THE UK’S LEADING REGENERATION SPECIALIST
Annual Report and
Financial Statements 2013
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Strategic Report
Welcome
St. Modwen is the UK’s
leading regeneration specialist.
We operate across the full
spectrum of the property
industry from a network
of seven regional offices,
a residential business and
through joint ventures
with public sector and
industry-leading partners.
For further information
please visit our website:
www.stmodwen.co.uk
Non-statutory information
As the Group utilises a number of joint venture
arrangements, additional disclosures are
provided to give a better understanding of
our business. These include information on
the Group including its share of joint ventures
together with non-statutory measures such
as trading profit and profit before all tax. A full
reconciliation of such measures is provided in
note 2 to the Group Financial Statements.
Front cover image: The first phase of
Swansea University’s £450m Bay Campus.
Strategic Report
our performance
Financial highlights
• 56% increase in profit
before all tax to £82.2m
(2012: £52.8m)
• Shareholders’ NAV up 11%
to 279p per share (2012:
251p per share), and EPRA
NAV up 10% to 298p per
share (2012: 272p per share)
• Realised property profits up
37% to £40m (2012: £29m)
• Successful completion of
a £49m equity placing to
support redevelopment of
New Covent Garden Market
• 20% decrease in loan-to-
value to 33% (2012: 41%)
• Final dividend for the year
increased by 10% to 2.67p
per share, providing a total
dividend for 2013 of 4.00p
per share (2012: 3.63p)
PRoFit bEFoRE All tAx £m
Equity NEt ASSEtS PER ShARE p
51.7
52.8
82.2
232
251
279
2011
2012
2013
2011
2012
2013
improved by
56%
improved by
11%
tRAdiNG PRoFit £m
SEE-thRouGh loAN-to-VAluE %
22.8
25.5
33.3
39
41
33
2011
2012
2013
2011
2012
2013
improved by
31%
improved by
20%
operational highlights
• overall net valuation
• Significant milestones
increase of £42m (2012:
£28m), comprising gains
of £28m (2012: £48m) as a
result of planning gain asset
management and £14m
market-driven valuation gain
(2012: £20m loss)
• Elephant & Castle Shopping
Centre sold for £80m
completed across all major
projects:
Longbridge – 150,000 sq ft
pre-let secured to Marks &
Spencer which will anchor
the second phase of the
new town Centre
Swansea University,
Bay Campus – first phase
of works on schedule with
student accommodation
now underway
on track to deliver New
Covent Garden Market
with planning approval
anticipated in 2015
St. Modwen Properties PLC Annual Report and Financial Statements 2013 01
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Commercial land and development
18 Chairman’s statement
20 Chief Executive’s review
22
28 Residential
34
38 Financial review
46 Principal risks and uncertainties
50
Corporate social responsibility
Income producing properties
Strategic Report
Contents
in this report
Strategic Report
IFC Welcome to this year’s report
01 Our performance
02
In this report
03 What we do
04 Where we operate
06 Our business model
08 The land bank
10 Recurring income
12 Asset management
14 Delivery
16 Our strategy
Corporate Governance
56 The Board
58 Regional Directors
59
68 Audit Committee report
74
Nomination Committee report
76 Directors’ remuneration report
98
Corporate governance report
Directors’ report
Financial review
See page 38
Financial Statements
103 Independent auditor’s report
106 Group income statement
107 Group balance sheet
108 Group statement of
comprehensive income
108 Group statement of changes in equity
109 Group cash flow statement
110 Accounting policies
116 Notes to the Group financial statements
143 Company balance sheet
144 Notes to the company
Financial Statements
152 Five year record
02 St. Modwen Properties PLC Annual Report and Financial Statements 2013
‘…a more positive outlook
on the horizon…’
Chief Executive’s
review
See page 20
‘…excellent growth
resulting in a significant
rise in profits…’
Chairman’s statement
See page 18
Additional Information
153 Glossary of terms
155 Notice of Annual General Meeting
165 Information for Shareholders
167 Shareholder notes
See page 22
for more detail
What we do
Commercial land
and development
Our commercial land portfolio makes
up 13% of our land bank by value.
We acquire this land in its raw state
at low cost and then manage its
development through the remediation
and planning process, taking
advantage of local market conditions
to release the land for development at
the most appropriate time.
Residential
We acquire sites with opportunity for
residential development and maximise
their potential through the development
process, realising value through three
routes to market:
• residential land sales
• St. Modwen Homes
• Persimmon joint venture
Our residential portfolio makes up 42%
of our land bank by value. Across the
entire portfolio we have planning
permission or allocations within local
plans for over 21,900 plots.
See page 28
for more detail
See page 34
for more detail
Income producing
properties
Comprising industrial, retail and office
assets, our income producing portfolio
makes up 45% of our land bank
by value. All assets in this portfolio
are held with a view to generating
significant future value but we do make
sure that a major proportion produces
income prior to development which
typically covers the running costs of
the Group’s business.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 03
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Strategic Report
Where we operate
Strategically positioned
Our diverse UK-wide portfolio and our 5,900 acre land bank are
controlled by highly-skilled professionals from a network of seven
regional offices and a residential business. This provides us with
local knowledge and expertise that keeps us in tune with the needs
of the local community and ensures that we remain politically and
economically sensitive to each individual area.
30%
of gross portfolio located in
london and the South East
For further information
about our projects visit
www.stmodwen.co.uk
See page 20
Major project progress
We have made good progress with all of
our major projects, all at varying stages
of development.
See pages 22–37
diverse uK-wide portfolio
our diverse uK-wide portfolio, which
now includes a five megawatt Solar Park,
means we are not overexposed to a single
scheme, tenant or sector.
7 regional offices
N E W C O V E N T
GARDEN MARKET
HEDNEsfORD sKypARK WEMblEy CENTRAl
EDMONTON GREEN fARNbOROuGH
sWANsEA uNIVERsITy
04 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Of our gross portfolio, 30% is in London and the South East
where around 50% by value of our residential assets are also located.
Our extensive national portfolio includes four flagship projects:
New Covent Garden Market, Swansea University, Longbridge
and Project MoDEL.
£1.1bn
property portfolio
See pages 28–33
Residential business growth
in line with the upturn in the market, residential
output has risen significantly with many
housebuilders, including St. Modwen homes
and Persimmon, reporting a healthy increase
in sales.
See pages 22–27
improved commercial market place
by continuing to prime our land bank for
development over the last five years we are
in a good position to benefit from ongoing
improvement in this market.
100+
development projects
GREAT HOMER sTREET COED DARCy
lONGbRIDGE
R A f u X b R I D G E
CRANfIElD uNIVERsITy WyTHENsHAWE
THE TRENTHAM EsTATE
St. Modwen Properties PLC Annual Report and Financial Statements 2013 05
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Strategic Report
our business model
What makes St. Modwen the uK’s leading
regeneration specialist?
S ales of assets
provide capital
for investm ent
d elivery
Asset
management
expertise
A
s
s
e
t
m
Regeneration
and
sustainability
at our heart
p
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olio
R ecurring inco m e
u nderpins
running costs
of the business
e
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Remediation
expertise
06 St. Modwen Properties PLC Annual Report and Financial Statements 2013
The land
bank
Recurring
income
our long-term view allows us to acquire assets at low
cost and then maximise their potential by steadily adding
value to them over time through remediation and planning.
then at the appropriate time we either dispose of the asset
to realise any increase in value or release it for development
ourselves or in joint venture.
What differentiates us?
the diverse and extensive nature of our £1.1bn land bank
provides us with the flexibility to move with market demands
and, coupled with our local expertise, means we can pursue
value-creating opportunities. A considerable proportion of
our land bank is held at relatively low value, giving us access
to a wide variety of development opportunities without the
need for significant financing.
See pages 08–09
Whilst all of our assets are ultimately held with a view to
generating significant future value, some also produce
a steady income stream prior to development which
underpins the running costs of the business. this ensures
that commitments can be met if development profits fall and
enables us to extract the maximum value from our land bank
in the short-term.
What differentiates us?
We employ locally-based asset management capability to
manage the assets as efficiently as possible. We typically offer
low affordable rents on relatively short tenancies which ensure
that voids remain at their lowest possible level as we prepare
sites for development. the diversity of occupiers in our
income producing properties helps us to avoid overexposure
to a single scheme, sector or tenant.
See pages 10–11
Asset
management
Delivery
We increase the value of our land bank over time using our
expertise in and hands-on approach to remediation and
regeneration, managing sites, public consultation and the
planning process. our skills can be applied effectively to
small developments or be used to navigate complex and
long-term projects.
What differentiates us?
our ability to progress our land bank successfully through
the planning process and our expertise in brownfield land
remediation and other aspects of regeneration make us an
attractive partner to both landowners and public bodies.
the skill and experience of our people is fundamental to
the success of our asset management activities and we
continue to retain, develop and incentivise them.
See pages 12–13
When we are unable to add any further significant value to an
asset, we seek market-driven opportunities to dispose of it,
either through the delivery of pre-let and pre-sold buildings or
the sale of land. Cash generated on the sale provides recycled
capital to invest in the business and supports the delivery of
long-term shareholder value creation through a progressive
dividend policy.
What differentiates us?
We continue to find good development opportunities that are
not reliant on speculative development. Where industrial and
commercial occupiers have immediate requirements for new
premises, we are able to react quickly to meet their demands
with sites that already benefit from planning. our regeneration
projects continue to serve as catalysts for change, impacting
positively on the local economy and attracting a variety
of occupiers.
See pages 14–15
St. Modwen Properties PLC Annual Report and Financial Statements 2013 07
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Strategic Report
our business model
the
land bank
Our actively managed,
£1.1bn UK-wide land bank of
development opportunities
comprises over 5,900 acres.
Made up of predominantly
brownfield land and held
at relatively low value,
it provides us with a firm
foundation from which
to generate value.
At any point in time, our skilled teams
are either actively building, remediating
or pursuing planning permissions
which allow us to transform this land
into thriving communities or business
destinations that will encourage growth
right across the country.
Pictured: Glan llyn, Newport. this 600 acre
former llanwern steelworks site forms part
of our extensive regenerative work across
South Wales. translated as ‘lakeside’, Glan
llyn will provide three new lakes and a
parkland setting for 4,000 homes, as well as
1.5m sq ft of employment space, educational
facilities, and leisure and retail accommodation.
Persimmon is now on site with the first phase
of 307 homes as part of our joint venture
partnership. St. Modwen homes will also
be building properties on this site in 2014.
5,943
developable acres
72%
of land bank is wholly owned
08 St. Modwen Properties PLC Annual Report and Financial Statements 2013
St. Modwen Properties PLC Annual Report and Financial Statements 2013 09
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Strategic Report
our business model
Recurring
income
The stream of rental and
other recurring income
generated by our portfolio
of income producing assets
covers the running costs of
the business and enables
us to extract maximum
value from our land bank in
the short-term as we work
towards development.
Representing 45% of our £1.1bn
portfolio by value, this is the largest part
of our business and is made up of a
diverse asset base ranging from town
Centres to business and retail parks,
and leisure destinations.
Pictured: Farnborough town Centre,
hampshire. Works to the first two phases
of this £80m regeneration project are now
complete and are being actively managed for
income by our regional team of professionals.
the scheme currently comprises a 62,000
sq ft Sainsbury’s, a 77-bedroom travelodge,
J d Wetherspoon, a gym and the creation of
retail space for major brands including
Starbucks and New look. in May 2013, we
started on site with the transformation of
Kingsmead Shopping Centre which is
being overhauled to accommodate a new
seven-screen VuE Cinema and new
restaurants; this latest phase of the scheme
is due for completion in summer 2014.
£36.3m
net rental income
£9m
of new lettings
10 St. Modwen Properties PLC Annual Report and Financial Statements 2013
St. Modwen Properties PLC Annual Report and Financial Statements 2013 11
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Strategic Report
our business model
Asset
management
Our strong asset
management capabilities
are fundamental in enabling
us to realise maximum
value from our portfolio of
retained assets and are a key
component for the successful
delivery of new commercial
environments.
by creating attractive commercial spaces
we encourage and retain a variety of
occupiers into our schemes across the
country. in doing so, we can support
the surrounding community through the
creation of jobs and restoring confidence
in the local economy.
Pictured: longbridge, birmingham. the first
phase of the new town Centre opened in
August 2013 and comprises an 80,000 sq ft
Sainsbury’s, a 75-bedroom Premier inn, 24
shops, restaurants, 35,000 sq ft of offices and
the £2m Austin Park. it forms the heart of this
£1bn regeneration programme. together with
more than 150,000 sq ft of office and
industrial space, which is over 95% occupied,
other features of this extensive brownfield
regeneration project include the 250,000 sq ft
bournville College which opened in 2011 and
the £5m youth centre known as ‘the Factory’.
9%
like-for-like rent roll growth
£28m
added value gains
12 St. Modwen Properties PLC Annual Report and Financial Statements 2013
St. Modwen Properties PLC Annual Report and Financial Statements 2013 13
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Strategic Report
our business model
delivery
Our development pipeline
continues to grow with
a number of major
opportunities across
the country.
occupiers continue to be attracted by
our lease terms, which we are able to
offer at competitive levels as a result
of the location of our developments,
often in run-down areas undergoing
regeneration. they also recognise the
positive long-term economic impact
that our schemes deliver.
our strategy to prime our sites for
development places us in a strong
position to meet immediate occupier
demand for new premises across
the country.
Pictured: dunelm, doncaster. this 22,000
sq ft store started on site in summer 2013
and opened in time for Christmas trading.
it is situated on a 13 acre brownfield site
and additional development here includes
a Marston’s public house and new
community sports facilities.
25 year
track record
100+
development projects
14 St. Modwen Properties PLC Annual Report and Financial Statements 2013
St. Modwen Properties PLC Annual Report and Financial Statements 2013 15
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Strategic Report
our strategy
Strategically agile to take advantage
of opportunities…
As the UK’s leading regeneration specialist, our expertise in remediation, planning, asset
management and construction supports our strategy of securing excellent returns through
a focus on long-term significant added value while protecting existing assets.
Strategy
2013 Outcomes
Priority
Key performance indicators applied
secure excellent
returns…
invest at a point in the property lifecycle
from where maximum development
returns can be extracted.
Maximise individual asset values through
our locally-based expertise.
Recycle assets where significant
opportunities are exhausted.
PRoFit bEFoRE All tAx £m
51.7
52.8
82.2
2011
2012
2013
Equity NEt ASSEtS PER ShARE p
232
251
279
2011
2012
2013
through a focus on
long-term significant
added value…
while protecting
existing assets
build land bank to bring through future
opportunities and secure planning gain.
Continued programme of recycling
and reinvestment.
Create predictable, dependable and
cash-backed income streams.
have highly-skilled and motivated people
in place to deliver our asset strategies
and future growth.
Focus on brownfield renewal and
sustainable development.
lANd bANK developable acres
5,762
5,801
5,943
2011
2012
2013
PRoPoRtioN oF ASSEtS At thE StARt
oF thE yEAR RECyClEd by thE ENd
oF thE yEAR %
9
12
16
2011
2012
2013
Maintain sufficient income to
substantially cover business
running costs.
Maintain an appropriate capital structure
to meet future development and
funding needs.
Manage debt ratios whilst continuing
to invest.
RAtio oF RENtAl ANd othER iNCoME to
oPERAtiNG CoStS iNCludiNG iNtERESt %
97
92
86
2011
2012
2013
GEARiNG %
79
71
54
2011
2012
2013
16 St. Modwen Properties PLC Annual Report and Financial Statements 2013
diVidENd PAid p
3.10
3.41
3.75
2011
2012
2013
Priorities for 2014
targets
Principal risks
Continue to grow development profits
and create valuation gains, particularly
in residential.
Strive to demonstrate and grow the
Group’s inherent value and
long-term prospects.
Grow net assets so that dividends can
also grow. Continue to secure profitable
development to generate consistent
future returns.
Wider economic issues affect property
values and equity valuations.
the management of developments is
a complex process with successful
delivery depending on continued
excellence in the application of
our expertise.
MANAGEMENt With MoRE thAN
3 yEARS’ SERViCE %
75
78
82
2011
2012
2013
Selective and capital efficient
acquisitions.
Continued recycling of assets
with limited opportunity for further
significant added value.
Continue to retain, recruit and motivate
highly-skilled people throughout
the business.
As our work is conducted in a complex
legal and regulatory environment we
need to be able to successfully adapt
our asset strategies over the long-term.
Supplier and tenant carbon footprint is
not under our operational control.
Effective asset management to
maximise returns.
Put in place further extended finance
facilities to support ongoing growth.
Continued management of investment
and development programme to
maintain appropriate debt ratios.
Significant contraction in available debt
facilities reduces the opportunity for
strategic investment.
SEE-thRouGh loAN-to-VAluE %
39
41
33
2011
2012
2013
CoMMittEd FACilitiES to CoVER
dRAWN dEbt months
36
34
22
2011
2012
2013
St. Modwen Properties PLC Annual Report and Financial Statements 2013 17
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Strategic Report
Chairman’s
Statement
‘Challenges still
exist but the
Company
is already busier
than it was
12 months ago
and there is a
greater sense
of optimism across
our portfolio and
momentum in the
market place.’
it has been another very good year for
the Company, with excellent growth
resulting in a significant rise in profits
across the Group. Profit before all
tax increased by 56% to £82.2m
(2012: £52.8m) with shareholders’ equity
net asset value per share growing 11%
to 279p per share (2012: 251p per
share), after paying dividends of 3.75p
during the year (2012: 3.41p).
We have made good progress with all of
our major schemes across the country
over the last 12 months, each one
illustrating a key facet of our business
model and demonstrating its strength.
We completed a successful equity
placing in March 2013, which raised
gross proceeds of £49m. the funds will
be used to maximise the potential of the
development of the New Covent Garden
Market land in the medium-term without
increasing our debt levels.
£82.2m
profit before all tax
+10%
increase in final dividend
Works to the first phase of Swansea
university’s £450m bay Campus project
commenced in May 2013 and are well
advanced. We are extremely proud to
be working with the university on such
a prestigious project, which forms part
of our extensive regenerative work in
South Wales.
in November, Key Property investments
(KPi), our 50/50 joint venture with Salhia
Real Estate Co. K.S.C., disposed of the
Elephant & Castle Shopping Centre for
£80m. the sale, which was achieved well
above book value, crystallised significant
profits for our shareholders whilst freeing
up our people and capital resources to
focus on other significant regeneration
and development projects in london
and across the regions.
After a year of exceptional delivery
at longbridge, we were delighted to
announce in december 2013 the pre-let
of a 150,000 sq ft Marks & Spencer
store on the second phase of the town
Centre. this project is a testament to
how our transformational developments
serve as true catalysts for change and
breathe new life into areas in need of
regeneration across the uK.
the improvement in the residential
market continued during the year,
with profits and sales rates from our
residential operations reflecting this
upward trend.
18 St. Modwen Properties PLC Annual Report and Financial Statements 2013
diVidENd
boARd ChANGES
PRoSPECtS
in recent years, we have raised our
dividends broadly in line with the
increases in net asset value and to reflect
the strong results. this is again the case
for the year ended 30th November 2013
with your board recommending a 10%
increase in the final dividend for the year
to 2.67p per share (2012: 2.42p), making
a total distribution for the year of 4.00p
(2012: 3.63p). the final dividend will be
paid on 4th April 2014 to shareholders on
the register at 7th March 2014.
We intend for this dividend policy to
continue, subject to considering the
impact of one-off events in the year,
positive or negative, as they occur.
StRAtEGy
through our market-leading expertise,
we add value through remediation,
progressing assets through the
planning process and proactive asset
management and development.
Specifically, our regional teams
focus on opportunities where our
skill in regeneration enables us to
add significant long-term value and
generate profits in both commercial
and residential development.
As shown by this year’s strong set
of results, and our proven ability to
deliver good returns across the cycle,
our strategy is working. We expect
this success to continue into 2014
as the property market steadily
gathers momentum.
our decision to allocate additional
resource to the residential sector
– securing predominantly residential-led
planning permissions across our portfolio
while continuing to grow our own
housebuilding brand St. Modwen homes
and progressing our Persimmon joint
venture – has proved successful as the
regional market place is now showing
meaningful signs of improvement.
in addition, the improved market
conditions in the london and South East
property market are ongoing.
We have continued to strengthen the
property expertise on the board and
were delighted to welcome Richard
Mully as a non-executive director in
September 2013. Richard brings with
him a wealth of experience in real estate
investment, having spent almost 30
years in investment banking, capital
markets and real estate private equity
investing. Richard was appointed Senior
independent director in december 2013.
PEoPlE
despite the challenges of the last few
years, St. Modwen is now strongly
positioned to take advantage of the
upturn that is making its way across
the uK commercial and residential
markets. this would not have been
possible without the energy, skill and
dedication of our people. therefore,
i would like to take this opportunity on
behalf of the board to say thank you
to all employees for their hard work
and determination in continuing to
deliver strong performance and create
long-term value for our shareholders.
Even at the height of the recession, we
remained confident of the prospects
for the Company. Whilst we still remain
cautious about the overall economic
outlook in the uK and Europe, we
have a long track record of successful
regeneration, strong asset management
and creating value from our extensive
land bank. this track record, combined
with our robust business model and
strategy to deliver strong returns, puts
us in an excellent position to remain
resilient against continued economic
and market challenges whilst benefitting
strongly from the improving residential
and commercial markets.
With this increased optimism in the
market place, we are expanding our
development pipeline to capture value
across the uK. this year we expect
the regional residential market place
to continue to recover gradually and
london and the South East to remain
robust. We will therefore maintain our
focus on this sector throughout 2014
to capitalise on the strong returns that
we believe are available. Similarly, we
are witnessing a cautious recovery in
commercial property and consequently,
will also be focusing on progressing
opportunities in this market during
the year.
Challenges still exist but the Company
is already busier than it was 12 months
ago and there is a greater sense of
optimism across our portfolio and
momentum in the market place. With our
strong financial base, we look forward to
growing the business steadily throughout
2014 and beyond to generate further
value for our shareholders.
bill Shannon
Chairman
3rd February 2014
St. Modwen Properties PLC Annual Report and Financial Statements 2013 19
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Strategic Report
Chief
Executive’s
Review
‘The recovery has gathered momentum
in 2013 and, against this improving
backdrop, we achieved a number of
important milestones across our
business. This has been illustrated
by another strong set of results.’
it has been a very busy and successful
year defined by three key areas of activity:
• we have continued to unlock value
across our 5,900 acre uK land bank
through remediation and planning;
• we have sought to maximise
prospects from our residential
portfolio; and
• we have pursued opportunities
arising from the london and South
East market.
i am very pleased to say that our
decision to focus on these three areas
has culminated in an excellent set of
results with a 56% increase in profit
before all tax to £82.2m (2012: £52.8m).
the most significant transaction of
the year was the sale of the Elephant
& Castle Shopping Centre which
demonstrated clearly how our exposure
to the london and South East market
has enabled us to capitalise on the
growing investor interest in this area.
having acquired the asset, through
our 50:50 KPi joint venture, for £29m
in 2002, we added significant value
to the property during our ownership,
whilst also benefitting from the income it
delivered, finally achieving an attractive
sale price of £80m compared to £52.5m
book value at the start of the period.
our other major projects have
progressed well in the period. in May
2013, we started on site with works
to the first phase of the £450m bay
Campus for Swansea university and this
is now well on schedule for completion
in September 2015. our longbridge
development in birmingham remains
a regional success story with the
completion of the first phase of the
town Centre in the summer and the
subsequent 150,000 sq ft pre-let
to Marks & Spencer as the second
phase anchor tenant, announced just
after our year end. Furthermore, good
progress has been made with the public
consultation process for the New Covent
Garden Market redevelopment at Nine
Elms in london and we expect to submit
a planning application during the first half
of this year.
overall, our wide and diverse pipeline of
commercial development opportunities
located throughout the uK continues
to gather momentum, reflecting the
upturn in that market, and we have made
excellent progress with our schemes
across the country. demonstrating our
ability to extract maximum value from
our land bank and explore a variety of
new opportunities, we have recently
completed a five megawatt Solar Park
at our baglan bay site in South Wales.
We expect to continue to explore
energy-related opportunities across the
land bank during the course of 2014.
Across the country, we have been busy
preparing our land bank for development
through remediation and achieving
predominantly residential-led planning
permissions. housebuilder appetite
for our land is increasing and we are
experiencing good housing sales
rates across all of our residential
schemes, whether delivered in joint
venture with Persimmon or through
our own housebuilding brand,
St. Modwen homes.
20 St. Modwen Properties PLC Annual Report and Financial Statements 2013
StRAtEGy oVERViEW
Supported by our long-term approach
to development, our adherence to a
robust and proven business model has
delivered a track record of over 25 years
of successful regeneration schemes.
during the recession, we continued to
add value to our £1.1bn land bank of
assets. We achieved this by creating
maximum value from our income
producing properties through asset
management initiatives, whilst preparing
sites for redevelopment through
remediation and securing planning
permissions. in doing so, we laid down
strong foundations for growth to take
immediate advantage of any market
recovery, whilst underpinning our
business activities with a steady income
stream. At the same time, we disposed of
assets to which we could add no further
value and reinvested the capital back into
the business.
by taking this long-term view and relying
on our own efforts to create value, we
have remained resilient to challenging
economic times and our efforts are
already being rewarded as momentum
in the residential market grows across
the uK and as the regional commercial
property market gradually starts
to improve.
MARKEt oVERViEW
there is a tangible increase in activity
in the residential market place, with
the recovery that started in 2012
on the back of rising consumer
and housebuilder sentiment being
further augmented by the success of
Government schemes such as help to
buy. Momentum continues to gather
pace in london and the South East
with confidence now spreading into
the regions. this improved outlook
has already had a positive impact
on our joint venture with Persimmon
which is now building and selling
all eight schemes under the original
agreement to deliver over 2,300 homes.
Furthermore, our own housebuilding
brand, St. Modwen homes, is performing
very well in its second full year of
operations; it has continued to expand
during 2013 and is now operational on
eight developments.
As the year has progressed, we have
kept under close review the increased
optimism in the commercial property
market, driven predominantly by a
strong increase in investor appetite.
the recovery is now visibly starting to
buSiNESS outlooK
our major projects at longbridge,
Swansea university and New Covent
Garden Market, are all at varying stages
of development, with each having an
active year to look forward to, which
should add value to the Group.
the disposal of the Elephant & Castle
Shopping Centre makes way for Project
ModEl* to become our fourth major
project. this consists of the two former
RAF sites at uxbridge and Mill hill which
are now being developed into two new
communities, together comprising
over 3,500 homes. Given their london
location and the residential-led nature
of each development, we are already
experiencing excellent returns and
expect this only to improve in line with
the buoyant london property market.
We expect to further capitalise on the
improving residential market place which
will remain a dominant force in our
portfolio in terms of land and housing
sales. We are already looking for new
opportunities both from within our own
land bank and more generally in the
market place where we can identify
opportunities at the right price to apply
our proven skills to create value.
having spent the last five years preparing
our commercial land in readiness for this
market to improve, we anticipate more
opportunities to start coming through in
2014, enabling us to add to our pipeline
of development projects.
With a successful 2013 behind us, this
year will be one of continued delivery,
adding value to our portfolio of assets
and a renewed focus on business
areas where we can deliver realised
development profits. We are not yet
completely free of the overhang of the
recession, and there is no room for
complacency, but there is certainly a
more positive outlook on the horizon and
we are already well placed to capitalise
on this opportunity.
take hold but a wholesale improvement
in commercial property is still being
restricted by an improving but
inconsistent level of tenant demand.
Against this backdrop, our
comprehensive regeneration schemes
serve as positive catalysts for change
and are encouraging renewed tenant
demand. our regeneration of the
longbridge site in birmingham is
a good example. here, we have
successfully created the centrepiece to
this important project by building and
securing important retail tenants for
the new town Centre which opened in
August. in doing so, we have boosted
the community significantly by creating
jobs and restoring confidence in the local
economy which is a key component
of the successful delivery of new
commercial environments. We have
recently submitted planning for the
second phase of the town Centre which
includes a 150,000 sq ft full-offer store
pre-let to Marks & Spencer, further
testament to the attractive commercial
environment that we continue to
create here.
Next year, there is a General Election
on the horizon. Whether this benefits
development or not remains to be seen.
Recent comments from politicians
accusing developers and landowners of
hoarding land are misleading. it does not
make commercial sense to sit on land
and do nothing with it, especially in areas
where land values are not appreciating.
St. Modwen is in the business of
development and our uK land bank of
over 5,900 acres is owned specifically
with a view to developing it out to create
homes and communities in which people
can live and work. At any point in time we
are either actively building, remediating
or pursuing planning permissions
which allow us to transform this land
into thriving communities or business
destinations that will encourage growth
right across the country.
Notwithstanding inconsistent tenant
demand in the regions, it is clear that
the uK property market is improving.
We continue to be successful in securing
planning permissions but it is taking
much longer than it should do, which is
having a knock-on effect on delivery.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 21
*See glossary.
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Strategic Report
Chief Executive’s Review
Commercial
land and
development
With our sites primed for
development, we are well
placed to capitalise on
the improving commercial
property market and
are already growing our
pipeline of development
opportunities.
Pictured: Swansea university’s bay Campus.
the first phase is on track to welcome
students in September 2015.
£146m
commercial land value
2,997
commercial land acreage
the land bank
See pages 24–25
Asset management
See page 25
Recurring income
See pages 26–27
delivery
See pages 26–27
22 St. Modwen Properties PLC Annual Report and Financial Statements 2013
St. Modwen Properties PLC Annual Report and Financial Statements 2013 23
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Strategic Report
Chief Executive’s Review
Commercial
land and
development
(continued)
StRAtEGy
our long-term approach to regeneration
helps us to weather economic cycles.
over the last five years we have
focused on priming our land bank for
development through remediation and
planning which has ultimately put us in
a good position to benefit from current
market improvements.
through our network of regional
offices, we remain in tune with local
requirements and any new opportunities.
this local knowledge has enabled us
to stay opportunistically acquisitive
over this period, securing land and
commercial assets with latent value that
can be realised at the right time.
Furthermore, our highly-skilled in-house
team of construction professionals
oversees the delivery of all our projects
and works closely with clients and
partners to ensure the end product
matches their needs. Responsible for
our ‘shop window’ they are a valued
and important part of the business that
safeguards the Company’s principles
of delivering high-quality, sustainable
developments as a legacy for businesses
and communities to enjoy for years
to come.
MARKEt CoMMENtARy
our strategy to prime our land for
development has borne fruit during 2013.
demand for design and build projects
on our ‘ready to go’ employment sites
has grown as businesses are feeling
more confident to expand and seek
new premises, and occupiers recognise
we can deliver on their requirements
quickly. in those areas where we are
experiencing an increasing number
of tangible enquiries coming through,
such as london and the South East, the
Midlands and the South West, we are
submitting detailed planning applications
for commercial-led developments on our
existing land bank.
our secondary shopping centres
continue to experience good take-up of
space from occupiers. here, our ongoing
regeneration activities and favourable
lease terms are attracting new retailers
who recognise the positive, long-term
economic impact that our schemes are
set to have as we transform any given
area. A good example is our £80m
regeneration of Farnborough town
Centre, where works are now complete
on the first two phases including a
62,000 sq ft Sainsbury’s, travelodge,
J d Wetherspoon, a gym and the
creation of retail space for major brands
including Starbucks and New look.
in May 2013, we started on site with the
transformation of Kingsmead Shopping
Centre which is being extensively rebuilt
to accommodate a new seven-screen
VuE Cinema and restaurants, which is
due for completion in summer 2014.
Commercial land
during the period, with a view to
augmenting and adding value to our
commercial development pipeline, we
have continued to secure sites and
prepare them for development through
remediation and planning.
We have secured a significant number
of commercial-led brownfield land
opportunities over the last 12 months
with highlights including:
• Wellingborough – formerly
owned by Whitworth bakery, we
acquired this 3.5 acre site with a
view to transforming it into a retail
park comprising 35,000 sq ft of
accommodation for which we will
submit a planning application in
February 2014.
the regeneration of Farnborough town Centre
is gathering momentum and now includes
a Sainsbury’s, New look, Starbucks and
VuE Cinema.
24 St. Modwen Properties PLC Annual Report and Financial Statements 2013
An indicative image of the 150,000 sq ft
full-offer store pre-let to Marks & Spencer
at longbridge, birmingham.
Works at Castledown business Park, where
we are delivering 33,650 sq ft of employment
space for Wiltshire Council.
in addition to the ongoing residential
development at locking Parklands,
Weston-super-Mare, we have also developed
5,800 sq ft of first phase office space.
• Tamworth, Staffordshire – we have
signed a development agreement to
regenerate this 240 acre site into a
high-quality mixed-use scheme.
• Derby Gateway, Chaddesden Triangle,
Derby – a 70 acre brownfield site, the
largest in derby, to comprise 700,000
sq ft of commercial accommodation
which will be developed in partnership
with Network Rail. A masterplan
application is currently being prepared
and will be submitted in spring 2014.
• Clay Cross, Derbyshire – a 204 acre
site benefitting from outline planning
consent to create a mixed-use
scheme that includes up to 250,000
sq ft of employment space.
We have also made good progress in
converting planning applications to
approval and delivery. highlights include:
• Rugby, Warwickshire – we have
recently submitted a planning
application to deliver a 100,000
sq ft retail park at this former
Alstom industrial site which is being
redeveloped into a mixed-use scheme
that sits alongside the 150,000 sq ft
Warwickshire College completed in
2010. Currently on site, Greene King is
constructing a ‘hungry horse’ public
house and St. Modwen homes is
developing a scheme of 175 homes.
• Worcestershire Fire Station,
Worcester – we secured planning
permission for a 20,000 sq ft facility
on behalf of hereford & Worcester
Fire Authority as part of the second
phase of development at our Great
Western business Park where
the fully occupied phase one
comprises 125,000 sq ft of office and
industrial accommodation.
• Branston, Burton upon Trent –
planning for 770,000 sq ft of industrial
space has now been secured on
part of this 175 acre site on which
we expect to commence with site
infrastructure in 2014.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 25
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Commercial development progress
(major projects):
• Bay Campus, Swansea University
– we continue to progress well with
the delivery of the first phase of
works at the £450m bay Campus for
Swansea university. Steelworks and
superstructure are advancing and
the construction of the student
accommodation is now underway.
We remain on track to welcome
new students to the scheme in
September 2015.
• Longbridge – we completed phase
one of the longbridge town Centre
in August 2013 which is anchored
by an 80,000 sq ft Sainsbury’s and
comprises 24 shops, beefeater
and hungry horse restaurants, a
Premier inn and the £2m Austin Park.
Following the year end, we completed
the pre-let of a 150,000 sq ft Marks
& Spencer full-offer store that will
anchor the second phase of the new
town Centre. A planning application
for this second phase was submitted
in december 2013 together with an
application to build a 30,000 sq ft
specialist Construction Centre for
bournville College.
We are currently on site with over 75,000 sq ft
of design and build space at quedgeley West
business Park, Gloucestershire.
At Skypark, Exeter, we are nearing completion
of a 24,100 sq ft facility for ASoC.
Strategic Report
Chief Executive’s Review
Commercial
land and
development
(continued)
Public consultation for the redevelopment
of the New Covent Garden Market sites
is progressing well and we are on track to
secure planning permission in early 2015.
26 St. Modwen Properties PLC Annual Report and Financial Statements 2013
• New Covent Garden Market sites –
we have just completed the second
tranche of public consultation
and expect to submit a planning
application for this major regeneration
project during the first half of 2014.
under a 50/50 ViNCi St. Modwen joint
venture, our plans are to consolidate
the current market, which covers a 57
acre site, into a more efficient 37 acre,
550,000 sq ft scheme. the 20 acres
freed up by the new development will
be redeveloped into a residential-led
mixed-use regeneration scheme,
providing over 2,900 homes and
115,000 sq ft of commercial
accommodation and community
facilities. this is a significant project
which is set to deliver excellent returns
once planning consent is granted,
which we expect in 2015.
development progress (other key sites):
• Skypark, Exeter – developed in
joint venture with devon County
Council, momentum is building on
the redevelopment of this 110 acre
former airport complex into a major
employment centre and business
park for Exeter and East devon.
having completed the 30,000 sq ft
energy centre for EoN in 2012, we are
now nearing completion of a 24,100
sq ft purpose-built facility for the South
Western Ambulance Service NhS
Foundation trust, having started on
site in spring 2013.
• Quedgeley West, Gloucestershire
– there is currently over 125,000
sq ft of space under construction
at this business Park. this includes
Gardiner bros & Co (leathers) ltd
which has agreed to purchase a
34,700 sq ft design and build unit
which is in addition to its 30,000
sq ft headquarters also located at
quedgeley West. Engineering firm,
lister Petter, will be relocating from our
nearby scheme in littlecombe, dursley
to a 35,000 sq ft purpose-built facility
at the business Park. both occupiers
will move into their new premises in
spring 2014.
• Dunelm Mill, Wheatley Hall Road
– we completed a 22,000 sq ft store
for dunelm Mill on this brownfield
site. the site also now comprises
a new Marston’s public house and
community sports facilities.
outlooK
We anticipate the commercial property
market will continue to improve at a
steady rate throughout 2014. this will
impact positively on our pipeline of
delivery where we are gradually receiving
an increased amount of enquiries.
the retail market will remain challenging
but the location of our portfolio provides
us with firm foundations to continue to
secure tenants at competitive rents and
create new retail environments.
Developable acres
Retail
industrial and commercial
Residential
use not yet specified
Total
Nov 2013
Nov 2012
337
2,997
1,893
716
5,943
342
2,859
1,804
796
5,801
St. Modwen Properties PLC Annual Report and Financial Statements 2013 27
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Strategic Report
Chief Executive’s Review
Residential
There is a tangible increase
in activity in the residential
market place. Momentum
continues to gather pace
in London and the South
East with confidence now
spreading into the regions.
Pictured: St. Modwen homes’ award-
winning locking Parklands development,
Weston-super-Mare.
£482m
value of residential portfolio
21,900+
plots with planning status
the land bank
See page 30
Asset management
See page 31
delivery
See page 32
28 St. Modwen Properties PLC Annual Report and Financial Statements 2013
St. Modwen Properties PLC Annual Report and Financial Statements 2013 29
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Strategic Report
Chief Executive’s Review
Residential
(continued)
StRAtEGy
RESidENtiAl lANd
our land strategy continues to be to ‘buy
wholesale’ and ‘sell retail’. Essentially,
we buy land, predominantly brownfield,
at a low cost and maximise its value
over time through intensive asset
management, remediation and planning.
We then realise that value through one of
the following three routes to market:
We remain successful in our ability to
secure residential-led planning consents
across our land bank, regardless of the
continued challenges with the planning
regime. As a result, 81% of our portfolio
(over 21,900 plots) has either planning
permissions or allocations within
local plans.
• residential land sales
• St. Modwen homes
• Persimmon joint venture.
MARKEt CoMMENtARy
Residential output has risen
significantly over the last 12 months,
with many housebuilders, including
St. Modwen homes and Persimmon,
reporting a healthy increase in sales.
improving consumer sentiment,
supportive Government schemes such
as ‘help to buy’ and an increasingly
stable economy have all contributed to a
more positive outlook for the residential
market as a whole. these aspects are
playing a central role in boosting the
regions while london and the South East
continue to perform strongly.
81%
of residential portfolio with planning
£22m
value added to residential land
30 St. Modwen Properties PLC Annual Report and Financial Statements 2013
in line with our business model, we
continue to top up our land bank with
future residential-led opportunities
to ensure that we are constantly
in a position to create value. in the
last 12 months we have increased
our land bank to over 27,000 plots.
Recent highlights include:
• Clay Cross, Derbyshire – a 204 acre
brownfield site acquired in September
2013. it already benefits from outline
planning consent for the creation of
a high-quality mixed-use regional
regeneration scheme that includes
up to 600 homes. it is designated as
a key development area within the
district of North East derbyshire.
• Eastwood, Nottinghamshire – 17
acres acquired in November 2013.
Currently comprising circa 280,000
sq ft of unoccupied buildings, this site
will be redeveloped to create a new,
residential-led, mixed-use community.
As the market continues to improve,
competition from the major national
housebuilders for land primed for
residential development is intensifying.
this translates into greater land values
and sales achieved above book
value. throughout the year, we have
experienced growing demand for our
land across the country as housebuilders
replenish their stocks to meet increasing
demand. As a result, in the period, we
have sold or committed for sale 57 acres
of land, totalling £58m.
Significant residential land transactions
• RAF Mill Hill – the sale of seven
acres to Galliford try for £25.5m and
contracts exchanged on circa three
acres with Cala homes for £13m.
• Rugby – the sale of 10 acres to taylor
Wimpey for £6.7m.
• Taunton – the sale of 4.7 acres to
david Wilson homes for £4.2m and
6.1 acres to taylor Wimpey for £5.5m.
Planning consents achieved
• Branston, Burton upon Trent – for
660 homes and new employment
space on this 280 acre site, including
manufacturing, storage and
distribution units.
• Pirelli, Burton upon Trent – for 289
homes, a hotel, restaurants, public
house, offices and commercial units
on disused parts of the Pirelli Factory.
• Edison Place, Rugby – for 175
homes on part of this 50 acre site of
which 32 acres are earmarked for
residential development.
• Hartshill, Stoke-on-Trent – for 111
homes, along with a restaurant,
public house and a parade of shops
on this 11 acre site owned by
dyson industries.
Applications submitted
• Uttoxeter, Staffordshire – for 700
homes, employment space, new
school, sports and recreational
facilities, a local retail centre and the
provision of open green space.
• Ellesmere Port, Cheshire – for 350
homes, open public space, footpath
and cycle links on this 29 acre site.
• Wigan Enterprise Park, Manchester
– for 325 homes as part of the
redevelopment of the oldest parts
of this commercial site.
Future opportunities
• New Covent Garden Market – over
2,900 apartments to be delivered
as part of this major regeneration
project situated in the Nine Elms area
of london, for which we anticipate
achieving a planning consent in 2015.
• Faverdale Garden Village, Darlington
– a scheme of 600 homes plus open
space and improvement of bus, cycle
and walking links.
• Hilton, South Derbyshire – a new
mixed-use development at this former
Mod site which currently comprises
a mix of industrial and open storage
to provide 485 homes, a new primary
school and employment opportunities.
over 2,900 apartments will be delivered
as part of the redevelopment of the 57
acre New Covent Garden Market site in
Nine Elms, london.
Persimmon started on site with 284 homes at
Meon Vale, long Marston, Warwickshire, one
of the eight sites being delivered as part of the
joint venture.
St. Modwen homes is progressing well with
its first phase development of 94 homes at
littlecombe, dursley.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 31
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Strategic Report
Chief Executive’s Review
Residential
(continued)
Persimmon joint venture
our joint venture with Persimmon,
established in 2010, continues to
perform well and we are now building
or selling on all eight sites that were
planned under the agreement. this will
see over 2,300 residential plots delivered
by 2017. Scheme highlights include:
• RAF Uxbridge, London – delivery of
the first 453 homes is progressing well
as part of this 110 acre mixed-use
scheme which has planning for 1,340
homes, 200,000 sq ft of commercial
office and retail development, a new
primary school, theatre, community
facilities, hotel and a 40 acre
public park.
• Meon Vale, Long Marston,
Warwickshire – Persimmon started
on site with 284 homes this year
at this former Mod site which
is being transformed into a
mixed-use community.
• Coed Darcy, South Wales –
Persimmon has experienced excellent
sales rates for its scheme of 300
homes which forms part of a broader
1,063 acre regeneration project that is
transforming this former bP oil refinery
into a new sustainable community of
4,000 homes, with 440,000 sq ft of
commercial accommodation.
RESidENtiAl dEVEloPMENt
in line with the improving market place
over the last 12 months, residential
development and sales have gathered
pace, resulting in an overall profit
increased by 33% to £8m (2012: £6m)
which provides an excellent platform
from which to grow this area of the
business further.
St. Modwen homes
in its second full year of building,
St. Modwen homes has continued to
grow from its base at longbridge and it
has opened a second office in bristol to
support the delivery of current and future
St. Modwen homes’ sites across the
South West and South Wales.
At present, St. Modwen homes is on
site with eight schemes at various
stages of delivery across the country
and totalling around 1,000 new homes.
As we continue to build the brand,
St. Modwen homes will continue to
focus on delivering around 200 to 300
units per year.
St. Modwen homes benefits from our
extensive land bank providing it with a
competitive advantage in terms of being
able to use our considerable expertise
in planning and select sites that are
best suited to the brand. in turn, it can
focus on providing a higher quality and
bespoke product. Future opportunities
currently include two schemes in
South Wales comprising a total of 460
homes and an initial phase of a 660
home development in branston, burton
upon trent.
RESidENtiAl lANd bANK £m
25
45
77
213
122
■ under management – Regions
■ under management – london and SE
■ Persimmon joint venture
■ St. Modwen homes
■ Exchanged for sale
32 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Residential development sales
Albeit impacted by delayed site starts
during the first six months of the year
due to continued challenges with the
planning system, sales rates achieved
for the entire year have been steady.
in the financial year we have achieved
365 house sale completions (2012: 259)
comprising 126 for St. Modwen homes
(2012: 158) and 239 for the Persimmon
joint venture (2012: 101).
outlooK
As demand from house buyers continues
to improve and housebuilders continue
to seek attractive land to replenish their
stocks, we expect greater levels of
activity in the residential market but at
a stable pace. Momentum is already
starting to build in the regions and this is
expected to continue throughout 2014
whilst activity in london and the South
East will remain considerably more
buoyant. With our sites now primed
for residential development, we expect
to take advantage of the increased
appetite for residential land and are in a
good position to exploit this throughout
2014. Mirroring this upturn, we expect
St. Modwen homes and the Persimmon
joint venture to continue to grow during
2014, both in terms of profit delivery and
sales volumes.
Residential land bank at 30th November 2013
With planning recognition allocated within the
local plan or similar
Resolution to grant
outline permission
detailed permission
No planning recognition
Total residential land
November 2013
November 2012
Acres
Units
Acres
Units
238
105
892
190
3,669
1,470
14,191
2,579
178
140
794
169
3,396
1,942
13,175
2,337
1,425 21,909
1,281
20,850
468
5,114
523
5,694
1,893
27,023
1,804
26,544
Residential development as at 30th November 2013
Number of sites
units
units completed
land revenue received (£m)
Future land revenue (estimate £m)
Potential St. Modwen share of future
development profits £m
Total
St. Modwen
Homes
Persimmon
joint venture
Active and
completed
8
1,236
299
7
26
29
55
Active
TOTAL
8
16
2,323
3,559
340
639
41
62
45
107
48
88
74
162
St. Modwen Properties PLC Annual Report and Financial Statements 2013 33
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Chief Executive’s Review
income
producing
properties
The backbone of our
long-term business,
our income producing
properties ensure we
extract the maximum value
from our land bank in the
short-term by working hard
those assets that generate
a steady income stream
prior to development.
Pictured: the five megawatt Solar Park at
baglan bay.
£514m
value of income producing properties
1,700+
tenants
the land bank
See page 36
Asset management
See page 37
Recurring income
See page 37
34 St. Modwen Properties PLC Annual Report and Financial Statements 2013
St. Modwen Properties PLC Annual Report and Financial Statements 2013 35
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Strategic Report
Chief Executive’s Review
income
producing
properties
(continued)
the trentham Estate generated £1.25m of
income during the period and welcomed over
425,000 visitors.
StRAtEGy
our income producing assets now
make up 45% of our property portfolio.
Regeneration and development is
a long-term business producing
significant future value and we extract
the maximum value from our land
bank in the short-term by working hard
those assets that generate a steady
income stream prior to development.
Furthermore, we employ locally-based
asset management teams to
manage these assets as efficiently as
possible and typically offer affordable
rents on relatively short tenancies,
ensuring that voids remain at their
lowest possible level as we work
towards redevelopment.
Similarly, once a site is developed, we
will retain it for income until we feel we
can no longer add any further value, at
which point we will dispose of the asset
and reinvest the capital raised back into
the business.
Portfolio yield analysis
We currently manage a diverse base
of over 1,700 occupiers that cover a
wide variety of sectors with a broad
range of requirements. the diversity
of our tenant base mitigates our risk
against any administrations and specific
sector challenges.
PERFoRMANCE
At the year end our income producing
properties were valued at £514m
(2012: £562m) and represent the largest
tranche of our portfolio. Providing further
evidence of the gradual recovery of the
commercial property market and the
strength of our tenant portfolio, we have
experienced very few administrations
during the year and occupancy levels
remain steady at 88% (2012: 88%).
We have managed the churn in our
portfolio by securing £9.0m of new
lettings, equivalent to 20% of our gross
rent roll during the year (2012: £9.7m).
Equivalent
Net initial
Value £m
Nov 2013
Nov 2012
Nov 2013
Nov 2012
Nov 2013
Nov 2012
9.2%
9.7%
9.2%
9.2%
9.0%
9.4%
9.2%
9.2%
7.7%
7.0%
8.0%
7.8%
7.6%
7.0%
7.9%
7.7%
201
59
254
514
240
61
261
562
Retail
office
industrial
Portfolio
36 St. Modwen Properties PLC Annual Report and Financial Statements 2013
highlights include:
income
• Heartlands Park, Washwood Heath
– this 55 acre business park is now
approaching 100% occupancy
following a letting in August 2013 to
Network Rail on a five year lease for
38,000 sq ft of warehouse and office
accommodation. this latest letting
brings the rental income of the site to
£1.6m per annum.
• The Trentham Estate, Stoke-on-Trent
– attracted over 425,000 visitors in
the period (2012: 403,954), and this
725 acre leisure destination generated
£1.23m of operational income
(2012: £1.0m), with the shopping village
remaining 100% occupied.
• Solar Park, Baglan Bay, South Wales
– we have now completed work to
the Solar Park at baglan bay which
comprises 20,000 photovoltaic panels.
once live in March 2014, it will generate
five megawatts of electricity sufficient
to supply over 1,200 homes and
provide an annual income of around
£600,000.
disposals
We disposed of several assets during the
year to which we could add no further
value. All capital raised from the sale
of these assets has been reinvested in
the business and will be used to fund
new opportunities.
the most significant disposal, completed
at the end of the year, was of the Elephant
& Castle Shopping Centre. We acquired
the property in 2002 for £29m and
since then, through our skilful asset
management capabilities, have added
significant value which is reflected in the
£80m sale price versus a book value
of £52.5m.
Acquisitions
Ensuring that our property portfolio
remains topped up with opportunities
that provide short-term income and
long-term development potential, we
acquired the Waterdale Shopping Centre
in doncaster in october 2013 for £3.6m.
immediately securing rental income
and increasing its value to £4.0m,
we have already secured three new
lettings to local retailers and discussions
are underway with other interested
occupiers. Currently, the centre produces
a gross rent of over £900,000. during the
course of 2014 we will work on the
extensive refurbishment of the centre to
provide a more modern, attractive space
for both retailers and customers.
outlooK
As occupier confidence grows and
companies start to think about
expansion and diversification, we expect
this area of the business to continue to
provide us with a significant and secure
source of income that underpins our
running costs.
Reflected in our market valuations,
pressure on yields is easing and will
continue to do so, but at a steady pace
as this market slowly starts to improve.
in line with the gradual improvement
in the commercial property market, we
will continue to grow our development
pipeline not only from within our existing
portfolio but as new opportunities with
the potential to add value come through.
bill oliver
Chief Executive
3rd February 2014
the 125,000 sq ft phase one of Great Western
business Park is now fully let and provides an
annual income of £0.4m.
the first phase of the new town Centre
at longbridge opened in August 2013.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 37
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Strategic Report
Financial
Review
‘Our ability to
generate strong
returns across
the cycle, driven
by the underlying
quality of the
business, is now
very apparent.’
iNCoME StAtEMENt
St. Modwen is a proactive company
focused on creating long-term
value through our own efforts.
We take a pragmatic approach,
making investments to which we add
and realise value through planning,
asset management, remediation and
development over time. our continued
success of delivery is a testament to this
long-term view.
£40m
property profits
+31%
trading profit increase
A core part of our business model is
ensuring that a major proportion of
our assets generate income prior to
development. this consists of core rental
income and other revenue deriving from
our £514m portfolio of income producing
properties, comprising more than 100
commercial properties and making up
45% of our total portfolio. these cash
streams underpin the running costs
of the business and provide firm
foundations from which we can add
value to our portfolio through planning
and asset management activities with
the aim of realising profits from our
development activities.
As we use a number of joint venture
arrangements, the statutory Financial
Statement disclosures do not always
provide a straightforward way of
understanding our business. to enable
a better understanding, we have also
provided information including the
Group’s share of joint ventures and a full
reconciliation is provided in note 2 to the
Group Financial Statements.
38 St. Modwen Properties PLC Annual Report and Financial Statements 2013
overheads
our cost base is driven by the
employment of skilled teams of
professionals to manage existing and
potential assets. our uK-wide land bank
allows us the flexibility to adapt to market
demands and consequently pursue
only those opportunities that generate
the greatest value at any time. We have
continued to expand our residential team
and this, together with the bonuses paid
for successful business delivery, means
that administrative expenses for 2013
(including the Group’s share of joint
ventures and associates) has increased
to £20.2m (2012: £18.6m).
PRoFitS
Rental and recurring income
this core part of our business continues
to perform well. Even taking into account
asset sales in the year i can once again
report a marginal increase in the Group’s
share of net rental income to £36.3m
(2012: £36.2m), achieved as a result
of our successful asset management
capabilities. the excess of new lettings
and rent reviews over churn and
administrations has increased to £3.8m
(2012: £2.0m) and we anticipate our
net rental income remaining steady
throughout 2014 as we replace income
sold during the course of 2013.
occupancy levels remain stable at
88% (2012: 88%) and our average
lease length has been held at 5.0 years
(2012: 5.0 years). due to the nature of
our business, where we retain assets for
income prior to development, we tend to
maintain voids at a reasonably high level
as we require properties to be vacant
whilst we prepare them for development.
therefore, our void levels remain in line
with our expectations.
Property profits
We have achieved a 37% increase
in realised property profits to £40m
(2012: £29.0m) from development.
this includes significant contributions
from our development of the bay
Campus for Swansea university and
the sale of the Elephant & Castle
Shopping Centre by our KPi joint
venture. both these transactions
highlight the value of the St. Modwen
long-term business model. in particular,
the Elephant & Castle transaction
demonstrates our ability to add value
to our retained assets. the joint venture
acquired the asset for £29m in 2002,
significantly increased the income
generated by it and then sold the asset
for £80m, representing a yield of 4.25%.
Residential housing sales have
contributed over £8m. the residential
contribution reflects how this area of
the business has grown throughout
the year and highlights the success
we have achieved in setting up our
St. Modwen homes business and
the development of our Persimmon
joint venture.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 39
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Strategic Report
Financial Review
Property portfolio – valuation movements in the year
2013
Value
added by
St. Modwen
Market value
movements
Residential
Commercial land
income producing:
Retail
office
industrial
Total
21
(4)
(1)
(1)
(1)
14
2012
Value
added by
St. Modwen
Market value
movements
Total
43
(4)
3
(1)
1
22
–
4
–
2
8
(1)
(8)
(6)
(13)
(20)
Total
44
(1)
(1)
(7)
(7)
36
–
7
(1)
6
28
42
48
28
PRoFitS (CoNtiNuEd)
PRoPERty VAluAtioN
Property portfolio
our property portfolio is worth £1.1bn
(2012: £1.1bn). during the period, we
have continued to actively manage
our portfolio, spending £177m on
acquisitions and capital expenditure and
realising £172m from asset disposals.
As the uK economy becomes more
active, we expect these numbers to
remain significant.
Movements in the year
Property valuation movements are
made up of two main elements: those
resulting from actions that we undertake
specifically to add value to our assets,
and those resulting from changes in the
overall property market. Jones lang
laSalle llP provides this valuation split
for us.
Finance costs and income
As we have become more active on the
development of our schemes throughout
the year, this has been reflected in a
slight increase, after allowing for the
equity placing, in net debt and higher
average borrowing levels for the period.
An increased proportion of the debt
is fixed cost, either on our retail bond
or our hedging arrangements. the full
year of fixed cost on the retail bond has
resulted in a slight increase in finance
costs in the period.
trading profit
overall trading profit has therefore
increased again this year by 31% to
£33.3m (2012: £25.5m), an extremely
positive result. We will continue to
focus on generating value across our
land bank and ensuring that our rental
income and recurring other income
underpins the running costs of the
business. Supported by our firm financial
footing, with key projects within our
development pipeline (such as the
bay Campus, Swansea university and
the Marks & Spencer development
at longbridge), along with our other
major schemes, we expect to be in a
good position to continue to take on an
increase in workload as the economic
environment improves.
tRAdiNG PRoFit £m
22.8
25.5
33.3
2011
2012
2013
AddEd VAluE VAluAtioN
GAiNS £m
33
48
28
2011
2012
2013
40 St. Modwen Properties PLC Annual Report and Financial Statements 2013
PRoFit bEFoRE All tAx
our profit before all tax is stated before
tax on joint venture income and after
movements in the market value of our
interest rate derivatives (hedges and
swaps). the valuations are based on
the financial market’s forward prediction
curves for interest rates. At the end of the
financial reporting period and together
with other finance charges, this caused
a credit of £6.7m (2012: £0.6m debit).
Profit before all tax increased
substantially by 56% to £82.2m
(2012: £52.8m), an extremely positive
result for the year.
£14m
market-driven valuation increase
ltV (oN bAlANCE ShEEt) %
36
40
34
2011
2012
2013
ltV (iNCludiNG JV dEbt) %
38
41
33
2011
2012
2013
Market-driven valuation movements
in line with market movements, yields
over the last 12 months have been
broadly steady with value reductions
in the first half of the year offset by
improvements in the second half
valuations of our income producing
portfolio. there has been a material
increase in the value of our residential
portfolio, notably in the South East
(although residential land is increasing
in value across England and Wales), of
£21m (2012: £8m) which has resulted
in an overall net market-driven increase
in the value of our property portfolio of
£14m (2012: £20m decrease).
Valuation improvements as a result of
St. Modwen actions
our ability to add value to our existing
portfolio by actively managing our asset
base is a crucial part of our business
model and this year has again delivered
some very good results. this success
comes from managing commercial and
residential land through planning, despite
the difficulties of this process.
based on independent valuations from
Jones lang laSalle, we have been
able to generate revaluation gains of
£28m in the year (2012: £48m including
a significant contribution from RAF
uxbridge). We expect to continue to
generate significant value improvements
given the increased activity across
our portfolio, and our expertise in
asset management.
basis of property valuation
All our investment properties are
independently valued every six months
by Jones lang laSalle llP, a global
real estate professional services
business. Jones lang laSalle based
its valuations upon an open market
transaction between a willing buyer
and a willing seller at the balance Sheet
date. therefore, no value is taken for any
future expectations of value increases
but discounts are applied to reflect
future uncertainties. Where appropriate
we supplement our internal procedures
with an independent assessment of our
work in progress for any impairment
issues. in accordance with accounting
standards, valuation movements are
put through the income Statement as
gains or losses. Valuations in all our
asset classes have been substantiated
by open market transactions during the
course of the year.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 41
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Net assets
At the year end, the shareholders’
equity value of net assets was £614m
or 279p per share. this represents an
11% increase over the year (2012: 251p
per share). in addition to this increase
dividends of £8.2m (3.75p per share)
were paid during 2013 (2012: £6.8m or
3.41p per share).
EPRA net asset value
in line with industry best practice we
also report net assets per share using
the EPRA (European Public Real Estate
Association) methodology*. our diluted
EPRA net asset value rose 10% to 298p
from 272p per share. A full reconciliation
of our net assets is provided in note 2 to
the Group Financial Statements.
PENSioN SChEME
our defined benefit pension scheme
continues to be fully funded on an iAS19
basis. With the scheme being closed
to new entrants and closed to future
accrual we do not currently expect any
significant material future increase in
scheme contributions.
tAxAtioN ANd PRoFitS AFtER tAx
A lower level of valuation gains
attributable to our joint venture assets
has led to a reduced tax charge in
the year of £8.3m (2012: £10.5m).
After allowing for this, we have achieved
a very strong result for the year with
profits after tax of £73.9m, a 75%
increase compared with 2012 (£42.3m).
bAlANCE ShEEt
in the first half of the year we
successfully completed an equity
placing, raising gross proceeds of £49m
at a price of 245p per share which was
closely aligned with the shareholders’
equity net asset value per share of 251p
at November 2012.
the funds from the placing will be
used to exploit the potential of the
development at the New Covent Garden
Market (NCGM) sites in Nine Elms,
london. the equity funds mean that
we can enter discussions with potential
partners for NCGM knowing that we
have sufficient resources to deliver our
other major projects.
the assets and liabilities of the NCGM
contract will only be recognised on
our balance Sheet once detailed
planning consent is achieved and the
contract becomes fully unconditional.
our expectation remains that this will
happen during our 2015 financial year.
Strategic Report
Financial Review
Equity NEt ASSEt PER ShARE p
232
251
279
2011
2012
2013
EPRA NEt ASSEt
VAluE PER ShARE p
250
272
298
2011
2012
2013
42 St. Modwen Properties PLC Annual Report and Financial Statements 2013
* Note: as a development business many of the
EPRA metrics are inappropriate as they are geared
to property investment.
CoRPoRAtE FACilitiES
We have ample headroom within our
corporate facilities allowing us to meet
future development and funding needs.
At the year end we had £479m of
facilities against drawn debt of £341m.
hedging and cost of debt
We hedge the majority of our interest rate
risk as we aim to have predictable costs
attached to our borrowing. At the year
end we were 86% hedged against our
corporate debt (2012: 93%). We expect
this proportion to reduce in future as
our hedging slowly drops away. As any
new financing is put in place we will
ensure that our hedging positions are
appropriate for our future development.
Corporate funding covenants
We are operating well within the
covenants that apply to both our
corporate banking facilities and to
the retail bond. these are:
bank:
• Net assets must be greater than
£250m (actual £627m).
• Gearing must not exceed 175%
(actual 54%).
• interest cover ratio (that excludes
non-cash items such as revaluation
movements) must be greater than
1.25x (actual 2.9x).
bond:
• See-through loan-to-value ratio must
not exceed 75% (actual 33%).
• interest cover ratio must be greater
than 1.5x (actual 3.1x).
Although the current economic
environment still has an element of
uncertainty, we have considered
available market information, consulted
with our advisers and applied our
own knowledge and experience.
Consequently, we believe that covenant
levels are adequate for our possible
negative scenarios.
Current banking facilities
£m
500
450
400
350
300
250
200
150
100
50
0
Lloyds
VSM
Barclays
RBS
HSBC
Santander
2013 FY
Debt
2014 HY
Renewal
2014 FY
Renewal
2015 HY
Renewal
2015 FY
Renewal
2016 HY
Renewal
2016 FY
Renewal
2017 HY
Renewal
2017 FY
Renewal
2018 HY
Renewal
2018 FY
Renewal
2019 HY
Renewal
2019 FY
Renewal
Retail Bond
Pbb
St. Modwen Properties PLC Annual Report and Financial Statements 2013 43
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Strategic Report
Financial Review
Joint venture facilities
our two joint venture facilities are ViNCi
St. Modwen (VSM) and Key Property
investments (KPi):
• VSM uxbridge – our 50:50 joint
venture with ViNCi PlC has grown
out of Project ModEl, whereby we
acquired and developed a portfolio
of sites in North london which were
formerly owned by the Ministry of
defence. land receipts are rapidly
reducing the debt which was £40m
at the year end (St. Modwen share
£20m) (2012: £50m, St. Modwen share
£25m). We expect this debt reduction
to accelerate in 2014.
We are also now working together
with ViNCi in joint venture on the New
Covent Garden Market sites. We are in
continual dialogue with our partners on
the appropriate ownership structures
for these joint ventures and as has
happened previously, these ownership
shares may change moving debt on or
off balance Sheet.
• KPi – our 50:50 joint venture with
Salhia Real Estate Company K.S.C.
holds significant retail and commercial
assets with long-term development
potential. during the year the joint
venture sold the Elephant & Castle
Shopping Centre in london for £80m.
this disposal, together with other
asset sales, significantly reduced the
debt in the joint venture to £29m at the
year end, with the St. Modwen share
representing £14.5m (2012: £115m,
St. Modwen share £57.5m).
Since the year end dividends paid to
shareholders have increased the debt
levels. We are reviewing the financing
arrangements for this joint venture
to ensure that they are appropriately
matched for our future requirements.
Funding levels
We have no corporate or joint venture
facilities that require renewal before
November 2014, when our £100m
lloyds facility matures.
We have existing offers for the renewal
and extension of this and other debt
facilities and continue to consider
options to increase the diversity and
longevity of our facilities. We are well
positioned to move forward with
sufficient facilities of the right type to
support further growth in the business.
£139m
undrawn facility headroom
£49m
raised from equity placing
44 St. Modwen Properties PLC Annual Report and Financial Statements 2013
outlooK
our ability to generate strong returns
across the cycle, driven by the
underlying quality of the business, is
now very apparent. throughout the
year and against the backdrop of the
changing economic environment, we
have continued to maximise and grow
our income and we continue to invest
in the business whilst maintaining a
prudent financial structure. We also look
forward to securing planning permission
for the New Covent Garden Market land
which is not yet accounted for within
our financial results. these factors
combined provide us with a sound
financial platform from which we can
continue to add value and drive the
business forward.
Michael dunn
Group Finance director
3rd February 2014
As we evaluate the various routes for our
major projects it might be appropriate for
us to consider funding that is designed
specifically for each opportunity.
in the second half of the year, the
improving economy has meant that
we have invested in our business and
increased the value of our assets.
Consequently, although there has been a
slight increase in equivalent on balance
Sheet debt (£341m) (2012: £318m after
adjusting for the equity placing) our
gearing and loan-to-value ratios have
continued to fall. this is particularly
noticeable once the significant reduction
in joint venture debt is considered with
the see-through loan-to-value ratio falling
to 33% (2012: 41%).
Given the improving economic
environment we will continue to
invest to generate future returns.
throughout the next year, on a
see-through basis, we expect both
the gearing and loan-to-value ratios
to remain broadly consistent although
changes in joint venture structures may
affect the on balance Sheet ratios.
Principal risks and uncertainties
the principal risks and uncertainties
which could have a material impact
on the Group and the corresponding
mitigating actions that are in place are
set out on pages 46 to 49.
Given the progress of the business and
the increased optimism for the economy
we consider that the overall position
continues to improve.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 45
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Strategic Report
Principal risks and uncertainties
how we manage our risks
Economic and
market risk
uncertainty in the economic
and market environment
increases the risk attached
to property valuation and
development returns
Risk and
potential impact
Mitigation
Market/economic changes such as higher
interest rates, reduced demand for land
and new properties (e.g. residential),
reduced availability of credit and declining
investment yields restrict business
development and cause valuation falls.
•
•
Regional spread and portfolio diversity mitigates
sector or location-specific risks.
Active portfolio management achieves a better
than market utilisation of assets.
• Hedging policy reduces interest rate risk.
Failure to identify a pipeline of future
residential sites reduces our supply of
homes or reduced availability of mortgage
finance adversely impacts demand for
homes in our residential business.
Poor market intelligence (i.e. failure to
anticipate market changes) leads to
selection of inappropriate and, ultimately,
unprofitable schemes.
•
•
•
•
•
•
•
•
Team of professionals with residential experience
and expertise.
Extensive land bank with a continuing stream
of planning applications.
Flexible approach to mortgage financing
(e.g. shared equity schemes).
Use of JV partners with residential expertise
(e.g. Persimmon).
Regional offices in touch with their local market.
Dedicated central resource supporting regional teams.
Flexible and innovative approach to acquisitions
and schemes in order to adapt to market changes.
Projects, acquisitions and disposals are reviewed
(and financially appraised) within clearly defined
authority limits.
Financial collapse of, or dispute with, a key
joint venture partner leads to financial loss.
•
Monthly review of performance to identify if senior
management intervention is required.
• Flexible but legally secure contracts with partners.
Our key partners are Persimmon PLC, VINCI PLC and Salhia Real Estate K.S.C. of Kuwait. These
are financially strong partners with good prospects and strong balance sheets. Where we have
financially weaker partners, we are exiting from these arrangements, meaning that the overall risk has
reduced year-on-year.
We choose to operate only in the UK, which is subject to relatively low risk and low returns from a
stable and mature, albeit cyclical, economy and property market. By involvement with all sectors of
that economy and property market, we are as diversified as possible, without venturing overseas.
Our land bank of over 5,900 acres provides us with the flexibility to move with market demands and
pursue those opportunities that generate the greatest value at any one time.
Over the course of the last year, the continuing (albeit improving) sovereign debt problems within the
Eurozone means that the overall market position continues to represent a high risk.
The planning environment is becoming more difficult with an increased likelihood of delays in the
planning process. However, our scale and expertise means that we are still being successful in this
area, although individual schemes may suffer delay. Demand for new homes remains strong and has
been boosted by an increase in the availability of new mortgage finance which is due at least in part
to the Government’s Help to Buy scheme.
The excellent reputation and financial capacity of the Company has enabled us to continue to win
schemes and grow the land bank to record levels, in an improving but still challenging market and
economy. In this environment, with a reduced number of active competitors, we expect to be able to
continue to source attractive acquisitions.
Our prudent approach to forward commitments, speculative development and asset disposals has
enabled us to optimise operational cash flows and 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. The success of our first retail bond (October 2012) and an equity
placing (March 2013) has further diversified our debt financing profile by providing access to
unsecured funding.
•
Recurring income from rents provides funding for
a large percentage of overhead and interest costs.
Availability of funding reduces, causing
a lack of liquidity that impacts borrowing
capacity and reduces the saleability
of assets.
Financial risk
our geared financial structure
means that there are
inevitable risks attached to the
availability of funding and the
management of fluctuations
in our cash flows
• Strong relationships with key banks.
Financial headroom maintained to
•
provide flexibility.
Alternative sources of funding (e.g. retail bond in
2012, equity placing in 2013).
Weighted average expiry of facilities is 2.5 years at
30th November 2013.
•
•
Unforeseen significant changes to cash
flow requirements (e.g. operating cost
increases, pension fund shortfall) limit the
ability of the business to meet its ongoing
commitments.
•
Regular and detailed cash flow forecasting
enables monitoring of performance and
management of future cash flows.
Our cash flow is closely monitored throughout the year and the year end position in line with the
guidelines that we set at the start of the year.
46 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Key:
Risk exposure increase
Risk exposure reduced
No significant change
in risk exposure
Change since 2012
Annual Report
Economic and
market risk
uncertainty in the economic
and market environment
increases the risk attached
to property valuation and
development returns
Market/economic changes such as higher
•
Regional spread and portfolio diversity mitigates
interest rates, reduced demand for land
and new properties (e.g. residential),
reduced availability of credit and declining
investment yields restrict business
development and cause valuation falls.
sector or location-specific risks.
•
Active portfolio management achieves a better
than market utilisation of assets.
• Hedging policy reduces interest rate risk.
Failure to identify a pipeline of future
residential sites reduces our supply of
homes or reduced availability of mortgage
finance adversely impacts demand for
homes in our residential business.
Poor market intelligence (i.e. failure to
anticipate market changes) leads to
selection of inappropriate and, ultimately,
unprofitable schemes.
•
Team of professionals with residential experience
and expertise.
•
Extensive land bank with a continuing stream
of planning applications.
•
Flexible approach to mortgage financing
(e.g. shared equity schemes).
•
Use of JV partners with residential expertise
(e.g. Persimmon).
•
•
•
Regional offices in touch with their local market.
Dedicated central resource supporting regional teams.
Flexible and innovative approach to acquisitions
and schemes in order to adapt to market changes.
•
Projects, acquisitions and disposals are reviewed
(and financially appraised) within clearly defined
authority limits.
Commentary
We choose to operate only in the UK, which is subject to relatively low risk and low returns from a
stable and mature, albeit cyclical, economy and property market. By involvement with all sectors of
that economy and property market, we are as diversified as possible, without venturing overseas.
Our land bank of over 5,900 acres provides us with the flexibility to move with market demands and
pursue those opportunities that generate the greatest value at any one time.
Over the course of the last year, the continuing (albeit improving) sovereign debt problems within the
Eurozone means that the overall market position continues to represent a high risk.
The planning environment is becoming more difficult with an increased likelihood of delays in the
planning process. However, our scale and expertise means that we are still being successful in this
area, although individual schemes may suffer delay. Demand for new homes remains strong and has
been boosted by an increase in the availability of new mortgage finance which is due at least in part
to the Government’s Help to Buy scheme.
The excellent reputation and financial capacity of the Company has enabled us to continue to win
schemes and grow the land bank to record levels, in an improving but still challenging market and
economy. In this environment, with a reduced number of active competitors, we expect to be able to
continue to source attractive acquisitions.
Financial collapse of, or dispute with, a key
•
Monthly review of performance to identify if senior
joint venture partner leads to financial loss.
management intervention is required.
• Flexible but legally secure contracts with partners.
Our key partners are Persimmon PLC, VINCI PLC and Salhia Real Estate K.S.C. of Kuwait. These
are financially strong partners with good prospects and strong balance sheets. Where we have
financially weaker partners, we are exiting from these arrangements, meaning that the overall risk has
reduced year-on-year.
Availability of funding reduces, causing
a lack of liquidity that impacts borrowing
capacity and reduces the saleability
of assets.
Financial risk
our geared financial structure
means that there are
inevitable risks attached to the
availability of funding and the
management of fluctuations
in our cash flows
•
Recurring income from rents provides funding for
a large percentage of overhead and interest costs.
• Strong relationships with key banks.
•
Financial headroom maintained to
provide flexibility.
•
Alternative sources of funding (e.g. retail bond in
2012, equity placing in 2013).
•
Weighted average expiry of facilities is 2.5 years at
30th November 2013.
Our prudent approach to forward commitments, speculative development and asset disposals has
enabled us to optimise operational cash flows and 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. The success of our first retail bond (October 2012) and an equity
placing (March 2013) has further diversified our debt financing profile by providing access to
unsecured funding.
Unforeseen significant changes to cash
flow requirements (e.g. operating cost
increases, pension fund shortfall) limit the
ability of the business to meet its ongoing
commitments.
•
Regular and detailed cash flow forecasting
enables monitoring of performance and
management of future cash flows.
Our cash flow is closely monitored throughout the year and the year end position in line with the
guidelines that we set at the start of the year.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 47
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Strategic Report
Principal risks and uncertainties
Risk and
potential impact
Mitigation
Construction
risk
the management of
developments is a
complex process
Regulatory and
compliance risk
our work is undertaken in a
complex environment with
consequent compliance risks
Inadequate due diligence on major new
schemes leads to unforeseen exposures,
costs and liabilities, which prevent effective
delivery and result in financial loss.
Inadequate construction delivery and
procurement leads to quality issues
and cost overruns causing customer
dissatisfaction and/or financial damage.
National Planning Policy Framework
changes adversely impact on our business
strategy by limiting our ability to secure
viable permissions and/or by removing
our competitive advantage.
Failure to manage long-term environmental
issues relating to brownfield and
contaminated sites leads to a major
environmental incident, resulting in financial
and/or reputational damage.
•
•
•
•
•
•
Use and close supervision of a preferred
supply chain of high-quality trusted suppliers
and professionals.
Projects, acquisitions and disposals are reviewed
and financially appraised in detail, with clearly
defined authority limits.
Contractual liability clearly defined.
Strong internal construction management team.
Clearly defined formal tender process that
evaluates qualitative and quantitative factors
in bid assessment.
Use and close supervision of a preferred
supply chain of high-quality trusted suppliers
and professionals.
• Use of high-quality professional advisers.
• Active involvement in public consultation.
•
Constant monitoring of all aspects of the planning
process by experienced in-house experts.
Contacts in place with central and
local government.
•
• Use of high-quality external advisors.
• Highly qualified and experienced internal staff.
•
Risk assessments conducted as part of due
diligence process.
Full warranties from professional consultants and
remediation contractors.
Defined business processes to proactively
manage issues.
•
•
human
resources and
organisational
risk
our activities require
highly-skilled and motivated
people in order to deliver
consistently and effectively
• Annual independent audit of environmental risk.
Reputation managed by a core team of skilled
•
PR professionals.
Lack of succession planning and/or over
reliance on key people causes loss
of/failure to attract good people and/or
significant disruption/loss of intellectual
property.
•
•
Succession planning monitored at Board level
and below.
Targeted recruitment with competitive,
performance-driven remuneration packages.
HS&E culture leads to a major incident
(e.g. serious injury to, or death of, an
employee, client, contractor or member
of the public) or non-compliance with
legislation, resulting in financial penalties
and/or reputational damage.
Inadequate Business Continuity Planning
(BCP) for operations and IT, leading to
significant business disruption, financial/IP
loss and/or reputational damage in the
event of an accident, act of terrorism or
cyber crime.
•
Performance indicators are reviewed at
Board level.
• Use of high-quality external HS&E advisers.
Defined business processes to proactively
•
manage issues.
•
•
Documented BCP and crisis management plans
covering IT and operations.
Dedicated IT team monitors performance of all
information systems.
48 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Our programme for the year has been delivered successfully and we have conducted robust
processes in selecting contractors for future projects.
During the year, all our developments have been completed on time and within budget.
Our contractor selection processes are rigorous; whilst the improving UK economy has reduced
the risk overall, we continue to favour financially stable and robust contractors, and we are mindful
of contractors’ cash flows becoming stretched in a rising market.
Our daily exposure to all aspects of the planning process, and internal procedures for spreading
best practice, ensure we remain abreast of most developments. Furthermore, we continue our
efforts to influence public policy debate. Although the current fluctuations in proposed planning
legislation mean that future rules are uncertain, with an increased proportion of planning applications
going to appeal, our expertise should enable us to prosper relative to our competitors, irrespective of
the planning environment.
We are willing to accept a degree of environmental risk, enabling higher returns to be made.
The inherent risks are passed on or minimised where possible but cannot be eliminated, although
the residual risks have been acceptably low in recent years.
We continue to offer attractive and competitive remuneration packages as is evidenced by the lack
of vacancies and churn. We continue to adapt our recruitment strategy to source the skills that will
support the Company’s long-term business objectives.
Health and safety continues to be a high priority. The assessment of environmental costs
(and the subsequent optimising of remediation solutions) is an integral part of our acquisition and
post-acquisition process. We seek to minimise or pass on any such environmental risks, and believe
that the residual risk remains acceptably low. In other social and ethical areas, our operations are
underpinned by a simple but rigorous set of operating commitments.
While the business does not internally rely on IT as a business process for its success, our reliance
on these areas is increasing. Consequently, we are increasing our preventative security and the
robustness of our reactive procedures in order to address this.
Key:
Risk exposure increase
Risk exposure reduced
No significant change
in risk exposure
Change since 2012
Annual Report
Commentary
Our programme for the year has been delivered successfully and we have conducted robust
processes in selecting contractors for future projects.
During the year, all our developments have been completed on time and within budget.
Our contractor selection processes are rigorous; whilst the improving UK economy has reduced
the risk overall, we continue to favour financially stable and robust contractors, and we are mindful
of contractors’ cash flows becoming stretched in a rising market.
Our daily exposure to all aspects of the planning process, and internal procedures for spreading
best practice, ensure we remain abreast of most developments. Furthermore, we continue our
efforts to influence public policy debate. Although the current fluctuations in proposed planning
legislation mean that future rules are uncertain, with an increased proportion of planning applications
going to appeal, our expertise should enable us to prosper relative to our competitors, irrespective of
the planning environment.
We are willing to accept a degree of environmental risk, enabling higher returns to be made.
The inherent risks are passed on or minimised where possible but cannot be eliminated, although
the residual risks have been acceptably low in recent years.
Construction
risk
the management of
developments is a
complex process
Inadequate due diligence on major new
schemes leads to unforeseen exposures,
costs and liabilities, which prevent effective
delivery and result in financial loss.
Inadequate construction delivery and
procurement leads to quality issues
and cost overruns causing customer
dissatisfaction and/or financial damage.
Regulatory and
compliance risk
our work is undertaken in a
complex environment with
consequent compliance risks
National Planning Policy Framework
changes adversely impact on our business
strategy by limiting our ability to secure
viable permissions and/or by removing
our competitive advantage.
•
Use and close supervision of a preferred
supply chain of high-quality trusted suppliers
and professionals.
•
Projects, acquisitions and disposals are reviewed
and financially appraised in detail, with clearly
defined authority limits.
•
Contractual liability clearly defined.
•
•
Strong internal construction management team.
Clearly defined formal tender process that
evaluates qualitative and quantitative factors
in bid assessment.
•
Use and close supervision of a preferred
supply chain of high-quality trusted suppliers
and professionals.
• Use of high-quality professional advisers.
• Active involvement in public consultation.
•
Constant monitoring of all aspects of the planning
process by experienced in-house experts.
•
Contacts in place with central and
local government.
• Highly qualified and experienced internal staff.
•
Risk assessments conducted as part of due
diligence process.
•
Full warranties from professional consultants and
remediation contractors.
•
Defined business processes to proactively
manage issues.
• Annual independent audit of environmental risk.
•
Reputation managed by a core team of skilled
PR professionals.
Failure to manage long-term environmental
• Use of high-quality external advisors.
issues relating to brownfield and
contaminated sites leads to a major
environmental incident, resulting in financial
and/or reputational damage.
human
resources and
organisational
risk
our activities require
highly-skilled and motivated
people in order to deliver
consistently and effectively
Lack of succession planning and/or over
•
Succession planning monitored at Board level
reliance on key people causes loss
of/failure to attract good people and/or
significant disruption/loss of intellectual
property.
and below.
•
Targeted recruitment with competitive,
performance-driven remuneration packages.
HS&E culture leads to a major incident
(e.g. serious injury to, or death of, an
employee, client, contractor or member
of the public) or non-compliance with
legislation, resulting in financial penalties
and/or reputational damage.
Inadequate Business Continuity Planning
(BCP) for operations and IT, leading to
significant business disruption, financial/IP
loss and/or reputational damage in the
event of an accident, act of terrorism or
cyber crime.
•
Performance indicators are reviewed at
Board level.
• Use of high-quality external HS&E advisers.
•
Defined business processes to proactively
manage issues.
•
Documented BCP and crisis management plans
covering IT and operations.
•
Dedicated IT team monitors performance of all
information systems.
We continue to offer attractive and competitive remuneration packages as is evidenced by the lack
of vacancies and churn. We continue to adapt our recruitment strategy to source the skills that will
support the Company’s long-term business objectives.
Health and safety continues to be a high priority. The assessment of environmental costs
(and the subsequent optimising of remediation solutions) is an integral part of our acquisition and
post-acquisition process. We seek to minimise or pass on any such environmental risks, and believe
that the residual risk remains acceptably low. In other social and ethical areas, our operations are
underpinned by a simple but rigorous set of operating commitments.
While the business does not internally rely on IT as a business process for its success, our reliance
on these areas is increasing. Consequently, we are increasing our preventative security and the
robustness of our reactive procedures in order to address this.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 49
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Strategic Report
Corporate
Social
Responsibility
Acquiring brownfield sites
and breathing new life into
areas that need it the most
is at the heart of who we are
and what we do.
Pictured: the trentham Estate celebrates
10 years of being open to the public in 2014.
90%+
of our developable portfolio with
specified use is brownfield
50 St. Modwen Properties PLC Annual Report and Financial Statements 2013
St. Modwen Properties PLC Annual Report and Financial Statements 2013 51
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Strategic Report
Corporate social responsibility
98%
of remediated materials are
recycled or reused
We are committed to improving the built
environment through our regeneration
projects, all of which seek to transform
run-down areas and disused sites
into inspirational and thriving business
and residential communities. in doing
so, we aim to ensure that community,
environmental and social considerations
are integrated within our day-to-day
working practices and at all stages
of the project lifecycle.
SuStAiNAbility
the principles of sustainable
development are integral to our
business and they form the basis
of our environmental policy which
demonstrates our commitment to
improving the environment. to this aim
we seek to:
• be continually mindful of the impact
of our developments on the local and
wider environments;
• protect and enhance the environment,
transforming run-down areas and
disused sites by developing them to
the highest possible standards;
• continue to engage regularly with
statutory and non-statutory bodies,
with the local community and through
the planning and environmental
regulatory framework;
• conserve energy, reduce consumption
of raw materials and minimise waste
production; and
• adopt practices which lead to
improvements in environmental
performance, for example
sustainable design of sites and
buildings and the use of sustainable
construction techniques.
As part of this commitment, we seek
to ensure the following principles are
adhered to across the Company:
• ensure all buildings occupied by
the Group are managed efficiently
by its facilities team and the
building surveyor;
• encourage all employees to
conserve energy
• promote recycling by negotiating
contracts and providing facilities to
enable employees to recycle office
waste and other used products;
• control business travel and provide
opportunities for employees to travel
to work in various ways, such as
providing cycle racks and showers;
• consult with the local community
on our proposed schemes;
• ensure that all fluorescent light
tubes are disposed of in a safe
manner, compliant with appropriate
regulations; and
• ensure that we employ
considerate constructors.
We also pay particular attention to
recycling materials on site, using
sustainable materials, conserving
energy, reducing our consumption
of raw materials and minimising
waste production.
the results below demonstrate our
commitment to reusing and recycling
materials on site and in all instances we
have met or over-achieved our targets
for the year. the slight decline in the
percentage of remediated materials
reused or recycled on site is attributable
to us having to dispose of some material
to landfill because they were unfit for
recycling or reuse elsewhere.
Recycling/ remediation on site
Percentage of remediated materials
reused or recycled
Percentage of demolition products
reclaimed or retained on site or recycled
Percentage of construction waste reused
or recycled
Target
2013
achieved
2012
achieved
2011
achieved
98%
98%
99%
99%
90%
93%
93%
96%
80%
91%
90%
88%
52 St. Modwen Properties PLC Annual Report and Financial Statements 2013
GREENhouSE GAS EMiSSioNS
We are conscious of our carbon footprint
and below have reported emissions for
those sources we deem ourselves to be
directly responsible.
total purchased gas and electricity
• this represents the gas and electricity
which has been consumed at
properties under our operational
control – head office, certain regional
offices, including St. Modwen homes’
offices, sales offices occupied by
St. Modwen homes and vacant space.
Petrol and diesel
• Petrol and diesel from all company
cars in use across the Group.
Cars available to certain employees
as part of the Company’s car scheme
are restricted to Co2 emissions of
130 g/km or less.
organisation boundary and responsibility
We do not have responsibility for
emission sources that are beyond the
boundary of our operational control.
Consequently, not all gas and electricity
purchased is included within Scope
1 and 2 as our tenants’ consumption
is not under our operational control.
Furthermore, the data excludes
consumption from those sites which fall
within the joint venture with Persimmon
as it is our joint venture partner that
controls the procurement of utilities to
these sites. For all other joint ventures,
100% of the data is included in our
emissions table as we are wholly
responsible for the emissions sources.
Greenhouse Gas Emissions
Scope 1:
total purchased gas
Petrol and diesel
TOTAL SCOPE 1
Scope 2:
total purchased electricity
TOTAL SCOPE 2
TOTAL SCOPE 1 and 2
Intensity ratio
tCO2
emissions/
full-time
employees1
tCO2
emissions/
£m property
portfolio2
CO2
emissions
(tonnes)
225
495
720
961
961
1,681
2.8
0.6
3.8
6.6
0.8
1.4
1. Equivalent Co2 emissions per full-time employee
2. Equivalent Co2 per £m of property portfolio held by the Company
Reporting year
our reporting year for greenhouse gas
emissions is the same as our financial
reporting year, being 1st december 2012
to 30th November 2013.
Methodology
We have reported on all of the emission
sources required under the Companies
Act 2006 (Strategic Report and directors’
Reports) Regulations 2013. to calculate
emissions from gas and electricity
consumption, we have used the main
requirements of the GhG Protocol
Standard (revised edition) and emission
factors from uK Government’s GhG
Conversion Factors for Company
Reporting 2014.
to measure emissions from company
cars, we have based this on the
‘Environmental Reporting Guidelines:
including mandatory greenhouse gas
emissions reporting guidance’ (June
2013) issued by the department for
Environment, Food and Rural Affairs
(dEFRA). We have also utilised dEFRA’s
2013 conversion factors within our
reporting methodology.
this is the first year for which we have
reported our greenhouse gas emissions
and this will form the baseline data for
subsequent Annual Reports. As part
of our ongoing commitment to reduce
our carbon footprint, we will continually
endeavour to improve on the way we
capture data for future reports.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 53
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Strategic Report
Corporate social responsibility
EMPloyEE diVERSity
boARd diVERSity
our employees are instrumental to our
business success and we respect and
value the individuality and diversity that
each one brings.
the Company adheres to a clear equality
policy which sets out individuals’ rights
and obligations as defined by the
Equality Act 2010. this policy covers
the responsibilities and approach we
have to our employees and our duty
to avoid discrimination in all aspects
of recruitment and employment.
A breakdown by gender of the number
of persons who were directors of the
Company, senior managers and other
employees (both full and part time) as
at 30th November 2013 is set out here.
in considering appointments to the
board and to senior executive positions,
it is our policy to evaluate the skills,
knowledge and experience required
by a particular role with due regard for
the benefit of diversity and to make an
appointment accordingly.
2
7
■ Male (78%)
■ Female (22%)
SENioR MANAGER diVERSity
1
7
■ Male (87%)
■ Female (13%)
All EMPloyEE diVERSity
152
170
■ Male (53%)
■ Female (47%)
54 St. Modwen Properties PLC Annual Report and Financial Statements 2013
tRAiNiNG ANd dEVEloPMENt
hEAlth ANd SAFEty
ChARitAblE CoNtRibutioNS
Affiliated to the Government’s
landfill tax Credit Scheme and
regulated by ENtRuSt, the
St. Modwen 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.
Established in 2008, the trust has funded
over £250,000 of community projects
and in 2013, it reached the end of its
lifecycle. We are now working to renew
our strategy for charitable support which
will be aligned with our business strategy
and have both local and national focus.
the motivation of our employees is
important to us as it maintains a good
level of staff retention which is key for
ensuring stability across the business
and in turn, ensures our long-term
projects are managed effectively. in the
period, 82% of management had served
over three years of service (2012: 78%).
during 2013 we improved our appraisal
system which is designed to assist
employees in developing their careers,
identify and provide appropriate training
and support the Company’s succession
planning objectives.
Senior management also participated in
a leadership development Programme
during the year. the programme
comprised a series of individual
workshops that were designed to
enhance effective business skills and
entrepreneurial thinking. over the next
12 months, the programme will be rolled
out at an appropriate level to all other
professional staff and tailored to their
individual needs.
huMAN RiGhtS
Whilst we do not have a specific human
rights policy at present, we do have
policies that adhere to internationally
proclaimed human rights principles.
We will give careful consideration to
whether a specific human rights policy is
needed in the future over and above our
existing policies.
the Company gives high priority to
safeguarding the health and safety of the
public and its employees by pursuing a
policy which ensures that:
• its business is conducted in
accordance with standards that are
in compliance with relevant statutory
provisions for health and safety
of staff and any other persons on
Company premises;
• a safe and healthy working
environment is established
and maintained at all of the
Company’s locations;
• managers at all levels regard health
and safety matters as a prime
management responsibility;
• sufficient financial resources are
provided to ensure that policies can
be implemented effectively;
• good standards of training and
instruction in matters of health and
safety are provided and maintained
at all levels of employment;
• risk assessments are carried out where
appropriate; and
• a suitable advisory service in matters
of health and safety is provided
and maintained.
the Company’s health and safety
performance continues to be very good,
with no enforcement notices issued, no
prosecutions for breaches of health and
safety, and no fatalities.
APPRoVAl oF StRAtEGiC REPoRt
the Strategic Report for the year ended
30th November 2013, which is set out
from this annual report to page 55, has
been approved by the board and was
signed on its behalf by
bill oliver
Chief Executive
3rd February 2014
St. Modwen Properties PLC Annual Report and Financial Statements 2013 55
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information the board
bill ShANNoN
bill oliVER
StEVE buRKE
Non-executive Chairman
Appointed to the Board as non-executive
director and Chairman Designate in November
2010 and became non-executive Chairman in
March 2011.
Committee membership
Chairs the Nomination Committee and is a
member of the Remuneration Committee.
Experience
A 30 year career at Whitbread plc which
culminated in his appointment as a main Board
director for 10 years until his retirement in 2004.
Former Chairman of AEGON UK plc (previously
Scottish Equitable), Gaucho Grill Holdings Ltd
and Pizza Hut (UK) Ltd, and former
non-executive director of The Rank Group plc,
Barratt Developments plc and Matalan plc.
Currently a non-executive director of Johnson
Service Group plc and Trustee of the Royal
Voluntary Service. A qualified Chartered
Accountant (Scotland).
Chief Executive
Appointed to the Board in January 2000.
Construction Director
Appointed to the Board in November 2006.
Committee membership
None.
Committee membership
None.
Experience
Has over 30 years’ experience in the property
industry with residential and commercial
development companies such as Alfred
McAlpine, Barratt and The Rutland Group.
Finance Director of Dwyer Estates plc from
1994 to 2000. Joined St. Modwen in 2000
as Finance Director, and was subsequently
appointed Managing Director in 2003 and
Chief Executive in 2004. A member of the
advisory board of the Government’s
Regeneration Investment Organisation.
A qualified Chartered Accountant.
Experience
Joined St. Modwen in 1995 as a Contracts
Surveyor after a number of years’ construction
experience in senior roles with national
contracting companies including Balfour
Beatty and Clarke Construction.
Appointed Construction Director in 1998
and joined the Board as a director in 2006.
MiChAEl duNN
RiChARd Mully
Group Finance Director
Appointed to the Board in December 2010.
Committee membership
None.
Experience
A 20 year career in finance, including as
Finance Director of both Private Finance and
Building at Carillion plc. Joined St. Modwen in
2010 from May Gurney Integrated Services plc
where he spent five years as Group Finance
Director. A non-executive director of
Metropolitan Housing Association and
a qualified Chartered Accountant.
Senior Independent Director
Appointed to the Board in September 2013
and became Senior Independent Director in
December 2013.
Committee membership
Member of the Audit, Remuneration
and Nomination Committees.
Experience
A 30 year career in investment banking and real
estate private equity investing, including as
co-founder and managing partner of Grove
International Partners LLP (formerly Soros Real
Estate Partners LLC). Currently Senior
Independent Director of Hansteen Holdings plc
and ISG plc, non-executive director of Aberdeen
Asset Management plc and Supervisory Board
member of Alstria Office REIT-AG.
56 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Corporate Governance KAy ChAldECott
SiMoN ClARKE
lESlEy JAMES, CbE
Independent non-executive director
Appointed to the Board in October 2012.
Non-executive director
Appointed to the Board in October 2004.
Independent non-executive director
Appointed to the Board in October 2009.
Committee membership
Member of the Audit, Remuneration
and Nomination Committees.
Experience
Joined Capital Shopping Centres Group plc
(now Intu Properties plc) on graduating and held
a number of senior management positions,
including Managing Director, during a career
spanning 27 years. Also served as a main
Board director from 2005 until leaving the Group
in 2011. Currently a non-executive director of
NewRiver Retail Limited. A member of the Royal
Institution of Chartered Surveyors.
Committee membership
None.
Experience
Former Deputy Chairman of Northern Racing
plc and director and Vice-Chairman of The
Racecourse Association Ltd. Currently
Chairman of Dunstall Holdings Ltd. The son
of Sir Stanley Clarke, the founder and former
Chairman of St. Modwen, and represents the
interests of the Clarke and Leavesley families,
the Company’s largest shareholders, on
the Board.
Committee membership
Chairs the Remuneration Committee
and is a member of the Audit and
Nomination Committees.
Experience
HR Director for Tesco plc from 1985 to 1999
and a main Board director from 1994.
Former non-executive director for a number
of companies including Care UK plc, Alpha
Airports Group plc, Inspicio plc, Liberty
International plc and the West Bromwich
Building Society. Former Trustee of the charity
I CAN. Currently a non-executive director of
Anchor Trust. A Companion of the Chartered
Institute of Personnel and Development.
JohN SAlMoN
Independent non-executive director
Appointed to the Board in October 2005.
Interim Senior Independent Director from
March 2013 to November 2013.
Committee membership
Chairs the Audit Committee and is a member of
the Remuneration and Nomination Committees.
Experience
Admitted to partnership of Price Waterhouse
in 1976 and was a senior client partner at
PricewaterhouseCoopers LLP with lead
responsibility for a range of major listed
companies until his retirement in 2005.
A former member and Deputy Chairman of
PwC’s Supervisory Board and former Trustee
and Council Member of the British Heart
Foundation. A qualified Chartered Accountant.
tANyA StotE
Company Secretary
Joined St. Modwen as Company Secretary
in March 2012. Has held senior Company
Secretary roles in a number of FTSE listed
companies including Taylor Woodrow plc,
Travis Perkins plc and, most recently, GKN plc
where she was Deputy Company Secretary
and Head of Secretarial Department.
A Fellow of the Institute of Chartered
Secretaries and Administrators.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 57
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Regional directors
JohN doddS, FRiCS
Regional Director
Midlands
MiKE hERbERt
Regional Director
The Trentham Estate
RuPERt JoSElANd, MRiCS
Regional Director
South West and South Wales
StEPhEN PRoSSER, MRiCS
tiM SEddoN, MRiCS
Regional Director
North
Regional Director
London and South East
RuPERt Wood, MRiCS
Regional Director
Northern Home Counties
Guy GuStERSoN, MbA
Residential Director
58 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Corporate Governance Corporate Governance Report
Chairman’s overview
As a board, we are responsible for the
stewardship of the business and are
committed to maintaining high standards
of corporate governance across the
Group. We believe good governance
enhances business performance as
well as our reputation within our market
place and across relationships with
our stakeholders.
our approach to governance is
outlined in the following report, which
describes how we integrate into our
business the main principles of the five
sections of the 2012 uK Corporate
Governance Code (the Code), namely
leadership, effectiveness, accountability,
remuneration and relations with
shareholders. i am pleased to report that,
throughout the financial year ended 30th
November 2013, the Company complied
in full with the Code.
in line with the development of our
business, our governance framework
is kept under close review in order to
ensure that shareholders’ interests are
safeguarded and to sustain the success
of the Company over the longer-
term. As reported in my statement on
page 19, we have deepened further
the expertise on the board by the
appointment of Richard Mully, who has
spent almost 30 years in investment
banking, capital markets and real estate
private equity investing, as Senior
independent director.
the performance evaluation review
undertaken at the end of the year
highlighted the positive and open culture
on the board. the results of this review
are being analysed as this report is
finalised; details of the actions identified
and progress towards achieving these
will be disclosed in next year’s report.
our board Committees have also
continued to perform effectively during
the year. the focus of the Nomination
Committee included the leadership
needs and succession planning at both
board and senior management level,
including the recruitment of Richard
Mully. the Remuneration Committee
reviewed the policy for executive director
remuneration and worked to ensure that
remuneration arrangements continue to
support the Company’s strategy. As part
of its remit the Audit Committee reviewed
the results of the valuation process of
the Company’s property portfolio and
considered the accounting treatment to
apply in respect of the developments at
New Covent Garden Market and the bay
Campus for Swansea university. you will
find more on the work of the Committees
in the corporate governance section of
this Annual Report.
At this year’s AGM resolutions will be
proposed to renew the Company’s
existing Saving Related Share
option Scheme and to approve the
remuneration policy for directors which
will take effect from 1st december 2014.
it is proposed that all votes on the
resolutions at the AGM will be taken
by way of a poll rather than a show of
hands. this reflects current best practice
and ensures that voting intentions of all
shareholders, including those who are
not able to attend the AGM but who
have appointed proxies, are taken into
account. the notice of meeting, which
includes the special business to be
transacted and an explanation of all the
resolutions to be considered at the AGM,
is set out on pages 155 to 164.
i hope that you find the corporate
governance section of this report
informative and i look forward to seeing
you at our AGM in March.
bill Shannon
Chairman
St. Modwen Properties PLC Annual Report and Financial Statements 2013 59
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Corporate Governance Report (continued)
lEAdERShiP
The Board
the board provides leadership of the
Company and direction for management.
it is collectively responsible and
accountable to shareholders for the
long-term success of the Company.
it sets the strategy, oversees
implementation and reviews
performance, ensuring that only
acceptable risks are taken and the
appropriate people and resources
are in place to deliver long-term value
to shareholders and benefits to the
wider community.
to help retain control of key decisions,
the board has put in place a formal
schedule of reserved matters that require
its approval. the principal reserved
matters include:
• strategy;
• new business or geographical areas;
• authorisation of transactions in
excess of £10m and those which are
otherwise significant;
• risk management and internal control;
• dividend policy;
• documents to shareholders and
the annual and half year report and
financial statements;
• matters relating to share capital, such
as share issues or buybacks; and
• the appointment/removal of directors
and the Company Secretary.
The Board
(Chairman, non-executive and executive directors)
boARd-lEVEl CoMMittEES
Audit Committee
(independent
non-executive directors)
Remuneration Committee
(Chairman and independent
non-executive directors)
Nomination Committee
(Chairman and independent
non-executive directors)
ExECutiVE CoMMittEES
Executive Team
(executive directors and
Company Secretary)
Property Board
(executive directors,
regional directors and
Company Secretary
Health and Safety
Steering Group
(Senior management)
the board delegates responsibility for
the implementation of strategy to the
executive directors.
the Executive Team, comprising the
executive directors and the Company
Secretary, meets weekly to discuss key
operational matters.
the Property Board meets monthly
to review performance and consider
Group-wide issues and initiatives.
the Health and Safety Steering Group,
led by the Construction director,
has oversight of the formulation
and implementation of the Group’s
approach to health and safety and
monitors performance.
the board also delegates certain
responsibilities to a number of board
Committees (membership of these
Committees is set out on pages 56
and 57).
the Audit Committee monitors the
integrity of the financial reporting and
audit processes, reviews external
valuations of the property portfolio
and assesses the Company’s risk
management and internal control
systems. A report on its activities during
the year is given on pages 68 to 73.
the Remuneration Committee
determines and agrees with the board
the Group’s general policy on executive
and senior management remuneration
and designs the Company’s share
incentive schemes. the directors’
Remuneration Report is set out on
pages 76 to 97.
the Nomination Committee
recommends board and board
Committee appointments which
ensure an appropriate mix of skills and
experience and reviews succession
planning against the leadership needs
of the Group. A report on its activities
during the year is given on pages 74
and 75.
60 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Corporate Governance Senior Independent Director
Richard Mully, as Senior independent
director, is responsible for ensuring
that the views of each non-executive
director are given due consideration and
to provide an additional communication
channel for shareholders.
Board activity
the board discharges its responsibilities
through an annual programme of board
and Committee meetings. typically the
board meets formally nine times a
year; directors’ attendance at meetings
held in 2012/13 is set out on page
63. the board also visits sites within
the Company’s property portfolio; in
2013 the board visited london to view
New Covent Garden Market, leegate
Shopping Centre and Elephant & Castle
Shopping Centre, together with Great
homer Street in liverpool, lowfield lane
in St. helens, Vulcan urban Village in
Newton-le-Willows and Wythenshawe
town Centre in Manchester.
Each Committee has written terms of
reference which have been approved by
the board and are reviewed periodically
to ensure that they continue to comply
with legal and regulatory requirements
and best practice guidance.
Board roles
the board comprises the Chairman,
the executive directors, a Senior
independent director and four
non-executive directors.
The Chairman
As Chairman, bill Shannon’s role is to
lead the board. he is responsible for
ensuring both an effective board and
effective contribution from the directors
based on a culture of openness, debate
and constructive challenge.
the Chairman sets the board’s agenda
and chairs board meetings, ensuring
that adequate time is available for
discussion of all agenda items,
particularly strategic issues. he also
ensures that directors receive accurate,
timely and clear information to enable
them to carry out their duties effectively.
the Chairman takes the lead in providing
a comprehensive, formal and tailored
induction programme for new directors
and regularly reviews and agrees
with each director any training and
development needs. he leads on board
performance evaluation and ensures that
effective communication occurs between
the Company and its shareholders.
The Chief Executive
bill oliver, the Chief Executive, is
responsible for the day-to-day
management of the Group’s business,
for recommending the Group’s strategy
to the board and for implementing the
strategy agreed by the board.
Role profiles setting out the division
of responsibilities between both the
Chairman and the Chief Executive have
been approved by the board.
Executive directors
Michael dunn, Group Finance director,
and Steve burke, Construction director,
support bill oliver in devising and
implementing strategy and in the
management of the business.
Non-executive directors
the non-executive directors, who
have a range of complementary skills,
constructively challenge the executive
directors, help to develop the Company’s
strategy and monitor delivery of the
agreed strategy within the risk and
control framework set by the board.
With the exception of Simon Clarke, who
represents the interests of the Clarke and
leavesley families which together hold
19.4% of the Company’s issued share
capital, all non-executive directors are
deemed to be independent.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 61
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Corporate Governance Report (continued)
board agendas are set by the Chairman in consultation with the Chief Executive and
with the assistance of the Company Secretary, who maintains a 12 month rolling
programme of agenda items to ensure that all matters reserved to the board and other
key issues are considered at the appropriate time.
Key activities of the Board in 2012/2013
Standing agenda items included:
• Annual strategy review
• Reports from the Chief Executive, the
Construction director and the Group
Finance director
• Reports on the activities of
the Audit, Remuneration and
Nomination Committees
• Financing
• Property acquisitions and disposals
• Risk and risk management
• health and safety reports
• Approval of the half year and annual
results, the Annual Report, the notice
of AGM and dividends
• investor feedback
• hR reports
• Reports from the trustee of the
Company’s pension scheme
• directors’ conflicts of interest
• Actions arising from board
performance evaluation
Key agenda items also considered included:
• Equity placing which raised gross
proceeds of £49m
• Entering a development agreement
in respect of the New Covent Garden
Market sites in Nine Elms, london
(gross development value of circa £2bn)
• the bay Campus development for
Swansea university (first phase of
£450m development)
• disposal of the Elephant & Castle
Shopping Centre by the Company’s
KPi joint venture (sold for £80m,
representing a yield of 4.25%)
• Presentations from Numis Securities
and J.P. Morgan Cazenove, the
Company’s joint brokers, and Fti
Consulting, the Company’s financial
PR advisers
• Review of the Group’s leadership
development programme
• Appointment of Richard Mully as
non-executive director and Senior
independent director
• Appointment of Kay Chaldecott
and John Salmon to the
Nomination Committee
• lease to Marks & Spencer at
• Re-appointment of bill Shannon and
longbridge (150,000 sq ft over
45 years)
Simon Clarke
• Review of fees payable to the
• Progress at the baglan bay Solar Park
Chairman and non-executive directors
AlloCAtioN oF tiME SPENt At
boARd MEEtiNGS iN 2012/13 %
10
25
35
30
■ Strategy
■ Finance and Risk
■ operations
■ Governance
62 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Corporate Governance
Board and Committee meetings and attendance1
Director
Chairman
bill Shannon
Executive directors
bill oliver
Steve burke
Michael dunn
Non-executive directors
Kay Chaldecott2
Simon Clarke3
lesley James4
Richard Mully5
John Salmon2
Former non-executive directors
david Garman6
Katherine innes Ker7
Main Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
9/9
9/9
9/9
9/9
9/9
8/9
8/9
3/3
9/9
3/4
3/4
–
–
–
–
3/3
–
3/3
1/1
3/3
1/1
1/1
4/4
3/3
–
–
–
4/4
–
4/4
2/2
4/4
0/1
1/1
–
–
–
2/2
–
3/3
1/1
2/2
0/1
–
1 Actual attendance/maximum number of meetings a director could attend.
2 Kay Chaldecott and John Salmon were appointed to the Nomination Committee with effect from
27th March 2013.
3 Simon Clarke was unable to attend the board meeting in January due to a prior business commitment.
4 lesley James was unable to attend the board meeting in May due to a prior personal commitment.
5 Richard Mully was appointed to the board on 1st September 2013.
6 david Garman retired from the board on 27th March 2013. he was unable to attend the Remuneration
Committee meeting in January and the Nomination Committee and board meetings in February due to prior
business commitments.
7 Katherine innes Ker retired from the board on 27th March 2013. She was unable to attend the board meeting
in February due to a prior business commitment.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 63
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Corporate Governance Report (continued)
relating to membership of board
Committees, is arranged as appropriate.
Major shareholders are also offered the
opportunity to meet newly appointed
directors should they express a desire
to do so. this induction process was
applied following the appointment of
Richard Mully in September 2013.
the Company is committed to the
continuing development of directors
in order that they may build on
their expertise and develop an ever
more detailed understanding of the
business and the markets in which
St. Modwen operates. training and
development needs are discussed with
each director by the Chairman as part
of the annual individual performance
evaluation process and kept under
review. development activities include
visits to sites within the Company’s
property portfolio, both as a board and
individually, regular presentations to the
board by regional directors and senior
management on key issues and projects,
and meetings with Jones lang laSalle
llP to review their external property
valuation reports. the attendance by
members of board Committees on
courses relevant to aspects of their
respective Committee specialisms
is also encouraged.
EFFECtiVENESS
Board composition
board composition continues to develop
and was further strengthened during the
year with the appointment of Richard
Mully as a non-executive director
in September 2013 and as Senior
independent director with effect from
1st december 2013.
the board currently comprises three
executive and six non-executive
directors, including the Chairman.
With the exception of Simon Clarke,
the board considers that all of the
non-executive directors are independent
and is not aware of any relationship
or circumstance likely to affect the
judgement of any director.
Recommendations for appointments to
the board are made by the Nomination
Committee. the Committee follows
board-approved procedures which
provide a framework for different types
of board appointments on which the
Committee may be expected to make
recommendations. Appointments are
made on merit and against objective
criteria with due regard to diversity
(including skill, experience and gender).
Non-executive appointees are also
required to demonstrate that they have
sufficient time to devote to the role.
these procedures were used by
the Nomination Committee in
recommending to the board the
appointment of Richard Mully as a
non-executive director. the Committee
also engaged the services of an external
search consultant in relation to the
appointment. Further information can
be found in the Nomination Committee
Report on pages 74 and 75.
independence and a broad range of
skills, experience, knowledge and
diversity, including gender diversity,
are represented on the board.
biographical details of all directors are
given on pages 56 and 57.
the board acknowledges the
importance of diversity in all forms and
recognises the benefits that it can bring
to both the board and throughout the
business. in terms of gender diversity,
the Company currently has 22.2%
female representation on the board.
Further information on gender diversity
throughout the Group can be found on
page 54.
At the 2014 Annual General Meeting
(AGM), and in accordance with the
Company’s Articles of Association,
shareholders will be asked to elect
Richard Mully to the board. All other
directors will seek re-election in
accordance with the provisions of
the Code.
Induction and development
the Chairman, assisted by the
Company Secretary, is responsible
for the induction of all new directors.
on joining the board, a director
receives a comprehensive induction
pack which includes background
information on the Company, material
on matters relating to the activities
of the board and its Committees
and governance-related information
(including the duties and responsibilities
of directors). Meetings are arranged with
the executive directors, for briefings
on strategy and performance, as well
as the external auditor and valuers.
Visits to key sites within the Company’s
property portfolio are scheduled and
external training, particularly on matters
diRECtoRS’ iNdEPENdENCE
NuMbER oF diRECtoRS
SKillS
NuMbER oF diRECtoRS
tENuRE oF diRECtoRS AS At
30th NoVEMbER 2013 yEARS
1
4
5
3
5
2
2
3
2
■ independent
■ Non-independent
■ Property and operations
■ Finance
■ hR
64 St. Modwen Properties PLC Annual Report and Financial Statements 2013
■ less than 3
■ 3–6
■ 7–9
■ More than 9
Corporate Governance Information and support
All directors have direct access to the
advice and services of the Company
Secretary, who is tasked with ensuring
that board procedures are complied
with. in addition, all directors are able
to seek independent professional advice
in the course of their professional duties
at the Company’s expense.
the Company Secretary is responsible
for advising the board through the
Chairman on all governance matters.
She works with the Chairman to ensure
good information flows between the
board and its Committees and between
senior management and non-executive
directors, as well as facilitating the
induction of directors and assisting
with their professional development
as required. All board Committees are
supported by the Company Secretary.
Performance evaluation
building on the external effectiveness
review of the board and its Committees
conducted by dr. tracy long of
boardroom Review in 2012, the 2013
review comprised the following activities:
• a meeting of the non-executive
directors led by the Chairman;
• individual one-to-one discussions
between the Chairman and all
directors plus the Company Secretary;
• assessment of the Audit and
Remuneration Committees by way of
a questionnaire, which was completed
by relevant Committee members and
meeting attendees;
• consideration of progress made
against actions arising from the 2012
review. details of the key actions can
be found in the table below; and
• observation of a board meeting
and review of associated papers by
dr. tracy long.
outputs from these activities were
presented to the board in december
2013; these remain under consideration
and key areas of focus will be agreed
by the board in early 2014.
the individual performance of the
directors was evaluated through
one-to-one discussions with the
Chairman. John Salmon, as interim
Senior independent director, led the
review by the non-executive directors of
the Chairman’s performance, which took
into account the views of the executive
directors. No actions were considered
necessary as a result of these
evaluations and the Chairman confirms
that the performance of each director
continues to be effective, that they
continue to demonstrate commitment
to their respective roles, and that
their respective skills complement
one another to enhance the overall
operation of the board.
boARd GENdER SPlit
PRoGRESS AGAiNSt KEy ACtioNS FRoM 2012 boARd EVAluAtioN REViEW
2
■ Men
■ Women
7
• Enhanced strategic review process to accommodate directors’ collective and
individual requests and desired outcomes.
• Strengthening of non-executive expertise with the appointment of Richard Mully.
• Non-executive director membership of all board Committees aligned.
• Further engagement on leadership development and succession planning by the
board and the Nomination Committee.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 65
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Corporate Governance Report (continued)
ACCouNtAbility
Financial and business reporting
When reporting to shareholders, the
board aims to present a fair, balanced
and understandable assessment of
the Company’s position and prospects
and is assisted in this by the Audit
Committee. this responsibility covers
the annual and half year report and
financial statements, other price sensitive
public reports, reports to regulators and
information required to be presented
by statute. the assessment for the year
ended 30th November 2013 is provided
in the Strategic Report set out from the
inside front cover of this Report to page
55. the responsibilities of the directors in
respect of the preparation of the Annual
Report are set out on page 102 and the
Auditor’s Report on pages 103 to 105
includes a statement by deloitte about
its reporting responsibilities. As set out
on page 101, the directors are of the
opinion that the Company is a going
concern. the board considers that the
Annual Report and Financial Statements
2013, taken as a whole, is fair, balanced
and understandable and provides the
information necessary for shareholders
to assess the Company’s performance,
business model and strategy.
Risk management and internal control
the board is ultimately responsible for
maintaining sound risk management and
internal control systems. its policy is to
have systems in place which optimise
the Company’s ability to manage risk
in an effective and appropriate manner.
these systems also include financial
controls, controls in respect of the
financial reporting process and controls
of an operational and compliance
nature. the board’s approach to risk
management is supported by an
oversight structure which includes the
Audit Committee. the risk management
and internal control systems of
St. Modwen are designed to identify,
manage and, where practicable, reduce
and mitigate the effect of the risk of
failure to achieve business objectives.
they are not designed to eliminate such
risk and can only provide reasonable,
not absolute, assurance against material
misstatement or loss.
System of risk management and
internal control
the risk management and internal
control system includes comprehensive
monthly reporting to the board on all
activities through detailed portfolio
analysis, property development progress
reviews, management accounts
and a comparison of committed
expenditure against available facilities.
detailed annual budgets are reviewed
by the board and revised forecasts
for the year are prepared on a regular
basis, including explanations for
any variances between actual and
budgeted performance. there are
clearly defined procedures for the
authorisation of capital expenditure,
purchases and sales of development
and investment properties, construction
activity, contracts and commitments,
together with 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 anti-bribery and corruption,
fraud prevention, whistleblowing, health
and safety, employment and it.
Whistleblowing
the Audit Committee oversees an
independently operated whistleblowing
facility to enable employees to raise
concerns on a confidential basis.
the Audit Committee ensures that
independent investigation of any
whistleblowing incidents is undertaken.
Assurance
the Audit Committee is responsible for
reviewing the ongoing control process.
during the year it considered the
effectiveness of the systems of internal
control through a detailed report from
senior management which sets out the
Group’s control environment, the manner
in which key business risks are identified,
the adequacy of information systems
and control procedures and the manner
in which any required corrective action is
to be taken.
the work of the internal audit function
is focused on the controls that mitigate
the principal risks faced by the Group.
Key internal controls are reviewed by
internal audit as part of the annual audit
plan and findings are reported to and
considered by the Audit Committee.
both the board and the Audit Committee
review and approve the Group Risk
Register, which is maintained by
executive management, on an annual
basis. A summary of the principal risks
which could have a material impact on
the Group is given on pages 46 to 49.
the board has reviewed the
effectiveness of the Group’s systems of
internal control and risk management
during the period covered by this Annual
Report. it confirms that the processes
described above, which accord with the
guidance on internal control (the revised
66 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Corporate Governance CoMPliANCE StAtEMENt
this corporate governance statement,
together with the Audit Committee
Report, the Nomination Committee
Report and the directors’ Remuneration
Report, provide a description of how
the main principles of the Code have
been applied by St. Modwen in 2012/13.
the Code is published by the Financial
Reporting Council and is available on its
website at www.frc.org.uk.
it is the board’s view that, throughout
the financial year ended 30th November
2013, the Company was in compliance
with the relevant provisions set out in
the Code.
With the exception of disclosures
required by Rule 7.2.6 which are set
out in the directors’ Report on pages
98 to 102, this corporate governance
statement contains the information
required by Rule 7.2 of the disclosure
and transparency Rules of the Financial
Conduct Authority.
turnbull Guidance), have been in place
throughout that period and up to the
date of approval of this report. the board
also confirms that no significant failings
or weaknesses have been identified.
REMuNERAtioN
the primary objective of the Company’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 reward financial success
appropriately. the policy is structured
so as to be aligned with key strategic
priorities and to be consistent with
a board-approved level of business
risk. details of the Company’s policy
on remuneration and how this was
implemented for the year ended
30th November 2013 are set out in
the directors’ Remuneration Report
on pages 76 to 97.
RElAtioNS With ShAREholdERS
Dialogue with investors
the board has a comprehensive
investor relations programme which
aims to provide existing and potential
investors with a means of developing
their understanding of St. Modwen.
the programme is split between
institutional shareholders (which make
up the majority of shareholders), private
shareholders and debt investors.
Feedback is provided to the board
to ensure that directors develop an
understanding of the Company’s
major investors.
As part of the programme, presentations
on the half year and annual results
are given in face to face meetings
and conference calls with institutional
investors, analysts and the media.
Copies of these presentations, together
with interim management statements,
are published on the Company’s website
at www.stmodwen.co.uk. in 2013 the
Company held an investor day for
institutional investors and analysts which
included presentations on the results
and the bay Campus development
for Swansea university, together with
a tour of the New Covent Garden
Market sites in london. Meetings with
principal shareholders, including the
Clarke and leavesley families, were
also held and the Company had regular
dialogue with its key relationship banks.
the Chairman is available to meet with
institutional shareholders and investor
representatives to discuss matters
relating to strategy and governance.
Private shareholders are encouraged to
give feedback and communicate with the
board through the Company Secretary.
Annual General Meeting
the AGM provides an opportunity for all
shareholders to vote on the resolutions
proposed and to question the board
and the Chairs of the board Committees
on matters put to the meeting.
it is proposed that resolutions for
consideration at the 2014 AGM be voted
on by way of a poll rather than by a show
of hands as the board believes that this
is a more transparent method of voting
as it allows the votes of all shareholders
to be counted, including those cast by
proxy. the results of the poll vote will be
published on the Company’s website,
www.stmodwen.co.uk, after the meeting.
the notice of meeting for the 2014 AGM
can be found on pages 155 to 164.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 67
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Audit Committee Report
JohN SAlMoN
Chair of the Audit Committee
RolE oF thE CoMMittEE
the Committee’s primary role is to assist the board in the provision of effective governance over the appropriateness of the Group’s
financial reporting. it is responsible for monitoring the integrity of the Financial Statements and considering whether accounting
policies adopted are appropriate. it also reviews the Company’s internal controls and risk management systems, and considers the
activities, plans and effectiveness of both the Group’s internal audit function and its external auditor.
the Committee’s terms of reference are available on the Company’s website at www.stmodwen.co.uk. the terms of reference were
reviewed during 2013 to ensure that they continue to reflect accurately the Committee’s remit.
CoMMittEE MEMbERShiP
the Committee’s composition is kept under review by the Nomination Committee, which is responsible for making
recommendations to the board as to its membership.
As at the date of this report, the Committee comprises the following independent non-executive directors, all of whom served
throughout the financial year unless indicated otherwise below:
Director
John Salmon
Kay Chaldecott
lesley James
Richard Mully
Audit Committee position
Chair
Member
Member
Member (from appointment to the Board on 1st September 2013)
Simon Clarke and bill Shannon attend meetings of the Committee as observers. the secretary to the Committee is tanya Stote,
Company Secretary. david Garman and Katherine innes Ker were members of the Committee until their retirement from the board
on 27th March 2013.
Committee members’ biographical details can be found on pages 56 and 57. Each member brings broad financial and business
experience at a senior level. As a former partner of PricewaterhouseCoopers llP, John Salmon, the Committee Chair, is considered
by the board to have recent and relevant financial experience as required by the Code.
All members of the Committee receive an appropriate induction to ensure that they have an understanding of the principles of, and
recent developments in, financial reporting, key aspects of the Company’s accounting policies and judgements and internal control
arrangements, as well as the role of the internal and external auditors. ongoing training is undertaken as required.
68 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Corporate Governance AdViCE PRoVidEd to thE CoMMittEE
the Committee has direct access to both the internal Audit Manager and external audit engagement partner outside formal
Committee meetings. Whilst permitted to do so, no member of the Committee, nor the Committee collectively, sought outside
professional advice beyond that which was provided directly to the Committee by the external auditor and the external valuer during
the financial year.
CoMMittEE MEEtiNGS
the Committee met on three occasions in the financial year ended 30th November 2013; members’ attendance at meetings is set out
in the table on page 63. Meetings were scheduled to take place around key events in the Company’s financial reporting calendar.
the Group Finance director, Group Financial Controller, internal Audit Manager, the external audit engagement partner and other
representatives of deloitte llP, the Group’s external auditor, attended meetings of the Committee by invitation. Representatives of
the Group’s external valuers, Jones lang laSalle llP, also attended the meetings after the half year and full year valuation processes
to present their reports. Periodically the Committee reserves time for discussion without invitees being present.
on two occasions during the year the Committee held private sessions with the internal Audit Manager and representatives from the
external auditor.
ACtiVitiES oF thE CoMMittEE
Matters that were formally reviewed and discussed by the Committee during the year ended 30th November 2013 are set out below.
Financial reporting
• Monitored the financial reporting process, including the review of the half year and annual results, associated commentary and
announcements and the Annual Report. Following its review, the Committee has advised the board that it is of the view that
the Annual Report and Financial Statements 2013, taken as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company’s performance, business model and strategy.
• Reviewed the continuing appropriateness of accounting policies and the use of estimates and judgements as noted in the Group
Financial Statements, and concluded that the estimates, judgements and assumptions used were reasonable based on the
information available and had been used appropriately in applying the Company’s accounting policies.
• Considered independent property valuation reports prepared by Jones lang laSalle which detailed movements resulting from
activities undertaken by the Company and those arising from changes in the property market.
• Considered a going concern review.
• Reviewed reports prepared by the external auditor on the half year and annual results.
Further information on the significant issues that the Committee considered in relation to the Financial Statements, and how these
issues were addressed, is set out on page 71.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 69
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Audit Committee Report (continued)
ACtiVitiES oF thE CoMMittEE (CoNtiNuEd)
Risk management and internal control
• Reviewed updates on corporate risk assessment management activities and a presentation on the issues and risks arising from
cyber security.
• Considered risk registers at both Group and subsidiary level, including appropriate mitigating actions.
• Considered reports on the Company’s internal control system and the Group’s tax compliance position.
• Reviewed actual and potential legal claims and litigation involving the Group.
• Approved the introduction of a whistleblower hotline operated by an independent third-party specialist provider.
Internal audit
• Considered updates on the activities of internal audit, including audits on the central functions of information technology
and Sales ledger to provide assurance that the control environment continued to operate effectively.
• Assessed status reports on the implementation of internal audit recommendations.
• Considered and approved the internal audit programme of reviews of the Group’s processes and controls, including coverage
and allocation of resource.
• Reviewed the Group internal Audit Charter which sets out the objectives, accountability and independence, authority,
responsibilities, scope of work and standards and performance for internal audit.
• Reviewed and were satisfied with the effectiveness of the internal audit function.
External auditor
• Considered and approved the external audit plan.
• Reviewed the policy in respect of the provision of non-audit services by the external auditor.
• Monitored the independence of deloitte and the effectiveness of the external audit process.
• Considered the changes to the regulatory framework in respect of external audit tendering.
AlloCAtioN oF tiME SPENt
At Audit CoMMittEE MEEtiNGS
iN 2012/13 %
15
15
40
15
15
■ Financial reporting
■ Valuation
■ Risk management and internal control
■ External audit
■ internal audit
70 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Corporate Governance FiNANCiAl REPoRtiNG ANd SiGNiFiCANt FiNANCiAl iSSuES
the Audit Committee pays particular attention to matters it considers to be important by virtue of their impact on the Group’s results,
or the level of complexity, judgement or estimation involved in their application to the consolidated Financial Statements. the main
areas of focus during the year are set out below:
Valuation of investment property
the external valuation of the portfolio is a key determinant of the Group’s results and balance Sheet. the Committee adopts
a rigorous approach to monitoring and reviewing the independent valuation process undertaken by Jones lang laSalle.
Representatives of Jones lang laSalle attended meetings of the Committee at the half year and full year review of results to present
their valuation reports; these included the methodology and outcomes of the valuation, market conditions and significant judgements
made, including estimation of remediation and other costs. Jones lang laSalle also met with members of the Committee prior to the
January and June Committees to discuss the valuation. in addition, deloitte had direct access to the valuers, reviewed the valuations
and process and reported its findings to the Committee. the Committee discussed in detail the rationale underlying significant
increases to valuations, particularly those in respect of the residential portfolio, and considered these on a case-by-case basis as
appropriate. the valuation was considered as a whole to ensure that it was appropriate for inclusion in the Financial Statements.
Valuation of inventory
the Group’s inventory, comprising property held for sale, property under development and land under option, is of significant value.
All inventory is carried at the lower of cost and net realisable value and appropriate allowances are made for remediation and other
costs to complete. the Committee reviewed whether any provision was required against the carrying value of inventory, either at
Group level or within any joint venture arrangements. the assessment process undertaken to determine net realisable value was
considered by the Committee, which included ongoing monitoring by management as well as detailed reviews at both the half and
full year. External valuations were also provided by Jones lang laSalle for certain sites, typically new build units not yet sold.
Bay Campus, Swansea University
the Committee considered the accounting treatment to be applied following the signing of a development agreement with Swansea
university in March 2013 for the first phase of the £450m bay Campus. A detailed paper was presented by management setting out
the proposed treatment in respect of revenue streams from the delivery of the campus, the investment sale of the income from the
student accommodation to a major investor and the residual income from the accommodation. both the Committee and deloitte
agreed that the treatment proposed, which is on the same basis as the majority of the Company’s developments, albeit it on a larger
scale, was appropriate.
New Covent Garden Market
in January 2013 the Company and ViNCi PlC signed a contract with Covent Garden Market Authority as development partner for
the New Covent Garden Market sites in london. this multi-phased project has a gross development value of approximately £2bn.
the development agreement remains conditional upon, amongst other things, the achievement of improved planning consent, and
the Committee agreed (and deloitte concurred) that it was not appropriate to recognise either an asset or liability in respect of the
development until these conditions have been satisfied.
Elephant & Castle Shopping Centre
As the sale of the Elephant & Castle Shopping Centre took place immediately before the year end, the Committee received reports
from both management and deloitte and were satisfied that it was appropriate to recognise the sale in the financial year.
Tax provisions
As a property group, tax planning is often an integral part of transactions. Where tax planning is entered into, benefits are recognised
by the Group to the extent the outcome is reasonably certain. Where tax planning has been challenged by hMRC, or management
believe that there is a risk of such challenge, provision is made for the best estimate of potential exposure based on the information
available at the reporting date. having considered reports from management which addressed individual judgements made in
respect of potential tax exposures, the Committee was satisfied (and deloitte concurred) that the level of tax provisioning at both
the full year and half year was appropriate.
Going concern
As the going concern basis relies on forecasts, the Committee considered the assumptions and judgements applied by
management in relation to the timing of receipt and payment cash flows, the ongoing availability of funding and covenant
compliance. the Committee concluded that it remains appropriate for the Financial Statements to be prepared on a going concern
basis. the statement of the directors in respect of going concern is set out on page 101.
Further details on significant judgements, key assumptions and estimates can be found on page 114 of the Group
Financial Statements.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 71
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Audit Committee Report (continued)
iNdEPENdENCE oF ExtERNAl AuditoR
the Committee is responsible for the development, implementation and monitoring of the Company’s policies on external audit.
the policies, designed to maintain the objectivity and independence of the external auditor, regulate the appointment of former
employees of the external audit firm and set out the approach to be taken when using the external auditor for non-audit work.
during the year the Committee reviewed the policy governing the provision of non-audit services by the external auditor. Whilst it
recognises that it can be advantageous for the external auditor to provide non-audit services to the Group, the policy only permits
this where alternative providers do not exist or where it is cost effective or in the Group’s interest for the external auditor to provide
such services. the external auditor would not be invited to provide any non-audit services where it was felt that this could adversely
affect their independence or objectivity; such services would include the provision of litigation support, actuarial services or internal
audit activities.
the policy sets out areas of work that the external auditor may be permitted to undertake, those areas where the involvement of the
external auditor is prohibited and those areas for which a case-by-case decision is required. With regard to the non-audit services
provided by the external auditor the following framework is in place:
• Audit-related assurance services: substantially all of these services relate to the review of the half year results, which the external
auditor is required to undertake by virtue of its position.
• tax compliance services: these are services that are intended to ensure that the Company complies with existing tax regulations.
to date these services have been undertaken by deloitte through a separate tax compliance team to ensure that objectivity and
independence is not impaired. however, in light of the level of non-audit fees, the Committee has agreed with deloitte that a formal
tender to appoint an alternative provider of tax compliance services be undertaken by the Company.
• tax advisory services: deloitte is one of a number of firms that provide tax advisory services. Selection is dependent on who
is best suited in the circumstances. tax advisory services provided by deloitte in the year included those in relation to the bay
Campus development for Swansea university, RAF uxbridge and Mill hill, and the disposal of the Elephant & Castle Shopping
Centre. Given its detailed understanding of the business, deloitte was able to provide these services more cost efficiently
and effectively than an alternative provider who would not have benefitted from the same level of pre-existing knowledge of
St. Modwen.
• Property consulting: the external auditor does not provide general consultancy services except in certain circumstances, and
then only after consideration that it is best placed to provide the service and that its independence and objectivity would not be
compromised. All property consulting services for which non-audit fees were charged in the years ended 30th November 2012
and 2013 were provided by deloitte Real Estate (formerly drivers Jonas deloitte), whose engagement in respect of these services
pre-dated the firm’s acquisition by deloitte.
Where it is proposed to use the external auditor for the provision of non-audit services, the policy requires advance approval of both
the Group Finance director and the Chair of the Audit Committee if the engagement is anticipated to generate fees in excess of
£25,000 or where the fee is contingent in full or in part. Approval below these levels is required from the Group Finance director.
Total audit fees
Audit-related assurance services
other assurance services
tax compliance services
tax advisory services
Property consulting
Total non-audit fees
Total fees
2013
2012
Audit and
audit-related
services
£’000
Other services
£’000
270
55
–
–
–
–
55
325
–
–
–
166
174
30
370
370
Audit and
audit-related
services
£’000
Other services
£’000
255
55
20
–
–
–
75
330
–
–
–
150
171
47
368
368
Total
£’000
270
55
–
166
174
30
425
695
Total
£’000
255
55
20
150
171
47
443
698
the Committee has received confirmation from deloitte as to their independence and objectivity within the context of applicable
regulatory requirements and professional standards. it has also reviewed the fees paid to the deloitte for the provision of non-audit
services during the year ended 30th November 2013 and is satisfied that these do not compromise either their independence or
objectivity as the Company’s external auditor.
72 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Corporate Governance EFFECtiVENESS oF ExtERNAl Audit PRoCESS
the Committee has undertaken a review of deloitte’s performance and the effectiveness of the external audit process. the review
included a self-assessment carried out by deloitte on audit objectives, leadership, qualification, quality and independence and
a review methodology developed by the institute of Chartered Accountants of Scotland on external audit effectiveness which
had been assessed by management. the Committee also gave consideration to deloitte’s experience and expertise, the extent
to which the audit plan had been met, its robustness and perceptiveness with regard to key accounting and audit judgements,
and the content of its audit reports.
the Committee remains satisfied with deloitte’s performance and is of the view that there is nothing of concern that would impact
the effectiveness of the external audit process.
APPoiNtMENt oF ExtERNAl AuditoR
the Audit Committee has responsibility for making a recommendation on the appointment, re-appointment and removal of the
external auditor.
the Audit Committee notes the changes to the Code, the recent findings of the Competition Commission and the Guidance for
Audit Committees issued by the Financial Reporting Council in the context of tendering for the external audit contract at least every
10 years. the Group’s current external auditor, deloitte, was appointed in 2007 following a tender process. the audit engagement
partner responsible for the Group’s audit was subsequently rotated for the 2011/12 financial year in line with ethical standards
published by the Auditing Practices board and will remain in post until the 2016/17 financial year. having conducted a full tender
within the last 10 years, the Committee will continue to give consideration as to the timing of the next formal tender in light of
regulatory requirements and any further changes to the regulatory framework. there are no contractual obligations which would
restrict the Company’s selection of an external auditor.
having considered the performance of deloitte (including value for money and quality and effectiveness of the audit process), its
independence, compliance with relevant statutory, regulatory and ethical standards and objectivity, the Committee unanimously
recommended to the board that a resolution for the re-appointment of deloitte as the Company’s external auditor be proposed
to shareholders at the 2014 AGM.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 73
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Nomination Committee Report
bill ShANNoN
Chair of the Nomination Committee
RolE oF thE CoMMittEE
the Committee is responsible for reviewing the structure, size and composition of the board and planning its progressive refreshing.
in doing so it evaluates the optimal level of independence and diversity of skills, knowledge, experience and gender required
for the board to operate effectively. the Committee also considers issues of succession planning, both at board and senior
management levels.
the Committee leads the process for the identification and selection of new directors and makes recommendations to the board in
respect of such appointments. the Committee also makes recommendations to the board on membership of its Committees and
on the re-appointment of any non-executive director at the conclusion of his or her specified term of office. the Committee follows
board-approved procedures in making its recommendations.
the Committee’s terms of reference are available on the Company’s website at www.stmodwen.co.uk. the terms of reference were
reviewed during 2013 to ensure that they continue to reflect accurately the Committee’s remit.
CoMMittEE MEMbERShiP
As at the date of this report, the Committee comprises the following independent non-executive directors, all of whom served
throughout the financial year unless indicated otherwise below:
Director
bill Shannon
Kay Chaldecott
lesley James
Richard Mully
John Salmon
Nomination Committee position
Chair
Member (from 27th March 2013)
Member
Member (from appointment to the Board on 1st September 2013)
Member (from 27th March 2013)
bill Shannon chairs the Committee except when the Committee is dealing with the appointment of a successor as Chairman, when
the Senior independent director chairs the Committee.
Simon Clarke attends meetings of the Committee as an observer. the secretary to the Committee is tanya Stote, Company
Secretary. david Garman was a member of the Committee until his retirement from the board on 27th March 2013.
Committee members’ biographical details can be found on pages 56 and 57.
AdViCE PRoVidEd to thE CoMMittEE
Where necessary and appropriate, external search consultants are used by the Committee to provide support in recruiting and
selecting potential candidates for appointment to the board. during the financial year ended 30th November 2013 the Zygos
Partnership was retained by the Committee as outlined on page 75; the firm has no other connection with the Company.
74 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Corporate Governance ACtiVitiES oF thE CoMMittEE
the Committee met on three occasions in the financial year ended 30th November 2013; members’ attendance at meetings is set out
in the table on page 63. Matters considered by the Committee included:
• continued monitoring of the structure, size, composition and diversity of both the board and its Committees;
• reviewing the leadership needs of and succession planning for the Group;
• the recruitment of a new non-executive director;
• making recommendations to the board on the re-appointment of non-executive directors;
• a review of gender diversity at both board level and throughout the Group;
• recommending appointment procedures for approval by the board; and
• potential approaches to the 2013 board and Committee performance evaluation review (details of which can be found on page 65).
the Zygos Partnership was retained to assist with the search for a suitable candidate to be appointed to the role of Senior
independent director. in accordance with the Committee’s appointment procedures, a number of candidates were identified, based
on an agreed profile, and interviews held. Following a thorough process, and taking into account the skills and experience required
for the role, the board approved the Committee’s recommendation to appoint Richard Mully as non-executive director with effect
from 1st September 2013 and as Senior independent director with effect from 1st december 2013. details of the induction arranged
for Richard Mully are set out on page 64.
in terms of board Committee composition, the Committee determined that, with the exception of the Chairman who is not a
member of the Audit Committee, it was appropriate for all independent non-executive directors to be appointed as members of all
Committees. it therefore recommended, and the board approved, the appointment of both Kay Chaldecott and John Salmon to the
Committee with effect from 27th March 2013 and Richard Mully’s membership of all board Committees on his appointment to the
board on 1st September 2013.
the Committee also reviewed the performance of Simon Clarke and bill Shannon, whose respective terms of office ended during
the year. Noting that Simon Clarke is not deemed to be independent by virtue of his representation of the interests of the Clarke and
leavesley families (who together hold 17.35% of the Company’s issued share capital), the Committee recommended to the board
(which unanimously approved) the re-appointment of both Simon Clarke and bill Shannon for further three year periods.
Succession planning at both board and senior management level was considered by the Committee throughout the year.
the recruitment process to identify an Audit Committee Chair to replace John Salmon, who is nearing the end of his term of office,
has commenced.
As detailed on page 100, Richard Mully will retire and offer himself for election at the 2014 AGM. All other directors will retire and offer
themselves for re-election to the board.
boARdRooM diVERSity
the search for board candidates is conducted, and appointments made, on merit against objective selection criteria. diversity,
whether in terms of skills, knowledge, experience or gender, is considered by the Committee when reviewing board composition
and making recommendations for board appointments or re-appointments. in terms of gender diversity, the Company currently has
22.2% female representation on the board.
Whilst no formal measurable objectives for female representation at board level have been set, the Committee will continue to
ensure that the board has the optimal range of skills, experience and diversity required and will, as part of this process, take into
consideration the recommendations of the davies Report on Women on boards.
AlloCAtioN oF tiME SPENt At
NoMiNAtioN CoMMittEE MEEtiNGS
iN 2012/13 %
7
30
63
■ Succession planning
■ board composition
■ Administration
St. Modwen Properties PLC Annual Report and Financial Statements 2013 75
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information directors’ Remuneration Report
lESlEy JAMES
Chair of the Remuneration Committee
Annual Statement
on behalf of the board i am pleased to present the report on directors’ remuneration for the financial year ended
30th November 2013.
RolE oF thE CoMMittEE
the principal role of the Remuneration Committee is to determine and agree with the board the policy for the remuneration of
the executive directors. Within the framework of the agreed policy the Committee is responsible for all aspects of the executive
directors’ remuneration, for setting the fee of the Chairman of the board, for monitoring the remuneration of other senior executives
and administering the Company’s long-term incentive arrangements. it undertakes a regular review of the incentive plans to ensure
that they remain appropriate to the Company’s current circumstances, prospects and strategic priorities and that, in particular, the
remuneration policy adopted is aligned with and based on the creation of value for shareholders and provides appropriate incentives
for management to achieve this objective without taking inappropriate business risks. the Committee also reviews and notes
annually the remuneration trends across the Company and any major changes in employee benefit structures.
ACtiVitiES oF thE CoMMittEE
the Committee met on four occasions in the financial year ended 30th November 2013 to consider the following matters:
• review executive directors’ base salaries and the fee payable to the Chairman;
• set corporate and personal objectives for the 2013/14 annual bonus arrangements for executive directors and an assessment
of performance against targets for 2012/13;
• approve the outturn of Performance Share Plan awards granted in 2011;
• approve share awards granted in 2013, including the performance conditions to apply to future awards;
• review the proposed rules to renew the current Saving Related Share option Scheme, a resolution for which will be put
to shareholders at the 2014 AGM;
• consider investor feedback on remuneration policy;
• review executive directors’ service contracts; and
• consider the revised remuneration reporting regulations and prepare this report
on directors’ remuneration.
Members’ attendance at meetings is set out in the table on page 63.
AlloCAtioN oF tiME SPENt At
REMuNERAtioN CoMMittEE
MEEtiNGS iN 2012/13 %
the Committee’s terms of reference are available on the Company’s website at
www.stmodwen.co.uk. the terms of reference were reviewed in the year to ensure
that they continue to reflect accurately the Committee’s remit.
10
15
40
76 St. Modwen Properties PLC Annual Report and Financial Statements 2013
35
■ Policy
■ implementation and performance review
■ disclosure
■ Administration
Corporate Governance REMuNERAtioN iN 2012/13
in the financial year ended 30th November 2013 the executive directors had the opportunity to earn a bonus of up to 125% of base
salary. Reflecting both the excellent corporate results for the year, which were ahead of both budget and market expectations,
and strong individual performance, the annual bonus awarded to each executive director for 2012/13 was 118.75% of base salary
(2011/12: 112.5% of salary).
the performance period for the 2011 Performance Share Plan awards ended on 30th November 2013. Vesting of half of this award
was subject to tSR performance relative to the FtSE All-Share Real Estate investment & Services index, with the remaining 50%
subject to an absolute tSR condition. to reflect absolute tSR growth of 110% and relative tSR performance of 155%, awards will
vest at 100%.
REMuNERAtioN FoR 2013/14
We believe that the remuneration policy and incentive framework currently in place is working well to support the Company’s
strategy in the current economic environment, is helping to retain and motivate our management team and is helping to drive strong
returns for our shareholders. the structure of remuneration arrangements for 2013/14 will therefore remain largely unchanged from
that applied in 2012/13.
in line with the average salary increase awarded to employees, salaries of the executive directors have been increased by 3% with
effect from 1st december 2013. Executive directors will continue to have the opportunity to earn a bonus of up to 125% of salary
and will receive long-term incentive awards to the same value.
REMuNERAtioN diSCloSuRE
this report complies with the requirements of the large and Medium-Sized Companies and Groups (Accounts and Reports)
Regulations 2008 as amended in 2013 (the Regulations), the principles of the 2012 uK Corporate Governance Code and the listing
Rules of the Financial Conduct Authority.
it is split into two distinct sections:
1. a remuneration policy report (pages 78 to 87) which provides details of the remuneration policy that we propose will apply from
1st december 2014 subject to obtaining shareholder approval through a binding vote at the 2014 AGM; and
2. the annual report on remuneration (pages 87 to 97) which describes how the remuneration policy was implemented for the year
ended 30th November 2013 and how we intend for the policy to apply for the year ending 30th November 2014. this report and my
annual statement will be put to an advisory shareholder vote at the 2014 AGM.
i hope that you find the report helpful and informative and i look forward to receiving feedback on the information presented from
our investors in the coming months.
Approved by the board and signed on its behalf by
lesley James
Chair of the Remuneration Committee
3rd February 2014
St. Modwen Properties PLC Annual Report and Financial Statements 2013 77
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information directors’ Remuneration Report (continued)
Remuneration Policy Report
hoW thE CoMMittEE SEtS thE REMuNERAtioN PoliCy
the primary objective of the Company’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. Remuneration includes a significant proportion
of performance-related elements with demanding targets in order to align the interests of directors and shareholders and to reward
appropriately financial success. the policy is structured so as to be aligned with key strategic priorities and to be consistent with a
board-approved level of business risk.
in setting the remuneration policy for the executive directors, the Committee takes into consideration the remuneration practices
found in other uK companies of comparable size and scope and has regard to the remuneration arrangements for the Company’s
employees generally. in general, the components and levels of remuneration for employees will differ from the policy for executive
directors which is set out below. As a result, greater emphasis is placed on variable pay for executive directors and senior
employees, although maximum opportunities are reduced at levels below the board. Similarly, long-term incentives are offered only
to those anticipated to have the greatest impact on Company performance.
the Committee does not directly consult with employees regarding the remuneration of directors. however, when considering
remuneration levels to apply, the Committee will take into account base pay increases, bonus payments and share awards made
to the Company’s employees generally.
the Committee is committed to an ongoing dialogue with shareholders and seeks the views of its major shareholders when
considering significant changes to remuneration arrangements. the Committee also considers shareholder feedback received
in relation to the directors’ Remuneration Report each year at a meeting following the AGM. this feedback, plus any additional
feedback received from time to time, is then considered as part of the Committee’s annual review of remuneration policy.
REMuNERAtioN PoliCy
the remuneration policy that is intended to apply, subject to shareholder approval, from 1st december 2014 is set out on pages 79
to 83. Remuneration arrangements for the financial year ending 30th November 2014 will be in line with the policy below; further
information can be found on pages 95 and 96.
the Committee retains the discretion to make any payments, notwithstanding that they are not in line with the policy set out below,
where the terms of the payment were agreed (i) before the policy came into effect, or (ii) at a time when the relevant individual
was not a director of the Company and, in the opinion of the Committee, the payment was not in consideration of the individual
becoming a director of the Company. For these purposes ‘payments’ includes the Committee satisfying awards of variable
remuneration and, in relation to an award over shares, the terms of the payment are determined at the time the award is granted.
details of any such payments will be disclosed in the annual report on remuneration for the relevant year.
the Committee will operate the annual bonus and long-term incentive arrangements according to their respective rules and in
accordance with the listing Rules where relevant. Consistent with market practice the Committee retains certain discretions
in respect of the operation and administration of these arrangements which include, but are not limited to, the following:
• the participants;
• the timing of the grant of an award or payment;
• the size of an award;
• the determination of the extent to which performance measures have been met and the corresponding vesting or payment levels;
• discretion required when dealing with a change of control or restructuring of the Group;
• determination of the treatment of leavers based on the rules of the respective arrangement and the appropriate treatment chosen,
including the pro-rating of awards;
• adjustments required in certain circumstances (e.g. rights issues, corporate restructuring events and special dividends);
• the annual review of performance measures, weighting and targets from year to year; and
• the manner in which share awards can be satisfied (i.e. through the use of new issue, market purchased or treasury shares or
by way of a cash payment).
in addition, the Committee retains the ability to adjust the targets and/or set different measures if events occur (e.g. a material
acquisition and/or divestment of a Group business) which cause it to determine that the conditions are no longer appropriate and
the amendment is required so that the conditions achieve their original purpose and are not materially less difficult to satisfy.
Any use of the above discretions would be explained in the annual report on remuneration for the relevant year and may,
as appropriate, be the subject of consultation with the Company’s major shareholders.
78 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Corporate Governance Element
bASE SAlARy
• to attract, retain and motivate individuals of the necessary calibre to execute the
Company’s strategy
• to provide competitive non-variable remuneration relative to the external market
• to recognise and reward performance, skills and experience
Operation
Normally reviewed annually with changes effective from 1st december. Review reflects:
• individual and corporate performance;
• the individual’s level of skill and experience;
• increases throughout the Company (including cost of living awards);
• internal relativities; and
• prevailing market conditions through periodic benchmarking for comparable roles in companies
of a similar size and scope. the Committee is mindful of institutional investors’ concerns on the
upward ratchet of base salaries and does not consider benchmark data in isolation.
Opportunity
Salary increases will normally be (in percentage of salary terms) in line with any general cost
of living increase throughout the Company. however, larger increases may be awarded at the
Committee’s discretion to take account of individual circumstances such as:
• changes in scope and responsibility of a role; and
• where a new director is appointed at a salary which is at a lower level to reflect their experience
at that point, the Committee may award a series of increases over time to achieve the desired
salary position subject to satisfactory performance and market conditions.
Actual salary levels are disclosed in the annual report on remuneration for the relevant financial
year (see page 95 for those effective 1st december 2013).
Performance measures
None, although overall performance of the individual is considered by the Committee as part
of the annual review.
Element
Operation
bENEFitS
• to provide a competitive and cost-effective benefits package
• to assist with recruitment and retention
the Company provides a range of non-pensionable benefits to executive directors which may
include a combination of a company car or car allowance, private fuel, driver, private medical
insurance, permanent health insurance, life assurance, holiday and sick pay, and professional
advice in connection with their directorship.
other benefits such as relocation allowances may be offered if considered appropriate and
reasonable by the Committee.
Opportunity
benefits are set at a level which the Committee considers to be appropriately positioned against
comparable roles in companies of a similar size and scope and provides a sufficient level of
benefit based on the role and individual circumstances.
Performance measures
None.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 79
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information directors’ Remuneration Report (continued)
Remuneration Policy Report (continued)
Element
Operation
PENSioN
• to provide competitive post-retirement benefits in a cost-effective manner
• to assist with recruitment and retention
the Company offers an allowance (expressed as a percentage of base salary) which can be
taken as:
• an employer contribution to the defined contribution section of the Company’s pension scheme;
• a cash allowance (which is not bonusable); or
• a blend of the two.
As a result of historic contractual commitments, retirement benefits for Steve burke are also
delivered by membership of the defined benefit section of the Company’s pension scheme which
is closed to future accrual.
the Committee may amend the form of any executive director’s pension arrangements in response
to changes in pensions legislation or similar developments, so long as any amendment does not
increase the cost to the Company of a director’s pension provision.
Opportunity
15% of base salary for all executive directors.
Performance measures
None.
Element
Operation
ANNuAl boNuS
• to incentivise and reward the delivery of stretching, near-term strategic, financial and
operational measures at Company and personal levels
• Corporate measures selected are consistent with and complement the budget and
strategic plan
• An element of compulsory investment in shares to align to shareholders’ interests in the creation
of sustainable, long-term value
All measures and targets are reviewed and set annually by the Committee at the beginning of
the financial year and levels of award determined by the Committee after the year end based
on performance against the targets set.
the Committee retains an overriding discretion to ensure that overall bonus payments reflect its
view of corporate performance during the year.
bonuses are paid in cash and are non-pensionable. directors are required to invest an amount
equal to one-third of the net bonus received in the Company’s shares and to retain these shares
for a minimum period of three years.
Clawback provisions apply to all bonuses paid.1
Opportunity
Maximum bonus potential of 125% of salary for all executive directors. on target performance
would result in a bonus payment of 75% of salary.
Performance measures
Performance is assessed using the following metrics:
• up to 105% of salary will be awarded based on corporate measures; and
• up to 20% of salary will be awarded based on personal measures.2
the specific measures that will apply for the year ending 30th November 2014 are described in the
annual report on remuneration on page 95. Measures for subsequent years will be summarised in
the annual report on remuneration for the relevant year.
1 the Committee has discretion to recover some or all of the value of awards of annual bonus 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.
2 the annual bonus metrics are designed to ensure that annual performance is focused on key financial measures which support the Company’s strategic targets.
these are supported by individual performance measures to ensure that executive directors are incentivised to deliver across a range of objectives. targets are set in line
with the Company’s budget and strategic plan for the year with a stretch element to reward substantial outperformance.
80 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Corporate Governance Element
loNG-tERM iNCENtiVES
• to incentivise and reward the delivery of strong returns to shareholders and sustained,
Operation
long-term performance
• Aligns the long-term interests of directors and shareholders
• Promotes retention
Awards of nil-cost options are normally made annually with vesting, in normal circumstances,
dependent on the achievement of stretching performance conditions set by the Committee and
measured over a three year period, and the director remaining in employment.
the Committee has discretion to decide whether and to what extent performance conditions have
been achieved and must also be satisfied that two underpin conditions are met before permitting
awards to vest.1
on the exercise of vested awards, executive directors receive an amount (in cash or shares)
equal to the dividends paid or payable between the date of grant and the date of exercise on the
number of shares which have vested.
Clawback provisions apply to all awards granted.2
Certain executive directors have vested but unexercised awards granted under the Company’s
Executive Share option Schemes (ESoS). other than in exceptional circumstances as determined
by the Committee, no further grants under the ESoS will be made to executive directors.
Opportunity
Maximum award level permitted under the scheme rules is 150% of salary (or 180% in
exceptional circumstances). the normal and current annual award limit is 125% of salary for all
executive directors.
Awards vest on the following basis:
• on target performance delivers 25% of the shares awarded; and
• maximum performance delivers 100% of the shares awarded,
with straight-line vesting between.
Performance measures
Performance is measured over a three year period with no retesting against the following metrics:
• 50% of the award based on relative tSR performance; and
• 50% of the award based on absolute tSR growth.3
the specific measures that will apply for the year ending 30th November 2014 are described in the
annual report on remuneration on page 96. Measures for subsequent years will be summarised in
the annual report on remuneration for the relevant year.
1 the conditions are (i) that the extent of vesting under the performance conditions is appropriate given the general financial performance of the Company over the
performance period; and (ii) 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.
2 the Committee has discretion to reduce some or all of the value (calculated at vesting) of any awards granted where the value of future annual bonus cash payments
are insufficient to recover fully any clawback applicable to the annual bonus arrangements or, within a period of four years following the end of the performance period
for an award, there is a material misstatement of the accounts or an error in the calculation of any performance condition which resulted in excess awards vesting to the
participant or there is other misconduct which, if known at the time, would have meant that a lower or nil award would have vested.
3 the Committee believes that this combination of tSR measures provides strong alignment with the interests of shareholders and complements the focus on operational
performance measures in the annual bonus arrangements. targets are set to ensure that only modest awards are available for delivering on target performance with
maximum rewards requiring substantial outperformance of the Company’s budget and strategic plans.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 81
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information directors’ Remuneration Report (continued)
Remuneration Policy Report (continued)
Element
Operation
All-EMPloyEE ShARE SChEMES
• to encourage all employees to make a long-term investment in the Company’s shares in a tax
efficient way
All employees, including executive directors, are entitled to participate in a uK tax approved
all-employee share scheme.
A resolution to extend the Company’s current all-employee share scheme for a further 10 years
will be put to shareholders at the 2014 AGM. this scheme is substantially the same as the
Company’s existing arrangements and will allow employees to make monthly savings over a
period of three or five years linked to the grant of an option over the Company’s shares.
At the end of the period, participants can use the monies to purchase shares at a discount (up to
the maximum permitted by hMRC) to the market value of shares on the relevant invitation date.
Alternatively they may ask for their savings to be returned with any accrued interest.
Opportunity
Maximum participation limits are set in line with hMRC guidelines in force at the time of award.
Performance measures
None.
Element
Operation
Opportunity
ShAREholdiNG REquiREMENt
• to ensure alignment of interests of executive directors and shareholders
the Company operates a shareholding requirement which is subject to periodic review.
Executive directors are required to build up a shareholding worth 200% of base salary within five
years of appointment.
Performance measures
None.
82 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Corporate Governance Element
Operation
FEES PAyAblE to ChAiRMAN ANd NoN-ExECutiVE diRECtoRS
• to pay fees in line with those paid by other uK listed companies of comparable size
• Additional payments to the Senior independent director and Chairs of board Committees to
reflect the additional responsibilities attached to these positions
Normally reviewed annually with changes effective from 1st december, taking into account any
cost of living increase applied throughout the Company. Periodic benchmarking for comparable
roles in companies of a similar size and scope is also undertaken.
Fees are structured as follows:
• the Chairman is paid an all-inclusive fee for all board responsibilities. this fee is determined by
the board on the recommendation of the Committee; and
• non-executive directors are paid a basic fee, plus additional fees for chairing board Committees
or as Senior independent director which are determined by the board on the recommendation
of the executive directors.
Fees are currently paid in cash.
Neither the Chairman nor the other non-executive directors participate in the annual bonus or
long-term incentive arrangements or in the pension scheme, nor do they receive benefits in kind.
Opportunity
Fees are set at a level which reflects the commitment and contribution that is expected and is
appropriately positioned against comparable roles in companies of a similar size and scope.
overall fees paid to directors will remain within the limit set out in the Company’s articles
of association.
Actual fee levels are disclosed in the annual report on remuneration for the relevant financial year
(see page 96 for those effective 1st december 2013).
Performance measures
None, although overall performance of the individual is considered as part of the annual review.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 83
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information directors’ Remuneration Report (continued)
Remuneration Policy Report (continued)
illuStRAtioN oF REMuNERAtioN PoliCy
the following charts illustrate the remuneration opportunity provided to each executive director in line with the policy set out on
pages 79 to 83 above at different levels of performance for the 2013/14 financial year.
three scenarios have been illustrated for each executive director:
1. Minimum performance:
comprising the minimum remuneration receivable (being base salary and pension allowances for
the 2013/14 financial year and benefits calculated using the 2012/13 figure as set out in the table on
page 87).
2. on target performance:
comprising fixed pay, an annual bonus payment at 60% of the maximum opportunity (75% of salary)
and long-term incentive awards vesting at 25% of maximum opportunity (31.25% of salary).
3. Maximum performance:
comprising fixed pay, 100% of annual bonus (125% of salary) and 100% vesting of long-term incentive
awards (125% of salary).
the illustrations do not take into account share price appreciation or dividends.
bill oliVER
Chief Executive £’000
StEVE buRKE
Construction director £’000
MiChAEl duNN
Group Finance director £’000
£571
£1,071
£1,748
34%
34%
14%
33%
£1,800
£1,500
£1,200
£900
£600
£300
100%
53%
32%
£0
Minimum
performance
On target
performance
Maximum
performance
£1,800
£1,500
£1,200
£900
£600
£300
£0
£386
£716
£1,163
33%
33%
14%
32%
100%
54%
34%
Minimum
performance
On target
performance
Maximum
performance
£1,800
£1,500
£1,200
£900
£600
£300
£0
■ Fixed pay ■ Annual bonus ■ long-term incentives
£336
£636
£1,043
34%
34%
14%
33%
100%
53%
32%
Minimum
performance
On target
performance
Maximum
performance
84 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Corporate Governance RECRuitMENt ARRANGEMENtS
in the event of hiring a new executive director, the Committee will typically seek to align his or her remuneration package with the
policy set out above. however, the Committee retains the discretion to offer appropriate remuneration outside of the standard policy
to facilitate the hiring of candidates of an appropriate calibre and to meet the individual circumstances of the recruitment. this may,
for example, include the following:
• where an interim appointment is made to fill an executive director role on a short-term basis;
• exceptional circumstances require that the Chairman or a non-executive director takes on an executive function on a
short-term basis;
• an executive director is recruited at a time in the year when it would be inappropriate to provide a bonus or long-term incentive
award for that year as there would not be sufficient time to assess performance. the quantum in respect of the months employed
during the year may be transferred to the subsequent year so that reward is provided on a fair and appropriate basis;
• an executive is recruited from a business that offered some benefits that the Committee might consider appropriate to buy out but
that do not fall into the definition of ‘variable remuneration forfeited’ that can be included in the buyout element under the wording
of the Regulations; or
• the executive received benefits from his or her previous employer which the Committee considers it appropriate to offer.
the Committee will, however, seek to ensure that arrangements are in the best interests of both the Company and its shareholders
and to not pay more than is appropriate.
base salary levels for new recruits will be set in accordance with the policy set out on page 79, taking into account the experience
and calibre of the individual recruited. Where it is appropriate to offer a lower salary initially to reflect the individual’s experience at
that point, the Committee may award a series of increases over time to achieve the desired salary position subject to performance
and market conditions. Pension arrangements will be in line with the policy detailed on page 80.
unless the Committee deems it appropriate to tailor benefits to the unique circumstances of the appointment, benefits will be
provided in line with those made available to other executive directors (see policy table on page 79), with relocation allowances
offered if considered necessary.
the Committee may structure a remuneration package that it considers appropriate to recognise incentive pay or benefit
arrangements that the individual would forfeit on resigning from his or her previous employer. this may take the form of cash
and/or share awards as appropriate. in doing so the Committee will take account of relevant factors including the form (e.g. cash or
shares), timing and expected value (i.e. likelihood of meeting any existing performance criteria) of the remuneration being forfeited.
the Committee will generally seek to structure buyout awards on a comparable basis to awards forfeited. Replacement share
awards, if used, will, to the extent possible, be granted using the Company’s existing share schemes, although awards may also
be granted outside of these schemes if necessary and as permitted under the listing Rules (which allow for the grant of awards
to facilitate, in unusual circumstances, the recruitment of a director).
the Committee may also apply different performance measures, performance periods and/or vesting periods for initial awards made
following appointment under the annual bonus and/or long-term incentive arrangements, subject to the rules of the scheme, if it
determines that the circumstances of the recruitment merit such alteration.
the maximum level of variable pay which may be awarded to new executive directors, excluding the value of any buy-out
arrangements, will be in line with the policy set out on pages 80 and 81 (i.e. at an aggregate maximum of 315% of salary, comprising
125% for annual bonus and 180% for long-term incentive arrangements).
Where a position is fulfilled internally, the Committee will honour any pre-existing remuneration obligations or outstanding variable
pay arrangements in relation to the individual’s previous role such that these shall be allowed to continue according to the original
terms (adjusted as relevant to take account of the board appointment).
Fees payable to a newly-appointed Chairman or non-executive director will be in line with the fee policy in place at the time
of appointment.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 85
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information directors’ Remuneration Report (continued)
Remuneration Policy Report (continued)
ExtERNAl APPoiNtMENtS
the board recognises the benefit which the Company can obtain if executive directors serve as non-executive directors of other
companies. Subject to review in each case, the board’s general policy is that an executive director can accept one non-executive
directorship of another company (but not the chairmanship) and can retain the fees in respect of such appointment. No fees were
received by executive directors for external appointments during the year ended 30th November 2013.
ExECutiVE diRECtoR SERViCE CoNtRACtS ANd PAyMENtS FoR loSS oF oFFiCE
All current executive directors have service contracts which may be terminated by the Company for breach by the executive
or with 12 months’ notice from the Company and either 12 months (Michael dunn) or six months (bill oliver and Steve burke)
from the individual. None have fixed terms of service. Service contracts for new executive directors will generally be limited to
12 months’ notice. the dates of the executive directors’ service contracts are as follows: bill oliver – 24th January 2000; Steve burke
– 1st January 2006; Michael dunn – 9th November 2010.
if notice is served by either party, the executive director can continue to receive base salary, benefits and pension for the duration
of their notice period during which time the Company may require the individual to continue to fulfil their current duties or may
assign a period of garden leave. the Company may elect to make a payment in lieu of notice equivalent in value to 12 months’ base
salary, payable in monthly instalments, which would be subject to mitigation if alternative employment is taken up during this time.
Alternatively, this payment may be paid as a lump sum. in the event of termination for cause (e.g. gross misconduct) neither notice
nor payment in lieu of notice will be given and the executive director will cease to perform his services immediately.
in redundancy situations the Committee will comply with prevailing relevant legislation. in addition, and consistent with market
practice, the Company may pay a contribution towards the executive director’s legal fees for entering into a statutory agreement and
may pay a contribution towards fees for outplacement services as part of a negotiated settlement. there is no provision for additional
compensation on termination following a change of control. Payment may also be made in respect of accrued benefits, including
untaken holiday entitlement.
the following principles will apply to annual bonus and long-term incentive arrangements in the event of loss of office:
Remuneration element
Annual bonus
‘Good’ leavers
Other leavers
unless the Committee exercises its
discretion to treat the executive director as
a good leaver, no bonus will be payable.
An executive director will be treated
as a good leaver if he or she dies or
ceases employment due to injury,
disability, retirement with the Company’s
agreement, or sale of the business in
which he or she is employed.
in these circumstances, the executive
director remains eligible to be paid
a bonus, subject to the applicable
performance measures. Any payment
awarded may be pro-rated to reflect the
period of time served from the start of the
financial year to the date of termination,
but not for any period in lieu of notice.
Long-term incentive awards
(as apply to the Company’s current
Performance Share Plan)
An executive director will be treated as
a good leaver if he or she dies or ceases
employment due to injury or disability.
All awards will lapse in full where
termination is by reason of
summary dismissal.
unvested awards can be exercised
either on date of cessation or after
three years from grant, in either case
pro-rated for time employed during the
performance period, achievement of
applicable performance measures, and
having regard to such other factors as
the Committee may deem relevant.
in other circumstances unvested awards
will lapse in full unless the Committee
applies discretion to treat the executive
director as a good leaver.
in respect of all-employee share schemes and the Company’s Executive Share option Schemes, the same leaver conditions will be
applied to executive directors as those applied to other employees.
86 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Corporate Governance NoN–ExECutiVE diRECtoR tERMS oF APPoiNtMENt
the terms of service of the Chairman and the other non-executive directors are contained in letters of appointment.
Appointments are for a fixed term of three years, during which period the appointment may be terminated by three months’ notice
by either party. Non-executive directors are typically expected to serve two three year terms subject to mutual agreement and
satisfactory performance reviews. there are no provisions for payment in the event of termination, early or otherwise.
the dates of the current letters of appointment for the Chairman and other non-executive directors and expiry of their current terms
are as follows:
Non-executive director
bill Shannon
Kay Chaldecott
Simon Clarke
lesley James
Richard Mully
John Salmon
Date of current letter of appointment
Expiry of current term
25/11/13
22/10/12
24/09/13
24/10/12
16/07/13
31/10/11
31/10/16
21/10/15
10/10/16
18/10/15
31/08/16
16/10/14
Annual Report on Remuneration
SiNGlE totAl FiGuRE oF REMuNERAtioN (AuditEd iNFoRMAtioN)
Executive directors
bill oliver
Steve burke
Michael dunn
Non-executive directors
bill Shannon
Kay Chaldecott7
Simon Clarke
david Garman8
Katherine innes Ker8
lesley James
Richard Mully9
John Salmon10
Base salary/fees
£’000
Benefits1
£’000
Annual bonus2
£’000
Share plans vesting
£’000
Pension contribution/
allowance5
£’000
Total
£’000
2013
2012
2013
2012
2013
2012
20133
20124
2013
2012
2013
2012
457
302
266
446
294
268
135
135
40
40
15
13
49
10
55
5
38
44
38
47
–
47
30
29
11
–
–
–
–
–
–
–
–
29
21
10
543
358
3266
502
331
301
1,085
716
782
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
628
412
–
–
–
–
–
–
–
–
–
69
45
40
–
–
–
–
–
–
–
–
67
44
40
2,184
1,672
1,450
1,102
1,425
619
–
–
–
–
–
–
–
–
135
135
40
40
15
13
49
10
55
5
38
44
38
47
–
47
1,382
1,362
70
60
1,227
1,134
2,583
1,040
154
151
5,416
3,747
1 All benefits for the executive directors (comprising mainly the provision of company car/car allowance, private fuel and medical insurance) arise from employment with
the Company and do not form part of final pensionable pay.
2 bonus payable in respect of the relevant financial year. Further information as to how the level of bonus awarded in 2013 was determined is provided on page 88.
3 Relates to the 2011 PSP awards which are due to vest and became exercisable on 21st March 2014. the share price used to value the awards was 328.98p, being the
three month average to 30th November 2013. Further information on the awards and the performance conditions to which they were subject can be found on page 89.
4 Relates to the 2009 and 2010 PSP awards which vested and became exercisable on 24th July 2012 and 22nd February 2013 respectively. the share price used to
value the awards was 177.75p (2009 awards) and 277.5p (2010 awards), being the share price on the relevant vesting date. Further information on the performance
conditions which applied to the awards is set out on page 90.
5 Further details regarding pension entitlements can be found on page 93.
6 the bonus awarded was based on annual salary of £274,495 rather than salary earned in the year which, at £265,544, was lower as a result of unpaid paternity
leave taken.
7 Appointed to the board on 22nd october 2012.
8 Retired from the board on 27th March 2013.
9 Appointed to the board on 1st September 2013.
10 Fee paid in the year ended 30th November 2013 reflected John Salmon’s appointment as interim Senior independent director from 28th March 2013 until the year end.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 87
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information directors’ Remuneration Report (continued)
Annual Report on Remuneration (continued)
ANNuAl boNuS outtuRN (AuditEd iNFoRMAtioN)
Measure
Corporate
On target
performance
Actual
performance
As % of base
salary at maximum
bonus opportunity
Bonus awarded as
% of base salary
• Post dividend growth in shareholders’ equity net asset value per share
8% growth
to 270p
11% growth
to 279p
• increase in profit before all tax
• increase in total dividend for the year
• Gearing levels
• Covenant compliance
• Achievement against a number of strategic objectives
Personal
£55.1m
3.90p per
share
62%
Full
Achieved
• Achievement against a number of operational objectives
Achieved
£82.2m
4.00p per
share
54%
Full
Partially
achieved
Partially
achieved
105%
100.00%
20%
18.75%
the executive directors’ individual performance was assessed by the Committee against the measures, relying on audited
information where appropriate, and having regard to the value which has been created for shareholders. Weightings were not given
to individual corporate measures; since they are all of key importance to the short- and longer-term success of the Company, the
Committee did not wish to distort behaviour by placing particular focus on any single element.
As noted in the Strategic Report, the Company delivered an excellent set of results for the year. Performance highlights include:
• shareholders’ equity net asset value per share increasing by 11% to 279p per share;
• an increase in profit before all tax of 56% to £82.2m;
• realised property profits up by 37% to £40m;
• significant reduction in gearing to 54% following a successful equity placing;
• final dividend for the year increased by 10% to 2.67p per share, making a total distribution for the year of 4.00p per share;
• sustained valuation gains of £42m, of which £28m was as a result of active asset management and planning gains; and
• the disposal by St. Modwen’s KPi joint venture of the Elephant & Castle Shopping Centre for £80m, representing a yield of 4.25%.
in light of both corporate and individual performance, the Committee determined that each executive director should receive a bonus
equal to 95% of the maximum opportunity for the year, representing 118.75% of salary.
bonus payments are 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 the Company shares and to retain those shares for a minimum period of three
years. in respect of bonuses paid for the 2011/12 financial year, bill oliver and Mike dunn satisfied this investment requirement
through the acquisition of shares issued as part of the equity placing completed in March 2013 whilst Steve burke acquired shares
both through the placing and the exercise of his 2009 and 2010 PSP awards.
88 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Corporate Governance loNG-tERM iNCENtiVES (AuditEd iNFoRMAtioN)
Performance Share Plan (PSP)
on 6th March 2013, the following PSP awards were granted to executive directors as nil cost options:
Executive director
Bill Oliver
Steve Burke
Michael Dunn
Basis of award
125% of salary
125% of salary
125% of salary
Face value of award
£0001
Number of shares
% of award that would vest
for threshold performance2
£571
£377
£343
231,077
152,468
138,802
25%
25%
25%
1 Calculated using the average share price of 247.2p which was, in accordance with the rules of the PSP, used to determine the number of shares to be awarded (being
the average over the three dealing days immediately preceding the date of grant).
2 the performance measures that apply to the awards mirror those proposed for the 2014 awards which are described on page 96. the performance period started on
1st december 2012 and will end on 30th November 2015.
the three year performance period for the 2011 PSP awards ended on 30th November 2013. the performance conditions which
applied to the awards together with actual performance are summarised in the table below:
Performance measure
Absolute tSR growth
tSR relative to FtSE
All-Share Real Estate
investment & Services index
Weighting
50% of
award
50% of
award
Threshold
performance
Vesting of award at
threshold
performance
Maximum
performance
Vesting of award at
maximum
performance
Actual
performance
Proportion of
award to vest
20%
12.5%
50%
50%
110%
50%
Equal
to Index
12.5%
120% of
Index
50%
155%
totAl
50%
100%
to ensure that the level of vesting of PSP awards accurately reflected the performance of the Company during the period, the
Committee also considered whether it was satisfied that the two underpins (details of which are set out in note 1 on page 81) had
been met. in respect of the dividend underpin, an interim dividend of 1.33p per share was paid on 3rd September 2013 and the board
is recommending that a final dividend for the year of 2.67p per share be paid on 4th April 2014. Furthermore, the Committee currently
has no reason to believe that dividend(s) will not be paid in respect of the 2014 financial year, being the year in which the award will
vest. the Committee also considered the general financial performance of the Company over the performance period and noted
the following:
Key financial indicator
Profit before all tax
Shareholders’ equity net asset value per share
total dividend per share for the financial year
Gearing
See-through loan-to-value
As at 1st
December 2010
As at 30th
November 2013
Improvement
£38.2m
£82.2m
213.2p
3.00p
72%
39%
278.7p
4.00p
54%
33%
115%
31%
33%
24%
15%
the Committee therefore determined that 100% of the PSP awards granted in 2011 will vest and become exercisable on the third
anniversary of grant (21st March 2014) subject to continued employment. Further details can be found in the table below:
Executive director
bill oliver
Steve burke
Michael dunn
Total number of shares granted
Number of shares to vest
319,774
210,992
230,496
319,774
210,992
230,496
dividends will be treated as accruing from the date of grant to the date of exercise; on exercise the total dividend accrued is
converted into shares using the average market price for the three dealing days immediately prior to the date of exercise and
released to the director.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 89
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information directors’ Remuneration Report (continued)
Annual Report on Remuneration (continued)
All PSP awards held by the executive directors who served during the year, together with any movements, are shown below:
Executive director
Date of grant1
Awards held on
1st December
2012
Awards
made
during year2
Awards
vested
during year3
Awards
exercised
during year
Awards lapsed
during year
Awards held
on 30th
November
2013
bill oliver
24/07/09
134,498
22/02/10
282,154
21/03/11
319,774
17/02/125
363,529
–
–
–
–
06/03/13
–
231,077
–
129,480
–
–
–
1,099,955
231,077
129,480
–
–
–
–
–
–
–
134,498
152,674
129,480
–
–
–
319,774
363,529
231,077
152,674
1,178,358
End of
performance
N/A
N/A
period4 Exercise period
24/07/12 to
23/07/19
22/02/13 to
21/02/20
21/03/14 to
20/03/21
17/02/15 to
16/02/22
06/03/16 to
05/03/23
30/11/14
30/11/15
30/11/13
Steve burke
24/07/09
88,744
22/02/10
186,170
21/03/11
210,992
17/02/125
239,863
–
–
–
–
06/03/13
–
152,468
–
88,7446
–
85,433
85,4336
100,737
–
–
N/A
N/A
–
–
–
–
–
–
–
–
–
210,992
30/11/13
239,863
30/11/14
152,468
30/11/15
725,769
152,468
85,433
174,177
100,737
603,323
Michael dunn
21/03/11
230,496
17/02/125
218,362
–
–
06/03/13
–
138,802
448,858
138,802
–
–
–
–
–
–
–
–
–
–
–
–
230,496
30/11/13
218,362
30/11/14
138,802
30/11/15
587,660
24/07/12 to
23/07/19
22/02/13 to
21/02/20
21/03/14 to
20/03/21
17/02/15 to
16/02/22
06/03/16 to
05/03/23
21/03/14 to
20/03/21
17/02/15 to
16/02/22
06/03/16 to
05/03/23
1 Awards made in 2012 and 2013 are subject to clawback as described on page 81.
2 the share price used to calculate the number of shares awarded, under the rules of the PSP, was 247.2p. the closing mid-market share price on the date of the award
was 249.1p. the performance conditions for the 2013 award mirror those proposed for the 2014 awards as described on page 96.
3 the share price used to calculate the number of shares which vested when originally awarded, under the rules of the PSP, was 188p. the closing mid-market share price
on the date the shares vested was 277.5p.
4 Performance conditions for the 2009 and 2010 awards are described in the table below. the performance conditions for awards made in 2011, 2012 and 2013 mirror
those proposed for the 2014 awards as described on page 96.
Performance measure
Weighting
Threshold performance
Vesting of award at
threshold performance
Cumulative growth in net
asset value per share
tSR relative to FtSE 350
Real Estate index
50% of award
5% for 2009 award/
7.5% for 2010 award
50% of award
Equal to index
12.5%
12.5%
Maximum performance
20% for 2009 award/
30% for 2010 award
120% of index
Vesting of award at
maximum performance
50%
50%
5 Awards comprise an hMRC approved option over 19,769 shares with an exercise price of 151.75p and an unapproved award for the balance.
6 Awards exercised on 29th April 2013. in addition to the shares exercised Steve burke received shares representing the value of dividends paid from the date of award to
the date of exercise for both the 2009 PSP award (3,286 shares) and 2010 PSP award (3,163 shares).
90 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Corporate Governance Executive Share Option Schemes (ESOS)
ESoS awards held by the executive directors who served during the year, together with any movements, are shown below:
Executive director
Date of grant
Options held
on 1st
December
2012
Options
granted
during year
Options
exercised
during year1
Options
lapsed
during year
bill oliver
13/08/04
105,610
15/08/05
102,955
208,565
Steve burke
13/08/04
46,315
15/08/05
39,825
86,140
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Options held
on 30th
November
2013 Exercise price2 Exercise period
13/08/07 to
12/08/14
15/08/08 to
14/08/15
375.22p
236.31p
105,610
102,955
208,565
46,315
236.31p
39,825
375.22p
86,140
13/08/07 to
12/08/14
15/08/08 to
14/08/15
1 All options have vested in full, having met the performance conditions, but have not been exercised.
2 Adjusted to take account of the dilutive effect of the 2009 equity issue.
No further grants under the ESoS will be made to executive directors other than in exceptional circumstances as determined by
the Committee.
Saving Related Share Option Scheme (SAYE)
SAyE awards held by the executive directors who served during the year, together with any movements, are shown below:
Executive director
Date of grant
Options held
on 1st
December
2012
Options
granted
during year
Options
exercised
during year
Options
lapsed
during year
Options held
on 30th
November
2013
bill oliver
Steve burke
15/09/09
6,941
16/08/11
9,887
Michael dunn
16/08/11
9,887
–
–
–
–
–
–
–
–
–
6,941
9,887
9,887
224p
Exercise price Exercise period
01/10/14 to
31/03/15
01/10/16 to
31/03/17
01/10/16 to
31/03/17
156p
156p
the closing mid-market share price on 29th November 2013 was 357.6p and the price range during the year was 219.0p to 361.5p.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 91
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information directors’ Remuneration Report (continued)
Annual Report on Remuneration (continued)
StAtEMENt oF diRECtoRS’ ShAREholdiNG ANd ShARE iNtEREStS (AuditEd iNFoRMAtioN)
the interests of the directors and their connected persons in the issued ordinary share capital of the Company are shown in the
table below:
As at 30th November 2013
PSP awards
As at 1st December 2012
PSP awards
Ordinary
shares
Vested
but
unexercised
Not yet
vested
ESOS
awards1
SAYE
awards
Ordinary
shares
Vested
but
unexercised
Not yet
vested
ESOS
awards1
SAYE
awards
Director
Executive director
bill oliver
Steve burke2
Michael dunn
364,883
96,568
Non-executive director
bill Shannon
Kay Chaldecott
65,000
10,000
Simon Clarke
4,612,657
david Garman
10,0003
Katherine innes Ker
lesley James
Richard Mully4
–3
10,000
–
John Salmon
30,000
527,469
263,978
914,380 208,565
6,941
494,819
134,498
965,457
208,565
– 603,323
86,140
9,887
264,153
88,744
637,025
86,140
–
587,660
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9,887
76,168
–
448,858
–
–
50,000
–
– 4,612,657
–
–
–
–
–
10,000
–
10,000
–
25,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6,941
9,887
9,887
–
–
–
–
–
–
–
–
1 Awards have vested but have not been exercised.
2 Exercised PSP awards granted in 2009 and 2010. the number of shares retained on exercise following the sale of sufficient shares to satisfy the tax liability arising on
exercise is included in the number of ordinary shares held. Further details can be found on page 90.
3 on retirement from the board on 27th March 2013.
4 Appointed to the board on 1st September 2013.
there were no changes in these shareholdings or interests between 30th November 2013 and the date of this report.
in order to reinforce the alignment of their interests with those of shareholders, executive directors are required to build up a holding
of ordinary shares in the Company over a five year period worth at least 200% of their base salary (increased from 100% of base
salary with effect from 1st december 2013). As set out in the table below, both bill oliver and Steve burke have met or exceeded
the shareholding requirement; Michael dunn has until december 2015 to achieve the required holding.
Executive director
bill oliver
Steve burke
Michael dunn
Ordinary shares held as at
30th November 2013
Shareholding requirement as
% of base salary
Shareholding at 30th November 2013 as
% of base salary1
527,469
364,883
96,568
200%
200%
200%
413%
433%
126%
1 based on the closing mid-market share price on 29th November 2013 of 357.6p and salary as at 30th November 2013.
the Committee has noted the views of an institutional investor that long-term incentive arrangements should be subject to
a minimum holding period of five years between the date of grant of an award and the sale of the resulting shares. Given the
substantial shareholding requirement set out above, the Committee does not currently feel that such holding periods are necessary
for the Company’s PSP arrangements. it will however continue to monitor developments in this area and keep the matter
under review.
92 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Corporate Governance PENSioN ENtitlEMENtS (AuditEd iNFoRMAtioN)
All executive directors receive a pension contribution of 15% of base salary which is paid either into the defined contribution
section of the Company’s pension scheme or as a cash allowance in lieu of pension contribution (or a combination of both).
No compensation is offered for any additional tax suffered by an executive director in the event that the value of their pension
exceeds the statutory lifetime Allowance.
For the year ended 30th November 2013, bill oliver received a cash allowance in lieu of pension contributions which amounted
to £68,547 (2012: £66,875). the other executive directors received Company contributions to the pension scheme as follows:
Steve burke £45,228 (2012: £44,125) and Michael dunn £39,832 (2012: £40,170).
Steve burke is also a deferred member of the defined benefit section of the Company’s pension scheme, which was closed to
new members in 1999 and to future accrual in 2009. benefits are based on years of credited service and final pensionable pay;
the maximum benefit generally payable under the scheme is two-thirds of final pensionable pay.
information required by the Regulations in respect of defined benefit pension arrangements are set out below:
Age at 30th
November 2013
Normal retirement
age
Accrued
pension at
30th November
20121
£pa
Accrued
pension at
30th November
20131
£pa
Increase in
accrued pension
during the year
£pa
Increase in
accrued pension
during the year
(excluding inflation)
£pa
Steve burke
54
65
26,6712
27,2692
598
0
1 the accrued annual pension includes entitlements earned as an employee prior to becoming an executive director as well as for qualifying services after becoming an
executive director and is that which would be paid annually on retirement at age 65 based on service to the end of the year.
2 these figures have been calculated by applying deferred revaluation to Steve burke’s deferred pension as at 1st September 2009, being the date that accrual ceased
under the defined benefits section of the scheme.
3 the following is additional information relating to the defined benefit pension arrangements applicable to Steve burke:
– Normal retirement age is 65 years. Retirement may take place at any age after age 55 subject to Company consent. Pensions may be reduced to allow for their
earlier payment.
– there are no death in service benefits payable and no additional benefits due on early retirement.
– deferred pensions are assumed to increase in line with CPi capped at 5% per annum in the period before retirement.
Further information on the Company’s pension scheme is shown in note 18 to the Group Financial Statements.
PAyMENtS to PASt diRECtoRS ANd FoR loSS oF oFFiCE (AuditEd iNFoRMAtioN)
No director left during the year and no payments for loss of office were made. No payments were made to former directors who were
not directors at the time of payment.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 93
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information directors’ Remuneration Report (continued)
Annual Report on Remuneration (continued)
hiStoRiC CoMPANy PERFoRMANCE ANd ChiEF ExECutiVE REMuNERAtioN
the following information allows comparison of the Company’s tSR (based on share price growth and dividends reinvested) with the
remuneration of bill oliver, Chief Executive, over the last five financial years.
£400
£350
£300
£250
£200
£150
£100
£50
£0
30th Nov
2008
30th Nov
2009
30th Nov
2010
30th Nov
2011
30th Nov
2012
30th Nov
2013
St. Modwen
FTSE 250
FTSE All-Share Real Estate Investment & Services
the chart is prepared in accordance with the Regulations. it shows the Company’s tSR and that of the FtSE 250 and the FtSE All-Share Real Estate investment &
Services indices based on an initial investment of £100 on 30th November 2008 and values at intervening financial year ends over a five year period to 30th November 2013.
Since the Company was a constituent of both the FtSE 250 and the FtSE All-Share Real Estate investment & Services indices during the year, these are considered to be
appropriate benchmarks for the graph.
Chief Executive remuneration for year ended 30th November
total remuneration (£000)1
Annual bonus awarded (as a % of maximum opportunity)
PSP vesting (as a % of maximum opportunity)
2009
876
50%2
0%
2010
902
80%
0%
2011
1,049
95%
0%
2012
1,672
90%
45.77%3
2013
2,184
95%
100%
1 total remuneration includes those elements shown in the single total figure of remuneration table on page 87.
2 in addition to the annual bonus, the Chief Executive was also awarded a one-off, exceptional payment of £100,000 in relation to the successful equity raising and
financial restructuring undertaken in the year.
3 Comprises 45.64% of the 2009 PSP awards and 45.89% of the 2010 PSP awards.
ChANGE iN REMuNERAtioN oF ChiEF ExECutiVE CoMPAREd to EMPloyEES
the table below show the percentage change in salary, benefits and annual bonus between the years ended 30th November 2013
and 30th November 2012 for both the Chief Executive and for all permanent employees of the Company.
Chief Executive
All permanent employees1
2.5%
3.2%
3.4%
7.4%
8.2%
5.9%
% change in base salary
% change in benefits
% change in annual bonus earned
1 Reflects the change in average remuneration for all permanent employees, excluding bill oliver.
94 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Corporate Governance RElAtiVE SPENd oN PAy
the table below shows the total expenditure on remuneration for all employees of the Company (including pension, variable pay
and social security costs) compared to other key financial indicators as reported in the audited financial statements for the last two
financial years. information in respect of profit and net asset value performance has been provided for context.
Measure
total spend on pay
Profit before all tax
dividends paid1
Equity attributable to
owners of the Company2
Relevant note to the
financial statements
3c
2a
7
2g
Year ended 30th November
2012
£14.9m
£52.8m
£6.8m
2013
£15.5m
£82.2m
£8.2m
£502.6m
£614.2m
% increase
4%
56%
21%
22%
1 during the year a total of 20,016,057 shares were issued as part of the equity placing completed in March 2013. dividends paid per share in the year ended 30th
November 2013 increased by 10% to 3.75p (2012: 3.41p).
2 Equity attributable to owners of the Company for the year ended 30th November 2013 includes net proceeds of £47.9m from the equity placing completed in March
2013. Net asset value per share for the year ended 30th November 2013 increased by 11% to 278.7p (2012: 250.8p).
iMPlEMENtAtioN oF REMuNERAtioN PoliCy FoR 2013/14
Base salary
in line with the cost of living salary increase awarded to the Company’s employees, the executive directors received an annual salary
increase of 3% with effect from 1st december 2013. base salaries payable from this date are as follows:
Executive director
bill oliver
Steve burke
Michael dunn
£
470,687
310,568
282,730
Benefits and pension arrangements
benefits and pension arrangements for the financial year ending 30th November 2014 will be consistent with the respective policies
detailed on pages 79 and 80.
Annual bonus
the annual bonus arrangements for the financial year ending 30th November 2014 will operate on the same basis as for 2012/13 and
will be consistent with the annual bonus policy detailed on page 80 (including the Committee’s overriding discretion to ensure that
payments reflect its view of corporate performance, the requirement for directors to invest an amount equal to one-third of the net
bonus received in the Company’s shares and clawback provisions).
Executive directors will have the opportunity to earn a bonus of up to 125% of salary based on achievement of the following measures:
Measure
Corporate
• Growth in shareholders’ equity net asset value per share
• increase in profit before all tax
• increase in total dividend for the year
• Gearing levels
• Covenant compliance
Proportion of salary payable
For on target performance:
For maximum performance:
• Achievement against a number of strategic objectives
Personal
Achievement against a number of operational objectives
For on target performance:
For maximum performance:
65%
105%
10%
20%
the measures have been selected to reflect a range of key financial and operational goals which support the Company’s strategic
objectives. the respective targets have not been disclosed as they are considered by the board to be commercially sensitive.
however, retrospective disclosure of the targets and performance against them will be provided in the Remuneration Report for the
year ending 30th November 2014 provided that they do not remain commercially sensitive at that time.
bonus payments will not be dependent on achievement of any single target in isolation, since the measures and targets are all of key
importance to the short- and longer-term health of the Company and the Committee does not wish to distort behaviour by focusing
on a single element. the executive directors’ performance will be assessed individually by the Committee against the measures and
targets, relying on audited information where appropriate, and having regard to the value which has been created for shareholders.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 95
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information directors’ Remuneration Report (continued)
Annual Report on Remuneration (continued)
Long-term incentives – PSP
As in 2012/13, PSP awards granted to executive directors in the financial year ending 30th November 2014 will be over shares worth
125% of salary and will be consistent with the long-term incentives policy detailed on page 81 (including the application of the two
underpin conditions before awards can vest and the clawback provisions).
the Committee has undertaken a review of the tSR performance targets which will apply to the awards in order to consider changes
in the outlook for the sector and the Company. it remains satisfied that the existing targets remain sufficiently challenging and intends
to apply these to the awards to be granted in 2014; these targets are set out in the table below and will be measured over the three
financial years ending on 30th November 2016:
Performance measure
Absolute tSR growth
tSR relative to FtSE All-Share Real Estate investment
& Services index
Threshold
performance
Vesting of award at
threshold
performance
Maximum
performance
Vesting of award at
maximum
performance
Weighting
50% of award
20%
12.5%
50%
50%
50% of award Equal to Index
12.5%
120% of Index
50%
Vesting of awards between threshold and maximum performance will be on a straight-line basis.
in calculating tSR, a three month average is used at both the start and the end of the performance period to ensure that the
calculation is not impacted by potential volatility arising from day-to-day share price fluctuations. the tSR data and relative
positioning of St. Modwen is obtained from J.P. Morgan Cazenove to ensure that performance is independently verified.
Chairman and non-executive director fees
Following a review by the board, the annual fees payable to the Chairman and non-executive directors with effect from
1st december 2013 are as follows:
Base fee
Chairman
Non-executive directors
Additional fees3
Senior independent director
Audit Committee Chair
Remuneration Committee Chair
£
150,0001
41,2002
£
9,000
9,000
9,000
1 the fee payable to the Chairman had remained unchanged since his appointment in 2010 and was increased from £135,000 to reflect both performance and relative
market positioning.
2 Fee increased by 3% in line with the cost of living salary increase awarded to employees with effect from 1st december 2013.
3 the fee payable to the Senior independent director was increased from £6,000 with effect from 27th March 2013. No further increases have been applied to the
additional fees payable.
dilutioN liMitS
in line with the rules of the PSP, ESoS and SAyE, the Company observes the recommendation of the Association of british insurers
that the number of new shares that may be issued to satisfy awards is restricted to 10% of the issued ordinary share capital of the
Company over any rolling 10 year period. Whilst not formally within the rules of the Company’s existing executive share schemes,
the Company also adheres to the recommended 5% in any rolling 10 year limit for its discretionary schemes.
the total number of shares which could be allotted under the Company’s share schemes compared to the dilution limits as at
30th November 2013 was as follows:
Type of scheme
All schemes
Executive schemes only
Limit
10%
5%
Actual
4.71%
4.43%
the Company has, since 1998, satisfied awards under all schemes from market-purchased shares sourced from the
St. Modwen Properties PlC Employee Share trust (the trust) which is administered by an external trustee. the trust currently holds
a total of 72,582 shares in the Company (2012: 215,754 shares) and has waived the right to receive dividends paid on these shares.
96 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Corporate Governance CoMMittEE MEMbERShiP
the Committee’s composition is kept under review by the Nomination Committee, which is responsible for making
recommendations to the board as to its membership.
As at the date of this report, the Committee comprises the following independent non-executive directors, all of whom served
throughout the financial year unless indicated otherwise below:
Director
lesley James
Kay Chaldecott
Richard Mully
John Salmon
bill Shannon
Remuneration Committee position
Chair
Member
Member (from appointment to the Board on 1st September 2013)
Member
Member
Simon Clarke attends meetings of the Committee as an observer. the secretary to the Committee is tanya Stote, Company
Secretary. david Garman and Katherine innes Ker were members of the Committee until their retirement from the board on
27th March 2013.
Committee members’ attendance at meetings is set out in the table on page 63. their biographical details can be found on pages
56 and 57.
All members of the Committee receive an appropriate induction to ensure that they have a sound and objective understanding of the
principles of, and recent developments in, executive remuneration matters. ongoing training is undertaken as required.
AdViCE PRoVidEd to thE CoMMittEE
New bridge Street (NbS), a trading name of Aon hewitt limited (the parent company of NbS) and part of Aon plc, was appointed
by the Committee in 2010 following a tender process to provide independent advice on remuneration matters. Representatives from
NbS attend Committee meetings and provide advice to the Committee Chair outside of meetings as necessary. in 2012/13 NbS
provided specific advice on performance conditions for long-term incentives, the Regulations and their impact on the directors’
Remuneration Report, and share dilution limits. Fees paid to NbS in the year totalled £35,500.
NbS is a member of the Remuneration Consultants Group and operates voluntarily under the Group’s code which sets out the
scope and conduct of the role of executive remuneration consultants when advising uK listed companies. on the basis that neither
NbS nor Aon hewitt limited undertakes any other work for the Company, the Committee is satisfied that the advice provided by
NbS remains objective and independent. Nonetheless, the Committee intends to review the arrangements by which it receives
independent advice during 2014.
the Committee also receives input from bill oliver, the Chief Executive, on the remuneration arrangements of the other executive
directors and of the Company Secretary, and advice from tanya Stote, the Company Secretary, on governance matters. Neither the
Chief Executive nor the Company Secretary were present when their own remuneration was discussed.
StAtEMENt oF ShAREholdER VotiNG At thE AGM
At the AGM held on 27th March 2013 votes cast in respect of directors’ remuneration were as follows:
Resolution
to approve the directors’
Remuneration Report
For
Against
No. of votes
% of vote
No. of votes
% of vote
Total votes cast
Votes withheld1
165,229,138
99.08%
1,535,720
0.92% 166,764,858
42,382
1 A vote withheld is not a vote in law and is not counted in the calculation of the proportion of votes cast for or against a resolution.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 97
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information directors’ Report
StRAtEGiC REPoRt
the Companies Act 2006 requires the directors to prepare a Strategic Report which contains a fair review of the Company’s
business and a description of the principal risks and uncertainties that it faced. the Strategic Report for the year ended
30th November 2013 is set out from the inside front cover of this Report to page 55.
PoSt–bAlANCE ShEEt EVENtS ANd FutuRE dEVEloPMENtS
there were no post-balance Sheet events in respect of the year ended 30th November 2013. likely future developments are
described in the Strategic Report.
CoRPoRAtE GoVERNANCE StAtEMENt
the disclosure and transparency Rules of the Financial Conduct Authority require certain information to be included in a corporate
governance statement in the directors’ Report. information that fulfils the requirements of the corporate governance statement can
be found in the Corporate Governance section on pages 59 to 97 and is incorporated into this directors’ Report by reference.
ANNuAl GENERAl MEEtiNG
the AGM of the Company will be held at 12.00 noon on Friday, 28th March 2014 at the Marketing Suite, innovation Centre, 1 devon
Way, longbridge technology Park, birmingham b31 2tS. the notice of meeting, which includes the special business to be
transacted and an explanation of all the resolutions to be considered at the meeting, is set out on pages 155 to 164.
diVidENd
the directors recommend a final dividend of 2.67p per ordinary share in respect of the year ended 30th November 2013, to be paid
on 4th April 2014 to ordinary shareholders on the register on 7th March 2014. this, together with the interim dividend of 1.33p per
share paid on 3rd September 2013, brings the total dividend for the year to 4.00p per share (2012: 3.63p per share).
ShARE CAPitAl
the Company has a single class of share capital which is divided into ordinary shares of 10p each. the issued share capital of the
Company is set out in note K to the Company Financial Statements. the Company does not currently hold any shares in treasury.
At the 2013 AGM, shareholders authorised the Company to make market purchases of up to 20,036,093 ordinary shares,
representing 10% of the issued share capital at that time, and to allot up to an aggregate nominal amount of £13,357,395.
these authorities expire at the 2014 AGM. during the year ended 30th November 2013, no shares were allotted or repurchased.
Resolutions to renew these authorities will be proposed at the 2014 AGM.
St. Modwen operates an Employee Share trust (trust) to satisfy the vesting and exercise of awards of ordinary shares made under
the Company’s share-based incentive arrangements. As at 30th November 2013, the trust held 72,582 shares (2012: 215,754
shares), representing 0.03% (2012: 0.11%) of the Company’s issued share capital. the trust deed contains a dividend waiver
provision in respect of these shares. Any voting or other similar decisions relating to shares held by the trust would be taken by the
trustee, who may take account of any recommendations of the Company. there were no purchases of shares by the trust during
the financial year.
Rights and obligations attaching to shares
the holders of ordinary shares in the Company are entitled to receive dividends when declared, to receive the Company’s Annual
and half year Reports, to attend and speak at general meetings of the Company, to appoint proxies and to exercise voting rights.
Full details of the deadlines for exercising voting rights in respect of the resolutions to be considered at the 2014 AGM are set out
in the notice of meeting on pages 155 to 164.
Restrictions on the transfer of shares
As at 30th November 2013 and the date of this report, except as referred to below, there are no restrictions on the transfer of ordinary
shares in the Company, no limitations on the holding of ordinary shares and no requirements to obtain the approval of the Company,
or of other holders of ordinary shares in the Company, for a transfer of shares.
the directors may refuse to register the transfer of a share in certificated form which is not fully paid or on which the Company has
a lien, where the instrument of transfer does not comply with the requirements of the Company’s Articles of Association, or if the
transfer is in respect of more than one class of share or is in favour of more than four joint holders. the directors may also refuse to
register a transfer of a certificated share, which represents an interest of at least 0.25% in a class of shares, following the failure by
the member or any other person appearing to be interested in the shares to provide the Company with information requested under
section 793 of the Companies Act 2006.
transfers of uncertificated shares must be carried out using CRESt and the directors can refuse to register the transfer of an
uncertificated share in accordance with the regulations governing the operation of CRESt.
the Company is not aware of any agreements between shareholders that may result in restrictions on the transfer of shares or on
voting rights.
98 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Corporate Governance 9.06%
8.29%
5.03%
3.09%
Substantial shareholders
As at 30th November 2013, the Company had been notified of the following holdings of voting rights in its shares in accordance with
the disclosure and transparency Rules of the Financial Conduct Authority:
Direct
Indirect
voting rights % of voting rights
voting rights % of voting rights
Total
voting rights
% of
voting rights
Shareholder
lady Clarke and connected parties
(excluding Simon Clarke)
J.d. leavesley and connected parties
18,263,382
19,962,539
9.06%
8.29%
–
–
–
–
19,962,539
18,263,382
blackRock, inc.
–
–
11,075,661
5.03% 11,075,661
tR Property investment trust PlC
6,802,638
3.09%
–
–
6,802,638
As at 3rd February 2014, the Company had not been advised of any changes or additions to the interests set out above.
diRECtoRS
the following served as directors during the year ended 30th November 2013:
Name
Steve burke
Kay Chaldecott
Simon Clarke
Michael dunn
david Garman
Katherine innes Ker
lesley James
Richard Mully1
bill oliver
John Salmon2
bill Shannon
Position as at 30th November 2013
Service in the year ended 30th November 2013
Construction director
Served throughout the year
independent non-executive director
Served throughout the year
Non-executive director
Group Finance director
N/A
N/A
Served throughout the year
Served throughout the year
Retired on 27th March 2013
Retired on 27th March 2013
independent non-executive director
Served throughout the year
independent non-executive director
Appointed on 1st September 2013
Chief Executive
Served throughout the year
Senior independent director
Served throughout the year
Chairman
Served throughout the year
1 Appointed Senior independent director on 1st december 2013.
2 Senior independent director from 28th March 2013 to 30th November 2013.
the biographical details of all the directors serving at 30th November 2013, including details of their relevant experience and other
significant commitments, are shown on pages 56 and 57.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 99
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information directors’ Report (continued)
diRECtoRS (CoNtiNuEd)
Following his appointment to the board in September 2013 and in accordance with the Company’s Articles of Association, Richard
Mully will retire and offer himself for election at the 2014 AGM. All other directors will retire and offer themselves for re-election in
accordance with the Code.
the Articles of Association provide that a director may be appointed by an ordinary resolution of shareholders or by the existing
directors, either to fill a casual vacancy or as an additional director.
the directors’ Remuneration Report, which includes details of directors’ service contracts and their interests in the Company’s
shares, is set out on pages 76 to 97. With the exception of service contracts or those contracts detailed in note 22 to the Group
Financial Statements, no director had a material interest in any significant contract with the Company or any of its operating
companies at any time during the year.
Copies of the service contracts of the executive directors and the letters of appointment for the non-executive directors are
available for inspection at the Company’s registered office during normal business hours and will be available for inspection at the
Company’s AGM.
Powers of the directors
the board may exercise all the powers of the Company, subject to the Company’s Articles of Association, uK legislation including
the Companies Act 2006 and any directions given by the Company in general meeting.
the directors have been authorised by the Company’s Articles of Association to issue and allot ordinary shares and to make market
purchases of the Company’s own shares. these powers are referred to shareholders for renewal at each AGM. Further information is
set out under the heading ‘share capital’ on page 98.
Conflicts of interest
under the Companies Act 2006, directors have a statutory duty to avoid conflicts of interest with the Company. As permitted by the
Act, the Company’s Articles of Association enable directors to authorise actual or potential conflicts of interest. Formal procedures
for the notification and authorisation of such conflicts are in place. these procedures enabled non-conflicted directors to impose
limits or conditions when giving or reviewing authorisation and require the board to review the register of directors’ conflicts twice
yearly and on an ad hoc basis when necessary. Any potential conflicts of interest in relation to newly appointed directors are
considered by the board prior to appointment.
Directors’ liability insurance and indemnity
the Company has arranged appropriate insurance cover in respect of potential legal action taken against its directors. to the extent
permitted by law and in accordance with its Articles of Association, the Company also indemnifies the directors against any claims
made against them as a consequence of the execution of their duties as directors of the Company.
ARtiClES oF ASSoCiAtioN
the Company’s Articles of Association, which, in accordance with the provisions of the Companies Act 2006, may only be amended
by a special resolution of the shareholders, are available on its website www.stmodwen.co.uk.
ChANGE oF CoNtRol
the Company is party to a number of committed bank facilities which, upon a change of control, are terminable at the bank’s
discretion. under such circumstances, awards made under the Company’s share-based incentive arrangements would normally vest
or become exercisable subject to the satisfaction of any performance conditions. in addition, the Company’s retail bondholders have
an option to require the Company to redeem the bonds should a change of control event occur.
FiNANCiAl iNStRuMENtS
the Group’s exposure to and management of capital risk, market risk, credit risk and liquidity risk is set out in note 16 to the Group
Financial Statements.
100 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Corporate Governance EMPloyEES
St. Modwen is committed to regular communication and consultation with its employees and encourages employee involvement
in its performance. News concerning St. Modwen, its activities and performance is published on the Company’s intranet.
quarterly management meetings are held to inform senior staff about matters affecting them as employees, at which their feedback
is sought on decisions likely to affect their interest, and where a common awareness of the financial and economic factors affecting
the Company’s performance is developed; this information is then cascaded to all employees. A performance-related annual bonus
scheme and share option arrangements are designed to encourage employee involvement in the success of the Company.
Employment of disabled persons
it is the policy of the Company to give full and fair consideration to applications for employment received from disabled persons,
having regard to their particular aptitudes and abilities. the policy includes, where practicable, the continued employment
of those who may become disabled during their employment with the Company and the provision of appropriate training.
St. Modwen provides the same opportunities for training, career development and promotion for disabled as for other employees.
GREENhouSE GAS EMiSSioNS
All disclosures concerning the Group’s greenhouse gas emissions (as required to be disclosed under the Companies Act 2006
(Strategic Report and directors’ Report) Regulations 2013) are contained in the Corporate Social Responsibility Report (which forms
part of the Strategic Report) on pages 50 to 55.
PolitiCAl doNAtioNS
in accordance with the Company’s policy, no political donations were made and no political expenditure was incurred during
the year.
GoiNG CoNCERN
the Group’s business activities, together with the factors likely to affect its future development, performance and position, are set out
in the Strategic Report. the directors have considered these factors and reviewed the financial position of the Group, including its
joint ventures and associates.
the review included an assessment of future funding requirements based on cash flow forecasts extending for 18 months from the
date of signing the Financial Statements, valuation projections and the ability of the Group to meet covenants on existing borrowing
facilities. the directors were satisfied that the forecasts and projections were based on realistic assumptions and that the sensitivities
applied in reviewing downside scenarios were appropriate.
As described in the Financial Review on pages 43 to 45, there are no corporate facilities that require renewal before November 2014,
when the Group’s £100m facility with lloyds banking Group matures. the directors have reviewed the options available in respect of
this and the Group’s other banking facilities, together with opportunities to increase the diversity and longevity of debt facilities. As a
result the directors are satisfied that the Group will have sufficient ongoing facilities available for the Group’s financing requirements.
based on their assessment, the directors are of the opinion that the Group has adequate available resources to fund its operations
for the foreseeable future and so determine that it remains appropriate for the Financial Statements to be prepared on a going
concern basis.
AuditoR
the Company’s auditor, deloitte llP has expressed a willingness to continue in office and resolutions for their re-appointment and
to authorise the directors to determine their remuneration will be proposed at the 2014 AGM. the board, on the advice of the Audit
Committee, recommends their re-appointment.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 101
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information directors’ Report (continued)
StAtEMENt oF diRECtoRS’ RESPoNSibilitiES
the directors are responsible for preparing the Annual Report, the directors’ Remuneration 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 have
prepared the Group Financial Statements in accordance with international Financial Reporting Standards (iFRSs) as adopted by
the European union and the 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 Financial Statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and the Company and of their profit or loss for that period.
in preparing these 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 iFRSs as adopted by the European union and applicable united Kingdom Accounting Standards have been
followed, subject to any material departures disclosed and explained in the Group and Company Financial Statements
respectively; and
• prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue
in business.
the directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s and
the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group
and enable them to ensure that the Financial Statements and the directors’ Remuneration Report comply with the Companies Act
2006 and, as regards the Group Financial Statements, Article 4 of the iAS Regulation. they are also responsible for safeguarding
the assets of the Company and the Group 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 (www.stmodwen.co.uk). legislation in the united Kingdom governing the preparation and dissemination of Financial
Statements may differ from legislation in other jurisdictions.
Each of the directors in office as at the date of this report, whose names and functions are set out on pages 56 and 57, confirm that
to the best of their 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 directors’ Report and the Strategic Report include 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.
Each of the directors in office as at the date of this report also confirms that:
• so far as the director is aware, there is no relevant audit information of which the Company’s auditor is unaware; and
• the director has taken all 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 auditor is aware of that information.
this confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.
the directors as at the date of this report consider that the Annual Report and Financial Statements 2013, taken as a whole, is fair,
balanced and understandable and provides the information necessary for shareholders to assess the Company’s and the Group’s
performance, business model and strategy.
Approved by the board and signed on its behalf by
tanya Stote
Company Secretary
3rd February 2014
102 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Corporate Governance independent Auditor’s Report
to the members of St. Modwen Properties PlC in respect of the Group Financial Statements
opinion on Financial Statements of
St. Modwen Properties plc
In our opinion:
•
•
•
•
the Financial Statements give a true and fair view of the state of the Group’s and of the
Parent Company’s affairs as at 30th November 2013 and of the Group’s profit for the year
then ended;
the Group Financial Statements have been properly prepared in accordance with
International Financial Reporting Standards (IFRSs) as adopted by the European Union;
the Parent Company Financial Statements have been properly prepared in accordance
with United Kingdom Generally Accepted Accounting Practice; and
the Financial Statements have been prepared in accordance with the requirements of
the Companies Act 2006 and, as regards the Group Financial Statements, Article 4 of the
IAS Regulation.
the financial statements comprise the Group income Statement, the Group Statement of
Comprehensive income, the Group and Parent Company balance Sheets, the Group Cash
Flow Statement, the Group Statement of Changes in Equity and the related Group notes 1 to
22 and Parent Company notes A to P. the financial reporting framework that has been applied
in the preparation of the Group Financial Statements is applicable law and iFRSs as adopted
by the European union. the financial reporting framework that has been applied in the
preparation of the Parent Company Financial Statements is applicable law and united
Kingdom Accounting Standards (united Kingdom Generally Accepted Accounting Practice).
Going concern
As required by the listing Rules we have reviewed the directors’ statement contained within
the directors’ Report on page 101 that the Group is a going concern. We confirm that:
•
•
we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate; and
we have not identified any material uncertainties that may cast significant doubt on the
Group’s ability to continue as a going concern.
however, because not all future events or conditions can be predicted, this statement is not a
guarantee as to the Group’s ability to continue as a going concern.
our assessment of risks of
material misstatement
the assessed risks of material misstatement described below are those that had the greatest
effect on our audit strategy, the allocation of resources in the audit and directing the efforts of
the engagement team:
Risk
how the scope of our audit responded to the risk
Valuation of investment property
Valuation of investment property is an
area of judgement which could materially
affect the Financial Statements. the
external valuers make a number of key
estimates and assumptions, certain of
which require input from management.
these estimates and assumptions are
subject to market forces and will change
over time.
Valuation of inventories
Valuation of inventories requires
management to ensure that those
properties under construction and land
held under option are carried at the
lower of cost and net realisable value.
Accounting for property
acquisitions and disposals
Accounting for property acquisitions
and disposals as these can be
significant and complex transactions.
We met with the third-party valuers, Jones lang laSalle llP (Jll), appointed by management
for each element of the property portfolio and we assessed the reasonableness of the
significant judgements and assumptions applied in their valuation model, including occupancy
rates, lease incentives, break clauses and yields. With the assistance of a member of the audit
team who is a chartered surveyor we tested a sample of properties through benchmarking,
understanding the valuation methodology and wider market analysis along with testing the
integrity of a sample of the data provided to Jll. We verified the integrity of a sample of
information provided to valuers by management relating to rental income, occupancy and life
of the lease.
We tested the net realisable value of inventories through testing a sample of those valued by
management (which is the majority) using their internal site appraisals, and those valued by
Jll to focus on those with lower margins and assessed the reasonableness of the
assumptions applied.
using Sale and Purchase agreements we carried out testing on purchase cost or sales
proceeds, re-calculation of profit or loss on disposal and consideration around whether the
profit or loss on disposal provides further evidence of the carrying values of other assets in
the portfolio.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 103
Financial StatementsStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information Financial Statements
independent Auditor’s Report (continued)
to the members of St. Modwen Properties PlC in respect of the Group Financial Statements
Risk
how the scope of our audit responded to the risk
Accounting for taxation
Accounting for taxation to ensure
appropriate tax provisions have
been recorded.
We tested the Group tax workings and considered the current and deferred tax implications of
property acquisitions, disposals and valuation movements which occurred during the year. We
utilised our tax specialists to appraise the likely outcome of uncertain tax positions and
considered the adequacy of disclosures made in the Annual Report.
Covenant compliance and
liquidity disclosure
Covenant compliance and liquidity
disclosure which are dependent on
cash management and the
associated headroom available,
property valuations and the terms of
the Group’s finance facilities.
Revenue recognition
Revenue recognition, including the
timing of revenue recognition in relation
to the sale of property, recognition of
revenue arising from construction
contracts and rental income arising
from investment properties.
We tested compliance with loan covenants and reviewed management’s forecasts and
assumptions for ongoing covenant compliance and available headroom on these covenants
and existing finance facilities. We also confirmed that adequate disclosures have been made in
the Annual Report.
We carried out testing around cut off and timing of revenue recognition, the treatment of
discounts, rebates, VAt and other sales taxes or duty as well as substantive testing,
analytical procedures and assessing whether the revenue recognition policies adopted
complied with iFRSs.
the Audit Committee’s consideration of these risks is set out on page 71.
our audit procedures relating to these matters were designed in the context of our audit of the Financial Statements as a whole, and not to
express an opinion on individual accounts or disclosures. our opinion on the Financial Statements is not modified with respect to any of
the risks described above, and we do not express an opinion on these individual matters.
our application of materiality
An overview of the scope of
our audit
We define materiality as the magnitude of misstatement in the Financial Statements that makes
it probable that the economic decisions of a reasonably knowledgeable person would be
changed or influenced. We use materiality both in planning the scope of our audit work and in
evaluating the results of our work.
When establishing our overall audit strategy, we determined a magnitude of uncorrected
misstatements that we judged would be material for the Financial Statements as a whole. We
determined planning materiality for the Group to be £6.2 million, which is approximately 7.5%
of adjusted pre-tax profit, below 1% of equity.
We agreed with the Audit Committee that we would report to the Committee all audit
differences in excess of £0.12 million, as well as differences below that threshold that, in our
view, warranted reporting on qualitative grounds.
We also report to the Audit Committee on disclosure matters that we identified when assessing
the overall presentation of the Financial Statements.
our Group audit scope focused primarily on the audit work of the major lines of business of
which the Group auditor is responsible and as such there is no component auditor reporting
into Group. the Group auditor is responsible for the other significant lines of business where
joint venture agreements are in place, notably around the Key Property investments (KPi) and
VSM uxbridge (Group) limited (VSM uxbridge). KPi accounts for 11% of the Group’s net
assets, 9% of the Group’s revenue and 25% of the Group’s recurring pre-tax profit. VSM
uxbridge Group accounts for 4% of the Group’s net assets, 0% of the Group’s revenue and
4% of the Group’s recurring pre-tax profit.
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 Strategic Report and the directors’ Report for the financial year
for which the Financial Statements are prepared is consistent with the Financial Statements.
104 St. Modwen Properties PLC Annual Report and Financial Statements 2013
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Matters on which we are required
to report by exception
Adequacy of explanations received
and accounting records
Directors’ remuneration
under the Companies Act 2006 we are required to report to you if, in our opinion:
•
•
•
we have not received all the information and explanations we require for our audit; or
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 are not in agreement with the accounting
records and returns.
We have nothing to report in respect of these matters.
under the Companies Act 2006 we are also required to report if in our opinion certain
disclosures of directors’ remuneration have not been made or the part of the directors’
Remuneration Report to be audited is not in agreement with the accounting records and
returns. We have nothing to report arising from these matters.
Corporate Governance statement
under the listing Rules we are also required to review the part of the Corporate Governance
statement relating to the Company’s compliance with nine provisions of the uK Corporate
Governance Code. We have nothing to report arising from our review.
Our duty to read other information
in the Annual Report
under international Standards on Auditing (uK and ireland), we are required to report to you if,
in our opinion, information in the Annual Report is:
Respective responsibilities of
directors and auditor
Scope of the audit of the
Financial Statements
•
•
materially inconsistent with the information in the audited Financial Statements; or
apparently materially incorrect based on, or materially inconsistent with, our knowledge of
the Group acquired in the course of performing our audit; or
• otherwise misleading.
in particular, we are required to consider whether we have identified any inconsistencies
between our knowledge acquired during the audit and the directors’ statement that they
consider the Annual Report is fair, balanced and understandable and whether the Annual
Report appropriately discloses those matters that we communicated to the Audit Committee
which we consider should have been disclosed. We confirm that we have not identified any
such inconsistencies or misleading statements.
As explained more fully in the directors’ Responsibilities Statement, the directors are
responsible for the preparation of the 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 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.
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.
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 and 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. in addition, we read all the financial and non-financial
information in the Annual Report to identify material inconsistencies with the audited Financial
Statements and to identify any information that is apparently materially incorrect based on, or
materially inconsistent with, the knowledge acquired by us in the course of performing the
audit. if we become aware of any apparent material misstatements or inconsistencies we
consider the implications for our report.
Jonathan Dodworth (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
Birmingham, UK
3rd February 2014
St. Modwen Properties PLC Annual Report and Financial Statements 2013 105
Group income Statement
for the year ended 30th November 2013
Revenue
Net rental income
development profits
Gains on disposal of investments/investment properties
investment property revaluation gains
Goodwill written off on corporate acquisition of investment properties
other net income
Profits of joint ventures and associates (post-tax)
Administrative expenses
Profit before interest and tax
Finance cost
Finance income
Profit before tax
tax charge
Profit for the year
Attributable to:
Equity attributable to owners of the Company
Non-controlling interests
Basic earnings per share
Diluted earnings per share
Notes
1
1
1
8
1
10
3
4
4
5
Notes
6
6
2013
£m
161.1
29.0
24.7
3.6
32.6
–
2.9
21.8
(19.9)
94.7
(23.6)
9.4
80.5
(6.6)
73.9
72.1
1.8
73.9
2013
pence
33.5
32.9
2012
£m
219.1
28.3
22.4
1.4
6.4
(1.3)
2.8
22.6
(18.1)
64.5
(22.3)
5.2
47.4
(5.1)
42.3
42.7
(0.4)
42.3
2012
pence
21.3
21.2
All results are derived from continuing operations. A reconciliation of non-statutory measures used in the Strategic Report is included
in note 2 to the Group Financial Statements.
106 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Financial Statements Group balance Sheet
as at 30th November 2013
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
Retained earnings
Share incentive reserve
own shares
other reserves
Equity attributable to owners of the Company
Non-controlling interests
Total equity
Notes
2013
£m
2012
£m
8
9
10
11
12
11
13
14
5
13
14
5
17
813.3
6.6
95.3
17.6
932.8
205.9
59.7
7.4
273.0
(170.2)
(62.5)
(3.4)
(236.1)
(46.2)
(285.6)
(10.9)
(342.7)
627.0
22.0
102.8
441.4
2.1
(0.3)
46.2
614.2
12.8
627.0
770.4
6.8
75.2
21.6
874.0
175.2
46.5
8.9
230.6
(155.6)
(3.3)
(3.3)
(162.2)
(48.6)
(371.6)
(8.5)
(428.7)
513.7
20.0
102.8
377.6
2.4
(0.5)
0.3
502.6
11.1
513.7
these Financial Statements were approved by the board of directors on 3rd February 2014 and were signed on its behalf by bill
oliver and Michael dunn.
Bill Oliver
Chief Executive
Michael Dunn
Group Finance director
St. Modwen Properties PLC Annual Report and Financial Statements 2013 107
Financial StatementsStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Group Statement of Comprehensive income
for the year ended 30th November 2013
Profit for the year
Pension fund:
– Actuarial losses
– deferred tax thereon
Total comprehensive income for the year
Attributable to:
– owners of the Company
– Non-controlling interests
Total comprehensive income for the year
Notes
18
18
2013
£m
73.9
(0.1)
–
73.8
72.0
1.8
73.8
2012
£m
42.3
(0.1)
–
42.2
42.6
(0.4)
42.2
Group Statement of Changes in Equity
for the two years ended 30th November 2013
Share
capital
£m
Share
premium
account
£m
Retained
earnings
£m
Share
incentive
reserve
£m
Own
shares
£m
Other
reserves
£m
Equity
attributable
to owners
of the
Company
£m
Non-
controlling
interest
£m
Total
equity
£m
20.0
102.8
341.8
–
–
–
–
–
–
–
–
–
–
–
–
42.7
(0.1)
42.6
–
–
(6.8)
20.0
102.8
377.6
–
–
–
2.0
–
–
–
–
–
–
–
–
–
–
72.1
(0.1)
72.0
–
–
–
(8.2)
–
–
–
–
2.1
0.3
–
2.4
–
–
–
–
(0.3)
–
–
(0.5)
0.3
464.4
11.6
476.0
–
–
–
–
–
–
–
–
–
–
–
–
42.7
(0.1)
42.6
2.1
0.3
(6.8)
(0.5)
0.3
502.6
–
–
–
–
–
0.2
–
–
–
–
45.9
–
–
–
72.1
(0.1)
72.0
47.9
(0.3)
0.2
(8.2)
(0.4)
42.3
–
(0.4)
–
–
(0.1)
11.1
1.8
–
1.8
–
–
–
(0.1)
(0.1)
42.2
2.1
0.3
(6.9)
513.7
73.9
(0.1)
73.8
47.9
(0.3)
0.2
(8.3)
At 30th November 2011
Profit for the year attributable
to shareholders
Pension fund actuarial losses
(note 18)
total comprehensive income
transfer share-based payments
provision to share incentive reserve
Share-based payment charge
dividends paid
At 30th November 2012
Profit for the year attributable
to shareholders
Pension fund actuarial losses
(note 18)
total comprehensive income
Equity raise
Share-based payment charge
Share transfers
dividends paid
At 30th November 2013
22.0
102.8
441.4
2.1
(0.3)
46.2
614.2
12.8
627.0
on 1st March 2013 the Group completed a ‘cash box’ placing of 20,016,057 ordinary shares of 10p each at £2.45 per share.
Net proceeds were £47.9m after share issue costs, of which the £2.0m nominal value of the shares was credited to share capital
with the balance to other reserves.
own shares represent the cost of 72,582 (2012: 215,754) shares held by the Employee benefit trust. the open market value of the
shares held at 30th November 2013 was £259,553 (2012: £469,912).
108 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Financial Statements Group Cash Flow Statement
for the year ended 30th November 2013
Operating activities
Profit before interest and tax
Gains on disposals of investments/investment properties
Share of profits of joint ventures and associates (post-tax)
investment property revaluation gains
Goodwill written off on corporate acquisition of investment properties
depreciation
impairment losses on inventories
(increase)/decrease in inventories
increase in trade and other receivables
increase/(decrease) in trade and other payables
Share options and share awards
tax paid
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
dividends received
Net cash outflow from investing activities
Financing activities
dividends paid
dividends paid to non-controlling interests
interest paid
Receipt of funds from equity placing
New borrowings drawn
Repayment of borrowings
Net cash outflow from financing activities
(decrease)/increase 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
2013
£m
94.7
(3.6)
(21.8)
(32.6)
–
0.5
1.7
(22.3)
(9.0)
21.8
(0.1)
(4.1)
25.2
54.0
(74.5)
(0.4)
–
–
1.7
(19.2)
(8.2)
(0.1)
(20.3)
47.9
51.0
(77.8)
(7.5)
(1.5)
8.9
7.4
2012
£m
64.5
(1.4)
(22.6)
(6.4)
1.3
0.5
3.8
55.7
(4.0)
(51.0)
0.3
(2.2)
38.5
29.5
(37.4)
(0.3)
0.4
3.1
–
(4.7)
(6.8)
(0.1)
(20.6)
–
98.8
(101.4)
(30.1)
3.7
5.2
8.9
St. Modwen Properties PLC Annual Report and Financial Statements 2013 109
Financial StatementsStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information Accounting Policies
for the year ended 30th November 2013
bASiS oF PREPARAtioN
the Group’s Financial Statements have been prepared in accordance with international Financial Reporting Standards (iFRSs) as
issued by the international Accounting Standards board (iASb) and as adopted by the Eu as they apply to the Group for the year
ended 30th November 2013, 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 principal iFRSs accounting policies are set out below.
bASiS oF CoNSolidAtioN
the Group’s 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 interests in joint ventures, being those entities over which the Group has joint control, 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 joint ventures 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.
buSiNESS CoMbiNAtioNS
the acquisition method of accounting is used to account for business combinations. the consideration transferred for the
acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by
the Group. the consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value
of any pre-existing equity interest in the subsidiary.
Acquisition-related costs are expensed as incurred. identifiable assets acquired and liabilities and contingent liabilities assumed in a
business combination are, with limited exceptions, measured initially at their fair values at the acquisition date.
on an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the
non-controlling interest’s proportionate share of the acquiree’s net identifiable assets.
the excess of the consideration transferred and the amount of any non-controlling interest in the acquiree over the fair value of the
Group’s share of the net identifiable assets acquired is recorded as goodwill. if those amounts are less than the fair value of the net
identifiable assets of the acquired subsidiary and the measurement of all amounts has been reviewed, the difference is recognised
directly in the income Statement as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present
value as at the date of exchange. the discount rate used is the entity’s incremental borrowing rate, which is the rate that a similar
borrowing could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently
remeasured to fair value with changes in fair value recognised in the income Statement.
110 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Financial Statements 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 or loss 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.
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 — over the shorter of the lease term and 25 years
Plant, machinery and equipment — over two to five 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.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 111
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Accounting Policies (continued)
for the year ended 30th November 2013
iNCoME tAxES (CoNtiNuEd)
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 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 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 equity attributable to owners of the Company 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.
112 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Financial Statements 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 of 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.
ShARE-bASEd PAyMENtS
the Group accounts for share-based payments as equity-settled. Equity-settled share-based payments are measured at fair value
at the date of grant using an appropriate option pricing model. For those share options that had previously been accounted for
as cash-settled, the fair value at the date of transition became the fair value at the date of grant for the equity-settled share-based
options. the fair value at the date of grant is expensed on a straight-line basis over the vesting period based on the Group’s estimate
of shares that will eventually vest.
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 expire.
Trade and other receivables
trade receivables are recognised and carried at the lower of their original invoiced value or 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.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 113
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Accounting Policies (continued)
for the year ended 30th November 2013
FiNANCiAl iNStRuMENtS (CoNtiNuEd)
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 Financial Statements 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
Statements. 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 Strategic Report
and adoption of the going concern assumption is confirmed in the directors’ Report.
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.
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 2013. 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.
Taxation As a property group, tax planning is often an integral part of transactions. Where tax planning is entered into benefits are
recognised by the Group to the extent the outcome is reasonably certain. Where tax planning has been challenged by hMRC, or
management believe that there is a risk of such challenge, provision is made for the best estimate of potential exposure based on the
information available at the balance Sheet date. Management’s assessment of the level of provision required is, where applicable,
supported by the Group’s tax advisors. if hMRC were to be successful in challenging tax planning arrangements to a greater extent
than has been provided at the balance Sheet date then additional provisions may be required.
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 and interpretations adopted not affecting the Financial Statements
the following standards, amendments and interpretations have been adopted in the current year but have had no impact on the
amounts reported or the disclosures in the Financial Statements:
iAS12 (amended 2010)
deferred tax: Recovery of underlying Assets
iAS1 (amended 2011)
Preferation of items of other Comprehensive income
in addition, minor amendments to existing standards were made under improvements to iFRSs (issued december 2010) which have
been adopted during the year.
114 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Financial Statements Impact of standards and interpretations in issue but not yet effective
At the date of authorisation of these Financial Statements, the following standards, amendments and interpretations which have
not been adopted in these Financial Statements were in issue but not yet effective (and in some cases had not yet been adopted
by the Eu):
iAS19 (revised 2013)
defined benefit Plans: Employee Contributions
iAS19 (revised 2011)
Employee benefits
iAS27 (revised 2011)
Separate Financial Statements
iAS27 (amended 2012)
investment Entities
iAS28 (revised 2011)
investments in Associates and Joint Ventures
iAS32 (amended 2011)
offsetting Financial Assets and Financial liabilities
iAS36 (amended 2013)
Recoverable Amount disclosures for Non-financial Assets
iAS39 (amended 2013)
Novation of derivatives and Continuation of hedge Accounting
iFRiC20
iFRiC21
Stripping Costs in the Production Phase of a Surface Mine
levies
iFRS1 (amended 2012)
Government loans
iFRS7 (amended 2011)
disclosures – offsetting Financial Assets and Financial liabilities
iFRS9
iFRS10
Financial instruments
Consolidated Financial Statements
iFRS10 (amended 2012)
investment Entities
iFRS11
iFRS12
Joint Arrangements
disclosure of interest in other Entities
iFRS12 (amended 2012)
investment Entities
iFRS13
Fair Value Measurement
in addition, improvements to iFRSs (issued May 2012 and december 2013) are the latest tranches of the improvements to iFRSs
project and these have a number of minor amendments to existing iAS and iFRSs, which have not yet been adopted.
While the directors are still assessing the impact that the adoption of these standards, amendments and interpretations will have
on the Financial Statements of the Group in future periods, they do not currently believe that adoption will have a material impact
on the reported results of the Group, although amended disclosures may be required.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 115
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Notes to the Group Financial Statements
for the year ended 30th November 2013
1. REVENuE ANd GRoSS PRoFit
Revenue
Cost of sales
Gross profit
Revenue
Cost of sales
Gross profit
2013
Rental
£m
Development
£m
37.1
(8.1)
29.0
Rental
£m
39.3
(11.0)
28.3
118.1
(93.4)
24.7
2012
Development
£m
174.1
(151.7)
22.4
Other
£m
5.9
(3.0)
2.9
Other
£m
5.7
(2.9)
2.8
Total
£m
161.1
(104.5)
56.6
Total
£m
219.1
(165.6)
53.5
the Group operates exclusively in the uK and all of its revenues derive from its portfolio of properties which the Group manages
internally, and reports to the board, 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 2013 was £169.0m (2012: £229.3m) and in addition to the amounts above included service charge
income of £6.5m (2012: £6.9m), for which there was an equivalent expense and interest income of £1.4m (2012: £3.3m). in the year
ended 30th November 2013 both development revenue and cost of sales include £20.8m (2012: £60.9m) in relation to amounts
settled by the Ministry of defence in respect of RAF Northolt under Project ModEl.
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 £0.1m (2012: £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
2013
£m
41.9
(27.3)
14.6
2012
£m
77.7
(63.2)
14.5
Amounts recoverable on contracts as disclosed in note 11 comprise £10.2m (2012: £7.2m) of contract revenue recognised and
£0.8m (2012: £0.9m) of retentions.
there were no amounts due to customers (2012: £nil) included in trade and other payables in respect of contracts in progress at the
balance Sheet date.
116 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Financial Statements 2. NoN-StAtutoRy iNFoRMAtioN
a. Trading profit
the non-statutory measures of trading profit and profit before all tax, which includes the Group’s share of joint ventures and
associates, have been calculated as set out below:
Notes
(1)
(2)
(3)
(1)
(2)
(3)
Net rental income
development profit
Gains on disposal of investments/
investment properties
other income
Administrative expenses
Finance costs
Finance income
Trading profit
investment property revaluation gains
other finance costs
other finance income
Profit before all tax
taxation
Profit for the year
2013
Joint
ventures and
associates
£m
7.3
0.5
9.3
–
(0.3)
(6.5)
–
10.3
11.1
–
2.1
23.5
(1.7)
21.8
Group
£m
29.0
26.4
3.6
2.9
(19.9)
(20.4)
1.4
23.0
30.9
(3.2)
8.0
58.7
(6.6)
52.1
Total
£m
36.3
26.9
12.9
2.9
(20.2)
(26.9)
1.4
33.3
42.0
(3.2)
10.1
82.2
(8.3)
73.9
2012
Joint
ventures and
associates
£m
7.9
1.2
0.2
–
(0.5)
(6.2)
–
2.6
26.7
(1.3)
–
28.0
(5.4)
22.6
Group
£m
28.3
26.2
1.4
2.8
(18.1)
(18.8)
1.1
22.9
1.3
(3.5)
4.1
24.8
(5.1)
19.7
Total
£m
36.2
27.4
1.6
2.8
(18.6)
(25.0)
1.1
25.5
28.0
(4.8)
4.1
52.8
(10.5)
42.3
(1) Stated before the deduction of net realisable value provisions of: Group £1.7m (2012: £3.8m); joint ventures and associates £nil (2012: £0.1m). these items are
reclassified to investment property revaluations, together with goodwill written off on the corporate acquisition of investment properties.
(2) Stated before mark-to-market of derivatives and other non-cash items of: Group £3.2m (2012: £3.5m); joint ventures and associates £nil (2012: £1.3m). these amounts
are reclassified to other finance costs.
(3) Stated before mark-to-market of derivatives, loan settlement fees and other non-cash items of: Group £8.0m (2012: £4.1m); joint ventures and associates £2.1m
(2012: £nil). these items are reclassified to other finance income.
b. Property valuations
Property valuations, including the Group’s share of joint ventures and associates, have been calculated as set out below:
investment property revaluation gains
Net realisable value provisions
Property valuation gains
Added value
Market movements
Property valuation gains
2013
Joint
ventures and
associates
£m
11.1
–
11.1
7.1
4.0
11.1
Group
£m
32.6
(1.7)
30.9
21.0
9.9
30.9
Total
£m
43.7
(1.7)
42.0
28.1
13.9
42.0
2012
Joint
ventures and
associates
£m
26.8
(0.1)
26.7
27.8
(1.1)
26.7
Group
£m
5.1
(3.8)
1.3
19.8
(18.5)
1.3
Total
£m
31.9
(3.9)
28.0
47.6
(19.6)
28.0
the split of property valuation gains between added value and market movements is based on an analysis of total property valuation
movements provided by the Group’s external valuers: Jones lang laSalle llP, Chartered Surveyors.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 117
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Notes to the Group Financial Statements (continued)
for the year ended 30th November 2013
2. NoN-StAtutoRy iNFoRMAtioN (CoNtiNuEd)
c. Property portfolio
the property portfolio, including the Group’s share of joint ventures and associates, is derived from the balance Sheet as
detailed below:
investment properties
less assets held under finance leases
Add back lease incentives (recorded
in receivables)
inventories
less ‘barter’ properties and
accrued inventory(1)
Property portfolio
2013
Joint
ventures and
associates
£m
137.6
(1.2)
1.3
3.6
–
141.3
Group
£m
813.3
(3.9)
5.6
205.9
(20.4)
1,000.5
Total
£m
950.9
(5.1)
6.9
209.5
(20.4)
1,141.8
Group
£m
770.4
(3.9)
4.5
175.2
(30.8)
915.4
2012
Joint
ventures and
associates
£m
174.9
(1.2)
1.6
7.5
–
Total
£m
945.3
(5.1)
6.1
182.7
(30.8)
182.8
1,098.2
(1) Represents deductions for ‘barter’ properties, principally RAF Northolt as part of the Project ModEl arrangements between VSM Estates limited and the Ministry of
defence, and accrued inventory.
As at 30th November 2013 the Group had assets of £228.6m (2012: £167.4m) included within the Group property portfolio (excluding
joint ventures and associates) which were wholly owned, unencumbered and able to be pledged as security for the Group’s
debt facilities.
the Group property portfolio, including its share of joint ventures and associates, can be split by category as detailed below:
Retail
offices
industrial
Income producing
Residential land
Commercial land
Property portfolio
d. Movement in net debt
Movement in net debt as discussed in the Strategic Report is calculated as set out below:
Movement in cash and cash equivalents
borrowings drawn
Repayment of borrowings
Receipt of funds from equity placing
Joint venture debt repaid between 30th November 2011 and acquisition as subsidiary undertakings on
31st May 2012
(Increase)/decrease in equivalent net debt
Receipt of funds from equity placing
Joint venture debt at 30th November 2011 now consolidated
Decrease/(increase) in net debt
2013
£m
201.0
59.4
253.2
513.6
481.8
146.4
2012
£m
240.2
60.7
260.6
561.5
397.4
139.3
1,141.8
1,098.2
2013
£m
(1.5)
(51.0)
77.8
(47.9)
–
(22.6)
47.9
–
25.3
2012
£m
3.7
(98.8)
101.4
–
1.6
7.9
–
(26.8)
(18.9)
included in the increase in net debt for the year ended 30th November 2012 is £24.8m as a result of the Group now consolidating
both Sowcrest limited and holaw 462 limited as subsidiary undertakings. Prior to 30th November 2012 these entities were
accounted for as joint ventures with net debt of £26.8m as at 30th November 2011.
118 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Financial Statements e. Trading cash flow
trading cash flows are derived from the Group Cash Flow Statement as set out below:
Operating
activities
£m
2013
Investing
activities
£m
Financing
activities
£m
Net rent and other income
Property disposals
Property acquisitions
Capital expenditure
Working capital and other movements
overheads and interest
taxation
Trading cash flow
Receipt of funds from equity placing
Net borrowings
Net dividends
Movement in cash and cash equivalents
Net rent and other income
Property disposals
Property acquisitions
Capital expenditure
Working capital and other movements
overheads and interest
taxation
Trading cash flow
Net borrowings
Joint venture debt at 30th November 2011 now consolidated
Net dividends
31.9
118.1
(14.8)
(87.0)
0.6
(19.5)
(4.1)
25.2
–
–
–
25.2
Operating
activities
£m
31.1
97.5
(10.7)
(73.3)
13.4
(17.3)
(2.2)
38.5
–
–
–
Movement in cash and cash equivalents
38.5
(4.7)
–
54.0
(8.7)
(66.2)
–
–
–
(20.9)
–
–
1.7
(19.2)
–
–
–
–
–
(20.3)
–
(20.3)
47.9
(26.8)
(8.3)
(7.5)
2012
Investing
activities
£m
Financing
activities
£m
–
29.5
(6.5)
(31.2)
0.4
3.1
–
(4.7)
–
–
–
–
1.6
–
–
–
(20.6)
–
(19.0)
22.6
(26.8)
(6.9)
(30.1)
Total
£m
31.9
172.1
(23.5)
(153.2)
0.6
(39.8)
(4.1)
(16.0)
47.9
(26.8)
(6.6)
(1.5)
Total
£m
31.1
128.6
(17.2)
(104.5)
13.8
(34.8)
(2.2)
14.8
22.6
(26.8)
(6.9)
3.7
St. Modwen Properties PLC Annual Report and Financial Statements 2013 119
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Notes to the Group Financial Statements (continued)
for the year ended 30th November 2013
2. NoN-StAtutoRy iNFoRMAtioN (CoNtiNuEd)
f. Group Balance Sheet
VSM Estates (holdings) limited and its subsidiary undertakings (VSM) are party to a series of contracts with the Ministry of defence
known as Project ModEl. the property assets of VSM are subject to purchase on deferred terms and, to increase disclosure of the
impact of these arrangements, an additional split of the Group balance Sheet showing the proportion attributable to VSM has been
provided below.
investment property
other non-current assets
inventory
Cash and cash equivalents
other current assets
Total assets
Current liabilities
borrowings
other non-current liabilities
Total liabilities
Net assets
Equity attributable to owners of
the Company
Non-controlling interests
Total equity
Group
£m
744.6
108.9
199.7
3.2
34.7
1,091.1
(142.0)
(338.1)
(19.3)
(499.4)
591.7
587.7
4.0
591.7
2013
VSM
£m
68.7
10.6
6.2
4.2
25.0
114.7
(31.6)
(10.0)
(37.8)
(79.4)
35.3
26.5
8.8
35.3
Total
£m
813.3
119.5
205.9
7.4
59.7
1,205.8
(173.6)
(348.1)
(57.1)
(578.8)
627.0
614.2
12.8
627.0
Group
£m
703.6
88.0
148.3
5.0
26.9
971.8
(125.0)
(344.5)
(12.4)
(481.9)
489.9
485.3
4.6
489.9
g. Net assets per share
Net assets per share are calculated as set out below:
total equity (£m)
less: Non-controlling interest
Equity attributable to owners of the Company
deferred tax on capital allowances and revaluations
Mark-to-market of interest rate swaps
Fair value of inventories
diluted EPRA net assets
Shares in issue (number)
total equity attributable to owners of the Company net assets per share (pence)
Percentage increase
diluted EPRA net assets per share (pence)
Percentage increase
2012
VSM
£m
66.8
15.6
26.9
3.9
19.6
Total
£m
770.4
103.6
175.2
8.9
46.5
132.8
1,104.6
(33.9)
(30.4)
(44.7)
(109.0)
23.8
17.3
6.5
23.8
2013
627.0
(12.8)
614.2
20.5
12.7
8.5
(158.9)
(374.9)
(57.1)
(590.9)
513.7
502.6
11.1
513.7
2012
513.7
(11.1)
502.6
18.7
19.1
3.9
655.9
544.3
220,376,988 200,360,931
278.7
11%
297.6
10%
250.8
8%
271.7
9%
120 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Financial Statements h. Gearing and loan-to-value
the following table shows the calculation of:
• gearing, being the ratio of net debt to total equity; and
• loan-to-value, being the ratio of net debt to the property portfolio (representing amounts that could be used as security for
that debt).
in addition ‘equivalent’ net debt and associated metrics are discussed in the Strategic Report. these figures assume that the equity
placing was in place at 30th November 2012. Adjustments to derive these figures are also detailed below.
Property portfolio (note 2c)
total equity
Adjustment assuming equity placed as at
30th November 2012
Comparable equity
Net debt
Adjustment assuming equity placed as at
30th November 2012
Comparable debt
Gearing
loan-to-value
Equivalent gearing
Equivalent loan-to-value
2013
Joint
ventures and
associates
£m
141.3
N/A
N/A
N/A
33.0
–
33.0
Group
£m
1,000.5
627.0
–
627.0
340.7
–
340.7
54%
34%
54%
34%
Total
£m
1,141.8
627.0
–
627.0
373.7
–
373.7
60%
33%
60%
33%
Group
£m
915.4
513.7
47.9
561.6
366.0
(47.9)
318.1
71%
40%
57%
35%
2012
Joint
ventures and
associates
£m
182.8
N/A
N/A
N/A
82.5
–
82.5
Total
£m
1,098.2
513.7
47.9
561.6
448.5
(47.9)
400.6
87%
41%
71%
36%
St. Modwen Properties PLC Annual Report and Financial Statements 2013 121
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Notes to the Group Financial Statements (continued)
for the year ended 30th November 2013
3. othER iNCoME StAtEMENt diSCloSuRES
a. Administrative expenses
Administrative expenses have been arrived at after charging:
depreciation
operating lease costs
b. Auditor’s remuneration
the analysis of auditor’s remuneration is as follows:
2013
£m
0.5
0.7
2012
£m
0.5
1.0
Fees payable for the audit of the
Company’s Annual Financial Statements
the audit of subsidiary companies and
joint ventures pursuant to legislation
Total audit fees
Audit-related assurance services
other assurance services
tax compliance services
tax advisory services
Property consulting
Total non-audit fees
Total fees
2013
2012
Audit and
audit-related
services
£’000
Other services
£’000
Total
£’000
Audit and
audit-related
services
£’000
Other services
£’000
Total
£’000
120
150
270
55
–
–
–
–
55
325
–
–
–
–
–
166
174
30
370
370
120
150
270
55
–
166
174
30
425
695
118
137
255
55
20
–
–
–
75
330
–
–
–
–
–
150
171
47
368
368
118
137
255
55
20
150
171
47
443
698
the above amounts include all amounts charged in respect of joint venture undertakings. Further information is included in the Audit
Committee Report.
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
Total employees
the total payroll costs of these employees were:
Wages and salaries
Social security costs
Pension costs
Total payroll costs
details of the directors’ remuneration is given in the directors’ Remuneration Report.
2013
Number
2012
Number
146
63
46
255
2013
£m
12.8
1.9
0.8
15.5
136
63
41
240
2012
£m
12.5
1.6
0.8
14.9
122 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Financial Statements d. Share-based payments
the Group has a Save As you Earn share option scheme which is open to all employees. Employees must ordinarily 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.
2013
Weighted average price
All
options
£
Excluding
PSP
£
outstanding at start of year
Granted
Forfeited
lapsed
Exercised
outstanding at end of year
Exercisable at year end
Number of
options
10,930,665
1,758,696
(528,823)
(266,239)
(1,522,802)
10,371,497
3,324,326
1.49
2.09
1.92
0.20
1.65
1.58
1.90
Number of
options
8,623,043
3,021,762
(197,768)
(360,588)
(155,784)
1.90
2.97
1.92
4.10
1.86
2.06
10,930,665
2.06
2,672,736
2012
Weighted average price
All
options
£
1.57
1.25
(2.33)
(0.49)
(1.66)
1.49
2.01
Excluding
PSP
£
1.96
1.77
(2.33)
(1.85)
–
1.90
2.20
Share options are priced using a black-Scholes valuation model. the fair values calculated and the assumptions used are as follows:
30th November 2013
30th November 2012
Charge
to Income
Statement
£m
Risk-free
interest rate
%
Expected
volatility
%
Dividend
yield
%
Share
price
£*
1.9
0.3
0.4–1.1
37.6–56.9
0.4–1.1
37.6–56.9
1.1
1.6
1.23–3.20
1.23–2.00
* based on the earlier of the 90 day average to 30th November 2011 or, for options granted after this date, the closing share price on the date of grant.
the fair value of the share incentive reserve in respect of share options outstanding at the year end was £2.1m (2012: £2.4m) and
included £0.7m (2012: £0.4m) 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 £3.00 (2012: £1.97). the executive share options outstanding at the
year end had a range of exercise prices between £1.69 and £3.75 (2012: £1.14 and £3.75) with PSP options exercisable at £nil
(2012: £nil) cost. outstanding options had a weighted average maximum remaining contractual life of 9.0 years (2012: 9.0 years).
St. Modwen Properties PLC Annual Report and Financial Statements 2013 123
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Notes to the Group Financial Statements (continued)
for the year ended 30th November 2013
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
interest on pension scheme liabilities (note 18)
Total finance cost
2013
£m
(20.2)
(1.2)
(0.9)
(0.2)
(1.1)
2012
£m
(18.6)
(1.2)
(1.1)
(0.2)
(1.2)
(23.6)
(22.3)
the finance income on interest rate derivatives derives from financial liabilities held at fair value through profit or loss.
All finance costs derive from financial liabilities measured at amortised cost.
2013
£m
1.4
–
0.1
6.7
1.2
9.4
2013
£m
4.3
(0.1)
4.2
2.7
3.0
(1.2)
(1.0)
(1.1)
2.4
6.6
–
–
2012
£m
1.1
2.0
0.2
0.6
1.3
5.2
2012
£m
3.4
1.9
5.3
(0.4)
2.7
0.9
(0.5)
(2.9)
(0.2)
5.1
–
–
interest receivable
Credit in respect of loan settlement fees
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 on ordinary activities
tax charge/(credit) 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
Net (recognition)/utilisation of tax losses
Change in rate for provision of deferred tax
Adjustments in respect of previous years
total tax charge in the income Statement
tax relating to items in the Statement of Comprehensive income:
Deferred tax
Actuarial losses on pension schemes
tax credit in the Statement of total Recognised income and Expense
124 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Financial Statements b. Reconciliation of effective tax rate
Profit before tax
less: joint ventures and associates
Pre-tax profit attributable to the Group
Corporation tax at 23.3% (2012: 24.7%)
Permanent differences
Short-term timing differences
impact of current year revaluations and indexation
difference between chargeable gains and accounting profit
Change in rate used for provision of deferred tax
deferred tax asset recognised
Current year charge
Adjustments in respect of previous years
Tax charge for the year
Effective rate of tax
2013
£m
80.5
(21.8)
58.7
13.7
0.1
5.8
(3.0)
(6.8)
(0.4)
(1.6)
7.8
(1.2)
6.6
11%
2012
£m
47.4
(22.6)
24.8
6.1
(0.7)
(1.7)
2.2
0.7
(0.5)
–
6.1
(1.0)
5.1
21%
the post-tax results of joint ventures and associates are stated after a tax charge of £1.7m (2012: £5.4m). the effective tax rate for
the Group including joint ventures and associates is a charge of 10.1% (2012: 19.9% charge).
the Finance Act 2013 was enacted on 17th July 2013 and included provisions which reduced the main rate of corporation tax to
21% from 1st April 2014 and 20% from 1st April 2015. Current tax has therefore been provided at 23.3% and deferred tax at 21% for
amounts expected to reverse before 1st April 2015 and 20% for amounts expected to reverse thereafter.
c. Balance Sheet
balance at start of the year
Charge/(credit) to the income Statement
Net payment
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
–
–
–
(1.6)
(3.5)
(5.1)
2013
Liability
£m
11.8
3.5
0.7
–
–
16.0
2013
2012
Corporation
tax
£m
Deferred
tax
£m
Corporation
tax
£m
3.3
4.2
(4.1)
3.4
Net
£m
11.8
3.5
0.7
(1.6)
(3.5)
10.9
8.5
2.4
–
10.9
Asset
£m
–
–
–
(0.1)
(5.4)
(5.5)
0.2
5.3
(2.2)
3.3
2012
Liability
£m
9.5
3.6
0.9
–
–
14.0
Deferred
tax
£m
8.7
(0.2)
–
8.5
Net
£m
9.5
3.6
0.9
(0.1)
(5.4)
8.5
At the balance Sheet date, the Group has unused tax losses in relation to 2013 and prior years of £3.2m (2012: £1.8m), of which
£1.6m (2012: £0.1m) has been recognised as a deferred tax asset. A deferred tax asset of £1.6m (2012: £1.7m) has not been
recognised in respect of current and prior year tax losses as it is not considered sufficiently 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 continue to be able to claim capital allowances in excess of
depreciation in future years.
As a property group, tax planning is often an integral part of transactions. Where tax planning is entered into benefits are recognised
by the Group to the extent the outcome is reasonably certain. Where tax planning has been challenged by hMRC, or management
believe that there is a risk of such challenge, provision is made for the best estimate of potential exposure based on the information
available at the balance Sheet date.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 125
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Notes to the Group Financial Statements (continued)
for the year ended 30th November 2013
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 attributable to equity shareholders (basic and diluted)
basic earnings per share
diluted earnings per share
2013
Number of
shares
2012
Number of
shares
215,236,438
200,145,177
4,074,926
1,534,599
219,311,364
201,679,776
2013
£m
72.1
2013
pence
33.5
32.9
2012
£m
42.7
2012
pence
21.3
21.2
Shares held by the Employee benefit trust are excluded from the above calculations.
As the Group is principally a development business EPRA earnings per share on a basic and diluted basis are not provided.
these calculations exclude development profits and would not provide a meaningful measure of the performance of the Group.
7. diVidENdS
dividends paid during the year were in respect of the final dividend for 2012 and an interim dividend for 2013. 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.
2013
2012
p per share
£m
p per share
£m
2.42
1.33
3.75
5.3
2.9
8.2
2.20
1.21
3.41
2.67
5.9
2.42
4.4
2.4
6.8
4.8
126 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Financial Statements 8. iNVEStMENt PRoPERty
Fair value
At 30th November 2011
Additions – new properties
other additions
Net transfers to inventories (note 12)
disposals
Gain/(loss) on revaluation
At 30th November 2012
Additions – new properties
other additions
Net transfers (from)/to inventories (note 12)
Reclassification from operating properties (note 9)
disposals
Gain on revaluation
At 30th November 2013
Freehold
investment
properties
£m
Leasehold
investment
properties
£m
560.7
288.0
35.0
31.8
(46.7)
(16.2)
11.1
575.7
9.4
54.9
(10.7)
0.1
(35.0)
21.1
615.5
–
11.5
(4.1)
(96.0)
(4.7)
194.7
–
6.3
0.6
–
(15.3)
11.5
197.8
Total
£m
848.7
35.0
43.3
(50.8)
(112.2)
6.4
770.4
9.4
61.2
(10.1)
0.1
(50.3)
32.6
813.3
investment properties were valued at 30th November 2013 by Jones lang laSalle llP, Chartered Surveyors, in accordance with the
Appraisal and Valuation Manual of the Royal institution of Chartered Surveyors, on the basis of market value. Jones lang laSalle
llP are professionally qualified independent external valuers and have recent experience in the relevant location and category of
the properties being valued.
Additions – new properties include £nil (2012: £31.6m) acquired through business combinations.
the historical cost of investment properties at 30th November 2013 was £699.3m (2012: £680.5m).
As at 30th November 2013, £633.2m (2012: £632.8m) of investment property was pledged as security for the Group’s loan facilities.
included within leasehold investment properties are £3.9m (2012: £3.9m) of assets held under finance leases.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 127
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Notes to the Group Financial Statements (continued)
for the year ended 30th November 2013
9. oPERAtiNG PRoPERty, PlANt ANd EquiPMENt
Cost
At 30th November 2011
Additions
At 30th November 2012
Additions
Reclassified to investment property (note 8)
At 30th November 2013
Depreciation
At 30th November 2011
Charge for the year
At 30th November 2012
Charge for the year
At 30th November 2013
Net book value
At 30th November 2011
At 30th November 2012
At 30th November 2013
tenure of operating properties:
Freehold
leasehold
Operating
properties
£m
Operating
plant and
equipment
£m
6.9
0.1
7.0
–
(0.1)
6.9
0.7
0.1
0.8
0.1
0.9
6.2
6.2
6.0
4.9
0.1
5.0
0.4
–
5.4
4.0
0.4
4.4
0.4
4.8
0.9
0.6
0.6
2013
£m
3.4
2.6
6.0
Total
£m
11.8
0.2
12.0
0.4
(0.1)
12.3
4.7
0.5
5.2
0.5
5.7
7.1
6.8
6.6
2012
£m
3.5
2.7
6.2
128 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Financial Statements
10. JoiNt VENtuRES ANd ASSoCiAtES
the Group’s share of the trading results for the year of its joint ventures and associates is:
2013
VSM
Estates
Uxbridge
(Group)
Limited
£m
Other
joint
ventures
and
associates
£m
Key
Property
Investments
Limited
£m
Income Statements
Revenue
Net rental income
development profits/(losses)
Gains on disposal of investments/
investment properties
investment property revaluation
gains/(losses)
Administrative expenses
Profit before interest and tax
Finance cost
Finance income
Profit before tax
taxation
Profit/(loss) for the year
13.8
7.1
0.2
9.3
6.2
(0.2)
22.6
(4.1)
1.9
20.4
(1.6)
18.8
–
(0.1)
–
–
5.1
(0.1)
4.9
(2.3)
0.2
2.8
(0.1)
2.7
Key
Property
Investments
Limited
£m
18.9
7.3
1.3
Total
£m
15.2
7.3
0.5
1.4
0.3
0.3
–
9.3
0.2
(0.2)
–
0.4
(0.1)
–
0.3
–
0.3
11.1
(0.3)
27.9
(6.5)
2.1
23.5
(1.7)
21.8
(0.4)
(0.3)
8.1
(4.8)
–
3.3
0.3
3.6
2012
VSM
Estates
Uxbridge
(Group)
Limited
£m
Other
joint
ventures
and
associates
£m
0.1
(0.1)
–
–
27.2
(0.1)
27.0
(2.4)
–
24.6
(5.5)
19.1
0.8
0.7
(0.2)
–
–
(0.1)
0.4
(0.3)
–
0.1
(0.2)
(0.1)
included in other joint ventures and associates above are results from associated companies of £nil (2012: losses of £0.1m).
the Group’s share of the balance Sheets of its joint ventures and associates is:
2013
VSM
Estates
Uxbridge
(Group)
Limited
£m
Other
joint
ventures
and
associates
£m
Key
Property
Investments
Limited
£m
80.7
10.2
(8.9)
(15.2)
66.8
49.2
–
18.8
(1.2)
66.8
60.0
2.9
(16.0)
(25.1)
21.8
19.1
–
2.7
–
21.8
6.4
4.1
(2.4)
(1.4)
6.7
6.9
–
0.3
(0.5)
6.7
2012
VSM
Estates
Uxbridge
(Group)
Limited
£m
Other
joint
ventures
and
associates
£m
Key
Property
Investments
Limited
£m
116.8
13.6
(19.2)
(62.0)
49.2
45.6
–
3.6
–
49.2
58.9
2.9
(6.2)
(36.5)
19.1
–
–
19.1
–
19.1
3.8
4.8
(0.9)
(0.8)
6.9
4.7
2.3
(0.1)
–
6.9
Total
£m
147.1
17.2
(27.3)
(41.7)
95.3
75.2
–
21.8
(1.7)
95.3
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
dividends paid
Equity at end of year
included in other joint ventures and associates above are net assets of £2.8m (2012: £2.9m) in relation to associated companies.
these net assets comprise total assets of £3.6m (2012: £3.6m) and total liabilities of £0.8m (2012: £0.7m).
St. Modwen Properties PLC Annual Report and Financial Statements 2013 129
Total
£m
19.8
7.9
1.1
0.2
26.8
(0.5)
35.5
(7.5)
–
28.0
(5.4)
22.6
Total
£m
179.5
21.3
(26.3)
(99.3)
75.2
50.3
2.3
22.6
–
75.2
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Notes to the Group Financial Statements (continued)
for the year ended 30th November 2013
10. JoiNt VENtuRES ANd ASSoCiAtES (CoNtiNuEd)
Joint venture companies and associates comprise:
Name
Status
Interest
Principal nature of business
Key Property investments limited
VSM Estates uxbridge (Group) limited
VSM (NCGM) limited
barton business Park limited
Killingholme Energy limited
Killingholme land limited
Meaford Energy limited
Meaford land limited
Skypark development Partnership llP
Wrexham land limited
Wrexham Power limited
Coed darcy limited
baglan bay Company limited
Joint venture
Joint venture
Joint venture
Joint venture
Joint venture
Joint venture
Joint venture
Joint venture
Joint venture
Joint venture
Joint venture
Associate
Associate
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
49%
25%
Property investment and development
Property investment and development
Property development
Property development
Property development
Property development
Property development
Property development
Property development
Property development
Property development
Property investment and development
Property management
in the Strategic Report a series of commercial contracts with Persimmon is referred to as the ‘Persimmon joint venture’. this is not
a statutory entity and the results from these commercial contracts are not included in the figures disclosed above. Revenue and
profit from the Persimmon joint venture are recognised in Group development profit on legal completion of housing unit sales to
third-party customers.
Many of the shareholder agreements for joint ventures and associates contain change of control provisions, as is common for
such arrangements.
11. tRAdE ANd othER RECEiVAblES
Non-current
other debtors
Amounts due from joint ventures
Current
trade receivables
Prepayments and accrued income
other debtors
Amounts recoverable on contracts
Amounts due from joint ventures
iFRS 7 disclosures in respect of financial assets included above are provided in note 16.
2013
£m
2012
£m
11.6
6.0
17.6
2.2
4.9
29.3
11.0
12.3
59.7
15.6
6.0
21.6
4.9
7.1
18.2
8.1
8.2
46.5
130 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Financial Statements
12. iNVENtoRiES
Properties held for sale
Properties under construction
land under option
the movement in inventories during the two years ended 30th November 2013 is as follows:
At 30th November 2011
Additions
Net transfers from investment property (note 8)
disposals (transferred to development cost of sales) (note 1)
At 30th November 2012
Additions
Net transfers from investment property (note 8)
disposals (transferred to development cost of sales) (note 1)
At 30th November 2013
2013
£m
9.7
177.3
18.9
205.9
2012
£m
9.6
143.1
22.5
175.2
£m
191.1
85.0
50.8
(151.7)
175.2
114.0
10.1
(93.4)
205.9
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 £1.7m (2012: £3.8m).
As at 30th November 2013 £43.3m (2012: £41.0m) of inventory was pledged as security for the Group’s loan facilities.
13. tRAdE ANd othER PAyAblES
Current
trade payables
Amounts due to joint ventures
other payables and accrued expenses
other payables on deferred terms
derivative financial instruments
Non-current
other payables on deferred terms
Finance lease liabilities (head rents)
2013
£m
21.1
25.0
92.8
18.5
12.8
170.2
42.3
3.9
46.2
2012
£m
20.4
13.1
74.8
27.8
19.5
155.6
44.7
3.9
48.6
iFRS 7 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.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 131
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Notes to the Group Financial Statements (continued)
for the year ended 30th November 2013
14. boRRoWiNGS
Current
bank overdrafts
bank loans
Non-current
Amounts repayable between one and two years
Amounts repayable between two and five years
Amounts repayable after more than five years
Total
2013
£m
–
62.5
62.5
64.0
138.0
83.6
285.6
348.1
2012
£m
3.3
–
3.3
85.1
201.6
84.9
371.6
374.9
Where borrowings are secured, the individual bank facility has a fixed charge over a discrete portfolio of certain of the Group’s
property assets.
Maturity profile of committed borrowing facilities
the Group’s debt is provided by floating rate bilateral revolving credit facilities (providing the flexibility to draw and repay loans as
required) and an unsecured 6.25% fixed rate retail bond. the maturity profile of the Group’s committed borrowing facilities is set
out below:
Secured floating rate borrowings:
less than one year(1)
one to two years
two to three years
three to four years
More than five years
Unsecured fixed rate borrowings:
More than five years
Drawn
£m
62.5
74.0
128.0
–
3.6
268.1
80.0
348.1
2013
Undrawn
£m
42.5
20.0
67.0
–
1.0
130.5
–
130.5
Total
£m
Drawn
£m
105.0
94.0
195.0
–
4.6
398.6
80.0
478.6
3.3
85.1
120.3
81.3
4.9
294.9
80.0
374.9
2012
Undrawn
£m
1.7
14.9
84.7
23.7
0.1
125.1
–
125.1
Total
£m
5.0
100.0
205.0
105.0
5.0
420.0
80.0
500.0
(1) in addition to the principal amounts included above, £0.8m (2012: £0.9m) of interest payable was committed at the year end. these amounts all fall due within three
months of the year end.
No undrawn committed facilities are ring fenced for VSM Estates (holdings) limited (2012: £0.6m).
132 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Financial Statements
Interest rate profile
the interest rate profile of the Group’s borrowings after taking into account the effects of hedging is set out below:
Floating rate bank debt
Fixed rate bank debt
Fixed rate retail bond
At 30th November 2013
2013
Applicable interest rate
Margin + 3 month LIBOR
Margin + 3.34%
weighted average swap rate
6.25% fixed rate
£m
68.1
200.0
80.0
348.1
2012
Applicable interest rate
Margin + 3 month liboR
Margin + 3.34%
weighted average swap rate
6.25% fixed rate
£m
64.9
230.0
80.0
374.9
the average margin on the Group’s bank debt is 2.0% (2012: 2.1%).
Interest rate swaps
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 2.01% to 5.16% (2012: 2.01% to 5.16%). details of the maturity
profile of derivative financial instruments are given below and the change in fair value of these instruments as charged to the income
Statement is disclosed in note 4.
Earliest termination
Latest termination
Earliest termination
Latest termination
2013
2012
%*
3.83%
3.28%
2.99%
2.01%
4.72%
£m
20.0
70.0
60.0
20.0
30.0
–
%*
2.79%
3.28%
2.99%
2.01%
4.76%
£m
10.0
70.0
60.0
20.0
40.0
–
£m
30.0
60.0
50.0
60.0
20.0
10.0
200.0
3.34%
200.0
3.34%
230.0
%*
4.83%
3.60%
2.91%
2.99%
2.01%
4.32%
3.34%
£m
10.0
50.0
50.0
60.0
20.0
40.0
230.0
%*
4.65%
3.34%
2.91%
2.99%
2.01%
4.76%
3.34%
less than one year
one to two years
two to three years
three to four years
Four to five years
More than five years
* Weighted average interest rate.
Certain of the interest rate swaps are extendable at the bank’s option; the tables above therefore show the dates of normal
termination and extended termination. the weighted average maturity of interest rate swaps to the earliest termination date is
2.4 years (2012: 2.8 years).
St. Modwen Properties PLC Annual Report and Financial Statements 2013 133
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Notes to the Group Financial Statements (continued)
for the year ended 30th November 2013
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
2013
£m
1.0
2.7
0.3
4.0
2012
£m
0.8
2.9
0.1
3.8
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
2013
£m
30.2
86.8
184.2
301.2
2012
£m
29.2
87.1
167.6
283.9
Contingent rents, calculated as a percentage of turnover for a limited number of tenants, of £0.4m (2012: £0.4m) were recognised
during the year.
Obligations under finance leases
Finance lease liabilities payable in respect of certain leasehold investment properties are as follows:
in one year or less
between one and five years
in five years or more
2013
2012
Minimum
lease
payments
£m
0.2
1.0
65.9
67.1
Interest
£m
Principal
£m
0.2
1.0
62.0
63.2
–
–
3.9
3.9
Minimum
lease
payments
£m
0.2
1.0
66.1
67.3
Interest
£m
0.2
1.0
62.2
63.4
Principal
£m
–
–
3.9
3.9
Finance leases are for periods of up to 999 years from inception and a discount rate of 6.0% (2012: 6.0%) has been used to derive
the fair value of the principal amount outstanding. All lease obligations are denominated in sterling.
134 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Financial Statements 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
Retail bond
trade and other payables
other payables on deferred terms
Finance lease liabilities (head rents)
Notes
(1)
(1)
Notes
(2)
(1)
(1)
(1)
(1)
(1)
2013
£m
7.4
52.4
59.8
2013
£m
12.8
268.1
80.0
87.2
60.8
3.9
2012
£m
8.9
46.1
55.0
2012
£m
19.5
294.9
80.0
68.0
72.5
3.9
512.8
538.8
(1) the directors consider that the carrying amount recorded in the Financial Statements approximates their fair value.
(2) derivative financial instruments are carried at fair value. the fair value is calculated using quoted market prices relevant for the
term and instrument.
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 £9.0m (2012: £6.8m) 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 £51.7m (2012: £40.3m) of non-financial liabilities.
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 £12.8m recognised as at 30th November 2013 (2012: £19.5m) 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 while 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.
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 subsequent table details the Group’s sensitivity, after tax, to a 1% change in interest rates based on
year end levels of debt.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 135
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Notes to the Group Financial Statements (continued)
for the year ended 30th November 2013
16. FiNANCiAl iNStRuMENtS (CoNtiNuEd)
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
2013
£m
(1.6)
1.6
–
2013
£m
1.6
(1.6)
–
2012
£m
(2.1)
1.7
(0.4)
2012
£m
2.1
(1.7)
0.4
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
acceptable (generally A and above) 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 £1.6m (2012: £1.6m) 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 £0.5m (2012: £0.4m) 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 uncollectable
impairment losses reversed
At end of year
2013
£m
0.4
0.6
(0.3)
(0.2)
0.5
2012
£m
0.5
0.4
(0.2)
(0.3)
0.4
trade and other receivables include £0.5m (2012: £1.0m) which are past due as at 30th November 2013 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
More than 60 days
2013
£m
0.1
0.2
0.2
0.5
2012
£m
0.3
0.3
0.4
1.0
136 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Financial Statements 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 fixed rate debt bilateral facilities, overdrafts and cash with a range of maturity
dates to ensure continuity of funding.
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:
2013
trade and other payables
other payables on deferred terms
2012
trade and other payables
other payables on deferred terms
Less than
1 month
£m
1 to 3
months
£m
3 months
to 1 year
£m
42.4
–
42.4
Less than
1 month
£m
37.3
–
37.3
8.6
–
8.6
1 to 3
months
£m
1.9
10.4
12.3
35.9
18.6
54.5
3 months
to 1 year
£m
32.5
17.4
49.9
1 to 5
years
£m
–
46.3
46.3
1 to 5
years
£m
3.9
45.8
49.7
More than
5 years
£m
65.9
–
65.9
More than
5 years
£m
63.4
–
63.4
the Group’s approach to cash flow, financing and bank covenants is discussed further in the Financial Review section of the
Strategic Report.
17. ShARE CAPitAl
Equity share capital
At start of year
issue of share capital
At end of year
Ordinary
10p shares
Number
200,360,931
20,016,057
220,376,988
Total
£m
152.8
64.9
217.7
Total
£m
139.0
73.6
212.6
£m
20.0
2.0
22.0
on 1st March 2013 the Group completed a ‘cash box’ placing of 20,016,057 ordinary shares of 10p each at £2.45 per share.
Net proceeds were £47.9m after share issue costs, of which the £2.0m nominal value of the shares was credited to share capital with
the balance to other reserves.
See note 3d for details of outstanding options to acquire ordinary shares.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 137
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Notes to the Group Financial Statements (continued)
for the year ended 30th November 2013
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, future accrual. the income Statement includes:
• a charge of £0.2m (2012: £0.1m) for the defined benefit section; and
• a charge of £0.6m (2012: £0.6m) for the defined contribution section.
the last formal actuarial valuation of the scheme was at 5th April 2011, when the market value of the net assets of the scheme
was £33.5m, a funding level of 104% based on the trustees’ proposed assumptions for technical provisions (these are yet to be
finalised). the valuation was performed using the ‘Projected unit Credit Method’ under iAS 19. the main actuarial assumptions were:
investment rate of return:
increase in pensions
pre-retirement
post-retirement
6.3% pa
4.8% pa
3.6% pa
the actuarial valuation of the defined benefit section, a final salary scheme, was updated to 30th November 2013 on an iAS basis by
a qualified independent actuary. the major assumptions used by the actuary were:
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
2013
2.6%
3.0%
3.4%
4.5%
2.6%
2012
2.0%
2.7%
2.7%
4.3%
2.0%
2011
2.4%
3.0%
3.1%
4.9%
2.4%
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 S1 year of birth and medium cohort tables with an underpin to future improvements of
1.5% to reflect the fact that medium cohort improvements will reduce over time. the resultant assumptions are, for example, male
members who are currently retired are expected to draw their pensions for 26.7 years and non-retired members for 29.0 years,
based on a normal retirement age of 60.
the Group made a contribution of £0.2m to the defined benefit section of the scheme in 2013 and expects contributions to remain at
similar levels 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:
2013
2012
2011
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
%
4.7
4.0
4.7
3.7
£m
7.6
14.6
5.8
1.0
29.0
(28.5)
(0.5)
–
–
–
%
4.5
4.2
4.5
3.2
£m
11.0
9.7
6.4
1.0
28.1
(27.0)
(1.1)
–
–
–
%
5.1
4.8
5.1
4.0
£m
9.5
7.9
8.2
1.5
27.1
(24.8)
(2.3)
–
–
–
the cumulative amount of actuarial gains and losses (before unrecognised surplus of £0.5m) recorded in the Group Statement of
Comprehensive income is a loss of £0.2m (2012: £0.1m).
138 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Financial Statements Analysis of the amount charged to operating profit
Current service cost and total operating charge
Analysis of the amount credited to finance costs and income
Expected return on pension scheme assets
interest on pension scheme liabilities
2013
£m
(0.2)
2013
£m
1.2
(1.1)
0.1
2012
£m
(0.2)
2012
£m
1.3
(1.2)
0.1
2011
£m
(0.2)
2011
£m
1.5
(1.3)
0.2
the actual return on pension scheme assets was a gain of £2.0m (2012: £2.4m). the expected return on pension scheme assets
was calculated assuming cash and gilts will make returns in line with the yield on the 15 year gilt index and that equities and
properties will return 1.2% 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 present value of the scheme liabilities
2013
£m
0.8
(0.2)
(1.3)
0.6
(0.1)
2011
£m
24.7
0.2
–
1.3
–
(1.4)
–
2012
£m
1.1
(0.5)
(1.8)
1.1
(0.1)
2010
£m
26.9
0.2
–
1.4
(1.3)
(2.5)
–
2011
£m
(0.4)
(1.8)
1.8
0.2
(0.2)
2009
£m
23.6
0.2
0.1
1.4
3.7
(1.4)
(0.7)
26.9
2013
£m
27.0
0.2
–
1.1
1.5
(1.3)
–
2012
£m
24.8
0.2
–
1.2
2.3
(1.5)
–
28.5
27.0
24.8
24.7
beginning of year
Movement in year:
Current service cost
Employee contributions
interest cost
Actuarial gains and losses
benefits paid
Curtailment gain
End of year
St. Modwen Properties PLC Annual Report and Financial Statements 2013 139
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Notes to the Group Financial Statements (continued)
for the year ended 30th November 2013
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
19. ACquiSitioN oF SubSidiARy
2013
£m
28.1
1.2
0.2
–
0.8
(1.3)
29.0
0.5
(0.5)
–
2013
£m
0.8
2.8%
(0.2)
0.7%
2012
£m
27.1
1.3
0.2
–
1.0
(1.5)
28.1
1.1
(1.1)
–
2012
£m
1.1
3.9%
(0.5)
1.9%
2011
£m
27.2
1.5
0.2
–
(0.4)
(1.4)
27.1
2.3
(2.3)
–
2011
£m
(0.4)
(1.5%)
(1.8)
7.3%
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%
2009
£m
24.9
1.4
0.3
0.1
1.8
(1.4)
27.1
0.2
(0.2)
–
2009
£m
1.8
6.6%
3.7
(13.8%)
on 31st May 2012, the Company acquired the power to govern the financial and operating policies of its joint venture entities
Sowcrest limited (Sowcrest) and Chertsey Road Property limited, Statedale limited together with its 100% subsidiary holaw
(462) limited (together holaw). these linked transactions were facilitated by entering into a sale and purchase agreement to
simultaneously acquire the remaining 50% equity interest in each company for nil consideration. the acquisitions provided the
Group with full control of Sowcrest and holaw, enabling it to develop the second phase at Wembley Central as well as providing it
with additional rental income from the investment property held by those entities.
As required by iFRS 3 (2008) business Combinations, these deemed acquisitions of control resulted in the joint venture interests
being remeasured to their fair values at the acquisition date and net goodwill arising. this was not deemed to be recoverable, and
was written off to the income Statement in the year ended 30th November 2012.
Fair values were reported as provisional in the Financial Statements for the year ended 30th November 2012. No subsequent
amendments were made.
20. CAPitAl CoMMitMENtS
At 30th November 2013 the Group had contracted capital expenditure of £12.6m (2012: £11.0m). in addition the Group’s share of
the contracted capital expenditure of its joint venture undertakings was £2.8m (2012: £5.6m). All capital commitments relate to
investment properties.
140 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Financial Statements 21. 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, together with ViNCi PlC has provided a joint and several parent company guarantee in respect of the £40m bank facility
provided to VSM Estates uxbridge limited, a subsidiary of VSM Estates uxbridge (Group) limited. the Group, together with ViNCi
PlC, has provided a joint and several guarantee in respect of the obligations of VSM (NCGM) limited relating to the redevelopment
of New Covent Garden Market, london. this is a guarantee in the ordinary course of business and would require the guarantors
to comply with the terms of the development agreement and to indemnify Covent Garden Market Authority against any breach of
those terms.
the Group, together with Salhia Real Estate K.S.C. has provided a parent company guarantee in respect of the £135m bank facility
provided to Key Property investments limited. the guarantee provided by the Group is capped at 50% of the total commitment
under the agreement from time to time, limiting the Group guarantee to £67.5m as at 30th November 2013. the Group has provided
a guarantee of up to £80m in respect of corporate obligations related to the share sale and purchase agreement facilitating the sale
of Elephant and Castle Shopping Centre. Salhia Real Estate K.S.C. has provided a guarantee to the Group in respect of 50% of
these obligations.
St. Modwen Properties PlC has guaranteed the liabilities of the following subsidiaries in order that they qualify for the exemption
from audit under Section 479A of the Companies Act 2006 in respect of the year ended 30th November 2013.
Name of subsidiary
Festival Waters limited
Shaw Park developments limited
St. Modwen developments (Chorley) limited
St. Modwen developments (Connah’s quay) limited
St. Modwen developments (hull) limited
St. Modwen developments (longbridge) limited
St. Modwen developments (Meon Vale) limited
St. Modwen developments (queens Market) limited
St. Modwen developments (quinton) limited
St. Modwen developments (Wythenshawe) limited
St. Modwen investments limited
22. RElAtEd PARty tRANSACtioNS
Company Registration Number
04354481
04625000
05727011
05726352
05593517
02885028
05294589
05289380
01479159
05594279
00528657
transactions between the Group and its non-wholly owned subsidiaries, joint ventures and associates are all undertaken on an arm’s
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 £0.5m
(2012: £0.7m). the balance due to the Group at year end was £1.8m (2012: £4.3m). No interest is charged on this balance.
VSM Estates Uxbridge (Group) Limited (VSM Uxbridge)
in the prior year the Group set up VSM uxbridge as a new joint venture with ViNCi PlC to hold the former RAF uxbridge site.
VSM entities holding the former RAF uxbridge sites were transferred to this joint venture together with the related liabilities to settle
the deferred consideration due under Project ModEl.
VSM uxbridge is funded by loan notes and short-term funding provided by the Group and ViNCi PlC together with bank debt.
the balance due to the Group at the year end was £13.7m (2012: £8.6m), of which £6.0m (2012: £6.0m) is loan notes on which
interest is chargeable. interest charged in the year ended 30th November 2013 was £1.4m (2012: £0.7m).
Barton Business Park Limited (Barton)
the balance due to barton at the year end was £3.8m (2012: £3.8m). No interest is charged on this balance.
Skypark Development Partnership LLP (Skypark)
during the year the Group provided funding of £0.6m to Skypark (2012: £nil). the balance due to the Group from Skypark at the year
end was £1.1m (2012: £0.5m), of which £1.1m (2012: £0.5m) relates to loan notes issued to the Group. No interest is charged on
this balance.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 141
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Notes to the Group Financial Statements (continued)
for the year ended 30th November 2013
22. RElAtEd PARty tRANSACtioNS (CoNtiNuEd)
Wrexham Power Limited (Wrexham Power)
during the year the Group provided funding to Wrexham Power of £nil (2012: £0.2m). the balance due to the Group at the year end
was £0.2m (2012: £0.2m). No interest is charged on this balance.
Wrexham Land Limited, (Wrexham Land)
during the year the Group provided funding to Wrexham land of £nil (2012: £0.1m). the balance due to the Group at the year end
was £0.1m (2012: £0.1m). No interest is charged on this balance.
VSM (NCGM) Limited (VSM (NCGM))
in december 2012 the Group set up VSM (NCGM) as a new joint venture with ViNCi PlC to jointly redevelop the 57 acre New
Covent Garden Market sites in partnership with the Covent Garden Market Authority.
during the year the Group provided funding to VSM (NCGM) of £1.4m (2012: £nil). the balance due to the Group at the year end
was £1.4m (2012: £nil). No interest is charged on this balance.
St. Modwen Pension Scheme
the Group occupies offices owned by the pension scheme with a value of £0.4m (2012: £0.4m) with an annual rental payable
of £0.1m (2012: £0.1m). the balance due to the Group at year end was £0.1m (2012: £0.1m).
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 less than a 90% interest were as follows:
Management fees
Interest
Balance
Norton & Proffitt developments limited
Stoke-on-trent Regeneration
(investments) limited
Stoke-on-trent Regeneration limited
trentham leisure limited
uttoxeter Estates limited
VSM Estates (holdings) limited
Widnes Regeneration limited
2013
£m
–
–
–
–
–
–
–
–
2012
£m
–
–
–
–
–
0.2
–
0.2
2013
£m
–
–
(0.1)
1.4
–
0.6
–
1.9
2012
£m
–
–
(0.1)
1.4
–
0.8
–
2.1
2013
£m
(0.2)
(0.8)
(3.5)
19.5
(0.2)
(17.3)
2.3
(0.2)
2012
£m
(0.4)
0.8
(3.7)
19.7
(0.4)
(7.3)
2.4
11.1
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 (2012: £nil). No guarantees have been given or received from related parties.
Transactions in which directors have an interest
Branston Properties Limited (Branston)
in 2010 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.
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.
142 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Financial Statements Company balance Sheet
as at 30th November 2013
Fixed assets
tangible fixed assets
investments held as fixed assets
Current assets
debtors (including amounts falling due after more than one year of £212.6m (2012: £221.0m))
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
Revaluation reserve
Profit and loss Account
Share incentive reserve
own shares
other reserves
Equity shareholders’ funds
Notes
2013
£m
2012
£m
E
F
G
H
H
K
L
L
L
L
L
L
0.5
692.7
693.2
514.2
3.2
(296.7)
220.7
913.9
(270.0)
643.9
22.0
102.8
422.9
48.2
2.1
(0.3)
46.2
643.9
0.5
650.4
650.9
437.8
2.9
(293.0)
147.7
798.6
(271.1)
527.5
20.0
102.8
380.6
21.9
2.4
(0.5)
0.3
527.5
these Financial Statements were approved by the board of directors on 3rd February 2014 and were signed on its behalf by
bill oliver and Michael dunn.
Bill Oliver
Chief Executive
Michael Dunn
Group Finance director
St. Modwen Properties PLC Annual Report and Financial Statements 2013 143
Financial StatementsStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information Notes to the Company Financial Statements
for the year ended 30th November 2013
(A). ACCouNtiNG PoliCiES
Basis of preparation
the Financial Statements and notes have been prepared in accordance with applicable uK GAAP on a going concern basis, as
discussed in the Strategic Report.
the principal accounting policies are summarised below and have been applied consistently in the current and preceding year.
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 two to five 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.
Current taxation
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.
144 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Financial Statements 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.
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 payments
the Company accounts for share-based payments as equity-settled. Equity-settled share-based payments are measured at fair
value at the date of grant using an appropriate option pricing model. For those share options that had previously been accounted for
as cash-settled, the fair value at the date of transition became the fair value at the date of grant for the equity-settled share-based
options. the fair value at the date of grant is expensed on a straight-line basis over the vesting period based on the Company’s
estimate of shares that will eventually vest.
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 derivative financial instruments
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.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 145
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Notes to the Company Financial Statements (continued)
for the year ended 30th November 2013
(A). ACCouNtiNG PoliCiES (CoNtiNuEd)
Own shares
Shares in St. Modwen Properties PlC held by the Company are classified in 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 to 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.
(b). RESult 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 profit for the year ended 30th November 2013 was £34.6m (2012: £9m loss).
(C). oPERAtiNG ExPENSES
(i) Audit fees
Fees paid to deloitte llP in respect of:
Fees payable for the audit of the
Company’s Annual Financial Statements
Total audit fees
Audit-related assurance services
other assurance services
tax compliance services
tax advisory services
Total non-audit fees
Total fees
2013
2012
Audit and
audit-related
services
£’000
Other services
£’000
Total
£’000
Audit and
audit-related
services
£’000
Other services
£’000
Total
£’000
150
150
50
–
–
–
50
200
–
–
–
–
50
45
95
95
150
150
50
–
50
45
145
295
137
137
50
–
–
–
50
187
–
–
–
20
50
19
89
89
137
137
50
20
50
19
139
276
(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
Total employees
the total payroll costs of the employees were:
Wages and salaries
Social security costs
Pension costs
Total payroll costs
146 St. Modwen Properties PLC Annual Report and Financial Statements 2013
2013
Number
2012
Number
146
38
46
230
2013
£m
11.7
1.8
0.7
14.2
136
38
41
215
2012
£m
11.4
1.5
0.7
13.6
Financial Statements (d). diVidENdS
dividends paid during the year were in respect of the final dividend for 2012 and an interim dividend for 2013. 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.
(E). tANGiblE FixEd ASSEtS
2013
2012
p per share
£m
p per share
2.42
1.33
3.75
2.67
5.3
2.9
8.2
5.9
2.20
1.21
3.41
2.42
Cost or valuation
At 30th November 2012
Additions
At 30th November 2013
Depreciation
At 30th November 2012
Charge for the year
At 30th November 2013
Net book value
At 30th November 2012
At 30th November 2013
Long
leasehold
investment
properties
£m
Plant,
machinery
and
equipment
£m
0.3
–
0.3
–
–
–
0.3
0.3
2.5
0.2
2.7
2.3
0.2
2.5
0.2
0.2
£m
4.4
2.4
6.8
4.8
Total
£m
2.8
0.2
3.0
2.3
0.2
2.5
0.5
0.5
investment properties were valued at 30th November 2013 by Jones lang laSalle llP, Chartered Surveyors, in accordance with the
Appraisal and Valuation Manual of the Royal institution of Chartered Surveyors, on the basis of market value. Jones lang laSalle
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.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 147
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Notes to the Company Financial Statements (continued)
for the year ended 30th November 2013
(F). iNVEStMENtS hEld AS FixEd ASSEtS
Valuation
At 30th November 2012
Revaluation of investments
At 30th November 2013
Cost
At 30th November 2012
At 30th November 2013
Investment
in subsidiary
companies
£m
Investment
in joint
ventures
£m
565.0
23.3
588.3
278.3
278.3
85.4
19.0
104.4
26.5
26.5
Total
£m
650.4
42.3
692.7
304.8
304.8
Subsidiary companies
At 30th November 2013 the principal subsidiaries, all of which were held directly by the Company, were as follows:
Entity name
Chaucer Estates limited
holaw (462) limited
leisure living limited
Redman heenan Properties limited
Sowcrest limited
St. Modwen developments limited
St. Modwen Properties Sarl
St. Modwen Ventures limited
Stoke on trent Regeneration limited
uttoxeter Estates limited
trentham leisure limited
Norton & Proffitt developments limited
VSM Estates (holdings) limited
Country of incorporation
Proportion of ordinary
shares held
Principal nature
of business
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
Luxembourg
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
100%
100%
100%
100%
100%
100%
100%
100%
81%
81%
80%
75%
50%
Property investment
Property investment
Leisure operator
Property investment
Property development
Property development
Property investment
Property investment
Property development
Property development
Leisure operator
Property development
Property development
Joint ventures
At 30th November 2013 the principal joint ventures were:
Entity name
barton business Park limited
Key Property investments limited
Skypark development Partnership llP
Country of incorporation
England & Wales
England & Wales
England & Wales
VSM Estates uxbridge (Group) limited
England & Wales
Proportion of ordinary
shares held
Principal nature
of business
50%
50%
50%
50%
Property development
Property investment
and development
Property development
Property investment
and development
Many of the shareholder agreements for joint ventures and associates contain change of control provisions, as is common for
such arrangements.
the Company has taken advantage of the exemption under Section 410(2) of the Companies Act 2006 by providing information
only in relation to undertakings whose results or financial position, in the opinion of the directors, principally affected the Group
Financial Statements.
A complete list of subsidiary, joint venture and associated undertakings will be attached to the next St. Modwen Properties PlC
annual return to Companies house.
148 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Financial Statements (G). dEbtoRS
Amounts falling due after more than one year:
Amounts falling due from subsidiaries
Amounts due from joint venture and associated companies
Amounts falling due within one year:
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)
(h). CREditoRS
Amounts falling due within one year:
bank overdrafts
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 loans
2013
£m
206.6
6.0
212.6
2013
£m
0.3
275.8
11.2
1.4
3.2
5.9
3.8
2012
£m
215.0
6.0
221.0
2012
£m
0.3
196.5
6.8
1.2
3.8
2.9
5.3
301.6
216.8
2013
£m
2012
£m
8.4
0.8
257.7
4.0
1.5
1.4
10.6
12.3
296.7
2013
£m
190.0
80.0
270.0
5.4
1.2
252.1
3.9
0.8
0.8
10.3
18.5
293.0
2012
£m
191.1
80.0
271.1
All bank borrowings are secured by a fixed charge over the property assets of the Company and its subsidiaries.
other loans comprise an unsecured 6.25% fixed rate retail bond maturing in November 2019.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 149
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Notes to the Company Financial Statements (continued)
for the year ended 30th November 2013
(i). boRRoWiNGS
the maturity profile of the bank borrowings, all of which are wholly repayable within five years, is as follows:
less than one year
one to two years
two to five years
More than five years
total
(J). dEFERREd tAxAtioN
the amounts of deferred taxation provided and unprovided in the Financial Statements are:
2013
£m
62.5
45.0
82.5
80.0
270.0
other timing differences
Reconciliation of movement on deferred tax asset included in debtors
balance as at 30th November 2012
Profit and loss Account
Balance as at 30th November 2013
Reconciliation of deferred tax liability included in pension scheme asset
balance as at 30th November 2012
Profit and loss Account
Statement of total Recognised Gains and losses
Balance as at 30th November 2013
(K). ShARE CAPitAl
Equity share capital
At start of year
issue of share capital
At end of year
Provided
Unprovided
2013
£m
(3.8)
(3.8)
2012
£m
(5.3)
(5.3)
2013
£m
–
–
Ordinary
10p shares
Number
200,360,931
20,016, 057
220,376,988
2012
£m
5.4
100.0
91.1
80.0
276.5
2012
£m
–
–
£m
(5.3)
1.5
(3.8)
£m
–
–
–
–
£m
20.0
2.0
22.0
See note 3d of the Group Financial Statements for details of outstanding options to acquire ordinary shares.
on 1st March 2013 the Group completed a ‘cash box’ placing of 20,016,057 ordinary shares of 10p each at £2.45 per share.
Net proceeds were £47.9m after share issue costs, of which the £2.0m nominal value of the shares was credited to share capital
with the balance to other reserves.
150 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Financial Statements (l). RESERVES
At 30th November 2012
Surplus on revaluation of investments
Retained profit for the year (note b)
Equity raise
Share-based payment charge
Net share disposals
dividends paid (note d)
Actuarial loss on pension scheme (note M)
Movement on deferred tax relating to pension asset (note J)
Share
premium
account
£m
102.8
–
–
–
–
–
–
–
–
Revaluation
reserve
£m
Profit
and Loss
Account
£m
Share
incentive
reserve
£m
Own
shares
£m
Other
reserves
£m
380.6
42.3
–
–
–
–
–
–
–
21.9
–
34.6
–
–
–
(8.2)
(0.1)
–
2.4
(0.5)
–
–
–
(0.3)
–
–
–
–
–
–
–
–
0.2
–
–
–
0.3
–
–
45.9
–
–
–
–
–
At 30th November 2013
102.8
422.9
48.2
2.1
(0.3)
46.2
own shares represents the cost of 72,582 (2012: 215,754) shares held by the Employee benefit trust. the open market value of the
shares held at 30th November 2013 was £259,553 (2012: £469,912). in addition the Employee benefit trust has £0.1m (2012: £0.1m)
of cash and £0.3m due to the Company (2012: £3.5m due from the Company), that can only be used for the benefit of employees.
(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 iAS 19 ‘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
(o). CoNtiNGENt liAbilitiES
2013
2012
Land and
buildings
£m
–
0.5
0.1
0.6
Other
£m
0.2
0.4
0.2
0.8
Land and
buildings
£m
–
0.1
0.5
0.6
Other
£m
0.1
0.4
0.2
0.7
details of contingent liabilities together with guarantees made in respect of certain subsidiaries in order that they qualify for the
exemption from audit under S479A of the Companies Act 2006 are provided in note 21 to the Group Financial Statements. Further,
the Company guarantees the performance of its subsidiaries in the course of their usual commercial activities.
(P). RElAtEd PARty tRANSACtioNS
details of related party transactions are provided in note 22 to the Group Financial Statements.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 151
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Five year Record
Rental income(1)
Property profits(1)(2)
Revaluation surplus/(deficit)(1)(3)
Pre-tax profit/(loss)(4)
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
Minority interests
Equity attributable to owners of the Company
Financed by
Share capital
Reserves
own shares
(1) including share of joint ventures
(2) Stated before net realisable value provisions
(3) including net realisable value provisions
(4) including post-tax profit of joint ventures
the figures above are all presented under iFRSs.
2009
£m
33.5
7.6
(122.3)
(120.2)
(59.7)
–
–
200.1
(20%)
762.9
41.3
192.7
(277.1)
(318.8)
(8.7)
392.3
20.0
372.7
(0.4)
392.3
2010
£m
33.7
21.9
23.0
38.2
18.6
1.00
18.6
218.6
9%
828.0
49.4
171.6
(297.3)
(314.9)
(9.6)
427.2
20.0
407.8
(0.6)
427.2
2011
£m
35.5
23.8
33.9
51.7
21.7
3.10
7.0
237.6
9%
848.7
50.3
191.1
(267.0)
(347.1)
(11.6)
464.4
20.0
444.9
(0.5)
464.4
2012
£m
36.2
29.0
28.0
52.8
21.3
3.41
6.2
256.4
8%
770.4
75.2
175.2
(141.1)
(366.0)
(11.1)
502.6
20.0
483.1
(0.5)
502.6
2013
£m
36.3
39.8
42.0
82.2
33.5
3.75
9.4
278.7
11%
813.3
95.3
195.5
(136.4)
(340.7)
(12.8)
614.2
22.0
592.5
(0.3)
614.2
152 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Financial Statements Glossary of terms
Active management — the component of property revaluations delivered as a direct result of management actions and initiatives e.g.
obtaining planning consent, achieving remediation milestones and improving lease terms.
EPRA — 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) — the balance Sheet net assets, excluding fair value adjustments for debt and related derivatives
together with deferred taxation on revaluations and capital allowances.
EPRA net asset value per share — EPRA net asset value divided by the diluted number of shares at the period end.
Estimated net rental income — the passing cash rent less ground rent at the balance sheet date, estimated non-recoverable
outgoings and void costs including service charges, insurance costs and void rates.
Estimated rental value (ERV) — 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 — 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 — the level of the Group’s bank borrowing (excluding finance leases) expressed as a percentage of net assets.
Gross development Value (GdV) — the sale value of property after construction.
iFRiC — international Financial Reporting interpretations Committee.
iFRSs — international Financial Reporting Standards.
initial yield — the annualised net rent expressed as a percentage of the valuation.
interest — net finance costs (excluding the mark-to-market of derivative financial instruments and other non-cash items) for the
Group (including its share of joint ventures and associates).
interest Cover Ratio — the ratio of operating income to interest.
land bank — the bank of property comprising all of the land under the Group’s control, whether wholly owned or through joint
ventures or development agreements.
liboR — the london interbank offered Rate is the average interest rate that leading banks in london charge when lending to
other banks.
loan-to-value ratio (ltV) — the ratio of Group net debt to the Group property portfolio (excluding joint ventures and associates).
Market value — 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.
Net asset value (NAV) per share — equity attributable to owners of the Company divided by the number of ordinary shares in issue at
the period end.
Net debt — total borrowings less cash and cash equivalents.
Net rental income — the rental income receivable in the period after payment of ground rents and net property outgoings.
Net initial yield — a calculation by the Group’s external valuers as the yield that would be received by a purchaser, based on the
estimated net rental income expressed as a percentage of the acquisition cost, being the market value plus assumed actual
purchasers’ costs at the reporting date. the calculation is in line with EPRA guidance.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 153
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information Glossary of terms (continued)
occupancy rates — the ERV attributable to vacant units as a proportion of total ERV (including the Group’s share of joint ventures
and associates).
operating income — the total of net rental income, other income and property profits.
operating costs/business running costs — administrative expenses plus net finance costs (excluding the mark-to-market of
derivative financial instruments and other non-cash items) for the Group (including its share of joint ventures and associates).
Persimmon joint venture — a contractual arrangement with Persimmon to develop residential units on agreed sites within the
St. Modwen land bank.
Pre-sold projects — 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.
Profit before all tax — profit before tax stated before the deduction of tax payable by joint ventures and associates.
Project ModEl — Project ModEl originally saw six former london-based RAF sites freed up for disposal and development as the
Mod relocated to an integrated site at RAF Northolt. ViNCi St. Modwen (VSM) was appointed by the Mod in 2006 to secure planning
consent to redevelop the six sites of which VSM disposed of four, retaining RAF Mill hill and RAF uxbridge. the latter was removed
from the Mod arrangement and transferred to a separate joint venture with ViNCi in 2012.
Property portfolio — the property components of investment properties and inventories of the Group (including its share of joint
ventures and associates).
Property profits — development profit (before the deduction of net realisable value provisions) plus gains on disposals of
investments/investment properties for the Group, including its share of joint ventures and associates.
Rental lease length — the weighted average lease term to the first tenant break.
Rent roll — the gross rent plus rent reviews that have been agreed as at the reporting date.
RiCS — Royal institution of Chartered Surveyors.
See-through gearing — the ratio of see-through net debt to net assets.
See-through loan-to-value ratio — the ratio of see-through net debt to the property portfolio.
See-through net debt — net debt of the Group together with its share of the net debt of joint ventures and associates.
SiC — Standards and interpretations Committee.
trading profit — operating income less operating costs.
tSR — total shareholder return represents the growth in value of a shareholding over a specified period, assuming that dividends are
reinvested to purchase additional units of stock.
Voids — the ERV of vacant properties expressed as a percentage of the total ERV 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 — the Group loan interest and derivative costs per annum at the period end, divided by total Group
debt in issue at the period end.
154 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Additional Information Notice of Annual General Meeting
Notice is hereby given that the seventy third Annual General Meeting (AGM) of St. Modwen Properties PlC (the Company) will
be held at the Marketing Suite, innovation Centre, 1 devon Way, longbridge technology Park, birmingham b31 2tS on Friday,
28th March 2014 at 12.00 noon to consider and, if thought fit, to pass the following resolutions. Resolutions 1 to 17 inclusive will
be proposed as ordinary resolutions and resolutions 18 to 20 inclusive will be proposed as special resolutions.
oRdiNARy buSiNESS
1. that the Annual Report and Financial Statements for the financial year ended 30th November 2013 be received.
2. that the directors’ Remuneration Report, excluding the part containing the directors’ remuneration policy, set out on pages 76 to
97 of the Annual Report and Financial Statements for the financial year ended 30th November 2013 be approved.
3. that the directors’ remuneration policy, the full text of which is set out on pages 78 to 87 of the Annual Report and Financial
Statements for the financial year ended 30th November 2013 and which will take effect from 1st december 2014, be approved.
4. that a final dividend for the financial year ended 30th November 2013 of 2.67p per ordinary share payable on 4th April 2014 to
those shareholders on the register of members at the close of business on 7th March 2014 be declared.
5. that Richard Mully be elected as a director.
6. that Steve burke be re-elected as a director.
7. that Kay Chaldecott be re-elected as a director.
8. that Simon Clarke be re-elected as a director.
9. that Michael dunn be re-elected as a director.
10. that lesley James be re-elected as a director.
11. that bill oliver be re-elected as a director.
12. that John Salmon be re-elected as a director.
13. that bill Shannon be re-elected as a director.
14. that deloitte llP be re-appointed as auditor of the Company to hold office until the conclusion of the next general meeting at
which accounts are laid before the Company.
15. that the directors be authorised to determine the remuneration of the Company’s auditor.
SPECiAl buSiNESS
16. that the amendments to the rules of the St. Modwen Properties PlC 2004 Saving Related Share option Scheme (including
the extension of the scheme for a period of 10 years from the date of the AGM), as summarised and explained in Part i of
the Appendix to this notice of AGM, be approved and the directors be authorised to do all things necessary to give effect to
the amendments.
17. that, in substitution for all existing authorities and without prejudice to previous allotments or offers or agreement to allot made
pursuant to such authorities, the directors be generally and unconditionally authorised in accordance with section 551 of the
Companies Act 2006 to exercise all the powers of the Company to:
(a) allot shares in the Company or grant rights to subscribe for or to convert any security into shares in the Company up to an
aggregate nominal amount of £7,345,899 (the Section 551 amount); and
(b) allot equity securities (within the meaning of section 560 of the Companies Act 2006) up to a further aggregate nominal
amount of £7,345,899 in connection with an offer by way of a rights issue to:
(i) ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings; and
(ii) holders of other equity securities, as required by the rights of those securities or, subject to such rights, as the directors
otherwise consider necessary,
subject to such exclusions or other arrangements as the directors may deem necessary or expedient to deal with treasury
shares, fractional entitlements or legal or practical problems under the laws of, or the requirements of any regulatory body or
any stock exchange in, any country or territory,
such authorities to expire at the conclusion of the AGM of the Company to be held after the date of the passing of this resolution
or 27th June 2015, whichever is the earlier, but, in each case, so that the Company may make offers and enter into agreements
before the expiry of such authority which would or might require shares to be allotted or rights to subscribe for or to convert any
security into shares to be granted after such expiry and the directors may allot shares or grant such rights under any such offer or
agreement as if the authority had not expired.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 155
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information
Notice of Annual General Meeting (continued)
SPECiAl buSiNESS (CoNtiNuEd)
Special resolution
18. that, in substitution for all existing powers and subject to the passing of resolution 17, the directors be generally empowered
pursuant to section 570 of the Companies Act 2006 to allot equity securities (within the meaning of section 560 of the Companies
Act 2006) for cash pursuant to the authority granted by resolution 17 and/or where the allotment constitutes an allotment of
equity securities by virtue of section 560(3) of the Companies Act 2006, in each case free of the restriction in section 561 of the
Companies Act 2006, such power to be limited to:
(a) the allotment of equity securities pursuant to the authority granted by paragraph (a) of resolution 17 and/or an allotment which
constitutes an allotment of equity securities by virtue of section 560(3) of the Companies Act 2006 (in each case otherwise
than in the circumstances set out in paragraph (b) of this resolution) up to a nominal amount of £1,101,884 (the Section 561
amount); and
(b) the allotment of equity securities in connection with an offer of equity securities (but in the case of an allotment pursuant to
the authority granted by paragraph (b) of resolution 17, such power shall be limited to the allotment of equity securities in
connection with an offer by way of a rights issue only):
(i)
to ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings; and
(ii) to holders of other equity securities, as required by the rights of those securities or, subject to such rights, as the directors
otherwise consider necessary,
subject to such exclusions or other arrangements as the directors may deem necessary or expedient to deal with treasury
shares, fractional entitlements or legal or practical problems under the laws of, or the requirements of any regulatory body or
any stock exchange in, any country or territory,
such power to expire at the conclusion of the AGM of the Company to be held after the date of the passing of this resolution or
27th June 2015, whichever is the earlier, but so that the Company may make offers and enter into agreements before the power
expires which would or might require equity securities to be allotted after such power expires and the directors may allot equity
securities under any such offer or agreement as if the power had not expired.
Special resolution
19. that the Company be generally and unconditionally authorised for the purposes of section 701 of the Companies Act 2006
to make market purchases (as defined in section 693 of the Companies Act 2006) of ordinary shares of 10p each in its capital
(ordinary Shares) on such terms and in such manner as the directors may from time to time determine provided that:
(a) the maximum aggregate number of ordinary Shares hereby authorised to be purchased is 22,037,698;
(b) the minimum price which may be paid for an ordinary Share is 10p (exclusive of expenses);
(c) the maximum price which may be paid for an ordinary Share is the highest of (in each case exclusive of expenses):
(i)
an amount equal to 105% of the average market value of an ordinary Share for the five business days immediately
preceding the day on which the ordinary Share is contracted to be purchased; and
(ii) the higher of the price of the last independent trade and the highest current independent bid for any number of ordinary
Shares on the london Stock Exchange; and
(d) this authority shall, unless previously renewed, expire at the conclusion of the AGM of the Company to be held after the
date of the passing of this resolution or 27th June 2015, whichever is the earlier, except in relation to the purchase of any
ordinary Shares the contract for which was concluded before the date of expiry of the authority and which would or might be
completed wholly or partly after that date.
Special resolution
20. that a general meeting other than an AGM may be called on not less than 14 clear days’ notice.
RECoMMENdAtioN
the board confirms that, in its opinion, all of the resolutions are in the best interests of the Company and its shareholders as a whole.
the directors unanimously recommend that shareholders vote in favour of each of the above resolutions, as they intend to do in
respect of their own beneficial shareholdings.
by order of the board
tanya Stote
Company Secretary
20th February 2014
St. Modwen Properties PlC
Registered number: 349201
Registered office: Sir Stanley Clarke house, 7 Ridgeway, quinton business Park, birmingham b32 1AF
156 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Additional Information
ExPlANAtoRy NotES to PRoPoSEd RESolutioNS
Resolution 1 – Annual Report and Financial Statements
Resolution 1 is an ordinary resolution to receive the Annual Report and Financial Statements for the financial year ended
30th November 2013. Copies will be available at the AGM.
Resolutions 2 and 3 – directors’ Remuneration Report
there are new requirements this year in relation to the content and approval of the directors’ Remuneration Report following changes
made to the Companies Act 2006. in accordance with the new Companies Act 2006 provisions, the directors’ Remuneration
Report contains:
• a statement by lesley James, Chair of the Remuneration Committee pages 76 – 77;
• the remuneration policy report (pages 78 – 87) which provides details of the remuneration policy that will apply from 1st december
2014; and
• the annual report on remuneration (pages 87 – 97) which describes how the remuneration policy was implemented for the year
ended 30th November 2013 and how the policy will apply for the year ending 30th November 2014.
Resolution 2 is an ordinary resolution to approve the directors’ Remuneration Report, other than the part containing the directors’
remuneration policy. Resolution 2 is an advisory resolution and does not affect the future remuneration paid to any director.
Resolution 3 is an ordinary resolution to approve the directors’ remuneration policy which is set out in the directors’ Remuneration
Report. once the directors’ remuneration policy as approved by shareholders comes into effect, all payments by the Company to
the directors and any former directors must be made in accordance with the policy (unless a payment has been separately approved
by a shareholder resolution). if approved, the directors’ remuneration policy will take effect from 1st december 2014. Payments will
continue to be made to directors and former directors in line with existing arrangements until that date.
Resolution 4 – declaration of final dividend
Resolution 4 is an ordinary resolution by which shareholders are asked to declare a final dividend. the directors recommend a final
dividend for the financial year ended 30th November 2013 of 2.67p per ordinary share. if approved, this will be paid on 4th April 2014
to shareholders on the register of members at the close of business on 7th March 2014.
Resolutions 5 to 13 – Election and re-election of directors
Resolutions 5 to 13 are ordinary resolutions which deal with the election and re-election of the directors.
Following his appointment to the board on 1st September 2013 and in accordance with the Company’s Articles of Association,
Richard Mully will retire and offer himself for election at the 2014 AGM. All other directors will retire and offer themselves for
re-election in accordance with the 2012 uK Corporate Governance Code.
biographical details of all directors are set out on pages 56 and 57.
the performance of the board as a whole, as well as the contribution made by individual directors, has been reviewed during the
course of the year. After considering this evaluation, the Chairman has confirmed that the performance of every executive and
non-executive director continues to be effective, that they continue to demonstrate commitment to their respective roles, and that
their respective skills complement one another to enhance the overall operation of the board.
Resolutions 14 and 15 – Auditor appointment and remuneration
At last year’s AGM shareholders re-appointed deloitte llP as auditor of the Company to hold office until the conclusion of the 2014
AGM. deloitte has expressed a willingness to continue in office and the Audit Committee has reviewed the effectiveness of the audit
process and recommends their re-appointment. therefore resolutions 14 and 15 are ordinary resolutions to re-appoint deloitte llP
as auditor until the conclusion of the next general meeting at which accounts are laid before the Company and to authorise the
directors to determine their remuneration.
Resolution 16 – Proposed extension of SAyE option scheme and amendments
the St. Modwen Properties PlC 2004 Saving Related Share option Scheme (the SAyE Scheme) was adopted by the Company
in general meeting on 6th August 2004. it is a tax-advantaged option scheme under which employees are offered options over the
Company’s shares, linked to a savings account funded by deductions from the employees’ salary. the savings are used to pay
the exercise price on exercise of the option, but can be withdrawn by the employee if the option is not exercised. options must
be offered to all employees of the Group who have completed a qualifying period of employment, and the board views the SAyE
Scheme as a useful way to motivate the wider workforce and align their interests with those of shareholders.
the SAyE Scheme is due to terminate on 6th August 2014. the board would like to retain the ability to grant tax-advantaged
save-as-you-earn options, and it has been decided that it would be administratively simpler to extend the existing scheme for a
further 10 years than to adopt a new scheme. Accordingly, the board is seeking shareholder approval to an amendment to the SAyE
Scheme to extend it for a further 10 years.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 157
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Notice of Annual General Meeting (continued)
ExPlANAtoRy NotES to PRoPoSEd RESolutioNS (CoNtiNuEd)
the opportunity is also being taken to update the rules in certain respects and make certain other changes. the Finance Act
2013 made certain simplifications and improvements to the legislative rules applicable to option schemes such as the SAyE
Scheme, and some of these provisions had the effect of automatically amending the SAyE Scheme as of 17th July 2013. the text
of the rules is being updated to reflect these automatic amendments. the text is also being updated to reflect certain amendments
to statutory references arising from the updating of tax and company law legislation: these changes are not intended to alter the
meaning of the rules. the opportunity is also being taken to rename the SAyE scheme the ‘St. Modwen Properties PlC Saving
Related Share option Scheme’.
the terms of the SAyE Scheme provide that no alteration to the rules to the advantage of option holders (except for minor
amendments to benefit the administration of the scheme and amendments to obtain or maintain favourable tax, exchange control
or regulatory treatment for option holders or any participating company) shall be made without the prior approval of shareholders
in general meeting. Part i of the Appendix to this notice of AGM summarises the proposed amendments in relation to which
shareholder approval is being sought at the AGM and explains their effect.
in addition, as it is proposed that the SAyE Scheme be renewed for a further 10 years, a description of the principal terms of the
SAyE Scheme as amended by the proposed amendments is set out in Part ii of the Appendix to this notice of AGM.
A copy of the rules of the SAyE Scheme, showing the proposed amendments (including amendments in relation to which
shareholder approval is not being sought), will be available for inspection at the registered office of the Company during normal
business hours from the date of this notice of AGM until the close of the AGM, and at the place of the AGM from 15 minutes before
the start of the meeting until the end of the meeting.
Resolution 17 – Authority to allot shares
the authority conferred on the directors at last year’s AGM to allot shares in the Company expires at the conclusion of the 2014
AGM. Resolution 17 is an ordinary resolution to renew this authority.
the Association of british insurers (Abi) guidelines on directors’ authority to allot shares state that Abi members will permit, and
treat as routine, resolutions seeking authority to allot new shares representing up to one-third of a company’s issued share capital.
in addition, they will treat as routine a request for authority to allot shares representing an additional one-third of a company’s issued
share capital provided that it is only used to allot shares pursuant to a fully pre-emptive rights issue.
Paragraph (a) of resolution 17 will, if passed, authorise the directors to allot shares up to a maximum aggregate nominal amount of
£7,345,899 which represents one-third of the Company’s issued ordinary share capital as at 10th February 2014 (being the latest
practicable date prior to the publication of the notice of AGM). Paragraph (b) of resolution 17 proposes that, in accordance with
Abi guidance, an additional authority be conferred on the directors to allot shares in connection with a rights issue up to a further
maximum aggregate nominal amount of £7,345,899.
the authorities sought in paragraphs (a) and (b) of resolution 17 are in substitution for all existing authorities granted in the
Company’s Articles of Association or otherwise, and are without prejudice to previous allotments or agreements or offers to
allot made under such existing authorities. the authorities will each expire at the earlier of the conclusion of the next AGM of the
Company and 27th June 2015.
the directors have no present intention of exercising these authorities other than to fulfil the Company’s obligations under its
share incentive schemes approved previously by shareholders, but believe that it is in the best interests of the Company to have
the authorities available to respond to market developments and to enable allotments to take place without the need for a general
meeting should they determine that it is appropriate to do so.
Resolution 18 – disapplication of pre-emption rights
if the directors wish to allot new shares and other equity securities company law requires that these shares are offered first to
shareholders in proportion to their existing holdings.
Resolution 18 is a special resolution which seeks to renew the authority conferred on the directors at last year’s AGM to issue equity
securities of the Company for cash without application of the pre-emption rights as provided by section 561 of the Companies
Act 2006.
Paragraph (a) of resolution 18 will, if passed, authorise the directors to allot new shares pursuant to the authority given in paragraph
(a) of resolution 17 for cash (i) in connection with a pre-emptive offer or rights issue or (ii) otherwise up to a maximum aggregate
nominal value of £1,101,884, equivalent to 5% of the Company’s issued ordinary share capital as at 10th February 2014 (being the
latest practicable date prior to the publication of the notice of AGM) in each case without the shares first being offered to existing
shareholders in proportion to their existing holdings.
in light of the Abi guidance described in the explanation of resolution 17 above, paragraph (b) of resolution 18 will, if passed,
authorise the directors to allot new shares pursuant to the authority given by paragraph (b) of resolution 17 for cash in connection
with a rights issue without the shares first being offered to existing shareholders in proportion to their existing holdings.
the authorities sought in paragraphs (a) and (b) of resolution 18 are in substitution for all existing authorities granted in the
Company’s Articles of Association or otherwise, and are without prejudice to previous allotments or agreements or offers to
allot made under such existing authorities. the authorities will each expire at the earlier of the conclusion of the next AGM of the
Company and 27th June 2015.
158 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Additional Information in accordance with the Pre-Emption Group’s Statement of Principles dated July 2008, the directors confirm their intention not to
issue more than 7.5% of the Company’s issued ordinary share capital for cash other than to existing shareholders in any rolling
three-year period without prior consultation with shareholders.
Resolution 19 – Authority to purchase shares
Resolution 19 is a special resolution to renew the authority granted to the directors at last year’s AGM to make market purchases of
its own ordinary shares through the market as permitted by the Companies Act 2006 and within institutional shareholder guidelines.
No shares were purchased during the year and the Company does not currently hold any shares in treasury.
if passed, the resolution gives authority for the Company to purchase up to 22,037,698 of its ordinary shares, which represents
10% of the Company’s issued ordinary share capital as at 10th February 2014 (being the latest practicable date prior to the
publication of the notice of AGM). the resolution specifies the minimum and maximum prices which may be paid for any ordinary
shares purchased under this authority. the authority will expire at the earlier of the conclusion of the next AGM of the Company and
27th June 2015.
the directors have no present intention for the Company to exercise the authority granted by this resolution to purchase its own
shares. they would do so only after taking account of the overall financial position of the Company and in circumstances where to
do so would be regarded by the board as being in the best interests of shareholders generally and result in an increase in earnings
per ordinary share. the Company may either cancel any shares it purchases under this authority or transfer them into treasury (and
subsequently sell or transfer them out of treasury or cancel them).
As at 10th February 2014 (being the latest practicable date prior to the publication of the notice of AGM), the Company had options
outstanding over 10,361,137 ordinary shares, representing 4.70% of the issued share capital on that date. if the Company was to
purchase the maximum number of shares permitted pursuant to this resolution, the options outstanding at 10th February 2014 would
represent 5.81% of the issued share capital.
Resolution 20 – Notice period of general meetings
Resolution 20 is a special resolution to renew an authority granted at last year’s AGM to allow the Company to hold general meetings
(other than AGMs) on not less than 14 clear days’ notice.
Changes made to the Companies Act 2006 by the Companies (Shareholders’ Rights) Regulations 2009 increased the notice period
required for general meetings of the Company to 21 clear days unless shareholders approve a shorter notice period, which cannot
be less than 14 clear days. this approval will be effective until the Company’s next AGM when it is intended that a similar resolution
will be proposed.
the shorter notice period would not be used as a matter of routine for such meetings, but only where the flexibility is merited by the
business of the meeting and is thought to be to the advantage of shareholders as a whole. AGMs will continue to be held on at least
21 clear days’ notice.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 159
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Notice of Annual General Meeting (continued)
ShAREholdER NotES
1. Entitlement to attend and vote
to be entitled to attend and vote at the AGM (and for the purpose of determining the number of votes they may cast), shareholders
must be entered on the Company’s register of members at 6.00pm on Wednesday, 26th March 2014 (or, in the event of any
adjournment, at 6.00pm on the date which is two days before the date of the adjourned meeting). Changes to the register of
members after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the meeting in
respect of the number of shares registered in their name at that time. it is proposed that all votes on the resolutions at the AGM will
be taken by way of a poll.
2. Appointment of proxies – general
A shareholder entitled to attend and vote at the meeting convened by the notice of AGM is entitled to appoint a proxy to exercise
all or any of his or her rights to attend and to speak and vote on his or her behalf at the meeting. A shareholder 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 held by that shareholder. A proxy need not be a shareholder of the Company but must attend the meeting in person.
For the appointment to be effective, a proxy form (or electronic appointment of proxy, see note 4 below) must be received by the
Company’s registrar not less than 48 hours before the time of the meeting, i.e. not later than 12.00 noon on Wednesday, 26th March
2014. the appointment of a proxy will not prevent a shareholder from subsequently attending the meeting and voting in person if he
or she is entitled to do so and so wishes.
3. Appointment of proxies – proxy form
A proxy form which may be used to make such appointment and give proxy instructions has been sent to shareholders. if you do
not have a proxy form and believe that you should have one, or if you require additional forms to appoint more than one proxy,
please contact the Company’s registrars, Equiniti, on 0871 384 2198 (calls to this number will be charged at 8p per minute plus
network extras. overseas callers should dial +44 (0)121 415 7047. lines are open from 8.30am to 5.30pm, Monday to Friday).
Alternatively photocopy the proxy form which has been sent to you. All forms must be signed and should be returned together in the
same envelope.
the notes to the proxy form explain how to direct your proxy to vote on each resolution or withhold their vote. Please note that the
vote withheld option on the proxy form is provided to enable you to abstain on any particular resolution; it is not a vote in law and will
not be counted in the calculation of votes for or against the resolution. if you sign the proxy form and return it without any specific
directions your proxy will vote or abstain from voting at his or her discretion. if you wish to appoint a proxy other than the Chairman
of the meeting, please insert the name of your chosen proxy holder in the space provided on the proxy form. 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).
in the case of joint holders, the vote of the senior joint holder who tenders a vote, whether in person or by proxy, in respect of the
holding will be accepted to the exclusion of the votes of the other joint holders. For this purpose seniority is determined by the
order in which the names appear in the Company’s register of members in respect of the joint holding. in the case of a corporate
shareholder, the proxy form must be executed under its common seal or signed on its behalf by a duly authorised officer or attorney.
in the case of an individual, the proxy form must be signed by the appointing shareholder. Any alterations made to the proxy form
should be initialled.
4. Appointment of proxies electronically
Shareholders who would prefer to register the appointment of their proxy electronically via the internet can do so through Equiniti’s
website at www.sharevote.co.uk using their personal Voting id, task id and Shareholder Reference Number (which are printed
on the proxy form). Alternatively, shareholders who have already registered with Equiniti’s online portfolio service, Shareview, can
appoint their proxy electronically by logging on to their portfolio at www.shareview.co.uk. Full details and instructions on these
electronic proxy facilities are given on the respective websites. A proxy appointment made electronically will not be valid if sent to
any address other than those provided or if received after 12.00 noon on Wednesday, 26th March 2014.
5. Appointment of proxies through CRESt
CRESt members who wish to appoint a proxy or proxies for the AGM, and any adjournment(s) thereof, through the CRESt
electronic proxy appointment service may do so 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.
160 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Additional Information 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). the message, regardless of whether it relates to 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 Equiniti (id RA19)
by the latest time for receipt of proxy appointments specified above. For this purpose, the time of receipt will be taken to be the time
(as determined by the time stamp applied to the message by the CRESt Applications host) from which Equiniti 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.
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.
6. Changing and revoking proxy instructions
to change your proxy instruction simply submit a new proxy appointment using the methods set out above. the deadline for
receipt of proxy appointments (see note 2 above) also applies in relation to amended instructions. Where two or more valid separate
appointments of proxy are received in respect of the same share and for the same meeting, those received last by Equiniti will
take precedence.
in order to revoke a proxy instruction, a shareholder will need to inform the Company by sending a signed hard copy notice clearly
stating his/her intention to revoke a proxy appointment to Equiniti limited, Aspect house, Spencer Road, lancing bN99 6dA. in the
case of a corporate shareholder, the revocation notice must be executed under its common seal or signed on its behalf by a duly
authorised officer or attorney. Any power of attorney or any other authority under which the revocation notice is signed (or a duly
certified copy of such power of attorney) must be included with the revocation notice. the revocation must be received no later than
12.00 noon on Wednesday, 26th March 2014. if a shareholder attempts to revoke his or her proxy appointment but the revocation is
received after the time specified the original proxy appointment will remain valid. termination of proxy appointments made through
CRESt must be made in accordance with the procedures described in the CRESt Manual.
7. Corporate representatives
A corporate shareholder can appoint one or more corporate representatives who may exercise on its behalf all of its powers as a
shareholder provided that they do not do so in relation to the same shares. Representatives of shareholders that are corporations will
have to produce evidence of their proper appointment when attending the AGM. Please contact Equiniti for further guidance.
8. Nominated persons
Any person to whom this notice is sent who is not a shareholder but is a person nominated by a shareholder under section 146
of the Companies Act 2006 to enjoy information rights (a Nominated Person) may, under an agreement with the shareholder who
nominated him/her, have a right to be appointed, or have someone else appointed, as a proxy for the AGM. if a Nominated Person
has no such right or does not wish to exercise it, he/she may, under any such agreement, have a right to give voting instructions to
the shareholder.
the statement of the rights of shareholders in relation to the appointment of proxies set out in notes 2 to 7 above does not apply
to Nominated Persons. the rights described in those notes can only be exercised by shareholders of the Company. if you are a
Nominated Person it is important to remember that your main contact in terms of your investment remains the registered shareholder
or the custodian or broker who administers the investment on your behalf.
9. Shareholder participation
Any shareholder attending the AGM has the right to ask questions relating to the business of the meeting and the Company has
an obligation to answer such questions unless (i) to do so would interfere unduly with the preparation for the meeting or involve the
disclosure of confidential information, (ii) the answer has already been given on a website in the form of an answer to a question, or
(iii) it is undesirable in the interests of the Company or the good order of the meeting that the question be answered.
10. Availability of information on website
A copy of this notice of AGM, 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.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 161
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Notice of Annual General Meeting (continued)
ShAREholdER NotES (CoNtiNuEd)
11. Website publication of audit concerns
Shareholders satisfying the threshold requirements in section 527 of the Companies Act 2006 can require the Company to publish
a statement on its website setting out any matter that such shareholder proposes to raise at the meeting relating to (a) the audit of
the Company’s accounts (including the auditor’s report and the conduct of the audit) that are to be laid before the AGM or (b) any
circumstances connected with an auditor of the Company ceasing to hold office since the last AGM. the Company cannot require
the shareholders requesting the publication to pay its expenses in complying with the request. Any statement placed on the website
must also be sent to the Company’s auditor no later than the time the statement is made available on the website. the business
which may be dealt with at the meeting includes any statement that the Company has been required to publish on its website under
section 527 of the Companies Act 2006.
12. total voting rights
As at 10th February 2014 (being the latest practicable date prior to the publication of the notice of AGM), the Company’s issued share
capital consisted of 220,376,988 shares carrying one vote each. therefore the total voting rights in the Company as at 10th February
2014 was 220,376,988.
13. documents available for inspection
the following documents are available for inspection at the registered office of the Company during normal business hours and will
be at the place of the AGM from 15 minutes before the start of the meeting until the end of the meeting:
(i) copies of the directors’ service contracts with the Company;
(ii) copies of the non-executive directors’ letters of appointment;
(iii) a copy of the Company’s Articles of Association; and
(iv) a copy of the rules of the SAyE Scheme showing the proposed amendments (including amendments in relation to which
shareholder approval is not being sought).
14. Communication with the Company
you may not use any electronic address provided in this notice of AGM or any related documents (including the proxy form) to
communicate with the Company for any purposes other than those expressly stated.
162 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Additional Information APPENdix – AMENdMENtS to thE St. ModWEN PRoPERtiES PlC 2004 SAViNG RElAtEd ShARE oPtioN SChEME
Part i of this Appendix to the notice of AGM summarises and explains the effect of the proposed amendments to the St. Modwen
Properties PlC 2004 Saving Related Share option Scheme (the SAyE Scheme) in relation to which shareholder approval is sought at
the AGM. Part ii of this Appendix contains a description of the principal terms of the SAyE Scheme, amended as proposed.
A copy of the rules of the SAyE Scheme, showing the proposed amendments (including amendments in relation to which
shareholder approval is not being sought), will be available for inspection at the registered office of the Company during normal
business hours from the date of this notice of AGM until the close of the AGM, and at the place of the AGM from 15 minutes before
the start of the meeting until the end of the meeting.
Part i – Summary and explanation of the effect of amendments to the SAyE Scheme in relation to which shareholder approval is
sought at the AGM
1. Extension of term of SAYE Scheme
the SAyE Scheme (as currently drafted) is due to terminate on 6th August 2014, without prejudice to existing options. No new
options may be granted under it after that date. it is proposed that the SAyE Scheme be extended so that it will terminate on the
tenth anniversary of the date of the AGM, i.e. 28th March 2024, and options may be granted until that date. the termination would,
again, be without prejudice to options which have already been granted by that date. For a description of the principal terms of the
SAyE Scheme, amended as proposed, see Part ii of this Appendix.
2. Allowing three year options to be granted
the legislation governing option schemes such as the SAyE Scheme allows either three year or five year options to be granted,
linked to savings contracts with either 36 or 60 monthly savings contributions respectively. the SAyE Scheme is currently drafted
on the basis that only five year options will be granted. it is proposed that the SAyE Scheme be amended to facilitate invitations to
apply for the grant of either or both three and five year options, at the discretion of the board. this will give added flexibility and is
expected that it may increase participation in the SAyE Scheme by employees.
3. Allowing exercise prices at a discount of up to 20% to market value
the legislation governing option schemes such as the SAyE Scheme allows options to be granted with an exercise price which is no
less than 80% of the market value of the shares at the time of grant (or such earlier time as may be agreed with hMRC). the SAyE
Scheme as currently drafted allows an exercise price which is no less than 90% of the market value of the shares at the date of
the invitation. it is proposed that this is amended to 80%, to give more flexibility and to allow the SAyE Scheme to be made more
attractive to participants. if invitations are issued with an exercise price of 80% of market value, rather than 90% of market value, this
would enable participants to acquire more shares for the same savings, and accordingly may increase the overall number of shares
used in the SAyE Scheme.
4. Amendments to SAYE Scheme limits
the SAyE Scheme (in existing Rule 5.1) currently limits the number of new shares which may be issued or made issuable pursuant to
the grant of options under the scheme in any 10 year period to 12,077,395, or, if lower, the number of shares which represents 10%
of the issued share capital of the Company from time to time. it is proposed that this limit be removed. Such a limit is not required
by guidelines issued by the Association of british insurers (there is a 10% limit in 10 years for all share schemes established by the
Company, in existing Rule 5.2, and this will remain).
the SAyE Scheme also (in existing Rule 5.3) currently limits the number of new shares which may be issued or made issuable
pursuant to the grant of options under the scheme in any five year period, when combined with shares issued or made issuable
pursuant to grants under other share schemes established by the Company, to 5% of the issued share capital of the Company at
the date of grant. Such a limit used to be required by the guidelines issued by the Association of british insurers, but no longer is. it is
therefore proposed that this limit be removed, for consistency with other share schemes operated by the Company.
5. Grant periods
the SAyE Scheme provides that options under the scheme may normally only be granted during a ‘Grant Period’. A Grant Period is
defined as the period of 42 days following the publication of the annual or half yearly results of the Company, or the date on which
the SAyE Scheme was originally approved by hMRC. it is proposed that the period of 42 days following the date of the AGM at
which the proposed amendments are approved be added as a Grant Period. in addition, it is proposed that the wording of the
existing rules be amended to clarify that it is the issue of invitations, rather than the grant of options, under the SAyE Scheme that
may normally only be made during a Grant Period. this appears to have been the intention of the original wording.
Part ii – description of the principal terms of the SAyE Scheme, amended as proposed
1. Invitations
during the period of 42 days following the publication of the Company’s annual and interim results, and after the date of the AGM
at which the proposed amendments are approved, the board may, if it so decides, invite eligible employees to apply for the grant of
options to them. in exceptional circumstances invitations may be issued outside such periods.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 163
Strategic ReportCorporate GovernanceFinancial StatementsAdditional Information Notice of Annual General Meeting (continued)
APPENdix – AMENdMENtS to thE St. ModWEN PRoPERtiES PlC 2004 SAViNG RElAtEd ShARE oPtioN SChEME (CoNtiNuEd)
2. Eligibility
People who have been employees of the Group for a qualifying period will be eligible to participate in the SAyE Scheme. in addition,
the board has discretion to allow participation by employees who do not meet all the eligibility requirements. the invitations offered
to different people may only vary according to the lengths of service or salary of the individual concerned, or other similar factors.
3. Acceptance and individual limits
to accept an invitation, the applicant will be required to sign and return to the Company the savings contract proposal form and to
state his or her proposed monthly saving contribution. this will be subject to the statutory maximum (which will be £500 per month
from 6th April 2014) or such lower amount as may be set by the board. the applicant must sign an authority to allow the chosen
amount of contribution to be deducted from his or her salary.
4. Grant of options and option exercise price
the applicant will be granted an option to acquire with the amount of money that will be due to the employee at the end of the
savings contract term, the largest whole number of shares that could be acquired at the date of grant of the option for a price per
share that is not less than 80% of the market value of an equivalent share on the relevant invitation date.
Market value on any day means, while shares are listed on the london Stock Exchange, the average of the middle market quotations
of a share as derived from the daily official list of the london Stock Exchange for the three immediately preceding dealing days.
5. Restrictions on the number of new shares in respect of which options may be granted
the number of shares issued or made issuable by the Company pursuant to options granted under the SAyE Scheme and any other
share option schemes operated by the Company, excluding lapsed options, during the 10 year period ending on any date of grant
under the SAyE Scheme shall not, when added to any shares issued or made issuable in the same period under any other share
scheme operated by the Company, exceed the number of shares that represents 10% of the ordinary share capital of the Company
in issue on the relevant date of grant.
6. Exercise and lapse of options
options may normally only be exercised during the six month period immediately following the termination of the savings contract.
Special provisions govern the exercise and lapse of options in particular circumstances, such as where the option holder dies, leaves
the Company, or if the Company is taken over or goes into liquidation.
the rules of the SAyE Scheme state that former employees shall not be entitled by way of compensation for loss of office, or
otherwise, to compensation for loss of any actual or prospective right or benefit accrued or anticipated under the SAyE Scheme.
7. Issue of shares
Any shares issued pursuant to the SAyE Scheme will rank pari passu in all respects with other ordinary shares already in issue, save
that they will not rank for any dividend or other distribution of the Company announced or paid by reference to a record date that is
prior to the date of exercise of the relevant option.
8. Variation of share capital
in the event of certain adjustments to the share capital of the Company, for example as a result of a rights issue or subdivision of
share capital, adjustments necessary to maintain the value of the option will be made to the number of shares subject to the option
and/or the option exercise price and/or the maximum number and/or the nominal value of shares available for issue under the SAyE
Scheme. these adjustments will be subject to confirmation from the Company’s auditors that they are fair and reasonable, and to
hMRC approval where required.
9. Alterations
the SAyE Scheme provides that the scheme cannot be amended to the advantage of participants without the prior approval of
shareholders in general meeting (except for minor amendments to benefit the administration of the scheme and amendments to
obtain or maintain favourable tax, exchange control or regulatory treatment for participants in the scheme or for the Company or
members of the Group).
10. Administration
the SAyE Scheme will be administered by the board who will resolve any disputes relating to the scheme or uncertainty as to the
meaning of the scheme rules. the board may delegate their powers in relation to the SAyE Scheme to a committee.
11. Termination
the SAyE Scheme shall terminate on the tenth anniversary of the date of the AGM at which the proposed amendments are
approved, or earlier if the board so resolves. termination of the SAyE Scheme shall be without prejudice to the subsisting rights of
option holders. No options shall be granted under the SAyE Scheme after the date of termination.
164 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Additional Information information for Shareholders
FiNANCiAl CAlENdAR
ordinary shares quoted ex-dividend
5th March 2014
2012/13 final dividend record date
7th March 2014
AGM
28th March 2014
2012/13 final dividend payment date
4th April 2014
Announcement of 2014 half year results
1st July 2014
Announcement of 2014 final results
February 2015
ANNuAl GENERAl MEEtiNG
the AGM will be held on Friday, 28th March 2014 at the Marketing Suite, innovation Centre, 1 devon Way, longbridge technology
Park, birmingham b31 2tS, commencing at 12.00 noon. the notice of meeting, together with an explanation of the resolutions be
considered at the meeting, is set out on pages 155 to 164.
WEbSitE
information about St. Modwen, including this and prior years’ Annual Reports, half year reports, results announcements and
presentations, together with the latest share price information, is available on our website at www.stmodwen.co.uk/investor-relations.
ShAREholdiNG ENquiRiES ANd iNFoRMAtioN
All general enquiries concerning holdings of shares in St. Modwen should be addressed to our registrar:
Equiniti
Aspect house
Spencer Road
lancing
West Sussex
bN99 6dA
telephone: 0871 384 2198* (+44 (0)121 415 7047 from outside the uK)
A range of shareholder information is available online at Equiniti’s website www.shareview.co.uk. here you can also view information
about your shareholding and obtain forms that you may need to manage your shareholding, such as a change of address form or a
stock transfer form.
diVidENd MANdAtE
if you are a shareholder who has a uK bank or building society account, you can arrange to have dividends paid direct via a bank or
building society mandate. there is no fee for this service and a tax voucher confirming details of the dividend payment will be sent to
your registered address. Please contact Equiniti on 0871 384 2198* or go to www.shareview.co.uk for further information.
oVERSEAS diVidENd PAyMENt SERViCE
if you are resident outside the uK, Equiniti (by arrangement with Citibank Europe PlC) can provide dividend payments that are
automatically converted into your local currency and paid direct to your bank account, For more information on this overseas
payment service please contact Equiniti on +44 (0)121 415 7047 or download an application form at www.shareview.co.uk.
ShARE dEAliNG SERViCE
if you are uK resident, you can buy and sell shares in St. Modwen through Shareview dealing, a telephone and internet based
service provided by Equiniti Financial Services ltd. For further details please visit www.shareview.co.uk/dealing or call Equiniti on
08456 037037. Equiniti Financial Services ltd is authorised and regulated by the Financial Conduct Authority. other brokers and
banks or building societies also offer share dealing facilities.
ElECtRoNiC CoMMuNiCAtioNS
As an alternative to receiving documents in hard copy, shareholders can elect to be notified by email as soon as documents such
as our Annual Report are published. this notification includes details of where you can view or download the documents on our
website. Shareholders who wish to register for email notification can do so via Equiniti’s website at www.shareview.co.uk.
*Calls to this number cost 8p per minute plus network extras. lines are open 8.30am to 5.30pm, Monday to Friday.
St. Modwen Properties PLC Annual Report and Financial Statements 2013 165
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information information for Shareholders (continued)
ShAREholdER SECuRity
Shareholders are advised to be very wary of unsolicited mail or telephone calls offering free investment advice, offers to buy shares
at a discount or sell shares at a premium, or offers of free company reports. Such contact is typically from overseas based ‘brokers’
who target uK shareholders through operations commonly known as ‘boiler rooms’. these ‘brokers’ can be very persistent and
extremely persuasive and often have websites to support their activities.
to avoid share fraud:
• Keep in mind that firms authorised by the Financial Conduct Authority (FCA) are unlikely to contact you out of the blue with an offer
to buy or sell shares.
• do not get into a conversation, note the name of the person and firm contacting you and then end the call.
• Check the Financial Services Register at www.fca.org.uk to see if the person and firm contacting you is authorised by the FCA.
• beware of fraudsters claiming to be from an authorised firm, copying its website or giving you false contact details.
• use the firm’s contact details listed on the Register if you want to call it back.
• Call the FCA on 0800 111 6768 if the firm does not have contact details on the Register or you are told they are out of date.
• Search the list of unauthorised firms to avoid at www.fca.org.uk/scams.
• Consider that if you buy or sell shares from an unauthorised firm you will not have access to the Financial ombudsman Service or
the Financial Services Compensation Scheme.
• think about getting independent financial and professional advice before you hand over any money.
• Remember: if it sounds too good to be true, it probably is!
if you are approached by fraudsters please tell the FCA using the share fraud reporting form at www.fca.org.uk/scams, where you
can find out more about investment scams. you can also call the FCA Consumer helpline on 0800 111 6768.
if you have already paid money to share fraudsters you should contact Action Fraud on 0300 123 2040.
ShAREholdER ANAlySiS
holdings of ordinary shares as at 30th November 2013:
By shareholder
individuals
directors and connected persons
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
Shareholders
Shares
Number
%
Number
%
3,286
80.80
12,576,068
36
678
67
0.88
38,287,698
16.67
169,073,878
1.65
439,344
5.71
17.37
76.72
0.20
4,067
100.00 220,376,988
100.00
Shareholders
Shares
Number
%
Number
%
1,052
696
1,421
349
321
70
89
27
42
25.87
17.11
34.94
8.58
7.89
1.72
2.19
0.67
257,777
539,369
3,315,166
2,523,662
6,986,781
5,152,324
22,390,251
19,402,248
1.03
159,809,410
0.12
0.24
1.50
1.15
3.17
2.34
10.16
8.80
72.52
4,067
100.00 220,376,988
100.00
166 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Additional Information Shareholder Notes
St. Modwen Properties PLC Annual Report and Financial Statements 2013 167
Additional InformationStrategic ReportCorporate GovernanceFinancial StatementsAdditional Information Shareholder Notes (continued)
168 St. Modwen Properties PLC Annual Report and Financial Statements 2013
Additional Information Disclaimer
This Annual Report and Financial Statements has been prepared for the members of St. Modwen
Properties PLC and should not be relied upon by any other party or for any other purpose. The
Company, its directors and employees, agents and advisers do not accept or assume responsibility
to any other person to whom this document is shown or into whose hands it may come and any such
responsibility or liability is expressly disclaimed.
The Annual Report and Financial Statements contains certain forward looking statements which,
by their nature, involve risk and uncertainty because they relate to future events and circumstances.
Actual outcomes and results may differ materially from any outcomes or results expressed or implied
by such forward looking statements. Any forward looking statements made by or on behalf of the
Company are made in good faith based on the information available at the time the statement is
made; no representation or warranty is given in relation to them, including as to their completeness
or accuracy or the basis on which they were prepared. The Company does not undertake to update
forward looking statements to reflect any changes in its expectations with regard thereto or any
changes in events, conditions or circumstances on which any such statement is based. Nothing in
this Annual Report and Financial Statements should be construed as a profit forecast.
Photography:
Steve Townsend – front cover, pages 3, 4, 5, 8, 10, 22, 24, 25, 26, 28, 31, 34
Craig Holmes – pages 12, 31, 37
Matthew Nichol – page 14
The paper used in this report is elemental chlorine free and is FSC accredited.
It is printed to ISO 14001 environmental procedures, using vegetable based inks.
The Forest Stewardship Council (FSC) is an international network which promotes
responsible management of the world’s forests. Forest certification is combined with
a system of product labelling that allows consumers to readily identify timber based
products from certified sources.
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St. Modwen ProPertieS PLC
offiCeS
YorkSHire and nortH eaSt
Company No. 349201
Head offiCe
Sir Stanley Clarke House
7 Ridgeway
Quinton Business Park
Birmingham
B32 1AF
0121 222 9400
MidLandS
Park Point
17 High Street
Longbridge
Birmingham
B31 2UQ
0121 647 1000
London and SoutH eaSt
180 Great Portland Street
London
W1W 5QZ
020 7788 3700
Ground Floor, Unit 2
Landmark Court
Elland Road
Leeds
LS11 8JT
0113 272 7070
nortH StaffordSHire
The Trentham Estate
Stone Road
Trentham
Stoke-on-Trent
ST4 8JG
01782 645222
SoutH weSt and SoutH waLeS
nortH weSt
Green Court
King’s Weston Lane
Avonmouth
Bristol
BS11 8AZ
0117 316 7780
nortHern HoMe CountieS
First Floor, Unit E1
The Courtyard
Alban Park
Hatfield Road
St Albans
Hertfordshire
AL4 0LA
01727 732690
Chepstow House
Trident Business Park
Daten Avenue
Risley
Warrington
WA3 6BX
01925 825950
reSidentiaL
Park Point
17 High Street
Longbridge
Birmingham
B31 2UQ
0121 647 1000
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www.stmodwen.co.uk
info@stmodwen.co.uk