Final Results

Helical Bar PLC 06 June 2006 6 June 2006 HELICAL BAR PLC ('Helical'/'Company'/'Group') Preliminary Results For the year to 31 March 2006 HELICAL GROWS BY 30% FOR THE SECOND YEAR RUNNING Financial Highlights • Adjusted diluted net asset value plus trading stock surplus totalling 309p per share (2005: 238p) up 30% • Profit before tax of £57.1m (2005: £64.7m) • Gain on sale and revaluation of investment properties of £43.6m (2005: £44.2m) • Valuation of investment properties up 17.3% (2005: 14.2%) • Diluted earnings per share of 51.8p (2005: 53.7p) • Substantial increase in trading profits and a strong performance in investment portfolio underpin results • Final dividend proposed of 2.45p per share (2005: 2.20p) - up 11% Giles Weaver, Chairman, commented: 'Helical has demonstrated its ability to outperform in good times and in bad. After a terrific run we believe that the rate of yield compression will slow and property returns will not be sustained at the exceptional level of recent years. However, we believe our ability to outperform and provide good returns for our shareholders will continue.' Further information, please contact: Helical Bar plc Michael Slade (Managing Director) Nigel McNair Scott (Finance Director) 020 7629 0113 Address: 11-15 Farm Street, London W1J 5RS Fax: 020 7408 1666 Website: www.helical.co.uk Financial Dynamics Stephanie Highett/Dido Laurimore 020 7831 3113 FINANCIAL HIGHLIGHTS Year To Year To 31 March 31 March 2006 2005 Notes £m £m Net rental income 16.5 20.4 Development profits 4.6 12.7 Trading profits 13.4 5.8 Gain on investment properties 43.6 44.2 Profits before tax 57.1 64.7 pence pence Basic earnings per share 2 54.7 56.3 Diluted earnings per share 2 51.8 53.7 Adjusted diluted earnings per share 2 8.5 11.5 Dividends per share (paid in year) - ordinary dividends 2 3.65 3.32 - Return of Cash 2 - 80.00 Adjusted diluted net assets per share 1/2 278 224 £m £m Value of investment portfolio 294.6 271.3 Net borrowings 112.7 125.0 Net assets 230.1 186.2 Net gearing 49% 67% Notes 1. After adding back deferred taxation arising from the clawback of capital allowances on sale of investment properties, the deferred taxation on the revaluation surpluses of the investment portfolio and the fair value of financial instruments. 2. Comparative figures have been adjusted to reflect the 5 for 1 share split on 1 September 2005. Chairman's Statement In my first statement as Chairman I am pleased to report that for the second year running, Helical has produced 30% net asset value per share growth. This reflects profits from a wide spread of projects and activities. We have continued to increase our diversification, investing in 15 schemes in the UK over the last two years as well as forming new joint ventures in Poland and with The Asset Factor. We continue to position ourselves towards high margin business and believe, when the benign impact of yield compression fades, our approach will continue to deliver outperformance. Results Profits before tax, prepared under International Financial Reporting Standards ('IFRS') for the first time, reduced to £57.1m (2005: £64.7m) as lower levels of net rental income and development profits exceeded the rise in trading profits. The return of almost £100m to shareholders in December 2004, representing circa 40% of shareholder value, contributed to the reduction in profits this year. As a consequence, diluted earnings per share fell to 51.8p (2005: 53.7p). The gain on sale and revaluation of the investment portfolio was steady at £43.6m (2005: £44.2m) reflecting a like for like valuation increase of 17.3% and sales of investment properties at 16.9% over 2005 book values. The Group's adjusted diluted net asset value per share rose by 24% (2005: 24%) to 278p (2005: 224p). This takes no account of any surplus on the £86m of trading and development stock which are held in our books, in accordance with normal practice, at the lower of cost and net realisable value. The directors' valuation of trading and development stock shows a surplus of £29m (2005: £13m) which, if taken into account, would increase adjusted net asset value per share to 309p (2005: 238p). The Company's prospects for 2006/7 are encouraging and allow the Board to recommend to shareholders a final dividend of 2.45p per share (2005: 2.20p), an increase of 11%. Under IFRS dividends are accounted for once declared and, as a consequence, this final dividend is not reflected in these accounts. However, taken with the interim dividend paid in December 2005 of 1.45p (2005: 1.32p) it represents a total dividend of 3.90p (2005: 3.52p), an increase of 11%. International Financial Reporting Standards (IFRS) These accounts are the first annual accounts to be prepared in accordance with IFRS. Included in the accounts are restated comparative figures for the year to 31 March 2005. Reconciliations to, and explanations of the differences between these figures and those previously reported under UK GAAP, are provided in the notes to these accounts. The adoption of IFRS has changed the presentation and format of the annual report. However, it has no impact on the cash flows of the business or its underlying performance. Share capital On 31 August 2005 shareholders approved a 5 for 1 share split effective from 1 September 2005. As a consequence the 18,424,385 ordinary 5p shares in existence on 1 September 2005 were divided into 92,121,925 ordinary 1p shares. The net asset value per share and earnings per share calculations for the current and comparative periods have all been adjusted accordingly. Key performance indicators and benchmarks A property company's share price should reflect growth in net assets per share. Our Company's main objective is to maximise growth in assets from increases in investment portfolio values and from retained earnings from other property related activities. We incentivise management to outperform the Company's competitors by setting the right levels for performance indicators against which rewards are measured. We also design our remuneration packages to align management's interest with shareholders' aspirations. Key to this is the monitoring and reporting against identifiable performance targets and benchmarks. For a number of years we have reported on these, the most important of which are: - Investment Property Databank The Investment Property Databank ('IPD') produces a number of independent benchmarks of property returns which are regarded as the main industry indices. They have compared the ungeared performance of Helical's total property portfolio against that of portfolios within IPD for the last 16 years. The company's annual performance target is to exceed the top quartile of the IPD database. Helical's ungeared performance for the year to 31 March 2006 was 25.9% (2005: 28.5%) compared to the IPD median benchmark of 20.6% (2005: 17.2%) and upper quartile of 22.8% (2005: 20.3%). IPD (all monthly and quarterly valued funds) ungeared returns Total Returns % % % % % Annualised over 1 yr 3 yrs 5 yrs 10 yrs 16 yrs Helical 25.9 22.9 17.9 20.3 18.2 IPD Benchmark 20.6 16.4 13.0 12.8 9.2 Percentile rank 10 1 4 0* 0* * '0' means the top ranked fund The returns on shareholder capital earned by Helical are generally higher than those measured by IPD due to the use of gearing. The returns noted above take no account of the £29m (2005:£13m) surplus of trading and development stock above book value arising from the directors' valuation. - Total Shareholder Return Total Shareholder Return ('TSR') measures the return to shareholders from share price movements and dividend income and is used to compare returns between companies listed on the Stock Exchange. Management is incentivised to exceed the top quartile of the real estate sector. Helical's TSR for the year to 31 March 2006 was 73.5% (2005: 35.6%) compared to the median of the listed real estate sector of 49.3% (2005: 25.4%) Total Total Total Total Total Total Shareholder Shareholder Shareholder Shareholder Shareholder Shareholder Return Return Return Return Return Return Measured Measured Measured Measured Measured Measured over over over over over over 1 year 3 years 5 years 10 years 15 years 20 years From From From From From From 31/03/2005 31/03/2003 31/03/2001 31/03/1996 31/03/1991 31/03/1986 % % % % % % Helical Bar plc 73.5 % 52.6% 26.5% 26.1% 23.3% 29.4% UK equity 28.0% 24.7% 5.7% 8.4% 10.2% 10.9% market Listed real 49.3% 44.6% 19.3% 15.7% 11.6% 11.2% estate sector index Direct property 20.9% 17.2% 13.8% 13.0% 11.1% 11.4% Source: New Bridge Street Consultants/Datastream - Net asset value Net asset value per share represents the share of net assets attributable to each ordinary share. Whilst the basic and diluted net asset per share calculation provide a guide to performance the property industry prefers to use an adjusted diluted net asset per share. The adjustments necessary to arrive at this figure are shown in note 25 to this announcement. Management is incentivised to exceed 15% p.a. growth in net asset value per share. The adjusted diluted net asset value per share, excluding trading stock surplus, at 31 March 2006 was 278p (2005: 224p), an increase of 24.0%. Including the surplus on valuation of trading and development stock, the adjusted diluted net asset value per share at 31 March 2006 was 309p (2005: 238p) an increase of 29.7% (2005: 31.2%). Adjusted triple net asset value per share rose by 29.6% (2005: 33.6%) to 284p (2005: 219p). Real Estate Investment Trust ('REIT') Legislation The real estate sector has welcomed the Government's proposed legislation for the introduction of REIT's to the UK. This legislation is likely to be enacted in July 2006. Companies converting to REIT status will benefit from a tax free status on their qualifying property activities, subject to meeting certain conditions. There is further consultation to be finalised before the new legislation is enacted, but it would appear unlikely that the Helical 'model', which has generated trading and development profits equal to investment income, will qualify. Helical's consistent success throughout the last 22 years since inception suggests that we should not alter our modus operandi solely to reduce tax liabilities. We are confident that our model is strong enough to continue to outperform our peers on a net of tax basis. The Board After serving the Company for almost 25 years, first as consultant with Laing & Cruickshank and, since 1984, as non-executive director and Chairman, John Southwell will step down from the Board at the 2006 AGM. In his time with the Company, John Southwell has been an instrumental part of a management team that has seen the share price increase from an equivalent 1p level to today's share price of 407p having paid out special dividends of 120p per share along the way. The Board would like to express its gratitude to John for his guidance, leadership and wise counsel over this long period at the helm of the Company. During the year the Board was strengthened by two appointments. As mentioned in last year's accounts, on 14 April 2005 Wilf Weeks joined as a non-executive director. Wilf specialises in Government Relations and is Chairman of European Public Affairs at Weber Shandwick. On 1 March 2006 Andrew Gulliford joined as a non-executive director. Andrew is a former Deputy Senior Partner of Cushman & Wakefield Healey & Baker where he headed up their Investment Group. I believe that these two appointments improve the strength of the Board from both an operational and a corporate governance viewpoint. Outlook Commercial property continues to deliver excellent returns as a result of yield compression. At some stage this will cease. In what will become a more challenging climate we will continue to obtain good results by adding value whether by refurbishment, redevelopment, active management or change of use via the planning process. We have increased the number of our joint ventures enabling us to tap into specialist skills whether geographical or sectorial. All of this activity diversifies our risk and enables us to find deals at reasonable prices. Helical has demonstrated its ability to outperform in good times and in bad. After a terrific run we believe that the rate of yield compression will slow and property returns will not be sustained at the exceptional level of recent years. However, we believe our ability to outperform and provide good returns for our shareholders will continue. Giles Weaver Chairman 6 June 2006 DEVELOPMENT PROGRAMME Helical's development objective is to create profit streams by focusing on large Central London office schemes, major mixed-use developments and retail schemes. As in the last cycle it is anticipated that the retail schemes will contribute to development profits before the larger office and mixed-use schemes come on stream. Development schemes Current and future programme Approximate Start Date Size Offices Sq ft City Mitre Square, London EC3 2008 350,000 Ropemaker Place, London EC2 2006 500,000 Central London - Mixed-use Clareville House, London SW1 2006 60,000 Wood Lane, White City 2006+ 43 acres Thames Valley Amen Corner, Bracknell 2010 500,000 Retail/Mixed-use Trinity Square, Nottingham 2005 235,000 Commercial Road, Bournemouth 2005 48,000 Bluebrick, Wolverhampton 2006 170,000 Hatters Retail Park, Luton 2006 105,000 Town Centre Shirley, Solihull 2007 200,000 Shrub Hill, Worcester 2007 35,000 In the year under review the major components of development profits recognised have come from the retail development at Commercial Road, Bournemouth and the mixed-use retail and student accommodation scheme at Trinity Square, Nottingham, with a contribution from a second phase at Stafford. On the offices side, the Company continues to work on schemes at Ropemaker Place EC2, Mitre Square EC3, Clareville House, SW1 as well as other Central London opportunities and in the longer term at White City and Amen Corner, Bracknell. OFFICE DEVELOPMENTS Mitre Square, London EC3 At Mitre Square we are planning a 350,000 sq ft office scheme in a joint venture with Ansbacher Property Development Ltd. In July 2005 the City resolved to grant detailed planning consent for the scheme subject to completion of a S.106 agreement, which is currently being negotiated. Completing the site acquisition is underway and the design is being worked up. The project is planned to commence on site in 2007 or 2008. Ropemaker Place, London EC2 Demolition of the previous building was completed last September. Helical were acting as Development Manager for DB Real Estate. DB Real Estate sold the site to British Land in March and the Development Management Agreement has been assigned to British Land who are planning to start on site this year. The Agreement provides for a fixed fee and a profit share dependent upon outcome. Wood Lane, White City, London W12 Working on behalf of the consortium of Landowners the Company has, with Rem Koolhaas of The Office of Metropolitan Architecture, produced a masterplan scheme for the 43 acre site. We will be looking to obtain formal adoption of this masterplan within the next few months. We are already proceeding with the production of an Environmental Impact Assessment with the intention of submitting, in early 2007, an outline planning application for a high density mixed-use scheme of 5 million sq ft plus. Clareville House, London SW1 We are acting as Development Manager for Lattice Group Pension Scheme with regard to the proposed refurbishment of the existing listed building. A planning application has been submitted for a scheme involving 35,000 sq ft of offices, bar/nightclub of 17,000 sq ft, restaurant of 4,000 sq ft and 2,000 sq ft of retail space. We are hoping to achieve planning consent shortly to allow a start on site at the beginning of 2007. Amen Corner, Bracknell We hold a number of properties and options over land at Amen Corner, Bracknell and are promoting a gateway office development off the A329(M). JOINT VENTURES Helical Poland A joint venture vehicle has been established with Jonathan Tinker and Peter Evans both of whom are based in Warsaw and who have considerable experience acquired over a number of years of the Polish Property Market. The joint venture is concentrating exclusively on out-of-town retail developments. Currently three sites are under contract comprising circa 1 million sq ft of retail space. The Asset Factor The Company announced during the year a new outsourcing joint venture called The Asset Factor. The Asset Factor is a joint venture with Matthew Punshon, Oliver Jones and Keith Perry all of whom have considerable experience of outsourcing. The venture will offer organisations integrated property asset management solutions with the aim of reducing costs, increasing efficiency and making their accommodation work for their business. Retail Developments 56-76 Commercial Road, Bournemouth This £40m scheme was completed during the year and the units handed over to the retailers at the end of 2005 for fitting out. The redeveloped section, comprising 48,000 sq ft was let to Hennes, Zara, Republic and Ann Summers. The scheme was pre-sold to Irish investors, and also includes three retained shops let to Wallis, Dixons and Carphone Warehouse. Helical's share of the profit was circa £5.5 million. Trinity Square, Nottingham The £45m building contract was awarded to Shepherd Construction in 2005, and work is now well under way on this 10 storey scheme divided into two blocks. Completion of the works and trading by retailers is expected by the summer of 2007. The development comprises nearly 200,000 sq ft of retail accommodation, plus 700 student units and a multi storey car park. Nearly 60% of the retail accommodation has been pre-let to Borders, TK Maxx and Dixons. The entire scheme has been pre-sold to Morley for over £100m and their Beech Fund will operate the student accommodation. Friary Retail Park, Stafford Phase 2 of this retail park was successfully completed in March of this year with the construction of a 4,000 sq ft unit for Laura Ashley Home Furnishings at the entrance to the scheme. The entire development of 42,400 sq ft is fully let to PC World, T K Maxx, Choices and Laura Ashley with rents now reaching £20 per sq ft reflecting the strong trading location. The park was funded by Arlington Investment Managers last year for £12m. Bluebrick, Wolverhampton Building work has commenced on the first phase of the 11 acre site which is a major mixed-use regeneration scheme. Planning consent was received in spring 2006 and an infrastructure contract is underway to prepare the sites that have been pre-sold to Reg Vardy for a 20,000 sq ft car showroom and Whitbread for an 88 bed hotel and a 7,000 sq ft public house. The three acre residential site of 208 apartments is being marketed for sale and the listed Low Level Station buildings are under offer to a casino operator subject to obtaining a gaming licence. A further two phases are under discussion with potential tenants and with planning authorities. Hatters Retail Park, Luton This former brownfield site of approx. 8.5 acres received planning consent last year for a mixed retail and industrial scheme. The site was acquired in two stages with the final purchase completing in October 2005. Phase 1 will comprise a bulky goods retail park of 80,000 sq ft and so far lettings have been secured with anchor tenants DFS, SCS, Carpetright and P Simon Furnishings. Two further units are under offer to Harveys and Pizza Hut. Enabling works on site were completed in April 2006 and the main contract will commence in the autumn with completion due April 2007. Phase 2 will comprise approx 25,000 sq ft of industrial space split into small starter units with completion estimated for April 2008. Parkgate, Shirley, Solihull The scheme which comprises 200,000 sq ft of retail anchored by an 80,000 sq ft Asda foodstore and some 200 apartments is being progressed through a 50:50 joint venture with Coltham Developments Ltd. Development agreements have been exchanged with Solihull Metropolitan Borough Council and Asda and a planning application has been submitted. Marketing of the retail units will commence in the summer 2006 with a view to starting on site in summer 2007. A further phase offers the opportunity for a major leisure/residential project. Shrub Hill, Worcester A purchase contract has been exchanged with First Bus on the four acre site close to the centre of Worcester which has the benefit of planning consent for 35,000 sq ft of retail warehousing and 45 apartments. A relocation site has been identified for the bus depot and vacant possession of the site should be achieved in spring 2007. RESIDENTIAL DEVELOPMENTS Lime Tree Village, Dunchurch, Rugby At Lime Tree Village, Dunchurch, Rugby we have refurbished, with our joint venture partners, a Victorian country house and are substantially through a programme constructing a retirement village of 153 bungalows, cottages and apartments. Phase 1 and 2 are complete and only a few units remain unoccupied. Work on the third phase commenced early in the new year and the first units have been released for sale. These have been well received at prices well in advance of phase 1 and 2. A fourth phase is being planned to commence 2008/2009. Bramshott Place, Liphook At Bramshott Place, Liphook two resolutions to grant planning permission, one for a retirement village of 144 units and one for 150 open market units were granted by the local authority on 6 April subject to entering a S.106 Agreement. The site has already been adopted by East Hampshire District Council in its Local Plan. We anticipate the final consent to be granted around June 2006, whereupon the site will be sold to a housebuilder. Maudsley Park, Great Alne Maudsley Park, Great Alne is a 314,000 sq ft industrial estate on a 20 acre site with potential for a retirement village development use. Stratford District Council has accepted the Local Plan Inspector's recommendation and this site is now in policy terms a major development site in the green belt upon which new forms of development are appropriate. A planning brief is being prepared promoting a mixed-use scheme of a nursing home, small nursery units to let and a retirement village of circa 230,000 sq ft together with a Country Club facility. It is anticipated that the outcome of this planning application will be known in the autumn of 2006. OTHER DEVELOPMENTS Future Opportunities The Company is currently working on several new large projects in London which we hope to announce over the next few months. Gerald Kaye Development Director Investment The investment and trading portfolio had another good year with a like for like valuation increase of 17.3%, sales of investment properties at 16.9% over 2005 valuation and trading profits of £13.4 million. In all, this produced an unleveraged total return of 27.2% as against 27.6% in the previous year. All figures exclude the surplus arising from the valuation of trading and development stock referred to in the Chairman's Statement. Retail The first phase of our refurbishment of the 225,000 sq ft Morgan Department Store in Cardiff is due to complete in the autumn. Prelets to Borders and SportsWorld make up over 60% of the anticipated new income with two further lettings in solicitors' hands increasing this to 80%. The conversion of the top floors to 55 flats will complete next year. The Royal and Morgan Arcades, which form the final part of this holding, comprise 55 retail units which forge a link between the main public transport nodes and the proposed St David's 2 Shopping Centre. Further growth was secured at our shopping centre in Letchworth with five new lettings setting rentals at double the level pertaining at the time of our purchase in 2003. Meanwhile, our retail holding at Chiswick was sold at circa 150% over original purchase cost having obtained a residential consent at the rear of the site and regeared the retail lease. A portfolio of 95 small off-licences acquired for £25.5 million in 2005 was traded out at auction over the year to show a profit of circa £9 million, over 30% on cost. Our retail warehouse park in Weston-Super-Mare was sold during the year for £42.65 million. This price included the forward purchase of a new 29,000 sq ft unit, currently under construction and prelet to Wickes. The transaction showed a profit of circa 200% on 1999 purchase cost plus capital expenditure. At Crowborough, a property acquired last year, we regeared the occupational lease to Focus and sold on at a 30% profit on cost. Our retail warehouse in Sheffield, also acquired last year, was traded on to a residential developer at over 50% above purchase cost. In joint venture with local developers Abbeygate we have recently commenced construction of the £100 million C4.1 mixed-use project in Milton Keynes. The retail element, a 110,000 sq ft supermarket, has been forward sold to Sainsbury's and the social element of the 440 unit residential scheme pre-sold to Genesis. We have also recently submitted a planning application in Milton Keynes for a 300,000 sq ft retail and leisure scheme anchored by furniture retailer ILVA on the site of our existing 120,000 sq ft Leisure Plaza. Offices At Shepherds Building we have in recent years converted a large 150,000 sq ft office building in an unconventional location in Shepherds Bush into a thriving media related hub. Over 50 tenants occupy units from 200 sq ft to 35,000 sq ft anchored around a communal bar cafe. We have a waiting list of tenants seeking to move into the building and lettings recently agreed show a 25% increase in rental value. We have now rolled this format out in Battersea where we have just finished converting a 60,000 sq ft disused TV studios. Ten lettings have been secured to date and after the year end planning consent was granted for a further 50,000 sq ft of floorspace on site. Our 80,000 sq ft Rex House in St James's, which was refurbished and let in 2001, has been enjoying a strong underlying rental recovery and has considerable marriage value potential - comprising a 30 year leasehold interest. At 61 Southwark Street the location of our holding continues to improve with the imminent completion of the Bankside development nearby, adding to the Southbank's renaissance. Industrials During the year, sites have been acquired for schemes at Southall, West London (250,000 sq ft), Kidlington, Oxford (140,000 sq ft) and Southampton (135,000 sq ft) in joint venture with Chancerygate to develop small units for freehold sales. Final sales were completed at our existing schemes in Slough and Edenbridge and good progress made on sales in Sawston, Cambridge (65,000 sq ft / 73% sold) and Cowley, Oxford (73,000 sq ft / 43% sold). Our site in Newmarket, acquired in 2005, was sold on to an owner occupier at a 25% profit on cost. All these projects are held as trading stock. From within the investment portfolio we sold our holdings in Preston at 12% over valuation and 150% over historic purchase cost. We also sold just over half of our Woolwich estate at more than the whole cost of purchase in 2002 and subsequent refurbishment. We are hopeful of securing this year a retirement village consent on our twenty acre industrial holding in Great Alne, Warwickshire. We also continue to make progress in pursuing a residential consent for our industrial estate in Fleet, having recently acquired an amenity site to overcome objections by English Nature. Over the year we assembled a site in Sandiacre, Nottingham acquiring three separate interests which is now under offer to be sold to a supermarket operator. Michael Brown Investment Director Investment portfolio Like for like valuation increase Average unexpired term years In-town retail 22.1% 9.5 Out-of-town retail 28.7% 11.4 Offices 14.9% 7.8 Industrial 6.1% 8.3 -------- ------ Total 17.3% 8.7 Valuation yields Initial Reversionary Equivalent True equivalent In-town retail 3.4% 6.3% 6.0% 6.2% Out-of-town retail 4.4% 5.4% 5.3% 5.5% Offices 6.8% 7.2% 6.6% 6.9% Industrial 5.7% 7.8% 7.7% 8.1% ------- ------- ------- ------- Total 5.3% 6.8% 6.4% 6.7% Investment Properties Average Ownership TOWN CENTRE RETAIL Size passing rent Year interest/ (sq ft) (psf) Vacancy rate acquired Comments Morgans Department 160,000 £14 37% 2005 Prelets to Store, Cardiff Borders & SportsWorld Morgan & Royal 65,000 £40 ZA 3% 2005 Arcades, Cardiff Garden Square, 165,000 £45ZA 6% 2003 New lettings Letchworth @ £65 psf ZA East Grinstead 37,000 £9 0% Adjoins proposed development Glasgow Portfolio 23,000 £30 10% 450,000 16% OUT-OF-TOWN RETAIL Otford Road Retail 43,000 £14 0% 2003 75% interest Park, Sevenoaks Homebase, St Austell 36,000 £8 0% 2002 75% interest Focus, Ashford 32,000 £15 0% 2004 75% interest Focus, Paignton 24,000 £12 0% 2005 67% interest Wickes, Worthing 26,000 £11 0% 2003 75% interest 161,000 £12 0% OFFICES Rex House, SW1 80,000 £56 0% 2000 Leasehold expires 2035 Shepherds Building, 151,000 £20 0% 2000 90% interest W14 61 Southwark 66,000 £20 10% 1998 Street, SE1 Battersea Studios, 53,000 £17 73% 2005 50% interest SW8 Amberley Court, 31,000 £11 43% 2006 90% interest Crawley 381,000 £28 16% INDUSTRIAL Hawtin Park, 251,000 £2.85 63% 2003 Blackwood Aldridge, Walsall 208,000 £2.40 29% 2006 90% interest Sawston, Cambridge 188,000 £4.40 0% 2003 67% interest Golden Cross, Hailsham 102,000 £5.50 0% 2001 Waterside, Fleet 54,000 £7.00 9% 1999 Residential potential Standard Estate, N 50,000 £9.00 35% 2002 60% interest Woolwich Mailcom, Milton Keynes 28,000 £6 0% 2004 Retail Warehouse potential 881,000 £4.10 27% OTHER Cardiff Royal Infirmary - vacant hospital on a peppercorn lease with redevelopment potential TRADING PROPERTIES Address Description Year % acquired interest C4.1, Milton Keynes 110,000 sq ft supermarket + 440 residential 2006 50% units under construction Leisure Plaza, Milton Keynes 119,000 sq ft leisure scheme with potential for 2003 50% retail warehouse use Upper High Street, Epsom Residential site with supermarket potential 2005 100% Sandiacre, Nottingham 145,000 sq ft industrial with supermarket 2005 75% potential Great Alne, Maudslay Park 314,000 sq ft industrial estate on a 20 acre site 2004 100% with potential for a retirement home use Aycliffe & Peterlee Industrial sites with residential or retail 1987 100% potential Sawston, Cambridge 65,000 sq ft offices/industrial developed for 2003 67% owner occupier sales Watlington Road, Oxford 73,000 sq ft offices/industrial in course of 2005 80% refurbishment/ redevelopment for owner occupier sales Kidlington, Oxford 140,000 sq ft industrial to be developed for 2006 80% owner occupier sales Southall, West London 250,000 sq ft industrial to be developed for 2006 80% owner occupier sales Millbrook, Southampton 135,000 sq ft industrial to be developed for 2006 80% owner occupier sales ENTIRE PORTFOLIO CASHFLOW YIELDS (YIELDS EARNED BY HELICAL - EXCLUDE NOTIONAL PURCHASER'S COSTS) Initial Reversionary Equivalent Investment 5.6% 7.1% 6.7% Trading 0.8% 8.1% 7.5% Development 0.2% 7.3% 6.7% ------- ------- ------- Total 4.4% 7.3% 6.8% PORTFOLIO BALANCE Offices Retail Offices South Retail Out-of- London East In-town town Industrial Other Total Investment 31.4% 1.2% 24.1% 9.4% 10.0% - 76.1% Trading 0.5% - - - 7.8% 3.4% 11.7% Development 0.4% 2.9% - 5.8% 1.4% 1.7% 12.2% -------- -------- -------- -------- -------- --------- --------- Total 32.3% 4.1% 24.1% 15.2% 19.2% 5.1% 100.0% Financial Review International Financial Reporting Standards ('IFRS') In common with all companies listed on European Union Stock exchanges, Helical adopted IFRS with effect from 1 April 2004, although for practical purposes these Reports and Accounts are the first to be prepared in accordance with IFRS. Included in these accounts are restated comparative figures for the year to 31 March 2005. Prior to the adoption of IFRS, the financial statements of the Company had been prepared in accordance with the United Kingdom accounting standards ('UK GAAP'). UK GAAP differs in certain respects from IFRS and certain accounting valuation and consolidation methods have been amended, when preparing these financial statements, to comply with IFRS. Reconciliations to, and explanations of the differences between these figures and those previously reported under UK GAAP are provided in the notes to these accounts. The adoption of IFRS has changed the presentation and format of the annual report. However, it has no impact on the cash flows of the business or its underlying performance. The principal changes arising from the presentation of these accounts under IFRS are as follows: Disclosure of financial information under IFRS A Consolidated Income Statement replaces the Consolidated Profit and Loss Account. This Income Statement provides a more detailed sectional analysis of gross profit and includes revaluation movements where previously they had been shown through the revaluation reserve. The impact on deferred tax associated with the revaluation movements are taken to the Income Statement whereas previously they were shown as unprovided contingent liabilities or assets. Movements in the fair value of financial instruments, previously disclosed as contingent assets and liabilities, are now taken to the Income Statement and Balance Sheet. The Consolidated Balance Sheet under IFRS analyses assets and liabilities between current and non-current. The Consolidated Cash Flow Statement is restated to reconcile opening and closing cash balances, reconciling cash from operating activities with cash generated from investing and financial activities. Changes in accounting policies under IFRS In addition to the change in disclosure relating to investment property revaluation surpluses, their associated deferred tax liabilities and the fair value of financial instruments, the adoption of IFRS has resulted in changes to the accounting policies on goodwill, amortisation of rent free periods and other lease incentives and letting costs. In addition the provisions of IFRS2 on Share Based Payments have been applied in respect of equity settled awards granted since 7 November 2002 where those awards had not been vested by 1 January 2005. Details of the accounting policies adopted by the Company under IFRS are included in Note 2. Consolidated Income Statement Profits Profits before tax fell to £57.1m (2005: £64.7m) as reduced levels of net rental income and developments profits exceeded the increase in trading profits. Adjusted profits before tax, which excludes the gain on sale and revaluation of investment properties, fell to £13.6m (2005: £20.5m). Profits after tax and minority interest fell to £47.6m (2005: £65.5m). Rental income Net rental income for the year fell to £16.5m (2005: £20.4m) reflecting the sale of let investment and trading properties and their replacement with vacant or partially let properties with refurbishment and rental growth prospects. During the year £110m of investment and trading properties, yielding £5.3m of rental income were sold. £40m was used to add to the investment portfolio and £37m was used to purchase income producing properties to be re-developed or traded. Together these currently produce a passing rent of £2.0m. Rent reviews and new lettings, net of lease expiries and rent free periods, added rental income of £1.4m on the remaining portfolio. Rental costs increased from £2.3m to £3.6m, reflecting the costs of vacant space at properties undergoing refurbishment. Trading and other profits Trading profits of £13.4m were up on last year (2005: £5.8m) and arose from the sale of number of properties at Harlow, Sawston, Edenbridge, Newmarket, Dunstable, Oxford, Slough and Sheffield, as well as a portfolio of Unwins retail outlets. Development profits The development programme produced profits at the retail schemes at Bournemouth, Nottingham and Stafford. IFRS IFRS UK GAAP UK GAAP UK GAAP 2006 2005 2004 2003 2002 Developments £ 000 £ 000 £ 000 £ 000 £ 000 Profits 4,594 12,664 38 4,630 17,072 Share of results of joint ventures The major contributor to the results of the joint ventures during the period was the recognition of the remaining profit (net of tax) at the Homebase development at Winterhill, Milton Keynes. Administrative expenses Administrative expenses increased from £15.8m to £16.6m due to an increased charge for share based payments offsetting a lower level of performance related cash bonuses. Administrative expenses, before impairment of goodwill and executive bonuses, increased to £6.1m (2005: £5.6m). Gain on sale and revaluation of investment properties During the year to 31 March 2006 the Group sold investment properties with book values of £57.6m (2005: £124.2m) on which it made £7.8m (2005: £14.1m) of profit. The properties sold included the retail park at Weston-Super-Mare, a Focus DIY store at Crowborough, a retail unit in Chiswick and a number of industrial units at Woolwich, Sawston and Preston. Finance costs and finance income Lower levels of debt throughout the year reduced finance costs to £7.4m (2005: £8.7m), after capitalising £2.8m (2005: £2.3m) of interest. Finance income earned on cash deposits reduced from £1.9m to £1.3m. IFRS IFRS UK GAAP UK GAAP UK GAAP 2006 2005 2004 2003 2002 Net finance costs £ 000 £ 000 £ 000 £ 000 £ 000 Interest payable on bank 7,638 8,330 7,548 9,543 14,804 loans Other interest payable 2,346 2,243 1,741 2,351 3,215 Finance arrangement 234 457 170 783 408 costs Interest capitalised (2,797) (2,296) (1,817) (795) (1,006) Interest receivable (1,295) (1,948) (1,070) (2,244) (2,642) 6,126 6,786 6,572 9,638 14,779 Taxation The tax charge for the year is less than the standard rate of 30% due to the use of capital allowances and tax losses. It is expected that the tax charge in the year to 31 March 2007 will be less than the standard rate of 30% due to the use of capital allowances. The deferred tax charge for the year reflects a provision for tax on revaluation surpluses and on temporary differences between the carrying amount of assets and liabilities in the financial statements and their corresponding tax bases in accordance with IFRS. Dividends The Board is recommending to shareholders at the Annual General Meeting on 20 July 2006 a final dividend of 2.45p per share (2005: 2.20) to be paid on 21 July 2006 to shareholders on the register on 23 June 2006. This final dividend, amounting to £2.2m (2005: £1.8m) has not been included as a liability at 31 March 2006, in accordance with IFRS. IFRS IFRS UK GAAP UK GAAP UK GAAP 2006 2005 2004 2003 2002 Dividends pence pence pence pence pence Interim 1.45 1.32 1.32 1.20 1.10 Prior period 2.20 2.00 2.00 1.80 1.65 final Total 3.65 3.32 3.32 3.00 2.75 Special - - - - 20.0 3.65 3.32 3.32 3.00 22.75 In the year to 31 March 2005 a 400p per share dividend was paid to shareholders holding 14,143,020 A ordinary 5p shares as part of the Return of Cash on 23 December 2004. Earnings per share Earnings per share in the year to 31 March 2006 were 54.7p (2005: 56.3p) per share and on a diluted basis were 51.8p (2005: 53.7p) per share. IFRS IFRS UK GAAP UK GAAP UK GAAP 2006 2005 2004 2003 2002 Earnings per share pence pence pence pence pence Earnings per share 54.7 56.3 8.2 12.2 12.0 Diluted earnings per share 51.8 53.7 7.9 11.8 11.6 Adjusted diluted earnings per 8.5 11.5 - - - share Adjusted diluted earnings per share excludes from earnings the IFRS effects of including the gain on sale and revaluation of investment properties and fair value movement on derivative financial instruments. Consolidated balance sheet Investment portfolio During the year investment properties with a book value of £57.6m were sold and partly replaced by £30.8m of new properties. In addition around £9.4m of capital expenditure was spent on refurbishing various office, industrial and retail buildings. At 31 March 2006 there was a revaluation surplus of £35.7m (2005: £30.1m) on the investment portfolio. IFRS IFRS UK GAAP UK GAAP UK GAAP 2006 2005 2004 2003 2002 Investment portfolio £ 000 £ 000 £ 000 £ 000 £ 000 Cost or valuation at 1 April 271,315 334,114 342,484 439,911 453,607 Additions at cost 40,230 26,957 50,464 47,175 32,838 Disposals (57,564) (124,210) (82,178) (131,168) (65,062) Joint venture share of 4,869 3,357 - - - revaluation Revaluation 35,733 30,097 24,162 (13,434) 18,528 Cost or valuation at 31 March 294,583 271,315 334,932 342,484 439,911 Net asset values The adoption of IFRS, with effect from 1 April 2004, reduced net assets at that date by £15.9m and by £10.5m as at 31 March 2005. The individual adjustments are included in note 3 d) to this announcement. The performance of the Company in the year to 31 March 2006 has increased equity shareholders funds, on which the net asset value per share is calculated, by £47.6m and this has led to a 23% increase in diluted net assets per share to 253p and a 24% increase in adjusted diluted net assets per share to 278p. Taking into account the directors' valuation of trading and development stock of £29m (2005: £13m) the adjusted diluted net assets per share increase by 30% to 309p (2005: 238p). IFRS IFRS IFRS UK GAAP UK GAAP 2006 2005 2004 2003 2002 Net asset values per ordinary share pence pence pence pence pence Diluted - 1 253 205 164 155 155 Adjusted diluted - 2 278 224 182 141 133 Adjusted diluted plus stock - 3 309 238 n/a n/a n/a 1 - net asset value diluted for share options. 2 - net asset value diluted for share options and adding back deferred tax on revaluation surpluses and capital allowances and fair value of financial instruments. 3 - net asset value as per 2. plus the surplus on directors' valuation of trading and development stock. Borrowings and financial risk The Group's increased trading activity and net sales of investment property have continued the reduction in debt and, at 31 March 2006, net debt had fallen from £125.0m to £112.7m. Taken with an increase in net assets of £47.6m, the reduction in net debt combined to reduce the Group's net gearing from 67% to 49%. IFRS IFRS IFRS UK GAAP UK GAAP 2006 2005 2004 2003 2002 Net debt and gearing Net debt £112.7m £125.0m £129.8m £140.9m £152.4m Gearing 49% 67% 55% 62% 67% The Group seeks to manage financial risk by ensuring that there is sufficient financial liquidity to meet foreseeable needs and to invest surplus cash safely and profitably. At the year end, Helical had £56m of undrawn bank facilities and cash of £10.1m (2005: £28.2m). In addition it had £158m (2005: £130m) of uncharged property on which the Group could borrow funds. As at 6 June 2006 Helical's average interest rate was 5.83%. Performance measures In order to evaluate its overall performance against other small to mid-size capital companies, both here and abroad, Helical looks at equity value added. Equity value added Year ended 31 March 2006 2005 2004 2003 2002 Capital employed £m 336 347 348 377 390 Return on capital % 21.7 22.1 11.5 3.9 10.5 Weighted average cost of capital % 6.9 6.7 7.0 6.1 6.3 Spread % 14.8 15.4 4.5 (2.2) 4.2 Equity value added/(lost) £m 49.6 53.4 15.6 (8.5) 19.6 Nigel McNair Scott Finance Director Unaudited Consolidated Income Statement Year To Year To 31 March 31 March 2006 2005 Notes £000 £000 Revenue 4 119,274 101,469 Net rental income 5 16,524 20,440 Trading profits 13,441 5,771 Development profits 4,594 12,664 Share of operating profit of joint ventures after tax 437 2,699 Other operating income 235 235 Gross profit before gain on investment properties 35,231 41,809 Gain on investment properties 6 43,551 44,204 Gross profit 78,782 86,013 Administrative expenses 7 (16,582) (15,757) Operating profit 62,200 70,256 Finance costs 8 (7,421) (8,734) Finance income 1,295 1,948 Change in fair value of derivative financial instruments 1,046 1,225 Profit before tax 57,120 64,695 Tax 9 (9,676) 844 Profit after tax 47,444 65,539 - attributable to minority interests (124) 17 - attributable to equity shareholders 47,568 65,522 Profit for the year 47,444 65,539 Earnings per 1p share 10 - basic 54.7p 56.3p - fully diluted 51.8p 53.7p Unaudited Consolidated Balance Sheet At 31 March 2006 At At 31 March 31 March 2006 2005 Notes £000 £000 Non-current assets Investment properties 11 294,583 271,315 Owner occupied property, plant and 12 equipment 489 540 Investment in joint ventures 295 2,195 Goodwill 13 68 182 295,435 274,232 Current assets Land, developments and trading properties 14 86,076 95,568 Available for sale investments 15 66 161 Trade and other receivables 16 33,925 41,528 Cash and cash equivalents 17 10,135 28,203 130,202 165,460 Total assets 425,637 439,692 Current liabilities Trade and other payables 18 (49,506) (75,833) Taxation (3,394) (5,787) Redeemable preference shares - (2,451) Borrowings 19 (42,683) (21,136) (95,583) (105,207) Non-current liabilities Borrowings 19 (80,160) (132,043) Derivative financial instruments (610) (1,657) Deferred tax provision 9 (19,005) (14,438) Obligations under finance leases 20 (182) (182) (99,957) (148,320) Total liabilities (195,540) (253,527) Net assets 230,097 186,165 Unaudited Consolidated Balance Sheet At 31 March 2006 At At 31 March 31 March 2006 2005 Notes £000 £000 Equity Called up share capital 21 1,209 1,170 Share premium account 24 42,490 39,110 Revaluation reserve 24 64,820 54,530 Capital redemption reserve 24 7,478 7,467 Other reserves 24 291 291 Profit and loss account 24 120,948 86,822 Investment in own shares 23 (7,139) (6,893) Equity shareholders' funds 230,097 182,497 Minority interests - 3,668 Total equity 230,097 186,165 Net assets per share Basic 25 259p 215p Diluted 25 253p 205p Adjusted diluted 25 278p 224p Unaudited Consolidated Cash Flow Statement Year To Year To 31 March 2006 31 March 2005 £000 £000 Cash flows from operating activities Operating profit 62,200 70,256 Depreciation 179 190 Gain on investment properties and other non-cash items (44,005) (47,632) Cash flows from operations before changes in working capital 18,374 22,814 Change in trade and other receivables 3,232 (14,375) Change in land, developments and trading properties 11,989 (21,366) Change in trade and other payables (30,779) 42,188 Cash generated from operations 2,816 29,261 Finance costs (10,256) (10,408) Finance income 1,295 1,942 Minority interest dividends paid (3,545) (1,249) Dividends from joint ventures 2,337 846 Tax paid (4,743) (42) (14,912) (8,911) Cash flows from operating activities (12,096) 20,350 Cash flows from investing activities Purchase of investment property (39,055) (54,515) Sale of investment property 65,991 138,305 Purchase of own shares (85) (4,078) Acquisitions - (124) Sale of plant and equipment 47 47 Purchase of plant and equipment (140) (231) 26,758 79,404 Cash flows from financing activities Issue of shares 3,418 3,965 Borrowings drawn down 35,146 51,114 Borrowings repaid (65,647) (46,255) Equity dividends paid (3,127) (60,798) Repurchase of shares - (4,467) Return of cash - B share repurchase (2,451) (32,465) - expenses - (709) Refinancing costs (69) (220) (32,730) (89,835) Net (decrease)/ increase in cash and cash equivalents (18,068) 9,919 Cash and cash equivalents at 1 April 2005 28,203 18,284 Cash and cash equivalents at 31 March 2006 10,135 28,203 Unaudited Consolidated Statement of Recognised Income and Expense For the year to 31 March 2006 Year To Year To 31 March 31 March 2006 2005 £000 £000 Profit for the period after taxation 47,444 65,539 Minority interest 124 (17) Fair value movements on available for sale investments (14) 38 Total recognised income and expense 47,554 65,560 Unaudited Notes to the Preliminary Announcement 1. Financial Information The financial information contained in this report does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The full accounts for the year ended 31 March 2005, which were prepared under UK GAAP and which received an unqualified report from the Auditors, and did not contain a statement under s237(2) or (3) of the Companies Act 1985, have been filed with the Registrar of Companies. Financial statements for the year ended 31 March 2006 will be presented to the Members at the Annual General Meeting on 20 July 2006. The auditors have indicated that their report on these Financial Statements will be unqualified. 2. Principal Accounting Policies Basis of preparation The preliminary announcement has been prepared in accordance with International Financial Reporting Standards ('IFRS') but does not contain sufficient information to comply fully with IFRS. The Financial Statements to be presented to Members at the 2006 AGM are expected to fully comply with IFRS. The preliminary announcement has been prepared under the historical cost convention as modified by the revaluation of investment properties, available for sale investments and derivative financial instruments. The measurement and principal accounting policies are set out below. The policies have changed from the previous year when financial statements were prepared under applicable United Kingdom Generally Accepted Accounting Principles ('UK GAAP'). The comparative information has been restated in accordance with IFRS. The disclosures required by IFRS1 concerning the transition from UK GAAP to IFRS are provided in note 3. The date of transition to IFRS was 1 April 2004. The Group has taken advantage of certain exemptions available under IFRS1 First time adoption of International Financial Reporting Standards. The exemptions are explained under the respective accounting policy. Basis of consolidation The Group financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to 31 March 2006. Subsidiary undertakings are those entities over which the Group has the ability to govern the financial and operating policies through the exercise of voting rights. Unrealised gains on transactions between the Company and its subsidiaries and between subsidiaries are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of impairment of the asset transferred. Revenue recognition Property revenue consists of gross rental income on an accruals basis, together with sales of trading and development properties, excluding sales of investment properties. Rental income receivable in the period from lease commencement to the earlier of lease expiry and any tenant option to break is spread evenly over that period. Any incentive for lessees to enter into a lease agreement and any costs associated with entering into the lease are spread over the same period. Revenue in respect of investment and other income represents investment income, fees and commissions earned on an accruals basis and profits or losses recognised on investments held for the short-term. Dividends are recognised when the shareholders' right to receive payment has been established. Interest income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate. A property is regarded as sold when the significant risks and returns have been transferred to the buyer. For conditional exchanges, sales are recognised as the conditions are satisfied. Income tax The charge for current taxation is based on the results for the year as adjusted for items which are non-assessable or disallowed. It is calculated using rates that have been enacted or substantively enacted by the balance sheet date. Tax payable upon realisation of revaluation gains recognised in prior periods is recorded as a current tax charge with a release of the associated deferred taxation. Deferred tax is provided using the balance sheet liability method in respect of temporary differences between the book value and tax base of relevant assets and liabilities. Deferred tax is provided on all temporary differences. Deferred tax is determined using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. It is recognised in the Income Statement except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Investments Investments are classified as available-for-sale investments or trading investments dependent on the purpose for which they were acquired. Available-for-sale investments, being investments intended to be held for an indefinite period, are revalued to fair value at the balance sheet date. For listed investments, fair value is the bid market listed value ruling at the balance sheet date. Gains or losses arising from changes in fair value are included in the revaluation reserve except to the extent that losses are attributable to impairment, in which case they are recognised in the income statement. Upon disposal, accumulated fair value adjustments are included in the income statement. Trading investments, acquired principally for the purpose of generating a profit from short-term fluctuations in price, are included in current assets and revalued to fair value. Realised and unrealised gains or losses arising from changes in fair value are included in the income statement in the period in which they arise. Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cash and cash equivalents comprise cash in hand, deposits with banks, other short term, highly liquid investments with original maturities of three months or less, net of bank overdrafts. Investment in joint ventures Entities whose activities are jointly controlled by the Group and by other ventures independent of the Group are accounted for using the equity method of accounting. Under IFRS the Group's share of the results and of the net assets of the joint ventures are shown in the Consolidated Income Statement and Consolidated Balance Sheet respectively. Goodwill Goodwill representing the excess of the cost of acquisition over the fair value of the Group's share of indentifiable net assets acquired, is capitalised and reviewed annually for impairment. Goodwill is carried at cost less accumulated impairment losses. Negative goodwill is recognised immediately after acquisition in the income statement. Depreciation In accordance with IAS 40 on Investment Property depreciation is not provided for on freehold investment properties or on leasehold investment properties. The Group does not own the freehold land and buildings which it occupies. Costs incurred in respect of leasehold improvements to the Group's head office at 11-15 Farm Street, London W1J 5RS are capitalised and held as short term leasehold improvements. Leasehold improvements, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Residual values are re-assessed annually. Depreciation is charged so as to write off the cost of assets less residual value over their estimated useful lives, using the straight line method, on the following basis: Short leasehold improvements - 10% or length of lease if shorter Plant and equipment - 25%. Investment properties Investment properties are properties owned or leased by the Group which are held for long-term rental income and for capital appreciation. Investment properties are initially recognised at cost and revalued at the balance sheet date to fair value as determined by professionally qualified external valuers. In accordance with IAS 40, investment properties held under the leases are stated gross of the recognised finance lease liability. Gains or losses arising from changes in the fair value of investment properties are included in other operating income in the income statement of the period in which they arise. In accordance with IAS 40, as the Group uses the fair value model, no depreciation is provided in respect of investment properties including integral plant. When the Group redevelops an existing investment property for continued future use as investment property, the property remains an investment property measured at fair value and is not reclassified. Interest is capitalised before tax relief until the date of practical completion. Leases Leases are classified according to the substance of the transaction. A lease that transfers substantially all the risks and rewards of ownership to the lessee is classified as a finance lease. All other leases are classified as operating leases. In accordance with IAS 40, finance and operating leases of investment property are accounted for as finance leases and recognised as an asset and an obligation to pay future minimum lease payments. The investment property asset is included in the balance sheet at fair value, gross of the recognised finance lease liability. Lease payments are allocated between the liability and finance charges so as to achieve a constant financing rate. Assets leased out under operating leases are included in investment property, with rental income recognised on a straight-line basis over the lease term. Land, developments and trading properties Land, developments and trading properties held for sale are inventory and are included in the balance sheet at the lower of cost and net realisable value. Derivative financial instruments Derivative financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument. The Group enters into derivative transactions such as interest, caps and floors in order to manage the risks arising from its activities. Derivatives are initially recorded at fair value and are subsequently re-measured to fair value based on market prices, estimated future cash flows and forward rates as appropriate. Any change in the fair value of such derivatives is recognised immediately in the income statement as a finance cost. Share based payments The Company provides share-based payments in the form of share options, performance share plan awards and a share incentive plan. All share-based payment arrangements granted after 7 November 2002 that had not vested prior to 1 January 2005 are recognised in the financial statements. The Company uses the Stochastic valuation model and the resulting value is amortised through the Income Statement over the vesting period of the share-based payments. For the performance share plan and share incentive plan awards, where non-market conditions apply, the expense is allocated over the vesting period, to the Income Statement based on the best available estimate of the number of awards that are expected to vest. Estimates are subsequently revised if there is any indication that the number of awards expected to vest differs from previous estimates. Borrowing and borrowing costs Interest bearing loans and overdrafts are recorded at fair value, net of finance and other costs yet to be amortised. Finance and other costs incurred in respect of the obtaining and maintenance of borrowings are accounted for on an accruals basis and written-off to the Income Statement over the length of the associated borrowings. Borrowing costs directly attributable to the acquisition and construction of new development and investment properties are added to the costs of such properties until the earliest of: • the date when the development or investment becomes fully let; • the date when the income exceeds the outgoings; and, • the date of completion of the development or investment. All other borrowing costs are recognised in the income statement in the period in which they are incurred. Trade receivables Trade receivables do not carry any interest and are initially recognised at fair value and subsequently at amortised cost as reduced by appropriate allowances for estimated irrecoverable amounts. Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cash and cash flow equivalents comprise cash in hand, deposits with banks, other short-term, highly liquid investments with original maturities of three months or less, net of bank overdrafts. Trade and other payables Trade and other payables are not interest bearing and are initially recognised at fair value and subsequently at amortised cost. Use of estimates and judgements To be able to prepare accounts according to generally accepted accounting principles, management must make estimates and assumptions that affect the asset and liability items and revenue expense amounts recorded in the financial accounts. These estimates are based on historical experience and various other assumptions that management and the Board of Directors believe are reasonable under the circumstances. The results of this form the basis for making judgements about the carrying value of assets and liabilities that are not readily available from other sources. Areas requiring the use of estimates and critical judgement that may significantly impact on the Group's earnings and financial position are revenue and cost recognition on developments, valuation of investment properties, calculation of deferred tax liabilities, calculation and assessment of recoverability of deferred tax assets and the recognition of share-based payment charges. Dividends Dividend distributions to the Company's shareholders are recognised as a liability in the financial statements in the period in which dividends are declared. 3. Reconciliation between UK GAAP and IFRS The principal changes arising from the presentation of the 31 March 2004 and 31 March 2005 results under IFRS are: (a) Profit after tax Year To 31 March 2005 £000 As previously reported under UK GAAP 26,814 IFRS adjustments to profit before taxation 29,844 IFRS adjustments to taxation 8,881 IFRS profit after tax 65,539 (b) Profit before tax Year To 31 March 2005 £000 As previously reported under UK GAAP 34,851 Goodwill amortisation 86 Amortisation of rent free periods and other lease incentives (1,029) Amortisation of letting costs (82) Share based payments (75) Joint venture share of taxation (570) Revaluation gains on investment properties reported as income - subsidiaries 30,098 - associated companies 191 Movement in fair value of derivative financial instruments 1,225 IFRS adjustments 29,844 IFRS profit before tax 64,695 (c) Taxation Current tax Year To 31 March 2005 £000 As previously reported under UK GAAP 8,583 Joint venture share of current tax (570) As restated under IFRS 8,013 Deferred tax As previously reported under UK GAAP (546) Investment property surpluses (5,825) Capital allowances (93) Financial instruments 368 Tenants incentives (309) Letting costs (24) Performance share plan award (303) Share option gains (2,125) IFRS adjustments (8,311) As restated under IFRS (8,857) Taxation as restated under IFRS (844) (d) Net assets At At 31 March 1 April 2005 2004 £000 £000 As previously reported under UK GAAP 196,712 238,615 Amortisation of rent free periods and other lease incentives 3,240 4,269 Amortisation of letting costs 1,606 1,687 Fair value of financial instruments (1,657) (2,882) Tax effect of the above (957) (922) Goodwill impairment (491) (576) Share based payment (24) 51 Fair value of available for sale investments 38 - Preference shares (2,451) - Exclusion of provision for proposed dividend 1,831 2,524 Provision for contingent tax liability - on revaluation surplus (14,684) (20,509) - on capital allowances (306) (399) - other timing differences 3,308 880 IFRS adjustments (10,547) (15,877) As at 31 March under IFRS 186,165 222,738 (e) Adjusted net asset value per share At At 31 March 1 April 2005 2004 pence pence As previously reported 216 177 Amortisation period of lease incentives (net of tax) 2 2 Amortisation of letting costs (net of tax) 1 1 Dividend adjustment 2 2 Deferred tax on other timing differences 3 - Restated under IFRS 224 182 4. Revenue Year To Year To 31 March 31 March 2006 2005 £000 £000 Trading property sales 72,101 25,432 Rental income 20,102 22,745 Developments 26,756 52,916 Other income 315 376 119,274 101,469 5. Net rental income Year To Year To 31 March 31 March 2006 2005 £000 £000 Gross rental income 20,102 22,745 Rents payable (489) (396) Other property outgoings (3,089) (1,909) Net rental income 16,524 20,440 6. Gain on investment properties Year To Year To 31 March 31 March 2006 2005 £000 £000 Net proceeds from the sale of investment properties 65,992 140,183 Book value (57,565) (124,210) Lease incentive and letting costs adjustment (609) (1,867) Profit on sale of investment properties 7,818 14,106 Revaluation gains on investment properties 35,733 30,098 Gain on investment properties 43,551 44,204 7. Administrative expenses Year To Year Ended 31 March 31 March 2006 2005 £000 £000 Total administrative expenses 16,582 15,757 Operating profit on ordinary activities is stated after: Staff costs 9,488 11,471 Share based payments charge 3,458 1,010 Depreciation 179 190 Auditors remuneration 137 110 Administrative expenses includes salaries and cash bonuses in respect of the directors of £5,666,000 (2005: £7,426,000) plus cash bonuses payable to directors arising out of their exercise of share options of £693,000 (2005: £854,000). 8. Finance costs Year To Year To 31 March 31 March 2006 2005 £000 £000 Interest payable on bank loans and overdrafts 7,638 8,330 Other interest payable and similar charges 2,346 2,243 Finance arrangement costs 234 457 Interest capitalised (2,797) (2,296) Finance costs 7,421 8,734 9. Taxation Year To Year To 31 March 31 March 2006 2005 £000 £000 The tax charge is based on the profit for the period and represents: United Kingdom corporation tax at 30% (2005: 30%) - group corporation tax 5,983 6,100 - adjustments in respect of prior periods - 1,913 Current tax charge 5,983 8,013 Deferred tax- capital allowances (804) (639) other timing differences (872) (2,393) revaluation surpluses 5,369 (5,825) Deferred tax 3,693 (8,857) Tax on profit 9,676 (844) Deferred tax Capital gains 20,927 14,684 Capital allowances 1,301 2,105 Other temporary differences (3,223) (2,351) Deferred tax provision 19,005 14,438 10. Earnings per share The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year. Shares held by the ESOP, which has waived its entitlement to receive dividends, are treated as cancelled for the purposes of this calculation. The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares and the post tax effect of dividends on the assumed exercise of all dilutive options. Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below. 31.03.06 31.03.05 000's 000's Ordinary shares in issue 90,506 135,740 Weighting adjustment (3,540) (19,430) Weighted average ordinary shares in issue for calculation of basic earnings per 86,966 116,310 share Weighted average ordinary shares issued on exercise of share options 1,087 1,250 Weighted average ordinary shares to be issued on exercise of share options 2,535 4,185 Weighted average ordinary shares to be issued under performance share plan 1,296 250 Weighted average ordinary share in issue for calculation of diluted earnings 91,884 121,995 per share 31.03.06 31.03.05 000's 000's Earnings used for calculation of basic diluted earnings per share 47,568 65,522 Basic earnings per share 54.7p 56.3p Diluted earnings per share 51.8p 53.7p Earnings used for calculation of basic and diluted earnings per share 47,568 65,522 Less gain on sale and revaluation of investment properties (43,551) (44,204) Less fair value movement on derivative financial instruments (1,046) (1,225) Add back deferred tax in respect of investment properties 4,565 (6,463) Add back deferred tax in respect of derivative financial instruments 314 368 Earnings used for calculation of adjusted earnings per share 7,850 13,998 Adjusted earnings per share 9.0p 12.0p Adjusted diluted earnings per share 8.5p 11.5p 11. Investment properties Freehold Leasehold Total Freehold Leasehold Total 31.03.06 31.03.06 31.03.06 31.03.05 31.03.05 31.03.05 £000 £000 £000 £000 £000 £000 Group Fair value at 1 203,683 67,632 271,315 270,182 64,932 335,114 April Additions at cost 39,799 5,300 45,099 29,324 990 30,314 Disposals (57,564) - (57,564) (117,853) (6,357) (124,210) Revaluation 25,533 10,200 35,733 22,030 8,067 30,097 surplus Fair value at 31 211,451 83,132 294,583 203,683 67,632 271,315 March Interest capitalised during the year in respect of the refurbishment of investment properties amounted to £300,000 (2005: £nil). Interest capitalised during the year in respect of the refurbishment of investment properties is included in investment properties to the extent of £1,313,000 (2005: £1,013,000). 12. Owner occupied property, plant and equipment Short Vehicles Short Vehicles leasehold and Leasehold and office improvements office Total Improvements equipment Total 31.03.06 Equip- 31.03.06 31.03.05 31.03.05 31.03.05 £000 ment £000 £000 £000 £000 31.03.06 £000 Cost at 1 April 646 853 1,499 646 820 1,466 Additions at cost - 142 142 - 232 232 Disposals - (129) (129) - (199) (199) Cost at 31 March 646 866 1,512 646 853 1,499 Depreciation at 1 April 458 501 959 412 551 963 Provision for the year 47 132 179 46 144 190 Eliminated on disposals - (115) (115) - (194) (194) Depreciation at 31 505 518 1,023 458 501 959 March Net book amount at 31 141 348 489 188 352 540 March 13. Intangible fixed assets At At 31 March 2006 31 March 2005 £000 £000 Cost at 1 April 1,515 1,391 Additions - 124 Cost at 31 March 1,515 1,515 Impairment at 1 April 1,333 1,095 Impairment for the year 114 238 Impairment at 31 March 1,447 1,333 Fair value at 31 March 68 182 14. Land, developments and trading properties At At 31 March 31 March 2006 2005 Cost £000 £000 Development sites 40,568 34,711 Properties held as trading stock 45,508 60,857 86,076 95,568 The directors' valuation of trading and development stock showed a surplus of £29m above book value at 31 March 2006 (2005: £13m). Interest capitalised in respect of the development of sites is included in stock to the extent of £2,867,000 (2005: £2,185,000). Interest capitalised during the period in respect of development sites amounted to £2,497,000 (2005: £2,296,000). 15. Available for sale investments At At 31 March 31 March 2006 2005 £000 £000 UK listed investments at fair value 66 161 66 161 16. Trade and other receivables At At 31 March 31 March 2006 2005 £000 £000 Trade receivables 13,156 16,056 Other receivables 5,999 11,979 Prepayments and accrued income 14,770 13,493 33,925 41,528 17. Cash and cash equivalents At At 31 March 31 March 2006 2005 £000 £000 Rent deposits and cash held at managing agents 1,980 2,612 Cash secured against debt and cash held at solicitors 189 2,368 Cash held to fund future development costs 382 364 Free cash 7,584 22,859 10,135 28,203 18. Trade and other payables At At 31 March 31 March 2006 2005 £000 £000 Trade payables 8,424 32,149 Other payables 7,372 8,910 Accruals 33,710 34,774 49,506 75,833 19. Borrowings At At 31 March 31 March 2006 2005 £000 £000 Bank overdraft and loans - maturity Due within one year 42,683 21,136 Due after more than one year 80,160 132,043 122,843 153,179 31 March 31 March 2006 2005 £000 £000 Undrawn committed bank facilities Expiring in one year or less 45,000 30,578 Expiring in more than one year but not more than two years 2,011 - Expiring in more than two years 8,691 20,625 55,702 51,203 Interest Rates 31 March % Expiry 2006 £000 Fixed rate borrowings - fixed 9.050 Feb 2009 7,388 - swap rate plus bank margin 5.939 Sep 2009 14,324 - swap rate plus bank margin 6.329 Feb 2008 5,800 - swap rate plus bank margin 4.965 Mar 2007 5,925 - swap rate plus bank margin 5.846 Jun 2006 3,500 - swap rate plus bank margin 5.819 Sep 2007 3,460 - swap rate plus bank margin 5.439 Jun 2011 4,536 - swap rate plus bank margin 5.759 Nov 2010 5,200 Weighted average 6.279 Feb 2009 50,133 Floating rate borrowings 72,953 Total borrowings 123,086 Deferred arrangement costs (243) 122,843 Floating rate borrowings bear interest at rates based on LIBOR. Hedging In addition to the fixed rates, borrowings are also hedged by the following financial instruments. Instrument Value Rate Start Expiry £000 % Current - cap 80,000 7.000 Jan 2006 Sept 2009 Gearing At Restated 31 March At 31 March 2006 2005 £000 £000 Total borrowings 122,843 153,179 Cash (10,135) (28,203) Net borrowings 112,708 124,976 Net assets 230,097 186,165 Gearing 49% 67% Net borrowings exclude the Group's share of borrowings in joint ventures of £11,718,000 (2005: £2,483,000). 20. Obligations under finance leases At At 31 March 31 March 2006 2005 £000 £000 Lease payments under finance leases fall due: Not later than one year 14 14 Later than one year and not later than five years 46 46 Later than five years 122 122 Present value of finance lease obligations 182 182 21. Share capital At At 31 March 31 March 2006 2005 £000 £000 Authorised - the authorised share capital of the Company is £39,576,626.60 39,577 39,577 divided into ordinary shares of 1p each, 5.25p convertible cumulative redeemable preference shares 2012 of 70p each and deferred shares of 1 /8p each 39,577 39,577 Allotted, called up and fully paid - 94,371,925 ordinary shares of 1p each 944 905 - 212,145,300 deferred shares of 1/8 p each 265 265 1,209 1,170 As at 1 April 2005 the Company had 18,101,164 ordinary 5p shares in issue. On 17 June 2005 options over 323,221 ordinary 5p shares were exercised increasing the issued share capital of the Company to 18,424,385 ordinary 5p shares. On 1 September 2005, following approval by shareholders at an EGM on 31 August 2005, each 5p share was split into five 1p shares. Following this share split there were 92,121,925 ordinary 1p shares in issue. On 7 September options over 1,750,000 ordinary 1p shares were exercised. On 16 December options over 300,000 ordinary 1p shares were exercised. On 6 January options over 102,173 ordinary 1p shares were exercised. On 13 January 2006 options over 97,827 ordinary 1p shares were exercised. At 31 March 2006 there were 94,371,925 ordinary 1p shares in issue. Share options At 31 March 2006 unexercised options over 3,655,510 (31 March 2005: 7,521,615) new ordinary 1p shares in the Company and 6,234,695 (31 March 2005: 6,484,695) purchased ordinary 1p shares held by the ESOP had been granted to directors and employees under the Company's share option schemes. During the period no new options were granted. Options over 323,221 new ordinary 5p shares and 2,250,000 new ordinary 1p shares were exercised and 250,000 purchased ordinary 1p shares were exercised. 22. Dividends Year To Year To 31 March 31 March 2006 2005 £000 £000 Attributable to equity share capital Ordinary interim paid of 1.45p (2005: 1.32p) per share 1,296 1,702 prior period final paid 2.20p (2005: 2.00p) per share 1,831 2,524 A Shares - Return of Cash - 56,572 3,127 60,798 The interim dividend of 1.45p was paid on 22 December 2005 to shareholders on the register on 2 December 2005. The final dividend, if approved by shareholders at the AGM on 20 July 2006, amounting to £2,174,000, representing 2.45 pence per share, will be paid on 21 July 2006 and has not been included as a liability as at 31 March 2006. 23. Investment in own shares Following approval at the 1997 Annual General Meeting the Company established the Helical Bar Employees' Share Ownership Plan Trust (the 'Trust') to be used as part of the remuneration arrangements for employees. The purpose of the Trust is to facilitate and encourage the ownership of shares by or for the benefit of employees by the acquisition and distribution of shares in the Company. The Trust purchases shares in the Company to satisfy the Company's obligations under its Share Option Schemes and Performance Share Plan. At 31 March 2006 the Trust held 5,648,080 (31 March 2005: 5,695,580) ordinary shares in Helical Bar plc. At 31 March 2006 options over 6,234,695 (31 March 2005: 6,484,695) ordinary shares in Helical Bar plc had been granted through the Trust. At 31 March 2006 awards over 4,514,380 (31 March 2005: 2,549,760) ordinary shares in Helical Bar plc had been made under the terms of the Performance Share Plan. Provision for ESOP share purchase 24. Statement of Changes in Equity Capital Profit Investment Share Share Revaluation redemption Other and loss in own Capital premium reserve reserve reserves account shares Total £000 £000 £000 £000 £000 £000 £000 £000 At 1 April 2004 1,357 35,900 68,814 7,246 291 115,538 (10,106) 219,040 Issue of 45 3,210 3,255 shares Purchase of (26) 221 (46,802) (3,776) (50,383) shares Revaluation 36,114 (36,114) - surplus Realised on (49,438) 49,438 - disposals Return of cash (206) 7,431 7,225 Provision (442) (442) released Total 65,560 65,560 Recognised income Dividends (60,798) (60,798) paid Minority (960) (960) interest in revaluation surplus Performance 707 707 share plan Provision for (707) (707) ESOP share purchase As at 31 1,170 39,110 54,530 7,467 291 86,822 (6,893) 182,497 March 2005 Issue of 39 3,380 3,419 shares Revaluation 30,364 (30,364) - surplus Realised on (20,074) 20,074 - disposals Total 47,554 47,554 recognised income Dividends (3,127) (3,127) paid Purchase of 11 (11) (472) (472) shares Share options 226 226 exercised Performance 3,128 3,128 share plan Provision for (3,128) (3,128) ESOP share purchase As at 31 1,209 42,490 64,820 7,478 291 120,948 7,139 230,097 March 2006 25. Net assets per share At At 31 March 31 At 2006 At March 31 Number 31 2005 March Of Pence March Number Pence 2006 Shares Per 2005 Of Per £000 000's share £000 Shares share 000's Net assets 230,097 88,724 182,497 84,810 Less deferred shares (265) (265) Basic 229,832 88,724 259 182,232 84,810 215 Unexercised share options 3,506 3,655 6,925 7,522 Diluted 233,338 92,379 253 189,157 92,332 205 Adjustment for: - Deferred tax on capital allowances 2,175 2,105 - Deferred tax on chargeable gains 20,927 14,684 - Fair value of financial 427 1,160 instruments Adjusted diluted net asset value 256,867 92,379 278 207,106 92,332 224 Adjusted for: - Directors valuation of trading 28,704 12,884 stock Adjusted diluted net asset value plus stock surplus 285,571 92,379 309 219,990 92,332 238 Adjustment for: - Deferred tax on capital allowances (2,175) (2,105) - Deferred tax on capital gains (20,927) (14,684) - Fair value of financial statements (427) (1,160) - Adjusted diluted triple NAV 262,042 92,379 284 202,041 92,332 219 This information is provided by RNS The company news service from the London Stock Exchange

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Helical (HLCL)
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