
£m
2010
£m
2009
£m
Capital allowances in excess of depreciation
Other timing differences
—
(5.7)
(5.7)
0.1
(6.2)
(6.1)
—
0.8
0.8
—
0.9
0.9
86 St Modwen Properties PLC Annual Report 2010
Financial Statements
Notes to the Company Accounts continued
for the year ended 30th November 2010
(J). DeFeRReD TAxATION CONTINUED
Reconciliation of movement on deferred tax asset included in debtors
Balance as at 30th November 2009
Profit and loss account
Balance as at 30th November 2010
Reconciliation of deferred tax liability included in pension scheme asset
Balance as at 30th November 2009
Profit and loss account
Statement of total recognised gains and losses
Balance as at 30th November 2010
(K). ShARe CAPITAL
Authorised:
Equity share capital
At start and end of year
Allotted and fully paid:
Equity share capital
At start and end of year
£m
(6.1)
0.4
(5.7)
£m
—
—
—
—
£m
Ordinary 10p shares
No.
250,000,000
25.0
200,360,931
20.0
See Note 3d of the Group financial statements for details of outstanding options to acquire ordinary shares.
(L). ReSeRveS
At 30th November 2009
Revaluation of investments (Note F)
Retained loss for the year (Note B)
Net share additions
Dividends paid (Note D)
Actuarial loss on pension scheme (Note M)
At 30th November 2010
Share premium
account
£m
Capital
redemption
reserve
£m
Revaluation
reserve
£m
102.8
—
—
—
—
—
102.8
0.3
—
—
—
—
—
0.3
164.7
89.9
—
—
—
—
254.6
Profit
& loss
account
£m
86.4
—
(22.3)
—
(2.0)
(0.1)
62.0
Own shares
£m
(0.4)
—
—
(0.2)
—
—
(0.6)
Own shares represent the cost of 259,414 (2009: 273,330) shares held by the Employee Benefit Trust. The open market value of the shares held
at 30th November 2010 was £351,246 (2009: £580,280). In addition the Employee Benefit Trust has £0.1m (2009: £0.1m) of cash and £9.0m
(2009: £10.3m) due from the Company that can only be used for the benefit of employees.
www.stmodwen.co.uk
87
(M). PeNSIONS
The Company’s pension schemes are the principal pension schemes of the Group and details are set out in Note 18 of the Group financial statements.
The directors are satisfied that this note, which contains the required IAS19 “Employee Benefits” disclosures for the Group, also covers the
requirements of FRS17 “Retirement Benefits” for the Company.
(N). OPeRATING LeASe COMMITMeNTS
Operating lease commitments where the Company is the lessee
Annual commitments under non-cancellable operating leases are as follows:
Operating leases which expire:
In one year or less
Between one and five years
In more than five years
2010
2009
Land and
buildings
£m
—
—
0.5
0.5
Other
£m
0.1
0.3
—
0.4
Land and
buildings
£m
—
—
0.5
0.5
Other
£m
0.1
0.6
—
0.7
(O). CONTINGeNT LIABILITIeS
The Company has a joint and several unlimited liability with Vinci PLC and the Ministry of Defence under guarantees in respect of the financial
performance of VSM Estates (Holdings) Limited (“VSM”). This is a guarantee in the ordinary course of business and would require the guarantors to
step into VSM’s place in the event of a default on Project MoDEL. Completion of the project is not considered onerous as the forecast revenues
exceed the anticipated costs and it is not expected that there would be any net outflow in this regard.
The Company is also party to a joint and several guarantee to Fortis Bank in respect of the performance of Sowcrest Limited which is limited to
£16.0m (2009: £18.4m).
Further, the Company guarantees the performance of its subsidiaries in the course of their usual commercial activities.
88 St Modwen Properties PLC Annual Report 2010
Financial Statements
Independent Company Auditors’ Report
to the Members of St. Modwen Properties PLC
We have audited the parent company financial statements of St. Modwen Properties PLC for the year ended 30 November 2010 which comprise the
Company Balance Sheet and the related Notes A to O. The financial reporting framework that has been applied in their preparation is applicable law
and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the
Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the parent company financial
statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the parent company
financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to
comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the
financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting
policies are appropriate to the parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of
significant accounting estimates made by the directors; and the overall presentation of the financial statements.
Opinion on financial statements
In our opinion the parent company financial statements:
• give a true and fair view of the state of the Company’s affairs as at 30 November 2010 and of its loss for the year then ended;
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
• the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and
• the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the parent
company financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches
not visited by us; or
• the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the
accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Other matter
We have reported separately on the Group financial statements of St. Modwen Properties PLC for the year ended 30 November 2010.
Stephen Griggs FCA (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
Birmingham, UK
4th February 2011
www.stmodwen.co.uk
Five Year Record
Net rental income*
Property profits/(losses)*
Revaluation surplus/(deficit)*
Pre-tax profit/(loss)†
Earnings/(loss) per share (pence)
Dividends paid per share (pence)
Dividend cover (times)
Net assets per share (pence)§
Increase/(decrease) on prior year
Net assets employed
Investment properties
Investments
Inventories
Other net liabilities
Net borrowings
Net assets
Financed by
Share capital
Reserves
Own shares
Minority interests
89
2010
£m
33.7
15.5
29.4
37.5
18.6
1.0
18.6
218.0
9%
828.0
49.4
171.6
(297.3)
(314.9)
436.8
20.0
407.8
(0.6)
9.6
436.8
2006
£m
33.2
44.6
55.6
96.9
61.6
10.2
6.0
245.3
15%
736.4
77.9
65.9
(237.5)
(252.9)
389.8
12.1
373.7
(0.8)
4.8
389.8
2007
£m
34.9
54.5
62.8
100.1
73.3
11.7
6.3
284.1
16%
846.9
75.4
209.3
(262.0)
(401.9)
467.7
12.1
446.8
(0.7)
9.5
467.7
2008
£m
33.2
9.7
(64.6)
(73.1)
(37.3)‡
3.9
(11.0)
251.4
(12%)
814.3
64.2
228.1
(282.9)
(421.5)
402.2
12.1
380.7
(0.1)
9.5
402.2
2009
£m
33.5
(8.2)
(106.5)
(119.4)
(59.7)
—
—
200.1
(20%)
762.9
41.3
192.7
(277.1)
(318.8)
401.0
20.0
372.7
(0.4)
8.7
401.0
*
†
§
Including share of joint ventures
Including post-tax profit of joint ventures
2006 to 2008 restated for comparability purposes on the assumption that the 2009 Firm Placing and Placing and Open Offer had occurred on 1st December 2005
The figures above are all presented under IFRS.
90 St Modwen Properties PLC Annual Report 2010
Financial Statements
Notice of Annual General Meeting
Notice is hereby given that the seventieth Annual General Meeting of St. Modwen Properties PLC will be held at 12 noon on Tuesday 22nd March
2011 at the Marketing Suite, Innovation Centre, 1 Devon Way, Longbridge Technology Park, Birmingham, B31 2TS for the following purposes:
Ordinary Business
1. To receive and adopt the report of the directors and the accounts for the year ended 30th November 2010.
2. To declare a final dividend of 2p per share.
3. To re-elect Steve Burke as a director.
4. To re-elect Simon Clarke as a director.
5. To re-elect Lady Katherine Innes Ker as a director.
6. To re-elect Lesley James as a director.
7. To re-elect Bill Oliver as a director.
8. To re-elect John Salmon as a director.
9. To elect Michael Dunn as a director.
10. To elect David Garman as a director.
11. To elect Bill Shannon as a director.
12. To reappoint Deloitte LLP as Auditors of the Company to hold office until the conclusion of the next General Meeting at which accounts are laid
and to authorise the directors to determine their remuneration.
Special Business
To consider and, if thought fit, pass the following resolutions:
13. Ordinary Resolution
That the Directors’ remuneration report for the year ended 30th November 2010 be approved.
14. Ordinary Resolution
That the authority to allot relevant securities and equity securities conferred on the directors by Article 7.2 of the Company’s Articles of
Association be and is hereby granted for the period ending on 22nd June 2012 or at the conclusion of the Annual General Meeting of the
Company to be held after the date of the passing of this Resolution (whichever is the earlier) and for such period the Section 551 amount shall
be £4,963,907.
15. Special Resolution
That the power to allot relevant securities and equity securities conferred on the directors by Article 7.2 of the Company’s Articles of Association
be and is hereby granted for the period ending on 22nd June 2012 or at the conclusion of the Annual General Meeting of the Company to be held
after the date of the passing of this Resolution (whichever is the earlier) and for such period the Section 561 amount shall be £1,001,805.
16. Special Resolution
That, in accordance with Article 9 of its Articles of Association and Section 701 of the Companies Act 2006, the Company be and is hereby
granted general and unconditional authority to make market purchases (as defined in Section 693 of the Companies Act 2006) of any of its
own ordinary shares on such terms and in such manner as the Board of directors may from time to time determine PROVIDED THAT the general
authority conferred by this Resolution shall:
(a) be limited to 20,036,093 ordinary shares of 10p each;
(b) not permit the payment per share of more than 105% of the average middle market price quotation on the London Stock Exchange for the
ordinary shares on the five previous dealing days or less than 10p (in each case exclusive of advance corporation tax (if any) and expenses
payable by the Company); and
(c) expire on 22nd June 2012 or at the conclusion of the next Annual General Meeting of the Company to be held after the date of the passing
of this Resolution (whichever is the earlier), save that if the Company should before such expiry enter into a contract of purchase then the
purchase may be completed or executed wholly or partly after such expiry.
www.stmodwen.co.uk
91
17. Special Resolution
To consider and, if thought fit, to pass the following as a special resolution:
That a general meeting other than an annual general meeting may be called on not less than 14 clear days’ notice.
By order of the Board
Reeta Stokes
Company Secretary
28th February 2011
Registered Office:
Sir Stanley Clarke House
7, Ridgeway
Quinton Business Park
Birmingham B32 1AF
explanatory notes to the Resolutions
1 Resolution 1 is to receive the Accounts and the Reports of the Directors and the Auditors for the year ended 30th November 2010.
2 The performance of the Board as a whole, as well as the contribution made by the individual non-executive directors has been reviewed during the
course of the year. After considering this evaluation, the Board believes that the individuals continue to demonstrate commitment to their roles
and that their respective skills complement each other to enhance the overall operation of the Board. All of the directors offer themselves for re-
election, proposed through separate resolutions 3 to 8. Biographical details of these directors can be found on pages 28 and 29.
3 Under the Company’s Articles of Association, any director appointed by the Board since the date of the last Annual General Meeting may only
hold office until the next Annual General Meeting, at which time the director is required to stand for election by the shareholders. Accordingly,
David Garman, Bill Shannon and Michael Dunn, having been appointed on 19th April, 1st November and 1st December 2010 respectively, offer
themselves for election, under resolutions 9 to 11. Their biographies are shown on pages 28 and 29.
4
Resolution 12 is proposed to re-appoint Deloitte LLP as auditors to hold office until the next general meeting of the Company at which accounts
are presented and to authorise the Directors to determine the level of the auditors’ remuneration.
5 Resolution 13 is to approve the Directors’ Remuneration Report, which is included on pages 38 to 43 and provides details of the Group’s
remuneration policy for the directors and senior executives. In accordance with sections 439 and 440 of the Companies Act 2006, the vote on
this resolution is advisory and no director’s remuneration is conditional upon the passing of this resolution.
6 The existing general authority of the directors to allot shares and the current disapplication of the statutory pre-emption rights granted at the
Company’s 2010 Annual General Meeting expire at the conclusion of the forthcoming Annual General Meeting.
Article 7.2 of the Company’s Articles of Association contains a general authority for the directors to allot shares in the Company for a period (not
exceeding five years) (“the prescribed period”) and up to a maximum aggregate nominal amount (“the Section 551 amount”) approved by a
Special or Ordinary Resolution of the Company. Article 7.2 also empowers the directors during the prescribed period to allot shares for cash in
connection with a rights issue and also to allot shares for cash in any other circumstances up to a maximum aggregate nominal amount approved
by a Special Resolution of the Company (“the Section 561 amount”).
Resolution 14, which will be proposed as an Ordinary Resolution, provides for the Section 551 amount to be £4,963,907 (being an amount
equal to the authorised but unissued share capital of the Company at the date of this report and representing 25% of the Company’s issued share
capital at that date). The Board has no intention at present to exercise the authority to allot shares under this resolution.
Resolution 15, which will be proposed as a Special Resolution, provides for the Section 561 amount to be £1,001,805 (representing 5% of the
Company’s issued share capital).
The prescribed period for which these powers and authorities are granted will expire at the conclusion of the Annual General Meeting to be held
next year or on 22nd June 2012 if earlier, when the directors intend to seek renewal of the authorities.
7 Resolution 16 is to renew the authority for the Company to purchase certain of its own shares for a further year. The directors believe it is
advantageous to have such authority but would only exercise it if it was believed to be in the best interests of shareholders. At present, the Board
has no intention to exercise the authority.
92 St Modwen Properties PLC Annual Report 2010
Financial Statements
Notice of Annual General Meeting continued
8. Changes made to the 2006 Act by the Shareholders’ Rights Regulations increase the notice period required for general meetings of the Company
to 21 clear days unless shareholders approve a shorter notice period, which cannot however be less than 14 clear days. Annual General Meetings
(“AGM”) will continue to be held on at least 21 clear days’ notice.
Before the Shareholders’ Rights Regulations came into force on 3 August 2009, the Company was able to call general meetings other than AGMs
on 14 clear days’ notice without obtaining such shareholder approval. In order to preserve this ability, Resolution 17 seeks such approval. The
approval will be effective until the Company’s next AGM, when it is intended that a similar resolution will be proposed.
The following notes explain your general rights as a shareholder and your right to attend and vote at this AGM or to appoint someone else to vote
on your behalf.
a) A member entitled to attend and vote at this meeting may appoint a proxy to attend, speak and vote on his/her behalf. A member may
appoint more than one proxy in relation to the meeting provided that each proxy is appointed to exercise the rights attached to a different
share or shares of the member. A proxy need not be a member but must attend the meeting in person. Proxy forms should be lodged with the
registrar’s office or submitted not later than 48 hours before the time for which the meeting is convened. Completion of the appropriate proxy
form does not prevent a member from attending and voting in person if he/she is entitled to do so and so wishes.
b) To be valid, the Form of Proxy and the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of
such power or authority, must be received by the Company’s registrars before 12 noon on Sunday 20th March 2011, either in hard copy form
by post, by courier or by hand to the Company’s registrars, Equiniti Aspect House, Spencer Road, Lancing, BN99 6DA.
c) Any person to whom this notice is sent who is a person nominated under section 146 of the Companies Act 2006 to enjoy information rights
(“Nominated Person”) may, under an agreement with the member who nominated him/her, have a right to be appointed, or have someone
else appointed, as a proxy for the meeting. If a Nominated Person does not have this right or does not wish to exercise it, he or she may have
a right under such an agreement to give the member voting instructions.
d) The statement of the rights of members in relation to the appointment of proxies in Note (a) does not apply to Nominated Persons
e) As at 25th February 2011 (being the last working day prior to the publication of this notice), the Company’s issued share capital consisted of
200,360,931 shares, carrying one vote each, which represents the total voting rights in the Company as at that date.
f) The following documents are available for inspection during normal business hours at the registered office of the Company on any business
day and may also be inspected at the Marketing Suite, Innovation Centre, 1 Devon Way, Longbridge Technology Park, Birmingham, B31 2TS
at least 15 minutes prior to the commencement of, and during the continuance of, the Annual General Meeting:
(i) copies of the Directors’ service contracts with the Company;
(ii) copies of the Non-Executive Directors’ letters of appointment; and
(iii) a copy of the Company’s Articles of Association
g) In accordance with Regulation 41 of the Uncertificated Securities Regulations 2001, the Company gives notice that only those shareholders
entered on the relevant register of members (the “Register”) for certificated or uncertificated shares of the Company (as the case may be)
at 6 p.m. on Sunday 20th March 2011 (the “Specified Time”) will be entitled to attend or vote at the meeting in respect of the number of
shares registered in their name at the time. Changes to entries on the Register after the Specified Time will be disregarded in determining
the rights of any person to attend or vote at that meeting. Should the meeting be adjourned to a time not more than 48 hours after the
Specified Time, that time will also apply for the purpose of determining the entitlement of members to attend and vote (and for the purpose
of determining the number of votes they may cast) at the adjourned meeting. Should the meeting be adjourned for a longer period, then to be
so entitled, members must be entered on the Register at the time which is 48 hours before the time fixed for the adjourned meeting or, if the
Company gives notice of the adjourned meeting, at the time specified in the notice.
h) Electronic proxy appointment through CREST
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 and any adjournment(s) thereof by using the procedures described in the CREST Manual. CREST Personal Members or other
CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor
or voting service provider(s), who will be able to take the appropriate action on their behalf.
In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a “CREST Proxy
Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s (“EUI”) specifications and must contain
the information required for such instructions, as described in the CREST Manual (available at www.euroclear.com/CREST). The message,
regardless of whether it constitutes the appointment of a proxy or an amendment to the instruction given to a previously appointed proxy
must, in order to be valid, be transmitted so as to be received by the Company’s agent (ID RA19) by the latest time(s) for receipt of proxy
appointments specified in the notice of meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the
timestamp applied to the message by the CREST Applications Host) from which the Company’s agent is able to retrieve the message by
enquiry to CREST in the manner prescribed by CREST. After this time any change of instructions to proxies appointed through CREST should
be communicated to the appointee through other means.
www.stmodwen.co.uk
93
CREST members and, where applicable, their CREST sponsors or voting service providers should note that EUI does not make available special
procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST
Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or
sponsored member or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such
action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection,
CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the
CREST Manual concerning practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities
Regulations 2001.
i) Representatives of shareholders that are corporations will have to produce evidence of their proper appointment when attending the AGM. Please
contact our Registrars if you need any further guidance on this.
j) Every shareholder has the right to appoint some other person(s) of their choice, who need not be a shareholder as his proxy to exercise all or any
of his rights, to attend, speak and vote on their behalf at the meeting. If you wish to appoint a person other than the Chairman, please insert
the name of your chosen proxy holder in the space provided. If the proxy is being appointed in relation to less than your full voting entitlement,
please enter in the box next to the proxy holder’s name the number of shares in relation to which they are authorised to act as your proxy. If left
blank your proxy will be deemed to be authorised in respect of your full voting entitlement (or if the proxy form has been issued in respect of a
designated account for a shareholder, the full voting entitlement for that designated account).
k) To appoint more than one proxy, (an) additional proxy form(s) may be obtained by contacting the Registrars’ helpline on 0871 384 2198 or you
may photocopy this form (calls to this number are charged at 8p per minute from a BT landline, other telephony provider costs may vary. Overseas
callers should dial +44 121 415 7047. Lines are open from 8.30am to 5.30pm Monday to Friday). Please indicate in the box next to the proxy
holder’s name the number of shares in relation to which they are authorised to act as your proxy. All forms must be signed and should be returned
together in the same envelope.
l) Shareholders who would prefer to register the appointment of their proxy electronically via the internet can do so through the Sharevote website,
www.sharevote.co.uk, using their personal Authentication Reference Number (this is the series of numbers printed under the headings Voting ID,
Task ID and Shareholder Reference Number on the Proxy Form). Alternatively, shareholders who have already registered with Equiniti Registrars’
online portfolio service, Shareview, can appoint their proxy electronically by logging on to their portfolio at www.shareview.co.uk and clicking on
the link to vote under their St. Modwen Properties PLC holding details. Full details and instructions on these electronic proxy facilities are given
on the respective websites.
You may not use any electronic address provided in either this Notice of General Meeting or any related documents (including the Proxy Form) to
communicate with the Company for any purposes other than those expressly stated.
m) Any shareholder attending the meeting has the right to ask questions. The Company must cause to be answered any such question relating to
the business being dealt with at the meeting but no such answer need be given if (a) to do so would interfere unduly with the preparation for the
meeting or involve the disclosure of confidential information, (b) the answer has already been given on a website in the form of an answer to a
question, or (c) it is undesirable in the interests of the Company or the good order of the meeting that the question be answered.
n) A copy of this notice, and other information required by section 311A of the Companies Act 2006, can be found on the Company’s website at
www.stmodwen.co.uk.
94 St Modwen Properties PLC Annual Report 2010
Financial Statements
Glossary of Terms
Annualised net rents are gross rents as at a reporting date plus, where
rent reviews are outstanding, any increases to estimated rental value
(as determined by the Group’s external valuers), less any ground rents
payable under head leases.
Interest cover is profit before interest and tax (excluding non-cash items
such as investment property revaluations) plus the realisation of previous
years’ revaluations, as a percentage of net interest (excluding non-cash
items such as mark-to-market of interest rate swaps).
BReeAM — Building Research Establishment Environmental Assessment
Method — an industry-wide system of standards to assess sustainable
developments and measure the environmental impact of buildings.
Capital allowances deferred tax provision — In accordance with IAS 12,
full provision has been made for the deferred tax arising on the benefit of
capital allowances claimed to date. However, in the Group’s experience,
the liabilities in respect of capital allowances provided are unlikely to
crystallise in practice and are therefore excluded when arriving at
EPRA NAV.
Compulsory purchase order (CPO) is the compulsory acquisition of land
by a planning authority, undertaken in the public interest and with pre-
defined timescales and compensation arrangements.
CSR — Corporate social responsibility.
ePRA is the European Public Real Estate Association — a body that has
put forward recommendations for best practice for financial reporting by
real estate companies.
ePRA net asset value (ePRA NAv) is the balance sheet net assets,
excluding fair value adjustments for debt and related derivatives,
deferred taxation on revaluation and capital allowances.
ePRA net assets per share is EPRA net assets divided by the diluted
number of shares at the period end.
estimated rental value (eRv) is the Group’s external valuers’ opinion as to
the open market rent which, on the date of valuation, could reasonably
be expected to be obtained on a new letting or rent review of the
property.
equivalent yield is a weighted average of the initial yield and reversionary
yield and represents the return a property will produce based on the
timing of the income received.
Gearing is the level of the Group’s bank borrowing (excluding finance
leases) expressed as a percentage of net assets.
hopper is the bank of property comprising all of the land under the
Group’s control, whether wholly owned or through joint ventures or
development agreements.
IFRS — International financial reporting standards.
Initial yield is the annualised net rent expressed as a percentage of the
valuation.
IPD is Investment Property Databank Ltd., a company that produces an
independent benchmark of property returns.
Market value is an opinion of the best price at which the sale of an
interest in the property would complete unconditionally for cash
consideration on the date of valuation (as determined by the Group’s
external valuers).
In accordance with usual practice, the Group’s external valuers report
valuations net, after the deduction of the prospective purchaser’s costs,
including stamp duty, agent and legal fees.
Marshalling is the process of progressing projects through planning and
development.
Net rental income is the rental income receivable in the period after
payment of ground rents and net property outgoings.
Pre-sold projects are those projects where we are constructing buildings
that have been specified by, and designed for, or adapted by, a specific
client under a specific construction contract. On such projects, profit is
recognised using the stage completion method.
Property profits includes profits made on sales of investment properties,
properties held for sale and properties under construction.
Rent roll is the gross rent plus rent reviews that have been agreed as at
the reporting date.
Section 106 agreements are legally binding agreements reached with local
planning authorities under S106 of the Town and Country Planning Act
1990. They address the impact of proposed developments on the local
community and often involve a financial contribution by the developer.
voids is the estimated rental value of vacant properties expressed as a
percentage of the total estimated rental value of the portfolio, excluding
development properties.
Weighted average debt maturity — Each tranche of Group debt is
multiplied by the remaining period to its maturity and the result is
divided by total Group debt in issue at the period end.
Weighted average interest rate is the Group loan interest and derivative
costs per annum at the period end, divided by total Group debt in issue
at the period end.
www.stmodwen.co.uk
95
Information for Shareholders
Financial Calendar
Annual General Meeting
Announcement of 2011 interim results
Announcement of 2011 final results
Ordinary shareholdings at 30th November 2010
By shareholder
Directors and connected persons
Individuals
Insurance companies, nominees and pension funds
Other limited companies and corporate bodies
By shareholding
Up to 500
501 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 50,000
50,001 to 100,000
100,001 to 500,000
500,001 to 1,000,000
1,000,001 and above
22nd March 2011
July 2011
February 2012
Shareholders
Shares
No.
%
No. (m)
%
26
3,793
682
110
0.39
82.43
14.79
2.39
53,403,706
12,221,276
131,256,494
3,479,455
26.65
6.10
65.51
1.74
Shareholders
Shares
No.
%
No. (m)
%
1,118
825
1,671
420
356
68
85
22
46
24.25
17.89
36.24
9.11
7.72
1.47
1.84
0.48
1.00
278,013
638,071
3,873,975
3,029,388
7,532,349
4,983,697
19,741,993
16,494,417
143,789,028
0.14
0.32
1.93
1.51
3.76
2.49
9.85
8.23
71.77
Registrars
The Registrars to the Company are Equiniti, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DH.
Shareholder enquiry line: 0871 384 2198.
The Registrars’ website is: www.shareview.co.uk. Registering on this website will enable you, amongst other features, to view your
St. Modwen Properties PLC shareholding online.
Share dealing service
Equiniti offer a telephone and internet share dealing service which allows you to buy or sell St. Modwen Properties PLC shares if you are a UK resident.
Details can be found on their website www.shareview.co.uk/dealing. This arrangement is available at any time during market trading hours and provides
an easy and convenient facility to trade shares offering real time prices through a range of market makers. Full terms and conditions for this service are
available on the Shareview website. To trade over the telephone, please call 08456 037037.
Registered office
Sir Stanley Clarke House
7 Ridgeway
Quinton Business Park
Birmingham
B32 1AF
Company number
349201
Website
www.stmodwen.co.uk
Joint Stockbrokers
JP Morgan Cazenove
Numis Securities
This annual report is printed on Claro Silk, comprising fibres sourced from
sustainable forest reserves and bleached without the use of chlorine. The
production mill for this paper operates to EMAS, ISO 14001 environmental
and ISO 9001 quality standards.
96 St Modwen Properties PLC Annual Report 2010
Development Projects
NORTh WEST
NEWTON-LE-WILLOWS
– Vulcan Works
GLASGOW
– Pegasus Business Park
– Springburn
PRESTON
– Channel Way
BLACkBuRN
– Evolution Park
SkELMERSDALE
– Town Centre
ECCLES
– Lankro Way
WIGAN
– Enterprise Park
MANChESTER
– Wythenshawe
– Trafford Park
– Openshaw
LIvERPOOL
– East Lancs Road
– Great Homer Street
WIDNES
– Economic Development Zone
– Town Centre
WARRINGTON
– Trident Business Park
PRESCOT
CONNAh’S QuAY
ELLESMERE PORT
BuRNLEY
YORkShIRE & NORTh EAST
DARLINGTON
– Whessoe Road
SuNDERLAND
huLL
– Melton Park
DONCASTER
– Worcester Avenue
– Parkside
LINCOLN
NORTh STAFFORDShIRE
STOkE-ON-TRENT
– Etruria Valley, Festival Park
– Trentham Lakes
– Fenton 25 & Berryhill
– Phoenix Park
– Blythe Vale Business Park
– Victoria Park
– Nile Street
– The Trentham Estate &
Gardens
STONE
– Meaford Business Park
MIDLANDS
DERBY
– Hilton Depot
STAFFORD
– Lichfield Road
– St. Leonard’s
BuRTON-uPON-TRENT
– Barton Business Park
– Branston
– Pirelli
WOLvERhAMPTON
– Goodyear
TELFORD
– Brockton Business Park
– Queensway Business Park
WALSALL
– St. Matthew’s Quarter
– Pelsall Road
BIRMINGhAM
– Washwood Heath
– Quinton Business Park
LONGBRIDGe
RuGBY
– Mill Road
– Newbold Road
WORCESTER
– Shrub Hill Industrial Estate
– Blackpole Trading Estate
– Great Western Business Park
– Gregorys Bank
– Taylors Lane
STRATFORD-uPON-AvON
– Long Marston
COvENTRY
– Whitley Business Park
CANNOCk
– Hednesford Town Centre
– Pye Green
– Watling Street
NOTTINGhAM
– Bestwood Business Park
SOuTh WEST & SOuTh WALES
GLOuCESTER
– Quedgeley Business Park
LONDON & SOuTh EAST
MILL hILL
– Inglis Barracks
uxBRIDGE
– RAF Uxbridge
ThuRROCk
– South Ockendon
LONDON
– Elephant & Castle
– Leegate
– Wembley Central
– Hounslow
WOkING
– The Planets
BRIGhTON
– Woodingdean
FARNBOROuGh
– Town Centre
GuILDFORD
– Henley Industrial Estate
YALDING
– Syngenta
EASTLEIGh
– Campbell Road
POOLE
– Discovery Court
ESSEx
– South Ockendon
SuRREY
– Copthorne
NEWPORT, GWENT
– Glan Llyn (Llanwern)
– Celtic Business Park
DuRSLEY
– Littlecombe
AvONMOuTh, BRISTOL
– Access 18
TAuNTON
– Langford Mead
– Firepool
NEATh
– Coed Darcy
ExETER
– Skypark
PORT TALBOT
– Baglan Bay
WESTON-SuPER-MARE
– Westlands
– Locking Parklands
SWANSEA
– Transit (Swansea University)
CLEvEDON
– Clevedon Business Park
NORThERN hOME COuNTIES
CRANFIELD
– Technology Park
BEDFORD
– Thurleigh Airfield
– Town Centre
ENFIELD
– Edmonton Green Town Centre
MILTON kEYNES
– Stratford Road
hATFIELD
– Town Centre
LETChWORTh
– Letchworth Business Park
LuTON
– Guildford Street
hEMEL hEMPSTEAD
– Maxsted Park
St. Modwen Properties PLC Annual Report 2010
welcome to St. Modwen
Contents
www.stmodwen.co.uk
resource Centre
St. Modwen is the uK’s leading regeneration
specialist. over the last 30 years we have built
up a land bank of over 5,700 developable acres
and have transformed the uK landscape via
thoughtfully planned sustainable communities,
mixed-use and town centre schemes, district
centres and business and employment
developments.
our schemes act as the catalyst for wide scale
comprehensive regeneration in the areas that need
it the most. With each development we seek to
leave a legacy by providing the right physical and
economic infrastructure where businesses and
communities can evolve and develop.
We have a strong presence across the uK and our
diverse property portfolio of over 180 sites means
we are not over exposed to a single scheme, tenant
or sector. this portfolio is largely divided into
three specific areas of focus: income producing,
residential land and commercial land.
Business review
Page 07
Operational and financial
performance in 2010 and
prospects for 2011.
08 Chairman’s Statement
10 Chief Executive’s Review
12 Operating and Financial Review
Corporate Governance
Page 21
Information regarding the
Board and how they have run
the business for the benefit
of the shareholders.
22 Corporate Social Responsibility
28 Board Members and
Senior Management
31 Corporate Governance Report
38 Directors’ Remuneration Report
Financial Statements
Page 45
Detailed analysis of
financial performance.
46 Directors’ Responsibilities
Statement
47
Independent Group
Auditors’ Report
48 Group and Company
Accounts
88
Independent
Auditors’ Report
89 Five Year Record
90 Notice of Annual
General Meeting
94 Glossary of Terms
95
Information for Shareholders
96 Development Projects
Reports and Publications
St. Modwen’s reports and publications are
available to view online or download from
www.stmodwen.co.uk
You can order St. Modwen’s printed
publications, free of charge from:
UK and Rest of World
Sir Stanley Clarke House
7 Ridgeway
Quinton Business Park
Birmingham
B32 1AF
Industrial
St. Modwen’s reports and publications are available to view online or
download from www.stmodwen.co.uk
Retail
Registered office
Sir Stanley Clarke House
7 Ridgeway
Quinton Business Park
Birmingham
B32 1AF
Company number
349201
Website
www.stmodwen.co.uk
Joint Stockbrokers
JP Morgan Cazenove
Numis Securities
18573-04
16/02/2011
Proof 7
18573-04
16/02/2011
Proof 7
nortHern HoMe CoUntieS
First Floor, Unit E1
The Courtyard
Alban Park
Hatfield Road
St Albans
Hertfordshire
AL4 0LA
01727 732690
St. Modwen
ProPertieS PLC
Company Number 349201
HeAd oFFiCe & MidLAndS
reGionAL oFFiCe
Sir Stanley Clarke House
7 Ridgeway
Quinton Business Park
Birmingham
B32 1AF
0121 222 9400
www.stmodwen.co.uk
info@stmodwen.co.uk
reGionAL oFFiCeS:
London & SoUtH eASt
180 Great Portland Street
London
W1W 5QZ
020 7788 3700
SoUtH weSt & SoUtH wALeS
Green Court
King’s Weston Lane
Avonmouth
Bristol
BS11 8AZ
0117 316 7780
YorKSHire & nortH eASt
Ground Floor, Unit 2
Landmark Court
Elland Road
Leeds
LS11 8JT
0113 272 7070
nortH StAFFordSHire
The Trentham Estate
Management Suite
Stone Road
Trentham
Stoke-on-Trent
ST4 8AX
01782 281844
nortH weSt
Chepstow House
Trident Business Park
Daten Avenue
Risley
Warrington
WA3 6BX
01925 825950
S
t
M
o
d
w
e
n
P
r
o
P
e
r
t
i
e
S
P
L
C
A
n
n
u
A
l
R
e
p
o
R
t
f
o
R
t
h
e
y
e
A
R
e
n
d
e
d
3
0
n
o
V
e
M
B
e
R
2
0
1
0
the uK’s leading
Regeneration Specialist
St. Modwen ProPertieS PLC
www.stmodwen.co.uk
StoCK Code: SMP
St Modwen ProPertieS PLC
AnnuAl RepoRt foR the yeAR ended 30 noVeMBeR 2010
18573-04
16/02/2011
Proof 7
18573-04
16/02/2011
Proof 7