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GOVERNANCE > Directors' Report |
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The Directors submit their annual report together with the audited accounts for the year ended 31 December 2007 which were approved by the Board on 5 March 2008.
Business Review
The principal activities of the Group continued throughout 2007 to be commercial property development, construction and investment and the provision of services associated with such activities. The Group also provided utility services prior to the disposal of Slough Heat & Power.
The Business Review on pages 14 to 48, which is incorporated into the Directors’ Report by reference, provides a fair review of the business of the Company and the description of the principal risks and uncertainties facing the Company along with risk management and financial risk management policies and the future developments the Company. The Business Review also contains details of the Company’s health and safety policies and its corporate responsibility activities.
Results
The results for the year are set out in the Group income statement on page 65. The Group’s pre-tax profits were £242.9 million (as detailed on page 73 of the financial statements) (2006: £690.1 million). Loss after tax from continuing operations amounted to £244.4 million (2006: profit £811.6). After allowing for minority interests of £1.1 million, the loss attributable to ordinary shareholders was £74.9 million (2006: £916.5 million profit). Basic earnings per ordinary share excluding exceptional items and deferred tax amounted to 32.3 pence (2006: 25.1 pence) and a loss of 16.4 pence (2006: 201.8 pence earnings) including exceptional items and deferred tax.
Adjusted diluted net assets per ordinary share excluding deferred tax relating to investment properties reduced to 704 pence (2006: 775 pence).
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Post Balance Sheet Events
There were no post balance sheet events to the date of this report.
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Property Income Distribution and Ordinary Dividends
On 1 January 2007 the Group assumed UK Real Investment Trust (REIT) status. Under the REIT regime SEGRO plc will, in the normal course of business, pay Property Income Distributions (PIDs) but may also make regular dividend payments in addition to the payment of the PID. Following the disposal of the Group’s US business the Company paid, on 31 August 2007, a special dividend of 53.0 pence per share to shareholders.
An interim PID of 8.3 pence per share was paid to shareholders on 5 October 2007.
The Board recommends a final dividend of 14.7 pence per share in respect of the year ended 2007, giving a total dividend for the year of 23.0 pence (2006: 19.0 pence).
The total dividend comprises 14.0 pence paid as a PID and 9.0 pence paid as a regular dividend. Subject to authorisation at the AGM to be held on 20 May 2008, the final PID, in respect of 2007, will be payable on 23 May 2008 and the record date will be 18 April 2008. A property income distribution reinvestment plan was introduced in January 2008 which enables ordinary shareholders to invest their PIDs in the ordinary shares of the Company.
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Property Valuations
The valuation of the Group’s investment and development properties which was carried out by external valuers as at 31 December 2007, amounted to £4,740.0 million, a decrease of £876 million over last year’s £5,616.3 million. After taking into account expenditure on investment and development properties of £774 million, the book value of property disposals of £1,350 million, exchange gains of £45 million, the deficit transferred to revaluation reserve amounted to £345 million.
Further details concerning the valuation are set out in note 15 to the accounts.
The property assets of Slough Heat & Power Ltd were excluded from the valuation.
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Directors
The present Directors who held office throughout the year are named on pages 46 and 47.
Lesley MacDonagh and Walter Hens were appointed as Directors on 1 January 2007. Marshall Lees resigned from the Board as at 1 August 2007, following the sale of the US business.
Details of Directors’ remuneration, pension rights, service contracts and Directors’ interests in the ordinary shares of the Company are included in the Remuneration Report on pages 55 to 63.
The appointment and replacement of the Directors is subject to shareholder approval at the AGM and governed by the Code, the Companies Acts and other prevailing legislation and also by the Articles of Association, which are available on request.
In accordance with the Articles of Association, Lord Blackwell, Ian Coull, David Sleath and Thom Wernink will stand for re-election at the forthcoming AGM. The Nomination Committee has confirmed that the Directors subject to re-election continue to perform effectively and have demonstrated commitment to their respective roles. The Board, excluding the Directors subject to re-election, has recommended those Directors for re-election.
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Share Capital
Following the disposal of the US business in August 2007, the share capital of the Company was consolidated on a 12 for 13 basis (the nominal capital being re-denominated from 25 pence per share to 271/12 pence per share) and approximately £250 million was returned to shareholders by way of a special dividend. Further details are provided in note 29 to the accounts.
At the 2007 AGM, shareholders gave the Company renewed authority to repurchase, in the market, ordinary shares representing up to 10 per cent of the issued share capital at that time with such authority to expire at the 2008 AGM. No shares were repurchased in the year to 31 December 2007. A resolution to renew this authority in respect of up to 10 per cent of the issued share capital will be proposed at the 2008 AGM. Under the proposed authority, shares repurchased may be either cancelled or held in Treasury. The Company’s authorised and issued share capital as at 31 December 2007, together with details of the share consolidation conducted in August 2007 and shares issued during the year, is set out in note 29 to the accounts.
The Company has one class of ordinary share. Each ordinary share carries the right to one vote at general meetings of the Company and all issued shares are fully paid. The shares of the Company do not carry the right to a fixed income. The Articles of Association do not create any restrictions in respect of the size of any particular holding, nor, in respect of the transfer of shares. The Directors are not aware of any agreements which limit the transfer of shares or curtail the voting rights attaching to those shares. The Trustees of the Share Incentive Plan vote the shares held in trust for the purposes of the plan only upon the instruction of the participants in the plan. The Trustees of the executive share plans do not vote the shares. As at the date of this report, 81 per cent of the authorised capital was issued. As is the established practice, resolutions will be put to shareholders giving the authority to the Directors to allot the unissued capital of the Company which amounts to 24 per cent of the issued capital, and within defined limits, to dis-apply pre-emption rights in continuance of the Company’s existing practice. There exists no current intention to allot capital save for purposes of the employee and executive share schemes however, the Directors may consider allotting capital should business opportunities become apparent that are consistent with the Company’s strategic objectives.
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Major Interests
At 3 March 2008 the following major interests (3 per cent or more) in the ordinary share capital of the Company had been notified to the Company: |
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| Shareholder |
Direct
Voting Rights |
Indirect
Voting Rights |
Aggregate
Voting Rights |
Percentage |
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| The AXA Group and its subsidiaries |
16,549,379 |
4,621,412 |
21,170,791 |
4.85 |
| Legal & General Investment Management |
18,806,556 |
1,919,596 |
20,726,152 |
4.75 |
| Barclays plc |
8,008,295 |
10,886,113 |
18,894,408 |
4.33 |
| Cohen & Steers Inc |
- |
18,646,053 |
18,646,053 |
4.27 |
| ABP Investments |
17,043,599 |
- |
17,043,599 |
3.91 |
| M&G Investment Management |
13,211,510 |
- |
13,211,510 |
3.03 |
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| Issued capital at 3 March 2008 |
436,243,891 |
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Directors’ Interests in Share and Loan Capital
The Directors of the Company who were in office at 31 December 2007 and the beneficial and non-beneficial interests of these Directors and their families in the share and loan capital of the Company, are shown in the Remuneration Report on pages 55 to 63.
Save as disclosed in the Remuneration Report, no Director had any holding or interest in the Company’s shares or in any of the Company’s debenture or unsecured loan stocks, or unsecured bonds and none of the Directors had any beneficial interest in the share or loan capital of any subsidiary of the Company and no Director had a material interest in any contract, transaction or arrangement with the Company, or any of its subsidiaries at, or during the year ended, 31 December 2007.
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Provisions on Change of Control
There are a number of agreements which take effect, alter or terminate upon a change of control, none of these are considered significant in relation to the Company.
The Company’s share schemes contain provisions which take effect in the event of a change of control. The provisions in relation to share schemes do not entitle participants to a greater interest in the shares of the Company than that created by the initial grant or award under the relevant scheme.
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Directors’ Indemnities
Directors of the Company are entitled to be indemnified by the Company against any liability, loss or expenditure incurred in connection with their duties, powers or office, to the extent permitted by statute.
The contracts of employment of the Directors and employees of the Company do not provide for compensation for the loss of office that occurs because of takeover.
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Payment of Suppliers
It is the Company’s and the Group’s payment policy, in respect of all suppliers, to settle agreed outstanding accounts in accordance with terms and conditions agreed with suppliers when placing orders and suppliers are made aware of these payment conditions. Payment becomes due when it can be confirmed that goods and/or services have been provided in accordance with relevant contractual conditions. The Group’s trade creditors as a proportion of amounts invoiced by suppliers represented 12 days at 31 December 2007 (2006: 19 days). The Directors do not consider that there is any one supplier (or person) with whom the Company has a contractual arrangement which is essential to the business.
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Charitable, Political and Other Donations
There were no political donations during the year and it is the Group’s policy not to make cash donations to political parties. However, the definition of political donations used in the Political Parties Election and Referendums Act 2000 is very broad and as a result could cover activities that form part of the relationships between the Group and bodies with political affiliations. These activities are not designed to support any political party nor to influence public support for a particular party. Therefore, authority from shareholders will be sought at the AGM to ensure that the Group acts within the provisions of the current UK law when carrying out its normal business activities.
The charitable amounts given by the Company in 2007 were as follows: |
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£ |
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| Charitable Donations |
630,558 |
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| The main donations made were as follows:- |
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| Slough Social Fund |
363,181 |
| Corporate Health (benefit in kind) |
199,370 |
| In kind support |
68,000 |
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Donations are made to a variety of community and social charities and in particular to charities connected to localities in which the Group is represented. Slough Social Fund is a charity which provides financial support to local charities in the Slough and South Bucks area. The benefit in kind provided to Corporate Health includes the provision of a rent-free building which Corporate Health (a registered charity) uses to provide occupational health services to the Slough Trading Estate.
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Environment and Corporate Responsibility
The Group’s environmental policy is published on the Company’s website www.segro.com. We report on our environmental activities in more detail in the Business Review pages 42 and 43. We report on corporate responsibility matters including employees, health, safety and the environment both in this report and in our separate 2007 Corporate Responsibility Report.
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Employment Policy
The Group recognises, values and promotes the involvement of its employees and strives to further honest two-way communication. It looks to keep employees informed on areas affecting their employment, as well as the financial and economic factors affecting the Group’s performance. Employees are encouraged to participate in the Group’s all-employee share schemes. The Group also encourages employee involvement in the development of the employment standards and policies which shape our culture and way of working.
The Group is committed to following an equal opportunities policy throughout an employee’s career with the Company, from recruitment and selection, through training and development, promotion and retirement.
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Disabled Employees
The Group welcomes applications for employment by disabled persons. These are always fully and fairly considered, bearing in mind the aptitudes of the applicant concerned. In the event of an employee becoming disabled every effort is made to ensure that their employment with the Group continues and that appropriate training is arranged. It is the policy of the Group that the training, career development and promotion of disabled persons should as far as possible be identical to that of other employees.
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Auditors to the Company
Deloitte and Touche LLP were appointed by the Board as auditors to the Company following the resignation of PricewaterhouseCoopers LLP on 21 June 2007. Deloitte and Touche LLP has expressed their willingness to act as auditors to the Company and accordingly, resolutions to formally appoint Deloitte & Touche LLP as auditors to the Company and to authorise the Directors to fix the remuneration of the auditors will be proposed at the forthcoming AGM.
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Disclosure of Information to the Auditor
Each of the persons who is a Director at the date of approval of this report confirms that: |
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so far as the Director is aware, there is no relevant audit information of which the Company’s auditors are unaware; and |
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the Director has taken all the steps that he/she ought to have taken as a Director in order to make himself/herself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information. |
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This confirmation is given and should be interpreted in accordance with the provisions of s234ZA of the Companies Act 1985.
By order of the Board
J R Probert
Secretary
5 March 2008 |
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