The Crown Estate Annual Report and Accounts 2015/16 Conscious commercialism in action Our year, our business Our risks and opportunities Financial statements and strategy Our approach to risk management 42 The Certificate and Report of the 87 The Crown Estate at a glance 2 Our principal risks and opportunities 44 Comptroller and Auditor General to the Houses of Parliament Chairman’s statement 4 Our viability statement 47 Consolidated statements of 91 Chief Executive’s review 6 comprehensive income Conscious commercialism Our performance Consolidated balance sheet 92 in action Interim Chief Financial Officer’s review 48 Consolidated cash flow statement 93 St. James’s Market 12 Resources and relationships review 50 Consolidated statement of changes 94 in capital and reserves Banbury Gateway 14 Governance Notes to the consolidated 95 Westermost Rough 16 Chairman’s review 58 financial statements Windsor Great Park 18 The members of our Board 60 Ten-year record (unaudited) 119 Glossary 120 Creating value, in context The members of our 62 Management Board Our business model 20 Board evaluation exercise 64 Our investment strategy 23 Board activities 66 Material issues 24 Committee reports 69 Our markets 26 Complying with the 1961 Act, 2011 77 Our review of activities 30 Code of Good Practice, and the 2014 Governance Code Statement of The Crown Estate Commissioners and Accounting Officers’ responsibilities 80 Remuneration Report 81 Continuing to integrate What’s next The Crown Estate is an independent In this, our fourth integrated annual Even though we have come a long business, created by Act of report, we have continued to build on the way, we know that there is still more to Parliament. Our role is to make progress made so far. We have refined do on our integrated reporting journey sure that the land and property we several elements to improve clarity and to demonstrate clearly how we create invest in and manage are sustainably connectivity, for example our business and maintain value. In order to provide worked, developed and enjoyed to model, our strategic objectives and additional credibility to what we say, deliver the best value over the long connectivity between material issues and we are working to add rigour to our KPI term. At the heart of how we work is risk. In the case of our strategic objectives and Total Contribution data collection an astute, considered, collaborative we have reduced these from six to four, processes and to ensure that the data approach that helps us create better to reflect our business. is robust. To this end we are gradually transferring the responsibility for all data success for our business and for We have given a few examples of Total (not just the pure financial) to our finance those with whom we work. We call Contribution indicators in the report which function and increasingly receiving this conscious commercialism. helps us to appreciate the value of some of independent assurance from PwC for those activities not normally accounted for Our vision is to be a progressive limited assurance or ‘Insight’ on that data in economic terms. Values for many more commercial business creating and on our Total Contribution approach. significant value beyond financial indicators will feature in a Total Contribution return. We work with partners and report to be published later this year. An integrated report is aligned with The Companies Act 2006 (Strategic Report stakeholders to grow our business, The approach helps to highlight the and Directors’ Report) Regulations 2013. outperforming the market whilst positive and negative impacts of what we delivering sustainable long-term do directly, commission or enable on the In the opinion of the Audit Committee, returns. In everything we do, land we manage. This has great potential our 2015/16 Integrated Annual Report is in we are guided by our values – to influence decision-making and further to alignment with the International Integrated commercialism, integrity integrate our thinking. For further detail see Reporting Council (IIRC) Framework. and stewardship. www.thecrownestate.co.uk/our-business/ how-we-measure-value. To The Queen’s Most Excellent Majesty A May it please Your Majesty, The Crown Estate Commissioners take leave to submit this their sixtieth PwC has provided limited assurance against ISAE 3000 and ISAE 3410 standards for selected key data in 2015/16. Report and Accounts, in obedience to sections 2(1) Where you see the ‘Assurance Symbol’ in this report it indicates data has been externally assured. For the full and 2(5) of the Crown Estate Act 1961. limited assurance opinion and our reporting criteria see www.thecrownestate.co.uk/pwc-statement. 1 The Crown Estate Integrated Annual Report 2015/16 01_TCE_contents_page_design_review_LE.indd 1 28/06/2016 10:34 From the backbone of the West End strategy and business our year, Our to the UK’s seabed and from regional retail to rural land – our approach combines smart business thinking with a long-term approach. We call this conscious commercialism. It’s about being astute and enterprising in how we create value today while considering the long-term effects of what we do and how we do it. Across Regent Street, St James’s and our assets throughout the country, our approach helps us to outperform the market, generate growing returns for HM Treasury and make a greater Total Contribution – economically, socially and environmentally. Key numbers Net revenue profit Financial resources Our people £2.4bn 83% £304.1m Generated for HM Treasury Great Place to Work employee +6.7% over last ten years engagement score Capital value Physical resources Our know-how £12bn 19.3% £12.9bn Property value Total Return. Outperforming our three-year annualised IPD +12.2% bespoke benchmark of 16.2% Property value* Natural resources Our networks 5% 77% £12bn Improvement in Suppliers paid +9.7% emissions intensity within 30 days * Including share of joint venture properties and other property investments. The Crown Estate Integrated Annual Report 2015/16 1 CrownEstates_AR2016.indb 1 22/06/2016 11:15 The Crown Estate at a glance It has been a fast-paced and productive year across our diverse portfolio The structure in this section reflects the way has been divided into Central London and we were organised over the last financial year. Retail, with Windsor incorporated into Rural & During the year we announced a restructure Coastal. We have also established a separate designed to make us more agile as a progressive Scotland Portfolio ahead of its devolution to business. From 1 April 2016 the Urban Portfolio the Scottish Government. Urban • We manage, invest in and develop property assets in central London and prime retail and leisure locations across the UK. • Our Central London Portfolio includes the whole of Regent Street and much of St James’s, and we are delivering a £1.5 billion investment and redevelopment plan. • We are one of the largest owners of major retail schemes outside the capital with 14 retail parks, three shopping centres and two leisure destinations. • We are active asset managers and manage strategic joint ventures containing around £1.9 billion of our partners’ funds. • Placemaking is at the heart of our development activity as we see enhancing the streets and public realm around our buildings as an important factor in the long-term out-performance of our properties. Revenue (£m) Property valuation (£m)* Revenue by activity (£m) Other 4.1 Retail – West End 2016 277.7 2016 9,119 Industrial 6.0 92.6 2015 263.7 2015 8,196 Residential 10.8 Retail – 2014 248.9 2014 6,867 Offices – Rest of UK Rest of UK 24.7 2013 239.5 2013 5,928 7.0 2012 225.3 2012 5,480 Retail and Offices – West End leisure parks * Including share of joint property and other property investments. 75.4 57.1 2 The Crown Estate Integrated Annual Report 2015/16 CrownEstates_AR2016.indb 2 22/06/2016 11:16 Our year, our business and strategy and business our year, Our The Crown Estate at a glance Rural & Coastal • We are one of the country’s largest rural It has been a fast-paced and productive landowners with around 336,000 acres of agricultural land and forests, with our major interests focussing on prime rural year across our diverse portfolio and strategic land. • We also manage mineral rights, renewable energy, aquaculture, marinas, ports and harbours, and around half of the UK’s shoreline. • Through our in-house expertise we identify and acquire strategic land sites which are promoted through the planning process and sold to developers. Revenue (£m) Property valuation (£m) Revenue by activity (£m) Cables and pipelines 0.5 Agriculture 2016 49.5 2016 1,621 21.6 Aquaculture 2015 50.5 2015 1,653 3.7 2014 48.5 2014 1,559 Residential Coastal 3.7 2013 46.5 2013 1,437 17.1 2012 43.3 2012 1,393 Forestry Minerals 0.5 2.4 Energy, Minerals & Infrastructure Windsor • We are responsible for managing the whole of the Windsor Estate, encompassing some 6,400 hectares (15,800 acres), where our role is to manage and maintain this historic estate, combining progressive commercial management with careful stewardship. Revenue by activity (£m) Other Residential 1.1 3.9 Commercial Visitors property 3.0 1.6 • We are managers of the UK’s seabed. Revenue by activity (£m) • Our business includes wind, wave and Renewables Aggregates Revenue (£m) tidal power, marine aggregates and 22.9 20.3 minerals, cables and pipelines. 2016 9.6 • We play a unique role in developing and 2015 8.4 helping sustain UK energy supply and Cables and 2014 7.9 infrastructure by working in collaboration pipelines 2013 7.1 with a wide range of organisations.