REG - Helical PLC - Annual Results For The Year to 31 March 2022
24/05/2022 07:16
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RNS Number : 5225M Helical PLC 24 May 2022
HELICAL PLC
("Helical" or the "Group" or the "Company")
Annual Results for the Year to 31 March 2022
HELICAL, DELIVERING A SUSTAINABLE FUTURE
Gerald Kaye, Chief Executive, commented:
"Today marks the opening to the public of the Elizabeth Line, one of the
largest transport infrastructure projects in the UK, increasing Central
London's rail capacity by 10% and bringing an additional 1.5 million people
within 45 minutes of Central London. Our £1bn portfolio of sustainable,
amenity rich London offices, of which 99% by value are situated within a 12
minute walk of a nearby Elizabeth Line station, will continue to benefit from
their proximity to this new arterial route through Central London. It is this
connection, together with the improving strength of the prime London office
market, that has underpinned a strong set of results after emerging from the
Covid-19 pandemic following two difficult years.
"Our Total Accounting Return ("TAR") for the year, a key performance indicator
for Helical, was 15.0% on our net assets measured under IFRS and 10.2% based
on our EPRA net tangible assets. Over the three years to 31 March 2022, the
compound annual growth rate of our EPRA TAR was 7.8% pa, an indication of the
strength and consistency of the financial performance of the Group, despite
the challenges of the period. These results were driven by growing rental
income and strong valuation surpluses from both our completed development
schemes, now held for long term income growth and future asset management
opportunities, and our schemes under development.
"This morning we published our Net Zero Carbon Pathway to becoming a net zero
carbon business by 2030, as our contribution, as a responsible business, to
the decarbonising of the UK economy by 2050. In continuing this journey, we
have identified meaningful ways of reducing both our embodied and operational
carbon emissions. As part of this process, we have signed up to the Better
Buildings Partnership Climate Commitment, which provides an accountable and
transparent framework for delivering net zero carbon for a property portfolio.
"We are a specialist developer and investor in prime Central London real
estate, creating inspiring and sustainable, best-in-class office buildings.
London is a leading world city, a safe haven, attracting a mix of established
and growing businesses seeking a base for their operations and well
capitalised investors looking to invest their funds.
"We will continue to see bifurcation between the best-in-class new sustainable
buildings and the older less sustainable buildings. This will be reflected in
strong rental growth for the former and rental decline for the latter.
Helical is well positioned to capitalise upon a period of opportunity within
the sector over the next 10-20 years, changing the older "brown" buildings
into "green" sustainable buildings.
"In the last year, we have deployed capital to acquire 100 New Bridge Street,
EC4, with this exciting redevelopment due to start by the end of 2023,
following the expiry of the current tenancies. Along with 33 Charterhouse
Street, EC1, due for completion in September 2022, and continuing asset
management opportunities in the remaining, completed investment portfolio, we
are optimistic that our successful track record of outperforming the market
and delivering strong financial returns will continue."
Operational Highlights
· Major boost to the development pipeline with the acquisition of 100
New Bridge Street, EC4. Delivery of a c.185,000 sq ft office scheme planned
for early 2025.
· Practical completion of 33 Charterhouse Street, EC1, a 205,369 sq ft
BREEAM "Outstanding" office development, on track for September 2022.
· 14 residential units at Barts Square sold in this 236 unit residential
scheme, leaving 14 apartments available at the year end of which one has
since been sold and two are under offer.
· 12 new lettings completed across the portfolio, totalling 54,118 sq
ft, delivering contracted rent of £3.3m (Helical's share £3.0m) at 1.8%
above the 31 March 2021 ERV (excluding managed lettings).
· 95.8% of all rent contracted and payable for the financial year
collected with 2.2% to be collected following the end of the Government's
general moratorium and 2.0% having been written off or agreed concessions.
· Post year end disposals of:
- Trinity, our last remaining asset in Manchester, for £34.55m, at a net
premium of c.£2.0m to our 31 March 2022 book value and representing a net
initial yield of 5.0%.
- 55 Bartholomew, EC1, for £16.5m (our share £7.6m), at a 3% premium to
31 March 2022 book value, reflecting a net initial yield of 4.5%.
Financial Highlights
Earnings and Dividends
· IFRS profit after tax increased to £88.9m (2021: £17.9m).
· See-through Total Property Return(1) of £89.5m (2021: £48.6m):
- Group's share(1) of net rental income of £31.2m (2021: £25.0m) - up
24.8%.
- Net gain on sale and revaluation of investment properties of £51.7m
(2021: £23.9m).
- Development profits of £6.6m (2021: losses of £0.3m).
· Total Property Return, as measured by MSCI, of 10.7%, compared to the
MSCI Central London Offices Total Return Index of 7.9%.
· IFRS basic earnings per share of 72.8p (2021: 14.8p).
· EPRA earnings per share(1) of 5.2p (2021: loss of 1.8p).
· Final dividend proposed of 8.25p per share (2021: 7.40p), an increase
of 11.5%.
· Total dividend for the year of 11.15p (2021: 10.10p), an increase of
10.4%.
Balance Sheet
· Net asset value up 13.0% to £687.0m (31 March 2021: £608.2m).
· Total Accounting Return(1) on IFRS net assets of 15.0% (2021: 3.3%).
· Total Accounting Return(1) on EPRA net tangible assets of 10.2% (2021:
4.5%).
· EPRA Total Accounting Return CAGR(1) for the three years to 31 March
2022 of 7.8% (2021: 7.2%).
· EPRA net tangible asset value per share(1) up 7.3% to 572p (31 March
2021: 533p).
· EPRA net disposal value per share(1) up 13.6% to 551p (31 March 2021:
485p).
Financing
· See-through loan to value(1) increased to 36.4% (31 March 2021:
22.6%).
· See-through net borrowings(1) of £402.9m (31 March 2021: £193.9m).
· Average maturity of the Group's share(1) of secured debt of 3.0 years
(31 March 2021: 3.2 years), increasing to 3.7 years on exercise of options to
extend current facilities and on a fully utilised basis.
· Change in fair value of derivative financial instruments credit of
£18.0m (2021: £2.9m).
· See-through average cost of secured facilities(1) of 3.2% (31 March
2021: 3.5%).
· Group's share(1) of cash and undrawn bank facilities of £132m (31
March 2021: £423m).
· Helical elected to become a REIT, effective 1 April 2022, and will be
exempt from UK corporation tax on relevant future property activities.
Portfolio Update
· IFRS investment property portfolio value of £938.8m (31 March 2021:
£740.2m).
· 7.0% valuation increase, on a like-for-like basis(1) (5.6% including
sales and purchases), of our see-through investment portfolio, valued at
£1,097.3m, compared to £839.4m at 31 March 2021.
· Contracted rents of £46.4m (31 March 2021: £37.8m) compared to an
ERV(1) of £67.1m (31 March 2021: £52.1m).
· See-through portfolio WAULT(1) of 5.6 years (31 March 2021: 6.9
years).
· Vacancy rate reduced from 10.5% to 6.7%.
Sustainability Highlights
· Helical's "Net Zero Carbon Pathway" published today setting out our
commitment to becoming a net zero carbon business by 2030.
· Better Building Partnership's Climate Commitment adopted, providing an
accountable and transparent framework for delivering net zero carbon for a
property portfolio.
· Improvements across sustainability measures and ratings with a 4* Green
GRESB rating (85/100), MSCI ESG of AAA and an EPRA Sustainability BPR rating
of Gold.
· 96% of the space in our buildings has been recently developed or
refurbished (excluding 100 New Bridge Street, EC4) with 99% of our investment
portfolio, by value, having an A or B EPC rating.
For further information, please contact:
Helical plc 020 7629 0113
Gerald Kaye (Chief Executive)
Tim Murphy (Chief Financial Officer)
Address: 5 Hanover Square, London W1S 1HQ
Website: www.helical.co.uk (http://www.helical.co.uk)
Twitter: @helicalplc
FTI Consulting 020 3727 1000
Dido Laurimore/Richard Gotla/Andrew Davis
schelical@fticonsulting.com (mailto:schelical@fticonsulting.com)
Results Presentation
Helical will be holding a presentation for analysts and investors starting at
08:30am on Tuesday 24 May 2022 at the offices of FTI Consulting, 200
Aldersgate, Aldersgate Street, London, EC1A 4HD. If you would like to attend,
please contact FTI Consulting on 020 3727 1000, or email
schelical@fticonsulting.com (mailto:schelical@fticonsulting.com)
The presentation will be on the Company's website www.helical.co.uk
(http://www.helical.co.uk) and a conference call facility will be available.
The dial-in details are as follows:
Participants, Local - London, United Kingdom: 0330 165 4012
Participation Code: 5156706
Webcast Link:
https://webcasting.brrmedia.co.uk/broadcast/624c2069e1d0d456b32a283b
(https://webcasting.brrmedia.co.uk/broadcast/624c2069e1d0d456b32a283b)
1. See Glossary for definition of terms. The financial statements have been
prepared in accordance with International Accounting Standards ("IAS") in
conformity with the Companies Act 2006. In common with usual and best practice
in our sector, alternative performance measures have also been provided to
supplement IFRS, some of which are based on the recommendations of the
European Public Real Estate Association ("EPRA"), with others designed to give
additional information about the Group's share of assets and liabilities,
income and expenses in subsidiaries and joint ventures.
Chief Executive's Statement
Overview
Today marks the opening to the public of the Elizabeth Line, one of the
largest transport infrastructure projects in the UK, increasing Central
London's rail capacity by 10% and bringing an additional 1.5 million people
within 45 minutes of Central London. Our £1bn portfolio of sustainable,
amenity rich London offices, of which 99% by value are situated within a 12
minute walk of a nearby Elizabeth Line station, will continue to benefit from
their proximity to this new arterial route through Central London. It is this
connection, together with the improving strength of the prime London office
market, that has underpinned a strong set of results after emerging from the
Covid-19 pandemic following two difficult years.
Our Total Accounting Return ("TAR") for the year, a key performance indicator
for Helical, was 15.0% on our net assets measured under IFRS and 10.2% based
on our EPRA net tangible assets. Over the three years to 31 March 2022, the
compound annual growth rate of our EPRA TAR was 7.8% pa, an indication of the
strength and consistency of the financial performance of the Group, despite
the challenges of the period. These results were driven by growing rental
income and strong valuation surpluses from both our completed development
schemes, now held for long term income growth and future asset management
opportunities, and our schemes under development.
Sustainability
This morning we published our Net Zero Carbon Pathway to becoming a net zero
carbon business by 2030, as our contribution, as a responsible business, to
the decarbonising of the UK economy by 2050. In continuing this journey, we
have identified meaningful ways of reducing both our embodied and operational
carbon emissions. As part of this process, we have signed up to the Better
Buildings Partnership Climate Commitment, which provides an accountable and
transparent framework for delivering net zero carbon for a property portfolio.
With our commitment to sustainability reporting, we measure our performance
against industry-wide benchmarks, and I am pleased again to be able to report
significant progress against these measures during the year.
We have improved our GRESB score from a 3* to a 4* Green rating, increasing
our score from 76 to 85, and have maintained our MSCI ESG rating at AAA, the
top rating. Further, we have been awarded a Gold rating under the EPRA
Sustainability BPR, up from Silver.
At a portfolio level, 99% by value of our completed portfolio has an EPC
rating of A or B (the remaining 1% has a C rating) and each of our refurbished
or redeveloped office buildings has a BREEAM rating of "Excellent", with
BREEAM "Outstanding" targeted for 33 Charterhouse Street, EC1 and 100 New
Bridge Street, EC4.
Overall, the Group has continued to respond decisively to the climate change
challenge, achieving its sustainability targets and, importantly, has a clear
path to continue this journey.
Results for the Year
The profit after tax for the year to 31 March 2022 was £88.9m (2021: £17.9m)
with a see-through Total Property Return of £89.5m (2021: £48.6m). Following
the letting of Kaleidoscope, EC1 in March 2021 and the recent purchase of 100
New Bridge Street, EC4, see-through net rental income increased by 24.8% to
£31.2m (2021: £25.0m) while developments generated see-through profits of
£6.6m (2021: loss of £0.3m). The see-through net gain on sale and
revaluation of the investment portfolio was £51.7m (2021: £23.9m).
Total see-through net finance costs increased to £19.7m (2021: £14.8m),
including £5.9m loan cancellation costs. An increase in expected future
interest rates led to an £18.0m credit (2021: £2.9m) from the valuation of
the Group's derivative financial instruments. Recurring see-through
administration costs were 2% higher at £9.9m (2021: £9.7m), with performance
related awards increasing to £6.0m (2021: £4.3m) and National Insurance on
these awards of £1.2m (2021: £0.8m).
A corporation tax credit of £1.1m has been recognised in the annual results
and following the election to become a REIT, with effect from 1 April 2022, a
deferred tax credit of £14.9m has also been recognised.
There was an IFRS basic earnings per share of 72.8p (2021: 14.8p) and an EPRA
earnings per share of 5.2p (2021: loss of 1.8p).
On a like-for-like basis, the investment portfolio increased in value by 7.0%
(5.6% including purchases and gains on sales). The see-through total portfolio
value increased to £1,097.3m (31 March 2021: £839.4m), following the
acquisition of 100 New Bridge Street, EC4 during the year.
The unleveraged return of our property portfolio, as measured by MSCI, was
10.7% (2021: 7.0%), showing strong outperformance of its benchmark. We compare
our portfolio performance to the MSCI UK Central London Offices Total Return
Index which produced a return of 7.9% (2021: -1.7%) with an upper quartile
return of 9.9% (2021: 1.6%).
The portfolio was 93.3% let at 31 March 2022, generating contracted rents of
£46.4m (2021: £37.8m), at an average of £60 psf, growing to £49.3m on the
letting of currently vacant space and moving towards capturing its ERV of
£67.1m (2021: £52.1m). The Group's contracted rent has a Weighted Average
Unexpired Lease Term ("WAULT") of 5.6 years.
The Total Accounting Return ("TAR"), being the growth in the IFRS net asset
value of the Group, plus dividends paid in the year, was 15.0% (2021: 3.3%).
Based on EPRA net tangible assets, the TAR was 10.2% (2021: 4.5%). EPRA net
tangible assets per share were up 7.3% to 572p (31 March 2021: 533p), with
EPRA net disposal value per share up 13.6% to 551p (31 March 2021: 485p).
Balance Sheet Strength and Liquidity
The Group has a significant level of liquidity with see-through cash and
unutilised bank facilities of £132m (31 March 2021: £423m) to fund capital
works on its portfolio and future acquisitions.
At 31 March 2022, the Group had £14.2m of cash deposits available to deploy
without restrictions and a further £19.1m of rent in bank accounts available
to service payments under loan agreements, cash held at managing agents and
cash held in joint ventures. Furthermore, the Group had £99.0m of loan
facilities available to draw on plus £31.0m of uncharged property.
The see-through loan to value ratio ("LTV") increased to 36.4% at the balance
sheet date (31 March 2021: 22.6%) and our see-through net gearing, the ratio
of net borrowings to the net asset value of the Group, increased to 58.6% (31
March 2021: 31.9%) over the same period.
At the year end, the average debt maturity on secured loans, on a see-through
basis, was 3.0 years (31 March 2021: 3.2 years), increasing to 3.7 years on
exercise of options to extend the Group's facilities and on a fully utilised
basis. The average cost of debt at 31 March 2022 was 3.2% (31 March 2021:
3.5%).
Helical as a Real Estate Investment Trust ("REIT")
Helical's business has evolved in recent years, from a developer/trader model,
selling its development schemes to third party investors, to become a
developer of, and investor in, new or refurbished Grade A buildings that are
retained for their capital growth and long-term income potential.
Today, Helical has a portfolio with a superior sustainability rating.
Together, this portfolio and the Company's long-term investment model has
facilitated the conversion of the Company's operations to a REIT, with the
notice to become a REIT submitted in March 2022 and effective from 1 April
2022.
It is the intention of the Board that there will be no material changes to the
Group's investment policy or strategy on becoming a REIT.
Helical intends to employ the same dividend policy as followed prior to its
conversion to a REIT. Within the REIT regime, distributions from the Company
may comprise Property Income Distributions (PIDs), ordinary dividends or a
combination of the two. The Company will be required to distribute at least
90% of the tax exempt income profits of its property rental business and will
be able to distribute additional amounts over and above the minimum PID
requirement, to enable it to continue its current dividend policy.
Dividends
Helical is a capital growth stock, seeking to maximise value by successfully
letting repositioned, refurbished and redeveloped property. Once stabilised,
these assets are either retained for their long-term income and reversionary
potential or sold to recycle equity into new schemes.
This recycling leads to fluctuations in our EPRA earnings per share, as the
calculation of these earnings excludes capital profits generated from the sale
and revaluation of assets. As such, both EPRA earnings and realised capital
profits are considered when determining the payment of dividends.
In the year to 31 March 2022, prior to Helical becoming a REIT, the Company
retained all its investment assets, investing its available cash resources to
grow the development pipeline with the acquisition of 100 New Bridge Street,
EC4. The additional income from this purchase and the growing net rental
income from the completed investment assets increased net rental income by
24.8% and EPRA earnings per share from a loss of 1.8p in 2021 to earnings of
5.2p in 2022.
In the light of the increased earnings and the strong results for the year,
the Board will be recommending to Shareholders a final dividend of 8.25p per
share, an increase of 11.5% on last year (7.40p). If approved by Shareholders
at the 2022 AGM, the total dividend for the year will be 11.15p, up 10.4% on
2021.
This final dividend, if approved, will be paid out of distributable reserves
generated from the Group's activities prior to its conversion into a REIT.
Board Matters
At this year's Annual General Meeting ("AGM") our Chairman, Richard Grant,
will step down from the Board after ten years' service. On behalf of the rest
of the Board, I thank him for his contribution to the success of Helical over
that period and wish him well.
Richard will be replaced as Chairman by Richard Cotton, our current Senior
Independent Director ("SID") with Sue Clayton, who has been on the Board for
six years, replacing Richard Cotton as SID.
Outlook
The geopolitical and economic backdrop has deteriorated since we reported on
our half year results in November 2021. The human tragedy of what is unfolding
in Ukraine is heart rending and shocking to Western democracies and it is
difficult to comprehend the motivation and methods of the aggressors. With
these events in Eastern Europe ongoing and growing inflationary pressures
accompanying a slowing economy leading to fears of "stagflation", it is right
to be concerned for the performance of UK businesses over the next year.
Despite these concerns, the fundamentals of our business remain strong, and we
believe our experience and reputation will enable us to secure new
opportunities as they arise.
We are a specialist developer and investor in prime Central London real
estate, creating inspiring and sustainable, best-in-class office buildings.
London is a leading world city, a safe haven, attracting a mix of established
and growing businesses seeking a base for their operations and well
capitalised investors looking to invest their funds.
We will continue to see bifurcation between the best-in-class new sustainable
buildings and the older less sustainable buildings. This will be reflected in
strong rental growth for the former and rental decline for the latter.
Helical is well positioned to capitalise upon a period of opportunity within
the sector over the next 10-20 years, changing the older "brown" buildings
into "green" sustainable buildings.
In the last year, we have deployed capital to acquire 100 New Bridge Street,
EC4, with this exciting redevelopment due to start by the end of 2023,
following the expiry of the current tenancies. Along with 33 Charterhouse
Street, EC1, due for completion in September 2022, and continuing asset
management opportunities in the remaining, completed investment portfolio, we
are optimistic that our successful track record of outperforming the market
and delivering strong financial returns will continue.
Gerald Kaye
Chief Executive
24 May 2022
Our Market
The past two years have seen the Central London commercial property market
face unprecedented challenges. Throughout this period, Helical has retained a
strong conviction that our portfolio of high quality, sustainable and
technologically advanced buildings would be resilient in the face of the
significant challenges facing the sector and well positioned to take advantage
of the quickly evolving demands of the marketplace. While headwinds remain,
this conviction has been borne out, and it is encouraging to see increasing
evidence that employees, occupiers and investors alike continue to place
significant importance on the value of the office and that our portfolio of
design led, amenity rich and well located properties continue to outperform in
a highly competitive market.
London
The Central London commercial property market continues to demonstrate its
inherent resilience. The end of the UK Government's Covid-19 restrictions has
enabled employees to return to the office and confidence to grow throughout
the sector. Data collected by The Freespace Index, which provides office use
statistics, shows that daily London office occupancy has steadily increased,
demonstrating the importance of the office in effective working practices,
albeit employees are adopting a range of working practices depending on the
nature of their industry. Any uncertainty over the future of the office has
much reduced as the value of the office to workplace culture, efficiency and
knowledge sharing is rediscovered and reinforced.
These trends are evidenced in the letting market where velocity has continued
to increase in Central London as greater stability has enabled occupiers to
develop longer-term plans. According to CBRE, since July 2021 the amount of
space under offer has exceeded the 10 year average of 3.3m sq ft. While
availability remains high at 26.0m sq ft, 18.1m sq ft of this relates to
second hand stock, further demonstrating that best-in-class space is desired
as the flight to quality intensifies. A combination of these factors, coupled
with limited newly built office space, has led to increases in headline rents
across most Central London sub-markets in 2021 for these best-in-class
buildings.
From an investment perspective, a significant amount of capital continues to
be allocated to the Central London office market with CBRE identifying more
than £40bn of capital targeting the sector at the end of 2021. While London
saw consecutive years of declining investment volumes in 2019 and 2020 due to
the destabilising impacts of Brexit and Covid-19, this trend reversed in 2021,
with investment into London offices of £12.3bn, an increase of £3bn on 2020.
2022 has continued this trend with CBRE reporting a record first quarter of
£5.5bn of inbound investment, with a further £5bn under offer.
London continues to be a highly desirable market and the renewed sense of
confidence is manifesting in growing development activity, with the amount of
new development starting on site at 1.0m sq ft above the long-term average.
While this is positive, significant headwinds remain, with the impact of
increasing cost price inflation, rising interest rates and disrupted global
supply chains adversely impacting development activity. As general inflation
hits its highest levels in 40 years, Arcadis notes that manufacturing
inflation is outpacing all other sectors, with raw material prices increasing
by 13.6% during the year. These disruptive trends will need to be monitored
over the coming year and are likely to partially moderate some of the renewed
sectoral confidence.
Sustainability
Sustainability is now at the forefront of business decision making, with an
increasing number of companies committing to net zero targets. Landlords and
tenants are increasingly aware of the need to both minimise embodied carbon in
the development of assets and reduce operational carbon through the building's
day to day use. Furthermore, legislative changes are mandating the efficient
operational performance of buildings to ensure wider environmental targets are
achieved. The quick response by landlords and tenants, and the Government's
regulatory changes, have combined to make London the highest ranked green city
globally out of 286 cities studied by Knight Frank.
The nature of sustainable development is evolving rapidly with an increased
focus on the development and integration of new technologies. Whilst these
technologies increase the initial cost, we believe that this is justified,
with increasing evidence of occupiers paying a premium for best-in-class
"green" buildings. In contrast, "brown" assets are increasingly hard to let.
Knight Frank has identified 24.5m sq ft of pending lease expiries between now
and the end of 2025, and this will undoubtably require landlords to undertake
substantial refurbishment work to meet the required energy performance
standards and enable these spaces to be relet.
The trend to ensure sustainability is at the heart of development is also
manifesting itself in a fundamental change in approach, as developers seek to
reduce embodied carbon by reusing, where possible, elements of an existing
building. Deloitte's Crane Survey has noted an emerging trend towards
substantial refurbishment rather than new ground up development, with 64% of
space under construction relating to refurbishment. This trend is further
evidenced by our most recent acquisition of 100 New Bridge Street, London EC4,
where we will work with the existing building structure, delivering a
best-in-class carbon friendly new build. Equally, Local Authorities are
seeking increasing justification for demolition, on sustainability grounds.
Amenity Rich and Flexible Space
As businesses seek to encourage employees to return to the office and to
provide them with an environment that is conducive to collaborative and
effective working, there is a requirement for amenity rich and flexible space.
Knight Frank found 46% of occupiers surveyed for their 2022 London Report
expect to have a greater amenity offering in their workplace in the next three
years.
Businesses are wishing to occupy buildings which provide flexible, varied
space to facilitate agile working practices and stimulate creativity.
Furthermore, they are looking for attractive spaces that help create a sense
of community for employees, which is more highly valued following the enforced
periods of isolated remote working. Across the Helical portfolio our carefully
designed buildings provide exceptional work environments with our occupiers
also able to benefit from spa-quality changing facilities, generous cycle
storage and thoughtfully designed outdoor spaces.
Alongside the amenity delivered within the building the external environment
is also of significant importance. Our portfolio of assets is located in some
of London's most vibrant communities enabling occupiers to benefit from local
food and beverage offerings, arts and cultural institutions and green spaces
which supplement their daily office experience.
Technology and Smart Buildings
As hybrid working models proliferate across most sectors, digital connectivity
is vitally important to ensure that office based and remote employees maintain
collaborative and connected working practices. All our buildings benefit from
excellent connectivity, enabling occupiers to have confidence in the digital
backbone of their operations.
The technology integrated within our increasingly smart buildings can be
utilised to generate extensive data. This data has significant value when
collated and analysed to provide insights into the operation of the building.
Both landlord and tenant have the ability, through the integration of
technologies, to access data and tailor environments for peak performance and
to drive operational efficiencies.
During the year, the Group invested in a proptech venture capital fund managed
by Pi Labs. The investment reflects the importance Helical places on
supporting businesses and technologies that aim to drive the evolution of the
workplace, and it is hoped that their products can be successfully deployed
into the portfolio.
The delivery of buildings has been enhanced with the introduction of
pioneering construction methodologies. 33 Charterhouse Street, EC1 saw the
offsite pre-fabrication of all service risers throughout the building,
reducing the construction programme considerably and enabling service
commissioning to be undertaken in a controlled factory environment rather than
on a live construction site, thereby increasing reliability. The new building
will also benefit from the incorporation of an intelligent and dynamic water
management and recycling system linked to real time weather data.
This trend will likely accelerate as developers continue to challenge industry
practices to build in a more efficient and sustainable manner and create more
advanced and technologically enabled buildings.
Health and Wellness
The Covid-19 pandemic has highlighted the importance of physical and mental
health for employers and employees. An increased focus has been placed upon
enhancing ventilation, lighting and acoustics within buildings to maximise
employee wellbeing and to provide an environment where they can work
efficiently. Similarly, technology has been rapidly adopted to minimise touch
points and to enable individuals to have a high degree of control over their
micro working environment. Furthermore, opportunities for well curated outdoor
spaces, with external greening, are now increasingly desired.
Buildings which deliver a healthy working environment supporting employee
wellbeing are increasingly in demand from occupiers and investors alike. All
of Helical's buildings benefit from extensive amenity and, as we continue to
grow our portfolio, the ability to deliver this for occupiers will remain a
key criterion in asset selection.
Sustainability and Net Zero Carbon
We have made good progress against the targets we set out in our
sustainability strategy "Built for the Future" and continue to drive forward
our ESG ambitions. In support of this, Helical has released its "Net Zero
Carbon Pathway".
In the UK, the built environment is responsible for 40% of the country's total
greenhouse gas emissions. If the UK is going to achieve its commitment of
becoming net zero by 2050, there needs to be rapid transformational change
within the sector. As a contributor to these emissions, we recognise the need
to be a part of this transformational change while still delivering long-term
sustainable growth to our Shareholders. In consideration of this, we are
committing to becoming a net zero carbon business by 2030.
In publishing our Net Zero Carbon Pathway, Helical has also become a signatory
to the Building Better Partnership's ("BBP") Climate Commitment, which
provides a clear, accountable and transparent mechanism for real estate
companies in the UK to drive towards net zero carbon. As we build on our
ambitions, we continue to recognise the importance of transparency and
independently assured reporting. Going forward we will be reporting on our
progress against our net zero carbon targets to make certain we are on track
for 2030.
Our portfolio is well placed in terms of energy efficiency, with 99% of our
assets (by value) already compliant with the proposed legislative requirement
that all rented commercial buildings achieve a minimum EPC of a B rating by
2030. Market research suggests only 23% of commercial assets are currently
compliant, with significant capital outlay likely to be required to take
non-compliant buildings up to the minimum standard.
For our development assets, we have undertaken significant initiatives to
minimise embodied carbon and maximise operational efficiency. At 33
Charterhouse Street, EC1, through the careful design and selection of
materials, we have reduced the embodied carbon to 40% below the RIBA
benchmark. Going forward we are focusing on delivering "carbon friendly new
build" schemes, such as 100 New Bridge Street, EC4, where we will re-use or
recycle large portions of the existing building and look to incorporate the
existing structural frame to minimise the carbon impact.
During the year, we have also further developed our reporting against the
recommendations of the Task Force on Climate-related Financial Disclosures. We
have performed an in-depth review of the risks and opportunities that could
arise from certain climate-related scenarios and evaluated the potential
impact to our business.
Performance Measurements
We measure our performance against our strategic objectives, using several
financial and non-financial Key Performance Indicators ("KPIs").
The KPIs have been selected as the most appropriate measures to assess our
progress in achieving our strategy, successfully applying our business model
and generating value for our Shareholders.
We incentivise management to outperform the Group's peers by setting
challenging targets and using these performance indicators to measure success.
We design our remuneration packages to align management's interests with
Shareholders' aspirations.
Total Accounting Return
Total Accounting Return is the growth in the net asset value of the Group plus
dividends paid in the reporting period, expressed as a percentage of the net
asset value at the beginning of the period. The metric measures the growth in
Shareholders' Funds each period and is expressed as an absolute measure.
The Group targets a Total Accounting Return of 5-10%.
The Total Accounting Return on IFRS net assets in the year to 31 March 2022
was 15.0% (2021: 3.3%).
2022 2021 2020 2019 2018
% % % % %
Total Accounting Return on IFRS net assets 15.0 3.3 7.7 8.4 5.3
EPRA Total Accounting Return
Total Accounting Return on EPRA net tangible assets is the growth in the EPRA
net tangible asset value of the Group plus dividends paid in the period,
expressed as a percentage of the EPRA net tangible asset value at the
beginning of the period.
The Group targets an EPRA Total Accounting Return of 5-10%.
The Total Accounting Return on EPRA net assets in the year to 31 March 2022
was 10.2% (2021: 4.5%).
Year to Year to Year to Year to Year to
2022 2021 2020 2019 2018
% % % % %
Total Accounting Return on EPRA net tangible assets 10.2 4.5 9.3 8.0* 1.0*
* Calculated using EPRA net assets.
EPRA Net Tangible Asset Value Per Share
The Group's main objective is to maximise growth in net asset value per share,
which we seek to achieve through increases in investment portfolio values and
from retained earnings from other property related activity. EPRA net tangible
asset value per share is the property industry's preferred measure of the
proportion of net assets attributable to each share as it includes the fair
value of net assets on an ongoing long-term basis. The adjustments to net
asset value to arrive at this figure are shown in Note 22 to the financial
statements.
The Group targets increasing its net assets, of which EPRA net tangible asset
growth is a key component.
The EPRA net tangible asset value per share at 31 March 2022 increased by 7.3%
to 572p (31 March 2021: 533p).
2022 2021 2020 2019 2018
p p p p p
EPRA net tangible asset value per share 572 533 524 494 468*
* Calculated using EPRA net assets.
Total Shareholder Return
Total Shareholder Return is a measure of the return on investment for
Shareholders. It combines share price appreciation and dividends paid to show
the total return to the Shareholder expressed as an annualised percentage.
The Group targets being in the upper quartile when compared to its peers.
The Total Shareholder Return in the year to 31 March 2022 was 1.7% (2021:
21.2%).
Performance Measured Over
1 year 3 years 5 years 10 years 15 years 20 years
Total return Total return Total return Total return Total return Total return
pa % pa % pa % pa % pa % pa %
Helical plc(1) 1.7 10.2 8.4 10.7 1.9 6.9
UK Equity Market(2) 13.0 5.3 4.7 7.2 5.3 6.2
Listed Real Estate Sector Index(3) 20.8 6.9 5.6 8.9 0.4 5.6
1. Growth over all years to 31/03/22.
2. Growth in FTSE All-Share Return Index over all years to 31/03/22.
3. Growth in FTSE 350 Real Estate Super Sector Return
Index over all years to 31/03/22.
MSCI Property Index
MSCI produces several independent benchmarks of property returns that are
regarded as the main industry indices.
MSCI has compared the ungeared performance of Helical's total property
portfolio against that of portfolios within MSCI for over 20 years. Helical's
ungeared performance for the year to 31 March 2022 was 10.7% (2021: 7.0%).
This compares to the MSCI Central London Offices Total Return Index of 7.9%
(2021: -1.7%) and the upper quartile return of 9.9% (2021: 1.6%).
Helical's share of the development portfolio (1% of gross property assets) is
included in its performance, as measured by MSCI, at the lower of book cost or
fair value and uplifts are only included on the sale of an asset.
Helical's unleveraged portfolio returns to 31 March 2022 were as follows:
1 year 3 years 5 years 10 years 20 years
% % % % %
Helical 10.7 9.1 9.6 13.1 11.6
MSCI Central London Offices Total Return Index 7.9 3.3 4.4 9.1 8.1
Source: MSCI
Average Length of Employee Service and Average Staff Turnover
A high level of staff retention remains a key feature of Helical's business.
The Group retains a highly skilled and experienced team with an increasing
length of service.
The Group targets staff turnover to be less than 10% per annum.
The average length of service of the Group's employees at 31 March 2022 was
11.8 years and the average staff turnover during the year to 31 March 2022 was
3.7%.
2022 2021 2020 2019 2018
Average length of service at 31 March - years 11.8 11.0 10.0 8.7 7.9
Staff turnover during the year to 31 March - % 3.7 3.6 10.3 6.9 15.2
BREEAM and EPC Ratings
BREEAM is an environmental impact assessment methodology for commercial
buildings. It sets out best practice standards for the environmental
performance of buildings through their design, specification, construction and
operational phases. Performance is measured across a series of ratings,
"Pass", "Good", "Very Good", "Excellent" and "Outstanding".
The Group targets a BREEAM rating of "Excellent" or "Outstanding" on all major
refurbishments or new developments.
At 31 March 2022, seven of our ten (31 March 2021: six of our nine) office
buildings had achieved, or were targeting, a BREEAM certification of
"Excellent" or "Outstanding". These seven buildings account for c.88% of the
portfolio by value.
Building BREEAM Rating EPC Rating
Completed, let, and available to let
The Warehouse and Studio, EC1 Excellent (2014) B
The Tower, EC1 Excellent (2014) B
25 Charterhouse Square, EC1 Excellent (2014) B
Kaleidoscope, EC1 Excellent (2014) B
55 Bartholomew, EC1 Excellent (2014) B
Under development or to be redeveloped
33 Charterhouse Street, EC1 Outstanding (2018)(1) A(2)
100 New Bridge Street, EC4 Outstanding (2018)(2) A(2)
1. Certified at design stage.
2. Targeted.
We are currently exploring BREEAM In Use certification for The Loom where it
was not possible to obtain a BREEAM certification at the design and
development stages.
Energy Performance Certificates ("EPC") provide ratings on a scale of A-G on a
building's energy efficiency and are required when a building is constructed,
sold or let. All but one of our completed buildings (99% by portfolio value)
have an EPC rating of A or B.
Helical's Property Portfolio - 31 March 2022
Property Overview
Helical's portfolio comprises income producing multi-let offices, office
refurbishments and developments and a mixed use commercial/residential scheme.
As at 31 March 2022, London represented 97% and Manchester 3% of the
investment property portfolio, by value. As evidenced by the recent
acquisition of 100 New Bridge Street, EC4, our strategy is to continue to
increase our Central London holdings, focusing on areas where we see strong
occupier demand and growth potential.
33 Charterhouse Street, EC1
The development of our 205,369 sq ft office building, in a 50:50 joint venture
with AshbyCapital, is due to reach practical completion in September 2022. The
building's external envelope is complete and work is now focused on the
delivery of the services and completing the internal finishes.
The building is situated just 100m from Farringdon Station and will provide
excellent connectivity via the Elizabeth Line, which is due to open today,
ahead of the building's practical completion. Once completed it will provide a
best-in-class "Net Zero" office development, meeting the highest ESG
credentials, as evidenced by its BREEAM 2018 New Construction "Outstanding"
design rating and anticipated NABERS 5* rating. It will also provide a
technologically pioneering environment with smart building systems and a fully
integrated building management app for occupiers.
100 New Bridge Street, EC4
On 1 March, Helical completed the acquisition of 100 New Bridge Street, EC4
for £160m.
The 167,026 sq ft office building is currently let to international law firm
Baker McKenzie, whose lease expires in December 2023. Helical proposes to
carry out a major, sustainability led refurbishment to create a carbon
friendly new build office that puts occupier amenity and wellbeing at its
centre. We also envisage undertaking significant public realm improvements
around the site to greatly improve the environment for both tenants and the
general public.
Kaleidoscope, EC1
Our 88,581 sq ft office building located directly above the Farringdon East
Elizabeth Line station is let to TikTok Information Technologies UK Limited on
a 15 year lease term at an annual rent of £7.6m. TikTok has recently
completed their fit out works and are beginning occupation of the building.
The Bower, EC1
The Bower is a landmark estate comprising 312,573 sq ft of innovative, high
quality office space along with 21,059 sq ft of restaurant and retail space.
The estate is located adjacent to the Old Street roundabout, which is
currently undergoing significant remodelling and will provide extensive
additional public realm when completed in Autumn 2022.
The Warehouse and The Studio
The Warehouse comprises 122,858 sq ft of offices and The Studio 18,283 sq ft
of offices, both fully let, with 10,298 sq ft of retail space across the two
buildings.
In June 2021 we completed a lease renewal with Stripe at the Warehouse,
extending the lease by three years. We have also completed all the rent
reviews for office tenants in the Warehouse which has added £782,000 to its
contracted rent, a 13.2% increase.
The retail unit in The Studio has been let to 28 Well Hung, a steak
restaurant, which will open this summer.
The Tower
The Tower offers 171,432 sq ft of office space with a contemporary façade and
innovatively designed interconnecting floors, along with 10,761 sq ft of
retail space, across two units, let to food and beverage occupiers Serata Hall
and Wagamama.
We have let the 17(th) floor, previously let to Finablr, to Verkada on a five
year lease for a rent which is in line with the 31 March 2021 ERV. The 12(th)
floor which, following the culmination of a specific project, was returned in
October 2021 by Brilliant Basics, is now under offer. They continue to occupy
three floors at The Tower.
Barts Square, EC1
Residential/Retail
At Barts Square, EC1, we have completed the sale of the last remaining
apartment in Phase One. In Phase Two, we completed the sale of 13 apartments
during the year and one further apartment sale had exchanged which has now
completed. Of the remaining 14 units available at the year end, one has since
been sold and two are under offer, leaving 11 available in this 236 unit
residential scheme.
The Barts Square residential development has been recognised for its
outstanding design and sympathetic approach to its surroundings by winning a
Housing Design Award, the only awards promoted by all five major professional
institutions, and a RIBA London Award.
The retail space in Phase One is fully let to Stem + Glory and Halfcup. One of
the Phase Two retail units is let to BEERS London and since the year end a
further unit has been let to Nest, a modern British restaurant. The remaining
four retail units are currently being marketed. The landscaping of the new
public square is complete, offering extensive public amenity.
55 Bartholomew
At 55 Bartholomew, EC1 we have completed three lettings to Push Gaming,
William Fry and Zero Gravity. Following the completion of these lettings,
which totalled 4,835 sq ft, the building is now 77% let with just the third
floor still available.
On 20 May 2022 we exchanged contracts to dispose of the property to a private
European investor for a consideration of £16.5m (our share £7.6m),
reflecting a net initial yield of 4.5% and a 3% premium to 31 March 2022 book
value.
The Loom, E1
At this 108,600 sq ft former Victorian wool warehouse, we have completed three
leases, totalling 8,623 sq ft, at an average rent of £53 psf. Following these
lettings, The Loom is 80% let with 21,803 sq ft across nine units available to
let. We anticipate further units to be returned in the coming year as lease
events take place, including original unrefurbished units, giving us the
opportunity to undertake asset management activities to capture reversionary
potential.
25 Charterhouse Square, EC1
25 Charterhouse Square comprises 42,921 sq ft of offices adjacent to the new
Farringdon East Elizabeth Line station, overlooking the historic Charterhouse
Square.
The newly refurbished first floor and one of the two ground floor units have
been let to Entain, the FTSE listed betting and gaming company, to establish a
global innovation hub. Following this letting the building is 96% let, with
the final unit now under offer.
The Power House, W4
The Power House is a listed building, providing 21,268 sq ft of office and
recording studio space, on Chiswick High Road and is fully let on a long lease
to Metropolis Music Group. The RPI linked rent review was concluded in
November, increasing contracted rent by 16.4%. The capital works to improve
the roof, undertaken on behalf of the tenants, are due to complete shortly.
Trinity, Manchester
We have completed three office lettings in the year with the first floor let
to British Engineering, the remaining part of the sixth floor let to Waterman
Group and the seventh floor let to AEW Architects. These lettings total 17,541
sq ft and achieved a combined premium of 4.6% to the 31 March 2021 ERV.
Following the completion of these lettings the 58,533 sq ft historic building,
which was comprehensively remodelled in 2019, is 76% let.
Following the year end we completed the sale of the property to clients of
Mayfair Capital, for a headline purchase price of £34.55m, which reflects a
net gain of c.£2.0m against the 31 March 2022 book value.
Portfolio Analytics
See-through Total Portfolio by Fair Value
Investment % Development % Total
£m £m £m %
London Offices
- Completed properties 783.9 71.5 - 0.0 783.9 70.8
- Development pipeline 282.3 25.7 - 0.0 282.3 25.5
London Residential - 0.0 8.3 77.7 8.3 0.7
Total London 1,066.2 97.2 8.3 77.7 1,074.5 97.0
Manchester Offices
- Completed properties 31.0 2.8 - 0.0 31.0 2.8
Total Manchester 31.0 2.8 - 0.0 31.0 2.8
Total Core 1,097.2 100.0 8.3 77.7 1,105.5 99.8
Other 0.1 0.0 2.4 22.3 2.5 0.2
Total Non-Core Portfolio 0.1 0.0 2.4 22.3 2.5 0.2
Total 1,097.3 100.0 10.7 100.0 1,108.0 100.0
See-through Land and Development Portfolio
Book value Fair value Surplus Fair value
£m £m £m %
London Residential 8.3 8.3 0.0 77.7
Land/retail 2.1 2.4 0.3 22.3
Total 10.4 10.7 0.3 100.0
Capital Expenditure
We have a committed and planned development and refurbishment programme.
Property Capex Remaining New space Total Completion
date
budget spend sq ft completed
space
(Helical share) (Helical share) Pre-redeveloped space
sq ft
£m £m sq ft
Investment - committed
- 33 Charterhouse Street, EC1 66.0 13.1 n/a 205,369 205,369 September 2022
Investment - anticipated
- 100 New Bridge Street, EC4 101.2 101.2 167,026 c.18,000 c.185,000 Early 2025
Asset Management
Asset management is a critical component in driving Helical's performance.
Through having well considered business plans and maximising the combined
skills of our management team, we are able to create value in our assets.
Fair Passing % Contracted rent % ERV % ERV change
Investment portfolio value rent £m £m like-for-like
weighting £m %
%
London Offices
- Completed properties 71.5 28.5 78.3 37.6 81.1 41.6 62.0 0.1
- Development pipeline 25.7 7.2 19.8 7.3 15.7 23.6 35.2 0.0
Total London 97.2 35.7 98.1 44.9 96.8 65.2 97.2 0.1
Manchester Offices
- Completed properties 2.8 0.7 1.9 1.4 3.0 1.8 2.7 -0.4
Total Manchester 2.8 0.7 1.9 1.4 3.0 1.8 2.7 -0.4
Other 0.0 0.0 0.0 0.1 0.2 0.1 0.1 0.0
Total 100.0 36.4 100.0 46.4 100.0 67.1 100.0 0.1
See-through
total portfolio contracted rent
£m
Rent lost at break/expiry (2.6)
Rent reviews and uplifts on lease renewals 1.0
New lettings - London 2.4
New lettings - Manchester 0.6
Total increase in the year from asset management activities 1.4
Contracted rent increase from purchases of London Offices 7.2
Net increase in contracted rents in the year 8.6
Investment Portfolio
Valuation Movements
Valuation change Valuation change Investment portfolio Investment portfolio
inc sales and purchases excl sales and purchases weighting weighting
% % 31 March 2022 31 March 2021
% %
London Offices
- Completed properties 5.4 5.4 71.5 88.5
- Development pipeline 5.3 17.2 25.7 8.2
Total London 5.4 6.8 97.2 96.7
Manchester Offices
- Completed properties 12.5 12.5 2.8 3.3
Total Manchester 12.5 12.5 2.8 3.3
Total 5.6 7.0 100.0 100.0
Portfolio Yields
EPRA topped EPRA topped Reversionary Reversionary True equivalent yield True equivalent yield
up NIY up NIY yield yield 31 March 31 March
31 March 31 March 31 March 31 March 2022 2021
2022 2021 2022 2021 % %
% % % %
London Offices
- Completed properties 4.2 4.5 4.8 5.1 4.9 5.0
- Development pipeline 4.2 n/a 4.5 5.6 4.2 4.9
Total London 4.2 4.5 4.7 5.3 4.6 4.9
Manchester Offices
- Completed properties 4.1 2.4 5.4 5.9 5.3 5.7
Total Manchester 4.1 2.4 5.4 5.9 5.3 5.7
Total 4.2 4.5 4.7 5.3 4.6 5.0
See-through Capital Values, Vacancy Rates and Unexpired Lease Terms
Capital value Capital value Vacancy rate Vacancy rate WAULT WAULT
31 March 31 March 31 March 31 March 31 March 31 March
2022 2021 2022 2021 2022 2021
£ psf £ psf % % Years Years
London Offices
- Completed properties 1,289 1,215 6.9 5.8 6.3 6.9
- Development pipeline 1,086 674 0.0 n/a 1.7 n/a
Total London 1,213 1,081 5.4 5.8 5.6 6.9
Manchester Offices
- Completed properties 530 465 23.9 54.1 6.1 8.4
Total Manchester 530 465 23.9 54.1 6.1 8.4
Total 1,175 1,040 6.7 10.5 5.6 6.9
See-through Lease Expiries or Tenant Break Options
Year to Year to Year to Year to Year to 2027
2023 2024 2025 2026 2027 onward
% of rent roll 9.5 25.8 4.0 0.8 10.0 49.9
Number of leases 17 28 10 4 18 31
Average rent per lease (£) 258,280 427,422 186,003 96,997 256,179 741,267
Top 15 Tenants
We have a strong rental income stream and a diverse tenant base. The top 15
tenants account for 79.3% of the total rent roll.
Tenant Tenant industry Contracted rent Rent roll
Rank £m %
1 TikTok Technology 7.6 16.5
2 Baker McKenzie Legal services 7.0 15.2
3 Farfetch Online retail 4.3 9.3
4 WeWork Flexible offices 4.0 8.6
5 Brilliant Basics Technology 2.4 5.1
6 VMware Technology 2.2 4.7
7 Anomaly Marketing 1.4 3.0
8 Viacom Media 1.2 2.5
9 Allegis Media 1.1 2.3
10 Dentsu Marketing 1.1 2.3
11 Stripe Financial services 1.0 2.1
12 Verkada Technology 1.0 2.1
13 Incubeta Marketing 0.9 2.0
14 Openpayd Financial services 0.9 1.9
15 Snowflake Technology 0.8 1.7
Total 36.9 79.3
Letting Activity - New Leases
Area Contracted rent Rent Change to Average
sq ft (Helical's share) £ psf 31 March 2021 ERV lease term to expiry
£ (exc Plug and Play and managed lettings) Years
%
Investment Properties
London
- The Tower, EC1 11,327 963,000 85.02 -0.2 5.00
- The Warehouse, EC1 2,524 115,000 45.56 13.9 15.00
- The Loom, E1 8,623 455,000 52.82 2.1 4.33
- 25 Charterhouse Square, EC1 9,268 715,000 77.13 0.5 10.00
- 55 Bartholomew, EC1 4,835 239,000 76.00 1.3 3.67
Total London 36,577 2,487,000 71.10 1.1 6.00
Total Manchester 17,541 557,000 31.77 4.6 10.00
Total 54,118 3,044,000 57.57 1.8 7.00
Financial Review
IFRS Performance EPRA Performance
Profit after tax EPRA profit
£88.9m (2021: £17.9m)
£6.4m (2021: loss of £2.2m)
Earnings per share (EPS) EPRA EPS
72.8p (2021: 14.8p)
5.2p (2021: loss of 1.8p)
Diluted NAV per share EPRA NTA per share
551p (31 March 2021: 492p)
572p (31 March 2021: 533p)
Total Accounting Return Total Accounting Return on EPRA NTA
15.0% (2021: 3.3%) 10.2% (2021: 4.5%)
Overview
The strong performance for the year was the result of significant valuation
gains from our sustainable, best-in-class investment portfolio and the Group's
ongoing development activities.
The results were further improved by gains in the fair value of the Group's
derivatives and the reversal of previously recognised deferred tax on the
Group's election to become a REIT.
The acquisition of 100 New Bridge Street, EC4 added to the development
pipeline and resulted in an increased LTV of 36.4%.
Results for the Year
The profit before tax for the year of £72.9m (2021: £20.5m) includes revenue
from rental income and development management of £51.1m, offset by direct
costs of £14.2m. The net gain on sale and revaluation of investment
properties added £33.3m and its joint venture activities a further £20.7m.
Administration expenses of £16.8m and finance costs of £19.2m were offset by
a gain in fair value of derivatives of £18.0m.
The Group holds a significant proportion of its property assets in joint
ventures. As the risk and rewards of ownership of these underlying properties
are the same as those it wholly owns, Helical supplements its IFRS disclosure
with a "see-through" analysis of alternative performance measures, which looks
through the structure to show the Group's share of the underlying business.
The see-through results for the year to 31 March 2022 include net rental
income of £31.2m, a net gain on sale and revaluation of the investment
portfolio of £51.7m and development profits of £6.6m, leading to a Total
Property Return of £89.5m (2021: £48.6m). Total see-through administration
costs of £17.1m (2021: £14.8m), see-through net finance costs of £19.7m
(2021: £14.8m) and see-through derivative financial instrument gains of
£18.0m (2021: £2.9m) contributed to an IFRS pre-tax profit of £72.9m (2021:
£20.5m).
The election to become a REIT from 1 April 2022 allowed the release of the
previously recognised deferred tax provision which contributed to a tax credit
for the year of £16.0m (2021: charge of £2.6m).
The post tax profit for the year was £88.9m (2021: £17.9m) and the EPRA net
tangible asset value per share increased by 7.3% to 572p (31 March 2021:
533p).
The Company has proposed a final dividend of 8.25p per share (2021: 7.40p)
which, if approved by Shareholders at the 2022 AGM, will be payable on 29 July
2022. The total dividend paid or payable in respect of the year to 31 March
2022 will be 11.15p (2021: 10.10p), an increase of 10.4%.
The Group's real estate portfolio, including its share of assets held in joint
ventures, increased to £1,108.1m (31 March 2021: £857.0m) primarily because
of the acquisition of 100 New Bridge Street, EC4, net revaluation gains on the
investment portfolio and capital expenditure at 33 Charterhouse Street, EC1.
The acquisition of 100 New Bridge Street, EC4 and capital expenditure on the
development of 33 Charterhouse Street, EC1 resulted in an increase in the
Group's see-through loan to value to 36.4% (31 March 2021: 22.6%). The Group's
weighted average cost of debt was 3.2% (31 March 2021: 3.5%) and the weighted
average debt maturity was 3.0 years (31 March 2021: 3.2 years). The average
maturity of the facilities would increase to 3.7 years on exercise of the
available extension options, on a fully utilised basis.
At 31 March 2022, the Group had unutilised bank facilities of £99.0m and cash
of £33.3m on a see-through basis. These are primarily available to fund the
development of 33 Charterhouse Street, EC1 and future property acquisitions.
Total Property Return
We calculate our Total Property Return to enable us to assess the aggregate of
income and capital profits made each year from our property activities. Our
business is primarily aimed at producing surpluses in the value of our assets
through asset management and development, with the income side of the business
seeking to cover our annual administration and finance costs.
Year to Year to Year to Year to Year to
2022 2021 2020 2019 2018
£m £m £m £m £m
Total Property Return 89.5 48.6 83.9 81.4 68.8
The net rental income, development profits and net gains on sale and
revaluation of our investment portfolio, which contribute to the Total
Property Return, provide the inputs for our performance as measured by MSCI.
Year to Year to Year to Year to Year to
2022 2021 2020 2019 2018
% % % % %
Helical's unleveraged portfolio 10.7 7.0 9.6 10.1 10.8
See-through Total Accounting Return
Total Accounting Return is the growth in the net asset value of the Group plus
dividends paid in the reporting period, expressed as a percentage of the net
asset value at the beginning of the period. The metric measures the growth in
Shareholders' Funds each year and is expressed as an absolute measure.
Year to Year to Year to Year to Year to
2022 2021 2020 2019 2018
% % % % %
Total Accounting Return on IFRS net assets 15.0 3.3 7.7 8.4 5.3
Total Accounting Return on EPRA net tangible assets is the growth in the EPRA
net tangible asset value of the Group plus dividends paid in the period,
expressed as a percentage of the EPRA net tangible asset value at the
beginning of the period.
Year to Year to Year to Year to Year to
2022 2021 2020 2019 2018
% % % % %
Total Accounting Return on EPRA net tangible assets 10.2 4.5 9.3 8.0* 1.0*
* Calculated using EPRA net assets.
Earnings Per Share
The IFRS earnings per share increased from 14.8p to 72.8p and are based on the
after tax earnings attributable to ordinary Shareholders divided by the
weighted average number of shares in issue during the year.
On an EPRA basis, the earnings per share were 5.2p compared to a loss per
share of 1.8p in 2021, reflecting the Group's share of net rental income of
£31.2m (2021: £25.0m) and development profits of £6.6m (2021: losses of
£0.3m), but excluding gains on sale and revaluation of investment properties
of £51.7m (2021: £23.9m).
Net Asset Value
IFRS diluted net asset value per share increased by 12.0% to 551p per share
(31 March 2021: 492p) and is a measure of Shareholders' Funds divided by the
number of shares in issue at the year end, adjusted to allow for the effect of
all dilutive share awards.
EPRA net tangible asset value per share increased by 7.3% to 572p per share
(31 March 2021: 533p). This movement arose principally from a total
comprehensive income (retained profits) of £88.9m (2021: £17.9m), less
£12.6m of dividends (2021: £10.5m).
EPRA net disposal value per share increased by 13.6% to 551p per share (31
March 2021: 485p).
Income Statement
Rental Income and Property Overheads
Gross rental income for the Group in respect of wholly owned properties
increased to £35.3m (2021: £28.0m), mainly reflecting the letting of
Kaleidoscope, EC1 in March 2021, with gross rents in joint ventures also
increasing to £0.3m (2021: £0.2m). Property overheads in respect of wholly
owned assets and in respect of those assets in joint ventures increased to
£4.4m (2021: £3.2m). Overall, see-through net rents increased by 25.0% to
£31.2m (2021: £25.0m).
Included within gross rental income is £5.8m (31 March 2021: reduction of
£0.4m) of accrued income for rent free periods.
The table below demonstrates the movement of the accrued income balance for
rent free periods granted and the respective rental income adjustment over the
four years to 31 March 2025, based on the tenant leases as at 31 March 2022.
The actual adjustment will vary depending on lease events such as new lettings
and early terminations and future acquisitions or disposals.
Accrued income Adjustment to rental income
£000 £000
Year to 31 March 2022 23,114 5,818
Year to 31 March 2023 27,557 4,443
Year to 31 March 2024 23,757 (3,800)
Year to 31 March 2025 20,495 (3,262)
Rent Collection
March 2021 - December 2021
quarters
%
Rent collected to date 95.8
Rent under discussion 2.2
Rent concessions 2.0
At 23 May 2022, the Group had collected 95.8% of all rent contracted and
payable for the March, June, September and December 2021 quarters.
Development Profits
In the year, from our role as development manager at 33 Charterhouse Street,
EC1, we recognised £1.3m of fees. Additional fees of £0.1m were recognised
for carrying out accounting and corporate services at Barts Square, EC1 and 33
Charterhouse Street, EC1.
Profits on the sales of a retail site at Kingswinford and land at Aycliffe of
£1.5m were recognised, as well as the write back of provisions made in
previous periods on two retail projects, at East Ham and Cortonwood, totalling
£2.3m. A further £0.8m of development income on closing out legacy projects,
offset by other costs of £0.2m, contributed to a net development profit in
the Group of £5.8m (2021: £0.6m).
Share of Results of Joint Ventures
The revaluation of our investment assets held in joint ventures generated a
surplus of £18.5m (2021: £6.4m). A profit of £0.7m (2021: loss of £0.9m)
was recognised in respect of sales at our Barts Square, EC1 residential
development.
Finance, administration and other sundry costs totalling £0.5m (2021: £1.1m)
were incurred. An adjustment to reflect our economic interest in the Barts
Square, EC1 development to its recoverable amount generated a gain of £0.8m,
and after a tax credit of £1.2m (2021: charge of £0.6m), there was a net
profit from our joint ventures of £20.7m (2021: £2.4m).
Gain on Sale and Revaluation of Investment Properties
The valuation of our investment portfolio, on a see-through basis, continued
to reflect the benefit of our letting and development activities where we
generated a see-through gain on sale and revaluation, including in joint
ventures, of £51.7m (2021: £23.9m).
Administrative Expenses
Administration costs in the Group, before performance related awards,
increased marginally from £9.3m to £9.6m.
Performance related share awards and bonus payments, before National Insurance
costs, increased to £6.0m (2021: £4.3m), reflecting the strong performance
of the business. Of this amount, £3.2m (2021: £2.0m), being the charge for
share awards under the Performance Share Plan, is expensed through the Income
Statement but added back to Shareholders' Funds through the Statement of
Changes in Equity. NIC incurred in the year on performance related awards was
£1.2m (2021: £0.8m).
2022 2021
£000
£000
Administrative expenses (excluding performance related awards) 9,598 9,276
Performance related awards 6,019 4,341
NIC 1,151 799
Group 16,768 14,416
In joint ventures 295 432
Total 17,063 14,848
Finance Costs and Derivative Financial Instruments
Total finance costs before cancellation of loans, including in joint ventures,
reduced to £13.8m (2021: £14.9m). The cost of early redemption of the
development facility for Kaleidoscope, EC1 and the term loan with Aviva,
totalling £5.8m (2021: £nil), allowed the Group to take advantage of the
lower cost of debt provided by the £400m Revolving Credit Facility, which
will be reflected in lower finance costs in future years.
2022 2021
£000
£000
Interest payable on secured bank loans - subsidiaries 10,169 10,567
- joint ventures 2,407 1,319
Amortisation of refinancing costs - subsidiaries 1,010 1,111
Sundry interest and bank charges - subsidiaries 2,169 2,401
- joint ventures 181 -
Interest capitalised - joint ventures (2,142) (514)
Total before cancellation of loans 13,794 14,884
Cancellation of loans - subsidiaries 5,886 -
Total 19,680 14,884
The significant movement upwards in medium and long-term interest rate
projections during the year contributed to a credit of £18.0m (2021: £2.9m)
on the mark-to-market valuation of the derivative financial instruments.
Taxation
The Group elected to become a REIT, effective from 1 April 2022, and will be
exempt from UK corporation tax on the profit of its property activities that
fall within the REIT regime. Helical will continue to pay corporation tax on
its profits that are not within this regime. As a result, the previously
recognised deferred tax liability of £13.5m in the Group (£1.7m in joint
ventures) has been released, with a credit of £14.9m in the Income Statement
and a charge of £1.4m recognised directly in the Statement of Changes in
Equity.
The current tax credit for the year was £1.1m (2021: charge of £0.9m),
resulting in a tax credit on profit on ordinary activities of £16.0m (2021:
charge of £2.6m).
Dividends
The interim dividend paid on 31 December 2021 of 2.90p was an increase of 7.4%
on the previous interim dividend of 2.70p. The Company has proposed a final
dividend of 8.25p, an increase of 11.5% on the previous year (2021: 7.40p),
for approval by Shareholders at the 2022 AGM. If approved, the total dividend
paid or payable in respect of the results for the year to 31 March 2022 will
be 11.15p (2021: 10.10p), an increase of 10.4%.
The final dividend, if approved by Shareholders, will be paid out of
distributable reserves generated from the Group's activities prior to its
conversion into a REIT.
Balance Sheet
Shareholders' Funds
Shareholders' Funds at 1 April 2021 were £608.2m. The Group's results for the
year added £88.9m (2021: £17.9m), net of tax, representing the total
comprehensive income for the year. Movements in reserves arising from the
Group's share schemes increased funds by £2.5m. The Company paid dividends to
Shareholders during the year of £12.6m. The net increase in Shareholders'
Funds from Group activities during the year was £78.8m to £687.0m.
Investment Portfolio
Wholly In joint venture See-through Head leases capitalised Lease incentives Book
owned £000 £000 £000 £000 value
£000
£000
Valuation at 31 March 2021 756,875 82,516 839,391 6,568 (18,934) 827,025
Acquisitions - wholly owned 160,000 - 160,000 - - 160,000
Capital expenditure - wholly owned 5,520 - 5,520 (14) - 5,506
- joint ventures - 35,074 35,074 (30) - 35,044
Letting costs amortised - wholly owned (226) - (226) - - (226)
- joint ventures - (9) (9) - - (9)
Revaluation surplus - wholly owned 39,331 - 39,331 - (6,020) 33,311
- joint ventures - 18,521 18,521 - (50) 18,471
Economic interest adjustment - joint ventures - (282) (282) - 2 (280)
Valuation at 31 March 2022 961,500 135,820 1,097,320 6,524 (25,002) 1,078,842
The Group acquired 100 New Bridge Street, EC4 for £160m and spent £40.6m on
capital works across the investment portfolio, mainly at 33 Charterhouse
Street, EC1 (£35.0m), 100 New Bridge Street, EC4 (£3.7m), Kaleidoscope, EC1
(£0.6m), The Loom, EC1 (£0.5m) and 25 Charterhouse Square, EC1 (£0.4m).
Revaluation gains added £57.9m to increase the see-through fair value of the
portfolio, before lease incentives, to £1,097.3m (31 March 2021: £839.4m).
The accounting for head leases and lease incentives resulted in a book value
of the see-through investment portfolio of £1,078.8m (31 March 2021:
£827.0m).
Debt and Financial Risk
In total, the see-through outstanding debt at 31 March 2022 of £440.9m (31
March 2021: £362.2m) had a weighted average interest cost of 3.2% (31 March
2021: 3.5%) and a weighted average debt maturity of 3.0 years (31 March 2021:
3.2 years). The average maturity of the facilities would increase to 3.7 years
following exercise of the one-year extension of the Group's £400m Revolving
Credit Facility, and the one-year extension of the joint venture development
loan, on a fully utilised basis.
Debt Profile at 31 March 2022 - Including Commitment Fees but Excluding the
Amortisation of Arrangement Fees
Total Total Available facility Weighted average interest Average maturity of facilities Average maturity including extensions*
facility utilised £000s rate Years Years
£000s £000s %
£400m Revolving Credit Facility 400,000 400,000 - 2.9 3.1 4.3
£60m Revolving Credit Facility 60,000 - 60,000 - - 0.7
Total wholly owned 460,000 400,000 - 3.0 3.1 3.8
In joint ventures 69,900 40,889 29,011 5.6 2.3 3.3
Total secured debt 529,900 440,889 89,011 3.2 3.0 3.8
Working capital 10,000 - 10,000 - - 1.0
Total unsecured debt 10,000 - 10,000 - - 1.0
Total debt 539,900 440,889 99,011 3.2 3.0 3.7
* Calculated on a fully utilised basis and assuming the exercise of the
one-year extension of the Revolving Credit Facility and the one-year extension
option of the joint venture development loan.
Secured Debt
The Group arranges its secured investment and development facilities to suit
its business needs as follows:
- £400m Revolving Credit Facility
The Group has a £400m Revolving Credit Facility in which all of its
investment assets, other than Trinity, Manchester, are secured. The value of
the Group's properties secured in this facility at 31 March 2022 was £870m
(31 March 2021: £729m) with a corresponding loan to value of 46.0% (31 March
2021: 46.8%). The average maturity of the facility at 31 March 2022 was 3.1
years (31 March 2021: 3.3 years), increasing to 4.3 years on a fully utilised
basis and following the one-year extension of the Revolving Credit Facility.
The weighted average interest rate was 2.9% (31 March 2021: 3.7%).
- £60m Revolving Credit Facility
The Group has a £60m Revolving Credit Facility to provide short-term
liquidity to acquire new property opportunities. The maturity of this undrawn
facility was 0.7 years and the weighted average interest rate was 3.2%, on a
fully utilised basis.
- Joint Venture Facilities
The Group has a number of investment and development properties in joint
venture with third parties and includes our share, in proportion to our
economic interest, of the debt associated with each asset. The average
maturity of the Group's share of bank facilities in joint ventures at 31 March
2022 was 2.3 years (31 March 2021: 1.9 years) with a weighted average
interest rate of 5.6% (31 March 2021: 6.5%). The average interest rate will
fall as the 33 Charterhouse Street, EC1 development facility is drawn down and
would be 4.95% on a fully utilised basis, reducing to 2.25% once the building
is complete and let.
Unsecured Debt
The Group's unsecured debt is £nil (31 March 2021: £nil).
Cash and Cash Flow
At 31 March 2022, the Group had £132m (31 March 2021: £423m) of cash and
agreed, undrawn, committed bank facilities including its share in joint
ventures, as well as £31.0m (31 March 2021: £28.1m) of uncharged property on
which it could borrow funds.
Net Borrowings and Gearing
Total gross borrowings of the Group, including in joint ventures, have
increased from £362.2m to £440.9m during the year to 31 March 2022. After
deducting cash balances of £33.3m (31 March 2021: £162.2m) and unamortised
refinancing costs of £4.7m (31 March 2021: £6.1m), net borrowings increased
from £193.9m to £402.9m. The see-through gearing of the Group, including in
joint ventures, increased from 31.9% to 58.6%.
31 March 31 March
2022 2021
See-through gross borrowings £440.9m £362.2m
See-through cash balances £33.3m £162.2m
Unamortised refinancing costs £4.7m £6.1m
See-through net borrowings £402.9m £193.9m
Shareholders' funds £687.0m £608.2m
See-through gearing - IFRS net asset value 58.6% 31.9%
Hedging
At 31 March 2022, the Group had £300.0m (31 March 2021: £280.8m) of
borrowings protected by interest rate swaps, with an average effective
interest rate of 2.8% (31 March 2021: 3.1%) and average maturity of 3.3 years.
The Group had a further £100.0m of floating rate debt (31 March 2021:
£60.4m) with an effective rate of 3.5% (31 March 2021: 4.2%). In addition,
the Group had £145m of interest rate caps at an average rate of 1.75% (31
March 2021: £240m at 1.75%) and with an average maturity of 1.3 years. In our
joint ventures, the Group's share of fixed rate debt was £40.9m (31 March
2021: £9.4m) with an effective rate of 5.6% and no floating rate debt (31
March 2021: £11.6m with an effective rate of 3.1%), with no interest rate
swaps or caps as at 31 March 2022 (31 March 2021: interest rate caps of
£35.3m at 1.5%).
31 March Effective interest rate 31 March Effective interest rate
2022 % 2021 %
£m £m
Fixed rate debt
- Secured borrowings 300.0 2.8 280.8 3.1
Total 300.0 2.8 280.8 3.1
Floating rate debt
- Secured 100.0 3.5(1) 60.4 4.2(1)
Total 400.0 3.0 341.2 3.3
In joint ventures
- Fixed rate 40.9 5.6(2) 9.4 10.7(2)
- Floating rate - - 11.6 3.1
Total borrowings 440.9 3.2 362.2 3.5
1. This includes commitment fees on undrawn facilities. Excluding
these would reduce the effective rate to 2.7%.
2. This includes commitment fees on undrawn
facilities. Excluding these would reduce the effective rate to 4.95% (31 March
2021: 4.95%).
Tim Murphy
Chief Financial Officer
24 May 2022
Consolidated Income Statement
For the year to 31 March 2022
Notes Year to Year to
31 March 31 March
2022 2021
£000 £000
Revenue 3 51,146 38,596
Cost of sales 3 (14,228) (12,987)
Net property income 4 36,918 25,609
Share of results of joint ventures 12 20,708 2,352
Gross profit before net gain on sale and revaluation of investment properties 57,626 27,961
Loss on sale of investment properties 5 (45) (1,341)
Revaluation of investment properties 11 33,311 19,387
Gross profit 90,892 46,007
Administrative expenses 6 (16,768) (14,416)
Operating profit 74,124 31,591
Finance costs 7 (19,234) (14,079)
Finance income 6 58
Change in fair value of derivative financial instruments 20 17,996 2,938
Profit before tax 72,892 20,508
Tax on profit on ordinary activities 8 16,002 (2,631)
Profit for the year 88,894 17,877
Earnings per share 10
Basic 72.8p 14.8p
Diluted 71.4p 14.5p
Consolidated Statement of Comprehensive Income
For the year to 31 March 2022
Year to Year to
31 March 31 March
2022 2021
£000 £000
Profit for the year 88,894 17,877
Total comprehensive income for the year 88,894 17,877
Consolidated Balance Sheet
At 31 March 2022
Notes At At
31 March 31 March
2022 2021
£000 £000
Non-current assets
Investment properties 11 938,797 740,207
Owner occupied property, plant and equipment 4,631 5,362
Investment in joint ventures 12 100,604 79,953
Other investments 13 306 -
Derivative financial instruments 20 11,104 171
1,055,442 825,693
Current assets
Land and developments 14 2,089 448
Corporation tax receivable 338 -
Trade and other receivables 15 48,453 40,427
Cash and cash equivalents 16 28,807 154,448
79,687 195,323
Total assets 1,135,129 1,021,016
Current liabilities
Trade and other payables 17 (43,986) (46,764)
Lease liability 18 (658) (634)
Corporation tax payable - (655)
(44,644) (48,053)
Non-current liabilities
Borrowings 19 (396,633) (336,703)
Derivative financial instruments 20 (538) (7,601)
Lease liability 18 (6,271) (6,929)
Deferred tax liability 8 - (13,569)
(403,442) (364,802)
Total liabilities (448,086) (412,855)
Net assets 687,043 608,161
Equity
Called-up share capital 21 1,223 1,478
Share premium account 112,654 107,990
Revaluation reserve 197,627 164,316
Capital redemption reserve 7,743 7,478
Other reserves 291 291
Retained earnings 367,505 326,608
Total equity 687,043 608,161
Consolidated Cash Flow Statement
For the year to 31 March 2022
Year to Year to
31 March 31 March
2022 2021
£000 £000
Cash flows from operating activities
Profit before tax 72,892 20,508
Adjustment for:
Depreciation 766 791
Revaluation surplus on investment properties (33,311) (19,387)
Letting cost amortisation 226 19
Loss on sale of investment properties 45 1,341
Profit on sale of plant and equipment (11) (14)
Net financing costs 19,228 14,021
Change in value of derivative financial instruments (17,996) (2,938)
Share based payment charge 3,843 2,031
Share of results of joint ventures (20,708) (2,352)
Cash inflows from operations before changes in working capital 24,974 14,020
Change in trade and other receivables (7,926) (2,554)
Change in land, developments and trading properties (1,641) 404
Change in trade and other payables 5,941 3,758
Cash inflows generated from operations 21,348 15,628
Finance costs (18,335) (12,902)
Finance income 6 58
Tax received 13 1,219
(18,316) (11,625)
Net cash generated from operating activities 3,032 4,003
Cash flows from investing activities
Additions to investment property (174,057) (16,306)
Net purchase of other investments (306) -
Net (costs)/proceeds from sale of investment property (45) 113,207
Investments in joint ventures and subsidiaries (3,323) (7,414)
Dividends from joint ventures 3,381 10,266
Sale of plant and equipment 44 23
Purchase of leasehold improvements, plant and equipment (68) (156)
Net cash (used by)/generated from investing activities (174,374) 99,620
Cash flows from financing activities
Borrowings drawn down 190,000 12,339
Borrowings repaid (131,150) (25,000)
Finance lease repayments (631) (610)
Shares issued 10 13
Sale of own shares 54 25
Equity dividends paid (12,582) (10,528)
Net cash generated from/(used by) financing activities 45,701 (23,761)
Net (decrease)/increase in cash and cash equivalents (125,641) 79,862
Cash and cash equivalents at start of year 154,448 74,586
Cash and cash equivalents at end of year 28,807 154,448
Consolidated Statement of Changes in Equity
At 31 March 2022
Share Share Revaluation Capital Other Retained earnings Total
capital premium reserve redemption reserves £000 £000
£000 £000 £000 reserve £000
£000
At 31 March 2020 1,465 103,522 171,464 7,478 291 314,469 598,689
Total comprehensive income - - - - - 17,877 17,877
Revaluation surplus - - 19,387 - - (19,387) -
Realised on disposals - - (26,535) - - 26,535 -
Issued share capital 13 4,468 - - - - 4,481
Performance Share Plan - - - - - 2,031 2,031
Performance Share Plan - deferred tax - - - - - 66 66
Share settled Performance Share Plan - - - - - (3,335) (3,335)
Share settled bonus - - - - - (1,145) (1,145)
Profit on sales of shares - - - - - 25 25
Dividends paid - - - - - (10,528) (10,528)
At 31 March 2021 1,478 107,990 164,316 7,478 291 326,608 608,161
Total comprehensive income - - - - - 88,894 88,894
Revaluation surplus - - 33,311 - - (33,311) -
Issued share capital 10 4,610 - - - - 4,620
Performance Share Plan - - - - - 3,223 3,223
Performance Share Plan - deferred tax - - - - - (1,325) (1,325)
Share settled Performance Share Plan - - - - - (3,591) (3,591)
Deferred bonus shares - - - - - 620 620
Share settled bonus - - - - - (1,031) (1,031)
Profit on sales of shares - 54 - - - - 54
Cancelled deferred shares (265) - - 265 - - -
Dividends paid - - - - - (12,582) (12,582)
At 31 March 2022 1,223 112,654 197,627 7,743 291 367,505 687,043
For a breakdown of Total Comprehensive Income see the Consolidated Statement
of Comprehensive Income.
The adjustment to retained earnings of £3,223,000 (31 March 2021:
£2,031,000) adds back the share based payments charge recognised in the
Consolidated Income Statement, in accordance with IFRS 2 Share Based Payments.
There were net transactions with owners of £10,012,000 (31 March 2021:
£8,405,000) made up of the Performance Share Plan credit of £3,223,000 (31
March 2021: £2,031,000) and related deferred tax charge of £1,325,000 (31
March 2021: credit of £66,000), dividends paid of £12,582,000 (31 March
2021: £10,528,000), the issued share capital of £10,000 (31 March 2021:
£13,000) and corresponding share premium of £4,610,000 (31 March 2021:
£4,468,000), share settled Performance Share Plan awards charge of
£3,591,000 (31 March 2021: £3,335,000), the share settled bonus awards
charge of £1,031,000 (31 March 2021: £1,145,000), deferred bonus shares of
£620,000 (31 March 2021: £nil) and the profit on the sale of shares of
£54,000 (31 March 2021: £25,000).
Notes to the Full Year Results
1. Basis of Preparation
These financial statements have been prepared using the recognition and
measurement principles of International Accounting Standards in conforming
with the Companies Act 2006.
The financial statements have been prepared in Sterling (rounded to the
nearest thousand) under the historical cost convention as modified by the
revaluation of investment properties and derivative financial instruments.
The financial information set out in this preliminary announcement does not
constitute statutory accounts as defined in section 434 of the Companies Act
2006 but has been derived from the Company's audited statutory accounts for
the year ended 31 March 2022. These accounts will be delivered to the
Registrar of Companies following the Annual General Meeting. The auditor's
opinion on the 2022 accounts was unqualified and did not contain a statement
under section 498(2) or (3) of the Companies Act 2006.
The principal accounting policies of the Group are consistent with those
applied in the year to 31 March 2021. The Group Annual Report and Financial
Statements for 2021 are available at Companies House or on the Group's
website.
Amendments to standards and interpretations which are mandatory for the year
ended 31 March 2022 are detailed below, however none of these have had a
material impact on the financial statements:
· Amendments to IFRS 16 Covid 19-Related Rent Concessions beyond 30 June
2021 (effective for periods beginning on or after 1 April 2021); and
· Amendments to IFRS 9 and IFRS 7 Interest Rate Benchmark Reform
(effective for periods beginning on or after 1 January 2020).
The following standards, interpretations and amendments have been issued but
are not yet effective and will be adopted at the point they are effective:
· Amendments to IAS 16 Property, Plant and Equipment - Proceeds before
Intended Use (effective for periods beginning on or after 1 January 2022);
· Annual Improvements to IFRS Standards 2018-2020 (effective for periods
beginning on or after 1 January 2022);
· Amendments to IFRS 3 Reference to the Conceptual Framework (effective
for periods beginning on or after 1 January 2022);
· Amendments to IAS 37 Onerous Contracts - Cost of Fulfilling a Contract
(effective for periods beginning on or after 1 January 2022);
· IFRS 17 Insurance Contracts (effective for periods beginning on or
after 1 January 2023);
· Amendments to IFRS 17 Insurance Contracts (effective for periods
beginning on or after 1 January 2023);
· Amendments to IAS 1 Classification of Liabilities as Current or
Non-current (effective for periods beginning on or after 1 January 2023);
· Amendments to IAS 1 Classification of Liabilities as Current or
Non-current - Deferral of Effective Date (effective for periods beginning on
or after 1 January 2023);
· Amendments to IAS 1 and IFRS Practice Statement 2 Disclosure of
Accounting Policies (effective for periods beginning on or after 1 January
2023); and
· Amendments to IAS 8 Definition of Accounting Estimates (effective for
periods beginning on or after 1 January 2023).
Going Concern
The Directors have considered the appropriateness of adopting a going concern
basis in preparing the financial statements. Their assessment is based on
forecasts for the next 12 month period, with sensitivity testing undertaken to
replicate severe but plausible downside scenarios related to the principal
risks and uncertainties associated with the business.
The key assumptions used in the review are summarised below:
• The Group's rental income receipts were modelled for each tenant on
an individual basis;
• Existing loan facilities remain available;
• Certain property disposals are assumed in line with the individual
asset business plans; and
• Free cash is utilised where necessary to repay debt/cure bank
facility covenants.
Compliance with the financial covenants of the Group's main debt facility, its
£400m Revolving Credit Facility, was the Directors' key area of review, with
particular focus on the following three covenants:
• Loan to Value ("LTV") - the ratio of the drawn loan amount to the
value of the secured property as a percentage;
• Loan to Rent Value ("LRV") - the ratio of the loan to the projected
contractual net rental income for the next 12 months; and
· Projected Net Rental Interest Cover Ratio ("ICR") - the ratio of
projected net rental income to projected finance costs.
The April 2022 compliance position for these covenants is summarised below:
Covenant Requirement Actual
LTV <65% 46%
LRV <12.0x 10.0x
ICR >150% 313%
The results of this review demonstrated the following:
• The forecasts show that all bank facility financial covenants will be
met throughout the review period, with headroom to withstand a 61% fall in
contracted rental income;
• The Group could withstand receiving no rental income during the going
concern period (excluding the impact on income covenants);
• Property values could fall by 47% before loan to value covenants come
under pressure;
• Whilst the Group has a WAULT of 5.6 years, in a downside scenario
whereby all tenants with lease expiries or break options in the going concern
period exercise their breaks or do not renew at the end of their lease, and
with no vacant space let or re-let, the rental income covenants would be met
throughout the review period; and
• Additional asset sales could be utilised to generate cash to repay
debt, materially increasing covenant headroom.
Based on this analysis, the Directors have adopted a going concern basis in
preparing the accounts for the year ended 31 March 2022.
Use of Judgements and Estimates
To be able to prepare accounts according to accounting principles, management
must make estimates and assumptions that affect the assets and liabilities and
revenue and expense amounts recorded in the financial statements. These
estimates are based on historical experience and other assumptions that
management and the Board of Directors believe are reasonable under the
particular circumstances. The results of these considerations form the basis
for making judgements about the carrying value of assets and liabilities that
are not readily available from other sources.
Areas requiring the use of critical judgements and estimates that may
significantly impact the Group's earnings and financial position are:
Significant Judgements
The key area is discussed below:
· Consideration of the nature of joint arrangements. In the context of IFRS
10 Consolidated Financial Statements, this involves determination of where the
control lies and whether either party has the power to vary its returns from
the arrangements. In particular, significant judgement is exercised where the
shareholding of the Group is not 50% (Note 12).
Key sources of estimation uncertainty
The key area is discussed below:
· Valuation of investment properties. Discussion of the sensitivity of
these valuations to changes in the equivalent yields and rental values is
included in Note 11.
2. Revenue from Contracts with Customers
Year to Year to
31 March 31 March
2022 2021
£000 £000
Development property income 7,490 1,700
Service charge income 8,304 8,841
Other revenue 28 48
Total revenue from contracts with customers 15,822 10,589
The total revenue from contracts with customers is the revenue recognised in
accordance with IFRS 15 Revenue from Contracts with Customers.
Impairment of contract assets of £5,000 was recognised in the year to 31
March 2022 (2021: £140,000).
3. Segmental Information
The Group identifies two discrete operating segments whose results are
regularly reviewed by the Chief Operating Decision Maker (the Chief Executive)
to allocate resources to these segments and to assess their performance. The
segments are:
• Investment properties, which are owned or leased by the Group for
long-term income and for capital appreciation; and
• Development properties, which include sites, developments in the course
of construction, completed developments available for sale, and pre-sold
developments.
Revenue Investments Developments Total Investments Year to Developments Total
Year to Year to Year to 31.03.21 Year to Year to
31.03.22 31.03.22 31.03.22 £000 31.03.21 31.03.21
£000 £000 £000 £000 £000
Gross rental income 35,324 - 35,324 28,007 - 28,007
Development property income - 7,490 7,490 - 1,700 1,700
Service charge income 8,304 - 8,304 8,841 - 8,841
Other revenue 28 - 28 48 - 48
Revenue 43,656 7,490 51,146 36,896 1,700 38,596
Cost of sales Investments Developments Total Investments Year to Developments Total
Year to Year to Year to 31.03.21 Year to Year to
31.03.22 31.03.22 31.03.22 £000 31.03.21 31.03.21
£000 £000 £000 £000 £000
Rents payable (169) - (169) (232) - (232)
Property overheads (4,069) - (4,069) (2,810) - (2,810)
Service charge expense (8,304) - (8,304) (8,841) - (8,841)
Development cost of sales - (3,864) (3,864) - (1,018) (1,018)
Development sales expenses - (107) (107) - (4) (4)
Reversal of provision/(provision) - 2,285 2,285 - (82) (82)
Cost of sales (12,542) (1,686) (14,228) (11,883) (1,104) (12,987)
Profit before tax Investments Developments Total Investments Developments Total
Year to Year to Year to Year to Year to Year to
31.03.22 31.03.22 31.03.22 31.03.21 31.03.21 31.03.21
£000 £000 £000 £000 £000 £000
Net property income 31,114 5,804 36,918 25,013 596 25,609
Share of results of joint ventures 20,603 105 20,708 4,389 (2,037) 2,352
Gain on sale and revaluation of Investment properties 33,266 - 33,266 18,046 - 18,046
Segmental profit/(loss) 84,983 5,909 90,892 47,448 (1,441) 46,007
Administrative expenses (16,768) (14,416)
Net finance costs (19,228) (14,021)
Change in fair value of derivative financial instruments 17,996 2,938
Profit before tax 72,892 20,508
Net assets Investments Developments Total Investments Developments Total
at 31.03.22 at 31.03.22 at 31.03.22 at 31.03.21 at 31.03.21 at 31.03.21
£000 £000 £000 £000 £000 £000
Investment properties 938,797 - 938,797 740,207 - 740,207
Land and developments - 2,089 2,089 - 448 448
Investment in joint ventures 96,157 4,447 100,604 74,165 5,788 79,953
1,034,954 6,536 1,041,490 814,372 6,236 820,608
Other assets 93,639 200,408
Total assets 1,135,129 1,021,016
Liabilities (448,086) (412,855)
Net assets 687,043 608,161
4. Net Property Income
Year to Year to
31 March 31 March
2022 2021
£000 £000
Gross rental income 35,324 28,007
Head rents payable (169) (232)
Property overheads (4,069) (2,810)
Net rental income 31,086 24,965
Development property income 7,490 1,700
Development cost of sales (3,864) (1,018)
Sales expenses (107) (4)
Reversal of provision /(provision) 2,285 (82)
Development property profit 5,804 596
Other revenue 28 48
Net property income 36,918 25,609
Included within Gross rental income above is £5,638,000 (2021: reduction of
£389,000) of accrued income for rent free periods.
5. Loss on Sale of Investment Properties
Year to Year to
31 March 31 March
2022 2021
£000 £000
Net (costs)/proceeds from the sale of investment properties (45) 113,207
Book value (Note 11) - (111,883)
Tenants' incentives on sold investment properties - (2,665)
Loss on sale of investment properties (45) (1,341)
6. Administrative Expenses
Year to Year to
31 March 31 March
2022 2021
£000 £000
Administration costs (9,598) (9,276)
Performance related awards, including annual bonuses (6,019) (4,341)
National Insurance on performance related awards (1,151) (799)
Administrative expenses (16,768) (14,416)
7. Finance Costs
Year to Year to
31 March 31 March
2022 2021
£000 £000
Interest payable on bank loans and overdrafts (10,169) (10,697)
Other interest payable and similar charges (3,179) (3,382)
Total before cancellation of loans (13,348) (14,079)
Cancellation of loans (5,886) -
Finance costs (19,234) (14,079)
8. Tax on Profit on Ordinary Activities
Year to Year to
31 March 31 March
2022 2021
£000 £000
The tax credit/(charge) is based on the profit for the year and represents:
United Kingdom corporation tax at 19%
- Group corporation tax - (1,218)
- Adjustment in respect of prior years 1,146 365
- Use of tax losses (38) -
Current tax credit/(charge) 1,108 (853)
Deferred tax
- Capital allowances 4,540 (398)
- Tax losses (1,024) (794)
- Unrealised chargeable gains 13,512 338
- Other temporary differences (2,134) (924)
Deferred tax credit/(charge) 14,894 (1,778)
Total tax credit/(charge) for year 16,002 (2,631)
Deferred tax At At
31 March 31 March
2022 2021
£000 £000
Capital allowances - (4,540)
Tax losses - 1,024
Unrealised chargeable gains - (13,512)
Other temporary differences - 3,459
Deferred tax liability - (13,569)
The Group became a UK REIT on 1 April 2022. As a result, the deferred tax
assets and liabilities associated with the Group's property business were
released. The majority of the liability released related to unrealised
revaluation gains on the Group's investment properties. In addition,
deferred tax assets totalling £4,402,000 recognised at 31 March 2021 were
released on the basis that it is no longer probable that sufficient taxable
profits will be generated in the non-property business in the future against
which these losses could be offset.
9. Dividends
Year to Year to
31 March 31 March
2022 2021
£000 £000
Attributable to equity share capital
Ordinary
- Interim paid 2.90p per share (2021: 2.70p) 3,547 3,274
- Prior year final paid 7.40p per share (2020: 6.00p) 9,035 7,254
12,582 10,528
A final dividend of 8.25p, if approved at the AGM on 14 July 2022, will be
paid on 29 July 2022 to the Shareholders on the register on 24 June 2022. This
final dividend, amounting to £10,092,000 has not been included as a liability
as at 31 March 2022, in accordance with IFRS.
10. Earnings Per Share
The calculation of the basic earnings per share is based on the earnings
attributable to ordinary shareholders divided by the weighted average number
of shares in issue during the year. This is a different basis to the net asset
per share calculations which are based on the number of shares at the year
end.
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 share awards.
The earnings per share is calculated in accordance with IAS 33 Earnings per
Share and the best practice recommendations of the European Public Real Estate
Association ("EPRA").
Reconciliations of the earnings and weighted average number of shares used in
the calculations are set out below:
Year to Year to
31 March 31 March
2022 2021
000 000
Ordinary shares in issue 122,325 121,266
Weighting adjustment (241) (282)
Weighted average ordinary shares in issue for calculation of basic and EPRA 122,084 120,984
earnings per share
Weighted average ordinary shares issued on share settled bonuses 662 719
Weighted average ordinary shares to be issued under Performance Share Plan 1,700 1,434
Weighted average ordinary shares in issue for calculation of diluted earnings 124,446 123,137
per share
£000 £000
Earnings used for calculation of basic and diluted earnings per share 88,894 17,877
Basic earnings per share 72.8p 14.8p
Diluted earnings per share 71.4p 14.5p
£000 £000
Earnings used for calculation of basic and diluted earnings per share 88,894 17,877
Net gain on sale and revaluation of investment properties
(33,266) (18,046)
- subsidiaries
(18,473) (5,870)
- joint ventures
Tax on profit on disposal of investment properties - 4,936
Gain on movement in share of joint ventures (820) 767
Fair value movement on derivative financial instruments (17,996) (2,938)
Expense on cancellation of loans 5,886 -
Deferred tax on adjusting items (17,844) 1,075
Earnings/(loss) used for calculations of EPRA earnings per share 6,381 (2,199)
EPRA earnings/(loss) per share 5.2p (1.8)p
The earnings used for the calculation of EPRA earnings per share include net
rental income and development property profits but exclude investment and
trading property gains.
11. Investment Properties
At At
31 March 31 March
2022 2021
£000 £000
Book value at 1 April 740,207 819,573
Additions at cost 165,505 13,149
Disposals - (111,883)
Letting cost amortisation (226) (19)
Revaluation surplus 33,311 19,387
As at year end 938,797 740,207
All properties are stated at market value 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 are as
follows:
At At
31 March 31 March
2022 2021
£000 £000
Book value 938,797 740,207
Lease incentives and costs included in trade and other receivables 24,836 18,815
Head leases capitalised (2,133) (2,147)
Fair value 961,500 756,875
Interest capitalised in respect of the refurbishment of investment properties
at 31 March 2022 amounted to £13,102,000 (31 March 2021: £13,102,000).
Interest capitalised during the year in respect of the refurbishment of
investment properties amounted to £nil (31 March 2021: £nil).
The historical cost of investment property is £739,231,000 (31 March 2021:
£573,709,000).
The fair value of the Group's investment property as at 31 March 2022 was
determined by independent external valuers at that date, except for investment
properties valued by the Directors. The valuations are in accordance with the
RICS Valuation - Professional Standards ("The Red Book") and the International
Valuation Standards and were arrived at by reference to market transactions
for similar properties.
Fair values for investment properties are calculated using the present value
income approach. The main assumptions underlying the valuations are in
relation to rent profile and yields as discussed below. A key driver of the
property valuations is the terms of the leases in place at the valuation date.
These determine the cash flow profile of the property for a number of years.
The valuation assumes adjustments from these rental values to current market
rent at the time of the next rent review (where a typical lease allows only
for upward adjustment) and as leases expire and are replaced by new leases.
The current market level of rent is assessed based on evidence provided by the
most recent relevant leasing transactions and negotiations. The equivalent
yield is applied as a discount rate to the rental cash flows which, after
taking into account other input assumptions such as vacancies and costs,
generates the market value of the property.
The equivalent yield applied is assessed by reference to market transactions
for similar properties and takes into account, amongst other things, any risks
associated with the rent uplift assumptions.
The net initial yield is calculated as the current net income over the gross
market value of the asset and is used as a sense check and to compare against
market transactions for similar properties. The valuation outputs, along with
inputs and assumptions, are reviewed to ensure these are in line with what a
market participant would use when pricing each asset.
The reversionary yield is the return received from an asset once the estimated
rental value has been captured on today's assessment of market value.
There are interrelationships between all the inputs as they are determined by
market conditions. The existence of an increase in more than one input would
be to magnify the input on the valuation. The impact on the valuation will be
mitigated by the interrelationship of two inputs in opposite directions.
A sensitivity analysis was performed to ascertain the impact of a 25 and 50
basis point shift in the equivalent yield and a 2.5% and 5% shift in ERVs for
the wholly owned investment portfolio:
At Change in portfolio value
31 March
2022 % £000
True equivalent yield 4.63%
+ 50 bps (13.0) (124,684)
+ 25 bps (6.8) (65,598)
- 25 bps 7.6 73,419
- 50 bps 16.2 155,947
ERV £70.02 psf
+ 5.00% 5.6 53,550
+ 2.50% 2.8 26,703
- 2.50% (2.8) (26,705)
- 5.00% (5.5) (53,249)
12. Joint Ventures
Share of results of joint ventures Year to Year to
31 March 31 March
2022 2021
£000 £000
Revenue 9,495 26,024
Gross rental income 317 156
Property overheads (175) (131)
Net rental income 142 25
Gain on revaluation of investment properties 18,473 6,423
Loss on sale of investment properties - (553)
Development property gain/(loss) 764 (948)
Gross profit 19,379 4,947
Administrative expenses (295) (432)
Operating profit 19,084 4,515
Interest payable on bank loans and overdrafts (2,407) (1,163)
Other interest payable and similar charges (181) (156)
Interest capitalised 2,142 514
Finance income - 5
Profit before tax 18,638 3,715
Tax 1,249 (596)
Profit after tax 19,887 3,119
Adjustment for Barts Square economic interest¹ 821 (767)
Share of results of joint ventures 20,708 2,352
( )
1. This adjustment reflects the impact of the consolidation of a joint
venture at its economic interest of 46.0% (March 2021: 47.0%) rather than its
actual ownership interest of 33.3%.
Investment in joint ventures At At
31 March 31 March
2022 2021
£000 £000
Summarised balance sheets
Non-current assets
Investment properties 140,045 86,817
Owner occupied property, plant and equipment 40 41
140,085 86,858
Current assets
Land and developments 8,349 16,545
Trade and other receivables 2,527 1,661
Cash and cash equivalents 4,474 7,781
15,350 25,987
Current liabilities
Trade and other payables (10,062) (7,098)
Borrowings - (11,455)
(10,062) (18,553)
Non-current liabilities
Trade and other payables (408) (408)
Borrowings (39,585) (8,014)
Leasehold interest (4,744) (4,584)
Deferred tax (125) (1,422)
(44,862) (14,428)
Net assets pre-adjustment 100,511 79,864
Acquisition costs 93 89
Investment in joint ventures 100,604 79,953
The fair value of investment properties at 31 March 2022 is as follows:
At At
31 March 31 March
2022 2021
£000 £000
Book value 140,045 86,817
Lease incentives and costs included in trade and other receivables 166 119
Head leases capitalised (4,391) (4,420)
Fair value 135,820 82,516
13. Other Investments
At At
31 March 31 March
2022 2021
£000 £000
Book value at 1 April - -
Acquisitions 306 -
As at year end 306 -
On 6 August 2021, the Group entered into a commitment of £1,000,000 to invest
in the Pi Labs European PropTech venture capital fund ("Fund") of which
£306,000 was invested during the year. The Fund is focused on investing in
the next generation of proptech businesses.
The fair value of the Group's investment is based on the net asset value of
the Fund, representing Level 2 fair value measurement as defined in IFRS 13
Fair Value Measurement.
14. Land and Developments
At At
31 March 31 March
2022 2021
£000 £000
At 1 April 448 852
Acquisitions and construction costs 2,913 220
Disposals (3,557) (804)
Reversal of provision 2,285 180
At 31 March 2,089 448
The Directors' valuation of development stock shows a surplus of £302,000 (31
March 2021: £578,000) above book value. This surplus has been included in the
EPRA net tangible asset value (Note 22).
No interest has been capitalised or included in land and developments.
15. Trade and Other Receivables
At At
31 March 31 March
2022 2021
£000 £000
Trade receivables 18,807 17,426
Other receivables 762 544
Prepayments 4,310 4,597
Accrued income 24,574 17,860
Total trade and other receivables 48,453 40,427
Included in accrued income are lease incentives of £22,965,000 (31 March
2021: £17,179,000).
16. Cash and Cash Equivalents
At At
31 March 31 March
2022 2021
£000 £000
Cash held at managing agents 10,589 3,289
Restricted cash 3,978 72,878
Cash deposits 14,240 78,281
Total cash and cash equivalents 28,807 154,448
Restricted cash is made up of cash held by solicitors and cash in restricted
accounts.
17. Trade and Other Payables
At At
31 March 31 March
2022 2021
£000 £000
Trade payables 23,122 24,194
Other payables 3,957 1,879
Accruals 7,418 14,023
Deferred income 9,489 6,668
Total trade and other payables 43,986 46,764
18. Lease Liability
At At
31 March 31 March
2022 2021
£000 £000
Current lease liability 658 634
Non-current lease liability 6,271 6,929
Included within the lease liability are £658,000 (31 March 2021: £634,000)
of current and £4,082,000 (31 March 2021: £4,740,000) of non-current lease
liabilities which relate to the long leasehold of the Group's head office.
19. Borrowings
At At
31 March 31 March
2022 2021
£000 £000
Current borrowings - -
Borrowings repayable within:
- two to three years 100,000 49,705
- three to four years 296,633 286,998
Non-current borrowings 396,633 336,703
Total borrowings 396,633 336,703
At At
31 March 31 March
2022 2021
£000 £000
Total borrowings 396,633 336,703
Cash (28,807) (154,448)
Net borrowings 367,826 182,255
Net borrowings exclude the Group's share of borrowings in joint ventures of
£39,585,000 (31 March 2021: £19,469,000) and cash of £4,474,000 (31 March
2021: £7,781,000). All borrowings in joint ventures are secured.
At At
31 March 31 March
2022 2021
£000 £000
Net assets 687,043 608,161
Gearing 54% 30%
20. Derivative Financial Instruments
At At
31 March 31 March
2022 2021
£000 £000
Derivative financial instruments asset 11,104 171
Derivative financial instruments liability (538) (7,601)
A gain on the change in fair value of £17,996,000 has been recognised in the
Consolidated Income Statement (31 March 2021: £2,938,000).
The fair values of the Group's outstanding interest rate swaps and caps have
been estimated by calculating the present values of future cash flows, using
appropriate market discount rates, representing Level 2 fair value
measurements as defined in IFRS 13 Fair Value Measurement.
21. Share Capital
At At
31 March 31 March
2022 2021
£000 £000
Authorised 39,577 39,577
The authorised share capital of the Company is £39,577,000 ordinary shares of
1p each.
At At
31 March 31 March
2022 2021
£000 £000
Allotted, called up and fully paid:
- 122,325,413 (31 March 2021: 121,265,710) ordinary shares of 1p each 1,223 1,213
- 212,145,300 deferred shares of 1/8p each - 265
1,223 1,478
The deferred shares of 1/8p each were cancelled during the year.
22. Net Assets Per Share
At Number of shares At Number of shares p
31 March 000 31 March 000
2022 2021
£000 £000
p
IFRS net assets 687,043 122,325 608,161 121,266
Adjustments:
- deferred shares - (265)
Basic net asset value 687,043 122,325 562 607,896 121,266 501
- share settled bonus 662 718
- dilutive effect of Performance Share Plan 1,657 1,519
Diluted net asset value 687,043 124,644 551 607, 896 123,503 492
Adjustments:
- fair value of financial instruments (10,565) 7,431
- deferred tax 503 18,348
- fair value of land and developments 302 578
- real estate transfer tax 73,155 56,877
EPRA net reinstatement value 750,438 124,644 602 691,130 123,503 560
- real estate transfer tax (36,656) (24,862)
- deferred tax (503) (7,605)
EPRA net tangible asset value 713,279 124,644 572 658,663 123,503 533
At Number of shares At Number of shares p
31 March 000 31 March 000
2022 2021
£000 p £000
Diluted net assets 687,043 124,644 551 607,896 123,503 492
Adjustments:
- surplus on fair value of stock 302 578
- fair value of fixed rate loan - (9,622)
EPRA net disposal value 687,345 124,644 551 598,852 123,503 485
The net asset values per share have been calculated in accordance with
guidance issued by the European Public Real Estate Association ("EPRA").
The adjustments to the net asset value comprise the amounts relating to the
Group and its share of joint ventures.
The calculation of EPRA net tangible asset value includes a real estate
transfer tax adjustment which adds back the benefit of the saving of the
purchaser's costs that Helical expects to receive on the sales of the
corporate vehicles that owns the buildings, rather than direct asset sales.
The calculation of EPRA net disposal value and triple net asset value per
share reflects the fair value of all the assets and liabilities of the Group
at 31 March 2022. One of the loans held by the Group in the prior year was at
a fixed rate and therefore not at fair value. The adjustment of £nil (31
March 2021: £9,622,000) is the increase from book to fair value.
23. Related Party Transactions
The following amounts were due from the Group's joint ventures:
At At
31 March 31 March
2022 2021
£000 £000
Charterhouse Street Limited 405 400
Barts Square companies 79 16
Shirley Advance LLP 8 8
Old Street Holdings LP 3 3
An accounting and corporate services fee of £50,000 (March 2021: £50,000)
was charged by the Group to the Barts Square companies. In addition, a
development management, accounting and corporate services fee of £1,380,000
(31 March 2021: £850,000) was charged by the Group to the Charterhouse Place
Limited group.
24. See-through Analysis
Helical holds a significant proportion of its property assets in joint
ventures with partners that provide a significant equity contribution, whilst
relying on the Group to provide asset management or development expertise.
Accounting convention requires Helical to account under IFRS for its share of
the net results and net assets of joint ventures in limited detail in the
Income Statement and Balance Sheet. Net asset value per share, a key
performance measure used in the real estate industry, as reported in the
financial statements under IFRS, does not provide Shareholders with the most
relevant information on the fair value of assets and liabilities within an
ongoing real estate company with a long-term investment strategy.
This analysis incorporates the separate components of the results of the
consolidated subsidiaries and Helical's share of its joint ventures' results
into a "see-through" analysis of its property portfolio, debt profile and the
associated income streams and financing costs, to assist in providing a
comprehensive overview of the Group's activities.
See-through Net Rental Income
Helical's share of the gross rental income, head rents payable and property
overheads from property assets held in subsidiaries and in joint ventures is
shown in the table below.
Year to Year to
31 March 31 March
2022 2021
£000 £000
Gross rental income - subsidiaries 35,324 28,007
- joint ventures 317 156
Total gross rental income 35,641 28,163
Rents payable - subsidiaries (169) (232)
Property overheads - subsidiaries (4,069) (2,810)
- joint ventures (175) (131)
See-through net rental income 31,228 24,990
See-through Net Development Profits/(Losses)
Helical's share of development profits/(losses) from property assets held in
subsidiaries and in joint ventures is shown in the table below.
Year to Year to
31 March 31 March
2022 2021
£000 £000
In parent and subsidiaries 3,519 678
In joint ventures 764 (948)
Total gross development profit/(loss) 4,283 (270)
Reversal of provision/(provision) - subsidiaries 2,285 (82)
See-through development profits/(losses) 6,568 (352)
See-through Net Gain on Sale and Revaluation of Investment Properties
Helical's share of the net gain on the sale and revaluation of investment
properties held in subsidiaries and joint ventures is shown in the table
below.
Year to Year to
31 March 31 March
2022 2021
£000 £000
Revaluation surplus on investment properties - subsidiaries 33,311 19,387
- joint ventures 18,473 6,423
Total revaluation surplus 51,784 25,810
Net loss on sale of investment properties - subsidiaries (45) (1,341)
- joint ventures - (553)
Total net loss on sale of investment properties (45) (1,894)
See-through net gain on sale and revaluation of investment properties 51,739 23,916
See-through Administration Expenses
Helical's share of the administration expenses incurred in subsidiaries and
joint ventures is shown in the table below.
Year to Year to
31 March 31 March
2022 2021
£000 £000
Administration expenses - subsidiaries 9,598 9,276
- joint ventures 295 432
Total administration expenses 9,893 9,708
Performance related awards, including NIC - subsidiaries 7,170 5,140
Total performance related awards, including NIC 7,170 5,140
See-through administration expenses 17,063 14,848
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 joint ventures is shown in the table below.
Year to Year to
31 March 31 March
2022 2021
£000 £000
Interest payable on bank loans and overdrafts - subsidiaries 10,169 10,697
- joint ventures 2,407 1,163
Total interest payable on bank loans and overdrafts 12,576 11.860
Other interest payable and similar charges - subsidiaries 9,065 3,382
- joint ventures 181 156
Interest capitalised - joint ventures (2,142) (514)
Total finance costs 19,680 14,884
Interest receivable and similar income - subsidiaries (6) (58)
- joint ventures - (5)
See-through net finance costs 19,674 14,821
See-through Property Portfolio
Helical's share of the investment, land and development property portfolio in
subsidiaries and joint ventures is shown in the table below.
At At
31 March 31 March
2022 2021
£000 £000
Investment property fair value - subsidiaries 961,500 756,875
- joint ventures 135,820 82,516
Total investment property fair value 1,097,320 839,391
Land and development stock - subsidiaries 2,089 448
- joint ventures 8,349 16,545
Total land and development stock 10,438 16,993
Total land and development stock surplus - subsidiaries 302 578
Total land and development stock at fair value 10,740 17,571
See-through property portfolio 1,108,060 856,962
See-through Net Borrowings
Helical's share of borrowings and cash deposits in subsidiaries and joint
ventures is shown in the table below.
At At
31 March 31 March
2022 2021
£000 £000
Gross borrowings more than one year - subsidiaries 396,633 336,703
Total 396,633 336,703
Gross borrowings less than one year - joint ventures - 11,455
Gross borrowings more than one year - joint ventures 39,585 8,014
Total 39,585 19,469
Cash and cash equivalents - subsidiaries (28,807) (154,448)
- joint ventures (4,474) (7,781)
Total (33,281) (162,229)
See-through net borrowings 402,937 193,943
25. See-through Net Gearing and Loan to Value
At At
31 March 31 March
2022 2021
£000 £000
Property portfolio 1,108,060 856,962
Net borrowings 402,937 193,943
Net assets 687,043 608,161
See-through net gearing 58.6% 31.9%
See-through loan to value 36.4% 22.6%
26. Total Accounting Return
At At
31 March 31 March
2022 2021
£000 £000
Brought forward IFRS net assets 608,161 598,689
Carried forward IFRS net assets 687,043 608,161
Increase in IFRS net assets 78,882 9,472
Dividends paid 12,582 10,528
Total accounting return 91,464 20,000
Total accounting return percentage 15.0% 3.3%
At At
31 March 31 March
2022 2021
£000 £000
Brought forward EPRA net tangible assets 658,663 640,424
Carried forward EPRA net tangible assets 713,279 658,663
Increase in EPRA net tangible assets 54,616 18,239
Dividends paid 12,582 10,528
Total EPRA accounting return 67,198 28,767
Total EPRA accounting return percentage 10.2% 4.5%
27. Total Property Return
At At
31 March 31 March
2022 2021
£000 £000
See-through net rental income 31,228 24,990
See-through development profits/(losses) 6,568 (352)
See-through revaluation surplus 51,784 25,810
See-through net loss on sale of investment properties (45) (1,894)
Total property return 89,535 48,554
28. Capital Commitments
The Group has a commitment of £nil (31 March 2021: £4,400,000) in relation
to development contracts which are due to be completed in the year to March
2023. A further £13,100,000 (31 March 2021: £45,600,000) relates to the
Group's share of commitments in joint venture.
29. Post Balance Sheet Events
In May 2022, the Group exchanged contracts for the sale of Trinity, Manchester
for £34.55m.
Appendix 1 - Five Year Review
Income Statements
Year ended Year ended Year ended Year ended Year ended
31.3.22 31.3.21 31.3.20 31.3.19 31.3.18
£000 £000 £000 £000 £000
Revenue 51,146 38,596 44,361 44,175 175,596
Net rental income 31,086 24,965 27,838 24,599 36,329
Development property profit/(loss) 3,519 678 2,076 2,564 (1,961)
Reversal of provisions/(provisions) 2,885 (82) 1,198 (4,345) (2,213)
Share of results of joint ventures 20,708 2,352 13,396 (3,217) 3,196
Other operating income 28 48 88 - 111
Gross profit before gain on investment properties 57,626 27,961 44,596 19,601 35,462
(Loss)/gain on sale of investment properties (45) (1,341) (1,272) 15,008 13,567
Revaluation surplus on investment properties 33,311 19,387 38,351 44,284 23,848
Fair value movement of available-for-sale assets - - - 144 1,385
Administrative expenses excluding performance related awards (9,598) (9,276) (10,524) (10,858) (11,023)
Performance related awards (including NIC) (7,170) (5,140) (6,191) (5,895) (1,742)
Finance costs (19,234) (14,079) (16,100) (17,407) (37,438)
Finance income 6 58 1,345 983 4,303
Change in fair value of derivative financial instruments 17,996 2,938 (7,651) (3,322) 4,029
Change in fair value of Convertible Bond - - 468 865 (1,559)
Foreign exchange gains/(losses) - - 8 53 (10)
Profit before tax 72,892 20,508 43,030 43,456 30,822
Tax on profit on ordinary activities 16,002 (2,631) (4,313) (836) (4,537)
Profit after tax 88,894 17,877 38,717 42,620 26,285
Balance Sheets
At At At At At
31.3.22 31.3.21 31.3.20 31.3.19 31.3.18
£000 £000 £000 £000 £000
Investment portfolio at fair value 961,500 756,875 836,875 791,250 802,134
Land, trading properties and developments 2,089 448 852 2,311 6,042
Group's share of investment properties held by joint ventures 135,820 82,516 76,809 25,382 22,623
Group's share of land, trading and development properties held by joint 8,349 16,545 34,164 56,935 76,474
ventures
Group's share of land and development property surpluses 302 578 578 578 2,328
Group's share of total properties at fair value 1,108,060 856,962 949,278 876,456 909,601
Net debt 367,826 182,255 273,598 227,712 325,121
Group's share of net debt of joint ventures 35,111 11,688 24,933 40,861 37,733
Group's share of net debt 402,937 193,943 298,531 268,573 362,854
Net assets 687,043 608,161 598,689 567,425 533,894
EPRA net tangible assets value 713,279 658,663 640,424 597,321 561,644*
Dividend per ordinary share paid 10.30p 8.70p 10.20p 9.60p 8.70p
Dividend per ordinary share declared 11.15p 10.10p 8.70p 10.10p 9.50p
EPRA earnings/(loss) per ordinary share 5.2p (1.8)p 7.6p (8.4)p (7.0)p
EPRA net tangible assets per share 572p 533p 524p 494p 468p*
*EPRA net asset value.
Appendix 2 - Property Portfolio
London Portfolio - Investment Properties
Property Description Area sq ft Vacancy rate at Vacancy rate at 31 March 2021
(NIA) 31 March %
2022
%
Completed properties
The Warehouse and Studio, The Bower, EC1 Multi-let office building 151,439 0.0 0.0
The Tower, The Bower, EC1 Multi-let office building 182,193 5.3 0.0
The Loom, E1 Multi-let office building 108,600 20.1 14.8
Kaleidoscope, EC1 Single-let office building 88,581 0.0 0.0
25 Charterhouse Square, EC1 Multi-let office building 42,921 4.4 26.0
55 Bartholomew, EC1 Multi-let office building 10,976 23.1 67.2
The Power House, W4 Single-let recording studios/office building 21,268 0.0 0.0
605,978 6.9 5.8
Development pipeline
33 Charterhouse Street, EC1 Office development 205,369 n/a n/a
100 New Bridge Street, EC4 Single-let office building 167,026 0.0 n/a
978,373 0.0 n/a
London Portfolio - Development Properties
Property Description Total apartments Unsold Unsold apartments
apartments at 31 March
at 31 March 2021
2022
Barts Square, EC1 Residential apartments and 8 retail units 236 14 28
Manchester Offices
Property Description Area sq ft Vacancy rate Vacancy rate at 31 March 2021
(NIA) at 31 March %
2022
%
Trinity Multi-let office building 58,533 23.9 54.1
Appendix 3 - EPRA Performance Measures
At At
31 March 31 March
2022 2021
EPRA net tangible assets £713.3m £658.7
EPRA net reinstatement value per share 602p 560p
EPRA net tangible assets per share 572p 533p
EPRA net disposal value per share 551p 485p
EPRA net initial yield 3.5% 3.2%
EPRA "topped up" net initial yield 4.5% 4.6%
EPRA vacancy rate 4.8% 7.9%
EPRA cost ratio (including direct vacancy costs) 52.8% 59.0%
EPRA cost ratio (excluding direct vacancy costs) 48.8% 56.3%
EPRA earnings/(loss) £6.4m (£2.2m)
EPRA earnings/(loss) per share 5.2p (1.8p)
Appendix 4 - Risk Register
Risk Description Mitigating actions Changes in risk severity
Strategic Risks
Strategic risks are external risks that could prevent the Group delivering its
strategy. It is these risks which principally impact decision-making with
respect to the purchasing or selling of property assets.
The Group's strategy is inconsistent with the market Changing market conditions leading to a reduction in demand or deferral of Management constantly monitors the market and makes changes to the Group's The pandemic had various strategic impacts on property companies and
decisions by occupiers, impacting property values, could hinder the Group's strategy in light of market conditions. The Group conducts an annual strategic uncertainty regarding the full economic and social impacts of the Covid-19
ability to buy, develop, manage and sell assets as envisioned in its strategy. review and maintains rolling forecasts, with inbuilt sensitivity analysis to pandemic continues. Over the course of the year, we have seen an improved
The location, size and mix of properties in Helical's portfolio determine the model anticipated economic conditions. sentiment towards the future of the office, but the agile working movement
impact of the risk. If the Group's chosen markets underperform, the impact on
continues, with many businesses adopting hybrid working practices.
the Group's liquidity, investment property revaluations and rental income will The Group's management team is highly experienced and has a strong track
be greater. record of understanding the property market. It has become evident that the market favours the best-in-class space with
strong sustainability credentials and Helical's portfolio is well positioned
The small size of the Group's management team enables quick implementation of to respond to this trend. The UK's Covid-19 vaccination programme has also had
strategic change when required. a positive impact on this risk. Consequently, the severity of this risk has
decreased.
We have robust and established governance and approval processes.
We are active members of industry bodies and professional organisations and
participate in local business and community groups. This ensures we are
actively engaged in decisions affecting our business, customers, partners and
communities.
Risks arising from the Group's significant development projects The Group carries out significant development projects over a number of years Management carefully reviews the risk profile of individual developments and The Group currently has one ongoing development and the majority of these
and is therefore exposed to fluctuations in the market and tenant demand in some cases builds properties in several phases to minimise the Group's costs are fixed. Management will look to negotiate similar contract terms for
levels over time. exposure to reduced demand for particular asset classes or geographical its new development project: 100 New Bridge Street, EC4.
locations over time. The Group carries out developments in partnership with
Development projects often require substantial capital expenditure for land other organisations and pre-lets space to reduce development risk, where However, this risk is dependent on negotiations with contractors and may
procurement and construction and they usually take a considerable amount of considered appropriate. change as new development projects are acquired.
time to complete and generate rental income.
Management are highly experienced and have a track record of developing There remains risk of insolvencies in the construction industry given the
The risk of delays or failure to get planning approval is an inherent risk of best-in-class office spaces in highly desirable, well connected, locations. uncertainties around the future macroeconomic environment and geopolitical
property development.
market influences.
Management place significant focus on timely project delivery and strong
The construction industry is faced with both labour and materials supply relationships with construction partners with appropriate risk sharing. We opt
shortages which could lead to cost escalation and project delay. to work with highly regarded suppliers and contractors to minimise cost
uncertainty.
Exposure to developments increases the potential financial impact of cost
inflation, adverse valuation or other market factors which could affect the We typically enter into contracts with our contractors on a fixed price basis
Group's financial capabilities and targeted financial returns. and incorporate appropriate contingencies.
Development plans and exposure to risk are considered in the annual business
plan.
Detailed planning pre-applications and due diligence are conducted in advance
of any site acquisition.
Board approval required for commitments above a certain threshold.
Management continuously monitors the cost of materials and pressures on supply
chain and distribution networks.
Ongoing consideration is given to investing in the most energy efficient
machinery and building materials and using renewable sources of energy where
possible.
Property values decline/reduced tenant demand for space The property portfolio is at risk of valuation falls through changes in market The Group's property portfolio has tenants from diverse industries, reducing Although there has been a notable increase in the return of employees to their
conditions, including underperforming sectors or locations, lack of tenant the risk of over-exposure to one sector. We carry out occupier financial offices, a number of corporates are continuing to offer hybrid working
demand, deferral of occupiers' decisions or general economic uncertainty. covenant checks ahead of approving leases in order to limit our exposure to opportunities.
tenant failure. Management reviews external data, seeks the advice of industry
Property valuations are dependent on the level of rental income receivable and experts and monitors the performance of individual assets and sectors in order However, there is a strong market sentiment towards new, best-in-class office
expected to be receivable on that property in the future. Therefore, declines to dispose of non-performing assets and rebalance the portfolio to suit the space and given Helical's Grade A portfolio, the severity of this risk has
in rental income could have an adverse impact on revenue and the value of the changing market. Management regularly models different property revaluation reduced with respect to our portfolio.
Group's properties. scenarios through its forecasting process in order to prepare a considered
approach to mitigating the potential impact.
We work closely with our management agents, Ashdown Phillips, to engage
closely with our occupiers to understand their needs and respond quickly and
collaboratively to any changing requirements.
The Board and Management team conduct ongoing monitoring of property market,
direction and valuations. The bi-weekly Management meeting considers factors
such as new leases, lease events and tenant issues with respect to each
property in the portfolio.
We conduct ongoing monitoring of build cost inflation and factor this into
appraisals of all potential development schemes.
Geopolitical and economic Significant events or changes in the global/UK political or economic landscape Management seeks advice from experts to ensure it understands the political Whilst reduced, the Covid -19 pandemic continues to effect global and local
may have a significant impact on the Group's ability to plan and deliver its environment and the impact of emerging regulatory and tax changes on the economies e.g. inflationary pressures arising from supply chain shortages,
strategic priorities in accordance with its business model. Such events or Group. It maintains good relationships with planning consultants and local interest rate rises, cost of energy.
changes may result in decreased investor activity and reluctance of occupiers authorities. Where appropriate, management joins with industry representatives
to make decisions with respect to office space uptake. to contribute to policy and regulatory debate relevant to the industry. UK GDP growth estimates for 2022 have fallen since the beginning of the year.
There is a risk that regulatory and tax changes could adversely affect the Management monitor macroeconomic research and economic outlook considerations Furthermore, global economic and political conditions e.g. the Russo-Ukrainian
market in which the Group operates. are incorporated into the Group's annual business plan. war and associated sanctions, are exerting pressure on global supply chains
and economies.
The ongoing transition of the UK from the EU remains a risk and has an impact Management conduct ongoing assessments of post-Brexit impacts and the
on global trade. continuing effects of the Covid-19 pandemic. The risk is therefore considered to have increased since last year.
Political instability and unrest can have a significant knock-on effect on We will continue to monitor the economic and political situations in the UK
global economies and trade (as evidenced by the Russo-Ukrainian war). and globally and adapt any business decisions accordingly.
Significant business disruption/external catastrophic event The Group's operations, reputation or financial performance could be adversely In the event of a pandemic: Global rollout of Covid-19 vaccinations has reduced the probability of further
affected and disrupted by major external events such as pandemic disease,
significant and prolonged disruption due to the disease.
civil unrest, war and geopolitical instability, terrorist attacks, extreme · The Executive Committee will be tasked with the daily monitoring and
weather, environmental incidents, and power supply shortages. managing of the risk, and will focus on the impact on property locations, the However, the UK's terrorism national threat level is currently rated as
business and supply chain. significant.
· Regular Board discussions will be held during any pandemic to review The current Russo-Ukrainian war and associated sanctions are putting pressure
All of these potential events could have a considerable impact on the global the Group's response and mitigating actions. on global supply chains and economies.
economy, as well as that of our business and our stakeholders.
· Enhanced engagement with our stakeholders will be conducted Therefore, this risk remains unchanged.
(particularly with occupiers, contractors, shareholders and employees).
· There will be continuous review of Government guidelines and emerging
practice, with risk assessments undertaken as control measures change.
· Guidance will be issued to our staff, occupiers and contractors on how
to protect themselves and others.
The Group ensures that it has adequate Business Continuity Plans and IT
Business Continuity Plans in place to enable remote working for all staff.
Testing of business resilience and risk planning is conducted throughout the
year.
Climate change The Group is alive to the risks posed by climate change. Failing to respond to The Group has a Sustainability Committee, which reviews the Group's approach Climate change risk continues to increase in prominence and importance. In the
these risks appropriately (in line with societal attitudes or legislation) or and strategy to climate related risks and presents regularly to the Board and UK, the Government continues to introduce more legislation linked to climate
failing to identify potential opportunities could lead to reputational damage, Executive Committee on emerging issues and mitigation plans. The Committee risk e.g. TCFD and legislation requiring higher standards for energy
loss of income or decline in property values. sets appropriate targets and KPIs to effectively monitor the Group's efficiency in commercial and residential properties (EPCs).
performance.
There is also the additional risk that the costs to operate our business
The risks associated with the impact of climate change continue to increase
(energy or water) or undertake development activities (construction materials) During the year, a detailed scenario analysis was performed to ascertain the and businesses are being encouraged to pro-actively respond by all their
will rise as a consequence of climate change. potential risks and opportunities that arise due to specific climate related stakeholders.
scenarios. The outcome of this analysis has been incorporated into our wider
Task Force on Climate Related Financial Disclosures (TCFD) statement.
Annually, the Group produces a Sustainability Performance Report with key data
and performance points which are externally assured.
In May 2022, the Group released its Net Zero Carbon Pathway, which commits to
becoming net zero carbon by 2030 and includes the actions and steps required
to meet the associated targets.
Financial Risks
Financial risks are those that could prevent the Group from funding its chosen
strategy, both in the long and short-term.
Availability and cost of bank borrowing and cash resources The inability to roll over existing facilities or take out new borrowing could The Group maintains a good relationship with many established lending The Group has significant cash and undrawn bank facilities and a conservative
impact on the Group's ability to maintain its current portfolio and purchase institutions and borrowings are spread across a number of these. level of borrowings.
new properties. The Group may forego opportunities if it does not maintain
sufficient cash to take advantage of them as they arise. Funding requirements are reviewed monthly by management, who seek to ensure
that the maturity dates of borrowings are spread over several years.
The Group is at risk of increased interest rates on unhedged borrowings.
Management monitors the cash levels of the Group on a daily basis and
maintains sufficient levels of cash resources and undrawn committed bank
facilities to fund opportunities as they arise.
The Group hedges the interest rates on the majority of its borrowings,
effectively fixing or capping the rates over several years.
Breach of loan covenants If the Group breaches debt covenants, lending institutions may require the Covenants are closely monitored throughout the year. Management carries out The pandemic has put some tenants under cash flow pressure. Although the
early repayment of borrowings. sensitivity analyses to assess the likelihood of future breaches based on Group's rental collection remains strong, this is still a key risk for the
significant changes in property values or rental income. business.
The risk is further mitigated through the obtaining of tenant guarantors/bank
guarantees/deposits.
Operational Risks
Operational risks are internal risks that could prevent the Group from
delivering its strategy.
Our people The Group's continued success is reliant on its management and staff. The senior management team is very experienced with a high average length of Although there is currently strong competition for talent in the employment
service. The Nominations Committee and Board continuously review succession market at present, this risk has remained broadly similar due to our high
The failure to attract, develop and retain the right people with requisite plans, and the Remuneration Committee oversees the Directors' Remuneration staff retention levels.
skills, as well as failure to maintain a positive working environment for Policy and its application to senior employees, and reviews and approves
employees could inhibit the execution of our strategy and dimmish our incentive arrangements to ensure they are commensurate with market practice. The Board reaffirmed the succession plans for key roles within the Company
long-term sustainability. Remuneration is set to attract and retain high calibre staff. during the year which supports the long-term success of the business.
Our annual appraisal process focuses on future career development and staff
are encouraged to undertake personal development and training courses,
supported by the Company.
The Board and senior management engage directly with employees through a
variety of engagement initiatives which enable the Board to ascertain staff
satisfaction levels and implement changes to working practices and the working
environment as necessary.
We also arrange all staff training activities and events throughout the year.
Relationships with business partners and reliance on external partners The Group's continued success is reliant on successful relationships with its Business partners External factors such as the Covid-19 pandemic, geopolitical tensions and high
joint venture partners.
levels of demand for certain raw materials and components place increased
· The Group nurtures well established relationships with joint venture pressure on supply chains and distribution networks.
As several of the Group's properties are held in conjunction with third partners, seeking future projects where it has had previous successful
parties, the Group's control over these properties is more limited and these collaborations. Given our reliance on external third parties to ensure the successful delivery
structures also reduce the Group's liquidity.
of our development programmes and asset management, these external factors
· Management has a strong track record of working effectively with a could have a significant impact on our business and, accordingly, this risk
Operational effectiveness and financing strategies may also be adversely diverse range of partners. has increased.
impacted if partners are not strategically aligned.
· Our joint venture business plans are prepared to ensure operational and
The Group is dependent on a number of external third parties to ensure the strategic alignment with our partners.
successful delivery of its development programme and asset management of
existing assets. These include:
· Contractors and suppliers; External partners
· Consultants; · The Group actively monitors its development projects and uses external
project managers to provide support. Potential contractors are vetted for
· Managing agents; and their quality, health and safety record and financial viability prior to
engagement.
· Legal and professional teams.
· The Group has a highly experienced team managing its properties, who
The Group would be adversely impacted by increases in the cost of services regularly conduct on-site reviews and monitor cash flows against budget.
provided by third parties.
· The Group seeks to maintain excellent relationships with its specialist
professional advisors, often engaging parties with whom it has successfully
worked previously.
· Management actively monitors these parties to ensure they are
delivering the required quality on time and strong working relationships are
maintained.
Health and safety The nature of the Group's operations and markets expose it to potential health The Group reviews and updates its Health & Safety Policy regularly and it This remains a key area of focus for the business and the risk remains the
and safety risks both internally and externally within the supply chain. is approved by the Board annually. same.
Contractors are required to comply with the terms of our Health & Safety
Policy. The Group engages an external health and safety consultant to review
contractor agreements prior to appointment and ensures they have appropriate
policies and procedures in place, then monitors the adherence to such policies
and procedures throughout the project's lifetime.
The Executive Committee reviews the report by the external consultant every
month and the Board reviews them at every scheduled meeting. The internal
asset managers carry out regular site visits.
Cyber attacks to our business and our buildings/cyber security The Group relies on information technology ("IT") to perform effectively, and The Group engages and actively manages external IT experts to ensure its IT Cyber risks persist as cyber criminals continue to exploit changes in working
a cyber-attack could result in IT systems being unavailable, adversely systems operate effectively and that we respond to the evolving IT security practices post-pandemic.
affecting the Group's operations. environment. This includes regular off-site backups and a comprehensive
disaster recovery process. The external provider also ensures the system is The Group's cyber security controls have continued to be strengthened and no
The increasing reliance on and use of digital technology heighten the risks secure and this is subject to routine testing including bi-annual disaster major breaches were reported during the year.
associated with IT and cyber security. recovery tests and annual Cyber Essential Plus Certification.
However, as the number of UK businesses reporting security threats has not
Commercially sensitive and personal information is electronically stored by There is a robust control environment in place for invoice approval and decreased over the year, we have not revised the risk severity rating for the
the Group. Theft of this information could adversely impact the Group's payment authorisations including authorisation limits and a dual sign off forthcoming year.
commercial advantage and result in penalties where the information is governed requirement for large invoices and bank payments.
by law (GDPR and Data Protection Act 2018).
The Group provides training and performs penetration testing to identify
Risks are continually evolving, and we must design, implement and monitor emails of a suspicious nature, ensuring these are flagged to the IT providers
effective controls to protect the Group from cyber-attack or major IT failure. and ensure employees are aware they should not open attachments or follow
The Group increasingly employs IT solutions across its property portfolio to instructions within the email. On an annual basis, our external IT providers
ensure its buildings are "smart". provide IT security training to ensure all staff are adopting best practice IT
security measures to help protect the business against cyberattack.
The Group is at risk of being a victim of social engineering fraud.
An external review of Helical's anti-financial crime and cyber security
frameworks was conducted during the year and training delivered to staff.
The Group has a disaster recovery plan, on-site security at its properties and
insurance policies in place in order to deal with any external events and
mitigate their impact.
Reputational Risks
Reputational risks are those that could affect the Group in all aspects of its
strategy.
Poor management of stakeholder relations Reputational damage resulting in a loss of credibility with key stakeholders The Group believes that successfully delivering its strategy and mitigating This risk remains and is expected to remain at the same level.
including Shareholders, analysts, banking institutions, contractors, managing its principal risks should protect its reputation.
agents, tenants, property purchasers/sellers and employees is a continuous
risk for the Group. The Group regularly reviews its strategy and risks to ensure it is acting in
the interests of its stakeholders.
The Group maintains a strong relationship with investors and analysts through
regular meetings.
We ensure strong community involvement in the design process for our
developments and create employment and education opportunities through our
construction and operations activities.
Management closely monitors day-to-day business operations, and the Group has
a formal approval procedure for all press releases and public announcements.
A Group Disclosure Policy and Share Dealing Code, Policy & Procedures have
been circulated to all staff in accordance with the UK Market Abuse Regulation
(UK MAR).
Non-compliance with prevailing legislation, regulation and best practice The nature of the Group's operations and markets exposes it to financial The Group's anti-bribery and corruption and whistleblowing policies and This risk is consistent for the business due to the ever changing legal and
crimes risks (including bribery and corruption risks, money laundering and tax procedures are reviewed and updated annually and emailed to staff and regulatory landscape the business operates in. Therefore, the risk remains at
evasion) both internally and externally within the supply chain. displayed on our website. Projects with greater exposure to bribery and a similar level.
corruption are monitored closely.
The Group is exposed to the potential risk of acquiring or disposing of a
property where the owner/ purchaser has been involved in criminal conduct or The Group avoids doing business in high-risk territories. The Group has
illicit activities. related policies and procedures designed to mitigate bribery and corruption
risks including:
The Group would attract criticism and negative publicity were any instances of
modern slavery and human trafficking identified within its supply chain. Know Your Client checks, due diligence processes, capital expenditure
controls, contracts risk assessment procedures, and competition and anti-trust
The Group would attract criticism and negative publicity if instances of guidance. The Group engages legal professionals to support these policies
non-compliance with GDPR and the Data Protection Act 2018 were identified. where appropriate.
Non-compliance may also result in financial penalties.
All employees are required to complete anti-bribery and corruption training
and to submit details of corporate hospitality and gifts received. This year,
staff also received anti-financial crime training to enhance their awareness.
All property transactions are reviewed and authorised by the Executive
Committee.
Our Modern Slavery Act statement, which is prominently displayed on our
website, gives details of our policy and our approach.
The Group monitors its GDPR and Data Protection Act 2018 compliance to ensure
appropriate safeguards, policies, procedures, contractual terms and records
are implemented and maintained in accordance with the regulation.
Appendix 5 - Glossary of Terms
Capital value (psf)
The open market value of the property divided by the area of the property in
square feet.
Company or Helical or Group
Helical plc and its subsidiary undertakings.
Compound Annual Growth Rate (CAGR)
The annualised average growth rate.
Diluted figures
Reported amounts adjusted to include the effects of potential shares issuable
under the Director and employee remuneration schemes.
Earnings per share (EPS)
Profit after tax divided by the weighted average number of ordinary shares in
issue.
EPRA
European Public Real Estate Association.
EPRA earnings per share
Earnings per share adjusted to exclude gains/losses on sale and revaluation of
investment properties and their deferred tax adjustments, the tax on
profit/loss on disposal of investment properties, trading property
profits/losses, movement in fair value of available-for-sale assets and fair
value movements on derivative financial instruments, on an undiluted basis.
Details of the method of calculation of the EPRA earnings per share are
available from EPRA (see Note 10).
EPRA net assets per share
Diluted net asset value per share adjusted to exclude fair value surplus of
financial instruments, and deferred tax on capital allowances and on
investment properties revaluation but including the fair value of trading and
development properties in accordance with the best practice recommendations of
EPRA (see Note 22).
EPRA net disposal value per share
Represents the Shareholders' value under a disposal scenario, where deferred
tax, financial instruments and certain other adjustments are calculated to the
full extent of their liability, net of any resulting tax (see Note 22).
EPRA net reinstatement value per share
Net asset value adjusted to reflect the value required to rebuild the entity
and assuming that entities never sell assets. Assets and liabilities, such as
fair value movements on financial derivatives, that are not expected to
crystallise in normal circumstances and deferred taxes on property valuation
surpluses are excluded (see Note 22).
EPRA net tangible assets per share
Assumes that entities buy and sell assets, thereby crystallising certain
levels of unavoidable deferred tax, but excludes assets and liabilities, such
as fair value movements on financial derivatives, that are not expected to
crystallise in normal circumstances and deferred taxes on property valuation
surpluses are excluded (see Note 22).
EPRA topped-up NIY
The current annualised rent, net of costs, topped-up for contracted uplifts,
expressed as a percentage of the fair value of the relevant property.
Estimated rental value (ERV)
The market rental value of lettable space as estimated by the Group's valuers
at each Balance Sheet date.
Gearing
Total borrowings less short-term deposits and cash as a percentage of net
assets.
Initial yield
Annualised net passing rents on investment properties as a percentage of their
open market value.
Like-for-like valuation change
The valuation gain/loss, net of capital expenditure, on those properties held
at both the previous and current reporting period end, as a proportion of the
fair value of those properties at the beginning of the reporting period plus
net capital expenditure.
MSCI INC. (MSCI IPD)
MSCI INC. is a company that produces independent benchmarks of property
returns using its investment Property Databank (IPD).
Net asset value per share (NAV)
Net assets divided by the number of ordinary shares at the Balance Sheet date
(see Note 22).
Net gearing
Total borrowings less short-term deposits and cash as a percentage of net
assets.
Passing rent
The annual gross rental income being paid by the tenant.
Reversionary yield
The income/yield from the full estimated rental value of the property on the
market value of the property grossed up to include purchaser's costs, capital
expenditure and capitalised revenue expenditure.
See-through/Group share
The consolidated Group and the Group's share in its joint ventures (see Note
24).
See-through net gearing
The see-through net borrowings expressed as a percentage of net assets (see
Note 25).
Total Accounting Return
The growth in the net asset value of the Company plus dividends paid in the
year, expressed as a percentage of net asset value at the start of the year
(see Note 26).
Total Property Return
The total of net rental income, trading and development profits and net gain
on sale and revaluation of investment properties on a see-through basis (see
Note 27).
Total Shareholder Return (TSR)
The growth in the ordinary share price as quoted on the London Stock Exchange
plus dividends per share received for the year expressed as a percentage of
the share price at the beginning of the year.
True equivalent yield
The constant capitalisation rate which, if applied to all cash flows from an
investment property, including current rent, reversions to current market rent
and such items as voids and expenditures, equates to the market value. Assumes
rent is received quarterly in advance.
Unleveraged returns
Total property gains and losses (both realised and unrealised) plus net rental
income expressed as a percentage of the total value of the properties.
WAULT
The total contracted rent up to the first break, or lease expiry date, divided
by the contracted annual rent.
HELICAL PLC
Registered in England and Wales No.156663
Registered Office:
5 Hanover Square
London
W1S 1HQ
T: 020 7629 0113
F: 020 7408 1666
E: reception@helical.co.uk (mailto:reception@helical.co.uk)
www.helical.co.uk (http://www.helical.co.uk)
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