Search HOME // ABOUT US // OUR BUSINESS // KPIS KPIs SEGRO is a UK Real Estate Investment Trust (REIT), and a leading owner, asset manager and developer of modern warehousing and light industrial property. KPIS STRATEGY OUR BUSINESS MODEL WHERE WE DO IT DOWNLOADS AT A GLANCE Our aim is to deliver attractive returns to our shareholders and stakeholders through the execution of our strategy. We track our progress against nine Key Performance Indicators on which we report each year. They are based on proportionally consolidated metrics, incorporating our share of joint ventures. Some of these metrics are also used to determine how management and employees are remunerated. Further details on our remuneration policies and the metrics used to determine remuneration are set out in the Remuneration Committee Report. What it is: TPR is the ungeared combined income and capital return from our portfolio of standing investments held throughout the year. It is an important measure of the success of our strategy in terms of asset selection and management. MSCI Real Estate prepares the calculation, as well as providing benchmark TPR data for similar properties in their wider universe. We aim to outperform the benchmark over the long term. Details on how TPR impacts short- and long-term incentives are provided on pages 126 to 143 of the Annual Report and Accounts. Our performance: The TPR of the Group’s standing assets held throughout 2020 was 14.6 per cent (2019: 10.5 per cent). The UK portfolio generated a TPR of 13.8 per cent, performing ahead of the benchmark calculated by MSCI Real Estate UK All Industrial Quarterly of 9.2 per cent. The TPR of our Continental Europe portfolio was 16.2 per cent. Benchmark data for Continental Europe will be received later in the year. What it is: Adjusted NAV (Net Asset Value) is the value of our assets less the book value of our liabilities that is attributable to our shareholders. It is calculated in accordance with EPRA guidelines and aligns with the EPRA NTA metric that was introduced in 2020 (the 2019 figure above has been restated to align with this definition). We aim for sustainable long-term asset value growth whilst carefully managing our liabilities to maintain balance sheet strength. Our performance: Adjusted NAV increased by 114 pence per share over the year to 31 December 2020, most of which was due to a 10.3 per cent like-for-like increase in the value of the Group’s property portfolio. Diluted NAV per share increased by 112 pence to 809 pence. The reconciliation between Diluted NAV per share and Adjusted NAV per share can be found in Note 12(ii) on page 175 of the Annual Report and Accounts. What it is: The vacancy rate measures our ability to minimise the quantity of non-income producing built assets within our portfolio. An improving vacancy rate generally implies additional rental income and lower vacant property costs. Some level of vacancy will always exist within our portfolio in order to support our asset management activities and allow our customers the opportunity to move premises. We target a longer-term vacancy rate of 4 to 6 per cent based on the ERV of vacant space compared to the ERV of the portfolio. Our performance: The portfolio vacancy rate decreased to 3.9 per cent (31 December 2019: 4.0 per cent) reflecting a strong performance in letting both existing space and recently completed speculative developments. Further details can be found in Table 7 on page 208 of the Annual Report and Accounts. What it is: The percentage of our customers who rate their experience as occupiers of our buildings as ‘good’ or ‘excellent’ as opposed to ‘poor’ or ‘average’. Our customers are at the heart of our business and we strive to ensure that we are providing the best level of service possible to maximise customer retention. Our performance: Satisfaction as an occupier of our buildings was rated as ‘good’ or ‘excellent’ by 87 per cent of the 200 customers which participated in the 2020 survey (2019: 88 per cent). The continued high satisfaction rate reflects our focus on communication, being responsive and understanding the needs of our customers and we intend to target similarly high levels in the future. 99 per cent of our customers said that they would recommend SEGRO to others. What it is: The proportion of our property assets (including investment, owner-occupier and trading properties at carrying value and our share of properties in joint ventures and excludes head lease ROU asset) that are funded by borrowings. At this stage in the cycle, and based on our investment plans, we aim to maintain our LTV at around 30 per cent for the forseeable future. We believe that REITs with lower leverage offer a lower risk and less volatile investment proposition for shareholders. Our performance: The Group’s LTV ratio was flat at 24 per cent year on year, despite £1.3 billion of net investment in our business during 2020. This was due to the equity raise in June 2020 combined with the unrealised gain on the value of our portfolio. The timing of investment decisions and disposals, as well as movement in the value of our assets may cause the LTV to fluctuate. What it is: TSR measures the change in our share price over the year assuming that dividends paid are reinvested. This KPI reflects our commitment to delivering enhanced returns for our shareholders through the execution of our strategy over the medium term. TSR is a key metric used in setting the long-term incentive plan remuneration for both the Executive Directors and senior management. Our performance: The TSR of the Group was 8.7 per cent, compared with -16.6 per cent for the FTSE 350 Real Estate index. This performance reflects a combination of the 21.3 pence dividend (14.4 pence 2019 final dividend and 6.9 pence 2020 interim dividend) paid during the year and an increase in the share price from 897 pence at 31 December 2019 to 948 pence at 31 December 2020. What it is: Our headline Adjusted earnings per share (EPS) reflects earnings from our operating business: rental income less operating, administrative and financing costs and tax. It is the primary determinant of the level of the annual dividend. IFRS EPS includes the impact of realised and unrealised changes in the valuation of our assets which can often mask the underlying operating performance. The reconciliation between Basic EPS and Adjusted EPS can be found in Note 12(i) on page 175 of the Annual Report and Accounts. Our performance: Adjusted EPS increased by 4.1 per cent during the year, reflecting higher rental income from our standing assets, new income from acquisitions and developments, partly offset by higher finance costs and additional shares from the equity placing in June 2020. What it is: The ratio of our total administration and property operating costs expressed as a percentage of gross rental income. This is an indicator of how cost-effectively we manage both our property assets and our administrative costs in order to improve profitability. Over the medium term we are targeting a total cost ratio of 20 per cent. Our performance: The total cost ratio was lower at 21.1 per cent (2019: 22.9 per cent). Excluding share-based payments, the total cost ratio would have been 18.8 per cent, also lower than in 2019 (19.9 per cent). Further details can be found in Table 8 on page 209 of the Annual Report and Accounts. What it is: The headline annualised gross rental income contracted during the year less income lost from takebacks. There are two elements: to grow income from our standing assets by reducing vacancy and increasing rents from lease renewals and rent reviews; and to generate new rent by developing buildings either on a pre-let or speculative basis. Rent from new acquisitions is not included. Our performance: In total, we generated £60.1 million of net new annualised rent during the year (2019: £54.5 million). The increase was driven substantially by higher rents on review and renewal in the UK and by the increased volume of rent from development completions and pre-let agreements secured during the year. 1 The TPR has been calculated independently by MSCI Real Estate in order to provide a consistent comparison with an appropriate MSCI benchmark. It is calculated as the change in capital value, less any capital expenditure incurred, plus net income, expressed as a percentage of capital employed over the period concerned for standing investments held throughout the year, excluding land. 2 Adjusted NAV is an alternate metric that is calculated in accordance with the Best Practices Recommendations of the European Public Real Estate Association (EPRA) and aligns with EPRA NTA. SEGRO discloses EPRA alternative metrics on pages 205 to 210 to provide a transparent and consistent basis to enable comparison between European property companies. See www.epra.com for further details. 3 As a result of the Rights Issue in March 2017, a bonus adjustment factor of 1.046 has been applied to per share metrics prior to 2017, including Earnings per share and Adjusted NAV per share. 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