HELICAL'S LONDON PORTFOLIO CONTINUES TO DELIVER

RNS Number : 1763G
Helical PLC
25 May 2017
 

HELICAL PLC

("Helical" or the "Group" or the "Company")

Annual Results for the Year to 31 March 2017

 

HELICAL'S LONDON PORTFOLIO CONTINUES TO DELIVER

 

Gerald Kaye, Chief Executive, commented:

 

"Helical has a dynamic portfolio with good upside potential through a combination of development, refurbishment and significant asset management opportunities. We believe our concentration on offices and mixed use assets in London, offices in Manchester and well located logistics units will provide capital growth from development gains and rising income streams.

 

"We have ambition to continue to grow the Company and have actively sought to add to our development pipeline with exciting new schemes, particularly in London. Rebalancing the portfolio through the sale of non-core assets enables us to recycle some of the value we have created in recent years and fully pursue those opportunities that we have identified."

 

Financial Highlights

 

Results

 

·   EPRA net asset value per share up 3.7% to 473p (31 March 2016: 456p).

·   EPRA earnings per share of 0.5p (2016: 17.1p).

·   IFRS basic earnings per share of 34.0p (2016: 91.3p).

·   IFRS Profit before tax of £41.6m (2016: £114.0m).

·   Total Accounting Return of 8.3% (2016: 22.5%).

·   See-through Total Property Return of £79.9m (2016: £164.6m).

-       Group's share of net rental income of £47.0m (2016: £43.4m) - up 8.3%.

-       Development losses of £5.7m (2016: profits of £27.5m), after provisions of £12.8m (2016: £6.4m).

-       Net gain on sale and revaluation of investment properties of £38.6m

(2016: £93.7m).

·   Final dividend proposed of 6.20p per share (2016: 2nd interim plus final 5.87p) - up 5.6%.

 

Property Valuations

 

·   Group's share of property portfolio £1,205m (31 March 2016: £1,240m).

·   Unleveraged return of property portfolio as measured by IPD of 9.4% (2016: 21.7%) compared to 4.4% (2016: 11.4%) for the benchmark index.

·   Investment property valuations, on a like-for-like basis, up 5.2% (4.5% including sales and purchases).

 

Financing

·   See-through loan to value reduced to 51% (31 March 2016: 55%).

·   Average maturity of the Group's share of debt of 3.6 years (31 March 2016: 4.5 years) at an average cost of 4.3% (31 March 2016: 4.2%).

·   Group's share of cash and undrawn bank facilities at 31 March 2017 of £267m

(31 March 2016: £193m).

 

Operational Highlights       

 

London Portfolio - strong valuation performance supported by ongoing lettings progress and the completion of refurbishments

 

·   9.8% valuation increase, on a like-for-like basis, of see-through London investment portfolio, valued at £666m at 31 March 2017 (65.5% of investment portfolio) compared with £593m at 31 March 2016 (56.4%).

·   Contracted rents on our see-through London portfolio at 31 March 2017, including pre-lets at The Bower, increased to £27.9m (2016: £23.6m) compared to an ERV of £45.0m (2016: £45.4m).

·   At 25 Charterhouse Square EC1, refurbishment works on this 43,600 sq ft building were completed in March 2017 with 50% of the office space (18,725 sq ft) let at £75 psf.

·   At The Loom E1, a major repositioning of the building was completed in September 2016 and 19,275 sq ft is currently available with 2,750 sq ft under offer. Average contracted rents of £37.50 psf compare to lettings during the year of up to £54 psf.

·   Planning permission granted at Power Road Studios, Chiswick W4 for 42,500 sq ft of new office space.

·   At The Bower EC1, 58,907 sq ft of Phase 2, The Tower, was pre-let to WeWork in November 2016.

·   At Barts Square EC1, 118 (82%) of the 144 residential units in Phase One had exchanged by 24 May 2017 (31 March 2016: 102 units) at an average of £1,570 psf, with a further three reserved.

 

Regional Portfolio - asset recycling providing stronger focus on Manchester offices and logistics units

 

·   2.1% valuation decrease, on a like-for-like basis, in the see-through Regional investment portfolio, valued at £351m at 31 March 2017 (34.5% of investment portfolio) compared with £460m at 31 March 2016 (43.6%).

·   Contracted gross rents on see-through Regional investment portfolio at 31 March 2017 of £24.3m (2016: £32.4m) compared to an ERV of £26.6m (2016: £35.6m).

·   Regional investment portfolio comprised 9.3% offices, 5.0% in town retail, 2.8% retail parks, 15.4% logistics and 2.0% other (percentages of whole investment portfolio at year end).

·   Sales of 22 regional assets during the period comprising 13 logistics units, three offices and six retail assets for £117m at a 1.5% premium to March 2016 values.

·   The Morgan Quarter, Cardiff and a retail park at Great Yarmouth sold post year end for a total of £59m.

·   Trinity Court, a 47,500 sq ft office building in Manchester, acquired for £12.9m post year end.

·   39,047 sq ft let at Churchgate House, Manchester at average rents of £17.27 psf, 12.7% above March 2016 ERV.

·   92,672 sq ft logistics unit let in Burton-on-Trent at £5.50 psf, 5% above March 2016 ERV.

·   Since 31 March 2016, 96 retirement village units sold for £39.3m with 53 reserved or exchanged for £27.4m.

·   Land at Liphook sold for £3.7m at a profit of £3.1m.

 

 

For further information, please contact:

 

Helical plc

020 7629 0113

Gerald Kaye (Chief Executive)

 

Tim Murphy (Finance Director)

 

 

 

Address:

5 Hanover Square, London W1S 1HQ

Website:

www.helical.co.uk

Twitter:

@helicalplc

 

 

FTI Consulting

020 3727 1000

Dido Laurimore/Tom Gough/Richard Gotla

 

Results Presentation

 

Helical will be holding a presentation for analysts and investors at 9am, Thursday 25 May 2017 at FTI Consulting, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD. If you would like to attend, please contact Jenni Nkomo on 020 3727 1000, or email her at jenni.nkomo@fticonsulting.com.

 

Helical plc will host a live conference call and webcast. The details are as follows:

 

Conference Call Details:

 

Participants, Local - London, United Kingdom:

+44 (0)330 336 9411

Confirmation Code:

5857195

 

Webcast Link:

http://webcasting.brrmedia.co.uk/broadcast/591f0b181ef2297b08216e7c

 

The presentation will also be on the Company's website www.helical.co.uk

 

 

Financial Highlights

 

 

See-through Income Statement

Notes

1, 8

Year to

31 March 2017

£m

Year to

31 March 2016

Restated

£m

Net rental income

 

47.0

43.4

Development property (losses)/profits

 

(5.7)

27.5

Gain on revaluation of investment properties

 

37.3

49.8

Gain on sale of investment properties

 

1.3

43.9

Total property return

 

79.9

164.6

 

 

 

 

IFRS Profit before tax

 

41.6

114.0

EPRA earnings

 

0.5

19.6

 

 

Earnings Per Share and Dividends

 

 

 

Pence

 

Pence

Basic earnings per share

2

34.0

91.3

Diluted earnings per share

2

33.2

88.0

EPRA earnings per share

2

0.5

17.1

Dividends per share paid in year

 

3.12

12.60

Dividends per share declared for year

 

8.60

8.17

 

 

See-through Balance Sheet

 

3

At

31 March 2017

£m

At

31 March 2016

Restated

£m

See-through property portfolio

 

1,205.2

1,240.0

See-through net borrowings

 

620.0

681.8

Net assets

 

516.9

480.7

 

 

 

 

Net assets per share, gearing and loan to value

 

 

 

EPRA Net Asset Value per share

4

473p

456p

See-through loan to value

5

51%

55%

Pro-forma see-through loan to value

6

49%

n/a

See-through net gearing

7

120%

142%

 

Notes

1.     Includes Group's share of income and gains of its subsidiaries and joint ventures. See Appendix 1.

2.     Calculated in accordance with IAS 33 and guidance issued by the European Public Real Estate Association ("EPRA"). EPRA earnings per share exclude the net gain on sale and revaluation of the investment portfolio of £38.6m (2016: £93.7m) but include development losses of £5.7m (2016: profits of £27.5m).

3.     Includes the Group's share of assets and liabilities of its subsidiaries and joint ventures. See Appendix 1.

4.     The EPRA Net Asset Value per share at 31 March 2016 has been restated from 461p for the matters referred to in note 25.

5.     See-through loan to value is the ratio of see-through net borrowings to see-through property portfolio. See Appendix 2.

6.     See-through loan to value at 31 March 2017, adjusted for £65m of sales proceeds and £13m of purchases since the year end. 

7.     See-through net gearing is the ratio of see-through net borrowings to net assets. See Appendix 2.

8.     See the Glossary in Appendix 6 for definition of key terms.

 

 

Chief Executive's Statement

 

Overview

 

I am pleased to present the Company's 2017 Annual Results, the first since my appointment as Chief Executive of Helical plc at the 2016 AGM.

 

The year to 31 March 2017 has been eventful with the real estate sector proving resilient against a background of both UK and international political change. Looking back 12 months it was clear that the exceptional growth in property values that we experienced over the period from 2012 to 2016, as the market recovered from the 2008 Global Financial Crisis, was coming to an end with yields approaching historic lows, but with some prospect for growth in rental values.

 

At Helical, we took advantage of the strong recovery in property values during this period by expanding the Company's business activities, investing in development opportunities in London and higher yielding regional assets to provide a stable flow of rental income. Using the proceeds of our 2013 Retail Bond and our 2014 Convertible Bond, together with additional borrowings, we increased our property portfolio from £626m at 31 March 2013 to over £1.2bn, generating significant surpluses which have more than doubled shareholders' funds from £254m to £517m at 31 March 2017.

 

During the year we have sought to recycle some of the capital created in this period into the schemes which we believe will continue to support the future growth of the Company. We have narrowed the focus of the Company to London, offices in Manchester and a portfolio of logistics units. We expect to complete this process during the current year with the sale of the remaining non-core assets, being the retail properties and regional offices outside of Manchester, whilst continuing to work through the retirement village programme.

 

In the year under review, the majority of our performance has come from the assets we own in London, where we have increased our weighting to 63% of the total portfolio. Sales of regional assets since the year end have increased this London weighting further to 66%. In the investment portfolio we have created buildings which reflect the needs of our tenants, acknowledging that modern lifestyles increasingly merge work and leisure needs. We now have a portfolio of multi-let, flexible and desirable properties which also provide ongoing asset management opportunities to add value. Our London portfolio remains reversionary with further value to be created through the completion of our redevelopment and refurbishment programme, letting vacant space and upcoming rent reviews.

 

We believe that London will continue to outperform the rest of the UK over the medium and long term and our strategy is to continue to increase our London holdings.

 

Results for the Year

 

The profit before tax for the year to 31 March 2017 was £41.6m (2016: £114.0m). Total Property Return reduced to £79.9m (2016: £164.6m) and included growing net rents of £47.0m, an increase of 8.3% on 2016 (£43.4m), and development losses of £5.7m (2016: £27.5m) after deducting provisions of £12.8m (2016: £6.4m). The gain on sale and revaluation of the investment portfolio contributed £38.6m (2016: £93.7m).

 

Net finance costs of £21.2m were lower than in 2016 (£22.6m) and the Income Statement benefited from the shortening of the maturity period for the Group's remaining interest rate swaps which led to a £0.8m credit (2016: charge of £6.9m) arising from the valuation of the Company's derivative financial instruments. The revaluation of the Company's Convertible Bond provided a credit of £3.0m (2016: £0.5m). Recurring administration costs were marginally higher at £10.8m (2016: £10.7m). Performance related awards were substantially lower at £6.9m (2016: £13.3m) with National Insurance on these awards of £0.7m (2016: £2.1m).

 

These results allow the Board to continue its progressive dividend policy and to recommend to shareholders a final dividend of 6.20p which, together with the interim dividend of 2.40p paid in December 2016, takes the total dividend for the year to 8.60p (2016: 8.17p), an overall increase of 5.3%.

 

Performance

 

We measure our performance at both portfolio and Company level, seeking to outperform the relevant sector indices and our peer group in the medium and long term.

 

EPRA earnings per share fell from 17.1p to 0.5p, reflecting growing net rental income offset by reduced development profits. On a like-for-like basis, the investment portfolio increased by 5.2% (4.5% including sales and purchases). Sales during the year offset this growth in values contributing to an overall reduction in the portfolio value to £1,205m (2016: £1,240m). The unleveraged return of our property portfolio, as measured by IPD, was 9.4% (2016: 21.7%), compared to 4.4% (2016: 11.4%) for the benchmark index. These investment gains contributed to an increase in EPRA net asset value per share, up 3.7% to 473p (2016: 456p).

 

Finance

 

The Company has expanded its activities significantly in recent years, seeking to increase shareholder funds through the generation and retention of increased net rental streams, development profits and valuation surpluses. This growth has been financed through an increase in secured debt borrowed primarily from UK high street banks and, since 2013, through the use of unsecured debt in the form of a Retail Bond and a Convertible Bond. In assessing the needs of the business the Company is conscious that it needs to manage any risks inherent in this leveraged approach to growing the business. It seeks to do this through the use of unsecured debt (24% of total debt), by maintaining an appropriate debt maturity profile and by hedging its interest rate exposure.

 

The Company uses gearing on a tactical basis throughout the property cycle, being raised to accentuate property performance when property returns are judged to materially outperform the cost of debt and lowered when seeking to reduce exposure to the property cycle.

 

At 31 March 2017, the Company's see-through loan to value ("LTV"), being the ratio of see-through net borrowings to the value of the see-through property portfolio, was 51%. This metric has varied between 45% and 55% in the last five years and, subsequent to the year end, has fallen below 50% following the recent sales of properties in Cardiff and Great Yarmouth.

 

Looking forward, the Company will seek to operate within an LTV range of 40%-50% for the foreseeable future, subject to being able to maximise opportunities in the market whilst remaining aware of the risks of higher levels of gearing.

 

During the year, the average debt maturity reduced to 3.6 years (2016: 4.5 years), with no secured loan repayable before November 2019, whilst marginally increasing the average cost of debt at 4.3% (2016: 4.2%). The Company has a significant level of liquidity with cash and unutilised bank facilities of £267m (2016: £193m) to fund capital works on its portfolio.

 

Board Matters

 

In July 2016, I became CEO of Helical succeeding Michael Slade who became the Company's Non-Executive Chairman. The Board also consists of three Executive Directors and five Independent Non-Executive Directors. Our Executive team has an average of over 19 years' experience at Helical and are supported by a strong team of property and finance professionals and administrative staff.

 

The Future

 

Helical has a dynamic portfolio with good upside potential through a combination of development, refurbishment and significant asset management opportunities. We believe our concentration on offices and mixed use assets in London, offices in Manchester and well located logistics units will provide capital growth from development gains and rising income streams.

 

We have ambition to continue to grow the Company and have actively sought to add to our development pipeline with exciting new schemes, particularly in London. Rebalancing the portfolio through the sale of non-core assets enables us to recycle some of the capital we have created in recent years and fully pursue those opportunities that we have identified.

 

 

 

Gerald Kaye
Chief Executive

25 May 2017

 

 

 

Our Market

 

Overview

 

Helical's core business is developing and owning dynamic, well located office space in London and Manchester and also includes a portfolio of logistics units along the motorway network of England and Wales. With intelligent stock selection, we aim to maximise returns by development and refurbishment as well as through significant asset management initiatives.

 

London

 

In our judgement, the London commercial property market currently provides the best source of potential capital profits and we expect this to remain the case for the foreseeable future, notwithstanding the risks associated with our exit from the European Union and other potential headwinds.

 

In order for Helical to generate capital profits the Company needs to identify those areas where it believes tenant demand is, or will become, strong and to source opportunities in those areas at an appropriate entry price. Using the skills, knowledge and expertise gained over many years, the Helical team aims to deliver attractive and exciting office space, in locations with growing tenant demand.

 

The Company has recognised three continuing major developments in the London office market. First, the growth of the London population, which exceeded its previous peak during 2015. Second, the continuing and rapid expansion of the creative industries, predominantly in technology and media. Third, the migration of occupiers from the West End to the City and East London. 

 

London's population reached 8.7 million in 2015, exceeding its previous peak in 1939, and is forecast to continue growing towards 10 million by 2030. Whilst this growth will present challenges to London, particularly in terms of its infrastructure, the opening of the Elizabeth Line (Crossrail) at the end of 2018 will assist in alleviating these problems. Our properties in the City and Tech Belt are all in locations that will benefit from this rail link.

 

Recently published research by CBRE noted that the UK is a global leader in the creative industries and we have targeted these industries with our portfolio. In London, companies involved in media, advertising and marketing, technology and other creative industries comprised 54% of our new lettings in the year to 31 March 2017.

 

The third factor influencing our choice of location for our portfolio is the migration of occupiers across central London to the City and East London. The desire to be part of creative hubs, surrounded by like-minded individuals, located a short travelling distance from home is a common theme in discussing requirements with tenants. Most obviously, those hubs are in the Tech Belt from Kings Cross to Whitechapel.

 

In London, Helical is building up a portfolio of multi-tenanted office buildings in the Tech Belt locations of Farringdon, the Old Street roundabout and Whitechapel and also in West London from Chiswick to Shepherd's Bush. By owning these "clusters" or "villages" of office buildings it has a portfolio of assets with multiple lease events leading to ongoing asset management opportunities.

 

The Company also seeks to expand its profitability by taking on additional schemes in Central London either by co-investment or by forward selling/funding them, to allow for the generation of profit shares and development management fees but with reduced balance sheet exposure.

 

 

The Regions

 

Outside London, the Company has identified two key areas that contribute the potential for capital growth and are a source of recurring net rental income at good yields.

 

In Manchester we now have four assets (one acquired post year-end) with a potential capital value, after all refurbishment works and lettings are concluded, approaching £100m.  Here, the occupational and investment market continues to strengthen.  The city has high quality office stock and a diverse occupier base which has seen much international and institutional investment over the past few years.  Companies have access to a deep and highly skilled talent pool in a cost effective location both for the employer and the employee.  Recent research by CBRE identified Manchester as the "leading UK creative location outside London by some margin" and our buildings are designed to attract creative occupiers.  Annual office take up is consistently in excess of 1m sq ft with high profile new occupiers coming to the City on a frequent basis.

 

In addition, we have a portfolio of logistics units comprising 15% of our investment portfolio but which contribute 25% of our current contracted rents. This sector is characterised by strong occupational demand and limited available supply.  These properties have little obsolescence and good prospects of rental growth.

 

Looking Forward

 

The key areas of focus going forward for Helical are London, Manchester offices and logistics units. All other assets currently held are regarded as non-core and we will seek to continue to exit those assets as the opportunities to do so arise.

 

Our ambition is to have a balanced portfolio which generates sufficient net rental income to exceed all of our recurring costs and provide a surplus significantly greater than our annual dividend to shareholders. We have an ERV on the portfolio, post recent sales, of £69m and expect to generate this surplus once all of our current asset management initiatives are completed. We also seek a pipeline of opportunities to grow the balance sheet of Helical through the creation of development profits and capital surpluses.

 

 

Performance

 

We measure our performance using a number of financial and non-financial key performance indicators ("KPIs").

 

We incentivise management to outperform the Group's competitors by setting appropriate levels for performance indicators against which rewards are measured. We also design our remuneration packages to align management's interests with shareholders' aspirations. Key to this is the monitoring and reporting against identifiable performance targets and benchmarks.

 

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.

 

IPD has compared the ungeared performance of Helical's total property portfolio against that of portfolios within IPD for the last 20 years. The Group's annual performance target is to exceed the top quartile of the IPD database, which it has consistently achieved. Helical's ungeared performance for the year to 31 March 2017 was 9.4% (2016: 21.7%) compared to the IPD benchmark of 4.4% (2016: 11.4%) and upper quartile benchmark of 6.9% (2016: 13.0%).

 

Helical's unleveraged portfolio returns to 31 March 2017 were as follows:

 

 

1 yr

% pa

3 yrs

% pa

5 yrs

% pa

10 yrs

% pa

20 yrs

% pa

Helical

9.4

17.0

16.6

8.4

14.5

IPD Benchmark

4.4

11.0

10.0

4.3

8.8

Helical's Percentile Rank

8

3

3

3

2

 

Source: Investment Property Databank

 

Helical's trading and development portfolio (15.5% of gross assets) is shown in IPD at the lower of book cost or fair value and uplifts are only included on the sale of an asset.  
 

EPRA Net Asset Value Per Share

 

Our Group's main objective is to maximise growth in net asset value which we seek to achieve through increases in investment portfolio values and from retained earnings from other property related activity. EPRA net asset value per share is the property industry's preferred measure of the share of net assets attributable to each share as it includes the fair value of net assets on an ongoing long term basis. The adjustments to net asset value to arrive at this figure are shown in note 22 to the financial statements.


The diluted net asset value per share, excluding trading stock surplus, at 31 March 2017 increased by 6.4% to 431p (2016: 405p). Including the surplus on valuation of trading and development stock and adjusting for the fair value of derivatives and deferred taxation, the EPRA net asset value per share at 31 March 2017 increased by 3.7% to 473p (2016: 456p).

 

Total Shareholder Return

 

Total Shareholder Return is a measure of the return on investment for shareholders. It combines share price appreciation and dividends paid to show the total return to the shareholder expressed as an annualised percentage.


The Total Shareholder Return in the year to 31 March 2017 was -18.0% (2016: 1.0%). Over five, ten, fifteen, twenty and twenty five years Helical's Total Shareholder Return exceeded that of the Listed Real Estate Sector Index.

 

 

 

Performance Measured Over

 

 

1 year

Total return

pa %

3 years

Total return

pa %

5 years

Total return

pa %

10 years

Total return

pa %

15 years

Total return

pa %

20 years

Total return

pa %

25 years

Total return

pa %

Helical plc

1

-18.0

-3.8

13.0

-1.3

6.4

10.6

16.2

UK Equity Market

2

22.0

7.7

9.7

5.7

6.6

6.7

8.7

Listed Real Estate Sector Index

3

-0.3

4.7

12.2

-2.1

5.6

5.8

8.2

Direct Property - monthly data

4

3.8

11.2

10.0

3.9

7.8

8.8

8.9

 

1. Growth over all periods to 31/03/17.

2. Growth in FTSE All-Share Return Index over all periods to 31/03/17.

3. Growth in FTSE 350 Real Estate Super Sector Return Index over all periods 31/03/17. For data prior to 30 

   September 1999 FTSE All Share Real Estate Sector Index has been used.

4. Growth in Total Return of IPD UK Monthly Index (All Property) over all periods to 31/03/17.

 

Average Length of Employee Service and Average Staff Turnover

 

High levels of staff retention remain a key feature of Helical's business. The Group retains a highly skilled and experienced team. We assess our success based on two key metrics, the average length of service of the Group's head office employees and average staff turnover.

 

The average length of service of the Group's head office employees at 31 March 2017 was eight years and the average staff turnover during the year to 31 March 2017 was 5.7%.

 

 

2017

2016

2015

2014

2013

Average length of service at 31 March - Years

8.0

7.6

7.6

8.7

10.2

Staff Turnover during the year to 31 March - %

5.7

14.3

12.5

5.9

10.3

 

 

 

Financial Review

 

 

IFRS Performance

 

 

EPRA Performance

Profit Before Tax
£41.6m (2016: £114.0m)

 

EPRA EPS
0.5p (2016: 17.1p)

 

IFRS Diluted EPS
33.2p (2016: 88.0p)

 

EPRA NAV
473p (2016: 456p)

 

IFRS Diluted NAV
431p (2016: 405p)

 

EPRA Triple NAV442p (2016: 424p)

 

 

Results for the Year

 

The year to 31 March 2017 saw the Group deliver continued growth in net rental income and a valuation surplus on the investment portfolio leading to pre-tax profit of £41.6m and an increase in EPRA net asset value per share of 3.7%.

 

The proposed final dividend of 6.20p takes the total dividend for the year to 8.60p, a 5.3% increase on the previous year. With growing rents from our core London portfolio, supported by strong income streams from the regional portfolio, the Company aims to continue to grow this dividend.

 

The Group's real estate portfolio, including its share of assets held in joint ventures, reduced to £1,205m (2016: £1,240m) as gains from its annual revaluation and capital expenditure on the investment portfolio and development programme were offset by the sale of £199m of assets. There were no purchases of new investment, trading or development assets during the year.

 

The sale of investment assets during the year has resulted in a reduction in the Group's loan to value to 51% (2016: 55%) which has been reduced further since the year end to 49% on a pro-forma basis following the sale of £65m of assets and the purchase of one asset for £13m. The Group's debt maturity profile shortened to 3.6 years (2016: 4.5 years) and its weighted average cost of debt increased to 4.3% (2016: 4.2%).

 

At 31 March 2017, the Group had unutilised bank facilities of £158m and £109m of cash. The bank facilities are primarily available to fund Phase Two of the Group's redevelopment of The Bower, London EC1, the construction works at Barts Square, London EC1, including the last phase of residential, its retirement village development programme and future potential investment purchases.

 

 

Total Accounting Return

 

The total accounting return is the growth in the net asset value of the company plus dividends paid in the year, expressed as a percentage of the net asset value at the beginning of the period. The metric measures the growth in shareholders' funds each year and is expressed as an absolute measure.

 

 

2017
%

2016
%

2015

%

2014

%

2013

%

Total Accounting Return

8.3

 

22.5

 

21.1

 

36.8

 

2.4

 

Total Property Return

We calculate our Total Property Return to enable us to assess the aggregate of income and capital profits made each year from our property activities. Our business is primarily aimed at producing surpluses in the value of our assets through asset management and development, with the income side of the business seeking to cover our annual administration and finance costs.

 

 

2017
£m

2016
£m

2015

£m

2014

£m

2013

£m

Total Property Return

79.9

164.6

 

155.3

 

140.1

 

35.9

 

Earnings Per Share

 

The IFRS earnings per share decreased from 91.3p to 34.0p and is based on the after tax earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year.

 

On an EPRA basis, earnings per share were 0.5p (2016: 17.1p), reflecting the Group's share of net rental income of £47.0m (2016: £43.4m) and development losses of £5.7m (2016: profits of £27.5m) but excluding gains on sale and revaluation of investment properties of £38.6m (2016: £93.7m).

 

Net Asset Value

 

IFRS diluted net asset value per share increased from 405p to 431p and is a measure of shareholders' funds divided by the number of shares in issue at the period end, excluding those held by the Company's Employee Share Ownership Plan Trust, adjusted to allow for the effect of all dilutive share awards.

 

EPRA net asset value per share increased by 3.7% to 473p per share (2016: 456p). This increase arose principally from a total comprehensive income (retained profits) of £39.2m (2016: £104.9m) less dividends paid of £3.6m (2016: £14.4m) and reflecting a reduction in the surplus on valuation of the trading and development stock to £12.5m (2016: £19.4m).

 

 

Income Statement

 

Rental Income and Property Overheads

 

Gross rental income receivable by the Group in respect of wholly owned properties increased by 7.3% to £48.8m (2016: £45.5m) reflecting the partial capture of the investment portfolio's reversionary potential offset by sales of assets during the year. In the joint ventures, gross rents fell from £1.8m to £0.9m. Property overheads in respect of wholly owned assets and in respect of those assets in joint ventures fell from £3.4m to £2.5m. After taking account of net rents payable to our profit share partners of £0.3m (2016: £0.5m), see-through net rents increased by 8.3% to £47.0m (2016: £43.4m).

 

Development Profits

 

The majority of the Group's development activities are carried out on assets held as investment properties such as The Bower, London EC1 and 25 Charterhouse Square, London EC1, schemes funded with third parties, or in joint ventures as referred to below.

 

In the year under review the Company made progress at its retirement village portfolio, increasing sales to £40.0m, including the sale of land, (2016: £29.9m) with profits of £1.8m (2016: £0.6m). In its development management role at Barts Square, London EC1 and One Creechurch Place, London EC3 and in respect of the development of the Scottish Power headquarters in Glasgow, it earned fees of £2.8m. Our retail development programme generated net profits of £2.3m (2016: loss of £1.8m) as the pre-let scheme at Cortonwood was forward funded during the year. In total, the Group generated development profits of £7.1m (2016: £30.7m).

 

At the year end we reviewed the book value of our land holdings and made provisions of £6.3m (2016: £6.4m), primarily in respect of the retirement village at Great Alne, where forecast costs have increased during the year. Net of these provisions, a development property profit of £0.8m (2016: £24.3m) was recognised.

 

In the previous year to 31 March 2016, profits included a development management fee of £23.2m in respect of The Bower, London EC1 and £3.7m in respect of One Creechurch Place and the Scottish Power headquarters.

 

Share of Results of Joint Ventures

 

The sale of our retail development at Shirley and the termination of the lease to the NHS at Barts Square to allow the final phase of development to commence reduced net rents in our joint ventures from £1.3m to £0.8m. No further rents are expected in respect of assets currently held in joint ventures in the short term. At the year end we reviewed the book value of our land holdings in the joint ventures and made provisions of £6.5m against the carrying value of our schemes at Hammersmith Town Hall and Barts Square. Finance, administration and taxation costs and sundry provisions against the carrying value of assets added a further £0.8m of losses leaving a net loss from our joint venture of £6.5m.

 

In the previous year to 31 March 2016, gains on the sale or revaluation of the investment assets of £43.9m, mainly in respect of The Bower, London EC1 and Barts Square, London EC1, contributed to a total net profit from joint ventures for that year of £50.5m.

 

Gain on Sale and Revaluation of Investment Properties

 

During the year, we sold 24 investment assets for a total of £159m generating a net overall profit of £1.4m. In London we sold two office buildings at One King Street, Hammersmith, W6 and Chart House, EC1 for £42.0m at a small net loss of £0.3m. In the regions we sold three office buildings at Castle Donnington, Cheadle and Cobham for £14.2m at a profit of £0.7m after costs. We sold six retail assets during the period, being a shop in Leicester and five retail parks in Ellesmere Port, Harrogate, Huddersfield, Scarborough and Stockport for a combined £44.1m at a net loss of £2.9m. From our logistics portfolio, we sold 13 assets for £58.5m at a net profit of £3.8m.

 

The valuation of our investment portfolio continued to reflect the benefit of our refurbishment activities in London where we generated an increase of 9.1% overall and 9.8% on a like-for-like basis. The regions contributed a loss of 1.3% overall and 2.1 % on a like-for-like basis. In total, the investment portfolio showed a valuation increase of 4.5%, or 5.2% on a like-for-like basis.

 

The total impact on our results of the gain on sale and revaluation of our investment portfolio, including in joint ventures, was a net gain of £38.6m (2016: £93.7m).

 

Administration Costs

 

Administration costs, before performance related awards, increased marginally from £10.7m to £10.8m.

 

Performance related share awards and bonus payments, before National Insurance costs, were £6.9m (2016: £13.3m). Of this amount, the £1.7m (2016: £6.7m) charge for share awards under the Performance Share Plans is expensed through the Income Statement but added back to Shareholders' Funds through the Statement of Changes in Equity. In addition, National Insurance of £0.7m (2016: £2.1m) has been charged in the year.

 

 

2017
£000

2016
£000

Administration Costs

10,800

10,717

Share awards

1,672

6,666

Directors and senior executives' bonuses

5,182

6,633

NIC on share awards and bonuses

718

2,087

Total

18,372

26,103

 

Finance Costs, Finance Income and Derivative Financial Instruments

 

Interest payable on secured bank loans including our share of loans on assets held in joint ventures, but before capitalised interest, increased to £24.7m (2016: £23.9m). Interest payable in respect of the unsecured Retail and Convertible Bonds was £8.8m (2016: £8.8m). The movement in medium and long term interest rate projections during the year, offset by the shortening maturity period of the Group's financial instruments, contributed to a credit of £0.8m (2016: charge of £6.9m) on their mark-to-market valuation. Capitalised interest increased from £4.9m to £7.9m as development schemes progressed. Total finance costs, including joint ventures, reduced from £27.8m to £25.6m. Finance income earned was £4.4m (2016: £5.1m).

 

Taxation

 

Helical pays corporation tax on its UK sourced net rental income, trading and development profits and realised chargeable gains, after offset of administration and finance costs.

 

The deferred tax charge for the year is principally derived from the revaluation surpluses recognised in the year offset by the recognition of tax losses which the Group believes will be utilised against profits in the foreseeable future.

 

 

Dividends

 

Helical follows a progressive dividend policy increasing its dividends in line with its results, whilst retaining the majority of funds generated for investment in growing the business. The interim dividend paid on 30 December 2016 of 2.40p was an increase of 4.3% on the previous interim dividend of 2.30p. The Company has proposed a final dividend of 6.20p, an increase of 5.6% on the previous year (2016: 5.87p). In total, the dividend paid or payable in respect of the results for the year to 31 March 2017 is 8.60p (2016: 8.17p), an increase of 5.3%. Since 2014 the compound annual growth rate of the Company's dividends has been 8.4%.

 

 

Balance Sheet

 

Shareholders' Funds

 

Shareholders' funds at 1 April 2016 were £480.7m. The Group's results for the year added £39.2m, net of tax, representing the total comprehensive income for the year. Movements in reserves arising from the Group's share schemes increased funds by £0.6m. The Company paid dividends to shareholders amounting to £3.6m leaving a net increase in Shareholders' Funds from the Group activities during the year of £36.2m to £516.9m.

 

Investment Portfolio

 

 

Wholly

owned
£000

In joint venture

£000

See-through

£000

Lease incentives

£000

Book

Value

£000

Valuation at 31 March 2016

1,041,100

11,552

1,052,652

(6,067)

1,046,585

Acquisitions

-

-

-

-

-

Capital Expenditure

63,712

4,230

67,942

-

67,942

Disposals

(155,548)

-

(155,548)

685

(154,863)

Transfer from Stock

5,066

-

5,066

-

5,066

Revaluation Surplus - Helical

49,210

(1,875)

47,335

(10,058)

37,277

                                  - Profit Share Partners

(540)

-

(540)

-

(540)

Valuation at 31 March 2017

1,003,000

13,907

1,016,907

(15,440)

1,001,467

 

Debt and Financial Risk

 

In seeking to finance Helical's expansion in recent years, the Group has used a combination of new secured facilities, whose purpose and terms reflect the nature of the assets charged to the lenders, and unsecured bonds which have provided the firepower to acquire many of the assets which have contributed to the recent growth in Shareholders' Funds. The composition of the Group's debt structure has significantly changed since 31 March 2013 with unsecured debt now representing 24% of debt drawn at 31 March 2017.

 

In total, Helical's outstanding debt at 31 March 2017 of £737m (2016: £778m) had an average maturity of 3.6 years (2016: 4.5 years) and a weighted interest cost of 4.3% (2016: 4.2%).

 

Debt Profile at 31 March 2017 - Excluding the Effect of Arrangement Fees

 

 

Total

facility

£000's

Total

utilised

£000's

Available facility

£000's

Net LTV

%

Weighted average

interest rate

%

Average
maturity

Years

Investment facilities

572,859

457,992

114,867           

-

4.3

4.1

Development facilities

60,000

42,949

17,051

-

3.7

3.4

Total wholly owned

632,859

500,941

131,918

-

4.3

3.6

In joint ventures

72,270

55,886

16,384

-

3.4

2.7

Total secured debt

705,129

556,827

148,302

37

4.2

3.9

Retail Bond

80,000

80,000

-

-

6.0

3.2

Convertible Bond

100,000

100,000

-

-

4.0

2.2

Working capital

10,000

-

10,000

-

-

-

Fair Value of Convertible Bond

(226)

(226)

-

-

-

-

Total unsecured debt

189,774

179,774

10,000

-

4.9

2.7

Total debt

894,903

736,601

158,302

51

4.3

3.6

 

 

Secured Debt

 

The Group arranges its secured investment and development facilities to suit its business needs as follows:

 

•    Investment facilities

We have £190m of revolving credit facilities which enable the group to acquire, refurbish, reposition and hold significant parts of our investment portfolio. We have used these facilities to finance our regional portfolio. Our London investment assets are primarily held in £383m of term loan secured facilities which, where appropriate, allow us to finance refurbishment projects including the redevelopment of The Tower at The Bower, Old Street, London EC1. The value of the Group's properties secured in these facilities at 31 March 2017 was £983m (31 March 2016: £945m) with a corresponding loan to value of 47% (2016: 54%). The average maturity of the Group's investment facilities at 31 March 2017 was 4.1 years (2016: 5.0 years) with a weighted average interest rate of 4.3% (2016: 3.8%).

 

•    Development facilities

These facilities finance the construction of the retirement villages at Durrants Village, Horsham; Maudslay Park, Great Alne; Milbrook Village, Exeter and the fourth phase of Bramshott Place, Liphook. The average maturity of the Group's development facilities at 31 March 2017 was 3.4 years (2016: 4.4 years) with a weighted average interest rate of 3.7% (2016: 3.8%).

 

•    Joint venture facilities

We hold a number of investment and development properties in joint venture with third parties and include in our reported figures our share, in proportion to our economic interest, of the debt associated with each asset. The average maturity of the Group's share of bank facilities in joint ventures at 31 March 2017 was 2.7 years (2016: 3.7 years) with a weighted average interest rate of 3.4% (2016: 3.4%).

 

Unsecured Debt

The Group's unsecured debt, including the Convertible Bond at its mark-to-market valuation, is £179.8m (2016: £182.7m) as follows:

 

•    Retail Bond

 

In June 2013, the Group raised £80m from the issue of an unsecured Retail Bond with a 6.00% coupon. This bond is repayable in June 2020.

 

•    Convertible Bond

In June 2014, the Group raised £100m from the issue of a listed unsecured Convertible Bond with a 4.0% coupon, repayable in June 2019, or, subject to certain conditions, convertible at the option of the bond holders into ordinary shares, unless a cash settlement option is exercised by the Company. The initial conversion price has been set at £4.9694 per share, representing a 35% premium above the price on the day of the issue and a premium of 59% above the Company's EPRA net asset value per share at 31 March 2014. The value of the Bond at 31 March 2017, as determined by the listed market price, was £99.8m (2016: £102.7m).

 

•    Short term working capital facilities

     These facilities provide access to additional working capital for the Group.

 

Cash and Cash Flow

 

At 31 March 2017, the Group had £267m (2016: £193m) of cash and agreed, undrawn, committed bank facilities including its share in joint ventures as well as £17m (2016: £153m) of uncharged property on which it could borrow funds.

 

Net Borrowings and Gearing

 

Total gross borrowings of the Group, including in joint ventures, have reduced from £777.9m to £736.6m during the year to 31 March 2017. After deducting cash balances of £109.0m (2016: £86.8m) and unamortised refinancing costs of £7.6m (2016: £9.3m), net borrowings reduced from £681.8m to £620.0m. The gearing of the Group, including in joint ventures, reduced from 142% to 120%.

 

 

2017

2016

See-through gross borrowings

£736.6m

£777.9m

See-through cash balances

£109.0m

£86.8m

Unamortised refinancing costs

£7.6m

£9.3m

See-through net borrowings

£620.0m

£681.8m

Shareholders' funds

£516.9m

£480.7m

See-through gearing - IFRS

120%

142%

 

Hedging

 

At 31 March 2017, the Group had £651.4m (2016: £635.5m) of fixed rate debt with an average effective interest rate of 4.2% (2016: 4.2%) and £29.3m (2016: £107.1m) of floating rate debt with an average effective interest rate, excluding commitment fees, of 3.0% (2016: 3.9%). In addition, the Group has £3.3m of interest rate caps at an average of 0.75% (2016: £157m at 4.0%). In our joint ventures, the Group's share of fixed rate debt was £nil (2016: £nil) and £55.9m (2016: £35.3m) of floating rate debt with an effective rate of 3.4% (2016: 3.4%) with interest rate caps set at 1.5% plus margin on £61.8m and 0.5% plus margin on £56.9m (2016: £nil).

 

2017

£m

Effective interest rate

%

2016

£m

Effective interest rate

%

Fixed rate debt

 

 

 

 

- Secured borrowings

471.6

4.0

452.8

3.9

- Retail Bond

80.0

6.0

80.0

6.0

- Convertible Bond

100.0

4.0

100.0

4.0

- Fair value of Convertible Bond

(0.2)

-

2.7

-

Total

651.4

4.2

635.5

4.2

Floating rate debt

 

 

 

 

- Secured

29.3

8.9¹

107.1

3.9

Total

680.7

4.4

742.6

4.2

In joint ventures

 

 

 

 

- Fixed rate

-

-

-

-

- Floating rate

55.9

3.4

35.3

3.4

Total borrowings

736.6

4.3

777.9

4.2

 

¹This includes commitment fees on undrawn facilities. Excluding these would reduce the effective rate to 3.0%.

 

Interest Cover

 

In assessing the results of the Group for each financial year, Helical considers its interest cover as a measure of its performance and its ability to finance its annual interest payments from its net operating income, before revaluation gains or losses on the investment portfolio and net realisable provisions on the trading and development stock. In the year to 31 March 2017, this interest cover was 2.6 times (2016: 5.4 times).

 

 

2017

2016

See-through net operating income

£55.4m

£121.3m

See-through net finance costs

£21.2m

£22.6m

Interest cover

2.6x

5.4x

 

 

Investment Property Accounting Treatment

 

International Accounting Standard 40 - Investment Property requires that accrued operating lease income assets should be shown separately and deducted from the fair value of the investment properties in the Statement of Financial Position. This accounting treatment had not been applied at 31 March 2016 but has been adopted for the period ended 31 March 2017. A prior year adjustment has been made to ensure consistency of comparative information, clarity and transparency.

 

The effect of the adjustment on the relevant financial statement line items for the year ended 31 March 2016 is detailed in note 25.  

 

 

 

Tim Murphy
Finance Director

25 May 2017

 

 

 

Helical's Property Portfolio - 31 March 2017

 

Property Overview

 

Helical divides its property activities into three core markets: London, Manchester offices and logistics. The London Portfolio represents 63% of the total property portfolio and drives capital growth, development profits and, increasingly, income. Manchester offices accounts for 6%, and logistics account for 13%.

 

In addition, we have a portfolio of four retirement villages which are being completed and sold over the next three years, a small portfolio of regional offices and four regional retail assets (two of which were sold post year end).

 

The London Portfolio

 

Our strategy is to continue to increase our London holdings, focusing on areas where we see strong tenant demand and growth potential, such as the "Tech Belt" that runs from King's Cross through Old Street and Shoreditch to Whitechapel and in West London, in particular Shepherds Bush, Chiswick and Hammersmith. Our London portfolio comprises income producing multi-let offices, office refurbishments and developments and residential development schemes.

 

·   City and Tech Belt

 

The Bower, Old Street EC1 

This asset was acquired in November 2012 for £60.8m in a joint venture with Crosstree Real Estate Partners LLP. The site is in the heart of an area which has become a "creative halo", a district of London which is a hub for technology, media and telecommunications companies and which is benefiting from substantial investment in infrastructure. A planning consent has been implemented to increase the floor space on the site by 116,000 sq ft, to refurbish existing areas and significantly upgrade the public realm with the creation of a new pedestrian street.

 

On 20 January 2016, Helical acquired The Warehouse and The Studio (211 Old Street) and The Tower (207 Old Street) from the joint venture.

 

211 Old Street EC1

The development of Phase One, comprising The Warehouse, 128,262 sq ft, and The Studio, 23,177 sq ft, completed in November 2015.

 

Phase One is fully let to CBS, Farfetch, Pivotal, Allegis and Stripe (The Warehouse) and John Brown Media (The Studio), and all tenants are in occupation. The retail operators are Bone Daddies, Draft House, Enoteca da Luca, Honest Burger, Maki and Franze & Evans.

 

207 Old Street EC1

At The Tower, 178,724 sq ft, the refurbishment and construction works are well underway with practical completion scheduled for Q2 2018. Whilst the formal letting campaign for the building is expected to commence closer to completion, we have already pre-let six floors, comprising 58,907 sq ft, to WeWork, the leading global provider of flexible collaborative co-working space.

 

Barts Square EC1

In a joint venture with The Baupost Group LLC, Helical owns the freehold interest of Barts Square, a 3.2 acre site between St Pauls and Smithfield Market, situated a short walk from Farringdon East station on the Elizabeth Line (Crossrail) which is due to be operational at the end of 2018.

 

Barts Square will ultimately provide an entirely new quarter of the City consisting of 236 residential apartments, three office buildings of 213,000 sq ft, 23,485 sq ft and 10,200 sq ft and 20,400 sq ft of retail/A3 at ground floor as well as major public realm improvements.

 

Phase One - Residential/offices/retail

Phase 1 of Barts Square comprises 144 residential units, 8,900 sq ft of retail space, 23,485 sq ft of new office space and extensive public realm improvements. Construction work is progressing well with the first apartments being handed over to purchasers in Summer 2017. Contracts have been exchanged for the sale of 118 residential units for a total value of £151.3m at an average of £1,570 psf, with a further three units under offer.

 

Phase Two - One Bartholomew Close - Offices

One Bartholomew Close was sold to clients of Ashby Capital LLP ("Ashby") for £102.4m in August 2015. The demolition of the existing building and the construction of a new 12 storey office block of 213,000 sq ft commenced in January 2016. The building is due to be completed in August 2018. Ashby's clients finance the development costs and when the building is completed and successfully let the joint venture will be entitled to receive a profit share payment. Helical is the development manager for delivery of the project.

 

Phase Three - Residential/retail

Demolition work on Phase 3 of Barts Square is well underway. This phase will comprise 92 apartments and 11,500 sq ft of retail space. Completion is due in Summer 2019.

 

One Creechurch Place, City of London EC3

One Creechurch Place is a landmark City office scheme in the heart of the insurance sector in London. In May 2014, Helical signed a joint venture agreement with HOOPP (Healthcare of Ontario Pension Plan) to redevelop the site. Under the terms of the joint venture, HOOPP and Helical jointly funded the project on a 90:10 split, with Helical acting as development manager for which it will receive a promote payment depending on the successful outcome of the scheme. The new building, comprising 272,505 sq ft NIA of offices and 786 sq ft of retail, achieved practical completion on 7 November 2016 and is currently being marketed for occupation. There are a number of potential tenants interested in the building.

 

C-Space, 37-45 City Road EC1

Helical acquired C-Space in June 2013. Planning consent was obtained for a complete refurbishment of the building which increased the previous 50,000 sq ft office building to 61,973 sq ft. The works, which were completed in October 2015, involved an additional floor and extensions to the third floor, a landscaped courtyard and entrance pavilion to the rear and full height glazing to the raised ground floor. 75% of the space was pre-let to the creative agency MullenLowe in June 2015, with the remaining space let to NeuLion in November 2016.

 

25 Charterhouse Square, Smithfield EC1

In January 2016, Helical was granted a new 155 year leasehold interest in 25 Charterhouse Square, from the Governors of Sutton's Hospital in Charterhouse for £16m. Helical has carried out a major refurbishment of the existing building, which increased the previous 34,000 sq ft to 38,355 sq ft of offices, with the addition of a new sixth floor, and added 5,138 sq ft of retail/restaurant. The building achieved practical completion on 28 March 2017. The top two floors, totalling 12,200 sq ft, have been let to Anomaly at £75.00 psf for a ten year lease term.

 

The Loom, Whitechapel E1

This 110,000 sq ft listed former wool warehouse was acquired in 2013. A major repositioning was completed in September 2016 to include a new entrance and reception onto Gowers Walk, café, showers and a bike store. During the year we completed 11 new lettings and five renewals securing £1.8m of contracted rent. We also completed two rent reviews with an uplift to contracted rent of £300,000. The largest, most prominent, unit in the building of 9,000 sq ft was let in July for £54 psf. The average contracted rent for the building is £37.50 psf.  19,275 sq ft is currently available in five units with an ERV of circa £950k, of which 2,750 sq ft is under offer.

 

·  The West

 

The Shepherds Building, Shepherds Bush W14

This 151,000 sq ft multi-let office building close to the Westfield London shopping centre maintains an occupancy approaching 100%, as it has for nine consecutive years. The average contracted rent for the building is £44 psf with a total contracted rent of £6.57m and a passing net rent of £3.6m. During the year 13 new lettings, all in excess of £47.50 psf, were completed securing a contracted rent of £500,000. Two rent reviews were settled with an uplift to contracted rent of £225,000. 2,550 sq ft is currently available in four studio units.

 

Power Road Studios, Chiswick W4

The site comprises 62,000 sq ft of offices across five buildings and is multi-let to a wide range of predominantly media tenants. Recent lettings have been concluded at a rent of £38 psf with £40 psf having been achieved in Studio 1, compared to an average rental of £24 psf at acquisition. Cineworld, which occupied 16,000 sq ft, has surrendered its lease and vacated which permits the comprehensive refurbishment of the unit and creation of a new entrance at the front of the building. These works started in November 2016 and are expected to last nine months, increasing the rental value for this space from £22.00 psf to £42.50 psf. Planning permission to add a further 42,500 sq ft of office space has been granted.

 

The Powerhouse, Chiswick W4

Helical acquired this 24,288 sq ft office and recording studios by way of sale and leaseback in 2013. The Powerhouse is a listed building on Chiswick High Road and is fully let on a long lease to Metropolis Music Group.

 

King Street, Hammersmith W6

Hammersmith & Fulham Borough Council, who have been opposed to this regeneration project since the Council became Labour controlled, have exercised their option to terminate the development agreement. With our partners Grainger plc we will now seek to maximise the value of the land held by the joint venture company.

 

In addition to our holdings in the City and Tech Belt and West London we have one scheme in Covent Garden WC2.

 

Drury Lane & Dryden Street, Covent Garden WC2

The existing buildings, which are in office and retail use, sit on an island site of approximately 0.5 acres. Approximately half of the site, adjacent to Dryden Street, sits within the Covent Garden Conservation Area. In July 2015, contracts were exchanged with Diageo Pension Fund (a fund managed by Savills Investment Management) for the conditional acquisition of the Drury Lane site. The contract is conditional on the viability of the scheme and Helical securing planning consent. A planning application for the residential led scheme of 68 apartments was submitted in August 2015 and resolution to grant consent was issued at a planning committee in April 2016. A further planning consent for an alternative office led scheme was submitted in December 2016 and is currently being considered by Westminster City Council.

 

The Regional Portfolio

 

Our approach to regional investment is to acquire assets where occupational demand is robust throughout the property cycle and the barriers to new supply are high. Successfully picking the sectors and assets with these attributes will ensure strong cash flows and rental growth. In general, yields for regional assets are higher than those in London and these assets are acquired to provide significant cash flow for the Group. We anticipate that income will become an increasingly important part of total returns as yield compression slows and, as such, we focus our attention on areas where we believe the occupational market remains robust.

 

Our regional portfolio contributed 60% of our net rental income from tenants in diverse sectors and geographical locations. The £351m regional portfolio comprises £156m of logistics (44% of the regional investment portfolio), £95m of offices (27%), £80m retail warehousing and in-town retail (23%), mainly the Morgan Quarter, Cardiff, which has been sold for £55m since year end, and £20m of value from ground rents and assignment fees from our retirement village development programme (6%).

 

Logistics

 

Helical had 25 distribution and logistics units located around major UK transport networks at 31 March 2017. These units generally have few bespoke features making them straightforward to re-let if vacancies occur with minimal capital expenditure required. The majority of the assets are single let. Significant assets within the portfolio include a 256,000 sq ft distribution warehouse let to Sainsbury's in Yate, Bristol, a 203,000 sq ft facility in Leighton Buzzard, Bedfordshire and a 183,000 sq ft distribution warehouse let to the Royal Mail in Chester.

 

Manchester and other Regional Offices

 

Our regional office investment portfolio comprises seven assets including four in Manchester and others in Crawley, Glasgow and Reading. During the year we sold three assets in Cobham, Castle Donnington and Cheadle for £14.15m, a 6.8% premium to book value.

 

Manchester is a city with a diverse, thriving and growing economy which is widely regarded as England's second city and the centre of the "Northern Powerhouse". The assets we hold there are:

 

Churchgate and Lee House, Manchester

This asset, comprising 249,000 sq ft of multi let offices, was purchased in March 2014. Since purchase we have refurbished the reception and 75,254 sq ft of office space. With the successful letting of the 1st floor of Lee House and the Sunshine Suite (15,536 sqft), Churchgate and Lee House is now 100% occupied. Looking forward asset management initiatives still exist to drive further rental growth. We will continue to refurbish the asset as space becomes available through lease events.

 

Dale House, Manchester

Dale House is a 54,000 sq ft office building situated in the Northern Quarter of Manchester. Following purchase we have pursued surrenders across the building. We successfully achieved surrenders of the top three floors, lower ground and basement spaces which amounts to circa 33,000 sq ft. Refurbishment of these areas has commenced with delivery in Q4 2017. We have secured a pre-let of the 5th floor (7,100 sq ft) and have significant interest in the remaining space that is being delivered.

 

31 Booth Street, Manchester

This 25,441 sq ft office located in the prime city core was acquired in January 2016 for £4.7m. The building has been fully refurbished and was launched to the market in March 2017. We have received significant occupational interest to date and hope to secure our first letting soon.

 

Trinity Court, Manchester

Trinity Court, purchased in May 2017 for £12.9m, is a 47,500 sqft office building situated in the central business district of Manchester. The building is currently 100% let with secured income until the end of 2017 at a passing rent of £26.94 psf. The building will be vacated in 2018 and a full refurbishment and extension will be implemented delivering new office space to the market in early 2019.

 

Retail

 

Our retail assets total £80m, 7% of our portfolio (31 March 2016: £143m). This part of the portfolio includes a prime retail asset in Cardiff, three retail parks and a number of pre let and/or prefunded retail developments.

 

During the year, six retail properties were sold for a total of £44.1m, at c. 6% below book value. At the year end the portfolio consisted of four assets of which Cardiff and Great Yarmouth have since been sold reducing the total value of the portfolio to £24.2m.

 

The Morgan Quarter, Cardiff

During the year we continued to reposition the asset and strengthen the tenant mix. We concluded 12 retail leases representing over £400,000 per annum in rental income which included two tenants upsizing within the estate. Negotiations with Jack Wills, first started in 2015, for them to extend their store finally came to fruition in December.

 

Along with this expansion, we also completed all of the planned lease renewals and regears with the Hayes retailers, Molton Brown, White Stuff and Joules. In addition we completed the lease renewal with Route One in the Morgan Arcade.

               

Within the Creative Quarter we completed six office leases and work on Phase Three of the refurbishment completed in May 2017 providing 5,700 sq ft of new space. Since the year end this asset has been sold for £55m, a net initial yield of 5.9% in line with its March 2016 book value.

 

Retail Developments

 

Parkgate, Shirley, West Midlands

The shopping centre at Parkgate, Shirley, where Helical had a 50% interest, was completed in 2014 and the 80,000 sq ft Asda, which had been pre-sold to the food-store, together with a number of other retailers including Poundland, Peacocks and Store Twenty-one have all opened successfully for trade. In November 2016 the scheme was sold to a private purchaser.

 

A second phase of high density residential is being progressed on a 10 acre site opposite the Parkgate scheme. Completions of the first phase of the site sales has occurred to Extracare Charitable Trust and Lioncourt Homes and demolition and infrastructure works have completed. A site for a petrol filling station has been sold to Asda.

 

Cortonwood Retail Park

This 79,750 sq ft retail park has been 100% pre-let to tenants including Outfit, H&M, New Look, River Island and Marks and Spencer. The scheme has been forward funded with clients of Aberdeen Asset Management and construction is continuing with completion due in July 2017.

 

Truro

Helical has entered into a Conditional Purchase Agreement on the six acre Truro City Football Club site which has planning consent, subject to a s.106 Agreement, for a 78,000 sq ft non-food retail park. The scheme proposals provide for the relocation of the football club and we anticipate starting on site in 2018.

 

Retirement Villages

 

Our retirement village portfolio consists of four villages. We design each of the villages with an active, independent retirement in mind and the communities that we create are the ideal place to live a social and varied lifestyle. Each private, age-exclusive retirement community is centred around a residents' clubhouse, and features many amenities including an indoor pool and gym, landscaped gardens, bar, restaurant and library. With an increasing proportion of the UK population over 65 years old, and a severe under supply in retirement housing, this sector creates significant opportunities for investors and developers.

 

Bramshott Place, Liphook, Hampshire

This village is situated amongst natural parkland near the village of Liphook on the border of Hampshire, West Sussex and Surrey. The village features a selection of two and three bedroom cottages and one, two and three bedroom apartments arranged around a residents' clubhouse. All construction works to Phases One to Three are completed where 151 units in total have been built and sold.  Phase 4 commenced in August 2016 with the construction of 40 additional cottages, due for completion in January 2018.  Sales on the site will be formally launched in July 2017, with six of the 40 new cottages already having been reserved and a further two of the 40 being exchanged. The residents' clubhouse is now fully refurbished.

 

Durrants Village, Faygate, West Sussex

Durrants Village is set within 30 acres of private parkland in the hamlet of Faygate, near Horsham in West Sussex. The village features a selection of cottages and apartments. The first two phases of construction completed in January 2016 with 105 units located around the residents' clubhouse. Phase 3A has commenced and consists of an additional 20 units and is due to complete in September 2017. Sales have progressed well with 99 units sold, 1 exchanged and an additional 10 units reserved. Good interest is being shown in Phase 3A and more reservations are expected to be secured leading up to the delivery of this section in September 2017.

 

Millbrook Village, Exeter, Devon

Millbrook Village is nestled close to the River Exe in the heart of the historic cathedral city of Exeter. The village features a selection of two and three bedroom cottages and one, two and three bedroom apartments. The site will comprise 164 units once completed. The clubhouse was completed in March and includes a restaurant and bar, games room, gym, cinema and a swimming pool. The build programme is well advanced with 114 units currently completed with more stock now coming online at regular three month intervals. We anticipate that the village will be fully constructed by November 2017. 59 units have been sold, two exchanged with an additional 22 reserved.

 

Maudslay Park, Great Alne, Warwickshire

Maudslay Park is set in 90-acres of parkland in the Warwickshire village of Great Alne, near Stratford-upon-Avon. The village will comprise 166 units with a mixture of cottages and apartments built around the central clubhouse facility. Similar to our other villages the clubhouse will include a restaurant and bar, games room, gym, cinema and a swimming pool.  Phase 1 of the development is currently under construction which consists of 14 cottages, 35 apartments and the central clubhouse facility. The first cottages were completed in April 2017 with the central clubhouse facility being completed in January 2018. Currently we have sold one unit and have a further ten reservations.

 

 

 

Total Portfolio by Fair Value

 

  

Investment

£m

% 

Development

£m

% 

Total

£m

 

%

London Offices

 

 

 

 

 

 

 - Completed, let and available to let

501.5

49.3

19.8

10.5

521.3

43.3

 - Being redeveloped

125.7

12.4

-

-

125.7

10.4

 - Held for future development

38.4

3.8

-

-

38.4

3.2

London Residential

-

-

78.8

41.9

78.8

6.5

Total London

665.6

65.5

98.6

52.4

764.2

63.4

 

 

 

 

 

 

 

Regional Offices

95.3

9.3

0.5

0.3

95.8

7.9

Regional logistics

156.5

15.4

-

-

156.5

13.0

Regional Retail

79.5

7.8

-

-

79.5

6.6

Retirement Villages

19.9

2.0

82.9

44.0

102.8

8.6

Land

0.1

-

6.3

3.3

6.4

0.5

Total Regional

351.3

34.5

89.7

47.6

441.0

36.6

 

 

 

 

 

 

 

Total

1,016.9

100.0

188.3

100.0

1,205.2

100.0
               

 

Trading and Development Portfolio

 

 

Book Value

£m

Fair Value

£m

Surplus

£m

Fair Value

%

London Offices

15.8

19.8

4.0

10.5

London Residential

75.8

78.8

3.0

41.9

Total London

91.6

98.6

7.0

52.4

 

 

 

 

 

Regional Offices

0.2

0.5

0.3

0.3

Retirement Villages

79.0

82.9

3.9

44.0

Land

5.0

6.3

1.3

3.3

Total Regional

84.2

89.7

5.5

47.6

 

 

 

 

 

Total

175.8

188.3

12.5

100.0

 

Capital Expenditure

 

We have a planned development and refurbishment programme.

 

Property

Capex Budget

(Helical Share)

£m

Remaining spend

(Helical share)

£m

Current

Total

Space

Sq ft

Refurbished
Space

Sq ft

New Space

Sq ft

Completion
date

London Offices

 

 

 

 

 

 

207 Old Street, London EC1

94.5

62.9

114,000

179,000

65,000

Jun 2018

Power Road Studios, W4

4.5

3.4

60,000

20,000

-

Sep 2017

The Loom, London E1

7.9

1.8

112,000

80,500

-

Mar 2018

London Residential

 

 

 

 

 

 

Barts Square, London EC1

87.4

55.7

n/a

 n/a

n/a

Sep 2019

Regional Offices

 

 

 

 

 

 

Dale House, Manchester

4.3

3.5

54,000

30,000

-

Dec 2017
                 

 

 

Retirement Villages

 

Property

Capex Budget 

£m

Remaining spend

£m

Total number of units

Completed units

 

Units under construction

Completion
date

Millbrook Village, Exeter

43.5

7.1

164

114

50

Nov 2017

Durrants Village, Faygate

49.3

17.9

173

105

20

Sep 2019

Maudslay Park, Great Alne

60.9

53.1

166

5

45

May 2019

Bramshott Place, Liphook

17.8

9.5

40

-

40

Jan 2018

 

171.5

87.6

543

224

155

 

 

Asset Management

 

Asset management is a critical component in driving Helical's performance. Through having well considered business plans and by maximising the combined skills of our management team, we are able to create value in our assets without relying on market movements.

 

 

Investment portfolio

Fair

Value

Weighting

%

Passing

Rent

£m

 %

Contracted Rent

£m

 %

ERV

£m

% 

ERV Change Since

March 2016

%

ERV Change Like

for

Like

%

London Offices

 

 

 

 

 

 

 

 

 

- Completed, let and available to let

49.3

11.3

32.8

22.8

47.1

29.1

40.6

2.6

5.1

- Being redeveloped

12.4

-

-

-

-

13.4

18.7

2.6

2.6

- Held for future development

3.8

1.2

3.5

1.3

2.7

2.5

3.4

(3.3)

17.3

Total London

65.5

12.5

36.3

24.1

49.8

45.0

62.7

(1.1)

4.9

 

 

 

 

 

 

 

 

 

 

Regional Offices

9.3

5.5

15.9

6.3

13.0

7.9

11.0

(9.9)

3.9

Regional Logistics

15.4

10.9

31.6

12.2

25.2

12.5

17.6

(25.1)

(1.4)

Regional Retail

7.8

5.6

16.2

5.8

12.0

6.2

8.7

(38.6)

(0.9)

Retirement Villages

2.0

-

-

-

-

-

-

-

-

Total Regional

34.5

22.0

63.7

24.3

50.2

26.6

37.3

(25.1)

0.3

 

 

 

 

 

 

 

 

 

 

Total

100.0

34.5

100.0

48.4

100.0

71.6

100.0

(11.7)

3.1
                       

 

During the year contracted income increased by £3.5m as a result of new lettings and rent reviews, net of any losses from breaks and lease expiries (2016: £12.7m). The significant contributors to the new lettings were: The Loom, London E1 (£1.6m), C-Space, London EC1 (£1.0m), and 25 Charterhouse Square, London EC1 (£0.9m).

 

There was significant activity within the investment portfolio with 165 lease events.

 

 

Contracted Rent

£m

Rent lost at break/expiry

(2.3)

Rent reviews

0.5

Uplift at lease renewals

0.2

New lettings

5.1

Total increase in the year

3.5

 

 

Portfolio Yields

 

 

EPRA Topped Up NIY

%

Reversionary

%

London Offices

 

 

- Completed, let and available to let

4.3

5.4

- Being redeveloped

-

5.8

- Held for future development

3.1

5.6

Total London

4.2

5.5

 

 

 

Regional Offices

6.2

7.4

Regional Logistics

7.3

7.3

Regional Retail

6.9

7.2

Total Regional

6.9

7.3

 

 

 

Total

5.2

6.1

 

Capital Values, Vacancy Rates and Unexpired Lease Terms

 

 

Capital value psf

£

Vacancy rate*

%

WAULT

Years

London Offices

 

 

 

- Completed, let and available to let

926

10.0

6.8

- Being redeveloped

619

n/a

-

- Held for future development

645

43.2

0.1

Total London

828

33.2

6.9

 

 

 

 

Regional Offices

201

12.9

5.1

Regional Logistics

54

4.3

4.8

Regional Retail

217

2.8

4.9

Total Regional

94

5.2

5.0

 

 

 

 

Total

220

10.0

5.9

*The vacancy rates exclude assets in the course of redevelopment.

 

Valuation Movements

 

 

Val Change

inc Capex,

Sales & Purchases

%

Val Change

inc Capex,

excl Sales & Purchases

%

Investment Portfolio Weighting

March 2017

%

Investment Portfolio Weighting

March 2016

%

London Offices

 

 

 

 

- Completed, let and available to let

11.1

12.3

49.3

45.0

- Being redeveloped

0.3

0.3

12.4

8.6

- Held for future development

3.9

3.9

3.8

2.8

Total London

9.1

9.8

65.5

56.4

 

 

 

 

 

Regional Offices

1.7

1.4

9.3

9.7

Regional Logistics

1.6

0.2

15.4

20.0

Regional Retail

(9.6)

(11.4)

7.8

12.8

Retirement Villages

14.3

10.6

2.0

1.1

Total Regional

(1.3)

(2.1)

34.5

43.6

 

 

 

 

 

Total

4.5

5.2

100.0

100.0

 

Lease Expiries or Tenant Break Options

 

 

Year to

2018

Year to

2019

Year to

2020

Year to

2021

Year to

2022

% of rent roll

9.8

10.6

11.2

5.1

14.7

Number of leases

91

90

68

22

35

Average rent per lease (£)

51,742

56,770

79,331

111,898

202,620

 

We have a strong rental income stream and a diverse tenant base, with the largest tenant in the portfolio accounting for only 8.1% of the rent roll. The top 10 tenants account for 34.8% of the total rent roll and the tenants come from a variety of industries.

 

 

Rank

Tenant

Tenant Industry

Rent

£m

Rent Roll

%

1

Endemol UK Limited

Media

          3.9

8.1

2

MullenLowe Limited

Marketing Communications

            2.6

5.4

3

Gopivotal (UK) Limited

Technology

2.0

4.1

4

Farfetch UK Limited

Online Retail

1.9

3.9

5

Sainsbury's Supermarkets Limited

Food Retail

             1.2

2.6

6

Economic Solutions Limited

Employment and Skills Training

1.1

2.3

7

Neulion Limited

Technology

1.0

2.2

8

CBS Interactive Limited

Media

1.0

2.2

9

Allegis Group Limited

Recruitment

             1.0

2.1

10

Anomaly UK Limited

Marketing

0.9

1.9

Total

 

16.6

34.8

 

 

Consolidated income statement

 

For the year ended 31 March 2017

  

Notes

Year ended

31.3.17

£000

Year ended

31.3.16

Restated

£000

Revenue

2

99,934

116,500

Net rental income

3

46,162

42,164

Development property profit

4

843

24,252

Share of results of joint ventures

12

(6,528)

50,469

Other operating income

 

982

20

Gross profit before net gain on sale and revaluation of investment properties

 

41,459

 

116,905

 

Net gain on sale and revaluation of investment properties

5

40,543

49,826

Impairment of available-for-sale investments

14

(3,352)

(1,370)

Gross profit

 

78,650

165,361

Administrative expenses

6

(18,372)

(26,103)

Operating profit

 

60,278

139,258

Finance costs

7

(25,598)

(24,113)

Finance income

 

3,156

5,128

Change in fair value of derivative financial instruments

 

789

(6,860)

Change in fair value of Convertible Bond

 

2,973

516

Foreign exchange (loss)/gain

 

(3)

100

Profit before tax

 

41,595

114,029

Tax on profit on ordinary activities

8

(2,471)

(9,146)

Profit after tax

 

39,124

104,883

- attributable to equity shareholders

 

39,124

104,943

- attributable to non-controlling interests

 

-

(60)

Profit for the year

 

39,124

104,883

 

 

 

 

 

 

 

 

Earnings per share

10

 

 

Basic

 

34.0p

91.3p

Diluted

 

33.2p

88.0p

 

 

Consolidated statement of comprehensive income

 

For the year ended 31 March 2017

 

Year ended

31.3.17

£000

Year ended

31.3.16

Restated

£000

Profit for the year

39,124

104,883

Exchange difference on retranslation of net investments in foreign operations

48

(16)

Total comprehensive income for the year

39,172

104,867

- attributable to equity shareholders

39,172

104,927

- attributable to non-controlling interests 

-

(60)

Total comprehensive income for the year

39,172

104,867

 

The exchange differences on retranslation of net investments in foreign operations will be reclassified to the Income Statement on disposal.

 

 

Consolidated balance sheet

 

At 31 March 2017

 

Notes

 

31.3.17

£000

 

31.3.16

Restated

£000

Non-current assets

 

 

 

Investment properties

11

987,560

1,035,033

Owner occupied property, plant and equipment

 

2,124

2,200

Investment in joint ventures

12

19,882

27,990

 

 

1,009,566

1,065,223

Current assets

 

 

 

Land, developments and trading properties

13

86,680

92,035

Available-for-sale investments

14

-

3,114

Corporate tax receivable

 

3,320

-

Trade and other receivables

15

73,925

73,057

Cash and cash equivalents

16

99,262

74,670

 

 

263,187

242,876

Total assets

 

1,272,753

1,308,099

Current liabilities

 

 

 

Trade and other payables

17

(56,349)

(71,000)

Corporation tax payable

 

-

(1,592)

Borrowings

18

(2,517)

(885)

 

 

(58,866)

(73,477)

Non-current liabilities

 

 

 

Borrowings

18

(671,184)

(733,178)

Derivative financial instruments

19

(13,981)

(14,955)

Deferred tax liability

8

(11,825)

(5,768)

 

 

(696,990)

(753,901)

Total liabilities

 

(755,856)

(827,378)

 

 

 

 

Net assets

 

516,897

480,721

 

 

 

 

Equity

 

 

 

Called-up share capital

20

1,447

1,447

Share premium account

 

98,798

98,798

Revaluation reserve

 

164,190

143,699

Capital redemption reserve

 

7,478

7,478

Other reserves

 

291

291

Retained earnings

 

244,693

229,008

Equity attributable to equity holders of the parent

 

516,897

480,721

Non-controlling interests

 

-

-

Total equity

 

516,897

480,721

 

Consolidated cash flow statement

    

For the year to 31 March 2017

 

Year ended

31.3.17

£000

Year ended

31.3.16

Restated

£000

Cash flows from operating activities

 

 

Profit before tax

41,595

114,029

Depreciation

391

338

Net revaluation gain on investment properties

(39,152)

(47,441)

Gain on sales of investment properties

(1,391)

(2,385)

Profit on sale of plant and equipment

(56)

-

Net financing costs

22,442

18,985

Change in value of derivative financial instruments

(789)

6,860

Change in fair value of Convertible Bond

(2,973)

(516)

Share based payment charge

1,672

6,666

Share of results of joint ventures

6,528

(50,469)

Impairment of available-for-sale investment

3,352

1,370

Foreign exchange movement

6

250

Cash inflows from operations before changes in working capital

31,625

47,687

Change in trade and other receivables

876

(5,074)

Movement in property derivative financial asset

-

16,388

Change in land, developments and trading properties

3,789

306

Change in trade and other payables

(9,338)

5,314

Cash inflows generated from operations

26,952

64,621

Finance costs

(33,041)

(25,312)

Finance income

1,413

3,915

Tax paid

(3,392)

(4,712)

 

(35,020)

(26,109)

Cash flows from operating activities

(8,068)

38,512

Cash flows from investing activities

 

 

Additions to investment property

(59,310)

(405,133)

Sale of investment property

156,254

121,770

Return of investment in joint ventures

-

11,495

Dividends from joint ventures

1,580

82,569

Available for sale asset additions

(238)

(142)

Sale of plant and equipment

178

70

Purchase of owner occupied property, plant and equipment

(442)

(263)

Net cash generated from/(used by) investing activities

98,022

(189,634)

Cash flows from financing activities

 

 

Borrowings drawn down

41,986

299,754

Borrowings repaid

(102,887)

(161,648)

Purchase of own shares

(944)

(18,857)

Equity dividends paid

(3,566)

(14,437)

Net cash (used by)/generated from financing activities

(65,411)

104,812

Net increase/(decrease) in cash and cash equivalents

24,543

(46,310)

Exchange gains/(losses) on cash and cash equivalents

49

(13)

Cash and cash equivalents at start of year

74,670

120,993

Cash and cash equivalents at end of year

99,262

74,670

 

 

Consolidated statement of changes in equity

 

At 31 March 2017

 

Share

capital

£000

Share

premium

£000

Re-valuation

reserve

£000

Capital

redemption

reserve

£000

Other

reserves

£000

Retained earnings

£000

Own shares

held

£000

Non-

controlling

interests

£000

Total

£000

At 31 March 2015

1,447

98,798

108,060

7,478

291

188,229

-

60

404,363

Total comprehensive income

-

-

-

-

-

104,927

-

(60)

104,867

Revaluation surplus

-

-

47,441

-

-

(47,441)

-

-

-

Realised on disposals

-

-

(11,802)

-

-

11,802

-

-

-

Performance share plan

-

-

-

-

-

6,666

-

-

6,666

Performance share plan - deferred tax

-

-

-

-

-

(3,002)

-

-

(3,002)

Share settled bonus

-

-

-

-

-

1,121

-

-

1,121

Dividends paid

-

-

-

-

-

(14,437)

-

-

(14,437)

Purchase of own shares

-

-

-

-

-

-

(18,857)

-

(18,857)

Own shares held reserve transfer

-

-

-

-

-

(18,857)

18,857

-

-

At 31 March 2016 restated

1,447

98,798

143,699

7,478

291

229,008

-

-

480,721

Total comprehensive income

-

-

-

-

-

39,172

-

-

39,172

Revaluation surplus

-

-

39,152

-

-

(39,152)

-

-

-

Realised on disposals

-

-

(18,661)

-

-

18,661

-

-

-

Performance share plan

-

-

-

-

-

1,672

-

-

1,672

Performance share plan - deferred tax

-

-

-

-

-

(2,062)

-

-

(2,062)

Share settled bonus

-

-

-

-

-

1,904

-

-

1,904

Dividends paid

-

-

-

-

-

(3,566)

-

-

(3,566)

Purchase of own shares

-

-

-

-

-

-

(944)

-

(944)

Own shares held reserve transfer

-

-

-

-

-

(944)

944

-

-

At 31 March 2017

1,447

98,798

164,190

7,478

291

244,693

-

-

516,897
                       

 

For a breakdown of total comprehensive income see the Consolidated Statement of Comprehensive Income.

 

The adjustment against retained earnings of £1,672,000 (31 March 2016: £6,666,000) adds back the share based payments charge in accordance with IFRS 2 Share Based Payments.

 

There were net transactions with owners of £2,996,000 (31 March 2016: £28,509,000) made up of the performance share plan charge of £1,672,000 (31 March 2016: £6,666,000) and related deferred tax debit of £2,062,000 (31 March 2016: £3,002,000), dividends paid of £3,566,000 (31 March 2016: £14,437,000), the purchase of own shares debit of £944,000 (31 March 2016: £18,857,000) and the share settled bonus credit of £1,904,000 (31 March 2016:  £1,121,000).

 

Notes to the full year results

 

1. Basis of Preparation

 

These financial statements have been prepared using the recognition and measurement principles of International Financial Reporting Standards ("IFRS"), including International Financial Reporting Interpretations Committee ("IFRIC") interpretations as adopted by the European Union.

 

The financial statements have been prepared in Sterling (rounded to the nearest thousand) under the historical cost convention as modified by the revaluation of investment properties, available-for-sale investments, convertible bonds and derivative financial instruments.

 

The principal accounting policies of the Group are set out in the Group's 2016 annual report and financial statements, there has been no significant change to these policies.

 

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in section 434 of the Companies Act 2006 but has been derived from the Company's audited statutory accounts for the year ended 31 March 2017. These accounts will be delivered to the Registrar of Companies following the Annual General Meeting. The Group Annual Report and Financial Statements for 2016 are available at Companies House. The auditor's opinion on the 2016 accounts was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

 

2.  Segmental Information

 

The Group identifies two discrete operating segments whose results are regularly reviewed by the Chief Operating Decision Maker (the Chief Executive) to allocate resources to these segments and to assess their performance. The segments are:

 

•    investment properties, which are owned or leased by the Group for long-term income and for capital appreciation, and trading properties, which are owned or leased with the intention to sell; and,

 

•    development properties, which include sites, developments in the course of construction, completed developments available for sale, and pre-sold developments.

 

Revenue

Investment

and Trading

Year ended

31.03.17

£000

Developments

Year ended

31.03.17

£000

Total

Year ended

31.03.17

£000

Investment

and Trading

Year ended

31.03.16

£000

Developments

Year ended

31.03.16

£000

Total

Year ended

31.03.16

£000

Rental income

48,835

-

48,835

45,158

347

45,505

Development property income

-

49,994

49,994

-

70,876

70,876

Other revenue

1,105

-

1,105

119

-

119

Revenue

49,940

49,994

99,934

45,277

71,223

116,500

 

 

 

Profit before tax

 

 

 

Investment and Trading

Year ended

31.03.17

£000

Developments

Year ended

31.03.17

£000

Total

Year ended

31.03.17

£000

Investment

and Trading

Year ended

31.03.16

£000

 

Developments

Year ended

31.03.16

£000

 

Total

Year ended

31.03.16

£000

Net rental income

46,213

(51)

46,162

42,010

154

42,164

Development property profit

-

843

843

-

24,252

24,252

Share of results of joint ventures

(2,049)

(4,479)

(6,528)

47,592

2,877

50,469

Gain on sale and revaluation of investment properties

40,543

-

40,543

49,826

-

49,826

 

84,707

(3,687)

81,020

139,428

27,283

166,711

Impairment of available for sale assets

 

 

(3,352)

 

 

(1,370)

Other operating income

 

 

982

 

 

20

Gross profit

 

 

78,650

 

 

165,361

Administrative expenses

 

 

(18,372)

 

 

(26,103)

Net finance costs

 

 

(18,680)

 

 

(25,329)

Foreign exchange (loss)/gain

 

 

(3)

 

 

100

Profit before tax

 

 

41,595

 

 

114,029

 

 

 

Balance sheet

Investment and Trading

31.03.17

£000

 

Developments

31.03.17

£000

 

Total

31.03.17

£000

Investment

and Trading

31.03.16

£000

 

Developments

31.03.16

£000

 

Total

31.03.16

£000

Investment properties

987,560

-

987,560

1,035,033

-

1,035,033

Land, development and trading properties

28

86,652

86,680

28

92,007

92,035

Investment in joint ventures

1,814

18,068

19,882

14,162

13,828

27,990

 

989,402

104,720

1,094,122

1,049,223

105,835

1,155,058

Other assets

 

 

178,631

 

 

153,041

Total assets

 

 

1,272,753

 

 

1,308,099

Liabilities

 

 

(755,856)

 

 

(827,378)

Net assets

 

 

516,897

 

480,721

 

 

 

3. Net Rental Income

 

 

Year ended

31.3.17

£000

Year ended

31.3.16

£000

Gross rental income

48,835

45,505

Rents payable

(68)

(80)

Property overheads

(2,283)

(2,728)

Net rental income

46,484

42,697

Net rental income attributable to profit share partner

(322)

(533)

Group share of net rental income

46,162

42,164

 

4.  Development Property Profit

 

 

Year ended

31.3.17

£000

Year ended

31.3.16

£000

Development property income

49,994

70,876

Profit on forward property contract

-

14

Cost of sales

(37,576)

(29,519)

Sales expenses

(5,275)

(10,671)

Provision against book values

(6,300)

(6,448)

Development property profit

843

24,252

 

5.  Net Gain on Sale and Revaluation of Investment Properties

 

 

Year ended

31.3.17

£000

Year ended

31.3.16

£000

Net proceeds from the sale of investment properties

156,939

122,201

Book value (note 11)

(154,863)

(119,385)

Tenants incentives on sold investment properties

(685)

(431)

Gain on sale of investment properties

1,391

2,385

Revaluation surplus on investment properties

39,152

47,441

Net gain on sale and revaluation of investment properties

40,543

49,826

 

6.  Administrative Expenses

 

 

Year ended

31.3.17

£000

Year ended

31.3.16

£000

Administration costs

(10,800)

(10,717)

Performance related awards

(6,854)

(13,299)

National Insurance on performance related awards

(718)

(2,087)

Administrative expenses

(18,372)

(26,103)

 

7.  Finance Costs

 

 

Year ended

31.3.17

£000

Year ended

31.3.16

£000

Interest payable on bank loans, bonds and overdrafts

(28,586)

(25,353)

Other interest payable and similar charges

(4,913)

(3,700)

Interest capitalised

7,901

4,940

Finance costs

(25,598)

(24,113)

 

 

8.  Tax on Profit on Ordinary Activities

 

 

Year ended

31.3.17

£000

Year ended

31.3.16

£000

The tax credit/(charge) is based on the profit for the year and represents:

 

United Kingdom corporation tax at 20%

 

 

- Group corporation tax

-

(7,010)

- Adjustment in respect of prior periods

1,521

(115)

- Overseas tax

2

(712)

Current tax credit/(charge)

1,523

(7,837)

 

 

 

Deferred tax

 

 

- Capital allowances

(1,023)

(385)

- Tax losses

(4,347)

500

- Unrealised chargeable gains

1,803

(7,447)

- Other timing differences

(427)

6,023

Deferred tax charge

(3,994)

(1,309)

Total tax charge for the year

(2,471)

(9,146)

 

Deferred tax

 

 

31.3.17

£000

 

31.3.16

£000

Capital allowances

(2,969)

(1,946)

Tax losses

8,174

12,521

Unrealised chargeable gains

(22,331)

(24,134)

Other timing differences

5,301

7,791

Deferred tax liability

(11,825)

(5,768)

 

Under IAS 12, deferred tax provisions are made for the tax that would potentially be payable on the realisation of investment properties and other assets at book value.

 

If upon sale of the investment properties the group retained all the capital allowances, the deferred tax provision in respect of capital allowances of £2,969,000 would be released and further capital allowances of £31,390,000 would be available to reduce future tax liabilities.

 

The net deferred tax asset in respect of other timing differences arises from tax relief available to the Group on the mark-to-market valuation of financial instruments, the future vesting of share awards and other timing differences.

 

 

9. Dividends

 

 

Year ended

31.3.17

£000

Year ended

31.3.16

£000

Attributable to equity share capital

 

 

Ordinary

 

 

- Interim paid 2.40p per share (2016: 2.30p)

2,743

2,652

- Second interim paid of 5.15p per share

-

5,886

- Prior year final paid 0.72p per share (2015: 5.15p)

823

5,899

 

3,566

14,437


A final dividend of 6.20p, if approved at the AGM on 13 July 2017, will be paid on 21 July 2017 to shareholders on the register on 23 June 2017. This final dividend, amounting to £7,249,950, has not been included as a liability as at 31 March 2017, in accordance with IFRS.

 

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. This is a different basis to the net asset per share calculations which are based on the number of shares at the year end. Shares held by the Helical Employees' Share Ownership Plan Trust (the "ESOP"), which has waived its entitlement to receive dividends, are treated as cancelled for the purpose 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.

 

The EPRA earnings per share is calculated in accordance with IAS 33 and the best practice recommendations of the European Public Real Estate Association ("EPRA").

 

 

Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below:

 

 

Year ended

31.3.17

000's

Year ended

31.3.16

000's

Ordinary shares in issue

118,196

118,184

Weighting adjustment

(3,110)

(3,296)

Weighted average ordinary shares in issue for calculation of basic and EPRA earnings per share

115,086

114,888

Weighted average ordinary shares issued on share settled bonuses

1,402

1,197

Weighted average ordinary shares to be issued under performance share plan

1,403

3,212

Weighted average ordinary shares in issue for calculation of diluted earnings per share

117,891

119,297
         

 

£000

£000

Earnings used for calculation of basic and diluted earnings per share

39,124

104,943

 

Basic earnings per share

 

34.0p

 

91.3p

Diluted earnings per share

33.2p

88.0p

 

 

£000

£000

Earnings used for calculation of basic and diluted earnings per share

39,124

104,943

Net (gain)/loss on sale and revaluation of investment properties              - subsidiaries

(40,543)

(49,826)

                                                                                                                - joint ventures

1,929

(50,210)

Tax on profit on disposal of investment properties

420

998

Fair value movement on derivative financial instruments                        - subsidiaries

(789)

6,860

                                                                                                                - joint ventures

42

(211)

Fair value movement on Convertible Bond

(2,973)

(516)

Impairment of available-for-sale investment

3,352

1,370

Deferred tax on adjusting items

(37)

6,212

Earnings used for calculations of EPRA earnings per share

525

19,620

 

 

 

EPRA earnings per share

0.5p

17.1p


The earnings used for the calculation of EPRA earnings per share includes net rental income and development property profits but excludes trading property gains.

 

11. Investment Properties

 

 

 

31.3.17

£000

 

31.3.16

£000

Book value at 1 April

1,035,033

701,521

Additions and transfers at cost

68,778

405,133

Disposals

(154,863)

(119,385)

Revaluation surplus

39,152

47,441

Revaluation surplus attributable to profit share partners

(540)

323

Book value at 31 March

987,560

1,035,033


 

 

All properties are stated at market value as at 31 March 2017, and are valued by professionally qualified external valuers (Cushman & Wakefield LLP) in accordance with the Valuation-Professional Standards published by the Royal Institution of Chartered Surveyors. The fair value of the investment properties at 31 March 2017 is as follows:

 

 

31.3.17

£000

31.3.16

£000

Book value

987,560

1,035,033

Lease incentives and costs included in trade and other receivables

15,440

6,067

Fair value

1,003,000

1,041,100

 

 

Interest capitalised in respect of the refurbishment of investment properties at 31 March 2017 amounted to £10,973,000 (31 March 2016: £6,571,000).

 

The historical cost of investment property is £822,161,000 (31 March 2016: £889,493,000).

 

12. Joint Ventures

 

Share of results of joint ventures

Year ended

31.3.17

£000

Year ended

31.3.16

£000

Gross rental income

931

1,828

Property overheads

(100)

(558)

Net rental income

831

1,270

Net (loss)/gain on revaluation of investment properties

(1,875)

2,316

(Loss)/profit on sale of investment properties

(54)

41,553

Development (loss)/profit

(35)

3,223

Provision against book values

(6,524)

-

Other operating (expenses)/income

(1,118)

218

Administrative expenses

(338)

(1,140)

Finance costs

(2)

(3,673)

Finance income

1,233

21

Change in fair value of derivative financial instruments

(42)

211

(Loss)/profit before tax

(7,924)

43,999

Tax

1,396

129

(Loss)/profit after tax

(6,528)

44,128

Economic interest adjustment*

-

6,341

Share of results of joint ventures

(6,528)

50,469

*Under the Barts Square joint venture agreement the Group is entitled to varying returns dependent upon the performance of the development. Whilst the Group holds a 33.35% equity share in the Barts Square group, it has accounted for its share at 43.8% at the current and prior year end to reflect its expected economic interest in the joint venture. The assessment of the Group's economic interest has not changed since 31 March 2016.

 

 

Investment in joint ventures

 

31.3.17

£000

 

31.3.16

£000

Summarised balance sheets

 

 

Non-current assets

 

 

Investment properties

13,907

11,552

Owner occupied property, plant and equipment

30

96

Derivative financial instruments

52

-

Deferred Tax

1,811

412

 

15,800

12,060

Current assets

 

 

Land, development and trading properties

89,115

75,904

Trade and other receivables

1,327

3,497

Cash and cash equivalents

9,745

12,177

 

100,187

91,578

Current liabilities

 

 

Trade and other payables

(17,699)

(14,436)

 

(17,699)

(14,436)

Non-current liabilities

 

 

Trade and other payables

(23,124)

(26,586)

Borrowings

(55,282)

(34,626)

 

(78,406)

(61,212)

Net assets

19,882

27,990


The Directors' valuation of trading and development stock shows a surplus of £7,500,000 (2016: £7,000,000) above book value.

 

13. Land, Developments and Trading Properties

 

 

 

31.3.17

£000

 

31.3.16

£000

Development properties

86,652

92,007

Properties held as trading stock

28

28

 

86,680

92,035


The Directors' valuation of trading and development stock shows a surplus of £5,014,000 (2016: £12,412,000) above book value.

 

Total interest to date in respect of the development of sites is included in stock to the extent of £11,178,000 (2016: £11,626,000). Interest capitalised during the period in respect of development sites amounted to £3,500,000.

 

14.       Available-For-Sale Investments

 

 

 

31.3.17

£000

 

31.3.16

£000

Fair value at 1 April

3,114

4,342

Fair value additions

248

142

Fair value disposals

(10)

-

Fair value impairment

(3,352)

(1,370)

Fair value 31 March

-

3,114


 

 

The fair value of the Group's Level 3 available-for-sale investment has been determined by assessing the expected future consideration receivable from this investment, as the value cannot be derived from observable market data. The fair value of the asset is sensitive only to potential sales proceeds.

 

15. Trade and Other Receivables

 

 

 

31.3.17

£000

 

31.3.16

£000

Trade receivables

12,836

20,869

Other receivables

27,462

32,382

Prepayments and accrued income

33,627

19,806

 

73,925

73,057

 

16.       Cash and Cash Equivalents

 

 

 

31.3.17

£000

 

31.3.16

£000

Rent deposits and cash held at managing agents

4,046

4,906

Restricted cash

12,111

17,063

Cash deposits

83,105

52,701

 

99,262

74,670


Restricted cash is made up of cash held by solicitors and cash in blocked/restricted accounts.

 

17.       Trade and Other Payables

 

 

 

31.3.17

£000

 

31.3.16

£000

Trade payables

12,197

14,463

Other payables

3,022

8,218

Accruals and deferred income

41,130

48,319

 

56,349

71,000

 

18. Borrowings

 

 

 

31.3.17

£000

 

31.3.16

£000

Current borrowings

2,517

885

Borrowings repayable within:

 

 

- one to two years

4,150

3,617

- two to three years

304,641

3,650

- three to four years

215,667

337,098

- four to five years

1,053

219,523

- five to six years

73,353

95,981

- six to ten years

72,320

73,309

Non-current borrowings

671,184

733,178

Total borrowings

673,701

734,063

 

Included within borrowings repayable within two to three years is the convertible bond at its fair value of £99,774,000. It is a financial instrument classified as Level 1 under the IFRS 13 fair value hierarchy.

 

Net Gearing

 

31.3.17

£000

 

31.3.16

£000

Total borrowings

673,701

734,063

Cash

(99,262)

(74,670)

Net borrowings

574,439

659,393

 

Net borrowings excludes the Group's share of borrowings in joint ventures of £55,282,000 (2016: £34,626,000) and cash of £9,745,000 (2016: £12,177,000). All borrowings in joint ventures are secured.

 

 

 

31.3.17

£000

 

31.3.16

£000

Net assets

516,897

480,721

Gearing

111%

137%

 

19. Derivative Financial Instruments

 

 

 

31.3.17

£000

 

31.3.16

£000

Derivative financial instruments asset

-

-

Derivative financial instruments liability

(13,981)

(14,955)

 

The fair values of the Group's outstanding interest rate swaps and caps have been estimated by calculating the present values of future cash flows, using appropriate market discount rates, representing Level 2 fair value measurements as defined in IFRS 13 Fair Value Measurement.

 

20. Share Capital

 

 

 

31.3.17

£000

 

31.3.16

£000

Authorised

39,577

39,577

 

The authorised share capital of the Company is £39,576,626.60 divided into ordinary shares of 1p each and deferred shares of 1/8p each.

 

Allotted, called up and fully paid:          

 

 

- 118,196,215 (2016: 118,183,806) ordinary shares of 1p each

1,182

1,182

- 212,145,300 deferred shares of 1/8p each

265

265

 

1,447

1,447

 

21. Own Shares Held

 

Following approval at the 1997 Annual General Meeting the Company established the Helical Employees' Share Ownership Plan Trust (the "ESOP") to be used as part of the remuneration arrangements for employees. The purpose of the ESOP 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 ESOP purchases shares in the Company to satisfy the Company's obligations under its Share Option Scheme and Performance Share Plan. For this purpose, 254,000 shares (2016: 4,488,000) in the Company were purchased during the year at a cost of

£944,000 (2016: £18,857,000).

 

At 31 March 2017 the ESOP held 1,262,000 ordinary shares in Helical plc (2016: 3,901,000).

 

At 31 March 2017 options over nil (2016: nil) ordinary shares in Helical plc had been granted through the ESOP. At 31 March 2017 awards over 4,744,000 (2016: 6,558,000) ordinary shares in Helical plc, made under the terms of the Performance Share Plan, were outstanding.

 

22. Net Assets per Share

 

 

 

31.3.17

£000

Number

of

Shares

000's

 

31.3.17

Pence Per Share

Net asset value

516,897

118,196

 

Less: - own shares held by ESOP

 

(1,262)

 

         - deferred shares

(265)

 

 

Basic net asset value

516,632

116,934

442

Add: share settled bonus

 

1,402

 

Add: dilutive effect of the Performance Share Plan

 

1,410

 

Diluted net asset value

516,632

119,746

431

Adjustment for:

 

 

 

      - fair value of financial instruments

13,929

 

 

      - fair value movement on Convertible Bond

(226)

 

 

      - deferred tax

23,124

 

 

Adjusted diluted net asset value

553,459

119,746

462

Adjustment for:

 

 

 

      - fair value of trading and development properties

12,514

 

 

EPRA net asset value

565,973

119,746

473

Adjustment for:

 

 

 

      - fair value of financial instruments

(13,929)

 

 

      - deferred tax

(23,124)

 

 

EPRA triple net asset value

528,920

119,746

442

 

The adjustment for the fair value of trading and development properties represents the surplus as at 31 March 2017.

 

 

 

31.3.16

£000

Number

of

Shares

000's

 

31.3.16

Pence Per Share

Net asset value

480,721

118,184

 

Less:        - own shares held by ESOP

 

(3,901)

 

                - deferred shares

(265)

 

 

Basic net asset value

480,456

114,283

420

Add: share settled bonus

 

1,197

 

Add: dilutive effect of the Performance Share Plan

 

3,177

 

Diluted net asset value

480,456

118,657

405

Adjustment for:

 

 

 

                - fair value of financial instruments

14,955

 

 

                - fair value movement on Convertible Bond

2,747

 

 

                - deferred tax

23,161

 

 

Adjusted diluted net asset value

521,319

118,657

439

Adjustment for:

 

 

 

                - fair value of trading and development properties

19,412

 

 

EPRA net asset value

540,731

118,657

456

Adjustment for:

 

 

 

                - fair value of financial instruments

(14,955)

 

 

                - deferred tax

(23,161)

 

 

EPRA triple net asset value

502,615

118,657

424

 

The net asset values per share have been calculated in accordance with guidance issued by the European Public Real Estate Association ("EPRA").

 

The adjustments to the net asset value comprise the amounts relating to the Group and its share of Joint Ventures.

 

23. Related Party Transactions

 

At 31 March 2017 and 31 March 2016 the following amounts were due from/(to) the Group's joint ventures.

 

31.3.17

£000

31.3.16

£000

King Street Developments (Hammersmith) Limited

8,162

6,231

Shirley Advance LLP

503

11,347

Barts Square companies

(13)

77

Helical Sosnica Sp. Zoo

1,126

1,099

Old Street Holdings LP

3

-

Creechurch Place Limited

15,883

13,345

 

24. Capital Commitments

 

The Group has a commitment of £69,830,000 (2016: £17,209,000) in relation to construction contracts, which are due to be completed in the period to June 2018.

 

25. Investment Property Accounting Restatement

 

International Accounting Standard 40 - Investment Property requires that accrued operating lease income assets should be shown separately and deducted from the fair value of the investment properties in the Consolidated Balance Sheet. This accounting treatment had not been applied at 31 March 2016 but has been adopted for the year ended 31 March 2017. A prior year adjustment has been made to ensure consistency of comparative information, clarity and transparency.

 

The effect of the adjustment on the relevant financial statement line items for the year ended 31 March 2016 is as follows:

Impact on equity - increase/(decrease) in equity

Original

31.3.16

£000

Adjustment

31.3.16

£000

Restated

31.3.16

£000

Investment properties

1,041,100

(6,067)

1,035,033

Deferred tax liability

(6,367)

599

(5,768)

Equity

486,189

(5,468)

480,721

 

Impact on the consolidated income statement - increase/(decrease) in profit for the year

Original

Year ended 31.3.16

£000

Adjustment

Year ended 31.3.16

£000

Restated

Year ended 31.3.16

£000

Net gain on sale and revaluation of investment properties

55,893

 

(6,067)

 

49,826

 

 

 

 

 

Profit before tax

120,096

(6,067)

114,029

Tax on profit on ordinary activities

(9,745)

599

(9,146)

Profit for the year

110,351

(5,468)

104,883

 

Impact on basic and diluted earnings per share and EPRA Net Asset Value - increase/(decrease)

Original

Year ended 31.3.16

pence

Adjustment

Year ended 31.3.16

pence

Restated

Year ended 31.3.16

pence

Basic earnings per share

96.1

(4.8)

91.3

Diluted earnings per share

92.6

(4.6)

88.0

 

 

 

 

EPRA net asset value per share

461

(5)

456

 

The adjustment did not have an impact on the Group's EPRA earnings per share.

 

No adjustment was made at 31 March 2015 on the grounds of materiality.

 

26. Post Balance Sheet Events

 

In May 2017, the Group sold The Morgan Quarter, Cardiff for £55m and a retail asset in Great Yarmouth for £4.2m, and purchased an office building, Trinity Court, Manchester for £12.9m.

 

Appendix 1 - See-Through Analysis

 

Helical holds a significant proportion of its property assets in joint ventures with partners that provide the majority of the equity required to purchase the assets, whilst relying on the Group to provide asset management or development expertise. Accounting convention requires Helical to account under IFRS for our share of the net results and net assets of joint ventures in limited detail in the income statement and balance sheet. Net asset value per share, a key performance measure used in the real estate industry, as reported in the financial statements under IFRS, does not provide shareholders with the most relevant information on the fair value of assets and liabilities within an ongoing real estate company with a long term investment strategy.

 

This analysis incorporates the separate components of the results of the consolidated subsidiaries and Helical's share of its joint ventures' results into a 'see-through' analysis of our property portfolio, debt profile and the associated income streams and financing costs, to assist in providing a comprehensive overview of the Group's activities.

 

See-through net rental income

Helical's share of the gross rental income, head rents payable and property overheads from property assets held in subsidiaries and in joint ventures are shown in the table below.

 

 

 

Year ended

31.3.17

£000

Year ended

31.3.16

£000

Gross rental income

- subsidiaries

48,835

45,505

 

- joint ventures

931

1,828

Total gross rental income

 

49,766

47,333

Rents payable

- subsidiaries

(68)

(80)

Property overheads

- subsidiaries

(2,283)

(2,728)

 

- joint ventures

(100)

(558)

Net rental income attributable to profit share partner

 

(322)

(533)

See-through net rental income

 

46,993

43,434
         

 

See-through net development profits

Helical's share of development profits from property assets held in subsidiaries and in joint ventures are shown in the table below.

 

 

 

Year ended

31.3.17

£000

Year ended

31.3.16

£000

In parent and subsidiaries

 

7,143

30,700

In joint ventures

 

(35)

3,223

Total gross development profit

 

7,108

33,923

Provision against stock

- subsidiaries

(6,300)

(6,448)

 

- joint ventures

(6,524)

-

See-through development (losses)/profits

 

(5,716)

27,475
         

 

 

See-through net gain on sale and revaluation of investment properties

Helical's share of the net gain on sale and revaluation of investment properties held in subsidiaries and in joint ventures are shown in the table below.

 

 

Year ended

31.3.17

£000

Year ended

31.3.16

£000

Revaluation surplus/(deficit) on investment properties

- subsidiaries

39,152

47,441

 

- joint ventures

(1,875)

2,316

Total revaluation surplus

 

37,277

49,757

Net gain/(loss) on sale of investment properties

- subsidiaries

1,391

2,385

 

- joint ventures

(54)

41,553

Total net gain on sale of investment properties 

1,337

43,938

See-through net gain on sale and revaluation of investment properties

38,614

93,695
         

 

See-through net finance costs

Helical's share of the interest payable, finance charges, capitalised interest and interest receivable on bank borrowings and cash deposits in subsidiaries and in joint ventures are shown in the table below.

 

 

 

Year ended

31.3.17

£000

Year ended

31.3.16

£000

Interest payable on bank loans and overdrafts

- subsidiaries

28,586

25,353

 

- joint ventures

2

3,673

Total interest payable on bank loans and overdrafts

28,588

29,026

Other interest payable and similar charges

- subsidiaries

4,913

3,700

Interest capitalised

- subsidiaries

(7,901)

(4,940)

Total finance costs

 

25,600

27,786

Interest receivable and similar income

- subsidiaries

(3,156)

(5,128)

 

- joint ventures

(1,233)

(21)

See-through net finance costs

 

21,211

22,637

 

See-through property portfolio

Helical's share of the investment, trading and development property portfolio in subsidiaries and joint ventures are shown in the table below.

 

 

 

 

 

31.3.17

£000

 

31.3.16

£000

Investment property fair value

- subsidiaries

 

1,003,000

1,041,100

 

- joint ventures

 

13,907

11,552

Total investment property fair value

 

 

1,016,907

1,052,652

Trading and development stock

- subsidiaries

 

86,680

92,035

 

- joint ventures

 

89,115

75,904

Total trading and development stock

 

 

175,795

167,939

Trading and development stock surplus

- subsidiaries

 

5,014

12,412

 

- joint ventures

 

7,500

7,000

Total trading and development stock surpluses

 

 

12,514

19,412

Total trading and development stock at fair value

 

 

188,309

187,351

See-through property portfolio

 

 

1,205,216

1,240,003

 

 

See-through net borrowings

Helical's share of borrowings and cash deposits in parent and subsidiaries and joint ventures are shown in the table below.

 

 

 

31.3.17

£000

 

31.3.16

£000

In parent and subsidiaries

- gross borrowings less than one year

2,517

885

 

- gross borrowings more than one year

671,184

733,178

 

Total

673,701

734,063

In joint ventures

- gross borrowings less than one year

-

-

 

- gross borrowings more than one year

55,282

34,626

 

Total

55,282

34,626

In parent and subsidiaries

Cash and cash equivalents

(99,262)

(74,670)

In joint ventures

Cash and cash equivalents

(9,745)

(12,177)

See-through net borrowings

619,976

681,842

 

 

Appendix 2 - See-through Analysis Ratios

 

 

Interest cover

31.03.17

£000

31.03.16

£000

31.03.15

£000

31.03.14

£000

31.03.13

£000

Net rental income

46,993

43,434

38,645

29,839

24,459

Trading profits/(losses)

-

-

2,503

252

(1)

Development profits (before provisions)

7,108

33,923

18,028

64,472

7,616

Gain/(loss) on sale of investment properties

1,337

43,938

3,571

8,580

(2,388)

Net operating income

55,438

121,295

62,747

103,143

29,686

 

 

 

 

 

 

Finance costs

21,211

22,637

24,799

12,360

10,893

 

 

 

 

 

 

Interest cover

2.6x

5.4x

2.5x

8.3x

2.7x

 

 

 

 

 

 

Balance sheet

 

 

 

 

 

Property portfolio

1,205,216

1,240,003

1,021,362

801,712

626,425

Net borrowings

619,976

681,842

531,897

365,059

283,350

Shareholders' funds

516,897

480,721

404,363

340,527

253,768

 

 

 

 

 

 

Loan to value

51%

55%

52%

46%

45%

Gearing

120%

142%

132%

107%

112%
             
 

 

Appendix 3 - Five Year Review

 

Income Statements

 

31.3.17

£000

31.3.16

£000

31.3.15

£000

31.3.14

£000

31.3.13

£000

Revenue

99,934

116,500

106,341

123,637

65,439

Net rental income

46,162

42,164

34,233

24,402

19,578

Development profit

7,143

30,700

16,126

62,273

7,616

Provisions against stock

(6,300)

(6,448)

(452)

552

(660)

Trading profit/(loss)

-

-

2,503

252

(1)

Share of results of joint ventures

(6,528)

50,469

27,497

16,448

3,854

Other income/(expense)

982

20

368

230

(547)

Gross profit before gain/(loss) on investment properties

41,459

116,905

80,275

104,157

29,840

Gain/(loss) on sale of investment properties

1,391

2,385

2,480

8,611

(2,388)

Revaluation surplus on investment properties

39,152

47,441

66,904

20,714

3,723

Impairment of available-for-sale investments

(3,352)

(1,370)

(773)

(88)

-

Administrative expenses excluding performance related awards

(10,800)

(10,716)

(10,156)

(8,816)

(8,092)

Performance related awards

(7,572)

(15,387)

(16,374)

(17,860)

(6,828)

Finance costs

(25,598)

(24,113)

(23,678)

(13,983)

(9,577)

Finance income

3,156

5,128

2,480

4,135

887

Movement in fair value of derivative financial instruments

789

(6,860)

(8,389)

5,312

(2,573)

Convertible Bond adjustment

2,973

516

(3,263)

-

-

Foreign exchange (losses)/gains

(3)

100

(2,061)

(501)

17

Profit before tax

41,595

114,029

87,445

101,681

5,009

Tax

(2,471)

(9,146)

(12,669)

(14,126)

815

Profit after tax

39,124

104,883

74,776

87,555

5,824

 

Balance Sheets

 

 

31.3.17

£000

31.3.16

£000

31.3.15

£000

31.3.14

£000

31.3.13
£000

Investment portfolio at fair value

1,003,000

1,041,100

701,521

493,201

312,026

Land, developments and trading properties

86,680

92,035

92,578

98,160

92,874

Group's share of investment properties held by joint ventures

13,907

11,552

88,305

107,504

94,962

Group's share of land, trading and development properties held by joint ventures

89,115

75,904

102,715

75,368

76,698

Group's share of land, trading and development stock surpluses

12,514

19,412

36,243

27,479

49,685

Group's share of total properties at fair value

1,205,216

1,240,003

1,021,362

801,712

626,425

 

 

 

 

 

 

Net debt

574,439

659,393

477,248

312,849

222,878

Group's share of net debt of joint ventures

45,537

22,449

54,649

52,210

60,472

Group's share of net debt

619,976

681,842

531,897

365,059

283,350

 

 

 

 

 

 

Shareholders' funds

516,897

480,721

404,363

340,527

253,768

EPRA shareholders' funds

565,973

540,731

469,128

370,062

313,733

 

 

 

 

 

 

Dividend per ordinary share paid/payable

3.12p

12.60p

6.85p

5.70p

5.25p

Dividend per ordinary share declared

8.60p

8.17p

7.25p

6.75p

5.55p

 

 

 

 

 

 

EPRA earnings per ordinary share

0.5p

17.1p

2.4p

33.3p

2.4p

EPRA net assets per share

473p

456p

385p

313p

264p

 

 

Appendix 4 - Property Portfolio

 

London Portfolio

Address

Description

Area

sq ft (NIA)

Vacancy rate

The Shepherds Building W14

Investment

Multi let office building

150,470

2%

The Bower (Ph 1) EC1

Investment

Office and retail buildings

151,439

 -

The Bower (Ph 2) EC1

Investment

Office and retail buildings undergoing refurbishment and extension

178,724

n/a

The Loom E1

Investment

Multi let office building

110,143

18%

C-Space EC1

Investment

Multi let office building

61,973

-

The Powerhouse W4

Investment

Single let recording studios/office building

24,288

-

Power Road Studios W4

Investment

Multi let office building with redevelopment potential

58,404

43%

25 Charterhouse Square EC1

Investment

Office refurbishment scheme completed in March 2017

43,493

72%

Barts Square EC1

Investment/

Development

213,000 sq ft offices, 236 residential apartments and 20,400 sq ft retail/leisure development under construction

471,228

n/a

One Creechurch Place EC3

Development

 

277,513

n/a

Drury Lane WC1

Development

Planning consent for an alternative office led scheme has been submitted

 

n/a

King Street W6

Development

Development site

 

n/a

 

 

 

1,527,675

 

 

 

Regional Portfolio

 

 

Address

Held As

Description

Area

sq ft (NIA)

Vacancy rate

In Town Retail

 

 

The Morgan Quarter, Cardiff

Investment

Prime retail parade and listed retail arcades

289,537

6.6%

 

 

 

289,537

 

Out-of-town Retail

 

 

Great Yarmouth

Investment

Single let retail park

38,771

-

Sevenoaks, Kent

Investment

Retail park

42,490

-

Southend on Sea

Investment

Retail park

74,954

-

 

 

 

156,215

 

Industrial/Logistics                                                  

 

 

Bolton

Investment

Single let cash and carry

73,433

-

Bristol, Portbury

Investment

Single let industrial centre

64,003

-

Brownhills, Birmingham

Investment

Single let distribution centre

52,538

-

Cannock

Investment

Single let distribution centre

153,665

-

Cannock

Investment

Single let distribution centre

103,050

-

Cardiff, Heol Billingsley

Investment

Single let distribution centre

50,684

-

Chester

Investment

Single let distribution centre

182,824

-

Doncaster, Aspect Way

Investment

Single let distribution centre

122,591

100%

Doncaster, Kirk Sandalls

Investment

Single let distribution centre

153,547

-

Gloucester Quedgley

Investment

Multi let industrial estate

43,723

-

Halesowen

Investment

Single let industrial centre

72,120

-

Hinckley

Investment

Single let distribution centre

189,349

-

Jarrow

Investment

Single let industrial centre

101,476

 

Leighton Buzzard

Investment

Multi let industrial estate

202,674

-

Newton Aycliffe

Investment

Multi let industrial estate

20,657

7%

Northampton, Crow Lane

Investment

Multi let distribution centre

146,716

-

Peterborough

Investment

Single let industrial centre

160,791

-

Stone, Bibby

Investment

Single let industrial centre

122,301

-

Stone, Opal Way

Investment

Single let industrial centre

130,537

-

Sunderland, Doxford

Investment

Single let industrial centre

139,130

-

Telford

Investment

Single let distribution centre

65,225

-

Thetford

Investment

Single let distribution centre

127,574

-

Warrington, Raglan Court

Investment

Single let distribution centre

81,342

-

Wellingborough

Investment

Single let industrial centre

67,570

-

Yate

Investment

Single let distribution centre

255,714

-

 

 

 

 

2,883,234

 
               

 

 

 

 

Address

Held As

Description

Area

sq ft (NIA)

Vacancy rate

Regional Offices

 

 

 

 

Crawley

Investment

Single let office building

48,131

-

The Hub, Glasgow

Investment

Multi let office building

57,388

2%

Manchester, 31 Booth St

Investment

Multi let office building

25,441

n/a

Manchester, Churchgate & Lee House

Investment

Multi let city centre office

249,233

2%

Manchester, Dale House

Investment

Multi let city centre office building with refurbishment and asset management potential

53,635

53%

Reading

Investment

Office building

35,847

-

 

 

 

469,675

 

Land

 

 

 

 

Telford, Dawley Road

Development

Residential land

n/a

n/a

Crawley, Tilgate

Development

Commercial development site

n/a

n/a

 

 

 

 

 

Retail Development

 

 

 

 

Cortonwood Retail Park

Development

Pre-let retail park

79,750

-

Four Pools, Evesham

Development

Retail park

41,000

15%

Ibstock site, Kingswinford

Development

Retail park

80,000

n/a

Barking Road, East Ham

Development

Retail/leisure

43,000

-

Treyew Road, Truro

Development

Retail park

78,000

n/a

 

 

 

321,750

 

 

Address

Held As

Description

Units

Vacancy rate

 

Retirement Villages 

 

                               

Millbrook, Exeter

Development

Retirement village development

164

n/a

 

Durrants Village, Faygate

Development

Retirement village development

173

n/a

 

Maudslay Park, Great Alne

Development

Retirement village development

166

n/a

 

Bramshott Place, Liphook

Development

Retirement village development

191

n/a

 

Bramshott Place Clubhouse

Investment

Clubhouse at retirement village

n/a

n/a

 

Durrants Village Clubhouse

Investment

Clubhouse at retirement village

n/a

n/a

 

Millbrook Village Clubhouse

Investment

Clubhouse at retirement village

n/a

n/a

 

 

 

 

694

 

 
             

 

 

 

Appendix 5 - Risk Register

 

STRATEGIC RISKS

Strategic risks are external risks that could prevent the Group delivering its strategy. These risks principally impact our decision to purchase or exit from a property asset.

Risk

Risk description

Mitigation/action

The Group's strategy is inconsistent with the market.

Changing market conditions could hinder the Group's ability to buy and sell properties envisioned in its strategy. The location, size and mix of properties in the Helical portfolio determine the impact of the risk.

 

If the Group's chosen markets underperform, the impact on the Group's liquidity, investment property revaluations and rental income is greater.

 

The Group carries out significant development projects over several years and is therefore exposed to fluctuations in the market over time.

Management constantly monitors the market and makes changes to the Group's strategy in light of market shifts.

 

The Group's management is highly experienced and has a strong track record of calling the property market.

 

Due to the Group's small management team, changes in strategy can be implemented quickly.

 

Management carefully reviews the risk profile of individual developments and in some cases builds properties in several phases to minimise the exposure to reduced demand for particular asset classes or geographical locations over time. The Group limits the number of speculative developments it does on its own balance sheet.

Property values decline/reduced tenant demand for space.

The property portfolio is at risk of revaluation falls through changes in market conditions, including under-performing sectors or locations, lack of tenant demand or general economic uncertainty.

The Group's property portfolio is diverse in asset type, location and tenant industries, reducing over-exposure to one sector. Management reviews external data, seeks the advice of industry experts and monitors the performance of individual assets and sectors in order to dispose of non-performing assets and rebalance the portfolio for the changing market.

 

Political risk

There is a risk that regulatory and tax changes could adversely affect the market in which the Group operates and changes in legislation could lead to delays in receiving planning permission.

 

The risk has increased significantly following the United Kingdom's decision to leave the European Union in June 2016.

Management seeks advice from experts to ensure continued monitoring of upcoming regulatory and tax changes and to understand the potential impact on the Group. It maintains good relationships with planning consultants and local authorities.

 

FINANCIAL RISKS

Financial risks are those that could prevent the Group from funding its chosen strategy, both in the long and short term.

Availability of bank borrowing and cash resources

The inability to roll over existing facilities or take out new borrowing would impact on the Group's ability to maintain its current portfolio and purchase new properties. The Group may forego opportunities if it does not maintain sufficient cash to take advantage of them as they arise.

The Group maintains a good relationship with many established lending institutions and borrowings are spread across a number of these.

 

Funding requirements are reviewed weekly by management, who ensure that the maturity dates of borrowings are spread over several years.

 

Management monitors the cash levels of the Group on a daily basis and maintains sufficient levels of cash resources and undrawn committed bank facilities to fund opportunities as they arise.

Breach of loan and bond covenants

If the Group breaches debt covenants, lending institutions may require the early repayment of borrowings.

Covenants are closely monitored throughout the year. Management carries out sensitivity analysis to assess the likelihood of future breaches based on significant changes in property values or rental income.

Increase in cost of borrowing

The Group is at risk of increased interest rates on unhedged borrowings.

The Group hedges the interest rates on the majority of its borrowings, effectively fixing the rates over several years.
           

 

OPERATIONAL RISK

Operational risks are internal risks that could prevent the Group from delivery its strategy.

Risk

Risk description

Mitigation/action

Employment and retention of key personnel

 

The Group's continued success is reliant on its management and staff and successful relationships with its joint venture partners.

The senior management team is very experienced and the average length of service is high. The Nominations Committee and Board regularly review succession planning issues and remuneration is set to attract and retain high calibre staff.

 

The Group has well established relationships with joint venture partners.

Inability to asset manage, develop and let property assets

The Group relies on external parties to support it in asset managing, developing and letting its properties, including planning consultants, contractors, architects, project managers, marketing agencies, lawyers and managing agents.

The Group has a highly experienced team managing its properties. It seeks to maintain excellent relationships with its specialist professional advisors. Management actively monitors these parties to ensure they are delivering the required quality on time.

Health and Safety/Bribery and corruption risk

 

The nature of the Group's operations and markets expose it to potential health and safety and bribery and corruption risks.

The Group reviews and updates its Health and Safety policy regularly and it is approved by the Board annually. The Group engages an external health and safety consultant to review contractor contracts prior to appointment to ensure they have appropriate policies and procedures in place, then monitors the adherence to policies throughout the project.

 

The Executive Committee reviews the report by the external consultant every month and the Board reviews them at every scheduled meeting. The internal asset managers carry out regular site visits.

 

The Group's anti-bribery and whistleblowing policies are reviewed and updated annually and projects with greater exposure to bribery and corruption are monitored closely. The Group avoids doing business in high risk territories.

 

All employees are required to complete an online anti-bribery and corruption course and to submit details of corporate hospitality and gifts received.

Disruption to the business from failure of Information Technology systems

 

The Group relies on Information Technology to perform effectively. Failure would adversely affect the Group's operations.

Commercially sensitive information is electronically stored by the Group. Theft of this information could adversely impact the Group's commercial advantage and result in penalties where the information is protected by law. 

The Group engages and actively manages external Information Technology experts to ensure the systems operate effectively and that we respond to the evolving I.T. security environment. This includes regular off- site backups and a comprehensive disaster recovery process.

 

The external provider also ensures the system is secure and this is subject to routine testing. 

 

 

REPUTATIONAL RISKS

Reputational risks are those that could affect the Group in all aspects of its strategy.

Risk

Risk description

Mitigation/action

Poor management of stakeholder relations

 

The Group risks suffering from reputational damage resulting in a loss of credibility with key stakeholders including shareholders, analysts, banking institutions, contractors, managing agents, tenants, property purchasers/sellers and employees.

The Group believes that by successfully delivering its strategy and mitigating its strategic, financial and operational risks its strong reputation will be protected.

 

The Group regularly reviews its strategy and risks to ensure it is acting in the interests of its stakeholders.

The Group maintains a strong relationship with investors and analysts through regular meetings.

The Group has a formal approval procedure for all press releases and public announcements.

 

A Group Disclosure Policy and Share Dealing Code, Policy & Procedures have been circulated to all staff in accordance with the EU Market Abuse Regulation (MAR)

Modern Slavery and Human Trafficking

 

The Group risk would attract criticism and negative publicity were any instances of "modern slavery" identified within our supply chain.

Our Modern Slavery Act statement, which is prominently displayed on our website, gives details of our policy and our approach.  

 

Appendix 5 - Glossary of Terms

Average unexpired lease term

The average unexpired lease term expressed in years.

Capital value (psf)

The open market value of the property divided by the area of the property in square feet.

Company or Helical or Group

Helical plc and its subsidiary undertakings.

EPRA earnings per share

Earnings per share adjusted to exclude losses/gains on sale and revaluation of investment properties and their deferred tax adjustments, the tax on loss/profit on disposal of investment properties, trading property losses/profits, impairment of available-for-sale investments and fair value movements on derivative financial instruments, on an undiluted basis. Details of the method of the calculation of the EPRA earnings per share are available from EPRA.

EPRA net assets per share

Diluted net asset value per share adjusted to exclude fair value of financial instruments and the convertible bond and deferred tax on capital allowances and on investment properties revaluation, but including the fair value of trading and development properties in accordance with the best practice recommendations of EPRA.

EPRA Topped-up NIY

The current annualised rent, net of costs, topped-up for contracted uplifts, expressed as a percentage of the fair value of the relevant property.

EPRA triple net asset value per share

EPRA net asset value per share adjusted to include fair value of financial instruments and deferred tax on capital allowances and on investment properties revaluation.

Diluted figures

Reported amounts adjusted to include the effects of potential shares issuable under the Director and employee remuneration schemes.

Earnings per share (EPS)

Profit after tax divided by the weighted average number of ordinary shares in issue.

EPRA

European Public Real Estate Association.

Equivalent yield

The constant capitalisation rate which, if applied to all cash flows from an investment property, including current rent, reversions to current market rent and such items as voids and expenditures, equates to the market value. Assumes rent is received in arrears.

Estimated rental value (ERV)

The market rental value of lettable space as estimated by the Group's valuers at each balance sheet date.

Gearing

The normal value of Group borrowings expressed as a percentage of net assets

Initial yield

Annualised net rents on investment properties as a percentage of the investment property valuation.

IPD

The Investment Property Databank Limited (IPD) is a company that produces a number of independent benchmarks of unleveraged commercial property returns.

Net assets value per share (NAV)

Equity shareholders' funds divided by the number of ordinary shares at the balance sheet date.

Net gearing

Total borrowings less short-term deposits and cash as a percentage of equity shareholders' funds.

Passing rent

The annual gross rental income being paid by the tenant.

Reversionary yield

The income/yield from the full estimated rental value of the property on the market value of the property grossed up to include purchaser's costs, capital expenditure and capitalised revenue expenditure.

See-through

The consolidated Group and the Group's share in its Joint Ventures.

See-through gearing

The see-through net borrowings as expressed as a percentage of equity shareholders' funds.

Total Accounting Return

The growth in the net asset value of the Company plus dividends paid in the year, expressed as a percentage of net asset value.

Total property return

The total of net rental income, trading and development profits and net gain on sale and revaluation of investment properties on a See-through basis.

Total shareholder return (TSR)

The growth in the ordinary share price as quoted on the London Stock Exchange plus dividends per share received for the period expressed as a percentage of the share price at the beginning of the period.

True equivalent yield

The constant capitalisation rate which, if applied to all cash flows from an investment property, including current rent, reversions to current market rent and such items as voids and expenditures, equates to the market value. Assumes rent is received quarterly in advance.

Unleveraged returns

Total property gains and losses (both realised and unrealised) plus net rental income expressed as a percentage of the total value of the properties.

WAULT

The total contracted rent up to the lease expiry date dividend by the contracted annual rent.

 

 

 

 

HELICAL PLC

 

Registered in England and Wales No.156663

 

Registered Office:
5 Hanover Square
London

W1S 1HQ

 

T: 020 7629 0113

F: 020 7408 1666

 

E: reception@helical.co.uk


www.helical.co.uk

 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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