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Helical PLC   -  HLCL   

Half-year Report

Released 07:00 21-Nov-2019

RNS Number : 1342U
Helical PLC
21 November 2019
 

HELICAL PLC

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

Half Year Results for the Six Months to 30 September 2019

 

HELICAL'S PREMIUM PORTFOLIO CONTINUES TO ATTRACT NEW TENANTS WITH 244,000 SQ FT OF LETTINGS IN LONDON & MANCHESTER SINCE APRIL 2019

 

Gerald Kaye, Chief Executive, commented:

 

"We have made good progress in the first half of the financial year by attracting new tenants to 172,860 sq ft of space, generating £3.9m (our share) of contracted rental income, and since 30 September 2019 have let a further 71,525 sq ft, generating an additional £2.1m of rental income for the Group. As we let the remaining 121,000 sq ft of available space and the 99,000 sq ft of developments due to achieve practical completion by January 2020, we will make significant headway towards capturing the portfolio's see-through ERV of £59.6m. The success we have had since 1 April this year underpins our belief that the enduring quality and location of our buildings will continue to attract tenants, boosting our earnings and dividend cover.

 

"We remain a Company focused on the creation of capital profits through the development and letting of the high quality office space that today's occupiers are seeking. Our current portfolio will continue to generate such profits as it reaches its fully let and stabilised potential. Further growth is dependent on the Group unearthing new opportunities and management's efforts are focused on achieving this. With our experience and track record, we are confident in our ability to add to our pipeline and to continue the growth of Helical."

 

Operational Performance

 

·       Acquisition of a major development opportunity with the purchase of 33 Charterhouse Street, London EC1, a c.200,000 sq ft office development site next to Farringdon station, in a 50:50 joint venture with AshbyCapital.

·       Secured 133,218 sq ft of new London office lettings delivering contracted rent of £9.8m (Helical's share £3.0m at 5.9% above 31 March 2019 ERV).

·       Post half year end, let a further 69,581 sq ft of London office space delivering £5.6m of contracted rents (Helical's share £2.1m at 3.2% above 31 March 2019 ERV).

·       In Manchester, five office lettings achieved on 39,642 sq ft, generating rental income of £0.9m at 1.6% above 31 March 2019 ERV, with a further 1,944 sq ft let post period end in line with 31 March 2019 ERV.

·       Completed the sale of two units in the first phase of residential at Barts Square, EC1 with a further unit completed since the period end, leaving just seven units available for sale. In the final phase, exchanged contracts for the sale of a further seven units and exchanged on one further unit since the period end, taking the total number of units exchanged to 45. These sales are due to complete by February 2020.

·       Sale of Helical's 10% shareholding in One Creechurch Place to our joint venture partner, completing our involvement in the development.

·       We increased and extended our Revolving Credit Facility to £400m, providing an additional £50m of firepower for acquisitions.



 

Financial Highlights

 

Earnings

 

·    IFRS basic earnings per share of 11.7p (2018: 21.8p).

·    IFRS Profit before tax of £13.1m (2018: £29.1m).

·    Total Accounting Return1 of 2.7% (2018: 5.1%).

·    See-through Total Property Return1 of £28.6m (2018: £43.2m):

-     Group's share1 of net rental income of £13.0m (2018: £11.7m).

-     Development profits of £5.7m (2018: losses of £2.1m), after provisions of £1.2m (2018: £6.2m).

-     Net gain on sale and revaluation of investment properties of £9.9m (2018: £33.6m).

·    EPRA earnings per share1 of 5.4p (2018: loss of 4.6p).

·    Interim dividend declared of 2.70p per share (2018: 2.60p), up 3.8%.

 

Balance Sheet

 

·    Net asset value up 1.1% to £573.7m (31 March 2019: £567.4m).

·    EPRA net asset value per share1 up 0.8% to 486p (31 March 2019: 482p).

·    EPRA triple net asset value per share1 up 0.2% to 466p (31 March 2019: 465p).

 

Property Valuations

 

·    IFRS property portfolio value of £836.1m (31 March 2019: £793.6m).

·    See-through property portfolio1 of £955.8m (31 March 2019: £876.4m).

·    See-through investment property valuation gain, on a like-for-like basis, of 1.5% (1.4% including purchases and gains on sales).

 

Financing

 

·    See-through loan to value1 of 35.3% (31 March 2019: 30.6%).

·    See-through net borrowings1 of £337.4m (31 March 2019: £268.6m).

·    Average maturity of the Group's share1 of secured debt of 4.5 years (31 March 2019: 3.4 years), increasing to 5.6 years, on exercise of options to extend current facilities.

·    See-through average cost of borrowings1 of 3.5% (31 March 2019: 4.0%).

·    Group's share1 of cash and undrawn bank facilities at 30 September 2019 of £261m (31 March 2019: £382m).

 

Portfolio Update

 

London Portfolio

 

·    1.8% valuation increase, on a like-for-like basis, valued at £773.9m at 30 September 2019 (85.9% of investment portfolio) compared to £693.8m at 31 March 2019 (85.0% of investment portfolio).

·    Contracted rents of £30.2m (31 March 2019: £27.5m) growing to an ERV of £50.4m (31 March 2019: £42.4m).

·    WAULT of 7.4 years (31 March 2019: 8.0 years).

 

Manchester Portfolio

 

·    Valuation of investment portfolio remained unchanged, on a like-for-like basis, at £127.0m at 30 September 2019 (14.1% of investment portfolio) compared to £122.7m at 31 March 2019 (15% of investment portfolio) after taking into account capital expenditure.

·    Contracted rents increased to £6.1m (31 March 2019: £5.7m) growing to an ERV of £9.1m (31 March 2019: £9.0m).



 

·    WAULT of 4.3 years (31 March 2019: 3.9 years).

Interim Dividend

 

An Interim Dividend of 2.70 pence per share (2018: 2.60 pence per share) will be paid to Shareholders as follows:

 

Ex-dividend Date

28 November 2019

Record Date

29 November 2019

Payable Date

31 December 2019

 

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

 

Half Year Results Presentation

 

Helical will be holding a presentation for analysts and investors starting at 9am on Thursday 21 November 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 9411

Passcode:

8746796

 

Webcast Link:

https://webcasting.brrmedia.co.uk/broadcast/5d91c523cbe3ca44a572e3b2

 

 

1.  See Glossary for definition of terms. The half year condensed unaudited consolidated 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

 

Overview

 

The results for the half year to 30 September 2019 reflect continued progress on all fronts.

 

We are rapidly approaching the completion of the current development programme, which started in March 2011 with the acquisition, in joint venture, of land and buildings at Barts Square, London EC1. On completion of the third and final phase of Barts Square and Kaleidoscope, London EC1, both anticipated by early 2020, we will have built or refurbished 2.3m sq ft of office space and delivered 236 residential units in the last nine years. Of this, we have retained 1.1m sq ft of these offices and added 200,000 sq ft at 33 Charterhouse Street, London EC1 to our investment portfolio, valued at £901.0m and generating £36.4m of contracted rent.

 

We have made good progress in the first half of the financial year by attracting new tenants to 172,860 sq ft of space, generating £3.9m (our share) of contracted rental income, and since 30 September 2019 have let a further 71,525 sq ft, generating an additional £2.1m of rental income for the Group. As we let the remaining 121,000 sq ft of available space and the 99,000 sq ft of developments due to achieve practical completion by January 2020, we will make significant headway towards capturing the portfolio's see-through ERV of £59.6m. The success we have had since 1 April this year underpins our belief that the enduring quality and location of our buildings will continue to attract tenants, boosting our earnings and dividend cover.

 

Results for the Half Year

 

The profit before tax for the half year to 30 September 2019 was £13.1m (2018: £29.1m) with a Total Property Return of £28.6m (2018: £43.2m). The increase in net rents to £13.0m (2018: £11.7m) reflects the impact of our letting success over the period. Developments contributed profits of £6.9m (2018: £4.1m) before provisions of £1.2m (2018: £6.2m). The gain on sale and revaluation of the investment portfolio contributed £9.9m (2018: £33.6m).

 

Total see-through finance costs were £8.9m (2018: £8.4m), offset by interest receivable of £1.3m (2018: £1.0m) to give net finance costs of £7.6m (2018: £7.4m). A reduction in expected future interest rates led to a charge from the valuation of the Group's derivative financial instruments of £5.0m (2018: credit of £0.3m). Recurring administration costs were £5.3m (2018: £5.6m) with £0.3m (2018: £0.2m) in our joint ventures. The provision for performance related remuneration, including associated NIC, was £1.7m (2018: £2.3m).

 

A corporation tax charge of £1.2m (2018: £11.2m) has been recognised in the Half Year Results. With a reduction in the Group's deferred tax provision of £2.1m, a net tax credit of £0.9m (2018: charge £3.2m) has been recognised.

 

The profit for the period, after recognition of this tax credit, was £14.0m (2018: £25.9m) and this result allows the Board to declare an Interim Dividend of 2.70p (2018: 2.60p), an increase of 3.8%.

 

Finance

 

The see-through loan to value ratio ("LTV") increased to 35.3% at the half year end (31 March 2019: 30.6%) reflecting the acquisition, in joint venture, of our new scheme at 33 Charterhouse Street, London EC1 and capital expenditure on our portfolio, particularly at Kaleidoscope, London EC1. Our see-through net gearing, the ratio of net borrowings to the net asset value of the Group, increased from 47.3% as at 31 March 2019 to 58.8%.

 

During the period under review, the average debt maturity on secured loans, on a see-through basis, increased to 4.5 years (31 March 2019: 3.4 years) as we increased and extended our Revolving Credit Facility from £150m to £400m, repaying the £200m development facility on The Bower. The weighted average cost of debt fell from 4.0%, at 31 March 2019, to 3.5% at the period end. Our £100m Convertible Bond was repaid in June 2019. The Group has £261m of cash and unutilised bank facilities available to fund capital works on the portfolio and future acquisitions.

 

Board Matters

 

At the 2019 AGM held in July, we said goodbye to Mike Slade, the founder and former Chief Executive of Helical, who stepped down from the Board after 35 years to be replaced as Chairman by Richard Grant. The whole Board congratulates Mike on his remarkable career and wishes him every success with his continued endeavours for charity as well as a happy and relaxing retirement.

 

During the period we appointed Sue Farr as an independent Non-Executive Director of the Board and a member of the Audit and Risk, Nominations and Remuneration Committees. Sue brings considerable expertise in marketing, branding and consumer issues to the team and I welcome her to the Company.

 

Sustainability

 

We have long recognised that our business impacts on the environment and the wider communities in which we operate and we seek to create sustainable buildings through our development and refurbishment activities. During the period we formalised many of our ESG policies, establishing a Sustainability Committee headed by our Property Director, Matthew Bonning-Snook, and incorporating representatives from each of our internal departments. In addition to seeking individual ratings for our portfolio under BREEAM, where we have achieved "Excellent" for all of the redeveloped properties within our London portfolio, we also look to measure and improve our corporate ESG ratings under the assessments made by EPRA, MSCI and the Carbon Disclosure Project ("CDP"). During the period, we added GRESB to the list of measures and benchmarks against which we assess our sustainability achievements.

 

Outlook

 

We operate in a climate of political uncertainty and we hope that the forthcoming General Election will provide clarity in a manner which is positive for the UK economy.

 

We remain a Company focused on the creation of capital profits through the development and letting of the high quality office space that today's occupiers are seeking. Our current portfolio will continue to generate such profits as it reaches its fully let and stabilised potential. Further growth is dependent on the Group unearthing new opportunities and management's efforts are focused on achieving this. With our experience and track record, we are confident in our ability to add to our pipeline and to continue the growth of Helical.

 

 

 

Gerald Kaye

Chief Executive

21 November 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 in the UK. As evidenced by the continued strong tenant demand for Grade A office space, we expect this to remain the case for the foreseeable future, assuming a government supportive of business.

 

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, such as 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 now comprise 52% of our tenant base.

 

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. We continue to evolve our tenant offering to reflect trends in demand, specifically with the recent introduction of fitted "plug and play" solutions on some of the buildings where we have smaller floor plates.

 

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

 

Manchester continues to present attractive opportunities for us outside London and its city centre has seen the highest take-up figures on record for the first half of 2019. With 824,021 sq ft let across 124 transactions, it is well on track to exceed the five year rolling average of 1.2m sq ft. Meanwhile, Grade A office supply continues to fall and is currently at its lowest reported level.

 

Prime rents have risen to £36.50 psf and, with a lack of Grade A supply, it is likely rental growth will continue and it is expected to reach £40.00 psf by the end of 2020. Whilst investment volumes are significantly down in 2019, prime yields have remained steady.

 

Over the past decade Manchester's population has seen the greatest percentage growth outside London. Urbanisation continues, with city centre living having risen by 185% over the past 15 years. This increase has helped drive significant employment growth and this is expected to continue, predicted to increase by 11.8% over the next five years.

 

Manchester is well known for having the highest graduate retention rate outside London. The city's young and highly skilled workforce has seen it attract tech businesses which now occupy 35% of commercial property within the city.

 

As with London, we believe in clustering assets together. Our four offices are all within a ten minute walk of one another, enabling us to offer tenants a choice in design, size and rental tone and aiding in the long term retention of our tenants.

 

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 a see-through ERV on the portfolio of £59.6m 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.

 



 

Financial Review

 

 

IFRS Performance


 

EPRA Performance

IFRS Profit Before Tax
£13.1m (2018: £29.1m)

 

EPRA Earnings
£6.5m (2018: loss of £5.5m)

 

IFRS EPS
11.7p (2018: 21.8p)

 

EPRA EPS
5.4p (2018: loss of 4.6p)

 

IFRS Diluted NAV Per Share
472p (31 March 2019: 469p)

 

EPRA NAV Per Share
486p (31 March 2019: 482p)

 

 

Overview

 

The half year has seen continued letting success, particularly at The Tower, London EC1 and One Bartholomew, London EC1. Combined with the development progress made at Kaleidoscope, London EC1 and the recognition of the final profit on exit from One Creechurch Place, London EC3, the resultant valuation gains and development profits recognised have driven the Group's net asset growth.

 

With the repayment of the £100m Convertible Bond in June 2019 and the completion of the expanded £400m Revolving Credit Facility, the Group has reduced its average cost of debt whilst extending the maturity of its borrowings.

 

Results for the Half Year

 

The see-through results for the half year to 30 September 2019 include net rental income of £13.0m, a net gain on sale and revaluation of the investment portfolio of £9.9m and development profits of £5.7m, leading to a Total Property Return of £28.6m (2018: £43.2m). Total administration costs of £7.4m (2018: £8.0m) and net finance costs of £7.6m (2018: £7.4m) contributed to a pre-tax profit of £13.1m (2018: £29.1m). EPRA net asset value per share increased by 0.8% to 486p (31 March 2019: 482p).

 

The interim dividend, payable on 31 December 2019, will be 2.70p per share, a 3.8% increase on the previous interim period.

 

The Group's real estate portfolio, including its share of assets held in joint ventures, increased to £955.8m (31 March 2019: £876.4m) as a result of the acquisition, in joint venture, of 33 Charterhouse Street, London EC1, capital expenditure and net revaluation gains on the investment portfolio.

 

The expenditure on the investment portfolio during the period increased the Group's see-through loan to value to 35.3% (31 March 2019: 30.6%). Repayment of the Convertible Bond and refinancing The Bower into an expanded £400m Revolving Credit Facility reduced the Group's weighted average cost of debt to 3.5% (31 March 2019: 4.0%) and increased the weighted average debt maturity to 4.5 years (31 March 2019: 2.7 years). The average maturity of the facilities would increase to 5.8 years on exercise of the two one-year extension options on the Revolving Credit Facility and on a fully utilised basis.

 



 

At 30 September 2019, the Group had unutilised bank facilities of £210m and £51m 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 and future property acquisitions.

 

Total Accounting Return

 

The Total Accounting Return is the growth in the net asset value of the company plus dividends paid in the period, expressed as a percentage of the net asset value at the beginning of the period. The metric measures the growth in Shareholders' Funds each period and is expressed as an absolute measure.

 


Half Year to

2020

%

Year to

2019

%

Year to

2018

%

Year to

2017

%

Year to

2016

%

Year to

2015

%

Total Accounting Return

2.7

8.4

5.3

8.3

22.5

21.1

 

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. 

 


Half Year to

2020

£m

Year to

2019

£m

Year to

2018

£m

Year to

2017

£m

Year to

2016

£m

Year to

2015

£m

Total Property Return

28.6

81.4

68.8

79.9

164.6

155.3

 

Earnings Per Share

 

The IFRS earnings per share decreased from 21.8p to 11.7p and are based on the after tax earnings attributable to ordinary Shareholders divided by the weighted average number of shares in issue during the period. 

 

On an EPRA basis, the loss per share of 4.6p in 2018 improved to a positive earnings per share of 5.4p, reflecting the Group's share of net rental income of £13.0m (2018: £11.7m) and development profits of £5.7m (2018: losses of £2.1m), but excluding gains on sale and revaluation of Investment properties of £9.9m (2018: £33.6m).

 

Net Asset Value

 

IFRS diluted net asset value per share increased from 469p to 472p and is a measure of shareholders' funds divided by the number of shares in issue at the period end, adjusted to allow for the effect of all dilutive share awards. 

 

EPRA net asset value per share increased by 0.8% to 486p per share (31 March 2019: 482p). This movement arose principally from a total comprehensive income (retained profits) of £14.1m (2018: £25.9m), less £9.0m of dividends (2018: £8.3m).

 

EPRA triple net asset value per share marginally increased to 466p (31 March 2019: 465p).



 

Income Statement

 

Rental Income and Property Overheads

 

Gross rental income receivable by the Group in respect of wholly owned properties increased to £14.5m (2018: £13.5m), reflecting letting success and partial capture of the investment portfolio's reversionary potential, offset by sales of assets during the prior periods. In the joint ventures, gross rents remained steady at £0.4m (2018: £0.4m). Property overheads in respect of wholly owned assets and in respect of those assets in joint ventures fell by 20.8% to £1.9m (2018: £2.4m). After taking account of net rents receivable from our profit share partners of £nil (2018: £0.1m), see-through net rents increased to £13.0m (2018: £11.7m).

 

Development Profits

 

In the period under review, from our role as development manager at One Creechurch Place, London EC3, we recognised £0.8m of profit. A further profit of £0.9m was recognised for carrying out a similar role at Barts Square, London EC1.

 

Project expenditure of £0.4m on potential new opportunities and to satisfy cost indemnities given on the sale of our Retirement Villages in 2017, and provisions of £0.1m against our legacy retail development programme, combined with other net income of £0.2m, contributed to a net development profit of £1.4m (2018: £1.7m).

 

Share of Results of Joint Ventures

 

The revaluation of our investment assets held in joint ventures generated a surplus of £0.5m (2018: £1.1m). Under our development management agreement for One Bartholomew, London EC1, we recognised a net development fee of £5.4m as a result of letting progress, but a reassessment of the expected sales proceeds from the remaining units in the first phase of residential at Barts Square resulted in a provision of £1.1m. The sale of the Group's 10% investment in One Creechurch Place, London EC3 resulted in a profit of £1.3m.

 

Finance, administration, taxation and other sundry items added a further £0.7m of costs. An adjustment to reflect our economic interest in the Barts Square, London EC1 development and to ensure our investment in One Creechurch Place, London EC3 is shown at its recoverable amount, generated surpluses of £2.6m, leaving a net profit from our joint ventures of £8.0m (2018: loss of £3.9m).

 

Gain on Sale and Revaluation of Investment Properties

 

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 1.7% (including purchases and gains on sales) and 1.8% on a like-for-like basis. In Manchester, the portfolio remained unchanged on a like-for-like basis. In total, the see-through investment portfolio showed a valuation surplus of 1.4% (including purchases and gains on sales), or 1.5% 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 £9.9m (2018: £33.6m). 

 



 

Administrative Expenses

 

Administration costs in the Group, before performance-related awards, reduced from £5.6m to £5.3m.

 

Performance related share awards and bonus payments, including National Insurance costs, were £1.7m (2018: £2.3m). Of this amount, £0.9m (2018: £0.9m), being the 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

Administrative expenses (excluding performance related rewards)

5,324

5,552

Performance related awards, including NIC

1,730

2,309

Group

7,054

7,861

In joint ventures

335

161

Total

7,389

8,022

 

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 £6.1m (2018: £6.3m). Interest payable in respect of the unsecured bonds was £0.9m (2018: £2.0m). Bank charges, commitment fees, sundry interest and the amortisation of refinancing costs increased to £3.0m (2018: £2.4m) due to the early repayment of The Bower facility upon the transfer of the property into the expanded Revolving Credit Facility. Capitalised interest reduced from £2.3m to £1.1m as development schemes progressed and as a result of the completion of The Tower, London EC1 in August 2018. Total finance costs, including in joint ventures, increased to £8.9m (2018: £8.4m).

 

Finance income earned, including in joint ventures, was £1.4m (2018: £1.1m). The movement in medium and long-term interest rate projections during the period contributed to a charge of £5.0m (2018: credit of £0.3m) on their mark-to-market valuation. The repayment of the £100m Convertible Bond resulted in a credit of £0.5m (2018: £1.0m) on the reversal of the 31 March 2019 mark-to-market valuation.

 

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 decrease in current tax charge for the period to £1.2m from £11.2m is primarily a result of the tax charge on the capital gain on the sale of The Shepherds Building, London W14 in the prior period.

 

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 Company has proposed an interim dividend of 2.70p, an increase of 3.8% on the previous period (2018: 2.60p).



 

Balance Sheet

 

Shareholders' Funds

 

Shareholders' Funds at 1 April 2019 were £567.4m. The Group's results for the period added £14.1m (2018: £25.9m), net of tax, representing the total comprehensive income for the period. Movements in reserves arising from the Group's share schemes increased funds by £1.2m. The Company paid dividends to Shareholders amounting to £9.0m leaving a net increase in Shareholders' Funds from Group activities during the period of £6.3m to £573.7m.

 

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 2019

791,250

25,382

816,632

2,189

(14,781)

804,040

Acquisitions

- wholly owned

-

-

-

-

-

-


- joint ventures

-

37,114

37,114

-

-

37,114

Capital expenditure        

- wholly owned

31,965

-

31,965

(21)

-

31,944

                                         

- joint ventures

-

2,698

2,698

-

-

2,698

Revaluation surplus

- wholly owned

11,885

-

11,885

-

(2,443)

9,442

                                

- joint ventures

-

676

676

-

(204)

472

Valuation at 30 September 2019

835,100

65,870

900,970

2,168

(17,428)

885,710

 

In the period to 30 September 2019, the Group acquired 33 Charterhouse Street, London EC1 in joint venture for £37.1m (our share). The Group spent £34.7m on capital works on the investment portfolio, mainly at Kaleidoscope, London EC1 (£20.6m), The Tower, London EC1 (£6.6m), Barts Square, London EC1 (£1.7m), The Tootal Buildings (formally called Churchgate and Lee), Manchester (£3.2m) and Fourways House, Manchester (£0.9m). Revaluation gains added £12.6m to increase the see-through value of the portfolio, before lease incentives, to £901.0m (31 March 2019: £816.6m). The accounting for head leases and lease incentives resulted in a book value of the see-through investment portfolio of £885.7m (31 March 2019: £804.0m).

 

Debt and Financial Risk

 

In total, Helical's outstanding debt at 30 September 2019 of £395.2m (31 March 2019: £479.2m) had a weighted interest cost of 3.5% (31 March 2019: 4.0%) and a weighted average debt maturity of 4.5 years (31 March 2019: 2.7 years). The average maturity of the facilities would increase to 5.8 years following exercise of the two one-year extensions of the Group's £400m Revolving Credit Facility on a fully utilised basis.

 

Debt Profile at 30 September 2019 - Including Commitment Fees but Excluding the Amortisation 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

493,000

314,000

179,000

3.2

4.9

6.5

Development facilities

50,400

32,770

17,630

4.9

3.9

3.9

Total wholly owned

543,400

346,770

196,630

3.4

4.8

6.2

In joint ventures

51,684

48,446

3,238

3.9

2.3

2.3

Total secured debt

595,084

395,216

199,868

3.5

4.5

5.9

Working capital

10,000

-

10,000

-

-

1.0

Total unsecured debt

10,000

-

10,000

-

-

1.0

Total debt

605,084

395,216

209,868

3.5

4.5

5.8

 

* 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 a £400m Revolving Credit Facility that enables the Group to acquire, refurbish, reposition and hold significant parts of our investment portfolio with the remaining London investment assets held in a £93m term loan secured facility. The value of the Group's properties secured in these facilities at 30 September 2019 was £717m (31 March 2019: £698m) with a corresponding loan to value of 43.8% (31 March 2019: 44.4%). The average maturity of the Group's investment facilities at 30 September 2019 was 4.9 years (31 March 2019: 3.5 years), increasing to 6.5 years on a fully utilised basis and following the two one-year extensions of the Revolving Credit Facility. The weighted average interest rate was 3.2% (31 March 2019: 3.9%). The marginal cost of fully utilising the undrawn Revolving Credit Facility was 2.2% (31 March 2019: 2.1%).

 

-       Development Facilities

This facility finances the over-station development at Kaleidoscope, London EC1. The maturity of the Group's development facility at 30 September 2019 was 3.9 years (31 March 2019: 4.4 years) with a weighted average interest rate of 4.9% (31 March 2019: 6.3%). Excluding the impact of commitment fees, the weighted average interest rate of this facility is 4.2% (31 March 2019: 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 30 September 2019 was 2.3 years (31 March 2019: 2.8 years) with a weighted average interest rate of 3.9% (31 March 2019: 4.0%).

 

Unsecured Debt

 

The Group's unsecured debt, following the repayment of the £100m Convertible Bond in June 2019, is £nil (31 March 2019: £100.5m), as follows:

 

-       Short-term Working Capital Facilities

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

 

Cash and Cash Flow

 

At 30 September 2019, the Group had £261m (31 March 2019: £382m) of cash and agreed, undrawn, committed bank facilities including its share in joint ventures, as well as £62m (31 March 2019: £25m) of uncharged property on which it could borrow funds.

 



 

Net Borrowings and Gearing

 

Total gross borrowings of the Group, including in joint ventures, have decreased from £479.2m to £395.2m during the six month period to 30 September 2019. After deducting cash balances of £51.3m (31 March 2019: £205.2m) and unamortised refinancing costs of £6.6m (31 March 2019: £5.4m), net borrowings increased from £268.6m to £337.4m. The see-through gearing of the Group, including in joint ventures, increased from 47.3% to 58.8%.

 


30 September

 2019

31 March

2019

See-through gross borrowings

£395.2m

£479.2m

See-through cash balances

£51.3m

£205.2m

Unamortised refinancing costs

£6.6m

£5.4m

See-through net borrowings

£337.4m

£268.6m

Shareholders' Funds

£573.7m

£567.4m

See-through gearing - IFRS net asset value

58.8%

47.3%

 

Hedging

 

At 30 September 2019, the Group had £243.0m (31 March 2019: £363.0m) of fixed rate debt with an average effective interest rate of 3.0% (31 March 2019: 3.7%) and £103.8m (31 March 2019: £67.2m) of floating rate debt with an average effective interest rate of 4.4% (31 March 2019: 5.7%). In addition, the Group had £200m of interest rate caps at an average of 1.75% (31 March 2019: £240m at 1.69%). In our joint ventures, the Group's share of fixed rate debt was £nil (31 March 2019: £nil) and £48.4m (31 March 2019: £49.0m) of floating rate debt with an effective rate of 3.9% (31 March 2019: 4.0%), with interest rate caps set at 1.5% plus margin on £32.9m (31 March 2019: £11.0m at 0.5%).

 


30 September

2019

£m

Effective interest rate

%

31 March

2019

£m

Effective interest rate

%

Fixed rate debt





- Secured borrowings

243.0

3.0

262.5

3.6

- Convertible Bond

-

-

100.0

4.0

- Fair value of Convertible Bond

-

-

0.5

-

Total

243.0

3.0

363.0

3.7

Floating rate debt





- Secured

103.8

4.41

67.2

5.71

Total

346.8

3.4

430.2

4.0

In joint ventures





- Floating rate

48.4

3.9

49.0

4.0

Total borrowings

395.2

3.5

479.2

4.0

 

¹ This includes commitment fees on undrawn facilities. Excluding these would reduce the effective rate to 3.1% (31 March 2019: 3.7%).

 

 

 

Tim Murphy

Finance Director

21 November 2019

Helical's Property Portfolio - 30 September 2019

 

Property Overview

 

Helical divides its property activities into two core markets: London and Manchester offices. London represents 87% and Manchester 13% of the total see-through 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.

 

33 Charterhouse Street, EC1

In May 2019 we acquired the rights to a long leasehold interest in 33 Charterhouse Street, a major development site located in Farringdon, in a 50:50 joint venture with AshbyCapital.  The site is situated on the corner of Charterhouse Street and Farringdon Road, adjacent to Farringdon Station and immediately opposite the future Museum of London site at Smithfield General Market.

 

Since acquisition, extensive work has been undertaken to refine the existing planning consent such that the building is now expected to provide for c.190,000 sq ft of offices across ten floors and c.10,000 sq ft of ground floor retail. Work on site will commence shortly and completion is anticipated in Spring 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 21,280 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. The repositioning of 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 buildings were fully pre-let when they completed in November 2015.

 

The Tower

The Tower offers 171,434 sq ft of office space with a contemporary façade and innovatively designed interconnecting floors, along with 10,982 sq ft of restaurant space let to Albion & East (trading as Serata Hall) and Wagamama.

 

In the period we have let the 14th floor on a fitted basis to Snowflake Computing, the cloud-built data warehouse solutions provider, and the 16th floor to Incubeta, a global digital marketing performance group. Since the period end the 12th floor has also been let, on a fitted basis, to an existing tenant, Brilliant Basics, an Infosys company and the 13th floor to OpenPayd, a banking and payments platform for businesses. Following these lettings, The Tower is now 93% let with only the 15th floor available.

 



 

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 the Farringdon East Elizabeth Line 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 10,187 sq ft together with 21,122 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. In the period we completed the sales of two residential units taking the total sales to 136 residential units, with a total value of £173.9m at an average price of £1,555 psf. Following the completion of one further sale after the period end, seven apartments remain available. The landscaping of the new public square has been completed with the restaurant space let to Stem + Glory and Halfcup.

 

90 Bartholomew Close - Office/Restaurant

The 24,013 sq ft office building, with 6,414 sq ft of restaurant space, completed in March 2018. In the period we let the fourth and fifth floors to Sia Partners, taking the building to 61% let. Since the end of the period, we have let all of the remaining floors with the second floor let as expansion space to an existing Helical tenant on a fitted basis, the third floor to Constantine Cannon and the sixth floor to Eric Salmon.

 

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 now that the building is completed and successfully let, the joint venture is entitled to receive a profit share payment.

 

During the period, we have let the ground, first and second floors to The University of Chicago Booth School of Business, the sixth floor to Sopra Steria and the seventh floor to InfraRed Capital Partners, taking the building to 73% let. Since the period end the third and fourth floors have been let to BDB Pitmans taking the building to 91% let, with only the fifth floor available.

 

Phase Three

 

Residential/Retail

Construction works on Phase Three of Barts Square are nearing completion with the first block having reached practical completion in November 2019 and the remaining two due to complete in January and February 2020. This phase comprises 92 apartments and 11,607 sq ft of retail space. During the period, contracts were exchanged on seven units, taking the total number of units exchanged to 44, at a value of £69.7m and an average price of £1,793 psf. Following exchange on one further unit since the period end, 46 units are available for sale and one additional unit that will be released at a later date.

 

55 Bartholomew

With completion of this refurbishment project due in December 2019 we have commenced marketing of the newly created 10,187 sq ft of office space spread over five floors. The works comprised the substantial refurbishment and extension of the original building and the addition of a new fifth floor.

 



 

Kaleidoscope, EC1

The over-station development at the Farringdon East Elizabeth Line station, which will comprise a six storey 86,183 sq ft office building, with a 2,497 sq ft restaurant unit on the ground floor, is due to complete in January 2020. The building sits immediately east of Smithfield Market with views over Charterhouse Square and towards St Paul's Cathedral. The building is being marketed with good interest being expressed by potential tenants.

 

The Loom, E1

This 108,610 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.

 

Since 1 April 2019, we have let three units at a premium to 31 March 2019 ERVs taking the building to 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 on 28 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 57,164 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. We have also secured planning consent for a new 30,000 sq ft building.

 

In the period we have completed five lettings representing 16,160 sq ft, at a 10.8% average premium to 31 March 2019 ERVs taking the building to 88% let.

 

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.

 

One Creechurch Place, EC3

The sale of our 10% shareholding in One Creechurch Place to our joint venture partner, HOOPP, took place in September 2019, completing our involvement in the development.

 



 

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.

 

The Tootal Buildings, Manchester

The buildings, formally referred to as Churchgate and Lee, comprise 243,666 sq ft of multi-let offices. The assets were 64% let when acquired in March 2014. Since their purchase, we have refurbished the Churchgate House reception and 94,493 sq ft of office space, with a further 46,739 sq ft currently being refurbished as expansion space for an existing tenant. In the period we have completed the lettings of the recently refurbished third floor in Churchgate House and the sixth and seventh floors in Lee House to Capita Business Services. Following the completion of these lettings the building is now fully let. We continue to actively manage the buildings, with a recently completed full refurbishment of the reception at Lee House.

 

35 Dale Street, Manchester

35 Dale Street is a 56,124 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 period Couchbase have taken occupation of the newly reconfigured former loading bay for office use.

 

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, both of which are available to let.

 

Fourways House, Manchester

This 58,369 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 our management programme and have let two units in the period at a 12.7% premium to 31 March 2019 ERVs and have let a further unit since the period end. We have recently obtained planning permission to undertake a significant refurbishment of the atrium and common parts and works will commence shortly, with completion expected in July 2020.

 

 



 

Portfolio Analytics

 

See-through Valuation Movements

 


Val change

inc purchases & gains on sales

%

Val change

excl purchases & gains on sales

%

Investment

portfolio

weighting

30 September 2019

%

Investment portfolio

weighting

31 March 2019

%

London Offices





- Completed, let and available to let

1.4

1.4

70.2

75.3

- Being redeveloped

2.6

3.9

15.7

9.7

Total London

1.7

1.8

85.9

85.0

Manchester Offices





- Completed, let and available to let

0.0

0.0

14.1

15.0

Total Manchester

0.0

0.0

14.1

15.0

Total

1.4

1.5

100.0

100.0

 

See-through Total Portfolio by Fair Value

 

  

Investment

£m

Development

£m

Total

£m

 

%

London Offices







 - Completed, let and available to let

632.7

70.2

-

-

632.7

66.2

 - Being redeveloped

141.2

15.7

-

-

141.2

14.8

 - Held for redevelopment

-

-

0.3

0.5

0.3

0.0

London Residential

-

-

53.2

97.1

53.2

5.6

Total London

773.9

85.9

53.5

97.6

827.4

86.6

Manchester Offices







 - Completed, let and available to let

127.0

14.1

-

-

127.0

13.3

Total Manchester

127.0

14.1

-

-

127.0

13.3








Total Core Portfolio

900.9

100.0

53.5

97.6

954.4

99.9








Other

0.1

0.0

-

-

0.1

0.0

Regional Retail

-

-

0.7

1.3

0.7

0.1

Land

-

-

0.6

1.1

0.6

0.0

Total Non-Core Portfolio

0.1

0.0

1.3

2.4

1.4

0.1








Total

901.0

100.0

54.8

100.0

955.8

100.0

 

See-through Trading and Development Portfolio

 


Book value

£m

Fair value

£m

Surplus

£m

Fair value

%

London Offices

0.3

0.3

-

0.5

London Residential

53.2

53.2

-

97.1

Total Core Portfolio

53.5

53.5

-

97.6






Regional Retail

0.7

0.7

-

1.3

Land

-

0.6

0.6

1.1

Total Non-Core Portfolio

0.7

1.3

0.6

2.4






Total

54.2

54.8

0.6

100.0

 



 

Capital Expenditure

 

We have a committed and 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

109.8

5.7

114,000

68,416

182,416

Completed

Kaleidoscope, London EC11

59.0

16.3

-

88,680

88,680

January 2020

55 Bartholomew, London EC1

2.4

0.4

9,000

1,187

10,187

December 2019

Investment - planned







33 Charterhouse Street, London EC1

62.8

62.0

-

200,000

200,000

H1 2022

Development - committed







Barts Square, London EC1 - Phase One

64.7

0.3

-

127,364

127,364

Completed

Barts Square, London EC1 - Phase Three

39.8

4.5

-

89,383

89,383

November 2019

to February 2020

in three phases

 

1. Includes deferred consideration payment due in April 2020.

 

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.

 

 

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

70.2

22.6

82.7

30.2

83.2

35.1

58.9

0.7

- Being redeveloped

15.7

-

-

-

-

15.3

25.7

0.1

Total London

85.9

22.6

82.7

30.2

83.2

50.4

84.6

0.6

Manchester Offices









- Completed, let and available to let

14.1

4.7

17.2

6.1

16.7

9.1

15.3

1.4

Total Manchester

14.1

4.7

17.2

6.1

16.7

9.1

15.3

1.4

Other

-

0.1

0.1

0.1

0.1

0.1

0.1

-

Total

100.0

27.4

100.0

36.4

100.0

59.6

100.0

0.7

 

During the period, total contracted income increased by £3.2m as a result of new lettings and rent reviews.

 


See-through

total portfolio contracted rent

£m

Rent lost at break/expiry

(0.8)

Rent reviews and uplifts on lease renewals

0.1

New lettings


- London

3.0

- Manchester

0.9

Total increase in the period from asset management activities

3.2

Total contracted rental change from sales and purchases

-

Net increase in contracted rents in the period

3.2



 

Investment Portfolio

 

Portfolio Yields

 


EPRA topped

up NIY

30 September

2019

%

EPRA topped

up NIY

31 March

2019

%

Reversionary

yield

30 September

2019

%

Reversionary

yield

31 March

2019

%

True equivalent yield

30 September

2019

%

True equivalent yield

31 March

2019

%

London Offices







- Completed, let and available to let

4.5

4.2

5.2

5.2

5.1

5.1

- Being redeveloped

n/a

n/a

5.3

5.7

4.9

4.9

Total London

4.5

4.2

5.2

5.3

5.0

5.1

Manchester Offices







- Completed, let and available to let

4.6

4.2

6.3

6.3

6.1

6.1

Total Manchester

4.6

4.2

6.3

6.3

6.1

6.1








Total

4.5

4.2

5.4

5.4

5.2

5.2

 

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

 


30 September 2019

Capital value psf

£

30 September 2019

Vacancy rate

%

30 September 2019

WAULT

Years

31 March 2019

WAULT

Years

London Offices





- Completed, let and available to let

1,090

8.9

7.4

8.0

- Being redeveloped

610

n/a

n/a

n/a

Total London

927

8.9

7.4

8.0

Manchester Offices





- Completed, let and available to let

304

17.7

4.3

3.9

Total Manchester

304

17.7

4.3

3.9






Total

731

12.5

6.9

7.3



 

See-through Lease Expiries or Tenant Break Options

 


Period to

2020

Year to

2021

Year to

2022

Year to

2023

Year to

2024

% of rent roll

3.1

6.0

11.5

10.4

12.8

Number of leases

17

20

31

19

24

Average rent per lease (£)

66,689

109,858

134,432

200,005

193,356

 

Top 10 Tenants

 

We have a strong rental income stream and a diverse tenant base. The top 10 tenants account for 47.6% 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

10.8

2

WeWork

Flexible offices

3.8

10.5

3

Pivotal

Technology

2.0

5.5

4

Infosys

Technology

1.4

3.9

5

Anomaly

Marketing

1.4

3.9

6

CBS

Media

1.0

2.9

7

Allegis

Recruitment

1.0

2.7

8

Finablr

Financial services

0.9

2.6

9

Incubeta

Marketing

0.9

2.5

10

Stripe

Technology

0.8

2.3

Total


17.1

47.6

 

Principal Lettings During the Period

 

 

Property

Tenant

Area

sq ft

Lease term

to expiry

years

The Tower, London EC1

Incubeta

 11,306

10

The Tower, London EC1

Snowflake Computing

 9,568

5

The Tootal Buildings, Manchester

Capita Business Services

 35,118

11

Power Road Studios, London W4

So Energy

7,135

5

90 Bartholomew Close, London EC1

Sia Partners

 7,564

10

Power Road Studios, London W4

HOPP

 5,495

3

The Loom, London E1

UI Centric

 3,048

5

The Loom, London E1

Qbic Hotels

 1,407

3

The Loom, London E1

Oyster Information Management Solutions

 1,706

10

Power Road Studios, London W4

Kobayashi Healthcare

 1,971

5

 



 

Letting Activity

 


Area

sq ft

Contracted Rent

(Helical's Share)

£

Rent

per sq ft

£

% Above

 31 March 2019 ERV

%

Investment Properties





London Offices





The Tower, The Bower, EC1

 20,874

 1,726,000

82.69

2.41

The Loom, E1

 6,161

 359,000

58.22

10.4

Power Road Studios, W4

 16,160

 682,000

41.53

10.8

90 Bartholomew Close, EC1

 7,564

 245,000

74.05

0.9

Total London

50,759

3,012,000

59.34

5.9






Manchester Offices





                The Tootal Buildings

 35,118

 755,000

21.50

0.1

Fourways House

 4,524

 120,000

26.51

12.7

Total Manchester

39,642

875,000

22.07

1.6

Total

 90,401

 3,887,000

43.00

4.7






Development Properties





London Offices





One Bartholomew, EC1

 82,459

 -  

78.96

n/a

 

1. Excludes leases on a fitted basis.

 



 

Statement of Directors' Responsibilities

 

We confirm that to the best of our knowledge:

 

a)    The condensed unaudited consolidated financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting';

 

b)    The interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events and their impact during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

 

c)    The interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

 

Balances with related parties at 30 September 2019, 30 September 2018 and 31 March 2019 are disclosed in Note 25.

 

A list of current Directors is maintained at 5 Hanover Square, London, W1S 1HQ and at www.helical.co.uk.

 

The half year statement was approved by the Board on 21 November 2019 and is available from the Company's registered office at 5 Hanover Square, London, W1S 1HQ and on the Company's website at www.helical.co.uk.

 

 

 

On behalf of the Board

Tim Murphy
Finance Director

21 November 2019



 

Independent Review Report to the Members of Helical plc

 

Introduction

 

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2019 which comprises the Unaudited Consolidated Income Statement, Unaudited Consolidated Statement of Comprehensive Income, Unaudited Consolidated Balance Sheet, Unaudited Consolidated Cash Flow Statement and Unaudited Consolidated Statement of Changes in Equity, the cash flow statement and related notes 1 to 29. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

 

Directors' Responsibilities

 

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

As disclosed in Note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.

 

Our Responsibility

 

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

 

Scope of Review

 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.



 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2019 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

 

 

Deloitte LLP
Statutory Auditor

London, United Kingdom        
21 November 2019



 

Unaudited Consolidated Income Statement

 

For the Half Year to 30 September 2019

 

  

Notes

Half Year to

30 September 2019

£000

Half Year to

30 September 2018

£000

Year to

31 March

2019

£000

Revenue

3

22,055

23,395

44,175

Net rental income

4

12,811

11,747

24,599

Development property profit/(loss)

5

1,441

1,686

(1,781)

Share of results of joint ventures

13

7,982

(3,874)

(3,217)

Other operating income


44

4

-

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


22,278

9,563

19,601

(Loss)/gain on sale of Investment properties

6

(28)

1,102

15,008

Revaluation of Investment properties

12

9,442

31,435

44,284

Change in fair value of available-for-sale investments

16

-

144

144

Gross profit


31,692

42,244

79,037

Administrative expenses

7

(7,054)

(7,861)

(16,753)

Operating profit


24,638

34,383

62,284

Finance costs

8

(8,315)

(7,616)

(17,407)

Finance income


1,311

1,033

983

Change in fair value of derivative financial instruments

22

(4,980)

325

(3,322)

Change in fair value of Convertible Bond


468

958

865

Foreign exchange gain


9

65

53

Profit before tax


13,131

29,148

43,456

Tax on profit on ordinary activities

9

898

(3,224)

(836)

Profit for the period


14,029

25,924

42,620






Earnings per share

11




Basic


11.7p

21.8p

35.8p

Diluted


11.6p

21.6p

35.3p

 

Unaudited Consolidated Statement of Comprehensive Income

 

For the Half Year to 30 September 2019

 


Half Year to

30 September 2019

£000

Half Year to

30 September 2018

£000

Year to

31 March

2019

£000

Profit for the period

14,029

25,924

42,620

Exchange difference on retranslation of net investments in foreign operations

55

(47)

(51)

Total comprehensive income for the period

14,084

25,877

42,569

 

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



 

Unaudited Consolidated Balance Sheet

 

At 30 September 2019

 


Notes

At

30 September 2019

£000

At

30 September 2018

£000

At

31 March

2019

£000

Non-current assets





Investment properties

12

820,138

744,850

778,752

Owner occupied property, plant and equipment


6,394

1,783

1,747

Investment in joint ventures

13

78,073

31,519

24,676

Derivative financial instruments

22

319

1,703

915



904,924

779,855

806,090

Current assets





Land, developments and trading properties

14

1,035

4,048

2,311

Investment property held for sale

15

-

125,200

-

Trade and other receivables

17

36,539

98,700

58,726

Cash and cash equivalents

18

47,726

63,093

197,570



85,300

291,041

258,607

Total assets


990,224

1,070,896

1,064,697

Current liabilities





Trade and other payables

19

(52,539)

(55,652)

(43,159)

Lease liability

20

(599)

-

-

Corporation tax payable


(280)

(6,874)

(2,561)

Borrowings

21

-

(100,375)

(100,468)



(53,418)

(162,901)

(146,188)

Non-current liabilities





Borrowings

21

(340,603)

(332,290)

(324,814)

Derivative financial instruments

22

(8,017)

(1,529)

(4,158)

Lease liability

20

(7,872)

(2,189)

(2,189)

Trade and other payables

19

(590)

(10,815)

(11,405)

Deferred tax liability

9

(6,066)

(8,576)

(8,518)



(363,148)

(355,399)

(351,084)

Total liabilities


(416,566)

(518,300)

(497,272)






Net assets


573,658

552,596

567,425






Equity





Called-up share capital

23

1,465

1,459

1,459

Share premium account


103,462

101,304

101,304

Revaluation reserve


140,492

194,852

131,050

Capital redemption reserve


7,478

7,478

7,478

Other reserves


291

291

291

Retained earnings


320,470

247,212

325,843

Total equity


573,658

552,596

567,425



 

Unaudited Consolidated Cash Flow Statement

 

For the Half Year to 30 September 2019

 


Half Year to

30 September 2019

£000

Half Year to

30 September 2018

£000

Year to

31 March

2019

£000

Cash flows from operating activities




Profit before tax

13,131

29,148

43,456

Adjustment for:




Depreciation

409

151

296

Revaluation surplus on Investment properties

(9,442)

(31,435)

(44,284)

Loss/(gain) on sale of Investment properties

28

(1,102)

(15,008)

Profit on sale of plant and equipment

(11)

(35)

(52)

Net financing costs

7,004

6,583

16,424

Change in value of derivative financial instruments

4,980

(325)

3,322

Change in fair value of Convertible Bond

(468)

(958)

(865)

Share based payment charge

920

898

2,274

Share of results of joint ventures

(7,982)

3,874

3,217

Change in fair value of available-for-sale investment

-

(144)

(144)

Foreign exchange movement

55

(47)

(52)

Cash inflows from operations before changes in working capital

8,624

6,608

8,584

Change in trade and other receivables

16,394

(6,463)

40,561

Change in land, developments and trading properties

1,276

1,994

3,731

Change in trade and other payables

3,231

2,660

(3,176)

Cash inflows generated from operations

29,525

4,799

49,700

Finance costs

(12,525)

(13,525)

(25,358)

Finance income

6,680

87

461

Tax paid

(3,482)

-

(2,200)


(9,327)

(13,438)

(27,097)

Net cash generated from/(used by) operating activities

20,198

(8,639)

22,603

Cash flows from investing activities




Additions to Investment property

(32,423)

(58,959)

(79,742)

Net (costs)/proceeds from sale of Investment property

(28)

29,036

164,058

Investments in joint ventures and subsidiaries

(46,748)

-

-

Proceeds from disposal of joint ventures

1,334

-

-

Dividends from joint ventures

-

416

416

Receipts from available-for-sale investments

-

144

144

Sale of plant and equipment

26

41

155

Purchase of leasehold improvements, plant and equipment

(7)

(114)

(320)

Net cash (used by)/generated from investing activities

(77,846)

(29,436)

84,711

Cash flows from financing activities




Borrowings drawn down

213,747

25,132

64,089

Borrowings repaid

(296,679)

(7,540)

(54,306)

Finance lease repayments

(290)

-

-

Shares issued

6

8

8

Equity dividends paid

(8,980)

(8,303)

(11,406)

Net cash (used by)/generated from financing activities

(92,196)

9,297

(1,615)

Net (decrease)/increase in cash and cash equivalents

(149,844)

(28,778)

105,699

Cash and cash equivalents at start of period

197,570

91,871

91,871

Cash and cash equivalents at end of period

47,726

63,093

197,570

 



 

Unaudited Consolidated Statement of Changes in Equity

 

At 30 September 2019

 


Share

capital

£000

Share

premium

£000

Revaluation

reserve

£000

Capital

redemption

reserve

£000

Other

reserves

£000

Retained earnings

£000

Total

£000

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

Balances at 1 April 2019, as previously reported

1,459

101,304

131,050

7,478

291

325,843

567,425

Impact of transition to IFRS 16

-

-

-

-

-

(548)

(548)

Adjusted balances at 1 April 2019

1,459

101,304

131,050

7,478

291

325,295

566,877

Total comprehensive income

-

-


-

-

14,084

14,084

Revaluation surplus

-

-

9,442

-

-

(9,442)

-

Issued share capital

6

2,158

-

-

-

-

2,164

Performance Share Plan

-

-

-

-

-

920

920

Performance Share Plan - deferred tax

-

-

-

-

-

355

355

Share settled Performance Share Plan

-

-

-

-

-

(1,349)

(1,349)

Share settled bonus

-

-

-

-

-

(413)

(413)

Dividends paid

-

-

-

-

-

(8,980)

(8,980)

At 30 September 2019

1,465

103,462

140,492

7,478

291

320,470

573,658

 

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

 

The credit adjustment to retained earnings of £920,000 (31 March 2019: £2,274,000) is the contra to the share based payments charge recognised in the Unaudited Consolidated Income Statement, in accordance with IFRS 2 'Share Based Payments'.

 

There were net transactions with owners of £7,303,000 (31 March 2019: £9,038,000) made up of the Performance Share Plan credit of £920,000 (31 March 2019: £2,274,000) and related deferred tax credit of £355,000 (31 March 2019: £94,000), dividends paid of £8,980,000 (31 March 2019: £11,406,000), the issue of share capital of £6,000 (31 March 2019: £8,000) and corresponding share premium of £2,158,000 (31 March 2019: £2,506,000), share settled Performance Share Plan awards charge of £1,349,000 (31 March 2019: £1,837,000) and the share settled bonus awards charge of £413,000 (31 March 2019: £677,000).



 


Share

capital

£000

Share

premium

£000

Revaluation

reserve

£000

Capital

redemption

reserve

£000

Other

reserves

£000

Retained earnings

£000

Total

£000

At 31 March 2018

1,451

98,798

162,753

7,478

291

263,123

533,894

Total comprehensive income

-

-

-

-

-

25,877

25,877

Revaluation surplus

-

-

31,435

-

-

(31,435)

-

Realised on disposals

-

-

664

-

-

(664)

-

Issued share capital

8

2,506

-

-

-

-

2,514

Performance Share Plan

-

-

-

-

-

898

898

Performance Share Plan - deferred tax

-

-

-

-

-

230

230

Share settled Performance Share Plan

-

-

-

-

-

(1,837)

(1,837)

Share settled bonus

-

-

-

-

-

(677)

(677)

Dividends paid

-

-

-

-

-

(8,303)

(8,303)

At 30 September 2018

1,459

101,304

194,852

7,478

291

247,212

552,596

 

The credit adjustment to retained earnings of £898,000 is the contra to the share based payments charge recognised in the Unaudited Consolidated Income Statement, in accordance with IFRS 2 'Share Based Payments'.

 

There were net transactions with owners of £7,175,000 made up of the Performance Share Plan credit of £898,000 and related deferred tax credit of £230,000, share settled Performance Share Plan charge of £1,837,000, share settled bonus charge of £677,000, dividends paid of £8,303,000, the issue of share capital of £8,000 and corresponding share premium of £2,506,000.



 

Unaudited Notes to the Half Year Results

 

1. Financial Information

 

The financial information contained in this statement does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. The full accounts for the year ended 31 March 2019, which were prepared under International Financial Reporting Standards as adopted by the European Union and which received an unqualified report from the Auditors, and did not contain a statement under Section 498(2) or Section 498(3) of the Companies Act 2006, have been filed with the Registrar of Companies.

 

These interim condensed unaudited consolidated financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 March 2019.

 

These interim condensed unaudited consolidated financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union. The same accounting policies and methods of computation are followed in the 30 September 2019 interim condensed unaudited consolidated financial statements as in the most recent annual financial statements.

 

New Standards Adopted During the Period

During the six months to 30 September 2019, the following accounting standards and interpretations have been adopted by the Group:

 

Adoption of IFRS 16 'Leases'

 

The Group has adopted IFRS 16 'Leases', effective from 1 April 2019. This standard introduces significant changes for lessees by removing the distinction between operating and finance leases, requiring the recognition of a 'Right of Use Asset' and a 'Lease Liability' on the Balance Sheet. This applies to the Group and Company's lease of its head office premises, which was previously an operating lease under IAS 17 'Leases', and the headlease payments due under the long leasehold Investment properties. The accounting for rental income earned by the Group as a lessor remains unchanged.

 

Revised accounting policy

 

The Group assesses whether a contract contains a lease on entering into the contract. IFRS 16 expressly excludes short leases (under 12 months) and leases of low value. Where the Group has these leases, lease payments are recognised as operating expenses on a straight-line basis over the lease term.

 

IFRS 16 requires that a Lease Liability and corresponding Right of Use Asset are recognised on the Balance Sheet.

 

The Lease Liability is initially measured at the present value of future lease payments discounted at the rate implicit in the lease or, if this is not readily available, the Group's incremental borrowing rate. The Lease Liability is subsequently increased by the interest charge and decreased by lease payments made. The Lease Liability is adjusted for changes in the lease term or payments and contract modifications as they arise.

 

The Right of Use Asset initially comprises the corresponding Lease Liability, lease payments made at or before the commencement date and any direct costs. Where the Group has an obligation to restore the premises at the end of the lease term, a provision is made under IAS 37 'Provisions, Contingent Liabilities and Contingent Assets'. The costs are added to the Right of Use Asset. It is subsequently measured at cost less accumulated depreciation and impairment losses.

Approach to transition

 

The Group has applied IFRS 16 using the modified retrospective approach and therefore the results for the year to 31 March 2019 have not been restated. The Lease Liability is calculated at transition using the incremental borrowing rate at that date of 3.79%, being the weighted average cost of general debt at 31 March 2019. The Right of Use Asset is measured applying IFRS 16.C8(b)(i) where the Standard is assumed to apply from the commencement of the lease but discounted at the incremental borrowing rate at 31 March 2019. The resulting cumulative charge to 31 March 2019 is recognised as an adjustment to retained earnings on transition of £548,000. No practical expedients have been applied on transition.

 

Additional changes from previous lessee accounting

 

In addition to the new requirement for leases previously considered operating leases to be reflected as a Right of Use Asset and a Lease Liability on the Balance Sheet, the following changes apply:

 

-        lease incentives are to be recognised as part of the initial measurement on the Balance Sheet where they were previously a lease incentive liability, amortised on a straight-line basis;

-        Right of Use Assets are to be tested for impairment under IAS 36 'Impairment of Assets', replacing the onerous lease provisions under IAS 17;

-        the rental expense in Administrative Expenses is replaced by depreciation of the Right of Use Asset and interest on the Lease Liability; and

-        the cash payments are to be recognised within financing activities (principal payment) and interest paid (interest payment) in the Consolidated and Company Cash Flow Statements, where all lease payments were previously shown as operating cash outflows.

 

The following table sets out the adjustments made on transition to IFRS 16:

 


Under IAS 17

31 March

2019

£000

Impact of

IFRS 16

£000

Under IFRS 16

1 April

2019

£000

Non-current assets




Owner occupied property, plant and equipment

-

5,064

5,064

Current assets




Trade and other receivables

189

(189)

-

Total assets

189

4,875

5,064

Current liabilities




Trade and other payables

(1,150)

1,150

-

Non-current liabilities




Lease liability

-

(6,573)

(6,573)

Total liabilities

(1,150)

(5,423)

(6,573)

Retained earnings

325,843

(548)

325,295

Net assets

567,425

(548)

566,877

 

The difference between the operating lease commitments of £7,773,000 disclosed at 31 March 2019 and the Lease Liability of £6,573,000 at 1 April 2019 is due to discounting.

 



 

Going Concern

 

The Directors have assessed the going concern of the Group for a period of five years to March 2024, being the period for which the Board regularly reviews forecasts and which encompasses the lifetime of the Group's major development projects.

 

In making its assessment, the Board considers the principal risks and then assesses the potential impacts in severe, but plausible, downside scenarios together with the likely effectiveness of mitigating actions that the Group would have at its disposal.

 

Based on their assessment the Directors have a reasonable expectation that the Group will continue in operational existence for the foreseeable future and have, therefore, used the going concern basis in preparing the condensed unaudited financial statements.

 

Principal Risks and Uncertainties        

 

The responsibility for the governance of the Group's risk profile lies with the Board of Directors of Helical. The Board is responsible for setting the Group's risk strategy by assessing risks, determining its willingness to accept those risks and ensuring that the risks are monitored and that the Group is aware of and, if appropriate, reacts to changes in those risks. The Board is also responsible for allocating responsibility for risk within the Group's management structure.

 

The Group considers its principal risks to be:

 

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

 

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

 

Operational Risks - internal risks that could prevent the Group from delivering its strategy.

 

Reputational Risk - risks that could affect the Group in all aspects of its strategy.

 

There have been no significant changes to these risk areas in the period nor are there expected to be for the half year to 31 March 2020. A further analysis of these risks is included within the consolidated financial statements of the Group for the year ended 31 March 2019.



 

Critical Accounting Judgements

 

In addition to those noted in the 31 March 2019 Annual Report the Group made the following judgement:

 

Accounting treatment for 33 Charterhouse Street, London EC1.

 

During the period the Group acquired, in joint venture, a Development Agreement which contains the right to develop the 33 Charterhouse Street, London EC1 office building. In return, and once practical completion has been achieved, it will receive the long leasehold interest in the site. The Group has determined that the Development Agreement represents an agreement for lease and it should be accounted for as an Investment property at fair value, under IAS 40 'Investment Property', as the intention is to complete the development of the office and hold it for rental income and capital appreciation.

 

Key Sources of Estimation

 

There were no new estimates in addition to those noted in the 31 March 2019 Annual Report.

 

2. Revenue from Contracts with Customers

 


Half Year to

30 September 2019

£000

Half Year to

30 September 2018

£000

Year to

31 March

2019

£000

Development property income

3,080

5,545

7,963

Service charge income

4,422

4,319

8,058

Other revenue

 47

4

-

Total revenue from contracts with customers

7,549

9,868

16,021

 

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.

 

No impairment of contract assets was recognised in the half year to 30 September 2019 (half year to 30 September 2018: £nil: year to 31 March 2019: £nil).



 

3. Segmental Information

 

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

 

•    Investment properties, which are owned or leased by the Group for long-term income and for capital appreciation; and

 

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

 

Revenue

Investments

Half Year to 30.09.19

£000

Developments

Half Year to

30.09.19

£000

Total

Half Year to

30.09.19

£000

Investments

Half Year to 30.09.18

£000

Developments

Half Year to

30.09.18

£000

Total

Half Year to

30.09.18

£000

Rental income

14,506

-

14,506

13,527

-

13,527

Service charge income

4,422

-

4,422

4,319

-

4,319

Development property income

-

3,080

3,080

-

5,545

5,545

Other revenue

47

-

47

4

-

4

Revenue

18,975

3,080

22,055

17,850

5,545

23,395

Revenue

Investments Year to

31.03.19

£000

Developments

Year to

31.03.19

£000

Total

Year to

31.03.19

£000

Rental income

28,154

-

28,154

Development property income

-

7,963

7,963

Service charge income

8,058

-

8,058

Revenue

36,212

7,963

44,175

 

Profit before tax

Investments

Half Year to 30.09.19

£000

Developments

Half Year to

30.09.19

£000

Total

Half Year to

30.09.19

£000

Investments

Half Year to 30.09.18

£000

Developments

Half Year to

30.09.18

£000

Total

Half Year to

30.09.18

£000

Net rental income

12,811

-

12,811

11,769

(22)

11,747

Development property gain

-

1,441

1,441

-

1,686

1,686

Share of results of joint ventures

6,514

1,468

7,982

1,252

(5,126)

(3,874)

Gain on sale and revaluation of Investment properties

9,414

-

9,414

32,537

-

32,537


28,739

2,909

31,648

45,558

(3,462)

42,096

Fair value movement of available-for-sale investments



-



144

Other operating income



44



4

Gross profit



31,692



42,244

Administrative expenses



(7,054)



(7,861)

Net finance costs



(7,004)



(6,583)

Change in fair value of derivative financial instruments



(4,980)



325

Change in fair value of Convertible Bond



468



958

Foreign exchange gain



9



65

Profit before tax



13,131



29,148

 



 

 

Profit before tax

Investments

Year to

31.03.19

£000

Developments

Year to

31.03.19

£000

Total

Year to

31.03.19

£000

Net rental income

24,599

-

24,599

Development property loss

-

(1,781)

(1,781)

Share of results of joint ventures

5,203

(8,420)

(3,217)

Gain on sale and revaluation of Investment properties

59,292

-

59,292


89,094

(10,201)

78,893

Fair value movement of available-for-sale investments



144

Gross profit



79,037

Administrative expenses



(16,753)

Net finance costs



(16,424)

Change in fair value of derivative financial instruments



(3,322)

Change in fair value of Convertible Bond



865

Foreign exchange gain



53

Profit before tax



43,456

 

Net assets

Investments

At 30.09.19

£000

Developments

At 30.09.19

£000

Total

At 30.09.19

£000

Investments 

At 30.09.18

£000

Developments

At 30.09.18

£000

Total

At 30.09.18

£000

Investment properties

820,138

-

820,138

744,850

-

744,850

Land, development and trading properties

-

1,035

1,035

-

4,048

4,048

Investment in joint ventures

31,739

46,334

78,073

13,604

17,915

31,519


851,877

47,369

899,246

758,454

21,963

780,417

Other assets



90,978



290,479

Total assets



990,224



1,070,896

Liabilities



(416,566)



(518,300)

Net assets



573,658



552,596

Net assets

 

Investments

At 31.03.19

£000

Developments

At 31.03.19

£000

Total

At 31.03.19

£000

Investment properties

778,752

-

778,752

Land, development and trading properties

-

2,311

2,311

Investment in joint ventures

17,556

7,120

24,676


796,308

9,431

805,739

Other assets



258,958

Total assets



1,064,697

Liabilities



(497,272)

Net assets



567,425

 

4. Net Rental Income

 


Half Year to

30 September 2019

£000

Half Year to

30 September 2018

£000

Year to

31 March

2019

£000

Gross rental income

14,506

13,527

28,154

Property overheads

(1,695)

(1,919)

(3,695)


12,811

11,608

24,459

Net rental expense attributable to profit share partner

-

139

140

Net rental income

12,811

11,747

24,599

 



5. Development Property Profit/(Loss)

 


Half Year to

30 September 2019

£000

Half Year to

30 September 2018

£000

Year to

31 March

2019

£000

Development property income

3,080

5,545

7,963

Cost of sales

(1,493)

(1,980)

(5,399)

Sales expenses

(20)

-

-

Provision against book values

(126)

(1,879)

(4,345)

Development property profit/(loss)

1,441

1,686

(1,781)

 

6. (Loss)/Gain on Sale of Investment Properties

 


Half Year to

30 September 2019

£000

Half Year to

30 September 2018

£000

Year to

31 March

 2019

£000

Net (costs)/proceeds from the sale of Investment properties

(28)

29,046

164,058

Book value (Note 12)

-

(26,469)

(147,550)

Tenants' incentives on sold Investment properties

-

(1,475)

(1,500)

(Loss)/gain on sale of Investment properties

(28)

1,102

15,008

 

7. Administrative Expenses

 


Half Year to

30 September 2019

£000

Half Year to

30 September 2018

£000

Year to

31 March

2019

£000

Administration costs

(5,324)

(5,552)

(10,858)

Performance related awards

(1,366)

(2,033)

(5,202)

National Insurance on performance related awards

(364)

(276)

(693)

Administrative expenses

(7,054)

(7,861)

(16,753)

 

8. Finance Costs

 


Half Year to

30 September 2019

£000

Half Year to

30 September 2018

£000

Year to

31 March

2019

£000

Interest payable on bank loans, bonds and overdrafts

(6,756)

(8,263)

(16,414)

Other interest payable and similar charges

(2,686)

(1,618)

(4,208)

Interest capitalised

1,127

2,265

3,215

Finance costs

(8,315)

(7,616)

(17,407)

 



 

9. Tax on Profit on Ordinary Activities

 


Half Year to

30 September 2019

£000

Half Year to

30 September 2018

£000

Year to

31 March

2019

£000

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


United Kingdom corporation tax at 19%




- Group corporation tax

(1,201)

(11,201)

(8,813)

- Adjustment in respect of prior periods

-

-

315

- Use of tax losses

-

-

(509)

Current tax charge

(1,201)

(11,201)

(9,007)





Deferred tax




- Capital allowances

(576)

252

(1,003)

- Tax losses

147

(1,498)

(677)

- Unrealised chargeable gains

2,029

10,250

10,647

- Other temporary differences

499

(1,027)

(796)

Deferred tax credit

2,099

7,977

8,171

Total tax credit/(charge) for period

898

(3,224)

(836)

Deferred tax

 

At

30 September 2019

£000

At

30 September 2018

£000

At

31 March

2019

£000

Capital allowances

(3,839)

(2,008)

(3,263)

Tax losses

2,167

1,198

2,019

Unrealised chargeable gains

(7,131)

(9,556)

(9,159)

Other temporary differences

2,737

1,790

1,885

Deferred tax liability

(6,066)

(8,576)

(8,518)

 

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 £3,839,000 (net) would be released and further capital allowances of £62,519,000 (gross) would be available to reduce future tax liabilities.

 

The net deferred tax asset in respect of other temporary 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

 


Half Year to

30 September 2019

£000

Half Year to

30 September 2018

£000

Year to

31 March

2019

£000

Attributable to equity share capital




Ordinary




- Interim paid 2.60p per share

-

-

3,103

- Prior period final paid 7.50p per share (2018: 7.00p)

8,980

8,303

8,303


8,980

8,303

11,406


The interim dividend of 2.70p (30 September 2018: 2.60p per share) was approved by the Board on 21 November 2019 and will be paid on 31 December 2019 to Shareholders on the register on 29 November 2019. This interim dividend, amounting to £3,239,000, has not been included as a liability as at 30 September 2019.

 



 

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 period. This is a different basis to the net asset per share calculations which are based on the number of shares at the period 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 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:

 


Half Year to
30 September 2019

000s

Half Year to
30 September 2018

000s

Year to

31 March

2019

000s

Ordinary shares in issue

119,957

119,363

119,363

Weighting adjustment

(237)

(613)

(307)

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

119,720

118,750

119,056

Weighted average ordinary shares issued on share settled bonuses

636

735

862

Weighted average ordinary shares to be issued under Performance Share Plan

868

326

778

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

121,224

119,811

120,696


 

£000

£000

£000

Earnings used for calculation of basic and diluted earnings per share

14,029

25,924

42,620

Basic earnings per share

11.7p

21.8p

35.8p

Diluted earnings per share

11.6p

21.6p

35.3p


 

£000

£000

£000

Earnings used for calculation of basic and diluted earnings per share

14,029

25,924

42,620

Net gain on sale and revaluation of Investment properties




                                                                                                - subsidiaries

(9,414)

(32,537)

(59,292)

                                                                                                - joint ventures

(472)

(1,081)

(1,288)

Tax on profit on disposal of Investment property held for sale

-

13,641

-

Tax on profit on disposal of Investment properties

-

270

14,130

Tax on gain on settlement of derivative component of Convertible Bond

1,556

-

-

Gain on movement in share of joint ventures

(2,404)

-

-

Fair value movement on derivative financial instruments           - subsidiaries

4,980

(325)

3,322

                                                                                                - joint ventures

34

22

35

Fair value movement on Convertible Bond

(468)

(958)

(865)

Profit on cancellation of derivative financial instruments

(218)

(72)

(72)

Expense on cancellation of loans

1,131

-

1,458

Fair value movement of available-for-sale investments

-

(144)

(144)

Deferred tax on adjusting items

(2,270)

(10,202)

(9,935)

Earnings/(loss) used for calculations of EPRA earnings per share

6,484

(5,462)

(10,031)





EPRA earnings/(loss) per share

5.4p

(4.6)p

(8.4)p


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

 



12. Investment Properties

 


Half Year to

30 September 2019

£000

Half Year to

30 September 2018

£000

Year to

31 March

2019

£000

Book value at 1 April

778,752

791,948

791,948

Additions at cost

31,944

72,040

90,320

Disposals

-

(26,469)

(147,550)

Transfer of Investment property held for sale

-

(125,200)

-

Revaluation surplus

9,442

32,781*

44,284

Revaluation deficit attributable to profit share partners

-

(250)

(250)

As at period end

820,138

744,850

778,752

 

* Revaluation surplus is presented net of the transaction expenditure on The Shepherds Building, London, W14 of £1,346,000 which had been accrued for the period to 30 September 2018.

 

All properties are stated at market value as at 30 September 2019, and are valued by professionally qualified external valuers (Cushman & Wakefield LLP) in accordance with the Valuation - Professional Standards published by the Royal Institution of Chartered Surveyors. The fair value of the Investment properties at 30 September 2019 is as follows:

 


Half Year to

30 September 2019

£000

Half Year to

30 September 2018

£000

Year to

31 March

2019

£000

Book value

820,138

744,850

778,752

Lease incentives and costs included in trade and other receivables

17,130

11,589

14,687

Head leases capitalised

(2,168)

(2,189)

(2,189)

Fair value

835,100

754,250

791,250

 

Interest capitalised in respect of the refurbishment of Investment properties at 30 September 2019 amounted to £12,484,000 (30 September 2018: £11,322,000; 31 March 2019: £11,357,000). Interest capitalised during the period in respect of the refurbishment of Investment properties amounted to £1,127,000 (30 September 2019: £2,265,000, 31 March 2019: £3,215,000).

 

The historical cost of Investment property is £676,356,000 (30 September 2018: £635,488,000; 31 March 2019: £645,521,000).

 



 

13. Joint Ventures

 

Share of results of joint ventures

Half Year to

30 September 2019

£000

Half Year to

30 September 2018

£000

Year to

31 March

2019

£000

Revenue

6,746

37,848

52,402

Gross rental income

392

426

971

Property overheads

(162)

(466)

(411)

Net rental income/(expense)

230

(40)

560

Gain on revaluation of Investment properties

472

1,081

1,288

Development profit

5,355

500

4,570

Provision against book values

(1,083)

(4,288)

(7,198)

Other operating income

-

31

9

Gross profit/(loss)

4,974

(2,716)

(771)

Administrative expenses

(335)

(161)

(406)

Operating profit/(loss)

4,639

(2,877)

(1,177)

Finance costs

(595)

(807)

(2,087)

Finance income

41

32

92

Change in fair value of derivative financial instruments

(34)

(22)

(35)

Profit/(loss) before tax

4,051

(3,674)

(3,207)

Tax

(31)

(967)

(1,399)

Profit/(loss) after tax

4,020

(4,641)

(4,606)

Reversal of One Creechurch Place loss1

224

767

1,389

Profit on sale of interest in One Creechurch Place

1,334

-

-

Uplift for Barts Square economic interest2

2,404

-

-

Share of results of joint ventures

7,982

(3,874)

(3,217)

Investment in joint ventures

 

At

30 September 2019

£000

At

30 September 2018

£000

At

31 March

2019

£000

Summarised balance sheets




Non-current assets




Investment properties

65,572

24,427

25,289

Owner occupied property, plant and equipment

111

26

106

Deferred tax

1,687

2,110

23

Derivative financial instruments

6

37

1,774


67,376

26,600

27,192

Current assets




Land, development and trading properties

53,188

53,466

56,935

Trade and other receivables

14,605

12,626

10,554

Cash and cash equivalents

3,551

17,629

7,612


71,344

83,721

75,101

Current liabilities




Trade and other payables

(12,376)

(18,559)

(13,599)


(12,376)

(18,559)

(13,599)

Non-current liabilities




Trade and other payables

(323)

(17,814)

(20,419)

Borrowings

(48,026)

(46,680)

(48,473)


(48,349)

(64,494)

(68,892)

Net assets pre-adjustment

77,995

27,268

19,802

Reversal of One Creechurch Place net liability position1

-

4,251

4,874

Acquisition costs

78

-

-

Investment in joint ventures

78,073

31,519

24,676


1 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 period to ensure that the Group's interest is shown at its recoverable amount.

 

2 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%, following additional equity invested during the period.



 

The Directors' valuation of trading and development stock shows a surplus of £nil (30 September 2018: £800,000; 31 March 2019: £nil) above book value. This surplus has been included in the EPRA net asset value (Note 24).

 

14. Land, Developments and Trading Properties

 


At

30 September 2019

£000

At

30 September 2018

£000

At

31 March

2019

£000

Development properties

1,007

4,020

2,283

Properties held as trading stock

28

28

28


1,035

4,048

2,311


The Directors' valuation of trading and development stock shows a surplus of £578,000 (30 September 2018: £628,000; 31 March 2019: £578,000) above book value. This surplus has been included in the EPRA net asset value (Note 24).

 

No interest has been capitalised or included in land, developments and trading properties.

 

15. Investment Property Held for Sale

 


At

30 September 2019

£000

At

30 September 2018

£000

At

31 March

2019

£000

Transferred from Investment property

-

123,734

-

Outstanding lease incentives

-

1,466

-


-

125,200

-


In the prior period, the Group unconditionally exchanged contracts on the sale of The Shepherds Building, London W14, for £125.2m. Completion took place after the prior period end on 5 October 2018 and the property was classified as a held for sale asset under IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations'.

 

16.       Available-For-Sale Investments

 

The gain of £144,000 recognised in the prior period is the result of cash received in relation to a previously fully impaired asset.

 

17. Trade and Other Receivables

 


At

30 September 2019

£000

At

30 September 2018

£000

At

31 March

2019

£000

Trade receivables

10,588

38,059

9,680

Other receivables

1,656

20,899

22,856

Prepayments

4,210

4,502

4,173

Accrued income

20,085

35,240

22,017


36,539

98,700

58,726

 



 

18. Cash and Cash Equivalents

 


At

30 September 2018

£000

At

31 March

2019

£000

Cash held at managing agents

4,900

4,118

2,599

Restricted cash

8,330

1,572

2,678

Cash deposits

34,496

57,403

192,293


47,726

63,093

197,570

 

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

 

19.       Trade and Other Payables

 


At

30 September 2019

£000

At

30 September 2018

£000

At

31 March

2019

£000

Trade payables

20,200

15,000

13,009

Other payables

1,559

8,731

1,869

Accruals

24,355

25,044

23,368

Deferred income

6,425

6,877

4,913

Current trade and other payables

52,539

55,652

43,159

Accruals

590

10,815

11,405

Non-current trade and other payables

590

10,815

11,405

Total trade and other payables

53,129

66,467

54,564

 

20. Lease Liability

 


At

30 September 2019

£000

At

30 September 2018

£000

At

31 March

2019

£000

Current lease liability

599

-

-

Non-current lease liability

7,872

2,189

2,189

 

Included within the lease liability are £599,000 (30 September 2019: £nil, 31 March 2019: £nil) of current and £5,683,000 (30 September 2019: £nil, 31 March 2019: £nil) of non-current lease liabilities which relate to the adoption of IFRS 16 'Leases'.

 

21. Borrowings

 


At

30 September 2019

£000

At

30 September 2018

£000

At

31 March

2019

£000

Current borrowings

-

100,375

100,468

Borrowings repayable within:




- one to two years

-

184,686

-

- two to three years

-

-

195,410

- three to four years

31,930

-

-

- four to five years

216,591

24,887

37,399

- five to six years

92,082

-

92,005

- six to ten years

-

122,717

-

Non-current borrowings

340,603

332,290

324,814

Total borrowings

340,603

432,665

425,282

 

The £100,000,000 Convertible Bond was repaid in June 2019.



 


At

30 September 2019

£000

At

30 September 2018

£000

At

31 March

2019

£000

Total borrowings

340,603

432,665

425,282

Cash

(47,726)

(63,093)

(197,570)

Net borrowings

292,877

369,572

227,712

 

Net borrowings excludes the Group's share of borrowings in joint ventures of £48,026,000 (30 September 2018: £46,680,000; 31 March 2019: £48,473,000) and cash of £3,551,000 (30 September 2018: £17,629,000; 31 March 2019: £7,612,000). All borrowings in joint ventures are secured.

 


At

30 September 2019

£000

At

30 September 2018

£000

At

31 March

2019

£000

Net assets

573,658

552,596

567,425

Gearing

51%

67%

40%

 

22. Derivative Financial Instruments

 


At

30 September 2019

£000

At

30 September 2018

£000

At

31 March

2019

£000

Derivative financial instruments asset

319

1,703

915

Derivative financial instruments liability

(8,017)

(1,529)

(4,158)

 

A loss on the change in fair value of £4,980,000 has been recognised in the Unaudited Consolidated Income Statement (30 September 2018: gain of £325,000, 31 March 2019: loss of £3,322,000).

 

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

 

23. Share Capital

 


At

30 September 2019

£000

At

30 September 2018

£000

At

31 March

2019

£000

Authorised

39,577

39,577

39,577

 

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

 

Allotted, called up and fully paid:             




- 119,956,767 (30 September 2018: 119,363,349; 31 March 2019: 119,363,349) ordinary shares of 1p each

1,200

1,194

1,194

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

265

265

265


1,465

1,459

1,459

 



24. Net Assets Per Share

 


At

30 September 2019

£000

Number

of

shares

000s

At

30 September 2019

Pence per share

Net asset value

573,658



Less         - deferred shares

(265)



Basic net asset value

573,393

119,957

478

Add          - share settled bonus


636


Add          - dilutive effect of the Performance Share Plan


926


Diluted net asset value

573,393

121,519

472

Adjustment for:




                - fair value of financial instruments

7,689



                - deferred tax

9,309



Adjusted diluted net asset value

590,391

121,519

486

Adjustment for:




                - fair value of trading and development properties

578



EPRA net asset value

590,969

121,519

486

Adjustment for:




                - fair value of fixed rate loans

(7,282)



                - fair value of financial instruments

(7,689)



                - deferred tax

(9,309)



EPRA triple net asset value

566,689

121,519

466

 

The adjustment for the fair value of trading and development properties represents the surplus as at 30 September 2019.

 


At

31 March

2019

£000

Number

of

shares

000s

At

31 March

2019

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 surplus 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 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.

 



 

25. Related Party Transactions

 

The following amounts were due from/(to) the Group's joint ventures:

 


At

30 September 2019

£000

At

30 September 2018

£000

At

31 March 

2019

£000

ARE 1 Farringdon SARL

370

-

-

Charterhouse Place Ltd

9

-

-

Barts Square companies

31

2,543

34

Creechurch Place Ltd

-

37,890

22,073

King Street Developments (Hammersmith) Ltd

71

309

71

Old Street Holdings LP

3

3

3

Shirley Advance LLP

14

249

330

 

During the period, interest on bonds of £745,000 (30 September 2018: £875,000; 31 March 2019: £451,000) and a promote fee for development management services of £305,000 (30 September 2018: £4,874,000; 31 March 2019: £7,142,000) were charged by the Group to Creechurch Place Limited. A development management, accounting and corporate services fee of £945,000 (30 September 2018: £670,000; 31 March 2019: £821,000) was charged by the Group to the Barts Square companies. In addition, an accounting and corporate services fee of £9,000 (30 September 2018: £nil, 31 March 2019: £nil) was charged by the Group to each of ARE 1 Farringdon SARL and Charterhouse Place Ltd.



26. See-through Analysis

 

Helical holds a significant proportion of its property assets in joint ventures with partners that provide a significant equity contribution, whilst relying on the Group to provide asset management or development expertise. Accounting convention requires Helical to account under IFRS for its 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 its 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 is shown in the table below.

 



Half Year to

30 September

2019

£000

Half Year to
30 September

2018

£000

Year to

31 March

2019

£000

Gross rental income

- subsidiaries

14,506

13,527

28,154


- joint ventures

392

426

971

Total gross rental income


14,898

13,953

29,125

Property overheads

- subsidiaries

(1,695)

(1,919)

(3,695)


- joint ventures

(162)

(466)

(411)

Net rental expense attributable to profit share partner

-

139

140

See-through net rental income


13,041

11,707

25,159

 

See-through Net Development Profits/(Losses)

Helical's share of development profits/(losses) from property assets held in subsidiaries and in joint ventures is shown in the table below.

 


Half Year to

30 September

2019

£000

Half Year to

30 September

2018

£000

Year to

 31 March

2019

£000

In parent and subsidiaries

1,567

3,565

2,564

In joint ventures

5,355

500

4,570

Total gross development profit

6,922

4,065

7,134

Provision against stock

- subsidiaries

(126)

(1,879)

(4,345)


- joint ventures

(1,083)

(4,288)

(7,198)

See-through development profits/(losses)

5,713

(2,102)

(4,409)

 



 

See-through Net Gain on Sale and Revaluation of Investment Properties

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

 



Half Year to

30 September

2019

£000

Half Year to

30 September

2018

£000

Year to

31 March

2019

£000

Revaluation surplus on Investment properties

- subsidiaries

9,442

31,435

44,284


- joint ventures

472

1,081

1,288

Total revaluation surplus


9,914

32,516

45,572

Net (loss)/gain on sale of Investment properties

- subsidiaries

(28)

1,102

15,008

Total net (loss)/gain on sale of Investment properties 

(28)

1,102

15,008

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

9,886

33,618

60,580

 

See-through Net Finance Costs

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

 



Half Year to

30 September

2019

£000

Half Year to

30 September

2018

£000

Year to

31 March

2019

£000

Interest payable on bank loans and overdrafts

- subsidiaries

6,756

8,263

16,414


- joint ventures

267

7

511

Total interest payable on bank loans and overdrafts

7,023

8,270

16,925

Other interest payable and similar charges

- subsidiaries

2,686

1,618

4,208


- joint ventures

328

800

1,576

Interest capitalised

- subsidiaries

(1,127)

(2,265)

(3,215)

Total finance costs


8,910

8,423

19,494

Interest receivable and similar income

- subsidiaries

(1,311)

(1,033)

(983)


- joint ventures

(41)

(32)

(92)

See-through net finance costs


7,558

7,358

18,419

 

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.

 



At

30 September 2019

£000

At

30 September 2018

£000

At

31 March

2019

£000

Investment property fair value

- subsidiaries

835,100

754,250

791,250


- joint ventures

65,870

24,427

25,382

Investment property held for sale

- subsidiaries

-

125,200

-

Total Investment property fair value


900,970

903,877

816,632

Trading and development stock

- subsidiaries

1,035

4,048

2,311


- joint ventures

53,188

53,466

56,935

Total trading and development stock


54,223

57,514

59,246

Trading and development stock surplus

- subsidiaries

578

628

578


- joint ventures

-

800

-

Total trading and development stock surpluses


578

1,428

578

Total trading and development stock at fair value


54,801

58,942

59,824

See-through property portfolio


955,771

962,819

876,456

 



 

See-through Net Borrowings

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

 


At

30 September

2019

£000

At

30 September 2018

£000

At

31 March

2019

£000

Gross borrowings less than one year

- subsidiaries

-

100,375

100,468

Gross borrowings more than one year

- subsidiaries

340,603

332,290

324,814


Total

340,603

432,665

425,282

Gross borrowings more than one year

- joint ventures

48,026

46,680

48,473


Total

48,026

46,680

48,473

Cash and cash equivalents

- subsidiaries

(47,726)

(63,093)

(197,570)


- joint ventures

(3,551)

(17,629)

(7,612)

See-through net borrowings

337,352

398,623

268,573

 

27. See-through Gearing and Loan to Value

 


At

30 September 2019

£000

At

30 September 2018

£000

At

31 March

2019

£000

Property portfolio

955,771

962,819

876,456

Net borrowings

337,352

398,623

268,573

Net assets

573,658

552,596

567,425

See-through net gearing

58.8%

72.1%

47.3%

See-through loan to value

35.3%

41.4%

30.6%

 

28. Capital Commitments

 

The Group has a commitment of £27,188,000 (30 September 2018: £78,746,000; 31 March 2019: £64,900,000) in relation to construction contracts which are due to be completed in the period to March 2021. Of the total, £22,406,000 relates to the Group's Investment property portfolio and £4,782,000 is in relation to the Group's residential scheme at Barts Square.

 

29. Post Balance Sheet Events

 

There are no material post balance sheet events.

 



 

Appendix 1 - 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 24).

 

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 24).

 

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.

 

MSCI 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 24).

 

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 Note 26).

 

See-through net gearing

The see-through net borrowings expressed as a percentage of net assets (see Note 27).

 

Total Accounting Return

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

 

Total Property Return

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

 

Total Shareholder Return (TSR)

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

 

True equivalent yield

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

 

Unleveraged returns

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

 

WAULT

The total contracted rent up to the 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

 

 

 

 

 

 


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Half-year Report - RNS