Key property performance indicators and benchmarks
A property company’s share price should reflect growth in net assets per share. Our Company’s main objective is to create shareholder value through a wide variety of high margin activities with property investment at our core. We incentivise management to outperform the Company’s competitors by setting the right levels for performance indicators against which rewards are measured. We also design our remuneration packages to align management’s interests with shareholders’ aspirations. Key to this is the monitoring and reporting against identifiable performance targets and benchmarks. For a number of years we have reported on these, the most important of which are:
Investment Property Databank
The Investment Property Databank (“IPD”) produces a number of independent benchmarks of property returns which are regarded as the main industry indices. They have compared the ungeared performance of Helical’s total property portfolio against that of portfolios within IPD for the last 17 years. The Company’s annual performance target is to exceed the top quartile of the IPD database. Helical’s ungeared performance for the year to 31 March 2007 was 24.1% (2006: 25.9%) compared to the IPD median benchmark of 15.8% (2006: 20.6%) and upper quartile benchmark of 17.2% (2006: 22.8%).
IPD (all monthly and quarterly valued funds)
Unleveraged property returns  | | | | | |
| Total returns % | % | % | % | % | % |
|---|
| | | | | | | Annualised over | 1 year | 3 years | 5 years | 10 years |
17 years |
|---|
| | | | | | | Helical | 24.1 | 25.9 | 19.5 |
20.8 |
18.5 | | | | | | | | IPD Benchmark | 15.8 | 17.8 | 14.9 |
13.3 |
9.7 |
| | | | | | | Percentile rank |
5 |
3 |
3 |
1 |
0* | | | | | | | | * “0” means the top ranked fund. |
The returns on shareholder capital earned by Helical are generally higher than those measured by IPD due to the use of gearing. The returns noted above take no account of the £36m (2006: £29m) surplus of trading and development stock above book value arising from the directors’ valuation.
Total Shareholder Return
Total Shareholder Return (“TSR”) measures the return to shareholders from share price movements and dividend income and is used to compare returns between companies listed on the Stock Exchange. Management is incentivised to exceed the top quartile of the real estate sector. Helical’s TSR for the year to 31 March 2007 was 9.7% (2006: 73.5%) compared to the median of the listed real estate sector of 22.1% (2006: 49.3%).
Total Shareholder Return measures the return to shareholders from share price movements and dividend income
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Performance measured over |
| Total Shareholder Return |
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3 yrs
%pa |
5 yrs
%pa |
10 yrs
%pa |
15 yrs
%pa |
20 yrs
%pa |
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1 yr
%pa |
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| Helical Bar plc |
9.7 |
37.2 |
23.6 |
24.0 |
29.5 |
19.2 |
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| UK equity market |
11.1 |
18.0 |
8.6 |
7.7 |
10.8 |
10.1 |
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| Listed real estate sector index |
22.1 |
31.7 |
23.5 |
14.7 |
16.0 |
10.8 |
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| Direct property – monthly data |
15.6 |
18.1 |
15.5 |
13.5 |
12.1 |
11.6 |
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Net asset value
Net asset value per share represents the share of net assets attributable to each ordinary share. Whilst the basic and diluted net asset per share calculation provide a guide to performance the property industry prefers to use the diluted net EPRA asset per share. The adjustments necessary to arrive at this figure are shown in note 31 of the Annual Report.
Management is incentivised to exceed 15% pa growth in net asset value per share.
The adjusted diluted net asset value per share, excluding trading stock surplus, at 31 March 2007 was 334p (2006: 278p), an increase of 20%.
Including the surplus on valuation of trading and development stock, the diluted EPRA net asset value per share at 31 March 2007 was 374p (2006: 309p) an increase of 21.0% (2006: 29.7%). Adjusted EPRA triple net asset value per share rose by 21.8% (2006: 29.6%) to 346p (2006: 284p).
Equity value added
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| Year ended 31 March |
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IFRS
2007 |
IFRS
2006 |
IFRS
2005 |
UK GAAP
2004 |
UK GAAP
2003 |
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| Capital employed |
£m |
411 |
336 |
347 |
348 |
377 |
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| Return on capital |
% |
21.6 |
19.7 |
24.2 |
11.5 |
3.9 |
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| Weighted average cost of capital |
% |
7.7 |
7.0 |
6.7 |
7.0 |
6.1 |
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| Spread |
% |
13.9 |
12.7 |
17.5 |
4.5 |
(2.2) |
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| Equity value added/(lost) |
£m |
46.7 |
44.1 |
60.9 |
15.6 |
(8.5) |
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