Chief Executive’s overview and goals
The year saw us deliver a sound performance in challenging circumstances, largely due to a diversified portfolio based on high quality, sustainable assets and supported by a talented team which we strengthened during the year. The Crown Estate is an organisation focused on long-term achievement and this strategy will place us in a good position to face the difficult months ahead.
The year under review was characterised by an already challenging property sector becoming markedly worse as the onset of the credit crunch tipped the UK into a deep recession. Neither The Crown Estate nor our customers are immune to a global crisis of such daunting scale and we have had to contend with a number of difficult circumstances including, tenant defaults, which have affected our income stream.
Nevertheless, we have reported a creditable financial performance which bears testimony to our continued focus on high quality assets, sustainable growth and the importance of medium- and long-term performance over short-term gain. Our people are crucial to the delivery of that strategy and we have continued to build our team, bringing a number of new people into the organisation during the year, particularly in the marine estate as we prepare for a major expansion in offshore renewable energy generation.
Our revenue (excluding service charges) for 2008/09 rose by 7.1% to £285.8 million. The net income surplus, which is the profit which we pass to the Treasury for the benefit of UK taxpayers, increased by 6.1% to £226.5 million.
Reflecting the downturn in the UK commercial property sector, however, the total value of our directly held property portfolio reduced by 16.3% to £5.5 billion. Our total capital value at the end of the year was £6 billion, representing a fall of 18% over the previous year.
We monitor our performance against the Investment Property Databank (IPD) Index, which benchmarks The Crown Estate against our peers. For 2008/09, our total return was –15.8%, outperforming the IPD Quarterly Index which reported a return of –25.5%. This follows three consecutive years in which we outperformed the Index.
The estates
The urban estate reported revenue excluding service charges from directly held property and income from indirect investments of £213.3 million, an increase of 3.3%. The portfolio fell in value by 21.4% to £4.2 billion.
On the marine estate, we achieved income growth of 18.5% to £49.7 million, with property value increasing by 10.6% to £409.5 million. The marine estate represents a major opportunity for The Crown Estate, as we continue to play our part in helping the UK meet its renewable energy targets. This year we signalled our commitment to co-investing in the marine estate alongside other developers, and are moving decisively from being a relatively reactive manager of this part of our portfolio to a much more proactive role.
The rural estate has recorded another good performance, with revenue up by 18.9% to £26.7 million and values also rising by 1.9% to £919.5 million. Agriculture has enjoyed a period of prosperity but is now facing a challenging period. We are actively seeking opportunities where we can co-invest to support our tenants' businesses and help them through the recession.
The Windsor Estate continues to make an important contribution to our performance, with the cost of running the estate down by 3.5% to £2 million, although values were down by some 4.3% to £165.5 million. Windsor provides an outstanding public amenity, incorporating a world-class heritage landscape which we are proud to manage.
“The Crown Estate is an organisation focused on long-term achievement and this strategy will place us in a good position to face the difficult months ahead.”
It is clear to us that a successful business has to be a sustainable business. For The Crown Estate sustainability is about balancing a strong financial performance with the need to positively contribute to the environment and communities in which we operate. Our report this year therefore integrates our sustainability activity within the reporting of our business activities as denoted by a green tinted heading.
Looking ahead
As we head into more difficult times, it is important that we keep sight of our long-term goals and continue to pursue the ‘Going for Gold' targets you see here. Achieving our objectives may take a little longer than we initially hoped, because of the poor business environment, but we will not allow ourselves to be deflected from our long-term aims. We will also maintain our focus on our core values of commercialism, integrity and stewardship.
Finally, I wish to place on record my sincere thanks to Ian Grant, our Chairman, who retires at the end of this year. The Board and staff wish him well. Ian has been an outstanding Chairman and an excellent ambassador for The Crown Estate. He has provided a firm strategic hand on the tiller at Board level while also providing great support for me personally. I thank him unreservedly.
Roger Bright CB Chief Executive
Comparative revenue figures are stated prior to the change in accounting estimate discussed in the 2007/08 financial statements.
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