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THE UK’S LEADING REGENERATION SPECIALIST
Annual Report and
Financial Statements
2014
CONTENTS
PICTURED:
The first phase of Longbridge Town
Centre is now well established with the
second phase M&S anchor underway.
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
01 Our performance
02 At a glance
03 At our heart
52 The Board
54 Property Board
56
Introduction
106 Independent auditor’s report
164 Glossary of terms
112 Group Income Statement
166 Notice of Annual General Meeting
113 Group Balance Sheet
173 Information for shareholders
04 Our business model
58 Corporate Governance Report
114 Group Statement of
176 Shareholder notes
08 Our strategy
09 Strategic focus
66 Audit Committee Report
73 Nomination Committee Report
12 Chairman’s Statement
77 Directors’ Remuneration Report
14 Our values in action
101 Directors’ Report
20 Chief Executive’s Review
22 Commercial land and
development
26 Residential
30
Income producing properties
32 Financial Review
38 Risk management
40 Our principal risks
44 Corporate social responsibility
Comprehensive Income
114 Group Statement of
Changes in Equity
115 Group Cash Flow Statement
116 Accounting policies
122 Notes to the Group
Financial Statements
153 Company Balance Sheet
154 Notes to the Company
Financial Statements
163 Five year record
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.
Strategic Report
OUR PERFORMANCE
Financial highlights
PROFIT BEFORE ALL TAX
£m
EQUITY NET ASSETS
PER SHARE p
PROPERTY PROFITS £m
SEE-THROUGH
LOAN-TO-VALUE %
138.1
325
279
251
232
218
57.7
39.8
39
40
41
33
30
29.0
23.8
21.9
82.2
51.7 52.8
38.2
2010 2011 2012 2013 2014
2010 2011 2012 2013 2014
2010 2011 2012 2013 2014
2010 2011 2012 2013 2014
• 68% increase in profit before all tax to £138.1m
• Property profits up 45% to £57.7m (2013: £39.8m)
(2013: £82.2m)
• Shareholders’ NAV per share up 17% to 324.9p
(2013: 278.8p), and EPRA NAV per share up
16% to 344.1p (2013: 297.7p)
• Debt portfolio fully refinanced with earliest maturity
now 2018 and successful launch of £100m
convertible bond
• Earnings per share up 57% to 52.7p (2013: 33.5p)
• Total dividend for the year increased by 15%
to 4.6p per share (2013: 4.0p per share)
Operational highlights
• Overall valuation increase of £90m (2013: £42m),
comprising gains of £32m (2013: £28m) as a result
of planning and asset management initiatives and
£58m market-driven valuation gain (2013: £14m)
• Housebuilding activities delivered a 167% increase
in residential profits to £24m (2013: £9m)
• Significant milestones completed across all major
projects:
New Covent Garden Market – a resolution to
grant planning was received in November 2014,
unconditional status is targeted in the first half
of 2015
Longbridge, Birmingham – excellent progress has
been made across the scheme with construction of
the Marks & Spencer 150,000 sq ft flagship store
now well underway and on schedule to complete in
time for Christmas 2015 trading
Bay Campus, Swansea University – signed a
Development Agreement with the University for an
additional 545 student apartments and new student
facilities. Forward sold 50% of the apartments to
M&G Investments for the M&G Secured Property
Income Fund for £20m
St. Modwen Properties PLC Annual Report and Financial Statements 2014 01
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 AT A GLANCE
Who we are
The UK’s leading regeneration specialist
Working across full
industry spectrum
7
regional offices and
a residential business
With a team of
skilled professionals
Through joint ventures
and with industry
leading partners
development projects £1.3bn
100+
property portfolio
Our development pipeline
Residential
land bank of
28,800+
plots
See pages 26–29
3m+active commercial
SQ
F T
development
pipeline
See pages 22–25
B
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N
B
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B
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BRANSTON
LEAS
DERBY
LOCKING
TRIANGLE
PARKLANDS
RAF UXBRIDGE
LONGBRIDGE
NEW COVENT GARDEN MARKET
D
C
GREAT HOMER
A
O
STREET
TRENTHAM
R
E
LAKES
C
D
SWANSEA
Y
UNIVERSITY
H
G
U
O
R
O
B
N
R
A
F
K
R
A
P
Y
K
S
02 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Strategic Report
AT OUR HEART
Our values
WE THINK LONG-TERM
WE ARE INNOVATIVE
WE DO WHAT WE SAY
We take a long-term approach to
regeneration and development and
during any project lifecycle we are
flexible enough to move with market
demands and pursue those opportunities
that generate the greatest value at any
one time. We work hard to build and
maintain long-term relationships with
local authorities, our shareholders and
our partners.
We continuously explore new ways
to develop our land bank in order to
generate sustainable value for all our
stakeholders. We look beyond standard
development routes to create innovative
schemes that strive to meet the needs
and expectations of local residents,
businesses and the wider community,
and create value for our shareholders.
We are a straight-talking company.
Colleagues, customers, suppliers and
stakeholders can rely on us to deliver
on the promises and commitments we
make and to bring about long-term,
sustainable regeneration.
See pages 14–15
See pages 16–17
See pages 18–19
Corporate social responsibility
Target: to recycle
and reuse
100,000
tonnes of concrete
in 2015
Target:
10,000
trees to be planted
in 2015
PICTURED:
The Italian Garden,
The Trentham Estate.
Find out more about our corporate social responsibility
www.stmodwen.co.uk/csr and
see pages 44–51
St. Modwen Properties PLC Annual Report and Financial Statements 2014 03
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 Our values
Our resources and relationships
OUR BUSINESS MODEL
Our business model is enabled by…
Our expertise
• Remediation
• Planning
• We think long-term
• We are innovative
• Asset development
• We do what we say
• Construction
C onstruction
expertise
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Diverse and
extensive portfolio
The land bank
Our
values
Asset development
Increases
portfolio value
• We rely on a variety of resources
and relationships at every stage
of our business model.
See pages 6–7 for further
information.
R
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Planning
expertise
04 St. Modwen Properties PLC Annual Report and Financial Statements 2014
…and supports our robust business strategy.
See pages 08–09.
Strategic Report
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 to realise any increase in value, we either dispose or
release assets for development ourselves or in joint venture.
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?
WHAT DIFFERENTIATES US?
The diverse and extensive nature of our £1.3bn 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.
We employ locally-based asset development capability to
manage the assets as efficiently as possible. We typically offer
low affordable rents on relatively short tenancies which ensure
that voids remain low 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.
ASSET
DEVELOPMENT
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.
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?
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 are fundamental to
the success of our asset development activities and we
continue to retain, develop and incentivise them.
We continue to find good development opportunities that
generate value for the business. 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.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 05
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176
OUR BUSINESS MODEL
continued
Resources
EMPLOYEES
Our employees are a valued and vital part of the business
and we aim to attract, develop and retain the best people,
whose efforts, expertise and judgement we can leverage
across our extensive portfolio. We have a highly skilled
in-house team encompassing all facets of the industry.
They safeguard our principles of delivering high-quality,
sustainable developments as a legacy for businesses and
communities to enjoy for years to come.
FINANCIAL CAPITAL
We are a stable business, operating from a robust financial
position and underpinned by a recurring income stream from
our £539m portfolio of income producing assets. This enables
us to acquire assets to which we can add value. In turn, our
partners and key stakeholders can trust in our ability to fulfil
contracts and deliver projects on time and to budget.
LAND BANK
We actively manage a £1.3bn UK-wide portfolio of
development opportunities across a land bank of 5,900
acres. We acquire this land specifically to develop 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 across the country.
BUILDINGS
Across our portfolio we retain a bank of assets which
generate income whilst awaiting development. Once we are
ready to progress their redevelopment we will reclaim and
recycle as much of the existing materials as is possible.
The redeveloped asset is then either retained for income
or sold.
06 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Strategic Report Relationships
LOCAL COMMUNITIES AND TENANTS
Our network of seven regional offices provides us with local
knowledge and expertise that keeps us abreast of the needs
of local communities, ensuring we remain politically and
economically sensitive to each area.
We engage with communities
development process and value their input and support.
throughout
the entire
Our locally-based asset management teams regularly engage
with our tenants, many occupying more than one site across
our portfolio.
PRIVATE SECTOR AND JOINT VENTURES
We have formed strong relationships with many private
sector partners. Linked by our skills and culture, these
partnerships are established through joint ventures, strategic
land acquisitions and development agreements. All bring
about successful regeneration and development projects
that in turn stimulate investment and growth. Our private
sector partners include VINCI PLC, Persimmon PLC and
Salhia Real Estate Company K.S.C.
PUBLIC SECTOR AND REGULATORS
We also work hand in hand with a variety of public sector
organisations across the Country including many local
authorities, some of which we have been in partnership
for over 10 years either through joint venture initiatives or
Development Agreements. We also work closely with key
Government regulators such as the Environment Agency
and Highways Agency to ensure our projects are of the
highest standard.
SUPPLY CHAIN
We have a careful contractor selection process. Many of
our contractors work with us on a number of schemes and
we share a mutual trust to deliver our projects to the
highest standard, within budget and on time. We maintain
close involvement with our contractors throughout the
construction process.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 07
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 OUR STRATEGY
Strategically agile to take advantage of opportunities…
As the UK’s leading regeneration specialist, our expertise in remediation, planning, asset
development and construction supports our strategy of securing excellent returns through
a focus on long-term significant added value while protecting our assets.
Secure excellent
returns
Profitable
growth
Protecting
assets
Focus on
long-term
added value
08 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Strategic Report STRATEGIC FOCUS
STRATEGY
SECURE EXCELLENT
RETURNS…
THROUGH A FOCUS ON
LONG-TERM SIGNIFICANT
ADDED VALUE…
WHILE PROTECTING
OUR ASSETS
Objective
Principal risks (pages 40–43)
Invest at a point in the
property lifecycle from which
we can achieve maximum
development returns.
Maximise individual asset
values through our locally-
based expertise.
Recycle assets where significant
opportunities to add value are
exhausted in order to generate
capital for reinvestment.
Wider economic issues affect
property values and equity valuations.
Uncertainty caused by significant
upcoming political events, such
as the 2015 General Election, can
impact performance.
The management of developments is
a complex process, with successful
delivery dependent on our expertise.
Build our land bank to deliver
future opportunities and secure
planning gain, with a focus
on brownfield renewal and
sustainable development.
Adapt our asset strategies over
the long-term to meet changing
market demands.
Employ highly-skilled and
motivated people to deliver our
asset strategies and future growth.
Unforeseen or failure to manage
long-term environmental issues
arising from brownfield or
contaminated sites.
Inability to recruit, develop and retain
staff with the necessary skills and
expertise as competition for the best
people increases.
Maintain an appropriate capital
structure to meet our future
development and funding needs.
Generate cash-backed income
streams to substantially cover the
running costs of our business.
Promote a positive, Group-wide
culture towards safety, health and
environmental matters.
Significant contraction in available
debt facilities reduces the opportunity
for strategic investment.
Unforeseen significant changes
to cash flow requirements limit
the Group’s ability to meet its
ongoing commitments.
Inadequate security or disaster
recovery planning causes significant
business disruption.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 09
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176
STRATEGIC FOCUS
continued
KPIs – WHAT WE HAVE ACHIEVED
SECURE EXCELLENT
RETURNS…
Key performance indicators applied
PROFIT BEFORE ALL TAX £m
DIVIDEND PAID p
38.2
51.7
52.8
82.2
138.1
1.00
3.10
3.41
3.75
4.13
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
THROUGH A FOCUS ON
LONG-TERM SIGNIFICANT
ADDED VALUE…
LAND BANK developable acres
ASSET RECYCLING: DISPOSALS AS A
PROPORTION OF PROPERTY ASSETS
AT THE START OF THE YEAR %
5,736
5,762
5,801
5,943
5,871
10
9
12
16
22
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
WHILE PROTECTING
OUR ASSETS
GEARING %
82
79
71
54
45
RATIO OF RENTAL AND OTHER
INCOME TO OPERATING COSTS
INCLUDING INTEREST %
97
89
92
86
87
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
SEE-THROUGH LOAN-TO-VALUE %
39
39
41
33
30
2010
2011
2012
2013
2014
10 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Strategic Report
KPIs – WHAT WE HAVE ACHIEVED
Secure excellent
returns
Profi table
growth
Protecting
assets
Focus on
long-term
added value
Link to remuneration (pages 77–100)
Targets
NEXT STEPS
EQUITY NET ASSETS PER SHARE p
218.6
237.6
256.4
278.8
324.9
2010
2011
2012
2013
2014
Profit before all tax, total dividend for
the year and post-dividend growth
in shareholders’ equity net asset
value per share were corporate
performance measures of the annual
bonus arrangements for executive
directors in the year.
Continue to grow development
profits and create valuation gains,
particularly through planning gain.
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.
MANAGEMENT WITH MORE THAN
3 YEARS SERVICE %
70
75
78
82
84
Executive directors’ individual
objectives for the year’s annual bonus
arrangements included people-
related targets.
2010
2011
2012
2013
2014
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.
COMMITTED FACILITIES TO COVER
DRAWN DEBT months
32
36
34
22
55
2010
2011
2012
2013
2014
Gearing was a corporate
performance measure of the annual
bonus arrangements for executive
directors in the year. In addition, their
individual objectives included funding-
related measures.
Effective asset management to
maximise returns.
Manage existing finance facilities to
support ongoing growth.
Continued management of
investment and development
programme to maintain appropriate
debt ratios.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 11
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176
CHAIRMAN’S STATEMENT
Bill Shannon
Non-executive Chairman
15%
increase
in total dividend
for the year
Secure excellent returns
Through a focus on
long-term significant
added value
While protecting
our assets
See pages 08–11
This is a record year
for St. Modwen with
the business
achieving profit
before all tax
of £138.1m.
I am very proud to be reporting on a record year for
St. Modwen with the business achieving 17% growth in net
asset value to 324.9p per share (2013: 278.8p per share) and
profit before all tax of £138.1m (2013: £82.2m).
This outstanding set of results has been helped by strong
valuation gains across our portfolio attributable to our
planning and asset management initiatives, combined with
positive movements in the UK residential and commercial
marketplaces which reflect the overall upturn in the economy.
Sitting alongside our robust business strategy, at the heart
of our success and inherent to St. Modwen, is a set of core
values. They reflect our strengths and our approach to all
facets of regeneration. In a year of record profits, these
values have never been more relevant. We have set them out
below, together with examples from our business activities
highlighting our individual approach.
We think long-term
Over the last few years we have continued to focus on our
regional portfolio, placing strong emphasis on asset managing
our income producing properties and preparing sites for
delivery for when the market conditions are appropriate.
This long-term approach has positioned us well, enabling
us to respond quickly to the increase in demand across the
regional market as it continues to recover and benefit from the
meaningful contribution the regions have made to this year’s
record results.
Our long-term approach to regeneration is exemplified by the
£1bn regeneration of Longbridge, Birmingham, one of our
major projects. Having started on site in 2007, we continued
to deliver this important scheme throughout the recession,
creating hundreds of new homes, the new 250,000 sq ft
Bournville College and a 150,000 sq ft Technology Park.
We have since launched the new £100m Town Centre and in
October 2014 we started on site with the second phase retail
anchor, a 150,000 sq ft Marks & Spencer store, drawn to our
Longbridge development because of its vibrancy, connectivity
and growing population. We look forward to welcoming more
national high street brands to the Town Centre during 2015.
12 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Strategic Report We are innovative
We are continuously looking at new and inventive ways to
develop our brownfield land portfolio in order to generate the
best value for the business, our shareholders and partners and
local communities.
We have also applied this innovative approach to strengthen
further our financial base, pursuing and securing alternative
forms of funding to reduce reliance on bank finance whilst
decreasing our gearing levels. In the last three years, we have
issued a retail bond in October 2012 which raised £80m,
completed a £49m equity placing in March 2013 and, in
February 2014, successfully launched a £100m convertible
bond. Also in 2014, we completely restructured our bank
finance such that all of our corporate and joint venture facilities
now extend until at least 2018.
We do what we say
No one can deny we are a straight-talking company and it
is this direct approach that has cemented some important
partnerships for the business and resulted in the success that
we are reporting on today. Colleagues, customers, suppliers,
shareholders and major stakeholders rely on us to deliver on the
promises and commitments we make to bring about long-term
sustainable regeneration.
We acquired the 2,500-acre portfolio of BP sites in 2009 at
the height of the recession and are now delivering on our
plans by transforming swathes of former industrial land across
South Wales into an innovative mix of housing, education and
energy-related projects. These include a 30-acre Solar Park
at Baglan Bay which we launched in March 2014, the £450m
Bay Campus for Swansea University and the 1,060-acre
residential-led regeneration at Coed Darcy in Neath.
DIVIDEND
In recent years, we have increased our dividends in line with the
growth in net asset value and to reflect the Company’s results.
For the year ended 30th November 2014, the Board has decided
to recommend a 15% increase in the total dividend for the year
to 4.60p per share (2013: 4.00p per share) giving a final dividend
for the year of 3.137p per share (2013: 2.67p per share).
The final dividend will be paid on 2nd April 2015 to shareholders
on the register at 6th March 2015.
BOARD CHANGES
We continue to refresh the composition of the Board to ensure
that it is best placed to operate effectively. In the year, John
Salmon, Audit Committee Chairman announced his intention to
retire from the Board at the conclusion of the 2015 AGM after
more than nine years’ service. On behalf of the Board, I would
like to take this opportunity to thank John for his significant
commitment and valued contribution to St. Modwen and to
wish him well for the future.
John will be succeeded as Audit Committee Chairman by
Ian Bull, who joined the Board as a non-executive director in
September 2014. Ian is Chief Financial Officer and a main board
director at Ladbrokes plc, a position he has held since 2011.
His strong financial and commercial pedigree will complement
the existing experience of the Board and I am delighted
that he will be continuing John’s excellent work as Audit
Committee Chairman.
We announced in December 2014 that Michael Dunn, Group
Finance Director, would be leaving the Company. The search
for his successor, which will consider both internal and external
candidates, is already well advanced. Mike has played an
important part in the Company’s success since his appointment
in 2010 and on behalf of the Board, I would like to thank him for
his valuable contribution and wish him well for the future.
PROSPECTS
We are a national business with a UK-wide portfolio of
commercial and residential development opportunities.
We have clear visibility on the progression of plans for our
major projects and anticipate further growth in commercial
development activity across the UK, leading us to extend our
active pipeline of opportunities throughout 2015 and beyond.
Our residential business continues to go from strength to
strength both in terms of its size and the reputation of the
brand, and we anticipate sustained levels of performance in
the coming year.
We remain well positioned to benefit from the growth potential
in the UK economy and the property market as a whole and we
look forward to further success in 2015 when we will continue
to add value to our portfolio to ensure good long-term returns
for our shareholders.
PEOPLE
The dedication and energy of our staff personifies our values
and they have made a significant contribution to the delivery
of this year’s excellent set of results. Therefore, I would like to
thank everyone at St. Modwen for their ongoing commitment,
hard work and determination throughout the last 12 months.
Bill Shannon
Chairman
2nd February 2015
St. Modwen Properties PLC Annual Report and Financial Statements 2014 13
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 PICTURED:
This Zone One development will
comprise 3,000 apartments.
14 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Strategic Report Our values in action
WE THINK
LONG-TERM
We have a 25-year track record of delivering long-term
regeneration projects.
We are delivering the transformation of the 57-acre New Covent
Garden market site through a VINCI St. Modwen 50/50 joint venture
(VSM) and in partnership with the Covent Garden Market Authority.
A 10-year project, it has received a resolution to grant planning from
Wandsworth Council in November 2014 and unconditional status is
targeted for the first half of 2015. It will see the development of over
500,000 sq ft of modern market facilities consolidated onto one site
for the 200-tenant businesses.
In return for delivering the new market, VSM secures 20 acres of
remaining freehold land which will be transformed into a new, high
quality, residential-led, mixed-use regeneration scheme comprising
3,000 new homes, 135,000 sq ft of office space, and 100,000 sq ft
of retail, leisure, and new community facilities including shops, cafés
and restaurants.
This long-term and complex project requires careful foresight in
terms of the design and the sensitive delivery of each project phase.
Also, as the biggest physical regeneration site in this part of London,
we are conscious of how it needs to complement the rest of this
important, large-scale regeneration area and to ensure we leave
a positive legacy for generations to enjoy beyond its completion.
New Covent Garden Market is
home to over
200 businesses
employing around
2,500 people
– the largest employment site
in Nine Elms.
2014
celebrated the market’s 40th
anniversary at Nine Elms. Its much
needed regeneration will provide
modern facilities, ensuring it is
transformed into a trading space
fit for the 21st century.
DID YOU KNOW?
• The Nine Elms redevelopment is the largest regeneration site in London.
• Our New Covent Garden Market scheme is the biggest single
development site in Nine Elms.
• Our scheme includes a new linear park, stretching from Vauxhall to
Battersea Power station. It is the largest stretch of green space in Nine Elms.
• As well as delivering a new market, we will develop 3,000 new homes,
135,000 sq ft office space, and 100,000 sq ft of retail, leisure and
community facilities.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 15
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 PICTURED:
Extending over 468 acres, our Longbridge
scheme is one of the largest regeneration
projects in the West Midlands.
16 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Strategic Report Our values in action
WE ARE
INNOVATIVE
One of the largest regeneration schemes outside of London, the
transformation of the 468 acre Longbridge site in Birmingham from
the largest car plant in the world to a thriving-mixed £1bn community
exemplifies our innovative approach to regeneration.
Since 2007, and throughout the recession, we have invested over
£300m into this important scheme, created over 3,700 jobs and
welcomed over 50 new businesses.
The scheme now comprises around 350 new homes, over
200,000 sq ft of office and industrial space and the 250,000 sq ft
Bournville College with a 30,000 sq ft specialist construction centre.
It also includes the completed first phase of the new Town Centre
including an 80,000 sq ft Sainsbury’s, Costa Coffee, Greggs,
Beefeater, Hungry Horse restaurant, 80-bedroom Premier Inn and
the £2m Austin Park.
Current development work includes the delivery of Phase Two of the
Town Centre anchored by a 150,000 sq ft Marks & Spencer store, plus
45,000 sq ft of additional retail units. During 2015 the development of
an ‘Extra Care’ retirement home comprising 260 assisted living units
will commence and we anticipate planning approval of a 105,000 sq ft
headquarter-style office building and 215 new homes – all forming
future phases of the new Town Centre.
2m
sq ft
of office, industrial and retail space
to be delivered over 15 years
DID YOU KNOW?
• 150,000 sq ft Marks &
Spencer store will open in
time for Christmas 2015.
It will be the largest M&S store
in the Midlands.
• Over 40 companies, employing
3,700 people, have moved to
Longbridge since 2007.
• Two rivers which have been in
culvert for over 80 years have
now been opened up and form
an integral part of Longbridge.
PICTURED :
150,000 sq ft M&S under construction.
3,700
jobs have been
created at Longbridge
since 2007
St. Modwen Properties PLC Annual Report and Financial Statements 2014 17
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 PICTURED:
The Great Hall forms the centrepiece
of the new Bay Campus.
18 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Strategic Report Our values in action
WE DO WHAT
WE SAY
The 65 acre Bay Campus site was acquired in 2009 as part of a 2,500
acre portfolio of disused BP sites. This acquisition made us the largest
private owner of brownfield land in South Wales.
Following an intensive remediation programme, we are now
transforming this portfolio into a major linked development of which
the £450m Bay Campus forms a fundamental part. It exemplifies our
ability to deliver major regeneration schemes to the highest standards,
on time and within budget.
Since becoming Swansea University’s development partner in 2013,
we have delivered on our promises and have progressed quickly with
the development of the Bay Campus, which comprises circa 1m sq ft
of buildings:
• 465,000 sq ft of academic and R&D space including a new Institute
of Structural Materials, Engineering Central, Engineering East, Bay
Library, Great Hall and School of Management; and
• around 500,000 sq ft of student accommodation for 1,142 students,
with ancillary retail space and modern facilities to include a gym,
sports hall and crèche.
In December 2014 we completed the first of the engineering buildings
and we are on programme to complete this campus project in time to
welcome the new student intake in September 2015.
This £450m project will bring about a positive economic impact for
the Swansea Bay City region of about £3bn, with potential for the
creation of up to 10,000 jobs across the 10 year lifetime of the project
and beyond.
DID YOU KNOW?
At Swansea University, Bay Campus:
• The volume of concrete used in
Phase one would fill over 100
Olympic-sized swimming pools.
• The data cable used on site would
reach from Swansea to Paris.
• The pile foundations, if put on top
of each other, would reach the
summit of Mount Everest…twice.
Potential
10,000
JOBS
across the 10-year lifetime
of the project and beyond
79
Trainees, apprentices
and work experience
graduates currently on site
St. Modwen Properties PLC Annual Report and Financial Statements 2014 19
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 CHIEF EXECUTIVE’S REVIEW
Bill Oliver
Chief Executive
17% increase
in net asset value
per share
Secure excellent returns
Through a focus on
long-term significant
added value
While protecting
our assets
See pages 08–11
We have achieved
significant progress
across all of our
major projects as well
as increasing
our pipeline of active
development
opportunities to over
3m sq ft of space.
The combination of our extensive experience, robust business
model and consistent strategy has come together this year
to generate exceptional growth for the business. This has
resulted in record results with an increase in profit before all
tax of 68% to £138.1m (2013: £82.2.m) and a 17% increase
in net asset value per share to 324.9p (2013: 278.8p).
This successful year has seen many high points, the most
recent being the receipt of a resolution to grant planning
permission in November 2014 for the redevelopment of the
New Covent Garden Market sites at Nine Elms in London.
We are targeting to achieve unconditional status in the first
half of 2015; this will be a hugely significant milestone for the
project and the business as a whole and will have a substantial
and positive impact on the valuation of our portfolio.
Our other major projects, the £1bn regeneration of
Longbridge, Birmingham and the £450m Bay Campus for
Swansea University, have made excellent progress during
the period. The first completed building at Bay Campus was
handed over to the University on time and within budget in
December 2014, whilst the 150,000 sq ft Marks & Spencer
store at Longbridge is now under construction and scheduled
to complete in time for Christmas 2015 trading. In line
with the growing prominence of Longbridge as a business
location, we moved our Head Office there in October 2014.
The development, a flagship project for the Company,
exemplifies every facet of our regeneration skills and is a
natural base from which St. Modwen can continue its growth.
Both Longbridge and the Bay Campus contribute to our active
pipeline of commercial development activity across the UK
which now amounts to over 3m sq ft, and we are well positioned
to capitalise on the continued upturn in the market. This pipeline
and the increase in our construction activity, not only
underlines the recovery of the regional property market but also
demonstrates our ability to think long-term and to manage our
5,900-acre land bank effectively throughout economic cycles.
20 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Strategic Report Our residential business has performed well in the period
delivering an overall profit increase of 167% to £24m
(2013: £9m) with good sales rates being achieved across
the Country. With the Persimmon joint venture now
firmly established, we are focusing our attention on our
housebuilding brand, St. Modwen Homes, which completed
258 new homes over the period and has nine active sites.
Meanwhile, the Persimmon joint venture completed 562 new
homes in the period from eight sites.
We continue to look at new and innovative ways to use our land
in order to maximise its value and to ensure that it is developed
to best complement its surroundings. Against the backdrop of
a diminishing energy supply across the UK, we are pursuing a
number of energy-related opportunities, including the delivery
of gas fired Combined Cycle Gas Turbine power stations on
two sites. Both are at differing stages of the planning process
but we anticipate further progress for at least one of these
opportunities during 2015.
STRATEGY OVERVIEW
Our strategy remains fundamentally unchanged. We continue
to add value to our £1.3bn land bank through planning and
asset management initiatives that are carried out by our regional
teams of skilled property professionals. At the same time,
we prepare sites for redevelopment through remediation and
securing planning permissions and dispose of those assets to
which we can no longer add value in order to release capital
for reinvestment.
This strategy, supported by our long-term approach to
development and our proven business model, has enabled
us to create value throughout the cycle and to take immediate
advantage of the market recovery as reflected by record profits
in the period.
We will remain true to this long-term strategy and adopt a
pragmatic approach as residential and commercial markets
continue to improve. As the economy gets stronger, we will
ensure that our business grows by increasing our active pipeline
of development opportunities, creating a firm base for the
continuing delivery of shareholder value.
MARKET OVERVIEW
We are one of the few property companies in the UK to have
stood firm in having a regional development bias whilst also
progressing projects in and around London. With the economic
recovery now gathering momentum, we are already well
positioned to capitalise on the upturn, particularly in the regions.
Currently, we have an active pipeline of over 3m sq ft of
commercial development across the UK, and we continue to
increase our construction levels across our commercial portfolio
as companies look to expand or move into new premises.
We are mindful of the increasing cost of construction materials
and continue to work closely with our supply chain to sustain
build quality. We are also undertaking some speculative
development and have been successful in acquiring new
opportunities in competitive situations, which we will start to
build out in 2015.
As tenant demand improves across the UK, this has had a
positive impact on rent roll across our commercial portfolio and
we are witnessing a steadily increasing stream of enquiries.
There is good take up across our Town Centre regeneration
projects, notably at Wembley Central where we will soon
conclude works to the final phase of this £90m mixed-use
development in London. At our Technology Retail Park in Rugby
we are already 100% pre-let on the 70,000 sq ft out-of-town
retail scheme and, in addition to securing planning permission
for Marks & Spencer in June 2014, we are now in detailed
discussions with a number of national retailers seeking to take
space in Longbridge Town Centre in 2015.
In terms of the residential market, demand has been sustained
but there are concerns over interest rate rises, changes to the
mortgage market and the usual uncertainty in the lead-up to the
2015 UK General Election. However, there remains a structural
lack of housing supply across the Country and, as a result,
demand for our land from national housebuilders continues
to increase. Similarly, good sales rates have been maintained
throughout the year both for the Persimmon joint venture
and St. Modwen Homes sites and we anticipate a sustained
performance into 2015.
BUSINESS OUTLOOK
We will continue to build on the success of 2014 over the
next 12 months and now look to take full advantage of the
market recovery. We will focus our efforts on delivering our
commercial sites in the regions, growing our active commercial
development pipeline of over 3m sq ft, and progressing our
key projects, including the redevelopment of the New Covent
Garden Market sites.
We expect the current favourable residential market conditions
in the regions to be sustained throughout the year, and through
the planning process we will bring new sites forward for
sale or development, as well as focusing on delivery within
St. Modwen Homes and the Persimmon joint venture.
With a record year now firmly under our belts, we are in a very
good position to grow the business further in 2015 and deliver
another year of success for our shareholders.
Bill Oliver
Chief Executive
2nd February 2015
St. Modwen Properties PLC Annual Report and Financial Statements 2014 21
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 COMMERCIAL LAND
AND DEVELOPMENT
PICTURED RIGHT:
150,000 sq ft M&S store will be
open for 2015 Christmas trading
at Longbridge Town Centre,
Birmingham.
PICTURED ABOVE:
We are progressing well with the
310,000 sq ft extension of Screwfix
at Trentham Lakes, Stoke-on-Trent.
PICTURED RIGHT:
Our Skypark project in Exeter will
deliver 1.4m sq ft of office and
industrial manufacturing space,
including a 60,000 sq ft distribution
centre for DPD (UK).
22 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Strategic Report STRATEGY
Alongside a growing and active pipeline of commercial
development opportunities, we continue to prime and add
long-term value to our land bank through careful remediation
and by successfully progressing sites through the planning
process. In doing so, we ensure that a continual stream of
opportunities is being progressed at any point in the cycle by
our highly-skilled, regionally-based development teams, each
supported by our centralised construction management team.
Our regional office framework has stood us in good stead in
recent years, keeping us abreast of local requirements and
enabling us to respond quickly to any emerging development
opportunities. Similarly, our on the ground expertise enables
us to select the right moment at which to dispose of those
assets to which we can no longer add value or to acquire new
opportunities to add to our portfolio for future development.
On the back of an improving regional property market, we have
heightened our focus on commercial land and development
and we are now embarking on a number of either pre-let or
speculative schemes in selected areas where our teams have
identified growing demand. As a result of this and the increase
in pre-let and design and build opportunities coming through,
we have grown our active commercial development pipeline to
over 3m sq ft (74%% pre-let or pre-sold) which represents a
total committed capital expenditure of £286m. At present, this
pipeline of development reflects a gross development value of
£458m.
MARKET COMMENTARY
Confidence is growing in the UK’s commercial property market,
but availability of product remains an issue. Many occupiers
recognise that with our ‘oven ready’ land we can react quickly
to their needs. In addition, we are progressing a number of
pre-let or speculatively built schemes in localised areas of the
Midlands, the South West, London and the South East, where
we have identified potential occupational and investor demand.
We will seek to increase production levels across the Country
as the economy continues to improve.
Within this context, the industrial market is experiencing good
growth across the UK as businesses seek to expand and
commit to new premises. Vacancy levels across our retained
industrial portfolio are reducing and an increasing number of
enquiries for design and build projects are being converted
into live schemes.
Much of what we do in the retail sector is already meeting an
evolving shopper demand and retailer requirements. We focus
on remodelling historic shopping centres such as Farnborough,
Wembley Central and Wythenshawe, or we regenerate former
industrial sites such as Longbridge which we have transformed
into a new retail destination.
All such schemes in our portfolio are designed with the belief
that a Town Centre should service its community and provide
an integrated, open and accessible environment with good
transport links, parking provision and retail complemented by
employment space, food stores and leisure. As a result, we
continue to consistently secure a good level of take up from
new retailers and are experiencing strong footfall across all of
our secondary retail schemes.
Our ability to offer affordable rents combined with the appeal
of our regeneration schemes as places where surrounding
communities and, consequently, footfall grow, means that we
are able to maintain high occupancy rates and fill voids swiftly.
PERFORMANCE – COMMERCIAL LAND
At the heart of our business lies our skill in cleaning up
brownfield sites and preparing them for market by securing
planning permissions and either developing them for immediate
sale or retaining them as a long-term income producing asset
for the business.
We have secured a number of commercial-led brownfield
land opportunities over the last 12 months either as direct
acquisitions or through a competitive tendering process.
Highlights
• Spray Street, Woolwich – in December 2014, together with
development partners Notting Hill Housing Group, we were
awarded preferred developer status by the Royal Borough of
Greenwich to redevelop the Spray Street quarter in Woolwich.
A former market area, the site will be transformed into a
753,000 sq ft mixed-use housing-led scheme of 612 homes,
including retail and an art-house cinema.
• London Road Industrial Estate, Newbury – following our
selection by West Berkshire Council in April 2014 as
Development Partner for the regeneration of this 25 acre
industrial estate, we are working up our plans with the
Council to create a new mixed-use development comprising
waterside, residential and commercial phases.
We have continued to be successful in securing planning
approvals across our commercial land bank which has
promoted a series of site starts across the UK.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 23
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 COMMERCIAL LAND
AND DEVELOPMENT
continued
PICTURED RIGHT:
Henley Business Park is the largest
regeneration project in West
Surrey. The 41,000 sq ft depot for
Meridian Metal was handed over in
September 2014.
PICTURED ABOVE:
The £80m transformation of
Farnborough Town Centre is
well underway, with a new VUE
cinema and restaurants opening
in early 2015.
PICTURED RIGHT:
The £90m redevelopment of
Wembley Central will complete in
early 2015.
24 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Strategic Report Development highlights
• Great Homer Street, Liverpool – works have started on site
at this £150m regeneration scheme which, in addition to a
100,000 sq ft Sainsbury’s supermarket, will bring 80,000 sq ft
of retail, 900 car parking spaces, a petrol filling station and
new homes. Sainsbury’s will begin development of its store
in summer 2015, with opening expected to take place in
summer 2016.
• Wembley Central, London – the final phase of this £90m
mixed-use Town Centre redevelopment will complete in
early 2015. It now comprises 120,000 sq ft of new retail and
leisure space let to a range of national retailers including
TK Maxx, Tesco, Sports Direct, Iceland, Argos and The Gym.
The scheme also comprises an 86-bedroom Travelodge
Hotel, 273 apartments, a new public square and an enhanced
tube and train station.
• Screwfix, Stoke-on-Trent – construction work has
commenced on a 310,000 sq ft extension for Screwfix,
almost doubling the size of its existing distribution facility at
Trentham Lakes to 630,000 sq ft. Developed in partnership
with M&G Real Estate, the freeholders, the extension is
scheduled to complete by summer 2015.
OUTLOOK
We anticipate that the commercial property market will continue
to improve throughout 2015, allowing us to further increase
our active pipeline of delivery across the UK of over 3m sq ft.
The industrial market will lead the way and we will continue to
grow our industrial portfolio. We will work closely with retailers
and evolve our schemes to suit their demands, with rental
levels and the regional focus of our portfolio providing us with
a competitive advantage as we continue to secure new leases
at favourable rents and create new retail environments.
Major projects
• New Covent Garden Market, London – in November
2014, the London Borough of Wandsworth resolved to
grant planning permission for the regeneration of the New
Covent Garden Market sites in Nine Elms, London. To be
delivered under the VINCI St. Modwen joint venture, this
transformational project will see the development of over
500,000 sq ft of modern market facilities, 3,000 homes,
135,000 sq ft of new office space and over 100,000 sq ft of
retail, leisure and new community facilities. We are targeting
to achieve unconditional status in the first half of 2015, with
preparatory works starting on site shortly afterwards.
• Longbridge, Birmingham – in the second half of the year, we
secured planning permission and started construction of
the 150,000 sq ft Marks & Spencer store which will anchor
the second phase of the new Longbridge Town Centre.
During the year, we also completed the 30,000 sq ft specialist
construction centre for Bournville College and secured
planning permission and a land sale for a £35m Extra Care
retirement village which will comprise 260 apartments.
• Bay Campus, Swansea University – we are actively building
circa 1m sq ft of student accommodation and academic
facilities at this £450m new campus development and
handed over the Institute of Structural Materials building, the
first to be completed, to the University at the end of 2014.
Earlier in the year, we signed a Development Agreement with
Swansea University for an additional 545 student apartments
for occupation during the first quarter of 2016 and major
new student facilities as part of this scheme. We have since
completed the forward sale of 50% of the income from this
latest phase of student accommodation to M&G Investments
for the M&G Secured Property Income Fund for £20m.
Across our broader portfolio, we have also made good progress
in converting planning applications to approval and delivery.
Commercial planning highlights
• Branston, Burton upon Trent – planning permission has been
granted for a regeneration scheme comprising 660 homes,
over 770,000 sq ft of commercial space and over 140 acres
of new woodland and open green space.
• DPD (UK) – planning consent has been granted for a
60,000 sq ft distribution centre for express delivery service
DPD (UK) at the £210m Skypark scheme, adjacent to Exeter
Airport. Providing further endorsement of our well located
portfolio of sites across the UK, DPD (UK) has selected
Etruria Valley, Stoke-on-Trent and Stonebridge, Liverpool as
the locations for two further facilities, comprising 60,000 sq ft
and 69,000 sq ft, respectively, for which planning applications
have been submitted.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 25
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 RESIDENTIAL
PICTURED RIGHT:
Since we started developing
Meon Vale in 2013, considerable
investment has been made to deliver
302 homes through the Persimmon
joint venture and we have recently
submitted a planning application for
an additional 550 homes at this new,
leisure-led Warwickshire community.
PICTURED ABOVE:
St. Modwen Homes’ Gregorys Bank
development will comprise a total
of 120 new high-quality homes
when complete.
PICTURED ABOVE:
St. Modwen Homes has sold almost
all of its properties within the first
phase at Littlecombe, Dursley,
and will launch its second phase
in early 2015.
26 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Strategic Report STRATEGY
We have continued to focus on our proven strategy of buying
land at low cost and then maximising its value over time
through remediation and planning. We will always favour
development on brownfield land, with value being realised
through three routes to market:
• Residential land sales – the development and sale of
oven ready, predominantly brownfield, sites with viable
implementable planning permissions in place.
• St. Modwen Homes – in-house development under our own
brand, using our extensive housebuilding expertise to capture
additional development profits.
• Persimmon joint venture – maximising value through
development with the backing of one of the UK’s leading
national housebuilders.
MARKET COMMENTARY
As the year has progressed, the residential marketplace has
continued to improve with sustainable house price growth
across the Country. There remains a significant undersupply
of housing across the UK and, along with a slowly improving
economy, job market and expected population growth, this
imbalance supports a positive house price inflation environment
which should be at more practicable levels in London and the
South East.
In response to the undersupply, demand for our residential
land from national housebuilders is increasing, and
St. Modwen Homes and the Persimmon joint venture continue
to achieve sales rates of over 0.6 completions per week, which
is above the national average.
The Private Rental Sector market is experiencing significant
growth which, in many cases, is driven by the lack of affordable
housing, particularly in London. We continue to explore a
number of opportunities across our UK portfolio that lend
themselves to this specific sub-sector.
Residential land bank at 30th November
With planning recognition allocated within the local plan or similar
Resolution to grant
Outline permission
Detailed permission
Planning application submitted
Other land
Total residential land
PERFORMANCE – RESIDENTIAL LAND
In the period, we have increased our land bank to 28,790 plots
(2013: 27,023) of which 83% have either planning permission
or allocations within local plans. We have experienced growing
demand for our land across the Country as housebuilders
respond to the lack of housing supply across the UK and to
date have sold or committed for sale 52 acres of land, for total
proceeds of £95m.
Planning consents achieved
• New Covent Garden Market – resolution to grant planning
received for 3,000 new homes as part of this major
regeneration scheme. Making up the largest redevelopment
site in Nine Elms, London, this project also includes the
delivery of over 500,000 sq ft of modern market facilities,
235,000 sq ft of commercial space and new community
facilities including shops, cafes, restaurants and a new
linear park.
• Uttoxeter, Staffordshire – for 700 new homes, employment
space, a new school, sports and recreational facilities, a local
retail centre and the provision of open green space.
• Hilton, South Derbyshire – for 485 new homes, a new primary
school and employment opportunities as part of a mixed-
use development at this former MoD site which currently
comprises industrial and open storage space.
2014
2013
Acres
92
397
891
144
1,524
167
261
1,952
Units
1,789
5,395
14,680
2,022
23,886
2,042
2,862
28,790
Acres
238
105
892
190
1,425
57
411
1,893
Units
3,669
1,470
14,191
2,579
21,909
625
4,489
27,023
St. Modwen Properties PLC Annual Report and Financial Statements 2014 27
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 RESIDENTIAL
continued
PICTURED LEFT:
St. Modwen Homes has reported
a record year of sales in 2014,
including substantial success at its
Locking Parklands development in
Weston-super-Mare.
PICTURED RIGHT:
In 2014 St. Modwen Homes
released its first phase of properties
for sale at the £1bn regeneration of
Glan Llyn in Llanwern, South Wales.
PICTURED LEFT:
We have seen a growing demand
for residential land across our
sites, with significant transactions
completed at Millbrook Park,
RAF Mill Hill, London.
28 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Strategic Report Applications submitted
• Meon Vale, Long Marston, Warwickshire – for an additional
550 homes and a one form entry primary school at this
478-acre, former MoD site which is being regenerated into
a £150m mixed-use leisure-led scheme. Here, 284 homes
are already under construction through the Persimmon
joint venture and the £5m Meon Vale Leisure Centre
opened to the public in August 2014. At the same time we
opened the central facilities, including a shop, community
centre, public open space, children’s play area, one mile
Greenway extension into Stratford-upon-Avon and a 30-pitch
caravan and camping site. The scheme also benefits from
800,000 sq ft of retained employment space which is 100%
occupied.
• Hendrefoilan, Swansea – for 300 high quality homes
on this 52-acre former Swansea University student
accommodation site.
• Wigan, Greater Manchester – for 325 new homes, extensive
public open space, and the opening up of the culverted water
course to encourage wildlife on this disused industrial site.
PERFORMANCE – RESIDENTIAL DEVELOPMENT
St. Modwen Homes
Our housebuilding business, St. Modwen Homes, now
comprises a team of over 50 professionals looking after 13
sites at various stages of planning and development across the
Country which will deliver 1,686 new homes. We continue to
focus on providing quality over quantity delivering between 300
to 350 units per year.
Future opportunities for this part of the business in 2015
comprise a range of schemes representing a total of 700
homes across the Country including development at: Branston
Leas, Burton upon Trent; Uttoxeter, Staffordshire; and Trentham
Lakes, Stoke-on-Trent.
Residential development as at 30th November 2014
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
Persimmon joint venture
Our joint venture with Persimmon is now firmly established
with all eight sites (2,364 plots) under the original agreement
now either under construction or being marketed for sale.
Residential development sales and profit
Reacting to the uptick in the residential marketplace, sales rates
for the year have been good. We have achieved 820 house
sale completions in the year (2013: 365) comprising 258 for
St. Modwen Homes (2013: 126) and 562 for the Persimmon
joint venture (2013: 239).
As the market has continued to improve across the UK over
the last 12 months, residential development and sales have
mirrored this trend, resulting in an overall profit increase of
167% to £24m (2013: £9m), providing a firm platform from
which to sustain this area of the business.
OUTLOOK
We expect a good level of activity in the residential market next
year, particularly in the regions, as demand from housebuyers
continues and housebuilders also seek attractive land to
replenish their stocks. We anticipate profits, delivery and sales
volumes to be maintained for St. Modwen Homes next year and
the Persimmon joint venture to continue to perform well.
St. Modwen
Homes
Persimmon
joint venture
Active and
completed
Active and
completed
14
2,124
557
12
66
54
120
8
2,364
902
57
46
40
86
Total
22
4,488
1,459
69
112
94
206
St. Modwen Properties PLC Annual Report and Financial Statements 2014 29
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 INCOME PRODUCING
PROPERTIES
PICTURED RIGHT:
Comprising approximately
320,000 sq ft of retail and ancillary
office space, we acquired
Billingham Town Centre in
November 2014 as an income
producing asset to which we can
add value.
PICTURED BELOW:
The £100m regeneration of
Edmonton Green Shopping Centre
has resulted in an abundance of
new lettings and now produces
a total rental income of £4.7m
per annum.
PICTURED RIGHT:
We completed the £7m sale of
Hednesford Town Centre in 2014.
PICTURED RIGHT:
In October 2014 we announced the
next phase of restoration works in
our Capability Brown Restoration
Project at the Trentham Estate
30 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Strategic Report STRATEGY
Whilst our primary business is regeneration, we seek to
ensure that a large proportion of our assets generate a stream
of income prior to development in order that the revenue
generated from these assets covers the running costs of
the business.
These income producing assets now make up 43% of our
property portfolio and we extract value from them through
our proven asset management initiatives undertaken by our
regional teams of experts across the Country. Typically, we
offer affordable rents on relatively short tenancies to ensure
that voids remain at their lowest possible levels as we work
towards redevelopment.
We will also seek to retain newly built assets for income and
then sell them on at a later stage once we feel no further
value can be added. The capital raised from disposal is then
reinvested in the business.
Across our income producing portfolio, we manage a broad
range of assets on behalf of over 1,700 occupiers, operating
within a variety of sectors. This diversity helps to mitigate
against specific sector challenges and possible administrations.
PERFORMANCE
Reflecting the continued improvement in the economy, at
the year end our income producing portfolio was valued at
£539m (2013: £514m). Tenant administrations have had little
or no impact on our portfolio, the most high profile during the
period being Phones4U which occupied just three stores in
our Town Centre schemes, all of which have since been re-let.
Occupancy levels have increased slightly to 89% (2013: 88%)
and we have secured £5.3m in new lettings (2013: £9.0m).
This contributes 11% to our annualised gross rent roll which
has increased from last year to £45.4m (2013: £44.7m).
Income
• Trident Business Park, Warrington – a total of 31,050 sq ft
industrial and office units have been let in the last 12 months
and income has increased by 34% to £435,500 across this
office and industrial park.
• Eastleigh Works, Southampton – Arlington Fleet Services Ltd,
the principal occupier of this 47-acre site, has contracted to
expand its occupation from 380,000 sq ft to 430,000 sq ft
at the end of 2016 and has extended its lease to the end of
2019, delivering £1.1m annual rental income. All the floor
space on the site is now fully let after Alstom Transport
vacated and left a virtually empty site.
• Edmonton Green Shopping Centre, Enfield – a total of
20,500 sq ft of retail units and market stalls were let in 2014,
including 5,000 sq ft to PoundWorld, 2,500 sq ft to Explore
Learning and 1,500 sq ft to Turkish Bank IS, generating
£310,500 annual rental income. In addition, a number of
significant rent reviews and lease renewals were concluded
which in aggregate delivered an increase in rent of £52,450
per annum. The Centre now produces a total rental income
of £4.7m per annum.
Acquisitions
We have been monitoring the market carefully for the right
opportunities to add to our existing portfolio of retained assets.
Our most recent purchase is Billingham Shopping Centre in
Stockton-on-Tees, which we acquired in November 2014 for
£14.3m and which provides an immediate gross rent roll of
£1.9m that we intend to grow on the back of our proven asset
management expertise.
Disposals
We have taken advantage of a rising market and have disposed
of a range of assets to which we can no longer add value,
generating receipts of £44m. These include the sale of The
Planets Shopping Centre in Woking for £8m and the £7m sale
of Hednesford Town Centre, construction of the latter having
been completed in 2012.
OUTLOOK
Throughout 2015, we will continue to selectively add to
our portfolio of income producing properties with the right
opportunities. We foresee occupier confidence growing in
2015, particularly in the industrial sector, which should lead to
further positive impact on rental revenue across our income
producing portfolio.
Portfolio yield analysis
Retail
Office
Industrial
Portfolio
Equivalent
Net initial
Value £m
Nov 2014
Nov 2013
Nov 2014
Nov 2013
Nov 2014
Nov 2013
8.9%
9.2%
8.8%
8.9%
9.2%
9.7%
9.2%
9.2%
7.1%
7.3%
7.7%
7.4%
7.7%
7.0%
8.0%
7.8%
230
61
248
539
201
59
254
514
St. Modwen Properties PLC Annual Report and Financial Statements 2014 31
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 FINANCIAL REVIEW
Michael Dunn
Group Finance Director
Property profits
£57.7m
INCOME STATEMENT
Our business is focused on creating long-term significant
added value and generating strong returns through our own
capabilities. We take a pragmatic approach to development
and expand our 5,900 acre land bank in a manner which is
capital efficient. This means making long-term investments to
which we can add to and realise value through remediation,
management of the planning process, asset management
and development.
Our income producing assets form the largest part by value
of our portfolio, representing 43% and with a gross rent roll of
£45.4m comprising mostly core rental income. These assets
underpin the business, providing a steady stream of income
prior to development and a solid base from which the business
can continue to grow.
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.
Developable acres
Nov 2014
Nov 2013
Retail
Industrial and commercial
Residential
Use not yet specified
Total
342
2,935
1,954
642
5,873
337
2,997
1,893
716
5,943
Secure excellent returns
Through a focus on
long-term significant
added value
While protecting
our assets
See pages 08–11
Achieving record
profits is a testament
to our skill in
generating strong
returns through our
market-leading
expertise and
foresight in
regeneration
and development.
32 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Strategic Report Finance costs and income
Finance costs have reduced this year, despite average debt
levels being similar to 2013, as a result of us undertaking a
significant refinancing process, including the successful issue
of a £100m convertible bond and comprehensive refinancing of
our bank facilities. This has reduced the weighted average cost
of debt significantly from 5.6% at the start of the year to 4.8%
at the end of the year, whilst net interest charges have reduced
to £23.5m (2013: £25.5m).
Trading profit
We have therefore experienced a 55% increase in our overall
trading profit in the period to £51.7m (2013: £33.3m) which
is an exceptionally strong result driven by the activities we
undertake ourselves.
During 2015, we will continue to focus on generating value
across our land bank and ensure that our rental and recurring
income underpins the running costs of the business.
PROFITS
Rental and recurring income
Even taking into account asset sales we are once again
pleased to report an increase in the Group’s share of net rental
income to £37.1m (2013: £36.3m). This has been achieved as
a result of our robust asset management capabilities and an
increase in new lettings as a result of the improving regional
property market.
Net rental income for St. Modwen of £2.0m per annum from
student accommodation at the Bay Campus, Swansea
University will be coming on line in 2015.
We have sold a number of income producing assets in the
period but still anticipate our net rental income growing
throughout the course of 2015 as we bring new assets onto
our books.
Occupancy levels have increased slightly to 89% (2013: 88%)
and our average lease length has remained steady at five years
(2013: five years). We prefer to maintain voids at a relatively
high level whilst we prepare our income producing assets for
development. Consequently, our void levels are consistent with
our expectations.
Property profits
The Group’s share of property profits from development have
increased by 45% to £57.7m (2013: £39.8m). This includes
notable contributions from the Bay Campus development at
Swansea University and a marked increase in commercial
development. Asset sales of both income producing properties
and residential land which were achieved at well above book
value have also impacted positively on property profits.
Residential housing sales have also made a strong contribution
to property profits achieving £24m in the period (2013: £9m)
which demonstrates the rapid growth of St. Modwen Homes
and reflects the well-established nature of the Persimmon
joint venture.
Overheads
Reflecting the upturn in the economy and its positive impact on
the property market, we have recruited more staff to service our
growing pipeline of over 3m sq ft of commercial development
opportunities. Similarly, the St. Modwen Homes sites are fast
gaining momentum across the Country and the team has now
grown to over 50 staff. Our recruitment drive, coupled with
the bonuses paid for successful business delivery, means that
administrative expenses for 2014 (including the Group’s share
of joint ventures and associates) have increased to £23.2m
(2013: £20.2m).
St. Modwen Properties PLC Annual Report and Financial Statements 2014 33
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 FINANCIAL REVIEW
continued
PROPERTY VALUATION
Basis of property valuation
All our investment properties are independently valued every six
months by our external valuers. The external valuers base their
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 will also independently assess 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 validated by open
market transactions during the course of the year.
As detailed in the Audit Committee Report, we have an ongoing
process of competitively tendering our key advisory roles.
During the year we ran such an exercise for the external valuers
and Jones Lang LaSalle LLP were replaced with DTZ Ltd
(DTZ). Both valuers are global real estate professional services
businesses whose specialisations include property valuation.
Property portfolio
Our property portfolio is worth £1.3bn (2013: £1.2bn).
During the period we have continued its active management,
spending £276m on acquisitions and capital expenditure and
realising £301m from asset disposals. As the UK economy
becomes more active we expect to continue activity at
these levels.
Movements in the year
Property valuation movements are made up of two main
elements: those resulting from our own actions that we
undertake specifically to add value to our assets, and those
resulting from changes in the overall property market.
DTZ provides this valuation split for us.
Consistent with market movements, valuations of our income
producing portfolio have increased by around 7% on average
during the year.
Property portfolio – valuation movements in the year (£m)
Market-driven valuation movements
Market-driven valuation movements of our income producing
portfolio represent a 5% increase across the year. In addition to
benefitting from this improvement in value, we have also been
able to sell assets into a strong market that has helped underpin
both profits for the year and our cash positions. It is anticipated
that valuations for this type of asset will continue to improve.
Our residential portfolio has experienced a substantial increase
in value of £28m (2013: £21m), most notably in the South East
(although residential land has increased in value across England
and Wales). Together with the improvement in commercial land
values, this has resulted in an overall market-driven increase in
the value of our property portfolio of £58m (2013: £14m).
Valuation improvements as a result of St. Modwen actions
One of our core skills is our asset management capability, which
continues to deliver strong returns as we successfully add value
to our existing portfolio by managing it through the planning
process. Based on independent valuations from DTZ, we have
generated revaluation gains of £32m in the year (2013: £28m).
Considering the increased activity across our portfolio, we
expect to continue to generate significant value improvements
in 2015, in addition to the significant uplift expected
when the redevelopment of New Covent Garden Market
becomes unconditional.
Residential
Commercial land
Income producing:
– Retail
– Office
– Industrial
Total
2014
2013
Market value
movements
Value added by
St. Modwen
Total
Market value
movements
Value added by
St. Modwen
28
2
9
2
17
58
21
5
4
–
2
32
49
7
13
2
19
90
21
(4)
(1)
(1)
(1)
14
22
–
4
–
2
28
Total
43
(4)
3
(1)
1
42
34 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Strategic Report New Covent Garden Market
The assets and liabilities of this contract will only be recognised
on our Balance Sheet once the contract becomes fully
unconditional. Having received a resolution to grant planning
permission in November 2014 we are targeting to achieve
unconditional status in the first half of 2015.
Once the contract becomes unconditional we will recognise
the value of the extra 20 acres of land as an asset and the cost
of developing and building the new market facility as a liability.
The surplus less likely overage payable to the public sector
will generate valuation profits for the year and there will be an
uplift after tax obligations to our net asset value. The contract
is in joint venture with VINCI PLC and so will appear in the joint
venture line of our Balance Sheet.
Net assets
At the year end the shareholders’ equity value of net assets
was £717.9m or 324.9p per share which represents a 17%
increase over the year (2013: 278.8p per share). In addition to
this, increased dividends of £9.1m (4.13p per share) were paid
during 2014 (2013: £8.2m or 3.75p 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 16% to
344.2p from 297.7p per share. A full reconciliation of our net
assets is provided in note 2 to the Group Financial Statements.
* Note: as a development business many of the EPRA metrics are inappropriate as they are
geared to property investment. The EPRA metrics are nevertheless reported on page 127.
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), our convertible
bond and the retail bond. The valuations are based on the
financial market’s forward prediction curves for interest rates.
Yield curves flattened considerably towards the end of the year
causing a charge against our profits. At the end of the financial
reporting period, and together with other finance charges, this
gave rise to a charge of £3.8m (2013: £6.9m credit).
Nevertheless, profit before all tax has increased substantially
by 68% to a record level of £138.1m (2013: £82.2m).
TAXATION AND PROFITS AFTER TAX
Our record profitability increased our tax charge (including joint
venture tax and deferred tax included in negative goodwill)
for the year to £16.0m (2013: £8.3m). Despite this, we have
achieved a very strong result for the year with profits after tax
increasing by 65% to £122.1m (2013: £73.9m). The resultant
earnings per share of 52.7p (2013: 33.5p) is up 57% year
on year.
BALANCE SHEET
Funding levels
Taking advantage of an increasingly active investment market,
we have completed a significant number of acquisitions and
disposals during the year. Overall, our Balance Sheet debt
at £334m (2013: £341m) has fallen and as the value of our
property portfolio has increased, our gearing and loan to
value ratios have continued to fall. On Balance Sheet gearing
has decreased to 45% (2013: 54%) while see-through loan-
to-value, taking into account our share of joint ventures, has
reduced to 30% (2013: 33%).
As the economic environment improves further, we will remain
acquisitive and continue to invest in site development in order
to generate future returns. We therefore expect absolute levels
of debt to rise during 2015. We also expect the value of our
property portfolio to rise as we invest. In particular, when the
New Covent Garden Market project achieves unconditional
status there will be asset recognition without any accompanying
debt. Overall we expect our debt ratios to remain broadly in the
same range.
Trading profit
Overall valuation
increase of
£51.7m
£90m
St. Modwen Properties PLC Annual Report and Financial Statements 2014 35
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 FINANCIAL REVIEW
continued
CORPORATE FACILITIES
In the first half of the year we successfully launched an offering
of £100m of unsecured guaranteed convertible bonds. The five-
year bond was placed at a coupon of 2.875% and a conversion
premium of 35%, representing a conversion price at a 90%
premium to the 2013 shareholders’ equity net asset value per
share. The net proceeds of the offering were used to repay
existing debt.
Over the course of the last 12 months we have also undertaken
a comprehensive refinancing of our banking portfolio:
• A new seven-year £50m revolving credit facility with
Santander has replaced the previous £30m facility that was
due to expire in January 2016.
• New four-year £99m revolving credit facilities with Barclays on
improved terms replaces the previous £84m Barclays facility
that was to expire in September 2015.
• A new five-year £125m revolving credit facility with the Royal
Bank of Scotland on improved terms replaces the previous
£95m facility that was due to expire in November 2015.
• A new five-year £100m revolving credit facility with HSBC on
improved terms replaces the previous £75m facility that was
due to expire in January 2016.
Our two remaining joint venture facilities have also
been refinanced:
• A new five-year £85m revolving credit facility for our KPI joint
venture on improved terms has replaced the previous £135m
facility that was due to expire in 2017.
• A new five-year £30m facility for our VSM Uxbridge joint
venture on improved terms.
The above actions have extended the weighted average facility
maturity to 4.6 years (2013: 2.5 years), with all corporate and
joint venture facilities now extending until at least 2018.
We have sufficient headroom within our corporate facilities
to enable us to meet future development and funding needs.
At the date of reporting we have £554m of facilities against
year-end drawn debt of £334m.
Hedging and cost of debt
We aim to have predictable costs attached to our borrowing
and therefore hedge the majority of our interest rate risk.
As anticipated, at the year end we were 63% hedged against
our corporate debt which is a significant fall compared to the
previous year (2013: 86%). 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 £737m).
• Gearing must not exceed 175% (actual 45%).
• Interest cover ratio (that excludes non-cash items such
as revaluation movements) must be greater than 1.25x
(actual 3.2x).
Retail bond:
• See-through loan-to-value ratio must not exceed 75%
(actual 30%).
• Interest cover ratio must be greater than 1.5x (actual 4.2x).
The current economic environment still has an element of
uncertainty. However, we have considered available market
information, consulted with our advisors and applied our
own knowledge and experience, and we have concluded
that covenant levels are adequate for our possible
negative scenarios.
Average facility
maturity increased to
Gearing
4.6 years 45%
36 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Strategic Report 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.
OUTLOOK
Achieving record profits is testament to our skill in generating
strong returns through our market-leading expertise and
foresight in regeneration and development.
During the year, we have taken advantage of an improving
marketplace and have focused on growing our income across
the UK through active asset management initiatives and
disposals of those properties to which we can no longer add
value. We will continue to do so in 2015 whilst growing our
pipeline of development opportunities as enquiries continue
to increase and the market gathers pace.
We also look forward to making further progress on New
Covent Garden Market which is not yet accounted for within our
financial results. All of these factors and our ability to harness
the growth in the marketplace whilst also maintaining a prudent
financial structure provide us with an excellent base from which
to grow the business further.
Current banking facilities
£m
600
500
400
300
200
100
0
Barclays
Convertible
Bond
RBS
Retail
Bond
HSBC
Santander
2014
Debt
2015
Renewal
2016
Renewal
2017
Renewal
2018
Renewal
2019
Renewal
2020
Renewal
2021
Renewal
St. Modwen Properties PLC Annual Report and Financial Statements 2014 37
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 RISK MANAGEMENT
RISK MANAGEMENT AND INTERNAL CONTROL
OUR APPROACH TO RISK MANAGEMENT
The Board recognises the importance of identifying and actively
monitoring the full range of financial and non-financial risks
facing the business. Its policy is to have systems in place which
optimise the Company’s ability to manage risk in an effective
and appropriate manner. By regularly reviewing the risk appetite
of the business, the Board ensures that the risk exposure
remains appropriate at any point in the cycle.
Importantly the Board perceives risk not only as having a
potential negative influence on the business but also as an
opportunity that can be a source of financial outperformance
as we have the expertise to take and manage risks that others
cannot. As the UK’s leading regeneration specialist, exposure
to risk is inherent in our business but is subject to extensive
mitigating controls.
The Board is ultimately responsible for maintaining sound risk
management and internal control systems and for determining
the nature and extent of the principal risks it is willing to take
to achieve its strategic objectives. Management assesses
and the Audit Committee reviews the principal risks facing the
Company, including those that would threaten its solvency or
liquidity. Their evaluation of these solvency risks is described
further in the Going Concern section on page 104 and a
description of how these risks are managed and mitigated
is included in the table of principal risks on pages 40 to 43.
The Audit Committee also oversees the effectiveness of sound
risk management and internal control systems. During the
year it considered a detailed report from 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 executive directors are responsible for delivering
the Company’s strategy and managing operational risk.
They in turn place reliance on the Property Board and their
teams to monitor and manage operational risk on an ongoing
basis, as well as identifying emerging risks. Risk registers, which
exist at both a Group and regional basis, provide a framework
for all employees to contribute in recognition of their shared
responsibility for effective management of risk in delivering
our strategy.
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.
Audit Committee Report Pages 66–72
Going Concern Page 104
At St. Modwen, assessment of risk is a cornerstone of
our strategy and our risk management framework is
fundamental to its delivery. Our integrated approach
combines a top-down strategic view with a complementary
bottom-up operational process.
The top-down approach involves a review of the external
environment in which we operate, to guide an assessment of
the risks which we are comfortable exposing the business to
in pursuit of our strategy. The bottom-up process involves the
identification, management and monitoring of risks in each area
of our business to ensure that risk management is embedded
in our everyday operations. Control of this process is provided
through maintenance of regional risk registers. This approach
ensures that operational risks are fully considered in determining
the risk appetite and corresponding strategy of the business.
Key features of St. Modwen’s risk management and
internal control system:
• an organisational structure with clear segregation of duties,
control and authority;
• a robust system of financial reporting, budgeting and
re-forecasting processes;
• monthly operational reviews between the Chief Executive
and regional directors;
• comprehensive monthly reporting to the Board through
development progress reviews, management accounts
and a comparison of committee expenditure against
available facilities;
• clearly defined procedures for the authorisation of capital
expenditure, acquisitions and sales of development and
investment properties, construction activity, and other
contracts and commitments;
• a treasury policy;
• a formal schedule of matters, including major investment
and development decisions and strategic matters, that are
reserved for Board approval;
• a suite of policies and procedures in respect of anti-bribery
and corruption, fraud prevention and IT security;
• an independently operated whistleblowing facility to
enable employees to raise concerns on a confidential
basis, with investigation overseen by the Audit Committee;
and
• other control measures outlined elsewhere in this Annual
Report, including legal and regulatory compliance and
health and safety.
38 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Strategic Report Details of the principal risks which could prevent the
achievement of our strategic objectives and may have a
material impact on our business are set out in the table that
follows. This year we recognise the increasing risks associated
with upcoming political events, such as the UK General Election
and cyber-crime.
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 guidance on
internal control, have been in place throughout that period
and up to the date of approval of this report. The Board also
confirms that it has not identified, nor been advised of, a failing
or weakness which it has determined to be significant.
St. Modwen’s risk management and internal control systems
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.
In 2014 a workshop facilitated by KPMG was held for senior
management to consider in detail the effectiveness of the
Group’s risk management framework and review the Group’s
risk register. The workshop focused on:
• the risk management culture within St. Modwen;
• the governance framework;
• risk identification and assessment processes;
• internal reporting;
• monitoring and assurance; and
• mitigation and controls.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 39
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 OUR PRINCIPAL RISKS
Strategic objective
Risk and potential impact
Mitigation
SECURE
EXCELLENT
RETURNS…
Market/economic changes such
as higher interest rates, reduced
demand for land/new properties,
reduced availability of credit and
declining investment yields restrict
business development and cause
valuation falls. Significant upcoming
political events which delay and/or
impact investment decisions and
reduce returns.
• 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.
• Investment and financing strategy is determined against
a backdrop of potential outcomes of political events.
Changes to local and national
planning processes adversely
impacts our strategy by limiting our
ability to secure viable permissions
and/or by removing our competitive
advantage.
• Use of high-quality professional advisors.
• Active involvement in public consultation.
• Constant monitoring of all aspects of the planning process
by experienced in-house experts.
• Lobbying to/contact with both central
and local Government.
Inadequate due diligence on major
new schemes, programme
management, construction
delivery and/or procurement
leads to unforeseen exposures,
quality issues and/or cost overruns
causing customer dissatisfaction
and/or financial loss.
• Acquisitions, development and ultimate disposals are
reviewed and financially appraised in detail, with clearly
defined authority limits.
• 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.
• Contractual liability clearly defined.
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 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. The 2015 UK General
Election has the potential to impact the appeal and performance of investment in the UK in general
and real estate in particular, both through the related uncertainty and resultant implementation of
policies and regulation.
Over the course of the last year, the continuing economic problems within the Eurozone mean that
the overall market position continues to represent a risk.
Our daily exposure to all aspects of the planning process, and internal procedures for sharing best
practice, ensure we remain abreast of most developments. Furthermore, we continue our efforts to
influence public policy debate. Although the imminent General Election means that future rules are
uncertain, our expertise should enable us to prosper relative to our competitors, irrespective of the
planning environment.
Our programme for the year has been completed on time and within budget. Our contractor
selection and management processes are rigorous; we continue to favour financially stable
and robust contractors and are mindful of contractors’ cash flows becoming stretched in a
rising market.
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.
• Fewer but financially strong 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 considerable financial resources.
We maintain detailed and ongoing dialogue and have exited from any arrangements with financially
weaker partners, so the overall risk continues to reduce year-on-year.
THROUGH A
FOCUS ON
LONG-TERM
SIGNIFICANT
ADDED VALUE…
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.
Failure to recruit, develop and
retain staff with the necessary skills
resulting in significant disruption/
loss of intellectual property.
40 St. Modwen Properties PLC Annual Report and Financial Statements 2014
• Use of high-quality external advisors.
• Highly qualified, experienced staff and proven track record
as the UK’s leading regeneration specialist.
• Risk assessments conducted as part of due diligence
process, with contamination remediated following
acquisition and cost plans allowing for unforeseen
remediation costs.
• 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.
• Succession planning monitored at Board level and below.
• Targeted recruitment with competitive, performance-
driven remuneration packages to secure highly-skilled and
motivated employees.
• Leadership and management development plans in place.
• Exit interviews undertaken.
• Key information is documented to safeguard knowledge.
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.
Our succession planning was put into action during the year with the promotion of Stephen Prosser
as Midlands Regional Director and the appointments of Richard Bannister, Steven Knowles,
Richard Powell and Andy Taylor to the Property Board. Staff turnover remains low and the
proportion of management with more than three years’ service is now at 84%. As competition to
attract the best people increases, we continue to adapt our recruitment strategy to source the skills
that will support the Company’s long-term business objectives.
Strategic Report Key:
Risk exposure increased
Risk exposure reduced
No significant change
in risk exposure
Movement in
the year
SECURE
EXCELLENT
RETURNS…
Market/economic changes such
as higher interest rates, reduced
demand for land/new properties,
reduced availability of credit and
declining investment yields restrict
business development and cause
valuation falls. Significant upcoming
political events which delay and/or
impact investment decisions and
reduce returns.
• 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.
• Investment and financing strategy is determined against
a backdrop of potential outcomes of political events.
Changes to local and national
planning processes adversely
impacts our strategy by limiting our
ability to secure viable permissions
and/or by removing our competitive
advantage.
• Use of high-quality professional advisors.
• Active involvement in public consultation.
• Constant monitoring of all aspects of the planning process
by experienced in-house experts.
• Lobbying to/contact with both central
and local Government.
Inadequate due diligence on major
• Acquisitions, development and ultimate disposals are
new schemes, programme
management, construction
delivery and/or procurement
leads to unforeseen exposures,
quality issues and/or cost overruns
causing customer dissatisfaction
and/or financial loss.
reviewed and financially appraised in detail, with clearly
defined authority limits.
• 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.
• Contractual liability clearly defined.
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 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. The 2015 UK General
Election has the potential to impact the appeal and performance of investment in the UK in general
and real estate in particular, both through the related uncertainty and resultant implementation of
policies and regulation.
Over the course of the last year, the continuing economic problems within the Eurozone mean that
the overall market position continues to represent a risk.
Our daily exposure to all aspects of the planning process, and internal procedures for sharing best
practice, ensure we remain abreast of most developments. Furthermore, we continue our efforts to
influence public policy debate. Although the imminent General Election means that future rules are
uncertain, our expertise should enable us to prosper relative to our competitors, irrespective of the
planning environment.
Our programme for the year has been completed on time and within budget. Our contractor
selection and management processes are rigorous; we continue to favour financially stable
and robust contractors and are mindful of contractors’ cash flows becoming stretched in a
rising market.
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.
• Fewer but financially strong 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 considerable financial resources.
We maintain detailed and ongoing dialogue and have exited from any arrangements with financially
weaker partners, so the overall risk continues to reduce year-on-year.
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.
THROUGH A
FOCUS ON
LONG-TERM
SIGNIFICANT
ADDED VALUE…
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.
Failure to recruit, develop and
retain staff with the necessary skills
resulting in significant disruption/
loss of intellectual property.
Our succession planning was put into action during the year with the promotion of Stephen Prosser
as Midlands Regional Director and the appointments of Richard Bannister, Steven Knowles,
Richard Powell and Andy Taylor to the Property Board. Staff turnover remains low and the
proportion of management with more than three years’ service is now at 84%. As competition to
attract the best people increases, we continue to adapt our recruitment strategy to source the skills
that will support the Company’s long-term business objectives.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 41
• Use of high-quality external advisors.
• Highly qualified, experienced staff and proven track record
as the UK’s leading regeneration specialist.
• Risk assessments conducted as part of due diligence
process, with contamination remediated following
acquisition and cost plans allowing for unforeseen
remediation costs.
• 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.
• Succession planning monitored at Board level and below.
• Targeted recruitment with competitive, performance-
driven remuneration packages to secure highly-skilled and
motivated employees.
• Leadership and management development plans in place.
• Exit interviews undertaken.
• Key information is documented to safeguard knowledge.
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176
OUR PRINCIPAL RISKS
continued
Strategic objective
Risk and potential impact
Mitigation
WHILE
PROTECTING
OUR ASSETS
Availability of funding reduces,
causing a lack of liquidity that
impacts borrowing capacity and
reduces the saleability of assets.
Unforeseen significant changes
to cash flow requirements
(e.g. operating cost increases,
pension fund shortfall) which limit
the ability of the business to meet
its ongoing commitments.
Failure to anticipate market
changes through poor market
intelligence leads to the selection
of inappropriate and, ultimately,
unprofitable schemes.
Failure to identify a pipeline of future
residential sites or reduced
availability of mortgage finance
adversely impacts the performance
of our residential business.
Safety, health and environment
(SHE) 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 security or business
continuity and disaster recovery
planning for operations and IT,
leading to significant business
disruption, financial/intellectual
property loss and/or reputational
damage in the event of an accident,
act of terrorism or cyber-crime.
• Recurring income from rents provides funding for a large
percentage of overhead and interest costs.
• Strong relationships with key banks; all corporate debt
refinanced until at least 2018.
• Finance successfully raised through alternative, unsecured
means (retail bond, equity placing and convertible bond).
• Financial headroom maintained to provide flexibility and
scenario modelling tools employed to evaluate the
likelihood of a breach of financing covenant limits.
• Regular and detailed cash flow forecasting enables
monitoring of performance and management of future
cash flows.
• 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.
• Acquisitions, development and ultimate disposals are
reviewed and financially appraised in detail, with clearly
defined authority limits.
• 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 joint venture partners with residential expertise
(e.g. Persimmon).
• Use of high-quality external SHE advisors.
• Annual cycle of SHE audits.
• SHE Steering Group chaired by the Group
Construction Director.
• Regular Board reporting.
• Programme of employee training specific to roles
and responsibilities.
• Defined business processes to proactively manage issues.
• Asset risk assessments (e.g. security, environmental,
health and safety).
• Documented disaster recovery and crisis management
plans in place across the business.
• Dedicated IT team monitors security and performance
of all information systems.
• Comprehensive insurance arrangements.
42 St. Modwen Properties PLC Annual Report and Financial Statements 2014
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. 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. Over the last year we
successfully launched a £100m convertible bond and have refinanced the debt portfolio, extending
the weighted average life to 4.6 years (2013: 2.5 years) and reducing the weighted average cost of
debt to 4.8% (2013: 5.6%).
The excellent reputation and financial capacity of the Company has enabled us to continue to win
schemes and grow the property portfolio 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.
Whilst the planning environment remains challenging and subject to inevitable delays, our scale and
expertise enables us to navigate the process with considerable success. Demand for new homes
remains strong, supported by the NPPF’s housing supply requirements and the availability of
mortgage finance (due at least in part to the Government’s Help to Buy scheme). Furthermore, the
geographic spread of our business means we are not overly exposed to any one region.
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 processes. 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.
Whilst our exposure to the loss of intellectual property is relatively low, we are mindful of the
increasing threat to corporate security from cyber-crime. As the profile of cyber-security continues
to grow, our risk management approach has adapted to further increase preventative security and
enhance the robustness of existing procedures.
Strategic Report Key:
Risk exposure increased
Risk exposure reduced
No significant change
in risk exposure
Movement in
the year
WHILE
PROTECTING
OUR ASSETS
Availability of funding reduces,
causing a lack of liquidity that
impacts borrowing capacity and
reduces the saleability of assets.
Unforeseen significant changes
to cash flow requirements
(e.g. operating cost increases,
pension fund shortfall) which limit
the ability of the business to meet
its ongoing commitments.
Failure to anticipate market
changes through poor market
intelligence leads to the selection
of inappropriate and, ultimately,
unprofitable schemes.
• Recurring income from rents provides funding for a large
percentage of overhead and interest costs.
• Strong relationships with key banks; all corporate debt
refinanced until at least 2018.
• Finance successfully raised through alternative, unsecured
means (retail bond, equity placing and convertible bond).
• Financial headroom maintained to provide flexibility and
scenario modelling tools employed to evaluate the
likelihood of a breach of financing covenant limits.
• Regular and detailed cash flow forecasting enables
monitoring of performance and management of future
cash flows.
• 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.
• Acquisitions, development and ultimate disposals are
reviewed and financially appraised in detail, with clearly
defined authority limits.
Failure to identify a pipeline of future
• Team of professionals with residential experience
residential sites or reduced
availability of mortgage finance
adversely impacts the performance
of our residential business.
and expertise.
• Extensive land bank with a continuing stream of
planning applications.
• Flexible approach to mortgage financing (e.g. shared
• Use of joint venture partners with residential expertise
equity schemes).
(e.g. Persimmon).
Safety, health and environment
(SHE) 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 security or business
continuity and disaster recovery
planning for operations and IT,
leading to significant business
disruption, financial/intellectual
property loss and/or reputational
damage in the event of an accident,
act of terrorism or cyber-crime.
• Use of high-quality external SHE advisors.
• Annual cycle of SHE audits.
• SHE Steering Group chaired by the Group
Construction Director.
• Regular Board reporting.
• Programme of employee training specific to roles
and responsibilities.
• Defined business processes to proactively manage issues.
• Asset risk assessments (e.g. security, environmental,
health and safety).
• Documented disaster recovery and crisis management
plans in place across the business.
• Dedicated IT team monitors security and performance
of all information systems.
• Comprehensive insurance arrangements.
Commentary
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. 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. Over the last year we
successfully launched a £100m convertible bond and have refinanced the debt portfolio, extending
the weighted average life to 4.6 years (2013: 2.5 years) and reducing the weighted average cost of
debt to 4.8% (2013: 5.6%).
The excellent reputation and financial capacity of the Company has enabled us to continue to win
schemes and grow the property portfolio 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.
Whilst the planning environment remains challenging and subject to inevitable delays, our scale and
expertise enables us to navigate the process with considerable success. Demand for new homes
remains strong, supported by the NPPF’s housing supply requirements and the availability of
mortgage finance (due at least in part to the Government’s Help to Buy scheme). Furthermore, the
geographic spread of our business means we are not overly exposed to any one region.
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 processes. 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.
Whilst our exposure to the loss of intellectual property is relatively low, we are mindful of the
increasing threat to corporate security from cyber-crime. As the profile of cyber-security continues
to grow, our risk management approach has adapted to further increase preventative security and
enhance the robustness of existing procedures.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 43
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176
PICTURED:
2014 marked St. Modwen’s 10-year
anniversary at The Trentham Estate.
90%+
of our developable portfolio with specified
use is brownfield
44 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Strategic Report CORPORATE
SOCIAL
RESPONSIBILITY
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.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 45
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 CORPORATE SOCIAL
RESPONSIBILITY
continued
OUR APPROACH
As a regeneration specialist we are constantly cleaning up
and renewing brownfield land, creating and investing in
new communities and, ultimately, providing a much needed
economic boost to many areas across the country. We give
careful thought to everything we develop, from demolition and
remediation, through to build completion and beyond. At every
stage of the development cycle, we ensure that our work
is contributing positively to the enhancement of the natural
and built environment, leaving behind a positive legacy that
communities can enjoy for years to come.
As a responsible developer, we employ the most sustainable
and environmentally responsible techniques across our
construction projects, paying close attention to conserving
energy, reducing our consumption of raw materials, using
sustainable resources and minimising waste.
Wherever possible, we seek to employ local materials and
labour whilst also creating opportunities for apprentices,
graduates and work experience trainees across the UK.
We are also acutely aware of the need to create new, and
preserve and enhance existing, public spaces within and
surrounding our development projects. Our activities can
range from planting thousands of new trees to provide a new
wildlife haven on disused industrial land, to creating public
access linking communities through previously inaccessible
industrial sites. We also actively engage with local schools and
community groups on our sites through public consultation
events, health and safety initiatives and environmentally-
led projects.
10
corporate social
responsibility
objectives identified
At every stage of the
development cycle,
we ensure our work
is successfully
enhancing the natural
and built environment,
leaving behind a
positive legacy
that communities
can enjoy for
years to come.
46 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Strategic Report recycled
125km
of pipeline and cables
more than
1.2m litres
of oil recycled
CASE STUDY – BP PORTFOLIO
A classic example of how all the facets of our CSR approach
can come together in one project is the regeneration of a
3,500-acre portfolio of disused BP sites, predominantly
located across South Wales. One of the biggest remediation
projects in Europe, it exemplifies our expertise and
commitment to positive regeneration.
Following our acquisition of the 1,060-acre former Llandarcy
oil refinery from BP in 2008, we acquired an additional
2,500-acre industrial portfolio from them in 2009 and
overnight we became the largest private owner of
brownfield land in South Wales.
Collectively, this 3,500-acre portfolio comprised land heavily
impacted by the legacy of oil refinery and chemical production.
The entire remediation and clean-up process of major parts of
this portfolio has taken five years to complete, during which
time and working closely with the environmental authorities,
we have successfully:
Housing – Coed Darcy
A 25-year project, we are replacing the industrial legacy left
by the former BP Llandarcy oil refinery site with Coed Darcy,
a thriving new community with potential economic impact of
£1.2bn and provision of 4,000 homes.
Employment – Baglan Bay
This 1,050-acre site, formerly home to one of the largest
petro-chemical factories in Europe, is earmarked to provide
over 4m sq ft of employment space. Following extensive
remediation works in 2010 and 2011 we have since developed
a 30-acre Solar Park which is now generating electricity
sufficient to supply enough energy for more than 1,200 homes.
Education – Bay Campus, Swansea University
We are presently transforming the 65 acre former BP Transit
site into the new £450m Bay Campus for Swansea University.
With potential economic impact of £3bn over the 10-year
life of the project, the campus will focus on STEM subjects
(Science, Technology, Engineering and Maths).
• recycled more than 1.2m litres of oil, recovered from lakes,
ponds and soil, for use as fuel and lubricants;
Find out more about our corporate social responsibility
www.stmodwen.co.uk/csr
• removed over 200,000 tonnes of sludge, employing new
remediation techniques to produce material which can be
used for landscaping;
• recovered and recycled over 250,000 tonnes of concrete
and 125km of pipeline and cables; and
• created a new habitat for one of Europe’s largest
populations of Greater Crested Newts.
This land now represents a major linked development that
stretches across South Wales and has three key regeneration
strands, each of them leaving their own important legacy on
this area of South Wales.
PICTURED BELOW:
Coed Darcy is now transforming into an attractive, sustainable community.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 47
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 CORPORATE SOCIAL
RESPONSIBILITY
continued
CSR STEERING GROUP
Individual project case studies are an excellent way of
exemplifying our approach to CSR and sustainability across
our individual sites. However, we have become increasingly
aware of the need for firm objectives and targets that will help
to strengthen our CSR capabilities and crystallise the positive
work being carried out across our entire portfolio.
In 2014 we established the CSR Steering Group. Chaired by
Steve Burke, Group Construction Director, and comprising
management representing a range of St. Modwen business
disciplines, the Group has been created to ensure:
• we capture and report on the right data in terms of social,
economic and environmental CSR activities so that we can
benchmark our performance in these areas;
• we are continually improving our approach to CSR and
building on initiatives that are already in place;
• we are adhering to corporate guidance on CSR;
• we identify and actively pursue any business opportunities
arising from our CSR activities;
• we promote our CSR activities across the Country in the
appropriate way; and
• our CSR initiatives complement our corporate values.
Meeting every four to six weeks, this Steering Group has
established a set of 10 CSR objectives.
Both strategic and long-term, these objectives focus on
improving the environment, promoting responsible development
and construction, and enhancing the communities in which
we build. We are aware of the need to promote responsible
construction and development that reflects our approach to
CSR and will look to both our employees and our supply chain
to help us achieve our goals.
These objectives will be reviewed annually. The CSR Steering
Group will continue to meet regularly throughout 2015 to ensure
we remain on track with these objectives and to discuss new
initiatives so that we remain innovative in our approach to CSR
and are constantly mindful of the positive impact our projects
can have on the community, the environment and the economy.
Initiative
Objective
Tree planting
Plant a minimum of 10,000 new trees
across our development portfolio.
Renewable energy Offset the energy consumed by our
Rainwater
harvesting
Smart meters
Reuse and
reclamation
Waste recycling
Considerate
contractors
Apprenticeships
Health
and safety
Support to
local schools
St. Modwen Homes sales offices
by installing solar panels on all
St. Modwen Homes’ showhomes.
Recycle and reuse rainwater on 25%
(by floor area) of our speculative, new
build, industrial unit developments.
Over the next five years, install
smart meters in all of our income
producing properties.
Recycle and reuse over 100,000
tonnes of concrete, in accordance
with the Specification for Highway
Works, to avoid the use of natural
quarried materials.
Instigate segregated waste recycling
across our entire Shopping Centre
portfolio to reduce the amount of waste
sent to landfill by 5%.
Achieve a minimum Considerate
Contractor score of 35/40 on all
St. Modwen Homes’ schemes,
targeting with a 5% improvement
over two years.
Implement the Considerate Contractor
scheme across our Major Projects:
Bay Campus, Swansea University;
Longbridge, and New Covent
Garden Market.
Create opportunities for five full-time or
equivalent trainees/graduates on our
St. Modwen Homes schemes.
Create opportunities for up to five full-
time or equivalent trainees/graduates
on our Major Projects.
Target to achieve the industry standard
(Accident Frequency Rate) across
our portfolio.
Visit local schools adjacent to all of
our large construction sites, to provide
presentations on health, safety and
sustainability, at least once a year.
48 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Strategic Report GREENHOUSE GAS EMISSIONS
This is the second year in which we have reported our
greenhouse gas emissions meaning that we now have a
comparable benchmark from which we can monitor our
progress. As part of our ongoing commitment to reduce our
carbon footprint, we will continually endeavour to improve the
way we capture data for future reports. For reporting purposes,
we have continued to monitor emissions for those sources we
deem ourselves to be directly responsible, namely:
Total purchased gas and electricity
This represents the gas and electricity which has been
consumed at properties under our operational control –
Head Office, a number of regional offices, including our
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.
On face value the 2014 results for total Scope 1 and 2 remain
broadly the same as for 2013. However, closer analysis of the
figures in each Scope indicates an improvement on a like-for-
like basis, particularly when taking into account the increase
in the Company’s headcount and the rise in the number of
St. Modwen Homes’ sales offices that have opened across
the Country during 2014. Further detailed explanation is
provided below.
Scope 1
Reflecting the improvement in the economy and its positive
effect on the commercial and residential property markets, the
Company has grown throughout the year and we now employ
on average 287 full-time equivalent employees across the
business. Whilst the increase in staff has resulted in an overall
increase in CO2 emissions from petrol and diesel to 764 tonnes
(2013: 720 tonnes), when looking at those individuals who had
company cars in current and preceding reporting years the CO2
emissions has reduced by five tonnes.
Scope 2
Scope 2 shows a reduction of 2% in CO2 emissions to 937
tonnes (2013: 961 tonnes) across our portfolio of operational
business properties. This is a positive result, considering that
the number of St. Modwen sales offices has risen throughout
2014 to 7 (2013: 6) and these make up 11% of the properties
monitored as part of our carbon reporting.
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
2014
Intensity ratio
2013
Intensity ratio
CO2 emissions
(tonnes)
tCO2 emissions/
full-time
employees(1)
tCO2 emissions/
£m property
portfolio(2)
CO2 emissions
(tonnes)
tCO2 emissions/
full-time
employees(1)
tCO2 emissions/
£m property
portfolio(2)
222
542
764
937
937
1,701
2.7
0.6
3.3
6.0
0.7
1.3
225
495
720
961
961
1,681
2.8
3.8
6.6
0.6
0.8
1.4
(1) Equivalent CO2 emissions per full-time employee.
(2) Equivalent CO2 per £m of property portfolio held by the Company.
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. We have based the measurement of emissions from company cars 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.
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 these
emissions sources.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 49
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 CORPORATE SOCIAL
RESPONSIBILITY
continued
BOARD DIVERSITY
SENIOR MANAGER DIVERSITY
(20%)
2
8
(80%)
(13%)
1
7
(87%)
ALL EMPLOYEE DIVERSITY
Male
Female
(45%)
143
177
(55%)
EMPLOYEE DIVERSITY
We value and respect the individuality and diversity that each of
our employees brings to the business. Their skill, dedication and
the quality of their work is vital to our success and we recognise
our responsibility as an employer to look after their wellbeing
and ensure that each individual feels like a respected part of
our workforce.
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.
Details of the gender diversity of the Board, our senior
management and our employee population (including both full
and part time staff) as at 30th November 2014 is set out above.
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.
Nomination Committee Report Pages 73–76
TRAINING AND DEVELOPMENT
Essential to maintaining a good level of staff retention is
ensuring the motivation of our employees. Well-motivated staff
not only perform better but they enhance business stability and
this is reflected in the effective management of our projects and
the business as a whole. In the period, 84% of management
had more than three years’ service (2013: 82%).
Following on from our Leadership Development Programme
for the Property Board, the next tranche involving senior
managers across the business has commenced. Produced by
Farscape Developments and Pinsent Masons, the training
sessions, involving six groups, will take place during the first
half of 2015. Feedback will be used to support the Company’s
ongoing succession planning programme, and determine what
further training is required in order to continue the professional
development of all staff for the ongoing benefit of the business.
In addition, employees are encouraged to maintain their
Continuous Professional Development (CPD) and support
is provided where necessary for staff to attain qualifications
relevant to their role.
Finally, we remain committed to taking on bright new talent
and channelling skills into appropriate areas of our business
and during 2015 we will be promoting our newly established
graduate trainee programme. Please see our website
for more information about this programme and for case
studies in relation to apprenticeships, work experience and
graduate trainees.
HUMAN RIGHTS
Whilst we do not have a specific human rights policy, we do
have policies that adhere to internationally proclaimed human
rights principles. We will continue to give careful consideration
as to whether our approach to human rights issues
remains appropriate.
84%
of management
have over three
years’ service
50 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Strategic Report HEALTH AND SAFETY
WORKING WITH CHARITIES
At St. Modwen we remained committed to ensuring the
health, safety and welfare of our employees, contractors,
subcontractors, customers and visitors to our sites.
We have a comprehensive safety, health and environmental
(SHE) management system in place, which is integral to our
business. This is supported by detailed policies and procedures
in respect of both our development and residential activities;
these are continually refreshed to ensure they reflect any
changes to regulation or best practice.
The SHE Steering Group, chaired by the Group Construction
Director, monitors the Company’s SHE management system.
It receives reports from senior management, reviews incident
and accident prevention performance and agrees initiatives
designed to continue the promotion of a positive safety culture
across St. Modwen’s activities. The Steering Group reports on
its activities to the Board.
We engage independent consultants to ensure compliance
with Construction and Design Management (CDM) regulation,
with particular focus on our residential activities through
St. Modwen Homes where we are the principal contractor.
All St. Modwen Homes’ sites are registered with the
Considerate Contractors scheme and a number have been
awarded certificates of performance beyond compliance,
which recognise consideration to the locality, the workforce
and the environment that goes beyond statutory requirements.
Specialist external consultants carry out regular health and
safety audits of all our sites under development. Regular risk
assessments of our properties are undertaken using an online
management system, with implementation of any resulting
actions monitored by the Property Board. St. Modwen also
operates a pre-qualification process to ensure the selection
of competent consultants and contractors.
We encourage responsibility for the identification and mitigation
of health and safety risks at an individual level. Regular and
appropriate competence training is provided for our employees,
contractors and subcontractors to ensure that health and safety
considerations remain at the forefront of any activity.
We measure our health and safety performance through
accident frequency rates (AFR), measured as the number of
reportable incidents x100,000 (being the number of hours a
person works in a lifetime) divided by the total hours worked
by all persons at risk.
For the 12 months to 30th November 2014 the AFR for our
development sites and for St. Modwen Homes was 0.4 and
0.1 respectively, both outperforming the industry benchmark.
There were no health and safety prosecutions, enforcement
actions or fatalities arising from our activities during the year.
We continue to review our strategy for charitable support and
in the meantime we consider each opportunity, whether at
national, regional or local level, on a case by case basis and
subject to its synergy with our projects. For more information
about our work with local and national charities, please see
www.stmodwen.co.uk/CSR/charity work
Find out more about our corporate social responsibility
www.stmodwen.co.uk/csr
APPROVAL OF STRATEGIC REPORT
The Strategic Report for the year ended 30th November 2014
has been approved by the Board and was signed on its
behalf by
Bill Oliver
Chief Executive
2nd February 2015
St. Modwen Properties PLC Annual Report and Financial Statements 2014 51
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 THE BOARD
Bill Shannon
Non-executive
Chairman
Bill Oliver
Chief Executive
Steve Burke
Group Construction
Director
Michael Dunn
Group Finance Director
Richard Mully
Senior Independent
Director
Ian Bull
Independent
non-executive director
Kay Chaldecott
Kay Chaldecott
Independent
Independent
non-executive director
non-executive director
Simon Clarke
Simon Clarke, DL
Non-executive
Non-executive
director
director
John Salmon
Independent
non-executive director
Tanya Stote
Company Secretary
Lesley James, CBE
Lesley James, CBE
Independent
Independent
non-executive director
non-executive director
52 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Corporate Governance Bill Shannon
Steve Burke
Ian Bull
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.
Committees
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
Deputy Chairman and Senior
Independent Director of
LSL Property Services plc,
a non-executive director of
Johnson Service Group plc and
Trustee of the Royal Voluntary
Service. A qualified Chartered
Accountant (Scotland).
Bill Oliver
Chief Executive
Appointed to the Board in
January 2000.
Committees
Attends meetings of the Audit,
Nomination and Remuneration
Committees by invitation.
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.
Group Construction Director
Appointed to the Board in
November 2006.
Committees
Attends meetings of the Audit
Committee by invitation.
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
Group Finance Director
Appointed to the Board in
December 2010.
Committees
Attends meetings of the Audit
Committee by invitation.
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.
Richard Mully
Senior Independent Director
Appointed to the Board in
September 2013 and became
Senior Independent Director in
December 2013.
Committees
Member of the Audit, Nomination
and Remuneration 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.
Independent
non-executive director
Appointed to the Board in
September 2014.
Committees
Member of the Audit, Nomination
and Remuneration Committees.
Experience
Chief Financial Officer and main
board director at Ladbrokes plc
since 2011. Over 20 years’
financial experience with
companies such as Whitbread plc,
Buena Vista Home Entertainment
(Walt Disney Company) and BT
Group. Group Finance Director
of Greene King plc from 2006 to
2011 and former non-executive
director of Paypoint Limited.
A Fellow of the Chartered Institute
of Management Accountants.
Kay Chaldecott
Independent
non-executive director
Appointed to the Board in
October 2012.
Committees
Member of the Audit, Nomination
and Remuneration 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
and Boyer Planning Limited and
a member of the Advisory Board
of Next Leadership. A member
of the Royal Institution of
Chartered Surveyors.
Lesley James, CBE
Independent
non-executive director
Appointed to the Board in
October 2009.
Committees
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 Alpha
Airports Group plc, Anchor Trust,
Care UK plc, Inspicio plc, Liberty
International plc and the West
Bromwich Building Society.
Former Trustee of the charity
I CAN. A Companion of the
Chartered Institute of
Personnel and Development.
John Salmon
Independent
non-executive director
Appointed to the Board in
October 2005.
Committees
Chairs the Audit Committee and is
a member of the Nomination and
Remuneration 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.
Simon Clarke, DL
Tanya Stote
Non-executive director
Appointed to the Board in
October 2004.
Committees
Attends meetings of the Audit,
Nomination and Remuneration
Committees by invitation.
Experience
Former Deputy Chairman of
Northern Racing plc and director
and Vice-Chairman of The
Racecourse Association Ltd.
Currently Chairman of Dunstall
Holdings Ltd and a Deputy
Lieutenant for Staffordshire.
The son of Sir Stanley Clarke,
the founder and former Chairman
of St. Modwen, he represents
the interests of the Clarke and
Leavesley families, the Company’s
largest shareholders, on the Board.
Company Secretary
Joined St. Modwen as Company
Secretary in March 2012.
Committees
Attends all Audit, Nomination
and Remuneration Committee
meetings in her capacity as
Company Secretary.
Experience
Has over 15 years of governance
and compliance experience in
FTSE listed companies, including
Misys plc, Taylor Woodrow plc
(now Taylor Wimpey plc) and Travis
Perkins plc. Joined St. Modwen
from 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 2014 53
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 PROPERTY
BOARD
Richard Bannister
Regional Manager
– Yorkshire and
North East
Guy Gusterson
Residential Director
– St. Modwen Homes
Mike Herbert
Regional Director
– The Trentham Estate
Rupert Joseland
Regional Director
– South West
and South Wales
Stephen Knowles
Regional Director
– North West
Richard Powell
Build Director
Stephen Prosser
Regional Director
– Midlands
Tim Seddon
Regional Director
– London
and South East
Andy Taylor
Group Financial
Controller
Rupert Wood
Regional Director
– Northern Home
Counties
54 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Corporate Governance Richard Bannister
Regional Manager
– Yorkshire and North East
6 years’ service
Promoted to Regional Manager in
2014 and now leading the asset
management of Waterdale
Shopping Centre, Doncaster and
plans for redevelopment of part of
Melton Park in Hull for 510 new
homes. Successfully completed
the purchase of Billingham Town
Centre at the end of 2014 for
£14.3m and will continue to
oversee the plans for its future
regeneration.
Guy Gusterson
Residential Director
– St. Modwen Homes
8 years’ service
Responsible for maximising the
value of the Company’s residential
land bank which covers over
1,900 acres of developable land
nationally. Oversees the Persimmon
joint venture and is Managing
Director of the Company’s
housebuilding business,
St. Modwen Homes, which
has 10 schemes in production
across the UK.
Mike Herbert
Regional Director
– The Trentham Estate
24 years’ service
Has delivered numerous major
regeneration projects across North
Staffordshire, including Festival
Park, Etruria Valley and Trentham
Lakes. Now has primary
responsibility for the continued
£100m regeneration of the
725-acre historic Trentham Estate,
one of the top tourist and leisure
destinations in the UK which
welcomed over 470,000 paying
visitors during 2014.
Rupert Joseland
Regional Director
– South West and
South Wales
13 years’ service
Set up the South West and South
Wales Regional Office in 2004 and
now oversees 18 development
schemes across the region.
Instrumental in the 2,500-acre BP
portfolio acquisitions and
responsible for their subsequent
redevelopment, including the
£1bn regeneration of Coed Darcy,
Neath. Also oversees the
ongoing redevelopment of Locking
Parklands, Weston-super-Mare
and the 600-acre mixed-use
regeneration of Glan Llyn,
South Wales.
Steven Knowles
Regional Director
– North West
11 years’ service
Promoted to Regional Director in
2014 and oversees approximately
27 projects within the North West
region, including the regeneration
of Great Homer Street in
North Liverpool, the continued
re-development of Wythenshawe
Town Centre and the delivery of
325 new homes in Ellesmere Port.
Richard Powell
Build Director
8 years’ service
Reports to the Group Construction
Director and responsible for the
Company’s build programme.
Ensures the smooth transition of
build projects, from contractor
appointment through to conclusion
and handover. Currently fronting the
delivery team for the new Bay
Campus, Swansea University
and also oversees projects
including the redevelopment of
RAF Uxbridge, the regeneration of
Farnborough Town Centre and the
310,000 sq ft extension of
Screwfix, Stoke-on-Trent.
Stephen Prosser
Regional Director
– Midlands
17 years’ service
Formerly Regional Director for the
North prior to his promotion and
move to the Midlands in 2014.
Has direct responsibility for all
activity across the region, including
the ongoing £1bn regeneration of
Longbridge, the mixed-use
leisure-based Meon Vale scheme
in Stratford-upon-Avon, and the
extensive redevelopment of a
280-acre former industrial site in
Branston, Burton upon Trent.
Tim Seddon
Regional Director
– London and South East
8 years’ service
Oversees all of St. Modwen’s
development and asset
management activities across
London and the South East.
Managed the successful and
ongoing redevelopment of the
former RAF sites at both Mill Hill
and Uxbridge and the regeneration
of Wembley Central and Leegate
Shopping Centre. Heads up the
delivery team for the redevelopment
of the New Covent Garden Market
sites in Nine Elms, London.
Andy Taylor
Group Financial Controller
7 years’ service
Reports to the Group Finance
Director and responsible for all
areas of operational finance
together with the management of
corporate finance activity, treasury
and tax. Was instrumental in the
launch of the £100m convertible
bond and the refinancing of the
Company’s debt portfolio in 2014.
Rupert Wood
Regional Director
– Northern Home Counties
8 years’ service
Established the Northern Home
Counties Regional office in 2008
and now oversees the
management of its portfolio which
includes Edmonton Green
Shopping Centre and Cranfield
University. Also created
St. Modwen Energy, a new
business unit to promote large
scale power generation projects
across the UK. Two sites have
since been identified with capital
investment totalling £2bn.
Bill Oliver, Michael Dunn, Steve Burke and Tanya Stote are also
members of the Property Board. See pages 52–53.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 55
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 INTRODUCTION
Bill Shannon
Non-executive Chairman
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.
56 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Corporate Governance Dear Shareholder
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
marketplace 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 2012 UK Corporate Governance Code (the Code). The Code’s principles on remuneration are addressed in
the Directors’ Remuneration Report which is set out on pages 77 to 100. St. Modwen’s risk management and internal control
framework together with details of the principal risks and uncertainties that the Group faces are described on pages 38 to 43.
In September 2014 a revised version of the Code was published by the Financial Reporting Council. This includes updated
principles in respect of remuneration, risk management, internal control and going concern and we have already taken steps to
address the revisions made. The new Code will apply from our financial year ending 30th November 2015 and I look forward to
reporting on our compliance in the 2015 Annual Report. In the meantime, I can confirm that, throughout the financial year ended
30th November 2014, the Company complied in full with the 2012 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. The year has seen
John Salmon announce his imminent retirement from the Board after more than nine years’ service. He has chaired the Audit
Committee since 2006, a role he has undertaken with the utmost distinction. On behalf of the Board I would like to thank John
for the significant contribution he has made to St. Modwen and to wish him well for the future.
John’s retirement has enabled us to refresh further the Board’s composition with the appointment of Ian Bull as non-executive
director in September 2014. Ian is Chief Financial Officer and a main board director at Ladbrokes plc, a position he has held since
2011. His strong financial and commercial pedigree will complement the existing experience of the Board and I am delighted that
Ian will be continuing John’s excellent work as Audit Committee Chairman following his retirement.
We announced in December 2014 that Michael Dunn, Group Finance Director, would be leaving the Company. The search for his
successor, which will consider both internal and external candidates, is already well advanced. Mike has played an important part
in the Company’s success since his appointment in 2010 and on behalf of the Board I would like to thank him for his contribution
and wish him well for the future.
It is important that shareholders understand the Company’s strategy and objectives and their feedback must be properly
considered. To this end I extended an invitation to our major institutional shareholders to discuss matters relating to St. Modwen’s
strategy and our approach to governance. Three investors accepted the invitation and their views have been reported to and
considered by the Board. I intend to issue a similar invite this year and would encourage all shareholders to give feedback and
communicate with the Board through the Company Secretary.
I hope that you find the corporate governance section of this report informative and look forward to seeing you at our AGM
in March.
Bill Shannon
Chairman
2nd February 2015
St. Modwen Properties PLC Annual Report and Financial Statements 2014 57
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 CORPORATE GOVERNANCE REPORT
LEADERSHIP
The Board
The Board provides leadership of the Company and direction for management. It is collectively responsible and accountable
to shareholders for St. Modwen’s long-term success. 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
Develops strategy and leads St. Modwen to achieve long-term success
Board biographies Page 53
Our business model Pages 4–7
Our strategy Pages 8–9
SUPPORTED BY
EXECUTIVE
DIRECTORS
BOARD
COMMITTEES
PROPERTY BOARD
Implement strategic
decisions approved by
the Board and monitor
operational performance
Chief Executive’s
Review Pages 20–31
Audit
Committee
Nomination
Committee
Remuneration
Committee
Reviews performance and
considers Group-wide
operational issues and
initiatives
Financial Review
Pages 32–37
Board Committees
Page 59
Property Board
Pages 54–55
SAFETY, HEALTH
AND ENVIRONMENT
STEERING GROUP
Oversees strategy,
procedure and performance
in relation to safety, health
and environmental matters
across the business
CSR STEERING GROUP
Established during the year
to co-ordinate the Group’s
approach to and enhance
the reporting of its
Corporate Social
Responsibility activities
Corporate
Social Responsibility
Pages 44–51
Corporate
Social Responsibility
Pages 44–51
58 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Corporate Governance
Board Committees
The Board delegates certain responsibilities to Board Committees to ensure compliance with regulatory and governance
requirements. The activities of and any recommendations made by the Committees are reported by the relevant Committee
Chairman to the Board meeting following the relevant Committee meeting.
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.
The Board
Reports on activities to the Board
Reports on activities to the Board
Reports on activities to the Board
AUDIT COMMITTEE
NOMINATION COMMITTEE
REMUNERATION COMMITTEE
Oversees financial and narrative reporting,
property portfolio valuations, internal control,
risk management systems, and internal and
external audit processes
Oversees Board succession planning, leads
the process for Board appointments and
monitors membership of Board Committees
Determines the remuneration arrangements
for the executive directors, the Chairman and
the Company Secretary
Audit Committee Report
Pages 66–72
Nomination Committee Report
Pages 73–76
Director’s Remuneration Report
Pages 77–100
Terms of reference
Terms of reference
Terms of reference
www.stmodwen.co.uk/about-us/corporate-
governance
www.stmodwen.co.uk/about-us/corporate-
governance
www.stmodwen.co.uk/about-us/corporate-
governance
St. Modwen Properties PLC Annual Report and Financial Statements 2014 59
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 CORPORATE GOVERNANCE REPORT
continued
LEADERSHIP continued
Responsibilities of Board members
To ensure that no one individual has unfettered powers of decision, the primary responsibilities of the Chairman, the Chief
Executive, the Senior Independent Director, the Company Secretary and the non-executive directors are set out in writing.
THE CHAIRMAN
THE CHIEF EXECUTIVE AND EXECUTIVE DIRECTORS
As Chairman, Bill Shannon’s role is to lead the Board and
ensure that it operates effectively. His responsibilities include:
• setting appropriate agendas for Board meetings and
ensuring that all matters are given due consideration;
Bill Oliver, the Chief Executive, is responsible for the leadership
of the business, managing it within the authorities delegated
by the Board. His responsibilities include:
• day-to-day management of the business;
• maintaining a culture of openness, debate and constructive
• recommending proposals for St. Modwen’s strategic
challenge in the boardroom;
• ensuring effective dialogue takes place between
St. Modwen and its shareholders;
• providing a tailored induction programme for newly
appointed directors and agreeing any training and
development needs with other members of the Board; and
• ensuring the Board’s effectiveness.
development and implementing the strategy agreed by
the Board;
• leading the executive management team; and
• ensuring the efficient use of resources.
NON-EXECUTIVE DIRECTORS
SENIOR INDEPENDENT DIRECTOR
The non-executive directors work with and challenge the
executive directors in the development of St. Modwen’s
strategy. They offer an independent, external perspective
on the business and bring wide and varied commercial
experience to both the Board and its Committees. With the
exception of Simon Clarke, all non-executive directors are
deemed to be independent.
As Senior Independent Director, Richard Mully’s role involves:
• acting as a sounding board for the Chairman;
• serving as an intermediary for the other directors when
necessary; and
• providing an additional communication channel
for shareholders.
The management of the business is undertaken by the Chief Executive and the other executive directors. They are responsible for
updating the Board and Board Committees on the overall performance of the Company and on specific aspects of the business,
as required. Their key areas of responsibility are shown below:
BILL OLIVER
• Corporate performance
• Implementing strategy
• Communications
• Public affairs
• Human resources
MICHAEL DUNN
• Finance
• Risk
• Investor relations
• Internal audit
• IT
STEVE BURKE
• Procurement
• Programme delivery
• Major projects
• Health and safety
• Corporate social responsibility
60 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Corporate Governance Board activity
The Board discharges its responsibilities through an annual programme of Board and Committee meetings which are
supplemented by visits to sites within the Company’s property portfolio; in 2014 the Board toured residential development at
the former RAF sites in both Mill Hill and Uxbridge in London, the Bay Campus development at Swansea University, the recently
completed Baglan Bay Solar Park and the ongoing regeneration at Coed Darcy in South Wales.
KEY ACTIVITIES OF THE BOARD IN 2013/14
Standing agenda items included:
Key agenda items also considered included:
• Annual strategy review
• Launch of a convertible bond which raised £100m
• Reports from the Chief Executive, the Group Construction
• Refinancing of the Company’s debt portfolio
Director and the Group Finance Director
• Planning for the redevelopment of the New Covent Garden
• Reports on the activities of the Audit, Remuneration and
Market sites in Nine Elms, London
Nomination Committees
• Financing
• Property acquisitions and disposals
• Risk and risk management
• Health and safety
• Approval of the half year and annual results, the Annual
Report, the notice of AGM and dividends
• Investor feedback
• HR reports
• Development Agreement with Swansea University for
additional student accommodation and new facilities at the
Bay Campus development for Swansea University
• Acquisition of Billingham Town Centre for £14.25m
• Tender exercises to appoint tax compliance service
providers and external valuers
• Presentations from Numis Securities and
J.P. Morgan Cazenove, the Company’s joint brokers,
and FTI Consulting, the Company’s financial PR advisors
• Appointment of Ian Bull as non-executive director
• Reports from the trustee of the Company’s pension scheme
• Board succession plans and composition
• Directors’ conflicts of interest
• Operational presentations from the management team
• Actions arising from Board performance evaluation
Board and Committee meetings and attendance(1)
Director
Chairman
Bill Shannon
Executive directors
Bill Oliver
Steve Burke
Michael Dunn
Non-executive directors
Ian Bull(2)
Kay Chaldecott
Simon Clarke
Lesley James(3)
Richard Mully
John Salmon
Board
Audit
Committee
Nomination
Committee
Remuneration
Committee
9/9
9/9
9/9
9/9
2/3
9/9
9/9
7/9
9/9
9/9
–
–
–
–
1/1
3/3
–
3/3
3/3
3/3
3/3
4/4
–
–
–
1/1
3/3
–
3/3
3/3
3/3
–
–
–
2/2
4/4
–
4/4
4/4
4/4
(1) Actual attendance/maximum number of meetings a director could attend.
(2) Ian Bull was appointed to the Board on 1st September 2014. He was unable to attend the October 2014 Board meeting due to a prior business commitment.
(3) Lesley James was unable to attend the Board meeting in December 2013 due to illness and the Board meeting in May 2014 due to a prior personal commitment.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 61
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continued
EFFECTIVENESS
Board composition
The Board currently comprises 10 members: the Chairman, three executive directors and six non-executive directors.
Board biographies Page 53
Board composition continues to develop and was further strengthened during the year with the appointment of Ian Bull as a non-
executive director in September 2014. Ian is Chief Financial Officer and a main Board director at Ladbrokes plc. He will succeed
John Salmon as Audit Committee Chairman who will retire from the Board at the conclusion of the Company’s Annual General
Meeting (AGM) to be held on 27th March 2015.
Nomination Committee Report Pages 73–76
At the 2015 AGM, and in accordance with the Company’s Articles of Association, shareholders will be asked to elect Ian Bull to the
Board. With the exception of John Salmon, all other directors will seek re-election in accordance with the provisions of the Code.
The explanatory notes set out in the notice of meeting state the reasons why the Board believes that each director proposed for
re-election at the AGM should be re-appointed. The Board has based, in part, its recommendation for re-election on its review
of the results from the Board evaluation process and the Chairman’s review of individual evaluations. It has concluded that
the performance of each director continues to be effective, that they continue to demonstrate substantial commitment to their
respective roles, and that their respective skills complement one another to enhance the overall operation of the Board.
Notice of AGM Pages 166–172
Director independence
The Board considers Bill Shannon to have been independent on his appointment as Chairman in 2011 and that he remains so.
Simon Clarke, a non-executive director, represents the interests of the Clarke and Leavesley families on the Board. Together the
families hold 15.6% of the Company’s issued share capital and are St. Modwen’s largest shareholder. Consequently the Board has
determined that Simon Clarke is not independent for the purposes of the Code.
John Salmon has been a non-executive director of the Company since October 2005. Whilst his tenure now exceeds nine years,
the Board remains of the view that John is independent in character and judgement and that it was appropriate for him to continue
in office as Audit Committee Chairman to provide continuity for the approval of the results for the year ended 30th November 2014.
He will retire at the 2015 AGM.
The Board considers that all other non-executive directors are independent and is not aware of any relationship or circumstance
likely to affect the judgement of any director.
DIRECTORS’ INDEPENDENCE
10%
50%
40%
Independent directors
Non-independent directors
Non-executive Chairman
(independent)
62 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Corporate Governance Board appointments
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 Ian Bull as a
non-executive director. The Committee also engaged the services of an external search consultant in relation to the appointment.
Nomination Committee Report Page 75
External appointments
The Chairman and the Board are advised by each director of any proposed external appointments or other significant
commitments as they arise. In October 2014 Kay Chaldecott was appointed a non-executive director of Boyer Planning
Ltd. Bill Shannon joined the Board of LSL Property Services plc as a non-executive director in January 2014 and became
Deputy Chairman and Senior Independent Director in January 2015. He also chairs the Company’s Remuneration and
Nomination Committees.
The Board is satisfied that the changes in the Chairman’s external appointments during the year do not impact on his ability
to allocate sufficient time to discharge his responsibilities to St. Modwen.
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 with the external auditor and valuers. Visits to key sites within the Company’s property portfolio are scheduled and external
training, particularly on matters 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 Ian Bull in September 2014.
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 the external valuers to review their property valuation reports. The attendance by members of Board Committees
on courses relevant to aspects of their respective Committee specialisms is also encouraged.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 63
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continued
EFFECTIVENESS continued
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
The annual Board performance evaluation review provides an opportunity for the directors to reflect on their collective and
individual effectiveness and consider any changes that could improve the operation of the Board and its Committees.
Dr. Tracy Long of Boardroom Review (who has no other connection to the Company and is considered to be independent)
conducted a full review in 2012 and was invited to input to the internal review undertaken in 2013. In light of the involvement of an
external facilitator in the prior two years, the Board felt that the evaluation review for 2014 should be led by the Chairman through
one-to-one discussions with each director, together with a review of the effectiveness of the Committees considered collectively
by relevant Committee members.
The individual performance of the directors was evaluated through one-to-one discussions with the Chairman. Richard Mully, as
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.
The Board has concluded that it remains effective and operates to a high level, with good progress made against the areas for
improvement identified in last year’s evaluation. No serious issues were raised.
Progress against 2013 evaluation actions
Good progress has been made against actions arising from last year’s Board evaluation review.
• Reports to the Board have been enhanced to provide additional content requested by non-executive directors. Reporting has
also been re-formatted to facilitate digital distribution of and access to Board papers which was introduced during the year.
• To give non-executive directors greater visibility of talent within the business, presentations to the Board by members of the
management team on key projects have been scheduled in the rolling programme of Board agenda items.
• An annual invitation is now issued by the Chairman to major shareholders to discuss matters relating to strategy
and governance.
• Ongoing review of Board succession planning, including the appointment of Ian Bull.
• Arrangements for the provision of independent external advice to the Remuneration Committee were reviewed and New
Bridge Street was re-appointed as advisor to the Committee.
Areas for focus in 2015
• The Board’s annual schedule is to be reviewed in order to reduce the frequency of meetings (currently nine per annum plus two
site visits). Meeting duration will instead be increased to enable greater in-depth discussion.
• Board agendas are to include topical areas for deep-dives to enhance the contribution the non-executive directors can make
to key matters affecting the business.
• The Board and Audit Committee will ensure that the Company’s risk management systems continue to be enhanced through
regular focus and review, supported by improved reporting.
64 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Corporate Governance 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 from the programme of events is provided to the
Board to ensure that directors develop an understanding of the views 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 2014 the Company held an investor day for institutional
investors and analysts at the Bay Campus development at Swansea University, which included presentations on the results,
information on the Company’s activities across South Wales and a tour of the campus. 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
Chairmen of the Board Committees on matters put to the meeting. Resolutions for consideration at the 2015 AGM will 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.
Notice of AGM Pages 166–172
COMPLIANCE STATEMENT
This Corporate Governance Report, together with the Audit Committee Report, the Nomination Committee Report, the Directors’
Remuneration Report and the sections of this Annual Report entitled ‘Risk management’ and ‘Our principal risks’, provide a
description of how the main principles of the Code have been applied by St. Modwen in 2013/14. 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 2014, 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, this Corporate Governance
Report contains the information required by Rule 7.2 of the Disclosure and Transparency Rules of the Financial Conduct Authority.
The directors are responsible for preparing this Annual Report. The statement of directors’ responsibilities on pages 104 and 105 is
made at the conclusion of a robust and effective process undertaken by the Company for the preparation and review of the Annual
Report. The directors believe that these well-established arrangements, details of which are set out on page 70, enable them to
ensure that the information presented in this Annual Report is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company’s position and performance, business model and strategy.
Risk Pages 38–43
Audit Committee Report Pages 66–72
Nomination Committee Report Pages 73–76
Directors’ Remuneration Report Pages 77–100
Directors’ Report Pages 101–105
St. Modwen Properties PLC Annual Report and Financial Statements 2014 65
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 AUDIT COMMITTEE REPORT
John Salmon
Chairman of the
Audit Committee
Committee members
John Salmon (Chairman)
Ian Bull
Kay Chaldecott
Lesley James
Richard Mully
Principal role
Monitors the integrity of the Group’s financial reporting and audit
processes and the development and maintenance of sound systems
of risk management and internal control.
Terms of reference
www.stmodwen.co.uk/about-us/corporate-governance
Dear Shareholder
The Committee’s agenda in respect of the financial year ended 30th November 2014 has again been full. In addition to its primary
role of monitoring the integrity of the Group’s reporting, the Committee has overseen steps taken by management to strengthen
further the systems of risk management and internal control.
In accordance with best practice and noting investor concerns about the level of non-audit fees, the Committee has continued
to keep the provision of non-audit services by Deloitte under review. Following a formal tender, PricewaterhouseCoopers LLP
(PwC) has been engaged for tax compliance work from June 2014 in succession to Deloitte. Drivers Jonas, now part of Deloitte
Real Estate, provided property consulting services to the Group during the year on two long-term development projects, their
involvement in which pre-dated their acquisition by Deloitte. In view of their significant knowledge of these projects, it has not
been in the Group’s commercial interests to appoint alternative advisors. The majority of their work has now been completed
and no further work has been or is currently planned to be placed with Deloitte Real Estate. Non-audit fees paid to Deloitte in the
year totalled £349,000, which is less than their fees for audit and audit-related assurance services, and it is anticipated that the
proportion of non-audit fees will continue to fall.
The independent valuation of St. Modwen’s property portfolio is a key determinant of the Group’s Balance Sheet and performance
as well as the variable elements of executive remuneration. In light of the long tenure of Jones Lang LaSalle LLP (JLL), the external
valuers, the Committee requested that a tender process be undertaken in advance of the year end valuations. This was a multi-
staged process involving senior management to assess capability, cultural fit, effectiveness and value for money (further details
can be found on page 71). The view shared by those involved was that DTZ Debenham Tie Leung Ltd (DTZ) provided the best offer
and they were duly appointed as the Company’s valuers. On behalf of the Company I would like to thank JLL for their rigorous
approach to the valuation process undertaken for the Company over many years.
The Committee continues to focus on those matters it considers to be important by virtue of their size, complexity, level of
judgement required or impact on the Financial Statements; these included the accounting treatment of the £100m convertible bond
successfully launched in February 2014 and eventual Balance Sheet recognition in respect of the redevelopment of New Covent
Garden Market as it moves through the planning process and the transaction become unconditional. Such issues considered by
the Committee during the year, and the actions taken to address them, are detailed within this report.
During my tenure as Chairman of the Committee, a position I have held since 2006, the demands and expectations placed on
audit committees have increased substantially. I would like to express my gratitude to our Finance team, the internal and external
auditors and the Company Secretary for the many reports and advice they have provided to the Committee, which have been
essential to our activities. I would also like to thank my fellow Committee members for their unwavering support and commitment
to ensuring effective governance through the Committee’s activities. I am delighted that Ian Bull, who joined the Board as a
non-executive director in September 2014 and is Chief Financial Officer of Ladbrokes plc, will be appointed in my stead on my
retirement at the 2015 AGM.
I hope that the following report provides a useful guide to the activities of the Committee during the year.
John Salmon
Chairman of the Audit Committee
2nd February 2015
66 St. Modwen Properties PLC Annual Report and Financial Statements 2014
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.
Board biographies Page 53
Nomination Committee Report Pages 73–76
Each Committee member brings broad financial and business experience at a senior level which enables them to fulfil their role.
As Chief Financial Officer of Ladbrokes plc, Ian Bull is considered to have significant, recent and relevant financial experience as
required by the Code. The Committee Chairman, John Salmon, is also considered to have significant and relevant experience as
a former partner of PwC.
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.
Committee meetings and
attendance during the year ended
30th November 2014(1)
Audit Committee attendees (by invitation)
Audit Committee members
John Salmon
Chairman
Ian Bull(2)
Member
Kay Chaldecott
Member
Lesley James
Richard Mully
Member
Member
3/3
1/1
3/3
3/3
3/3
(1) Actual attendance/maximum number of meetings a director could attend.
(2) From appointment to the Board on 1st September 2014.
Bill Shannon
Michael Dunn
Simon Clarke
Chairman of the Company
Group Finance Director
Non-executive director
David Edwards
Internal Audit Manager
Tanya Stote
Company Secretary and
secretary to the Committee
Andy Taylor
Group Financial Controller
Representatives from Deloitte External auditor
Representatives from DTZ
(previously JLL)
External valuers
ADVICE PROVIDED TO THE COMMITTEE
The Committee has direct access to the Internal Audit Manager, the external audit engagement partner and the external valuers
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 during the financial year.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 67
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continued
ACTIVITIES OF THE COMMITTEE
Key matters formally discussed and reviewed by the Committee in the year
Reporting
• Integrity of the financial reporting process, including the half year and annual
results, related commentary and announcements, the Annual Report and
associated reports prepared by Deloitte.
• Continuing appropriateness of and changes to accounting policies and the
use of estimates and judgements as noted in the Group Financial Statements.
• Impact of new accounting standards.
• Independent property valuation reports prepared by JLL and DTZ which
detailed movements resulting from activities undertaken by the Company and
those arising from changes in the property market.
Significant financial issues Pages 69–70
• Going concern review.
Going Concern Page 104
• The fair, balanced and understandable concept in respect of the 2014 Annual
Fair, balanced and understandable Page 70
Report and Financial Statements.
External audit
• Deloitte’s audit plan.
The external auditor Pages 71–72
• Policy in respect of the provision of non-audit services by the external auditor.
• The independence of Deloitte and the effectiveness of the external
audit process.
• The tenure of both Deloitte and the audit engagement partner, and changes
to the regulatory framework in respect of external audit tendering.
Risk management and internal control
• Updates on corporate risk assessment management activities.
Risk Pages 38–43
Internal audit
• Ongoing risk management activities, including the outturn of a risk workshop
involving executive directors and senior management and facilitated by KPMG.
• Risk registers at both Group and regional level, including appropriate
mitigating actions.
• Reports on the Company’s internal control system and the Group’s tax
compliance position.
• Actual and potential legal claims and litigation involving the Group.
• Updates on the activities of internal audit, including audits on the Group
pension scheme and the Persimmon joint venture, to provide assurance that
the control environment continued to operate effectively.
• Status reports on the implementation and follow-up of internal
audit recommendations.
• Internal audit programme of reviews of the Group’s processes and controls,
including coverage and allocation of resource.
• 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.
• Effectiveness of the internal audit function.
Other
• Formal tender processes in relation to external valuation and tax
compliance advisors.
• The effectiveness of the Committee.
• The Committee’s terms of reference.
68 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Corporate Governance FINANCIAL REPORTING AND SIGNIFICANT FINANCIAL ISSUES
The 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 Group Financial Statements. The significant
financial issues considered by the Committee during the year are set out below.
Valuation of investment property
The independent valuation of St. Modwen’s investment property is a key determinant of the Group’s Balance Sheet
and performance and the Committee adopts a rigorous approach to monitoring and reviewing the valuation process.
Representatives of JLL and DTZ attended meetings of the Committee at the half year and full year review of results respectively 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. Members of the Committee also met with representatives
from the external valuers 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 management’s assessment as to 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 the external valuers for certain sites,
typically new build units not yet sold.
New Covent Garden Market
As the redevelopment moves through the planning process, the Committee continued to monitor the extent to which the contract
remained conditional for the purposes of asset and liability recognition. Despite resolution to grant planning permission being
received in November 2014, the Development Agreement remains conditional upon a number of matters, including finalisation of
revised planning consent. The Committee therefore determined (and Deloitte concurred) that it remained inappropriate to recognise
either an asset or liability in respect of the development until such conditions had been satisfied.
Acquisition of Branston Properties Ltd
Following the exercise of an option by the Group to acquire the issued share capital of Branston Properties Ltd in May 2014, the
Committee considered the fair value of Branston’s assets and liabilities which were required to be remeasured as at the point of
acquisition. Given the proximity of the acquisition to the valuation undertaken by JLL in respect of the 2014 half year results, the
Committee agreed that the fair value adjustment on acquisition should accord with JLL’s valuation of £2.6m, which reflected an
uplift as a result of the achievement of a planning milestone. Approval of the conditional agreement to acquire the remaining 12.5%
of the issued share capital in Branston which is held by Simon Clarke, a non-executive director of the Company, will be sought at
the 2015 AGM. In the meantime no minority interest has been recognised in respect of this holding.
Revenue recognition
In respect of the Bay Campus development at Swansea University, the Committee continued to monitor the appropriateness of the
accounting 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 applied, which is on the same basis as the majority of the Company’s developments, albeit it on a larger
scale, remained appropriate and should be applied in respect of the second phase of development.
Issue of convertible bond
In conjunction with the launch by the Company in February 2014 of the convertible bond (which can be settled in either cash or
shares on conversion), the Committee considered an opinion prepared by Deloitte on the appropriate accounting treatment to be
applied; it agreed that the bond should be accounted for as a single financial liability measured at fair value without separation of
the option.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 69
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continued
FINANCIAL REPORTING AND SIGNIFICANT FINANCIAL ISSUES continued
Tax provisions
As a property group, tax and its treatment is often an integral part of transactions. The outcome of tax treatments are recognised by
the Group to the extent the outcome is reasonably certain. Where tax treatments have 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. Based on reports from both management and Deloitte, the Committee considered the individual
judgements made by management in respect of tax provisions and the resultant level of tax provisioning at both the full year and
half year to ensure that they remained 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 104.
FAIR, BALANCED AND UNDERSTANDABLE
When reporting to shareholders the Board aims to present a fair, balanced and understandable assessment of the Company’s
position and performance and is assisted in this by the Audit Committee. This responsibility covers the Annual and Half Year
Reports and Financial Statements, as well as interim management statements and other financial reporting.
The Audit Committee is satisfied and has confirmed to the Board that the 2014 Annual Report and Financial Statements are fair,
balanced and understandable and provide the information necessary for shareholders to assess the Company’s position and
performance, business model and strategy.
In reaching this view the Committee considered the robust and well-established processes in place to prepare the Annual Report
and Financial Statements which includes:
• clear guidance and instruction is given to all contributors;
• revisions to regulatory requirements and governance principles, including the UK Corporate Governance Code, are
continually monitored;
• meetings are held with the auditors in advance of the year end reporting process;
• input is provided by senior management to identify relevant and material information and ensure accurate, consistent and
balanced reporting;
• detailed debates and discussions regarding principal risks and uncertainties;
• focused review and approval of specific sections by the relevant Board Committees, supported by regular reporting by Board
Committees to the Board on their activities;
• a review by the Audit Committee of management reports on accounting estimates and judgements, auditor reports on
internal controls, accounting and reporting matters and a management representation letter concerning accounting and
reporting matters;
• consideration of the draft Annual Report and Financial Statements by the Audit Committee in advance of final sign-off; and
• review and approval by the external auditor.
The Board takes into account the view of the Audit Committee when undertaking its own review of the document prior to giving
final approval.
70 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Corporate Governance VALUATIONS
In light of the long tenure of JLL as the Company’s external valuers, the Committee requested that a tender process be undertaken
in 2014 in advance of the year end valuations.
A number of firms, together with JLL, were approached to tender for the external valuer appointment based on their listed business
reporting experience, commercial development portfolio valuations expertise, residential land expertise, national reach and local
accessibility. The first stage of the process involved initial presentations in order to assess capability and cultural fit. Three firms
were then shortlisted and requested to submit a full tender which included detailed analysis, sample valuations and fee estimates.
Each shortlisted firm was given access to management and details of the property portfolio before presenting their proposals to the
selection panel comprising executive directors and key operational management.
The Audit Committee and the Board considered both the selection panel’s recommendation and input from non-executive directors
in approving the appointment of DTZ as external valuers, to commence in respect of the valuation process for the financial year
ended 30th November 2014.
THE EXTERNAL AUDITOR
Independence
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.
The current policy in respect of the latter only permits the external auditor to provide non-audit services to the Group 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.
In accordance with best practice and noting investor concerns about the level of non-audit fees, a tender exercise to appoint an
alternative provider of tax compliance services to Deloitte was undertaken during the year. The first phase of the tender focused
on the over-arching approach, people and cultural fit and involved a panel comprising the Group Finance Director and other
senior members of the Finance function. The second phase involved a more detailed presentation to both the panel and the
Audit Committee Chairman on both delivery of work and pricing. As a result of the tender PwC has been engaged to provide tax
compliance services in place of Deloitte with effect from June 2014.
• 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 advice in respect of the
convertible bond issued in February 2014, legacy HMRC matters in respect of employment taxes, and enquiries raised by the
District Valuer. 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 at that time 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 2013
and 2014 were provided by Deloitte Real Estate (formerly Drivers Jonas), whose involvement in respect of these services for long-
term projects at Burnley and, principally, Leegate pre-dated the firm’s acquisition by Deloitte. Advice in respect of Burnley is now
substantially complete but some follow up may be required during the planning process for Leegate (50% of the planning costs
for Leegate will be borne by the tenant). No further work has been or is currently planned to be placed with Deloitte Real Estate.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 71
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 AUDIT COMMITTEE REPORT
continued
THE EXTERNAL AUDITOR continued
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 Chairman 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 and all expenditure is reviewed annually by the Committee. During the year approval of the Audit Committee Chairman
was requested and given in respect of advice from Deloitte for the tax and accounting treatment on the issue and delivery of the
convertible bond. Details of the non-audit services provided by Deloitte are set out in the table below.
Total audit fees
Audit-related assurance services
Other audit-related assurance services
(convertible bond accounting advice)
Tax compliance services
Tax advisory services
Property consulting
Total non-audit fees
Total fees
Audit and
audit-related
services
£000
2014
Other
services
£000
280
55
20
–
–
–
75
355
–
–
–
67
80
202
349
349
Audit and
audit-related
services
£000
270
55
–
–
–
–
55
325
Total
£000
280
55
20
67
80
202
424
704
2013
Other
services
£000
–
–
–
166
174
30
370
370
Total
£000
270
55
–
166
174
30
425
695
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 2014 and is satisfied that these do not compromise either their independence or
objectivity as the Company’s external auditor.
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
management’s assessment of external audit effectiveness using an extensive framework developed by Deloitte. 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
The Audit Committee has responsibility for making a recommendation on the appointment, re-appointment and removal of the
external auditor.
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 can remain in post until the 2016/17 financial year. The Committee currently expects to undertake
an external audit tender process in the year ending 30th November 2017. 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 2015 AGM.
72 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Corporate Governance NOMINATION COMMITTEE REPORT
Bill Shannon
Chairman of the
Nomination Committee
Committee members
Bill Shannon (Chairman)
Ian Bull
Kay Chaldecott
Lesley James
Richard Mully
John Salmon
Principal role
Reviews the succession planning and leadership needs of the Group
and leads the process for Board appointments, ensuring that directors
have an appropriate range of skills and experience to deliver St. Modwen’s
strategy.
Terms of reference
www.stmodwen.co.uk/about-us/corporate-governance
Dear Shareholder
During the year the Nomination Committee spent significant time discussing and recommending changes to the Board both at
and outside of formal meetings to ensure that the composition of the Board is best placed to operate effectively in the context of
St. Modwen’s strategic objectives. This included consulting with other Board members and working with the Zygos Partnership
(Zygos), an external search agency.
Following Richard Mully’s appointment to the Board as a non-executive director in September 2013 and a comprehensive
induction process, Richard was appointed as Senior Independent Director with effect from 1st December 2013.
In the year John Salmon, Audit Committee Chairman, indicated his intention to retire from the Board at the conclusion of the
Company’s 2015 AGM after more than nine years’ service. Zygos was engaged to conduct a search for his replacement, details
of which can be found in the body of this report, and the process concluded with the appointment of Ian Bull as a non-executive
director on 1st September 2014. Ian is Chief Financial Officer and a main board director of Ladbrokes plc and both the Nomination
Committee and the Board felt that his strong financial and commercial pedigree would complement the existing composition of the
Board and enable him to continue John’s excellent work as Audit Committee Chairman following his retirement.
The Company’s succession planning was also put into action during the year with the internal promotion of a number of senior
management to new roles, including appointments to the Property Board. Management development remains a key priority within
St. Modwen; following the successful delivery of a leadership programme to Property Board members, the focus is now on the
development of other professionally-qualified staff through a multi-event programme tailored to meet specific development needs.
Diversity in all its forms, including gender, remains a key area of focus for the Committee. The composition and capabilities of
all directors is kept under review to ensure that Board membership is sufficiently diverse and reflects a broad range of skills,
knowledge and experience to enable it to meet its responsibilities. We are supporting the Government and the Equality and Human
Rights Commission in their review of the recruitment and appointment processes adopted across the FTSE 350 and await their
findings with interest.
Looking forward to 2015, we have appointed Odgers Berndtson to assist with our search for a Group Finance Director following the
announcement made in December 2014 regarding the departure of Michael Dunn. The process, which will consider both internal
and external candidates, is already well advanced and we look forward to confirming an appointment in due course.
Further information in respect of the Committee and its activities during the year is set out in the remainder of this report, which
I hope you find informative.
Bill Shannon
Chairman of the Nomination Committee
2nd February 2015
St. Modwen Properties PLC Annual Report and Financial Statements 2014 73
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176
NOMINATION COMMITTEE REPORT
continued
COMMITTEE MEMBERSHIP
Nomination Committee
members
Bill Shannon(2)
Chairman
Ian Bull(3)
Member
Kay Chaldecott
Member
Lesley James
Richard Mully
John Salmon
Member
Member
Member
Committee meetings and
attendance during the year ended
30th November 2014(1)
Audit Committee attendees (by invitation)
Bill Shannon
Michael Dunn
Tanya Stote
Chairman of the Company
Group Finance Director
Company Secretary and
secretary to the Committee
3/3
1/1
3/3
3/3
3/3
3/3
(1) Actual attendance/maximum number of meetings a director could attend.
(2) 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.
(3) From appointment to the Board on 1st September 2014.
Board biographies Page 53
ACTIVITIES OF THE COMMITTEE
The Committee met on three occasions in the financial year ended 30th November 2014 to consider the following matters:
• Continued monitoring of the structure, size, composition and diversity of the Board and its Committees.
• The selection and appointment of Ian Bull as a non-executive director.
• Succession planning, including:
– changes to the composition of the Property Board; and
– the identification of potential internal candidates for vacancies at senior management level which may arise on a crisis, short,
medium or longer-term basis.
• Recommending to the Board the renewal of the letter of appointment for John Salmon.
COMPOSITION OF THE BOARD
Independence and a broad range of skills, experience, knowledge and diversity, including gender diversity, are represented on
the Board.
COMPOSITION OF THE BOARD
LENGTH OF DIRECTORS’ TENURES
10%
50%
40%
Independent directors
Non-independent directors
Non-executive Chairman
(independent)
Less than 3 years
3–6 years
7–9 years
More than 9 years
30%
30%
10%
30%
74 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Corporate Governance DIRECTORS’ CORE AREAS OF EXPERTISE
EXECUTIVE DIRECTORS’ APPOINTMENTS
Property & Operations
Finance
HR
10%
50%
40%
33%
67%
Internal promotion
External appointment
During the year Zygos was engaged by the Committee to assist with the search to identify a new non-executive director to replace
John Salmon as Chairman of the Audit Committee, who will retire from the Board at the 2015 AGM. Whilst Zygos has been
engaged by the Company in a search consultancy capacity in the past, it does not provide any other services to the Company.
In accordance with the Committee’s appointment procedures, Zygos prepared a detailed role specification which included the
expected time commitment and duties to be performed both as a non-executive director and as Chairman of the Audit Committee.
Suitable candidates were then identified by Zygos, noting that an appropriate level of financial experience and expertise would
be required to fulfil the role of Audit Committee Chairman effectively. Candidates from a range of backgrounds were considered,
including both male and female candidates, and comprehensive profiles were prepared by Zygos for consideration by the
Committee. Detailed references were sought in respect of the shortlisted candidates. Following a thorough process, the Nomination
Committee recommended that Ian Bull be appointed to the role. The Board accepted the recommendation and Ian Bull was duly
appointed as a non-executive director on 1st September 2014. He will take up the role of Chairman of the Audit Committee on
conclusion of the 2015 AGM.
DIVERSITY POLICY
Recognising the benefits that diversity can bring, the Board seeks to recruit directors from different backgrounds with a range of
experience, perspectives, personalities, skills and knowledge. The Board agrees with the conclusions of the Davies Review of
Women on Boards that greater efforts should be made in improving the gender balance of corporate boards and that quotas for
female Board representation are not the preferred approach. The Company currently has two female directors: Lesley James,
Chairman of the Remuneration Committee, who was appointed in October 2009, and Kay Chaldecott who was appointed as a
non-executive director in October 2012. Together they represent 20% female Board membership.
Both the Committee and the Board have a fundamental obligation to ensure that appointments are of the best candidates, selected
on merit against objective criteria. Subject to this, the availability of suitable candidates and compliance with the requirements of
the Equality Act, the Board is committed to strengthening female representation at Board and senior management level. It has not
however set prescriptive targets as it does not believe these are in the best interests of either the Company or its shareholders.
In support of its diversity policy, the Committee will only engage executive search firms who have signed up to the Enhanced
Voluntary Code of Conduct which supports more female appointments to FTSE 350 boards.
Corporate social responsibility Pages 44–51
St. Modwen Properties PLC Annual Report and Financial Statements 2014 75
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continued
INDEPENDENCE AND RE-ELECTION TO THE BOARD
The Board also takes into account the length of tenure of existing directors when considering re-appointments and succession planning.
John Salmon has been a non-executive director of the Company since October 2005. Whilst his tenure now exceeds nine years, the
Board remains of the view that John is independent in character and judgement and that it was appropriate for him to continue in office
as Audit Committee Chairman to provide continuity for the approval of the results for the year ended 30th November 2014. He will retire
at the 2015 AGM.
Following his appointment in September 2014 Ian Bull will retire and offer himself for election at the 2015 AGM. With the exception of
John Salmon, all other directors will retire and offer themselves for re-election to the Board.
The Committee believes that all the directors continue to demonstrate commitment to their roles as Board and Committee members,
continue to discharge their duties effectively and each makes a valuable contribution to the leadership of the Company.
With the exception of Simon Clarke, who is not deemed to be independent by virtue of his representation of the interests of the Clarke
and Leavesley families, the Committee has reviewed and confirmed the independence of each non-executive director seeking election
or re-election at the forthcoming AGM.
TRAINING AND DEVELOPMENT
The Board recognises the importance of developing employees of St. Modwen, particularly in relation to succession planning for
senior positions within the Company. People development is reviewed by both the Nomination Committee and the Board to ensure
that plans are in place to recognise and grow internal talent. The results of such initiatives were evidenced during the year by the
promotion of Stephen Prosser as Midlands Regional Director and the appointments of Richard Bannister, Steven Knowles, Richard
Powell and Andy Taylor to the Property Board.
Property Board Pages 54–55
Following on from the success of the Leadership Development Programme, the focus for 2015 is on the development of other members
of the management team through a multi-event programme tailored to meet specific development needs. We also continue to operate
a mentoring programme, which is being cascaded more widely to employees in relevant roles.
76 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Corporate Governance DIRECTORS’ REMUNERATION REPORT
Lesley James, CBE
Chairman of the
Remuneration Committee
Committee members
Lesley James (Chairman)
Ian Bull
Kay Chaldecott
Richard Mully
John Salmon
Bill Shannon
Principal role
To determine the policy for the remuneration of the executive directors
which is designed to promote the long-term success of the Company, be
compatible with risk policies and systems and be aligned to the
Company’s long-term strategic goals.
Terms of reference
www.stmodwen.co.uk/about-us/corporate-governance
ANNUAL STATEMENT
Dear Shareholder
On behalf of the Board I am pleased to present the report on directors’ remuneration for the financial year ended
30th November 2014.
This report includes an annual report on remuneration (pages 88 to 100) which describes how the remuneration policy
was implemented for the year ended 30th November 2014 and how we intend for the policy to apply for the year ending
30th November 2015. This report, together with my annual statement, will be put to an advisory shareholder vote at the 2015 AGM.
To ensure clarity and to enable you to cross reference our remuneration practice against our policy, we have also republished our
remuneration policy. This policy received binding shareholder approval, for the first time, at the 2014 AGM and came into effect
on 1st December 2014. The Committee remains satisfied that the policy continues to support the Company’s strategy, to retain
and motivate our management team and to drive strong returns for our shareholders. Shareholders will not therefore be asked
to approve any revisions to the policy at the 2015 AGM.
Alignment of remuneration with strategy
As the UK’s leading regeneration specialist, our expertise in remediation, planning, asset development and construction supports
our strategy of securing excellent returns through a focus on long-term significant added value while protecting existing assets.
Page 9 of our Strategic Report describes how we deliver this strategy whilst managing risk.
To ensure that the interests of our management team are aligned to those of our shareholders, the variable elements of our
remuneration policy are relevant to and support our stated strategy. The link between our strategy and relative incentive measures
is described on pages 10 and 11.
The annual bonus arrangements incorporate both corporate and operational performance measures to ensure that executive
directors are incentivised to deliver across a range of key financial and strategic objectives. Awards under our Performance Share
Plan are based on two separate TSR measures (one being relative and the other absolute) which are designed to promote clear
alignment of interest between executive directors and shareholders.
Remuneration outcomes in 2013/14
You will see from our financial results that the Company has had an exceptional year, delivering record profits and strong growth
in net asset value. Performance highlights can be found on page 1 of the Strategic Report.
Reflecting both the outstanding corporate results for the year, which were ahead of both budget and at the top end of market
expectations, and strong individual performance, each executive director was awarded the maximum bonus potential of 125%
of base salary for the year ended 30th November 2014 (2013: 118.75% of salary).
The 2012 Performance Share Plan awards are due to vest in February 2015 based on performance over the three financial years
to 30th November 2014. 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 the Company’s performance
relative to the Index of 174% and absolute TSR growth of 211% over the performance period, awards will vest in full (2013: 100%).
St. Modwen Properties PLC Annual Report and Financial Statements 2014 77
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176
DIRECTORS’ REMUNERATION REPORT
continued
ANNUAL STATEMENT continued
Remuneration policy for 2014/15
Our policy has been developed taking full account of the UK Corporate Governance Code, the views of our major shareholders
and the advice of New Bridge Street, who was re-appointed as adviser to the Committee following a tender process conducted
in the year. Incentive pay is subject to withholding and recovery provisions, the annual bonus arrangements include an element of
compulsory investment in and retention of shares in the Company, and robust share ownership guidelines apply. The Committee
considers that these features promote significant alignment with shareholders and provide an appropriate level of risk mitigation.
The structure of remuneration arrangements for 2014/15 will therefore remain largely unchanged from that applied in 2013/14.
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 2014. 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, both subject to stretching and rigorously applied performance
conditions. As announced on 22nd December 2014 Michael Dunn, Group Finance Director, has agreed with St. Modwen to leave
the Company. Details of his remuneration arrangements and contractual payments in relation to loss of office are set out in
this report.
I hope that you find the report helpful and informative and I look forward to receiving feedback from our investors on the
information presented.
Approved by the Board and signed on its behalf by
Lesley James
Chairman of the Remuneration Committee
2nd February 2015
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.
78 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Corporate Governance REMUNERATION POLICY REPORT
Extracts from the Policy Report that was approved by shareholders at the 2014 AGM are set out below to enable the reported
remuneration to be assessed in the context of the relevant aspects of the policy. The current intention is that this policy will
operate until the 2017 AGM.
References made in the Policy Report to specific levels of pay in 2013/14 have been updated so that the report can be read
in the context of the 2014/15 financial year. The original Policy Report approved at the 2014 AGM (which includes charts
illustrating the remuneration opportunities for executive directors) is published in its entirety in the Company’s Annual Report
for the year ended 30th November 2013, which is available at www.stmodwen.co.uk.
It should also be noted that following the publication of the Policy Report last year, and subsequent to discussions with
shareholder representatives at that time, the Remuneration Committee published a supplementary announcement on
the Company’s website on 6th March 2014. The Committee clarified in that announcement that it does not envisage
using the discretion permitted under its recruitment policy described on page 86 to offer ‘golden hello’ cash payments
to facilitate recruitment.
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 structured so as to be 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 strategic and 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, albeit with lower maximum incentive opportunities 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 and
its implementation.
Remuneration policy
The remuneration policy that came into effect on 1st December 2014 is set out on pages 81 to 87. Remuneration arrangements
for the financial year ending 30th November 2015 will be in line with the policy below; further information can be found on
pages 96 to 98.
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.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 79
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 DIRECTORS’ REMUNERATION REPORT
continued
REMUNERATION POLICY REPORT continued
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.
80 St. Modwen Properties PLC Annual Report and Financial Statements 2014
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:
Opportunity
• 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.
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 96 for those effective 1st December 2014).
Performance measures
None, although overall performance of the individual is considered by the Committee as part
of the annual review.
Element
BENEFITS
Operation
• 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 2014 81
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 DIRECTORS’ REMUNERATION REPORT
continued
REMUNERATION POLICY REPORT continued
Element
PENSION
• To provide competitive post-retirement benefits in a cost-effective manner.
• To assist with recruitment and retention.
Operation
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
ANNUAL BONUS
Operation
• 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.
Withholding and recovery 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 2015 are described
in the annual report on remuneration on page 97. Measures for subsequent years will be
summarised in the annual report on remuneration for the relevant year.
82 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Corporate Governance Element
LONG-TERM INCENTIVES
• To incentivise and reward the delivery of strong returns to shareholders and sustained,
long-term performance.
• Aligns the long-term interests of directors and shareholders.
• Promotes retention.
Operation
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.(3)
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.
Withholding and recovery provisions apply to all awards granted.(4)
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.
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.
Opportunity
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.(5)
The specific measures that will apply for the year ending 30th November 2015 are described
in the annual report on remuneration on page 97. 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.
(3) 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.
(4) 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.
(5) 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 2014 83
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 DIRECTORS’ REMUNERATION REPORT
continued
REMUNERATION POLICY REPORT continued
Element
ALL-EMPLOYEE SHARE SCHEMES
• To encourage all employees to make a long-term investment in the Company’s shares in a tax
efficient way.
Operation
All employees, including executive directors, are entitled to participate in a UK tax approved all-
employee share scheme.
The Company’s current all-employee share scheme was approved at the 2014 AGM and allows
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
SHAREHOLDING REQUIREMENT
Operation
Opportunity
• 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.
84 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Corporate Governance Element
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 are made to the Senior Independent Director and Chairs of Board
Committees to reflect the additional responsibilities attached to these positions.
Operation
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 98 for those effective 1st December 2014).
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 2014 85
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 DIRECTORS’ REMUNERATION REPORT
continued
REMUNERATION POLICY REPORT continued
Recruitment arrangements
In the event of hiring a new executive director, the Committee will 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. For clarity and in line with the assurance given in the announcement published on the
Company’s website on 6th March 2014, the Committee does not envisage using the discretion outlined above to offer ‘golden hello’
cash payments to facilitate recruitment.
Base salary levels for new recruits will be set in accordance with the policy, 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.
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, 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 buyout
arrangements, will be in line with the policy.
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.
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.
86 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Corporate Governance 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.
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
‘Good’ leavers
Other leavers
Annual bonus
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.
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.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 87
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 DIRECTORS’ REMUNERATION REPORT
continued
ANNUAL REPORT ON REMUNERATION
This part of the report has been prepared in accordance with Part 4 of The Large and Medium-sized Companies and Groups
(Accounts and Reports) (Amendment) Regulations 2013 and with the requirements of the Financial Conduct Authority’s
Listing Rules.
Single total figure of remuneration (audited information)
Base salary/fees
£000
Benefits(1)
£000
Annual bonus(2)
£000
Share plans vesting
£000
Pension
contribution/
allowance(5)
£000
Other items
£000
Total
£000
Director
2014
2013
2014
2013
2014
2013
2014(3)
2013(4)
2014
2013
2014(6)
2013
2014
2013
Executive directors
Bill Oliver
Steve Burke
Michael Dunn
Non-executive directors
Bill Shannon
Ian Bull(8)
Kay Chaldecott
Simon Clarke
David Garman(9)
Katherine Innes Ker(9)
Lesley James
Richard Mully(10)
John Salmon(11)
471
311
283
457
302
266
34
26
11
30
29
11
588
388
358
353 326(7)
543 1,375 1,320
907
826
871
952
71
47
42
69
45
40
150
135
10
41
41
0
0
50
50
50
0
40
40
15
13
49
10
55
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
169
67
–
–
–
–
–
–
–
–
–
–
– 2,708 2,419
–
1,746 1,605
– 1,515 1,595
–
–
–
–
–
–
–
–
–
150
135
10
41
41
0
0
50
50
50
0
40
40
15
13
49
10
55
1,457 1,382
71
70 1,329 1,227 3,108 3,143
160
154
236
– 6,361 5,976
(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 2014 was determined is provided on pages 88 and 89.
(3) Relates to the 2012 PSP awards which are due to vest and became exercisable on 17th February 2015. As the awards had not vested as at the date of this report, their value has been
estimated using a share price of 366.81p, being the three month average to 30th November 2014, plus 11.293p per share which is the value of the dividend equivalent deliverable in
shares on the awards that vest. The dividend equivalent is based on dividends paid to shareholders with record dates occurring between the date of grant and 30th November 2014.
Further information on the awards and the performance conditions to which they were subject can be found on page 90.
(4) Relates to the 2011 PSP awards which vested and became exercisable on 21st March 2014. The share price used to value the awards was 400.00p, being the share price on the vesting
date, plus 12.93p per share which is the value of the dividend equivalent deliverable in shares at exercise. The dividend equivalent is based on dividends paid to shareholders with record
dates occurring between the date of grant and the date of exercise.
(5) Further details regarding pension entitlements can be found on page 94.
(6) Values shown comprise the notional gain on the exercise of options granted under the Company’s Executive Share Option Scheme and Saving Related Share Option Scheme: further
information can be found on page 92.
(7) 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.
(8) Appointed to the Board on 1st September 2014.
(9) Retired from the Board on 27th March 2013.
(10) Appointed to the Board on 1st September 2013.
(11) 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.
Annual bonus outturn (audited information)
In the financial year ended 30th November 2014 each executive director had the opportunity to be awarded an annual bonus of up
to 125% of his base salary as at 1st December 2013. Of this, 105% of salary was dependent on achieving corporate measures and
20% on meeting personal objectives, details of which are set out in the table which follows.
88 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Corporate Governance Measure
Corporate (105% of salary)
Post dividend growth in shareholders’ equity net asset value per share
Profit before all tax
Total dividend for the year
Gearing levels
Covenant compliance
Achievement against a number of strategic objectives which primarily included:
• Progressing the redevelopment of the New Covent Garden Market sites
in Nine Elms, London
• Agreeing a further phase of development at Bay Campus with Swansea University
• Implementation of further alternative sources of funding
Personal (20% of salary)
Achievement against a number of operational objectives which primarily included:
• Delivery of construction projects to programme and within budget
• Implementation of management succession plans and development of longer-
term resourcing arrangements in line with business needs
• Development and implementation of a leadership development programme
• Identification of alternative, financially viable opportunities to utilise the Company’s
land bank
• Enhancements to monthly Board reporting
On target
performance(1)
Maximum
performance(2)
Actual
performance
8% growth
£67.5m
4.1p per share
59%
Full
Committee
discretion
Committee
discretion
Committee
discretion
59%
Full
Achievement determined by
the Committee against
measurable objectives set at
the beginning of the year
Achievement determined by
the Committee against
measurable objectives set at
the beginning of the year
17% growth
to 324.9p
£138.1m
4.6p
per share
45%
Full
Achieved
in full as
detailed
in the
Strategic
Report
Achieved
in full as
detailed
in the
Strategic
Report
(1) Total bonus which can be awarded for on target performance is 75% of salary (60% of the maximum bonus opportunity).
(2) Total bonus which can be awarded for maximum performance is 125% of salary (100% of the maximum bonus opportunity).
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 has had an exceptional year, delivering record profits and strong growth in net asset
value. Performance highlights include:
• shareholders’ equity net asset value per share increasing by 17% to 324.9p per share;
• an increase in profit before all tax of 68% to £138.1m;
• realised property profits up by 45% to £57.7m;
• total final dividend for the year increased by 15% to 4.6p per share;
• valuation gain of £90m, of which £32m was as a result of planning and asset management initiatives;
• successful launch of £100m convertible bond in February 2014 and comprehensive refinancing of the debt portfolio, extending
the weighted average facility maturity to 4.6 years and reducing the weighted average cost of debt to 4.8%; and
• significant milestones achieved across all major projects, including a resolution to grant planning for the redevelopment of New
Covent Garden Market received in November 2014, a Development Agreement signed with Swansea University for an additional
£50m of student accommodation and major new facilities at Bay Campus and commencement of the construction of the Marks
& Spencer 150,000 sq ft new flagship store at Longbridge, Birmingham.
In light of both corporate and individual performance, the Committee determined that each executive director should be awarded
the maximum bonus potential of 125% of base salary for the year. 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’s shares and to retain those shares for a minimum period of three years.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 89
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 DIRECTORS’ REMUNERATION REPORT
continued
ANNUAL REPORT ON REMUNERATION continued
Long-term incentives (audited information)
Performance Share Plan (PSP)
On 5th March 2014, 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
£000(1)
Number of shares
% of award that would vest for
threshold performance(2)
£588
£388
£353
150,141
99,066
90,186
25%
25%
25%
(1) Calculated using the average share price of 391.87p 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 2015 awards which are described on page 97. The performance period started on 1st December 2013 and
will end on 30th November 2016.
The three-year performance period for the 2012 PSP awards ended on 30th November 2014. The performance conditions which
applied to the awards together with actual performance are summarised in the table below:
Performance measure
Weighting
Threshold
performance
Vesting of award
at threshold
performance
Maximum
performance
Vesting of award
at maximum
performance
Actual
performance
Proportion of
award to vest
Absolute TSR growth
TSR relative to
FTSE All-Share
Real Estate Investment
& Services Index
50% of award
20%
12.5%
50%
50%
211.39%
50%
50% of award
Equal to Index
(78.97%)
120% of Index
(114.76%)
12.5%
174% of Index
(211.39)%
50%
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 3 on page 83) had
been met. In respect of the dividend underpin, an interim dividend of 1.463p per share was paid on 3rd September 2014 and the
Board is recommending that a final dividend for the year of 3.137p per share be paid on 2nd April 2015. Furthermore, the Committee
currently has no reason to believe that dividend(s) will not be paid in respect of the 2015 financial year, being the year in which the
award will vest. The Committee was also satisfied that the level of vesting was appropriate given the general financial performance
of the Company over the performance period, noting 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 2011
As at 30th
November 2014
Improvement
£51.7m
231.8p
3.3p
73%
39%
£138.1m
324.9p
4.6p
45%
30%
167%
40%
40%
38%
23%
The Committee therefore determined that the PSP awards granted in 2012 will vest in full and become exercisable on the third
anniversary of grant (17th February 2015) 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
363,529
239,863
218,362
363,529
239,863
218,362
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.
90 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Corporate Governance All PSP awards held by the executive directors who served during the year, together with any movements, are shown below:
Executive director
Date of grant(1)
Awards held
on 1st
December
2013
Awards
made
during year(2)
Awards
vested
during year
Awards
exercised
during year
Awards
lapsed
during year
Awards held
on 30th
November
2014
Bill Oliver
24/07/09
134,498
22/02/10
129,480
21/03/11
319,774
17/02/12(4)
363,529
06/03/13
231,077
–
–
–
–
–
05/03/14
–
1,178,358
150,141
150,141
Steve Burke
21/03/11
210,992
17/02/12(4)
239,863
06/03/13
152,468
–
–
–
05/03/14
–
603,323
99,066
99,066
Michael Dunn
21/03/11
230,496
17/02/12(4)
218,362
06/03/13
138,802
–
–
–
05/03/14
–
587,660
90,186
90,186
–
–
134,498(5)
129,480(5)
319,774
319,774(5)
–
–
–
–
–
–
319,774
583,752
210,992
210,992(5)
–
–
–
–
–
–
210,992
210,992
230,496
230,496(5)
–
–
–
–
–
–
230,496
230,496
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
End of
performance
31/05/12
period(3) 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
05/03/17 to
04/03/24
30/11/12
30/11/13
30/11/14
30/11/15
30/11/16
–
–
–
363,529
231,077
150,141
744,747
–
30/11/13
239,863
30/11/14
152,468
30/11/15
99,066
30/11/16
491,397
–
30/11/13
218,362
30/11/14
138,802
30/11/15
90,186
30/11/16
447,350
21/03/14 to
20/03/21
17/02/15 to
16/02/22
06/03/16 to
05/03/23
05/03/17 to
04/03/24
21/03/14 to
20/03/21
17/02/15 to
16/02/22
06/03/16 to
05/03/23
05/03/17 to
04/03/24
(1) Awards made from 2012 onwards are subject to withholding and recovery as described in note 4 on page 83.
(2) The share price used to calculate the number of shares awarded, under the rules of the PSP, was 391.87p. The closing mid-market share price on the date of the award was 392p.
(3) The performance conditions for all awards held on 30th November 2014 mirror those proposed for the 2015 awards as described on page 97.
(4) Awards comprise an HMRC approved option over 19,769 shares with an exercise price of 151.75p and an unapproved award for the balance.
(5) Awards exercised on 11th April 2014. In addition to the shares exercised, the executive directors received shares representing the value of dividends paid from the date of award to the date
of exercise as follows:
Executive director
Bill Oliver
Steve Burke
Michael Dunn
2009 PSP
2010 PSP
4,899
4,717
–
–
–
–
Total shares
awarded in lieu
of dividends
20,429
7,134
7,794
2011 PSP
10,813
7,134
7,794
St. Modwen Properties PLC Annual Report and Financial Statements 2014 91
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 DIRECTORS’ REMUNERATION REPORT
continued
ANNUAL REPORT ON REMUNERATION continued
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
2013
Options
granted
during year
Options
exercised
during year
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
(1) Adjusted to take account of the dilutive effect of the 2009 equity issue.
(2) Exercised on 7th July 2014.
(3) Exercised on 11th April 2014.
–
–
–
–
–
–
105,610(2)
–
105,610
46,315(3)
–
46,315
–
–
–
–
–
–
Options held
on 30th
November
2014 Exercise price(1) Exercise period
13/08/07 to
12/08/14
15/08/08 to
14/08/15
375.22p
236.31p
–
102,955
102,955
–
236.31p
39,825
39,825
375.22p
13/08/07 to
12/08/14
15/08/08 to
14/08/15
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
2013
Options
granted
during year
Options
exercised
during year
Options
lapsed
during year
Options held
on 30th
November
2014
Bill Oliver
15/09/09
6,941
Steve Burke
16/08/11
9,887
Michael Dunn
16/08/11
9,887
(1) Exercised on 1st October 2014.
–
–
–
6,941(1)
–
–
–
–
–
–
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 28th November 2014 was 383p and the price range during the year was 334p to 418p.
92 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Corporate Governance 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 2014
PSP awards
As at 1st December 2013
PSP awards
Ordinary
shares
Vested but
unexercised
Not yet
vested
ESOS
awards(1)
SAYE
awards
Ordinary
shares
Vested but
unexercised
Not yet
vested
ESOS
awards(1)
SAYE
awards
Executive directors
Bill Oliver
Steve Burke
Michael Dunn
Non-executive directors
Bill Shannon
Kay Chaldecott
Ian Bull(2)
Simon Clarke
Lesley James
Richard Mully
John Salmon
854,625
480,489
222,861
75,000
10,000
15,000
3,112,657
20,000
20,000
30,000
(1) Awards have vested but have not been exercised.
(2) Appointed to the Board on 1st September 2014.
– 744,747 102,955
–
527,469 263,978 914,380 208,565
– 491,397
39,825
9,887
364,883
– 603,323
86,140
– 447,350
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9,887
96,568
– 587,660
–
–
65,000
10,000
–
– 4,612,657
–
–
–
10,000
–
30,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6,941
9,887
9,887
–
–
–
–
–
–
–
There were no changes in these shareholdings or interests between 30th November 2014 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. As set out in the table below, all
executive directors have met and exceeded the shareholding requirement.
Executive director
Bill Oliver
Steve Burke
Michael Dunn
Ordinary shares held as at
30th November 2014
Shareholding requirement as
% of base salary
Shareholding at 30th November 2014 as
% of base salary(1)
854,625
480,489
222,861
200%
200%
200%
695%
593%
302%
(1) Based on the closing mid-market share price on 28th November 2014 of 383p and salary as at 30th November 2014.
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 element of compulsory investment in shares of the annual bonus
arrangements and robust incentive recovery and withholding provisions, 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.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 93
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 DIRECTORS’ REMUNERATION REPORT
continued
ANNUAL REPORT ON REMUNERATION continued
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.
Executive director
Bill Oliver
Steve Burke
Michael Dunn
Pension contribution
£
Cash allowance in lieu
of pension contribution
£
Total
£
2014
–
42,192
38,136
80,328
2013
–
45,228
39,832
85,060
2014
70,603
4,393
4,273
79,269
2013
68,547
–
–
2014
70,603
46,585
42,409
2013
68,547
45,228
39,832
68,547
159,597
153,607
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 is set out below:
Executive director
Steve Burke
Accrued
pension at 30th
November
2013(1)
£pa
Accrued
pension at 30th
November
2014(1)
£pa
Increase in
accrued pension
during the year
£pa
Increase in
accrued pension
during the year
(excluding inflation)
£pa
Age at 30th
November 2014
55
27,269(2)
28,006(2)
737
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.
94 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Corporate Governance Michael Dunn
As announced on 22nd December 2014, Michael Dunn has agreed with St. Modwen to leave the Company. He will step down
from the Board on 31st May 2015, or earlier if mutually agreed, and will be on garden leave for the remainder of his notice period.
During this period he will remain available to ensure an orderly transition and will continue to receive salary and contractual benefits
(including pension entitlements). He will also be eligible to be awarded a bonus, subject to achievement of performance measures,
in respect of the period from 1st December 2014 until the date on which he commences garden leave. The timing of any pro-rated
payment will be after 30th November 2015 in line with any payments made to other executive directors.
The Committee exercised discretion under the rules of the PSP to allow unvested awards to continue subject to time pro-rating
and performance assessment. Awards will be pro-rated to reflect the time elapsed from the date of grant to the date on which
Michael Dunn commences garden leave. Satisfaction of the performance conditions will be assessed at the end of the relevant
performance periods in line with the PSP rules and vesting will remain subject to the Committee’s determination as to whether the
two financial underpins (details of which are set out in note 3 on page 83) have been met. To the extent that they vest, awards will
be exercisable for a period of six months from the third anniversary of the date of grant.
The SAYE award held by Michael Dunn will be exercisable to the extent of accumulated savings (plus any applicable interest) in the
six months following the end of his notice period.
The Company also paid £1,250 plus VAT to Michael Dunn’s lawyers in respect of legal fees incurred by him in connection with
his departure.
External appointments
Michael Dunn is a non-executive director of Metropolitan Housing Trust. He received and retained fees of £8,702 for the period
from his appointment on 2nd January 2014 to 30th November 2014.
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 six 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
30th Nov
2014
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 six-year period to 30th November 2014. 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
2,419
95%
100%
2014
2,708
100%
100%
(1) Total remuneration includes those elements shown in the single total figure of remuneration table on page 88.
(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.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 95
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 DIRECTORS’ REMUNERATION REPORT
continued
ANNUAL REPORT ON REMUNERATION continued
Change in remuneration of Chief Executive compared to employees
The table below shows the percentage change in salary, benefits and annual bonus between the years ended 30th November 2014
and 30th November 2013 for both the Chief Executive and for all permanent employees of the Company.
Chief Executive
All permanent employees
Change in base salary
%
Change in benefits
%
Change in annual bonus
%
3.0
3.0(2)
0.0(1)
0.0(3)
8.4
13.8(4)
(1) The year-on-year increase in benefits shown in the single total figure of remuneration table on page 88 reflects additional taxable benefit arising following a change of company car.
(2) General cost of living increase for permanent employees. Including adjustments for promotions and recognition of exceptional performance, the weighted average increase in salary was
4.46%.
(3) There was no change to the overall structure of benefits available to permanent employees.
(4) Weighted average increase.
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
UK 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 paid
Equity attributable to
owners of the Company
Relevant note to the
Financial Statements
3c
2a
7
2g
Year ended 30th November
2013
£15.5m
£82.2m
£8.2m
£614.2m
2014
£17.4m
£138.1m
£9.1m
£717.8m
% increase
12%
68%
11%
17%
Implementation of remuneration policy for 2014/15
Base salary
In line with the general cost of living salary increase awarded to the Company’s permanent employees, the executive directors
received an annual salary increase of 3% with effect from 1st December 2014.
Executive director
Bill Oliver
Steve Burke
Michael Dunn
Base salary
as at 30th
November
2014
Base salary
with effect from
1st December
2014
£470,687
£484,807
£310,568
£282,730
£319,885
£291,211
Increase
3.0%
3.0%
3.0%
Benefits and pension arrangements
Benefits and pension arrangements for the financial year ending 30th November 2015 will be consistent with the respective policies
detailed on pages 81 and 82.
96 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Corporate Governance Annual bonus
The annual bonus arrangements for the financial year ending 30th November 2015 will operate on the same basis as for 2013/14
and will be consistent with the annual bonus policy detailed on page 82 (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 the operation of withholding and recovery 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:
Personal
Achievement against a number of operational objectives
For on target performance:
• Achievement against a number of strategic objectives
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 2015 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 any 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.
Long-term incentives – PSP
As in 2013/14, PSP awards granted to executive directors in the financial year ending 30th November 2015 will be over shares
worth 125% of salary and will be consistent with the long-term incentives policy detailed on page 83 (including the application
of the two underpin conditions before awards can vest and the operation of withholding and recovery 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 2015; these targets are set out in the table below and will be measured
over the three financial years ending on 30th November 2017:
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 New Bridge Street to ensure that performance is independently verified.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 97
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 DIRECTORS’ REMUNERATION REPORT
continued
ANNUAL REPORT ON REMUNERATION continued
Chairman and non-executive director fees
Following a review by the Board, the annual fees payable to the Chairman and non-executive directors have been increased in line
with the cost of salary increase awarded to the Company’s employees with effect from 1st December 2014.
Base fee
Chairman
Non-executive directors
Additional fees
Senior Independent Director
Audit Committee Chairman
Remuneration Committee Chairman
Dates of appointment of directors
Director
Executive directors
Bill Oliver
Steve Burke
Michael Dunn
Non-executive directors
Bill Shannon(1)
Ian Bull
Kay Chaldecott
Simon Clarke
Lesley James
Richard Mully
John Salmon
Fee as at 30th
November 2014
Fee with effect
from 1st
December 2014
£150,000
£154,500
£41,200
£42,436
£9,000
£9,000
£9,000
£9,000
£9,000
£9,000
Increase
3.0%
3.0%
0.0%
0.0%
0.0%
Date of appointment
Date of contract/original letter
of appointment
Expiry of current term
24th January 2000
30th November 2006
24th January 2000
1st January 2006
1st December 2010
9th November 2010
1st November 2010
1st September 2014
22nd October 2012
11th October 2004
19th October 2009
1st September 2013
18th October 2010
21st August 2014
22nd October 2012
4th October 2014
19th October 2009
16th July 2013
17th October 2005
14th October 2005
N/A
N/A
N/A
30th October 2016
31st August 2017
21st October 2015
10th October 2016
18th October 2015
31st August 2016
27th March 2015
(1) Appointed Chairman on 22nd March 2011.
Dilution limits
In line with the rules of the PSP, ESOS and SAYE, the Company observes the recommendation of The Investment Association
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 2014 was as follows:
Type of scheme
All schemes
Executive schemes only
Limit
10%
5%
Actual
4.57%
4.29%
During the year a total of 1m shares were allotted to the Company’s Employee Share Trust (the Trust) to enable it to satisfy the
vesting and exercise of awards. As at 30th November 2014 the Trust held a total of 460,427 shares in the Company (2013: 72,582
shares) and has, in accordance with the Trust deed, waived the right to receive dividends paid on these shares with the exception
of a hundredth of a penny per share.
98 St. Modwen Properties PLC Annual Report and Financial Statements 2014
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.
Nomination Committee Report Pages 73–76
Board biographies Page 53
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.
Remuneration Committee
members
Lesley James
Chairman
Ian Bull(2)
Kay Chaldecott
Richard Mully
John Salmon
Bill Shannon
Member
Member
Member
Member
Member
Committee meetings and
attendance during the year ended
30th November 2014(1)
4/4
2/2
4/4
4/4
4/4
4/4
(1) Actual attendance/maximum number of meetings a director could attend.
(2) From appointment to the Board on 1st September 2014.
Remuneration Committee attendees (by invitation)
Bill Oliver
Simon Clarke
Tanya Stote
Representatives from New
Bridge Street
Chief Executive
Non-executive director
Company Secretary and
secretary to the Committee
Remuneration
Committee advisor
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 re-
appointed by the Committee in 2014 following a tender process to provide independent advice on remuneration matters.
Representatives from NBS attend Committee meetings and provide advice to the Committee Chairman outside of meetings
as necessary. In 2013/14 NBS provided specific advice to the Committee on fees payable to non-executive members of the
Board, a review of variable remuneration performance measures, compliance with new remuneration disclosure regulations
and senior management benchmarking. Fees are charged on a cost incurred basis and totalled £11,500 in the year ended
30th November 2014.
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. Neither NBS nor Aon
plc undertakes any other work for the Company, and the Committee is satisfied that the advice provided by NBS remains objective
and independent.
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.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 99
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 DIRECTORS’ REMUNERATION REPORT
continued
ANNUAL REPORT ON REMUNERATION continued
Activities of the Committee
The Committee met on four occasions in the financial year ended 30th November 2014 to consider the following matters:
• to review the executive directors’ base salaries and the fee payable to the Chairman;
• to set corporate and personal objectives for the 2014/15 annual bonus arrangements for executive directors and undertake an
assessment of performance against targets for 2013/14;
• to approve the outturn of PSP awards granted in 2011;
• to consider investor feedback on the Company’s remuneration policy;
• to approve the renewal of the Company’s SAYE scheme;
• to approve share awards granted in 2014 together with associated performance criteria;
• to consider external benchmarking of selected senior management roles;
• to oversee the arrangements for the departure of Michael Dunn;
• to consider the executive directors’ service contracts;
• to progress and conclude the tender process for external advisors to the Committee;
• to review of the Committee’s performance and terms of reference; and
• to prepare this report on directors’ remuneration.
Statement of shareholder voting at the AGM
At the AGM held on 28th March 2014 votes cast in respect of directors’ remuneration were as follows:
Resolution
To approve the Directors’ Remuneration
Report (excluding the policy section)
To approve the policy section of the
Directors’ Remuneration Report
No. of votes for
% of vote for No. of votes against % of vote against
Total votes cast
Votes withheld(1)
158,912,413
97.98%
3,269,366
2.02% 162,181,779
342,779
156,644,976
98.79%
1,916,724
1.21% 158,561,700
3,962,858
(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.
100 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Corporate Governance 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 2014 is set out on pages 1 to 51.
POST-BALANCE SHEET EVENTS AND FUTURE DEVELOPMENTS
There were no post-Balance Sheet events in respect of the year ended 30th November 2014. 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 56 to 100 and is incorporated into this Directors’ Report by reference.
DISCLOSURE REQUIRED BY LISTING RULE 9.8.4
There are no disclosures required to be made under Rule 9.8.4 of the Listing Rules of the Financial Conduct Authority.
ANNUAL GENERAL MEETING
The AGM of the Company will be held at 12.00 noon on Friday, 27th March 2015 at the Evolution 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 166 to 172.
DIVIDEND
The directors recommend a final dividend of 3.137p per ordinary share in respect of the year ended 30th November 2014, to be paid
on 2nd April 2015 to ordinary shareholders on the register on 6th March 2015. This, together with the interim dividend of 1.463p per
share paid on 3rd September 2014, brings the total dividend for the year to 4.6p per share (2013: 4.0p 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.
At the 2014 AGM, shareholders authorised the Company to make market purchases of up to 22,037,698 ordinary shares,
representing 10% of the issued share capital at that time, and to allot shares up to an aggregate nominal amount of £14,691,798.
These authorities expire at the 2015 AGM and resolutions to renew them will be proposed. No shares were repurchased during the
year and the Company does not hold any shares in treasury.
During the year a total of 1,000,000 shares were allotted to the Company’s Employee Share Trust (Trust) to enable it to satisfy
the vesting and exercise of awards of ordinary shares made under the Company’s share-based incentive arrangements.
As at 30th November 2014, the Trust held 460,427 shares (2013: 72,582 shares), representing 0.21% (2013: 0.03%) of the
Company’s issued share capital. The Trust deed contains a dividend waiver provision in respect of shares held by the Trust.
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 2015 AGM are set out
in the notice of meeting on pages 166 to 172.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 101
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 DIRECTORS’ REPORT
continued
SHARE CAPITAL continued
Restrictions on the transfer of shares
As at 30th November 2014 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.
Substantial shareholders
As at 30th November 2014, 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 voting
rights
% of voting
rights
Indirect voting
rights
% of voting
rights
Total voting
rights
% of voting
rights
Shareholder
Lady Clarke and connected parties
(including Simon Clarke)
J.D. Leavesley and connected parties
15,996,845
Aviva plc
BlackRock, Inc.
18,575,196
8,889,142
8.39%
7.23%
4.02%
–
–
–
–
18,575,196
15,996,845
5,582,987
2.52% 14,472,129
–
–
11,075,661
5.00% 11,075,661
8.39%
7.23%
6.54%
5.00%
3.07%
TR Property Investment Trust plc
6,802,638
3.07%
–
–
6,802,638
As at 2nd February 2015, 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 2014:
Name
Ian Bull
Steve Burke
Kay Chaldecott
Simon Clarke
Michael Dunn
Lesley James
Richard Mully
Bill Oliver
John Salmon
Bill Shannon
Position as at 30th November 2014
Service in the year ended 30th November 2014
Independent non-executive director
Appointed on 1st September 2014
Group Construction Director
Served throughout the year
Independent non-executive director
Served throughout the year
Non-executive director
Group Finance Director
Served throughout the year
Served throughout the year
Independent non-executive director
Served throughout the year
Senior Independent Director
Served throughout the year
Chief Executive
Served throughout the year
Independent non-executive director
Served throughout the year
Chairman
Served throughout the year
102 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Corporate Governance The biographical details of all the directors serving at 30th November 2014, including details of their relevant experience and other
significant commitments, are shown on page 53.
Following his appointment to the Board in September 2014 and in accordance with the Company’s Articles of Association, Ian Bull
will retire and offer himself for election at the 2015 AGM. With the exception of John Salmon, who will retire from the Board at the
conclusion of the 2015 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 77 to 100. 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 of Directors 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 101.
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 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. A copy of the indemnity is
available for inspection at the Company’s registered office during normal business hours and will be available for inspection at the
Company’s AGM.
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 and
convertible 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.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 103
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 DIRECTORS’ REPORT
continued
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 44 to 51.
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 eighteen 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 page 36, there are no corporate or joint venture facilities that require renewal before May 2018.
As a result the directors are satisfied that the Group will have sufficient ongoing facilities available to meet its 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 2015 AGM. The Board, on the advice of the Audit
Committee, recommends their re-appointment.
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law
and regulations.
Company law requires the directors to prepare Financial Statements for each financial year. Under that law the directors are required
to prepare the Group Financial Statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the
European Union and Article 4 of the IAS Regulation and have elected to prepare the Company Financial Statements in accordance
with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law).
Under company law the directors must not approve the accounts unless they are satisfied that they give a true and fair view of the
state of affairs of the Company and of their profit or loss of the Company for that period.
104 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Corporate Governance In preparing the Group Financial Statements, International Accounting Standard 1 requires that directors:
• properly select and apply accounting policies;
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information;
• provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to
understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial
performance; and
• make an assessment of the Company’s ability to continue as a going concern.
In preparing the Company Financial Statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable United Kingdom Accounting Standards have been followed, subject to any material departures
disclosed and explained in the Financial Statements; and
• prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will
continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure
that the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the
Company’s website (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 52 and 53, 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;
• 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; and
• the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the
information necessary for shareholders to assess the Company’s position and performance, business model and strategy.
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.
Approved by the Board and signed on its behalf by
Tanya Stote
Company Secretary
2nd February 2015
St. Modwen Properties PLC Annual Report and Financial Statements 2014 105
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 INDEPENDENT AUDITOR’S
REPORT TO THE MEMBERS OF
ST. MODWEN PROPERTIES PLC
Opinion on Financial Statements of
St. Modwen Properties PLC
Going concern
Our assessment of risks of
material misstatement
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 2014
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 and Parent Company Balance Sheets, The Group Statement of
Comprehensive Income, the Group Statement of Changes in Equity, the
Group Cash Flow Statement 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).
As required by the Listing Rules we have reviewed the directors’ statement
contained within the Directors’ Report on page 104 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.
There has been no significant change in the Group’s operations nor in
our assessment of materiality, therefore the assessed risks of material
misstatement described below, which have the greatest effect on our audit
strategy, the allocation of resources in the audit and directing the efforts of the
engagement team are consistent with the risks in previous year:
106 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Financial Statements 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 Group and joint
ventures’ investment property portfolio is £1.05bn.
The Group’s accounting policy on page 117
states that investment property is held at fair
value. In determining the fair value, the external
valuers make a number of key estimates and
assumptions, in particular assumptions in relation
to market comparable yields and estimates
in relation to future rental income increases or
decreases, void periods and purchaser costs.
Certain of these estimates and assumptions
require input from management. Some of these
estimates and assumptions are subject to market
forces and will change over time.
Valuation of inventories
The Group and joint ventures has £206m 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. Management, as set out in the Group’s use
of estimates and judgements on page 117 rely,
for the majority of inventories held, on their own
internal procedures for assessing the carrying
value of inventory. These procedures inherently
rely on management judgement and estimates.
As set out in the Audit Committee’s Report on page 69 we met with
the third-party valuers, appointed by those charged with governance of
St. Modwen Properties PLC.
For each element of the investment property portfolio we assessed the
reasonableness of the significant judgements and assumptions applied in
their valuation model, including occupancy rates, lease incentives, break
clauses, lease lengths and yields. With the assistance of a specialist member
of the audit team who is a chartered surveyor we reviewed the significant
assumptions in the valuation process, tested a sample of properties
through benchmarking against appropriate property indices, understanding
the valuation methodology and wider market analysis. We verified the
integrity of a sample of information provided to the valuers by management
relating to rental income, occupancy and life of the lease by agreement to
lease contracts.
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 the third-party valuers to focus on those
with lower margins and assessed the reasonableness of the assumptions
applied. We have assessed whether the expected revenues in site appraisals
have been updated to reflect the cost and yields seen on similar assets in the
investment property portfolio and corroborated the key assumptions within
the appraisals to supporting evidence such as estimations and contracts
for future costs as well as estimated and contracted sales values. Where a
site has been held in inventory over a period of time, we have also sought
to understand the changes to assumptions for future use and forecast cost
and sales values. In our audit of property disposals we have also considered
whether the disposal values of similar properties provide further evidence of
the carrying values of the inventory portfolio.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 107
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 INDEPENDENT AUDITOR’S
REPORT TO THE MEMBERS OF
ST. MODWEN PROPERTIES PLC
continued
One-off property transactions
Accounting for property acquisitions and
disposals as these can be significant and complex
transactions which can be material to the Group’s
results in a given period. In the current year
there are two property transactions which we
consider to be significant, being the Development
Agreement for New Covent Garden Market and
the acquisition of Branston Properties Ltd.
New Covent Garden Market is a multi-phased
project with a gross development value of
approximately £2bn. The Development Agreement
is conditional upon a number of events. The key
area of judgement is whether the outstanding
matters that cause the contract to remain
conditional have sufficient substance to prevent
the recognition of the assets and liabilities that are
expected to arise under the contract.
The acquisition of Simon Clarke’s shares in
Branston Properties Ltd is subject to approval
from the shareholders of the Group at the AGM in
March 2015. As at 30th November 2014 the Group
has acquired the remainder of the shares in the
company but has not recognised a non-controlling
interest for the shares not yet acquired by the
Group. Our judgement is focused on whether this
accounting treatment is reasonable.
Accounting for taxation
As set out in the Group’s use of estimates and
judgements on page 121, tax planning is often
an integral part of transactions as the Group is
a property group. Where tax planning has been
challenged by HMRC, or management believe
there is a risk of such challenge, provision is made
for the best estimate of the potential exposure
based on the information available at the Balance
Sheet date.
Covenant compliance and liquidity disclosure
Covenant compliance and liquidity disclosure
is dependent on cash management and the
associated headroom available, property
valuations and the terms of the Group’s finance
facilities. The Group’s covenant compliance and
disclosure is dependent on forecasted property
sales and spend.
In the current period, we have considered the terms of the New Covent
Garden Market Development Agreement including the key milestones
required to be met before this contract becomes unconditional. We have
assessed the judgement regarding the conditions attached to the contract,
including the implications of the resolution to grant from the planning
authority, and whether appropriate accounting treatment has been followed
by management.
We have reviewed the evidence around the Branston site acquisition,
including the alternative options available to management in assessing
whether a non-controlling interest should be recognised for the shares not
yet acquired from Simon Clarke.
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, including reviewing any
correspondence with HMRC and considered the adequacy of disclosures
made in the Annual Report.
We tested compliance with loan covenants at the Balance Sheet date.
We reviewed management’s forecasts and assumptions for ongoing
covenant compliance and available headroom on these covenants and
existing finance facilities and reviewed the historical forecasting accuracy
of those forecasts. We also confirmed that adequate disclosures have been
made in the Annual Report.
108 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Financial Statements Revenue recognition
Revenue recognition in relation to revenue arising
from construction contracts requires judgement to
be exercised in determining the costs to complete
for each site and the stage of completion at the
Balance Sheet date.
We tested a sample of revenue recognised under construction contracts
and assessed whether the revenue recognition policies adopted complied
with IFRSs. We reviewed evidence of the stage of completion of the sample
of contracts to confirm that the revenue and profit recognised to date was
based on management’s current best estimate of stage of completion.
We referred to evidence such as signed contract terms and latest external
and internal contract valuations and discussed contract progress and future
risks with management.
The description of risks above should be read in conjunction with the significant issues considered by the Audit Committee
discussed on pages 69 and 70.
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
Opinion on other matters prescribed by the
Companies Act 2006
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.
We determined materiality for the Group to be £7.0m (2013: £6.2m), which
is approximately 1% of equity (2013: 1% of equity). As a property group,
we consider the Group’s equity to be the most appropriate benchmark
for materiality.
We agreed with the Audit Committee that we would report to the Committee
all audit differences in excess of £0.14m (2013: £0.12m), 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 is consistent with our scope in the previous year.
As the Group auditors we are responsible for the majority of the Group’s
subsidiaries and joint ventures, notably KPI and VSM Uxbridge Group.
The subsidiaries and joint ventures for which we did not perform or arrange
to have performed a component audit for the purposes of our Group audit
amount to 0.23% of the Group’s assets, 0.06% of Group revenue and 0.03%
of the Group’s profit before tax, as such, there is no component auditors
reporting into Group.
At the parent entity level we also tested the consolidation process and
carried out analytical procedures to confirm our conclusion that there were
no significant risks of material misstatement of the aggregated financial
information of the remaining components not subject to audit or audit of
specified account balances.
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.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 109
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 INDEPENDENT AUDITOR’S
REPORT TO THE MEMBERS OF
ST. MODWEN PROPERTIES PLC
continued
Matters on which we are required to
report by exception
Adequacy of explanations received and
accounting records
Directors’ remuneration
Corporate Governance Statement
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.
Under the Listing Rules we are also required to review the part of the
Corporate Governance Statement relating to the Company’s compliance with
10 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:
• 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.
110 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Financial Statements
Respective responsibilities of directors
and auditor
As explained more fully in the Statement of Directors’ Responsibilities, 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. We also comply with International Standard
on Quality Control 1 (UK and Ireland). Our audit methodology and tools aim
to ensure that our quality control procedures are effective, understood and
applied. Our quality controls and systems include our dedicated professional
standards review team and independent partner reviews.
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.
Scope of the audit of the Financial Statements An audit involves obtaining evidence about the amounts and disclosures
in the Financial Statements sufficient to give reasonable assurance that
the Financial Statements are free from material misstatement, whether
caused by fraud or error. This includes an assessment of: whether the
accounting policies are appropriate to the Group’s 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
2nd February 2015
St. Modwen Properties PLC Annual Report and Financial Statements 2014 111
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 GROUP INCOME STATEMENT
for the year ended 30th November 2014
Revenue
Net rental income
Development profits
Gains on disposal of investments/investment properties
Investment property revaluation gains
Negative goodwill
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
19
1
10
3
4
4
5
Notes
6
6
2014
£m
282.1
31.2
47.7
9.2
75.8
2.1
3.6
13.6
(22.9)
160.3
(27.9)
5.3
137.7
(15.6)
122.1
116.2
5.9
122.1
2014
pence
52.7
51.6
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
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.
112 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Financial Statements GROUP BALANCE SHEET
as at 30th November 2014
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
2014
£m
2013
£m
8
9
10
11
12
11
13
14
5
13
14
5
17
903.3
7.0
88.9
14.5
813.3
6.6
95.3
17.6
1,013.7
932.8
201.0
82.1
6.5
289.6
(172.4)
–
(9.3)
(181.7)
(28.5)
(340.6)
(16.0)
(385.1)
736.5
22.1
102.8
543.7
4.8
(1.8)
46.2
717.8
18.7
736.5
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
These Financial Statements were approved by the Board and authorised for issue on 2nd February 2015.
Bill Oliver
Chief Executive
Company Number: 349201
Michael Dunn
Group Finance Director
St. Modwen Properties PLC Annual Report and Financial Statements 2014 113
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 GROUP STATEMENT OF
COMPREHENSIVE INCOME
for the year ended 30th November 2014
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
2014
£m
122.1
–
–
122.1
116.2
5.9
122.1
2013
£m
73.9
(0.1)
–
73.8
72.0
1.8
73.8
GROUP STATEMENT OF CHANGES
IN EQUITY
for the two years ended 30th November 2014
Share
capital
£m
Share
premium
account
£m
Retained
earnings
£m
Share
incentive
reserve
£m
At 30th November 2012
20.0
102.8
377.6
2.4
Profit for the year attributable
to shareholders
Pension fund actuarial losses
(note 18)
Total comprehensive income
Equity raise
Share-based payments
Share transfers
Dividends paid
—
—
72.1
—
—
2.0
—
—
—
—
—
—
—
—
(0.1)
72.0
—
—
(8.2)
At 30th November 2013
22.0
102.8
441.4
—
—
—
(0.3)
—
—
2.1
Equity
attributable
to owners
of the
Company
£m
Other
reserves
£m
Non-
controlling
interest
£m
Total
equity
£m
0.3
502.6
11.1
513.7
—
72.1
1.8
73.9
—
—
45.9
—
—
—
(0.1)
72.0
47.9
(0.3)
0.2
(8.2)
46.2
614.2
—
1.8
—
—
(0.1)
12.8
(0.1)
73.8
47.9
(0.3)
0.2
(8.3)
627.0
Own
shares
£m
(0.5)
—
—
—
—
—
0.2
—
(0.3)
Profit for the year attributable
to shareholders
Pension fund actuarial losses
(note 18)
Total comprehensive income
Equity issue (note 17)
Share-based payments
Share transfers
Dividends paid
—
—
116.2
—
—
—
116.2
5.9
122.1
—
—
0.1
—
—
—
—
—
—
—
—
—
—
116.2
—
(6.2)
1.4
(9.1)
—
—
—
2.7
—
—
4.8
—
—
(0.1)
—
(1.4)
—
—
—
—
—
—
—
—
116.2
—
(3.5)
—
(9.1)
—
5.9
—
—
—
—
—
122.1
—
(3.5)
—
(9.1)
(1.8)
46.2
717.8
18.7
736.5
At 30th November 2014
22.1
102.8
543.7
Own shares represent the cost of 460,427 (2013: 72,582) shares held by The St. Modwen Properties PLC Employee Share Trust.
The open market value of the shares held at 30th November 2014 was £1,763,435 (2013: £259,553).
114 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Financial Statements GROUP CASH FLOW STATEMENT
for the year ended 30th November 2014
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
Negative goodwill
Depreciation
Impairment losses on inventories
Decrease/(increase) in inventories
Increase in trade and other receivables
(Decrease)/increase in trade and other payables
Pensions
Share options and share awards
Tax paid
Net cash inflow from operating activities
Investing activities
Investment property disposals
Investment property additions
Acquisition of subsidiary undertaking
Property, plant and equipment additions
Dividends received from joint ventures
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 in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
Notes
10
8
19
9
12
5 (c)
19
7
2014
£m
160.3
(9.2)
(13.6)
(75.8)
(2.1)
0.5
0.1
16.3
(6.8)
(9.9)
(0.1)
(3.4)
(5.1)
51.2
59.2
(87.5)
(0.8)
(1.0)
20.0
(10.1)
(9.1)
—
(25.4)
—
115.0
(122.5)
(42.0)
(0.9)
7.4
6.5
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
St. Modwen Properties PLC Annual Report and Financial Statements 2014 115
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 ACCOUNTING POLICIES
for the year ended 30th November 2014
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 2014, 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) to the Company’s
Financial Statements.
VSM Estates (Holdings) Ltd 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 negative goodwill.
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.
116 St. Modwen Properties PLC Annual Report and Financial Statements 2014
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; and
• 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.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 117
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 ACCOUNTING POLICIES continued
for the year ended 30th November 2014
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 will not be taxable or deductible.
Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and
their carrying amounts in the Financial Statements, using the rates of tax expected to apply based on legislation enacted or
substantively enacted at the Balance Sheet date, with the following exceptions:
• in respect of taxable temporary differences associated with investments in subsidiaries, joint ventures and associates, where
the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not
reverse in the foreseeable future; and
• deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which
the deductible temporary differences, carried forward tax credits or tax losses can be utilised.
Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when
the related asset is realised or liability is settled, based on tax rates and laws substantively enacted at the Balance Sheet date.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same authority and the Group intends to settle its current tax assets
and liabilities on a net basis.
Income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity. Otherwise, income tax
is recognised in the Income Statement.
PENSIONS
The Group operates a pension scheme with both defined benefit and defined contribution sections. The defined benefit section is
closed to new members and, from 1st September 2009, to future accrual.
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
Shares in St. Modwen Properties PLC held by the Group are classified in equity attributable to owners of the Company and are
recognised at cost.
DIVIDENDS
Dividends declared and approved after the Balance Sheet date are not recognised as liabilities at the Balance Sheet date.
118 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Financial Statements REVENUE RECOGNITION
Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can be reliably
measured. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, VAT and other sales
taxes or duty. The following criteria must also be met before revenue is recognised:
Sale of property
Revenue arising from the sale of property is recognised on legal completion of the sale. Where revenue is earned for development of
property assets not owned, this is recognised when the Group has substantially fulfilled its obligations in respect of the transaction.
Construction contracts
Revenue arising from construction contracts is recognised in accordance with the Group’s accounting policy on construction
contracts (see below).
Rental income
Rental income arising from investment properties is accounted for on a straight-line basis over the lease term.
Interest income
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable,
which is the rate that exactly discounts estimated future cash receipts over the expected life of the financial asset to that asset’s
net carrying amount.
Dividend income
Dividend income from joint ventures is recognised when the shareholders’ rights to receive payment have been established.
CONSTRUCTION CONTRACTS
Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the
stage of completion of the contract activity at the Balance Sheet date. The extent to which the contract is complete is determined
by the total costs incurred to date as a percentage of the total anticipated costs 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.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 119
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 ACCOUNTING POLICIES continued
for the year ended 30th November 2014
FINANCIAL INSTRUMENTS continued
Cash and cash equivalents
Cash and cash equivalents comprises cash balances and short-term deposits with banks.
Trade and other payables
Trade and other payables on deferred payment terms are initially recorded by discounting the nominal amount payable to net present
value. The discount to nominal value is amortised over the period of the deferred arrangement and charged to finance costs.
Interest bearing loans and borrowings
All loans and borrowings are initially recognised at fair value less directly attributable transaction costs. After initial recognition, loans
and borrowings are measured at amortised cost.
Gains and losses arising on the repurchase, settlement or otherwise cancellation of liabilities are recognised in finance income or
finance expense as appropriate.
The effective interest rate method is used to charge interest to the Income Statement.
Derivative financial instruments and hedging
The Group uses derivative financial instruments such as interest rate swaps to hedge its risks associated with interest rate
fluctuations. Such instruments are initially recognised at fair value on the date on which a contract is entered into and are
subsequently remeasured at fair value. The Group has determined that the derivative financial instruments in use do not qualify
for hedge accounting and, consequently, any gains or losses arising from changes in the fair value of derivatives are taken to the
Income Statement.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all its liabilities.
Equity instruments issued by the Group are recorded at the proceeds received less direct issue costs.
Convertible bonds
Convertible bonds are assessed on issue as to whether they should be classified as a financial liability, as equity or as a compound
financial instrument with both debt and equity components. This assessment is based on the terms of the bond and in accordance
with IAS32 Financial Instruments: Presentation.
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 2014. 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.
120 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Financial Statements Taxation As a property group, tax and its treatment is often an integral part of transactions. The outcome of tax treatments are
recognised by the Group to the extent the outcome is reasonably certain. Where tax treatments have 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 treatments 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
The following standards, amendments and interpretations have been adopted in the current year:
• IFRS13 Fair Value Measurement: This standard applies to IFRSs that require or permit fair value measurements or disclosures
and provides a single IFRS framework for measuring fair value and requires disclosures about fair value measurement.
The adoption of this standard has had no material impact on the measurement of fair value for the Group’s assets and liabilities
and no retrospective changes were required as a result of adopting this standard. Additional disclosures required by this standard
are set out in note 16.
• IAS19 (revised 2011) Employee Benefits: No material impact on the Group’s Financial Statements. Revised disclosures as
required by this standard are set out in note 18.
In addition, minor amendments to existing standards were made under Improvements to IFRSs (issued December 2010) and have
been adopted during the year.
Impact of standards and interpretations in issue but not yet effective
At the date of approval 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):
IAS1
Disclosure Initiative
IAS19 (revised 2013)
Defined Benefit Plans: Employee Contributions
IAS27 (revised 2011)
Separate Financial Statements
IAS27 (amended 2012)
Investment Entities
IAS28 (revised 2011)
Investments in Associates and Joint Ventures
IAS36 (amended 2013)
Recoverable Amount Disclosures for Non-financial Assets
IAS39 (amended 2013)
Novation of Derivatives and Continuation of Hedge Accounting
IFRIC21
IFRS9
IFRS10
Levies
Financial Instruments
Consolidated Financial Statements
IFRS10 (amended 2012)
Investment Entities
IFRS11
Accounting for Acquisitions of Interests in Joint Operations
IFRS12 (amended 2012)
Investment Entities
IFRS14
IFRS15
Regulatory Deferral Accounts
Revenue from Contracts with Customers
In addition, Improvements to IFRSs (issued May 2012, December 2013 and September 2014) 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.
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. Adoption of the majority of these standards, amendments and interpretations
are expected to have little or no impact on the reported results of the Group, although amended disclosures may be required.
IFRS15 may have an impact on revenue recognition and related disclosures. It is not practicable to provide a reasonable estimate
of the effect of IFRS 15 until a detailed review of the revenue streams to which is expected to apply has been completed.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 121
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 NOTES TO THE GROUP
FINANCIAL STATEMENTS
for the year ended 30th November 2014
1. SEGMENTAL INFORMATION
IFRS8 – Operating Segments, requires the identification of the Group’s operating segments, defined as being discrete components
of the Group’s operations whose results are regularly reviewed by the Chief Operating Decision Maker (being the Chief Executive) to
allocate resources to those segments and to assess their performance. The Group divides its business into the following segments:
• Residential development, being housebuilding activity through St. Modwen Homes and the Persimmon joint venture
arrangements; and
• The balance of the Group’s portfolio of properties which the Group manages internally, and reports as a single business segment.
Revenue
Rental income
Development
Other income
Total revenue
2014
Residential
development
£m
–
116.7
–
116.7
Portfolio
£m
39.2
119.8
6.4
165.4
Total
£m
39.2
236.5
6.4
282.1
2013
Residential
development
£m
–
46.0
–
46.0
Portfolio
£m
37.1
72.1
5.9
115.1
Total
£m
37.1
118.1
5.9
161.1
All revenues in the table above are derived from continuing operations exclusively in the UK.
The Group’s total revenue for 2014 was £292.1m (2013: £169.0m) and in addition to the amounts above included service
charge income of £7.8m (2013: £6.5m), for which there was an equivalent expense and interest income of £2.2m (2013: £1.4m).
In the year ended 30th November 2014 both development revenue and cost of sales include £6.7m (2013: £20.8m) in relation to
amounts settled by the Ministry of Defence in respect of RAF Northolt under Project MoDEL.
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
2014
£m
103.2
(83.0)
20.2
2013
£m
41.9
(27.3)
14.6
Amounts recoverable on contracts as disclosed in note 11 comprise £5.3m (2013: £10.2m) of contract revenue recognised and
£0.7m (2013: £0.8m) of retentions.
There were no amounts due to customers (2013: £nil) included in trade and other payables in respect of contracts in progress at
the Balance Sheet date.
122 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Financial Statements Profit before tax
Net rental income
Development profits
Gains on disposal of investments/
investment properties
Investment property revaluation gains
Negative goodwill attributed to
property assets(1)
Other net income
Administrative Expenses
Profits of joint ventures and associates(2)
Finance costs(3)
Finance income(4)
Attributable profit
Negative goodwill attributable to tax(1)
Other profits of joint ventures and
associates(2)
Other finance costs(3)
Other finance income(4)
Profit before tax
2014
Residential
development
£m
–
24.4
–
–
–
–
(5.0)
–
(2.4)
–
17.0
Portfolio
£m
31.2
23.3
9.2
75.8
2.6
3.6
(17.9)
12.1
(17.2)
2.2
124.9
2013
Residential
development
£m
–
8.8
–
–
–
–
(4.0)
–
(2.3)
–
2.5
Portfolio
£m
29.0
15.9
3.6
32.6
–
2.9
(15.9)
21.4
(18.1)
1.4
72.8
Total
£m
31.2
47.7
9.2
75.8
2.6
3.6
(22.9)
12.1
(19.6)
2.2
141.9
(0.5)
1.5
(8.3)
3.1
137.7
Total
£m
29.0
24.7
3.6
32.6
–
2.9
(19.9)
21.4
(20.4)
1.4
75.3
–
0.4
(3.2)
8.0
80.5
(1) Negative goodwill has been split between amounts relating to property revaluations arising as a result of fair value adjustments of £2.6m (2013: £nil) and deferred tax thereon of £0.5m
(2013: £nil).
(2) Stated before mark-to-market of derivatives, amortisation of loan arrangement fees, other non-cash items and tax of £1.5m (2013: £0.4m). These amounts are reclassified to other profits of
joint ventures and associates.
(3) Stated before mark-to-market of derivatives, amortisation of loan arrangement fees and other non-cash items of £8.3m (2013: £3.2m). These amounts are reclassified to other finance costs.
(4) Stated before mark-to-market of derivatives and other non-cash items of £3.1m (2013: £8.0m). These items are reclassified to other finance income.
Cost of sales in respect of rental income comprise direct operating expenses (including repairs and maintenance) related to the
investment property portfolio and total £8.0m (2013: £8.1m), of which £0.3m (2013: £0.1m) is in respect of properties that did not
generate any rental income.
Net assets
Investment property
Inventories
Investments in joint ventures
and associates
Attributable assets
Operating property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Borrowings
Tax payables
Deferred tax
Net assets
2014
Residential
development
£m
–
111.0
Portfolio
£m
903.3
90.0
Total
£m
903.3
201.0
88.9
–
88.9
1,082.2
111.0
1,193.2
2013
Residential
development
£m
–
122.0
Total
£m
813.3
205.9
–
95.3
122.0
1,114.5
Portfolio
£m
813.3
83.9
95.3
992.5
7.0
96.6
6.5
(200.9)
(340.6)
(9.3)
(16.0)
736.5
6.6
77.3
7.4
(216.4)
(348.1)
(3.4)
(10.9)
627.0
St. Modwen Properties PLC Annual Report and Financial Statements 2014 123
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 NOTES TO THE GROUP
FINANCIAL STATEMENTS continued
for the year ended 30th November 2014
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:
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
2014
Joint
ventures and
associates
£m
5.9
–
0.7
–
(0.3)
(6.1)
–
0.2
11.9
(0.1)
1.5
13.5
0.1
13.6
Group
£m
31.2
47.8
9.2
3.6
(22.9)
(19.6)
2.2
51.5
78.3
(8.3)
3.1
124.6
(16.1)
108.5
Total
£m
37.1
47.8
9.9
3.6
(23.2)
(25.7)
2.2
51.7
90.2
(8.4)
4.6
138.1
(16.0)
122.1
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
Notes
(1)
(2)
(3)
(1)
(2)
(3)
(4)
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
(1) Stated before the deduction of net realisable value provisions of: Group £0.1m (2013: £1.7m); joint ventures and associates £nil (2013: £nil). These items are reclassified to investment
property revaluations, together with negative goodwill arising on acquisitions as a result of fair value adjustments to property assets of £2.6m (2013: £nil).
(2) Stated before mark-to-market of derivatives, amortisation loan arrangement fees and other non-cash items of: Group £8.3m (2013: £3.2m); joint ventures and associates £0.1m (2013: £nil).
These amounts are reclassified to other finance costs.
(3) Stated before mark-to-market of derivatives and other non-cash items of: Group £3.1m (2013: £8.0m); joint ventures and associates £1.5m (2013: £2.1m). These items are reclassified to
other finance income.
(4) Stated after inclusion of negative goodwill arising as a result of deferred tax on property revaluations included as part of fair value adjustments of: Group £0.5m (2013: £nil); joint ventures and
associates £nil (2013: £nil).
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
Negative goodwill attributable to
property assets
Net realisable value provisions
Property valuation gains
Added value
Market movements
Property valuation gains
2014
Joint
ventures and
associates
£m
11.9
–
–
11.9
0.5
11.4
11.9
Group
£m
75.8
2.6
(0.1)
78.3
31.3
47.0
78.3
Total
£m
87.7
2.6
(0.1)
90.2
31.8
58.4
90.2
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
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.
124 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Financial Statements 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 (1)
Property portfolio
2014
Joint
ventures and
associates
£m
148.0
(1.2)
1.1
5.4
–
Group
£m
903.3
(3.9)
5.5
201.0
(0.7)
Total
£m
1,051.3
(5.1)
6.6
206.4
(0.7)
Group
£m
813.3
(3.9)
5.6
205.9
(20.4)
2013
Joint
ventures and
associates
£m
137.6
(1.2)
1.3
3.6
–
Total
£m
950.9
(5.1)
6.9
209.5
(20.4)
1,105.2
153.3
1,258.5
1,000.5
141.3
1,141.8
(1) 2014: Represents deductions for non-property assets within inventory. Through to 2013 this included ‘barter’ properties, including RAF Northolt as part of the Project MoDEL arrangements
between VSM Estates Ltd and the Ministry of Defence.
As at 30th November 2014 the Group had assets of £461.7m (2013: £228.6m) 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
Decrease/(increase) in equivalent net debt
Receipt of funds from equity placing
Decrease in net debt
2014
£m
230.3
61.0
248.1
539.4
573.2
145.9
2013
£m
201.0
59.4
253.2
513.6
481.8
146.4
1,258.5
1,141.8
2014
£m
(0.9)
(124.5)
132.0
–
6.6
–
6.6
2013
£m
(1.5)
(51.0)
77.8
(47.9)
(22.6)
47.9
25.3
St. Modwen Properties PLC Annual Report and Financial Statements 2014 125
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 NOTES TO THE GROUP
FINANCIAL STATEMENTS continued
for the year ended 30th November 2014
2. NON-STATUTORY INFORMATION continued
e. Trading cash flow
Trading cash flows are derived from the Group Cash Flow Statement as set out below:
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
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
Receipt of funds from equity placing
Net borrowings
Net dividends
Movement in cash and cash equivalents
2014
Operating
activities
£m
Investing
activities
£m
Financing
activities
£m
34.8
241.4
(5.6)
(181.0)
(7.4)
(25.9)
(5.1)
51.2
–
–
51.2
Operating
activities
£m
31.9
118.1
(14.8)
(87.0)
0.6
(19.5)
(4.1)
25.2
–
–
–
25.2
–
59.2
(37.6)
(51.7)
–
–
–
(30.1)
–
20.0
(10.1)
2013
Investing
activities
£m
–
54.0
(8.7)
(66.2)
–
–
–
(20.9)
–
–
1.7
(19.2)
–
–
–
–
–
(25.4)
–
(25.4)
(7.5)
(9.1)
(42.0)
Financing
activities
£m
–
–
–
–
–
(20.3)
–
(20.3)
47.9
(26.8)
(8.3)
(7.5)
Total
£m
34.8
300.6
(43.2)
(232.7)
(7.4)
(51.3)
(5.1)
(4.3)
(7.5)
10.9
(0.9)
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)
126 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Financial Statements f. Group Balance Sheet
VSM Estates (Holdings) Ltd 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
834.1
101.9
201.0
3.2
37.5
1,177.7
(130.2)
(340.6)
(23.4)
(494.2)
683.5
678.1
5.4
683.5
2014
VSM
£m
69.2
8.5
–
3.3
44.6
125.6
(51.5)
–
(21.1)
(72.6)
53.0
39.7
13.3
53.0
Total
£m
903.3
110.4
201.0
6.5
82.1
Group
£m
744.6
108.9
199.7
3.2
34.7
1,303.3
1,091.1
(181.7)
(340.6)
(44.5)
(566.8)
736.5
717.8
18.7
736.5
(142.0)
(338.1)
(19.3)
(499.4)
591.7
587.7
4.0
591.7
g. Net assets per share
Net assets per share are calculated as set out below:
Total equity
Less: Non-controlling interest
Equity attributable to owners of the Company
Fair value of inventories
Diluted EPRA triple net assets
Deferred tax on capital allowances and revaluations
Mark-to-market of derivative financial instruments
Diluted EPRA net assets
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
2014
£m
736.5
(18.7)
717.8
11.5
729.3
23.5
7.5
760.3
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
2013
£m
627.0
(12.8)
614.2
8.5
622.7
20.5
12.7
655.9
Shares in issue(1) (number)
220,916,561 220,304,406
Total equity attributable to owners of the Company net assets per share (pence)
Percentage increase
Diluted EPRA triple net assets per share (pence)
Percentage increase
Diluted EPRA net assets per share (pence)
Percentage increase
(1) Shares in issue exclude 460,427 shares held by The St. Modwen Properties PLC Employee Share Trust (2013: 72,582 shares)
324.9
17%
330.1
17%
344.2
16%
278.8
11%
282.6
12%
297.7
10%
St. Modwen Properties PLC Annual Report and Financial Statements 2014 127
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 NOTES TO THE GROUP
FINANCIAL STATEMENTS continued
for the year ended 30th November 2014
2. NON-STATUTORY INFORMATION continued
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 (LTV), being the ratio of net debt to the property portfolio (representing amounts that could be used as security for
that debt.
Property portfolio (note 2c)
Total equity
Net debt
Gearing
LTV
2014
Joint
ventures and
associates
£m
153.3
N/A
45.3
Group
£m
1,105.2
736.5
334.1
45%
30%
Total
£m
Group
£m
1,258.5
1,000.5
736.5
379.4
52%
30%
627.0
340.7
54%
34%
2013
Joint
ventures and
associates
£m
141.3
N/A
33.0
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:
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(1)
Tax advisory services(1)
Property consulting(2)
Total non-audit fees
Total fees
Audit and
audit-related
services
£000
2014
Other
services
£000
123
157
280
55
20
–
–
–
75
355
–
–
–
–
–
67
80
202
349
349
Audit and
audit-related
services
£000
120
150
270
55
–
–
–
–
55
325
Total
£000
123
157
280
55
20
67
80
202
424
704
2014
£m
0.5
1.0
2013
Other
services
£000
–
–
–
–
–
166
174
30
370
370
Total
£m
1,141.8
627.0
373.7
60%
33%
2013
£m
0.5
0.7
Total
£000
120
150
270
55
–
166
174
30
425
695
The Group continues to monitor the provision of non-audit services provided by the auditor and fees charged for other services
in 2014 were less than 100% of audit and audit-related fees. The Group’s policy permits the auditor to provide non-audit services
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. Of particular note with respect to non-audit services provided by Deloitte in the year are:
(1) Following a formal tender process, which did not include Deloitte, PricewaterhouseCoopers LLP (PwC) was engaged in June
2014 to provide tax compliance services to the Group. As a result the level of tax compliance and advisory services provided by
Deloitte has reduced in the year.
128 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Financial Statements (2) Deloitte Real Estate (previously Drivers Jonas) provided property consulting services to the Group in the year. All property
consulting services provided were in respect of long-term projects at Burnley and Leegate (where 50% of the planning costs
will be borne by the tenant). In both cases the involvement of Drivers Jonas pre-dated the firm’s acquisition by Deloitte and it
was not in the Group’s commercial interests to change provider. Advice in respect of Burnley is now substantially complete but
some follow up work may be required in respect of Leegate. No further work has been, or is currently planned to be, placed with
Deloitte Real Estate.
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 and administration
Leisure and other activities
Total employees
The total payroll costs of these employees were:
Wages and salaries
Social security costs
Pension costs
Total payroll costs
2014
Number
2013
Number
220
67
287
2014
£m
13.9
2.7
0.8
17.4
192
63
255
2013
£m
12.8
1.9
0.8
15.5
Details of the directors’ remuneration is given in the Directors’ Remuneration Report.
d. Share-based payments
The Group has a SAYE share option scheme open to all employees. Employees must ordinarily remain in service for a period of
three or 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 granted under this plan with
nil exercise price.
Outstanding at start of year
Granted
Forfeited
Lapsed
Exercised
Outstanding at end of year
Exercisable at year end
2014
Weighted average price
2013
Weighted average price
Number
of options
All options
£
Excluding nil
exercise price
£
Number of
options
All options
£
Excluding nil
exercise price
£
10,371,497
1,386,436
(47,108)
–
(2,593,388)
9,117,437
2,946,495
1.58
2.75
(2.26)
–
1.16
1.87
2.00
2.06
10,930,665
3.64
1,758,696
(2.26)
(528,823)
–
(266,239)
1.92
2.31
2.00
(1,522,802)
10,371,497
3,324,326
1.49
2.09
(1.92)
(0.20)
1.65
1.58
1.90
1.90
2.97
(1.92)
(4.10)
1.86
2.06
2.06
St. Modwen Properties PLC Annual Report and Financial Statements 2014 129
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 NOTES TO THE GROUP
FINANCIAL STATEMENTS continued
for the year ended 30th November 2014
3. OTHER INCOME STATEMENT DISCLOSURES continued
d. Share-based payments continued
Share options are priced using a Black-Scholes valuation model. The fair values calculated and the assumptions used are
as follows:
30th November 2014
30th November 2013
Charge
to Income
Statement
£m
Risk-free
interest rate
%
Expected
volatility
%
Dividend
yield
%
Share
price
£(1)
2.4
1.9
0.4–1.1
37.6–56.9
0.4–1.1
37.6–56.9
1.1
1.1
1.23–3.99
1.23–3.20
(1) 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 £4.8m (2013: £2.1m) and
included £0.8m (2013: £0.7m) 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 £3.82 (2013: £3.00). The executive share options outstanding at the
year end had a range of exercise prices between £1.75 and £3.75 (2013: £1.69 and £3.75) with PSP options exercisable at between
£nil and £1.52 (2013: £nil and £1.52). Outstanding options had a weighted average maximum remaining contractual life of nine
years (2013: nine years).
4. FINANCE COST AND FINANCE INCOME
Interest payable on borrowings
Amortisation of loan arrangement fees
Convertible bond issue costs
Amortisation of discount on deferred payment arrangements
Head rents treated as finance leases
Interest on pension scheme liabilities (note 18)
Total finance cost
2014
£m
(19.4)
(2.6)
(2.4)
(2.1)
(0.2)
(1.2)
2013
£m
(20.2)
(1.2)
–
(0.9)
(0.2)
(1.1)
(27.9)
(23.6)
All finance costs derive from financial liabilities measured at amortised cost. Included within amortisation of loan arrangement fees
is £1.4m (2013: £nil) in relation to the early termination and renewal of bank facilities.
Interest receivable
Credit in respect of discount on deferred receivables
Movement in fair value of derivative financial instruments
Expected return on pension scheme assets (note 18)
Total finance income
2014
£m
2.2
—
1.9
1.2
5.3
2013
£m
1.4
0.1
6.7
1.2
9.4
The finance income on interest rate derivatives derives from financial liabilities held at fair value through profit or loss.
130 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Financial Statements 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
Temporary differences
Impact of current year revaluations and indexation
Net use/(recognition) 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
b. Reconciliation of effective tax rate
Profit before tax
Less: joint ventures and associates
Pre-tax profit attributable to the Group
Corporation tax at 21.7% (2013: 23.3%)
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 not recognised
Current year charge
Adjustments in respect of previous years
Tax charge for the year
Effective rate of tax
2014
£m
12.3
(1.3)
11.0
1.0
6.0
1.3
–
(3.7)
4.6
15.6
–
–
2014
£m
137.7
(13.6)
124.1
26.9
0.2
0.6
(6.3)
(0.8)
—
—
20.6
(5.0)
15.6
13%
2013
£m
4.3
(0.1)
4.2
2.7
3.0
(1.2)
(1.0)
(1.1)
2.4
6.6
–
–
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%
The post-tax results of joint ventures and associates are stated after a tax credit of £0.2m (2013: £1.7m charge). The effective tax
rate for the Group including joint ventures and associates is a charge of 11.5% (2013: 10.1%).
The Finance Act 2013 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 21.7% and deferred tax at 20%.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 131
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 NOTES TO THE GROUP
FINANCIAL STATEMENTS continued
for the year ended 30th November 2014
5. TAXATION continued
c. Balance Sheet
Balance at start of the year
Charge to the Income Statement
Acquired with subsidiary
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
Total deferred tax
Asset
£m
–
–
–
–
(2.7)
(2.7)
2014
Liability
£m
14.3
3.9
0.5
–
–
18.7
2014
2013
Corporation
tax
£m
Deferred
tax
£m
Corporation
tax
£m
Deferred
tax
£m
3.4
11.0
–
(5.1)
9.3
Net
£m
14.3
3.9
0.5
–
(2.7)
16.0
10.9
4.6
0.5
–
16.0
Asset
£m
–
–
–
(1.6)
(3.5)
(5.1)
3.3
4.2
–
(4.1)
3.4
2013
Liability
£m
11.8
3.5
0.7
–
–
16.0
8.5
2.4
–
–
10.9
Net
£m
11.8
3.5
0.7
(1.6)
(3.5)
10.9
At the Balance Sheet date, the Group has unused tax losses in relation to 2014 and prior years of £1.3m (2013: £3.2m), of which
£nil (2013: £1.6m) has been recognised as a deferred tax asset. A deferred tax asset of £1.3m (2013: £1.6m) has not been
recognised in respect of current and prior year tax losses as it is not considered sufficiently certain that there will be appropriate
taxable profits available in the short-term against which these can be utilised.
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 and its treatment is often an integral part of transactions. The outcome of tax treatments are recognised by
the Group to the extent the outcome is reasonably certain. Where tax treatments have 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.
132 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Financial Statements 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
2014
Number of
shares
2013
Number of
shares
220,617,339 215,236,438
4,602,679
4,074,926
225,220,018
219,311,364
2014
£m
116.2
2014
pence
52.7
51.6
2013
£m
72.1
2013
pence
33.5
32.9
Shares held by The St. Modwen Properties PLC Employee Share Trust are excluded from the above calculations.
As the Group is principally a development business EPRA earnings per share are not provided. These calculations exclude all
revaluation gains, including value added by management actions, and development profits. These are the key activities of the
Group and excluding such gains and profits would not provide a meaningful measure of the performance of the business.
7. DIVIDENDS
Dividends paid during the year were in respect of the final dividend for 2013 and interim dividend for 2014. 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
2014
2013
p per share
£m
p per share
2.67
1.46
4.13
5.9
3.2
9.1
3.14
6.9
2.42
1.33
3.75
2.67
£m
5.3
2.9
8.2
5.9
The St. Modwen Properties PLC Employee Share Trust waives its entitlement to dividends with the exception of 1/100p per share.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 133
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 NOTES TO THE GROUP
FINANCIAL STATEMENTS continued
for the year ended 30th November 2014
8. INVESTMENT PROPERTY
Fair value
At 30th November 2012
Additions – new properties
Other additions
Net transfers to inventories (note 12)
Reclassification from operating properties (note 9)
Disposals
Gain on revaluation
At 30th November 2013
Additions – new properties(1)
Other additions
Net transfers to inventories (note 12)
Disposals
Gain on revaluation
At 30th November 2014
Freehold
investment
properties
£m
Leasehold
investment
properties
£m
Total
£m
575.7
194.7
770.4
9.4
54.9
(10.7)
0.1
(35.0)
21.1
615.5
28.3
47.2
(6.8)
(31.6)
48.6
–
6.3
0.6
–
(15.3)
11.5
197.8
–
4.8
–
(27.7)
27.2
9.4
61.2
(10.1)
0.1
(50.3)
32.6
813.3
28.3
52.0
(6.8)
(59.3)
75.8
701.2
202.1
903.3
(1) Additions – new properties include £8.5m (2013: £nil) acquired through business combinations.
Investment properties were valued at 30th November 2014 by DTZ Debenham Tie Leung Ltd, Chartered Surveyors (2013: Jones
Lang LaSalle LLP), in accordance with the Appraisal and Valuation Manual of the Royal Institution of Chartered Surveyors, on the
basis of market value. Both DTZ Debenham Tie Leung Ltd and Jones Lang LaSalle LLP are professionally qualified independent
external valuers and had appropriate recent experience in the relevant location and category of the properties being valued.
The historical cost of investment properties at 30th November 2014 was £723.9m (2013: £699.3m).
As at 30th November 2014, £450.0m (2013: £633.2m) of investment property was pledged as security for the Group’s loan facilities.
Included within leasehold investment properties are £3.9m (2013: £3.9m) of assets held under finance leases.
IFRS13 disclosures in respect of investment property are provided in note 16.
134 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Financial Statements 9. OPERATING PROPERTY, PLANT AND EQUIPMENT
Cost
At 30th November 2012
Additions
Reclassified to investment property (note 8)
At 30th November 2013
Additions
Disposals
At 30th November 2014
Depreciation
At 30th November 2012
Charge for the year
At 30th November 2013
Charge for the year
Disposals
At 30th November 2014
Net book value
At 30th November 2012
At 30th November 2013
At 30th November 2014
Tenure of operating properties:
Freehold
Leasehold
Operating
properties
£m
Operating
plant and
equipment
£m
7.0
–
(0.1)
6.9
0.1
–
7.0
0.8
0.1
0.9
0.1
–
1.0
6.2
6.0
6.0
5.0
0.4
–
5.4
0.9
(0.4)
5.9
4.4
0.4
4.8
0.4
(0.3)
4.9
0.6
0.6
1.0
2014
£m
3.4
2.6
6.0
Total
£m
12.0
0.4
(0.1)
12.3
1.0
(0.4)
12.9
5.2
0.5
5.7
0.5
(0.3)
5.9
6.8
6.6
7.0
2013
£m
3.4
2.6
6.0
St. Modwen Properties PLC Annual Report and Financial Statements 2014 135
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 NOTES TO THE GROUP
FINANCIAL STATEMENTS continued
for the year ended 30th November 2014
10. JOINT VENTURES AND ASSOCIATES
The Group’s share of the results for the year of its joint ventures and associates is:
2014
VSM
Estates
Uxbridge
(Group)
Ltd
£m
Other
joint
ventures
and
associates
£m
Key
Property
Investments
Ltd
£m
9.4
5.7
–
0.7
11.1
(0.2)
17.3
(3.1)
0.7
14.9
(0.4)
14.5
–
–
–
–
0.4
–
0.4
(3.0)
0.8
(1.8)
0.6
(1.2)
1.1
0.2
–
–
0.4
(0.1)
0.5
(0.1)
–
0.4
(0.1)
0.3
Key
Property
Investments
Ltd
£m
13.8
7.1
0.2
Total
£m
10.5
5.9
–
0.7
9.3
11.9
(0.3)
18.2
(6.2)
1.5
13.5
0.1
13.6
6.2
(0.2)
22.6
(4.1)
1.9
20.4
(1.6)
18.8
Income Statements
Revenue
Net rental income
Development profits
Gains on disposal of investments/
investment properties
Investment property revaluation
gains/(losses)
Administrative expenses
Profit before interest and tax
Finance cost
Finance income
Profit/(loss) before tax
Taxation
Profit/(loss) for the year
2013
VSM
Estates
Uxbridge
(Group)
Ltd
£m
Other
joint
ventures
and
associates
£m
Total
£m
15.2
7.3
0.5
1.4
0.3
0.3
–
9.3
(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
–
(0.1)
–
–
5.1
(0.1)
4.9
(2.3)
0.2
2.8
(0.1)
2.7
Included in other joint ventures and associates above are results from associated companies of £nil (2013: £nil).
The Group’s share of the Balance Sheet of its joint ventures and associates is:
2014
VSM
Estates
Uxbridge
(Group)
Ltd
£m
Other
joint
ventures
and
associates
£m
Key
Property
Investments
Ltd
£m
95.6
55.4
6.3
(7.2)
(33.4)
61.3
66.8
14.5
(20.0)
61.3
5.8
(21.5)
(19.1)
20.6
21.8
(1.2)
–
20.6
6.5
6.0
(4.1)
(1.4)
7.0
6.7
0.3
–
7.0
2013
VSM
Estates
Uxbridge
(Group)
Ltd
£m
Other
joint
ventures
and
associates
£m
Key
Property
Investments
Ltd
£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
Total
£m
157.5
18.1
(32.8)
(53.9)
88.9
95.3
13.6
(20.0)
88.9
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
Profit/(loss) for the year
Dividends paid
Equity at end of year
Included in other joint ventures and associates above are net assets of £nil (2013: £nil) in relation VSM (NCGM) Ltd. These net
assets comprise total current assets (inventory) of £2.6m (2013: £1.1m) offset by total liabilities (amounts due to shareholders) of
£2.6m (2013: £1.1m). The results and net assets of VSM (NCGM) Ltd are expected to be disclosed separately in future years.
Also included in other joint ventures and associates above are net assets of £2.9m (2013: £2.8m) in relation to associated
companies. These net assets comprise total assets of £3.5m (2013: £3.6m) and total liabilities of £0.6m (2013: £0.8m).
136 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Financial Statements Joint venture companies and associates comprise:
Name
Key Property Investments Ltd
VSM Estates Uxbridge (Group) Ltd
VSM (NCGM) Ltd
Barton Business Park Ltd
Killingholme Energy Ltd
Killingholme Land Ltd
Meaford Energy Ltd
Meaford Land Ltd
Skypark Development Partnership LLP
Wrexham Land Ltd
Wrexham Power Ltd
Coed Darcy Ltd
Baglan Bay Company Ltd
Status
Interest
Principal nature of business
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 in this
note. 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
Derivative financial instruments
IFRS7 and IFRS13 disclosures in respect of financial assets included above are provided in note 16.
2014
£m
2013
£m
8.5
6.0
14.5
4.7
5.5
39.0
6.0
25.0
1.9
82.1
11.6
6.0
17.6
2.2
4.9
29.3
11.0
12.3
–
59.7
St. Modwen Properties PLC Annual Report and Financial Statements 2014 137
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 NOTES TO THE GROUP
FINANCIAL STATEMENTS continued
for the year ended 30th November 2014
12. INVENTORIES
Properties held for sale
Properties under construction
Land under option
The movement in inventories during the two years ended 30th November 2014 is as follows:
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
Additions
Net transfers from investment property (note 8)
Disposals (transferred to development cost of sales) (note 1)
At 30th November 2014
2014
£m
5.8
176.7
18.5
201.0
2013
£m
9.7
177.3
18.9
205.9
£m
175.2
114.0
10.1
(93.4)
205.9
177.1
6.8
(188.8)
201.0
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 £0.1m (2013: £1.7m).
As at 30th November 2014 £16.8m (2013: £43.3m) 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)
2014
£m
24.4
29.0
89.5
20.8
8.7
172.4
24.6
3.9
28.5
2013
£m
21.1
25.0
92.8
18.5
12.8
170.2
42.3
3.9
46.2
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.
IFRS7 and IFRS13 disclosures in respect of financial liabilities included above are provided in note 16.
138 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Financial Statements 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
2014
£m
–
–
–
50.0
253.1
37.5
340.6
340.6
2013
£m
–
62.5
62.5
64.0
138.0
83.6
285.6
348.1
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) together with £80m of retail bonds and £100m of convertible bonds. 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
Four to five years
More than five years
Unsecured fixed rate borrowings
Four to five years
More than five years
Drawn
£m
–
50.0
–
64.0
9.1
37.5
160.6
180.0
–
340.6
2014
Undrawn
£m
–
25.0
–
35.0
115.9
12.5
188.4
–
–
188.4
Total
£m
Drawn
£m
–
75.0
–
99.0
125.0
50.0
349.0
180.0
–
529.0
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
105.0
94.0
195.0
–
–
4.6
398.6
–
80.0
478.6
(1) In addition to the principal amounts included above, £1.4m (2013: £0.8m) of interest payable was committed at the year end. These amounts all fall due within three months of the year end.
In January 2015 the £75m debt facility maturing in one to two years was increased to £100m and extended for a further five-year
term to January 2020. There were no substantial changes to the terms of the loan.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 139
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 NOTES TO THE GROUP
FINANCIAL STATEMENTS continued
for the year ended 30th November 2014
14. BORROWINGS continued
Interest rate profile
The interest rate profile of the Group’s borrowings after taking into account the effects of hedging is:
Floating rate bank debt
Fixed rate bank debt
Retail bonds – maturity 2019
Convertible bonds – maturity 2019
At 30th November
2014
2013
Applicable interest rate
Margin + 3 month LIBOR
Margin + 2.93% weighted
average swap rate
6.25% fixed rate
2.875% fixed rate – swapped
to 1.43% + 6 month LIBOR
until 6th March 2017
£m
30.6
130.0
80.0
100.0
340.6
£m
68.1
200.0
80.0
–
348.1
Applicable interest rate
Margin + 3 month LIBOR
Margin + 3.34% weighted
average swap rate
6.25% fixed rate
–
The average margin on the Group’s bank debt is 1.9% (2013: 2.0%).
Derivative financial instruments
The Group’s derivative financial instruments, which are classified as fair value through profit or loss, consist of:
a) Sterling denominated interest swaps from floating rate to fixed rate applicable as at 30th November 2014
These swaps hedge the Group’s floating rate bank debt as at 30th November 2014. The fixed rates for these swaps range from
2.01% to 5.16% (2013: 2.01% to 5.16%) and details of their maturity profile are given below. Certain of the interest rate swaps
are extendable at the bank’s option; the tables below therefore show the dates of normal termination and extended termination.
The weighted average maturity of the interest rate swaps below to the earliest termination date is 2.5 years (2013: 2.4 years).
2014
2013
Earliest termination
Latest termination
Earliest termination
Latest termination
£m
10.0
40.0
20.0
10.0
50.0
130.0
%(1)
3.81%
2.54%
2.01%
5.16%
3.00%
2.93%
£m
20.0
40.0
20.0
–
%(1)
4.48%
2.54%
2.01%
–
50.0
3.00%
£m
20.0
70.0
60.0
20.0
30.0
130.0
2.93%
200.0
%(1)
3.83%
3.28%
2.99%
2.01%
4.72%
3.34%
£m
10.0
70.0
60.0
20.0
40.0
200.0
%(1)
2.79%
3.28%
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
(1) Weighted average interest rate.
b) Forward starting sterling denominated interest swaps from floating rate to fixed rate
These swaps provide continuity of hedging beyond the term of the interest rate swaps applicable as at 30th November 2014 and
increase interest rate certainty through to bank facility renewal dates. The fixed rates for these swaps range from 2.72% to 2.97%
(2013: N/A) and details of their maturity profile are given below. These hedges when taken together with existing hedges with an
earliest termination date beyond 30th November 2017 comprise £110m of hedging at a weighted average interest rate of 2.95%
extending to a weighted average life of 4.7 years (2013: £50m at 3.58% for 4.1 years).
Period from 2016–2021
Period from 2017–2019
(1) Weighted average interest rate.
2014
2013
%(1)
£m
%(1)
2.90%
2.90%
2.90%
–
–
–
–
–
–
£m
20.0
40.0
60.0
140 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Financial Statements c) Convertible bonds
On 6th March 2014 St. Modwen Properties Securities (Jersey) Ltd (the Issuer) issued £100.0m 2.875% Guaranteed Convertible
Bonds due 2019 (the Convertible Bonds) at par. The Company has unconditionally and irrevocably guaranteed the due and
punctual performance by the Issuer of all its obligations (including payments) in respect of the Convertible Bonds and the
obligations of the Company, as guarantor, constitute direct, unsubordinated and unsecured obligations of the Company.
Subject to certain conditions, the Convertible Bonds are convertible into preference shares of the Issuer which are automatically
transferred to the Company in exchange for ordinary shares in the Company or (at the Company’s election) any combination of
ordinary shares and cash. The Convertible Bonds can be converted at any time from 16th April 2014 up to the 7th dealing day before
the maturity date.
The initial exchange price was £5.29 per ordinary share, a conversion rate of approximately 18,889 ordinary shares for every
£100,000 nominal value of the Convertible Bonds. Under the terms of the Convertible Bonds, the exchange price is adjusted
on the happening of certain events, including the payment of dividends by the Company in excess of a yield of 1.00% of the
average share price in the 90 days preceding the ex-dividend date. No changes to the exchange price have been made up to
30th November 2014.
The Convertible Bonds may be redeemed at par at the Company’s option subject to the Company’s ordinary share price having
traded at 30% above the conversion price for a specified period, or at any time once 85% of the Convertible Bonds have been
traded or cancelled. If not previously converted, redeemed or purchased and cancelled, the Convertible Bonds will be redeemed
at par on 6th March 2019.
A total of £100.0m nominal value of the Convertible Bonds were issued and remained outstanding at 30th November 2014.
The Convertible Bonds are designated as at fair value through profit or loss and so are presented on the Balance Sheet at fair value
with all gains and losses taken to the Income Statement through the movement in fair value of derivative financial instruments line.
At 30th November 2014 the fair value of the Convertible Bonds was £99.1m with the change in fair value charged to the Income
Statement. The Convertible Bonds are listed on the Official List of the Channel Islands Security Exchange.
Following the issue of the Convertible Bonds the Group was in an over-hedged position with an excess of debt at fixed rate.
In order to reduce the level of fixed rate borrowings an interest rate derivative was entered into to swap the interest rate in the
Convertible Bonds from a fixed rate of 2.875% to a floating rate of 6 month LIBOR plus 1.43% through to its third anniversary in
March 2017.
The change in fair value of all of the above instruments is charged/credited to the Income Statement is disclosed in note 4.
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
2014
£m
0.8
3.2
0.2
4.2
2013
£m
1.0
2.7
0.3
4.0
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
2014
£m
31.5
85.3
172.3
289.1
2013
£m
30.2
86.8
184.2
301.2
Contingent rents, calculated as a percentage of turnover for a limited number of tenants, of £0.8m (2013: £0.4m) were recognised
during the year.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 141
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 NOTES TO THE GROUP
FINANCIAL STATEMENTS continued
for the year ended 30th November 2014
15. LEASING continued
Obligations under finance leases
Finance lease liabilities payable in respect of certain leasehold investment properties are as follows:
Less than one year
Between one and five years
In five years or more
Minimum
lease
payments
£m
0.2
1.0
66.0
67.2
2014
Interest
£m
Principal
£m
0.2
1.0
62.1
63.3
–
–
3.9
3.9
Minimum
lease
payments
£m
0.2
1.0
65.9
67.1
2013
Interest
£m
0.2
1.0
62.0
63.2
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% (2013: 6.0%) has been used to derive
the fair value of the principal amount outstanding. All lease obligations are denominated in sterling.
16. FINANCIAL INSTRUMENTS
Categories and classes of financial assets and liabilities
Financial assets
Loans and receivables:
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments held at fair value through profit or loss
Financial liabilities
Derivative financial instruments held at fair value through profit or loss
Amortised cost:
Bank loans and overdrafts
Retail bonds
Convertible bonds
Trade and other payables
Other payables on deferred terms
Finance lease liabilities (head rents)
Notes
(1)
(1)
(2)
Notes
(2)
(1)
(1)
(1)
(1)
(1)
(1)
2014
£m
6.5
73.7
1.9
82.1
2014
£m
8.7
160.6
80.0
100.0
103.5
45.4
3.9
502.1
2013
£m
7.4
52.4
–
59.8
2013
£m
12.8
268.1
80.0
–
87.2
60.8
3.9
512.8
(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 £9.5m (2013: £9.0m) 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 £39.4m (2013: £51.7m) of non-
financial liabilities.
142 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Financial Statements 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).
The following table provides an analysis of the categorisation of the Group’s financial assets and liabilities measured subsequent
to initial recognition at fair value:
Investment property
– Income producing properties
– Residential land
– Commercial land
Assets held under finance leases
Lease incentives (recorded in receivables)
Level 3
Level 3
Level 3
N/A
N/A
2014
£000
428.4
368.5
106.5
3.9
(4.0)
2013
£000
417.5
281.7
115.8
3.9
(5.6)
903.3
813.3
Investment properties were valued at 30th November 2014 by DTZ Debenham Tie Leung Ltd, Chartered Surveyors
(2013: Jones Lang LaSalle LLP), in accordance with the Appraisal and Valuation Manual of the Royal Institution of Chartered
Surveyors, on the basis of market value. Both DTZ Debenham Tie Leung Ltd and Jones Lang LaSalle LLP are professionally
qualified independent external valuers and had appropriate recent experience in the relevant location and category of the
properties being valued.
Income producing properties have been valued using the investment method which involves applying a yield to rental income
streams. Inputs include equivalent yields, current rent and ERV. The resulting valuations are cross checked against the resulting
initial yields and, for certain assets, the land value underpin if the assets were to be redeveloped. For the valuation as at
30th November 2014 equivalent yields ranged from 7.0% to 14.5% (2013: 7.1% to 19.0%).
Residential land is valued using the residual development method. To derive the value of land the valuers will estimate the gross
development value of completed residential units on a site from which deductions will be made for build costs (including costs
to remediate and service land), finance costs and an appropriate profit margin.
Derivative financial instruments held at fair value through profit or loss
Assets
Liabilities
Level 2
Level 2
2014
£000
1.9
(8.7)
(6.8)
2013
£000
–
(12.8)
(12.8)
Derivative financial instruments are externally valued based on the present value of future cash flows estimated and discounted
based on the applicable yield curves derived from market expectations for future interest rates at the Balance Sheet date.
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.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 143
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 NOTES TO THE GROUP
FINANCIAL STATEMENTS continued
for the year ended 30th November 2014
16. FINANCIAL INSTRUMENTS continued
Interest rate sensitivity: The following table details the Group’s sensitivity, after tax, to a 1% change in interest rates based on year
end levels of debt.
1% increase in interest rates
Interest on borrowings
Effect of interest rate swaps
1% decrease in interest rates
Interest on borrowings
Effect of interest rate swaps
2014
£m
(1.2)
1.0
(0.2)
2014
£m
1.2
(1.0)
0.2
2013
£m
(1.6)
1.6
–
2013
£m
1.6
(1.6)
–
Credit risk
Credit risk is the risk of financial loss where counterparties are not able to meet their obligations as they fall due.
The credit risk on the Group’s liquid funds and derivative financial instruments is limited because the counterparties are banks with
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 (2013: £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 £0.6m (2013: £0.5m) 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
2014
£m
0.5
0.6
(0.3)
(0.2)
0.6
2013
£m
0.4
0.6
(0.3)
(0.2)
0.5
Trade and other receivables include £1.4m (2013: £0.5m) which are past due as at 30th November 2014 for which no provision has
been made because the amounts are considered recoverable. The following table provides an ageing analysis of these balances.
Number of days past due but not impaired
1–30 days
31–60 days
60 days +
2014
£m
0.4
0.2
0.8
1.4
2013
£m
0.1
0.2
0.2
0.5
144 St. Modwen Properties PLC Annual Report and Financial Statements 2014
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 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:
2014
Trade and other payables
Other payables on deferred terms
2013
Trade and other payables
Other payables on deferred terms
Less than
one month
£m
1-3 months
£m
51.8
–
51.8
Less than
one month
£m
42.4
–
42.4
10.1
–
10.1
1-3 months
£m
8.6
–
8.6
3 months
to 1 year
£m
41.7
20.8
62.5
3 months
to 1 year
£m
35.9
18.6
54.5
1-5 years
£m
–
26.7
26.7
1-5 years
£m
–
46.3
46.3
More than
five years
£m
66.0
–
66.0
More than
five years
£m
65.9
–
65.9
Total
£m
169.6
47.5
217.1
Total
£m
152.8
64.9
217.7
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
220,376,988
1,000,000
221,376,988
£m
22.0
0.1
22.1
On 7th April 2014 the Group issued 1,000,000 ordinary shares of 10p each at par which were allotted to The St. Modwen Properties
PLC Employee Share Trust to satisfy the exercise of awards made under the Company’s share-based incentive arrangements.
On 1st March 2013 the Group completed a ‘cash box’ placing of 20,016,057 ordinary shares of 10p each at 245p 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
and 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 2014 145
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176
NOTES TO THE GROUP
FINANCIAL STATEMENTS continued
for the year ended 30th November 2014
18. PENSIONS
The Group operates a UK based pension scheme, the St. Modwen 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 Income Statement includes:
• a charge of £0.2m (2013: £0.2m) for the defined benefit section; and
• a charge of £0.6m (2013: £0.6m) for the defined contribution section.
The St. Modwen Pension Scheme is governed by the trustee company, St. Modwen Pensions Ltd. It is regulated by the UK
regulatory regime, overseen by the Pensions Regulator.
The last formal actuarial valuation of the scheme was at 5th April 2014, when the market value of the net assets of the scheme
was £38m, a funding level of 97% based on the trustee’s proposed assumptions for technical provisions. The main actuarial
assumptions were:
Investment rate of return:
Increase in pensions
pre-retirement
post-retirement
5.6% pa
3.8% pa
2.7% pa
As the scheme is almost fully funded, the current schedule of contributions requires the Group to fund the Scheme to such an
extent as to cover administrative expenses only. The expected contribution for year ended 30th November 2015 is expected to be
£0.2m, consistent with the current year (£0.2m).
The actuarial valuation of the defined benefit section, a final salary scheme, was updated to 30th November 2014 on an IAS
basis by a qualified independent actuary. The valuation was performed using the ‘Projected Unit Credit Method’ under IAS 19.
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
2014
2.1%
3.0%
3.1%
3.6%
2.1%
2013
2.6%
3.0%
3.4%
4.5%
2.6%
2012
2.0%
2.7%
2.7%
4.3%
2.0%
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 Hymans Robertson Scheme Specific VITA Tables with an underpin to future improvements
of 1% per annum. The cohort effect is assumed to have peaked and improvements remain flat at the oldest ages. The resultant
assumptions are, for example:
• Average future life expectancy (in years) for a pensioner aged 65 at 30th November 2014: 23.0 (male), 23.8 (female).
• Average future life expectancy (in years) at age 65 for a non-pensioner aged 40 at 30th November 2014: 23.9 (male), 26.1 (female).
146 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Financial Statements
The fair values of assets in the defined benefit section of the scheme were:
Equities
UK equity
Overseas equity
Debt Securities
UK corporate bonds
Overseas corporate bonds
UK Government bonds
UK index-linked gilts
Property
Commodities
Cash
Actuarial value of liabilities
Unrecognised surplus
Surplus in the scheme
Related deferred tax liability
Fair value of pension asset net of deferred tax
2014
£m
2013
£m
5.2
2.5
6.8
1.0
0.8
7.8
5.6
0.1
0.5
30.3
(28.6)
(1.7)
–
–
–
5.7
1.9
5.8
1.1
1.3
6.4
5.8
0.1
0.9
29.0
(28.5)
(0.5)
–
–
–
The cumulative amount of actuarial gains and losses (before unrecognised surplus of £1.7m) recorded in the Group Statement of
Comprehensive Income is a gain of £1.0m (2013: loss of £0.2m).
Analysis of the amount charged to operating profit
Current service cost and total operating charge
Analysis of net interest
Interest income on scheme assets
Interest on pension scheme liabilities
Total net interest
The actual return on pension scheme assets was a gain of £3.4m (2013: £2.0m).
Analysis of the amount recognised in the Group Statement of Comprehensive Income
The returns on scheme assets (excluding amounts included in net interest)
Experience gains and losses arising on fair value of scheme liabilities
Actuarial gains and losses arising from changes in demographic assumptions
Actuarial gains and losses arising from changes in financial assumptions
Change in unrecognised surplus
Remeasurement of the net defined benefit asset
2014
£m
(0.2)
2014
£m
1.2
(1.2)
–
2013
£m
(0.2)
2013
£m
1.2
(1.1)
0.1
2014
£m
2.2
0.9
0.5
(2.4)
(1.2)
–
2012
£m
(0.2)
2012
£m
1.3
(1.2)
0.1
2013
£m
1.0
(0.5)
–
(1.2)
0.6
(0.1)
St. Modwen Properties PLC Annual Report and Financial Statements 2014 147
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 NOTES TO THE GROUP
FINANCIAL STATEMENTS continued
for the year ended 30th November 2014
18. PENSIONS continued
Analysis of the movement in the present value of the scheme liabilities
Beginning of year
Movement in year:
Current service cost
Interest cost
Employee contributions
Experience gains and losses arising on fair value of scheme liabilities
Actuarial gains and losses arising from changes in demographic assumptions
Actuarial gains and losses arising from changes in financial assumptions
Benefits paid
End of year
Analysis of the movement in the fair value of the scheme assets
Beginning of year
Movement in year:
Interest income
Contributions by employer
Employee contributions
Return on assets excluding amounts included in net interest
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
Information about the defined benefit obligation
Active members
Deferred members
Pensioners
Total
148 St. Modwen Properties PLC Annual Report and Financial Statements 2014
2014
£m
2013
£m
2012
£m
2.2
7.3%
0.9
(3.1%)
0.8
2.8%
(0.2)
0.7%
1.1
3.9%
(0.5)
1.9%
Number
of members
–
159
403
562
Liability split
Duration (years)
–
35.5%
64.5%
100.0%
–
20.0
12.0
14.8
2014
£m
28.5
0.2
1.2
–
(0.9)
(0.5)
2.4
(2.3)
2013
£m
27.0
0.2
1.1
–
0.5
–
1.2
(1.5)
28.6
28.5
2014
£m
29.0
1.2
0.2
–
2.2
(2.3)
30.3
1.7
(1.7)
–
2011
£m
(0.4)
(1.5%)
(1.8)
7.3%
2013
£m
28.1
1.2
0.2
–
0.8
(1.3)
29.0
0.5
(0.5)
–
2010
£m
0.9
3.3%
(0.7)
2.8%
Financial Statements
Sensitivity analysis
The impact of changes in actuarial assumptions compared with those adopted for the year ended 30th November 2014 would be:
• A 0.5% decrease in the discount rate would increase the actuarial value of liabilities by £2.2m to £30.8m.
• A one-year increase in life expectancy would increase the actuarial value of liabilities by £0.9m to £29.5m.
Defined benefit scheme – risk factors
The Group is exposed to a number of risks related to its defined benefit scheme, the most significant of which are detailed below.
Asset volatility
Pension scheme liabilities are calculated using discount rates set with reference to bond yields. If the assets within the scheme
deliver a return which is lower than the discount rate this will create or increase a deficit within the scheme. This risk is reduced by
holding a significant proportion of the scheme assets in matching assets (bonds or similar). As the scheme matures, it is anticipated
that this proportion will increase to better match the assets and liabilities of the scheme.
Changes in bond yields
A decrease in bond yields will typically increase liabilities, although this will be partially offset by an appreciation in the value of
scheme assets held in bonds.
Inflation risk
As the pension obligations are linked to inflation, higher inflation expectations will lead to higher liabilities. The asset portfolio
includes a significant proportion of inflation linked bonds to reduce this risk.
Member longevity
The pension obligations provide benefits for the life of the members, therefore increases in life expectancy will result in an increase
in liabilities (and vice-versa).
19. ACQUISITION OF SUBSIDIARY UNDERTAKING
In 2010, the Group entered into an option to acquire the entire issued share capital of Branston Properties Ltd (Branston),
of which Simon Clarke is a shareholder, at market value. The price paid for the option was £0.1m with exercise contingent on the
achievement of certain planning milestones in relation to land held by Branston.
Following achievement of these planning milestones the option was exercised by the Group on 22nd May 2014 and 87.5% of the
issue share capital of Branston was acquired. A conditional agreement to acquire the remaining 12.5% of the issued share capital,
which is held by Simon Clarke, was also entered into on 22nd May 2014. Total consideration payable for the entire issued capital of
Branston was:
• £0.8m on completion;
• £0.1m payable on shareholder approval;
• £0.1m 12 months after completion; and
• Contingent consideration payable based on the level of future development gains achieved in respect of the land and property
held by Branston. Based on the provisional fair values detailed below, no contingent consideration has been recognised.
The consideration payable to Mr. Clarke under the conditional agreement equates to 12.5% of the amounts above. As the
consideration payable to Mr. Clarke is in excess of £100,000, the conditional agreement constitutes a substantial property
transaction with a director of the Company under sections 190 and 191 of the Companies Act 2006. As a result, the agreement is
conditional, among other things, on approval of shareholders of St. Modwen Properties PLC; this approval will be sought at the
Company’s Annual General Meeting to be held on 27th March 2015.
As required by IFRS3 (2008) Business Combinations, this acquisition has resulted in the assets and liabilities of Branston being
remeasured to fair value at the acquisition date. Fair values are reported as provisional for 12 months to allow the incorporation
of any subsequent amendments and the negative goodwill arising has been credited to the Income Statement.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 149
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 NOTES TO THE GROUP
FINANCIAL STATEMENTS continued
for the year ended 30th November 2014
19. ACQUISITION OF SUBSIDIARY UNDERTAKING continued
The recognised amounts of identifiable assets acquired and liabilities assumed are set out in the table below:
Net assets acquired:
– Investment property
– Trade and other payables
– Deferred tax
Total identifiable net assets
Negative goodwill
Total consideration
Satisfied by:
– Cash payable on acquisition
– Deferred proceeds payable on shareholder approval
– Deferred proceeds payable on 22nd May 2015
Total consideration
Book value
£m
Fair value
adjustments
£m
5.9
(4.9)
–
1.0
2.6
–
(0.5)
2.1
Total
£m
8.5
(4.9)
(0.5)
3.1
(2.1)
1.0
£m
0.8
0.1
0.1
1.0
If the acquisition had been completed on the first day of the financial year there would have been no incremental change to the
Group’s revenue or profit before tax.
20. CAPITAL COMMITMENTS
At 30th November 2014 the Group had contracted capital expenditure of £10.1m (2013: £12.6m). In addition the Group’s share
of the contracted capital expenditure of its joint venture undertakings was £0.8m (2013: £2.8m). All capital commitments relate
to investment properties.
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) Ltd (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 has provided a parent company guarantee in respect of 50% of all obligations under the £26m bank facility provided
to VSM Estates Uxbridge Ltd, a subsidiary of VSM Estates Uxbridge (Group) Ltd. This facility was repaid in full post-year end and
a new five-year £30m facility was entered into. Under the terms of the revised facility the Group has provided a parent company
guarantee of up to £15m in respect of all obligations under this facility.
The Group, together with VINCI PLC, has provided a joint and several guarantee in respect of the obligations of VSM (NCGM) Ltd
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 £80m bank facility
provided to Key Property Investments Ltd. 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 £40m as at 30th November 2014.
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 2014.
150 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Financial Statements Name of subsidiary
Festival Waters Ltd
Shaw Park Developments Ltd
St. Modwen Developments (Chorley) Ltd
St. Modwen Developments (Connah’s Quay) Ltd
St. Modwen Developments (Hull) Ltd
St. Modwen Developments (Longbridge) Ltd
St. Modwen Developments (Meon Vale) Ltd
St. Modwen Developments (Queens Market) Ltd
St. Modwen Developments (Quinton) Ltd
St. Modwen Developments (Wythenshawe) Ltd
St. Modwen Investments Ltd
Company Registration Number
04354481
04625000
05727011
05726352
05593517
02885028
05294589
05289380
01479159
05594279
00528657
22. RELATED PARTY TRANSACTIONS
All related party translations involving directors, and those involving a change in the level of the Group’s interest in non-wholly
owned subsidiaries, joint ventures and associates, are specifically reviewed and approved by the Board. Monitoring and
management of transactions between the Group and its non-wholly owned subsidiaries, joint ventures and associates is delegated
to the executive directors. All related party transactions are clearly justified and beneficial to the Group, are undertaken on an arm’s
length basis on fully commercial terms and in the normal course of business. Related party transactions are detailed as follows:
Key Property Investments Ltd (KPI)
During the year the Group provided management and construction services to KPI for which it received fees totalling £0.4m
(2013: £0.5m). The balance due to the Group at year end was £2.5m (2013: £1.8m). No interest is charged on this balance.
VSM Estates Uxbridge (Group) Ltd (VSM Uxbridge)
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 £21.8m (2013: £13.7m), of which £6.0m (2013: £6.0m) is loan notes. All amounts
are interest bearing and interest charged in the year ended 30th November 2014 was £2.2m (2013: £1.4m).
Barton Business Park Ltd (Barton)
The balance due to Barton at the year end was £3.8m (2013: £3.8m). No interest is charged on this balance.
Skypark Development Partnership LLP (Skypark)
During the year the Group provided funding of £nil to Skypark (2013: £0.6m). The balance due to the Group from Skypark at the
year end was £1.1m (2013: £1.1m), of which £1.1m (2013: £1.1m) relates to loan notes issued to the Group. Interest of £0.1m
(2013: £nil) was charged in the year.
Wrexham Power Ltd (Wrexham Power)
During the year the Group provided funding to Wrexham Power of £0.7m (2013: £nil). The balance due to the Group at the year end
was £0.9m (2013: £0.2m). No interest is charged on this balance.
Wrexham Land Ltd (Wrexham Land)
During the year the Group provided funding to Wrexham Land of £nil (2013: £nil). The balance due to the Group at the year end
was £0.1m (2013: £0.1m). No interest is charged on this balance.
Killingholme Land Ltd (Killingholme Land)
During the year the Group provided funding to Killingholme Land of £0.1m (2013: £nil). The balance due to the Group at the year
end was £0.1m (2013: £nil). No interest is charged on this balance.
VSM (NCGM) Ltd (VSM (NCGM))
During the year the Group provided funding to VSM (NCGM) of £1.5m (2013: £1.4m). The balance due to the Group at the year end
was £2.9m (2013: £1.4m). No interest is charged on this balance.
St. Modwen Pension Scheme Ltd
The Group occupies offices owned by the St. Modwen Pension Scheme Ltd with an annual rental payable of £0.1m (2013: £0.1m).
The balance due to the Group at year end was £nil (2013: £0.1m).
St. Modwen Properties PLC Annual Report and Financial Statements 2014 151
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 NOTES TO THE GROUP
FINANCIAL STATEMENTS continued
for the year ended 30th November 2014
22. RELATED PARTY TRANSACTIONS continued
Non-wholly owned subsidiaries
The Company provides administrative and management services and provides a central purchase ledger system to subsidiary
companies. In addition, the Company also operates a central treasury function which lends to and borrows from subsidiary
undertakings as appropriate. Management fees and interest charged/(credited) during the year and net balances due (to)/from
subsidiaries in which the Company has a less than 90% interest were as follows:
Norton & Proffitt Developments Ltd
Stoke-on-Trent Regeneration (Investments) Ltd
Stoke-on-Trent Regeneration Ltd
Uttoxeter Estates Ltd
VSM Estates (Holdings) Ltd
Widnes Regeneration Ltd
Management fees
Interest
Balance
2014
£m
2013
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2014
£m
–
–
(0.1)
–
0.7
–
0.6
2013
£m
–
–
(0.1)
–
0.6
–
0.5
2014
£m
0.3
(0.5)
(10.1)
0.1
(3.3)
2.0
(11.5)
2013
£m
(0.2)
(0.8)
(3.5)
(0.2)
(17.3)
2.3
(19.7)
All amounts due to the Group are unsecured and will be settled in cash. All amounts above are stated before provisions for doubtful
debts of £nil (2013: £nil). No guarantees have been given or received from related parties.
On 27th November 2014, the Group acquired the remaining minority interest in Trentham Leisure Ltd for £0.1m. No changes were
required by IFRS3 (2008) Business Combinations as a result of this acquisition.
Transactions in which directors have an interest
Branston Properties Ltd (Branston)
In 2010 the Group entered into an option to acquire the entire issued share capital of Branston, of which Simon Clarke is a
shareholder, at market value. The price paid for the option was £0.1m and exercise of this was contingent on certain planning
milestones being achieved. Following achievement of the requisite planning milestones the option was exercised by the Group
on 22nd May 2014 and 87.5% of the issued share capital of Branston was acquired as discussed further in note 19.
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.
152 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Financial Statements COMPANY BALANCE SHEET
as at 30th November 2014
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
(2013: £212.6m))
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
2014
£m
2013
£m
(E)
(F)
(G)
(H)
(H)
(K)
(L)
(L)
(L)
(L)
(L)
(L)
1.0
796.8
797.8
563.3
3.2
(328.5)
238.0
1,035.8
(286.6)
749.2
22.1
102.8
526.9
48.2
4.8
(1.8)
46.2
749.2
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
These Financial Statements were approved by the Board and authorised for issue on 2nd February 2015.
Bill Oliver
Chief Executive
Company Number: 349201
Michael Dunn
Group Finance Director
St. Modwen Properties PLC Annual Report and Financial Statements 2014 153
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 NOTES TO THE COMPANY
FINANCIAL STATEMENTS
for the year ended 30th November 2014
(A). ACCOUNTING POLICIES
Basis of preparation
The Company 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.
Following the publication of FRS100 – Application of Financial Reporting Requirements by the Financial Reporting Council, the
Company is required to change its accounting framework for its entity financial statements, which is currently UK GAAP, for its
financial year commencing 1st December 2015. The Company intends to adopt FRS101 – Reduced Disclosure Framework for
its Parent Company Financial Statements. No disclosures in the current UK GAAP Financial Statements would be omitted on
adoption of FRS101. Objections to the use of the disclosure exemptions may be served by a shareholder or shareholders holding
in aggregate 5% or more of the total allotted shares in St. Modwen Properties PLC, in writing, to its registered office (Park Point,
17 High Street, Longbridge, Birmingham, B31 2UQ), not later than 31st May 2015.
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.
154 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Financial Statements 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.
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.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 155
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 NOTES TO THE COMPANY
FINANCIAL STATEMENTS continued
for the year ended 30th November 2014
(A). ACCOUNTING POLICIES continued
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.
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.
Convertible bonds
Convertible bonds are assessed on issue as to whether they should be classified as a financial liability, as equity or as a compound
financial instrument with both debt and equity components. This assessment is based on the terms of the bond and in accordance
with FRS25 – Financial Instruments: Presentation.
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 2014 was £13.9m (2013: £34.6m).
156 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Financial Statements (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
Audit and
audit-related
services
£000
2014
Other
services
£000
157
157
55
20
–
–
75
232
–
–
–
–
30
55
85
85
Audit and
audit-related
services
£000
2013
Other
services
£000
150
150
50
–
–
–
50
200
–
–
–
–
50
45
95
95
Total
£000
157
157
55
20
30
55
160
317
Total
£000
150
150
50
–
50
45
145
295
(ii) Employees
The average number of full-time employees (including executive directors) employed by the Company during the year was
as follows:
Property and administration
Leisure and other activities
Total employees
The total payroll costs of these employees were:
Wages and salaries
Social security costs
Pension costs
Total payroll costs
2014
Number
2013
Number
220
40
260
2014
£m
12.7
2.6
0.7
16.0
192
38
230
2013
£m
11.7
1.8
0.7
14.2
(D). DIVIDENDS
Dividends paid during the year were in respect of a final dividend for 2013 and an interim dividend for 2014. 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
2014
2013
p per share
£m
p per share
£m
2.67
1.46
4.13
5.9
3.2
9.1
2.42
1.33
3.75
3.14
6.9
2.67
5.3
2.9
8.2
5.9
The St. Modwen Properties PLC Employee Share Trust waives its entitlement to dividends with the exception of 1/100p per share.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 157
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 NOTES TO THE COMPANY
FINANCIAL STATEMENTS continued
for the year ended 30th November 2014
(E). TANGIBLE FIXED ASSETS
Cost or valuation
At 30th November 2013
Additions
Disposals
At 30th November 2014
Depreciation
At 30th November 2013
Charge for the year
Disposals
At 30th November 2014
Net book value
At 30th November 2013
At 30th November 2014
Long leasehold
investment
properties
£m
Plant,
machinery and
equipment
£m
0.3
–
–
0.3
–
–
–
–
0.3
0.3
2.7
0.8
(0.2)
3.3
2.5
0.2
(0.1)
2.6
0.2
0.7
Total
£m
3.0
0.8
(0.2)
3.6
2.5
0.2
(0.1)
2.6
0.5
1.0
Investment properties were valued at 30th November 2014 by DTZ Debenham Tie Leung Ltd, Chartered Surveyors (2013: Jones
Lang LaSalle LLP), in accordance with the Appraisal and Valuation Manual of the Royal Institution of Chartered Surveyors, on the
basis of market value. Both DTZ Debenham Tie Leung Ltd and Jones Lang LaSalle LLP are professionally qualified independent
external valuers and had appropriate 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.
158 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Financial Statements (F). INVESTMENTS HELD AS FIXED ASSETS
Valuation
At 30th November 2013
Additions
Revaluation of investments
At 30th November 2014
Cost
At 30th November 2013
At 30th November 2014
Investment in
subsidiary
companies
£m
Investment in
joint ventures
£m
588.3
0.1
111.5
699.9
278.3
278.4
104.4
–
(7.5)
96.9
26.5
26.5
Total
£m
692.7
0.1
104.0
796.8
304.8
304.9
Subsidiary companies
At 30th November 2014 the principal subsidiaries, all of which were held directly by the Company, were as follows:
Country of incorporation
Proportion of
ordinary shares held
Principal nature
of business
Name
Chaucer Estates Ltd
Holaw (462) Ltd
Leisure Living Ltd
Redman Heenan Properties Ltd
Sowcrest Ltd
St. Modwen Developments Ltd
St. Modwen Properties Sarl
St Modwen Ventures Ltd
Trentham Leisure Ltd
Stoke-on-Trent Regeneration Ltd
Uttoxeter Estates Ltd
Norton & Proffitt Developments Ltd
VSM Estates (Holdings) Ltd
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%
100%
81%
81%
75%
50%
Country of incorporation
Percentage shareholding
Joint ventures
At 30th November 2014 the principal joint ventures were:
Name
Barton Business Park Ltd
Key Property Investments Ltd
Skypark Development Partnership LLP
VSM (NGGM) Ltd
England & Wales
England & Wales
England & Wales
England & Wales
VSM Estates Uxbridge (Group) Ltd
England & Wales
50%
50%
50%
50%
50%
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 Company’s next annual return
to Companies House.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 159
Property investment
Property investment
Leisure operator
Property investment
Property development
Property development
Property investment
Property investment
Leisure operator
Property development
Property development
Property development
Property development
Principal nature
of business
Property development
Property investment
and development
Property development
Property development
Property investment
and development
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 NOTES TO THE COMPANY
FINANCIAL STATEMENTS continued
for the year ended 30th November 2014
(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
Derivative financial instruments
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
2014
£m
2013
£m
206.6
6.0
212.6
2014
£m
0.1
304.2
22.8
1.9
6.0
1.0
12.5
2.2
350.7
2014
£m
3.7
0.9
292.0
4.7
0.8
1.5
11.9
13.0
328.5
206.6
6.0
212.6
2013
£m
0.3
275.8
11.2
1.4
3.2
–
5.9
3.8
301.6
2013
£m
8.4
0.8
257.7
4.0
1.5
1.4
10.6
12.3
296.7
2014
£m
2013
£m
106.6
180.0
286.6
190.0
80.0
270.0
All bank borrowings are secured by a fixed charge over the property assets of the Company and its subsidiaries.
Other loans comprise £80m unsecured 6.25% fixed rate retail bonds maturing in November 2019 and £100m 2.875%
convertible bonds maturing March 2019. Details of the terms of the convertible bonds are provided in note 14 to the Group
Financial Statements.
160 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Financial Statements (I). BORROWINGS
The maturity profile of the Company’s borrowings is as follows:
Less than one year
One to two years
Two to five years
More than five years
Total
2014
£m
–
–
249.1
37.5
286.6
2013
£m
62.5
45.0
82.5
80.0
270.0
(J). DEFERRED TAXATION
The amounts of deferred taxation provided and unprovided in the Financial Statements are:
Provided
Unprovided
Other timing differences
Reconciliation of movement on deferred tax asset included in debtors
Balance as at 30th November 2013
Profit and Loss Account
Balance as at 30th November 2014
Reconciliation of deferred tax liability included in pension scheme asset
Balance as at 30th November 2013
Profit and Loss Account
Statement of Total Recognised Gains and Losses
Balance as at 30th November 2014
(K). SHARE CAPITAL
Equity share capital
At start of year
Issue of share capital
At end of year
2014
£m
(2.2)
(2.2)
2013
£m
(3.8)
(3.8)
2014
£m
–
–
Ordinary 10p
shares
Number
220,376,988
1,000,000
221,376,988
2013
£m
–
–
£m
(3.8)
1.6
(2.2)
£m
–
–
–
–
£m
22.0
0.1
22.1
On 7th April 2014 the Company issued 1,000,000 ordinary shares of 10p each at par, which were allotted to The St. Modwen
Properties PLC Employee Share Trust to satisfy the exercise of awards made under the Company’s share-based
incentive arrangements.
See note 3d of the Group Financial Statements for details of outstanding options to acquire ordinary shares.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 161
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 NOTES TO THE COMPANY
FINANCIAL STATEMENTS continued
for the year ended 30th November 2014
(L). RESERVES
At 30th November 2013
Surplus on revaluation of investments
Retained profit for the year (note (S))
Equity issue
Share-based payment charge
Net share disposals
Dividends paid (note (O))
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
422.9
104.0
–
–
–
–
–
–
–
Profit
and loss
account
£m
Share
incentive
reserve
£m
48.2
–
13.9
–
(6.2)
1.4
(9.1)
–
–
2.1
–
–
–
2.7
–
–
–
–
Own
shares
£m
(0.3)
–
–
(0.1)
–
(1.4)
–
–
–
Other
reserves
£m
46.2
–
–
–
–
–
–
–
–
At 30th November 2014
102.8
526.9
48.2
4.8
(1.8)
46.2
Own shares represents the cost of 460,427 (2013: 72,582) shares held by The St. Modwen Properties PLC Employee
Share Trust. The open market value of the shares held at 30th November 2014 was £1,763,435 (2013: £259,553). In addition
The St. Modwen Properties PLC Employee Share Trust has £0.1m (2013: £0.1m) of cash and £2.8m due to the Company
(2013: £0.3m due to 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 IAS19 ‘Employee Benefits’ disclosures
for the Group, also covers the requirements of FRS17 ‘Retirement Benefits’ for the Company.
(N). OPERATING LEASE COMMITMENTS
Operating lease commitments where the Company is the lessee
Annual commitments under non-cancellable operating leases are as follows:
Operating leases which expire:
In one year or less
Between one and five years
In five years or more
2014
2013
Land and
buildings
£m
–
0.5
0.1
0.6
Other
£m
–
0.7
0.6
1.3
Land and
buildings
£m
–
0.5
0.1
0.6
Other
£m
0.2
0.4
0.2
0.8
(O). CONTINGENT LIABILITIES
Details of contingent liabilities together with guarantees made in respect of certain subsidiaries in order that they qualify for the
exemption from audit under section 479A 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.
162 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Financial Statements FIVE YEAR RECORD
Rental income(1)
Property profits(1) (2)
Revaluation surplus/(deficit)(1) (3)
Pre-tax profit(4)
Earnings per share (pence)
Dividends paid per share (pence)
Dividend cover (times)
Shareholders’ equity net assets per share (pence)
Increase 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.
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
278.8
11%
813.3
95.3
195.5
(136.4)
(340.7)
(12.8)
614.2
22.0
592.5
(0.3)
614.2
2014
£m
37.1
57.7
90.2
138.1
52.6
4.13
12.7
324.9
17%
903.3
88.9
201.0
(122.6)
(334.1)
(18.7)
717.8
22.1
697.5
(1.8)
717.8
(3) Including net realisable value provisions and, where applicable, negative goodwill arising on acquisitions as a result of fair value adjustments to property assets.
(4) Stated before joint venture tax.
The figures above are all presented under IFRSs.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 163
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 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.
164 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Additional Information 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.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 165
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the seventy fourth Annual General Meeting (AGM) of St. Modwen Properties PLC (the Company) will
be held in the Evolution Suite, Innovation Centre, 1 Devon Way, Longbridge Technology Park, Birmingham B31 2TS on Friday,
27th March 2015 at 12.00 noon to consider and, if thought fit, to pass the following resolutions. Resolutions 1 to 16 inclusive will
be proposed as ordinary resolutions and resolutions 17 to 19 will be proposed as special resolutions.
ORDINARY BUSINESS
1. That the Annual Report and Financial Statements for the financial year ended 30th November 2014 be received.
2. That the Directors’ Remuneration Report, excluding the part containing the directors’ remuneration policy, set out on pages
77 to 100 of the Annual Report and Financial Statements for the financial year ended 30th November 2014 be approved.
3. That a final dividend for the financial year ended 30th November 2014 of 3.137p per ordinary share payable on 2nd April 2015
to those shareholders on the register of members at the close of business on 6th March 2015 be declared.
4. That Ian Bull be elected as a director.
5. That Steve Burke be re-elected as a director.
6. That Kay Chaldecott be re-elected as a director.
7. That Simon Clarke be re-elected as a director.
8. That Michael Dunn be re-elected as a director.
9. That Lesley James be re-elected as a director.
10. That Richard Mully be re-elected as a director.
11. That Bill Oliver be re-elected as a director.
12. That Bill Shannon be re-elected as a director.
13. 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.
14. That the directors be authorised to determine the remuneration of the Company’s auditor.
SPECIAL BUSINESS
15. That the acquisition by the Company of 12.5% of the issued share capital of Branston Properties Ltd which is held by Simon
Clarke (the Acquisition), as described in more detail in the note contained in this notice of the AGM, be approved for the
purposes of section 190 of the Companies Act 2006 and that the directors of the Company be authorised to do all acts
and things which they, in their absolute discretion, consider to be necessary or desirable to implement and give effect to, or
otherwise in connection with, the Acquisition.
16. 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 £7,379,232 (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 £7,379,232 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 26th June 2016, 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.
166 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Additional Information
Special resolution
17. That, in substitution for all existing powers and subject to the passing of resolution 16, 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 16 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 16 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 £1,106,884 (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 16, 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
26th June 2016, 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
18. 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 22,137,698;
(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 26th June 2016, 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
19. 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
19th February 2015
St. Modwen Properties PLC
Registered number: 349201
Registered Office: Park Point, 17 High Street, Longbridge, Birmingham B31 2UQ
St. Modwen Properties PLC Annual Report and Financial Statements 2014 167
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176
NOTICE OF ANNUAL GENERAL MEETING
continued
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 2014. Copies will be available at the AGM.
Resolution 2 – Directors’ Remuneration Report
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.
A resolution to approve the directors’ remuneration policy (set out in full in the Annual Report and Financial Statements for the year
ended 30th November 2013 which is available at www.stmodwen.co.uk) was approved by shareholders at the 2014 AGM.
Resolution 3 – Declaration of final dividend
Resolution 3 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 2014 of 3.173p per ordinary share. If approved, this will be paid on 2nd April
2015 to shareholders on the register of members at the close of business on 6th March 2015.
Resolutions 4 to 12 – Election and re-election of directors
Resolutions 4 to 12 are ordinary resolutions which deal with the election and re-election of the directors.
Following his appointment to the Board on 1st September 2014 and in accordance with the Company’s Articles of Association,
Ian Bull will retire and offer himself for election at the 2015 AGM. John Salmon will retire from the Board at the end of the AGM.
All other directors will retire and offer themselves for re-election in accordance with the 2014 UK Corporate Governance Code.
Biographical details of all directors are set out on page 53.
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 13 and 14 – 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 13 and 14 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 15 – Substantial property transaction
In 2010, the Company entered into an option to acquire the entire issued share capital of Branston Properties Ltd (Branston) at
market value. The price paid for the option was £0.1m, with exercise contingent on the achievement of certain planning milestones
in relation to land held by Branston. The option was exercised by the Company on 22nd May 2014, at which point it acquired
87.5% of the issued share capital of Branston. On the same day, the Company entered into an agreement to acquire the remaining
12.5% of the issued share capital of Branston, which is held by Simon Clarke, for an aggregate payment of £129,041 together with
the right to receive contingent consideration based on the level of future development gains achieved in respect of the land and
property held by Branston, subject always to compliance with the Listing Rules. As Mr. Clarke is a director of the Company, and the
consideration payable exceeds £100,000, the transaction constitutes a substantial property transaction under section 190 of the
Companies Act 2006. It is therefore conditional on the approval of the Company’s shareholders being given. Accordingly, resolution
15 is an ordinary resolution to approve this transaction.
Resolution 16 – 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 2015
AGM. Resolution 16 is an ordinary resolution to renew this authority.
The Investment Association (IA) guidelines on directors’ authority to allot shares state that IA 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 16 will, if passed, authorise the directors to allot shares up to a maximum aggregate nominal amount of
£7,379,232, which represents one-third of the Company’s issued ordinary share capital as at 10th February 2015 (being the latest
practicable date prior to the publication of the notice of AGM). Paragraph (b) of resolution 16 proposes that, in accordance with
IA 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 £7,379,232.
168 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Additional Information The authorities sought in paragraphs (a) and (b) of resolution 16 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 26th June 2016.
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 17 – 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 17 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 17 will, if passed, authorise the directors to allot new shares pursuant to the authority given in paragraph
(a) of resolution 16 for cash (i) in connection with a pre-emptive offer or rights issue or (ii) otherwise up to a maximum aggregate
nominal value of £1,106,884, equivalent to 5% of the Company’s issued ordinary share capital as at 10th February 2015 (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 IA guidance described in the explanation of resolution 16, paragraph (b) of resolution 17 will, if passed, authorise the
directors to allot new shares pursuant to the authority given by paragraph (b) of resolution 16 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 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 26th June 2016.
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 18 – Authority to purchase shares
Resolution 18 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 hold any shares in treasury.
If passed, the resolution gives authority for the Company to purchase up to 22,137,698 of its ordinary shares, which represents
10% of the Company’s issued ordinary share capital as at 10th February 2015 (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
26th June 2016.
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 2015 (being the latest practicable date prior to the publication of the notice of AGM), the Company had options
outstanding over 8,755,695 ordinary shares, representing 3.96% 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 2015
would represent 4.94% of the issued share capital.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 169
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 NOTICE OF ANNUAL GENERAL MEETING
continued
EXPLANATORY NOTES TO PROPOSED RESOLUTIONS continued
Resolution 19 – Notice period of general meetings
Resolution 19 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.
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, 25th March 2015 (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, 25th March
2015. 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.
170 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Additional Information 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, 25th March 2015.
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.
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 Ltd’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 or her intention to revoke a proxy appointment to Equiniti Ltd, 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, 25th March 2015. 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.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 171
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 NOTICE OF ANNUAL GENERAL MEETING
continued
SHAREHOLDER NOTES continued
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.
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 2015 (being the latest practicable date prior to the publication of the notice of AGM), the Company’s issued
share capital consisted of 221,376,988 shares carrying one vote each. Therefore the total voting rights in the Company as at
10th February 2015 was 221,376,988.
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 Company’s indemnity for directors.
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.
172 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Additional Information INFORMATION FOR SHAREHOLDERS
FINANCIAL CALENDAR
Ordinary shares quoted ex-dividend
2013/14 final dividend record date
AGM
5th March 2015
6th March 2015
27th March 2015
2013/14 final dividend payment date
2nd April 2015
Announcement of 2015 half year results
30th June 2015
Announcement of 2015 final results
February 2016
ANNUAL GENERAL MEETING
The AGM will be held on Friday, 27th March 2015 in the Evolution 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 166 to 172.
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.
* Calls to this number cost 8p per minute plus network extras. Lines are open 8.30 am to 5.30 pm, Monday to Friday.
St. Modwen Properties PLC Annual Report and Financial Statements 2014 173
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 INFORMATION FOR SHAREHOLDERS
continued
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.
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.
174 St. Modwen Properties PLC Annual Report and Financial Statements 2014
Additional Information SHAREHOLDER ANALYSIS
Holdings of ordinary shares as at 30th November 2014:
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
%
3,128
33
712
65
79.43
0.84
18.08
1.65
11,557,581
32,100,216
177,251,283
467,908
5.22
14.50
80.07
0.21
3,938
100.00
221,376,988
100.00
Shareholders
Shares
Number
%
Number
%
1,026
662
1,357
349
301
65
99
32
47
26.06
16.81
34.46
8.86
7.64
1.65
2.52
0.81
1.19
251,189
512,506
3,146,605
2,534,039
6,409,040
4,737,810
23,522,091
22,502,640
157,761,068
0.11
0.23
1.42
1.15
2.90
2.14
10.63
10.16
71.26
3,938
100.00
221,376,988
100.00
St. Modwen Properties PLC Annual Report and Financial Statements 2014 175
Strategic Report 01–51Corporate Governance 52–105Financial Statements 106–163Additional Information 164–176 SHAREHOLDER NOTES
176 St. Modwen Properties PLC Annual Report and Financial Statements 2014
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 used throughout the report has been taken by:
Craig Holmes
Matthew Livey
Matthew Nichol
Steve Townsend
Page Seven Photography
Joe Wainwright
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ST. MODWEN PROPERTIES PLC
OFFICES
SOUTH WEST AND SOUTH WALES
Company No. 349201
HEAD OFFICE
Park Point
17 High Street
Longbridge
Birmingham
B31 2UQ
0121 222 9400
LONDON AND SOUTH EAST
180 Great Portland Street
London
W1W 5QZ
020 7788 3700
Green Court
King’s Weston Lane
Avonmouth
Bristol
BS11 8AZ
0117 316 7780
MIDLANDS
Park Point
17 High Street
Longbridge
Birmingham
B31 2UQ
0121 647 1000
ST. MODWEN HOMES
Park Point
17 High Street
Longbridge
Birmingham
B31 2UQ
0121 647 1000
NORTHERN HOME COUNTIES
THE TRENTHAM ESTATE
IMEX
575-599 Maxted Road
Hemel Hempstead
Hertfordshire
HP2 7DX
01727 732690
Stone Road
Trentham
Stoke-on-Trent
ST4 8JG
01782 645222
NORTH WEST
Chepstow House
Trident Business Park
Daten Avenue
Risley
Warrington
WA3 6BX
01925 825950
YORKSHIRE AND NORTH EAST
Ground Floor, Unit 2
Landmark Court
Elland Road
Leeds
LS11 8JT
0113 272 7070
www.stmodwen.co.uk
info@stmodwen.co.uk