S
t
.
M
o
d
w
e
n
P
r
o
p
e
r
t
i
e
s
P
L
C
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
2
0
1
5
Annual Report and
Financial Statements 2015
WHAT DO YOU SEE?
WE SEE JOB CREATION
Formerly home to a BP fuel distribution hub, we have since
transformed this 65 acre site into the new Bay Campus for
Swansea University. It opened in September 2015 to 917
new students, providing 775,000 sq ft of academic space and
student accommodation. Future phases will increase facilities
to allow the Campus to accommodate 2,000 students by
September 2017.
A true catalyst for economic growth and regeneration across
South Wales, the Campus is expected to deliver positive
economic impact for the Swansea Bay City region of £3bn and
create up to 10,000 jobs over the project’s lifetime and beyond.
WE SEE COMMUNITIES
Previously owned by the Ministry of Defence, this
479 acre site is quickly transforming into a new Warwickshire
community known as ‘Meon Vale’. The mixed-use
redevelopment includes 800,000 sq ft of commercial
space, employing over 200 people, a leisure hub, public
open space and a 1-mile extension to the Greenway foot
and cycle path into Stratford-upon-Avon. With planning
for 1,050 homes, of which 230 have already been built,
Meon Vale offers a sustainable solution to the demand for
both housing and community facilities in this region.
WE SEE INCOME
The 10 year, £90m regeneration programme for Wembley
Central completed in March 2015. This prominent Town Centre
scheme comprises an 86-bedroom Travelodge and 120,000 sq ft
of new retail and leisure space leased to major national retailers
including TK Maxx, Tesco, Sports Direct, Iceland, Costa and Argos.
It also includes 273 apartments, a new public square and a
refurbished and upgraded tube and train station which services
over 2.5m users each year. This asset is now generating an
annualised rental income of £2.2m.
Strategic Report
2–45
1
Contents
“It is extremely pleasing to achieve record profits
and growth from a year of excellent delivery across
all areas of the portfolio.”
BILL OLIVER
Chief Executive
The Board
Develops strategy and leads St. Modwen to achieve long-term success
Audit Committee
Oversees financial and narrative reporting,
property portfolio valuations, internal
control, risk management systems, and
internal and external audit processes
Nomination Committee
Oversees Board and senior management
succession planning, leads the process
for Board appointments and monitors
membership of Board Committees
Remuneration Committee
Determines the remuneration
arrangements for the executive directors,
the Chairman and the Company Secretary
Supported by
Executive
directors
Capital Projects
Committee
Property
Board
Implement strategic
decisions approved
by the Board and
monitor operational
performance
Established during
the year to review
significant projects,
either in terms of
capital investment
and/or risk
Reviews performance
and considers Group-
wide operational
issues and initiatives
Safety, Health
and Environment
Steering Group
Oversees Group
strategy, procedure
and performance
in relation to
safety, health and
environmental matters
CSR Steering
Group
Co-ordinates the
Group’s approach
to and enhance
the reporting of its
corporate social
responsibility
activities
Strategic Report
2 At a glance
4 Chairman’s Statement
6 Chief Executive’s Review
10 Our marketplace
12 Our business model
14 Regeneration and remediation
16 Resources and relationships
18 Our strategy and KPIs
22 Commercial land and development
24 Residential
28
Income producing properties
30 Financial Review
36 Risk management
38 Our principal risks
42 Corporate Social Responsibility
Corporate Governance
47 Chairman's Introduction
48 The Board
50 The Property Board
52 Corporate Governance Report
58 Audit Committee Report
66 Nomination Committee Report
70 Directors’ Remuneration Report
94 Directors’ Report
PROFIT BEFORE ALL TAX
NET ASSET VALUE PER SHARE
£258.4m*
+91%
413.5p
+27%
PROPERTY PROFITS
SEE-THROUGH LOAN-TO-VALUE
£67.4m
+31%
EARNINGS PER SHARE
97.9p
+82%
30%
-1%
ADJUSTED GEARING
48%**
+1%
Financial Statements
100 Independent auditor’s report
106 Group Income Statement
106 Group Statement of Comprehensive
Income
107 Group Balance Sheet
108 Group Statement of Changes in Equity
109 Group Cash Flow Statement
110 Accounting policies
119 Notes to the Group Financial Statements
151 Company Balance Sheet
152 Notes to the Company Financial
Statements
164 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.
Additional Information
165 Glossary of terms
167 Notice of Annual General Meeting
175 Information for shareholders
*
Includes £127.4m, being the Group share of the gain from initial recognition of New Covent Garden Market.
** Adjusted gearing is the ratio of net borrowings (excluding finance leases) to net assets. See note 2 to the Group Financial Statements.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99
2
At a glance
WE SEE PROGRESS
This has been a year of achievement where we
have reached significant milestones in all areas
of regeneration across our portfolio.
ACTIVE LAND BANK
PROPERTY PORTFOLIO
COMMERCIAL PROPERTY PIPELINE
6,000
acres
2014
2015
£1.7bn
1.6m
sq ft
DECEMBER
Letchworth Business
Park, Letchworth
– works commenced
for 90,000 sq ft of
speculative development.
Subsequently 100%
let and investment
sale agreed
FEBRUARY
Access 18, Avonmouth – planning
consent granted for 148,000 sq ft of
speculative space of which 80,000 sq ft
was subsequently let and sold upon tenant
occupation. A further 68,000 sq ft of
speculative space is being progressed
We see job creation Pages 22 and 23
APRIL
North West acquisitions – of
two strategic sites, Moorgate Point,
Liverpool and Old Mill, Preston,
adding £1.7m of net rental income
Meon Vale, Warwickshire –
planning permission secured for an
additional 550 homes at this mixed-
use new community, bringing the
total number of consented homes
to 1,050
JUNE
Half Year Results
– record half year profits
of £203.1m announced
Technology Retail
Park, Rugby – sale
of this retail park,
100% pre-let to major
retailers, for £17.4m
to Aberdeen Asset
Management
JANUARY
DPD (UK) – following
a 60,000 sq ft unit in
Exeter, planning consent
granted to build two
additional depots for
DPD (UK) in Liverpool and
Stoke-on-Trent. All three,
totalling 189,000 sq ft,
subsequently sold upon
tenant occupation
Branston Leas
Woods, Burton
upon Trent – planting
of 21,000 trees and
14,000 bluebells
commenced at this new
woodland adjacent to the
growing community of
Branston Leas
MARCH
Wembley Central, London
– completion of this 10 year, £90m
regeneration project. This asset is generating
an annualised rental income of £2.2m
We see income Pages 28 and 29
MAY
Burton Gateway, Burton
upon Trent – an additional
230,000 sq ft of industrial space
granted planning permission
at this major employment site,
bringing total development
consented to 1m sq ft
Whitley Business Park,
Coventry – land sale and site
start for a 214,000 sq ft regional
distribution centre for Travis
Perkins and sale of land to
Jaguar Land Rover
St. Modwen Properties PLC Annual Report and Financial Statements 2015Strategic Report 2015
3
£1.7bn* portfolio overview
* On a proportionally
consolidated basis
including share of joint
ventures. Please see
note 2c to the Group
Financial Statements.
Income producing
£768m
45%
46%
Residential land
£772m
9%
Commercial land
and development
£152m
TOTAL RESIDENTIAL PORTFOLIO
NUMBER OF DEVELOPMENT PROJECTS
TRACK RECORD
32,516
plots
100+
30
years
AUGUST
New Covent Garden Market,
London – further to securing unconditional
status in April 2015, works commenced to
the New Covent Garden Market site in Nine
Elms, London
NOVEMBER
Longbridge, Birmingham – Phase 2
of the Town Centre opened with 150,000 sq ft
Marks & Spencer store and other national
retailers, delivering £3.2m annualised
income as part of this £1bn regeneration
project
We see communities Pages 24 to 27
We see income Pages 28 and 29
JULY
Brentwood,
Essex –
development
agreement signed
with Brentwood
Council for 1m
sq ft of industrial,
logistics and office
space, close to
the M25
OCTOBER
Kirkby Town
Centre,
Liverpool –
acquisition of this
key retail centre,
with additional
retail and housing
development
potential, for
£35.8m
Celtic Business
Park, Newport
– steel frames
erected at this
major new
business park in
South Wales
2016:
OUR 30TH ANNIVERSARY
2016 marks 30 years of St. Modwen’s status
as a listed company. Throughout the year we
will be launching a series of CSR initiatives,
in addition to reflecting on 30 years of
successful regeneration and looking forward
to delivering shareholder value in the years
to come…
SEPTEMBER
Bay Campus, Swansea University
– opens its doors to 917 new students and
‘St. Modwen Student Living’ established
to manage the recurring income from the
student accommodation which will increase
to 2,000 rooms by September 2017
We see job creation Pages 22 and 23
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 4
Chairman’s Statement
“This exceptional set of results is
testament to our expertise across the
many facets of regeneration.”
BILL SHANNON
Chairman
Looking back over the last 12 months alone, there are many
examples that illustrate these values in action.
We think long-term – continually restocking the development
pipeline with new opportunities:
Our successful business model is based on
a long-term approach to regeneration and
development. Be it a new acquisition offering
excellent potential for development and income, entering
a new marketplace that offers a recurring revenue stream
or building speculatively in an area with good prospects for
economic growth, this long-term approach ensures we are
continually adding value to our existing 6,000 acre land bank
as well as creating new opportunities for its growth.
In this way, we have maintained an active commercial
development pipeline this year, which now stands at 1.6m sq ft.
As we complete our developments, we seek to restock
the pipeline with new opportunities. For example, Longbridge
has been transformed from a disused car factory to a living,
breathing new community and a key business destination
for Birmingham. At its heart is a new Town Centre for which
the second phase completed in November 2015 marked
by opening of the 150,000 sq ft Marks & Spencer and other
national retailers.
In the coming year, new opportunities include a variety of
schemes throughout the UK, such as a 214,000 sq ft design
and build project for Travis Perkins in Whitley, Coventry and
148,000 sq ft of speculative development in Avonmouth, Bristol
of which over 50% is now let and sold.
We are innovative – creating new revenue streams:
We have the confidence in our own abilities
to tackle complex schemes and we embrace
challenges, always adopting a pragmatic approach
which enables us to manage risk and make
the right decisions for business growth whilst delivering
shareholder value.
This year is no exception as we completed a major milestone
for the New Covent Garden Market site which achieved
unconditional status in April. This is a particularly complex
and innovative development in terms of planning, design
and engineering.
TOTAL DIVIDEND FOR THE YEAR (p)
5.75
+25%
4.60
4.00
3.30
3.63
2011
2012
2013
2014
2015
As we approach our anniversary marking 30 years as a listed
company, I am extremely pleased to report on a record set of
results for the year ended 30th November 2015. The business
has achieved a 27% increase in shareholders' equity NAV per
share to 413.5p (2014: 325.1p) and profit before all tax of
£258.4m (2014: £135.4m).
This exceptional set of results is testament to our
expertise across the many facets of regeneration, ranging
from remediation and planning skills, to construction
and development, through to project delivery and
asset management.
These skills and expertise are driven by our set of core values
that define both the business and the approach we adopt to
manage, develop and extract maximum value from our land
bank. At every point of the development lifecycle ‘we think
long-term’, ‘we are innovative’ and ‘we do what we say’.
Our 30th anniversary in 2016 will provide an excellent
opportunity to reflect on how the business has grown with
these values at its core, whilst also looking forward to the
next 30 years of progress.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Strategic Report 5
We also demonstrated innovation through the introduction of
‘Income Producing Residential’ to our portfolio. This comprises
two new revenue streams for the business that highlight our
ability to increase the flow of development profits and create
further sources of income:
• St. Modwen Student Living, Bay Campus – to coincide with
the opening of the Bay Campus for Swansea University, we
established a team of facilities management professionals to
manage the retained student accommodation and associated
facilities for this major new asset in South Wales.
• Private Rented Sector (PRS) – having monitored this
growing marketplace over the last couple of years, in 2015 we
completed two initial PRS schemes in Wembley and Rugby.
We expect to grow in this market in 2016/17.
Finally, the growth of St. Modwen Homes shows how we
can assess our existing land bank carefully and bring new,
value-adding opportunities to life.
We do what we say – delivering for all our stakeholders:
As a trusted developer, we can be relied upon to
speak plainly and knowledgeably to our current and
prospective partners. In addition, when we know
a decision is the right one, having undertaken the
appropriate analysis, we will always follow through.
During 2015 we have taken advantage of strong investor
interest by disposing of a number of mature assets to which
we could no longer add material value. At the same time
we acquired new assets from which we can extract good
latent value.
The acquisition of Kirkby Town Centre is a good example
of our commitment to acquire valuable new property. In a
£35.8m transaction, we added this Town Centre scheme,
which combines development and income producing potential,
to the carrying amount of our £1.7bn* portfolio.
We also deliver on our promises in terms of the development
of design and build projects for major UK occupiers.
This includes Screwfix, which in 2015 extended its existing
distribution hub in Stoke-on-Trent by 310,000 sq ft to
630,000 sq ft. Following the completion of this project, we
converted it into an opportunity to deliver further value for
shareholders by disposing of the asset for £18.1m to the
Prudential Assurance Co. Ltd.
From a major project perspective, in 2013 we made a
commitment to Swansea University that we would complete
the new Bay Campus by September 2015. This year we
achieved exactly this, opening the first phase, comprising
775,000 sq ft, to 917 new students on time and within budget.
Dividend
Our policy is to increase our dividends in line with the growth
in net asset value and to reflect the Company’s results. For the
year ended 30th November 2015, the Board is recommending
a 25% increase in the total dividend for the year to 5.75p per
share (2014: 4.6p per share), giving a final dividend for the year
of 3.85p per share (2014: 3.137p per share). The final dividend
will be paid on 1st April 2016 to shareholders on the register at
4th March 2016.
People
These record results would not have been possible without the
passion of our talented team of dedicated staff. Embodying our
values of innovation, commitment and long-term thinking,
they are critical to the success of the business and I would
like to express my thanks to everyone at St. Modwen for their
continuing valuable contribution.
Board changes
In March 2015 John Salmon retired from the Board after more
than nine years’ service. His position as Audit Committee
Chairman has been assumed by Ian Bull, who joined the Board
in September 2014. Ian is currently Chief Financial Officer and
main board director at Ladbrokes plc.
We welcomed Rob Hudson to the Board in September 2015
on his appointment as Group Finance Director. Rob, previously
Group Financial Controller at British Land Company plc, has
wide-ranging financial skills and experience together with
property sector knowledge which makes him an excellent
addition to the Board.
Prospects
We have a long track record of unrivalled regeneration
expertise, robust asset management skills and a proven ability
to realise value from our extensive land bank. 2016 marks
30 years of such success and we see continued progress in
each of these areas of the business in the year ahead.
Whilst we are currently experiencing macro-economic
uncertainty, we anticipate a continued, if slow, overall
improvement in the UK economy with sustained growth in
the regions. Our extensive regional portfolio provides us with
a good base from which we will continue to realise residential
and commercial development opportunities, either from our
existing land bank or through new acquisitions. In addition, our
retained portfolio of assets and new ventures, including income
producing residential, should ensure a continued stream of
recurring income that continues to underpin the business
running costs.
We therefore look towards 2016 with a sense of optimism and
look forward to growing the business further and enhancing
shareholder value.
Bill Shannon
Chairman
1st February 2016
* On a proportionally consolidated basis including share of joint ventures.
Please see note 2c to the Group Financial Statements.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 6
Chief Executive’s Review
“It is extremely pleasing to achieve
record profits and growth from a year
of excellent delivery across all areas
of the portfolio.”
BILL OLIVER
Chief Executive
PROFIT BEFORE ALL TAX (£m)
£258.4m
258.4
135.4
51.7
52.8
77.2
2011
2012
2013
2014
2015
EQUITY NET ASSETS PER SHARE (p)
413.5
413.5p
325.1
278.8
231.8
250.8
2011
2012
2013
2014
2015
This has been another record year for the business, resulting
in an unprecedented increase in profit before all tax of 91%
to £258.4m (2014: £135.4m) and a significant 27% increase in
NAV per share to 413.5p (2014: 325.1p).
It has been a year of major achievement across the portfolio,
where we have recycled capital through disposals of mature
assets such as Cranfield University Technology Park into added-
value acquisitions including Kirkby Town Centre purchased off a
net initial yield of 9% on the main Shopping Centre.
This was a year in which we brought forward a further
400,000 sq ft into the commercial development pipeline,
underlining our ability to secure new opportunities and extract
maximum value from our 6,000 acre land bank.
It was also a year during which we established two new
revenue streams: the first through the management of income
from student accommodation at the Bay Campus for Swansea
University by our newly created ‘St. Modwen Student Living’
business and the second through delivery of our first two
developments for the Private Rented Sector (PRS) at Wembley
Central and Rugby.
We also saw continued growth of our housebuilding business,
culminating in an overall profit increase of 21% to £29m
(2014: £24m), of which St. Modwen Homes contributed £12m
(2014: £8m) and the Persimmon joint venture* contributed
£17m (2014: £16m).
Our achievements in 2015 were exemplified by the completion
of key milestones across all major projects, making a strong
contribution to this excellent set of results. Each of these
projects reflected a specific facet of our business model:
• New Covent Garden Market demonstrated our ability to add
significant value to brownfield land through our planning skills,
as we achieved unconditional status in the first half of the
year, adding a net £127.4m of value to our property portfolio.
Works to the new market commenced in the second half
of the year, signifying a major step towards securing vacant
possession of the 10 acre Nine Elms Square site and we will
explore our options to either sell, joint venture or develop the
site during 2016.
Photo: We achieved unconditional status for the New Covent Garden
Market site in April 2015.
* A series of commercial contracts with Persimmon.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Strategic Report 7
• As the second phase opened in November 2015, Longbridge
Town Centre highlighted our skill in generating an increased
stream of income from our development projects that helps
to underpin the running costs of the business. Anchored by
a 150,000 sq ft Marks & Spencer store, the largest in the
Midlands, and additional retail already leased to a number of
major national occupiers, the Town Centre will now generate
£3.2m of annualised income.
• The Bay Campus developed for Swansea University is a
prime example of our expertise in cleaning up brownfield
sites to develop thriving new communities that contribute
positively to the local and broader economy, whilst delivering
substantial recurring income and shareholder value.
We have retained ownership of the income from the student
accommodation, the first phase of which opened its doors in
September 2015 housing 917 new students and the second
phase opened in January 2016. Demonstrating our long-term
approach to development, the flexibility of our land bank and
our ability to deliver continued growth, in December 2015 we
signed a development agreement with Swansea University
to develop Phase 3 which will be available to new students in
September 2017 and will bring the total number of student
rooms to 2,000.
Strategy overview
We are constantly adding value to our 6,000 acre land
bank and growing our development pipeline through
initiatives carried out by our regional teams of property and
construction experts.
These initiatives include remediating brownfield land and
successfully securing planning permissions in order for sites
to be carefully and sensitively redeveloped. We also keep our
retained properties, both mature and newly developed, under
constant review, running them for income for a period of time
until we take a strategic decision to either their redevelopment
or disposal. This income stream underpins the running costs of
the business.
We are always looking for the next opportunity and actively
working our land bank at all stages of the development cycle.
As our major projects reach their peaks, new prospects
across our regional portfolio are already being identified and
prepared in order to deliver maximum value for shareholders
in the future.
Commercial development pipeline
Movement during the year
Position at 30th November 2014
Sold/transferred to investment properties
Schemes added to the pipeline
Position at 30th November 2015
Analysis of position at 30th November 2015
Retail
Industrial
Total
Number of
schemes
sq ft
% pre-let/
pre-sold
Development
expenditure
£m
32
2,045,000
62%
136
(10)
(855,000)
11
33
10
23
400,000
1,590,000
305,000
1,285,000
33 1,590,000
51%
50%
52%
51%
114
28
86
114
GDV
£m
259
213
64
149
213
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 8
Chief Executive’s Review (continued)
Our asset management capabilities continue to deliver strong
net rental income from our retained development portfolio.
In particular, the regeneration of Wembley Central, completed
in March 2015, combines an excellent mix of retail, leisure,
residential and office space which is now generating an
annualised net rental income of £2.2m.
The Company completed or secured a number of acquisitions
this year for a total value of £95m in order to grow the portfolio
and extend its development pipeline further. In addition to
Kirkby Town Centre, other highlights include industrial estates
at Moorgate Point in Liverpool and Old Mill in Preston.
The retail market remains competitive across the UK as
retailers face the challenge of meeting ever-changing customer
demands in an increasingly crowded space. Nevertheless, we
have managed to remain successful in this market and have
created a good level of retailer demand for our schemes which
are well-located, predominantly mixed-use and therefore offer
a one-stop-shop for the increasingly busy consumer.
Strong investment market
This year saw strong investor interest for commercial property
which we captured through the sale of a number of our
mature sites and newly developed assets. This included the
delivery of three distribution centres, comprising a total of
189,000 sq ft, for express delivery service DPD (UK) at three
of our sites across the UK. Demonstrating the appetite within
the investor marketplace, we disposed of all three assets in
two separate transactions at the time of tenant occupation at
yields of 5% and 5.3%.
Market overview
We see opportunity Pages 10 and 11
As a regeneration specialist, our activities touch many sectors
of the property market. The way we manage our land bank and
implement our strategy ensures that we have the flexibility to
alter our development focus at any time in the economic cycle.
Our biggest project by value, New Covent Garden Market, is
located in London but our regional presence in the UK defines
the business and has done so for the last 30 years.
Overall, our commitment to the regions has continued to
produce results during the year.
Active commercial marketplace
Our commercial marketplace, predominantly spanning retail
and industrial space, has fared well with our major projects
experiencing an exceptional year in terms of delivery and
income generation. Overall, our programme of commercial
development is now at 1.6m sq ft and we will continue to add
new opportunities to the pipeline as schemes complete.
Our programme of speculative space is now at 775,000 sq ft
for which we have been successful in securing a number of key
tenants over the last 12 months. We expect this momentum to
continue in line with current occupier demand.
We have also secured a number of significant design and build
projects this year, demonstrating appetite from larger tenants
for new premises as they expand or relocate. These include
the Defence Infrastructure Organisation (DIO) which has
committed to a £32m residential facility for military staff
working at the Royal Centre for Defence Medicine (RCDM)
Birmingham, to be delivered at Longbridge and Travis Perkins
for which we started on site with a 214,000 sq ft regional
distribution centre in Whitley, Coventry.
We are experiencing a steady flow of tenant demand for our
existing space, enabling us to grow our stream of recurring
income which, in turn, helps to underpin the running costs of
the business and provides a firm financial footing from which
we operate.
Photo: One of the three distribution centres built for DPD (UK) and
subsequently sold.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Strategic Report 9
We anticipate steady demand for our residential land from
third party housebuilders. On the development side, we
anticipate the continued growth of St. Modwen Homes
which will become more dominant and replace profits from
the Persimmon joint venture as it draws to its natural close
by 2018.
The newly established Income Producing Residential route to
market will experience further growth as new opportunities
come on line and as we look for other prospects within our
own land bank that enable us to enter emerging or existing
markets, with the aim of continually bolstering levels of
recurring income.
Finally, 2016 marks our 30th anniversary as a listed company
and provides for an opportunity to celebrate the positive
impact we have made to the UK landscape during this time;
creating new communities that lead to job creation, helping to
boost the local, regional and national economy and delivering
significant shareholder value.
Bill Oliver
Chief Executive
1st February 2016
Strong residential market
The residential part of our business is a core element of our
strength in the regions. The planning process continues to
prove challenging nationwide and has presented a delay to
some site starts during the year. However, across our extensive
portfolio we have successfully secured over 1,438 homes
through planning permissions granted in the year.
Demand still remains high for new homes across the UK with
regional house price inflation surpassing build cost inflation.
The Help to Buy initiative has contributed positively to sales
rates, underlining the need for affordable properties to meet
demand from first time buyers.
We have continued to grow in this market and remain strong
in the regions due to our ability to realise development
opportunities from our own land bank and our skill in adding
value through planning which enables us to satisfy quickly third
party housebuilder demand for land.
Our residential development activities have grown out of the
Midlands and we are now active across many other parts of the
UK including the South West, South Wales, the North West and
in parts of London.
Business outlook
During the next 12 months we will continue to add value
to the portfolio and realise milestones across our projects.
New Covent Garden Market will be a particular focus, where
we will progress towards vacant possession of the 10 acre Nine
Elms Square site and we will explore our options to either sell,
joint venture or develop the site during 2016.
Across our commercial portfolio, we anticipate an ongoing
steady stream of tenant demand. At the same time, our
development pipeline will continue to be restocked with new
opportunities as we embark on new speculative schemes and
design and build projects.
We expect an equally keen investor market in 2016 and will
progress with the disposal of those assets from within our
portfolio which have reached maturity. Similarly, we will remain
acquisitive, seeking new opportunities to grow our land bank,
generate more income and ultimately convert into our ongoing
programme of development.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 10
Our marketplace
WE SEE OPPORTUNITY
As a regeneration specialist, our activities touch many sectors of
the property market. Our regional presence has defined the business
for the last 30 years. Our commitment to this marketplace has
continued to produce results during the year with our commercial
development pipeline now at 1.6m sq ft.
Market trends and focus*
COMMERCIAL
Market trends
The commercial marketplace is performing well,
particularly the industrial sector where there is good
demand across most UK occupational and investment
markets.
Despite a steady pick up in speculative development, the
supply constraints in the big box and multi-let sectors
show little signs of easing, which is forcing occupiers
and investors to broaden their search criteria and
target good quality stock in well-located second tier
and secondary markets.
Demand for prime office space in key regional business
hubs is strengthening, driven by the services sector,
although overall take up is constrained by the lack of
prime stock.
RETAIL
Market trends
Outside of Central London, the retail market remains
competitive as retailers are trading in an increasingly
crowded space, with the added challenge of having
to continually diversify their offering to meet the ever
changing demands of the consumer.
Technology, accessibility and the combination of
demand for a leisure offering and night time economy
RESIDENTIAL
Market trends
The planning process continues to prove challenging
nationwide.
Demand for new homes remains high with regional
house price inflation surpassing build cost inflation.
The Help to Buy initiative is making a positive contribution
to sales rates and underlining the need for affordable
properties to meet demand from first time buyers.
INVESTMENT
Market trends
The low interest rate environment, coupled with
relatively high and stable income yields of UK
commercial property, is still proving attractive to
new investors.
is growing in importance to satisfy customers’
continually evolving tastes.
This considered, there is steady improvement in
specific areas of the country. Secondary High Street
markets have yet to build notable momentum with
moderate demand.
The Private Rented Sector (PRS) is now the second
largest rental provider in England. 19% of all households
are renting privately whilst home-ownership has fallen
to 64%.
Investment activity has been aided by greater depth
and liquidity in the financing market, particularly in
the regions, targeting opportunities across prime and
secondary markets.
As we enter 2016, yield compression is anticipated to
continue and strong demand and high pricing expected
to persist.
* Source: Cushman & Wakefield.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Strategic Report 11
What does this mean for St. Modwen?
We will continue to add to our 1.6m sq ft
commercial property pipeline as we reach
completion of those projects in build.
Our programme of speculative
development will be progressed across
the UK to meet ongoing demand.
We will continue to maximise revenue
streams through our asset management
capabilities and remain acquisitive for new
opportunities that enable value creation
through recurring income and ultimately
development.
The mixed-use, well-located nature
of our predominantly secondary retail
portfolio, combining a Town Centre
offering with leisure, work space and
housing, has enabled us to remain
successful in this market and attract
retailers to our schemes.
We will continue to remain abreast of
consumer tastes and adapt our offering
accordingly to ensure maximum return
on investment across this marketplace.
Through our strong regional presence
we will continue to realise residential
development opportunities from
our own land bank as well as making
appropriate acquisitions that suit our
portfolio and expertise.
St. Modwen Homes will become more
dominant and take over from the
Persimmon joint venture as it draws to its
natural close by 2018.
Having already experienced good returns
from our two initial PRS schemes, we expect
to grow in this marketplace in 2016.
We will continue to capture this strong
investor interest through the disposal
of those properties within our portfolio
to which we can no longer add material
value, reinvesting the revenue raised back
into the business.
The disposal of retained property is not
confined to our mature assets. We also
release assets for sale to satisfy specific
investor demand in the marketplace.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 12
Our business model
WE SEE OURSELVES DIFFERENTLY
Our business model generates recurring revenue and
drives portfolio value. It is successful because it enables
us to reinvest continually into the business, ensuring a
steady stream of development opportunities and income.
INPUTS
INVESTMENT
RETURNS
OUTPUTS AND
OUTCOMES
Resources
• Employees
• Financial capital
• Land bank
• Buildings
Relationships
• Local communities
and tenants
• Partners and
joint ventures
• Supply chain
See Pages 16 and 17
Investment
Land bank
cleaning
Asset
development
Sales/rental
income
Acquiring
new assets
that present
opportunities for
value creation
Remediating
and reclaiming
brownfield land
in advance of its
redevelopment
Managed
through
regional teams
of planning
experts with local
knowledge and
in touch with
communities
Income secured
through
disposals of
mature assets
and retained
rental income
Creation of new
income streams
Outputs
New and
regenerated
commercial
spaces and
new homes
Outcomes
Regenerated
community
spaces, local
employment,
improved local
and national
economies
Shareholder
returns
Proven value-
added approach
promotes
NAV growth
Cash flow
Underpins
running costs
and reinvested
into new
property
OUR VALUES
We think long-term
We are innovative
We do what we say
St. Modwen Properties PLC Annual Report and Financial Statements 2015Strategic Report
13
Purpose and values
Our business model generates recurring revenue and drives
portfolio value. It is successful because it enables us to reinvest
continually into the business, ensuring a steady stream of
development opportunities and income. At its core sits our
corporate values:
• We think long-term
• We are innovative
• We do what we say
These values drive the business model, defining employee
behaviour and our approaches to development and
regeneration, ultimately resulting in value creation.
Land bank cleaning
We have a land bank of 6,000 acres, of which 90% is previously
used (or brownfield) land.
As the UK’s leading expert in regeneration, cleaning up or
remediating brownfield land is fundamental to everything we
do. In doing so, we have a positive impact on the environment
and we add value to this low-cost development resource which
in turn enables us to breathe new life into previously neglected
areas of the country through redevelopment and without the
need for significant financing.
New and existing industrial partners choose us as their
developer of choice as they trust our proven capability to
remove risk from any site through our expertise and innovation
in remediation, leaving them a legacy to be proud of.
Asset development
Once a site has been cleaned we start to realise our vision for
its redevelopment through our regional teams.
Our strong track record in securing consents to develop our
proposed schemes is testament to the skill of these regional
teams who, throughout the planning process, will actively
consult with the local community, the relevant local authorities
and associated agencies to ensure our proposals remain
sensitive to local need. In addition, our close contact with these
key stakeholders ensures our plans include the right balance
of housing, commercial space, supporting infrastructure and
community facilities.
Our skills in this area can be applied to small developments or
long-term and complex regeneration projects.
How we create income
Sales income
We retain acquired commercial properties or existing retail
centres for income as they await redevelopment. Once a
development is completed, we either retain it, run it for income
and then sell on once we can add no further material value,
or we release it immediately to satisfy investor demand within
the market.
Similarly, we sell remediated brownfield land with planning
permission to housebuilders at a significantly higher value than
initially acquired.
Rental income
Whether awaiting redevelopment or newly completed, our
individual properties are worked hard by our teams of highly
skilled asset managers via regular rent reviews, lease renewals
and careful property maintenance which delivers a strong
revenue stream for the business.
Furthermore, our innovative approach to development
enables us to assess our existing land bank for other sources
of revenue. This year we added a new income stream to
our portfolio by way of ‘Income Producing Residential’ which
includes revenue received from our properties held in the
Private Rented Sector (PRS) and through the newly created
‘St. Modwen Student Living’ business to manage retained
income from student accommodation at Bay Campus, Swansea
University. Both streams will increase as we grow into these
new areas of the business.
How value is returned to shareholders/reinvested
The revenue raised from rental income and property sales
either helps to underpin the running costs of the business or is
reinvested into new land or properties that are run for income
initially, before their ultimate redevelopment which in turn
triggers the cycle of the business model once more.
This underlying and recurring source of income reduces
dramatically our reliance on bank finance and third party
funding and provides us with a firm financial footing from
which to fund our own development opportunities and deliver
shareholder value.
Similarly, our regeneration activities in terms of brownfield
renewal, the creation of new communities and business
destinations as well as our investment in new opportunities
help to promote NAV growth and deliver strong
shareholder returns.
Outputs and outcomes
The business model enables us to invigorate once neglected
spaces, former industrial estates and disused brownfield land
and create thriving new communities, business parks and new
Town Centres that help to satisfy housing demand, create
new jobs and provide a boost to the immediate, regional and
national economy. It also helps to ensure that we put into place
the right mix of uses and supporting infrastructure and create
new places that can be enjoyed for generations to come.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 14
St. Modwen Properties PLC Annual Report and Financial Statements 2015
Strategic Report
Regeneration and remediation
WE SEE POTENTIAL
The clean up and renewal of previously used
(brownfield) land is central to the progress of
development in the UK and is fundamental to
St. Modwen’s business model. We are experts in
this field, having reclaimed thousands of acres of
brownfield land over the last 30 years.
Photo: Reclamation at Glan Llyn, site of the former Llanwern steelworks, Newport,
South Wales where we are now delivering a £1bn new community.
15
Particular remediation challenges at Longbridge included:
• East Works – preparation of development plateau at the
East Works site which required the transfer and placement of
approximately 120,000 tonnes of soil;
• Flight Shed – this site has been subject to a six-year long
hydrocarbon extraction, recovery and recycling exercise to
remove a plume within former tunnels and the surrounding
soils; and
• East Works (northern area) – this site was prepared to
include a cut off wall to protect the site from surrounding
impacted areas and has since been redeveloped into a
housing scheme under our joint venture with Persimmon.
This meticulous approach to remediation has been
instrumental in the transformation of this brownfield site
from a former car plant to a thriving new community for this
part of Birmingham which now comprises a Town Centre,
£66m Bournville College, Technology Park, employment centre,
residential development and two new parks.
Photo: Remediation at the Longbridge site.
Corporate Social Responsibility Pages 42–45
Cleaning up, recycling and reusing this previously developed
land goes hand in hand with safeguarding the countryside and
preserving natural habitats. It also helps to tackle the blight of
dereliction by transforming poor quality sites into flourishing
new communities and successful business destinations that
trigger future economic growth.
Our expertise in this area rests with our team of highly
skilled construction experts who work closely with the
Environment Agency and other associated Government
regulators to ensure that we employ the latest and most
sustainable, environmentally responsible techniques across
our remediation and construction projects. In doing so, we
pay close attention to energy consumption, use of sustainable
resources, minimising waste and reducing our consumption of
raw materials.
Across our developable land bank there are currently hundreds
of acres of land in the process of being remediated, reclaimed,
remodelled and redeveloped. The following case study brings
our rare skill in this fundamental area of regeneration to life.
Longbridge, Birmingham
Remediation works commenced on the 468 acre Longbridge
site in 2001. At the time, it comprised four main sub-sites
namely North Works, South Works, East Works and West
Works, with two smaller sites known as Flight Shed (formerly an
engine test and fuel storage facility) and Cofton Works. All were
located around the (still operational) Shanghai Automotive
works. Phased remediation works were agreed with the
Environmental Authorities in line with an evolving masterplan
and programme.
The main elements of the remediation strategy included:
• removal of any hydrocarbon impacted material, including soil
and ground water;
• use of biophysical techniques to clean up soil in compliance
with risk-based remediation targets agreed with the
Environmental Authorities;
• monitoring and validation of shallow and deep
groundwater quality;
• careful monitoring of dust, noise, odour and surface
water levels;
• placement of remediated soil to an engineering specification;
• regular samples taken of remediated materials to
demonstrate targets have been achieved;
• installation of gas monitoring boreholes and subsequent
monitoring to confirm any preventative measures required
for future development; and
• production of reports for approval by the Environmental
Authorities to support planning.
For more information on our CSR activities
please see our February 2016 CSR booklet or
visit: www.stmodwen-csr.co.uk
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45
16
Resources and relationships
WE SEE PROSPECTS
Our long lasting partnerships with key stakeholders
are pivotal to the success of our regeneration activities.
These relationships are complemented by a key set of
resources, and together they enable us to create value
and generate strong returns.
Resources
Employees
Our employees are the driving
force behind our success and
we aim to attract, develop and
retain the best people. Across all
disciplines we employ a highly skilled
team to safeguard our values and
deliver excellent returns whilst
protecting assets.
Financial capital
Our recurring income stream
underpins the running costs of the
business. Whilst we maintain strong
relationships with key banks, we are
not reliant on bank finance and have
diversified our sources of funding
through equity and debt issues.
Land bank
Our £1.7bn property portfolio
is managed across our 6,000
acre land bank. At any point in
time we are continually adding
value to it through remediation,
planning, development, disposals
and new acquisitions.
Buildings
Where possible we seek to
reuse existing buildings during
development. However, where
demolition is necessary we will
reclaim and recycle as much
existing material as is possible to
reduce both cost and the impact
on the environment.
Relationships
Local communities
and tenants
We seek to maintain good working
relationships with our extensive
tenant base through our regional
and local asset management teams.
We engage with communities
throughout development to ensure
we remain sensitive to the impact of
our schemes.
Private sector and jvs
We have a number of long-term
relationships with private sector
partners either in joint venture
or through land acquisitions or
development agreements. Our
core values help to maintain these
relationships from which we seek to
secure maximum mutual value.
Public sector and regulators
We work with local authorities,
and public sector organisations
at a regional level throughout the
lifecycle of an asset. We also work
closely with the HSE, Environment
Agency and other Government
regulators to ensure best practice is
met at all stages of delivery.
Supply chain
Our supply chain partners are
required to share our core principles
of delivering to the highest quality,
on time and within budget. Many
of our contractors work with us on
a number of schemes, enhancing
mutual understanding and trust.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Strategic Report 17
Bay Campus, Swansea University
Longbridge, Birmingham
Professor Iwan Davies,
Pro-Vice Chancellor, Swansea University
Sacha Berendji, Director of Retail,
Marks & Spencer
" The Bay Campus has been recognised as among the most
ambitious projects in the UK higher education sector for decades.
" Its realisation, in partnership with St. Modwen, heralds a new era
and new status for Swansea University which is transforming
into a global exemplar of a 21st Century University and one that
promotes and champions the student experience.
" St. Modwen has been fundamental in adopting this vision and
enabling the University to deliver the first stage of this ambitious
development on time and on budget. This has been achieved
through the exceptional and dedicated project management
of St. Modwen’s senior team and the relationship with the
construction supply chain that they have managed throughout
the process.
" In addition, St. Modwen has respected the University’s policy
in promoting regional opportunities wherever that is possible.
The impact has been 170 contracts being awarded within Wales
and almost 7,000 jobs during the 26-month construction period."
" At 150,000 sq ft, M&S Longbridge is one of our biggest
stores. The vibrancy and connectivity of the area, plus the
diverse, growing population made it the perfect location and
St. Modwen's ongoing regeneration of Longbridge is establishing
it as a truly mixed use model of sustainability."
Richard Burden,
MP for Birmingham Northfield
" For a hundred years, Longbridge was not only a byword for car
making – one of the defining industries of the twentieth century.
It has also been central to the identity of this part of Birmingham;
part of the its culture and the way people thought about
themselves and their communities.
" So the collapse of the former MG Rover plant in 2005 was a
huge blow, not only to the economy but to the self-confidence
of local people. Therefore redeveloping the site has been about
rebuilding an identity and a community’s self-confidence as much
as the massive physical scale of the challenge involved.
" St. Modwen’s – and St. Modwen Homes’ – role in taking this
forward has been and remains pivotal – from the reclamation of
acres upon acres of industrial land to the construction of new
homes, a town centre and the attraction of new businesses.
The developer has also been pivotal in proactively engaging with
local people both directly and through their representatives.
" There is still a long way to go until the project is complete but it is
important to recognise how much the developer has contributed.
It is good to have them as partners on Longbridge’s climb into
the future."
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 18
Our strategy and KPIs
WE SEE VALUE
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…
Our broad regeneration expertise and land bank
of 6,000 acres provides us with the flexibility to
move with market demands and pursue those
opportunities that generate the greatest value at
any one time.
…through a
focus on long-
term significant
added value…
We have the financial strength and vision to
acquire sites opportunistically that have clear
potential to benefit from our specialist value-
adding skills and which can generate profits
from commercial and residential development at
every stage of the property lifecycle.
…while
protecting
our assets
As the UK’s leading regeneration specialist we strive
to adopt only the most sustainable approaches to
regeneration and development. We operate from
a firm financial footing, carefully monitoring cash
flow and debt, whilst our development activities are
underpinned by a reliable and recurring income
stream that enables us to fund our cost base and
progress our longer-term regeneration projects at
low risk and in a profitable manner.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Strategic Report 19
Secure excellent
returns...
Objectives
Progress
Next steps
We have experienced an exceptional year,
achieving key value-added milestones
across our £1.7bn property portfolio,
resulting in a valuation gain of £201.7m.
Most notably for all major projects: Phase 2
of Longbridge Town Centre completed,
Bay Campus for Swansea University opened
and NCGM reflected on the Balance Sheet.
Net asset value has continued to grow with
gains predominantly secured through our
own asset management initiatives, handled
in each region and including remediation,
planning gains, rental growth and strategic
disposal of mature assets.
Against the backdrop of some economic
uncertainty, our prevalence in the regions,
our strong financial position and the
diverse nature of our UK-wide property
portfolio enables us to avoid overexposure
to a single scheme, tenant or sector and
safeguards our strong financial position.
Continue to grow development profits and
generate valuation gains through planning
gain, strategic acquisitions and identifying
new opportunities from our existing
6,000 acre land bank.
Continue to promote and enhance the
Group’s inherent value and long-term
prospects.
Develop and grow our net asset base so
that dividends can grow in line. Continue to
secure profitable development to generate
consistent future returns.
Link to remuneration
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.
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.
Principal risks
Market/economic changes affect market
confidence and in turn, property and equity
valuations.
Changes to local and national planning
processes could adversely impact our
strategy by limiting our ability to secure
viable permissions and/or removing
competitive advantage.
The management of development is a
complex process, with successful delivery
dependent on our expertise.
Key performance indicators
PROFIT BEFORE ALL TAX (£m)
EQUITY NET ASSETS PER SHARE (p)
DIVIDEND PAID (p)
258.4
413.5
5.04
325.1
278.8
231.8
250.8
4.13
3.75
3.41
3.10
135.4
51.7
52.8
77.2
2011
2012
2013*
2014*
2015
2011
2012
2013*
2014*
2015
2011
2012
2013
2014
2015
* Restated.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 20
Our strategy and KPIs (continued)
…through a focus on long-term
significant added value…
Objectives
Progress
Next steps
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.
Selective and capital efficient acquisitions.
Continue to adopt the latest, most
sustainable, development and
remediation techniques.
Continued recycling of assets with
limited opportunity for further significant
added value. Capitalise on heightened
investor interest.
Continue to retain, recruit and motivate
highly-skilled people throughout the
business and implement an ongoing
programme of staff training and
management development.
We continue to acquire brownfield sites
at low cost and prepare for development
through remediation and securing planning
permissions which in turn realises value.
We have completed a number of strategic
acquisitions during the year, predominantly
in the North West, including Kirkby Town
Centre for £35.8m and our appointment
as development manager on the 200 acre
MoD Ashchurch site. In this way, we have
added value to the portfolio in terms of
securing immediate rental income and
presenting good future development
potential.
The business has grown throughout the
year, expanding each regional team and
St. Modwen Homes through a number
of senior appointments. The Group's
management team has grown by 5% to
63 (2014: 60), with all having completed a
comprehensive development programme
during the year.
The CSR Steering Group is now established
and all 10 objectives set at the start of the
period either exceeded, achieved or on
target to achieve.
Principal risks
Link to remuneration
Unforeseen or failure to manage long-term
environmental issues relating to brownfield
or contaminated sites.
Inability to recruit, develop and retain staff
with the right skills and expertise, resulting
in disruption/loss of intellectual property.
Employment of inadequate practices to
remediate contaminated sites results in
reputational damage.
Key performance indicators
LAND BANK (DEVELOPABLE ACRES)
5,762
5,801
5,943
5,873
6,012
MANAGEMENT WITH MORE THAN
3 YEARS’ SERVICE (%)
75
78
82
84
76
Executive directors’ individual objectives
for the year’s annual bonus arrangements
included people-related targets and
CSR activities.
ASSET RECYCLING: DISPOSALS AS A PROPORTION
OF PROPERTY ASSETS AT THE START
OF THE YEAR (%)
22
21
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
16
12
9
St. Modwen Properties PLC Annual Report and Financial Statements 2015Strategic Report 21
…while protecting
our assets
Objectives
Progress
Next steps
Maintain an appropriate capital structure
to meet our future development and
funding needs.
Generate cash-backed income streams
to substantially cover the running costs
of our business.
Promote positive Group-wide
culture towards safety, health and
environmental matters.
Manage existing finance facilities to support
ongoing growth.
Continued management of investment
and development programme to maintain
appropriate debt ratios.
Continue to enhance levels of recurring
income through robust asset management.
Actively seek to de-gear and sell more
assets into a receptive investment market.
Continue to attain or exceed 2016 health
and safety related CSR objectives.
We continue to innovate and secure value
from our existing land bank with new
value-added initiatives such as ‘income
producing residential’ (PRS and St. Modwen
Student Living) which generates substantial
recurring income.
Recurring income levels are enhanced by
retained income, strategic acquisitions and
robust asset management.
No facility refinancing is expected before
2018, with refinancings staggered between
2018 and 2021.
Sufficient headroom now exists with
our corporate facilities to enable us to
meet future development and funding
requirements. At the date of reporting we
have £554m of facilities against year-end
net borrowings of £443m.
Accident frequency rates for our
development sites and for St. Modwen
Homes significantly outperformed the
industry benchmark in the year.
Principal risks
Link to remuneration
Reduction in availability of funding, resulting
in lack of liquidity that impacts borrowing
capacity and reduces saleability of assets.
Failure to anticipate market changes
through poor market intelligence leads
to selection of inappropriate schemes,
ultimately impacting commercial and
residential profit levels.
Safety, health and environment
culture leads to a major incident,
resulting in financial penalties and/or
reputational damage.
Failure to monitor major projects effectively
leads to higher costs/reduced margins.
Key performance indicators
ADJUSTED GEARING* (%)
79
71
54
48
47
Gearing levels were a corporate
performance measure of the annual bonus
arrangements for executive directors in
the year.
COMMITTED FACILITIES TO COVER DRAWN DEBT
(MONTHS)
55
43
36
34
22
2011
2012
2013
2014
2015
RATIO OF RENTAL AND OTHER INCOME
TO OPERATING COSTS INCLUDING INTEREST (%)
SEE-THROUGH LOAN-TO-VALUE (%)
97
92
86
88
91
39
41
33
31
30
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
* Adjusted gearing is the ratio of net borrowings
(excluding finance leases) to net assets. See note 2
to the Group Financial Statements.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 22
Commercial land and development
WE SEE JOB CREATION
Our commercial land and development portfolio
has fared well, with our major projects experiencing
an exceptional year in terms of delivery and
income generation. Overall, our programme
of commercial development is now at 1.6m sq ft
and we will continue to add new opportunities
to the pipeline as schemes complete.
Photo: Remediation works at Coed Darcy, the site of the former Llandarcy Oil Refinery,
Neath Port Talbot, South Wales where we are now delivering a £1.2bn new community.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Strategic Report 23
Commercial development highlights:
• Letchworth Industrial Estate, Letchworth – commenced as
a speculative development in January 2015, this 90,000 sq ft
industrial estate is now complete and fully let to two major
operators; Tyco and Titan Logistics (a DPD (UK)-franchisee)
have leased 75,000 sq ft and 15,000 sq ft, respectively.
Generating an annual rental income of £680,000, the
investment has been sold post year-end at a yield of 5.2%.
• Whitley Business Park, Coventry – following a land sale
and agreement to build a 214,000 sq ft regional distribution
centre for Travis Perkins, for which works are due to complete
in Spring 2016, just seven acres now remain on this 93 acre
site which is under offer for sale to Jaguar Land Rover.
• Access 18, Avonmouth – further to securing a pre-let
with parcel distribution firm ‘MyHermes’ for a 43,000 sq ft
warehouse which was sold to Associated British Foods for
£5.6m at a yield of 5.9%, Kent Foods took a 37,000 sq ft
speculative unit as an owner-occupier for £3.6m. On the back
of these two transactions we are progressing with a further
68,000 sq ft of speculative space.
• DPD (UK) – three distribution centres were successfully
developed, totalling 189,000 sq ft of space, for express
delivery service DPD (UK) at our sites at Skypark in Exeter,
Etruria Valley in Stoke-on-Trent and Stonebridge in Liverpool.
The three assets were subsequently sold in two separate
transactions at yields of 5% and 5.3%, both completed upon
tenant occupation.
• Technology Retail Park, Rugby – this 100,000 sq ft retail
park was already 100% pre-let to major retailers including
Homebase, Wickes, Bensons for Beds and Pets at Home
before construction started in 2014. Prior to works
completing it was sold to Aberdeen Asset Management for
£17.4m, reflecting a net initial yield of 5.75%.
• Screwfix, Stoke-on-Trent – having extended an existing
320,000 sq ft distribution hub to 630,000 sq ft for this national
retailer of trade tools, accessories and hardware products,
within two months of completion the asset was sold to the
Prudential Assurance Co. Ltd for £18.1m.
Outlook
We anticipate sustained activity in the commercial sector
during 2016 and we will continue to build on our 1.6m sq ft
commercial development pipeline to meet ongoing
regional tenant demand.
Commercial land
Commercial land and development makes up 9% of the
overall portfolio by value, representing £152m. Over the last
12 months, with a view to adding value to our commercial
development pipeline, we have continued to secure sites,
predominantly brownfield, at low cost and prepare them for
development through remediation and planning.
Once an asset or new community is built, we either dispose
of it or retain it as a long-term income producing asset. In line
with the Company's strategy, many of our assets have further
development potential.
During the period, we have secured a number of commercial-
led brownfield land opportunities.
Highlights:
• Kirkby, Liverpool – an existing Town Centre with potential
for the development of 120,000 sq ft of new retail and leisure
space including a foodstore which, subject to planning, could
start on site in 2017.
• Brentwood, Essex – a strategic 58 acre site, situated at
junction 29 of the M25, for which a development agreement
was signed with the landowners in July 2015. The site will
now be progressed through the planning system and
then developed into 1m sq ft of industrial, logistics and
office space.
• Formby, Merseyside – a 40 acre site to be progressed
through planning with a view to developing 100,000 sq ft of
retail, 350,000 sq ft of new employment space and enhanced
sports facilities.
Commercial planning and development milestones
We are active across our 6,000 acre land bank at every stage
of the development cycle, and throughout the year we have
continued to secure planning approvals for commercial-led
schemes which have enabled us to add to our pipeline of
development and delivery.
Planning highlights:
• Burton Gateway, Burton upon Trent – planning consent
has been secured for an additional 230,000 sq ft of
distribution and industrial space at this key site for East
Staffordshire, taking the total amount of planned employment
space to 1m sq ft. Construction works began speculatively
on the first warehouse of 87,000 sq ft in the second half of
the year.
• Centurion Park, Tamworth – plans to build 200,000 sq ft of
industrial accommodation have been granted permission by
North Warwickshire Borough Council. Works to a 53,000 sq ft
unit started speculatively in August 2015; this is now under
offer to a tenant for occupation in June 2016. Once complete,
works to another speculative unit, comprising 153,000 sq ft of
space, will commence.
• Nunnery Park, Worcester – planning permission has been
granted by Worcester City Council for a 20 acre mixed-use
development which provides up to 160,000 sq ft of business
and industrial units as well as a car showroom, public house
and ‘drive-thru’ restaurant.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 24
Residential
WE SEE COMMUNITIES
The residential part of our business is a core element
of our strength in the regions. We have continued
to grow in this area due to our ability to realise
development opportunities from our own land bank
and our skill in adding value through planning.
Photo: Meon Vale, a new £500m Warwickshire community.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Strategic Report 25
We acquire potential residential land at low cost and add to its
value through remediation and securing planning permissions.
Residential land and development is now the largest part of the
portfolio, by value, representing 46% or £772m. To date, we
have realised this value through three routes to market:
• Residential land sales
• St. Modwen Homes
• Persimmon joint venture
This year we added another route to market, namely ‘Income
Producing Residential’ which demonstrates our ability to
increase our flow of development profits and create a further
source of recurring income from our residential land bank.
There are two facets to this: retained income from student
accommodation at the Bay Campus managed by the newly
established St. Modwen Student Living business and our
first two PRS developments at Wembley Central and Rugby.
Combined, these represent a further £106m, or 6% of the
wider portfolio by value.
Performance – Residential land
Our ongoing ability to secure planning permissions for
residential land has continued this year and 80% of our
portfolio (over 26,000 plots) has either planning permissions
or allocations within local plans. Overall, we have increased the
size of our residential portfolio to 32,516 plots (2014: 28,790)
as we continue to top-up this part of the land bank with
new opportunities.
Highlights:
• MoD Ashchurch, Gloucestershire – VINCI St. Modwen (VSM)
was appointed as Development Manager by the Defence
Infrastructure Organisation (DIO) for the regeneration of MoD
Ashchurch. This 200 acre site provides an opportunity to
deliver a new mixed-use community comprising up to 1,900
new homes and around 15 acres of land for employment
use. VSM will work closely with DIO to fund, manage and lead
the development.
• Whittington Road, Worcester – an 18.5 acre site from the
Department for Environment, Food and Rural Affairs (DEFRA).
Once planning permissions are secured we either retain
the site to develop ourselves or we sell on to third party
housebuilders. This year we sold or agreed for sale 70.1 acres
of land securing £87m of value.
Highlights:
• Millbrook Park, Mill Hill – the sale of 6.9 acres of land to
Taylor Wimpey and Prime Place (part of Wilmott Dixon Group)
for a total of £43m.
• Pirelli, Burton upon Trent – the sale of 16.5 acres of land to
Persimmon for £8.6m.
• Pye Green, Worcestershire – the sale of 17.4 acres of land
to Barratt Homes for £8.2m.
Planning consents achieved – highlights:
• New Covent Garden Market, London – for 3,019 homes
(600 affordable) and 100,000 sq ft of office and retail space,
plus a 500,000 sq ft new market.
• Meon Vale, Warwickshire – for 550 homes at this 479 acre
leisure-led development in addition to planning already
obtained for 500 homes, of which over 230 have been
developed by St. Modwen Homes and Persimmon.
• Hendrefoilan, Swansea – for up to 300 homes on this
site which is currently accommodating an existing Swansea
University student village.
Applications submitted – highlights:
• Wolverton Works, Milton Keynes – for a mixed-use
development including 375 homes on this rail-related site.
• Leegate, London – for 229 homes as part of a retail-led
mixed-use development.
• Locking Parklands, Weston-super-Mare – for an additional
165 homes at this 200 acre site which, when complete, will
comprise 650,000 sq ft of employment space, 1,450 homes,
a district centre including retail, library, school and additional
leisure and community facilities.
Performance – Residential development
We have experienced a year of strong growth across our
residential business, with the resulting development translating
into an overall profit increase of 21% to £29m (2014: £24m) of
which St. Modwen Homes contributed £12m (2014: £8m) and
the Persimmon joint venture £17m (2014: £16m). Sales rates
remain strong with a total of 967 house completions achieved
for the year (2014: 820) comprising 315 for St. Modwen Homes
(2014: 258) and 652 for the Persimmon joint venture
(2014: 562).
We expect to maintain performance in 2016 which will be
a transitional year as St. Modwen Homes becomes more
dominant and replaces the profits from the Persimmon joint
venture to give sustainable future profit levels.
St. Modwen Homes
At the core of St. Modwen Homes’ success is the competitive
advantage that our land bank provides. We are able to
use our extensive expertise in planning from across the
business and select those sites that are best suited to the
St. Modwen Homes brand. As a result, we invest by providing
a good quality product which, in comparison with the average
new home, benefits from larger gardens, greater ceiling heights
and a higher specification.
St. Modwen Homes continues to grow and is now operating
across the UK with 13 sites under development and
five due to start on site in 2016. Those currently under
development include:
• Gregory’s Bank, Worcestershire – a scheme of 165 homes,
all under development by St. Modwen Homes which has
already completed 76 units.
• Edison Place, Rugby – part of a large regeneration scheme
being carried out by St. Modwen and comprising a new
college, retail park and associated facilities, along with a total
of 600 new homes of which St. Modwen Homes is delivering
350 and to date has completed 132 units.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 26
Residential (continued)
Photo: Radley Park, Liverpool, a St. Modwen Homes scheme of 161 homes.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Strategic Report 27
We will continue to monitor this emerging marketplace closely
and selectively designate those sites that are best suited to
extract maximum value.
• Swansea University, Student Accommodation – coinciding
with the opening of the Bay Campus in September 2015,
we established ‘St. Modwen Student Living’ specifically to
manage the student accommodation which by 2017 will
comprise 2,000 rooms. This area of the business is generating
£1.8m of annualised net income which will continue to grow
as the future phases of student accommodation come
on line. At the same time, these new phases will provide
additional scope for further revaluation gains.
Outlook
We expect a continued focus on the regions next year
with some opportunities in the London market also coming
through. In terms of development activity, we expect
St. Modwen Homes to further expand and for 2016 to
be a year of transition during which St. Modwen Homes
becomes more dominant and replaces the profits from
the Persimmon joint venture to give sustainable future
profit levels.
There is still strong demand for new homes to be built
across the UK, consequently we expect continued
steady demand from third party housebuilders for our
residential land.
Income Producing Residential, our newest route to
market, will expand as we grow the number of sites for
the PRS business and as Swansea University welcomes
new students to the next phases of accommodation at
Bay Campus.
Overall, we anticipate continued growth of the residential
business, good profit levels and ongoing delivery across this
segment of our portfolio.
• Littlecombe, Dursley – part of the broader redevelopment
of the former Lister Petter factory, this 92 acre scheme
has planning for 40 acres of public, open green space,
150,000 sq ft of employment space and 450 homes of
which St. Modwen Homes is delivering 258. To date,
St. Modwen Homes has completed 88 homes.
The five sites to come on stream during 2016 include:
• Meon Vale, Warwickshire – for 258 new homes as part
of this 479 acre leisure-led, mixed-use community of 1,050
homes, 800,000 sq ft of commercial accommodation, primary
school, a community centre, gym and leisure hub.
• Longbridge East, Birmingham – for 175 new homes at
this 468 acre major regeneration project which has planning
permission for a total of 2,000 homes. This latest housing
phase is in addition to the 360 homes already delivered on
site and will add to this growing community which already
comprises 750,000 sq ft of commercial space, including a
new Town Centre, the £66m Bournville College, Longbridge
Technology Park and Cofton Centre, and the £2m Austin Park.
• St. Andrew’s Park, Uxbridge – for 71 homes at this 110 acre
former RAF site. Once complete, this new community will
comprise 1,340 new homes, 2,000 sq ft of commercial space,
a theatre and other key community facilities including a new
40 acre park for Greater London.
Persimmon joint venture
Our joint venture with Persimmon is now at its peak with
all eight sites and the majority of the 2,300 plots under the
agreement now in development. This partnership will reach
its natural end by 2018 with the first sites reaching completion
during 2016.
Income Producing Residential
This is the latest route to market for our residential portfolio
and underlines our ability to extract value from our existing
land bank, embrace new markets and produce a recurring
stream of income. It currently comprises two key areas:
• Private Rental Sector (PRS) – we have been monitoring
this growing marketplace closely over the last two years and
have started to realise private rental opportunities from our
existing portfolio. We have already delivered and let PRS
properties at Wembley Central, London and at Edison Place,
Rugby where we have completed the leasing of a total of
64 apartments which are generating an annualised income
of £0.7m.
We are progressing other opportunities in this sector, having
recently submitted a planning application for 77 private
rented apartments at Edmonton Green, London and we
plan to commence construction of up to 200 apartments at
St. Andrew’s Park, Uxbridge during 2016, for which we have
received detailed planning permission.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 28
St. Modwen Properties PLC Annual Report and Financial Statements 2015
Strategic Report
Income producing properties
WE SEE INCOME
Our asset management capabilities continue to
deliver strong rental income and we are experiencing
a steady stream of tenant demand for our existing
space. We continue to take advantage of heightened
investor demand by disposing of properties to which
we can add no further value. The revenue generated
from these activities helps to underpin the running
costs of the business and provides a firm financial
footing from which we operate.
Photo: Kirkby Town Centre, acquired for £35.8m in October 2015.
29
Performance
Representing 45% by value of the total portfolio, our income
producing properties have grown in value this year by 37%
to £768m (2014: £562m). This growth reflects the strategic
acquisitions that we have secured during the period which
include a regional Town Centre and industrial opportunities
across the UK.
Growth can also be attributed to a number of newly developed
assets which we have retained for income, all adding to the
annual rent roll, including Wembley Central which completed in
March 2015.
We manage all of these assets on behalf of over 1,700
occupiers for which there have been negligible tenant
administrations in the year. Any tenant vacations have been
more than offset by new occupiers with new lettings of £13.1m
(2014: £5.3m), all contributing to an annualised gross rent roll
of £58.4m (2014: £45.4m).
Income highlights
• Student Accommodation, Bay Campus, Swansea
University – the £450m Bay Campus opened in September
2015 welcoming 917 new students. Phase 2 opened in
January 2016 and Phase 3 will open in September 2017,
bringing the total number of student rooms to 2,000.
Currently this asset provides an annualised net income
of £1.8m.
• Longbridge Town Centre, Birmingham – Boots, Poundland
and Mountain Warehouse have taken 17,500 sq ft of space
next to the 150,000 sq ft Marks & Spencer store in Phase 2
of Longbridge Town Centre. The High Street is also filling
up with new lettings to EE, Countrywide Estate Agents and
Tailor Made, all contributing to an annualised rental income
of £3.2m.
• Wembley Central, London – the redevelopment of this
prominent Town Centre scheme completed in March 2015.
It comprises an 86-bedroom Travelodge and 120,000 sq ft of
new retail and leisure space leased to major national retailers
including TK Maxx, Tesco, Sports Direct, Iceland, Costa and
Argos. This asset is now generating an annualised rental
income of £2.2m.
Acquisitions
We have remained predominantly acquisitive during the
year, adding a number of key opportunities to the portfolio,
particularly in the North West.
Highlights:
• Kirkby Town Centre, Liverpool – comprising 400,000 sq ft of
retail and leisure space leased to 80 tenants and providing an
immediate gross rental income of £3m, we acquired this site
from Tesco, along with 80 acres of residential development
land and the opportunity to develop up to 120,000 sq ft of
new retail space, for £35.8m, reflecting a net initial yield of 9%
on the main Shopping Centre.
• Moorgate Point, Liverpool – comprising 445,000 sq ft
of industrial and office accommodation with 6.5 acres of
development land, this new asset provides an immediate
gross rental income of £1.3m. It was acquired from a private
vendor for £10m.
Disposals
We continue to assess our portfolio of retained assets for the
value they bring to the business. This year we disposed of a
number of properties which we developed for income or to
which we could no longer add any material value, including:
• Cranfield University Technology Park – this 110,000 sq ft
business park, almost fully let to over 60 businesses, was sold
in two separate transactions for a total of £16.5m.
• Eccles, Greater Manchester – this 22.6 acre site was fully let
to Akcros Chemicals and was sold to Friends Life for £8.27m,
reflecting a net initial yield of 7.4%.
Outlook
We expect continued activity in the investment market and
we will seek to dispose of those assets to which we can no
longer add value, and recycle the income to secure new
opportunities across the business. Equally, we will remain
acquisitive for the right opportunities in 2016.
We predict a steady occupational market during 2016,
however rental income will continue to grow as the
business benefits from those rental streams that have
come on line towards the end of the period, including
income producing residential opportunities such as
Swansea University, as well as Longbridge and Kirkby
Town Centres.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 30
Financial Review
“Growth has been delivered during the year
and we have achieved significant financial
milestones across all major projects.”
ROB HUDSON
Group Finance Director
Overview
The Group has had an exceptional year, achieving significant
financial milestones across all of its major projects and
culminating in the delivery of a record set of results, with profit
before all tax increasing by 91% to £258.4m (2014: £135.4m).
Our major project, New Covent Garden Market (NCGM),
achieved unconditional status in April 2015 and has played a
significant part in these results, with the Group share of the
valuation gain on initial recognition contributing £127.4m to a
total revaluation gain of £201.7m (2014: £93.5m).
Growth has also been delivered during the year from
strong underlying performance in the business through the
steady improvement of the regional property markets and
our ability to perform development, investment and asset
management actions.
As a result, our NAV per share increased by 27% to 413.5p over
the year (2014: 325.1p), and the value of our UK-wide property
portfolio (on a proportionally consolidated basis including share
of joint ventures) increased by 34% to £1.7bn.
The year can be defined as one of net investment, with
borrowings increasing as a result of some major strategic
transactions including the £35.8m acquisition of Kirkby Town
Centre, Liverpool, together with the retention of Longbridge
Town Centre Phase 2 and the student accommodation at Bay
Campus, Swansea University.
We cover our recurring overheads and interest costs
substantially with revenue from our income producing
portfolio. In the year, coverage of 91% (2014: 88%)
demonstrates a good rate, and would be over 100% excluding
direct residential overhead costs. The retention of major
completed developments in the second half of the year,
including the Bay Campus student accommodation and the
second phase of Longbridge Town Centre (incorporating Marks
& Spencer and additional retail), provides a platform for further
increases to net rents in 2016 and continued improvement to
our coverage of business running costs.
PROFIT BEFORE ALL TAX
£258.4m
+91%
NET ASSET VALUE (PER SHARE)
413.5p
+27%
St. Modwen Properties PLC Annual Report and Financial Statements 2015Strategic Report 31
Rental and recurring income
Net rental income increased to £38.7m (2014: £37.1m), largely
driven by retained income secured from our development
portfolio. In particular, the last quarter of the financial year saw
the completion of the first phase of the Bay Campus student
accommodation for Swansea University and the completion of
the second phase of Longbridge Town Centre (incorporating
Marks & Spencer and additional retail). Swansea University
contributes an annualised net income of £1.8m and
Longbridge Phase 2 contributes an additional £2.2m of
annualised net rental income.
The reduction in rent roll from the disposal of Cranfield
University Technology Park has been offset by a number of
acquisitions, most notably Kirkby Town Centre towards the
end of the financial year, which provides an immediate gross
rental income of £3m. Together, these actions have increased
our gross rent roll in the year to £58.4m (2014: £45.4m), and
will provide a source of continued growth in our reported rents
for 2016.
Occupancy levels remain stable at 89% and average lease
length has improved to six years (2014: five years). A degree
of void period is important for the Group as we prepare our
retained income producing properties for redevelopment.
Property profits
Property profits from development for the full year have
increased by 31% to £67.4m (2014: £51.3m). This comprises:
• £34m (2014: £22m) from commercial development, including
£5m from Longbridge Town Centre, as our pipeline converts
into realised profits;
• £4m (2014: £5m) from the completion of 775,000 sq ft of
academic buildings as part of the Bay Campus development
at Swansea University; and
• £29m (2014: £24m) from residential development which
provides positive, tangible returns and improved levels of
development. It is underpinned by the continued growth of
St. Modwen Homes which will offset the natural wind down
of the Persimmon joint venture over future years, giving a
sustainable level of profits.
Presentation of financial information
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 between the numbers reported
below and statutory numbers) in note 2 of the Group
Financial Statements.
Income Statement
Our 6,000 acre land bank sits at the heart of everything we
do, enabling us to create long-term added value and generate
strong returns from our £1.7bn portfolio of property assets,
amongst which our income producing properties represents
45% by value.
These properties are assets that we own and manage, both
directly and through joint venture arrangements, for income
whilst we progress the sites through the planning process
and ultimately redevelop and regenerate. We also retain a
proportion of our newly developed commercial assets for
income, until such time we feel it is right to dispose and reinvest
the proceeds into acquiring and delivering new opportunities.
Year ended
30th November
2015
£m
Year ended
30th November
2014
£m
38.7
67.4
4.2
(26.5)
83.8 (+22%)
(20.5)
63.3 (+39%)
38.6
127.4
35.7
(6.6)
37.1
51.3
3.6
(23.2)
68.8
(23.1)
45.7
35.9
–
57.6
(3.8)
258.4 (+91%)
135.4 (+68%)
97.9p
53.8p
Profit and loss
Net
Rental Income
Property Profits
Other Income
Overheads
Operating
Profit
Interest
Trading Profit
Added Value
Valuation Gains
NCGM
Valuation Gain
Market
Valuation Gain
Other
Finance Charges
Profit Before
All Tax
Earnings
Per Share
The above figures are stated on a proportionally consolidated basis including share of joint
ventures. Please see note 2 to the Group Financial Statements.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 32
Financial Review (continued)
Overheads
Ongoing growth in the business has been supported through
investment in additional staff to service both the development
pipeline and St. Modwen Homes. This brings our average
headcount to 309 full-time equivalent employees (2014: 287).
Our recruitment drive, coupled with the bonuses paid for
successful business delivery, means that administrative
expenses for 2015 increased to £26.5m (2014: £23.2m).
Finance costs and income
Finance costs have reduced during the year, despite average
debt levels increasing over 2014 with increased investment
activity. We are still experiencing the benefit of the extensive
refinancing activity carried out during 2014. This, together
with increased investment at lower marginal interest rates,
has reduced our weighted average cost of borrowing to 3.9%
(2014: 4.8%). At the year-end, 48% of our net debt position
was fixed. This proportion will increase as the convertible bond
reverts to fixed rate in March 2017. Net interest charges have
reduced to £20.5m (2014: £23.1m).
Trading profit
Overall we have achieved a trading profit increase of 39% to
£63.3m (2014: £45.7m), this strong result being driven by our
management actions.
During 2016, we will continue to focus on generating value
across our land bank and ensuring that our rental and
recurring income underpins the running costs of the business.
Investor appetite continues to be strong for commercial
property and we will dispose of mature assets selectively
and seek to reinvest in additional added value opportunities.
Combined with a residential market that continues to perform
at sustainable levels and our active management activities,
we anticipate further good prospects to grow the net asset
value of the Group.
Basis of valuation
All of our investment properties are independently valued
every six months by our external valuers Cushman &
Wakefield (formerly DTZ) and Jones Lang LaSalle (for NCGM
only). Our 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 expected increases but discounts are applied to reflect
any future uncertainties. In accordance with accounting
standards, valuation movements are reflected as gains or
losses in the Income Statement. Where appropriate, we
will also independently assess our work in progress for any
impairment issues.
Valuations in all our asset classes have been validated wherever
possible by open market transactions during the course of
the year.
Property portfolio
The value of our UK-wide property portfolio which includes
our share of joint venture arrangements stands at £1.7bn
(2014: £1.3bn). During the year, we continued to add
appropriate sites to our development portfolio, most notably
NCGM which achieved unconditional status in April and, more
recently, the acquisition of Kirkby Town Centre in October
2015. The portfolio includes the retained major completed
developments such as the second phase of Longbridge Town
Centre and the Bay Campus student accommodation for
Swansea University, the latter providing future scope for further
revaluation gains as new phases of accommodation come
on stream.
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 (land renewal,
planning gain, robust asset management), and those resulting
from changes in the overall property market.
Our valuers provide this split as part of their independent
property valuations.
Property valuation
Portfolio – shape
£m
Nov 2014
Additions
Reductions
Updated
portfolio
Valuation movement
Market
St. Modwen
added
Nov 2015
Residential land (46%)
– Residential portfolio
– NCGM
Commercial land (9%)
Income producing (45%)
– Industrial
– Retail
– Residential
– Office
553
3
146
248
220
33
61
1,264
167
90
86
22
102
52
–
519
(187)
–
(77)
(14)
–
–
(15)
(293)
533
93
155
256
322
85
46
1,490
2
–
–
15
16
1
2
36
17
127
(3)
5
–
20
–
552
220
152
276
338
106
48
166
1,692
• Stated on a proportionally consolidated basis including share of joint ventures. See note 2c to the Group Financial Statements.
• Additions include purchases, capital expenditure and inward reclassifications.
• Reductions include disposals and outward reclassifications.
• Income Producing Residential includes PRS and Bay Campus Student Accommodation.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Strategic Report 33
Yield analysis (weighted average including Group share of joint
ventures)
Equivalent
Net initial
30th Nov
2015
30th Nov
2014
30th Nov
2015
30th Nov
2014
7.6%
8.9%
8.4%
5.0%
7.7%
8.9%
9.2%
8.8%
n/a
8.9%
6.1%
6.6%
7.3%
5.0%
6.5%
7.1%
7.3%
7.7%
n/a
7.4%
Retail
Office
Industrial
Residential
Portfolio
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) and our
convertible bond. The derivative valuations are based on
the financial market’s forward prediction curves for interest
rates. As a result of the convertible bond trading above par
at the end of the financial reporting period, and together
with other finance charges, this caused a charge of £6.6m
(2014: £3.8m charge).
Including the recognition of NCGM and a net valuation gain of
£127.4m, profit before all tax increased substantially by 91% to
a record level of £258.4m (2014: £135.4m).
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 £41.1m (2014: £15.4m). Despite this, we achieved a
substantial result for the year with profits after tax up by 81% to
£217.3m (2014: £120.0m). The resultant earnings per share of
97.9p (2014: 53.8p) is up 82% year on year.
As a property group, tax and its treatment is often an integral
part of transactions. The outcome of tax treatments, including
tax planning, is recognised by the Group to the extent that the
outcome is reasonably certain. The effective rate of tax for the
year is 14% (2014: 11%) and benefits from certain investment
gains not being taxable as a result of indexation and the
property ownership structure within the group. As a result of
proposed changes in the Group structure the effective tax rate
is expected to move towards, but remain below, the standard
rate of tax.
New Covent Garden Market
2015 saw the culmination of several years of development
activity resulting in NCGM achieving unconditional status in
April 2015 and being included on the Balance Sheet. As a
result of completing the following development activities
conditionality was removed:
• documentation and agreement of a section 106
agreement together with entry into statutory roads and
services agreements;
• expiry of the subsequent judicial review period;
• delivery of a Deed of Grant with the US Embassy to provide
a road from the Embassy on surplus Covent Garden Market
Authority (CGMA) land;
• formal issue of planning consent and confirmation of
acceptability from CGMA and VINCI St. Modwen; and
• independent certification that the market can be procured
within CGMA’s affordability limit.
At the year-end, Jones Lang LaSalle reached its valuation of this
57 acre site by starting with a serviced land value of £643m,
based on static residential sales prices.
This was reduced over the half year position of £660m as a
result of build cost inflation, partly offset by a discount unwind
as we move closer to vacant possession of the first 10 acres
(Nine Elms Square).
Enabling costs and overage at the year-end of £203m have
reduced from the £220m at the half year as a result of reduced
overage on lower serviced land values, resulting in Jones Lang
LaSalle’s net valuation of £440m remaining unchanged from
the half year.
After deduction of the initial land value recognised and
subsequent costs incurred to date, totalling £185m, the
resulting gross valuation gain was £255m. Therefore, the 50%
Group share of the valuation gain also remains consistent with
the half year at £127m.
Other movements
In addition to this gain, we have continued to generate a
particularly strong level of added value from the balance of
our portfolio, with further gains of £38.6m as we successfully
managed assets through the planning process. Our portfolio
of residential and commercial land has remained broadly in
line with last year, with demand remaining steady. The growth
of St. Modwen Homes continues to provide additional liquidity
to our residential land bank.
During the year, in line with market movements and the
growth of our lower yielding residential portfolio, yields for our
income-producing properties have improved, with equivalent
yields now at 7.7% (2014: 8.9%). This yield compression, and
some limited regional rental growth, led to a market driven
valuation increase for our portfolio of £35.7m across the year
(2014: £57.6m).
Added value growth for the full year has therefore increased
to £166.0m (2014: £35.9m) of which NCGM contributes
£127.4m.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 34
Financial Review (continued)
Balance sheet
Balance sheet
30th Nov 2015
30th Nov 2014
Property assets
Investments in joint ventures
and other assets
1,265
232
Debtors
Pensions
Gross assets
Net borrowings
Finance leases
Trade payable etc
Gross liabilities
Net assets
Non-controlling assets
Shareholders’ funds
112
–
1,609
(443)
(55)
(189)
(687)
922
(7)
915
NAV per share
EPRA NAV per share
414 (+27%)
446 (+30%)
1,058
134
72
–
1,264
(337)
(23)
(180)
(540)
724
(6)
718
325p
342p
Restatements
During the period we were required to adopt a number of
new accounting standards including IFRS 10 Consolidated
Financial Statements. The adoption of this standard requires
that we equity account for VSM Estates (Holdings) Ltd on the
basis this is jointly controlled with our joint venture partner,
VINCI Investments Ltd. This entity was previously consolidated
under SIC 12 as a result of our greater economic interest.
Comparative information has been restated accordingly and
details are included in the Accounting Policies note to the
Group Financial Statements.
Following receipt of the first rental income, further
consideration was given to the revenue streams associated
with the first two phases of student accommodation at the
Bay Campus development for Swansea University. Due to
the fixed (subject only to annual RPI adjustment) nature of
the Group’s annual rental payments to M&G, meaning that
the Group retains exposure (both positive and negative) to all
variability in net rentals generated from the properties, it has
been concluded that the transaction is more appropriately
accounted for as a finance lease arrangement, rather than
as the sale of 50% of the assets. Consequently, we have
restated our 2014 results and opening Balance Sheet to reflect
recognition by the Group of the following elements:
• the whole (rather than 50%) of the property interest in the
student accommodation;
• to account for the amounts due to M&G as a finance
lease liability;
• to eliminate the construction contract accounting recognised in
respect of the proportion of the development work performed
on these sites that was funded by M&G; and
• to revalue the site during the course of construction.
Details of both restatements are included in the accounting
policies note to the Group Financial Statements.
Funding levels
During the year our Balance Sheet borrowings increased
reflecting recent investment activities, including the acquisition
of Kirkby Town Centre for £35.8m and the retention of major
completed developments at the Bay Campus for Swansea
University and the second phase of Longbridge Town Centre.
As a result, net borrowings (as detailed in note 2g to the Group
Financial Statements) stand at £443m (Nov 2014: £337m).
At the same time, the value of our property portfolio rose
throughout the year. This reflected our actions in the
management of our existing and new assets, continued
market driven increases and, more specifically, the NCGM site
achieving unconditional status in April 2015.
The measure most widely used in our industry is see-through
loan-to-value. Our see-through loan-to-value ratio of 30% has
decreased slightly from last year (2014: 31%). Gearing and
adjusted gearing (at amortised cost and excluding finance
leases) increased with our net investment activities.
The Company’s capital structure remains strong. We will
continue to dispose of assets as they mature and acquire
opportunities selectively as they arise.
GEARING (%)
ADJUSTED GEARING* (%)
SEE-THROUGH LOAN-TO-VALUE (%)
80
72
79
71
54
50
54
54
48
47
39
41
33
31
30
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
* Adjusted gearing is the ratio of net borrowings
(excluding finance leases) to net assets. See note 2
to the Group Financial Statements.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Strategic Report 35
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 £922m);
• gearing must not exceed 175% (actual 54%); and
• interest cover ratio (that excludes non-cash items such
as revaluation movements) must be greater than 1.25x
(actual 4.1x).
Retail bond:
• see-through loan-to-value ratio must not exceed 75% (actual
30%); and
• interest cover ratio must be greater than 1.5x (actual 5.4x).
Covenant compliance continues to be met at all levels and
across all metrics. We continue to operate with headroom on
loan-to-value, net asset value and gearing and even allowing for
a market decline, expect these to be met comfortably.
Pension scheme
Our defined pension scheme continues to be fully funded on
an IAS 19 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
The past year has been an exceptional one for the
business, particularly with the recognition of NCGM in the
first half.
Activity across our commercial portfolio is progressing in
line with the regional market recovery. We are witnessing a
steady stream of occupational demand, demonstrated by
the performance of our well-let income producing portfolio,
and are experiencing encouraging results from our
speculative commercial development programme. As we
realise our pipeline of development opportunities these are
contributing positively to property profits.
Investor appetite continues to remain strong for
commercial property and we will selectively dispose of
mature assets and seek to replenish these with new
opportunities in the marketplace. Combined with a
residential market that is performing at sustainable levels,
we anticipate delivering further NAV enhancing activity
during 2016.
New Covent Garden Market
With the contract for NCGM now fully unconditional as of April
2015, in the first half of the year we recognised the Group’s
interest in the value of the surplus 19 acres of NCGM land as
an asset and the cost of procuring the new market as a liability.
The contract is in joint venture with VINCI Investments Ltd and
therefore appears as part of joint ventures within our Balance
Sheet. This represents a step-change to our asset base and
on a see-through basis the value of our property portfolio is
now £1.7bn.
Works to the new market commenced in the second half
of the year, signifying a major step towards securing vacant
possession of the first 10 acres of surplus land, known as Nine
Elms Square, and we will explore our options to either sell, joint
venture or develop the site during 2016.
Net assets
At the year-end the shareholders’ equity value of net assets was
£915m (2014: £718m) or 413.5p per share which represents
a 27% increase over the year (2014: 325.1p per share).
This growth is after payment of increased dividends of £11.1m
(5.04p per share) in 2015 (2014: £9.1m or 4.13p per share).
This represents a 25% increase in line with dividend payable
for 2015 to 5.75p (2014: 4.6p) in line with NAV growth.
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 30%
to 446p from 342p per share. A full reconciliation of our net
assets is provided in note 2 to the Group Financial Statements.
Corporate facilities
Following the comprehensive refinancing of our banking
portfolio, the bulk of which was achieved during 2014 and
completed in January 2015 with an extension to the HSBC
facility to 2020, we have no facility refinancing expected before
2018 and going forward refinancings are staggered between
2018 and 2021.
Furthermore, we have sufficient headroom with our corporate
facilities to enable us to meet future development and funding
requirements. At the date of reporting we have £554m of
facilities against year-end net borrowings of £443m.
Hedging and cost of debt
We aim to have predictable costs attached to our borrowing
and therefore hedge a significant portion of our interest rate
risk. At the year end, 47% of our borrowings were fixed or
hedged (2014: 63%). With forward starting swaps in place, and
the expiry of swaps to floating, our proportion of borrowings
hedged will increase over time. As any new financing is put in
place we will ensure that our hedging positions are appropriate
for our future development expectations.
As a result of our refinancing activities and our net investment
at lower marginal costs of borrowing, our weighted average
cost of borrowing now stands at 3.9% (2014: 4.8%).
* As a development business many of the EPRA metrics are inappropriate as they are geared
to property investment. Relevant EPRA metrics are reported on page 124.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45
36
Risk management
Risk management and internal control
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 for 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 an extensive range of
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. The Board, through the
Audit Committee, has carried out a robust assessment of the
principal risks facing the Company, including those that would
threaten its business model, future performance, solvency
or liquidity. Its evaluation of these solvency risks is described
further in the Going Concern section on page 97 and a
description of how principal risks are managed and mitigated is
set out on pages 38 to 41.
The Audit Committee also monitors the Company’s 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 level, provide a framework
for all employees to contribute to delivering our strategy
by recognising their shared responsibility for the effective
management of risk.
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 its
annual audit plan and findings are reported to and considered
by the Audit Committee.
Audit Committee Report Pages 58 to 65
Going concern Page 97
Our approach to risk management
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. Oversight 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.
Our risk management framework
THE BOARD
• Determining and reviewing risk
appetite in light of strategic objectives
• Maintaining sound risk management
and internal control systems
• Assessing principal risks
EXECUTIVE
DIRECTORS
• Reviewing
principal risks
• Delivering
Company strategy
and managing
operational risk
PROPERTY
BOARD
• Monitoring
and managing
operational risk
• Identifying
emerging risks
AUDIT
COMMITTEE
• Reviewing
principal risks
• Monitoring the
Company's risk
management
and internal
control systems
INTERNAL
AUDIT
• Reviewing
internal controls
• Reporting to the
Audit Committee
EMPLOYEES
• Sharing responsibility for effective
management of risk
• Contributing to risk registers at both a
Group and regional level
St. Modwen Properties PLC Annual Report and Financial Statements 2015Strategic Report 37
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 on pages
38 to 41. This year we recognise the increasing risks
associated with economic uncertainty, upcoming political
events such as the UK referendum on EU membership
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.
Key features of St. Modwen’s risk management
and internal control systems:
• 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 committed 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;
Viability statement
The directors have assessed the viability of the Company
over the period to November 2018, being the first three
years of the most recent strategy process as this timeframe
gives more certainty over the forecasting assumptions
used. The strategy process is conducted at Group level and
reviewed each year by the Board with key influencers within
the business having ownership of the outcomes from the
process. Once approved by the Board, the plan provides
the basis for setting all detailed financial budgets and
strategic actions that are subsequently used by the Board to
monitor performance.
The strategy process considers the Group's cash flows
including the normal level of capital recycling expected to
occur, funding requirements and other key financial ratios
over the period, as well as the headroom in the financial
covenants contained in its various loan agreements.
In making their assessment the directors assessed the
potential impacts, in severe but plausible scenarios, of the
principal risks set out on pages 38 to 41 together with the
likely degree of effectiveness of mitigating actions reasonably
expected to be available to the Company.
• recent formation of a capital projects committee;
• 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.
The most relevant potential impact of these risks on viability
was considered to be:
• market/economic changes such as higher interest rates,
reduced demand for land/new properties, reduced
availability of credit and declining investment yields
restricting business development and causing valuation falls;
• significant political events which may delay or impact
investment decisions and reduce returns; and
• a reduction in the availability of funding causing a lack of
liquidity that impacts borrowing capacity and reduces the
saleability of assets.
On the basis of this and other matters considered and
reviewed by the Board during the year, the Board has
reasonable expectations that the Company will be able to
continue in operation and meet its liabilities as they fall due
over the periods used for the assessment. In doing so, it is
recognised that such future assessments are subject to a
level of uncertainty that increases with time and, therefore,
future outcomes cannot be guaranteed or predicted
with certainty.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 38
Our principal risks
Strategic objective:
Secure excellent returns..
Risk and potential impact
Mitigation
Commentary
Movement in
the year
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 impact our strategy by limiting our ability to
secure viable permissions and/or by removing our
competitive advantage.
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.
Financial collapse of, or dispute with, a key joint venture
partner leads to financial loss.
• 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.
• Contact with lobbying both central and local Government.
• 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.
• Monthly review of performance to identify if senior management
intervention is required.
• Flexible but legally secure contracts with partners.
• Fewer but financially strong partners.
Strategic objective:
...through a focus on long-term significant added value…
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 6,000 acres
provides us with the flexibility to move with market demands and pursue those opportunities that generate the
greatest value at any one time. The outcome of the UK referendum on EU membership has the potential to
impact the appeal and performance of investment in the UK in general.
Over the course of the last year, the continuing economic problems within the Eurozone and in China and the
emerging markets 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 ever changing nature of planning legislation 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 and we continue to favour financially stable and robust contractors.
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 with all our joint venture partners.
Risk and potential impact
Mitigation
Commentary
Failure to manage long-term environmental issues relating
to brownfield and contaminated sites and human health
issues 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.
• 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.
Movement in
the year
Staff turnover remains low and the proportion of management with more than three years’ service is at 76%.
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 2015Strategic Report 39
Key: (movement in the year)
Exposure increased
Exposure reduced
No significant change
Movement in
the year
Risk and potential impact
Mitigation
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 6,000 acres
provides us with the flexibility to move with market demands and pursue those opportunities that generate the
greatest value at any one time. The outcome of the UK referendum on EU membership has the potential to
impact the appeal and performance of investment in the UK in general.
Over the course of the last year, the continuing economic problems within the Eurozone and in China and the
emerging markets 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 ever changing nature of planning legislation means that future rules are uncertain,
our expertise should enable us to prosper relative to our competitors, irrespective of the planning environment.
Inadequate due diligence on major new schemes,
• Acquisitions, development and ultimate disposals are reviewed and
programme management, construction delivery and/or
financially appraised in detail, with clearly defined authority limits.
Our programme for the year has been completed on time and within budget. Our contractor selection and
management processes are rigorous and we continue to favour financially stable and robust contractors.
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 with all our joint venture partners.
Risk and potential impact
Mitigation
Commentary
Failure to manage long-term environmental issues relating
• Use of high-quality external advisors.
to brownfield and contaminated sites and human health
issues leads to a major environmental incident, resulting in
financial and/or reputational damage.
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.
Movement in
the year
Failure to recruit, develop and retain staff with the
necessary skills resulting in significant disruption/loss of
intellectual property.
• Succession planning monitored at Board level and below.
• Targeted recruitment with competitive, performance-driven
remuneration packages to secure highly-skilled and motivated
Staff turnover remains low and the proportion of management with more than three years’ service is at 76%.
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 objective:
Secure excellent returns..
Market/economic changes such as higher interest rates,
• Regional spread and portfolio diversity mitigates sector or location-
reduced demand for land/new properties, reduced availability
specific risks.
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.
• 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 impact 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.
• Contact with lobbying both central and local Government.
procurement leads to unforeseen exposures, quality issues
and/or cost overruns causing customer dissatisfaction and/or
financial loss.
• 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.
Financial collapse of, or dispute with, a key joint venture
• Monthly review of performance to identify if senior management
partner leads to financial loss.
intervention is required.
• Flexible but legally secure contracts with partners.
• Fewer but financially strong partners.
Strategic objective:
...through a focus on long-term significant added value…
• 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.
employees.
• Leadership and management development plans in place.
• Exit interviews undertaken.
• Key information is documented to safeguard knowledge.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 40
Our principal risks (continued)
Strategic objective:
...while protecting our assets
Risk and potential impact
Mitigation
Commentary
Movement in
the year
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.
• Recurring income from rents provides funding for a large percentage
Our geared financial structure means that there are inevitable risks attached to the availability of funding and the
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.
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. The success of our first retail bond (October 2012), a share placing (February
2013) and a convertible bond (February 2014) has further diversified our debt financing profile by providing
access to unsecured funding.
Failure to anticipate market changes through poor market
intelligence leads to the selection of inappropriate and,
ultimately, unprofitable schemes.
• Regional offices in touch with their local market.
• Dedicated central resource supporting regional teams.
• Flexible and innovative approach to acquisitions and schemes in order
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.
Failure to identify a pipeline of future residential sites or
reduced availability of mortgage finance adversely impacts the
performance of our residential business.
Failure to manage major projects effectively (e.g. civil
engineering and earth moving issues) leads to higher costs/
reduced margins.
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.
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).
• Most of our big projects can be broken down into smaller, more
manageable projects (e.g. Longbridge).
• Significant in-house expertise.
• High level of pre-sale agreements.
• 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.
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.
We use our knowledge and expertise in remediation, planning, asset development and construction to manage
all of our development activity, including our major projects. Our existing skill base enables us to oversee each
stage of the development process, progressing activities to completion before subsequent stages are
commenced. Major projects are also subject to detailed monitoring by executive management, and progress
reported to the Board at each Board meeting.
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 2015Strategic Report 41
Key: (movement in the year)
Exposure increased
Exposure reduced
No significant change
Movement in
the year
Strategic objective:
...while protecting our assets
• 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.
• 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.
• 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).
Failure to identify a pipeline of future residential sites or
• Team of professionals with residential experience and expertise.
reduced availability of mortgage finance adversely impacts the
performance of our residential business.
Failure to manage major projects effectively (e.g. civil
• Most of our big projects can be broken down into smaller, more
engineering and earth moving issues) leads to higher costs/
manageable projects (e.g. Longbridge).
reduced margins.
• Significant in-house expertise.
• High level of pre-sale agreements.
Safety, health and environment (SHE) culture leads to a
• Use of high-quality external SHE advisors.
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.
• Annual cycle of SHE audits.
• Regular Board reporting.
• SHE Steering Group chaired by the Group Construction Director.
• Programme of employee training specific to roles and responsibilities.
• Defined business processes to proactively manage issues.
Inadequate security or business continuity and disaster
• Asset risk assessments (e.g. security, environmental, health and safety).
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.
• Documented disaster recovery and crisis management plans in place
• Dedicated IT team monitors security and performance of all
across the business.
information systems.
• Comprehensive insurance arrangements.
Risk and potential impact
Mitigation
Commentary
Availability of funding reduces, causing a lack of liquidity that
• Recurring income from rents provides funding for a large percentage
impacts borrowing capacity and reduces the saleability of
of overhead and interest costs.
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.
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. The success of our first retail bond (October 2012), a share placing (February
2013) and a convertible bond (February 2014) has further diversified our debt financing profile by providing
access to unsecured funding.
Failure to anticipate market changes through poor market
• Regional offices in touch with their local market.
intelligence leads to the selection of inappropriate and,
ultimately, unprofitable schemes.
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.
We use our knowledge and expertise in remediation, planning, asset development and construction to manage
all of our development activity, including our major projects. Our existing skill base enables us to oversee each
stage of the development process, progressing activities to completion before subsequent stages are
commenced. Major projects are also subject to detailed monitoring by executive management, and progress
reported to the Board at each Board meeting.
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.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 42
St. Modwen Properties PLC Annual Report and Financial Statements 2015
Strategic Report
Corporate Social Responsibility
WE SEE FUTURE GENERATIONS
Acquiring brownfield sites, remediating and
transforming them into cleaner, greener and brighter
environments where business and communities can
thrive: this is the essence of what we do.
Photo: We regularly engage with the schools and communities related to our sites including pupils from the
newly built John Locke Academy, St. Andrew's Park, Uxbridge, who created hoardings for the site.
43
Our approach
As a brownfield regeneration specialist Corporate Social
Responsibility (CSR) lies at the very heart of who we are and
what we do. We are constantly cleaning and greening up
brownfield land across the country and from dilapidated
and disused sites we seek to create thriving and inspirational
new communities. We invest much needed time, money and
expertise into these areas and across the entire lifecycle of our
projects, we continue to ensure that environmental, social and
community considerations are integrated within our day-to-
day practices.
We actively promote responsible construction and
development that reflects our approach to CSR and look to our
employees, our partners and our supply chain to enable us to
achieve our short and long-term goals.
Our CSR objectives
For the financial year ended 30th November 2015 we
established a set of 10 CSR objectives and are pleased to
report that these have been achieved, with good progress
made against longer-term objectives. These objectives have
since been reviewed and updated by the CSR Steering Group
to ensure that we continue to strive for improved performance
during 2016.
Both strategic and long-term, our objectives focus on:
• ensuring sustainable business;
• creating better environments by greening and cleaning up
brownfield land (which makes up 90% of our developable
portfolio); and
• supporting the communities in which we build.
In addition, we also continue to support a number of CSR
initiatives which are not part of our 10 objectives. These prove
our innovative and broad-minded attitude to CSR; we are
constantly mindful of the positive impact our projects can have
on the community, the environment and the economy.
Our CSR results
3
2
5
Exceeded
Achieved
On target
For more information on our CSR results, goals and approach please see our
February 2016 CSR booklet or visit: www.stmodwen-csr.co.uk
CSR Steering Group
The CSR Steering Group, chaired by the Group Construction
Director, meets quarterly to review progress against our
CSR objectives and to ensure the Company maintains a best
practice approach to CSR activities across its operations.
Photo: We engage the local community on our sites through events,
Photo: We create new, and preserve and enhance existing, public spaces
initiatives and projects.
within and surrounding our developments.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 44
Corporate Social Responsibility (continued)
Training and development
We are proud to have a good level of staff retention.
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, 76% of management had more than three years’
service (2014: 84%). On face value there has been a decline on
the previous 12 months but the proportion reflects the growth
of our management team by 5% to 63 (2014: 60). We have
been successful in attracting more senior professionals into
the business over the period and this in turn is evidence of the
strength and appeal of the Company.
During the first half of 2015, our management team completed
training sessions, produced by Farscape Developments and
Pinsent Masons, from which staff initiatives were identified
and have since been implemented. We have received positive
feedback from this programme and we will continue to run
these sessions for new management staff throughout 2016.
Further training opportunities have also been identified and are
being pursued.
In addition, due to the geographic spread of our UK-wide
development portfolio, many staff are required to drive
significant distances to fulfil their role. To ensure they are
safe and best equipped to do so, during 2015 all staff with a
company car, van or car allowance were invited to attend a
driver training course in partnership with The Royal Society
for the Prevention of Accidents. Following the success of this
exercise, we are seeking to carry out further training in 2016.
All employees are encouraged to maintain their Continuing
Professional Development (CPD) and support is provided for
staff to attain qualifications and professional memberships
relevant to their role.
Finally, we remain committed to taking on bright new talent
and nurturing skills into appropriate areas of our business.
We have increased our CSR target to create opportunities for
a total of 25 full-time or equivalent trainees/graduates across
the business.
Human rights
We support the United Nation’s Universal Declaration of
Human Rights and have policies in place to ensure that we act
in accordance with our principles in relation to areas such as
anti-corruption, diversity and whistleblowing.
Employee diversity
We recognise our responsibility as an employer to look after
the wellbeing of our staff. We are committed to providing
an inclusive working environment where everyone feels
valued and respected. The diverse range of talent, skills
and experience across the business is reflected in the new
communities that we build and ensures our continued success.
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.
The charts below set out the number of men and women
employed (full-and part-time) as at 30th November 2015,
across our business and split between the Board, our senior
management and our employees.
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 66 to 69
Board diversity
22%
TOTAL
9
78%
7
2
Male
Female
Senior management diversity
8%
TOTAL
12
92%
11
1
Male
Female
Employee diversity
45%
TOTAL
324
55%
177
147
Male
Female
All employee diversity
43%
TOTAL
345
57%
195
150
Male
Female
St. Modwen Properties PLC Annual Report and Financial Statements 2015Strategic Report 45
Photo: We encourage staff to maintain their Continuing Professional
Photo: We are committed to supporting charities in the vicinity of our
Development.
development projects.
Health and safety
We are committed to safeguarding 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 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 2015 the AFR for our
development sites and for St. Modwen Homes was 0.09 and
0.00 respectively, both significantly outperforming the industry
benchmark (0.40). With the number of man hours worked in
the year exceeding 3m we are pleased to report that there
were no health and safety prosecutions, enforcement actions
or fatalities arising from our activities during the year.
Working with charities
Due to the variety of projects across our portfolio, we have
chosen not to focus on a single national charity. Instead, we
support a number of local charities linked or in close proximity
to our development sites.
For more information and to see case studies on some of the charities we
have supported throughout 2014/15 please see our February 2016 CSR booklet,
alternatively please visit:
www.stmodwen-csr.co.uk/charities
Approval of Strategic Report
The Strategic Report for the year ended 30th November 2015
has been approved by the Board and was signed on its
behalf by
Bill Oliver
Chief Executive
1st February 2016
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45
46
St. Modwen Properties PLC Annual Report and Financial Statements 2015
Corporate Governance
WE SEE STEWARDSHIP
Photo: Technology Retail Park, Rugby which was 100% pre-let to major national
retailers before being sold to Aberdeen Asset Management for £17.4m.
Chairman’s Introduction
47
“Good governance is crucial to ensuring
we are well managed and can deliver our
strategic priorities.”
BILL SHANNON
Non-executive Chairman
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.
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 composition of the Board is also refreshed and in the
year John Salmon retired from the Board as Audit Committee
Chairman and Michael Dunn stepped down as Group Finance
Director. Both have been ably replaced by Ian Bull and Rob
Hudson respectively.
Our approach to governance is outlined in the following report,
which describes how we integrate into our business the main
principles of the 2014 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
70 to 93. 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 36
to 41. This is the first year that the Company has been subject
to the 2014 Code and I am pleased to confirm that, throughout
the financial year ended 30th November 2015, we complied in
full with its provisions.
I hope that you find the corporate governance section of this
report informative and look forward to seeing you at our AGM
in March.
The Board remains committed to:
• Driving the Group’s long-term objectives.
• Oversight of operations to ensure competent and
prudent management.
• Sound planning and internal control.
• Developing leadership and succession plans.
• Maintaining strong relationships with key stakeholders.
Areas of focus for 2015/16:
• Competitive tender for the external auditor appointment.
• Full review of remuneration policy for executive directors.
• Monitoring of succession planning at Board and
senior management level.
Code principles – how they are applied
Bill Shannon
Chairman
1st February 2016
Leadership
Continued focus
on strategy and
its execution
Effectiveness
A strong, open and
effective Board
Accountability
Close scrutiny of
risks and controls
Remuneration
Prudent oversight
of executive
remuneration
Relations with
shareholders
Open engagement
with shareholders
Pages 52 to 54
Pages 55 and 56
Pages 36 to 41
Pages 70 to 93
Page 57
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 48
The Board
Bill Shannon
Non-executive Chairman
N * R
Bill Oliver
Chief Executive
Appointed: November 2010 as non-executive director and Chairman
Designate, March 2011 as non-executive Chairman.
Key strengths: significant management and board experience across retail,
leisure, financial services and property sectors.
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, 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. A qualified Chartered Accountant
(Scotland).
External appointments: Deputy Chairman and Senior Independent Director
of LSL Property Services plc, non-executive director of Johnson Service Group
plc and Council Member of the University of Southampton.
Appointed: January 2000.
Key strengths: extensive strategic and operational leadership and financial
management experience in the property industry.
Experience: 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 qualified Chartered Accountant.
External appointments: Member of the advisory board of the Government’s
Regeneration Investment Organisation.
Steve Burke
Group Construction Director
Rob Hudson
Group Finance Director
Appointed: November 2006.
Appointed: September 2015.
Key strengths: strong operational leadership and project management
experience in the construction sector.
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.
External appointments: none.
Key strengths: strong financial management, commercial and operational
experience in financial services, information services and commercial
property sectors.
Experience: over 20 years’ experience in finance, most recently as
Group Financial Controller at British Land PLC from 2011. Joined
PricewaterhouseCoopers on graduating then moved to Experian PLC in
2000 where he held a number of senior financial roles, including Global
Finance Director of its Decision Analytics business and UK Finance Director.
A qualified Chartered Accountant.
External appointments: member of the Board of Governors of the English
National Ballet School and chair of its Finance Committee.
Richard Mully
Senior Independent Director
A N R
Ian Bull
Independent non-executive
director
A * N R
Appointed: September 2013 as non-executive director, December 2013
as Senior Independent Director.
Key strengths: extensive experience in investment banking, fund
management, capital markets and real estate private equity investing with
considerable board experience.
Experience: Partner and Managing Director at Bankers Trust Company
from 1992 to 1998 and Managing Director and Head of European Merchant
Banking from 1998 to 2000. Co-Founder and Managing Partner of Soros Real
Estate Partners LLC and its successor firm, Grove International Partners LLP,
a major real estate private equity firm from 2000 to 2011. Former Senior
Independent Director of Hansteen Holdings plc.
External appointments: Senior Independent Director of ISG plc,
non-executive director of Aberdeen Asset Management plc and Supervisory
Board member of Alstria Office REIT-AG.
Appointed: September 2014.
Key strengths: strong financial management and operational experience
in major commercial businesses across a range of sectors.
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 Ltd. A Fellow of the Chartered
Institute of Management Accountants.
External appointments: Chief Financial Officer and main board director of
Ladbrokes plc.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Corporate Governance 49
Kay Chaldecott
Independent non-executive
director
A N R
Simon Clarke, DL
Non-executive director
Appointed: October 2012.
Appointed: October 2004.
Key strengths: significant knowledge of the retail property sector, including
the retail development process, retail mix and leasing and shopping centre
operations.
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. Former
non-executive director of Boyer Planning Ltd. A member of the Royal
Institution of Chartered Surveyors.
External appointments: non-executive director of NewRiver Retail Ltd and
Advisory Board member of Next Leadership.
Key strengths: strong commercial and management experience in both
farming and property and extensive knowledge of the Company’s history.
Experience: 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. Former Deputy
Chairman of Northern Racing plc and director and Vice-Chairman of The
Racecourse Association Ltd. An Honorary Doctor of Staffordshire University.
External appointments: Chairman of Dunstall Holdings Ltd. Trustee of
Racing Welfare and Chairman of Racing Homes. Member of Staffordshire
University’s Development Board. Deputy Lieutenant for Staffordshire.
Lesley James, CBE
Independent non-executive
director
A N R *
Tanya Stote
Company Secretary
Appointed: October 2009.
Key strengths: extensive executive remuneration and human resources
experience and considerable Board experience across public, private,
voluntary and education sectors.
Experience: HR Director for Tesco plc from 1985 to 1999 and a main board
director from 1994. Former non-executive director for various 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. Awarded a CBE in 2003 for services to the DTI
Partnership at Work Assessment Panel. A Companion of the Chartered
Institute of Personnel and Development.
External appointments: none.
Appointed: March 2012.
Experience: 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.
Key responsibilities: these include board and board committee support,
corporate governance, statutory and regulatory compliance, insurance,
HR and pensions.
Changes to the Board
• John Salmon retired from the Board as independent non-executive
director and Audit Committee Chairman on 27th March 2015.
• Ian Bull was appointed Audit Committee Chairman with effect from
27th March 2015.
• Michael Dunn stepped down from the Board as Group Finance
Director on 31st May 2015.
• Rob Hudson joined the Board as Group Finance Director on
28th September 2015.
Key:
A Member of the
Audit Committee
R Member of the
Remuneration Committee
N Member of the
Nomination Committee
* Denotes
Committee Chairman
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 50
The Property Board
Richard Bannister
Regional Director
– Yorkshire and North East
Guy Gusterson
Group Residential Director
Length of service: 7 years
Length of service: 9 years
Experience: began his career at St. Modwen as Development Manager for
the Yorkshire and North East region in 2008 and was promoted to Regional
Manager in 2014 and Regional Director in 2015. Previously Strategic Director
of Pearson Developments Ltd and worked at Turner & Partners Chartered
Surveyors. A member of the Royal Institution of Chartered Surveyors.
Experience: joined St. Modwen as Land Director for Project MoDEL in 2006
and became Residential Director in 2009. Previously Development Director
at Crest Nicholson PLC overseeing residential-led mixed use developments
in London and the South East. Led the establishment and development of
St. Modwen Homes.
Key activity in the year: continues to oversee the ongoing development of
Waterdale Shopping Centre, Doncaster, which has seen a 70% rise in overall
footfall and new lettings announced in 2015. Managed the sale of a 1.2 acre
site to Aldi plus four new lettings in the year at Billingham Town Centre
following its acquisition for £14.3m in 2014.
Key activity in the year: promoted to Group Residential Director in 2015
with responsibility for maximising the value of the Group’s residential
land bank by optimising St. Modwen’s residential projects, delivery of
infrastructure, working with joint venture partners and co-ordinating
development with St. Modwen Homes.
Mike Herbert
Regional Director
– The Trentham Estate
Rupert Joseland
Regional Director
– South West and
South Wales
Length of service: 25 years
Length of service: 14 years
Experience: began his career as a chartered surveyor at Louis Taylor
Ltd advising on commercial property projects before joining St. Modwen
as Development Surveyor and promoted to Regional Director in 1997.
Delivered numerous major projects across the North Staffordshire region
including Trentham Lakes, Etruria Valley and Festival Park.
Key activity in the year: continues to oversee the regeneration and
management of the Trentham Estate, a 725 acre tourist, leisure and shopping
destination centred on the restored Trentham Gardens and attracting over
3m visitors per year. The Gardens were named BBC Countryfile Magazine
‘Garden of the Year’ in March 2015.
Experience: joined Chestertons on graduating before moving to Boots
Properties Ltd and then to Miller Developments Ltd to gain further
experience in commercial development and estate management. Promoted
from Midlands Development Surveyor in 2004 and moved to Bristol to
establish the South West and South Wales regional office. A member of the
Royal Institution of Chartered Surveyors.
Key activity in the year: regional delivery of the first phase of the new
Swansea University Bay Campus comprising both student accommodation
and academic facilities. Responsible for the ongoing mixed-use regeneration
schemes at Coed Darcy, Neath and Glan Llyn, Llanwern, with the latter
welcoming its first resident in the year. Project lead for the redevelopment
of MoD Ashchurch.
Steven Knowles
Regional Director
– North West
Richard Powell
Build Director
Length of service: 12 years
Length of service: 9 years
Experience: has over 20 years’ experience in the property sector, including
in the investment and development division at Evans Property Group Ltd.
Joined as Northern Development Surveyor in 2003 and promoted to North
West Regional Director in 2014. A member of the Royal Institution of
Chartered Surveyors.
Key activity in the year: managed the £10m acquisition of Moorgate Point,
Liverpool and the purchase of Kirkby Town Centre for £35.8m. Continues to
oversee the regeneration of Great Homer Street, Liverpool and Skelmersdale
Town Centre.
Experience: held commercial management and quantity surveying roles
at a number of companies including Bovis Lend Lease Ltd, Balfour Beatty
Building Ltd and Skanska Construction UK Ltd. Joined St. Modwen in 2006
as Construction Manager and has delivered both mixed-use and commercial
schemes such as Wembley Central, Farnborough Town Centre and Skypark,
Exeter. Promoted to Build Director in 2015.
Key activity in the year: delivery of 775,000 sq ft of accommodation and
academic facilities at Bay Campus, Swansea to welcome over 900 students
in September 2015. The second phase of the project is on site and a
development agreement with the University to develop a third phase was
signed in December 2015.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Corporate Governance 51
Stephen Prosser
Regional Director
– Midlands
Tim Seddon
Regional Director
– London and South East
Length of service: 18 years
Length of service: 9 years
Experience: background in surveying, property valuation and asset
management for both local councils and Allied London Properties PLC.
Established the Yorkshire and North East office in 2005 and became Regional
Director for the North in 2012. Promoted to Midlands Regional Director in
2014. A member of the Royal Institution of Chartered Surveyors.
Experience: began his career at Edward Erdman as Development Surveyor
before moving to Land Securities PLC in 1994. Here he gained experience
in both the retail and commercial offices sectors and became Development
Director, with responsibility for a number of town and city centre
regeneration-led projects throughout the UK.
Key activity in the year: oversees the ongoing £1bn regeneration of
Longbridge, including the new 150,000 sq ft Marks & Spencer store which
opened in November 2015. Other regional activity includes 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.
Key activity in the year: the regeneration of the 57 acre New Covent Garden
Market sites in Nine Elms, London, which achieved unconditional status in the
year, and the mixed-use redevelopment of the former RAF site at Uxbridge.
Will also oversee delivery of a development agreement for a 1m sq ft
business park in Brentwood, Essex which was signed in July 2015.
Dave Smith
Managing Director
– St. Modwen Homes
Andy Taylor
Group Financial Controller
Length of service: Less than a year
Length of service: 8 years
Experience: joined St. Modwen in 2015 from Morgan Sindall where he
was Construction Managing Director with responsibility for the north of
England and Wales. Previously worked for St. Modwen from 2003 until 2009
as a Construction Manager. A member of the Royal Institute of Chartered
Surveyors and a fellow of the Chartered Institute of Building.
Key activity in the year: responsible for the ongoing operation of
St. Modwen Homes, the Group’s housebuilding business, which has
13 schemes under development across the country and five due to
start on site in 2016.
Experience: joined Deloitte on graduating and became Senior Audit and
Assurance Manager. Also held positions at Wilson Bowden plc as Group
Financial Controller and David Wilson Homes as Southern Division Finance
Director. Became Group Financial Controller for St. Modwen in 2007.
Key activity in the year: led the Group’s finance team and with
responsibility for all areas of operational finance, together with the
management of corporate finance activity, treasury, tax and internal and
external financial reporting. Appointed Acting Group Finance Director from
June to September 2015.
Rupert Wood
Regional Director
– Northern Home Counties
Bill Oliver, Steve Burke, Rob Hudson and Tanya Stote are also
members of the Property Board. See pages 48 and 49 for their
biographies.
Length of service: 9 years
Experience: previously worked for various retail agencies dealing in land
acquisition and property management. Joined St. Modwen in 2006 from
LendLease where he was Senior Development Manager. Established
the Northern Home Counties office in 2008 as Regional Manager and
promoted to Regional Director in 2009. A member of the Royal Institution of
Chartered Surveyors.
Key activity in the year: 90,000 sq ft speculative development at Letchworth
Industrial Estate completed and fully let, with the investment sold post
year-end at a yield of 5.2%. Managed the disposal of the Group’s assets at
Cranfield University Technology Park for £16.5m in July 2015. Continues to
lead St. Modwen Energy, established in 2011 to promote large scale power
generation projects across the UK, including Wrexham in North Wales and
Meaford in Staffordshire.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 52
Corporate Governance Report
Leadership
This report examines the members of the Board, their role,
their performance and their oversight. It also looks at the
induction, succession, independence and effectiveness of
the directors.
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 assist the Board in carrying out its functions and to ensure
independent oversight of matters such as remuneration,
internal control and risk management, the Board delegates
certain responsibilities to its three principal Committees.
Membership of these Committees consists primarily of the
independent non-executive directors and, in some cases, the
Chairman. The Chairmen of each Board Committee report to
the Board on matters discussed at Committee meetings.
Matters reserved to the Board
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
Audit Committee
Oversees financial and narrative reporting,
property portfolio valuations, internal control,
risk management systems, and internal and
external audit processes
Nomination Committee
Oversees Board and senior management
succession planning, leads the process
for Board appointments and monitors
membership of Board Committees
Remuneration Committee
Determines the remuneration arrangements
for the executive directors, the Chairman and
the Company Secretary
Audit Committee Report
Pages 58 to 65
Nomination Committee Report
Directors’ Remuneration Report
Pages 66 to 69
Pages 70 to 93
Supported by
Executive
directors
Capital Projects
Committee
Property
Board
Safety, Health
and Environment
Steering Group
CSR Steering
Group
Implement strategic
decisions approved by
the Board and monitor
operational performance
Established during the
year to review significant
projects, either in terms
of capital investment
and/or risk
Reviews performance
and considers Group-
wide operational issues
and initiatives
Oversees Group
strategy, procedure and
performance in relation
to safety, health and
environmental matters
Co-ordinates the
Group’s approach to and
enhance the reporting
of its corporate social
responsibility activities
St. Modwen Properties PLC Annual Report and Financial Statements 2015Corporate Governance
53
How the responsibilities of the Board are divided
The Board comprises the Chairman, three executive directors and five non-executive directors. Their responsibilities are
summarised in the table below and their biographical details can be found on pages 48 and 49. There is a clear division of
responsibility between the Chairman, who is accountable for the leadership of the Board, and the Chief Executive, who manages
and leads the business.
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;
• maintaining a culture of openness, debate and constructive 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.
Chief Executive
Bill Oliver 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;
• recommending proposals for St. Modwen’s strategic development and implementing the
strategy agreed by the Board;
• leading the executive management team; and
• ensuring the efficient use of resources.
Group Finance Director
Rob Hudson is responsible for devising and implementing the Group’s financial strategy and
policies. He also oversees investor relations, internal audit and IT.
Group Construction Director
Steve Burke is responsible for procurement and programme delivery and oversees the
Group’s major projects. He also chairs the Company’s Steering Groups for CSR and safety,
health and the environment.
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.
Non-executive directors
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.
Company Secretary
Tanya Stote:
• supports the Chairman and Chief Executive in fulfilling their duties;
• is available to all directors for advice and support;
• keeps the Board regularly updated on governance matters; and
• attends, and maintains a record of the matters discussed and approved at, Board and
Committee meetings.
She also oversees the Group’s HR and Insurance functions and supports the trustee of the
Group’s pension scheme.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 54
Corporate Governance Report (continued)
Board meetings
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 the year ended 30th November 2015 the Board
held nine meetings; individual director attendance is set out
in the table below.
Sites visits in the year included the Trentham Estate; the
310,000 sq ft extension to the Screwfix distribution facility
at Trentham Lakes, Stoke-on-Trent; the regeneration
scheme at Branston Leas in Burton upon Trent, comprising
both residential and commercial development; and
St. Modwen Homes’ sites at Manorfields, Swadlincote and
Edison Place, Rugby (including PRS units).
Matters considered at each Board meeting
• Strategic matters
• Acquisition and development opportunities
• Operational updates
• Trading results and forecasts
• Management accounts, key performance indicators
and financial commentary
• Health and safety
• Board Committee activities
• Investor relations and shareholder feedback
• Legal, company secretarial and regulatory matters
• Minutes of previous meetings
• Implementation of actions from previous meetings
• Rolling programme of agenda items
Key Board activity in 2014/15
Dec
• Considered annual renewal of
insurance arrangements for
the Group
• Approved the Chairman’s fee
• Toured commercial
development sites in
North Staffordshire
Apr
• Considered risks arising from
the Scottish referendum and the
UK General Election
• Annual strategy review,
including input from the
Company’s brokers
Sep
• Approved the appointment of
a professional trustee to the
Company’s pension scheme
Attendance at Board meetings
Jan
Jun
• Approved the Group’s results for
the year ended 30th November
2014, including the Group’s
property portfolio valuation and
final dividend recommendation
Mar
• Considered actions arising from
the internal Board evaluation
• Considered AGM-
related matters
• Considered Group
financing strategy
• Reviewed and approved the
acquisition of Kirkby Town
Centre, Liverpool
• Toured commercial and
Jul
residential sites in the Midlands,
including PRS schemes
• Reviewed and approved the
• Reviewed the Group’s plans
Oct
2016 budget
• Considered updates on Group
PR and environmental activity
Nov
in respect of employee
recruitment, retention
and development
Director
Ian Bull
Steve Burke
Kay Chaldecott
Simon Clarke(1)
Michael Dunn(2)
Rob Hudson(3)
Lesley James(4)
Richard Mully
Bill Oliver
John Salmon(5)
Bill Shannon
Role
Director since
Meetings attended in year
out of maximum possible
% attended
in year
Non-executive director
Group Construction Director
Non-executive director
Non-executive director
Group Finance Director
Group Finance Director
Non-executive director
Senior Independent Director
Chief Executive
Non-executive director
Chairman
Sep 2014
Nov 2006
Oct 2012
Oct 2004
Dec 2010
Sep 2015
Oct 2009
Sep 2013
Jan 2000
Oct 2005
Nov 2010
9/9
9/9
9/9
8/9
4/4
2/2
8/9
9/9
9/9
3/3
9/9
100%
100%
100%
89%
100%
100%
89%
100%
100%
100%
100%
(1) Unable to attend the Board meeting in June 2015 due to a prior personal commitment.
(2) Stepped down from the Board on 31st May 2015.
(3) Appointed to the Board on 28th September 2015.
(4) Unable to attend the Board visit in April 2015 due to illness.
(5) Retired from the Board on 27th March 2015.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Corporate Governance 55
Effectiveness
Induction of a new director
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.
Director development
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.
Director independence and re-election to the Board
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 14.4% 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.
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.
At the 2016 AGM, and in accordance with the Company’s
Articles of Association, Rob Hudson will retire and offer himself
for election. All other directors will retire and offer themselves
for 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 167 to 174
External appointments
On appointment directors are advised of, and requested to
make, the necessary time commitment required to discharge
their responsibilities effectively. This time commitment is
also outlined in the letters of appointment issued to non-
executive directors.
The Chairman reviews annually the time each director
has dedicated to St. Modwen as part of their individual
performance evaluations and is satisfied that their other duties
and time commitments do not conflict with those as directors
of the Company. Similarly, the Board is content that the
Chairman’s external appointments do not impact on his ability
to allocate sufficient time to discharge his responsibilities to
St. Modwen.
Conflicts of interest
The Board operates a policy to identify and, where appropriate,
manage any conflicts of interest affecting directors.
This enables the Board to consider and, if thought appropriate,
to authorise a director’s actual or potential conflict of interest,
taking into consideration what is in the best interests of
the Company and whether the director’s ability to act in
accordance with his or her wider duties is affected.
Governance in action: Rob Hudson’s induction
“On joining St. Modwen as Group Finance Director I
received a comprehensive, tailored induction. This involved
business briefings with members of the Board and
Property Board, meetings with senior managers of
operating departments such as finance, internal audit, IT
and HR and a review of Board policies and procedures with
the Company Secretary.
“I was introduced to key external advisors, including
the Company’s joint brokers, key banking relationship
managers and our external valuers and auditor, and have
had meetings with our joint venture partners.
“I have also taken the opportunity to visit St. Modwen’s
assets across the country and look forward to building
a more in depth knowledge of the Company’s property
portfolio in the coming months.”
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 56
Corporate Governance Report (continued)
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.
The evaluation review for 2014 was led by the Chairman
and involved one-to-one discussions with each director,
together with a review of the effectiveness of the Committees
considered collectively by relevant Committee members.
Progress against those areas for improvement identified by the
2014 review can be found in the table below.
It was agreed by the Board that the evaluation for 2015
would commence after Rob Hudson had joined as Group
Finance Director at the end of September 2015 in order
that his initial views on the operation of the Board could be
considered. In accordance with the Code, the assessment is
being facilitated by Dr. Tracy Long of Boardroom Review Ltd
(BRR), who received a comprehensive brief from the Chairman,
including the outturn of areas identified for improvement from
the 2014 internal review. Neither Tracy nor BRR has any other
connection with the Company and is considered by the Board
to be independent.
The outturn of the 2015 evaluation will be considered by the
Board at a separate meeting to be held in March 2016 and
reported on in the 2016 Annual Report.
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.
No actions were considered necessary as a result of these
evaluations and the Board is of the view that the performance
of all directors continues to be effective, that they continue to
demonstrate commitment to their respective roles, and that
their respective skills complement one another to enhance the
overall operation of the Board.
Board Committee performance was also evaluated by means
of a questionnaire completed by relevant Committee members
and meeting attendees. The outturn of these evaluations
will be considered as part of the Board performance review
meeting in March 2016.
2015 EVALUATION PROCESS
Review of Governance Framework
A suite of Board and Committee information was sent
to BRR to provide information on the governance
framework within which the Board operates.
One-to-One Interviews
Individual in-depth interviews were conducted by BRR
with each director and the Company Secretary.
Board Meeting Observation
BRR attended a Board meeting to observe the
conduct and operation of the Board. Copies of
meeting papers were circulated to BRR in advance
for briefing purposes.
Reporting
BRR will prepare a discussion document which
analyses current strengths and future challenges and
sets out objectives and recommendations.
Discussion and Evaluation
Draft conclusions will be discussed with the
Chairman and subsequently considered by all
directors at a meeting with BRR. The Board will agree
an action plan to implement, where appropriate,
any recommendations made.
2014 Board evaluation
2014 Findings
Progress 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.
Six Board meetings now held
annually, complemented by
two site visits. Intra-Board
communication between
meetings co-ordinated by
the Chairman.
Members of the management
team attended Board meetings
to facilitate discussion on
issues including PR, people-
strategy and the Group’s
environmental activities.
Board workshop held and
enhancements made to internal
risk reporting. External advisor
engaged to facilitate business-
wide improvements to risk
awareness and culture.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Corporate Governance 57
Relations with shareholders
Compliance statement
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
trading updates, are published on the Company’s website at
www.stmodwen.co.uk. Meetings with principal shareholders
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 2016 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 167 to 174
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 2014/15. 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 2015, 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 98 and
99 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 63, 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.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 58
Audit Committee Report
“The Committee continues to focus on
matters important by virtue of size,
complexity, level of judgement required
or impact on the Financial Statements.”
IAN BULL
Chairman of the Audit Committee
COMMITTEE MEETING ATTENDEES (BY INVITATION)
Chairman
Bill Shannon
Group Finance Director
Mike Dunn (1st December 2015 to 31st May 2015)
Rob Hudson (from 28th September 2015)
Non-executive director
Simon Clarke
Group Financial Controller
Andy Taylor
Internal Audit Manager
David Edwards
Company Secretary and secretary to the Committee
Tanya Stote
External auditor
Representatives from Deloitte
External valuers
Representatives from Cushman & Wakefield and
Jones Lang LaSalle
External tax advisors
Representatives from PwC
Committee member
Member since
Ian Bull(1)
Kay Chaldecott
Lesley James
Richard Mully
John Salmon(2)
Sep 2014
Dec 2012
Oct 2009
Sep 2013
Oct 2005
Meetings
attended
in year out of
maximum
possible
3/3
3/3
3/3
3/3
1/1
% attended
in year
100%
100%
100%
100%
100%
(1) Appointed Chairman of the Committee with effect from 27th March 2015.
(2) Retired from the Board and as Chairman of the Committee on 27th March 2015.
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.
Key activities in 2014/15
• Considered Balance Sheet recognition of the Group’s
interest in New Covent Garden Market and prior
year restatements.
• Examined changes to the UK Corporate Governance
Code (the Code) on risk management and assessed how
these would be implemented.
• Contributed towards a smooth transition following the
appointment of a new Group Finance Director and on the
change of Committee Chairman.
Areas of focus for 2015/16
• Competitive tender for the external auditor appointment
to be commenced.
• Continuing enhancements to the Group’s risk
assurance framework.
• Ongoing monitoring of cyber-security and the robustness
of the Group’s preventative procedures.
• Independent external review of the Internal
Audit function.
Terms of reference
www.stmodwen.co.uk/about-us/corporate-governance
St. Modwen Properties PLC Annual Report and Financial Statements 2015Corporate Governance
59
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. In 2015 these included accounting for the funds
received from M&G in relation to the student accommodation
at Bay Campus, Swansea University and associated
restatements, and Balance Sheet recognition in respect of the
Group’s interest at New Covent Garden Market. These and the
other issues considered by the Committee during the year,
and the actions taken to address them, are detailed within
this report.
As I approach the anniversary of my appointment as
Committee Chairman I would like to thank both my fellow
Committee members and the management team for their
continued support and commitment to ensuring effective
governance through the Committee’s activities. I would also
like to take this opportunity to thank John Salmon for the
insight, direction and focus that he provided over the years
as Committee Chairman and to wish him well for the future.
I hope that the following report provides a useful guide
to the activities of the Committee during the year.
Ian Bull
Chairman of the Audit Committee
1st February 2016
As Chairman of the Audit Committee I am pleased to present
our report for the financial year ended 30th November 2015.
The report is intended to provide meaningful insight into the
Committee’s activities in the year and sets out how we have
performed our responsibilities in relation to financial reporting,
internal control and risk management and in relation to the
external auditor, Deloitte.
Following the appointments of Cushman & Wakefield, formerly
DTZ, (external valuers) and PwC (tax compliance advisors) in
2014, 2015 was another key year for the Committee. A new
Group Finance Director, Rob Hudson, was appointed in
September 2015 and the Committee has spent time helping
to ensure a smooth transition from Rob’s predecessor.
As Committee Chairman I have also discussed with Rob
his initial priorities and look forward to working with and
supporting him as he settles into his role.
We have made good progress to further reduce the level
of non-audit fees payable to Deloitte, our external auditor.
Amounts paid to Deloitte in the year for non-audit services
represented 31% of the fees paid for audit and audit-related
assurance services. The Committee has approved the
continued engagement of Deloitte Real Estate for the provision
of property consulting services in respect of a long-term
development project, subject to a cap on fees.
The tendering of external audit arrangements has been the
subject of considerable debate in recent years, both at a
national and European level. Noting the requirements on audit
tendering set out in the Code, the Competition and Markets
Authority Order and the Department for Business, Innovation
and Skills proposals to implement the EU’s June 2014 Audit
Directive and Regulation, the Committee has agreed that
a competitive tender process be commenced during 2016
in readiness for the external audit for the year ending
30th November 2017.
In terms of risk, the Committee has agreed with management
that activity should continue to focus on enhancing the risk
management culture across the business, with individual
ownership of risks and associated mitigating actions. This in
turn should further strengthen the linkage between operational
risk management and risk reporting, both internally and
externally, with focus being given to those areas of highest risk.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 60
Audit Committee Report (continued)
Committee membership
All members of the Committee are independent non-executive
directors, with each bringing broad financial and commercial
experience at senior levels across a range of industries.
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.
In March 2015 John Salmon retired as Committee Chairman and
was replaced by Ian Bull, Chief Financial Officer of Ladbrokes plc.
Ian is considered to have significant, recent and relevant financial
experience as required by the Code.
All members of the Committee receive an appropriate induction
to ensure that they have an understanding of the principles of,
and recent developments in, financial reporting, key aspects of
the Company’s accounting policies and judgements, and internal
control and risk management arrangements, as well as the
role of the internal and external auditors. Ongoing training is
undertaken as required.
How the Committee operates
The Committee met three times during the year as part of its
standard schedule of meetings. No supplementary meetings
were necessary in the year. Meetings of the Committee
generally take place just prior to a Board meeting to maximise
the efficiency of interaction with the Board and the Committee
Chairman reports to the Board, as a separate agenda item, on
the activity of the Committee and matters of particular relevance
to the Board in the conduct of its work.
Representatives from the external auditor, Deloitte LLP, are
invited to each meeting together with other Board members,
the Group Financial Controller, the Internal Audit Manager and
the Company Secretary. Representatives from both Cushman
& Wakefield and Jones Lang LaSalle (JLL), the external valuers,
are invited to attend meetings at which the half year and annual
results are considered by the Committee. Representatives from
the Group’s tax compliance advisor, PwC, are invited to attend
meetings as appropriate.
At least once a year, immediately following a Committee meeting,
the Committee meets separately with the external audit
engagement partner and with the Internal Audit Manager to
give them the opportunity to discuss matters without executive
management being present. The Committee Chairman also
holds separate one to one meetings with the Group Finance
Director, the Internal Audit Manager and with Deloitte, typically
ahead of Committee meetings, in order to better understand the
issues and areas of concerns and to make sure adequate time is
devoted to these matters at the subsequent meeting.
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.
In late 2015 the Committee’s performance was reviewed
internally by way of a questionnaire which was completed by all
members of the Committee, the Group’s senior management
and external audit engagement partner. The feedback received
will be considered as part of the Board performance review
meeting in March 2016.
Activities of the Committee during the year
Reporting
The Committee’s primary responsibility in relation to the
Group’s financial reporting is to review with both management
and the external auditor the integrity of the Half Year and
Annual Financial Statements with particular focus on:
• the consistency of, and any changes to, accounting policies
and practices;
• material areas in which significant judgements have been
applied or where significant financial issues have been
discussed with the external auditor;
• the clarity of the disclosures and compliance with financial
reporting standards and relevant financial and governance
reporting requirements, such as statements on viability and
going concern; and
• whether the Annual Report, taken as a whole, is fair, balanced
and understandable and provides the information necessary
for shareholders to assess the Company’s position and
performance, business model and strategy.
Accounting policies and practices
The Committee received reports from management in
relation to the continuing appropriateness of accounting
policies applied by the Group and any changes required
as a consequence of the implementation of new
accounting standards.
During the year the Group was required to adopt a number
of new accounting standards including IFRS 10 Consolidated
Financial Statements, which replaced SIC 12 Consolidation
– Special Purpose Entities in its entirety and changed the
accounting treatment to be applied in respect of VSM Estates
(Holdings) Ltd. Whilst this entity is jointly owned with VINCI
Investments Ltd, under the funding agreement the Group
obtains the majority of benefits of the entity and also retains
the majority of the residual risks. This entity was previously
consolidated under SIC 12, however the conditions for
consolidation in IFRS 10 do not exist and, as such, the entity is
now required to be accounted for using the equity method.
Following consideration and discussions with Deloitte, the
Committee was satisfied that the accounting policies and
related disclosure in this Annual Report was appropriate.
Accounting policies Pages 110 to 118
Significant judgements and 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 in relation to the 2015 Financial Statements, and
how these were addressed, are outlined on pages 61 and 62.
The Committee discussed these with the external auditor and,
where appropriate, how these were addressed by Deloitte’s
audit scope.
Independent Auditor’s Report Pages 100 to 105
St. Modwen Properties PLC Annual Report and Financial Statements 2015Corporate Governance 61
Significant issue
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
as well as executive variable remuneration.
Although the portfolio valuation is conducted
externally by independent valuers, the nature
of valuation estimates is inherently subjective
and requires significant judgements and
assumptions to be made by the valuers.
These include market comparable yields,
estimates in relation to future rental income,
void periods, purchaser costs, together with
remediation and other costs to complete,
some of which require management input.
Valuation of inventory
The Group’s inventory, comprising property
held for sale, property under development
commenced with a view to sale 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. For the majority of
inventories held management rely on their
own internal procedures for assessing the
carrying value of inventory.
New Covent Garden Market
2015 saw the culmination of several years of
development activity resulting in this project
achieving unconditional status in April 2015
and being included on the Balance Sheet.
The recognition comprised the Group’s
interest in the value of the 19 acres of
surplus land as an asset and the cost of
procuring the 500,000 sq ft new market
facilities as a liability.
As with the rest of our portfolio, significant
judgements and assumptions were made by
JLL, our independent valuers of this project, in
arriving at the valuation, some of which
required management input.
Work undertaken by and conclusion of Committee
The Committee adopts a formal approach by which the valuation process, methodology,
assumptions and outcomes are reviewed and robustly challenged. This includes separate
review and scrutiny by both management and the Committee, with members of the Committee
discussing the valuations both prior to and at Committee meetings in January and June. It also
includes the external auditor which is assisted by its own specialist team of chartered surveyors
who are familiar with the valuation approach and UK property market.
The external auditor has direct access to the Group’s valuers and their remit extends to
investigating and confirming that no undue influence has been exerted by management in
relation to the valuations. The external auditor reviewed the valuations and process and
reported its findings to the Committee.
Both Cushman & Wakefield (formerly DTZ) and JLL submit their valuation reports to the
Committee as part of the half year and full year results process. Both valuers were asked to
attend and present to the Committee their valuation reports and highlight any significant
judgements made or disagreements between themselves and management; there were none.
With the background of continued strength in the property market, the Committee discussed in
detail the rationale underlying significant increases to valuations, and considered these on a
case-by-case basis as appropriate.
Based on the degree of oversight and challenge applied to the valuation process, the
Committee concluded that the valuation as a whole had each been conducted appropriately,
independently and in accordance with the valuers’ professional standards.
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.
The Committee concluded that the judgements and estimates made by management were in
line with Group policy, reasonable and appropriate.
The Committee reviewed the decision for recognition in the year, and the associated accounting
treatment.
In considering the satisfaction of the requirements for unconditional contract status, and
resulting Balance Sheet recognition, the Committee noted:
• documentation and approval of a section 106 agreement together with entry into statutory
roads and services agreements;
• expiry of the subsequent judicial review period;
• delivery of a Deed of Grant with the US Embassy to provide a road from the Embassy on
surplus Covent Garden Market Authority (CGMA) land;
• formal issue of planning consent and confirmation of acceptability from CGMA and VINCI
St. Modwen; and
• independent certification that the market can be procured within CGMA’s affordability limit.
The Committee also considered:
• accounting for the acquisition of the interest in land, including reviewing with both JLL and
management the valuation assumptions for the 19 acres of surplus land, enabling costs and
overage, and the costs of procuring the new market facilities;
• measurement of the liability to procure the new market facilities; and
• the classification of the Group’s interest in the surplus land as investment property.
The Committee concluded (and Deloitte concurred) that the recognition and accounting
treatment adopted was appropriate.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 62
Audit Committee Report (continued)
Activities of the Committee during the year (continued)
Work undertaken by and conclusion of Committee
During the year, following receipt of the first rental income, further consideration was given to
the revenue streams associated with the first two phases of student accommodation at the Bay
Campus. Due to the fixed (subject only to annual RPI adjustment) nature of the Group’s annual
rental payments to M&G, meaning that the Group retains exposure (both positive and negative)
to all variability in net rentals generated from the properties, it was concluded that the
transaction was more appropriately accounted for as a finance lease arrangement, rather than
as the sale of 50% of the assets.
Consequently the 2014 results and opening Balance Sheet have been restated to reflect
recognition by the Group of the following elements:
• the whole (rather than 50%) of the property interest in the student accommodation;
• to account for the amounts due to M&G as a finance lease liability;
• to eliminate the construction contract accounting recognised in respect of the proportion of
the development work performed on these sites that was funded by M&G; and
• to revalue the site during the course of construction.
Both the Committee and Deloitte agreed that the accounting for the project, including the
revised treatment applied to the student accommodation, was appropriate.
Details of the restatement are set out in the Accounting Policies note on pages 117 and 118.
Based on reports from management, Deloitte and PwC (the Group’s tax compliance advisor),
the Committee considered the individual judgements made by management in respect of tax
provisions and was satisfied that the resultant level of tax provisioning at both the full year and
half year remained appropriate.
Further disclosure on taxation is set out in Note 5 to the Group Financial Statements, page 128
and the Accounting Policies note on page 116.
Significant issue
Bay Campus, Swansea University
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 in respect of the academic facilities at
the Campus.
The Committee also reviewed the accounting
for the funds received from M&G in relation
to the student accommodation at the
Campus and, as part of the valuation of
investment properties, considered the
valuation of the Group’s interests in the
student accommodation facilities.
Tax provisions
As a property group, tax and its treatment is
often an integral part of transactions
undertaken by St. Modwen. The outcomes 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, or new
tax regulation is introduced, provision is
made for the best estimate of potential
exposure based on the information available
at the reporting date.
Viability and going concern
The Committee provides advice to the Board on the form and basis underlying both the going concern statement and the new,
longer-term viability statement.
As both statements rely 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 also reviewed the sensitivity analysis prepared by management, including the assumptions made.
The Committee concluded that it remains appropriate for the Financial Statements to be prepared on a going concern basis and
recommended the viability statement to the Board.
Going concern statement Page 97
Viability statement Page 37
St. Modwen Properties PLC Annual Report and Financial Statements 2015Corporate Governance 63
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 Committee. This responsibility covers the Annual and
Half Year Reports and Financial Statements, as well as trading
updates and other financial reporting.
External auditor
Deloitte, as the external auditor, is engaged to express
an opinion on the Company’s and the Group’s financial
statements. Their audit includes a review and test of the
systems of internal control and data contained in the Financial
Statements to the extent necessary to express an audit opinion
on them.
The Committee is satisfied and has confirmed to the Board
that the 2015 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 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 Committee of reports prepared by
management 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 Committee in advance of final sign-off; and
• review and approval by the external auditor.
The Board takes into account the view of the Committee when
undertaking its own review of the document prior to giving
final approval.
Audit plan
In respect of the audit for the financial year ended
30th November 2015, Deloitte presented their audit plan
(prepared in consultation with management and the Internal
Audit Manager) to the Committee. The audit plan took into
account key changes in the business and the impact of these
on materiality, scope and risk assessment. The audit fee, which
was approved by the Committee, was felt to be appropriate
given the scope of work whilst not adversely affecting Deloitte’s
independence or objectivity.
Non-audit fees
To help safeguard Deloitte’s objectivity and independence,
the Committee has approved a non-audit services policy
which sets out the circumstances and financial limits within
which the external auditor may be permitted to provide
certain non-audit services (such as tax and other services).
This policy sets a presumption that Deloitte should only
be engaged for non-audit services where alternative
providers do not exist or where it is cost effective or in the
Group’s interest for Deloitte to provide such services. It also
precludes Deloitte from providing certain services such
as litigation support, actuarial services or internal audit
activities. Advance approval of both the Group Finance
Director and the Committee Chairman is required if fees
for an engagement are anticipated to exceed £25,000
or where the fee is contingent in full or in part; no such
approvals were required in the year. Approval below these
levels is required from the Group Finance Director and all
expenditure is reviewed annually by the Committee.
Non-audit fees paid to Deloitte in the year totalled
£107,000, representing 31% of the fees paid for audit
and audit-related assurance services. The reduction in
expenditure over prior years follows the engagement of
PwC for tax compliance work from June 2014 and the
conclusion of certain property consulting services provided
by Drivers Jonas (now part of Deloitte Real Estate) on two
long-term development projects, their involvement in which
pre-dated their acquisition by Deloitte. It is anticipated that
further work will be required in respect of one project, and
the Committee has approved the continued engagement
of Deloitte Real Estate subject to an appropriate cap
on fees.
Further information on the remuneration of the
external auditor can be found in note 3b to the Group
Financial Statements.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 64
Audit Committee Report (continued)
External auditor (continued)
Independence
The Committee is responsible for monitoring and reviewing
the objectivity and independence of the external auditor.
In undertaking its assessment, the Committee has reviewed:
• the confirmation from Deloitte that they maintain
appropriate internal safeguards in line with applicable
professional standards;
• the Financial Reporting Council’s May 2015 Audit Quality
Inspection Report in respect of Deloitte’s audit engagements
and the firm’s policies and procedures supporting
audit quality;
• the mitigating actions taken by the Committee in seeking
to safeguard Deloitte’s independence status, including the
operation of policies designed to regulate the appointment of
former employees of the external audit firm and the extent of
non-audit services provided by the external auditor;
• the tenure of the audit engagement partner (not being
greater than five years); and
• the performance evaluation of Deloitte.
Taking the above review into account, the Committee
concluded that Deloitte remained objective and independent in
their role as external auditor.
Effectiveness
The Committee has undertaken a review of Deloitte’s
performance and the effectiveness of the external audit
process. The review was primarily undertaken by way of
an extensive questionnaire on external audit effectiveness
which was completed by management and assessed by the
Committee. The Committee also considered a self-assessment
carried out by Deloitte on audit objectives, leadership,
qualification, quality and independence, together with 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.
Tender
Deloitte was appointed in 2007 following a tender process.
The current audit engagement partner, Jonathan Dodworth,
was appointed for the 2011/12 financial year audit and, in
line with ethical standards published by the Auditing Practices
Board, can remain in post until the 2015/16 financial year audit.
In line with the various requirements on audit tendering in the
Code, the Competition and Markets Authority Order and the
Department for Business, Innovation and Skills proposals to
implement the EU’s June 2014 Audit Directive and Regulation,
Deloitte is able to complete the audit for the year ending
30th November 2016. The engagement of an external auditor
for the 2017 audit will need to be subject to a competitive
tender process and it is intended that this will be commenced
during 2016.
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
recommended to the Board that a resolution to re-appoint
Deloitte to office for a further year be proposed at the
2016 AGM.
There are no contractual obligations which would restrict the
Company’s selection of an external auditor.
Internal audit
The Group has an internal audit function which reports to the
Committee and works under the supervision of the Group
Finance Director. Its key objectives are to provide independent
and objective assurance that each business area implements
and maintains appropriate and effective controls. An Internal
Audit Charter, which is reviewed annually, governs its remit and
sets out the standards against which activities are undertaken.
Internal audit is an agenda item at each Committee meeting.
Reports from the Internal Audit Manager usually include
updates on audit activities, progress of the Group audit plan,
the results of internal audits and the status of implementation
of recommendations to address any unsatisfactory areas.
In 2015 internal audits were carried out across a number of
areas including the Baglan Solar Park, Group-wide service
charge arrangements and the Group insurance function.
On an annual basis the Committee reviews and approves
the audit plan for the year and has input into ensuring that
adequate resources are made available and that the necessary
support is provided by the business to accomplish the agreed
work programme. The Committee Chairman meets with the
Internal Audit Manager regularly to discuss activities and the
nature of any significant issues which may have arisen.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Corporate Governance 65
Whistleblowing and fraud
The Group’s ‘whistleblowing’ policy encourages employees
to report, in confidence and anonymously if preferred,
concerns about suspected impropriety or wrongdoing
in any matters affecting the business. Reports can be
made by confidential telephone reporting lines and a
secure website reporting facility which are operated
by an independent third party. Any matters reported
are investigated by the Company Secretary and, where
appropriate, reported to the Committee together with
details of any corrective action taken. During the year there
were no whistleblowing incidents reported.
The Group’s fraud prevention policy requires employees
to be alert to the possibility of the threat of fraud
and to report immediately any concerns they have.
The Company remains vigilant against such risk, including
fraudulent payment requests, and continues to ensure
the adequacy of controls and procedures to prevent
such fraud. The Committee is made aware of all potential
fraudulent activity.
The effectiveness of the internal audit function is reviewed
annually by the Committee, primarily by assessing performance
against the Internal Audit Charter. The Committee remained
satisfied that the function continued to operate effectively
throughout 2015.
In the spirit of improving all audit activities, and to ensure that
it remains appropriate for the future strategic direction of
the Group, in 2016 the Committee will seek an independent
external review to ensure the continued suitability of the
Internal Audit function to the business. Initial discussions have
also taken place with external providers to identify potential
co-sourcing relationships for agreed audit work and these will
be explored further during the coming year.
Risk management and internal control
During the year, the Committee monitored and reviewed
the effectiveness of the Group’s internal control systems,
accounting policies and practices, standards of risk
management and risk management procedures and
compliance controls, as well as the Company’s statements on
internal controls, before they were agreed by the Board for this
Annual Report.
In doing so the Committee considered:
• the Group’s risk register, including significant and emerging
risks, mitigating controls in place and how exposures have
changed over the reporting period;
• internal audit reports on key audit areas and any significant
deficiencies in the control environment;
• management reports on the systems of internal controls and
risk management, including tax compliance;
• external audit reports from Deloitte which included details of
their risk assessment process for the purposes of audit;
• actual and potential legal claims and litigation involving
the Group;
• internal audit reports on potential fraudulent activities
perpetrated against the Group;
• the effectiveness of the internal audit function; and
• the Group’s approach to IT, cyber-security and whistleblowing.
Risk Management Pages 36 and 37
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 66
Nomination Committee Report
“This year was again an important one
for the Committee, with the primary
focus on succession planning.”
BILL SHANNON
Chairman of the Nomination Committee
COMMITTEE MEETING ATTENDEES (BY INVITATION)
Chief Executive
Bill Oliver
Non-executive director
Simon Clarke
Company Secretary and secretary to the Committee
Tanya Stote
Meetings
attended
in year out of
maximum
possible
% attended
in year
7/7
7/7
7/7
7/7
2/2
7/7
100%
100%
100%
100%
100%
100%
Committee member
Member since
Ian Bull
Kay Chaldecott
Lesley James
Richard Mully
John Salmon(1)
Bill Shannon
Sep 2014
Mar 2013
Oct 2009
Sep 2013
Mar 2013
Nov 2010
(1) Retired from the Board on 27th March 2015.
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.
Key activities in 2014/15
• Selected and recommended the appointment of Rob
Hudson as Group Finance Director.
• Reviewed and recommended the re-appointment of
Lesley James and Kay Chaldecott.
• Reviewed succession plans for Board members and
senior management.
Areas of focus for 2015/16
• Continue to monitor Board and senior
management succession.
• Ongoing assessment of Board and senior
management diversity.
• Consider the re-appointments of Lesley James,
Bill Shannon and Richard Mully.
Terms of reference
www.stmodwen.co.uk/about-us/corporate-governance
St. Modwen Properties PLC Annual Report and Financial Statements 2015Corporate Governance
67
The Committee plays a vital role in ensuring that
St. Modwen is headed by a Board which is collectively
responsible for the long-term success of the Company and
is best placed to operate effectively in the context of our
strategic objectives.
This year was again an important one for the Committee,
with the primary focus on the process for identifying potential
candidates for the role of Group Finance Director. I am very
pleased with the outcome of this process which resulted in
the appointment of Rob Hudson, previously Group Financial
Controller at British Land Company plc. We announced Rob’s
appointment in April 2015 and he formally took up his position
on 28th September 2015.
The Committee continues to monitor non-executive director
succession to identify any skills gap whilst ensuring an
appropriate balance of skills and experience. In the year both
Lesley James and Kay Chaldecott were re-appointed and Ian
Bull replaced John Salmon as Audit Committee Chairman
following John’s retirement in March 2015.
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 2016, we will continue to review
succession plans to ensure that arrangements are in place
for the orderly and progressive refreshing of the Board
and to identify individuals with potential for appointment to
senior management and Board positions. Recognising the
benefits that diversity can bring, we will also continue to
support the Board in its commitment to strengthening female
representation at both Board and senior management level.
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
1st February 2016
Committee membership
All members of the Committee are independent non-executive
directors, with each bringing broad financial and commercial
experience at senior levels across a range of industries.
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.
The Chairman of the Board chairs all meetings of the
Committee unless they relate to the appointment of his
successor; for these meetings the Senior Independent Director
is invited to take the Chair.
How the Committee operates
The Committee meets on an ad hoc basis, usually immediately
prior to or following a Board meeting, but on other occasions
as may be needed. It met formally on seven occasions during
the year, primarily to progress the appointment of a new Group
Finance Director. A number of informal meetings, conference
calls and discussions also took place between Committee
members, search consultants and potential candidates
throughout the recruitment process. The Committee Chairman
reports to the Board, as a separate agenda item, on the activity
of the Committee and matters of particular relevance to the
Board in the conduct of its work.
Only members of the Committee have the right to attend
meetings. However an invitation to attend meetings is
extended to Simon Clarke, a non-executive director, and the
Chief Executive attends for all or part of meetings by invitation
as and when appropriate. Tanya Stote, Company Secretary, is
secretary to the Committee.
In 2015 the Committee’s performance was reviewed
internally by way of a questionnaire which was completed
by all members of the Committee and the Chief Executive.
The feedback received will be considered as part of the Board
performance review meeting in March 2016.
Activities of the Committee in the year
Appointment and re-appointment of directors
The Committee leads the process for appointments to the
Board and makes recommendations to the Board when
suitable candidates have been identified in line with Board-
approved procedures. When a vacancy arises, the Committee
evaluates the balance of skills, experience, independence
and knowledge on the Board before preparing a description
of the role and capabilities required for that appointment.
Where appropriate external recruitment consultants are
engaged to assist with the search process. Appointments are
made based on merit whilst having regard to the need to
maintain Board diversity in all its forms.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 68
Nomination Committee Report (continued)
Activities of the Committee in the year (continued)
Appointment of Group Finance Director
In December 2014 the Committee engaged Odgers Berndtson,
a leading executive search firm, to assist with the search for a
Group Finance Director to replace Michael Dunn, who stepped
down from the Board on 31st May 2015. Odgers Berndtson
has no other connection with the Company other than in its
capacity as a search consultant.
The Committee assessed the skills and experience
required to fulfil the role of Group Finance Director and
a list of potential candidates, both internal and external,
was drawn up. These included both men and women that
occupied senior finance roles in both listed and private
companies across a range of sectors. This list was reviewed
by the Committee in early 2015 and a shortlist prepared.
Interviews were conducted, initially involving both the Chairman
and Chief Executive, with short-listed candidates meeting
members of the Committee and the Group Construction
Director. Psychometric assessments were also undertaken.
After consideration the Committee unanimously concluded
that the appointment of Rob Hudson, then Group Financial
Controller at British Land Company plc, be recommended
to the Board. The Board unanimously approved the
recommendation and his appointment was confirmed in April
2015. Rob joined the Company on 28th September 2015.
Noting that the Company would have no Group Finance
Director in post for the period from June to September 2015,
the Committee agreed with the Chief Executive that Andy
Taylor, the Company’s Group Financial Controller, be appointed
Acting Group Finance Director for the period.
Re-appointment of non-executive directors
Independent non-executive directors, including the Chairman,
are appointed by the Board for an initial three-year term
and typically serve a second three-year term. Beyond this a
third term of up to three years may be served subject to a
particularly rigorous review and taking into account the need
for progressive refreshment of the Board. Appointments are
subject to satisfactory performance reviews, re-election by
shareholders and statutory provisions relating to the removal
of directors.
The terms of service of the Chairman and the other non-
executive directors are contained in letters of appointment.
These set out the time commitment expected from each
non-executive director to ensure they perform their duties
satisfactorily. Each non-executive director confirms that they
are able to allocate the time commitment required at the time
of their appointment and thereafter as part of their individual
annual effectiveness review undertaken by the Chairman
(or the Senior Independent Director in the case of the
Chairman’s review).
During the year the Committee considered the re-appointment
of Lesley James and Kay Chaldecott to the Board, who
had completed six and three years’ service respectively.
The Committee was satisfied that both Lesley and Kay
remained independent and would be able to continue to
dedicate sufficient time to fulfil their roles as non-executive
directors of the Company. The Committee recommended,
and the Board approved, the re-appointment of Kay for a
second three-year term. Noting that Lesley had completed her
second three-year term, and the need to ensure continued
refreshing of the Board, the Board approved the Committee’s
recommendation that her appointment be renewed for a
further year, and annually thereafter as appropriate to 2018.
Composition of the Board
Length of directors’ tenures
1
4
4
Independent directors
Non-independent directors
Non-executive Chairman (independent)
2
1
3
3
Less than 3 years
3–6 years
7–9 years
More than 9 years
St. Modwen Properties PLC Annual Report and Financial Statements 2015Corporate Governance 69
Board diversity
All aspects of diversity, including but not limited to gender, are
considered during the recruitment process at every level within
the business, including appointments to the Board.
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. 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.
The Board currently comprises two female non-executive
directors, Lesley James and Kay Chaldecott, who together
represent 22% female Board membership. Gender diversity
below Board level is set out in the Corporate Social
Responsibility Report.
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 Report Pages 42 to 45
Succession planning
John Salmon, non-executive director and Chairman of the
Audit Committee, retired at the 2015 AGM. Whilst his tenure
exceeded nine years, the Board was of the view that John
was 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.
The Committee recommended to the Board that Ian Bull,
who was appointed as a non-executive director in September
2014 and is Chief Financial Officer and main board director of
Ladbrokes plc, be appointed as Committee Chairman in John’s
stead. His appointment took effect from 27th March 2015.
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. For more information see page 44.
Independence and re-election to the Board
Following his appointment in September 2015 Rob Hudson
will retire and offer himself for election at the 2016 AGM.
In accordance with the UK Corporate Governance Code all
other directors will retire and offer themselves for re-election to
the Board.
Each of the directors has been subject to a formal performance
evaluation process and both the Committee and the Board
are satisfied that all directors continue to be effective in, and
demonstrate commitment to, their respective roles on the
Board and that each makes a valuable contribution to the
leadership of the Company. The Board therefore recommends
that shareholders approve the resolutions to be proposed
at the 2016 AGM relating to the election and re-election of
the directors.
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 also
reviewed and confirmed the independence of each non-
executive director seeking re-election at the 2016 AGM.
Directors’ core areas of expertise
Executive directors’ appointments
1
3
5
Property & Operations
Finance
HR
2
1
Internal promotion
External appointment
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 70
Directors’ Remuneration Report
“As the focus on executive pay
continues, the Committee remains
mindful of the developing
remuneration landscape.”
LESLEY JAMES, CBE
Chairman of the Remuneration Committee
Committee meeting attendees (by invitation)
Chief Executive
Bill Oliver
Non-executive director
Simon Clarke
Company Secretary and secretary to the Committee
Tanya Stote
Committee advisor
Representatives from New Bridge Street
Meetings
attended
in year out of
maximum
possible
% attended
in year
3/3
3/3
3/3
3/3
1/1
3/3
100%
100%
100%
100%
100%
100%
Committee member
Member since
Ian Bull
Kay Chaldecott
Lesley James
Richard Mully
John Salmon(1)
Bill Shannon
Sep 2014
Dec 2012
Oct 2009
Sep 2013
Oct 2005
Nov 2010
(1) Retired from the Board on 27th March 2015.
Principal role
Determines 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.
Key activities in 2014/15
• Determined the application of the remuneration policy
in respect of the recruitment of Rob Hudson, Group
Finance Director.
• Monitored market trends in and the governance
environment of remuneration arrangements.
• Commenced preparation for remuneration policy activity
required ahead of the 2017 AGM.
Areas of focus for 2015/16
• Full review of remuneration policy, including proposals for
replacement long-term incentive arrangements.
• Consult with major shareholder on any proposed
changes to remuneration policy.
Terms of reference
www.stmodwen.co.uk/about-us/corporate-governance
St. Modwen Properties PLC Annual Report and Financial Statements 2015Corporate Governance
71
Annual Statement
On behalf of the Board I am pleased to present the report
on directors’ remuneration for the financial year ended
30th November 2015.
This report includes an annual report on remuneration (pages
82 to 93) which describes how the remuneration policy was
implemented for the year ended 30th November 2015 and
how we intend for the policy to apply for the year ending
30th November 2016. This report, together with my annual
statement, will be put to an advisory shareholder vote at the
2016 AGM.
To ensure clarity and to enable you to cross reference our
remuneration practice against our policy, we have also
republished the key elements of 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, to drive strong returns for
our shareholders and to promote the long-term success of the
Company. Shareholders will not therefore be asked to approve
any revisions to the policy at the 2016 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. Pages 18 to 41 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 18 to 21.
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 2014/15
You will see from our financial results that the Company has
had another exceptional year, delivering record profits and
strong growth in net asset value. Performance highlights can
be found on pages 30 to 35 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 earned for the year ended
30th November 2015 (2014: 125% of salary).
The 2013 Performance Share Plan awards are due to vest in
March 2016 based on performance over the three financial
years to 30th November 2015. 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 142% and absolute TSR
growth of 123% over the performance period, awards will
vest in full. Further information, including the Committee’s
consideration of the underpin conditions which must be met
before it can permit awards to vest, can be found on pages 84
and 85.
Remuneration policy for 2015/16
Our policy has been developed taking full account of the UK
Corporate Governance Code (the Code), the views of our
major shareholders and the advice of New Bridge Street, the
Committee’s independent advisor on remuneration matters.
The remuneration packages of our executive directors include
a significant proportion of performance-related elements
which are subject to demanding targets, 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
2015/16 will therefore remain largely unchanged from that
applied in 2014/15.
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 2015. 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.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 72
Directors’ Remuneration Report (continued)
Annual Statement (continued)
Changes to the Board
We announced on 22nd December 2014 that Michael
Dunn had agreed with St. Modwen to leave the Company.
Michael subsequently stepped down from the Board
on 31st May 2015 and remained on garden leave for the
remainder of his notice period to 18th December 2015.
During this period Michael continued to receive salary and
contractual benefits and remained eligible to be awarded a
bonus for the period from 1st December 2014 to 31st May
2015. Michael’s unvested PSP awards will continue with
performance tested at the end of the relevant performance
periods and awards pro-rated to 31st May 2015. Full details
of his remuneration arrangements are set out on page 87.
We are delighted that Rob Hudson has joined us as Group
Finance Director on 28th September 2015. His remuneration
arrangements, details of which can be found on page 87,
are fully consistent with our remuneration policy. In order to
secure his appointment, the Committee agreed to take into
account deferred unvested incentive awards from his previous
employer which Rob would have forfeited. The Committee
has taken particular care in ensuring that these arrangements
are appropriate in light of our policy and replicate, as closely
as possibly, the expected value, form and time horizons of the
forfeited awards.
Looking ahead
As the focus on executive pay continues, the Committee
remains mindful of the developing remuneration landscape.
In 2016 we will consider our current remuneration policy
against this backdrop, whilst ensuring that it remains
clearly aligned to business strategy and promotes the
long-term success of the Company. We will also consult
with our major shareholders on the proposed scheme
to replace our Performance Share Plan, which expires in
2017. Resolutions seeking shareholder approval of both
the remuneration policy and new long-term incentive
arrangements will be put to the AGM in 2017.
Finally, I would like to thank my fellow Committee members
for their hard work and support, including John Salmon who
retired from the Committee and the Board in March 2015.
I hope that you find the report helpful and informative and I
look forward to receiving feedback from our investors on the
information presented.
Lesley James
Chairman of the Remuneration Committee
1st February 2016
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 2014
UK Corporate Governance Code and the Listing Rules of the Financial
Conduct Authority.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Corporate Governance 73
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.
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.
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 74 to 81. Remuneration arrangements
for the financial year ending 30th November 2016 will be in line
with the policy below; further information can be found on
pages 90 and 91.
The Committee retains the discretion to make any payments,
notwithstanding that they are not in line with the policy set
out below, where the terms of the payment were agreed
(i) before the policy came into effect, or (ii) at a time when
the relevant individual was not a director of the Company
and, in the opinion of the Committee, the payment was not
in consideration of the individual becoming a director of
the Company. For these purposes ‘payments’ includes the
Committee satisfying awards of variable remuneration and,
in relation to an award over shares, the terms of the payment
are determined at the time the award is granted. Details of
any such payments will be disclosed in the annual report on
remuneration for the relevant year.
The Committee will operate the annual bonus and long-term
incentive arrangements according to their respective rules
and in accordance with the Listing Rules where relevant.
Consistent with market practice the Committee retains certain
discretions in respect of the operation and administration
of these arrangements which include, but are not limited to,
the following:
• the participants;
• the timing of the grant of an award or payment;
• the size of an award;
• the determination of the extent to which performance
measures have been met and the corresponding vesting
or payment levels;
• discretion required when dealing with a change of control
or restructuring of the Group;
• determination of the treatment of leavers based on the rules
of the respective arrangement and the appropriate treatment
chosen, including the pro-rating of awards;
• adjustments required in certain circumstances (e.g. rights
issues, corporate restructuring events and special dividends);
• the annual review of performance measures, weighting
and targets from year to year; and
• the manner in which share awards can be satisfied
(i.e. through the use of new issue, market purchased or
treasury shares or by way of a cash payment).
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 74
Directors’ Remuneration Report (continued)
Remuneration Policy Report (continued)
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.
Base salary
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.
Performance
measures
None, although
overall performance
of the individual is
considered by the
Committee as part of
the annual review.
Purpose
Operation
Opportunity
• 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.
Normally reviewed annually with
changes effective from
1st December. Review reflects:
• individual and
corporate performance;
• the individual’s level of skill
and experience;
• increases throughout the
Company (including cost of
living awards);
• internal relativities; and
• prevailing market
conditions through periodic
benchmarking for comparable
roles in companies of a similar
size and scope. The Committee
is mindful of institutional
investors’ concerns on the
upward ratchet of base
salaries and does not consider
benchmark data in isolation.
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 90 for those effective
1st December 2015).
St. Modwen Properties PLC Annual Report and Financial Statements 2015Corporate Governance 75
Performance
measures
None
Performance
measures
None
Benefits
Purpose
Operation
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.
• 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.
Pension
Purpose
Operation
Opportunity
15% of base salary for all
executive directors.
• To provide
competitive
post-retirement
benefits in a cost-
effective manner.
• To assist with
recruitment
and retention.
The Company offers an
allowance (expressed as a
percentage of base salary) which
can be taken as:
• an employer contribution
to the defined contribution
section of the Company’s
pension scheme;
• a cash allowance (which is not
bonusable); or
• a blend of the two.
As a result of historic contractual
commitments retirement
benefits for Steve Burke are
also delivered by membership
of the defined benefit section of
the Company’s pension scheme
which is closed to future accrual.
The Committee may amend
the form of any executive
director’s pension arrangements
in response to changes in
pensions legislation or similar
developments, so long as any
amendment does not increase
the cost to the Company of a
director’s pension provision.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 76
Directors’ Remuneration Report (continued)
Remuneration Policy Report (continued)
Annual bonus
Purpose
Operation
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.
• 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)
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 2016
are described in the
annual report on
remuneration on
page 90.
(1) The Committee has discretion to recover some or all of the value of annual bonus if, within four years following payment, it acquires evidence to support the fact that the bonus has been
overpaid due to a restatement of accounts, or there has been an error, or it is determined that the eligible executive committed an act of gross misconduct which, if known at the time, would
have meant that a lower or nil bonus would have been paid. Overpayments can be recovered through clawing back the value of bonus payments direct from the executive, or by a reduction
of future bonus payments or future payments under any other incentive plan.
(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.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Corporate Governance 77
Performance
measures
Performance is
measured over a three
year period with no
retesting against the
following metrics:
• 50% of the award
based on relative TSR
performance; and
• 50% of the award
based on absolute
TSR growth.(3)
The specific measures
that will apply for
the year ending
30th November 2016
are described in the
annual report on
remuneration on
page 91.
Long-term incentives
Purpose
Operation
Opportunity
• 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.
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.
Awards of nil-cost options are
normally made annually with
vesting, in normal circumstances,
dependent on the achievement
of stretching performance
conditions set by the Committee
and measured over a three
year period, and the director
remaining in employment.
The Committee has discretion
to decide whether and to what
extent performance conditions
have been achieved and must
also be satisfied that two
underpin conditions are met
before permitting awards to
vest.(1)
On the exercise of vested
awards, executive directors
receive an amount (in cash or
shares) equal to the dividends
paid or payable between the
date of grant and the date of
exercise on the number of
shares which have vested.
Withholding and recovery
provisions apply to all awards
granted.(2)
Other than in exceptional
circumstances as determined by
the Committee, no further grants
under the Executive Share
Option Schemes (ESOS) will be
made to executive directors.
(1) The conditions are (i) that the extent of vesting under the performance conditions is appropriate given the general financial performance of the Company over the performance period; and
(ii) if no dividend has been paid on the last normal dividend date prior to the vesting date or if the Committee believes that no dividend will be paid in respect of the year in which the award
vests, the award will not vest at that time and vesting will be delayed (subject to continued employment) until dividend payments are resumed.
(2) The Committee has discretion to recover some or all of the value of any awards (calculated at vesting) if, within four years following vesting, it acquires evidence to support the fact that the
value of awards has been overstated due to a restatement of accounts, or there has been an error, or it is determined that the eligible executive committed an act of gross misconduct which,
if known at the time, would have meant that a lower or nil award would have vested. Vested awards can be recovered through clawing back the value of awards direct from the executive, or
by a reduction of future awards on vesting or future bonus payments.
(3) The Committee believes that this combination of TSR measures provides strong alignment with the interests of shareholders and complements the focus on operational performance
measures in the annual bonus arrangements. Targets are set to ensure that only modest awards are available for delivering on target performance with maximum rewards requiring
substantial outperformance of the Company’s budget and strategic plans.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 78
Directors’ Remuneration Report (continued)
Remuneration Policy Report (continued)
All-employee share schemes
Purpose
Operation
Opportunity
Performance
measures
Maximum participation limits are
set in line with HMRC guidelines
in force at the time of award.
None
• To encourage
all employees to
make a long-term
investment in the
Company’s shares in
a tax efficient way.
All employees, including
executive directors, are
entitled to participate in a UK
tax approved all-employee
share scheme.
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.
Shareholding requirement
Purpose
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
St. Modwen Properties PLC Annual Report and Financial Statements 2015Corporate Governance 79
Performance
measures
None, although
overall performance
of the individual is
considered as part of
the annual review.
Fees payable to Chairman and non-executive directors
Purpose
Operation
Opportunity
• 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.
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 91 for those effective
1st December 2015).
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.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 80
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.
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 six
months from the individual. None have fixed terms of service.
Service contracts for new executive directors will generally be
limited to 12 months’ notice.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Corporate Governance 81
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.
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 principles set out in the table below will apply to annual
bonus and long-term incentive arrangements in the event of
loss of office.
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.
Remuneration element
‘Good’ leavers
Other leavers
Annual bonus
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, 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.
An executive director will be treated as a good
leaver if he or she dies or ceases employment
due to injury or disability.
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.
Unless the Committee exercises its discretion to
treat the executive director as a good leaver, no
bonus will be payable.
All awards will lapse in full where termination is by
reason of summary dismissal.
In other circumstances unvested awards will lapse
in full unless the Committee applies discretion to
treat the executive director as a good leaver.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 82
Directors’ Remuneration Report (continued)
Annual Report on Remuneration
This part of the report has been prepared in accordance with Part 3, Schedule 8 to The Large and Medium-sized Companies
and Groups (Accounts and Reports) Regulations 2008 as amended in 2013 and with the requirements of the Financial
Conduct Authority’s Listing Rules.
Remuneration payable (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
2015
2014
2015
2014
2015
2014
2015(3)
2014(4)
2015
2014
2015
2014(6)
2015
2014
Executive directors
Bill Oliver
Steve Burke
Michael Dunn(7)
Rob Hudson(8)
Non-executive
directors
Bill Shannon
Ian Bull
Kay Chaldecott
Simon Clarke
Lesley James
Richard Mully
John Salmon(9)
485
320
146
49
471
311
283
–
155
150
49
42
42
51
51
17
10
41
41
50
50
50
31
11
6
39
–
–
–
–
–
–
–
34
26
11
–
606
400
182
61
–
–
–
–
–
–
–
–
–
–
–
–
–
–
588 1,032 1,750
388
353
681 1,155
462 1,051
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
73
48
22
7
–
–
–
–
–
–
–
71
47
42
–
–
–
–
–
–
–
–
1,407 1,457
87
71 1,249 1,329 2,175 3,956
150
160
–
–
–
–
–
–
–
–
–
–
–
–
169 2,227 3,083
67 1,460 1,994
–
–
–
–
–
–
–
–
–
818 1,740
156
–
155
150
49
42
42
51
51
17
10
41
41
50
50
50
236 5,068 7,209
(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. Rob Hudson is also entitled to a relocation allowance of up to 25% of base salary in respect of reasonable and appropriate costs to enable him to
relocate to the Midlands following his appointment on 28th September 2015; in the year ended 30th November 2015 payments totalling £37,471 were made to Rob Hudson in connection
with his relocation.
(2) Bonus payable in respect of the relevant financial year. Further information as to how the level of bonus awarded in 2015 was determined is provided on pages 83 and 84.
(3) Relates to the 2013 PSP awards which are due to vest and become exercisable on 6th March 2016. As the awards had not vested as at the date of this report, their value has been estimated
using a share price of 433.7p, being the three month average to 30th November 2015, plus 12.92p 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 2015. Further information on the
awards and the performance conditions to which they were subject can be found on pages 84 and 85.
(4) Relates to the 2012 PSP awards which vested and became exercisable on 17th February 2015. The share price used to value the awards was 470.00p, being the share price on the vesting
date, plus 11.293p per share which is the value of the dividend equivalent deliverable in shares on vesting. The dividend equivalent is based on dividends paid to shareholders with record
dates occurring between the date of grant and the date of vesting.
(5) Further details regarding pension entitlements can be found on pages 86 and 87.
(6) Values shown comprise the notional gain on the exercise of options granted under the Company’s Executive Share Option Schemes and Saving Related Share Option Scheme.
(7) Stepped down from the Board on 31st May 2015. Values for 2015 reflect remuneration received as a director in the period from 1st December 2014 to 31st May 2015. Information on the
payments made to Michael Dunn for the period from 1st June 2015 to 30th November 2015 can be found on page 87.
(8) Appointed to the Board on 28th September 2015. Further information on the recruitment arrangements for Rob Hudson can be found on page 87.
(9) Retired from the Board on 27th March 2015.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Corporate Governance 83
Annual bonus outturn (audited information)
In the financial year ended 30th November 2015 all executive directors had the opportunity to be awarded an annual bonus of
up to 125% of base salary as at 1st December 2014. 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 below.
Measure
Corporate (105% of salary)
On target
performance(1)
Maximum
performance(2)
Actual performance
Post dividend growth in shareholders’ equity net asset value per share
21% growth
Profit before all tax
Total dividend for the year
Gearing levels(3)
Covenant compliance
Achievement against a number of strategic objectives which
primarily included:
• achieving targeted development milestones to support future
profit delivery; and
• progressing acquisitions to enhance the Company’s land bank.
Personal (20% of salary)
Achievement against a number of operational objectives which
primarily included:
• achieving unconditional status in respect of New Covent Garden Market
and the identification of procurement options;
• delivering completion of the first phase at Bay Campus, Swansea University;
• initiation and development of PRS programme;
• advancing the embedding of risk management across the Group;
• development of longer-term resourcing arrangements in line with
business needs; and
• enhancing the Company’s CSR activities.
Committee
discretion
Committee
discretion
Committee
discretion
48%
Full
27% growth to
413.5p
£258.4m
5.75p per share
48%
Full
£231.2m
5.5p
per share
48%
Full
Achievement determined
by the Committee against
measurable objectives set
at the beginning of
the year
Achieved
in full as detailed
in the
Strategic Report
Achievement determined
by the Committee against
measurable objectives set
at the beginning of
the year
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).
(3) Defined as adjusted gearing, being the ratio of net borrowings (excluding finance leases) to net assets, and consistent with the measure set at the beginning of the year.
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 27% to 413.5p per share;
• an unprecedented increase in profit before all tax of 91% to £258.4m;
• realised property profits up by 31% to £67.4m;
• earnings per share up 82% to 97.9p;
• total dividend for the year increased by 25% to 5.75p per share;
• valuation gain of £201.7m, of which £166.0m was as a result of planning and asset management initiatives;
• significant milestones achieved across all major projects, including achieving unconditional status for the redevelopment of New
Covent Garden Market in April 2015, the opening of Bay Campus at Swansea University in September 2015 and completion of
the second phase of Longbridge Town Centre, including a new 150,000 sq ft flagship store for Marks & Spencer; and
• the continued recycling of capital through disposals of mature assets, such as Cranfield University Technology Park, into added-
value acquisitions, such as Kirkby Town Centre.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 84
Directors’ Remuneration Report (continued)
Annual Report on Remuneration (continued)
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 earned in the year. Consequently the award made to Michael Dunn was
pro-rated in respect of the period from 1st December 2014 to 31st May 2015 when he commenced garden leave and the award
made to Rob Hudson reflected his appointment to the Board on 28th September 2015.
Bonus payments made to Bill Oliver and Steve Burke were conditional upon the executive director 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. The payment made to Rob Hudson was similarly conditional, albeit he was required
to undertake to invest the full bonus received, after payment of income tax and national insurance.
Long-term incentives (audited information)
Performance Share Plan (PSP)
On 9th April 2015, the following PSP awards were granted to executive directors as nil cost options:
Executive director
Bill Oliver
Steve Burke
Basis of award
125% of salary
125% of salary
Face value of award
£000(1)
Number of shares
threshold performance(2)
% of award that would vest for
£606
£400
130,501
86,107
25%
25%
(1) Calculated using the average share price of 464.37p 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 2016 awards which are described on page 91. The performance period started on 1st December 2014
and will end on 30th November 2017.
Following his appointment on 28th September 2015, the following PSP award was granted as a nil cost option to Rob Hudson on
2nd October 2015:
Executive director
Rob Hudson
Basis of award
£000(1)
Number of shares
threshold performance(2)
Face value of award
% of award that would vest for
180% of salary
£495
119,018
25%
(1) Calculated using the average share price of 415.9p 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 award mirror those proposed for the 2016 awards which are described on page 91. The performance period started on 1st December 2014 and
will end on 30th November 2017.
The three year performance period for the 2013 PSP awards ended on 30th November 2015. 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%
122.65%
50%
50% of award
Equal to
Index
12.5%
120% of
Index
50%
142% of
Index
TOTAL
50%
100%
To ensure that the level of vesting of PSP awards accurately reflected the performance of the Company during the period, the
Committee also considered whether it was satisfied that the two underpins (details of which are set out in note 1 on page 77)
had been met. In respect of the dividend underpin, an interim dividend of 1.9p per share was paid on 3rd September 2015 and
the Board is recommending that a final dividend for the year of 3.85p per share be paid on 1st April 2016. Furthermore, the
Committee currently has no reason to believe that dividends will not be paid in respect of the 2016 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
Adjusted gearing
See-through loan-to-value
As at 1st
December 2012(1)
£52.8m
250.8p
3.63p
71%
41%
As at 30th
November 2015
£258.4m
413.5p
5.75p
48%
30%
Improvement
389%
65%
58%
32%
27%
(1) Due to the negligible impact, financial information has not been restated to reflect the revised accounting treatment of VSM Estates (Holdings) Ltd under IFRS 10. See the Accounting Policies
note on pages 116 and 117 of the Group Financial Statements for further information.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Corporate Governance 85
The Committee therefore determined that the PSP awards granted in 2013 will vest in full and become exercisable on the third
anniversary of grant (6th March 2016). 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
231,077
152,468
138,802
231,077
152,468
103,468(1)
(1) Pro-rated to reflect the time elapsed from the date of grant to 31st May 2015 when Michael Dunn stepped down from the Board. Further information can be found on page 87.
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.
All PSP awards held by the executive directors who served during the year, together with any movements, are shown below.
Executive director
Awards held on
1st December
2014
Date of
grant
Awards made
during year
Awards vested
during year
Awards
exercised
during year
Awards
lapsed/
forfeited
during year
Awards held
on 30th
November
2015(1)
Bill Oliver
17/02/12
363,529
06/03/13
231,077
05/03/14
150,141
–
–
–
09/04/15
–
130,501(4)
350,226
350,226(2)
13,303(3)
–
–
–
–
–
–
–
–
–
–
231,077
150,141
130,501
744,747
130,501
350,226
350,226
13,303
511,719
End of
performance
30/11/14
30/11/15
period Exercise period
17/02/15 to
16/02/22
06/03/16 to
05/03/23
05/03/17 to
04/03/24
09/04/18 to
08/04/25
30/11/16
30/11/17
Steve Burke
17/02/12
239,863
06/03/13
152,468
05/03/14
99,066
–
–
–
09/04/15
–
86,107(4)
226,560
226,560(2)
13,303(3)
–
30/11/14
–
–
–
–
–
–
–
–
–
152,468
30/11/15
99,066
30/11/16
86,107
30/11/17
491,397
86,107
226,560
226,560
13,303
337,641
Rob Hudson(5)
02/10/15
–
119,018
–
–
–
119,018
30/11/17
Michael Dunn(6)
17/02/12
218,362
06/03/13
138,802
05/03/14
90,186
447,350
–
–
–
–
205,059
205,059(2)
13,303(3)
–
30/11/14
–
–
–
–
35,334
103,468
30/11/15
52,911
37,275
30/11/16
205,059
205,059
101,558
140,743
17/02/15 to
16/02/22
06/03/16 to
05/03/23
05/03/17 to
04/03/24
09/04/18 to
08/04/25
02/10/18 to
01/10/25
17/02/15 to
16/02/22
06/03/16 to
05/03/23
05/03/17 to
04/03/24
(1) The performance conditions for all awards held on 30th November 2015 mirror those proposed for the 2016 awards as described on page 91.
(2) Awards exercised on 17th February 2015. 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: Bill Oliver: 8,753 shares; Steve Burke: 5,775 shares; Michael Dunn: 5,257 shares.
(3) The awards granted in 2012 comprised an approved ESOS award over 19,769 shares with an exercise price of 151.75p and a PSP award for the balance. On exercise the value delivered by
the PSP awards was scaled back by the value delivered by the approved ESOS award to ensure that the total pre-tax value delivered to executive directors remained unchanged. Details of
the approved ESOS awards granted in 2012 can be found in the table on page 86.
(4) The share price used to calculate the number of shares awarded, under the rules of the PSP, was 464.37p. The closing mid-market share price on the date of the award was 470p.
(5) Appointed to the Board on 28th September 2015. The share price used to calculate the number of shares awarded to Rob Hudson in the year, under the rules of the PSP, was 415.9p.
The closing mid-market share price on the date of award was 417p.
(6) Stepped down from the Board on 31st May 2015 and ceased to be an employee on 18th December 2015. PSP awards granted in 2013 and 2014 have been pro-rated to reflect the time
elapsed from the date of grant to 31st May 2015. Further information can be found on page 87.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 86
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
2014
Options
granted during
year
Options
exercised
during year
Options
lapsed
during year
Options held
on 30th
November
2015
Bill Oliver
15/08/05
102,955
17/02/12(3)
19,769
122,724
Steve Burke
15/08/05
39,825
17/02/12(3)
19,769
59,594
Michael Dunn(4)
17/02/12(3)
19,769
(1) Adjusted to take account of the dilutive effect of the 2009 equity issue.
(2) Exercised on 17th February 2015.
–
–
–
–
–
–
–
102,955(2)
19,769(2)
122,724
39,825(2)
19,769(2)
59,594
19,769(2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Exercise
price
375.22p(1)
151.75p
Exercise
period
15/08/08 to
14/08/15
17/02/15 to
16/02/22
375.22p(1)
151.75p
15/08/08 to
14/08/15
17/02/15 to
16/02/22
151.75p
17/02/15 to
16/02/22
(3) Granted in conjunction with the 2012 PSP awards so as to enable the executive directors to benefit from UK tax efficiencies under HMRC agreed share schemes legislation. For further
information see note (3) to the table on page 85.
(4) Stepped down from the Board on 31st May 2015.
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
2014
Options
granted during
year
Options
exercised
during year
Options
lapsed
during year
Options held
on 30th
November
2015
Exercise
price
Steve Burke
16/08/11
9,887
Michael Dunn(1)
16/08/11
9,887
–
–
–
–
–
–
9,887
156p
9,887
156p
Exercise
period
01/10/16 to
31/03/17
01/10/16 to
31/03/17
(1) Stepped down from the Board on 31st May 2015 and ceased to be an employee on 18th December 2015.
The closing mid-market share price on 30th November 2015 was 432.5p and the price range during the year was 370.0p to 493.6p.
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.
Pension contribution
£
Cash allowance in lieu of
pension contribution
£
Total
£
Executive director
Bill Oliver
Steve Burke
Michael Dunn
Rob Hudson(2)
2015
–
2014
2015
2014
2015
–
72,721
70,603
39,996
18,000(1)
42,192
38,136
7,987
3,841(1)
4,393
4,273
–
–
7,344
–
7,344
72,721
47,983
21,841(1)
2014
70,603
46,585
42,409
–
(1) Contributions made from 1st December 2014 to 31st May 2015 when Michael Dunn stepped down from the Board. Pension contributions paid from 1st June 2015 to 30th November 2015 are
57,996
80,328
91,893
79,269
149,889
159,597
detailed on page 87.
(2) Appointed to the Board on 28th September 2015.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Corporate Governance 87
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
Age at
30th November
2015
Accrued
pension at
30th November
Accrued
pension at
30th November
2014(1)
£pa
2015(1)
£pa
Increase in
accrued pension
during the year
£pa
Increase in
accrued pension
during the year
(excluding
inflation)
£pa
56
28,006(2)
28,342(2)
336
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.
Recruitment arrangements for Rob Hudson
Rob’s service contract and remuneration arrangements are consistent with the remuneration policy set out on pages 74 to
81. His base salary is £275,000 and he is eligible for an annual bonus of up to 125% of that salary. He will also be eligible for
an annual award under the Company’s PSP (the normal and current annual award limit is 125% of base salary). Additionally he
receives a pension allowance of 15% of base salary and other benefits in line with the remuneration policy; these benefits include
a relocation allowance of up to 25% of base salary in respect of reasonable and appropriate costs to enable Rob to relocate to
the Midlands.
As a consequence of joining the Company, Rob was required to forfeit certain long-term incentives from his previous employer.
In order to compensate him for that, the Committee agreed:
• a one-off cash payment of £414,000 in recognition of an outstanding long-term incentive award which had reached the end of
the performance measurement period in March 2015 (such that the full value could be determined) but which was not due to
vest until December 2015. As the vesting date fell soon after his appointment, a cash payment (rather than an award of shares)
was considered fair and reasonable. The payment was made in December 2015 and was subject to the deduction of tax and
national insurance contributions; and
• a PSP award over 119,018 shares in the Company granted on 2nd October 2015, representing 180% of base salary. This award
was in recognition of two outstanding long-term incentive awards for which performance measurement periods would end
in March 2016 and 2017. The Committee took the view that the PSP award was appropriate as it was of a lower fair value and
matched the form of and would vest later than the awards forfeited. Subject to the achievement of the same performance
measures and period as apply to the PSP awards granted on 9th April 2015, the award will vest on the third anniversary of grant.
Payments to past directors and for loss of office (audited information)
Further to the disclosure in last year’s Directors’ Remuneration Report, Michael Dunn stepped down from the Board on 31st May
2015. He remained on garden leave for the remainder of his notice period to 18th December 2015 when he ceased to be an
employee of the Company.
Details of his remuneration from 1st December 2014 to 31st May 2015 can be found in the table on page 82. For the period
from 1st June 2015 to 30th November 2015 Michael received £145,605 in base salary, £5,644 in benefits and £21,841 in pension
contribution. He remained eligible to be awarded a bonus, subject to the achievement of performance measures, in respect of the
period from 1st December 2014 to 31st May 2015; further details can be found on pages 83 and 84.
The Committee has exercised discretion under the rules of the PSP to allow unvested awards to continue subject to time pro-
rating and performance assessment. Awards have been pro-rated to reflect the time elapsed from the date of grant to 31st May
2015; details can be found on pages 84 and 85. 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 1 on page 77) 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 is exercisable to the extent of accumulated savings (plus any applicable interest) in the six
months following 18th December 2015.
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.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45
88
Directors’ Remuneration Report (continued)
Annual Report on Remuneration (continued)
Statement of directors’ shareholding and share interests (audited information)
The interests of the directors and their connected persons in the issued ordinary share capital of the Company are shown in the
table below.
As at 30th November 2015
Ordinary
shares
PSP awards
vested but
unexercised
PSP awards
not yet
vested
ESOS
awards
SAYE
awards
Ordinary
shares
As at 1st December 2014
PSP awards
vested but
unexercised
PSP awards
not yet
vested
ESOS
awards(1)
SAYE
awards
Executive
directors
Bill Oliver
Steve Burke
879,625
500,258
Michael Dunn
247,861(2)
Rob Hudson
Non-executive
directors
Bill Shannon
Ian Bull
Kay Chaldecott
Simon Clarke
Lesley James
Richard Mully
John Salmon
–
75,000
15,000
10,000
3,112,657
20,000
20,000
30,000(4)
(1) Awards had vested but had not been exercised.
(2) On stepping down from the Board on 31st May 2015.
(3) On appointment to the Board on 28th September 2015.
(4) On retirement from the Board on 27th March 2015.
–
511,719
– 337,641
– 140,743(2)
– 119,018
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
854,625
9,887
480,489
9,887(2) 222,861
–
–
–
–
–(3)
75,000
15,000
10,000
– 3,112,657
–
–
–
20,000
20,000
30,000
–
–
–
–(3)
744,747
102,955
–
491,397
39,825
9,887
447,350
–(3)
–
9,887
–(3)
–(3)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
There were no changes in these shareholdings or interests between 30th November 2015 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. Both Bill Oliver and
Steve Burke have met and exceeded the shareholding requirement; Rob Hudson has until 28th September 2020 to do so.
Executive director
Bill Oliver
Steve Burke
Rob Hudson
Ordinary shares held as at
30th November 2015
Shareholding requirement
as % of base salary
Shareholding at 30th November
2015 as % of base salary(1)
879,625
500,528
–
200%
200%
200%
785%
676%
0%
(1) Based on the closing mid-market share price on 30th November 2015 of 432.5p and salary as at 30th November 2015.
The Committee has noted investor sentiment and the provisions of the Code in respect of holding periods following the vesting or
exercise of long-term incentive awards. Given the substantial shareholding requirement set out above, the element of compulsory
investment in shares of the annual bonus arrangements and robust incentive withholding and recovery provisions, the Committee
does not currently feel that such holding periods are necessary for the Company’s PSP arrangements. However, detailed
consideration will be given to this area in 2016 in respect of both future long-term incentive design and remuneration policy
provisions, both of which will be put to shareholders for approval at the 2017 AGM.
External appointments
Michael Dunn is a non-executive director of Metropolitan Housing Trust. He received and retained fees of £5,417 for the period
from 1st December 2014 to 31st May 2015 when he ceased to be a director of the Company.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Corporate Governance 89
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 seven financial years.
£500
£450
£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
30th Nov
2015
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 seven year period to 30th November 2015. 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
2010
902
2011
1,049
2012
1,672
2013
2,419
2014
3,083
2015
2,227
50.00(2)
80.00
95.00
90.00
95.00
100.00
100.00
0.00
0.00
0.00
45.77(3)
100.00
100.00
100.00
(1) Total remuneration includes those elements shown in the single total figure of remuneration table on page 82.
(2) In addition to the annual bonus, the Chief Executive was also awarded a one-off, exceptional payment of £100,000 in relation to the successful equity raising and financial restructuring
undertaken in the year.
(3) Comprises 45.64% of the 2009 PSP awards and 45.89% of the 2010 PSP awards.
Change in remuneration of Chief Executive compared to employees
The table below shows the percentage change in salary, benefits and annual bonus between the years ended 30th November
2015 and 30th November 2014 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(1)
0.0(2)
0.0(3)
3.0
11.4(4)
(1) General cost of living increase for permanent employees. Including adjustments for promotions and recognition of exceptional performance, the weighted average increase in
salary was 4.6%.
(2) The year on year decrease in benefits shown in the single total figure of remuneration table on page 82 reflects a reduction in taxable benefit arising following a change of company car.
(3) There was no change to the overall structure of benefits available to permanent employees.
(4) Weighted average increase.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 90
Directors’ Remuneration Report (continued)
Annual Report on Remuneration (continued)
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 Group Financial Statements for the
last two financial years. Information in respect of profit and net asset value performance has been provided for context.
Measure
Total spend on pay
Profit before all tax
Dividends paid
Equity attributable to owners of the Company
Relevant note to
the Group
Financial
Statements
Year ended
30th November
2014
Year ended
30th November
2015
3c
2a
7
2f
£17.4m
£21.8m
£135.4m
£258.4m
£9.1m
£11.1m
£718.1m
£914.7m
% Increase
25%
91%
22%
27%
Implementation of remuneration policy for 2015/16
Base salary
In line with the general cost of living salary increase awarded to the Company’s permanent employees, Bill Oliver and Steve Burke
received an annual salary increase of 3% with effect from 1st December 2015. In light of his length of service the Committee
determined that it was not appropriate to apply an increase to the salary payable to Rob Hudson.
Executive director
Bill Oliver
Steve Burke
Rob Hudson(1)
(1) Appointed to the Board on 28th September 2015.
Base salary as at
30th November
2015
Base salary
with effect
from
1st December
2015
£484,807
£499,351
£319,885
£329,481
£275,000
£275,000
% Increase
3.0%
3.0%
0.0%
Benefits and pension arrangements
Benefits and pension arrangements for the financial year ending 30th November 2016 will be consistent with the respective
policies detailed on page 75.
Annual bonus
The annual bonus arrangements for the financial year ending 30th November 2016 will operate on the same basis as for 2014/15
and will be consistent with the annual bonus policy detailed on page 76 (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:
65%
105%
Personal
• Achievement against a number of strategic objectives
Achievement against a number of operational objectives For on target performance:
For maximum performance:
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 2016 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.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Corporate Governance 91
Long-term incentives – PSP
As in 2014/15, PSP awards granted to executive directors in the financial year ending 30th November 2016 will be over shares
worth 125% of salary and will be consistent with the long-term incentives policy detailed on page 77 (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 2016; these targets are set out in the table below and will be measured
over the three financial years ending on 30th November 2018.
Performance measure
Absolute TSR growth
TSR relative to FTSE All-Share Real Estate Investment
& Services Index
Weighting
50% of award
50% of award
Threshold
performance
20%
Equal
to Index
Vesting of award
at threshold
performance
12.5%
12.5%
Maximum
performance
50%
120%
of Index
Vesting of award
at maximum
performance
50%
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 provided by New Bridge Street to ensure that performance is independently verified.
Chairman and non-executive director fees
Following a review by the Board, the annual fees payable to the Chairman and non-executive directors have been increased in line
with the cost of living salary increase awarded to the Company’s employees with effect from 1st December 2015.
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
Rob Hudson
Non-executive directors
Bill Shannon(1)
Ian Bull
Kay Chaldecott
Simon Clarke
Lesley James
Richard Mully
(1) Appointed Chairman on 22nd March 2011.
Fee as at
30th November
2015
Fee with effect
from
1st December
2015
£154,500
£159,135
£42,436
£43,709
£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
28th September 2015
7th January 2016
18th January 2016
20th April 2015
N/A
N/A
N/A
1st November 2010
1st September 2014
22nd October 2012
11th October 2004
19th October 2009
1st September 2013
18th October 2010
30th October 2016
21st August 2014
22nd October 2012
4th October 2014
19th October 2009
16th July 2013
31st August 2017
21st October 2018
10th October 2016
18th October 2016
31st August 2016
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 92
Directors’ Remuneration Report (continued)
Annual Report on Remuneration (continued)
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 2015 was as follows:
Type of scheme
All schemes
Executive schemes only
Limit
10%
5%
Actual
3.24%
2.99%
During the year a total of 500,000 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 2015 the Trust held a total of 690,274 shares in the Company
(2014: 460,427 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.
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.
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
Committee meetings and attendance during the year ended 30th November 2015(1)
Lesley James
Ian Bull
Kay Chaldecott
Richard Mully
John Salmon
Bill Shannon
Chairman
Member
Member
Member
Member(2)
Member
(1) Actual attendance/maximum number of meetings a director could attend.
(2) Until retirement from the Board on 27th March 2015.
Remuneration Committee attendees (by invitation)
Bill Oliver
Simon Clarke
Tanya Stote
3/3
3/3
3/3
3/3
1/1
3/3
Chief Executive
Non-executive director
Company Secretary and secretary to the Committee
Representatives from New Bridge Street
Remuneration Committee advisor
Advice provided to the Committee
New Bridge Street (NBS), a trading name of Aon Hewitt Ltd (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 2014/15
NBS provided specific advice to the Committee on remuneration arrangements relating to the departure of Michael Dunn and
the appointment of Rob Hudson, the application of withholding and recovery provisions and TSR monitoring services. Fees are
charged on a cost incurred basis and totalled £50,500 in the year ended 30th November 2015.
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 2015Corporate Governance 93
Activities of the Committee
The Committee met on three occasions in the financial year ended 30th November 2015 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 2015/16 annual bonus arrangements for executive directors and undertake an
assessment of performance against targets for 2014/15;
• to approve the outturn of PSP awards granted in 2012;
• to approve share awards granted in 2015 together with associated performance criteria;
• to approve the application of withholding and recovery provisions to the rules of both the PSP and annual bonus arrangements
in line with Code requirements;
• to determine the application of the remuneration policy for the recruitment of Rob Hudson;
• to consider investor feedback on the Company’s remuneration policy and the report on directors’ remuneration for the 2014
Annual Report;
• to review market trends and the governance environment in respect of remuneration arrangements;
• to formulate actions required to enable shareholder approval of the Company’s proposed remuneration policy and revised long-
term incentive arrangements to be sought in 2017;
• to review 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 27th March 2015 votes cast in respect of directors’ remuneration were as follows:
Resolution
To approve the Directors’
Remuneration Report
(excluding the policy section)
No. of votes for
% of vote for
against % of vote against
Total votes cast
Votes withheld(1)
No. of votes
165,897,466
98.54%
2,458,130
1.46% 168,355,596
387,682
(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.
This report on remuneration has been approved by the Board and signed on its behalf by
Lesley James
Chairman of the Remuneration Committee
1st February 2016
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 94
Directors’ Report
The directors present their report for the year ended
30th November 2015.
This standard authority will expire at the 2016 AGM and a
resolution to renew it will be proposed.
As permitted by legislation, some of the matters historically
included in this report have instead been included in the
Strategic Report on pages 1 to 45 as the Board considers
them to be of strategic importance. Specifically these relate
to the Company’s business model and strategy, future
business developments and risk management. The corporate
governance statement as required by the Disclosure and
Transparency Rules of the Financial Conduct Authority (FCA) is
set out on pages 46 to 93 and is incorporated into this report
by reference.
Annual General Meeting
The AGM of the Company will be held at 12.00 noon
on Wednesday, 23rd March 2016 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 167 to 174.
Dividend
An interim dividend of 1.9p per ordinary share (2014: 1.463p)
was paid on 3rd September 2015.
The directors recommend a final dividend of 3.85p per ordinary
share in respect of the year ended 30th November 2015
(2014: 3.137p), making a total dividend for the year of 5.75p per
share (2014: 4.6p), payable on 1st April 2016 to shareholders
on the register on 4th March 2016.
Other than as referred to under the heading ‘Share capital’
below, during the year there were no arrangements under
which a shareholder has waived or agreed to waive any
dividends nor any agreement by a shareholder to waive
future dividends.
Share capital
Capital structure
The Company has a single class of share capital which is
divided into ordinary shares of 10p each, all ranking pari passu.
Each share carries the right to one vote at general meetings of
the Company.
At 30th November 2015 there were 221,876,988 ordinary
shares in issue and fully paid. Further details relating to share
capital, including movements during the year, are set out in
note (K) to the Company Financial Statements.
Share allotments
During the year, and in accordance with the authority granted
by shareholders at the 2015 AGM, 500,000 ordinary shares
were allotted at par value to the Company’s Employee Share
Trust to enable it to satisfy the vesting and exercise of awards
of ordinary shares made under the Company’s share-based
incentive arrangements.
Purchase by the Company of its own shares
At the 2015 AGM, shareholders renewed the Company’s
authority to make market purchases of up to 22,137,698
ordinary shares, representing 10% of the issued share capital
at that time. No shares were repurchased during the year
and the Company does not hold any shares in treasury.
Employee Share Trust (Trust)
As at 30th November 2015, the Trust held 690,274 shares
(2014: 460,427 shares), representing 0.31% (2014: 0.21%) of
the Company’s issued share capital. The Trust deed contains
a dividend waiver provision in respect of shares held by the
Trust, such that dividends are waived with the exception of a
hundredth of a penny per share. 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.
Further details regarding the Trust and of shares issued
pursuant to the Company’s share-based incentive
arrangements are set out in note (K) to the Company Financial
Statements.
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 report, 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 2016 AGM
are set out in the notice of meeting on pages 167 to 174.
Restrictions on the transfer of shares
As at 30th November 2015 and the date of this report, except
as referred to below:
• there were no restrictions on the transfer of ordinary shares
in the Company;
• there were no limitations on the holding of ordinary shares;
• there were no requirements to obtain the approval of the
Company, or of other holders of ordinary shares in the
Company, for a transfer of shares; and
• no person held shares in the Company carrying any special
rights with regard to control of the Company.
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 (Articles), 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 (Act).
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.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Corporate Governance 95
Interests in voting rights
Information provided to the Company pursuant to the FCA’s
Disclosure and Transparency Rules (DTR 5) is published on a
Regulatory Information Service and on the Company’s website.
As at 30th November 2015, the following information had been
received in accordance with DTR 5 from holders of notifiable
interests in the Company’s issued share capital.
The information provided below was correct at the date of
notification; however the date the notification received may
not have been within the current financial year. It should be
noted that these holdings are likely to have changed since
the Company was notified. Notification of any change is not
required until the next notifiable threshold is crossed.
Shareholder
The late Lady Clarke and connected parties
(including Simon Clarke)
J.D. Leavesley and connected parties
Aviva plc
BlackRock, Inc.
Royal London Asset Management Ltd
TR Property Investment Trust plc
Nature of holding Total voting rights
% of total voting
rights
Direct interest
18,575,196
Direct interest
13,447,099
Direct interest
8,889,142
Indirect interest
5,582,987
Total
14,472,129
Indirect interest
11,075,661
Direct interest
11,186,531
Direct interest
6,802,638
8.43%
6.07%
4.02%
2.52%
6.54%
5.03%
5.04%
3.40%
No changes in interests in the voting rights of the Company’s issued share capital have been notified to the Company in
accordance with DTR 5 between 30th November 2015 and 1st February 2016.
Directors
The Board
The following served as directors during the year ended
30th November 2015:
• Ian Bull
• Steve Burke
• Kay Chaldecott
• Simon Clarke
• Michael Dunn (stepped down from the Board on
31st May 2015)
• Rob Hudson (appointed on 28th September 2015)
• Lesley James
• Richard Mully
• Bill Oliver
• John Salmon (retired on 27th March 2015)
• Bill Shannon
The biographical details of all the directors serving at
30th November 2015, including details of their relevant
experience and other significant commitments, are shown
on pages 48 and 49.
The Directors’ Remuneration Report, which includes details
of directors’ service contracts and their interests in the
Company’s shares, is set out on pages 70 to 93. 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.
Appointment and replacement of directors
The appointment and replacement of directors is governed by
the Articles, the UK Corporate Governance Code (Code), the Act
and related legislation. Under the Articles:
• the number of directors is not subject to any maximum but
must not be less than three, unless otherwise determined by
the Company in general meeting;
• directors may be appointed by an ordinary resolution of
the Company or by resolution of the directors, either to fill a
casual vacancy or as an additional director; and
• a director appointed by the directors must retire at the
next AGM and is not taken into account in determining the
directors who are to retire by rotation at the meeting.
The Articles require that at least one third of the Board
must retire by rotation at each AGM. Notwithstanding these
provisions, the Board has agreed that all directors will seek
re-election at each AGM in accordance with the Code. At the
2016 AGM Robert Hudson, who was appointed by the
directors in September 2015, will retire and be offering himself
for election; all other directors will be offering themselves for
re-election.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 96
Directors’ Report (continued)
Directors (continued)
A director may be removed by a special resolution of the
Company. In addition, a director must automatically cease
to be a director if he or she:
• resigns from his or her office by notice in writing to the
Company or, in the case of an executive director, the
appointment is terminated or expires and the directors
resolve that his or her office be vacated;
• becomes bankrupt or makes any arrangement or
composition with his or her creditors generally;
• is suffering from a mental disorder;
• is absent from meetings of the directors for more than six
consecutive months without permission of the directors and
the directors resolve that his or her office be vacated; or
• becomes prohibited by law from acting as a director.
Powers of the directors
The Board of Directors may exercise all the powers of the
Company, subject to the Articles, UK legislation including
the Act and any directions given by the Company in
general meeting.
The directors have been authorised by the Articles 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 94.
Conflicts of interest
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.
Under the Act, directors have a statutory duty to avoid conflicts
of interest with the Company. As permitted by the Act, the
Articles enable non-conflicted directors to authorise actual
or potential conflicts of interest, either with or without limits
or conditions. Formal procedures for the notification and
authorisation of such conflicts are in place. Any potential
conflicts of interest in relation to newly appointed directors are
considered by the Board prior to appointment. All directors
have a continuing duty to update any changes to conflicts.
Indemnities and insurance
The Company has granted indemnities to each of its directors
and the Company Secretary to the extent permitted by law in
respect of costs of defending claims against them and third
party liabilities. These provisions, deemed to be qualifying third-
party indemnity provisions pursuant to section 234 of the Act,
were in force during the year ended 30th November 2015 and
remain in force as at the date of this report.
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.
The Company also maintains directors’ and officers’ liability
insurance which gives appropriate cover for any legal action
taken against its directors.
Articles of Association
The Articles can only be amended, or new Articles adopted, by
a special resolution at a general meeting of the Company.
A resolution to adopt new Articles will be put to shareholders at
the 2016 AGM; further information can be found in the notice
of meeting on pages 167 to 174.
Change of control
There are a number of agreements that take effect, alter or
terminate upon a change of control of the Company following
a takeover bid. These include committed bank facilities,
which would be terminable at the bank’s discretion, and the
Company’s retail and convertible bonds, holders of which
would have an option to require the Company to redeem
the bonds.
The Company’s share-based incentive arrangements contain
provisions that take effect in the event of a change of control
but do not entitle participants to a greater interest in the shares
of the Company than created by the initial grant or award
under the relevant scheme.
There are no agreements between the Company and its
directors or employees providing for compensation for loss of
office or employment that occurs specifically as a result of a
takeover bid.
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.
Employee involvement
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. Regular 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 and support
employee share ownership.
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.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Corporate Governance 97
Greenhouse gas emissions
The disclosures required by law relating to the Group’s
greenhouse gas emissions (GHG) are set out in the table below.
GHG from those sources for which the Company is deemed to
be directly responsible are monitored for reporting purposes,
namely gas and electricity purchased for consumption at
properties under the Company’s operational control (such
as Head Office, certain regional offices, St. Modwen Homes’
sales offices and vacant space), and petrol and diesel used in
Company cars.
Political donations
In accordance with the Company’s policy, no political donations
were made and no political expenditure was incurred during
the year.
Going concern
The Group’s business activities, together with the factors likely
to affect its future development, performance and position, are
set out in the Strategic Report. The directors have considered
these factors and reviewed the financial position of the Group,
including its joint ventures and associates.
The review included an assessment of future funding
requirements based on cash flow forecasts extending for
18 months from the date of signing the Financial Statements,
valuation projections and the ability of the Group to meet
covenants on existing borrowing facilities. The directors were
satisfied that the forecasts and projections were based on
realistic assumptions and that the sensitivities applied in
reviewing downside scenarios were appropriate.
As described in the Financial Review on pages 30 to 35, there
are no corporate or joint venture facilities that require renewal
before 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.
GHG
Scope 1:
Total purchased gas
Petrol and diesel
Total Scope 1
Scope 2:
Total purchased electricity
Total Scope 2
Total Scope 1 & 2
2015 intensity ratio
2014 intensity ratio(3)
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)
433
586
1,019
1,529
1,529
2,548
3.3
0.5
4.9
8.2
0.7
1.2
222
542
764
937
937
1,701
2.7
0.6
3.3
6.0
0.7
1.3
(1) Equivalent CO2 emissions per full-time employee.
(2) Equivalent CO2 per £m of property portfolio held by the Company.
(3) Due to the negligible impact, information has not been restated to reflect the revised accounting treatment of VSM Estates (Holdings) Ltd under IFRS 10. See the Accounting Policies note on
pages 116 and 117 of the Group Financial Statements for further information.
Methodology
Emissions from gas and electricity consumption have been calculated using the main requirements of the GHG Protocol Standard (revised edition) and emission factors from UK Government’s
GHG Conversion Factors for Company Reporting 2014. The measurement of emissions from Company cars is based 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). DEFRA’s 2013 conversion factors have also been used
within the reporting methodology.
Organisation boundary and responsibility
The Company does not have responsibility for GHG that are beyond the boundary of the Company’s operational control. As such, gas and electricity purchased and consumed by tenants is not
included within the Scope 1 and 2 data above. Data also excludes the purchase for and consumption by those sites which fall within the Persimmon joint venture as Persimmon controls the
procurement of utilities to these sites. GHG for all other joint ventures has been included as the Company is deemed to be wholly responsible for such GHG.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 98
Directors’ Report (continued)
Disclosure required by Listing Rule 9.8.4R
The information required to be disclosed by LR 9.8.4R of the FCA’s Listing Rules can be found on the following pages of this
Annual Report:
Section
Topic
Page reference
N/A
N/A
N/A
N/A
144
N/A
N/A
N/A
94
N/A
(1)
(2)
(4)
(5) & (6)
(7) & (8)
(9)
(10)
(11)
Interest capitalised
Publication of unaudited information
Details of long-term incentive schemes established specifically to recruit
or retain a director
Waiver of emoluments by a director
Non-pre-emptive issues of equity for cash
Parent company participation in placing by a listed subsidiary
Contracts of significance
Provision of services by a controlling shareholder
(12) & (13)
Shareholder waiver of dividends
(14)
Agreements with controlling shareholders
Important events since 30th November 2015
There have been no important events affecting the Company
or any subsidiary since 30th November 2015.
Auditor
Resolutions to re-appoint Deloitte LLP as auditor of the
Company and to authorise the Audit Committee to determine
their remuneration will be proposed at the 2016 AGM.
Management report
The Strategic Report and the Directors’ Report together
comprise the ‘management report’ for the purposes of the
FCA’s Disclosure and Transparency Rules (DTR 4.1.8R).
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 the Group and of their profit or loss for
that period.
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.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Corporate Governance 99
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 Act.
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 48 and 49,
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 management report (which comprises the Strategic
Report and the Directors’ Report) includes a fair review of
the development and performance of the business and the
position of the Company and the undertakings included in the
consolidation taken as a whole, together with a description of
the principal risks and uncertainties that they face; 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 Act.
The Directors’ Report, prepared in accordance with the
requirements of the Act and the FCA’s Listing and Disclosure
and Transparency Rules and comprising pages 94 to 99, was
approved by the Board and signed on its behalf by
Tanya Stote
Company Secretary
1st February 2016
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 100
Independent auditor’s report to the members of
St. Modwen Properties PLC
Opinion on Financial
Statements of
St. Modwen Properties PLC
In our opinion:
• the Financial Statements give a true and fair view of the state of the Group’s and of the
Parent Company’s affairs as at 30th November 2015 and of the Group’s profit for the year
then ended;
• the Group Financial Statements have been properly prepared in accordance with
International Financial Reporting Standards (IFRSs) as adopted by the European Union;
• the Parent Company Financial Statements have been properly prepared in accordance
with United Kingdom Generally Accepted Accounting Practice; and
• the Financial Statements have been prepared in accordance with the requirements of the
Companies Act 2006 and, as regards the Group Financial Statements, Article 4 of the IAS
Regulation.
The Financial Statements comprise the Group Income Statement, the Group Statement of
Comprehensive Income, the Group and Parent Company Balance Sheets, the Group Cash Flow
Statement, the Group Statement of Changes in Equity and the related Group notes 1 to 22 and Parent
Company notes (A) to (P). The financial reporting framework that has been applied in the preparation
of the Group Financial Statements is applicable law and IFRSs as adopted by the European Union. The
financial reporting framework that has been applied in the preparation of the Parent Company
Financial Statements is applicable law and United Kingdom Accounting Standards (United Kingdom
Generally Accepted Accounting Practice).
Separate opinion in relation to
IFRSs as issued by the IASB
As explained in the Accounting Policies note to the Group Financial Statements, in addition to
complying with its legal obligation to apply IFRSs as adopted by the European Union, the Group has
also applied IFRSs as issued by the International Accounting Standards Board (IASB).
In our opinion the Group Financial Statements comply with IFRSs as issued by the IASB.
Going concern and the
directors’ assessment of the
principal risks that would
threaten the solvency
or liquidity of the Group
Independence
Our assessment of risks of
material misstatement
As required by the Listing Rules we have reviewed the directors’ statement regarding the
appropriateness of the going concern basis of accounting contained within the Directors’ Report and
the directors’ statement on the longer-term viability of the Group contained within Risk Management.
We have nothing material to add or draw attention to in relation to:
• the directors’ confirmation on page 36 that they have carried out a robust assessment of the
principal risks facing the Group, including those that would threaten its business model, future
performance, solvency or liquidity;
• the disclosures on pages 38 to 41 that describe those risks and explain how they are being managed
or mitigated;
• the directors’ statement on page 97 about whether they considered it appropriate to adopt the going
concern basis of accounting in preparing the Financial Statements and their identification of any
material uncertainties to the Group’s ability to continue to do so over a period of at least 12 months
from the date of approval of the Financial Statements; and
• the directors’ explanation on page 37 as to how they have assessed the prospects of the Group, over
what period they have done so and why they consider that period to be appropriate, and their
statement as to whether they have a reasonable expectation that the Group will be able to continue
in operation and meet its liabilities as they fall due over the period of their assessment, including any
related disclosures drawing attention to any necessary qualifications or assumptions.
We agreed with the directors’ adoption of the going concern basis of accounting and we did not
identify any such material uncertainties. 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.
We are required to comply with the Financial Reporting Council’s Ethical Standards for Auditors and we
confirm that we are independent of the Group and we have fulfilled our other ethical responsibilities in
accordance with those standards. We also confirm we have not provided any of the prohibited
non-audit services referred to in those standards.
The assessed risks of material misstatement described below are those that had the greatest effect on
our audit strategy, the allocation of resources in the audit and directing the efforts of the engagement
team. In 2015, as part of the ‘one-off property transactions’ risk we have also considered the risk
around the correct accounting for the material prior period error, as disclosed in the Accounting
Policies note to the Group Financial Statements. Last year our auditor’s report included covenant
compliance and liquidity disclosure risk, which is not separately included in our report this year, since
the Group’s headroom has significantly grown over the years with significantly improved trading
results, and reduced gearing.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements 101
Risk
How the scope of our audit responded to the risk
We met with the third-party valuers, appointed by the directors, and assessed the
competence, capabilities and objectivity of those external valuers.
We selected a sample of investment properties (based on value, absolute and
percentage movement, and some random properties). For this sample, we assessed
and challenged the reasonableness of the significant judgements and assumptions
applied in the valuation model. We assessed the completeness and accuracy of the data
provided by St. Modwen to the valuers for the purposes of their valuation exercise.
With the assistance of expert members of our audit team who are chartered surveyors,
we reviewed the significant assumptions in the valuation process, tested a sample of
properties by benchmarking against external appropriate property indices, understood
the valuation methodology and the wider market analysis. We reviewed the information
provided by the valuers both in the meeting and contained in the detailed valuation
reports; and we undertook our own research into the relevant markets to evaluate the
reasonableness of the valuation inputs and the resulting fair values.
We identified the various components of the Group’s inventories and we sampled the
balance of £183.7m and challenged management’s appraisal documentation for a
representative sample of £145m. We have challenged 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 challenged the key assumptions within the
appraisals to supporting evidence through test of the management forecasts and
valuation reports. Where a site has been appraised by management over a period
of time, we have also sought to understand the changes to assumptions over time.
In addition we have also:
• reviewed a sample of marketed sites and post year-end sales prices to assess whether
any inventory held is marketed below its valuation;
• challenged the lack of NRV write-downs identified in the current period and challenged
whether evidence exists to reverse NRV write-downs recorded in prior periods
through review of documentation supporting the status of the project and
management’s plans; and
• for a representative sample of income generating sites valued by the external valuers
we assessed valuation yields used in appraisals for developments against yields used
on the investment property portfolio in line with the work set out above on valuation
of investment properties. Our real estate experts assisted us in this review.
For a representative sample we tested properties which have been transferred from
investment property to inventories and from inventories to investment property during
the year based on the documents, supporting management’s plans for future use of the
property, both to assess whether those transfers met the IFRS transfer criteria, and also
that the properties transferred to inventories are properly valued.
Valuation of investment property
Valuation of investment property is an area of
judgement which could materially affect the Financial
Statements. The Group’s investment property
portfolio, as detailed in note 8, together with the
Group’s share of joint ventures and associates is held
at fair value. The Group’s accounting policy is
described on page 111 and further details of
investment properties in note 2c. The directors
employ external valuers to assist in determining the
fair value, who 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, occupancy rates, lease incentives, break
clauses, lease lengths and purchaser costs.
Valuation of inventories
The Group’s accounting policy on inventory is
disclosed on page 112 and further details of inventory
in note 12. The Group’s inventory balance of £183.7m
(2014: £201.0m) includes assets for resale (those
being actively marketed) and properties being
developed with a view to sale.
The Group has continued to use its own internal
appraisal monitoring process during the year to assess
the net realisable value (NRV) of those properties held
within inventories through the preparation of
appraisals for each site which calculate forecast
revenues and costs.
The risk here is that the NRV could be overstated by
using inappropriate forecast revenue and forecast
cost to complete.
Moreover, management appraisals also include a
number of judgements, assumptions and estimates
regarding future costs and revenues. Given the
quantum of the inventories balance recorded by the
Group in its Financial Statements, a misstatement in
this balance could have a material impact on the
Financial Statements as a whole. At 30th November
2015, a limited proportion of inventory included on
the Balance Sheet (mainly income generating
inventory) is valued externally – this involves significant
judgements as demonstrated under valuation of
investment property.
The risk also involves proper classification and
valuation of inventory items transferred to and
from investment properties on a change in use
of the property.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 102
Independent auditor’s report to the members of
St. Modwen Properties PLC (continued)
One-off property transactions
The Group has restated the way that it accounts for its
Swansea student accommodation development.
Previously the Group position focused on the
provision of construction services to an M&G fund and
treated the contract as a development agreement with
M&G. During the current year, on revisiting the
underlying judgements and facts behind the
development, it became clear that the Group
continues to retain the risks and rewards of owning
the entire property, with M&G receiving a fixed
(subject only to RPI) return. In its 2015 Financial
Statements the Group has restated its 2014
comparatives in respect of this as is disclosed on
pages 116 and 117, resulting in the reversal of £5.4m
of development profits recognised in the year ended
30th November 2014 and £2.1m recognised in the
year ended 30th November 2013; recognition of a
finance lease obligation of £22.6m as at
30th November 2014; the recognition of an asset of
£22.7m, for the proportion of the property that had
previously been derecognised and reflected as
development expenditure on behalf of M&G. This has
been classified as an investment property. Investment
property revaluation gain of £8.4m was recognised in
the year ended 30th November 2014.
In addition, property acquisitions and disposals can be
significant and complex transactions for the Group’s
results in a given period. The most significant added
value movement in the year was the recognition of the
New Covent Garden Market (NCGM) site in Nine Elms,
London, for the regeneration of the 57 acre site, which
achieved unconditional planning status in April 2015.
The Group recognised the interest in land as
investment property when the contract became
unconditional, with a liability recorded at initial
recognition reflecting the obligation that was taken on
in exchange for the land. We have identified it as a
significant risk area for our annual audit, considering
the risks around contractual terms, initial classification,
initial measurement and subsequent valuation of
property (the model for which uses many assumptions
and inputs), initial measurement of the liability, as well
as alternative accounting treatments. The NCGM value
as at 30th November 2015 was £440m, which was held
in a joint venture as investment property. The results
of the joint venture were accounted for by the Group
under equity method.
We have analysed management’s accounting judgement paper on the Swansea student
accommodation development accounting, which summarised the facts and background
of the transaction, as well as previous accounting treatment, possible alternative
treatments and the reasons for a restatement. We have audited management’s
calculation of the correction, through review of the supporting contracts, challenging the
details of the calculation and resulting disclosures made in the Financial Statements.
We also audited other property transactions on a representative sample basis to
confirm there were no similar arrangements, which might have resulted in similar prior
period errors.
We assessed the NCGM transaction and evaluated the accounting treatment adopted
by management on initial recognition and on revaluation to fair value, as well as
available alternative treatments. We involved our real estate experts to review and
challenge valuation assumptions used by the external valuer in their valuation. In our
testing we:
• assessed the competence, capabilities and objectivity of the external valuers;
• reviewed the contractual conditions and ensured they were satisfied to render the
NCGM contract unconditional;
• assessed whether the interest in land under the contract meets the definition of
investment property under IFRS, and when they should be recognised;
• tested the value of the initial recognition of the liability arising from the contract
becoming unconditional including challenge of the key assumptions in the model;
• reviewed the asset valuation methodology applied by the Group’s external valuers as
well as assumptions used;
• challenged the key assumptions in the model used in initial recognition of the liability
arising from the contract becoming unconditional;
• reviewed management’s plans as part of the going concern analysis to ensure no
contradictory evidence exists as to the classification of the property interests as
investment property on the grounds of uncertain future use; and
• held a meeting attended by senior members of our core engagement team, our real
estate experts, who are also chartered surveyors, and the external valuers of the
Group. During this meeting, the valuation basis and assumptions used were
challenged by our experts and the audit team. Our experts also reviewed sensitivity
analysis around the key assumptions used by the external valuers in the valuation of
the NCGM property to illustrate how the property value responds to changes in those
assumptions.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements 103
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 a representative sample of revenue recognised under IAS 11 during the year
to ensure the Group policy is in line with the standards. We assessed whether the stage
of completion at the Balance Sheet date was reasonable by vouching the assessment of
stage of completion to independent certification where possible or to management’s
best estimate and contractual terms, recalculating any profit recognised and through
our audit of inventories assessing the costs to complete for reasonableness.
Accounting for taxation
As set out in the Group’s use of estimates and
judgements on pages 115 to 116, tax planning is often
an integral part of transactions as the Group is a
property group. Further details of provision are
disclosed in note 5. 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.
Revenue recognition
We have defined this risk for the Group as arising from
revenue recognition from development income under
IAS 11 ‘Construction Contracts’ and IFRIC
Interpretation 15 – Agreements for the Construction
of Real Estate. This is due primarily to the fact that
judgement is required as to whether revenue can be
recognised on a contract basis. Judgement is also
exercised in determining the costs to complete for
each site and the stage of completion at the Balance
Sheet date.
The significant risk in relation to revenue recognition
also arises from rental income and property disposal
transactions occurring near the period-end being
recognised in the wrong period.
The Group’s accounting policy on revenue is disclosed
on pages 113 to 114 and further revenue details in
note 1.
The description of risks above should be read in conjunction with the significant issues considered by the Audit Committee discussed on
pages 61 and 62.
These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters.
Our application of materiality
An overview of the scope of our audit
We define materiality as the magnitude of misstatement in the Financial Statements that
makes it probable that the economic decisions of a reasonably knowledgeable person
would be changed or influenced. We use materiality both in planning the scope of our
audit work and in evaluating the results of our work.
We determined materiality for the Group to be £9.0m (2014: £7.0m), which is
approximately 1% of equity (2014: 1% of equity). We consider the Group’s equity to be
the most appropriate benchmark for materiality, which is one of the main areas of
interest for the investors in property companies.
We agreed with the Audit Committee that we would report to the Committee all audit
differences in excess of £0.18m, (2014: £0.14m) 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 the Group audit team are not auditors amount to 0.54% (2014: 0.23%) of
the Group’s assets, 0.74% (2014: 0.06%) of Group revenue and 0.69% (2014: 0.03%)
of the Group’s profit before tax, as such, there are 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.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 104
Independent auditor’s report to the members of
St. Modwen Properties PLC (continued)
Opinion on other matters prescribed by
the Companies Act 2006
In our opinion:
• the part of the Directors’ Remuneration Report to be audited has been properly
prepared in accordance with the Companies Act 2006; and
• the information given in the Strategic Report and the Directors’ Report for the financial
year for which the Financial Statements are prepared is consistent with the Financial
Statements.
Matters on which we are required to
report by exception
Adequacy of explanations received and
accounting records
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
Directors’ remuneration
Corporate Governance Statement
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 certain provisions of
the UK Corporate Governance Code. We have nothing to report arising from our review.
Our duty to read other information in the
Annual Report
Under International Standards on Auditing (UK and Ireland), we are required to report
to you if, in our opinion, information in the Annual Report is:
Respective responsibilities of directors
and auditor
• materially inconsistent with the information in the audited Financial Statements; or
• apparently materially incorrect based on, or materially inconsistent with, our
knowledge of the Group acquired in the course of performing our audit; or
• otherwise misleading.
In particular, we are required to consider whether we have identified any inconsistencies
between our knowledge acquired during the audit and the directors’ statement that
they consider the Annual Report is fair, balanced and understandable and whether the
annual report appropriately discloses those matters that we communicated to the Audit
Committee which we consider should have been disclosed. We confirm that we have
not identified any such inconsistencies or misleading statements.
As explained more fully in the 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). 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.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements 105
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
1st February 2016
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 106
Group Income Statement
for the year ended 30th November 2015
Revenue
Net rental income
Development profits
Gains on disposals of investments/investment properties
Investment property revaluation gains
Release of negative goodwill to income
Other net income
Profits of joint ventures and associates (post-tax)
Administrative expenses
Profit before interest and tax
Finance costs
Finance income
Profit before tax
Taxation
Profit for the year
Attributable to:
Owners of the Company
Non-controlling interests
Basic earnings per share
Diluted earnings per share
Group Statement of Comprehensive Income
for the year ended 30th November 2015
Profit for the year
Items that will not be reclassified to profit and loss:
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
1
1
1
1
8
19
1
10
3
4
4
5a
6
6
Notes
18
18
2015
£m
2014 restated
£m
287.5
266.5
32.8
51.7
11.7
73.9
–
4.2
106.8
(26.1)
255.0
(25.2)
5.4
235.2
(17.9)
217.3
216.4
0.9
217.3
pence
97.9
90.4
31.2
42.3
5.2
63.9
2.1
3.6
27.1
(22.7)
152.7
(26.2)
5.3
131.8
(11.8)
120.0
118.6
1.4
120.0
pence
53.8
49.9
2015
£m
2014 restated
£m
217.3
120.0
(0.1)
–
–
–
217.2
120.0
216.3
0.9
217.2
118.6
1.4
120.0
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements Group Balance Sheet
as at 30th November 2015
Non-current assets
Investment properties
Operating property, plant and equipment
Investments in joint ventures and associates
Trade and other receivables
Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
Current liabilities
Trade and other payables
Derivative financial instruments
Borrowings and finance lease obligations
Current tax
Non-current liabilities
Trade and other payables
Borrowings and finance lease obligations
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
107
30th November
2015
£m
30th November
2014 restated
£m
1st December
2013 restated
£m
Notes
8
9
10
11
12
11
16
13
16
14
5
13
14
5
17
1,081.0
4.2
227.3
6.1
1,318.6
183.7
104.7
0.8
4.8
856.8
7.0
127.2
6.0
997.0
201.0
63.9
1.9
3.2
744.6
6.6
120.1
7.0
878.3
199.7
52.1
–
3.2
294.0
270.0
255.0
(146.6)
(148.6)
(144.6)
(8.0)
(0.4)
(11.1)
(166.1)
(8.7)
(0.1)
(7.3)
(12.8)
(62.5)
(3.6)
(164.7)
(223.5)
(3.1)
(506.5)
(15.4)
(525.0)
921.5
22.2
102.8
739.3
5.2
(1.0)
46.2
914.7
6.8
921.5
(3.5)
(363.1)
(11.7)
(378.3)
724.0
22.1
102.8
544.0
4.8
(1.8)
46.2
718.1
5.9
724.0
(9.1)
(275.6)
(8.5)
(293.2)
616.6
22.0
102.8
439.3
2.1
(0.3)
46.2
612.1
4.5
616.6
These Financial Statements were approved by the Board and authorised for issue on 1st February 2016.
Bill Oliver
Chief Executive
Company Number: 349201
Rob Hudson
Group Finance Director
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 108
Group Statement of Changes in Equity
for the two years ended 30th November 2015
Share
capital
£m
Share
premium
account
£m
Retained
earnings
£m
Share
incentive
reserve
£m
Own
shares
£m
Other
reserves
£m
Equity
attributable
to owners
of the
Company
£m
Non-
controlling
interests
£m
Total
equity
£m
22.0
102.8
441.4
–
–
(2.1)
2.1
–
(0.3)
–
46.2
614.2
–
(2.1)
12.8
(8.3)
627.0
(10.4)
22.0
102.8
439.3
2.1
(0.3)
46.2
612.1
4.5
616.6
–
–
–
0.1
–
–
–
–
118.6
–
–
–
–
–
–
–
118.6
–
(6.2)
1.4
(9.1)
–
–
–
–
2.7
–
–
–
–
–
(0.1)
–
(1.4)
–
–
–
–
–
–
–
–
118.6
1.4
120.0
–
–
–
118.6
1.4
120.0
–
(3.5)
–
(9.1)
–
–
–
–
–
(3.5)
–
(9.1)
22.1
102.8
544.0
4.8
(1.8)
46.2
718.1
5.9
724.0
–
–
–
0.1
–
–
–
–
–
–
–
–
–
–
–
–
216.4
(0.1)
216.3
–
(8.6)
(0.9)
(0.4)
(11.1)
–
–
–
–
0.4
–
–
–
–
–
–
(0.1)
–
0.9
–
–
–
–
–
–
–
–
–
–
216.4
0.9
217.3
(0.1)
–
(0.1)
216.3
0.9
217.2
–
(8.2)
–
(0.4)
(11.1)
–
–
–
–
–
–
(8.2)
–
(0.4)
(11.1)
22.2
102.8
739.3
5.2
(1.0)
46.2
914.7
6.8
921.5
Equity at 30th November
2013 (as reported)
Prior year adjustment
Equity at 30th November
2013 (restated)
Profit for the year
attributable to shareholders
(restated)
Pension fund actuarial
losses (note 18)
Total comprehensive income
for the year (restated)
Equity issue
Share-based payments
Share transfers
Dividends paid
Equity at 30th November
2014 (restated)
Profit for the year
attributable to shareholders
Pension fund actuarial
losses (note 18)
Total comprehensive income
for the year
Equity issue
Share-based payments
Share transfers
Adjustment arising from
change in
non-controlling interest
Dividends paid
Equity
at 30th November 2015
Own shares represent the cost of 690,274 (2014: 460,427) shares held by The St. Modwen Properties PLC Employee Share Trust.
The open market value of the shares held at 30th November 2015 was £2,985,435 (2014: £1,763,435).
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements Group Cash Flow Statement
for the year ended 30th November 2015
Operating activities
Profit before interest and tax
Gains on disposal of investments/investment properties
Share of profits of joint ventures and associates (post-tax)
Investment property revaluation gains
Release of negative goodwill to income
Depreciation
Impairment losses on inventories
(Increase)/decrease in inventories
Increase in trade and other receivables
Decrease in trade and other payables
Pensions
Share options and share awards
Tax paid
Net cash (outflow)/inflow from operating activities
Investing activities
Proceeds from 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
Interest paid
Amounts advanced under finance lease arrangements
New borrowings drawn
Repayment of borrowings
Net cash inflow/(outflow) from financing activities
Increase in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
Cash
Bank overdrafts
Cash and cash equivalents at end of year
109
Notes
2015
£m
2014 restated
£m
10
8
19
9
12
5c
19
9
7
255.0
(11.7)
(106.8)
(73.9)
–
0.8
1.4
(49.0)
(29.0)
(8.3)
–
(7.8)
(9.4)
(38.7)
84.4
(160.5)
(0.2)
(0.6)
6.7
(70.2)
(11.1)
(18.0)
32.5
190.9
(83.8)
110.5
1.6
3.2
4.8
4.8
–
4.8
152.7
(5.2)
(27.1)
(63.9)
(2.1)
0.5
0.1
10.1
(0.2)
(0.3)
(0.1)
(3.4)
(5.0)
56.1
31.4
(97.8)
(0.8)
(1.0)
20.0
(48.2)
(9.1)
(23.9)
22.6
115.0
(112.5)
(7.9)
–
3.2
3.2
3.2
–
3.2
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 110
Accounting policies
for the year ended 30th November 2015
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 2015, 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.
In the current year the Group has adopted:
• IFRS 10 ‘Consolidated Financial Statements’
• IFRS 11 ‘Joint Arrangements’
• IFRS 12 ‘Disclosure of Interests in Other Entities’
• IAS 27 (revised) ‘Separate Financial Statements’
• IAS 28 (revised) ‘Investments in Associates and Joint Ventures’
• IAS 32 (amendment) ‘Financial instruments: Presentation’ (assets and liability offsetting)
• IAS 36 (amendment) ‘Impairment of Assets’
• IAS 39 (amendment) ‘Financial Instruments: Recognition and Measurement’
• Amendments to IFRS 10, IFRS 11, IFRS 12 (transition guidance)
The Group undertook an assessment of the treatment of its subsidiaries, joint ventures and interests in other entities prior to
the adoption of IFRS 10, 11 and 12. Other than as detailed below in prior year restatements for IFRS 10, it was concluded that no
changes in relation to the presentation of these interests was required.
IFRS 10 replaces those parts of IAS 27 that relate to consolidated financial statements and SIC 12 in its entirety. It outlines
the requirements for the preparation of consolidated financial statements, requiring an entity to consolidate the results of all
investees it is considered to control. Control exists where an entity is exposed to variable returns and has the ability to affect those
returns through its power over the investee.
The Company’s functional currency (together with that of all of its subsidiaries) and the presentation currency for the Group is
pounds sterling and its principal IFRS 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 exposure, or rights, to variable returns, the power to direct the relevant activities of the investee and the ability
to use its power over the investee to affect the returns. This is achieved through direct or indirect ownership of voting rights or by
contractual agreement. A list of the entities controlled is given in note (F) to the Company’s Financial Statements.
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.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements 111
Interests in joint arrangements
Arrangements under which the Group has contractually agreed to share control with another party or parties are assessed to
determine whether they represent joint ventures or joint operations. Joint arrangements are classified as joint ventures where
the parties have rights to the net assets of the arrangement. Should the parties have rights to assets and obligations for liabilities
relating to the arrangement they would instead be classified as joint operations. Currently, all arrangements where the Group has
contractually agreed to share control have been determined to be joint ventures.
The Group recognises its interests in joint ventures using the equity method of accounting. Under the equity method, the interest
in the joint venture is carried in the Group Balance Sheet at cost plus post-acquisition changes in the Group’s share of its net
assets, less distributions received and less any impairment in value of individual investments. The Income Statement reflects the
Group’s share of the joint venture’s 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 joint
venture 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 arrangements, 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 to the former owners and the
equity interests issued by the Group. The consideration transferred also includes the fair value of any contingent consideration
arrangement and is adjusted to reflect 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 (adjusted to reflect the fair value of any pre-existing equity interest in the subsidiary)
and the amount of any non-controlling interest in the acquiree over the fair value of the Group’s share of the net identifiable
assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the acquired
subsidiary and the measurement of all amounts has been reviewed, the difference is recognised directly in the Income Statement
as a release of negative goodwill to income.
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.
Properties
Investment properties
Investment properties, being freehold and leasehold properties held to earn rental income, for capital appreciation and/or for
undetermined future use, together with land options where the land is for an 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 year.
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.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 112
Accounting policies (continued)
for the year ended 30th November 2015
Properties (continued)
Inventories
Inventories principally comprise properties held for sale, properties under construction and land under option with a view to
future sale. 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. Inventory is transferred to investment properties only when the asset meets the definition of
an investment property and there has been a change in use evidenced by commencement of an operating lease.
Due to the scale of the Group’s developments, the Group has to allocate site-wide development costs between properties on
the site. Such site-wide costs are allocated to properties based on the forecast value of each individual unit as a proportion of the
aggregate forecast value of the individual units on the site. In making these assessments, there is a degree of inherent uncertainty.
The Group has developed internal controls to assess and review carrying values and the appropriateness of estimates made.
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.
Interests in leasehold investment properties are accounted for as finance leases with the value of guaranteed minimum rents
inherent within the carrying value of the property and the liability reflected within long-term liabilities. On payment of a guaranteed
rent, initially the majority of such costs is charged to the Income Statement as interest payable, with the balance reducing
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, adjusted for the impact of any cash incentives given to the lessee and to reflect any rent-free
incentive periods, is recognised in the Income Statement on a straight-line basis over the lease term. Initial direct costs incurred in
negotiating and arranging a new lease are amortised on a straight-line basis over the period of the lease.
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.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements 113
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 or other comprehensive income if it relates to items that are credited or
charged to equity or other comprehensive income. 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 on the earlier of:
• the date on which the plan amendment or curtailment occurs; or
• when the Company recognises related restructuring costs or termination benefits.
Net interest is calculated by applying a discount rate to the net defined benefit liability or asset and is recognised in the Income
Statement as finance cost.
Actuarial gains and losses, the effect of the asset ceiling (if applicable) and the return on scheme assets (excluding interest) 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 the fair value of plan assets out
of which the obligations are to be settled directly.
When a pension asset (net surplus) arises from the above calculation, it is limited to the present value of any economic benefits
that will be available to the Company 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 as a deduction from 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.
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 (including the fair value of any residential
properties received in part-exchange), excluding discounts, rebates, VAT and other sales taxes or duty. Where required, revenue
is allocated between components in a multi-element transaction (e.g. where there is simultaneously a sale of land and a
construction contract with the purchaser of the land) based on their respective fair values of the components.
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.
Construction contracts
Revenue arising from construction contracts is recognised in accordance with the Group’s accounting policy on construction
contracts (see below). An appropriate proportion of revenue from construction contracts is recognised by reference to the stage
of completion of contract activity.
Rental income
Rental income arising from investment properties is accounted for on a straight-line basis over the lease term.
Management and performance fees
Where the Group is solely providing development management services (without being responsible for the performance of the
underlying construction), management fees receivable are recognised over time as the service is performed in the period to which
they relate. Performance fees are recognised when the Group has substantially fulfilled its obligations in respect of the transaction
and hence the amount of revenue can be measured reliably and it is probable that economic benefits will flow to the Group.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 114
Accounting policies (continued)
for the year ended 30th November 2015
Revenue recognition (continued)
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 to the extent that it is probable that they will result in revenue.
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’s equity-settled share-based payments are measured at fair value at the date of grant using an appropriate option
pricing model. The fair value at the date of grant (or at date of reclassification from cash settled to equity settled) is expensed
on a straight-line basis over the vesting period based on the Group’s estimate of shares that will eventually vest.
Fair value hierarchy
Assets and 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.)
Financial instruments
Financial assets and financial liabilities are recognised on the Group’s Balance Sheet when the Group becomes a party to the
contractual provisions of the instrument. The Group derecognises a financial asset only when the contractual rights to the cash
flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the
asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues
to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for any amounts it
may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group
continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. The Group
derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled, or expire.
Trade and other receivables
Trade receivables are recognised and carried at the lower of their original invoiced value or recoverable amount. Provision is made
when there is evidence that the Group will not be able to recover balances in full. Balances are written off when the probability of
recovery is assessed as being remote.
Cash and cash equivalents
Cash and cash equivalents comprises cash balances and short-term deposits with banks with initial maturity less than
three months.
Trade and other payables
Trade and other payables are recorded at amortised cost. Where payment is on deferred terms the liability is 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.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements 115
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 re-measured 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 IAS 32 Financial Instruments: Presentation. The Group’s convertible bonds have been designated as at fair value
through profit and loss.
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 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 as confirmed
in the Directors’ Report it is considered appropriate to prepare the Financial Statements for the year ended 30th November 2015
on a going concern basis.
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. Professional judgement is applied in determining such things as an appropriate yield for a given property and
estimated rental values.
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 for both revenue and costs were based
on information available at, and pertaining to, 30th November 2015. 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, some of
which involve costs which will be settled only gradually over a number of years and the application of discounting, may impact the
carrying values of investment properties and/or inventories and/or the quantum of liabilities recognised.
Complex transactions
Certain property transactions entered into by the Group involve an element of complexity and the need to exercise judgement
to determine the most appropriate accounting policy. Such transactions include the accounting for the acquisition of land at New
Covent Garden Market together with the associated obligation to procure the new market for the Covent Garden Market Authority
and the accounting for the first two phases of student accommodation at the Bay Campus development for Swansea University.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 116
Accounting policies (continued)
for the year ended 30th November 2015
Use of estimates and judgements (continued)
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.
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.
Standards and interpretations 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):
• Annual Improvements to IFRSs 2010 – 2012 cycle
• Annual Improvements to IFRSs 2011 – 2013 cycle
• IAS 16 (amended) ‘Property, Plant and Equipment’
• IAS 19 (amended) ‘Employee Benefits’
• IAS 27 (amended) ‘Separate Financial Statements’
• IAS 38 (amended) ‘Intangible Assets’
• IFRS 9 Financial Instruments
• IFRS 10 (amended) ‘Consolidated Financial Statements’
• IFRS 11 (amended) ‘Joint Arrangements’
• IFRS 14 ‘Regulatory Deferral Accounts’
• Annual Improvements to IFRSs 2012 – 2014 cycle
• IFRS 15 ‘Revenue from Contracts with Customers’
• IFRS 16 ‘Leases’
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.
IFRS 9 will impact both the measurement and disclosures of financial instruments and is effective for the Group’s year ending
31st March 2019. The Group has not yet completed its evaluation of the effect of the adoption.
IFRS 15 may have an impact on revenue recognition and related disclosures. Beyond the information above, it is not practicable to
provide a reasonable estimate of the effect of IFRS 15 until a detailed review has been completed.
IFRS 16 – the standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases
unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating
or finance, with IFRS 16’s approach to lessor accounting substantially unchanged from its predecessor, IAS 17. The Group has not
yet completed its evaluation of the effect of the adoption.
Prior year restatements
VSM Estates (Holdings) Ltd
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. In prior years, this entity was
consolidated in line with SIC 12 ‘Consolidation – Special Purpose Entities’. However the conditions for consolidation set out in
IFRS 10 do not exist and accordingly, the entity is now required to be accounted for using the equity method.
Under the equity method, the interest is carried in the Balance Sheet at cost plus post-acquisition changes in the Group’s share
of its net assets, less distributions received and less any impairment in value of individual investments. The Income Statement
reflects the Group’s share of the results after interest and tax.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements 117
The adoption of IFRS 10 requires the restatement of the comparative financial information for the two years ended
30th November 2014.
IFRS 11 replaced IAS 31 ‘Interests in Joint Ventures’ and SIC 13 ‘Jointly Controlled Entities – Non-monetary Contributions by
Venturers’. It defines two types of joint arrangement (joint operations and joint ventures) and specifies the accounting for each
arrangement. Joint operations must be accounted for by including the owner’s share of the assets, liabilities, income and expenses
on a line by line basis. Joint ventures are equity accounted in accordance with IAS 28 (revised).
VSM Estates (Holdings) Ltd is 50% owned by St. Modwen Properties PLC and is accounted for as a joint venture under IFRS 11.
Swansea University
During the year, further consideration was given to the revenue streams associated with the first two phases of student
accommodation at the Bay Campus development for Swansea University. Due to the fixed (subject only to annual RPI adjustment)
nature of the Group’s annual rental payments to M&G, the Group retains exposure (both positive and negative) to all variability
in net rentals generated from the properties, it has been concluded that the transaction is more appropriately accounted for as
a finance lease arrangement, rather than as the sale of 50% of the assets. Consequently, we have restated our 2014 results to
reflect recognition by the Group of the following elements:
• the whole (rather than 50%) of the property interest in the student accommodation;
• to account for the amounts due to M&G as a finance lease liability;
• to eliminate the construction contract accounting recognised in respect of the proportion of the development work performed
on these sites that was funded by M&G; and
• to revalue the site during the course of construction.
The impact on previously reported financial information for the year ended 30th November 2014 and the opening Balance Sheet
as at 1st December 2013 is as follows:
Income statement
Decrease in development profits
Decrease in gains on disposals of investments/investment properties
Decrease in investment property revaluation gains
Increase/(decrease) in profits of joint ventures and associates (post tax)
Decrease in administrative expenses
Decrease in profit before interest and tax
Decrease in finance costs
Decrease in profit before tax
Decrease in tax charge
Decrease in profit for the year
Equity attributable to owners of the Company
Non-controlling interests
Lease accounting adjustments (Swansea)
IFRS 10 adjustments (VSM Estates)
Year ended
30th November
2014
£m
(5.4)
(4.0)
(11.9)
13.5
0.2
(7.6)
1.7
(5.9)
3.8
(2.1)
2.4
(4.5)
(2.1)
Year ended
30th November
2014
£m
2.4
(4.5)
(2.1)
Basic and diluted earnings per share for the year ended 30th November 2014 each increased by 1.1p as a result of the prior year
restatements above.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 118
Accounting policies (continued)
for the year ended 30th November 2015
Prior year restatements (continued)
Assets, liabilities and equity
As at 30th November 2014
As at 1st December 2013
Previously
reported
£m
IFRS 10
adjustments
£m
Lease
accounting
adjustments
£m
Total
restated
£m
Previously
reported
£m
IFRS 10
adjustments
£m
Lease
accounting
adjustments
£m
Investment properties
Operating property, plant
and equipment
Investments in joint ventures
and associates
Non-current trade and other receivables
Inventories
Current trade and other receivables
Derivative financial instruments
Cash and cash equivalents
Current trade and other payables
Derivative financial instruments
Current borrowings and finance
lease obligations
Tax payables
Non-current trade and other payables
Non-current borrowings and finance
lease obligations
Deferred tax
Total effect on net assets
Equity attributable to owners of
the Company
Non-controlling interests
Total effect on equity
903.3
(69.2)
22.7
856.8
813.3
(68.7)
7.0
6.6
–
7.0
–
88.9
14.5
201.0
80.2
1.9
6.5
(163.7)
(8.7)
–
(9.3)
(28.5)
(340.6)
(16.0)
736.5
717.8
18.7
736.5
38.3
(8.5)
–
(16.3)
–
(3.3)
18.2
–
–
2.6
21.1
–
4.3
(12.8)
–
(12.8)
(12.8)
–
–
–
–
–
–
–
127.2
6.0
201.0
63.9
1.9
3.2
95.3
17.6
205.9
59.7
–
7.4
(3.1)
(148.6)
(157.4)
–
(8.7)
(12.8)
(0.1)
(0.6)
3.9
(0.1)
(7.3)
(3.5)
(62.5)
(3.4)
(46.2)
(22.5)
(363.1)
(285.6)
–
(11.7)
0.3
724.0
0.3
–
718.1
5.9
0.3
724.0
(10.9)
627.0
614.2
12.8
627.0
24.8
(10.6)
(6.2)
(7.6)
–
(4.2)
14.9
–
–
(0.2)
37.1
10.0
2.4
(8.3)
–
(8.3)
(8.3)
Total
restated
£m
744.6
6.6
120.1
7.0
199.7
52.1
–
3.2
–
–
–
–
–
–
–
–
(2.1)
(144.6)
–
–
–
–
–
–
(12.8)
(62.5)
(3.6)
(9.1)
(275.6)
(8.5)
(2.1)
616.6
(2.1)
–
612.1
4.5
(2.1)
616.6
The impact on cash flows for the two years ended 30th November 2013 and 30th November 2014 from these adjustments is to
change the movement on the cash and cash equivalents for those years as follows.
30th November 2013
30th November 2014
Previously
reported
£m
IFRS 10
adjustments
£m
(1.5)
(0.9)
(4.2)
0.9
Total
restated
£m
(5.7)
–
The impact on other, previously reported non-statutory financial information is shown in note 2.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements 119
Notes to the Group Financial Statements
for the year ended 30th November 2015
1. Segmental information
IFRS 8 – 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; 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
2015
Residential
development
£m
–
140.5
–
Portfolio
£m
41.2
98.4
7.4
147.0
140.5
2014 restated
Residential
development
£m
–
116.7
–
116.7
Portfolio
£m
39.2
104.2
6.4
149.8
Total
£m
41.2
238.9
7.4
287.5
Total
£m
39.2
220.9
6.4
266.5
All revenues in the table above are derived from continuing operations exclusively in the UK.
The Group’s total revenue for 2015 was £300.8m (2014: £276.5m) and in addition to the amounts above included service charge
income of £9.4m (2014: £7.8m), for which there was an equivalent expense and interest income of £3.9m (2014: £2.2m).
Profit before tax
Net rental income
Development profits
Gains on disposal of investments/
investment properties
Investment property revaluation gains
Negative goodwill attributable to
property assets(1)
Other net income
Profits of joint ventures and associates(2)
Administrative expenses
Finance costs(3)
Finance income(4)
Attributable profit
Negative goodwill attributable to tax(1)
Other losses of joint ventures and
associates(2)
Other finance costs(3)
Other finance income(4)
Profit before tax
2015
Residential
development
£m
–
29.1
–
–
–
–
–
(5.2)
(2.0)
–
21.9
Portfolio
£m
32.8
22.6
11.7
73.9
–
4.2
125.6
(20.9)
(15.1)
3.9
238.7
2014 restated
Residential
development
£m
–
24.4
–
–
–
–
–
(5.0)
(2.4)
–
17.0
Portfolio
£m
31.2
17.9
5.2
63.9
2.6
3.6
28.8
(17.7)
(15.5)
2.2
122.2
Total
£m
32.8
51.7
11.7
73.9
–
4.2
125.6
(26.1)
(17.1)
3.9
260.6
–
(18.8)
(8.1)
1.5
235.2
Total
£m
31.2
42.3
5.2
63.9
2.6
3.6
28.8
(22.7)
(17.9)
2.2
139.2
(0.5)
(1.7)
(8.3)
3.1
131.8
(1) Negative goodwill has been split between amounts relating to property revaluations arising as a result of fair value adjustments of £nil (2014: £2.6m) and deferred tax thereon of £nil
(2014: £0.5m).
(2) Stated before mark-to-market of derivatives, amortisation of loan arrangement fees, other non-cash items and tax of £18.8m (2014: £1.7m). 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 £8.1m (2014: £8.3m). These amounts are reclassified to other finance costs.
(4) Stated before mark-to-market of derivatives and other non-cash items of £1.5m (2014: £3.1m). These items are reclassified to other finance income.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 120
Notes to the Group Financial Statements (continued)
for the year ended 30th November 2015
1. Segmental information (continued)
Other net income of £4.2m (2014: £3.6m) comprises revenue of £7.4m (2014: £6.4m) less associated costs of £3.2m
(2014: £2.8m).
Cost of sales in respect of rental income comprise direct operating expenses (including repairs and maintenance) related to the
investment property portfolio and total £8.4m (2014: £8.0m), of which £0.6m (2014: £0.3m) is in respect of properties that did not
generate any rental income.
During the year the following amounts were recognised (as part of development revenue and cost of sales) in respect of
construction contracts:
Revenue
Cost of sales
Gross profit
2015
£m
2014 restated
£m
87.7
(75.2)
12.5
87.6
(62.0)
25.6
Amounts recoverable on contracts as disclosed in note 11 comprise £23.5m (2014: £5.3m) of contract revenue recognised and
£7.8m (2014: £0.7m) of retentions. Contracts in progress at 30th November 2015 include the aggregate amount of costs incurred
of £134.3m (2014: £127.9m), recognised profits less recognised losses to date of £35.5m (2014: £44.2m) and advances received
of £27.4m (2014: £85.3m).
There were no amounts due to customers (2014: £nil) included in trade and other payables in respect of contracts in progress at
the Balance Sheet date.
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
Derivative financial instruments
Borrowings and finance lease obligations
Tax payables
Deferred tax
Net assets
2015
Residential
development
£m
Total
£m
–
1,081.0
99.5
183.7
–
227.3
99.5
1,492.0
Portfolio
£m
1,081.0
84.2
227.3
1,392.5
2014 restated
Residential
development
£m
–
111.0
–
111.0
Portfolio
£m
856.8
90.0
127.2
1,074.0
4.2
110.8
4.8
(149.7)
(7.2)
(506.9)
(11.1)
(15.4)
921.5
Total
£m
856.8
201.0
127.2
1,185.0
7.0
69.9
3.2
(152.1)
(6.8)
(363.2)
(7.3)
(11.7)
724.0
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements 121
2. Non-statutory information
a. Trading profit and profit before all tax
The non-statutory measures of trading profit and profit before all tax, which include the Group’s share of joint ventures and
associates, have been calculated as set out below:
Net rental income
Development profit(1)
Gains on disposal of investments/
investment properties
Other income
Administrative expenses
Finance costs(2)
Finance income(3)
Trading profit
Investment property revaluation gains(1)
Other net finance costs(2)
Other finance income(3)
Profit before all tax
Taxation(4)
Profit for the year
2015
Joint ventures
and associates
£m
5.9
–
2.6
–
(0.4)
(8.3)
1.0
0.8
129.2
(0.6)
0.6
130.0
(23.2)
106.8
Group
£m
32.8
53.1
11.7
4.2
(26.1)
(17.1)
3.9
62.5
72.5
(8.1)
1.5
128.4
(17.9)
110.5
Total
£m
38.7
53.1
14.3
4.2
(26.5)
(25.4)
4.9
63.3
201.7
(8.7)
2.1
258.4
(41.1)
217.3
2014 restated
Joint ventures
and associates
£m
5.9
–
3.7
–
(0.5)
(7.4)
–
1.7
27.1
(0.1)
1.5
30.2
(3.1)
27.1
Group
£m
31.2
42.4
5.2
3.6
(22.7)
(17.9)
2.2
44.0
66.4
(8.3)
3.1
105.2
(12.3)
92.9
Total
£m
37.1
42.4
8.9
3.6
(23.2)
(25.3)
2.2
45.7
93.5
(8.4)
4.6
135.4
(15.4)
120.0
(1) Stated before the deduction of net realisable value provisions of: Group £1.4m (2014: £0.1m); Joint ventures and associates £nil (2014: £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 £nil (2014: £2.6m).
(2) Stated before mark-to-market of derivatives, amortisation loan arrangement fees and other non-cash items of: Group £8.1m (2014: £8.3m) ; Joint ventures and associates £0.6m
(2014: £0.1m). These items are reclassified to other finance costs.
(3) Stated before mark-to-market of derivatives and other non-cash items of: Group £1.5m (2014: £3.1m) ; Joint ventures and associates £0.6m (2014: £1.5m). 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 £nil (2014: £0.5m).
b. Property valuations
Property valuations, including, the Group’s share of joint ventures and associates, have been calculated as set out below:
Property revaluation gains
Release of negative goodwill to income
Net realisable value provisions
Property valuation gains
Added value
Market movements
Property valuation gains
2015
Joint ventures
and associates
£m
Total
£m
129.2
203.1
–
–
129.2
128.3
0.9
129.2
–
(1.4)
201.7
166.0
35.7
201.7
Group
£m
73.9
–
(1.4)
72.5
37.7
34.8
72.5
2014 restated
Joint ventures
and associates
£m
27.1
–
–
27.1
13.4
13.7
27.1
Group
£m
63.9
2.6
(0.1)
66.4
22.5
43.9
66.4
Total
£m
91.0
2.6
(0.1)
93.5
35.9
57.6
93.5
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.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 122
Notes to the Group Financial Statements (continued)
for the year ended 30th November 2015
2. Non-statutory information (continued)
c. Property portfolio
The property portfolio, including the Group’s share of joint ventures and associates, is derived from the Balance Sheet as
detailed below:
Investment properties
Less assets held under finance leases
not subject to revaluation
Add back lease incentives (recorded
in receivables)
Inventories
Less non-property assets
within inventory
Property portfolio as previously reported
Lease accounting additional
investment properties
IFRS 10 investment
properties adjustments
2015
Group
£m
Joint ventures
and associates
£m
Total
£m
1,081.0
416.8
1,497.8
2014 restated
Joint ventures
and associates
£m
Total
£m
148.0
1,051.3
Group
£m
903.3
(3.9)
(1.2)
(5.1)
(3.9)
11.9
183.7
–
1.4
1.9
–
13.3
185.6
5.5
201.0
–
(0.7)
(1.2)
1.1
5.4
–
(5.1)
6.6
206.4
(0.7)
1,272.7
418.9
1,691.6
1,105.2
153.3
1,258.5
–
–
–
–
–
–
22.7
(69.2)
–
22.7
52.0
205.3
(17.2)
1,264.0
Property portfolio as restated
1,272.7
418.9
1,691.6
1,058.7
As at 30th November 2015 the Group had assets of £633.2m (2014: £461.7m) included within the Group property portfolio
(excluding joint ventures and associates) which were wholly owned, unencumbered and able to be pledged as security for Group
debt facilities.
The Group’s property portfolio, including its share of joint ventures and associates, can be split by category as detailed below:
Industrial
Retail
Residential
Offices
Income producing
Residential land – New Covent Garden Market
Residential land – other
Total residential land
Commercial land
Property portfolio
d. Movement in net debt
Movement in net debt is set out below:
Change in cash and cash equivalent
Borrowings drawn
Repayment of borrowings
Fair value movements on convertible bonds
Increase in net borrowings
Fair value movements on convertible bonds
Finance leases
Increase in net debt
2015
£m
2014 restated
£m
275.6
337.5
106.3
48.1
767.5
220.0
552.3
772.3
151.8
248.1
220.0
33.0
61.0
562.1
2.6
553.4
556.0
145.9
1,691.6
1,264.0
2015
£m
1.6
(195.0)
83.8
4.1
(105.5)
(4.1)
(32.5)
(142.1)
2014 restated
£m
–
(115.0)
112.5
–
(2.5)
–
(22.6)
(25.1)
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements 123
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
Finance leases
Net dividends
Movement in cash and cash equivalents
Net rent and other income
Property disposals
Property acquisitions
Capital expenditure
Working capital and other movements
Overheads and interest
Taxation
Trading cash flow
Net borrowings
Finance leases
Net dividends
Movement in cash and cash equivalents
2015
Operating
activities
£m
Investing
activities
£m
Financing
activities
£m
37.0
180.5
–
–
84.4
(57.2)
(208.2)
(104.1)
(5.5)
(33.1)
(9.4)
(38.7)
–
–
–
(38.7)
Operating
activities
£m
25.6
245.4
(5.6)
(181.0)
2.6
(25.9)
(5.0)
56.1
–
–
–
56.1
–
–
–
(76.9)
–
–
6.7
(70.2)
2014 restated
Investing
activities
£m
–
31.4
(47.9)
(51.7)
–
–
–
(68.2)
–
–
20.0
(48.2)
–
–
–
–
–
(18.0)
–
(18.0)
107.1
32.5
(11.1)
110.5
Financing
activities
£m
–
–
–
–
–
(23.9)
–
(23.9)
6.4
18.7
(9.1)
(7.9)
Total
£m
37.0
264.9
(57.2)
(312.3)
(5.5)
(51.1)
(9.4)
(133.6)
107.1
32.5
(4.4)
1.6
Total
£m
25.6
276.8
(53.5)
(232.7)
2.6
(49.8)
(5.0)
(36.0)
6.4
18.7
10.9
–
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 124
Notes to the Group Financial Statements (continued)
for the year ended 30th November 2015
2. Non-statutory information (continued)
f. Net assets per share
Net assets per share are calculated as set out below.
Total equity
Less: Non-controlling interests
Equity attributable to owners of the Company
Adjustments of inventories to fair value
Diluted EPRA triple net assets
Deferred tax on capital allowances and revaluations
Mark-to-market of derivative financial instruments
Diluted EPRA net assets
2015
£m
2014 restated
£m
921.5
(6.8)
914.7
11.9
926.6
50.0
10.9
987.5
724.0
(5.9)
718.1
11.5
729.6
19.2
7.5
756.3
Shares in issue(1) (number)
221,186,714
220,916,561
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 690,274 shares held by The St. Modwen Properties PLC Employee Share Trust (2014: 460,427).
g. Net borrowing and net debt
Cash and cash equivalents
Borrowings due within one year
Borrowings due after more than one year
Less: Fair value movements on convertible bonds
Net borrowings
Fair value movements on convertible bonds
Finance lease liabilities due within one year
Finance lease liabilities due after more than one year
Net debt
413.5p
27%
418.9p
27%
446.4p
30%
325.1p
330.3p
342.3p
2015
£m
4.8
–
2014 restated
£m
3.2
–
(451.8)
(340.6)
4.1
–
(442.9)
(337.4)
(4.1)
(0.4)
(54.7)
(502.1)
–
(0.1)
(22.5)
(360.0)
h. Gearing and loan-to-value
The Group’s capacity to borrow is primarily linked to the quantum of the property portfolio excluding assets held under
finance leases. Accordingly both gearing and loan-to value are calculated using the comparable measure of net borrowings.
This represents bank loans and outstanding bond liabilities at amortised cost.
The table overleaf shows the calculation of:
• gearing, being the ratio of net debt to total equity;
• adjusted gearing, being the ratio of net borrowings to total equity; and
• loan-to-value being the ratio of net borrowings to the property portfolio (representing amounts that could be used as security
for that debt).
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements 125
2015
Group
£m
Joint ventures
and associates
£m
Total
£m
1,272.7
418.9
1,691.6
(53.1)
–
(53.1)
1,219.6
418.9
1,638.5
921.5
502.1
442.9
54%
48%
36%
Group
£m
1,105.2
(69.2)
22.7
1,058.7
(20.0)
1,038.7
736.5
(12.8)
0.3
724.0
334.1
3.3
22.6
360.0
334.1
3.3
337.4
45%
50%
45%
47%
30%
32%
N/A
47.6
46.4
2014 restated
Joint ventures
and associates
£m
153.3
52.0
–
921.5
549.7
489.3
60%
53%
30%
Total
£m
1,258.5
(17.2)
22.7
205.3
1,264.0
–
(20.0)
205.3
1,244.0
–
–
–
–
45.3
(2.5)
1.2
44.0
45.3
(2.5)
42.8
736.5
(12.8)
0.3
724.0
379.4
0.8
23.8
404.0
379.4
0.8
380.2
52%
56%
52%
53%
30%
31%
Property portfolio (note 2c)
Less valued assets held under finance leases
Net property portfolio
Total equity
Net debt
Net borrowings (note 2g)
Gearing
Adjusted gearing
Loan-to-value
Property portfolio (note 2c) – as previously reported
IFRS 10 adjustments
Lease accounting adjustments
Property portfolio as restated
Less valued assets held under finance leases
Net property portfolio as restated
Total equity as previously reported
IFRS 10 adjustments
Lease accounting adjustments
Total equity as restated
Net debt as previously reported(1)
IFRS 10 adjustments
Finance lease obligations (including accounting adjustments)
Net debt as restated
Net borrowings as previously reported
IFRS 10 adjustments
Net borrowings as restated
Gearing as previously reported
Gearing as restated
Adjusted gearing as previously reported
Adjusted gearing as restated
Loan-to-value as previously reported
Loan-to-value as restated
(1) Excludes £3.9m of finance leases that are included in £22.6m finance lease liabilities.
Bank covenant compliance is based on the ratio of gearing, being net debt to equity of 54% (2014 restated: 50%) against a
covenant of 175%.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 126
Notes to the Group Financial Statements (continued)
for the year ended 30th November 2015
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:
2015
£m
0.8
1.5
2014 restated
£m
0.5
1.0
Fees payable for the audit of the
Company's Annual Financial Statements
The audit of subsidiary companies and
joint ventures pursuant to legislation
Total audit fees
Audit-related assurance services
Other assurance services
Tax compliance services
Tax advisory services
Property consulting
Other
Total non-audit fees
Total fees
Audit and
audit-related
services
£000
2015
Other
services
£000
125
162
287
60
3
–
–
–
–
63
350
–
–
–
–
–
16
20
69
2
107
107
Audit and
audit-related
services
£000
2014
Other
services
£000
123
157
280
55
20
–
–
–
–
75
355
–
–
–
–
–
67
80
202
–
349
349
Total
£000
125
162
287
60
3
16
20
69
2
170
457
Total
£000
123
157
280
55
20
67
80
202
–
424
704
The Group continues to monitor the provision of audit and other services by the auditor and fees charged for other services in
2015 were 31% (2014: 98%) 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.
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 monthly 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
2015
Number
2014
Number
257
52
309
2015
£m
18.6
2.4
0.8
21.8
220
67
287
2014
£m
13.9
2.7
0.8
17.4
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements 127
d. Share-based payments
The Group has a Save As You Earn 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 operates a discretionary Executive Share Option Scheme (ESOS). Options are granted at a fixed exercise price
equal to the market price at the date of grant. With the exception of awards made to the executive directors in conjunction with
the PSP awards granted in 2012, there are no performance conditions attached to ESOS awards. Employees must ordinarily
remain in service for a period of three years from the date of grant before exercising their ESOS awards. The option period ends
on the 10th anniversary of the date of grant.
Details of the Group’s Performance Share Plan (PSP) are given in the Directors’ Remuneration Report.
The following table illustrates the movements in share options during the year. As the PSP includes the grant of options at £nil
exercise price the weighted average prices below are calculated including and excluding the options under this plan.
Outstanding at start of year
Granted
Forfeited
Exercised
Outstanding at end of year
Exercisable at year end
Number of
options
9,117,437
1,288,365
(398,241)
(3,917,473)
6,090,088
1,887,986
2015
Weighted average price
2014
Weighted average price
All options
£
Excluding PSP
£
Number of
options
All options
£
Excluding PSP
£
1.87
3.46
3.23
1.57
2.33
1.75
2.31
10,371,497
4.67
3.23
2.03
2.89
1.75
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
3.64
(2.26)
1.92
2.31
2.00
Share options are priced using a Black-Scholes valuation model. The fair values calculated and the assumptions used are
as follows:
30th November 2015
30th November 2014
Charge
to Income
Statement
£m
Risk-free
interest rate
%
Expected
volatility
%
Dividend
yield
%
Share
price
£(1)
2.0
2.4
0.4–1.1
37.6–56.9
0.4–1.1
37.6–56.9
1.1
1.1
1.23–3.99
1.23–3.99
(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 £5.2m (2014: £4.8m) and
included £1.8m (2014: £0.8m) 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 £4.63 (2014: £3.82). The executive share options outstanding at
the year end had a range of exercise prices between £1.75 and £4.74 (2014: £1.75 and £3.75) with PSP options exercisable at
between £nil and £4.71 (2014: £nil and £1.52). Outstanding options had a weighted average maximum remaining contractual life
of nine years (2014: nine years).
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 128
Notes to the Group Financial Statements (continued)
for the year ended 30th November 2015
4. Finance costs and finance income
Interest payable on borrowings
Amortisation of loan arrangement fees
Write off of convertible bond issue costs
Amortisation of discount on deferred payment arrangements
Head rents treated as finance leases
Movement in fair value of convertible bond
Movement in fair value of financial instruments
Interest on pension scheme liabilities
Total finance costs
2015
£m
16.5
1.1
–
1.1
0.6
4.1
0.8
1.0
25.2
2014 restated
£m
17.9
2.6
2.4
1.9
0.2
–
–
1.2
26.2
All finance costs, other than in respect of the convertible bond which is carried at fair value, derive from financial liabilities
measured at amortised cost. Included within amortisation of loan arrangement fees is £nil (2014: £1.4m) in relation to the early
termination of bank facilities.
Interest receivable
Movement in fair value of convertible bond
Movement in fair value of derivative financial instruments
Interest income on pension scheme assets
Total finance income
2015
£m
3.9
–
0.4
1.1
5.4
2014 restated
£m
2.2
0.9
1.0
1.2
5.3
The finance income on interest rate derivatives derives from financial liabilities held at fair value through profit or loss.
5. Taxation
a. Tax on loss 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 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 Comprehensive Income
2015
£m
2014 restated
£m
13.9
(0.8)
13.1
0.4
4.3
–
(0.1)
0.2
4.8
17.9
–
–
8.6
(1.3)
7.3
1.0
5.9
1.3
–
(3.7)
4.5
11.8
–
–
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements
b. Reconciliation of effective tax rate
Profit before tax
Less: joint ventures and associates
Pre-tax profit attributable to the Group
Corporation tax at 20.3% (2014: 21.7%)
Effect of non-deductible expenses
Impact of current year revaluations and indexation
Difference between chargeable gains and accounting profit
Change in rate used for provision of deferred tax
Losses – Recognition of previously unrecognised deferred tax assets
Current year charge
Adjustments in respect of previous years
Tax charge for the year
Effective rate of tax
129
2015
£m
2014 restated
£m
235.2
(106.8)
128.4
26.1
0.3
(6.3)
0.2
(0.1)
(1.7)
18.5
(0.6)
17.9
14.0%
131.8
(27.1)
104.7
22.6
0.8
(5.8)
(0.8)
–
–
16.8
(5.0)
11.8
11.3%
The post tax results of joint ventures and associates are stated after a tax charge of £23.2m (2014: £3.1m charge). The effective
tax rate for the Group including joint ventures and associates is a charge of 15.9% (2014: 11.4%).
The Finance (No. 2) Act 2015 included provisions which reduced the main rate of corporation tax to 19% from 1st April 2017 and
18% from 1st April 2020. Current tax has therefore been provided 20.33% and deferred tax at rates from 18% to 20%.
c. Balance Sheet
Balance at start of the year
Charge to the Income Statement
Acquired with subsidiary
Net payment
Other
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
–
–
–
(1.7)
(3.7)
(5.4)
2015
Liability
£m
16.4
3.9
0.5
–
–
20.8
2015
2014 restated
Corporation
tax
£m
Deferred
tax
£m
Corporation
tax
£m
Deferred
tax
£m
7.3
13.1
–
(9.4)
0.1
11.1
Net
£m
16.4
3.9
0.5
(1.7)
(3.7)
15.4
11.7
4.8
–
–
(1.1)
15.4
Asset
£m
–
–
–
–
(2.7)
(2.7)
3.6
7.3
–
(5.0)
1.4
7.3
2014 restated
Liability
£m
10.0
3.9
0.5
–
–
14.4
8.5
4.5
0.5
–
(1.8)
11.7
Net
£m
10.0
3.9
0.5
–
(2.7)
11.7
At the Balance Sheet date, the Group has unused tax losses in relation to 2015 and prior years of £2.9m (2014: £1.3m), of which
£1.7m (2014: £nil) has been recognised as a deferred tax asset. A deferred tax asset of £1.2m (2014: £1.3m) has not been
recognised in respect of current and prior year tax losses as it is not considered sufficiently certain that there will be taxable profits
available in the short-term against which these can be offset.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 130
Notes to the Group Financial Statements (continued)
for the year ended 30th November 2015
5. Taxation (continued)
d. Factors that may affect future tax charges
As a property group, tax and its treatment is often an integral part of transactions. The outcome of tax treatments, including tax
planning, are recognised by the Group to the extent that 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.
The effective rate of tax for the year of 14% reflects the benefit of certain investment gains not being taxable because of
indexation, recognition of tax losses and the property ownership structure within the Group. As a result of proposed changes in
the Group’s property ownership structure the effective tax rate is expected to move towards, but remain below, the standard rate
of tax as a result of indexation on property revaluations together with land remediation and other property reliefs.
6. Earnings per share
Weighted number of shares in issue
Weighted number of diluted shares relating to the convertible bond
Weighted number of diluted shares relating to share options
Earnings for the purposes of basic earnings per share being net profit attributable to owners
of the Company
Effect of dilutive potential ordinary shares:
Interest on convertible bond (net of tax)
Movement in fair value of the convertible bond
Earnings for the purposes of diluted earnings per share
Basic earnings per share
Diluted earnings per share
2015
Number of
shares
2014 restated
Number of
shares
221,076,984 220,617,339
18,867,925
14,150,943
6,383,088
4,602,679
246,327,997 239,370,961
2015
Earnings
£m
2014 restated
Earnings
£m
216.4
118.6
2.3
4.1
222.8
2015
pence
97.9
90.4
1.7
(0.9)
119.4
2014 restated
pence
53.8
49.9
Shares held by the St. Modwen Properties PLC Employee Share Trust are excluded from the above calculation.
In addition to the 1.1p increase resulting from prior year restatements for IFRS 10 and lease accounting, diluted EPS for the year
ended 30th November 2014 has been updated for the potentially dilutive impact of the Group’s convertible bond. This reduces
diluted EPS for the year ended 30th November 2014 by 2.8p to 49.9p.
As the Group is principally a development business EPRA earnings per share on a basic and diluted basis 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 a final dividend for 2014 and an interim dividend for 2015. 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
2015
2014
p per share
£m
p per share
3.14
1.90
5.04
3.85
6.9
4.2
11.1
8.5
2.67
1.46
4.13
3.14
£m
5.9
3.2
9.1
6.9
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 2015Financial Statements 8. Investment property
Fair value
At 30th November 2013 (restated)
Additions – new properties
Other additions
Net transfers to inventories (note 12)
Disposals
Gain on revaluation (restated)
At 30th November 2014 (restated)
Additions – new properties
Other additions
Net transfers from inventories (note 12)
Disposals
Gain on revaluation
At 30th November 2015
131
Freehold
investment
properties
£m
Restated
leasehold
investment
properties
£m
615.5
28.3
61.5
(6.8)
(31.6)
57.0
723.9
57.2
102.7
51.6
(55.4)
67.8
947.8
129.1
–
0.8
–
(3.9)
6.9
132.9
–
2.6
13.3
(21.7)
6.1
133.2
Total
£m
744.6
28.3
62.3
(6.8)
(35.5)
63.9
856.8
57.2
105.3
64.9
(77.1)
73.9
1,081.0
Investment properties were valued at 30th November 2015 and 30th November 2014 by DTZ Debenham Tie Leung Ltd (since
the merger of the firms trading, and herein referred to, as Cushman & Wakefield), Chartered Surveyors, in accordance with
the Appraisal and Valuation Manual of the Royal Institution of Chartered Surveyors, on the basis of market value. Cushman
& Wakefield 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 2015 was £840.5m (2014: £723.9m).
As at 30th November 2015, £498.2m (2014: £450.0m) of investment property was pledged as security for the Group’s loan facilities.
Included within investment properties are £57.0m (2014: £23.9m) of assets held under finance leases.
IFRS 13 ‘Fair Value Measurement’ disclosures in respect of investment property are detailed below.
The following table provides an analysis of the categorisation of the Group’s 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(1)
Lease incentives (recorded in receivables)
Level 3
Level 3
Level 3
N/A
N/A
2015
£m
656.6
339.8
92.6
3.9
(11.9)
1,081.0
2014 restated
£m
450.1
296.5
110.3
3.9
(4.0)
856.8
(1) £3.9m of the Group’s assets held under finance leases are not subject to revaluation. These assets represent head leases on certain investment property and are carried at the value
recognised at inception less repayments of principal. This does not include lease arrangements at Swansea University which are subject to revaluation.
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 estimated rental value. 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.
Equivalent yields and estimated rental value are considered to be unobservable inputs and details of the ranges used for each
category of income producing properties is provided overleaf.
All other factors being equal, a higher equivalent yield would lead to a decrease in the valuation of an asset, and an increase in the
current or estimated future rental stream would have the effect of increasing the capital value, and vice versa. However, there are
interrelationships between the unobservable inputs which are partially determined by market conditions, which would impact on
these changes.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 132
Notes to the Group Financial Statements (continued)
for the year ended 30th November 2015
8. Investment property (continued)
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.
Sales prices, build costs and profit margins are considered to be unobservable inputs and details of the ranges used are
provided below.
All other factors being equal, a higher sales price would lead to an increase in the valuation of an asset, a higher profit margin
would lead to a decrease in the valuation of an asset, and a decrease in the build costs would have the effect of increasing
the capital value, and vice versa. However, there are interrelationships between the unobservable inputs which are partially
determined by market conditions, which would impact on these changes.
Commercial land is valued on a land value per acre less costs to remediate and service the land. Land value per acre is considered
to be an unobservable input and details of the ranges used are detailed below.
All other things being equal, a higher value per acre would lead to an increase in the valuation of an asset and vice versa.
Information about fair value measurements using unobservable inputs (Level 3)
Income producing properties
Industrial
Retail
Residential
Offices
Total income producing properties
Income producing properties
Industrial
Retail
Residential
Offices
Total income producing properties
Fair value at
30th November
2015
£m
202.5
310.0
106.3
37.8
656.6
Fair value at
30th November
2014
£m
178.3
201.0
22.7
48.1
450.1
ERV per square foot
Equivalent yield
Min
£
0.67
5.00
12.60
7.50
Max
£
10.50
52.00
37.50
28.00
Min
%
6.4
5.6
4.1
7.3
ERV per square foot
Equivalent yield
Min
£
0.50
5.00
32.00
6.00
Max
£
10.50
52.00
36.00
28.00
Min
%
7.2
7.0
4.5
7.5
Max
%
12.0
12.0
6.7
14.4
Max
%
11.4
14.5
6.8
14.3
As the Group holds property both directly and through joint ventures and associates the Strategic Report discusses yields applied
to investment property on a weighted average see-through basis. This provides a composite position with respect to the Group’s
exposure to asset types by sector. The equivalent yield ranges provided above are consistent with those for assets held by the
Group together with its joint ventures and associates.
The Group’s portfolio has a wide spread of yields as it includes assets that are at various stages of the property lifecycle.
Income producing assets are generally acquired at high yields where the Group has the opportunity to add significant value.
As assets are enhanced and development activity is undertaken, improved and new assets are created and valued at lower yields.
Residential land
Commercial land
Residential land
Commercial land
Fair value at
30th November
2015
£m
339.8
92.6
Fair value at
30th November
2014
£m
296.5
110.3
Sales
price per sq ft
£
144–270
–
Land
value per acre
£000
–
125-595
Build
costs per sq ft
£
82–110
–
Sales
price per sq ft
£
145–260
–
Land
value per acre
£000
–
125-625
Build
costs per sq ft
£
75-110
–
Profit
margin %
20.0
–
Profit
margin %
20.0
–
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements
9. Operating property, plant and equipment
Operating
properties
£m
Operating
plant and
equipment
£m
Cost
At 30th November 2013
Additions
Disposals
At 30th November 2014
Additions
Disposals
At 30th November 2015
Depreciation
At 30th November 2013
Charge for the year
Disposals
At 30th November 2014
Charge for the year
Disposals
At 30th November 2015
Net book value
At 30th November 2013
At 30th November 2014
At 30th November 2015
Tenure of operating properties:
Freehold
Leasehold
6.9
0.1
–
7.0
–
(2.5)
4.5
0.9
0.1
–
1.0
0.1
–
1.1
6.0
6.0
3.4
5.4
0.9
(0.4)
5.9
0.6
(0.5)
6.0
4.8
0.4
(0.3)
4.9
0.7
(0.4)
5.2
0.6
1.0
0.8
2015
£m
3.4
–
3.4
133
Total
£m
12.3
1.0
(0.4)
12.9
0.6
(3.0)
10.5
5.7
0.5
(0.3)
5.9
0.8
(0.4)
6.3
6.6
7.0
4.2
2014
£m
3.4
2.6
6.0
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 134
Notes to the Group Financial Statements (continued)
for the year ended 30th November 2015
10. Joint ventures and associates
The Group’s share of the results for the year of its joint ventures and associates is:
2015
Key Property
Investments
Ltd
£m
VSM Estates
Uxbridge
(Group)
Ltd
£m
VSM Estates
(Holdings)
Ltd
£m
VSM
(NCGM)
Ltd
£m
Other joint
ventures and
associates
£m
16.8
5.9
2.8
6.7
(0.1)
15.3
(2.3)
0.5
13.5
(2.3)
11.2
–
(0.2)
–
(3.9)
–
(4.1)
(3.3)
0.4
(7.0)
1.8
(5.2)
–
–
(0.9)
(1.3)
(0.1)
(2.3)
(1.6)
0.7
(3.2)
2.8
(0.4)
0.4
–
0.4
127.4
(0.1)
127.7
(1.5)
–
126.2
(25.5)
100.7
4.6
0.2
0.3
0.3
(0.1)
0.7
(0.2)
–
0.5
–
0.5
2014 restated
Key Property
Investments
Ltd
£m
VSM Estates
Uxbridge
(Group)
Ltd
£m
VSM Estates
(Holdings)
Ltd
£m
VSM
(NCGM)
Ltd
£m
Other joint
ventures and
associates
£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)
–
–
3.0
15.2
(0.2)
18.0
(1.2)
–
16.8
(3.3)
13.5
–
–
–
–
–
–
–
–
–
–
–
1.1
0.2
–
0.4
(0.1)
0.5
(0.2)
–
0.3
–
0.3
Total
£m
21.8
5.9
2.6
129.2
(0.4)
137.3
(8.9)
1.6
130.0
(23.2)
106.8
Total
£m
10.5
5.9
3.7
27.1
(0.5)
36.2
(7.5)
1.5
30.2
(3.1)
27.1
Income Statements
Revenue
Net rental income
Gains/(losses) on disposal of
investments/ investment properties
Investment property revaluation gains/
(losses)
Administrative expenses
Profit/(loss) before interest and tax
Finance cost
Finance income
Profit/(loss) before tax
Taxation
Profit/(loss) for the year
Income Statements
Revenue
Net rental income
Gains on disposal of investments/
investment properties
Investment property revaluation gains
Administrative expenses
Profit before interest and tax
Finance cost
Finance income
Profit/(loss) before tax
Taxation
Profit/(loss) for the year
Included in other joint ventures and associates above are results from associated companies of £0.3m (2014: £nil).
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements 135
The Group’s share of the Balance Sheet of its joint ventures and associates is:
2015
Key Property
Investments
Ltd
£m
VSM Estates
Uxbridge
(Group)
Ltd
£m
VSM Estates
(Holdings)
Ltd
£m
VSM
(NCGM)
Ltd
£m
Other joint
ventures and
associates
£m
104.8
1.9
(6.7)
(34.2)
65.8
61.3
11.2
(6.7)
65.8
52.0
4.7
(17.2)
(24.1)
15.4
20.6
(5.2)
–
15.4
41.6
28.5
(25.4)
(6.8)
37.9
38.3
(0.4)
–
37.9
220.0
–
(5.5)
(113.8)
100.7
–
100.7
–
100.7
3.0
6.3
(3.4)
1.6
7.5
7.0
0.5
–
7.5
Key Property
Investments
Ltd
£m
VSM Estates
Uxbridge
(Group)
Ltd
£m
2014
VSM Estates
(Holdings)
Ltd
£m
VSM
(NCGM)
Ltd
£m
Other joint
ventures and
associates
£m
95.6
6.3
(7.2)
(33.4)
61.3
66.8
14.5
(20.0)
61.3
55.4
5.8
(21.5)
(19.1)
20.6
21.8
(1.2)
–
20.6
51.9
21.1
(15.6)
(19.1)
38.3
24.8
13.5
–
38.3
–
2.6
(2.6)
–
–
–
–
–
–
6.5
3.4
(1.5)
(1.4)
7.0
6.7
0.3
–
7.0
Total
£m
421.4
41.4
(58.2)
(177.3)
227.3
127.2
106.8
(6.7)
227.3
Total
£m
209.4
39.2
(48.4)
(73.0)
127.2
120.1
27.1
(20.0)
127.2
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
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 £3.3m (2014: £2.9m) in relation to associated companies.
These net assets comprise total assets of £3.9m (2014: £3.5m) and total liabilities of £0.6m (2014: £0.6m).
New Covent Garden Market (NCGM)
NCGM received unconditional status in the year and, as a result, the valuation increase of £127.4m has had a significant impact on
the current year results.
NCGM was valued at 30th November 2015 by Jones Lang LaSalle LLP, Chartered Surveyors; in accordance with the Appraisal
and Valuation Manual of the Royal Institution of Chartered Surveyors, on the basis of market value. Jones Lang LaSalle LLP are
professionally qualified independent external valuers and had appropriate recent experience in the relevant location and category
of the properties being valued.
The liability of VSM (NCGM) Ltd to procure a new market facility for CGMA has been calculated by:
• the Board of VSM (NCGM) Ltd, including representatives of VINCI and St. Modwen, assessing the costs of procuring the market
facility at current rates;
• applying a current estimate of inflation for the period of build; and
• discounting the forecast cash flows to today’s value using a discount rate of 5%.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 136
Notes to the Group Financial Statements (continued)
for the year ended 30th November 2015
10. Joint ventures and associates (continued)
The following information on unobservable inputs is detailed below for understanding and completeness.
Sales price
Build costs
Profit margin on GDV
The material joint venture and associate companies comprise the following:
Range per square foot
Minimum
£
Maximum
£
Average per
square foot
£
Profit margin
on GDV %
900
1,566
1,326
–
–
–
–
433
–
–
–
20.0
Name
Barton Business Park Ltd
Key Property Investments Ltd
Meaford Energy Ltd
Meaford Land Ltd
Skypark Development Partnership LLP
VSM (NCGM) Ltd
VSM Estates (Holdings) Ltd
VSM Estates Uxbridge (Group) Ltd
Wrexham Land Ltd
Wrexham Power Ltd
Coed Darcy Ltd
Baglan Bay Company Ltd
Status
Interest
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%
49%
25%
Activity
Property development
Property investment and development
Property development
Property development
Property development
Property development
Property development
Property investment and development
Property development
Property development
Property investment and development
Property management
A full list of joint venture and associate companies is included in note (F) to the Company Financial Statements.
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
IFRS 7 and IFRS 13 disclosures in respect of financial assets included above are provided in note 16.
2015
£m
2014 restated
£m
0.1
6.0
6.1
5.6
8.6
22.2
31.3
37.0
104.7
–
6.0
6.0
4.7
5.5
22.7
6.0
25.0
63.9
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements 12. Inventories
Properties held for sale
Properties under construction
Land under option
The movement in inventories during the two years ended 30th November 2015 is as follows:
At 30th November 2013 (restated)
Additions
Net transfers from investment property (note 8)
Disposals (transferred to development cost of sales) (note 1)
At 30th November 2014
Additions
Net transfers to investment property (note 8)
Disposals (transferred to development cost of sales) (note 1)
At 30th November 2015
137
2015
£m
5.3
161.6
16.8
183.7
2014 restated
£m
5.8
176.7
18.5
201.0
£m
199.7
173.1
6.8
(178.6)
201.0
234.8
(64.9)
(187.2)
183.7
The directors consider all inventories to be current in nature. The operational cycle is such that a proportion of inventories will not
be realised within 12 months. It is not possible to determine with accuracy when specific inventory will be realised as this will be
subject to a number of issues including the strength of the property market.
Included within disposals of inventories are net realisable value provisions made during the year of £1.4m (2014: £0.1m).
As at 30th November 2015 £43.4m (2014: £16.8m) 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
Non-current
Other payables on deferred terms
2015
£m
2014 restated
£m
38.5
15.4
75.6
17.1
146.6
3.1
3.1
24.4
29.0
74.4
20.8
148.6
3.5
3.5
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.
IFRS 7 and IFRS 13 disclosures in respect of financial liabilities included above are provided in note 16.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 138
Notes to the Group Financial Statements (continued)
for the year ended 30th November 2015
14. Borrowings and finance lease obligations
Current
Bank overdrafts
Bank loans
Finance lease liabilities due in less than one year
Non-current
Amounts repayable between one and two years
Amounts repayable between two and five years
Amounts repayable after more than five years
Non-current borrowings
Finance leases liabilities due after more than one year
Non-current borrowings and finance lease obligations
2015
£m
2014 restated
£m
–
–
0.4
0.4
–
344.3
107.5
451.8
54.7
506.5
–
–
0.1
0.1
50.0
253.1
37.5
340.6
22.5
363.1
Where borrowings are secured, the individual bank facility has a fixed charge over a discrete portfolio of certain of the Group’s
property assets.
Borrowings
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 an £80m retail bond and £100m convertible bond. The maturity profile of the Group’s committed
borrowing facilities is set out below:
Secured floating rate borrowings:
Less than one year(1)
One to two years
Two to three years
Three to four years
Four to five years
More than five years
Unsecured fixed rate borrowings:
Three to four years
Four to five years
Drawn
£m
–
–
89.0
71.2
70.0
37.5
267.7
184.1
–
451.8
2015
Undrawn
£m
–
–
10.0
53.8
30.0
12.5
106.3
–
–
106.3
Total
£m
–
–
99.0
125.0
100.0
50.0
374.0
184.1
–
558.1
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
–
75.0
–
99.0
125.0
50.0
349.0
–
180.0
529.0
(1) In addition to the principal amounts included above, £1.8m (2014: £1.4m) of interest payable was committed at the year end. These amounts all fall due within three months of the year end.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements 139
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
137.7 Margin + 3 month LIBOR
£m
Applicable interest rate
£m
30.6
Applicable interest rate
Margin + 3 month LIBOR
2015
2014
Fixed rate bank debt
130.0
Margin + 2.76% weighted
average swap rate
130.0
Margin + 2.93% weighted
average swap rate
Retail Bond – Maturity 2019
80.0
6.25% fixed rate
80.0
6.25% fixed rate
Convertible Bond – Maturity 2019
At 30th November
104.1
451.8
2.875% fixed rate – swapped
to 1.43% + 6 month LIBOR
until 6th March 2017
2.875% fixed rate – swapped
to 1.43% + 6 month LIBOR
until 6th March 2017
100.0
340.6
The average margin on the Group’s bank debt is 1.9% (2014: 1.9%).
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 2015
These swaps hedge the Group’s floating rate bank debt as at 30th November 2015. The fixed rates for these swaps range from
2.01% to 5.16% (2014: 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 2.0 years (2014: 2.5 years).
2015
2014
Earliest termination
Latest termination
Earliest termination
Latest termination
£m
50.0
20.0
–
50.0
10.0
130.0
%(1)
3.06
2.01
–
3.00
1.60
2.76
£m
40.0
20.0
10.0
50.0
10.0
130.0
%(1)
2.54
2.01
5.16
3.00
1.60
2.76
£m
20.0
40.0
20.0
–
50.0
130.0
%(1)
3.81
2.54
2.01
–
3.00
2.93
£m
10.0
40.0
20.0
10.0
50.0
130.0
%(1)
4.48
2.54
2.01
5.16
3.00
2.93
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 2015 and
increase interest rate certainty through to bank facility renewal dates. The fixed rates for these swaps range from 2.72% to 2.97%
(2014: 2.72% to 2.97%) 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 £120m of hedging at a weighted average interest
rate of 2.83% extending to a weighted average life of 3.6 years (2014: £110m at 2.95% for 4.7 years).
Period from 2016 – 2021
Period from 2017 – 2019
(1) Weighted average interest rate.
2015
£m
20.0
40.0
60.0
%(1)
2.90
2.87
2.88
2014
£m
20.0
40.0
60.0
%(1)
2.90
2.87
2.88
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 140
Notes to the Group Financial Statements (continued)
for the year ended 30th November 2015
14. Borrowings and finance lease obligations (continued)
c) Convertible bond (the Convertible Bonds)
On 6th March 2014 St. Modwen Properties Securities (Jersey) Ltd (the Issuer) issued £100.0m 2.875% Guaranteed Convertible
Bonds due 2019 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 seventh 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 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 dividend ex date. No changes to the exchange price have been made up to
30th November 2015.
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 of the Convertible Bonds were issued and remain outstanding at 30th November 2015.
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 2015 the fair value of the Convertible Bonds was £104.1m 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 as disclosed in note 4.
Obligations under finance leases
Finance lease liabilities payable in respect of certain leasehold investment properties are as follows:
Less than one year
Between one and five years
More than five years
2015
2014
Minimum
lease
payments
£m
2.7
13.6
164.2
180.5
Interest
£m
Principal
£m
2.3
11.4
111.7
125.4
0.4
2.2
52.5
55.1
Minimum
lease
payments
£m
1.1
5.5
101.3
107.9
Interest
£m
1.0
4.7
79.6
85.3
Principal
£m
0.1
0.8
21.7
22.6
Finance leases are for periods of up to 999 years from inception and a discount rate of 6.0% (2014: 6.0%) has been used to derive
the fair value of the principal amount outstanding. All lease obligations are denominated in sterling.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements 141
15. Operating leases
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
2015
£m
0.9
2.4
0.2
3.5
2014
£m
0.8
3.2
0.2
4.2
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
2015
£m
55.7
156.1
431.4
643.2
2014
£m
31.5
85.3
172.3
289.1
Contingent rents, calculated as a percentage of turnover for a limited number of tenants, of £0.7m (2014: £0.8m) were recognised
during the year.
16. Financial instruments
Categories and classes of financial assets and liabilities
Financial assets
Loans and receivables:
Cash and cash equivalents(1)
Trade and other receivables(1)
Derivative financial instruments held at fair value through profit or loss(2)
Financial liabilities
Derivative financial instruments held at fair value through profit or loss(2)
Amortised cost:
Bank loans and overdrafts(1)
Retail bond(1)
Convertible bond(1)
Trade and other payables(1)
Other payables on deferred terms(1)
Finance lease liabilities (head rents)(1)
2015
£m
2014 restated
£m
4.8
55.1
0.8
60.7
2015
£m
8.0
267.7
80.0
104.1
86.5
20.2
55.1
621.6
3.2
48.9
1.9
54.0
2014 restated
£m
8.7
160.6
80.0
100.0
88.4
24.3
22.7
484.7
(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 £15.8m (2014: £9.5m) of non-financial assets.
Trade and other payables above comprise trade payables, amounts due to joint ventures and other payables and accrued
expenses and as disclosed in note 13, for current and non-current amounts, after deduction of £43.0m (2014: £39.4m) of
non-financial liabilities.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 142
Notes to the Group Financial Statements (continued)
for the year ended 30th November 2015
16. Financial instruments (continued)
Derivative financial instruments held at fair value through profit or loss
Assets
Liabilities
Level 2
Level 2
2015
£000
0.8
(8.0)
(7.2)
2014 restated
£000
1.9
(8.7)
(6.8)
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.
Where applicable, the value of early termination options in favour of the issuing party are included in the external valuations using
an option pricing model which also factors in projected interest rate volatility.
Capital risk
The Group manages its capital to ensure that the entities in the Group will be able to continue as a going concern while
maximising the return to shareholders through the optimisation of the debt and equity balance. The capital structure of the
Company consists of debt (as disclosed in note 14), cash and cash equivalents and equity, comprising issued capital, reserves
and retained earnings as disclosed in the Group Statement of Changes in Equity.
Market risk
Market risk is the potential adverse change in Group income or the Group net worth arising from movements in interest rates
or other market prices. Interest rate risk is the Group’s principal market risk and is considered below.
Interest rate risk management: The Group is exposed to interest rate risk as it borrows funds at variable interest rates. The Group
uses a combination of variable rate borrowings and interest rate swaps to manage the risk.
Interest rate sensitivity: The 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
2015
£m
(2.1)
1.5
(0.6)
2015
£m
2.1
(1.5)
0.6
2014
£m
(1.2)
1.0
(0.2)
2014
£m
1.2
(1.0)
0.2
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 £2.5m (2014: £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.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements 143
Included within trade and other receivables is £0.4m (2014: £0.6m) 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
2015
£m
0.6
0.4
(0.4)
(0.2)
0.4
2014
£m
0.5
0.6
(0.3)
(0.2)
0.6
Trade and other receivables include £0.8m (2014: £1.4m) which are past due as at 30th November 2015 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 +
2015
£m
0.3
0.1
0.4
0.8
2014
£m
0.4
0.2
0.8
1.4
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 for the Group’s non-derivative financial liabilities, on an undiscounted basis is as follows:
2015
Bank loans and overdrafts and bonds
Trade and other payables
Finance leases – minimum lease
payments (note 14)
Other payables on deferred terms
2014 restated
Bank loans and overdrafts and bonds
Trade and other payables
Finance leases – minimum lease
payments (note 14)
Other payables on deferred terms
Less than
one month
£m
1–3 months
£m
3 months
to 1 year
£m
1.2
57.3
–
–
58.5
Less than
one month
£m
0.5
51.8
–
–
2.7
5.8
–
–
8.5
1–3 months
£m
3.4
10.1
–
–
52.3
13.5
11.6
23.3
2.7
17.1
54.7
3 months
to 1 year
£m
10.3
26.6
1.1
20.8
58.8
1–5 years
£m
452.5
–
13.6
3.1
More than
five years
£m
37.5
–
164.2
–
469.2
201.7
1–5 years
£m
354.9
–
5.5
5.6
366.0
More than
five years
£m
37.5
–
101.3
–
138.8
Total
£m
505.5
86.4
180.5
20.2
792.6
Total
£m
406.6
88.5
107.9
26.4
629.4
The Group’s approach to cash flow, financing and bank covenants is discussed further in the Financial Review section of the
Strategic Report.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45
144
Notes to the Group Financial Statements (continued)
for the year ended 30th November 2015
17. Share capital
Equity share capital
At start of year
Issue of share capital
At end of year
Ordinary
10p shares
Number
221,376,988
500,000
221,876,988
£m
22.1
0.1
22.2
On 23rd September 2015 the Group issued 500,000 ordinary shares of 10p each at par. The shares were allotted and issued 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 for details of outstanding options to acquire ordinary shares.
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, future accrual.
The Income Statement includes:
• a charge of £0.2m (2014: £0.2m) for the defined benefit section; and
• a charge of £0.7m (2014: £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 Trustees’ 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
Funding policy
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 2016 is expected
to be £0.2m, consistent with the current year (£0.2m). From 1st January 2015 the administrative expenses were met by
St. Modwen Properties PLC.
The actuarial valuation of the defined benefit section, a final salary scheme, was updated to 30th November 2015 on an IAS 19
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
2015
2.1%
3.0%
3.1%
3.5%
2.1%
2014
2.1%
3.0%
3.1%
3.6%
2.1%
2013
2.6%
3.0%
3.4%
4.5%
2.6%
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.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements 145
The mortality rates adopted are from the VITA Tables with CMI_2013 ‘core’ projections and a long-term improvement of 1% pa
with peaked short-term improvements and improvements remaining level at the oldest ages. The resultant assumptions are,
for example:
• Average future life expectancy (in years) for a pensioner aged 65 at 30th November 2015: 23.1 (male), 23.9 (female).
• Average future life expectancy (in years) at age 65 for a non-pensioner aged 40 at 30th November 2015: 24.0 (male), 26.2 (female).
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
Infrastructure
Cash
Actuarial value of liabilities
Unrecognised surplus
Surplus in the scheme
Related deferred tax liability
Fair value of pension asset net of deferred tax
2015
£m
4.2
2.4
7.0
1.2
0.4
8.3
5.3
–
0.4
0.6
29.8
(27.5)
(2.3)
–
–
–
2014
£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)
–
–
–
The cumulative amount of actuarial gains and losses (before unrecognised surplus of £2.3m) recorded in the Group Statement of
Comprehensive Income is a loss of £0.1m (2014: gain of £1.0m).
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 £1.3m (2014: £3.4m).
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
2015
£m
(0.2)
2015
£m
1.1
(1.0)
0.1
2014
£m
(0.2)
2014
£m
1.2
(1.2)
–
2015
£m
0.2
0.5
–
(0.2)
(0.6)
(0.1)
2013
£m
(0.2)
2013
£m
1.2
(1.1)
0.1
2014
£m
2.2
0.9
0.5
(2.4)
(1.2)
–
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 146
Notes to the Group Financial Statements (continued)
for the year ended 30th November 2015
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
2015
£m
28.6
–
1.0
–
(0.5)
–
0.2
(1.8)
27.5
2015
£m
30.3
1.1
–
–
0.2
(1.8)
29.8
2.3
(2.3)
–
2012
£m
1.1
3.9%
(0.5)
1.9%
2014
£m
28.5
0.2
1.2
–
(0.9)
(0.5)
2.4
(2.3)
28.6
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%
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
2015
£m
2014
£m
2013
£m
0.2
0.7%
0.5
(1.8%)
2.2
7.3%
0.9
(3.1%)
0.8
2.8%
(0.2)
0.7%
Liability split
Duration (years)
2015
%
–
34.0
66.0
100.0
2014
%
–
35.5
64.5
100.0
2015
years
–
20.0
12.0
14.8
2014
years
–
20.0
12.0
14.8
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements 147
Sensitivity analysis
Change in assumptions compared with 30th November 2015 actuarial assumptions:
• A 0.5% decrease in the discount rate would increase the actuarial value of liabilities by £2.1m to £29.6m.
• A 1 year increase in life expectancy would increase the actuarial value of liabilities by £0.8m to £28.3m.
• A 0.5% increase in the inflation rate would increase the actuarial value of liabilities by £1.3m to £28.8m.
• A 0.5% increase in the rate of increase in deferred pensions would increase the actuarial value of liabilities by £0.3m to £27.8m.
• A 0.5% increase in the rate of increase in pensions in payments would increase the actuarial value of liabilities by £1.0m to £28.5m.
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 a 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 was 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
issued share capital of Branston was acquired. A conditional agreement to acquire the remaining 12.5 % of the issued share
capital, which was held by Simon Clarke, was also entered into on 22nd May 2014. Total consideration payable for the entire issued
share capital of Branston was:
• £0.8m on completion;
• £0.1m payable on shareholder approval;
• £0.1m 12 months after completion which was paid on 22nd May 2015; 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 equated to 12.5% of the amounts above. As the
consideration payable to Mr. Clarke was in excess of £100,000, the conditional agreement constituted 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
was conditional, among other things, on approval of shareholders of St. Modwen Properties PLC; this approval was given at the
Company’s Annual General Meeting held on 27th March 2015.
As required by IFRS 3 (2008) Business Combinations, this acquisition resulted in the assets and liabilities of Branston
being remeasured to fair value at the acquisition date and the resulting negative goodwill arising of £2.1m credited to the
Income Statement.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 148
Notes to the Group Financial Statements (continued)
for the year ended 30th November 2015
19. Acquisition of a 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 paid on shareholder approval
– Deferred proceeds paid 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.
On 3rd March 2015 the Group acquired the remaining share capital in Killingholme Land Ltd and Killingholme Energy Ltd for
nil consideration.
20. Capital commitments
At 30th November 2015 the Group had contracted capital expenditure of £12.2m (2014 restated: £8.1m). In addition the Group’s
share of the contracted capital expenditure of its joint venture undertakings was £1.4m (2014 restated: £2.3m). 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, together with VINCI PLC, has provided a joint and several parent company guarantee in respect of the £26m bank
facility provided to VSM Estates (Uxbridge) Ltd, a subsidiary of VSM Estates Uxbridge (Group) Ltd.
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 per cent of the total commitment
under the agreement from time to time, limiting the Group guarantee to £40m as at 30th November 2015.
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 2015.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements Name of subsidiary
Blackpole Trading Estate (1978) Ltd
Boughton Holdings
Broomford Vange Ltd
Chertsey Road Property Ltd
Festival Waters Ltd
Holaw (462) Ltd
Shaw Park Developments Ltd
St. Modwen Developments (Chorley) Ltd
St. Modwen Developments (Connah's Quay) Ltd
St. Modwen Developments (Daresbury) Ltd
St. Modwen Developments (Eccles) Ltd
St. Modwen Developments (Hillington) Ltd
St. Modwen Developments (Holderness) 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 (Telford) Ltd
St. Modwen Developments (Weston) Ltd
St. Modwen Developments (Wythenshawe) Ltd
St. Modwen Hungerford Ltd
St. Modwen Investments Ltd
St Modwen Securities Ltd
149
Company registration number
00581658
04112012
05697168
06899060
04354481
03666441
04625000
05727011
05726352
06163550
05867740
04150262
05726995
05593517
02885028
05294589
05289380
01479159
05411357
05411348
05594279
06160323
00528657
00460301
22. Related party transactions
All related party transactions 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:
Joint ventures and associates
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
(2014: £0.4m). The balance due to the Group at year end was £0.8m (2014: £2.5m). 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 £22.3m (2014: £21.8m), of which £6.0m (2014: £6.0m) is loan notes.
All amounts are interest bearing and interest charged in the year ended 30th November 2015 was £2.6m (2014: £2.2m).
VSM Estates (Holdings) Ltd (VSM Holdings)
VSM Holdings is funded by loan notes and short term funding provided by the Group and VINCI PLC. The balance due from the
Group at the year-end was £0.5m (2014: £3.4m). All amounts due to the Group are interest bearing and interest charged in the
year ended 30th November 2015 was £1.1m (2014: £0.7m).
Barton Business Park Ltd (Barton)
The balance due to Barton at the year end was £3.8m (2014: £3.8m). No interest is charged on this balance.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 150
Notes to the Group Financial Statements (continued)
for the year ended 30th November 2015
22. Related party transactions (continued)
Skypark Development Partnership LLP (Skypark)
During the year the Group provided funding of £0.6m to Skypark (2014: £nil). The balance due to the Group from Skypark at the
year end was £1.7m (2014: £1.1m), of which £1.4m (2014: £1.1m) relates to loan notes issued to the Group. Interest of £0.1m
(2014: £0.1m) was charged in the year.
Wrexham Power Ltd (Wrexham Power)
During the year the Group provided funding to Wrexham Power of £0.2m (2014: £0.7m). The balance due to the Group at the
year end was £1.1m (2014: £0.9m). No interest is charged on this balance.
Wrexham Land Ltd (Wrexham Land)
During the year the Group provided funding to Wrexham Land of £nil (2014: £nil). The balance due to the Group at the year end
was £0.1m (2014: £0.1m). No interest is charged on this balance.
VSM (NCGM) Ltd (VSM (NCGM))
During the year the Group provided funding to VSM (NCGM) of £1.7m (2014: £1.5m). The balance due to the Group at the year
end was £4.6m (2014: £2.9m). No interest is charged on this balance.
Pension
St. Modwen Pension Scheme
The Group occupies offices owned by the pension scheme with an annual rental payable of £0.1m (2014: £0.1m). The balance due
to the Group at year end was £nil (2014: £nil).
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
VSM Estates (Ashchurch) Ltd
Widnes Regeneration Ltd
Management fees
Interest
Balance
2015
£m
2014
£m
–
–
–
–
–
–
–
–
–
–
–
–
2015
£m
–
–
(0.2)
–
–
(0.2)
2014
£m
–
–
(0.1)
–
–
(0.1)
2015
£m
0.3
(0.6)
(21.7)
0.2
2.0
(19.8)
2014
£m
0.3
(0.5)
(10.1)
–
2.0
(8.3)
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 (2014: £nil). No guarantees have been given or received from related parties.
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 was 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.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements Company Balance Sheet
as at 30th November 2015
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
(2014: £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
151
Notes
2015
£m
2014
£m
(E)
(F)
(G)
(H)
(H)
(K)
(L)
(L)
(L)
(L)
(L)
(L)
0.9
1,037.2
1,038.1
1.0
796.8
797.8
637.0
3.7
563.3
3.2
(356.9)
283.8
1,321.9
(354.3)
967.6
22.2
102.8
767.3
24.9
5.2
(1.0)
46.2
967.6
(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
These Financial Statements were approved by the Board and authorised for issue on 1st February 2016.
Bill Oliver
Chief Executive
Company Number: 349201
Rob Hudson
Group Finance Director
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 152
Notes to the Company Financial Statements
for the year ended 30th November 2015
(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.
Compliance with SSAP19 ‘Accounting for Investment Properties’ requires departure from the Companies Act 2006 relating to
depreciation and an explanation of the departure is given below.
Accounting convention
The Financial Statements have been prepared under the historical cost convention except for the revaluation of certain
properties, derivative financial instruments and the defined benefit section of the Company’s pension scheme.
Revenue recognition
Revenue is recognised to the extent that the Company obtains the right to consideration in exchange for its performance.
Revenue is measured at the fair value of the consideration received, excluding discounts and VAT.
Rental income
Rental income arising from investment properties is accounted for on a straight-line basis over the lease term.
Interest receivable
Interest receivable is recognised on an accruals basis.
Tangible fixed assets
Tangible fixed assets, other than investment properties, are stated at cost less accumulated depreciation and accumulated
impairment losses. Such cost includes costs directly attributable to making the asset capable of operating as intended.
Depreciation is provided on all plant, machinery and equipment at rates calculated to write off the cost less estimated residual
value, based on prices prevailing at the Balance Sheet date, of each asset evenly over its expected useful life as follows:
• plant, machinery and equipment – over two to five years;
• depreciation is not provided on investment properties which are subject to annual revaluations.
Long leasehold investment properties
In accordance with SSAP19, investment properties are revalued annually and the aggregate surplus or temporary deficit
is transferred to the revaluation reserve. Permanent diminutions are recognised through the Profit and Loss Account.
No depreciation is provided in respect of investment properties.
The Companies Act 2006 requires all properties to be depreciated. However, this requirement conflicts with the generally
accepted accounting principle set out in SSAP19. The directors consider that, because these properties are not held for
consumption but for their investment potential, to depreciate them would not give a true and fair view and that it is necessary to
adopt SSAP19 in order to give a true and fair view. If this departure from the Act had not been made, the profit for the financial
year would have been reduced by depreciation. However, the amount of depreciation cannot reasonably be quantified because
depreciation is only one of many factors reflected in the annual valuation and the amount which might otherwise have been
shown cannot be separately identified or quantified.
Investment in subsidiary, joint venture and associated companies
The investments in subsidiary, joint venture and associated companies are included in the Company’s Balance Sheet at the
Company’s share of net asset value. The valuation recognises the cost of acquisition and changes in the book values of the
underlying net assets. The surplus or deficit arising on revaluation is reflected in the Company’s reserves.
Current taxation
Current tax assets and liabilities are measured at the amount expected to be recovered from, or paid to, the taxation authorities,
based on tax rates and laws that are enacted or substantively enacted by the Balance Sheet date.
The tax currently payable is based on the taxable result for the year. The taxable result differs from the result as reported in the
Income Statement because it excludes items of income or expense that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements 153
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. The Company’s equity settled share based payments are
measured at fair value at the date of the grant using an appropriate option pricing model. The fair value at the date of grant (or
the date of reclassification from cash settled to equity settled) is expensed on a straight line basis over the vesting period on the
Company’s estimate of shares that will eventually vest.
Pensions
The Company operates a pension scheme with both defined benefit and defined contribution sections. The defined benefit
section is closed to new members and, from 1st September 2009, to future accrual.
The cost of providing benefits under the defined benefit section is determined using the projected unit credit method, which
attributes entitlement to benefits to the current period (to determine current service cost) and to the current and prior periods (to
determine the present value of the defined benefit obligation) and is based on actuarial advice. Past service costs are recognised
in the Profit and Loss Account immediately if the benefits have vested.
The interest element of the defined benefit cost represents the change in present value of scheme obligations. The expected
return on plan assets is based on an assessment made at the beginning of the year of long-term market returns on scheme
assets, adjusted for the effect on the fair value of plan assets of contributions received and benefits paid during the year.
The difference between the expected return on plan assets and the interest cost is recognised in the Profit and Loss Account as
other finance income or expense.
Actuarial gains and losses are recognised in full in the Statement of Total Recognised Gains and Losses in the year in which they
occur. The defined benefit pension asset or liability in the Balance Sheet comprises the present value of the defined benefit
obligation, less any past service cost not yet recognised and less the fair value of plan assets out of which the obligations are to
be settled directly.
Contributions to defined contribution schemes are recognised in the Profit and Loss Account in the period in which they
become payable.
Derivative financial instruments and hedging
The Company uses derivative financial instruments such as interest rate swaps to hedge its risks associated with interest rate
fluctuations. Such instruments are initially recognised at fair value on the date on which a contract is entered into and are
subsequently remeasured at fair value. The Company has determined that the derivative financial instruments in use do not
qualify for hedge accounting and, consequently, any gains or losses arising from changes in the fair value of derivative financial
instruments are taken to the Profit and Loss Account.
Full details of the Company’s derivative financial instruments are given in note 16 to the Group Financial Statements.
Own shares
Shares in St. Modwen Properties PLC held by the Company are classified in as a deduction from equity shareholder’s funds and
are recognised at cost.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 154
Notes to the Company Financial Statements (continued)
for the year ended 30th November 2015
(A). Accounting policies (continued)
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. The convertible bonds have been designated at fair value through
profit or loss.
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 loss for the year ended 30th November 2015 was £2.7m (2014 profit:
£13.9m).
(C). Other Income Statement disclosures
(i) Administrative expenses
Administrative expenses have been arrived at after charging:
Depreciation
Operating lease costs
(ii) Audit fees
2015
£m
0.6
1.5
2014
restated
£m
0.2
1.0
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
Other
Total non-audit fees
Total fees
Audit and
audit-related
services
£000
2015
Other
services
£000
125
125
55
3
–
–
–
58
183
–
–
–
–
16
20
2
38
38
Audit and
audit-related
services
£000
2014
Other
services
£000
123
123
55
20
–
–
–
75
198
–
–
–
–
30
55
–
85
85
Total
£000
125
125
55
3
16
20
2
96
221
Total
£000
123
123
55
20
30
55
–
160
283
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements 155
(iii) Employees
The monthly 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
Wages and salaries
Social security costs
Pension costs
Total payroll costs
2015
Number
2014
Number
257
31
288
2015
£m
17.3
2.3
0.8
20.4
220
40
260
2014
£m
12.7
2.6
0.7
16.0
(D). Dividends
Dividends paid during the year were a final dividend for 2014 and an interim dividend for 2015. 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
2015
2014
p per share
£m
p per share
£m
3.14
1.90
5.04
6.9
4.2
11.1
2.67
1.46
4.13
3.85
8.5
3.14
5.9
3.2
9.1
6.9
The St. Modwen Properties PLC Employee Share Trust waives its entitlement to dividends with the exception of 1/100p per share.
(E). Tangible fixed assets
Cost or valuation
At 30th November 2014
Additions
Disposals
At 30th November 2015
Depreciation
At 30th November 2014
Charge for the year
At 30th November 2015
Net book value
At 30th November 2014
At 30th November 2015
Long
leasehold
investment
properties
£m
Plant,
machinery
and
equipment
£m
0.3
–
–
0.3
–
–
–
0.3
0.3
3.3
0.6
(0.1)
3.8
2.6
0.6
3.2
0.7
0.6
Total
£m
3.6
0.6
(0.1)
4.1
2.6
0.6
3.2
1.0
0.9
Investment properties were valued at 30th November 2015 and 30th November 2014 by DTZ Debenham Tie Leung Ltd (since
the merger of the firms trading, and herein referred to, as Cushman & Wakefield), Chartered Surveyors, in accordance with
the Appraisal and Valuation Manual of the Royal Institution of Chartered Surveyors, on the basis of market value. Cushman
& Wakefield 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.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 156
Notes to the Company Financial Statements (continued)
for the year ended 30th November 2015
(F). Investments held as fixed assets
Valuation
At 30th November 2014
Revaluation of investments
At 30th November 2015
Cost
At 30th November 2014
At 30th November 2015
Investment
in subsidiary
companies
£m
Investment
in joint
ventures
£m
699.9
77.1
777.0
278.4
278.4
96.9
163.3
260.2
26.5
26.5
Subsidiary undertakings, joint ventures and associates as at 30th November 2015:
Total
£m
796.8
240.4
1,037.2
304.9
304.9
Principal
activities
Company name
Baglan Bay Company Ltd
Barton Business Park Ltd
Blue Ice (Widnes) Ltd
Boltro Properties Ltd
Boughton Enterprises Ltd
Boughton Holdings
Branston Properties Ltd
Broomford Vange Ltd
Castle Hill Dudley Ltd
Chaucer Estates Ltd
Barton Business Park Property Management Ltd
England and Wales
05289394
Bay Campus Developments LLP
England and Wales
OC389022
Blackpole Trading Estate (1978) Ltd
England and Wales
00581658
Country of
incorporation
Company
registration
number
Ultimate %
holding
England and Wales
06383208
England and Wales
03807742
England and Wales
06160293
England and Wales
02616865
England and Wales
05068420
England and Wales
04112012
25.0%
50.0%
50.0%
50.0%
100.0%
100.0%
100.0%
100.0%
100.0%
Property development
Property investment
Dormant
Dormant
Property investment
Dormant
Property investment
Dormant
Property investment –
ceased trading
England and Wales
02893827
100.0%
Property development
England and Wales
05697168
100.0%
Property investment
England and Wales
05411315
81.0%
Property development
England and Wales
00456386
100.0%
Property investment/
development
Property investment –
ceased trading
Chertsey Road Property Ltd
England and Wales
06899060
100.0%
Coed Darcy Estates Management Ltd
England and Wales
07848407
100.0%
Property management
Coed Darcy Ltd
Coed Darcy Management Ltd
Festival Waters Ltd
Glan Llyn Management Ltd
England and Wales
00577934
49.0%
Property development
England and Wales
06477385
England and Wales
04354481
100.0%
100.0%
Dormant
Property investment
England and Wales
07848409
100.0%
Property management
Great Yarmouth Regeneration Ltd
England and Wales
05594264
Heenan Group Pensions Ltd
Holaw (462) Ltd
Key Property (Developments) Ltd
England and Wales
00548316
England and Wales
03666441
England and Wales
04780513
Key Property Investments (Number Eight) Ltd
England and Wales
04502433
Key Property Investments (Number Eleven) Ltd
England and Wales
05226386
Key Property Investments (Number Four) Ltd
England and Wales
04305282
100.0%
100.0%
100.0%
50.0%
50.0%
50.0%
50.0%
Key Property Investments (Number Nine) Ltd
England and Wales
04471664
50.0%
Key Property Investments (Number One) Ltd
England and Wales
03450063
50.0%
Dormant
Dormant
Property investment
Property development
Property investment/
development
Property investment
Property investment/
development
Property investment/
development
Property investment/
development
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements 157
Company name
Country of
incorporation
Company
registration
number
Ultimate %
holding
Key Property Investments (Number Seven) Ltd
England and Wales
04460875
Key Property Investments (Number Six) Ltd
England and Wales
04331826
Key Property Investments (Number Ten) Ltd
England and Wales
04471654
Key Property Investments (Number Three) Ltd
England and Wales
04305272
Key Property Investments (Number Twelve) Ltd
England and Wales
05732834
Key Property Investments (Number Two) Ltd
England and Wales
04177539
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
Principal
activities
Holding company
Holding company
Dormant
Property investment/
development
Dormant
Property investment/
development
Key Property Investments Ltd
England and Wales
03372175
50.0%
Holding company
Killingholme Energy Ltd
Killingholme Land Ltd
Knights Park (Management) Ltd
KPI Corporate Services Ltd
KPI I S.à.r.l.
KPI II S.à.r.l.
KPI S.à.r.l.
England and Wales
08320277
100.0%
Property development
England and Wales
08320297
100.0%
Property development
England and Wales
02487814
England and Wales
09040522
Luxembourg
Luxembourg
Luxembourg
B154101
B154102
B153301
16.7%
50.0%
50.0%
50.0%
50.0%
12.5%
Dormant
Property management
Property investment
Property investment
Property investment
Dormant
Dormant
Lapwing Centre (Management) Ltd
England and Wales
02487912
Lawnmark Ltd
Leisure Living Ltd
England and Wales
04089229
100.0%
England and Wales
02106984
100.0%
Property development
Longbridge Innovation Centre Ltd
England and Wales
06163526
100.0%
Dormant
Meaford Energy Ltd
Meaford Land Ltd
England and Wales
08575649
England and Wales
08575760
Newcastle Regeneration Partnership Ltd
England and Wales
02741086
Norton & Proffitt Developments Ltd
England and Wales
03717397
Peacehaven Valley Owners Ltd
England and Wales
02648782
Petre Court Management (Number 1) Ltd
England and Wales
06160268
Radclyffe Estates Ltd
Redman Heenan Properties Ltd
England and Wales
05816682
England and Wales
00073265
50.0%
50.0%
100.0%
75.0%
4.2%
100.0%
100.0%
100.0%
Property development
Property development
Dormant
Property investment/
development
Dormant
Dormant
Dormant
Property investment/
development
Sandpiper Quay (Management Company No.1)
Ltd
Sandpiper Quay (Management Company No.2)
Ltd
England and Wales
02485619
13.3%
England and Wales
02485456
100.0%
Saxon Business Centre (Management) Ltd
England and Wales
02470756
40.0%
Dormant
Dormant
Dormant
Shaw Park Developments Ltd
England and Wales
04625000
100.0%
Property development
Skypark Development Partnership LLP
England and Wales
OC343583
50.0%
Property development
SMP 14H S.à.r.l.
Snipe Centre (Management) Ltd
Sowcrest Ltd
Luxembourg
B187462
England and Wales
02485535
England and Wales
02948648
St Modwen Developments (Meon Vale) Ltd
England and Wales
05294589
100.0%
33.3%
100.0%
100.0%
Property investment
Dormant
Property investment
Property investment –
ceased trading
St Modwen Securities Ltd
St. Modwen (SAC1) Ltd
St. Modwen (SAC2) Ltd
St. Modwen (Shelf 1) Ltd
England and Wales
00460301
100.0%
Property development
England and Wales
08296927
England and Wales
08296934
England and Wales
02741186
100.0%
100.0%
100.0%
Dormant
Property investment
Dormant
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 158
Notes to the Company Financial Statements (continued)
for the year ended 30th November 2015
(F). Investments held as fixed assets (continued)
Company name
St. Modwen (Shelf 64) Ltd
Country of
incorporation
Company
registration
number
Ultimate %
holding
England and Wales
06160316
100.0%
Principal
activities
Dormant
St. Modwen Corporate Services Ltd
England and Wales
06163437
100.0%
Property management
St. Modwen Development (Coed Darcy) Ltd
England and Wales
06163563
St. Modwen Developments (Bedford) Ltd
England and Wales
05411282
St. Modwen Developments (Belle Vale) Ltd
England and Wales
04145782
St. Modwen Developments (Blackburn) Ltd
England and Wales
05732825
St. Modwen Developments (Bognor Regis) Ltd
England and Wales
06160250
St. Modwen Developments (Brighton West Pier) Ltd
England and Wales
04069008
St. Modwen Developments (Chorley) Ltd
England and Wales
05727011
St. Modwen Developments (Colne) Ltd
England and Wales
05726325
St. Modwen Developments (Connah's Quay) Ltd
England and Wales
05726352
St. Modwen Developments (Cranfield) Ltd
England and Wales
06163509
St. Modwen Developments (Daresbury) Ltd
England and Wales
06163550
St. Modwen Developments (Eccles) Ltd
England and Wales
05867740
St. Modwen Developments (Edmonton) Ltd
England and Wales
02405853
St. Modwen Developments (Facility Services) Ltd
England and Wales
08996358
St. Modwen Developments (Hatfield) Ltd
England and Wales
04354480
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
St. Modwen Developments (Hillington) Ltd
England and Wales
04150262
100.0%
Dormant
Dormant
Dormant
Property investment
Dormant
Dormant
Property investment
Dormant
Dormant
Dormant
Dormant
Property investment
Property investment/
development
Dormant
Property investment/
development
Property investment/
development
St. Modwen Developments (Holderness) Ltd
England and Wales
05726995
100.0%
Property development
St. Modwen Developments (Hull) Ltd
England and Wales
05593517
100.0%
Property development
St. Modwen Developments (Kirkby 2) Ltd
England and Wales
09746395
100.0%
Property development
St. Modwen Developments (Longbridge) Ltd
England and Wales
02885028
100.0%
Property investment/
development
St. Modwen Developments (Queens Market) Ltd
England and Wales
05289380
100.0%
Property development
St. Modwen Developments (Quinton) Ltd
England and Wales
01479159
100.0%
Property development
St. Modwen Developments (Silverstone) Ltd
England and Wales
05594232
St. Modwen Developments (Skelmersdale) Ltd
England and Wales
06163591
St. Modwen Developments (St Helens) Ltd
England and Wales
05726666
St. Modwen Developments (Telford) Ltd
England and Wales
05411357
100.0%
100.0%
100.0%
100.0%
Dormant
Dormant
Dormant
Property investment/
development
St. Modwen Developments (Walthamstow) Ltd
England and Wales
06163459
100.0%
Dormant
St. Modwen Developments (Weston) Ltd
England and Wales
05411348
100.0%
Property development
St. Modwen Developments (Wythenshawe 2) Ltd
England and Wales
05851760
St. Modwen Developments (Wythenshawe) Ltd
England and Wales
05594279
St. Modwen Developments Ltd
England and Wales
00892832
100.0%
100.0%
100.0%
Dormant
Dormant
Property investment/
development
St. Modwen Holdings Ltd
St. Modwen Homes Ltd
St. Modwen Hungerford Ltd
St. Modwen Investments Ltd
St. Modwen Neath Canal Ltd
St. Modwen Pensions Ltd
St. Modwen Properties 11 S.à.r.l.
England and Wales
01991339
100.0%
Dormant
England and Wales
09095920
100.0%
Property development
England and Wales
06160323
100.0%
Property development
England and Wales
00528657
England and Wales
06160309
England and Wales
00878604
Luxembourg
B199875
100.0%
100.0%
100.0%
100.0%
Property investment
Holding company
Dormant
Property investment
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements 159
Company name
St. Modwen Properties I S.à.r.l.
St. Modwen Properties II S.à.r.l.
St. Modwen Properties III S.à.r.l.
St. Modwen Properties IV S.à.r.l.
St. Modwen Properties IX S.à.r.l.
St. Modwen Properties S.à.r.l.
St. Modwen Properties Securities (Jersey) Ltd
St. Modwen Properties V S.à.r.l.
St. Modwen Properties VI S.à.r.l.
St. Modwen Properties VII S.à.r.l.
St. Modwen Properties VIII S.à.r.l.
St. Modwen Properties X S.à.r.l.
Country of
incorporation
Company
registration
number
Ultimate %
holding
Luxembourg
B154036
Luxembourg
B154040
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Jersey
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
B154089
B154061
B154099
B153339
114977
B154141
B154133
B154093
B154097
B154153
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
Principal
activities
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Financing company
Property investment
Property investment
Property investment
Property investment
Property investment
St. Modwen Residential Living Ltd
England and Wales
09266033
100.0%
Property management
St. Modwen Services Ltd
St. Modwen Ventures Ltd
England and Wales
02885024
England and Wales
01486151
100.0%
100.0%
Dormant
Property investment/
development
Statedale Ltd
England and Wales
03656832
100.0%
Holding company
Stoke on Trent Regeneration (Investments) Ltd
England and Wales
04289476
Stoke on Trent Regeneration Ltd
England and Wales
02265579
Swan Business Park (Management) Ltd
England and Wales
02424524
The Company of Proprietors of the Neath
Canal Navigation
Trentham Gardens Ltd
Trentham Leisure Ltd
Tukdev 11 Ltd
Uttoxeter Estates Ltd
VSM (Mill Hill 1) Ltd
VSM (Mill Hill 2) Ltd
VSM (Mill Hill 3) Ltd
VSM (Mill Hill 4) Ltd
VSM (Mill Hill 5) Ltd
VSM (Mill Hill 6) Ltd
VSM (NCGM) Ltd
VSM (Uxbridge 1) Ltd
VSM (Uxbridge 2) Ltd
VSM (Uxbridge 3) Ltd
VSM (Uxbridge 4) Ltd
VSM (Uxbridge 5) Ltd
VSM (Uxbridge 6) Ltd
VSM (Uxbridge 7) Ltd
VSM (Uxbridge 8) Ltd
VSM (West Ruislip 3) Ltd
England and Wales
ZC000173
England and Wales
00533242
England and Wales
03246990
England and Wales
02885000
England and Wales
02725709
England and Wales
05851870
England and Wales
05851871
England and Wales
05851774
England and Wales
05867674
England and Wales
05867677
England and Wales
05867678
England and Wales
08333203
England and Wales
05851806
England and Wales
05851814
England and Wales
05851817
England and Wales
05851821
England and Wales
05851830
England and Wales
05851841
England and Wales
05851862
England and Wales
05851866
England and Wales
05867747
50.0%
50.0%
25.0%
68.4%
100.0%
100.0%
100.0%
81.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
Property investment
Property investment/
development
Dormant
Property investment
Dormant
Property investment
Dormant
Property investment
Property development
Property development
Property development
Property development
Property development
Property development
Property development
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment –
ceased trading
VSM (West Ruislip 4) Ltd
England and Wales
05867730
50.0%
Dormant
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 160
Notes to the Company Financial Statements (continued)
for the year ended 30th November 2015
(F). Investments held as fixed assets (continued)
Company name
VSM (West Ruislip 1) Ltd
VSM (West Ruislip 2) Ltd
VSM (Woolwich 1) Ltd
VSM (Woolwich 2) Ltd
VSM Estates (Ashchurch) Ltd
Country of
incorporation
Company
registration
number
Ultimate %
holding
England and Wales
05732822
England and Wales
05732818
England and Wales
05867687
England and Wales
05867692
England and Wales
09494284
VSM Estates (Holdings) Ltd
England and Wales
05867718
VSM Estates (Uxbridge Holdings) Ltd
England and Wales
08030263
VSM Estates (Uxbridge) Ltd
England and Wales
08000629
VSM Estates Ltd
England and Wales
05732806
VSM Estates Uxbridge (Group) Ltd
England and Wales
08083799
Principal
activities
Dormant
Dormant
Property investment –
ceased trading
Dormant
Property investment/
development
Property development
Dormant
Property investment/
development
Property development
Property development
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
Walton Securities Ltd
Widnes Regeneration Ltd
Woking Developments Ltd
England and Wales
02314059
100.0%
Dormant
England and Wales
03643210
81.0%
Property development
England and Wales
05411325
100.0%
Dormant
Woodingdean Estate Management Company Ltd
England and Wales
09293061
100.0%
Property management
Wrexham Land Ltd
Wrexham Power Ltd
England and Wales
06748467
England and Wales
06762265
50.0%
50.0%
Property development
Property development
Many of the shareholder agreements for joint ventures and associates contain change of control provisions, as is common for
such arrangements.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Financial Statements (G). Debtors
Amounts falling due after more than one year:
Amounts falling due from subsidiaries
Amounts due from joint venture and associated companies
Amounts falling due within one year:
Trade debtors
Amounts due from subsidiaries
Amounts due from joint venture and associated companies
Other debtors
Prepayments and accrued income
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
161
2015
£m
2014
£m
206.6
6.0
212.6
2015
£m
0.3
362.6
34.3
0.7
4.1
0.8
18.9
2.7
424.4
2015
£m
–
–
311.8
15.5
1.6
1.2
9.8
17.0
356.9
2015
£m
182.5
171.8
354.3
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
2014
£m
106.6
180.0
286.6
All bank borrowings are secured by a fixed charge over the property assets of the Company and its subsidiaries.
Other loans comprise an unsecured 6.25% fixed rate retail bond maturing in November 2019 and a 2.875% convertible bond
maturing March 2019.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 162
Notes to the Company Financial Statements (continued)
for the year ended 30th November 2015
(I). Borrowings
The maturity profile of the bank borrowings is as follows:
Less than one year
One to two years
Two to five years
More than five years
Total
2015
£m
–
–
316.8
37.5
354.3
2014
£m
–
–
249.1
37.5
286.6
(J). Deferred taxation
The amounts of deferred taxation provided and unprovided in the Financial Statements are :
Other timing differences
Provided
Unprovided
2015
£m
2.7
2014
£m
2.2
2015
£m
139.1
2014
£m
93.5
The unprovided deferred taxation represents the amounts that would be payable should the Company sell all of its investments in
subsidiaries, joint ventures and associated companies.
Reconciliation of movement on deferred tax asset included in debtors
Balance as at 30th November 2014
Profit and loss account
Balance as at 30th November 2015
Reconciliation of deferred tax liability included in pension scheme asset
Balance as at 30th November 2014
Profit and Loss Account
Statement of Total Recognised Gains and Losses
Balance as at 30th November 2015
(K). Share capital
Equity share capital
At start of year
Issue of share capital
At end of year
£m
2.2
0.5
2.7
£m
–
–
–
–
£m
22.1
0.1
22.2
Ordinary 10p
shares
Number
221,376,988
500,000
221,876,988
On 23rd September 2015 the Company issued 500,000 ordinary shares of 10p each at par. The shares were allotted and issued 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 2015Financial Statements 163
(L). Reserves
At 30th November 2014
Surplus on revaluation of investments
Retained (loss) for the year (note B)
Equity issue
Share-based payment charge
Net share disposals
Dividends paid (note D)
Actuarial loss on pension scheme
(note M)
Movement on deferred tax relating to
pension asset (note J)
Share
premium
account
£m
102.8
–
–
–
–
–
–
–
–
Revaluation
reserve
£m
526.9
240.4
–
–
–
–
–
–
–
Profit
and loss
account
£m
48.2
–
(2.7)
–
(8.6)
(0.9)
(11.1)
–
–
Share
incentive
reserve
£m
4.8
Own
shares
£m
(1.8)
Other
reserves
£m
46.2
–
–
–
0.4
–
–
–
–
–
–
(0.1)
–
0.9
–
–
–
–
–
–
–
–
–
–
–
At 30th November 2015
102.8
767.3
24.9
5.2
(1.0)
46.2
Own shares represents the cost of 690,274 (2014: 460,427) shares held by The St. Modwen Properties PLC Employee Share Trust.
The open market value of the shares held at 30th November 2015 was £2,985,435 (2014: £1,763,435). In addition the Employee
Benefit Trust has £0.1m (2014: £0.1m) of cash and an intercompany receivable of £13.8m due to the Company (2014: £2.8m 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 IAS 19 ‘Employee Benefits’ disclosures
for the Group, also covers the requirements of FRS17 ‘Retirement Benefits’ for the Company.
(N). Operating lease commitments
Operating lease commitments where the Company is the lessee
Annual commitments under non-cancellable operating leases are as follows:
Operating leases which expire:
In one year or less
Between one and five years
In more than five years
2015
Land and
buildings
£m
–
0.5
0.1
0.6
2014
Land and
buildings
£m
–
0.5
0.1
0.6
Other
£m
–
0.7
0.6
1.3
Other
£m
–
0.7
0.6
1.3
(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.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 164
Five Year Record
Rental income(1)
Property profits(1) (2)
Revaluation surplus/(deficit)(1) (3)
Profit before all tax(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 debt
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.
2011
£m
35.5
23.8
33.9
51.7
21.7
3.10
7.0
231.8
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
250.8
8%
770.4
75.2
175.2
(141.1)
(366.0)
(11.1)
502.6
20.0
483.1
(0.5)
502.6
2013 restated
£m
2014 restated
£m
36.3
37.7
39.1
77.2
30.9
3.75
8.2
278.8
11%
744.6
120.1
199.7
(112.9)
(334.9)
(4.5)
612.1
22.0
590.4
(0.3)
612.1
37.1
51.3
93.5
135.4
53.8
4.13
13.0
325.1
17%
856.8
127.2
201.0
(101.0)
(360.0)
(5.9)
718.1
22.1
697.8
(1.8)
718.1
2015
£m
38.7
67.4
201.7
258.4
97.9
5.04
19.4
413.5
27%
1,081.0
227.3
183.7
(68.4)
(502.1)
(6.8)
914.7
22.2
893.5
(1.0)
914.7
(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 2015Financial Statements 165
Glossary of terms
Active management – the component of property revaluations delivered as a direct result of management actions and initiatives,
for example obtaining planning consent, achieving remediation milestones and improving lease terms.
Adjusted gearing – the level of the Group’s net borrowings (at amortised cost and excluding finance leases) expressed as a
percentage of net assets.
Average lease length – the weighted average lease term to the first tenant break.
EPRA – the European Public Real Estate Association, a body that has put forward recommendations for best practice in financial
reporting by real estate companies.
EPRA net asset value (EPRA NAV) – the Balance Sheet net assets, adjusted to include the fair value of inventories and exclude
deferred tax on capital allowances and revaluations, and mark-to-market of derivative financial instruments.
EPRA net asset value per share – EPRA net asset value divided by the number of ordinary shares in issue at the period end
(excluding shares held by The St. Modwen Properties PLC Employee Share Trust).
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.
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.
Gearing – the level of the Group’s net debt 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 of a property expressed as a percentage of the property’s 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 – the ratio of operating income less overheads to interest for the Group (including its share of joint ventures
and associates).
Land bank – 100% of the land and property owned and controlled by the Group together with joint ventures and associates
(including land under option and development agreements).
LIBOR – the London interbank offered rate is the interest rate which banks charge when lending to other banks.
Loan-to-value (LTV) – the level of the Group’s net borrowings expressed as a percentage of the Group’s property portfolio
excluding assets held under finance leases (representing amounts that could be used as security of that debt and excluding
assets held under finance leases).
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 (excluding shares held by The St. Modwen Properties PLC Employee Share Trust).
Net borrowings – total borrowings (at amortised cost and excluding finance leases) less cash and cash equivalents and fair value
movements on the Group’s convertible bond.
Net debt – total borrowings and finance leases including fair value movements in the Group’s convertible bond less cash and
cash equivalents.
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.
Net rental income – the rental income receivable in the period less non-recoverable property costs for the Group (including its
share of joint ventures and associates).
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 166
Glossary of terms (continued)
Occupancy rates/levels – the ERV attributable to vacant units as a proportion of total ERV (including the Group’s share of joint
ventures and associates).
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).
Operating income – the total of net rental income, other income and property profits for the Group (including its share of joint
venture and associates).
Other income – other rental type income generated from the operating assets of the Group (including its share of joint ventures
and associates).
Persimmon joint venture – a series of commercial contracts with Persimmon to develop residential units on agreed sites within
St. Modwen’s land bank.
Pre-sold properties under construction – those properties we are constructing 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 – investment properties and inventories of the Group (including its share of joint ventures and associates)
comprising income producing properties together with residential and commercial land.
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).
Rent roll – the gross rent plus rent reviews that have been agreed as at the reporting date.
Reversionary yield – the anticipated yield to which the initial yield will rise or fall once the rent reaches the ERV.
RICS – Royal Institution of Chartered Surveyors.
Section 106 agreement – planning obligations attached to a development, often improvements to local infrastructure and
facilities, to ensure that wherever possible a development makes a positive contribution to the local area and community.
See-through loan-to-value (LTV) – the level of the Group’s net borrowings expressed as a percentage of the Group’s
property portfolio.
SIC – Standards and Interpretations Committee.
Trading profit – operating income less operating costs.
TSR – total shareholder return, representing the growth in value of a shareholding over a specified period, assuming that
dividends are reinvested to purchase additional units of stock.
Weighted average term of borrowings – each tranche of the Group’s borrowings is multiplied by the remaining period to its
maturity and the result is divided by total Group borrowings at the period end.
Weighted average interest rate – the Group’s annualised loan interest and derivative costs at the period end, divided by total
Group borrowings at the period end.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Additional Information 167
Notice of Annual General Meeting
Notice is hereby given that the seventy fifth 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
Wednesday, 23rd March 2016 at 12.00 noon to consider and,
if thought fit, to pass the following resolutions. Resolutions 1
to 15 inclusive will be proposed as ordinary resolutions and
resolutions 16 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 2015 be received.
2.
3.
That the Directors’ Remuneration Report, excluding the
part containing the directors’ remuneration policy, set
out on pages 70 to 93 of the Annual Report and Financial
Statements for the financial year ended 30th November
2015 be approved.
That a final dividend for the financial year ended 30th
November 2015 of 3.85p per ordinary share payable
on 1st April 2016 to those shareholders on the register
of members at the close of business on 4th March 2016
be declared.
4. That Rob Hudson be elected as a director.
5. That Ian Bull be re-elected as a director.
6. That Steve Burke be re-elected as a director.
7. That Kay Chaldecott be re-elected as a director.
8. That Simon Clarke be re-elected as a director.
9. That 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 Audit Committee be authorised to determine
the remuneration of the Company’s auditor on behalf of
the Board.
Special business
15. 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 (the 2006 Act)
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
£7,395,899; and
(b) allot equity securities (within the meaning of section
560 of the 2006 Act) up to a further aggregate nominal
amount of £7,359,899 in connection with an offer by
way of a rights issue to:
(i) ordinary shareholders in proportion (as nearly as
may be practicable) to their existing holdings; and
(ii) holders of other equity securities, as required by the
rights of those securities or, subject to such rights, as
the directors otherwise consider necessary,
subject to such exclusions or other arrangements as
the directors may deem necessary or expedient to
deal with treasury shares, fractional entitlements or
legal or practical problems under the laws of, or the
requirements of any regulatory body or any stock
exchange in, any country or territory,
such authorities to expire at the conclusion of the AGM of
the Company to be held after the date of the passing of this
resolution or 22nd June 2017, 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.
Special resolution
16. That, in substitution for all existing powers and subject to
the passing of resolution 15, the directors be generally
empowered pursuant to section 570 of the Companies
Act 2006 (the 2006 Act) to allot equity securities (within the
meaning of section 560 of the 2006 Act) for cash pursuant
to the authority conferred by resolution 15 and/or where
the allotment constitutes an allotment of equity securities
by virtue of section 560(3) of the 2006 Act, in each case free
of the restriction in section 561 of the 2006 Act, provided
that such power to be limited to:
(a) the allotment of equity securities pursuant to the
authority granted by paragraph (a) of resolution 15 and/
or an allotment which constitutes an allotment of equity
securities by virtue of section 560(3) of the 2006 Act
(in each case otherwise than in the circumstances set
out in paragraph (b) of this resolution) up to a nominal
amount of £2,218,769; 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 15, 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,
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45
168
Notice of Annual General Meeting (continued)
Special business (continued)
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 22nd June 2017, 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
17. That the Company be generally and unconditionally
authorised for the purposes of section 701 of the
Companies Act 2006 (the 2006 Act) to make market
purchases (as defined in section 693 of the 2006 Act) 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:
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
18th February 2016
(a) the maximum aggregate number of Ordinary Shares
hereby authorised to be purchased is 22,187,698;
St. Modwen Properties PLC
(b) the minimum price which may be paid for an Ordinary
Registered number: 349201
Registered Office: Park Point, 17 High Street, Longbridge,
Birmingham B31 2UQ
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 22nd June 2017, 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
18. That a general meeting other than an AGM may be called
on not less than 14 clear days’ notice.
Special resolution
19. That the new Articles of Association of the Company
produced to the meeting and initialled by the Chairman for
the purpose of identification be adopted as the Articles of
Association of the Company in substitution for, and to the
exclusion of, its existing Articles of Association.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Additional Information
169
Explanatory notes to proposed resolutions
Ordinary resolutions
For a resolution proposed as an ordinary resolution to be
passed, more than half of the votes cast must be in favour of
the resolution.
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 2015. 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
2015 of 3.85p per ordinary share. If approved, this will be paid
on 1st April 2016 to shareholders on the register of members at
the close of business on 4th March 2016.
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 28th September
2015 and in accordance with the Company’s Articles of
Association, Rob Hudson will retire and offer himself for
election at the 2016 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 pages 48
and 49.
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 2016 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 Audit Committee
to determine their remuneration on behalf of the Board.
Resolution 15 – 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
2016 AGM. Resolution 15 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 15 will, if resolution 15 is passed,
authorise the directors to allot shares up to a maximum
aggregate nominal amount of £7,395,899, which represents
one-third of the Company’s issued ordinary share capital as at
9th February 2016 (being the latest practicable date prior to the
publication of the notice of AGM). Paragraph (b) of resolution
15 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 £7,395,899.
The authorities sought in paragraphs (a) and (b) of resolution
15 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 22nd June 2017.
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.
Special resolutions
For a resolution proposed as a special resolution to be passed,
at least three-quarters of the votes cast must be in favour of
the resolution.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 170
Notice of Annual General Meeting (continued)
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 22nd June 2017.
The directors have no present intention of exercising this
authority other than to fulfil the Company’s obligations
under its share incentive schemes approved previously by
shareholders, but consider it prudent to obtain the flexibility
that this authority provides.
Resolution 17 – Authority to purchase shares
Resolution 17 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 22,187,698 of its ordinary shares, which
represents 10% of the Company’s issued ordinary share capital
as at 9th February 2016 (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 22nd June 2017.
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 9th February 2016 (being the latest practicable date
prior to the publication of the notice of AGM), the Company
had options outstanding over 6,047,076 ordinary shares,
representing 2.73% 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 9th February 2016 would represent 3.41% of
the issued share capital.
Explanatory notes to proposed resolutions
(continued)
Resolution 16 – Authority to disapply 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 16 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 16 will, if resolution 16 is passed,
authorise the directors to allot new shares pursuant to the
authority given in paragraph (a) of resolution 15 for cash up to
a maximum aggregate nominal value of £2,218,769, equivalent
to 10% of the Company’s issued ordinary share capital as at
9th February 2016 (being the latest practicable date prior to
the publication of the notice of AGM) without the shares first
being offered to existing shareholders in proportion to their
existing holdings.
In addition, in light of the IA guidance described in the
explanation of resolution 15 above, paragraph (b) of resolution
16 will, if resolution 16 is passed, authorise the directors to
allot new shares pursuant to the authority given by paragraph
(b) of resolution 15 for cash in connection with a rights issue
without the shares first being offered to existing shareholders
in proportion to their existing holdings.
This authority is in line with institutional shareholder guidance,
and in particular with the Pre-Emption Group’s Statement of
Principles (the Pre-Emption Principles) revised in March 2015
to allow the authority for an issue of shares for cash otherwise
than in connection with a pre-emptive offer to be increased
from 5% to 10% of a company’s issued ordinary share capital,
provided that the company confirms that it intends to use the
additional 5% authority only in connection with an acquisition
or specified capital investment (within the meaning of the
Pre-Emption Principles). The directors therefore confirm, in
accordance with the Pre-Emption Principles:
(a) that to the extent the authority in paragraph (a) of
resolution 16 is used for an issue of ordinary shares with a
nominal value in excess of £1,109,384, representing 5% of the
Company’s issued ordinary share capital as at 9th February
2016 (being the latest practicable date prior to the publication
of the notice of AGM), they intend that this authority will only
be used in connection with an acquisition or specified capital
investment which is announced contemporaneously with the
issue, or which has taken place in the preceding six-month
period and is disclosed in the announcement of the issue; and
(b) that, excluding any shares issued in connection with an
acquisition or specified capital investment as described above,
they intend 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.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Additional Information 171
Resolution 18 – Notice period of general meetings
Resolution 18 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.
Resolution 19 – Adoption of new Articles of Association
The Company regularly reviews the suitability of its Articles
of Association following developments in applicable law and
regulation and UK market practice. It is proposed that the
Company adopts new Articles of Association (the New Articles)
principally in order to reflect developments in current practice,
and to provide clarification and additional flexibility in relation to
certain matters. The existing Articles of Association were most
recently updated and adopted by the Company on 26th March
2010. A summary of the principal changes being proposed in
the New Articles are summarised in the Appendix to this notice
of AGM. Other changes, which are deemed to be of a minor,
non-substantive, technical or clarificatory nature (including,
where relevant, to certain defined terms), have not been noted
in the Appendix. A copy of the Company’s existing Articles of
Association, a copy of the New Articles and a copy marked up
to show the proposed changes will be available for inspection
at the registered office of the Company and at the offices of
Mayer Brown International LLP, 201 Bishopsgate, London
EC2M 3AF during normal business hours from the date of this
notice of AGM until the close of the AGM, and at the place of
the AGM from 15 minutes before the start of the meeting until
the end of the meeting.
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 Monday, 21st March 2016 (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 Monday,
21st March 2016. 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 0371 384 2198 (overseas callers should dial
+44 (0)121 415 7047. Lines are open from 8.30am to
5.30pm, Monday to Friday excluding UK bank holidays).
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.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 172
Notice of Annual General Meeting (continued)
Shareholder notes (continued)
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 Monday,
21st March 2016.
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/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
Monday, 21st March 2016. If a shareholder attempts to revoke
his or her proxy appointment but the revocation is received
after the time specified the original proxy appointment will
remain valid. Termination of proxy appointments made
through CREST must be made in accordance with the
procedures described in the CREST Manual.
7. Corporate representatives
A corporate shareholder can appoint one or more corporate
representatives who may exercise on its behalf all of its powers
as a shareholder provided that they do not do so in relation
to the same shares. Representatives of shareholders that are
corporations will have to produce evidence of their proper
appointment when attending the AGM. Please contact Equiniti
for further guidance.
8. Nominated persons
Any person to whom this notice is sent who is not a
shareholder but is a person nominated by a shareholder under
section 146 of the Companies Act 2006 to enjoy information
rights (a Nominated Person) may, under an agreement with
the shareholder who nominated him/her, have a right to be
appointed, or have someone else appointed, as a proxy for the
AGM. If a Nominated Person has no such right or does not wish
to exercise it, he/she may, under any such agreement, have a
right to give voting instructions to the shareholder.
The statement of the rights of shareholders in relation to the
appointment of proxies set out in notes 2 to 7 above does not
apply to Nominated Persons. The rights described in those
notes can only be exercised by shareholders of the Company.
If you are a Nominated Person it is important to remember
that your main contact in terms of your investment remains
the registered shareholder or the custodian or broker who
administers the investment on your behalf.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Additional Information 173
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.
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 9th February 2016 (being the latest practicable date prior
to the publication of the notice of AGM), the Company’s issued
share capital consisted of 221,876,988 shares carrying one vote
each. Therefore the total voting rights in the Company as at
9th February 2016 was 221,876,988.
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 existing Articles of Association,
a copy of the New Articles and a copy of the existing Articles
of Association marked up to show the proposed changes;
and
(iv) a copy of the Company’s indemnity for directors.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45 174
Notice of Annual General Meeting
Appendix
This appendix sets out a summary of the principal changes
proposed to be made to the Company’s existing Articles
of Association.
1. Share warrants
The Small Business, Enterprise and Employment Act 2015
prohibits the creation of new bearer shares and requires
existing bearer shares to be converted into registered
shares. In light of this, the provisions in the existing Articles of
Association relating to share warrants have been removed
from the New Articles.
2. Retirement and re-election of directors
The New Articles have been amended to reflect the Company’s
established practice, in line with the UK Corporate Governance
Code and current best practice, that all directors be subject to
annual re-election by shareholders. The New Articles provide
that at each AGM every director retires from office and each
director wishing to remain in office is required to stand for
election or re-election as appropriate.
3. Directors below minimum through vacancies
The New Articles include language to deal with a situation
where the number of directors required under the Articles
of Association falls below the minimum. Currently the Board’s
powers in this regard are limited. The amended wording in the
New Articles would allow the Board to remain fully functional in
this situation until additional directors have been appointed.
4. Directors’ fees
The cap on the fees payable to directors for their services in the
office of director has been increased in the New Articles from
£600,000 per annum to £800,000 per annum. This increase
would provide the Company with sufficient headroom and
flexibility in order to increase the number of directors and
maintain its directors’ fees in line with the market. Whilst the
Company does not anticipate any significant increase to
directors’ fees or any significant increases to the size of the
Board, the directors believe that it is prudent to maintain
flexibility in this regard. Any increase to fees will be in line
with the directors’ remuneration policy, last approved by
shareholders in 2014.
5. Company name
The New Articles give the directors the power to resolve to
change the Company’s name, as permitted by the Companies
Act 2006.
6. Dividend payment procedure
The New Articles have been amended following guidance
published by the ICSA Registrars’ Group in March 2014 to
provide the Company with additional flexibility to prescribe the
manner in which dividends are paid. Currently the Company
pays dividends by electronic payment, cheque or similar
financial instrument. The use of cheques and similar financial
instruments has reduced in recent years and there has been a
significant focus on the development of new payment methods,
which are intended to improve the security of payments to
shareholders and to reduce costs. Although the existing Articles
of Association permit the payment of dividends by electronic
means, the New Articles allow the directors to determine
how dividends are paid to shareholders, which method shall
be the default method for paying dividends and whether
shareholders may (or may not) make an election for payments
to be made other than in the default manner. It is not the
Board’s intention to change the current methods of payment at
this time. However, it is important that the Company is able to
cater for new developments and changes in practice, including
considering the efficiency and costs saving that would flow
from a change to electronic only payment. The New Articles
further specify when a dividend or other sum will be treated as
unclaimed for the purposes of the Articles of Association.
7. Scrip dividends
The existing Articles of Association already enable the directors
to offer shareholders a scrip dividend scheme if authorised by
an ordinary resolution of the shareholders. In line with recent
institutional investor guidance, the provision stating that a
resolution to authorise a scrip dividend for a period of five
years has been removed.
8. Indemnity and insurance
As permitted by the Companies Act 2006, provisions for the
indemnification of a director of an associated company against
liabilities incurred in connection with that associated company’s
activities as trustee of an occupational pension scheme of the
Company have been included in the New Articles.
9. Generally
Generally, the opportunity has been taken to bring clearer
language into the New Articles wherever appropriate.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Additional Information 175
Information for shareholders
Financial calendar
Ordinary shares quoted ex-dividend
3rd March 2016
2014/15 final dividend record date
4th March 2016
AGM
23rd March 2016
2014/15 final dividend payment date
1st April 2016
Announcement of 2016 half year results
5th July 2016
Announcement of 2016 final results
February 2017
Annual General Meeting
The AGM will be held on Wednesday, 23rd March 2016 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 to be considered at the meeting, is set out on
pages 167 to 174.
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: 0371 384 2198* (+44 (0)121 415 7047 if calling
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 0371 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.
* Lines are open 8.30 am to 5.30 pm, Monday to Friday excluding UK bank holidays.
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 03456 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/consumers/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 you should contact
Action Fraud on 0300 123 2040.
Additional Information 165–176Financial Statements 100–164Corporate Governance 46–99Strategic Report 2–45
176
Information for shareholders (continued)
Shareholder analysis
Holdings of ordinary shares as at 30th November 2015:
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
%
3,020
77.22
11,066,255
39
789
63
1.00
28,646,452
20.17 181,798,329
1.61
365,952
4.99
12.91
81.94
0.16
3,911
100.00 221,876,988
100.00
1,027
657
1,327
332
294
74
114
34
52
26.26
16.80
33.93
8.49
7.52
1.89
2.91
0.87
251,400
508,579
3,120,496
2,431,890
6,284,582
5,342,913
27,953,106
25,009,105
1.33 150,974,917
0.11
0.23
1.41
1.10
2.83
2.41
12.60
11.27
68.04
3,911
100.00 221,876,988
100.00
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 advisors 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.
St. Modwen Properties PLC Annual Report and Financial Statements 2015Additional Information Contacts
St. Modwen Properties Plc
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
Midlands
Park Point
17 High Street
Longbridge
Birmingham
B31 2UQ
0121 647 1000
Northern Home Counties
IMEX
575-599 Maxted Road
Hemel Hempstead
Hertfordshire
HP2 7DX
01727 732690
North West
Chepstow House
Trident Business Park
Daten Avenue
Risley
Warrington
WA3 6BX
01925 825950
South West and South Wales
Green Court
King’s Weston Lane
Avonmouth
Bristol
BS11 8AZ
0117 316 7780
St. Modwen Homes
Park Point
17 High Street
Longbridge
Birmingham
B31 2UQ
0121 647 1000
The Trentham Estate
Stone Road
Trentham
Stoke-on-Trent
ST4 8JG
01782 645222
Yorkshire and North East
Ground Floor, Unit 2
Landmark Court
Elland Road
Leeds
LS11 8JT
0113 272 7070
Imagery used throughout the report has been taken by:
Metro Photographic
Commercial Property Photography
Matthew Nichol Photography
Roger Smith Aerial Photography
The Nine Elms Vauxhall Partnership
Josh Kearns Photography
Radley Yeldar
The paper used in this report is elemental chlorine free and is FSC® accredited.
It is printed to ISO 14001 environmental procedures, using vegetable based inks.
The Forest Stewardship Council (FSC®) is an international network which
promotes responsible management of the world’s forests. Forest certification
is combined with a system of product labelling that allows consumers to readily
identify timber based products from certified sources.
Designed and produced by Radley Yeldar www.ry.com
S
t
.
M
o
d
w
e
n
P
r
o
p
e
r
t
i
e
s
P
L
C
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
2
0
1
5
WE SEE REGENERATION