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                     * accounts available to download in PDF format |
WE BELIEVE THAT RIGOROUS RISK ANALYSIS WILL ENABLE US TO DELIVER HIGHER RISK-ADJUSTED RETURNS.
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Group pre-tax profit for 2000 was £97.5m (1999 £54.2m) which combined with a revaluation surplus of £175.5m (1999 £111.9m) and gains on exchange produced a pre-tax total return on property assets of 16.4% (1999 14.0%). The 1999 figures above have been adjusted to reflect a full year's wholly owned participation in Grosvenor Americas. Further details on the key financial aspects underlying our results are given in the financial overview (available to download in the accounts section). Over the last five years our return has been 17.6% per annum. This compares with 16.4% per annum on the same basis at the end of 1999. Our pre-tax weighted average cost of capital (WACC) was 10% in 2000 and over the last five years has averaged 12.1%; against this we have generated added value of £342m. We continually review our cost of capital and in 2001 it is 9.1%. We calculate our WACC using the Capital Asset Pricing Model as a base; the key judgement elements are the equity risk premium and volatility of returns (Beta). We consult widely before reaching a conclusion. Following the reorganisation of the Group, capital allocation to each of the four regional Operating Companies is the focus for the central team. A range of factors are taken into account, the most significant of which is an analysis of the economic prospects resulting from in-depth research, a significant part of which is produced in-house. The charts below show property assets both by region and by sector. A total of £4.6bn of assets is managed by the Group, including £2.3bn of third party funds. |
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| Value of Grosvenor's property assets by Region £2.2bn | ||||
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| Value of Grosvenor's property assets by Sector £2.2bn | ||||
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| Total Assets under Management £4.6bn | ||||
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During the course of the year we embarked on a renewed evaluation of risk. We firmly believe that through continually striving for a deeper understanding and analysis of the principal risks facing the Group we will be able to achieve higher risk-adjusted returns. Senior management of all disciplines throughout the Group have reviewed the risks that could, in certain circumstances, have a significant financial impact. This is as much about the loss of potential opportunities as the crystallisation of a possible liability. Each region has a team of finance professionals supporting their local board while working within a framework of Group financial parameters. The effect of these parameters is to empower local boards and finance teams in driving forward their regional businesses and to ensure an appropriate flow of information to the centre. A Group finance board has been established with a membership of regional finance directors and other senior finance personnel, chaired by me. This Board meets regularly and addresses developmental issues and provides a forum for the adoption of co-ordinated solutions to common issues. The Group has implemented an effective world-wide financial reporting system that has speeded up conventional processes and which will be further enhanced in the future. Additionally, the launch of the Group's International Business Intelligence System will provide ready access to a database of key business knowledge as the system is expanded. With strong growth in shareholders' funds, increased to £1.56bn and gearing down to 36.5%, the Group is in a strong position going forward into 2001. Jonathan Hagger |
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