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RNS
Helical PLC   -  HLCL   

Final Results

Released 07:00 23-May-2019

RNS Number : 9252Z
Helical PLC
23 May 2019
 

HELICAL PLC

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

Annual Results for the Year to 31 March 2019

 

A YEAR OF STRONG PROGRESS

 

Gerald Kaye, Chief Executive, commented:

 

"The results for the year to 31 March 2019 reflect significant progress for Helical, now an office-led investment and development company focused purely on London and Manchester. We have completed three of our four on-site office development schemes, have let 304,073 sq ft at rents 4.3% above ERVs and have sold £167m of investment assets at a 12.0% premium to book value.

 

"We now have a collection of newly redeveloped or refurbished assets of premium quality which are attractive to occupiers and situated in desirable locations. We were delighted to announce earlier this week the acquisition, in a 50:50 joint venture, of a major site for the development of c.192,000 sq ft of offices in Farringdon, London EC1. This scheme supplements our existing assets located in the Tech Belt in EC1 and E1.

 

"We have a tremendous track record in London, built up over the last 25 years, and we believe this experience and our longstanding sector relationships will enable us to continue to add new opportunities to our pipeline. Our increased financial capacity, following the transformation of the portfolio over the last two years, allied to our current operational capacity, enables us to look forward with confidence in our ability to deliver capital profits and increased earnings."

 

Operational Performance

 

·    In our office development/refurbishment programme:

-     Practical completion was achieved at The Tower, London EC1 in August 2018, at One Bartholomew, London EC1 in December 2018 and at Trinity, Manchester in January 2019, delivering a total of 455,127 sq ft of new space.

-     Construction continues at our 88,680 sq ft office development at Farringdon East, renamed Kaleidoscope, London EC1, with completion expected in December 2019.

·    268,782 sq ft of new London office lettings during the year delivered contracted rent of £18.7m (Helical share £6.7m at 3.2% above 31 March 2018 ERVs).

·    Post year end, 62,854 sq ft has been let at One Bartholomew at premium rents.

·    In Manchester, five office lettings of 15,191 sq ft, with a further 8,208 sq ft let post year end, generated rental income of £538,000 at 15.9% above 31 March 2018 ERVs.

·    We have completed six lettings of 20,100 sq ft to restaurants or retailers, including Albion & East (trading as Serata Hall) at The Tower, London EC1 and Stem + Glory at Barts Square, London EC1 for contracted rents of £871,000 (Helical share £686,000) at 9.0% above 31 March 2018 ERVs.

·    Investment property sale proceeds of £167m since 31 March 2018 achieved at 12.0% above book value.

 

Financial Highlights

 

Earnings

 

·    IFRS basic earnings per share of 35.8p (2018: 22.3p).

·    IFRS Profit before tax of £43.5m (2018: £30.8m).

·    Total Accounting Return1 of 8.4% (2018: 5.3%).

·    See-through Total Property Return1 of £81.4m (2018: £68.8m):

-     Group's share1 of net rental income of £25.2m (2018: £36.1m).

-     Development losses of £4.4m (2018: £8.0m), after provisions of £13.7m (2018: £4.1m).

-     Net gain on sale and revaluation of investment properties of £60.6m (2018: £40.7m).

·    EPRA loss per share1 of 8.4p (2018: 7.0p).

·    Final dividend proposed of 7.50p per share (2018: 7.00p), up 7.1%.

·    Total dividend for the year of 10.10p (2018: 9.50p), up 6.3%.

 

Balance Sheet

 

·    Net asset value up 6.3% to £567.4m (31 March 2018: £533.9m).

·    EPRA net asset value per share1 up 3.0% to 482p (31 March 2018: 468p).

·    EPRA triple net asset value per share1 up 3.8% to 465p (31 March 2018: 448p).

 

Property Valuations

 

·    IFRS property portfolio value of £778.8m (31 March 2018: £791.9m).

·    See-through property portfolio1 of £876.4m (31 March 2018: £909.6m).

·    Total property portfolio performance, as measured by MSCI, of 10.1% compared to the MSCI Central London Offices Total Return Index of 4.8%.

·    See-through investment property valuation gain, on a like-for-like basis, of 6.8% (7.4% including purchases and gains on sales).

 

Financing

 

·    See-through loan to value1 reduced to 30.6% (31 March 2018: 39.9%).

·    See-through net borrowings1 of £268.6m (2018: £362.9m).

·    Average maturity of the Group's share1 of secured debt of 3.4 years (31 March 2018: 3.5 years), increasing to 4.2 years, on exercise of options to extend current facilities.

·    See-through average cost of secured facilities1 of 4.1% (31 March 2018: 4.4%).

·    £100m 4.0% Convertible Bond to be repaid in June 2019 from existing cash resources.

·    Group's share1 of cash and undrawn bank facilities of £382m (31 March 2018: £277m).

 

Portfolio Update

 

London Portfolio

 

·    6.6% valuation increase, on a like-for-like basis, of our see-through London investment portfolio, valued at £693.8m at 31 March 2019 (85.0% of investment portfolio) compared to £699.9m at 31 March 2018 (84.8% of investment portfolio).

·    Contracted rents on our see-through London investment portfolio of £27.5m (2018: £28.4m) compared to an ERV of £42.4m (2018: £49.6m).

·    WAULT of 8.0 years on the London portfolio (31 March 2018: 5.8 years).

 

Manchester Portfolio

 

·    7.8% valuation increase, on a like-for-like basis, of our Manchester investment portfolio, valued at £122.7m at 31 March 2019 (15.0% of investment portfolio) compared to £98.0m at 31 March 2018 (11.9% of investment portfolio).

·    Contracted rents on the Manchester portfolio at 31 March 2019 increased to £5.7m (2018: £4.7m) compared to an ERV of £9.0m (2018: £8.1m).

·   WAULT of 3.9 years on the Manchester portfolio (31 March 2018: 4.2 years).

 

 

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/ Richard Gotla

schelical@fticonsulting.com

 

 

Results Presentation

 

Helical will be holding a presentation for analysts and investors starting at 9am on Thursday 23 May 2019 at the offices of FTI Consulting, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD. If you would like to attend, please contact FTI Consulting on 020 3727 1000, or email schelical@fticonsulting.com.

 

The presentation will be on the Company's website www.helical.co.uk and a conference call facility will be available. The dial-in details are as follows:

 

Participants, Local - London, United Kingdom:

+44 (0)330 336 9125

Confirmation Code:

8740144

 

Webcast Link:

https://webcasting.brrmedia.co.uk/broadcast/5cadfaadeb566331974d5fc4

 

 

1 See Glossary for definition of terms. The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS).  In common with usual and best practice in our sector, alternative performance measures have also been provided to supplement IFRS, some of which are based on the recommendations of the European Public Real Estate Association ("EPRA"), with others designed to give more relevant information about the Group's share of assets and liabilities, income and expenses in subsidiaries and joint ventures. 

 

 

Chief Executive's Statement

 

I am pleased to present the Company's 2019 Annual Results.

 

A Year of Progress

 

The results for the year to 31 March 2019 reflect significant progress for Helical, now an office-led investment and development company focused purely on London and Manchester. We have completed three of our four on-site office development schemes, have let 304,073 sq ft at rents 4.3% above ERVs and have sold £167m of investment assets at a 12.0% premium to book value.

 

We now have a collection of newly redeveloped or refurbished assets of premium quality which are attractive to occupiers and situated in desirable locations. We were delighted to announce earlier this week the acquisition, in a 50:50 joint venture, of a major site for c.192,000 sq ft of offices in Farringdon, London EC1. This scheme supplements our existing assets located in the Tech Belt in EC1 and E1.

 

The London investment portfolio, following the completion of recent office developments and the sale of The Shepherds Building, was 83.8% let (31 March 2018: 91.7%), with contracted rent of £27.5m (2018: £28.4m), and with good interest in the remaining available space. In March we launched our redeveloped office building in Manchester, Trinity, to the market and contracted rents on the Manchester portfolio have grown from £4.7m (87.2% let) to £5.7m (80.2% let).

 

Our schemes at The Tower, London EC1 and One Bartholomew, London EC1 have both received BREEAM "Excellent" ratings from this world-leading sustainability assessment methodology, along with our other schemes at The Warehouse and The Studio, London EC1, 25 Charterhouse Square, London EC1 and One Creechurch Place, London EC3.

 

Results for the Year

 

Profit before tax for the year to 31 March 2019 increased by 41.2% from £30.8m to £43.5m. Total Property Return increased to £81.4m (2018: £68.8m) and included net rents of £25.2m (2018: £36.1m), offset by development losses, largely a result of the impact of the collapse of Carillion plc at Barts Square, London EC1, of £4.4m (2018: £8.0m). The gain on sale and revaluation of the investment portfolio contributed £60.6m (2018: £40.7m).

 

Net finance costs of £18.4m were substantially lower than in 2018 (£35.2m) as a result of the reduction in borrowings achieved in the last two years. However, the Income Statement was adversely affected by the reduction in medium and long-term interest rates over the year which led to a £3.3m charge (2018: credit of £4.0m) arising from the valuation of the Company's derivative financial instruments. The valuation of the Company's Convertible Bond provided a credit of £0.9m (2018: charge of £1.6m). Recurring administration costs were marginally lower at £10.9m (2018: £11.0m) whilst performance related awards increased to £5.2m (2018: £1.7m) with National Insurance on these awards of £0.7m (2018: £0.1m).

 

The Board is confident of the letting prospects of the remaining vacant space in the investment portfolio and, with net rental income increasing over the next few years, the Board expects the Group's EPRA earnings to improve significantly in the near future. This expectation has led the Board to recommend to Shareholders an increase in the final dividend of 7.1% to 7.50p (2018: 7.00p) which, together with the interim dividend of 2.60p paid in December 2018, takes the total dividend for the year to 10.10p (2018: 9.50p), an overall increase of 6.3%.

 

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.

 

IFRS basic earnings per share increased to 35.8p (2018: 22.3p) with EPRA loss per share of 8.4p (2018: 7.0p), reflecting a reduction in net rental income as the direct result of the sales of income producing investment properties in the last 18 months. On a like-for-like basis, the investment portfolio increased in value by 6.8% (7.4% including purchases and gains on sales). However, with the sales in the year of £167m, 12% above book value, the see-through portfolio value adjusted to £876m (31 March 2018: £910m).

 

The unleveraged return of our property portfolio, as measured by MSCI, was 10.1% (2018: 11.1%). We now compare our portfolio performance to two MSCI benchmarks. The March MSCI Annual All Properties Index produced a return of 3.6% (2018: 9.3%) with an upper quartile return of 7.0% (2018: 12.0%). The MSCI Central London Offices Total Return Index produced a return of 4.8% (2018: 7.5%) with an upper quartile return of 6.2% (2018: 9.0%).

 

Total Accounting Return, being the growth in the net asset value of the Company plus dividends paid in the year, was 8.4% (2018: 5.3%). EPRA net asset value per share was up 3.0% to 482p (31 March 2018: 468p), with EPRA triple net asset value per share up 3.8% to 465p (31 March 2018: 448p).

 

Finance

 

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

 

During the year to 31 March 2019, the Group generated gross proceeds of £167m from the sale of investment properties and £45m from the sale of development stock. These proceeds, net of investment in the portfolio of £124m, were used to reduce net borrowings by £94m, significantly reducing future finance costs.

 

The see-through loan to value ratio ("LTV") reduced to 30.6% at the year end (31 March 2018: 39.9%) and our see-though net gearing, the ratio of net borrowings to the net asset value of the Group, has fallen to 47.3% (31 March 2018: 68.0%) over the same period.

 

During the year, the average debt maturity on secured loans, on a see-through basis, was 3.4 years (31 March 2018: 3.5 years), increasing to 4.2 years on exercise of options to extend the Group's £150m RCF. No secured loan is repayable before July 2021. The average cost of debt at 31 March 2019 was 4.0% (31 March 2018: 4.3%). The Group's remaining unsecured debt instrument, the £100m Convertible Bond, will be repaid in June 2019, reducing the Group's annual interest payments by £4.0m. The Group has a significant level of liquidity with see-through cash and unutilised bank facilities of £382m (31 March 2018: £277m) to fund the repayment of the Convertible Bond, capital works on its portfolio and future acquisitions.

 

Board Matters

 

At this year's Annual General Meeting ("AGM") our Chairman and former Chief Executive, Mike Slade OBE, will step down from the Board after 35 years' service. Mike has been an inspiration to everyone at Helical and to many in the property industry during this time and, on behalf of the rest of the Board, I thank him for his considerable contribution to the success of Helical and wish him well for his retirement. He recently received an OBE for services to charity, for his work with LandAid, the sector's main charity, an award thoroughly deserved.

 

At the AGM, Michael O'Donnell will also step down after eight years serving as a Non-Executive Director. On behalf of the Board, I would like to thank him for his service to the Company.

 

In September 2018, we welcomed Joe Lister, CFO at Unite Group, as a Non-Executive Director. Joe will assume the role of Chairman of the Audit & Risk Committee ("Committee") on appointment to the Board at the close of the forthcoming AGM. Joe will replace Richard Grant as Chairman of the Committee, with Richard replacing Mike Slade as Chairman of the Board.

 

The Future

 

Helical is primarily a capital growth stock, albeit one with an increasingly important income stream as our redeveloped and refurbished investment assets become let. We have a tremendous track record in London, built up over the last 25 years, and we believe this experience and our longstanding sector relationships will enable us to add new opportunities to our pipeline. Our increased financial capacity, following the transformation of the portfolio over the last two years, allied to our current operational capacity, enables us to look forward with confidence in our ability to deliver capital profits and increased earnings.

 

 

 

Gerald Kaye

Chief Executive

23 May 2019

 

 

 

Our Market

 

Overview

 

Helical's core business is developing and owning dynamic, well located office space in London and Manchester. 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 continues to provide the best source of capital profits and we expect this to remain the case for the foreseeable future, notwithstanding the current political chaos over Brexit.

 

In order for Helical to generate capital profits, the Group 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. Equally important, we need to provide inspiring working environments suited to the needs of our customers, the tenants. Using the skills, knowledge and expertise gained over many years, the Helical team aims to deliver attractive and exciting office space in our identified locations. In a low growth environment, stock selection needs to reflect the granular characteristics that will attract our target market of occupiers.

 

Helical has based its investment decisions in London on four continuing major developments in the office market. First, the growth of the London population; second, the continuing and rapid expansion of the creative industries (predominantly in technology and media); third, the migration of occupiers across Central London to the City and East London; and fourth, a fast-growing market in flexible leasing.

 

London's population is forecast to grow to 9.5m by 2026, a 9% increase since mid-2016. This will present challenges, particularly in terms of infrastructure, but will also provide opportunities, particularly in the demand for new and refurbished offices. Whilst the Elizabeth Line has again been delayed, its eventual opening will be a boost to travelling in London.

 

The UK is a global leader in the creative industries, an area we have targeted with our portfolio. Companies involved in media, advertising and marketing, technology and other creative industries comprised 57% of our new lettings in the year (31 March 2018: 59%).

 

The third factor influencing our choice of location for our portfolio is the migration of occupiers from West to East 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 are common themes in discussing requirements with tenants. Most obviously, those hubs are in the Tech Belt from King's Cross to Whitechapel.

 

Finally, the growth of flexible leasing is having a continuing effect on the commercial office letting market in London and has spread to regional cities. At Helical we seek early and continued engagement with customers and look to develop long-standing relationships with them. By offering flexible leases on our multi-let assets, which allow them to occupy space commensurate with their requirements, we target long-term retention of our customers.

 

In London, Helical has been building up a portfolio of multi-tenanted office buildings in the Tech Belt locations of Farringdon, the Old Street roundabout and Whitechapel. We also own two assets in Chiswick, West London. By owning these "clusters" or "villages" of office buildings, the Company now has a portfolio of assets with multiple lease events leading to ongoing asset management opportunities with the potential to lock in future rental growth.

 

The Company is also seeking to expand its portfolio by taking on additional schemes in Central London either on its own balance sheet, or in the case of larger projects, by co-investment or by forward selling/funding them, to create the opportunity for significant profit shares but with reduced balance sheet exposure.

 

Manchester

 

We continue to believe that Manchester presents an attractive opportunity for us outside of London. The Manchester office market continues to outperform all other regional markets and demonstrates rich and diverse opportunities. 2018 saw a record year of take up with 1.75m sq ft of lettings across 314 transactions. Manchester has also seen the greatest volume of inward investment deals compared to the five other major UK regional cities and the office market demonstrates resilience and growth despite the background of political uncertainty.

 

Manchester benefits from the highest graduate retention rate outside of London and population growth within the city centre continue to rise. Research indicates the city will have 10,000 more office workers by 2021 than it did in 2018, whilst continued strong economic and employment growth forecasts reaffirm our belief that outside of London, Manchester is the best regional city in which to invest.

 

In Manchester we now have four assets, following the disposal of 31 Booth Street in December 2018. Our buildings, located across the city centre, have proven to be attractive to occupiers. Each building is specific in its offering, location, size and rental tone, with the opportunity for Helical to apply the skills, knowledge and property expertise gained over many years in London. The Manchester portfolio, of multi-tenanted office buildings, provides Helical with a resilient income stream outside of London.

 

Looking Forward

 

Our ambition is to have a balanced portfolio that generates sufficient net rental income to firstly, exceed all of our recurring costs and second, provide a surplus significantly greater than our annual dividend to Shareholders. We have an ERV on the portfolio of £51.5m and expect to generate this surplus once all of our current development and asset management activities are complete. We are also seeking a pipeline of opportunities to grow the balance sheet 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 peers by setting challenging targets and using these performance indicators to measure success. We design our remuneration packages to align management's interests with Shareholders' aspirations.

 

MSCI (formerly IPD)

 

MSCI produces a number of independent benchmarks of property returns that are regarded as the main industry indices.

 

MSCI has compared the ungeared performance of Helical's total property portfolio against that of portfolios within MSCI for the last 20 years. The Group's annual performance target is to exceed the top quartile of the MSCI Annual March All Properties Universe, which it has consistently achieved. Helical's ungeared performance for the year to 31 March 2019 was 10.1% (2018: 11.1%). This compares to the MSCI Annual March All Properties Universe of 3.6% (2018: 9.3%) with an upper quartile return of 7.0% (2018: 12.0%).

 

In addition, the Annual Bonus Scheme 2018 performance criteria include the comparison of the Group's performance with the MSCI Central London Offices Total Return Index, with target performance to match the index and outperformance exceeding it by 3.25%. In the year to 31 March 2019, this index showed a return of 4.8% (2018: 7.5%) with an upper quartile return of 6.2% (2018: 9.0%).

 

Helical's unleveraged portfolio returns to 31 March 2019 were as follows:

 


1 year

 

3 years

 

5 years

 

10 years

 

20 years

 

Helical (%)

10.1

10.2

14.4

11.9

12.8

MSCI Annual March All Properties Universe (%)

3.6

5.7

9.1

9.8

8.0

Helical's Percentile Rank

5

8

3

10

2

MSCI Central London Offices Total Return Index (%)

4.8

4.8

10.6

12.9

9.6

 

Source: MSCI

 

Helical's share of the trading and development portfolio (6.8% of gross property assets) is included in its performance, as measured by MSCI, 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

 

The Group's main objective is to maximise growth in net asset value per share, 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 proportion 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 EPRA net asset value per share at 31 March 2019 increased by 3.0% to 482p (31 March 2018: 468p). EPRA triple net asset value per share at 31 March 2019 increased by 3.8% to 465p (31 March 2018: 448p).

 

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 2019 was 5.2% (2018: 6.1%).

 


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 plc1  

5.2

(2.9)

(0.1)

3.6

6.4

9.0

10.3

UK Equity Market2 

6.4

9.5

6.1

11.1

7.8

5.1

7.4

Listed Real Estate Sector Index3 

(0.3)

2.4

4.3

12.5

4.7

5.8

6.2

Direct Property - monthly data4 

5.6

6.8

10.1

10.0

7.3

8.3

8.7

 

1.   Growth over all years to 31/03/19.

2.   Growth in FTSE All-Share Return Index over all years to 31/03/19.

3.   Growth in FTSE 350 Real Estate Super Sector Return Index over all years to 31/03/19. For data prior to 30 September 1999, the FTSE All Share Real Estate Sector Index has been used.

4.   Growth in Total Return of MSCI UK Monthly Index (All Property) over all years to 31/03/19.

 

Total Accounting Return

 

Total Accounting Return is the growth in the net asset value of the Group plus dividends paid in the reporting 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.

 

The Total Accounting Return in the year to 31 March 2019 was 8.4% (2018: 5.3%).

 


2019

2018

2017

2016

2015

Total Accounting Return

8.4

5.3

8.3

22.5

21.1

 

Average Length of Employee Service and Average Staff Turnover

 

A high level of staff retention remains 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 2019 was 8.7 years and the average staff turnover during the year to 31 March 2019 was 6.3%.

 


2019

2018

2017

2016

2015

Average length of service at 31 March - years

8.7

7.9

8.0

7.6

7.6

Staff turnover during the year to 31 March - %

6.3

15.2

5.7

14.3

12.5

 

 

 

Financial Review

 

 

IFRS Performance


 

EPRA Performance

Profit Before Tax
£43.5m (2018: £30.8m)

 

EPRA EPS
Loss 8.4p (2018: loss 7.0p)

 

IFRS EPS
35.8p (2018: 22.3p)

 

EPRA NAV
482p (31 March 2018: 468p)

 

IFRS Diluted NAV
469p (31 March 2018: 445p)

 

EPRA Triple NAV465p (31 March 2018: 448p)

 

 

Overview

 

Our development and asset management programme has driven the results for the year, principally through revaluation gains at The Tower, London EC1 and Kaleidoscope, London EC1, and from the sale of The Shepherds Building, London W14, at a significant premium to 31 March 2018 book value.

 

With the sale of the final three non-core assets in the year, the Group has completed its transformation to a London and Manchester investment and development company. Whilst the sales of £477m of investment assets over the last two years have reduced the Group's net rental income, the cash generated has been used to fund its development programme and repay debt, substantially reducing its LTV and finance costs. Going forward, we expect this income stream to grow as we work to capture the portfolio's ERV of £51.5m.

 

Results for the Year

 

The year to 31 March 2019 includes net rental income of £25.2m and a net gain on sale and revaluation of the investment portfolio of £60.6m, offset by development losses of £4.4m, leading to a Total Property Return of £81.4m (2018: £68.8m). Total administration costs of £17.2m (2018: £13.2m) and significantly reduced net finance costs of £18.4m (2018: £35.5m) contributed to a pre-tax profit of £43.5m (2018: £30.8m). EPRA net asset value per share increased by 3.0% to 482p (31 March 2018: 468p).

 

The proposed final dividend of 7.50p takes the total dividend for the year to 10.10p, a 6.3% increase on the previous year. With growing rents from our London and Manchester portfolios, the Company aims to continue to increase its annual dividend going forward.

 

The Group's real estate portfolio, including its share of assets held in joint ventures, reduced to £876.4m (31 March 2018: £909.6m) as gains from its annual revaluation and capital expenditure on the investment portfolio and development programme were offset by the sale of assets with a book value of £194m. One asset was purchased during the year, Fourways House, Manchester for £16.5m.

 

The cash generated from the sale of property assets during the year allowed the repayment of debt and reduced the Group's see-through loan to value to 30.6% (31 March 2018: 39.9%). The Group's weighted average cost of debt reduced to 4.0% (31 March 2018: 4.3%) and a weighted average debt maturity, excluding the Convertible Bond, of 3.4 years (2018: 3.5 years). The average maturity of the facilities would increase to 4.2 years following the two one-year extensions of the revolving credit facility. The £100m unsecured Convertible Bond is to be repaid in June 2019.

 

At 31 March 2019, the Group had unutilised bank facilities of £176m and £205m of cash on a see-through basis. The bank facilities are primarily available to fund the development of Kaleidoscope, London EC1, the construction of the last phase of residential at Barts Square, London EC1, future property acquisitions and to repay the £100m Convertible Bond in June 2019.

 

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. 

 


2019

£m

2018

£m

2017

£m

2016

£m

2015

£m

Total Property Return

81.4

68.8

79.9

164.6

155.3

 

Earnings Per Share

 

The IFRS earnings per share increased from 22.3p to 35.8p and are 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, losses per share were 8.4p (2018: loss 7.0p), reflecting the Group's share of net rental income of £25.2m (2018: £36.1m) and development losses of £4.4m (2018: £8.0m), but excluding gains on sale and revaluation of investment properties of £60.6m (2018: £40.7m).

 

Net Asset Value

 

IFRS diluted net asset value per share increased from 445p to 469p and is a measure of Shareholders' Funds divided by the number of shares in issue at the year end, adjusted to allow for the effect of all dilutive share awards. 

 

EPRA net asset value per share increased by 3.0% to 482p per share (31 March 2018: 468p). This movement arose principally from a total comprehensive income (retained profits) of £42.6m (2018: £26.3m), less £11.4m of dividends (31 March 2018: £10.2m) and the crystallisation of a £13.5m tax charge on the capital gain from the sale of The Shepherds Building, London W14.

 

EPRA triple net asset value per share increased by 3.8% to 465p (31 March 2018: 448p).

 

 

Income Statement

 

Rental Income and Property Overheads

 

Gross rental income receivable by the Group in respect of wholly owned properties reduced by 29.9% to £28.2m (2018: £40.2m), reflecting the partial capture of the investment portfolio's reversionary potential offset by sales of assets during the current and prior years. In the joint ventures, gross rents rose from £0.2m to £1.0m. Property overheads in respect of wholly owned assets and in respect of those assets in joint ventures remained steady at £4.1m (2018: £4.1m). After taking account of net rents receivable from our profit share partners of £0.1m (2018: payable of £0.1m), see-through net rents reduced by 30.2% to £25.2m (2018: £36.1m).

 

Development Profits

 

In the year under review the Group let the remaining space at One Creechurch Place, London EC3 which, under its role as development manager, allowed it to recognise £4.1m of profit. A further profit of £0.8m was recognised for carrying out a similar role at Barts Square, London EC1.

 

Provisions of £6.5m against our legacy retail development programme, non-core residential land and to satisfy cost indemnities given on the sale of our Retirement Villages in the prior year, combined with other costs of £0.2m, contributed to a net development loss of £1.8m (2018: £4.2m).

 

Share of Results of Joint Ventures

 

The revaluation of our investment assets held in joint ventures generated a surplus of £1.3m (2018: £3.3m). Under our development management agreement for One Bartholomew, Barts Square, London EC1, we recognised a net development fee of £3.9m as a result of achieving practical completion and letting progress, but an assessment of the book value of our land holdings at Barts Square development resulted in development provisions of £7.2m. A profit of £2.2m was recognised on the sale of the site at Hammersmith Town Hall.

 

Finance, administration, taxation and other sundry items added a further £4.8m (2018: £1.5m) of losses. Accounting adjustments to our interest in the One Creechurch Place joint venture generated surpluses of £1.4m, leaving a net loss from our joint ventures of £3.2m (2018: profit of £3.2m). 

 

Gain on Sale and Revaluation of Investment Properties

 

During the year, we sold five investment assets for gross proceeds of £167.0m, generating a net overall profit of £15.0m. In London, we sold The Shepherds Building, W14 for £125.2m, a 12.3% premium to its 31 March 2018 book value. 31 Booth Street, Manchester was sold for £11.9m, a 29.6% premium to its 31 March 2018 book value, and we also sold three non-core assets for a combined price of £28.5m at a 6.2% premium to 31 March 2018 book value.

 

The valuation of our investment portfolio, on a see-through basis, continued to reflect the benefit of our refurbishment activities in London where we generated a valuation surplus of 7.4% overall (including purchases and gains on sales) and 6.6% on a like-for-like basis. In Manchester, the portfolio generated a surplus of 7.8% on a like-for-like basis. In total, the see-through investment portfolio showed a valuation surplus of 7.4% (including purchases and gains on sales), or 6.8% 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 £60.6m (2018: £40.7m). 

 

Administration Costs

 

Administration costs in the Group, before performance-related awards, reduced slightly from £11.0m to £10.9m.

 

Performance related share awards and bonus payments, before National Insurance costs, were £5.2m (2018: £1.7m). Of this amount, the £2.3m (2018: £1.4m) charge for share awards under the Performance Share Plan is expensed through the Income Statement but added back to Shareholders' Funds through the Statement of Changes in Equity.

 


2019

£000

2018
£000

Administration costs

10,858

11,023

Share awards

2,274

1,388

Directors and senior executives' bonuses

2,929

289

NIC on share awards and bonuses

692

65

Group

16,753

12,765

In joint ventures

406

468

Total

17,159

13,233

 

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, reduced to £12.9m (2018: £18.5m). Interest payable in respect of the unsecured bonds was £4.0m (2018: £8.4m). Bank charges, commitment fees, sundry interest and the amortisation of refinancing costs decreased to £5.8m (2018: £17.8m) due to the prior year's redemption of the 6% Retail Bond (£8.7m premium) and the repayment of bank debt. Capitalised interest reduced from £5.2m to £3.2m as development schemes progressed and as a result of the sale of the Retirement Village portfolio in the prior year, as well as the completion of The Tower, London EC1 in August 2018. Total finance costs, including joint ventures, decreased to £19.5m (2018: £39.5m).

 

Finance income earned, including in joint ventures, was £1.1m (2018: £4.3m). The movement in medium and long-term interest rate projections during the year contributed to a charge of £3.3m (2018: credit of £4.0m) on their mark-to-market valuation. The mark-to-market valuation of the Convertible Bond resulted in a credit of £0.9m (2018: charge of £1.6m).

 

Taxation

 

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

 

The current tax charge for the year of £9.0m (2018: credit of £0.4m) is primarily a result of the tax charge on the capital gain on the sale of The Shepherds Building, London W14. The majority of this tax liability had been recognised as a deferred tax liability in the prior year and this liability was reversed as a deferred tax credit during the year. This deferred tax credit was offset by an increased liability on the investment property revaluation surpluses recognised in the year.

 

Dividends

 

Helical follows a progressive dividend policy of increasing its dividends whilst retaining the majority of funds generated for investment to grow the business. As the Group completes and lets its current development programme, it expects to be able to reflect the growth in earnings in increased dividends paid to Shareholders. The interim dividend paid on 31 December 2018 of 2.60p was an increase of 4% on the previous interim dividend of 2.50p. The Company has proposed a final dividend of 7.50p, an increase of 7.1% on the previous year (2018: 7.00p), for approval by Shareholders at the 2019 AGM. In total, the dividend paid or payable in respect of the results for the year to 31 March 2019 will be 10.10p (2018: 9.50p), an increase of 6.3%. Since 2016, the compound annual growth rate of the Company's dividends has been 7.3%.

 

 

Balance Sheet

 

Shareholders' Funds

 

Shareholders' Funds at 1 April 2018 were £533.9m. The Group's results for the year added £42.6m (2018: £26.3m), net of tax, representing the total comprehensive income for the year. Movements in reserves arising from the Group's share schemes increased funds by £2.3m. The Company paid dividends to Shareholders amounting to £11.4m leaving a net increase in Shareholders' Funds from Group activities during the year of £33.5m to £567.4m.

 

Investment Portfolio

 



Wholly

owned
£000

In joint venture

£000

See-through

£000

Head leases capitalised

£000

Lease incentives

£000

Book

value

£000

Valuation at 31 March 2018

802,134

22,623

824,757

2,189

(12,375)

814,571

Acquisitions

- wholly owned

29,500

-

29,500

-

-

29,500

Capital expenditure

- wholly owned

60,820

-

60,820

-

-

60,820


- joint ventures

-

1,377

1,377

-

-

1,377

Disposals

- wholly owned

(149,051)

-

(149,051)

-

1,501

(147,550)

Revaluation surplus

- wholly owned

48,097

-

48,097

-

(3,813)

44,284


- joint ventures

-

1,382

1,382

-

(94)

1,288


- profit share partners

(250)

-

(250)

-

-

(250)

Valuation at 31 March 2019

791,250

25,382

816,632

2,189

(14,781)

804,040

 

In the year to 31 March 2019, the Group acquired Fourways House, Manchester for £16.5m and paid additional consideration of £13.0m for Kaleidoscope, London EC1. The Group spent £62.2m on capital works on the investment portfolio, mainly at Kaleidoscope, London EC1 (£36.0m), The Tower, London EC1 (£10.5m), Barts Square, London EC1 (£1.4m), Trinity, Manchester (£6.9m) and 35 Dale Street, Manchester (£1.6m). The aggregate book value of the five investment assets sold during the year was £149.1m. Revaluation gains added £49.5m (£0.3m loss for our partners) to increase the see-through value of the portfolio, before lease incentives, to £816.6m (2018: £824.8m). The accounting for head leases and lease incentives resulted in a book value of the see-through investment portfolio of £804.0m (31 March 2018: £814.6m).

 

Debt and Financial Risk

 

In total, Helical's outstanding debt at 31 March 2019 of £479.2m (31 March 2018: £470.7m) had a weighted interest cost of 4.0% (31 March 2018: 4.3%) and a weighted average debt maturity excluding the Convertible Bond, of 3.4 years (31 March 2018: 3.5 years). The average maturity of the facilities would increase to 4.2 years following exercise of the two one-year extensions of the Group's £150m revolving credit facility. The £100m unsecured Convertible Bond is to be repaid in June 2019.

 

Debt Profile at 31 March 2019 - Excluding the Effect of Arrangement Fees

 


Total

facility

£000

Total

utilised

£000

Available facility

£000

Weighted average

interest rate

%

Average
maturity

Years

Extended* average maturity Years

Investment facilities

443,000

309,679

133,321

3.9

3.5

4.4

Development facilities

50,400

20,023

30,377

6.3

4.4

4.4

Total wholly owned

493,400

329,702

163,698

4.1

3.5

4.3

In joint ventures

51,684

48,980

2,704

4.0

2.8

2.8

Total secured debt

545,084

378,682

166,402

4.1

3.4

4.2

Convertible Bond

100,000

100,000

-

4.0

0.2

0.3

Working capital

10,000

-

10,000

-

-

1.0

Fair value of Convertible Bond

-

468

-

-

-

-

Total unsecured debt

110,000

100,468

10,000

4.0

0.2

0.3

Total debt

655,084

479,150

176,402

4.0

2.7

3.6

 

* Calculated on a fully utilised basis with the two one-year extensions of the revolving credit facility included.

 

Secured Debt

 

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

 

-       Investment Facilities

We have £150m of revolving credit facilities that enable the Group to acquire, refurbish, reposition and hold significant parts of our investment portfolio. Our London investment assets are primarily held in £293m of term loan secured facilities. The value of the Group's properties secured in these facilities at 31 March 2019 was £698m (31 March 2018: £706m) with a corresponding loan to value of 44.4% (31 March 2018: 45.3%). The average maturity of the Group's investment facilities at 31 March 2019 was 3.5 years (31 March 2018: 3.8 years), increasing to 4.4 years following the two one-year extensions of the revolving credit facility with a weighted average interest rate of 3.9% (31 March 2018: 4.5%). 

 

-       Development Facilities

This facility finances the over-station development at Kaleidoscope, London EC1. The maturity of the Group's development facility at 31 March 2019 was 4.4 years with a weighted average interest rate of 6.3%. Excluding the impact of commitment fees, the weighted average interest rate of this facility is 4.2%.

 

-          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 2019 was 2.8 years (31 March 2018: 1.7 years) with a weighted average interest rate of 4.0% (31 March 2018: 3.6%).

 

Unsecured Debt

 

The Group's utilised unsecured debt is £100.5m (31 March 2018: £101.3m), as follows:

 

-       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 2019, as determined by the listed market price, was £100.5m (31 March 2018: £101.3m). The Group expects to repay the £100m Bond in June 2019 from existing cash resources.

 

-       Short-term Working Capital Facilities

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

 

Cash and Cash Flow

 

At 31 March 2019, the Group had £382m (31 March 2018: £277m) of cash and agreed, undrawn, committed bank facilities including its share in joint ventures, as well as £25m (31 March 2018: £105m) of uncharged property on which it could borrow funds.

 

Net Borrowings and Gearing

 

Total gross borrowings of the Group, including in joint ventures, have increased from £470.7m to £479.2m during the year to 31 March 2019. After deducting cash balances of £205.2m (31 March 2018: £103.7m) and unamortised refinancing costs of £5.4m (31 March 2018: £4.1m), net borrowings reduced from £362.9m to £268.6m. The gearing of the Group, including in joint ventures, reduced from 68.0% to 47.3%.

 


31 March

 2019

31 March

2018

See-through gross borrowings

£479.2m

£470.7m

See-through cash balances

£205.2m

£103.7m

Unamortised refinancing costs

£5.4m

£4.1m

See-through net borrowings

£268.6m

£362.9m

Shareholders' Funds

£567.4m

£533.9m

See-through gearing - IFRS net asset value

47.3%

68.0%

 

Hedging

 

At 31 March 2019, the Group had £363.0m (31 March 2018: £366.6m) of fixed rate debt with an average effective interest rate of 3.7% (31 March 2018: 4.1%) and £67.2m (31 March 2018: £54.2m) of floating rate debt with an average effective interest rate, excluding commitment fees, of 3.7% (31 March 2018: 3.9%). In addition, the Group had £240m of interest rate caps at an average of 1.69% (31 March 2018: £15.0m at 0.75%). In our joint ventures, the Group's share of fixed rate debt was £nil (31 March 2018: £nil) and £49.0m (31 March 2018: £49.9m) of floating rate debt with an effective rate of 4.0% (31 March 2018: 3.6%) with interest rate caps set at 0.5% plus margin on £11.0m (31 March 2018: £58.0m).

 


2019

£m

Effective interest rate

%

2018

£m

Effective interest rate

%

Fixed rate debt





- Secured borrowings

262.5

3.6

265.3

4.1

- Convertible Bond

100.0

4.0

100.0

4.0

- Fair value of Convertible Bond

0.5

-

1.3

-

Total

363.0

3.7

366.6

4.1

Floating rate debt





- Secured

67.2

5.71

54.2

7.01

Total

430.2

4.0

420.8

4.4

In joint ventures





- Floating rate

49.0

4.0

49.9

3.6

Total borrowings

479.2

4.0

470.7

4.3

 

¹ This includes commitment fees on undrawn facilities. Excluding these would reduce the effective rate to 3.7% (31 March 2018: 3.9%).

 

 

 

Tim Murphy

Finance Director

23 May 2019

 

 

 

Helical's Property Portfolio - 31 March 2019

 

Property Overview

 

Helical divides its property activities into two core markets: London and Manchester offices. Following the sale of the last three non-core investment assets and the acquisition of a new office building in Manchester, London represents 86% and Manchester 14% of the total property portfolio. Whilst there are structural differences in these markets, Helical has found that its business model can be applied successfully to each, driving capital growth, development profits and rental income.

 

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. Our London portfolio comprises income-producing multi-let offices, office refurbishments and developments and a mixed use commercial/residential scheme.

 

Charterhouse Street, EC1

After the year end, we acquired in a 50:50 joint venture with AshbyCapital the long leasehold interest in a major development site in the heart of Farringdon, further enhancing our presence in this vibrant area. The site is situated on the corner of Charterhouse Street and Farringdon Road, just 100m from Farringdon Station and 350m from our development at Farringdon East, now named Kaleidoscope, at the opposite end of the Farringdon Elizabeth Line platform.

 

The site has an existing planning consent for c.192,000 sq ft of offices and ground floor retail. Demolition has already been undertaken and the site is vacant. Construction will commence later this year with completion anticipated early in 2022.

 

The Bower, EC1

The Bower is a landmark estate immediately adjacent to the Old Street roundabout and features 312,575 sq ft of innovative, high quality office space along with 20,606 sq ft of restaurant and retail space.

 

The Warehouse and The Studio

The Warehouse comprises 122,858 sq ft of offices and The Studio 18,283 sq ft of offices with 10,298 sq ft of retail space at the two buildings. Works on The Warehouse entailed a complete refurbishment of the building whilst retaining its original 1960s characteristics. The Studio was a ground up development on the former car park site.

 

The works were completed in March 2015 and the offices were fully pre-let to CBS, Farfetch, Pivotal, Allegis and Stripe (The Warehouse) and John Brown Media (The Studio). The retail operators are Bone Daddies, Draft House, Enoteca da Luca, Honest Burger, Franze & Evans, Ejder and Good To Go.

 

The Tower

The Tower offers 171,434 sq ft of office space with a contemporary façade and innovatively designed interconnecting floors, along with 10,308 sq ft of retail space across two units.

 

With six floors (34%) let to WeWork when construction started, we let, prior to completion of building works, an additional three floors to Farfetch, an existing tenant in The Warehouse. Since the building completed in August 2018, two floors have been let to Brilliant Basics (Infosys) and one floor to Finablr, taking the office space to 70% let, and there is good interest in the remaining space. In addition, the two retail units have been let, one to Albion & East (trading as Serata Hall) for an urban bar and one to restaurant operator Wagamama.

 

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 Paul's and Smithfield Market, situated a short walk from Farringdon East Crossrail station.

 

Barts Square provides a new quarter in the City, consisting of 236 residential apartments, three office buildings of 214,434 sq ft, 24,013 sq ft and 10,286 sq ft together with 21,330 sq ft of retail/A3 at ground floor as well as major public realm improvements.

 

Phase One

 

Residential/Retail

Phase One of Barts Square comprises 144 residential units, 3,101 sq ft of retail space and extensive public realm improvements. By the year end, 134 residential units, with a total value of £171.8m have been sold at an average price of £1,558 psf, leaving just 10 apartments to sell, one of which has exchanged since the year end. The retail space was let to Stem + Glory and Halfcup during the year.

 

90 Bartholomew Close - Office/Restaurant

The 24,013 sq ft office building, with 6,414 sq ft of restaurant space, completed in March 2018. During the year the first floor was let and the fourth and fifth floors are under offer. The ground and lower ground restaurant, let to Lino, opened in November 2018.

 

Phase Two

 

One Bartholomew - Offices

One Bartholomew was sold to clients of AshbyCapital for £102.4m in August 2015. The demolition of the existing building and the construction of a new 12 storey Grade A office block of 214,434 sq ft commenced in January 2016 and completed in December 2018. AshbyCapital's clients financed 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. During the year, the top three floors (9th-11th) were let to The Trade Desk, who subsequently took an additional floor (8th). Since the year end the ground, first and second floor have been let to The Chicago Booth School of Business and the seventh floor has been let to Infrared Capital Partners, taking the building to 64% let.

 

Phase Three

 

Residential/Retail

Construction works on Phase Three of Barts Square are well underway. This phase will comprise 92 apartments and 11,815 sq ft of retail space. Marketing of the units commenced in March 2018 and, during the year, contracts were exchanged on 23 units, taking the total number of units exchanged to 37, at a value of £63.0m and an average price of £1,810 psf.

 

Since the year end contracts have been exchanged on a further seven units, leaving 47 units left to sell and one additional unit that will be released at a later date.

 

54 Bartholomew Close

The refurbishment of 54 Bartholomew Close is ongoing and will provide 10,286 sq ft of offices, with completion expected in Q4 2019.

 

Kaleidoscope, EC1

The over-station development at the Farringdon East Elizabeth Line station will comprise a six storey 86,183 sq ft office building, with a 2,497 sq ft restaurant unit on the ground floor. The building will sit immediately east of Smithfield Market with views over Charterhouse Square and towards St Paul's Cathedral. Following the grant of a 150-year lease, development commenced in August 2018 and completion is due in December 2019.

 

One Creechurch Place, EC3

One Creechurch Place is a landmark City office scheme in the heart of the insurance district 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 now receive the final instalment of the promote payment following the successful completion and letting of the scheme.

 

The building, comprising 272,505 sq ft of offices and 786 sq ft of retail, achieved practical completion on 7 November 2016 and, following the letting of 86,311 sq ft during the year, the building is now fully let.

 

Helical will shortly exercise its option to sell its 10% shareholding in the joint venture to HOOPP, with completion of this sale expected in the next few months.

 

The Loom, E1

This 108,640 sq ft building is one of London's few remaining former Victorian wool warehouses and was acquired in 2013. Works to transform this asset completed in September 2016 and included a new entrance and reception onto Gowers Walk, a café, showers and a bike store. The Loom has won both a RIBA London and National Award as well as an Architects Journal Retrofit Award. Due to careful asset management, the building remained at an average of 78% let throughout the refurbishment. Since 1 April 2018, we have let 37,080 sq ft at 4.5% above 31 March 2018 ERVs, such that the building is now 97% let.

 

25 Charterhouse Square, 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. The building is a Grade A office adjacent to the new Farringdon East station on the Elizabeth Line and overlooks the historic Charterhouse Square. Helical 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 5,138 sq ft of retail space. The building achieved practical completion in March 2017 and was fully let to Anomaly, Peakon, Hudson Sandler and Senator International by December 2017, less than two years after it was acquired.

 

Power Road Studios, W4

The site comprises 57,585 sq ft of offices across four studio buildings and is multi-let to a wide range of predominantly media tenants. In October 2017 we completed the refurbishment of Studio 1, a project comprising c.16,000 sq ft of Grade A space, refurbished common parts and added two new lift shafts to accommodate a consented future roof extension of 13,000 sq ft. In the year, we have let 6,072 sq ft at average rents of £39.15 psf, with a further 2,007 sq ft let following the year end. Preliminary works have been completed for a new 30,000 sq ft office building which secured planning consent in August 2017.

 

The Powerhouse, 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.

 

The Shepherds Building, W14

In October 2018, after successfully completing new lettings on 12,375 sq ft, this 150,072 sq ft multi-let office building was sold for £125.2m. This price represented a net initial yield of 4.8% and a 12.3% premium to 31 March 2018 book value. The building had been acquired in 2000 for £12.8m and was fully refurbished with an extra floor added.

 

King Street, W6

Hammersmith & Fulham Borough Council, who had been opposed to this regeneration project since the Council became Labour controlled, exercised their option to terminate the development agreement. During the year, the sale of the land held by the Group (which is a 50/50 joint venture with Grainger plc) completed, resulting in a profit to Helical of £2.2m.

 

Drury Lane and Dryden Street, WC2

This is a 0.5 acre office and retail site which sits within the Covent Garden Conservation Area. The Group agreed with Savills Investment Management to act as development manager to obtain a revised office planning consent, which it achieved in February 2019. The Group will receive a fee for this which is dependent on the agreed value of the property with the benefit of the new planning permission.

 

The Manchester Portfolio

 

Manchester is a city with a diverse, thriving and growing economy that is widely regarded as England's second city and the centre of the "Northern Powerhouse". Helical has found that the approach it applies to development and asset management in London is equally well received by the tenants in Manchester.

 

Churchgate & Lee, Manchester

This asset comprises 244,627 sq ft of multi-let offices. The asset was 64% let when acquired in March 2014. Since its purchase, we have refurbished the reception and 73,374 sq ft of office space. Following the letting of 8,208 sq ft since the year end, all available space is now let. We continue to actively manage the building, with planning permission approved for a full refurbishment of Lee reception.

 

31 Booth Street, Manchester

This 24,902 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.

 

During the year, all of the newly refurbished space was let and the building was sold in December 2018 for £11.9m, a premium of 29.6% to March 2018 book value.

 

35 Dale Street, Manchester

35 Dale Street is a 54,112 sq ft office building situated in the Northern Quarter of Manchester, acquired in March 2015. The building underwent a comprehensive refurbishment which completed in June 2018. During the year, 10,134 sq ft was let and the building is now fully occupied.

 

Trinity, Manchester

Trinity, purchased in May 2017 for £12.9m, underwent a full redevelopment which completed in January 2019. The repositioned building comprises 54,651 sq ft of office space and 4,300 sq ft of retail/restaurant space.

 

Fourways House, Manchester

This 59,067 sq ft brick built Grade 2 listed former packing warehouse was acquired in July 2018 for £16.5m, representing a net initial yield of 5.3%. We have begun to apply our asset management skills and completed three new lettings of 5,057 sq ft at average rents of £24.00 psf, compared to average rents on acquisition of £16.00 psf.

 

Non-Core

 

Retail and Regional Office Investments

 

We sold our three remaining non-core investment assets at Sevenoaks (retail), Reading and Glasgow (both regional offices) during the year, for a total consideration of £28.5m, representing a 6.2% premium to book value and an aggregate net initial yield of 7.6%.

 

Retail Developments

 

We continue to progress our retail schemes at Kingswinford and East Ham. We have assigned our land option in Evesham, with a profit share dependent on the success of the scheme, which is due for completion in August 2019. These schemes require no capital input from Helical beyond fees to design, pre-let and pre-sell the consented developments.

 

 

Portfolio Analytics

 

See-through Total Portfolio by Fair Value

 

  

Investment

£m

Development

£m

Total

£m

 

%

London Offices







 - Completed, let and available to let

615.2

75.3

14.0

23.5

629.2

71.8

 - Being redeveloped

78.6

9.7

-

-

78.6

9.0

 - Held for redevelopment

-

-

0.3

0.4

0.3

0.0

London Residential

-

-

42.9

71.7

42.9

4.9

Total London

693.8

85.0

57.2

95.6

751.0

85.7

Manchester Offices







 - Completed, let and available to let

122.7

15.0

-

-

122.7

14.0

Total Manchester

122.7

15.0

-

-

122.7

14.0








Total Core Portfolio

816.5

100.0

57.2

95.6

873.7

99.7








Other

0.1

0.0

-

-

0.1

0.0

Regional Retail

-

-

0.8

1.4

0.8

0.1

Land

-

-

1.8

3.0

1.8

0.2

Total Non-Core Portfolio

0.1

0.0

2.6

4.4

2.7

0.3








Total

816.6

100.0

59.8

100.0

876.4

100.0

 

See-through Trading and Development Portfolio

 


Book value

£m

Fair value

£m

Surplus

£m

Fair value

%

London Offices

14.3

14.3

-

23.9

London Residential

42.9

42.9

-

71.7

Total Core Portfolio

57.2

57.2

-

95.6






Regional Retail

0.8

0.8

-

1.4

Land

1.2

1.8

0.6

3.0

Total Non-Core Portfolio

2.0

2.6

0.6

4.4






Total

59.2

59.8

0.6

100.0

 

Capital Expenditure

 

We have a planned development and refurbishment programme.

 

Property

Capex

budget

(Helical share)

£m

Remaining spend

(Helical share)

£m

Pre-redeveloped

space

sq ft

New space

sq ft

Total completed
space

sq ft

Completion
date

Investment - committed







The Tower, London EC1

108.8

10.5

114,000

67,742

181,742

Completed

Kaleidoscope, London EC1*

58.7

35.2

-

88,680

88,680

December 2019

Charterhouse Street, London EC1**

96.1

96.1

-

192,000

192,000

March 2022

54 Bartholomew Close, London EC1

2.1

1.6

9,000

1,286

10,286

October 2019

Development - committed







Barts Square, London EC1 - Phase One

64.6

1.0

-

127,323

127,323

Completed

Barts Square, London EC1 - Phase Three

39.8

16.6

-

90,427

90,427

From September 2019 to January 2020

 

* Includes deferred consideration payment due in April 2020.

** Acquired after 31 March 2019 - see Note 25.

 

Asset Management

 

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

 

 

See-through Investment portfolio

Fair

value

weighting

%

Passing

rent

£m

 %

Contracted rent

£m

 %

ERV

£m

ERV change

like-for-like

%

London Offices









- Completed, let and available to let

75.3

17.3

78.8

27.5

82.6

34.8

67.7

0.9

- Being redeveloped

9.7

-

-

-

-

7.6

14.7

14.0

Total London

85.0

17.3

78.8

27.5

82.6

42.4

82.4

3.0

Manchester Offices









- Completed, let and available to let

15.0

4.6

21.1

5.7

17.3

9.0

17.4

2.6

Total Manchester

15.0

4.6

21.1

5.7

17.3

9.0

17.4

2.6

Other

0.0

0.0

0.1

0.0

0.1

0.1

0.2

0.0

Total

100.0

21.9

100.0

33.2

100.0

51.5

100.0

3.0

 

During the year, total contracted income reduced by £2.3m as a result of the sale of investment properties and losses from breaks and lease expiries, offset by the purchase of one investment property and rent from new lettings and rent reviews.

 


See-through

total portfolio contracted rent

£m

Contracted rent reduced through disposals of London offices 

(7.4)

Contracted rent reduced through disposals of Manchester offices

(0.1)

Contracted rent reduced through disposals of non-core assets

(2.3)

Contracted rent increased from purchases of investment properties

0.9

Total contracted rental change from sales and purchases

(8.9)

Rent lost at break/expiry

(1.7)

Rent reviews and uplifts on lease renewals

0.1

New lettings


                    -   London

7.6

                    -   Manchester

0.6

Total increase in the year from asset management activities

6.6

Net decrease in contracted rents in the year

(2.3)

 

 

Investment Portfolio

 

Portfolio Yields

 


EPRA topped

up NIY

31 March 2019

%

True equivalent

yield

31 March 2019

%

Reversionary

yield

31 March 2019

%

EPRA topped

up NIY

31 March 2018

%

True equivalent yield

31 March 2018

%

Reversionary

yield

31 March 2018

%

London Offices







- Completed, let and available to let

4.2

5.1

5.2

4.5

5.4

5.3

- Being redeveloped

n/a

4.9

5.7

n/a

5.2

5.6

Total London

4.2

5.1

5.3

4.5

5.3

5.4

Manchester Offices







- Completed, let and available to let

4.2

6.1

6.3

5.3

6.4

6.5

- Being redeveloped

n/a

n/a

n/a

n/a

6.2

7.0

Total Manchester

4.2

6.1

6.3

5.3

6.4

6.7








Total

4.2

5.2

5.4

4.6

5.5

5.6

 

See-through Capital Values, Vacancy Rates and Unexpired Lease Terms

 


31 March 2019

Capital value psf

£

31 March 2019

Vacancy rate

%

31 March 2019

WAULT

Years

31 March 2018

WAULT

Years

London Offices





- Completed, let and available to let

1,061

16.2

8.0

5.8

- Being redeveloped

805

n/a

n/a

n/a

Total London

1,021

16.2

8.0

5.8

Manchester Offices





- Completed, let and available to let

295

19.8

3.9

4.2

Total Manchester

295

19.8

3.9

4.2

Other

-

-

-

3.8

Total

753

17.7

7.3

5.4

 

See-through Valuation Movements

 


Val change

inc purchases & gains on sales

%

Val change

excl purchases & gains on sale

%

Investment

portfolio

weighting

31 March 2019

%

Investment portfolio

weighting

31 March 2018

%

London Offices





- Completed, let and available to let

6.8

5.8

75.3

59.2

- Being redeveloped

13.3

13.3

9.7

25.6

Total London

7.4

6.6

85.0

84.8

Manchester Offices





- Completed, let and available to let

7.3

7.8

15.0

10.1

- Being developed

-

-

-

1.8

Total Manchester

7.3

7.8

15.0

11.9

Total Core

7.4

6.8

100.0

96.7

Regional Offices/ Retail/ Other

6.0

-

-

3.3

Total

7.4

6.8

100.0

100.0

 

See-through Lease Expiries or Tenant Break Options

 


Year to

2020

Year to

2021

Year to

2022

Year to

2023

Year to

2024

% of rent roll

5.9

6.4

11.7

7.9

13.4

Number of leases

36

19

28

15

25

Average rent per lease (£)

54,309

111,037

138,860

175,870

178,434

 

We have a strong rental income stream and a diverse tenant base. The top 10 tenants account for 51.6% of the total rent roll and the tenants come from a variety of industries.

 

 

Rank

Tenant

Tenant Industry

Contracted rent

£m

Rent roll

%

1

Farfetch

Online retail

3.9

11.8

2

WeWork

Co-working

3.8

11.5

3

Pivotal

Technology

2.0

6.0

4

Infosys

Technology

1.4

4.2

5

Anomaly

Marketing

1.4

4.2

6

CBS

Media

1.0

3.1

7

Allegis

Recruitment

1.0

3.0

8

Finablr

Financial services

0.9

2.8

9

Stripe Payments

Technology

0.8

2.5

10

The Growth Company

Community Development

0.8

2.5

Total


17.0

51.6

 

Principal lettings

 

 

Property

Tenant

Area

sq ft

Lease term

to expiry

years

The Tower, London EC1

Farfetch

29,671

9

The Tower, London EC1

Infosys

19,576

10

The Loom, London E1

Hey Habito

15,907

5

The Tower, London EC1

Finablr

11,329

10

90 Bartholomew, London EC1

Wright & Bell (trading as Lino)

6,414

25

The Loom, London E1

The Fairtrade Foundation

6,400

10

The Loom, London E1

G-Star

5,691

5

The Tower, London EC1

Albion & East (trading as Serata Hall)

5,395

25

90 Bartholomew, London EC1

Northridge Law

4,642

5

The Loom, London E1

Vidsy

3,619

3




 

Letting Activity

 


Area

sq ft

Contracted Rent

(Helical's Share)

£

Rent psf £

Change to

 31 March 2018 ERV

%

Investment Properties





Completed, let and available to let - offices





The Tower, The Bower, EC1

60,576

4,400,000

72.63

1.3

The Loom, E1

37,080

1,919,000

51.76

4.5

The Powerhouse, W4

-

-

-

-

Power Road Studios, W4

6,072

238,000

39.14

11.8

25 Charterhouse Square, EC1

-

-

-

-

90 Bartholomew Close, EC1

4,642

152,000

75.00

15.4






Completed, let and available to let - retail





The Warehouse and Studio, The Bower, EC1

277

15,000

55.69

-

The Tower, The Bower, EC1

10,308

526,000

51.03

18.3

Barts Square, EC1

3,101

57,000

41.92

-16.2

90 Bartholomew Close, EC1

6,414

88,000

40.88

0.0






Manchester





Churchgate & Lee

-

-

-

-

35 Dale Street

10,134

241,000

23.72

24.2

Trinity

-

-

-

-

Fourways House

5,057

121,000

23.98

2.0

Total

143,661

7,757,000

56.65

4.3%






Development Properties





Completed, let and available to let





One Creechurch Place, EC3

86,311

445,000

64.43

2.1

One Bartholomew, EC1

74,101

-

84.62

n/a

 

 

Consolidated Income Statement

 

For the year ended 31 March 2019

 

  

Notes

Year ended

31.3.19

£000

Year ended

31.3.18

£000

Revenue

3

44,175

175,596

Net rental income

4

24,599

36,329

Development property loss

5

(1,781)

(4,174)

Share of results of joint ventures

13

(3,217)

3,196

Other operating income


-

111

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


19,601

35,462

Gain on sale of investment properties

6

15,008

13,567

Revaluation of investment properties

12

44,284

23,848

Fair value movement of available-for-sale assets

15

144

1,385

Gross profit


79,037

74,262

Administrative expenses

7

(16,753)

(12,765)

Operating profit


62,284

61,497

Finance costs

8

(17,407)

(37,438)

Finance income


983

4,303

Change in fair value of derivative financial instruments


(3,322)

4,029

Change in fair value of Convertible Bond


865

(1,559)

Foreign exchange gain/(loss)


53

(10)

Profit before tax


43,456

30,822

Tax on profit on ordinary activities

9

(836)

(4,537)

Profit for the year


42,620

26,285





Earnings per share

11



Basic


35.8p

22.3p

Diluted


35.3p

22.1p

 

 

Consolidated Statement of Comprehensive Income

 

For the year ended 31 March 2019

 


Year ended

31.3.19

£000

Year ended

31.3.18

£000

Profit for the year

42,620

26,285

Exchange difference on retranslation of net investments in foreign operations

(51)

(15)

Total comprehensive income for the year

42,569

26,270

 

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 2019

 


Notes

31.3.19

£000

31.3.18

£000

Non-current assets




Investment properties

12

778,752

791,948

Owner occupied property, plant and equipment


1,747

1,825

Investment in joint ventures

13

24,676

27,809

Derivative financial instruments

20

915

123



806,090

821,705

Current assets




Land, developments and trading properties

14

2,311

6,042

Corporation tax receivable


-

3,736

Trade and other receivables

16

58,726

100,757

Cash and cash equivalents

17

197,570

91,871



258,607

202,406

Total assets


1,064,697

1,024,111

Current liabilities




Trade and other payables

18

(43,159)

(51,378)

Corporation tax payable


(2,561)

-

Borrowings

19

(100,468)

-



(146,188)

(51,378)

Non-current liabilities




Borrowings

19

(324,814)

(416,992)

Derivative financial instruments

20

(4,158)

(2,874)

Long leasehold liability


(2,189)

(2,189)

Trade and other payables

18

(11,405)

-

Deferred tax liability

9

(8,518)

(16,784)



(351,084)

(438,839)

Total liabilities


(497,272)

(490,217)





Net assets


567,425

533,894





Equity




Called-up share capital

21

1,459

1,451

Share premium account


101,304

98,798

Revaluation reserve


131,050

162,753

Capital redemption reserve


7,478

7,478

Other reserves


291

291

Retained earnings


325,843

263,123

Total equity


567,425

533,894

 

 

Consolidated Cash Flow Statement

 

For the year to 31 March 2019

 


Year ended

31.3.19

£000

Year ended

31.3.18

£000

Cash flows from operating activities



Profit before tax

43,456

30,822

Depreciation

296

291

Revaluation surplus on investment properties

(44,284)

(23,848)

Gain on sales of investment properties

(15,008)

(13,567)

(Profit)/loss on sale of plant and equipment

(52)

81

Net financing costs

16,424

33,135

Change in value of derivative financial instruments

3,322

(4,029)

Change in fair value of Convertible Bond

(865)

1,559

Share based payment charge

2,274

1,185

Share of results of joint ventures

3,217

(3,196)

Fair value movement of available-for-sale assets

(144)

(1,385)

Foreign exchange movement

(52)

(19)

Cash inflows from operations before changes in working capital

8,584

21,029

Change in trade and other receivables

40,561

(25,126)

Change in land, developments and trading properties

3,731

82,801

Change in trade and other payables

(3,176)

(6,917)

Cash inflows generated from operations

49,700

71,787

Finance costs

(25,358)

(45,537)

Finance income

461

162

Tax (paid)/received

(2,200)

6


(27,097)

(45,369)

Cash flows from operating activities

22,603

26,418

Cash flows from investing activities



Additions to investment property

(79,742)

(95,821)

Sale of investment property

164,058

337,570

Investment in joint ventures

-

(5,403)

Dividends from joint ventures

416

671

Receipts in respect of available-for-sale assets

144

1,385

Sale of plant and equipment

155

-

Purchase of owner occupied property, plant and equipment

(320)

(73)

Net cash generated from investing activities

84,711

238,329

Cash flows from financing activities



Borrowings drawn down

64,089

94,196

Borrowings repaid

(54,306)

(356,670)

Shares issued

8

4

Sale of own shares

-

521

Equity dividends paid

(11,406)

(10,195)

Net cash used by financing activities

(1,615)

(272,144)

Net increase/(decrease) in cash and cash equivalents

105,699

(7,397)

Exchange gains on cash and cash equivalents

-

6

Cash and cash equivalents at start of year

91,871

99,262

Cash and cash equivalents at end of year

197,570

91,871

 

 

Consolidated Statement of Changes in Equity

 

At 31 March 2019

 


Share

capital

£000

Share

premium

£000

Revaluation

reserve

£000

Capital

redemption

reserve

£000

Other

reserves

£000

Retained earnings

£000

Own shares

held

£000

Total

£000

At 31 March 2017

1,447

98,798

164,190

7,478

291

244,693

-

516,897

Total comprehensive income

-

-

-

-

-

26,270

-

26,270

Revaluation surplus

-

-

23,848

-

-

(23,848)

-

-

Realised on disposals

-

-

(25,285)

-

-

25,285

-

-

Issued share capital

4

-

-

-

-

-

-

4

Performance share plan

-

-

-

-

-

1,185

-

1,185

Performance share plan - deferred tax

-

-

-

-

-

(55)

-

(55)

Share settled bonus

-

-

-

-

-

(733)

-

(733)

Dividends paid

-

-

-

-

-

(10,195)

-

(10,195)

Sale of own shares

-

-

-

-

-

-

521

521

Own shares held reserve transfer

-

-

-

-

-

521

(521)

-

At 31 March 2018

1,451

98.798

162,753

7,478

291

263,123

-

533,894

Total comprehensive income

-

-

-

-

-

42,569

-

42,569

Revaluation surplus

-

-

44,284

-

-

(44,284)

-

-

Realised on disposals

-

-

(75,987)

-

-

75,987

-

-

Issued share capital

8

2,506

-

-

-

-

(2,514)

-

Performance share plan

-

-

-

-

-

2,274

-

2,274

Performance share plan - deferred tax

-

-

-

-

-

94

-

94

Share settled Performance Share Plan

-

-

-

-

-

(1,837)

1,837

-

Share settled bonus

-

-

-

-

-

(677)

677

-

Dividends paid

-

-

-

-

-

(11,406)

-

(11,406)

At 31 March 2019

1,459

101,304

131,050

7,478

291

325,843

-

567,425

 

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

 

The adjustment against retained earnings of £2,274,000 (31 March 2018: £1,185,000) adds back the share based payments charge in accordance with IFRS 2 Share Based Payments.

 

There were net transactions with owners of £9,038,000 (31 March 2018: £9,273,000) made up of the Performance Share Plan credit of £2,274,000 (31 March 2018: £1,185,000) and related deferred tax credit of £94,000 (31 March 2018: charge of £55,000), dividends paid of £11,406,000 (31 March 2018: £10,195,000), issued share capital of £8,000 (31 March 2018: £4,000) and corresponding share premium of £2,506,000 (31 March 2018: £nil), the sale of own shares of £nil (31 March 2018: £521,000), share settled PSP awards charge of £1,837,000 (31 March 2018: £nil) and the share settled bonus charge of £677,000 (31 March 2018: £733,000).

 

 

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 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 2019. These accounts will be delivered to the Registrar of Companies following the Annual General Meeting. The auditor's opinion on the 2019 accounts was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

 

The principal accounting policies of the Group are consistent with those applied in the year to 31 March 2018, as amended to reflect the new standards set out below.  The Group Annual Report and Financial Statements for 2018 are available at Companies House.

 

New standards adopted during the year

 

IFRS 15 Revenue from Contracts with Customers

 

IFRS 15 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The core principle of IFRS 15 is that the Group should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. The standard sets out a five-step model:

 

Step 1: Identify the contract(s) with a customer.

Step 2: Identify the performance obligations within a contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations within the contract.

Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation.

 

The standard is applicable to investment property disposals, development property disposals and property development management/advisory services but excludes rental income, which is within the scope of IAS 17 Leases (until the adoption of IFRS 16 for accounting periods beginning on or after 1 January 2019).

 

Prior year adjustment

An adjustment of £9,623,000 to the revenue reported for the year to 31 March 2018 has been made to reflect the gross up of service charges in rental income and costs, where the net amount had previously been recognised in rental costs. This adjustment is due to the adoption of IFRS 15 Revenue from Contracts with Customers and has no net impact on the profit for the year or on the Group's net asset position.

 

IFRS 9 Financial Instruments

 

This standard applies to classification and measurement of financial assets and financial liabilities, impairment provisioning and hedge accounting. The Group's assessment of IFRS 9 determined that the main area of potential impact was impairment provisioning on trade receivables, given the requirement to use a forward-looking expected credit loss model. However, the Group concluded that this has no material impact on its financial statements.

In addition, the following pronouncements had no significant impact on the consolidated financial statements:

 

·    IFRS 2 Share-based Payments (amendment);

·    IAS 28 Investments in Associates (amendment);

·    IAS 40 Investment Property (amendment); and

·    Amendments to IFRS (Annual improvements cycle 2014-2016).

 

Standards in issue but not yet effective

The following standards and interpretations, which have not been applied in these condensed unaudited financial statements, were in issue but not effective, and in some cases have not been adopted for use by the European Union:

 

IFRS 16 Leases

 

This standard does not affect the accounting for rental income earned by the Group as a lessor, but from the Group's initial assessment of its head office lease, it believes adoption will result in the recognition on the Consolidated and Company Balance Sheets of: a right of use asset of £5,600,000; a lease liability of £7,300,000; the reversal of lease incentive accrual of £1,300,000; and a net asset decrease of £400,000.

 

Going Concern

The Board continues to adopt the going concern basis in preparing the financial statements. The Board's assessment took into account the following:

 

·    The Group's latest cash flow and profit forecasts, which were subject to sensitivity analysis;

·    The cash and undrawn bank facilities available to the Group, within the constraints of the Group's loan covenants; and

·    The Group's principal risks that could impact on the Group's ability to settle its liabilities over the 12 months from the date of signing.

 

2.  Revenue from Contracts with Customers

 


Year ended

31.03.19

£000

Year ended

31.03.18

£000

Development management services

7,963

Development property sales

-

Corporate sale - retirement village portfolio

-

86,709

Development property income

7,963

125,678

Service charge income

8,058

Other income

-

138

Total revenue from contracts with customers

16,021

135,439

 

The total revenue from contracts with customers is the revenue recognised in accordance with IFRS 15 Revenue from Contracts with Customers. This reflects the Development property income and Other revenue in Note 3 Segmental Information.

 

No impairment of contract assets was recognised in the year to 31 March 2019 (2018: £nil).

 

3.  Segmental Information

 

IFRS 8 Operating Segments requires the identification of the Group's operating segments, which are defined as being discrete components of the Group's operations whose results are regularly reviewed by the Chief Operating Decision Maker (being the Chief Executive) to allocate resources to those segments and to assess their performance. The Group divides its business into the following segments:

 

·    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

31.03.19

£000

Developments

Year ended

31.03.19

£000

Total

Year ended

31.03.19

£000

Investment

and Trading

Year ended

31.03.18

£000

Developments

Year ended

31.03.18

£000

Total

Year ended

31.03.18

£000

Rental income

28,154

-

28,154

40,157

-

Development property income

-

7,963

7,963

-

125,678

Service charge income

8,058

-

8,058

9,623

-

Other revenue

-

-

-

138

-

138

Revenue

36,212

7,963

44,175

49,918

125,678

175,596

 

 

Profit before tax

Investment and Trading

Year ended

31.03.19

£000

Developments

Year ended

31.03.19

£000

Total

Year ended

31.03.19

£000

Investment

and Trading

Year ended

31.03.18

£000

 

Developments

Year ended

31.03.18

£000

 

Total

Year ended

31.03.18

£000

Net rental income

24,599

-

24,599

36,329

-

36,329

Development property loss

-

(1,781)

(1,781)

-

(4,174)

(4,174)

Share of results of joint ventures

5,203

(8,420)

(3,217)

5,135

(1,939)

3,196

Gain on sale and revaluation of Investment properties

59,292

-

59,292

37,415

-

37,415


89,094

(10,201)

78,893

78,879

(6,113)

72,766

Fair value movement of available-for-sale assets



144



1,385

Other operating income



-



111

Gross profit



79,037



74,262

Administrative expenses



(16,753)



(12,765)

Net finance costs



(18,881)



(30,665)

Foreign exchange gain/(loss)



53



(10)

Profit before tax



43,456



30,822

 

Net assets

Investment

and Trading

31.03.19

£000

Developments

31.03.19

£000

Total

31.03.19

£000

Investment

and Trading

31.03.18

£000

Developments

31.03.18

£000

Total

31.03.18

£000

Investment properties

778,752

-

778,752

791,948

-

791,948

Land, development and trading properties

-

2,311

2,311

28

6,014

6,042

Investment in joint ventures

17,556

7,120

24,676

12,352

15,457

27,809


796,308

9,431

805,739

804,328

21,471

825,799

Other assets



258,958



198,312

Total assets



1,064,697



1,024,111

Liabilities



(497,272)



(490,217)

Net assets



567,425



533,894

 

4.  Net Rental Income

 


Year ended

31.3.19

£000

Year ended

31.3.18

£000

Gross rental income

28,154

40,157

Rents payable

(285)

(144)

Property overheads

(3,410)

(3,549)

Net rental income

24,459

36,464

Net rental costs/(income) attributable to profit share partner

140

(135)

Net rental income

24,599

36,329

 

5.  Development Property Loss

 


Year ended

31.3.19

£000

Year ended

31.3.18

£000

Development property income

7,963

125,678

Cost of sales

(5,399)

(125,085)

Sales expenses

-

(2,554)

Provision against book values

(4,345)

(2,213)

Development property loss

(1,781)

(4,174)

 

6.  Gain on Sale of Investment Properties

 


Year ended

31.3.19

£000

Year ended

31.3.18

£000

Net proceeds from the sale of investment properties

164,058

341,911

Book value (Note 12)

(147,550)

(324,002)

Tenants' incentives on sold investment properties

(1,500)

(4,342)

Gain on sale of investment properties

15,008

13,567

 

7.  Administrative Expenses

 


Year ended

31.3.19

£000

Year ended

31.3.18

£000

Administration costs

(10,858)

(11,023)

Performance related awards

(5,203)

(1,677)

National Insurance on performance related awards

(692)

(65)

Administrative expenses

(16,753)

(12,765)

 

8.  Finance Costs

 


Year ended

31.3.19

£000

Year ended

31.3.18

£000

Interest payable on bank loans, bonds and overdrafts

(16,414)

(26,873)

Retail Bond redemption premium

-

(8,708)

Other interest payable and similar charges

(4,208)

(7,053)

Interest capitalised

3,215

5,196

Finance costs

(17,407)

(37,438)

 

9.  Tax on Profit on Ordinary Activities

 


Year ended

31.3.19

£000

Year ended

31.3.18

£000

The tax charge is based on the profit for the year and represents:


United Kingdom corporation tax at 19% (2018: 19%)



- Group corporation tax

(8,813)

(831)

- Adjustment in respect of prior periods

315

1,253

- Use of tax losses

(509)

-

Current tax (charge)/credit

(9,007)

422




Deferred tax



- Capital allowances

(1,003)

709

- Tax losses

(677)

(5,478)

- Unrealised chargeable gains

10,647

2,525

- Other timing differences

(796)

(2,715)

Deferred tax credit/(charge)

8,171

(4,959)

Total tax charge for the year

(836)

(4,537)

Deferred tax

 

31.3.19

£000

 

31.3.18

£000

Capital allowances

(3,263)

(2,260)

Tax losses

2,019

2,696

Unrealised chargeable gains

(9,159)

(19,806)

Other timing differences

1,885

2,586

Deferred tax liability

(8,518)

(16,784)

 

Note: all deferred tax balances have been calculated at an effective rate of corporation tax of 17% (2018: 19%) which is the average of the substantively enacted future rates for the periods in which the deferred tax is expected to be realised.

 

Under IAS 12 Income Taxes, 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 £3,263,000 (2018: £2,260,000) would be released and further capital allowances of £65,906,000 (2018: £40,921,000) 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.

 

10. Dividends

 


Year ended

31.3.19

£000

Year ended

31.3.18

£000

Attributable to equity share capital



Ordinary



- Interim paid 2.60p per share (2018: 2.50p)

3,103

2,934

- Prior year final paid 7.00p per share (2017: 6.20p)

8,303

7,261


11,406

10,195

 

A final dividend of 7.50p, if approved at the AGM on 11 July 2019, will be paid on 19 July 2019 to Shareholders on the register on 14 June 2019. This final dividend, amounting to £8,952,000, has not been included as a liability as at 31 March 2019, in accordance with IFRS.

 

11. 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.

 

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 Earnings per Share 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

31.3.19

000

Year ended

31.3.18

000

Ordinary shares in issue

119,363

Weighting adjustment

(307)

(997)

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

119,056

117,614

Weighted average ordinary shares issued on share settled bonuses

862

Weighted average ordinary shares to be issued under Performance Share Plan

778

478

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

120,696

119,012


 

£000

£000

Earnings used for calculation of basic and diluted earnings per share

42,620

26,285




Basic earnings per share

35.8p

Diluted earnings per share

35.3p

22.1p


 

£000

£000

Earnings used for calculation of basic and diluted earnings per share

42,620

26,285

Net gain on sale and revaluation of investment properties                    - subsidiaries

(59,292)

                                                                                                               - joint ventures

(1,288)

Tax on profit on disposal of investment properties

14,130

Gain on movement in share of joint ventures

-

Fair value movement on derivative financial instruments                      - subsidiaries

3,322

                                                                                                               - joint ventures

35

Fair value movement on Convertible Bond

(865)

Profit on cancellation of derivative financial instruments

(72)

Expense on cancellation of loans

1,458

Retail Bond redemption premium

-

Fair value movement of available-for-sale assets

(144)

Deferred tax on adjusting items

(9,935)

(1,431)

Loss used for calculations of EPRA earnings per share

(10,031)

(8,254)




EPRA loss per share

(8.4)p

(7.0)p

 

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

 

12.  Investment Properties

 


31.3.19

£000

31.3.18

£000

Book value at 1 April

791,948

987,560

Additions and transfers at cost

90,320

101,042

Disposals

(147,550)

(324,002)

Revaluation surplus

44,284

23,848

Revaluation (deficit)/surplus attributable to profit share partners

(250)

3,500

Book value at 31 March

778,752

791,948

 

All properties are stated at market value as at 31 March 2019, of which £791,100,000 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 remaining £150,000 was valued by the Directors. The fair value of the investment properties at 31 March 2019 is as follows:

 


31.3.19

£000

31.3.18

£000

Book value

778,752

791,948

Lease incentives and costs included in trade and other receivables

14,687

12,375

Head leases capitalised

(2,189)

(2,189)

Fair value

791,250

802,134

 

Interest capitalised in respect of the refurbishment of investment properties at 31 March 2019 amounted to £11,357,000 (31 March 2018: £9,057,000).

 

The historical cost of investment property is £645,521,000 (31 March 2018: £622,226,000).

 

13.  Investments in Joint Ventures

 

Share of results of joint ventures

Year ended

31.3.19

£000

Year ended

31.3.18

£000

Summarised consolidated income statement



Revenue

52,402

37,667

Gross rental income

971

189

Property overheads

(411)

(412)

Net rental income/(expense)

560

(223)

Development gain/(loss)

4,570

(1,939)

Provision against book value of development stock

(7,198)

(1,880)

Gain on revaluation of investment properties

1,288

3,317

Other operating income/(expenses)

9

(31)

Gross loss

(771)

(756)

Administrative expenses

(406)

(468)

Operating loss

(1,177)

(1,224)

Interest payable on bank loans and overdrafts

(511)

(24)

Other interest payable and similar charges

(1,576)

(2,012)

Finance income

92

16

Change in fair value of derivative financial instruments

(35)

7

Loss before tax

(3,207)

(3,237)

Tax

(1,399)

1,255

Loss after tax

(4,606)

(1,982)

Reversal of Creechurch loss*

1,389

3,485

Uplift for Barts Square economic interest**

-

1,693

Share of results of joint ventures

(3,217)

3,196

 

* This is an adjustment that has been made to add back the Group's share of the loss incurred in one of its joint ventures, arising from finance and other costs in the year, to ensure the Group's interest is shown at its recoverable amount.

 

** This is an adjustment to reflect the impact of the consolidation of a joint venture at its economic interest of 43.8% rather than its actual ownership interest of 33.3%.

 

Investment in joint ventures

31.3.19

£000

31.3.18

£000

Summarised balance sheets



Non-current assets



Investment properties

25,289

22,623

Owner occupied property, plant and equipment

106

39

Derivative financial instruments

23

59

Deferred tax

1,774

3,071


27,192

25,792

Current assets



Land, development and trading properties

56,935

76,474

Trade and other receivables

10,554

6,109

Cash and cash equivalents

7,612

11,790


75,101

94,373

Current liabilities



Trade and other payables

(13,599)

(18,666)


(13,599)

(18,666)

Non-current liabilities



Trade and other payables

(20,419)

(27,652)

Borrowings

(48,473)

(49,523)


(68,892)

(77,175)

Net assets pre-adjustments

19,802

24,324

Reversal of Creechurch net liability position*

4,874

3,485

Net assets

24,676

27,809

 

* This is an adjustment that has been made to add back the Group's share of the loss incurred in one of its joint ventures, arising from finance and other costs in the year, to ensure the Group's interest is shown at its recoverable amount.

 

The Directors' valuation of land, developments and trading properties shows a surplus of £nil (31 March 2018: £1,700,000) above book value.

 

14.  Land, Developments and Trading Properties

 


31.3.19

£000

31.3.18

£000

Development properties

2,283

6,014

Properties held as trading stock

28

28


2,311

6,042

 

The Directors' valuation of land, developments and trading properties shows a surplus of £578,000 (31 March 2018: £628,000) above book value.

 

Total interest to date in respect of the development of sites is included in stock to the extent of £nil (2018: £nil). Interest capitalised during the year in respect of development sites amounted to £nil (31 March 2018: £2,188,000 relating to assets which were sold during the year).

 

15.  Available-for-sale investments

 

The gain of £144,000 (2018: 1,385,000) recognised in the year is the result of cash received in relation to a previously fully impaired asset.

 

16.  Trade and Other Receivables

 


31.3.19

£000

31.3.18

£000

Trade receivables

9,680

35,883

Other receivables

22,856

30,083

Prepayments

4,173

3,841

Accrued income

22,017

30,950


58,726

100,757

 

17.  Cash and Cash Equivalents

 


31.3.19

£000

31.3.18

£000

Rent deposits and cash held at managing agents

2,599

5,371

Restricted cash

2,678

2,713

Cash deposits

192,293

83,787


197,570

91,871

 

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

 

18.  Trade and Other Payables

 


31.3.19

£000

31.3.18

£000

Trade payables

13,009

11,175

Other payables

1,869

1,632

Accruals

23,368

32,735

Deferred income

4,913

5,836

Current trade and other payables

43,159

51,378




Accruals

11,405

-

Non-current trade and other payables

11,405

-

Total trade and other payables

54,564

51,378

 

19.  Borrowings

 


31.3.19

£000

31.3.18

£000

Current borrowings

100,468

-

Borrowings repayable within:



- one to two years

-

272,501

- two to three years

195,410

-

- three to four years

-

-

- four to five years

37,399

21,878

- five to six years

92,005

-

- six to ten years

-

122,613

Non-current borrowings

324,814

416,992

Total borrowings

425,282

416,992

 

Included within current borrowings is the Convertible Bond at its fair value of £100,468,000 (31 March 2018: £101,333,000) which is repayable in June 2019. It is a financial instrument classified as Level 1 under the IFRS 13 Fair Value Measurement fair value hierarchy.

 

Net gearing

31.3.19

£000

31.3.18

£000

Total borrowings

425,282

416,992

Cash

(197,570)

(91,871)

Net borrowings

227,712

325,121

 

Net borrowings excludes the Group's share of borrowings in joint ventures of £48,473,000 (31 March 2018: £49,523,000) and cash of £7,612,000 (31 March 2018: £11,790,000). All borrowings in joint ventures are secured.

 


31.3.19

£000

31.3.18

£000

Net assets

567,425

533,894

Gearing

40%

61%

 

20.  Derivative Financial Instruments

 


31.3.19

£000

31.3.18

£000

Derivative financial instruments asset

915

123

Derivative financial instruments liability

(4,158)

(2,874)

 

The fair values of the Group's outstanding interest rate swaps, caps and floors 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.

 

21.  Share Capital

 


31.3.19

£000

31.3.18

£000

Authorised

39,577

39,577

 

The authorised share capital of the Company is £39,576,627 divided into ordinary shares of 1p each and deferred shares of 1/8p each.

 


31.3.19

£000

31.3.18

£000

Allotted, called up and fully paid:             



- 119,363,349 (31 March 2018: 118,610,741) ordinary shares of 1p each

1,194

1,186

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

265

265


1,459

1,451

 

22.  Net Assets per Share

 


 

31.3.19

£000

Number of

shares

000

 

31.3.19

Pence

per share

Net asset value

567,425

119,363


Less: deferred shares

(265)



Basic net asset value

567,160

119,363

475

Add: share settled bonus


862


Add: dilutive effect of the Performance Share Plan


734


Diluted net asset value

567,160

120,959

469

Adjustment for:




      - fair value of financial instruments

3,218



      - fair value movement on Convertible Bond

468



      - deferred tax

11,687



Adjusted diluted net asset value

582,533

120,959

482

Adjustment for:




      - fair value of trading and development properties

578



EPRA net asset value

583,111

120,959

482

Adjustment for:




      - fair value of fixed rate loans

(5,449)



      - fair value of financial instruments

(3,218)



      - deferred tax

(11,687)



EPRA triple net asset value

562,757

120,959

465

 

The adjustment for the fair value of trading and development properties represents the surplus as at 31 March 2019.

 


 

31.3.18

£000

Number of

shares

000

 

31.3.18

Pence

per share

Net asset value

533,894

118,611


Less deferred shares

(265)



Basic net asset value

533,629

118,611

450

Add: share settled bonus


920


Add: dilutive effect of the Performance Share Plan


478


Diluted net asset value

533,629

120,009

445

Adjustment for:




                - fair value of financial instruments

2,692



                - fair value movement on Convertible Bond

1,333



                - deferred tax

21,662



Adjusted diluted net asset value

559,316

120,009

466

Adjustment for:




                - fair value of trading and development properties

2,328



EPRA net asset value

561,644

120,009

468

Adjustment for:




                - fair value of financial instruments

(2,692)



                - deferred tax

(21,662)



EPRA triple net asset value

537,290

120,009

448

 

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.

 

The calculation of EPRA triple net asset value per share reflects the fair value of all the assets and liabilities of the Group at 31 March 2019. One of the loans held by the Group is at a fixed rate and therefore not at fair value. The adjustment of £5,449,000 (2018: £nil) is the increase from book to fair value.

 

23.  Related Party Transactions

 

At 31 March 2019 and 31 March 2018 the following amounts were due from the Group's joint ventures.

 


31.3.19

£000

31.3.18

£000

King Street Developments (Hammersmith) Limited

71

9,916

Shirley Advance LLP

330

249

Barts Square companies

34

2,205

Old Street Holdings LP

3

3

Creechurch Place Limited

22,073

32,096

 

24.  Capital Commitments

 

The Group has a commitment of £64,900,000 (31 March 2018: £63,143,000) in relation to construction contracts, which are due to be completed in the year to March 2020, of which £19,200,000 (2018: £520,000) relates to the Group's share of commitments in joint ventures.

 

25.  Post Balance Sheet Events

 

In May 2019 the Group completed its acquisition of the site at Charterhouse Street, London EC1, in joint venture with AshbyCapital, for £75,000,000 (Helical's share: £37,500,000).

 

 

Appendix 1 - See-through Analysis

 

All appendices are unaudited.

 

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

31.3.19

£000

Year ended

31.3.18

£000

Gross rental income

- subsidiaries

28,154

40,157


- joint ventures

971

189

Total gross rental income


29,125

40,346

Rents payable

- subsidiaries

(285)

(144)

Property overheads

- subsidiaries

(3,410)

(3,549)


- joint ventures

(411)

(412)

Net rental costs/(income) attributable to profit share partner


140

(135)

See-through net rental income


25,159

36,106

 

See-through net development (losses)/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

31.3.19

£000

Year ended

31.3.18

£000

In parent and subsidiaries


4,740

(1,961)

In joint ventures


4,570

(1,939)

Total gross development profit/(loss)

9,310

(3,900)

Provision against stock

- subsidiaries

(6,521)

(2,213)


- joint ventures

(7,198)

(1,880)

See-through development losses


(4,409)

(7,993)

 

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 is shown in the table below:

 



Year ended

31.3.19

£000

Year ended

31.3.18

£000

Revaluation surplus on investment properties

- subsidiaries

44,284

23,848


- joint ventures

1,288

3,317

Total revaluation surplus


45,572

27,165

Net gain on sale of investment properties

- subsidiaries

15,008

13,567


- joint ventures

-

-

Total net gain on sale of investment properties 

15,008

13,567

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

60,580

40,732

 

See-through net finance costs

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

 



Year ended

31.3.19

£000

Year ended

31.3.18

£000

Interest payable on bank loans, bonds and overdrafts

- subsidiaries

16,414

26,873


- joint ventures

511

24

Total interest payable on bank loans, bonds and overdrafts

16,925

26,897

Other interest payable and similar charges

- subsidiaries

4,208

15,761


- joint ventures

1,576

2,012

Interest capitalised

- subsidiaries

(3,215)

(5,196)

Total finance costs


19,494

39,474

Interest receivable and similar income

- subsidiaries

(983)

(4,303)


- joint ventures

(92)

(16)

See-through net finance costs


18,419

35,155

 

See-through property portfolio

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

 



 

31.3.19

£000

 

31.3.18

£000

Investment property fair value

- subsidiaries

791,250

802,134


- joint ventures

25,382

22,623

Total investment property fair value


816,632

824,757

Trading and development stock

- subsidiaries

2,311

6,042


- joint ventures

56,935

76,474

Total trading and development stock


59,246

82,516

Trading and development stock surplus

- subsidiaries

578

628


- joint ventures

-

1,700

Total trading and development stock surpluses


578

2,328

Total trading and development stock at fair value


59,824

84,844

See-through property portfolio


876,456

909,601

 

See-through net borrowings

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

 


31.3.19

£000

 

31.3.18

£000

Gross borrowings less than one year

- subsidiaries

100,468

-

Gross borrowings more than one year

- subsidiaries

324,814

416,992

Total gross borrowings in parent and subsidiaries


425,282

416,992

Gross borrowings less than one year

- joint ventures

-

-

Gross borrowings more than one year

- joint ventures

48,473

49,523

Total gross borrowings in joint ventures


48,473

49,523

Cash and cash equivalents

- subsidiaries

(197,570)

(91,871)


- joint ventures

(7,612)

(11,790)

See-through net borrowings

268,573

362,854

 

See-through analysis ratios

 


31.03.19

£000

31.03.18

£000

Balance sheet



Property portfolio

876,456

909,601

Net borrowings

268,573

362,854

Net assets

567,425

533,894




Loan to value

30.6%

39.9%

Gearing

47.3%

68.0%

 

 

Appendix 2 - Total Accounting Return and Total Property Return

 


Year ended

31.03.19

£m

Year ended

31.03.18

£m

Brought forward net assets

533.9

516.9

Carried forward net assets

567.4

533.9

Increase in net assets

33.5

17.0

Dividends paid

11.4

10.2

Total Accounting Return

44.9

27.2




Total Accounting Return

8.4%

5.3%

 

 


Year ended

31.03.19

£m

Year ended

31.03.18

£m

See-through net rental income

25.2

36.1

See-through development losses

(4.4)

(8.0)

See-through revaluation surplus

45.6

27.2

See-through net gain on sale of investment properties

15.0

13.5

Total Property Return

81.4

68.8

 

 

Appendix 3 - Five Year Review

 

Income Statements

 


Year ended

31.3.19

£000

Year ended

31.3.18

£000

Year ended

31.3.17

£000

Year ended

31.3.16

£000

Year ended

31.3.15

£000

Revenue

44,175

175,596

99,934

116,500

106,341

Net rental income

24,599

36,329

46,162

42,164

34,233

Development property profit/(loss)

2,564

(1,961)

7,143

30,700

16,126

Provisions against stock

(4,345)

(2,213)

(6,300)

(6,448)

(452)

Trading profit

-

-

-

-

2,503

Share of results of joint ventures

(3,217)

3,196

(6,528)

50,469

27,497

Other operating income

-

111

982

20

368

Gross profit before gain on investment properties

19,601

35,462

41,459

116,905

80,275

Gain on sale of investment properties

15,008

13,567

1,391

2,385

2,480

Revaluation surplus on investment properties

44,284

23,848

39,152

47,441

66,904

Fair value movement of available-for-sale assets

144

1,385

(3,352)

(1,370)

(773)

Administrative expenses excluding performance related awards

(10,858)

(11,023)

(10,800)

(10,716)

(10,156)

Performance related awards

(5,895)

(1,742)

(7,572)

(15,387)

(16,374)

Finance costs

(17,407)

(37,438)

(25,598)

(24,113)

(23,678)

Finance income

983

4,303

3,156

5,128

2,480

Movement in fair value of derivative financial instruments

(3,322)

4,029

789

(6,860)

(8,389)

Change in fair value of Convertible Bond

865

(1,559)

2,973

516

(3,263)

Foreign exchange gains/(losses)

53

(10)

(3)

100

(2,061)

Profit before tax

43,456

30,822

41,595

114,029

87,445

Tax on profit on ordinary activities

(836)

(4,537)

(2,471)

(9,146)

(12,669)

Profit after tax

42,620

26,285

39,124

104,883

74,776

 

Balance Sheets

 


31.3.19

£000

31.3.18

£000

31.3.17

£000

31.3.16

£000

31.3.15

£000

Investment portfolio at fair value

791,250

802,134

1,003,000

1,041,100

701,521

Land, developments and trading properties

2,311

6,042

86,680

92,035

92,578

Group's share of investment properties held by joint ventures

25,382

22,623

13,907

11,552

88,305

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

56,935

 

76,474

89,115

75,904

102,715

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

578

 

2,328

12,514

19,412

36,243

Group's share of total properties at fair value

876,456

909,601

1,205,216

1,240,003

1,021,362







Net debt

227,712

325,121

574,439

659,393

477,248

Group's share of net debt of joint ventures

40,861

37,733

45,537

22,449

54,649

Group's share of net debt

268,573

362,854

619,976

681,842

531,897







Net assets

567,425

533,894

516,897

480,721

404,363

EPRA net assets

583,111

561,644

565,973

540,731

469,128







Dividend per ordinary share paid/payable

9.60p

8.70p

3.12p

12.60p

6.85p

Dividend per ordinary share declared

10.10p

9.50p

8.60p

8.17p

7.25p







EPRA (loss)/earnings per ordinary share

(8.4)p

(7.0)p

0.5p

17.1p

2.4p

EPRA net assets per share

482p

468p

473p

456p

385p

 

 

Appendix 4 - Property Portfolio

 

London Portfolio - Investment Properties

 

Address

Description

Area

sq ft (NIA)

Vacancy rate at

31 March 2019

Completed, let and available to let





The Warehouse & Studio, The Bower, EC1

Multi-let office building

151,439

0.0%

0.0%

The Tower, The Bower, EC1

Multi-let office building

181,742

28.5%

n/a

The Loom, E1

Multi-let office building

108,640

2.9%

17.0%

The Powerhouse, W4

Single-let recording studios/office building

24,288

0.0%

0.0%

Power Road Studios, W4

Multi-let office building with redevelopment potential

57,585

40.3%

29.0%

25 Charterhouse Square, EC1

Multi-let office building

43,493

0.0%

0.0%

90 Bartholomew Close, EC1

Multi-let office building

30,427

63.7%

n/a



597,614

16.2%

8.3%

Being redeveloped





Kaleidoscope, EC1

Over-station office development

88,680*

n/a

n/a

54 Bartholomew Close, EC1

Office redevelopment

10,286*

n/a

n/a



696,580

n/a

n/a

 

*Estimated space once developed.

 

London Portfolio - Development Properties

 

Address

Description

Area

sq ft (NIA)

Vacancy rate at

31 March 2019

Completed, let and available to let





One Creechurch Place, EC3

Multi-let office building

273,291

0.0%

31.0%

Being redeveloped





Barts Square, EC1

236 residential apartments and 14,916 sq ft retail/leisure development under construction

217,750

n/a

n/a



491,041



 

Manchester Offices

 

Address

Description

Area

sq ft (NIA)

Vacancy rate at

31 March 2019

Vacancy rate at 31 March 2018

Churchgate & Lee

Multi-let office building

244,627

3.4%

0.0%

35 Dale Street

Multi-let office building

54,112

0.0%

38.0%

Fourways House

Multi-let office building

59,067

25.7%

n/a

Trinity

Newly completed office building

58,951

100.0%

n/a



416,757

19.8% 

12.8%

 

Regional Portfolio

 

Address

Held as

Description

Area

sq ft (NIA)

Vacancy rate at

31 March 2019

Land






Dawley Road, Telford

Development

Residential land

n/a

n/a

n/a

Retail Development






Ibstock site, Kingswinford

Development

Retail park

70,000*

n/a

n/a

Barking Road, East Ham

Development

Retail/leisure

43,000*

n/a

n/a




113,000



 

*Estimated space once developed.

 

 

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 Helical's 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.

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

 

The Group conducts an annual strategic review and maintains rolling forecasts with inbuilt sensitivity to model anticipated economic conditions.

 

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

 

Due to the Group's small management team, strategic change can be implemented quickly.

The Group carries out significant development projects

The Group carries out significant development projects over a number of years and is therefore exposed to fluctuations in the market and tenant demand levels over time.

Management carefully reviews the risk profile of individual developments and in some cases builds properties in several phases to minimise the Group's exposure to reduced demand for particular asset classes or geographical locations over time. The Group carries out developments in partnership with other organisations and pre-lets space to reduce development risk, where considered appropriate.

Property values decline/reduced tenant demand for space

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

The Group's property portfolio has tenants from diverse industries, reducing the risk of over-exposure to one sector. We carry out occupier financial covenant checks ahead of approving leases in order to limit our exposure to tenant failure.

 

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 to suit the changing market. Management regularly models different property revaluation scenarios through its forecasting process in order to prepare a considered approach to mitigating the potential impact.

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.

 

There remains uncertainty over the outcome of the United Kingdom's decision to leave the European Union. The result could adversely affect the case for investment in the UK, depressing the property investment and occupational market, negatively impacting the Group's performance.

Management seeks advice from experts to ensure it understands the political environment and the impact of emerging regulatory and tax changes on the Group. It maintains good relationships with planning consultants and local authorities. Where appropriate, management joins with industry representatives

to contribute to policy and regulatory debate relevant to the industry.

 

 

FINANCIAL RISKS

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

Risk

Risk description

Mitigation/action

Availability and cost of bank borrowing and cash resources

The inability to roll over existing facilities or take out new borrowing could 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 is at risk of increased interest rates on unhedged borrowings.

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

 

Funding requirements are reviewed bi-monthly by management, who seek to 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.

 

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

Breach of loan 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 analyses to assess the likelihood of future breaches based on significant changes in property values or rental income.

 

 

OPERATIONAL RISK

Operational risks are internal risks that could prevent the Group from delivering 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 with a high average length of service. The Nominations Committee and Board regularly review succession planning issues and remuneration is set to attract and retain high calibre staff. Staff are encouraged to undertake personal development and training courses, which the Company supports.

 

The Group has well established relationships with joint venture partners.

Reliance on key contractors and suppliers

 

The Group is dependent on the performance of its key contractors and suppliers for successful delivery of its development property assets.

The Group actively monitors its development projects and uses external project managers to provide support. Potential contractors are vetted for their quality, health and safety record and financial viability prior to engagement. Their performance is closely monitored throughout the development process, with bi-weekly reporting to management. The Group often works with contractors with whom it has previously worked successfully.

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, architects, project managers, marketing agencies, lawyers and managing agents.

The Group has a highly experienced team managing its properties, who regularly conduct on-site reviews and monitor cash flows against budget. The Group 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. Where appropriate, the Group engages parties it has worked with successfully previously.

Health and safety risk

The nature of the Group's operations and markets expose it to potential health and safety risks both internally and externally within the supply chain.

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 agreements prior to appointment and ensures they have appropriate policies and procedures in place, then monitors the adherence to such policies and procedures throughout the project's lifetime.

 

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.

Business disruption and cyber security

The Group relies on Information Technology to perform effectively and a cyber-attack could result in ITsystems being unavailable, adversely affecting the Group's operations.

    Commercially sensitive and personal 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 governed by law (GDPR and Data Protection Act 2018).

 

The Group is at risk of being a victim of social engineering fraud.

 

An external event such as extreme weather, environmental incident, power shortage or terrorist attack could cause significant damage, disruption to the business or reputational damage.

The Group engages and actively manages external Information Technology experts to ensure IT systems operate effectively and that we respond to the evolving IT 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 including bi-annual disaster recovery tests.

 

There is a robust control environment in place for invoice approval and payment authorisations including authorisation limits and a dual sign off requirement for large invoices and bank payments.

 

The Group provides training, and there are procedures in place, to identify emails of a suspicious nature ensuring these are flagged to the IT providers and employees do not open attachments or follow instructions within the email.

 

The Group has a disaster recovery plan, on-site security at its properties and insurance policies in place in order to deal with any external events and mitigate their impact.

 

 

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 good 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.

 

Management closely monitors day-to-day business operations and 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).

Non-compliance with prevailing legislation, regulation and best practice

The nature of the Group's operations and markets expose it to potential bribery and corruption risks(including money laundering and tax evasion) both internally and externally within the supply chain.

 

The Group is exposed to the potential risk of acquiring or disposing of a property where the owner/ purchaser has been involved in criminal conduct or illicit activities.

 

The Group would attract criticism and negative publicity were any instances of modern slavery and human

trafficking identified within its supply chain.

 

The Group would attract criticism and negative publicity if instances of non-compliance with GDPR and the Data Protection Act 2018 were identified. Non-compliance may also result in financial penalties.

The Group's anti-bribery and corruption and whistleblowing policies and procedures 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.

 

The Group has related policies and procedures designed to mitigate bribery and corruption risks including: Know Your Client checks; due diligence processes; capital expenditure controls; contracts risk assessment procedures and competition and anti-trust guidance. The Group engages legal professionals to support these policies where appropriate.

 

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

 

All property transactions are reviewed and authorised by the Executive Committee.

 

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

 

The Group monitors its GDPR and Data Protection Act 2018 compliance to ensure appropriate safeguards, policies, procedures, contractual terms and records are implemented and maintained in accordance with the regulation.

 

 

Appendix 6 - Glossary of Terms

 

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.

 

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.

 

EPRA earnings per share

Earnings per share adjusted to exclude gains/losses on sale and revaluation of investment properties and their deferred tax adjustments, the tax on profit/loss on disposal of investment properties, trading property profits/losses, movement in fair value of available-for-sale assets and fair value movements on derivative financial instruments, on an undiluted basis. Details of the method of calculation of the EPRA earnings per share are available from EPRA (see Note 11).

 

EPRA net assets per share

Diluted net asset value per share adjusted to exclude fair value surplus 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 (see Note 22).

 

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 (see Note 22).

 

Estimated rental value (ERV)

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

 

Gearing

Group borrowings expressed as a percentage of net assets.

 

Initial yield

Annualised net passing rents on investment properties as a percentage of their open market value.

 

Like-for-like valuation change

The valuation gain/loss, net of capital expenditure, on those properties held at both the previous and current reporting period end, as a proportion of the fair value of those properties at the beginning of the reporting period plus net capital expenditure.

 

MCSI Inc. (MSCI IPD)

MSCI Inc. is a company that produces independent benchmarks of property returns.

Net asset value per share (NAV)

Net assets divided by the number of ordinary shares at the balance sheet date (see Note 22).

 

Net gearing

Total borrowings less short-term deposits and cash as a percentage of net assets.

 

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/Group share

The consolidated Group and the Group's share in its joint ventures (see Appendix 1).

 

See-through net gearing

The see-through net borrowings expressed as a percentage of net assets (see Appendix 1).

 

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 at the start of the year (see Appendix 2).

 

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 (see Appendix 2).

 

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 first break, or lease expiry date, divided 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 news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
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Final Results - RNS