Shareholder Executive

Covent Garden Market Authority

Purpose

Covent Garden Market Authority (CGMA) owns and is responsible for the operation of New Covent Garden Market. It manages the Market site, provides essential services and undertakes the maintenance of buildings and roads.The Authority lets trading premises and offices to tenants, but takes no part in the actual trade of the Market which is the responsibility of individual traders.

As well as providing the physical infrastructure for its tenants, CGMA is dedicated to supporting and promoting its tenants’ businesses.

Legal Status and Ownership

CGMA is a statutory corporation whose duties are set out in the Covent Garden Market Acts. It is responsible for providing facilities for a horticultural wholesale market and it owns and manages the freehold of the 57 acre market site at Nine Elms, London SW8.The new Covent Garden Market began operating from this site in 1974, following the move of the old Covent Garden Market from its original home in London WC2.

CGMA is accountable to the Department for Environment, Food and Rural Affairs (Defra).

Government Objectives

CGMA generates revenues from renting trading and office space to wholesalers, distributors and related fresh produce businesses. It is required to ensure that its revenues are sufficient to cover costs and break even taking one year with another.

It is Defra’s long-term aim to transfer control of the Market from the Authority into new ownership so the Market can be run independently of Government. However, this can only be achieved with primary hybrid legislation. In the meantime, Defra recognises that the Authority is best placed to lead the redevelopment of the Nine Elms site to deliver a secure future for the Market. For this reason, Defra will defer the request for legislation to change the Market’s ownership for the foreseeable future so the redevelopment project can proceed unhindered.

Financial Performance

£m	2009	2008	2007
Turnover	13	14	13
Operating Profit1	2	1	0
Profit/(Loss) for the year2	0	1	0
Net Cash flow	(0)	0	(0)
Net Operating Assets	3	5	7
RONA	58.9%	27.9%	4.8%
Shareholders' Funds	17	17	16
Dividends	-	-	-

Dividend policy

Since 2000, profits have been retained to assist with the Authority’s investment needs, specifically for its redevelopment project.Therefore CGMA does not currently pay a dividend (although historically surpluses have been transferred to Defra annually).

Performance targets

CGMA’s primary target is to maximise the trading and office space let throughout the Market. Other targets include providing services (such as utilities provision) efficiently and at best value for money for tenants, and to provide tenants with a high level of customer service. In addition, CGMA is seeking to improve environmental performance at the Market.

Notes

¹ Operating profit pre-feasibility study costs. Note that 2009 figures include a Government cost of capital charge of £0.6m not applied in previous years.
² Profit after tax.

Commentary

During 2008-09, CGMA generated total trading income of £13.2m (2007-08: £14.0m) and operating profit, before redevelopment feasibility study costs, of £1.6m (2007-08: £1.4m).

Total income for the year declined by 5% compared with the previous year, which reflects cost savings passed on to tenants by a reduction in their service charge.The General Service Charge for the year was £11.93 per square foot (2007-08: £12.68). Rental income and other operating income increased marginally for the year.

Profit after tax was £0.1m (2007-08: £0.5m) after absorbing increased costs associated with the redevelopment project.

In terms of the Market traders’ activities, the Market’s total turnover increased by 11%. However, the economic environment has been challenging and some of the increase reflects food price inflation and the weak sterling exchange rate.Within this increase, wholesale distribution was up 16%. Fruit and Vegetable wholesaling rose by over 8%, whilst the Flower Market declined 1%.

Trading space let in the Market was 94% (2007-08: 95%).This decrease reflects both the downturn in the economy and that Market leases have a limited time to run before renewal in April 2010.

In September 2006, CGMA announced the start of its project to redevelop New Covent Garden Market and replace its 35 year old infrastructure with fresh, modern facilities for its tenants and their customers. Extensive work has been carried out to test the project’s financial and functional feasibility. In October 2008, the Government gave the green light for CGMA to move to the next phase and seek a private development partner to deliver a new market on the site.