The KPIs comprise financial and operational measures and each links to the three pillars of our strategy.
Adjusted earnings per share (EPS) is the Group’s primary profit measure and reflects underlying profit divided by the average number of shares in issue and is calculated based on EPRA guidelines, factoring in some Company specific adjustments.
In 2020, adjusted EPS reduced by 88% to 1.6 pence per share. This reflects the restatement of the 2019 EPS from 28.0 to 12.8 pence following the rights issue in the year. The most significant factors in the decline were reductions in the Group’s net rental income and earnings from Value Retail as a consequence of Covid-19 and the intermittent closures across all properties since the pandemic.
Net debt is the measure by which we monitor the indebtedness of our business, and comprises borrowing less cash and deposits.
The net proceeds of the rights issue and disposal of VIA Outlets, totalling £804 million were the main drivers of the £609 million reduction in net debt during 2020. These were partially offset by capital expenditure, cash outflow from operations and foreign exchange movements.
The Group's covenant metrics were all in line with or exceeded the Group’s internal guidelines with the exception of interest cover. This metric was significantly adversely impacted by the 41% like-for-like reduction in net rental income. The ratio will remain under pressure until the Covid-19 restrictions are lifted and the Group's net rental income levels begin to recover. The Group continues to actively pursue disposals to reduce debt.
Total property return (TPR) measures the income and capital growth of our property portfolio. It is calculated on a monthly time-weighted basis consistent with MSCI methodology. We judge success in generating property returns by comparing our performance with weighted MSCI All Retail benchmark which was 1.4% in 2018 and -3.0% in 2019. Our 2020 MSCI benchmark is not yet available.
During 2020, the Group’s properties produced a total return of -18.3%. For the flagship assets, the total returns were -33.7% in the UK, -11.9% in France and -14.8% in Ireland. The premium outlets generated a total return of -7.5%.
Valuation changes were the predominant driver impacting returns, resulting in a capital return of -20.9%, with reduced income levels causing approximately half of the reduction and higher yields approximately 40%. Income returns reduced by 150 basis points to 3.2%.
Net rental income (NRI) is the Group’s primary revenue measure. Like-for-like NRI growth is key to earnings and dividend growth.
Like-for-like NRI declined by 41.0% in 2020. All sectors suffered a decline due to the impacts of the Covid-19 pandemic on revenue streams coupled with increased provisioning against receivables due to lower collection rates and increased risk of further tenant failure.
The UK was the worst affected, with UK flagships and retail parks suffering like-for-like declines of -51% and -42% respectively, compared to -18% in France and -30% in Ireland.
Consistent with our view of the business, NRI from premium outlets has been excluded from this metric as these are externally managed. Proportionally consolidating the premium outlets NRI would result in Group like-for-like NRI reduction of -43%.
Keeping our properties occupied ensures we generate rental income and enlivens our destinations. The occupancy ratio measures the amount of space which is currently let. The ratio is calculated in line with EPRA guidance using the estimated rental value (ERV) of occupied space.
Occupancy fell below our 97% target in 2020, with 94.3% of the portfolio occupied at the end of 2020, a 290 basis point reduction compared to 2019. All sectors suffered a decline, with the UK flagships the most impacted.
Year end occupancy across our flagships was 93.2% in the UK, 95.3% in France and 98.2% in Ireland.
Our leasing strategy is designed to improve brand mix towards winning brands and categories, and differentiate our assets. This KPI shows the amount of income secured across the investment portfolio, including new lettings and lease renewals.
Leasing levels reduced by 35% to £14.6 million in 2020. £5.6 million of the decline was due to challenging leasing across the UK flagships, exacerbated by the ongoing closures resulting as a result of the pandemic.
In total there were 274 lettings, compared to 361 in the prior year. For principal leases, the rent was 9% below December 2019 ERVs and 17% lower than the previous passing rent.
Reducing carbon emissions is a key sustainability target. This ratio measures the amount of emissions from our properties and facilities, including corporate offices. The denominator is adjusted profit before tax. This measure demonstrates our progress in decoupling business growth from increasing carbon emissions.
GHG emissions fell by 29% in 2020 as energy demand declined. However, the ratio has increased substantially this year, reflecting the significant decrease in the profit denominator.
Our focus on energy efficiency and investment in renewables across the estate continue to underpin our long term strategy to minimise carbon emissions for the business.
Our talented people are key to our success and we strive to retain, engage and develop them. We continue to monitor voluntary staff turnover, together with other people metrics including the annual staff survey, to highlight any potential signs of demotivation or other people-related issues and include both corporate and centre-based employees in this measure.
Voluntary employee turnover across the Group fell marginally from 10.1% in 2019 to 9.7% in 2020. Voluntary turnover in the UK and Ireland increased from 9.7% to 10.4% year-on-year, offset by a reduction from 11.4% to 7.8% in France.
We continue to monitor leavers, retention rates and other employee metrics to ensure we are retaining talent within the organisation. Turnover remains low compared to the wider industry.