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A property company’s share price should reflect growth in net assets per share. Our Group’s main objective is to maximise growth in assets from increases in investment portfolio values and from retained earnings from other property related activities.
Key performance indicators and benchmarks
We incentivise management to outperform the Group’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. IPD has compared the ungeared performance of Helical’s total property portfolio against that of portfolios within IPD for the last 20 years. The Group’s annual performance target is to exceed the top quartile of the IPD database. Helical’s ungeared performance for the year to 31 March 2011 was 2.7% (2010: 8.5%) compared to the IPD median benchmark of 11.7% (2010: 17.4%) and upper quartile benchmark of 12.1% (2010: 21.5%).
As referred to in the Chairman’s Statement, the year to 31 March 2011 was a period during which the Group continued to transform its property holdings and this has had an impact on performance in the year. However, over three, five and ten years the Group’s property portfolio continued to outperform the IPD benchmark.
IPD (all monthly and quarterly valued funds) - ungeared returns
 | | | | | |
31.3.11
% |
31.3.10
% |
31.3.09
% |
|---|
| | | | Helical |
2.7 |
8.5 |
(6.3) |
| | | | | IPD upper quartile |
12.1 |
21.5 |
(21.9) |
| | | | | Percentile ranking |
96 |
90 |
1 |
| | | |
| | | |
At 31 March 2011 |
3 years
% |
5 years
% |
10 years
% |
|---|
| | | | | Helical |
1.4 |
5.5 |
11.5 |
| | | | | IPD upper quartile |
(0.9) |
0.7 |
6.7 |
| | | | | Percentile ranking |
24 |
4 |
4 |
| | | |
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 £32m (2010: £33m) 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 London Stock Exchange. Helical’s TSR for the year to 31 March 2011 was -19.3% (2010: 20.2%) compared to the median of the listed real estate sector of 12.6% (2010: 56.7%).
However, over three, five, ten, fifteen, twenty and twenty-five years Helical’s TSR has outperformed the Listed Real Estate Sector Index as shown on page 2 of the 2011 report and accounts.
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 calculations provide a guide to performance the property industry prefers to use an adjusted diluted net asset per share. The adjustments necessary to arrive at this figure are shown in note 34 of the 2011 report and accounts.
Management is incentivised to exceed 15% p.a. growth in net asset value per share.
The adjusted diluted net asset value per share, excluding trading stock surplus, at 31 March 2011 was 225p (2010: 241p).
Including the surplus on valuation of trading and development stock, the diluted EPRA net asset value per share at 31 March 2011 was 253p (2010: 272p). Diluted EPRA triple net asset value per share was 246p (2010: 259p).
Other key performance indicators include:
- - a surplus of net rental income over finance costs, overheads and dividends
- - staff retention and average length of service
- - inclusion in the FTSE4 Good Index
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