Annual Financial Report

RNS Number : 8916A

Great Portland Estates PLC

04 June 2021

 

4 June 2021

Great Portland Estates plc

Annual Report and Notice of Annual General Meeting 2021

Great Portland Estates plc (the "Company") announces that the following documents have today been posted or otherwise made available to shareholders:

· Annual Report and Accounts for the year ended 31 March 2021; and

· Notice of 2021 Annual General Meeting (the "AGM").

The above documents have been uploaded to the National Storage Mechanism and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism .

The 2021 Annual Report and Accounts and Notice of 2021 Annual General Meeting can also be viewed on the Company's website at  www.gpe.co.uk/investors/shareholder-information/agmgm .

The 2021 AGM will be held at the offices of Allen & Overy LLP, One Bishops Square, London E1 6AD on Thursday, 8 July 2021 at 12pm.   At the time of preparing the Notice of 2021 Annual General Meeting, compulsory government measures are in force in relation to the COVID-19 pandemic, and it is uncertain whether restrictions on indoor gatherings will remain in place on the date of the AGM. In light of this uncertainty, while we currently anticipate that attendance will be possible, we are inviting and encouraging all our shareholders to listen to the AGM online via a live audiocast, as an alternative to attending in person, and are strongly encouraging all shareholders to submit their proxy vote in advance.  Please refer to the Notice of 2021 Annual General Meeting for further information.

Any changes to the arrangements set out in the Notice of 2021 Annual General Meeting will be communicated to shareholders via the Company's website at www.gpe.co.uk/investors/shareholder-information/agmgm .

In accordance with Disclosure Guidance and Transparency Rule (DTR) 6.3.5R   and the requirements it imposes on issuers regarding regulated information,  we set out below:

·in Appendix A, the principal risks and uncertainties facing the Company; and

·in Appendix B, the Directors' responsibility statement.

The Company's preliminary consolidated financial information and information on important events that have occurred during the year, and their impact on the financial statements, were included in the Company's preliminary results announcement on 19 May 2021. That information, together with the Appendices below, which have been extracted from the 2021 Annual Report and Accounts, constitute the material required by DTR 6.3.5R to be communicated to the media in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the full 2021 Annual Report and Accounts.  To view the preliminary results announcement, please visit the Company's website www.gpe.co.uk .

For further information contact:

Darren Lennark

General Counsel & Company Secretary

Great Portland Estates plc  

020 7647 3000

LEI Number: 213800JMEDD2Q4N1MC42

APPENDIX A

Principal risks and uncertainties

A description of the Group's principal risks and uncertainties, together with a summary of steps taken to mitigate those risks, is shown below.

How we manage principal risks and uncertainties

Principal risk	How we monitor and manage risk	Commentary
Structural retail changes A continued structural shift in the retail industry, accelerated by COVID-19, forces changes to leasing requirements (e.g. turnover rents or shorter lease terms) and/or reduces the demand for, or profitability of retail space in central London. This reduces rental values and income, asset values and returns from retail space. Strategic priorities Drive innovation and change; Deliver and lease the committed schemes; Prepare the pipeline Net risk movement over the last 12 months No change	Strategic financial forecasts updated prior to each Board meeting including scenario planning for different economic cycles. Quarterly review and proactive monitoring of asset-by-asset business plans to assess exposures and inform hold/sell strategies. Regular reporting to Executive Committee and Board on negotiations and marketing campaigns, cash and rent collection. Regular updates received from central London retail agencies to understand current market trends and anticipating future changes to deal structures. Proactive engagement with retail occupiers to understand their occupational needs with a focus on retaining income, including through appropriate rent concession agreements. Design Review Panel reviews building design and specification to ensure the scheme can accommodate flexibility of unit sizes appropriate for future retail occupier demand. White box units are created where appropriate to encourage demand. In-house Leasing and Marketing teams liaise with external advisers on a regular basis, creating marketing campaigns, agreed budgets and timelines in accordance with our leasing/marketing objectives. Active participation in industry groups to promote London and lobby government to reduce pandemic-driven intervention on rent collection.	Retail space comprises 22% of our portfolio by value. During the year, UK retail has continued to suffer from a combination of lower retail sales and a structural shift, further accelerated by COVID-19, as increasing volumes of sales move online. Central London retail has been more significantly impacted as tourists have been absent and consumers have avoided busy locations during the pandemic, particularly where reliant on public transport. This has impaired our retail rent collection rate and the performance of our retail assets, with rental values falling by 27.3% across the portfolio. Our retail focus is to deliver high quality, modern retail units into locations with enduring appeal, with the bulk of our activities centred on the prime shopping streets of Oxford Street, Regent Street, Bond Street and Piccadilly. We anticipate that the continued progress of the vaccination programme will allow for a gradual reopening of the UK economy, and with it a re-population of city centres, including the return of international tourists and office workers who are crucial to supporting London's retail trade. Our current focus is on leasing the retail space in our developments at Oxford House, at the eastern end of Oxford Street, and Hanover Square, at the northern end of New Bond Street. In both cases we aim to deliver new retail experiences into locations that will benefit from the planned opening of Crossrail in 2022 and we will continue to be creative in our leasing strategy, including considering alternative uses where appropriate as supported by the government's recent changes to the 'Use Classes' system. We continue to proactively monitor individual asset plans and our exposure to any underperforming retail assets.
Climate change and decarbonisation The need to decarbonise our business increases the cost of our activities through the need to retrofit buildings to improve their sustainability credentials (e.g. minimum energy efficiency standards and building ratings). This also reduces our ability to redevelop due to planning restrictions, increased regulation and stakeholder expectations, the increased cost of low carbon technology and potentially the pricing of carbon. Failure to meet the climate challenge could impact our ability to deliver new buildings, reduce the demand for the buildings we own, cause significant reputational damage and result in exposure to environmental activism and potentially stranded assets. Strategic priorities Progress sustainability agenda; Drive innovation and change; Prepare the pipeline Net risk movement over the last 12 months Decreased	Regular Board and Executive review of Sustainability policy and climate change commitments. Sustainability Committee meets quarterly to consider strategy in respect of climate change and environmental and social impact strategy and risks. Its Portfolio and Development sub-committees meet monthly and report to Sustainability Committee on progress. Dedicated Sustainability & Social Impact Director on the Executive Committee supported by Sustainability Managers. Design Review Panel reviews design brief for all buildings to ensure that forthcoming sustainability risks are considered. Sustainable Development Brief and Sustainability strategy in place. Net Zero Carbon Roadmap established and carbon offsetting strategy approved by the Board. Decarbonisation fund established to support energy efficiency retrofitting in existing buildings. ESG-linked RCF and the introduction of ESG strategic bonus measures for Executive Committee members to support delivery of decarbonisation within the business. Programme of ESG investor engagement in place, with regular review of reporting requirements and participation in investor indices. Steering group to assess, manage and monitor EPC risks across the portfolio and to inform our buy, hold and sell decisions	With the built environment contributing approximately 40% of the UK's carbon footprint and the climate change debate moving from the periphery to now being both a moral and economic imperative, particularly for our occupiers and other stakeholders, we have been further expanding our sustainability commitments and activities. Having announced in 2020 our Sustainability Statement of Intent 'The Time is Now', this year we created our Roadmap to Net Zero, setting out how we will address the first pillar of the statement to decarbonise our business to become net zero carbon by 2030. The mitigating actions we are taking have supported a reduction in our overall net risk assessment for this risk. In early 2020, we incorporated our energy intensity target into our ESG-linked revolving credit facility, along with targets to reduce embodied carbon from our new developments and major refurbishments by 40% and to improve biodiversity net gain across our portfolio by 25%, in each case by 2030. As a result, the rate of interest we pay on this facility will depend on our performance against these targets. Furthermore, these targets have been included within the objectives of many of our senior executives and are being used to assess levels of remuneration. Good progress has been made against the 2020/21 annual targets, as set out on page 21 of the 2021 Annual Report. We continue to work to improve the number of our buildings rated for their sustainability credentials. Further to existing requirements for most commercial buildings to have at least an EPC 'E' rating by 1 April 2023, in December 2020, the UK government announced its intention that all buildings will require an Energy Performance Certificate (EPC) rating of 'B' or above by 2030. We estimate that 80%-90% of London's buildings do not currently meet this standard. As a result, we are compiling individual asset plans to proactively improve EPC ratings to meet government and broader stakeholder expectations, to assess potential exposures and inform our hold/sell strategies. Furthermore, we expect the sustainability challenge to provide us with potential opportunities to acquire orphaned assets needing a sustainability solution.
Pandemic COVID-19 and/or a future pandemic leads to a major and prolonged economic recession and associated fiscal response, significant decreases in demand in our markets, reduced footfall in central London, impairs our occupiers' ability to meet their rental obligations, adversely impacts our rental values and rent collection, reduces the availability, health and wellbeing of our workforce and/or disrupts our supply chains resulting in a decreased ability to maintain the consistency of our operations. A longer-term structural change in working and/or retail practices could occur as a result of a pandemic which changes the level and nature of demand for space in central London and we are unable to respond appropriately or quickly enough to meet evolving occupier needs. Strategic priorities Progress sustainability agenda; Drive innovation and change; Continue to grow Flex offer; COVID-19 response; Deliver and lease the committed schemes; Prepare the pipeline Net risk movement over the last 12 months No change	Business Continuity Plans and IT Business Continuity Plans in place. Response Committee established and led by the Chief Financial & Operating Officer to identify risks and concerns to help manage GPE's response to the COVID-19 crisis with weekly reporting to the Executive Committee. Additional Board calls held during COVID-19 crisis to review GPE's response and mitigations with key updates provided between meetings. Reviews of government guidelines and emerging practice with risk assessments undertaken as control measures change. Enhanced stakeholder engagement, particularly with occupiers, contractors, shareholders and employees. Health and safety plans to support employees, occupiers and contractors through lockdowns and their return to work, and to keep buildings open and 'COVID-19 Secure'. Health and wellbeing programme implemented to support employees' physical and mental health. Selection of contractors and suppliers based on creditworthiness.	During the year, the uncertainties, disruption and challenges of the COVID-19 pandemic have continued to evolve and impact the global economy, our markets and operations. The closure of offices and shops, and reduced tourism, have increased occupier failures, impacted rent collection and reduced occupational demand and property valuations, especially in relation to retail, hospitality and leisure assets. The ongoing vaccination programme and government roadmap to easing lockdown restrictions is currently supporting renewed optimism and market activity, however we remain mindful of the risk of further waves of the pandemic and the emergence of new variants. The Board, Audit and Executive Committees have overseen the Company's response to the pandemic throughout the year. We have engaged extensively with all our stakeholders, including offering financial assistance to our occupiers on a case-by-case basis, extended our community activities, including through the deployment of our Community Fund, and worked hard to ensure the safety and wellbeing of our employees, occupiers and contractors. All our office properties have remained open throughout the year, operating to government guidelines. We have also issued bespoke 'Return to the Workplace' playbooks to all occupiers to assist them in managing their phased repopulation of their offices as the lockdown eases. None of our employees have been furloughed and the Group has no current plans to access any UK government COVID-19 funding.
London attractiveness The appeal of London to occupiers and investors may diminish due to macro-economic conditions (e.g. post-Brexit international trading relationships), reduced appetite to travel to and work in London following COVID-19, changes in government policies adversely impacting London's appeal, the rise of alternative destinations for international trade, the impact of civil unrest and terrorism, the impact of long-term climate change (including risk of flooding) and the relative expense of operating in London. This could result in a lack of investment and occupier demand leading to decreasing income and asset values. Strategic priorities Drive innovation and change; Continue to grow Flex offer; Deliver and lease the committed schemes; Prepare the pipeline Net risk movement over the last 12 months No change	Board annual strategy review with regular economic and market updates received from third parties. Strategic financial forecasts are updated prior to each Board meeting with scenario planning for different economic cycles and eventualities, including to reflect potential impacts regarding COVID-19 and the UK's international trade relationships post-Brexit. Regular review of strategic priorities and transactions in light of the Group's dashboard of lead indicators and operational parameters. Key London indicators are monitored to help inform GPE's view of London's recovery following COVID-19, with potential actions identified in the Board strategy review. The impact of post-Brexit UK, EU and international trading relationships continues to be monitored and reported to the Executive Committee and Board. The Group aims to maintain a consistent policy of low financial leverage. Active participation in industry groups to promote London.	London generates around 24% of UK GDP, with the largest economy of any city in Europe, and is one of the world's leading commercial, creative and financial centres, with a deep pool of talent. The closure of many offices and shops, reduced tourism and a greater reliance on public transport have meant that London has been disproportionately impacted by COVID-19. Whilst activity levels remain low, we fully anticipate that London will be reinvigorated as the world returns to normal. Moreover, improving infrastructure, including extensions of the tube network and the expected opening of Crossrail in 2022, will bring more people within central London's reach. Central London has one of the world's largest commercial real estate markets, with around 440 million sq ft of office and retail property attracting a deep and diverse mix of occupiers and property investors, many from overseas. London's markets are also highly liquid and remain one of the leading global destinations for real estate investment. Its combination of relative value, strong legal system, time zone advantages, international connectivity and a welcoming attitude to global businesses has resulted in London being the number one city for cross border office investment for  seven out of the last ten years as measured by Real Capital Analytics. Whilst we continue to monitor for changes in government policies as a result of COVID-19 and the UK's global trading relationships post-Brexit, London has a long history of reinvention and innovation, and we anticipate that as confidence returns, London's economy will bounce back and its magnetism as a global cultural and business centre will be undiminished.
Impact of property market dislocation on financial leverage and banking covenants Capital markets disruption, macro-economic shock and/or an adverse change in market conditions reduces asset values and curtails income which could increase GPE's financial leverage and potentially result in our breaching banking covenants. Strategic priorities Drive innovation and change; Continue to grow Flex offer; Deliver and lease the committed schemes; Prepare the pipeline Net risk movement over the last 12 months Decreased	Quarterly review of capital structure, including gearing levels, by the Chief Financial & Operating Officer and Executive Committee. Board annual strategy review with regular economic and market updates received from third parties. Regular review of strategic priorities and transactions in light of the Group's dashboard of lead indicators and operational parameters. Quarterly review of current and forecast debt, hedging levels and financing ratios under various market scenarios. The Group aims to maintain a consistent policy of low financial leverage. The Group's funding measures are diversified across a range of bank and bond markets. Proactive balance sheet management. Investor relations programme, with regular broker consultation, to build a supportive shareholder base in the event of future fundraisings. Regular review of financing by the Chief Financial & Operating Officer and Executive Committee with reporting at each Board meeting.	Over the long term, real estate markets have historically been cyclical and London has been no exception to this. As a result, we have consistently adopted a conservative approach to financial leverage. As at 31 March 2021, our property LTV was 18.4%, net gearing was 24.6% and interest cover not measurable. As a result, we have substantial headroom above our Group debt covenants. We estimate property values could fall around 56% before Group debt covenants could be endangered, even before factoring in mitigating management actions. The risk of a property market dislocation resulting in a breach of our banking covenants has reduced following the prepayment of the non-recourse debt facility in our Great Victoria Partnership joint venture and the diversification of risk through GPE's £150 million USPP issue during the year. The Group also has significant financial capacity with liquidity of £443 million, comprising cash of £38 million and undrawn committed facilities of £405 million. In addition, the Group's weighted average interest rate remains low at only 2.5% (falling to 2.0% on a fully drawn basis), with an attractive debt maturity ladder and diverse funding sources, predominantly borrowing on an unsecured basis.
Failure to maximise returns from prevailing market conditions We fail to adequately read market conditions and respond accordingly. This could result in making leasing decisions or buying, selling or developing buildings at the incorrect time leading to insufficient returns on our investment. Additionally, in periods of stable and/or high value markets we fail to effectively adjust our business model to maximise returns from prevailing market conditions. Strategic priorities Progress sustainability agenda; Drive innovation and change; Continue to grow Flex offer; COVID-19 response; Deliver and lease the committed schemes; Prepare the pipeline Net risk movement over the last 12 months No change	Strategic financial forecasts are updated prior to each Board meeting including scenario planning for different economic cycles and eventualities. Regular review of property cycle by reference to a dashboard of lead indicators. Board annual strategy review including regular economic and market updates received from third parties. Dedicated in-house team with remit to research sub-markets in central London seeking the right balance between investment and development opportunities for current and prospective market conditions. Detailed due diligence undertaken for all prospective acquisitions prior to purchase to ensure appropriate risk adjusted returns. Quarterly review of asset-by-asset business plans to assess future performance and to inform hold/sell decision making.	Despite the economic impact and uncertainties arising from COVID-19, the Group has been active in its key markets and has completed two development schemes at Hanover Square, W1 and The Hickman, E1, totalling 296,800 sq ft of prime Grade A space. We also commenced the substantial repositioning of 50 Finsbury Square, EC2 which is due for completion in mid-2022. We continue to assess potential acquisition opportunities across central London. However, the type of assets we typically look to buy, in particular, assets with repositioning and/or development opportunities at prices that, in our view, fairly reflect their risk adjusted returns, continue to be limited. However, we do expect opportunities to emerge in the second half of 2021 as investment volumes recover, COVID-19 restrictions lift and the market reopens.
Failure to profitably deliver the development programme We fail to translate the development pipeline and current committed schemes into profitable developments through poor development management, an inappropriate level of development undertaken as a percentage of the portfolio, failure to agree acceptable terms with freeholders/adjoining owners/other stakeholders, poor timing of activity and/or inappropriate products for an evolving market and occupier needs (including sustainability expectations). This may result in weak leasing performance, reputational damage and reducing property returns. Strategic priorities Progress sustainability agenda; Drive innovation and change; Deliver and lease the committed schemes; Prepare the pipeline Net risk movement over the last 12 months No change	Updated strategic financial forecasts reviewed at each scheduled Board meeting including scenario planning for different economic cycles. Development management quarterly updates to the Executive Committee with reporting to each scheduled Board meeting. Regular review of portfolio mix and asset concentration. Adjustment of the portfolio as appropriate through undertaking acquisitions and/or development projects in joint venture or forward funding. Prior to committing to a development, the Group conducts a detailed financial and operational appraisal process which evaluates the expected returns from a development in light of likely risks. During the course of a development, the actual costs and estimated returns are regularly monitored to signpost prompt decisions on project management, leasing and ownership. Working with stakeholders, including agents, potential occupiers and purchasers, to identify and address their needs and aspirations, including in respect of safety, sustainability, wellbeing and technology during the planning application and design stages. Regular pipeline review meetings between Development and Portfolio Management teams and quarterly asset review sessions. Selection of contractors and suppliers based on their track record of delivery and creditworthiness, corporate responsibility and sustainability credentials. In-house Project Management team closely monitor construction and manage contractors to ensure adequate resourcing to meet the programme. Post-completion reviews undertaken through Final Appraisal process on all developments to identify best practice and areas for improvement. Regular review of the prospective performance of individual assets and their business plans with joint venture partners.	We currently have two committed schemes on-site, set to deliver 250,800 sq ft of high quality space, both near Crossrail stations and targeting BREEAM 'Excellent'. These schemes are 23.2% pre-let, with one of the schemes due for completion shortly. Beyond this, the Group is preparing a further eight schemes set to deliver more than 1.3 million sq ft across the coming decade, which are being designed to meet the highest standards of sustainable design, embrace technology and provide a variety of adaptable and flexible working environments.
Challenging planning environment The increasingly stringent planning environment limits the ability to create appropriate new spaces, increases costs and results in our failure to obtain viable planning consents and deliver the development pipeline. Strategic priorities Progress sustainability agenda; Drive innovation and change; Prepare the pipeline Net risk movement over the last 12 months Decreased	Prior to committing to a development, the Group conducts a detailed financial and operational appraisal process which evaluates the expected returns from a development in light of likely risks. Active engagement with planning authorities. Early engagement with local residents and community groups, adjoining owners and freeholders. Third-party expertise used to support in-house teams, where appropriate. Regular updates to the Executive Committee and Board on regulatory and planning policy developments. Sustainable building design, including climate change mitigation and adaptation, is considered at an early design stage. All our major developments are subject to a minimum BREEAM rating requirement of 'Very Good' for major refurbishments and 'Excellent' for new build developments.	To successfully deliver our developments, we work closely with both the local authorities and communities to secure planning consents to create great new spaces, helping London to thrive. The London Plan is now policy and includes a number of further challenging requirements. Moreover, our substantial and flexible pipeline of eight uncommitted schemes totals 1.3 million sq ft across four London boroughs, all of which will likely be subject to planning approval requirements. Overall, we consider that the net risk arising from the planning environment has reduced during the year following regulatory and local policy changes, including reforms to the 'Use Classes Order' and a relaxation of affordable housing requirements in some boroughs, and the strengthening of our understanding of the evolving planning landscape and our ability to engage with key planning authorities. We aim to engage with local authorities in an open, transparent and non-adversarial manner to enable us to secure planning consents that are both beneficial to us and the local communities in which they are built. In line with our social value guidelines, as a matter of course, we liaise with community stakeholders to understand their needs and, where possible, we will adjust our proposals to take account of comments received. We use planning performance agreements with the local planning authority to ensure that our planning applications are determined in a timely manner. During the year, we have continued to work with community groups in the London Bridge area, including Bankside Open Spaces Trust where, with our funding, they were able to bring their parks team back from furlough to maintain green spaces and provide much needed support for local volunteers. Our air quality, urban greening and apprenticeship initiatives will extend to our proposals for New City Court, SE1 to enhance the work already being undertaken by community groups in the area. Our social value guidelines ensure that we monitor the social impact from our development activities to deliver targeted outcomes. Urban greening and biodiversity projects are currently being supported in Islington as part of early engagement for our 50 Finsbury Square, EC2 scheme and were implemented for 1 Newman Street, W1. Moreover, sustainability is becoming ever more important in the planning process with key local authorities declaring climate emergencies. We will look to work with them to support their principles of 'good growth'.
People Failure to attract, develop and retain high quality, suitably experienced individuals means we may not have the necessary capability, diversity or resource levels resulting in the failure to deliver or develop our business plan. Strategic priorities Progress sustainability agenda; Drive innovation and change; Continue to grow Flex offer; COVID-19 response; Deliver and lease the committed schemes; Prepare the pipeline Net risk movement over the last 12 months No change	Regular review is undertaken of the Group's resource requirements and succession planning. The Group has a remuneration system that is strongly linked to performance and a formal six-monthly appraisal system to provide regular assessment of individual performance. Benchmarking of remuneration packages of all employees is undertaken annually to ensure competitive financial and non-financial packages in line with market rates. Annual personal development planning and ongoing training support for all employees together with focused initiatives to nurture potential successors, including mentoring and coaching programmes. Clear articulation of GPE values so all existing and prospective employees understand our core beliefs and behaviours. Board and Nomination Committee oversight of our Inclusion and Diversity strategy and new roadmap to improve the diversity of our Executive Committee. Health and wellbeing programme implemented to support employees' physical and mental health, including through COVID-19. Focus on people engagement with regular two-way communication and responsive employee-focused activities.	The motivation of our people and maintaining our strong collaborative culture remains fundamental to the delivery of our strategic priorities. During the year, the strength of our values and appeal of our culture was highlighted with our most recent employee pulse survey showing 95% of our people would "recommend GPE as a great place to work". We continue to develop our talent from within and we were delighted to promote Janine Cole to the Executive Committee this year, in addition to making several other internal promotions to the Senior Management Team. Following our achievement of the National Equality Standard accreditation in April 2020, we continue to implement initiatives to progress our Inclusion and Diversity strategy, with valuable participation from our Non-Executive Directors. In November 2020, the Nomination Committee approved our Inclusion and Diversity Roadmap which sets a clear priority to improve the diversity of the Executive Committee. During a challenging year, the physical and mental wellbeing of our people has been a key priority. Accordingly, we took the opportunity to formally review the wellbeing programme, which we launched in 2019, to focus on the physical and mental health, work-life balance and financial wellbeing of our people. We have also continued our Board Engagement Programme to enable the Board to listen and respond to feedback from employees and to discuss important matters impacting the business. Our employee retention remains high at 91% and we continue to focus on growing the breadth, depth and diversity of our talent, providing focused development support where needed.
Meeting occupier needs We fail to identify and react effectively to shifting patterns of work space use and/or understand and provide spaces that meet quickly evolving occupier needs. This could lead to GPE failing to deliver space and lease terms that occupiers want and/or an inappropriate mix of flex versus traditional space, resulting in poor investment returns, potentially stranded assets and losing occupiers to competitors. Strategic priorities Progress sustainability agenda; Drive innovation and change; Continue to grow Flex offer; COVID-19 response; Deliver and lease the committed schemes; Prepare the pipeline Net risk movement over the last 12 months No change	Quarterly review of individual property business plans and the market more generally, including review of property IRRs. Portfolio Management quarterly updates to the Executive Committee with reporting at each scheduled Board meeting. Board and management review of GPE's flexible space offer across the portfolio, including broadening our product offering. The Group's in-house Occupier and Property Services teams have proactive engagement with occupiers to understand their occupational needs and requirements with a focus on retaining income, including through meetings and regular occupier surveys which help us track our Net Promoter Score. Executive Committee members meet with our top 20 occupiers at least once a year. Our Director of Workplace and Innovation is responsible for keeping the Board up to date on market developments and incorporating innovation in the GPE portfolio. Board annual strategy review, including market updates received from third parties.	We have had another busy year of leasing, completing 27 new lettings and securing £12.9 million of rent at a 2.4% premium to March 2020 ERVs, whilst continuing the successful roll-out of our flexible space offering. Over the past 12 months, our flexible office space has increased from 219,600 sq ft to 266,700 sq ft, or 13.2% of our office portfolio, and we are also currently appraising a further 134,100 sq ft of flexible space across the portfolio. This year we also delivered 16,300 sq ft of new Flex+ space at 16 Dufour's Place, W1, which provides occupiers with added service provision as well as communal facilities such as a courtyard and ground floor café. To date the building is already 71% let or under offer. Based on our successes to date at 16 Dufour's Place, we are rolling out our Flex+ offer to a further six buildings to capture the growing demand for this innovative offer in prime locations. We continue to design and innovate in the areas of sustainability, technology, wellbeing and service provision to meet evolving occupier needs. We were very encouraged by this year's independent customer satisfaction survey which updated our understanding of how our occupiers view their buildings and the services we provide. Encouragingly, our Net Promoter Score increased from +25.3 in 2020 to +42.0 in 2021, materially ahead of our peer group average of minus 6.1.
Poor capital allocation decisions We make poor decisions regarding the allocation of capital such that we buy, sell, hold or develop the incorrect buildings resulting in inadequate investment returns. Strategic priorities Progress sustainability agenda; Drive innovation and change; Continue to grow Flex offer; Prepare the pipeline Net risk movement over the last 12 months Increased	Regular reviews conducted of individual property IRRs, including quarterly review of individual property dashboards and the market generally. Weekly investment meetings held and regular dialogue maintained with key intermediaries. Portfolio Management, Development and Leasing quarterly updates to the Executive Committee with reporting at each scheduled Board meeting. Strategy review forecast on an asset-by-asset basis provides a business plan for each individual property which is reviewed against the performance of the business as a whole. Detailed due diligence processes in place to help ensure appropriate returns.	Capital allocation risk has increased in view of uncertain and potentially volatile market conditions. With limited availability of attractively priced acquisition opportunities and the depth of opportunity in our existing portfolio, we made no acquisitions in the year. However, taking advantage of strong investor demand, we made sales of £16.0 million in the year. We also committed to the substantial repositioning of 50 Finsbury Square, EC2 which is due for completion in mid-2022.
Health and safety A health and safety incident (including by our contractors) results in loss of life, significant injury, widespread infection, and financial and/or reputational damage to GPE. Furthermore, significant changes in health and safety (including fire safety) regulations and practice driven by government intervention following events such as COVID-19 and Grenfell may increase compliance and development costs and/or risks of non-compliance. Strategic priorities Progress sustainability agenda; Drive innovation and change; Continue to grow Flex offer; COVID-19 response; Deliver and lease the committed schemes; Prepare the pipeline Net risk movement over the last 12 months No change	Quarterly Health and Safety Committee meetings are held with formal quarterly reporting on health and safety to the Executive Committee and regular reporting to the Board, including on progress against our Health and Safety strategy. Regular site health and safety checks are undertaken by Executive Committee members, Development and Project Management team members and third parties. Pre-qualification and competency checks are undertaken for contractors and consultants with contractor management processes in place. Formal reporting on near misses/significant incidents and accidents. Annual cycle of health and safety audits. Online health and safety management system in place for the business. Comprehensive fire safety management procedures in place. Activities are undertaken to monitor and raise employee awareness and understanding of health and safety matters, including through employee engagement surveys. Comprehensive health and wellbeing programme in place for employees with mental health first aiders and an employee assistance programme. Pandemic policies and procedures in place for head office and portfolio buildings.	We continue to focus on ensuring that we have a best-in-class and proactive health and safety culture. During the year, considerable focus has been given to ensure that our buildings and development sites have remained 'COVID-19 Secure' for our occupiers, suppliers and employees. Cleaning and air quality processes were strengthened and twice weekly lateral flow testing was introduced for employees, and strongly recommended for visitors, to further support the health and safety of all those using our buildings and head office. Employee mental health and wellbeing remains a key focus. Recognising the potential impact of the pandemic across our workforce, we continued our roll-out of mental health first aider training and wellbeing webinars in addition to home ergonomic work station assessments. During the year we refreshed our Health and Safety Committee to ensure there was senior representation from across all areas of the business. We improved reporting on asset level compliance, with consultants assigning risk ratings to all assets, allowing us to better pinpoint where proactive health and safety interventions were required. With the Grenfell Tower Inquiry still in progress, and the likely legislative changes to be implemented through the Building Safety Bill and Fire Safety Bill, we are actively monitoring developments and are proactively reviewing our own fire safety practices and procedures. The Group had no reportable accidents during the year. Where accidents do occur, we work with our supply chain on accident investigation to understand lessons learned and opportunities for improvement, to consider how the work could have been set up differently and to understand how, as a client, we can better support our suppliers. We continue to undertake activities to raise employee awareness and understanding of health and safety requirements. In our most recent employee pulse survey, 93% of respondents agreed or strongly agreed that the organisation takes health and safety seriously, whilst 88% felt that they had received the necessary health and safety training to do their jobs.
Cyber security and infrastructure failure A cyber attack or infrastructure failure could lead to business or network disruption within our portfolio or loss of information or occupier data. There is the potential for greater impact on Flex+ occupiers to which we provide increased infrastructure support and high risk occupiers. This may result in litigation, reputational damage, financial or regulatory penalties. Strategic priorities Progress sustainability agenda; Drive innovation and change; Continue to grow Flex offer; COVID-19 response; Deliver and lease the committed schemes; Prepare the pipeline Net risk movement over the last 12 months Increased	IT and cyber security updates are regularly reported to the Executive Committee and the Board. Our new three-year IT strategy was adopted in March 2021. Cyber security systems and controls are in place and regularly reviewed, with external support, against best practice. A head office and portfolio IT risk register is maintained. The Group's IT Business Continuity Plan is regularly reviewed and tested and recovery of data at an off-site recovery centre is tested during the year. Regular testing of IT security is undertaken including penetration testing of key systems. The Group's data is regularly backed up and replicated. The Group's Cyber Third Party Management and Security Policy and processes are designed to identify and control cyber-related risks arising from our third-party relationships. Employee awareness training on cyber risk is undertaken regularly. Cyber risk insurance is in place. Each building has a bespoke Emergency Action Plan, maintaining appropriate systems to mitigate any infrastructure failure.	Given the increased incidence of attempted cyber attacks on UK businesses, we have continued to invest time and resource into our cyber security measures, both in our head office and across our portfolio.

APPENDIX B

Directors' responsibility statement

The following statement is extracted from the 2021 Annual Report and Accounts and is repeated here for the purposes of compliance with DTR 6.3.5R.  This statement relates solely to the 2021 Annual Report and Accounts and is not connected to the extracted information set out in this announcement.

We confirm that to the best of our knowledge:

· the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;

· the Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

· the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position, performance, business model and strategy.

This responsibility statement was approved by the Board of Directors and is signed on its behalf by:

Toby Courtauld Nick Sanderson

Chief Executive   Chief Financial & Operating Officer

19 May 2021     19 May 2021

 

END

 

 

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