introducing true value methodology · 2016-01-05 · true value of the plaza / fresh market 1...

Introducing True Value Methodology

Pat-Nie Woo

8 July 2015

Introducing True Value

Conclusion

Local Case Study – Link Reit

International Case Study – NS Railways

© 2015 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. Printed in Hong Kong.

3

KPMG True Value Video

https://www.youtube.com/watch?v=jiByddiW0Uw


4

Three drivers of internalization


5

KPMG’s three step True Value methodology


6

A generic ‘true’ earning bridge

EARNINGS ECONOMIC SOCIAL ENVIRONMENTAL ‘TRUE’ EARNINGS

Revenue Cost Earnings Economic positive

Economic negative

Social positive

Social negative

Environ- mental positive

Environ- mental

negative

‘True’ earnings


Conclusion




8

Link Reit


9

Our assessment methodology

Revealed Preference Approach

True Value of AEs

Life Satisfaction Approach

■ This involves inferring the implicit prices placed on a good by individuals, by examining their behaviors in a similar or related market – asking individuals (through surveys) specific questions that then allow us to use established valuation tools to quantify values

■ An example would be travel time or dwell time to, and at Lok Fu Plaza and Fresh Market– which can be valued using transport appraisal methods used by the HK Government as a proxy for the community value created

■ This is a form of revealed preference – used extensively by overseas Governments – which (through a survey) determines the monetary value of community impacts, with reference to two indicators (changes in ‘life satisfaction’ from AEs and commensurate monetary values that would also bring about a similar level of ‘satisfaction’ for the individual concerned).


10

Revealed Preference Approach

True Value of the Plaza / Fresh Market

1

Travel time and cost

Travel time was converted into monetary values by multiplying the

respective value of time

2

Time spending at the Plaza / Fresh Market

Time spending was converted into monetary values by multiplying the

respective value of time

3

GDP contribution from additional spending at the

Plaza / Fresh Market

4

True Value of the Lok Fu Plaza / Fresh Market


11

Findings: Catchment area increased

Catchment area of survey

Project Site

Increase in catchment area after AE

Wong Tai Sin

Other Kowloon districts

Kowloon Tong

Kowloon City

Diamond Hill

Hong Kong Island

New Territories

Hung Hom


12

Findings: Number of footfall increased

No. of induced shopping trips + 29%

41,800 47,400

10,000 15,100 11,800

15,100 12,500

16,500 2,500

4,100

7,500

12,400 86,100

110,600

-

20,000

40,000

60,000

80,000

100,000

120,000

Before AEI After AEI

Num

ber o

f sho

pper

s

Number of shopping trips by districts, Lok Fu Plaza

Lok Fu Wong Tai SinKowloon City and Kowloon Tong Other Kowloon districtsHong Kong Island New Territories

10,200 11,400

2,200 3,500 2,800

3,200 2,500

3,000 300

500

1,100

1,800 19,100

23,400

-

5,000

10,000

15,000

20,000

25,000

Before AEI After AEI

Num

ber o

f sho

pper

s

Number of shopping trips by districts, Lok Fu Fresh Market

Lok Fu Wong Tai SinKowloon City and Kowloon Tong Other Kowloon districtsHong Kong Island New Territories

No. of induced shopping trips + 23%

After AE


13

Findings: Visit behaviours improved

Visiting Frequency Duration of stay Spending

Lok Fu Plaza

Lok Fu Fresh Market

+ 10% + 10% + 20%

+ 7% + 14% + 20%

8 times 9 times

- 1 2 3 4 5 6 7 8 9

10

Before Market AE After Market AE

Num

ber o

f vis

its p

er m

onth

12 times 14 times

-

2

4

6

8

10

12

14

Before Plaza AE After Plaza AE

Num

ber o

f vis

its p

er m

onth

60 mins 66 mins

-

10

20

30

40

50

60

70


Per

vis

it (in

min

utes

)

29 mins

33 mins

-

5

10

15

20

25

30

35

40

Before Market AE After Market AE

Per

vis

it (in

min

utes

)

HK$ 190

HK$ 228

-

50

100

150

200

250


Spe

ndin

g ($

per

vis

it)

HK$ 105

HK$ 127

-

20

40

60

80

100

120

140

Before Market AE After Market AES

pend

ing

($ p

er v

isit)


14

Life satisfaction: Lok Fu Plaza after AE

Satisfaction rating and ranking of Lok Fu Plaza

Economic features

Physical features

Social aspect

2.1

1.8

1.8

1.1

1.9

2.5

1.4

1.9

1.9

2.0

1.4

1.6

1.7

- 0.5 1.0 1.5 2.0 2.5 3.0

Overall

Shop diversification

Provision of daily necessities

Plaza promotions (such as parkingdiscounts)

Positioning

Internal layout and decoration

Provision of public area

Customer service and supporting facilities

Events and functions

Quality of life

Social network

Sense of belonging

Community development

Rating

Quality of life was generally perceived as one of the most appreciative element of the Lok Fu Plaza AE


15

Life satisfaction: Lok Fu Fresh Market after AE

Economic features

Physical features

Social aspect

2.4

2.1

1.9

1.2

2.1

2.7

1.4

1.9

1.4

2.1

1.6

1.7

2.1

- 0.5 1.0 1.5 2.0 2.5 3.0

Overall

Shop diversification

Provision of daily necessities

Market promotions (such as parkingdiscounts)

Positioning

Internal layout and decoration

Provision of public area

Customer service and supporting facilities

Events and functions

Quality of life

Social network

Sense of belonging

Community development

Rating

Satisfaction rating and ranking of Lok Fu Fresh Market

For Lok Fu Fresh Market, several social elements are highly regarded as a result of the AE: - Quality of life - Community development


16

Identifying the correct footfall

Percentage of total shoppers Lok Fu Plaza Revenue (HK$ 000s) generated per sq m

Lok Fu Fresh Market Revenue (HK$ 000s) generated per sq m

100% 255 560 90% 230 504 80% 204 448 70% 179 392 60% 153 336 50% 128 280 40% 102 224 30% 77 168 20% 51 112 10% 26 56

HK$ million (Annual)

Revealed preference approach (2014 prices) (1)

Life Satisfaction Approach (2014 prices)

Lok Fu Plaza 182 353

Lok Fu Fresh Market 24 91


17

True Value by the number of footfall

Percentage of total shoppers

Actual number of shoppers Revealed preference approach (HK$ million)

Life Satisfaction Approach (HK$ million)

100% 110,600 911 1,763 90% 99,540 820 1,586 80% 88,480 728 1,410 70% 77,420 637 1,234 60% 66,360 546 1,058 50% 55,300 455 881 40% 44,240 364 705 30% 33,180 273 529 20% 22,120 182 353 10% 11,060 91 176

Percentage of total shoppers

Actual number of shoppers Revealed preference approach (HK$ million)

Life Satisfaction Approach (HK$ million)

100% 23,500 120 456 90% 21,150 108 410 80% 18,800 96 365 70% 16,450 84 319 60% 14,100 72 273 50% 11,750 60 228 40% 9,400 48 182 30% 7,050 36 137 20% 4,700 24 91 10% 2,350 12 46

Lok Fu Plaza

Lok Fu Fresh Market


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Highlights of Survey findings

■ Every $1 spent by the Link REIT on Plaza and Fresh Market supports a further $2.10 – 4.10 and HK$ 1.80 – 6.70 socio-economic benefits in the Hong Kong community respectively.

■ Induced visitors come from a younger demographics with an expansion in the catchment area after the AEs.

■ Residents of the surrounding areas has a strong social dependency on Lok Fu Plaza and Fresh Market, the AEs have significantly improved their qualify of life and community development.

■ Driven by an increase in the number of visitors as a result of AEs, the economic activities and number of job opportunities in the Lok Fu Plaza and Fresh Market have been considerably increased, which have benefited the community of the surrounding area.

■ AEs provide a better public area for social networking and community development.

■ Compare to Plaza AE, Fresh Market AE has been more effective in term of generating social benefits such as community development and social networking.


Conclusion




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About NS (Dutch Railways)

About NS

NS Group is the largest public transport operator in the Netherlands, employing over 32,000 people and with 2013 revenues of €4.6 billion (US$5.2 billion). While the bulk of its revenues (85 percent) come from passenger transport, the group’s subsidiary companies also provide maintenance for trains and are responsible for the management and commercial development of more than 400 Dutch railway stations.

• In 2013, NS began its journey by quantifying its own environmental impacts.

• In 2014, it engaged KPMG to apply the KPMG True Value approach to calculate the socio-economic value, as well as the environmental value, that the company creates, and reduces, for society.

NS is the first railway company to go public with the results of this type of analysis, and hopes to accelerate change in the transport industry through its bold leadership.

NS & KPMG

“The KPMG True Value project has helped NS engage employees and management on sustainability.’’

Carola Wijdoogen, Managing Director, Sustainability, NS


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Prod

uct

Des

crip

tion

Step

Scope and Impact analysis definition

1 Identification of

sources and calculation

method

2 Data collection

and impact analysis valuation

3

Communication

4

Approach to KPMG True Value at NS

Assess scope (based on NS document) and stakeholder

feedback session

Determine acceptable sources and methodology

Assistance with data collection and measurement

Establish key messages and guidance for

external communication

Evaluate ‘scope document’ from NS

Handbook with Methodology

2014 annual report feedback and support in external communication

Elaboration of social impact analysis


22

SOCIO-ECONOMIC EXTERNALITIES AND VALUE-ADD: CORPORATE

EXPENDITURE, EDUCATION AND TRAINING

Positive (S/E+): • Contribution to the economy and society through

corporate expenditure, e.g. creating jobs by enabling suppliers to employ people

• Employee education and training

SOCIO-ECONOMIC EXTERNALITIES: SAFETY

Positive (S/E+): • Accidents avoided when travelling by NS trains vs

travelling by car Negative (S/E-): • Accidents occurring on trains and stations or travelling

to/from stations • Health and safety incidents experienced by

employees • Passenger aggression towards NS staff

ENVIRONMENTAL EXTERNALITIES

Positive (E+) • Emissions avoided vs car travel Negative (E-) • Greenhouse gas and other emissions • Impacts on ecosystems • Waste incineration • Water consumption • Noise pollution

SOCIO-ECONOMIC EXTERNALITIES: MOBILITY

Positive (S/E+): • Mobility, i.e. enabling people to travel for work, study

or leisure Negative (S/E-) • Passenger time spent travelling on trains and to or

from stations • Time spent waiting at stations and changing trains • Train delays and crowding

Key indicators identified


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The result

Mobility Safety

0

7000

6000

-1000 5000

4000

3000 -2000

2000

1000

8000

-3000

0

EUR M EUR M

Passenger mobility (value of travel enabled) Passenger time: travelling to and from stations Passenger time: waiting at stations Passenger time: delays Passenger time: travelling on trains Passenger time: travelling on crowded trains Passenger time: changing trains

0

500

400

300

200

100

0

-10

-20

-30

-40

-50

-60

-70

-80

-90

-100 EUR M EUR M

Avoided accidents (compared with car travel) Health & safety incidents (employees) Agression to towards NS staff Passenger accidents and injuries: during rail travel Passenger accidents and injuries: during travel to and from stations


24

The result

Corporate expenditure, education and training

Environmental value

Economic value created through procurement

0

1250

250

EUR M

EUR M EUR M

Avoided emissions (compared with car travel) Emissions: trains Emissions: buses Emissions: electricity use in buildings and stations Emissions: electricity use by rail infrastucture Emissions: manufacture of trains Emissions: passenger travel to and from stations Waste incineration, water use, noise pollution Ecosystem impacts of land use (tracks, etc)

0

20

100 0

-60


Conclusion




26

Conclusion

True Value helps organisations understand non-financial metrics

in monetary terms

This helps management reduce risks and capture value relating to

these externalities

There is increased interest in these methodologies locally and

abroad

There are a number of tools that are needed to calculate these

metrics. There is no one size fit all

These methodologies will help corporations build the

True Value bridge over time. It starts here

Presenter

Presentation Notes

We found that after pay, Purpose is the most important factor for employees when considering who to work for and is a very significant driver of discretionary effort and loyalty. For businesses with Purpose this converts into real competitive advantage.

Thank you

Presentation by Pat-Nie Woo


The KPMG name, logo and ‘cutting through complexity’ are registered trademarks or trademarks of KPMG International Cooperative (KPMG International).

introducing true value methodology · 2016-01-05 · true value of the plaza / fresh market 1...

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