Governance
Financial Statements
Additional Information
Strategic Report
Group performance and alignment We have set out on pages 20 to 23, the Key Performance Indicators (KPIs) that we currently use to monitor the success of the business. In order to appropriately align executive remuneration with business performance we incorporate KPIs within our incentive schemes. For both 2023/24 and 2024/25, the KPIs that we are using to determine variable remuneration are set out in the table above. The remaining 40% of the annual bonus is determined by corporate objectives. The key performance highlights noted by the Committee included: / The total property return was ahead of the MSCI UK Quarterly Property Index for the year, and our long-term record of outperformance has been maintained over one, three, five and ten years, and since launch in 2005; / EPRA earnings rose by 2.2% compared to 2022/23; / The portfolio ERV increased by 3% over the year; / Net property income rose by 4.5% compared to the previous year; / Further progress on the installation of on-site renewables, increasing capacity by 184%; / Contracts exchanged on the disposal of two part vacant office assets, facilitating loan repayment and dividend increase; / The proportion of the portfolio’s EPC ratings (A-C) has increased to 80% from 76% last year; and / Scope 1 and 2 greenhouse gas emissions are 16% below the 2019 baseline.
Measure
Comparator
Annual bonus
Long-term Incentive Plan
Total return
Relative to comparator group
(30% weighting)
Total property return
Relative to MSCI UK Quarterly Property index Relative to comparator group Absolute target range
(30% weighting)
(33% weighting)
Total shareholder return
(33% weighting)
EPRA EPS
(33% weighting)
Annual bonus awards for 2023/24 The Executive Directors were set a number of challenging targets for this year, comprising a combination of financial measures and corporate and personal objectives. The two financial measures were total return and total property return. The actual outcomes are set out in the Annual Report on Remuneration, but the overall result was that the Directors earned an estimated 46% of the maximum award available under these financial measures. The corporate objectives were set to ensure that specific key strategic targets were focused on. These included targets relating to improving income and occupancy, the disposal of assets in line with the alternative use strategy, identification and evaluation of growth opportunities and sustainability, including progress against the net zero carbon pathway. The Committee considered the extent to which the Executive Directors had met the objectives, and concluded that good progress had been made against many, but noted that occupancy had remained stable and that operating costs had increased significantly this year. Overall, the Committee considered that an outcome of 65% of the maximum award for each of the two Executive Directors were merited against the corporate objectives. In aggregate, annual bonus awards for the two Executive Directors are 54% of the maximum award (2022/23: 77% of maximum). The Committee considered the overall bonus awards against the reported financial results and determined that the proportion of the bonus deferred be set at a higher than standard 55% for the Executive Directors.
The Committee considered the formulaic bonus outcome in the context of the Group’s overall performance for the year. The key highlights of performance for the year are set out earlier in this statement. The Committee concluded that it was satisfied the formulaic bonus outcome was a fair reflection of overall Group performance during the past financial year. Long-term Incentive Plan awards (performance period to 31 March 2024) The LTIP provides the link between the long-term success of the Company and the remuneration of the whole team. The awards made under the Long-term Incentive Plan (LTIP) in June 2021 were based on three performance conditions measured over the three-year period ended on 31 March 2024. The Committee has assessed the extent to which these three performance performance conditions were total shareholder return, total property return and growth in EPRA earnings per share. The actual outcomes for these conditions are set out in the Annual Report on Remuneration conditions have been met. The three equally weighted and give rise to an overall award of 49.2% of the maximum granted. As explained above, the Committee concluded that it was satisfied the formulaic outcome was a fair reflection of overall Group
performance over the performance period.
Picton Property Income Limited / Annual Report 2024
111
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