Key performance indicators
Since the business of property investment and development, especially that
of Development Securities which has a considerable emphasis on development
activity, can only properly be judged over a long period, probably a complete
cycle, annual performance indicators are of less relevance in running our
business. That said, Total Shareholder Return* is a good guide to relative
performance, but the importance of that measure needs to be moderated by
both the risk profile which we are prepared to accept and the precise stage
that has been reached in any cycle. Our compound Total Shareholder Return
since January 2000, the date on which we would regard the present cycle
to have commenced, is 18 per cent per annum. This compares to 21 per cent
as similarly derived from the Real Estate sector index. One of the contributors
to our comparative under-performance to date is the lower level of gearing*
with which Development Securities has operated over the current cycle. It
is therefore perhaps not unexpected that the consequent reduction in exposure
to volatility risk should lead to a lower actual and required level of returns.
That said, we are of the view that the next stages of the current cycle
should generate superior returns from development activity, rather than
investment portfolios.
We also measure our overall investment portfolio performance against an
appropriate IPD Index* in order to assess relative performance of this asset
class. In 2006, the total return generated from our investment portfolio
was 18.5 per cent, compared to the IPD Index of 18.1 per cent. Over the
last five years, our total return has been 19.0 per cent, as compared to
15.1 per cent of the IPD Index.
* refer to note 1(p)
