Half-year Report

RNS Number : 0049Q
Helical PLC
24 November 2016
 

HELICAL PLC

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

Half Year Results for the Six Months to 30 September 2016

 

HELICAL'S MILESTONES DELIVERING GROWTH

 

Gerald Kaye, Chief Executive, commented:

 

"Against a background of some uncertainty in the UK Real Estate market and widespread debate as to whether the "property cycle" has peaked or is merely pausing, Helical's results for the half year to 30 September 2016 show growing net rental income, a net gain on sale and revaluation of our investment portfolio, growth in Shareholders' Funds and an increase in our EPRA net asset value per share.

 

"Helical's portfolio at the half year reflected passing rents of £39m, contracted rents of a further £13m and an ERV of £78m. As this reversionary potential is captured and passing rental income grows, I would expect our EPRA earnings per share to grow proportionately.

 

"In London, where most of this reversionary potential exists, we have an exciting collection of assets under refurbishment and development in locations where we believe demand from occupiers will continue to be robust. Today's news of a 59,000 sq ft pre-let at The Bower is a good example of this and I am confident that we will continue to attract occupiers to ensure that our schemes become vibrant and dynamic office communities.

 

"Looking ahead, the UK faces a continued period of uncertainty as it seeks its place in a post Brexit world. However, I believe it will remain resilient and London will continue to be a World City attracting people, businesses and investors."

 

Financial Highlights

 

Results

 

·   EPRA net asset value per share up 3% to 471p (31 March 2016: restated 456p).

·   EPRA earnings per share of 4.4p (2015: 13.0p).

·   IFRS Profit before tax of £31.1m (2015: £85.9m).

·   Total Property Return of £47.8m (2015: £107.6m).

-       Group's share of net rental income of £24.6m (2015: £20.8m) - up 18%.

-       Net gain on sale and revaluation of investment properties of £25.8m (2015: £68.1m).

·   Interim dividend proposed of 2.40p per share (2015: 2.30p) - up 4.3%.

 

Property Valuations

 

·   Group's share of property portfolio £1,250m (31 March 2016: £1,240m).

·   Investment property valuations, on a like-for-like basis, up 4.0% (3.0% including sales and purchases) with London office valuations up 5.3% (5.3% including sales and purchases).

 

Financing

·   See-through loan to value of 39% on a secured basis (31 March 2016: 40%) and 53% overall (31 March 2016: 55%). Post 30 September 2016 sales reduce pro forma loan to value to 34% on a secured basis and 49% overall.

·   Average maturity of the Group's share of debt of 4.0 years (31 March 2016: 4.5 years) at an average cost of 4.3% (31 March 2016: 4.2%).

·   Group's share of cash and undrawn bank facilities at 30 September 2016 of £220m (31 March 2016: £193m).

 

Operational Highlights               

 

London Portfolio

 

·   5.3% valuation increase of London investment portfolio now valued at £651m (61.5% of investment portfolio) - 31 March 2016: £593m (56.4%).

·   Contracted rents on our London portfolio at 30 September 2016 were £23.4m compared to an ERV of £46.9m.

·   At Barts Square EC1, 108 of the 144 residential units in Phase One had exchanged at 23 November 2016 (31 March 2016: 102 units), with a further two reserved.

·   One King Street, Hammersmith, W6 was sold post 30 September 2016 for £34.5m, its March value, at a net initial yield of 4.85%.

·   Completion of a major refurbishment at The Loom, E1 with 13,750 sq ft subsequently let at rents in excess of £50 psf and a further 9,250 sq ft under offer.

 

Regional Portfolio

 

·   1.0% valuation increase in the Regional investment portfolio, on a like for like basis, now valued at £408m (38.5% of investment portfolio) - 31 March 2016: £460m (43.6%).

·   Contracted gross rents on regional investment portfolio of £28.5m (31 March 2016: £32.4m).

·   Regional investment portfolio now comprises 9.5% offices, 5.4% in town retail, 3.0% retail parks, 19.5% logistics and 1.1% other (percentages of whole investment portfolio)

·   Sales of nine regional assets during the period comprising two logistics units, two offices and five retail assets for £56m at a 3.6% discount to March values.

·   Sales of ten logistics units and one retail asset post 30 September 2016 for £55m at a 6.7% premium to March values.

·   23,735 sq ft let at Churchgate House, Manchester at average rents of £16.50 psf, 7.7% above March ERV.

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

·   Since March 2016, 56 retirement village units sold for £22.7m with 44 reserved for £22.3m.

·   Land at Liphook sold for £3.7m (of which £2.5m was subsequent to half year end).

 

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

 

 

FTI Consulting

020 3727 1000

Dido Laurimore/Tom Gough/Richard Gotla

 

Half Year Results Presentation

 

Helical will be holding a presentation for analysts and investors at 9:30am, Thursday 24 November 2016 at FTI Consulting, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD. If you would like to attend, please contact Jenni Nkomo on 020 3727 1000, or jenni.nkomo@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)203 043 2002

Confirmation Code:

1906196

 

 

 

Financial Highlights

 

 

See-through Income Statement

Notes

1

Half Year to

30 September 2016

£m

Half Year to

30 September 2015

£m

Year to

31 March

2016

£m

Net rental income

 

24.6

20.8

43.4

Development property (losses)/profits

 

(2.6)

18.7

27.5

Gain on revaluation of investment properties

 

28.6

59.8

49.8

(Loss)/gain on sale of investment properties

 

(2.8)

8.3

43.9

Total property return

 

47.8

107.6

164.6

 

 

 

 

 

IFRS Profit before tax

 

31.1

85.9

114.0

EPRA earnings

 

5.0

14.9

19.6

 

 

Earnings Per Share and Dividends

 

 

 

Pence

 

Pence

 

Pence

Basic earnings per share

2

27.8

66.1

91.3

Diluted earnings per share

2

26.6

63.7

88.0

EPRA earnings per share

2

4.4

13.0

17.1

Dividends per share paid in period

 

0.72

5.15

12.60

Dividends per share declared for period

 

2.40

2.30

8.17

 

 

See-through Balance Sheet

 

3

At

30 September 2016

£m

At

30 September 2015

£m

At

31 March

2016

£m

See-through property portfolio

 

1,249.5

1,066.3

1,240.0

See-through net borrowings

 

664.3

518.0

681.8

Net assets

 

508.9

461.2

480.7

 

 

 

 

 

Net assets per share, gearing and loan to value

 

 

 

 

EPRA Net Asset Value per share

4

471p

436p

456p

See-through loan to value

5

53%

49%

55%

Pro-forma see-through loan to value

6

49%

n/a

n/a

See-through net gearing

7

131%

112%

142%

See-through Net Asset Value gearing

8

118%

99%

126%

 

Notes

1.     Includes Group's share of income and gains of its subsidiaries and joint ventures. See Note 25.

2.     Calculated in accordance with IAS 33 and guidance issued by the European Public Real Estate Association ("EPRA"). EPRA earnings per share exclude the net gain on sale and revaluation of the investment portfolio of £25.8m (2015: £68.1m) but include development losses of £2.6m (2015: profits of £18.7m).

3.     Includes the Group's share of assets and liabilities of its subsidiaries and joint ventures. See Note 25.

4.     The EPRA Net Asset Value per share at 31 March 2016 has been restated from 461p for the matters referred to in note 28.

5.     See-through loan to value is the ratio of see-through net borrowings to see-through property portfolio. See Note 26.

6.     See-through loan to value at 30 September 2016, adjusted for £91.5m of sales since the half year end.  

7.     See-through net gearing is the ratio of see-through net borrowings to net assets. See Note 26.

8.   See-through net asset value gearing is the ratio of see-through net borrowing to EPRA net asset value. See Note 26.

 

 

Chief Executive's Statement

 

Overview

 

I am pleased to be able to announce the Company's Half Year Results to 30 September 2016, my first results as Chief Executive Officer of Helical.

 

Against a background of some uncertainty in the UK Real Estate market and widespread debate as to whether the "property cycle" has peaked or is merely pausing, Helical's results show growing net rental income, a net gain on sale and revaluation of our investment portfolio, growth in Shareholders' Funds and an increase in our EPRA net asset value per share.

 

The results demonstrate:

·      our ability to enhance value through our development programme;

·      the success of our asset management initiatives for individual assets; and,

·      that stock selection is key to performance.

 

Our business model, using investment, trading and development strategies to acquire assets on an opportunity led basis, continues to have the potential to create value for Shareholders. For a number of years we have sought a balance between a higher yielding regional portfolio providing good cash flow for the business with development and capital profits coming from the London portfolio,  augmented by our retirement and retail development programmes. 

 

In recent years, we have made significant progress in de-risking our development programme, funding our largest two London schemes at One Creechurch Place, EC3 and One Bartholomew Place, EC1, with third party investors. Since 31 March 2016 we have made further progress on de-risking this development programme. These actions have enabled Helical to release equity from those properties where our asset management objectives have been met (One King Street, Hammersmith and two logistics portfolios) and to reduce our loan to value ("LTV") below our medium to long term target of 50%. As further asset management plans reach their conclusion, and as we continue to focus the business, I would expect additional recycling of equity to provide firepower for future acquisitions or to further reduce LTV levels.

 

Helical's portfolio at the half year reflected passing rents of £39m, contracted rents of a further £13m and an ERV of £78m. As this reversionary potential is captured and passing rental income grows, I would expect our EPRA earnings per share to grow proportionately.

 

In London, where most of this reversionary potential exists, we have an exciting collection of assets under refurbishment and development in locations where we believe demand from occupiers will continue to be robust. Today's news of a 59,000 sq ft pre-let at The Bower is a good example of this and I am confident that we will continue to attract occupiers to ensure that our schemes become vibrant and dynamic office communities.

 

Results for the Half Year

 

The IFRS profit before tax for the half year to 30 September 2016 was £31.1m (2015: £85.9m), Total Property Return was £47.8m (2015: £107.6m) and included growing net rents of £24.6m, an increase of 18.3% on 2015 (£20.8m), offset by development losses of £2.6m (2015: profit of £18.7m). The gain on sale and revaluation of the investment portfolio contributed £25.8m (2015: £68.1m).

 

Net finance costs of £12.8m were higher than in 2015 (£10.0m), and the Income Statement was adversely affected by falls in expected future interest rates which led to a £5.9m charge (2015: credit of £0.01m) arising from the valuation of the Group's derivative financial instruments. The valuation of the Group's Convertible Bond provided a credit of £7.7m (2015: £0.1m). Recurring administration costs were £5.8m (2015: £5.4m) and the provision for performance related remuneration, including associated NIC, was £0.1m (2015: £8.7m).

 

These results allow the Board to continue its progressive dividend policy and to recommend to Shareholders an interim dividend of 2.40p (2015: 2.30p), an increase of 4.3%.

 

The London Portfolio

 

Since 2010 we have steadily acquired property in two "clusters"; the City and Tech Belt districts of Farringdon, Shoreditch, Aldgate through to Whitechapel and the West London districts of Hammersmith, Shepherds Bush and Chiswick.

 

The London investment and development portfolio contributes capital growth and development profits and, increasingly, rental income. In the half year to 30 September 2016, London provided c. 66% of the total property return of £47.8m (2015: £107.6m).

 

·      City and Tech Belt

 

Helical has a portfolio of six investment assets in the East London districts of Shoreditch, Farringdon and Whitechapel acquired between 2012 and 2015. Five of these assets have been subject to complete or substantial redevelopment/refurbishment programmes. The assets in the Tech Belt comprise 42% of our total property portfolio and have made a substantial contribution to the growth of our current and future rental income stream and to the growth in our net assets.

 

Phase One of The Bower, comprising The Warehouse and The Studio, is fully let with contracted rents of £8.0m at an average of £53 psf compared to an ERV of £62 psf. Phase Two, The Tower, is being redeveloped, adding 65,000 sq ft to the current building, taking the completed building to 171,200 sq ft of offices and 7,200 sq ft of retail with works due for completion in June 2018. We are pleased to be able to announce today the pre-letting of six floors, comprising c. 59,000 sq ft, to WeWork, the global provider of flexible collaborative co-working space.

 

At The Loom, E1 we completed a major repositioning in September and recently announced two separate lettings totalling 4,750 sq ft at rents of £52.50 psf, a 17% premium to March 2016 ERV. A further 29,000 sq ft of this 110,000 sq ft building is available to let with 9,250 sq ft currently under offer.

 

We have let the remaining 15,387 sq ft at C-Space, EC1 and at 25 Charterhouse Square, EC1 we have made good progress on the redevelopment and expect works at this 43,674 sq ft building to complete in March 2017.

 

In the City we have completed and launched our 272,555 sq ft new office building at One Creechurch Place, EC3, funded with our joint venture partner HOOPP (Healthcare of Ontario Pension Plan). Several potential tenants are showing interest in taking space in the building and we hope that we shall be able to announce lettings by the end of our financial year.

 

At Barts Square, EC1, our mixed use scheme in joint venture with The Baupost Group LLC, we have now exchanged contracts on 108 of the 144 residential units with a further two units reserved in Phase One of the development. Phased completion of these units is expected to commence in Q2 2017. Demolition of the existing buildings for the second phase of residential is due to commence in December 2016 for 92 additional units with completion expected in 2019. Terms have been agreed with HSBC for the financing of these works. The office development of 213,000 sq ft at One Bartholomew Close, forward funded by clients of Ashby Capital, is under construction with completion due in August 2018.

 

·      The West

 

We had five assets in West London at 30 September 2016 comprising c. 17% of our total property portfolio. At One King Street, Hammersmith we have completed our asset management programme, having refurbished the building, adding a fifth floor to create 26,000 sq ft of offices with retail units on the ground floor. Having delivered on the business plan we sold the building in November 2016 for its March 2016 book value of £34.5m, a net initial yield of 4.85%. At Shepherd's Building, Shepherds Bush, W14 we have grown contracted rents to £6.3m with the most recent lettings at £54 psf. At Power Road Studios, W4 we have taken 17,000 sq ft of space back and are shortly to start on refurbishment works which is partly funded by dilapidations receipts and will increase rents from £22 psf to £42.50 psf. A planning application to add further office space is expected to be submitted in December 2016.

 

The Regional Portfolio

 

The regional portfolio provides a rental stream from a high yielding investment portfolio while contributing development profits from our retirement village and out-of-town retail development programmes.

 

The regional investment portfolio reduced to £408m at 30 September 2016 (31 March 2016: £460m) following the sale of two distribution warehouses, five retail assets and two regional offices for total proceeds of £56m. Subsequent to the half year end we have sold a further ten distribution warehouses and one retail asset for c.£55m, a 3.3% premium to 30 September 2016 book values and an 6.7% premium to March 2016 book values. Regional assets contributed £17.8m of net rental income during the period (2015: £15.6m).

 

Our regional development exposure is limited to our retirement villages, out-of-town retail development programmes and our Scottish Power project in Glasgow, where balance sheet risk is limited. In our retirement village development programme we continued the construction of units at Bramshott Place Liphook, Durrants Village Horsham, Millbrook Village Exeter and Maudslay Park Great Alne, near Stratford-upon-Avon. Since March we have sold 56 residential units at the three schemes (14 since 30 September 2016) and land at Liphook for £3.7m (£2.5m since 30 September 2016). In our retail development programme, we have forward funded our 79,750 sq ft retail park in Cortonwood, which is 95% pre-let and due for completion in June 2017. Scottish Power's new headquarters building in Glasgow is due to be completed by the end of this month.

 

Finance

 

In recent years, the Group has expanded its activities significantly, seeking to increase Shareholder Funds through the generation and retention of increased net rental streams, development profits and valuation surpluses. This growth has been financed through an increase in secured debt borrowed primarily from UK high street banks and, since 2013, through the use of unsecured debt in the form of a retail bond and a convertible bond.

 

At 31 March 2016, the growth in the activities took the LTV up to 55%. Since 31 March 2016, we have sold five of our eight out-of-town retail assets, two of our regional offices, 12 of our distribution warehouses (ten since 30 September 2016), one of our Central London offices and our 50% share of a shopping centre (both post half year end), reducing LTV to 53% at 30 September 2016 and to c. 49% on a pro-forma basis, taking into account the recent sales. With the first phase of our major residential scheme at Barts Square completing in mid 2017 and our retirement village development programme expected to be cash positive going forward, we expect to see further reductions in net debt levels and LTV in the foreseeable future, notwithstanding the planned capital expenditure on the portfolio.

 

As our individual asset management initiatives on our investment portfolio complete, driving rental income upwards and maximising value, we would expect to see equity recycled and cash resources boosted, enabling the Group to finance new acquisitions with potential for growth.

 

In pursuing this strategy, the Group operates with an average debt maturity of 4.0 years (31 March 2016: 4.5 years) with no secured loan repayable before November 2019, and with an average cost of debt of 4.3% (31 March 2016: 4.2%). The Group continues to retain a significant level of liquidity with cash and unutilised bank facilities of £220m (31 March 2016: £193m) to fund capital works and potential future additions to its portfolio.

 

Outlook

 

We stated in May that Helical is well placed to deal with any headwinds that may come its way and we reiterate that statement in the knowledge that we have made good progress on our development programme:

 

·      we have completed One Creechurch Place, EC3 on time and on budget and are encouraged with the level of interest being shown by potential tenants;

·      we have agreed a fixed price building contract on the second phase of The Bower and  have pre-let one third of the space at rents in line with our latest valuation;

·      we have let the remaining space at C Space, EC1 at 31 March 2016 ERV levels;

·      construction works continue at One Bartholomew Close, EC1, a scheme forward sold and wholly funded by clients of Ashby Capital;

·      we are on track to complete the redevelopment work at Charterhouse Square, EC1 in March 2017 and initial interest from potential tenants is encouraging; and,

·      we have exchange contracts on over 75% of Phase One of our residential scheme at Barts Square, well in advance of completion and have agreed terms for the financing of the final phase of residential.

 

In addition, we have a robust investment portfolio where we have demonstrated value through lettings above ERV and sales above book value.

When considering our strategy, we remain of the view that our portfolio, balanced between investments and redevelopment schemes in central London and high yielding regional investment assets, provides investors with access to a growing income stream and potential future capital growth.

Looking ahead, the UK faces a continued period of uncertainty as it seeks its place in a post Brexit world. However, I believe the UK will remain resilient and London will continue to be a World City attracting people, businesses and investors.

 

 

Gerald Kaye

Chief Executive

24 November 2016

 

 

Financial Review

 

Results for the Half Year

 

Despite growing concerns over the impact of global events, we are pleased to be able to report good results with pre-tax profits of £31.1m in the half year to 30 September 2016 (2015: £85.9m). Growing net rental income of £24.6m and a valuation surplus of £28.6m (2015: £59.8m) were driven by our London development and asset management strategies.

 

The fair value of the Group's real estate portfolio, including its share of assets held in joint ventures, increased to £1,250m (31 March 2016: £1,240m).

 

The Group acquired no new assets during the period and concentrated on value enhancing capital expenditure and letting available space which helped to create an increase in the value of its investment portfolio by £34.4m, of which £5.3m came through lease incentives and £29.1m as revaluation surpluses. This valuation increase and sales of £57m of investment assets during the period, helped to reduce the Group's loan to value to 53% (31 March 2016: 55%). Since the half year end, further sales of £91.5m of assets has reduced the Group's loan to value, based on the 30 September 2016 balance sheet, to 34% on a secured basis and 49% overall.

 

During the period we increased our facility with Deutsche Pfandbriefbank by £21m to £120m to fund the redevelopment of Charterhouse Square and refinanced our retirement village development facility with HSBC to fund the development of Phase 4 at Bramshott Place Liphook. At 30 September 2016, the Group's overall debt maturity profile reduced to 4.0 years (31 March 2016: 4.5 years) with a weighted average cost of debt marginally increasing to 4.3% (31 March 2016: 4.2%).

 

At 30 September 2016, the Group had unutilised bank facilities of £155m and £65m of cash. These facilities are primarily available to fund Phase Two of the Group's redevelopment of The Bower, London EC1, its retirement village development programme, Phase One of the construction works at Barts Square, London EC1, refurbishment works at 25 Charterhouse Square, London EC1 and potential future investment acquisitions.

 

EPRA Earnings per Share

 

EPRA earnings per share were 4.4p (2015: 13.0p), reflecting the Group's share of net rental income of £24.6m (2015: £20.8m) net of development losses of £2.6m (2015: profits £18.7m) but excluding gains on sale and revaluation of investment properties of £25.8m (2015: £68.1m).

 

EPRA Net Asset Value

 

EPRA net asset value per share increased by 3% to 471p per share (31 March 2016: 456p). This increase arose principally from a total comprehensive income (retained profits) of £31.7m (2015: £75.7m) less dividends paid of £0.8m (2015: £5.9m) and reflecting a reduction in the surplus on valuation of the trading and development stock to £13.6m (31 March 2016: £19.4m).

 

Income Statement

 

Rental Income and Property Overheads

 

Gross rental income receivable by the Group in respect of wholly owned properties increased by 20% to £25.5m (2015: £21.2m) as we continue to capture the investment portfolio's reversionary potential. In the joint ventures, gross rents fell from £1.0m to £0.8m. Property overheads in respect of wholly owned assets and in respect of those assets in joint ventures increased from £1.1m to £1.5m and after taking account of net rents payable to our profit share partners of £0.2m (2015: £0.2m), see-through net rents increased by 18.3% to £24.6m (2015: £20.8m).

 

Development Profits

 

Development profits, before provisions, reduced from £20.2m to £4.0m on a see-through basis. The main contributor to profits during the period was the out-of-town retail development at Cortonwood where we recognised £3.1m of development profits at this 79,750 sq ft retail park. Continued development management fees at the Scottish Power headquarters in Glasgow and at One Creechurch Place, London EC3, plus profits from the sale of our site in Bracknell, contributed a further £1.3m. Provisions against the carrying value of sites at Maudslay Park, Great Alne and King Street, London W6 offset these development profits and resulted in a net loss on developments of £2.6m on a see-through basis.

 

Share of Results of Joint Ventures

 

The results of the joint ventures include our development schemes at Barts Square, London EC1; One Creechurch Place, London EC3; Shirley Town Centre, West Midlands; and King Street, London W6. Detailed analysis of our share of these joint ventures is provided in note 13 to this report and in the see-through analysis in note 25. In the period, net rents of £0.7m (2015: £0.8m) were received. A loss on the revaluation of the investment assets of £0.5m (2015: gain of £23.4m) arose in respect of Barts Square, London EC1. Net of taxes, our joint ventures incurred a loss of £1.0m (2015: profit of £31.8m).

 

Gain on Sale and Revaluation of Investment Properties

 

The valuation of our investment portfolio reflected our increased exposure to London offices where we generated an increase of 5.3% overall and also on a like-for-like basis. The regions showed a valuation fall of 0.1% overall and an increase of 1.1% on a like-for-like basis. In total, the investment portfolio showed a valuation increase of 3.0%, or 4.0% on a like-for-like basis.

 

The total impact on our financial statements of the gain on sale and revaluation of our investment portfolio was a net gain of £25.8m (2015: £68.1m).

 

Administration Costs

 

Administration costs, before performance related awards, increased by 7% from £5.4m to £5.8m. Performance related share awards of £0.3m (2015: £2.8m) and bonus payments of £nil (2015: £4.5m), were accrued. In addition, there was a credit for the reversal of previously accrued National Insurance of £0.2m (2015: charge of £1.4m).

 

Finance Costs, Finance Income and Derivative Financial Instruments

 

Interest payable on secured bank loans, including our share of loans on assets held in joint ventures, but before capitalised interest, increased to £10.6m (2015: £10.0m) reflecting the impact of funding our development programme with bank finance. Interest payable in respect of the unsecured Retail and Convertible Bonds was £4.4m (2015: £4.4m). Capitalised interest increased from £2.4m to £3.5m as development schemes progressed. Other interest payable increased from £1.5m to £2.5m reflecting an increase in the amortisation of bank arrangement fees. Total finance costs increased from £13.4m to £14.1m and finance income earned was £2.3m (2015: £1.2m). Net finance costs for the period reduced from £12.1m to £11.7m. The continued fall in medium and long term interest rate projections at 30 September 2016 contributed to a charge of £5.9m (2015: £nil) on the derivative financial instruments which have been valued on a mark-to-market basis.

 

Taxation

 

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

 

The deferred tax credit for the half year is principally derived from the recognition of tax losses which the Group believes will be utilised against profits in the foreseeable future.

 

Dividends

 

Helical follows a progressive dividend policy, seeking to increase its dividends in line with its results and expected future profitability, whilst retaining the majority of funds generated for investment in growing the business. The interim dividend to be paid on 30 December 2016 is 2.40p (2015: 2.30p) per share, an increase of 4.3%.

 

Balance Sheet

 

Investment Portfolio

 

During the period no new investment assets were acquired whilst nine investment assets were sold with a combined book value of £57.2m. In accordance with the Group's current development and refurbishment programme, £26.1m was expended on capital works in the London investment portfolio and £3.5m on the regional investment portfolio. During the period, new lettings, erosion of rent free periods and other asset management activities created a revaluation surplus of £34.4m

 

 

Wholly owned
£000

In joint venture

£000

See-through

£000

Valuation at 31 March 2016

1,041,100

11,552

1,052,652

Acquisitions

-

-

-

Capital Expenditure

27,806

1,791

29,597

Disposals

(57,243)

-

(57,243)

Revaluation Surplus

- Helical

34,397

(510)

33,887

 

- Profit Share Partners

(50)

-

(50)

Valuation at 30 September 2016

1,046,010

12,833

1,058,843

 

Disclosed as:

 

 

 

Investment properties

1,034,687

12,833

1,047,520

In Trade and other receivables

11,323

-

11,323

 

1,046,010

12,833

1,058,843

 

Debt and Financial Risk

 

In seeking to finance Helical's recent expansion, the Group has used a combination of secured facilities, whose purpose and terms reflect the nature of the assets charged to the lenders, and unsecured bonds which have provided the firepower to acquire many of the assets which have contributed to the recent growth in Shareholders' Funds. The composition of the Group's debt structure has significantly changed in recent years with unsecured debt now representing 24% of debt drawn at 30 September 2016.

 

In total, Helical's outstanding debt at 30 September 2016 of £737m (31 March 2016: £778m) had an average maturity of 4.0 years (31 March 2016: 4.5 years) and a weighted interest cost of 4.3% (31 March 2016: 4.2%).

 

Debt profile at 30 September 2016 (excluding the impact of capitalised refinancing costs)

 

 

Total

Facility

£000's

Total

Utilised

£000's

Available Facility

£000's

Net LTV

%

Weighted Average Interest Rate

%

Average Maturity

Years

Investment facilities

589,566

472,925

116,641

-

4.3

4.4

Development facilities

60,000

46,119

13,881

-

3.6

3.9

Total wholly owned

649,566

519,044

130,522

-

4.2

4.3

In joint ventures

58,035

43,198

14,837

-

3.1

3.2

Total secured debt

707,601

562,242

145,359

39.2

4.2

4.2

Retail bond

80,000

80,000

-

-

6.0

3.6

Convertible bond

100,000

100,000

-

-

4.0

2.6

Working capital

10,000

-

10,000

-

-

-

Fair value of convertible bond

(4,916)

(4,916)

-

-

-

-

Total unsecured debt

185,084

175,084

10,000

-

4.9

3.2

Total debt

892,685

737,326

155,359

53.2

4.3

4.0

 

 

Secured Debt

 

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

 

-      Investment Facilities

We have £190m of revolving credit facilities which enable the group to acquire, refurbish, reposition and hold significant parts of our investment portfolio. We have used these facilities mainly to finance our regional portfolio. Our London investment assets are primarily held in £400m of secured loan facilities which, where appropriate, allow us to finance refurbishment projects, including the redevelopment of The Tower at The Bower, London EC1 and 25 Charterhouse Square, London EC1. Of the total of £590m of investment facilities we have £117m available to fund these redevelopment works and finance any new acquisitions. The average maturity of the Group's investment facilities at 30 September 2016 was 4.4 years with a weighted average interest rate of 4.3%.

 

-      Development Facilities

These facilities finance the construction of the retirement villages at Durrants Village Horsham; Maudslay Park Great Alne; Phase IV at Bramshott Place Liphook and Millbrook Village, Exeter. The average maturity of the Group's development facilities at 30 September 2016 was 3.9 years with a weighted average interest rate of 3.6%.

 

-      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 2016 was 3.2 years with a weighted average interest rate of 3.1%.

 

Unsecured Debt

 

The Group's unsecured debt, including the convertible bond at its mark-to-market valuation, is £175.1m as follows:

 

-      Retail Bond

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

 

-      Convertible Bond

In June 2014, the Group raised £100m from the issue of a listed unsecured Convertible Bond with a 4.0% coupon, repayable in June 2019, or, subject to certain conditions, convertible at the option of the bond holders into ordinary shares, unless a cash settlement option is exercised by the Company. The initial conversion price has been set at £4.9694 per share, representing a 35% premium above the price on the day of the issue and a premium of 59% above the Company's EPRA net asset value per share at 31 March 2014. The value of the Bond at 30 September 2016, as determined by the listed market price, was £95.1m.

 

-      Short term working capital facilities

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

 

 

Cash and Cash Flow

 

At 30 September 2016, the Group had £220m of cash and agreed, undrawn, committed bank facilities including its share in joint ventures as well as £93m of uncharged property on which it could borrow funds.

 

Net Borrowings and Gearing

 

Total gross borrowings of the Group, including in joint ventures, have reduced from £777.9m to £737.3m during the period to 30 September 2016. After deducting cash balances of £64.6m and unamortised refinancing costs of £8.4m, net borrowings reduced from £681.8m to £664.3m. The gearing of the Group, including in joint ventures, reduced from 142% to 131%. Including EPRA adjustments to IFRS shareholder's funds, the see-through net asset value gearing reduced from 126% to 118%. This gearing measure, the ratio of see-through net borrowings to EPRA net asset value, represents a longer term view of gearing than the standard measure.

 

 

30 September

2016

31 March

2016

See-through gross borrowings

£737.3m

£777.9m

See-through cash balances

£64.6m

£86.8m

Unamortised refinancing costs

£8.4m

£9.3m

See-through net borrowings

£664.3m

£681.8m

Shareholders' funds

£508.9m

£480.7m

EPRA shareholders' funds

£561.1m

£540.7m

See-through gearing - IFRS net asset value

131%

142%

See-through gearing - EPRA net asset value

118%

126%

 

Hedging

 

At 30 September 2016, the Group had £647.7m (31 March 2016: £635.5m) of fixed rate debt with an average effective interest rate of 4.2% (31 March 2016: 4.2%) and £46.4m (31 March 2016: £107.1m) of floating rate debt with an average effective interest rate of 2.9%. In our joint ventures, the Group had £43.2m (31 March 2016: £35.3m) of floating rate debt with an effective rate of 3.1% (31 March 2016: 3.4%).

 

 

30 September

2016

£m

30 September

2016

%

31 March

2016

£m

31 March

2016

%

Fixed rate debt

 

 

 

 

- Secured borrowings

472.6

4.0

452.8

3.9

- Retail Bond

80.0

6.0

80.0

6.0

- Convertible Bond

100.0

4.0

100.0

4.0

- Fair value of Convertible Bond

(4.9)

-

2.7

-

Total fixed rate debt

647.7

4.2

635.5

4.2

Floating rate debt

 

 

 

 

- Secured

46.4

2.9

107.1

3.9

Total wholly owned

694.1

4.4

742.6

4.2

In joint ventures

 

 

 

 

- Fixed rate

-

-

-

-

- Floating rate

43.2

3.1

35.3

3.4

Total borrowings

737.3

4.3

777.9

4.2

 

Interest Cover

 

In assessing the results of the Group for each financial year Helical considers its interest cover as a measure of its performance and its ability to finance its annual interest payments from its net operating income, before revaluation gains or losses on the investment portfolio and provisions on the trading and development stock. In the half year to 30 September 2016, this interest cover was 2.2 times (2015: 4.1 times).

 

 

30 September

2016

30 September 

2015

31 March

2016

See-through net operating income

£25.8m

£49.4m

£121.3m

See-through net financing costs

£11.7m

£12.1m

£22.6m

Interest Cover

2.2x

4.1x

5.4x

 

Investment Property Accounting Treatment

 

International Accounting Standard 40 - Investment Property requires that accrued operating lease income assets should be shown separately and deducted from the fair value of the investment properties in the Statement of Financial Position. This accounting treatment had not been applied at 31 March 2016 but has been adopted for the period ended 30 September 2016. A prior year adjustment has been made to ensure consistency of comparative information, clarity and transparency.

 

The effect of the adjustment on the relevant financial statement line items for the year ended 31 March 2016 is detailed in note 28.

 

 

Tim Murphy
Finance Director

24 November 2016

 

 

 

Helical's Property Portfolio - 30 September 2016

 

Total Portfolio by Fair Value

 

  

Investment

£m

Development

£m

Total

£m

 

%

London Offices

 

 

 

 

 

 

 - Completed

466.3

37.3

-

-

466.3

37.3

 - Being redeveloped/refurbished

142.1

11.4

22.3

1.8

164.4

13.2

 - Held for future development/refurbishment

42.6

3.4

-

-

42.6

3.4

London Residential

-

-

67.8

5.4

67.8

5.4

Total London

651.0

52.1

90.1

7.2

741.1

59.3

 

 

 

 

 

 

 

Regional Offices

101.2

8.1

1.0

0.1

102.2

8.2

Regional logistics

205.5

16.5

-

-

205.5

16.5

Regional Retail

89.1

7.1

7.8

0.6

96.9

7.7

Retirement Villages

11.9

1.0

85.9

6.8

97.8

7.8

Land

0.1

-

5.9

0.5

6.0

0.5

Total Regional

407.8

32.7

100.6

8.0

508.4

40.7

 

 

 

 

 

 

 

Total

1,058.8

84.8

190.7

15.2

1,249.5

100.0

 

Investment Portfolio by Asset Status

 

  

Income Producing

£m

Being redeveloped/refurbished

£m

 

 

Total

£m

 

%

London Offices

 

 

 

 

 

 

 - Completed

466.3

44.1

-

-

466.3

44.1

 - Being redeveloped/refurbished

-

-

142.1

13.4

142.1

13.4

 - Held for future development/refurbishment

42.6

4.0

-

-

42.6

4.0

Total London

508.9

48.1

142.1

13.4

651.0

61.5

 

 

 

 

 

 

 

Regional Offices

93.5

8.8

7.7

0.7

101.2

9.5

Regional logistics

205.5

19.5

-

-

205.5

19.5

Regional Retail

89.1

8.4

-

-

89.1

8.4

Retirement Villages

11.9

1.1

-

-

11.9

1.1

Land

-

-

0.1

-

0.1

-

Total Regional

400.0

37.8

7.8

0.7

407.8

38.5

 

 

 

 

 

 

 

Total

908.9

85.9

149.9

14.1

1,058.8

100.0

 

Income producing assets are those assets where the majority of the space is let. Major projects are those assets that are being substantially developed or refurbished.

 

Trading and Development Portfolio

 

 

Book Value

£m

Fair Value

£m

Surplus

£m

Fair Value

%

London Offices

18.3

22.3

4.0

11.7

London Residential

64.8

67.8

3.0

35.6

Total London

83.1

90.1

7.0

47.3

 

 

 

 

 

Regional Offices

0.2

1.0

0.8

0.5

Regional Retail

7.8

7.8

-

4.1

Retirement Villages

81.0

85.9

4.9

45.0

Land

5.0

5.9

0.9

3.1

Total Regional

94.0

100.6

6.6

52.7

 

 

 

 

 

Total

177.1

190.7

13.6

100.0

 

 

Overview

 

Helical divides its property activities into two core markets, London and the Regions. The London Portfolio represents 59% of the total property portfolio and drives capital growth, development profits and, increasingly, income. The Regional Portfolio, which accounts for the remaining 41%, predominantly generates rental income.

 

The London Portfolio

 

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

 

·   City and Tech Belt

 

The Bower, Old Street EC1 

This 3.12 acre asset was acquired in November 2012 for £60.8m in joint venture with Crosstree Real Estate Partners LLP. The site is in the heart of an area which has become a "creative halo", a district of London which is a hub for technology, media and telecommunications companies and which is benefitting from substantial investment in infrastructure. A planning consent has been implemented to increase the floor space on the site by 116,000 sq ft, to refurbish existing areas and significantly upgrade the public realm with the creation of a new pedestrian street.

 

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

 

- 211 Old Street EC1

The development of phase 1, comprising The Warehouse, 128,262 sq ft, and The Studio, 23,177 sq ft, completed in November 2015.

 

Phase 1 is fully let to CBS, Farfetch, Pivotal, Allegis and Stripe (The Warehouse) and John Brown Media (The Studio), and all tenants are in occupation. Retail operators Bone Daddies, Draft House, Enoteca da Luca, Honest Burger and Maki are open and trading.

 

- 207 Old Street EC1

Comprising The Tower, the phase 2 deconstruction works have been concluded and the main contractor has started on site with practical completion scheduled for Q2 2018. Whilst the formal letting campaign for the building is expected to commence closer to completion, we have pre-let 6 floors, comprising 59,000 sq ft, to WeWork, the global provider of flexible collaborative co-working space.

 

Barts Square EC1

In joint venture with The Baupost Group LLC we own the freehold interest in land and buildings at Bartholomew Close, Little Britain and Montague Street, a 3.2 acre site adjacent to the new Barts Hospital and just south of Smithfield Market and the Farringdon East station on the Elizabeth Line (Crossrail) due to be operational in 2018.

 

Planning consent has been implemented for a comprehensive redevelopment of 19 buildings to provide a total of 236 residential apartments, three office buildings of 213,000 sq ft, 23,000 sq ft and 10,200 sq ft, 20,600 sq ft of retail/A3 at ground floor as well as major public realm improvements, which will be incorporated into the wider Smithfield Area Strategy being worked up by the City of London.

 

- Phase 1 - Residential/offices/retail

Phase 1 of the redevelopment of Barts Square comprises 144 residential units, 8,800 sq ft of retail space, 23,000 sq ft of new offices behind retained facades and public realm improvements. Completion of Phase 1 is expected in summer 2017. Contracts have been exchanged for the sale of 108 residential units for a total value of c.£138.5m at an average £1,580 psf, with a further two units under offer.

 

- Phase 2 - One Bartholomew Close - Offices

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

 

- Phase 3 - Residential/retail

Phase 3 of the redevelopment of the site, involving the demolition of Queen Elizabeth II Building, 62 Bartholomew Close, 42-44 Little Britain and 45-47 Little Britain, is expected to commence after vacant possession of these buildings is obtained at the end of November 2016. In their place, 92 residential units and 11,800 sq ft of retail space will be constructed, with completion due in early 2019.

 

One Creechurch Place, City of London EC3

One Creechurch Place, is a landmark City office scheme in the heart of the insurance sector in London. In May 2014, Helical signed a joint venture agreement with HOOPP (Healthcare of Ontario Pension Plan) to redevelop the site. Under the terms of the joint venture, HOOPP and Helical jointly funded the project on a 90:10 split, with Helical acting as development manager for which it will receive a promote payment depending on the successful outcome of the scheme. The new building, comprising 272,555 sq ft NIA of offices and 787 sq ft of retail, achieved practical completion on 7 November 2016 and is currently being marketed for occupation. A number of potential tenants have viewed the building and we are hopeful of being able to announce letting progress before our year end in March 2017.

 

C-Space, 37-45 City Road EC1

Helical acquired C-Space in June 2013. Planning consent was obtained for a complete refurbishment of the building which increased the previous existing 50,000 sq ft office building to 62,000 sq ft. The works, which were completed in October 2015, involved an additional floor and extensions to the third floor, a landscaped courtyard and entrance "pavilion" to the rear and full height glazing to the raised ground floor. 75% of the space was pre-let to the creative agency MullenLowe in June 2015, with the remaining space let to NeuLion in November 2016.

 

25 Charterhouse Square, Smithfield EC1

In January 2016, Helical was granted a new 155 year leasehold interest in 25 Charterhouse Square, from the Governors of Sutton's Hospital in Charterhouse for £16m. Helical has received planning for and commenced a major refurbishment of the existing building, which will increase the current 34,000 sq ft to 38,500 sq ft of offices, with the addition of a new sixth floor, and add 5,100 sq ft of retail/restaurant. The completed building is expected to be delivered in Q1 2017.

 

The Loom, Whitechapel E1

This 110,000 sq ft listed former wool warehouse was acquired in 2013. A major repositioning was completed in September 2016 to include a new entrance and reception onto Gowers Walk, showers and a bike store. A rolling refurbishment of the offices is also ongoing with circa 60,000 sq ft completed. The average contracted rent for the building is £32 psf. The largest, most prominent unit in the building of 9,000 sq ft was let in July in excess of £50 psf. Since then a further 4,750 sq ft has been let at £52.50 psf, a 17% premium to March 2016 ERV. 29,000 sq ft is currently available in 10 different sized units with an overall ERV of £1.4m.

 

Chart House, Islington N1

Chart House is a 10,500 sq ft office building in Islington. There is currently planning consent for an additional floor of residential on top of the building. This building is 100% let.

 

·   The West

 

Shepherds Building, Shepherds Bush W14

This 151,000 sq ft multi-let office building close to the Westfield London shopping centre maintains an occupancy approaching 100%, as it has for eight consecutive years. A rolling refurbishment of the common parts continues and the average contracted rent for the building is £44 psf with a total contracted rent of £6.3m and a passing net rent of £4.9m. During the period, 10 new lettings, all in excess of £50 psf, were completed securing a contracted rent of £350,000 and two rent reviews settled with an uplift to contracted rent of £225,000.

 

Power Road Studios, Chiswick W4

The site comprises 62,000 sq ft of offices across five buildings and is multi-let to a wide range of predominantly media tenants. Recent lettings have been concluded at a rent of £38 psf compared to an average rental of £24 psf at acquisition. Cineworld, who occupy 17,000 sq ft, have surrendered their lease which permits the comprehensive refurbishment of the unit and creation of a new entrance at the front of the building. The works, which are planned to commence in November 2016 and expected to last nine months, should increase the rent for this space from £22.00 psf to £42.50 psf.  A planning application to add a further 45,000 sq ft of office space is expected to be submitted in December 2016.

 

One King Street, Hammersmith W6

This multi-let 39,000 sq ft building was acquired in 2012, comprising 26,000 sq ft of offices and 13,000 sq ft of ground floor retail. The building is fully let with a contracted rent of £1.8m. Following the period end this property has been sold to Orchard Street Investment Management at its March 2016 book value of £34.5m reflecting a net initial yield of 4.85%.

 

King Street, Hammersmith W6

King Street, Hammersmith W6, is a Council led regeneration project which is being carried out in a 50/50 joint venture with Grainger plc. Planning permission for the scheme has been granted for 196 apartments, a three-screen cinema, new retail and restaurant space and replacement offices for the Council. A minor amendment to the existing planning consent has been approved and demolition of the cinema site has commenced.

 

The Powerhouse, Chiswick W4

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

 

In addition to our holdings in East and West London we have one scheme in Covent Garden WC2.

Drury Lane & Dryden Street, Covent Garden WC2

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

 

 

The Regional Portfolio       

 

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

 

Our regional portfolio contributed 72% of our net rental income from tenants in diverse sectors and geographical locations. The £508.4m regional portfolio comprises £205.5m of logistics (41% of the regional portfolio), £102.2m of offices (20%), £96.9m of retail comprising £31.7m of retail warehousing and £65.2m of in-town retail, mainly the Morgan Quarter, Cardiff (in aggregate 19%), £97.8m in our retirement village development programme (19%) and £6.0m of land (1%).

 

Distribution Warehouses

 

Helical had 34 distribution and light logistics units located around major UK transport networks at 30 September 2016, of which ten have subsequently been sold. These units generally have few bespoke features making them straightforward to re-let if vacancies occur with minimal capital expenditure required. The majority of the assets are single let. Significant assets within the portfolio include a 256,000 sq ft distribution warehouse let to Sainsbury's in Yate, Bristol, a 203,000 sq ft facility in Leighton Buzzard, Bedfordshire and a 183,000 sq ft distribution warehouse let to the Royal Mail in Chester.

 

Regional Offices

 

Our regional office investment portfolio comprises seven assets valued at £101.2m, with c. 70% of value in Manchester. Other assets are located in Crawley, Glasgow, Reading and Cobham. During the half year we sold two assets in Castle Donnington and Cheadle for £7.0m, a 3% discount to book value.

 

We have three offices in Manchester; a city with a diverse, thriving and growing economy which is widely regarded as England's second city and the centre of the "Northern Powerhouse".

 

Churchgate and Lee House, Manchester

This asset, comprising 248,000 sq ft of multi occupied offices, was purchased in March 2014.

 

Since then we have refurbished the reception, cafe and just over 73,735 sq ft of the offices and will continue to reposition the asset as floors become vacant.

 

In the period we have concluded three new lettings on over 23,000 sq ft increasing the contracted rent across the buildings by £418,000. At the end of the period the building was 95% let. We have subsequently agreed terms on the 1st Floor of Lee House and with the completion of its lease anticipated before the end of November, we are on course to be 100% let.

 

Dale House, Manchester

Dale House is a 54,000 sq ft office building situated in the Northern Quarter of Manchester. It is 87% let to a number of tenants with an average rent of £12.70 psf and was acquired in March 2015 for £7.4m. The property is a long term hold with plans to significantly refurbish the building over time. Strategic lease surrenders across the building have been obtained and a refurbishment of 33,000 sq ft will commence in January 2017, with completion in August 2017.

 

Fountain Court, 31 Booth Street, Manchester

This vacant office located in the prime city core was acquired in January 2016 for £4.7m. Refurbishment of this 25,349 sq ft building is underway and nearing completion. We anticipate that the building will be launched to the market in January 2017.

 

St Vincent Street, Glasgow

In partnership with local development partner, Dawn Developments Ltd, Helical is the development manager for the new headquarters building for Scottish Power at St Vincent Street, Glasgow. The completed building comprises c. 220,000 sq ft of prime office space in the heart of the City's commercial district. Funded by M&G Investments, all works, including Scottish Power's fit out, are due to be completed in November 2016. As part of the overall deal, Helical took on three existing Scottish Power sites which are surplus to requirements. The site at Cathcart has been sold to Barratt Homes' subject to detailed planning approval being received (outline planning already achieved) and the listed Cathcart House has been sold subject only to vacant possession being granted following the move to the new headquarters by Scottish Power. The site at Yoker was sold to a supermarket operator during the period and the site at Falkirk was sold in the prior year.

 

Retail

 

The retail market is undergoing major structural changes with many high profile companies going into administration. There is a continued migration of customers and retailers to prime centres where the leisure offer and quality of the environment are a big driver of footfall.

 

Our retail assets total £97m, 8% of our portfolio (31 March 2016: £143m). This part of the portfolio includes a prime retail asset in Cardiff, three retail parks, one retail unit and a number of pre let and/or prefunded retail developments.

 

During the half year, five retail properties were sold for a total of £41m, at c. 6% below book value. At the period end the portfolio consisted of assets in Cardiff, Great Yarmouth, Leicester, Sevenoaks and Southend.

 

The Morgan Quarter, Cardiff

During the period we have continued our plans to reposition the asset and consolidate rental tone. We have concluded six new retail leases representing over £200,000 per annum in rental income. These include two tenants upsizing within the estate and the addition of JoJo Maman Bébé.

 

Within the Creative Quarter we have completed five new office leases on 1,265 sq ft and one renewal lease. Work is underway on Phase Three of the refurbishment which is due to complete early 2017 providing 5,700 sq ft of new space.

 

Retail Developments

 

Parkgate, Shirley, West Midlands

The shopping centre at Parkgate, Shirley, where Helical has a 50% interest, was completed in 2014 and the 80,000 sq ft Asda, which had been pre-sold to the food-store, together with a number of other retailers have all opened successfully for trade. The space beyond the food-store is let to occupiers such as B&M, Peacocks, Poundland, Pizza Express, JD Wetherspoon, Prezzo, Shoe Zone and Shirley Library and in November 2016 was sold to a private purchaser at its 30 September 2016 book value.

 

A second phase of high density residential is being progressed on a 10 acre site opposite the Parkgate scheme. Terms have been agreed with a care home provider, a residential developer and a supermarket operator for a petrol filling station.  Planning consent has been achieved subject to a s.106 Agreement.

 

Truro

Helical has entered into a Conditional Purchase Agreement on the six acre Truro City Football Club site which has planning consent, subject to a s.106 Agreement, for a 78,000 sq ft non-food retail park. The scheme proposals provide for the relocation of the football club and we anticipate starting on site in late 2017.

 

Cortonwood

This 79,750 sq ft retail park has been 95% pre-let to tenants including Outfit, H&M, New Look, River Island and Marks and Spencer. The scheme has been forward funded with clients of Aberdeen Asset Management and construction on site has started with completion due in June 2017. The remaining space is currently under offer.

 

Retirement Villages

 

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

 

Bramshott Place, Liphook, Hampshire

This village is situated amongst natural parkland near the village of Liphook on the border of Hampshire, West Sussex and Surrey. The village features a selection of two and three bedroom cottages and one, two and three bedroom apartments arranged around a residents' clubhouse. All construction works to Phases 1-3 are completed. 151 units in total have been built and sold.  Phase 4 commenced in August 2016 with the construction of 40 additional cottages, due for completion in January 2018.  Sales on the site will be formally launched in July 2017, with seven of the 40 new cottages already having been reserved. The residents' clubhouse is currently being extended and refurbished with completion of this project due in January 2017.

 

Durrants Village, Faygate, West Sussex

Durrants Village is set within 30 acres of private parkland in the hamlet of Faygate, near Horsham in West Sussex. The village features a selection of cottages and apartments. Phases 1 and 2 of the construction completed in January 2016 with 105 units located around the residents' clubhouse. Phase 3A has commenced and consists of an additional 20 units and is due to complete in July 2017. Sales have progressed well with 82 units sold, 4 exchanged and an additional 13 units reserved.

 

Millbrook Village, Exeter, Devon

Millbrook Village is nestled close to the River Exe in the heart of the historic cathedral city of Exeter. The village features a selection of two and three bedroom cottages and one, two and three bedroom apartments. The site will comprise 164 units once completed. The clubhouse will include a restaurant and bar, games room, gym, cinema and a swimming pool. The build programme is well advanced with 81 units currently completed with more stock now coming online at regular three month intervals. We anticipate that the village will be fully constructed by early 2018 with the clubhouse handed over in March 2017. 37 units have been sold, 7 exchanged with an additional 18 reserved.

 

Maudslay Park, Great Alne, Warwickshire

Maudslay Park is set in 90-acres of parkland in the Warwickshire village of Great Alne, near Stratford-upon-Avon. The village will comprise 164 units with a mixture of cottages and apartments built around the central clubhouse facility. The clubhouse will include a restaurant and bar, games room, gym, cinema and a swimming pool.  Phase 1 of the development is currently under construction which consists of 14 cottages, 35 apartments and the central clubhouse facility. We have recently launched the sales office on site and have achieved six reservations on cottages. We anticipate the first cottages being completed in February 2017 with the central clubhouse facility being completed in March 2018.

 

 

Capital Expenditure

 

We have a planned development and refurbishment programme to drive the rental value and secure the future of our assets.

 

Property
Capex Budget
(Helical Share)
£m
Remaining spend
(Helical share)
£m
Current
Total
Space
Sq ft
Refurbished
Space
Sq ft
New Space
Sq ft
Completion
date
Under Development
 
 
 
 
 
 
London Offices
 
 
 
 
 
 
207 Old Street, London EC1
93.5
72.6
114,000
114,000
65,000
Jun 2018
One Creechurch Place, London EC1
9.7
0.2
-
-
273,000
Nov 2016
25 Charterhouse Square, London  EC1
15.5
8.7
34,000
34,000
9,600
Mar 2017
The Loom, London E1
10.0
0.9
112,000
37,500
-
Jan 2017
London Residential
 
 
 
 
 
 
Barts Square, London EC1
85.2
63.7
n/a
 n/a
n/a
Mar 2019
Regional Offices
 
 
 
 
 
 
Booth St, Manchester
2.3
1.0
25,500
25,000
-
Dec 2016
 
 
 
 
 
 
 
Future Development
 
 
 
 
 
 
London Residential
 
 
 
 
 
 
Drury Lane, London WC2
75.0
73.2
-
-
80,000
Jun 2019
King Street, London W6
55.0
55.0
-
-
300,000
Dec 2021
  

Retirement Villages

 

Property

Capex Budget

£m

Remaining spend

£m

Total number of units

Completed units

 

Units under construction

Completion
date

Millbrook Village, Exeter

40.1

12.8

164

81

83

Mar 2018

Durrants Village, Faygate

46.5

17.9

173

105

20

Feb 2019

Maudslay Park, Great Alne

58.4

46.6

164

5

45

Dec 2020

Bramshott Place, Liphook

16.6

14.6

40

-

40

Jun 2018

 

161.6

91.9

541

191

188

 

 

 

Asset Management

 

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

 

 

 Investment portfolio

Fair

Value Weighting

%

Passing

Rent

£m

 %

Contracted Rent

£m

 %

ERV

£m

ERV Change Since

March 2016

%

London Offices

 

 

 

 

 

 

 

 

- Completed

44.1

10.6

27.2

21.5

41.4

28.3

36.4

3.0

- Being redeveloped/refurbished

13.4

-

-

-

-

16.1

20.7

-

- Held for future development

   /refurbishment

4.0

1.8

4.6

1.9

3.7

2.5

3.2

(0.8)

Total London

61.5

12.4

31.8

23.4

45.1

46.9

60.3

1.7

 

 

 

 

 

 

 

 

 

Regional Offices

9.5

5.9

15.3

6.8

13.1

8.3

10.6

1.0

Regional Logistics

19.5

14.8

38.1

15.8

30.4

16.1

20.8

0.2

Regional Retail

8.4

5.8

14.8

5.9

11.4

6.4

8.3

0.1

Retirement Villages

1.1

-

-

-

-

-

-

-

Total Regional

38.5

26.5

68.2

28.5

54.9

30.8

39.7

0.4

 

 

 

 

 

 

 

 

 

Total

100.0

38.9

100.0

51.9

100.0

77.7

100.0

1.2

                   

 

During the half year contracted income increased by £1.1m as a result of new lettings and rent reviews, net of any losses from breaks and lease expiries (2015: £1.5m). The significant contributors to the new lettings were: The Loom, London E1 (£0.3m), Shepherds Building, London W14 (£0.4m) and our logistics unit in Burton-on-Trent (£0.5m).

 

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

 

 

Contacted Rent

£m

Rent lost at break/expiry

(1.0)

Rent reviews

0.4

Uplift at Lease renewals

0.3

New Lettings

1.4

Total increase in the half year

1.1

 

Portfolio yields

 

 

EPRA Topped Up NIY

%

Reversionary

%

London Offices

 

 

- Completed

4.3

5.6

- Being redeveloped/refurbished

-

5.8

- Held for future development/refurbishment

4.3

5.4

Total London

3.3

5.7

 

 

 

Regional Offices

6.3

7.5

Regional Logistics

7.1

7.1

Regional Retail

6.2

6.7

Total

4.6

6.2

 

Capital values, vacancy rates and unexpired lease terms

 

 

Capital value psf

£

Vacancy rate*

%

WAULT

Years

London Offices

 

 

 

- Completed

868

9.5

6.7

- Being redeveloped/refurbished

575

n/a

-

- Held for future development/refurbishment

621

7.4

0.1

Total London

763

9.3

6.8

 

 

 

 

Regional Offices

204

10.9

5.5

Regional Logistics

57

3.5

4.7

Regional Retail

239

-

4.9

Total Regional

91

4.0

5.0

 

 

 

 

Total

197

4.6

5.8

 

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

Valuation movements

 

 

Val Change inc Capex, Sales & Purchases

%

Val Change inc Capex, excl Sales & Purchases

%

Investment Portfolio Weighting September 2016

%

Investment Portfolio Weighting March 2016

%

London Offices

 

 

 

 

- Completed

5.5

5.5

44.0

29.0

- Being redeveloped/refurbished

6.7

6.7

13.5

23.4

- Held for future development/refurbishment

(0.1)

(0.1)

4.0

4.0

Total London

5.3

5.3

61.5

56.4

 

 

 

 

 

Regional Offices

2.7

4.0

9.6

9.7

Regional Logistics

0.9

1.4

19.4

20.0

Regional Retail

(3.7)

(2.5)

8.4

12.8

Retirement Villages

-

-

1.1

1.1

Total Regional

(0.1)

1.0

38.5

43.6

 

 

 

 

 

Total

3.0

4.0

100.0

100.0

 

Lease expiries or tenant break options

 

 

Year to

2017

Year to

2018

Year to

2019

Year to

2020

Year to

2021

% of rent roll

8.5

11.8

14.4

8.7

6.9

Number of leases

72

109

73

41

21

Average rent per lease (£)

61,685

56,488

102,826

110,316

171,088

 

We have a strong rental income stream and a diverse tenant base, with the largest tenant in the portfolio accounting for only 7.5% of the rent roll. The top 10 tenants account for 31.3% of the total rent roll and the tenants come from a variety of industries.

 

 

Rank

Tenant

Tenant Industry

Rent

£m

Rent Roll

%

1

Endemol UK Limited

Media

          4.0

7.5

2

MullenLowe Limited

Marketing Communications

            2.6

4.9

3

Gopivotal (UK) Limited

Technology

2.0

3.8

4

Farfetch UK Limited

Online Retail

1.9

3.5

5

Sainsbury's Supermarkets Limited

Food Retail

             1.2

2.3

6

CBS Interactive Limited

Media

1.0

2.0

7

DSG Retail Limited

Retail

1.0

2.0

8

Allegis Group Limited

Recruitment

             1.0

1.9

9

Economic Solutions Limited

Employment and Skills Training

1.0

1.8

10

Stripe Payments UK Limited

Technology

0.8

1.6

Total

 

16.5

31.3

 

 

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 Year Results report of Helical plc for the six months ended 30 September 2016 which comprises the Unaudited Consolidated Income Statement, the Unaudited Consolidated Statement of Comprehensive Income, the Unaudited Consolidated Balance Sheet, the Unaudited Consolidated Cash Flow Statement, the Unaudited Consolidated Statement of Changes in Equity and the related unaudited notes. We have read the other information contained in the report: Financial Highlights, Chief Executive's Statement, Financial Review and Helical's Property Portfolio 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 Auditing Practices Board. Our review 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 conclusion we have formed.

 

Directors' responsibilities

 

The report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the report in accordance with the Disclosure 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 International Financial Reporting Standards as adopted by the European Union. The condensed set of financial statements included in this 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 a conclusion on the condensed set of financial statements in the 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 Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, 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 Ireland) 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 report for the six months ended 30 September 2016 is not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

 

 

Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants

London                 
24 November 2016

 

 

Unaudited consolidated income statement

 

For the Half Year to 30 September 2016

  

Notes

Half Year to

30 September 2016

£000

Half Year to

30 September 2015

£000

Year to

31 March 2016

Restated

£000

Revenue

3

52,367

58,280

116,500

Net rental income

4

23,911

19,999

42,164

Development property (loss)/profit

5

(83)

16,165

24,252

Share of results of joint ventures

13

(1,044)

31,795

50,469

Other operating (expense)/income

 

(1)

87

20

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

 

22,783

 

68,046

 

116,905

 

Net gain on sale and revaluation of investment properties

6

26,353

42,253

49,826

Impairment of available-for-sale investments

15

(1,179)

(350)

(1,370)

Gross profit

 

47,957

109,949

165,361

Administrative expenses

7

(5,871)

(14,079)

(26,103)

Operating profit

 

42,086

95,870

139,258

Finance costs

8

(13,949)

(11,281)

(24,113)

Finance income

 

1,199

1,248

5,128

Change in fair value of derivative financial instruments

 

(5,949)

(9)

(6,860)

Change in fair value of Convertible Bond

 

7,663

48

516

Foreign exchange gain

 

2

27

100

Profit before tax

 

31,052

85,903

114,029

Tax on profit on ordinary activities

9

672

(10,196)

(9,146)

Profit after tax

 

31,724

75,707

104,883

- attributable to equity shareholders

 

31,724

75,767

104,943

- attributable to non-controlling interests

 

-

(60)

(60)

Profit for the period

 

31,724

75,707

104,883

 

 

 

 

 

 

 

 

 

 

Earnings per share

11

 

 

 

Basic

 

27.8p

66.1p

91.3p

Diluted

 

26.6p

63.7p

88.0p

 

 

 

Unaudited consolidated statement of comprehensive income

 

For the Half Year to 30 September 2016

 

Half Year to

30 September 2016

£000

Half Year to

30 September 2015

£000

Year to

31 March 2016

Restated

£000

Profit for the period

31,724

75,707

104,883

Exchange difference on retranslation of net investments in foreign operations

21

5

(16)

Total comprehensive income for the period

31,745

75,712

104,867

- attributable to equity shareholders

31,745

75,772

104,927

- attributable to non-controlling interests 

-

(60)

(60)

Total comprehensive income for the period

31,745

75,712

104,867

 

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 2016

 

Notes

At

30 September 2016

£000

At

30 September 2015

£000

At

31 March 2016

Restated

£000

Non-current assets

 

 

 

 

Investment properties

12

1,034,687

800,600

1,035,033

Owner occupied property, plant and equipment

 

2,147

2,328

2,200

Investment in joint ventures

13

26,259

68,174

27,990

 

 

1,063,093

871,102

1,065,223

Current assets

 

 

 

 

Land, developments and trading properties

14

88,294

91,589

92,035

Available-for-sale investments

15

1,991

4,064

3,114

Corporate tax receivable

 

1,335

-

-

Trade and other receivables

16

77,485

72,104

73,057

Cash and cash equivalents

17

52,945

136,998

74,670

 

 

222,050

304,755

242,876

Total assets

 

1,285,143

1,175,857

1,308,099

Current liabilities

 

 

 

 

Trade and other payables

18

(62,408)

(82,085)

(71,000)

Corporation tax payable

 

-

(2,226)

(1,592)

Borrowings

19

(901)

(36,272)

(885)

 

 

(63,309)

(120,583)

(73,477)

Non-current liabilities

 

 

 

 

Borrowings

19

(685,404)

(577,695)

(733,178)

Derivative financial instruments

20

(20,721)

(8,104)

(14,955)

Deferred tax liability

9

(6,800)

(8,258)

(5,768)

 

 

(712,925)

(594,057)

(753,901)

Total liabilities

 

(776,234)

(714,640)

(827,378)

 

 

 

 

 

Net assets

 

508,909

461,217

480,721

 

 

 

 

 

Equity

 

 

 

 

Called-up share capital

21

1,447

1,447

1,447

Share premium account

 

98,798

98,798

98,798

Revaluation reserve

 

171,600

147,596

143,699

Capital redemption reserve

 

7,478

7,478

7,478

Other reserves

 

291

291

291

Retained earnings

 

229,295

205,607

229,008

Equity attributable to equity holders of the parent

 

508,909

461,217

480,721

Non-controlling interests

 

-

-

-

Total equity

 

508,909

461,217

480,721

 

Unaudited consolidated cash flow statement

    

For the Half Year to 30 September 2016

 

Half Year to

30 September 2016

£000

Year to

31 March 2016

Restated

£000

Cash flows from operating activities

 

 

 

Profit before tax

31,052

85,903

114,029

Depreciation

204

186

338

Net revaluation gain on investment properties

(29,141)

(41,249)

(47,441)

Loss/(gain) on sales of investment properties

2,788

(1,004)

(2,385)

Profit on sale of plant and equipment

(13)

-

-

Net financing costs

12,750

10,033

18,985

Change in value of derivative financial instruments

5,949

9

6,860

Change in fair value of Convertible Bond

(7,663)

(48)

(516)

Share based payment charge

283

2,841

6,666

Share of results of joint ventures

1,044

(31,795)

(50,469)

Impairment of available-for-sale investment

1,179

350

1,370

Foreign exchange movement

32

248

250

Other non-cash items

-

3

-

Cash inflows from operations before changes in working capital

18,464

25,477

47,687

Change in trade and other receivables

(4,319)

(5,333)

(5,074)

Movement in property derivative financial asset

-

16,388

16,388

Change in land, developments and trading properties

5,451

752

306

Change in trade and other payables

(7,625)

16,579

5,314

Cash inflows generated from operations

11,971

53,863

64,621

Finance costs

(17,028)

(11,923)

(25,312)

Finance income

627

1,248

3,915

Tax paid

(2,928)

(1,276)

(4,712)

 

(19,329)

(11,951)

(26,109)

Cash flows from operating activities

(7,358)

41,912

38,512

Cash flows from investing activities

 

 

 

Additions to investment property

(26,022)

(87,693)

(405,133)

Sale of investment property

54,919

31,101

121,770

Return of investment in joint ventures

-

-

11,495

Dividends from joint ventures

687

35,206

82,569

Available for sale asset additions

(56)

(72)

(142)

Sale of plant and equipment

49

48

70

Purchase of leasehold improvements, plant and equipment

(193)

(205)

(263)

Net cash generated from/(used by) investing activities

29,384

(21,615)

(189,634)

Cash flows from financing activities

 

 

 

Borrowings drawn down

15,725

128,005

299,754

Borrowings repaid

(57,709)

(111,641)

(161,648)

Shares issued

-

-

-

Purchase of own shares

(944)

(14,752)

(18,857)

Equity dividends paid

(823)

(5,899)

(14,437)

Net cash (used by)/generated from financing activities

(43,751)

(4,287)

104,812

Net (decrease)/increase in cash and cash equivalents

(21,725)

16,010

(46,310)

Exchange losses on cash and cash equivalents

-

(5)

(13)

Cash and cash equivalents at start of period

74,670

120,993

120,993

Cash and cash equivalents at end of period

52,945

136,998

74,670

 

 

Unaudited consolidated statement of changes in equity

 

At 30 September 2016

 

Share

capital

£000

Share

premium

£000

Revaluation

reserve

£000

Capital

redemption

reserve

£000

Other

reserves

£000

Retained earnings

£000

Own shares

held

£000

Non-

controlling

interests

£000

Total

£000

At 31 March 2015

1,447

98,798

108,060

7,478

291

188,229

-

60

404,363

Total comprehensive income

-

-

-

-

-

104,927

-

(60)

104,867

Revaluation surplus

-

-

47,441

-

-

(47,441)

-

-

-

Realised on disposals

-

-

(11,802)

-

-

11,802

-

-

-

Performance share plan

-

-

-

-

-

6,666

-

-

6,666

Performance share plan - deferred tax

-

-

-

-

-

(3,002)

-

-

(3,002)

Share settled bonus

-

-

-

-

-

1,121

-

-

1,121

Dividends paid

-

-

-

-

-

(14,437)

-

-

(14,437)

Purchase of own shares

-

-

-

-

-

-

(18,857)

-

(18,857)

Own shares held reserve transfer

-

-

-

-

-

(18,857)

18,857

-

-

At 31 March 2016 restated

1,447

98,798

143,699

7,478

291

229,008

-

-

480,721

Total comprehensive income

-

-

-

-

-

31,745

-

-

31,745

Revaluation surplus

-

-

29,141

-

-

(29,141)

-

-

-

Realised on disposals

-

-

(1,240)

-

-

1,240

-

-

-

Performance share plan

-

-

-

-

-

283

-

-

283

Performance share plan - deferred tax

-

-

-

-

-

(1,748)

-

-

(1,748)

Share settled bonus

-

-

-

-

-

(325)

-

-

(325)

Dividends paid

-

-

-

-

-

(823)

-

-

(823)

Purchase of own shares

-

-

-

-

-

-

(944)

-

(944)

Own shares held reserve transfer

-

-

-

-

-

(944)

944

-

-

At 30 September 2016

1,447

98,798

171,600

7,478

291

229,295

-

-

508,909

                     

 

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

 

The adjustment against retained earnings of £283,000 (31 March 2016: £6,666,000) adds back the share based payments charge in accordance with IFRS 2 Share Based Payments.

 

There were net transactions with owners of £3,557,000 (31 March 2016: £28,509,000) made up of the performance share plan charge of £283,000 (31 March 2016: £6,666,000) and related deferred tax debit of £1,748,000 (31 March 2016: £3,002,000), dividends paid of £823,000 (31 March 2016: £14,437,000), the purchase of own shares of £944,000 (31 March 2016: £18,857,000) and the share settled bonus of £325,000 (31 March 2016: credit of £1,121,000).

 

 

Share

capital

£000

Share

premium

£000

Revaluation

reserve

£000

Capital

redemption

reserve

£000

Other

reserves

£000

Retained earnings

£000

Own shares

held

£000

Non-

controlling

interests

£000

Total

£000

At 31 March 2015

1,447

98,798

108,060

7,478

291

188,229

-

60

404,363

Total comprehensive income

-

-

-

-

-

75,772

-

(60)

75,712

Revaluation surplus

-

-

41,249

-

-

(41,249)

-

-

-

Realised on disposals

-

-

(1,713)

-

-

1,713

-

-

-

Performance share plan

-

-

-

-

-

2,840

-

-

2,840

Performance share plan - deferred tax

-

-

-

-

-

(1,714)

-

-

(1,714)

Share settled bonus

-

-

-

-

-

667

-

-

667

Dividends paid

-

-

-

-

-

(5,899)

-

-

(5,899)

Purchase of own shares

-

-

-

-

-

-

(14,752)

-

(14,752)

Own shares held reserve transfer

-

-

-

-

-

(14,752)

14,752

-

-

At 30 September 2015

1,447

98,798

147,596

7,478

291

205,607

-

-

461,217

                     

 

The adjustment against retained earnings of £2,840,000 adds back the share based payments charge in accordance with IFRS 2 Share Based Payments.

 

There were net transactions with shareholders of £18,858,000 made up of the performance share plan charge of £2,840,000 and related deferred tax debit of £1,714,000, dividends paid of £5,899,000, the purchase of own shares of £14,752,000 and the share settled bonus of £667,000.

 

 

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 2016, 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 of the Companies Act 2006, have been filed with the Registrar of Companies.

 

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 principal accounting policies have remained unchanged from the prior financial period to 31 March 2016.

 

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 2016.

 

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 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 risk;

•    financial risk;

•    operational risk; and

•    reputational risk.

 

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 2017. A further analysis of these risks is included within the consolidated financial statements of the Group for the year ended 31 March 2016.

 

Use of estimates and judgements

The estimates and judgements have remained unchanged from the prior financial year to 31 March 2016.

 

2.  Statement of Directors' Responsibilities

 

Each of the Directors confirms that, to the best of his knowledge, the condensed set of unaudited financial statements, which has been prepared in accordance with IAS 34 as adopted by the European Union, gives a true and fair view of the assets, liabilities, financial position and profit or loss of the issuer, or the undertakings included in the consolidation as a whole and that the interim management report herein includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R.

 

Balances with related parties at 30 September 2016, 30 September 2015 and 31 March 2016 are disclosed in note 24.

 

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 24 November 2016 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

24 November 2016

 

 

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 trading properties, which are owned or leased with the intention to sell; and,

 

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

 

Revenue

Investment

and Trading

Half Year to 30.09.16

£000

Developments

Half Year to

30.09.16

£000

Total

Half Year to

30.09.16

£000

Investment

and Trading

Half Year to 30.09.15

£000

Developments

Half Year to

30.09.15

£000

Total

Half Year to

30.09.15

£000

Rental income

25,531

-

25,531

20,891

325

21,216

Development property income

-

26,836

26,836

-

36,948

36,948

Other revenue

-

-

-

116

-

116

Revenue

25,531

26,836

52,367

21,007

37,273

58,280

 

Revenue

 

Investment and Trading

Year to

31.03.16

£000

Developments

Year to

31.03.16

£000

Total

Year to

31.03.16

£000

Rental income

45,158

347

45,505

Development property income

-

70,876

70,876

Other revenue

119

-

119

Revenue

45,277

71,223

116,500

 

Profit before tax

 

Investment and Trading

Half Year to 30.09.16

£000

Developments

Half Year to

30.09.16

£000

Total

Half Year to

30.09.16

£000

Investment and Trading

Half Year to 30.09.15

£000

Developments

Half Year to

30.09.15

£000

Total

Half Year to

30.09.15

£000

Net rental income

23,935

(24)

23,911

19,803

196

19,999

Development property (loss)/ profit

-

(83)

(83)

-

16,165

16,165

Share of results of joint ventures

(704)

(340)

(1,044)

30,712

1,083

31,795

Gain on sale and revaluation of investment properties

26,353

-

26,353

42,253

-

42,253

 

49,584

(447)

49,137

92,768

17,444

110,212

Impairment of available for sale assets

 

 

(1,179)

 

 

(350)

Other operating (expense)/income

 

 

(1)

 

 

87

Gross profit

 

 

47,957

 

 

109,949

Administrative expenses

 

 

(5,871)

 

 

(14,079)

Net finance costs

 

 

(11,036)

 

 

(9,994)

Foreign exchange gain

 

 

2

 

 

27

Profit before tax

 

 

31,052

 

 

85,903

 

 

 

Profit before tax

Investment

and Trading

Year to

31.03.16

£000

 

Developments

Year to

31.03.16

£000

 

Total

Year to

31.03.16

£000

Net rental income

42,010

154

42,164

Development property profit

-

24,252

24,252

Share of results of joint ventures

47,592

2,877

50,469

Gain on sale and revaluation of investment properties

49,826

-

49,826

 

139,428

27,283

166,711

Impairment of available for sale assets

 

 

(1,370)

Other operating income

 

 

20

Gross profit

 

 

165,361

Administrative expenses

 

 

(26,103)

Net Finance costs

 

 

(25,329)

Foreign exchange gain

 

 

100

Profit before tax

 

 

114,029

 

Balance sheet

Investment and Trading

At 30.09.16

£000

 

Developments

At 30.09.16

£000

 

Total

At 30.09.16

£000

Investment

and Trading

At 30.09.15

£000

 

Developments

At 30.09.15

£000

 

Total

At 30.09.15

£000

Investment properties

1,034,687

-

1,034,687

800,600

-

800,600

Land, development and trading properties

28

88,266

88,294

28

91,561

91,589

Investment in joint ventures

3,192

23,067

26,259

57,825

10,349

68,174

 

1,037,907

111,333

1,149,240

858,453

101,910

960,363

Other assets

 

 

135,903

 

 

215,494

Total assets

 

 

1,285,143

 

 

1,175,857

Liabilities

 

 

(776,234)

 

 

(714,640)

Net assets

 

 

508,909

 

 

461,217

 

Balance sheet

 

Investment

and Trading

At 31.03.16

£000

Developments

At 31.03.16

£000

Total

At 31.03.16

£000

Investment properties

1,035,033

-

1,035,033

Land, development and trading properties

28

92,007

92,035

Investment in joint ventures

14,162

13,828

27,990

 

1,049,223

105,835

1,155,058

Other assets

 

 

153,041

Total assets

 

 

1,308,099

Liabilities

 

 

(827,378)

Net assets

 

 

480,721

 

 

 

4.  Net Rental Income

 

 

Half Year to

30 September 2016

£000

Half Year to

30 September 2015

£000

Year to

31 March

2016

£000

Gross rental income

25,531

21,216

45,505

Rents payable

(17)

(24)

(80)

Property overheads

(1,378)

(964)

(2,728)

Net rental income

24,136

20,228

42,697

Net rental income attributable to profit share partner

(225)

(229)

(533)

Group share of net rental income

23,911

19,999

42,164

 

5.  Development property (loss)/profit

 

 

Half Year to

30 September 2016

£000

Half Year to

30 September 2015

£000

Year to

31 March

2016

£000

Development property income

26,836

36,948

70,876

Profit on forward property contract

-

1,008

14

Cost of sales

(18,938)

(18,204)

(29,519)

Sales expenses

(4,012)

(2,056)

(10,671)

Provision against book values

(3,969)

(1,531)

(6,448)

Development property (loss)/profit

(83)

16,165

24,252

 

6.  Net Gain on Sale and Revaluation of Investment Properties

 

 

Half Year to

30 September 2016

£000

Half Year to

30 September 2015

£000

Year to

31 March

 2016

£000

Net proceeds from the sale of investment properties

54,919

31,101

122,201

Book value (note 12)

(57,243)

(30,097)

(119,385)

Tenants incentives on sold investment properties

(464)

-

(431)

(Loss)/gain on sale of investment properties

(2,788)

1,004

2,385

Revaluation surplus on investment properties

29,141

41,249

47,441

Net gain on sale and revaluation of investment properties

26,353

42,253

49,826

 

7.  Administrative Expenses

 

 

Half Year to

30 September 2016

£000

Half Year to

30 September 2015

£000

Year to

31 March

2016

£000

Administration costs

(5,801)

(5,356)

(10,717)

Performance related awards

(285)

(7,302)

(13,299)

National Insurance on performance related awards

215

(1,421)

(2,087)

Administrative expenses

(5,871)

(14,079)

(26,103)

 

 

8.  Finance Costs

 

 

Half Year to

30 September 2016

£000

Half Year to

30 September 2015

£000

Year to

31 March

2016

£000

Interest payable on bank loans, bonds and overdrafts

(14,923)

(12,178)

(25,353)

Other interest payable and similar charges

(2,520)

(1,468)

(3,700)

Interest capitalised

3,494

2,365

4,940

Finance costs

(13,949)

(11,281)

(24,113)

 

9.  Tax on Profit on Ordinary Activities

 

 

Half Year to

30 September 2016

£000

Half Year to

30 September 2015

£000

Year to

31 March

2016

£000

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

United Kingdom corporation tax at 20%

 

 

 

- Group corporation tax

-

(4,990)

(7,010)

- Adjustment in respect of prior periods

-

(98)

(115)

- Overseas tax

2

(19)

(712)

Current tax credit/(charge)

2

(5,107)

(7,837)

 

 

 

 

Deferred tax

 

 

 

- Capital allowances

(847)

(115)

(385)

- Tax losses

674

(1,379)

500

- Unrealised chargeable gains

(164)

(6,906)

(7,447)

- Other temporary differences

1,007

3,311

6,023

Deferred tax credit/(charge)

670

(5,089)

(1,309)

Total tax credit/(charge) for period

672

(10,196)

(9,146)

Deferred tax

 

At

30 September 2016

£000

At

30 September 2015

£000

At

31 March

2016

£000

Capital allowances

(2,793)

(1,676)

(1,946)

Tax losses

13,195

10,642

12,521

Unrealised chargeable gains

(24,298)

(23,593)

(24,134)

Other temporary differences

7,096

6,369

7,791

Deferred tax liability

(6,800)

(8,258)

(5,768)

 

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

 

If upon sale of the investment properties the group retained all the capital allowances, the deferred tax provision in respect of capital allowances of £2,793,000 would be released and further capital allowances of £27,551,000 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 2016

£000

Half Year to

30 September 2015

£000

Year to

31 March

2016

£000

Attributable to equity share capital

 

 

 

Ordinary

 

 

 

- Interim paid 2.30p per share

-

-

2,652

- Second interim paid of 5.15p per share

-

-

5,886

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

823

5,899

5,899

 

823

5,899

14,437


The interim dividend of 2.40p (30 September 2015: 2.30p per share) was approved by the Board on 22 November 2016 and will be paid on 30 December 2016 to Shareholders on the register on 2 December 2016. This interim dividend, amounting to £2,743,000 has not been included as a liability as at 30 September 2016.

 

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 year end. Shares held by the Helical Employees' Share Ownership Plan Trust (the "ESOP"), which has waived its entitlement to receive dividends, are treated as cancelled for the purpose of this calculation.

 

The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares and the post tax effect of dividends on the assumed exercise of all dilutive options.

 

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

 

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

 

 

Half Year to
30 September 2016

000's

Half Year to
30 September 2015

000's

Year to

31 March

2016

000's

Ordinary shares in issue

118,184

118,184

118,184

Weighting adjustment

(3,901)

(3,547)

(3,296)

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

114,283

114,637

114,888

Weighted average ordinary shares issued on share settled bonuses

1,197

1,053

1,197

Weighted average ordinary shares to be issued under performance share plan

3,700

3,271

3,212

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

119,180

118,961

119,297

 

 

 

£000

£000

£000

Earnings used for calculation of basic and diluted earnings per share

31,724

75,767

104,943

 

Basic earnings per share

 

27.8p

 

66.1p

 

91.3p

Diluted earnings per share

26.6p

63.7p

88.0p

 

 

 

£000

£000

£000

Earnings used for calculation of basic and diluted earnings per share

31,724

75,767

104,943

Net gain on sale and revaluation of investment properties      - subsidiaries

(26,353)

(42,253)

(49,826)

                                                                                                - joint ventures

518

(25,887)

(50,210)

Tax on (loss)/profit on disposal of investment properties

(308)

-

998

Fair value movement on derivative financial instruments        - subsidiaries

5,949

9

6,860

                                                                                                - joint ventures

-

(82)

(211)

Fair value movement on Convertible Bond

(7,663)

(48)

(516)

Impairment of available-for-sale investment

1,179

350

1,370

Deferred tax on adjusting items

(66)

7,021

6,212

Earnings used for calculations of EPRA earnings per share

4,980

14,877

19,620

 

 

 

 

EPRA earnings per share

4.4p

13.0p

17.1p


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

 

12. Investment Properties

 

 

Half Year to

30 September 2016

£000

Half Year to

30 September 2015

£000

Year to

31 March

2016

£000

Book value at 1 April

1,035,033

701,521

701,521

Additions at cost

27,806

87,693

405,133

Disposals

(57,243)

(30,097)

(119,385)

Revaluation surplus

34,397

41,249

53,508

Increase in lease incentive asset

(5,256)

-

(6,067)

Revaluation surplus attributable to profit share partners

(50)

234

323

As at period end

1,034,687

800,600

1,035,033


 

 

All properties are stated at market value as at 30 September 2016, 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 2016 is as follows:

 

 

Half Year to

30 September

2016

£000

Half Year to

30 September 2015

£000

Year to

31 March

2016

£000

Book value

1,034,687

800,600

1,035,033

Lease incentives and costs included in trade and other receivables

11,323

-

6,067

Fair value

1,046,010

800,600

1,041,100

 

 

Interest capitalised in respect of the refurbishment of investment properties at 30 September 2016 amounted to £8,355,000 (30 September 2015: £5,959,000; 31 March 2016: £6,571,000).

 

The historical cost of investment property is £861,338,000 (30 September 2015: £650,303,000; 31 March 2016: £889,493,000).

 

13. Joint Ventures

 

Share of results of joint ventures

Half Year to

30 September 2016

£000

Half Year to

30 September 2015

£000

Year to

31 March

2016

£000

Gross rental income

794

953

1,828

Property overheads

(90)

(130)

(558)

Net rental income

704

823

1,270

Net (loss)/gain on revaluation of investment properties

(510)

18,521

2,316

(Loss)/profit on sale of investment properties

(8)

7,366

41,553

Development profit

116

2,528

3,223

Provision against book values

(2,668)

-

-

Other operating income

-

263

218

Administrative expenses

(175)

(404)

(1,140)

Finance costs

(105)

(2,118)

(3,673)

Finance income

1,141

3

21

Change in fair value of derivative financial instruments

-

82

211

(Loss)/profit before tax

(1,505)

27,064

43,999

Tax

461

(196)

129

(Loss)/profit after tax

(1,044)

26,868

44,128

Economic interest adjustment*

-

4,927

6,341

Share of results of joint ventures

(1,044)

31,795

50,469

 

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

 

 

Investment in joint ventures

At

30 September 2016

£000

At

30 September 2015

£000

At

31 March

2016

£000

Summarised balance sheets

 

 

 

Non-current assets

 

 

 

Investment properties

12,833

88,545

11,552

Owner occupied property, plant and equipment

88

43

96

Deferred Tax

907

633

412

 

13,828

89,221

12,060

Current assets

 

 

 

Land, development and trading properties

88,831

60,402

75,904

Trade and other receivables

2,918

3,133

3,497

Cash and cash equivalents

11,690

12,845

12,177

 

103,439

76,380

91,578

Current liabilities

 

 

 

Trade and other payables

(17,184)

(13,366)

(14,436)

 

(17,184)

(13,366)

(14,436)

Non-current liabilities

 

 

 

Trade and other payables

(31,211)

(29,787)

(26,586)

Borrowings

(42,613)

(53,884)

(34,626)

Derivative financial instruments

-

(390)

-

 

(73,824)

(84,061)

(61,212)

Net assets

26,259

68,174

27,990


The Directors' valuation of trading and development stock shows a surplus of £7,000,000 (30 September 2015: £7,238,000; 31 March 2016: £7,000,000) above book value.

 

14. Land, Developments and Trading Properties

 

 

At

30 September 2016

£000

At

30 September 2015

£000

At

31 March

2016

£000

Development properties

88,266

91,561

92,007

Properties held as trading stock

28

28

28

 

88,294

91,589

92,035


The Directors' valuation of trading and development stock shows a surplus of £6,573,000 (30 September 2015: £17,906,000; 31 March 2016: £12,412,000) above book value.

 

Total interest to date in respect of the development of sites is included in stock to the extent of £11,441,000 (30 September 2015: £10,482,000; 31 March 2016: £11,626,000). Interest capitalised during the period in respect of development sites amounted to £1,710,000.

 

15.       Available-For-Sale Investments

 

 

Half Year to

30 September 2016

£000

Half Year to

30 September 2015

£000

Year to

31 March

2016

£000

Fair value at 1 April

3,114

4,342

4,342

Fair value additions

56

72

142

Fair value impairment

(1,179)

(350)

(1,370)

Fair value at period end

1,991

4,064

3,114


 

 

The fair values of the Group's available-for-sale investments have been determined by assessing the expected future consideration receivable from these investments, representing Level 3 fair value measurements as defined by IFRS 13 Fair Value Measurement as the value cannot be derived from observable market data. The fair value of the asset is sensitive only to potential sales proceeds.

 

16. Trade and Other Receivables

 

 

 

At

30 September 2016

£000

At

30 September 2015

£000

At

31 March

2016

£000

Trade receivables

13,974

5,432

20,869

Other receivables

36,022

52,027

32,382

Prepayments and accrued income

27,489

14,645

19,806

 

77,485

72,104

73,057

 

17.       Cash and Cash Equivalents

 

 

At

30 September 2016

£000

At

30 September 2015

£000

At

31 March

2016

£000

7,513

4,196

4,906

9,176

7,411

17,063

Cash deposits

36,256

125,391

52,701

 

52,945

136,998

74,670


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

 

18.       Trade and Other Payables

 

 

 

At

30 September 2016

£000

At

30 September 2015

£000

At

31 March

2016

£000

17,256

14,375

14,463

3,494

18,236

8,218

Accruals and deferred income

41,658

49,474

48,319

 

62,408

82,085

71,000

 

19. Borrowings

 

 

At

30 September 2016

£000

At

30 September 2015

£000

At

31 March

2016

£000

Current borrowings

901

36,272

885

Borrowings repayable within:

 

 

 

- one to two years

4,133

2,224

3,617

- two to three years

99,250

3,633

3,650

- three to four years

424,077

106,881

337,098

- four to five years

84,053

390,132

219,523

- five to six years

1,072

1,036

95,981

- six to ten years

72,819

73,789

73,309

Non-current borrowings

685,404

577,695

733,178

Total borrowings

686,305

613,967

734,063

 

Included within borrowings repayable within three to four years is the convertible bond at its fair value of £95,084,000. It is a financial instrument classified as Level 1 under the IFRS 13 fair value hierarchy.

 

Net Gearing

At

30 September 2016

£000

At

30 September 2015

£000

At

31 March

2016

£000

Total borrowings

686,305

613,967

734,063

Cash

(52,945)

(136,998)

(74,670)

Net borrowings

633,360

476,969

659,393

 

Net borrowings excludes the Group's share of borrowings in joint ventures of £42,613,000 (30 September 2015: £53,884,000; 31 March 2016: £34,626,000) and cash of £11,690,000 (30 September 2015: £12,845,000; 31 March 2016: £12,177,000). All borrowings in joint ventures are secured.

 

 

At

30 September 2016

£000

At

30 September 2015

£000

At

31 March

2016

£000

Net assets

508,909

461,217

480,721

Gearing

124%

103%

137%

 

20. Derivative Financial Instruments

 

 

At

30 September 2016

£000

At

30 September 2015

£000

At

31 March

2016

£000

Derivative financial instruments asset

-

-

-

Derivative financial instruments liability

(20,721)

(8,104)

(14,955)

 

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

 

21.       Share Capital

 

 

At

30 September 2016

£000

At

30 September 2015

£000

At

31 March

2016

£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:          

 

 

 

- 118,183,806 ordinary shares of 1p each

1,182

1,182

1,182

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

265

265

265

 

1,447

1,447

1,447

 

22. Own Shares Held

 

Following approval at the 1997 Annual General Meeting the Company established the Helical Employees' Share Ownership Plan Trust (the "ESOP") to be used as part of the remuneration arrangements for employees. The purpose of the ESOP is to facilitate and encourage the ownership of shares by or for the benefit of employees by the acquisition and distribution of shares in the Company.

The ESOP purchases shares in the Company to satisfy the Company's obligations under its Share Option Scheme and Performance Share Plan.

 

At 30 September 2016 the ESOP held 3,901,000 ordinary shares in Helical plc (30 September 2015: 2,901,000; 31 March 2016: 3,901,000).

 

At 30 September 2016 options over nil (30 September 2015 and 31 March 2016: nil) ordinary shares in Helical plc had been granted through the ESOP. At 30 September 2016 awards over 7,524,000 (30 September 2015 and 31 March 2016: 6,558,000) ordinary shares in Helical plc, made under the terms of the Performance Share Plan, were outstanding.

 

23. Net Assets per Share

 

 

At

30 September 2016

£000

Number

of

Shares

000's

At

30 September 2016

Pence Per Share

Net asset value

508,909

118,184

 

Less: - own shares held by ESOP

 

(3,901)

 

         - deferred shares

(265)

 

 

Basic net asset value

508,644

114,283

445

Add: share settled bonus

 

1,197

 

Add: dilutive effect of the Performance Share Plan

 

3,562

 

Diluted net asset value

508,644

119,042

427

Adjustment for:

 

 

 

      - fair value of financial instruments

20,721

 

 

      - fair value movement on Convertible Bond

(4,916)

 

 

      - deferred tax

23,094

 

 

Adjusted diluted net asset value

547,543

119,042

460

Adjustment for:

 

 

 

      - fair value of trading and development properties

13,573

 

 

EPRA net asset value

561,116

119,042

471

Adjustment for:

 

 

 

      - fair value of financial instruments

(20,721)

 

 

      - deferred tax

(23,094)

 

 

EPRA triple net asset value

517,301

119,042

435

 

The adjustment for the fair value of trading and development properties represents the surplus as at 30 September 2016.

 

 

At

31 March

2016

£000

Number

of

Shares

000's

At

31 March

2016

Pence Per Share

Net asset value

480,721

118,184

 

Less:        - own shares held by ESOP

 

(3,901)

 

                - deferred shares

(265)

 

 

Basic net asset value

480,456

114,283

420

Add: share settled bonus

 

1,197

 

Add: dilutive effect of the Performance Share Plan

 

3,177

 

Diluted net asset value

480,456

118,657

405

Adjustment for:

 

 

 

                - fair value of financial instruments

14,955

 

 

                - fair value movement on Convertible Bond

2,747

 

 

                - deferred tax

23,161

 

 

Adjusted diluted net asset value

521,319

118,657

439

Adjustment for:

 

 

 

                - fair value of trading and development properties

19,412

 

 

EPRA net asset value

540,731

118,657

456

Adjustment for:

 

 

 

                - fair value of financial instruments

(14,955)

 

 

                - deferred tax

(23,161)

 

 

EPRA triple net asset value

502,615

118,657

424

 

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

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

 

24. Related Party Transactions

 

At 30 September 2016, 30 September 2015 and 31 March 2016 the following amounts were due from the Group's joint ventures.

 

At

30 September 2016

£000

At

30 September 2015

£000

At

31 March  

2016

£000

King Street Developments (Hammersmith) Ltd

6,818

5,880

6,231

Shirley Advance LLP

11,688

10,372

11,347

Barts Square companies

-

36

77

Helical Sosnica Sp. zoo

1,112

1,090

1,099

207 Old Street Unit Trust

-

2,625

-

211 Old Street Unit Trust

-

2,401

-

Old Street Retail Unit Trust

-

725

-

City Road (Jersey) Ltd

-

737

-

Old Street Holdings LP

169

14,872

-

Creechurch Place Ltd

14,267

12,721

13,345

 

25. See-Through Analysis

 

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

 

In this statement we have incorporated the separate components into a more detailed "see-through" analysis of our property portfolio and debt profile and the associated income streams and financing costs to assist in providing a more comprehensive overview of the Group's activities.

 

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

 

See-through net rental income

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

 

 

 

Half Year to

30 September 2016

£000

Half Year to
30 September 2015

£000

Year to

31 March 2016

£000

Gross rental income

- subsidiaries

25,531

21,216

45,505

 

- joint ventures

794

953

1,828

Total gross rental income

 

26,325

22,169

47,333

Rents payable

- subsidiaries

(17)

(24)

(80)

Property overheads

- subsidiaries

(1,378)

(964)

(2,728)

 

- joint ventures

(90)

(130)

(558)

Net rental income attributable to profit share partner

 

(225)

(229)

(533)

See-through net rental income

 

24,615

20,822

43,434

           

 

See-through net development (losses)/profits

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

 

 

Half Year to

30 September 2016

£000

Half Year to

30 September 2015

£000

Year to

 31 March 2016

£000

In parent and subsidiaries

     3,886

17,694

30,700

In joint ventures

116

2,528

3,223

Total gross development profit

4,002

20,222

33,923

Provision against stock

(6,637)

(1,529)

(6,448)

See-through development (losses)/profits

(2,635)

18,693

27,475

 

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

 

 

Half Year to

30 September 2016

£000

Half Year to

30 September 2015

£000

Year to

31 March 2016

£000

Revaluation surplus on investment properties

- subsidiaries

29,141

41,249

47,441

 

- joint ventures

(510)

18,521

2,316

Total revaluation surplus

 

28,631

59,770

49,757

Net (loss)/gain on sale of investment properties

- subsidiaries

(2,788)

1,004

2,385

 

- joint ventures

(8)

7,366

41,553

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

(2,796)

8,370

43,938

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

25,835

68,140

93,695

           

 

See-through net finance costs

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

 

 

 

Half Year to

30 September 2016

£000

Half Year to

30 September 2015

£000

Year to

31 March 2016

£000

Interest payable on bank loans and overdrafts

- subsidiaries

14,923

12,178

25,353

 

- joint ventures

105

2,118

3,673

Total interest payable on bank loans and overdrafts

15,028

14,296

29,026

Other interest payable and similar charges

- subsidiaries

2,520

1,468

3,700

Interest capitalised

- subsidiaries

(3,494)

(2,365)

(4,940)

Total finance costs

 

14,054

13,399

27,786

Interest receivable and similar income

- subsidiaries

(1,199)

(1,248)

(5,128)

 

- joint ventures

(1,141)

(3)

(21)

See-through net finance costs

 

11,714

12,148

22,637

 

See-through property portfolio

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

 

 

 

At

30 September 2016

£000

At

30 September 2015

£000

At

31 March

2016

£000

Investment property fair value

- subsidiaries

1,046,010

800,600

1,041,100

 

- joint ventures

12,833

88,545

11,552

Total investment property fair value

 

1,058,843

889,145

1,052,652

Trading and development stock

- subsidiaries

88,294

91,589

92,035

 

- joint ventures

88,831

60,402

75,904

Total trading and development stock

 

177,125

151,991

167,939

Trading and development stock surplus

- subsidiaries

6,573

17,906

12,412

 

- joint ventures

7,000

7,238

7,000

Total trading and development stock surpluses

 

13,573

25,144

19,412

Total trading and development stock at fair value

 

190,698

177,135

187,351

See-through property portfolio

 

1,249,541

1,066,280

1,240,003

 

See-through net borrowings

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

 

 

At

30 September

2016

£000

At

30 September 2015

£000

At

31 March

2016

£000

In parent and subsidiaries

- gross borrowings less than one year

901

36,272

885

 

- gross borrowings more than one year

685,404

577,695

733,178

 

Total

686,305

613,967

734,063

In joint ventures

- gross borrowings less than one year

-

-

-

 

- gross borrowings more than one year

42,613

53,884

34,626

 

Total

42,613

53,884

34,626

In parent and subsidiaries

Cash and cash equivalents

(52,945)

(136,998)

(74,670)

In joint ventures

Cash and cash equivalents

(11,690)

(12,845)

(12,177)

See-through net borrowings

664,283

518,008

681,842

 

See-through net operating income

 

Half year to

30 September 2016

£000

Half year to

30 September 2015

£000

Year to

31 March

2016

£000

Net rental income

24,615

20,822

43,434

Development profits (before provisions)

4,002

20,222

33,923

(Loss)/gain on sale of investment properties

(2,796)

8,370

43,938

Net operating income

25,821

49,414

121,295

 

26. See-Through Interest Cover, Gearing and Loan to Value

 

 

At

30 September 2016

£000

At

30 September 2015

£000

At

31 March

2016

£000

Interest cover

2.2x

4.1x

5.4x

Gearing

131%

112%

142%

Gearing based on EPRA net asset value

118%

99%

126%

Loan to value

53%

49%

55%

 

 

27. Capital Commitments

 

The Group has a commitment of £131,085,000 (30 September 2015: £34,299,000, 31 March 2016: £34,054,000) in relation to construction contracts, which are due to be completed in the period to March 2019. Of the total, £86,155,000 relates to the Group's investment property portfolio and £44,930,000 are in relation to the Group's retirement village programme.

 

28. Investment property accounting restatement

 

International Accounting Standard 40 - Investment Property requires that accrued operating lease income assets should be shown separately and deducted from the fair value of the investment properties in the Consolidated Balance Sheet. This accounting treatment had not been applied at 31 March 2016 but has been adopted for the period ended 30 September 2016. A prior year adjustment has been made to ensure consistency of comparative information, clarity and transparency.

 

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

 

Impact on equity - increase/(decrease) in equity

Original

At 31 March

2016

£000

Adjustment

At 31 March

2016

£000

Restated

At 31 March

2016

£000

Investment properties

1,041,100

(6,067)

1,035,033

Deferred tax liability

(6,367)

599

(5,768)

Equity

486,189

(5,468)

480,721

 

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

Original

At 31 March

2016

£000

Adjustment

At 31 March

2016

£000

Restated

At 31 March

2016

£000

Net gain on sale and revaluation of investment properties

55,893

 

(6,067)

 

49,826

 

 

 

 

 

Profit before tax

120,096

(6,067)

114,029

Tax on profit on ordinary activities

(9,745)

599

(9,146)

Profit for the year

110,351

(5,468)

104,883

 

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

Original

At 31 March

2016

£000

Adjustment

At 31 March

2016

£000

Restated

At 31 March

2016

£000

Basic earnings per share

96.1

(4.8)

91.3

Diluted earnings per share

92.6

(4.6)

88.0

 

 

 

 

EPRA net asset value per share

461

(5)

456

 

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

 

29. Post Balance Sheet Events

 

Since the period end, the Group has sold ten logistics units, one retail asset and one London office for £91,500,000, an aggregate of £1,450,000 above 30 September 2016 fair values.

 

 

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: info@helical.co.uk


www.helical.co.uk

 

 


This information is provided by RNS
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