Group key performance indicators

How we measure up against our objectives

Over the medium term we aim to beat our benchmarks consistently. The year to 31 March 2010 was marked by an upturn in the investment market from the lows of 2008/09. This recovery, combined with the delivery of our strategic priorities during the year, is reflected in our KPIs returning to positive territory, and relative to our TSR, NAV and ROCE benchmarks the Group has outperformed.

graph key

Total Shareholder Return (TSR)

The measure and benchmark

TSR is the most direct way of measuring the change in shareholder returns during the year.

TSR of the Group is benchmarked against the TSR of the FTSE 350 Real Estate index (excluding agencies) being the most relevant group of comparable companies over the year.

Relative TSR is one of the performance criteria for the Group’s long-term incentive plans.


Commentary

The TSR of the Group was 81.9% for the year outperforming the FTSE 350 Real Estate index by 22.1 percentage points as investors supported our growth plans.

The Group’s five year TSR of 51.1% outperformed the benchmark of minus 15.3% over the five years to 31 March 2010.

Adjusted net assets per share growth

The measure and benchmark

Adjusted net assets per share growth is the traditional industry measure of the success in creating value at a balance sheet level because it captures changes in the valuation of the portfolio and the effect of the capital structure of the Group.

We compare the growth in net assets per share with the increase in the retail price index (RPI) plus a hurdle of up to 12% over a three year period which is used as a measure under the Group’s long-term incentive plans.


Commentary

Adjusted net assets per share increased by 15.5% over the year as property values recovered from the lows of 2008/09 and the Group benefited from accretive acquisitions. Our RPI benchmark stayed at broadly the same level as last year resulting in an 8.9 percentage point relative outperformance for the year.

For the five years to 31 March 2010 the Group’s net assets per share grew by a compound 2.6% p.a. compared with the benchmark RPI based hurdle of 7.7% p.a.


Total Property Return

The measure and benchmark

TPR is calculated from capital growth in the portfolio plus net rental income derived from holding these properties plus profit or loss on sale of disposals expressed as a percentage return on the period’s opening value.

The Group’s portfolio TPR is compared to a universe of over £20 billion of similar assets included in the IPD central London benchmark. This is an independent index and is the most appropriate way of benchmarking asset level returns against comparable buildings in our market.


Commentary

The Group generated a portfolio TPR of 18.4% in the year whereas the benchmark produced a return of 19.4% resulting in a relative underperformance of 0.8 percentage points. The Group’s return was adversely affected by the compulsory purchase order of 18/19 Hanover Square, W1 described in more detail on page 21.

Over the last five years the Group’s portfolio TPR was 9.5% outperforming the benchmark by 4.1 percentage points.

Return on Capital Employed

The measure and benchmark

ROCE is measured as reported profit before financing costs plus revaluation surplus or deficit on development property divided by the opening gross capital. This measure illustrates the level of value creation from operating activities compared to the capital base of the business.

The ROCE is best compared against the Group’s weighted average cost of capital which we calculate at 9.6% at 31 March 2010.


Commentary

ROCE for the year was 18.9% due to a recovery in property values from the lows of 2008/09 and the Group benefited from accretive acquisitions.

Over the five years to 31 March 2010 the Group’s annualised ROCE was 11.1% compared to the five year average WACC of 7.8%.

*Year to 31 March.