Interim Management Statement

RNS Number : 3525M

Helical Bar PLC

28 January 2009

 



28 January 2009

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN OR ANY JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL

Helical Bar plc ('Helical' or the 'Company')

Interim Management Statement for the third quarter to 31 December 2008

Commenting on the Company's activity in the third quarter, Mike Slade, Chief Executive, said:

'The Company continues to make steady progress on its existing pipeline of projects despite the challenges presented by the turbulent market conditions. In a rapidly falling market it has been prudent to delay making acquisitions but we remain convinced that compelling value lies ahead of us as prices fall considerably below equilibrium levels.  In light of this, the Company intends to raise additional equity so that it is even more favourably placed to take advantage of the many opportunities now starting to appear and which we expect to see in the coming months.'

Market update

Strong falls in valuations across the sector in November and December contributed to a market drop of 27% in the IPD UK monthly index for 2008. This 12 month decline is similar in scale to the whole of the early 1990s property crash which took place over 43 months. The index has now fallen 36% from its peak in the summer of 2007 but further declines seem inevitable due to increasing tenant defaults, rising voids and falling rental values driven by the ongoing recession as well as the lack of available financing and liquidity in the investment market. To date, unlike the early 1990s crash, we have witnessed few bank and receivership sales. However, with the complete erosion of the equity of the more highly leveraged property operators, we expect the banks to take increasing control of many assets and we await to see how they choose to work out these positions.

Against this backdrop, the Company continues to make progress across a wide range of sectors and activities, despite the difficulties presented by the recession. The Board believes that Helical has the resources and financial strength to cope with further anticipated declines in property values and their impact on banking covenants, whilst retaining the capacity to re-enter the market at the appropriate time. Additional spending power raised from the placing, as announced to shareholders today, ensures that Helical will be even better positioned to exploit the significant opportunities that are now appearing.

The Company has also identified investment partners that have indicated a desire to co-invest alongside Helical allowing the Company to deploy its capital efficiently and provides the opportunity to benefit from enhanced returns on successful investments.

Key activity over the last three months    

• We have received planning approval at Milton, Cambridge for a retirement village of 100 units.

• Our fully pre-let 10,000 sq m retail scheme at Wroclaw, Poland was completed before Christmas and is trading well.

• The site at Gliwice, Poland was acquired with bank finance provided by Aareal. Construction for this 68,000 sq m retail scheme, which is 30% pre-let to Carrefour & Castorama with a further 25% under offer to international retailers, is due to commence in 2009.

• Our 36,000 sq m retail scheme at Opole, Poland funded by Standard Life and part pre-let to Carrefour and Praktiker will commence on site in March. A further 20% is under offer to well known retailers.

• Completion of the 50,000 sq ft new office development at the Hub, Glasgow is due in February with 30% pre-let to Glasgow School of Art. There is good interest from our target audience of media companies.

• At Fordham, Newmarket we have completed the refurbishment of a laboratory, financed by the Royal Bank of Scotland and let to Quotient until 2022. The rent has increased by £283,000 pa.

• In our small unit industrial developments we have sold two units and have 10 under offer plus six acres in solicitors' hands in Oxford, Southall, Southampton and Stockport.

• At the Tideway Industrial Estate, London SW8 we received a further instalment of our profit with the remainder due later in 2009. We also received a further £6.9m instalment from Barratts in respect of C4.1 Milton Keynes with final payments due in March.

• We have agreed to sell our freehold interest in Cardiff Royal Infirmary to the long leaseholder. 

• At Liphook, Phase I of our retirement village is under construction with 17 of the 36 units reserved and 28 of a future Phase II of 49 units reserved.

• At Lime Tree Village 138 of the 154 units have now been sold with reservations on a further five units.

• Lettings in Sawston, Cambridge, Crawley and Shepherds Building, London W14 added over £100,000 pa to our rent roll.

• Completion of the refurbishment of Clarevillle House, London SW1 on behalf of a UK pension fund is due in February 2009.

• Tenant defaults in the quarter amounted to approximately 1.1% of the rent roll.

Financing

At 27 January 2009, the Company had gross borrowings of £302.3m at an average cost of 5.3% (30 September 2008: 6.1%) and a maturity profile as follows:

	£m
< 1 year	12.5
1 - 2 years	83.1
2 - 3 years	60.7
3 - 4 years	65.6
4 - 5 years	80.4
	302.3

The market value of the gross debt and interest rate swaps was £313.9m. At 27 January 2009, the Company had £40m cash, £42m of unutilised bank facilities and over £50m of unsecured properties on which further funds could be obtained.

During the last three months, the Company has obtained £20m of additional bank finance to purchase its site in Gliwice, Poland and to finance an extension to its buildings at Fordham, Newmarket. It has repaid £10.0m of current borrowings and extended £35.6m of short-term facilities by two years to December 2010. The Company has received confirmation that £7.0m of the facilities due to be repaid within one year will be renewed and will look to extend the remaining short term facilities of £5.5m due to expire in Autumn 2009.

The Company has been in discussions with a number of banks with regard to obtaining loans for future acquisitions. Whilst terms may be less favourable than in the recent past, the Company is confident it has access to additional bank finance should it be required.

Banking Covenants

Each bank loan is secured on individual properties in separate companies, where Helical usually stands as guarantor for the loans.

Loan to value covenants range from 64% to 85% and income covenants range from 1.08 to 1.75 of rent as a proportion of interest.

The Directors regularly stress test the portfolio with scenario planning to ensure that the Company can stay within its banking covenants allowing for recent and future potential falls in values. Covenants are monitored continuously and, where potential breaches are anticipated, the Company has recourse to cure rights to avert such breaches by the placing of deposits or additional security with lenders or by partial loan repayments. The Company's cash balances, unutilised bank facilities and unsecured properties provide it with the ability to remedy potential breaches of banking covenants on even the gloomiest of current market predictions.

For further information, please contact: 

Helical Bar plc     Michael Slade (Chief Executive) Mike Brown (Deputy Chief Executive) Nigel McNair Scott (Finance Director) Address: 11-15 Farm Street, London W1J 5RS Fax:      [phone] Website:  www.helical.co.uk	020 7629 0113
Financial Dynamics Stephanie Highett/Dido Laurimore/Laurence Jones	020 7831 3113

Forward looking statements

This document may contain certain forward looking statements. By their nature forward looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual outcomes and results may differ materially from any outcomes of results expressed or implied by such forward looking statements.

Any forward looking statements made by or on behalf of Helical speak only as at the date they are made and no representation or warranty is given in relation to them, including as to their completeness for accuracy or the basis on which they were prepared. Helical does not undertake to update forward looking statements to reflect any changes in Helical's expectations with regard thereto or any changes in events, conditions or circumstance on which any such statement is based.

Information contained in this document relating to the Company should not be relied upon as an indicator of future performance.

 

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